G S Auto International Ltd Management Discussions.


G.S. Auto International Limited (GS) is a north India based auto component manufacturing company, primarily for commercial vehicle industry, catering to all the three verticals of auto component industry in India .GS is one of the trusted brands in the automotive suspension industry supplying to almost all the major Original Equipment Manufacturers and one of the first auto component manufactures, supplying to after sales market through its pan India network of Distributors/Dealers and retailors.

India began the FY 2018-2019 on a strong note with broad base growth across all the sectors of the economy but started losing pace during the year and closed at an estimate growth rate of 3 % as compared to the growth rate of 3.1% of the previous year, due to rising global volatility, rising crude and commodity prices and rising external trade disputes.

Indian automotive industry comprises of several Indian origin and multinational players with varying degrees of presence in different product segments. Over the years, multinational players have established its presence in Indian market, from engineering centers to local sourcing and a wide spread channel. To remain competitive in a very value conscious market, Original Equipment Manufacturer (OEMs) are focusing on launching new products with attractive features and competitive prices.

The Commercial vehicle segment recorded a strong growth performance across all the categories of the Commercial vehicle Industry. While sales in this segment grew by app.17% in current financial year, the sales of medium and heavy commercial vehicles and light commercial vehicles has increased by 15% & 19% respectively (Source: SIAM)

However, the overall economic growth lost it steam ahead of its general election in the last two quarter of the financial year 2018-19. In the second quarter of FY 2018-19, the Ministry of Road Transport and Highways, notified the increase in the axle loading norms for heavy commercial vehicles. This has resulted in surplus capacity of about 20- 25% with transporters in the short term, leading to many either reducing or postponing their fleet purchase plans. This has a greater impact on the CV industry growth in the second half of financial year 2018-19. Going further into the year, the marked slowdown in demand over the period September - March was principally was a result of, muted demand from rural parts, due to poor monsoon, a deficit Monsoon and weak agricultural incomes due to poor price realization; tight credit conditions arising from stress in NBFC sector, which has a significant share in wholesale and retail financing. Despite all the above said challenges, the Country remains one of the fastest growing economies in the world supported by stable government & its polices and continued economic reforms.

The overall automotive industry is looking little bit week going forward, in the short term, due to changing automotive industry in the days to come. Micro factors such as implementation of BS-IV and emerging concepts like light weighting and e-mobility will help to re-energies the Industry. Further, the forthcoming changes in the automotive industry will open a lot of opportunities in the new area. Success of the Industry will depends upon how fast we respond to these changes and consequently adapts these changes.

The table below shows the size of various segments of the Indian auto industry for the period FY17-18 and FY18-19 and the growth rates, spanning Financial Year 2016-17 to Financial Year 2018-19.

Industry Segment (Domestic Sales) YOY Growth
FY- 2018 FY -2019 FY-2017 FY-2018 FY-2019
Cars 21,73,950 22,18,549 3.90% 3.30% 2.10%
Utility Vehicles 9,21,780 9,41,461 29.90% 21.00% 2.10%
Vans 1,92,235 2,17,426 2.40% 5.80% 13.10%
Total Passenger Vehicles 32,87,965 33,77,436 9.30% 7.90% 02.70%
MHCV 3,40,313 3,90,740 0.10% 12.50% 14.80%
MHCV Passenger 35,649 39,612 7.70% -24.60% 11.10%
M+LCV Goods 92,232 1,17,051 0.90% 3.20% 26.90%
HCV Goods 2,12,432 2,34,077 -2.40% 28.00% 10.20%
LCV 5,16.135 6,16.579 7.40% 25.40% 19.50%
LCV Passenger 49,002 52,170 3.70% -3.40% 06.50%
LCV Goods<2T GVW 1,65,479 2,35,024 0.30% 41.60% 42.00%
LCV Goods 2 to 3.50 GVW 2,55,599 2,80,205 13.20% 23.10% 09.60%
LCV Goods > 3.5T GVW 46,055 49,180 5.40% 27.00% 06.80%
Total Commercial Vehicles 8,56,448 10,07,319 4.10% 19.90% 17.60%
3W Passenger 5,17,423 5,72,392 -8.80% 28.70% 10.60%
3W Goods 1,18,275 1,28,619 12.80% 07.80% 08.70%
Total 3 Wheelers 6,35,698 7,01,011 -4.90% 24.20% 10.30%
Scooters 67,19,909 67,01,469 11.40% 19.90% -00.30%
Motor Cycle 1,26,20,690 1,35,99,678 3.70% 13.80% 07.80%
Mopeds 8,59,518 8,80,243 23.00% -3.50% 02.40%
Total 2 Wheelers 2,02,00,117 2,11,81,390 6.90% 14.80% 04.90%
Quardricycle 627
Total Domestic 2,49,80,228 2,62,67,783 6.80% 14.30% 05.20%
Domestic (Excl.2W) 47,80,111 50,86,393 6.50% 11.90% 06.40%

About The Company:

Your Company is presently manufacturing auto components for commercial vehicles only. We are manufacturing three categories of auto components, namely:-

1. Casting Components

a) Ferrous Casting (Spheroidal Graphite Cast Iron )

b) Non-Ferrous Casting

2. Machined Auto Components

3. Forged Auto Components

Further, your company is supplying, almost all its products in all the three verticals of automobile industry namely:-

1. Original Equipment Manufacturers (OEM)

2 After Sales Market (Replacement Market)

3 Exports Market

Companys Financial Performance and Operational Performance:

The Revenue from operations during the year shows a healthy growth 14.72% to Rs.15391.00 lakhs, as compared to the previous year of Rs.13416.45 lakhs, keeping in mind the above said growth, the overall performance of the company seems satisfactory.

Financial Information:

Property, Plant, Equipment and Capital work in Progress:

(Rs.in lacs)

Particulars As At March 31, As At March 31, Inc/(Dec)
2019 2018
Amount % to Revenue from Operation Amount % to Revenue from Operations %
Gross Block at the beginning of the year 9319.55 60.55 8700.32 64.85 07.11
Additions made during the year 212.57 01.38 862.70 06.43 (75.36)
(Including exchange differences)
Deductions during the year 320.01 02.08 243.47 1.81 31.44
Gross Fixed Assets at the Close of the year 9212.11 59.85 9319.55 69.46 (01.15)
Less: Accumulated Depreciation at the beginning of the year 3383.19 3057.36
Less:- Depreciation and Amortization for the year 428.65 470.54
Less:-Deductions/Adjustments during the year 108.71 144.71
Net Block at the Close of the year (a) 5508.98 35.79 5936.36 44.25 (07.20)
Capital Work in Progress (b) 00.00 00.00 3.80 00.03 (100.00)
Total Fixed Assets (Including Capital 5508.98 35.79 5940.16 44.28 (07.26)
Work in Progress) (a) + (b)

Company is continuously in the process of adding to its capacities for the long term growth prospectus of the Company. During the year under review the Company has made an investment of Rs.212.57 lakhs (Including capitalization of previous years capital work in progress) (previous year Rs.862.70 Lakhs), for the various capacity additions in different products & investments in the Intangible Asset of Rs. NIL (previous year Rs. 4.67 Lakhs). The previous year Capital work in progress is on account of Plant & Machinery.


(Rs.in lacs)

Particulars Inc/(Dec)
As At March 31, 2019 As At March 31, 2018
Amount % Amount % %
Raw Material and Components as a % of cost of material consumed 204.64 02.43 346.59 05.33 (40.96)
Stores, Spare & Consumables as a % of Consumption 318.88 28.85 395.05 29.88 (19.28)
Finished Goods (including in transit) as a % of Net sales of products 1101.14 07.15 643.22 04.80 71.19

The inventories level of finished goods at the year-end level is on the quite higher side on account of anticipated higher sales in the first quarter on the next financial year of stores & spares & consumables are almost at the same level as compared to previous year. The inventory of Raw material has come down by app.40% as compared to previous year.

Trade Receivables:

(Rs.in lacs)

Particulars As At March 31, 2019 As At March 31, 2018
Amount % Amount % %
As a % of Revenue from operations 2459.31 15.98 2933.51 21.87 (16.16)

The absolute amount of receivable and % of revenue from operations has come down during the year, as compared to previous year, primarily on account of higher revenue from operations, as compared to previous year, coupled with faster recoveries from the customers.

Long Term and Short Term Borrowings:

(Rs.in lacs)

Particulars As At March 31, 2019 As At March 31, 2018 Inc/(Dec)
Amount Amount %
Total Long Term Borrowings (without considering current maturities) 167.16 1011.50 (83.47)
Total Short Term Borrowings 2710.62 2607.44 (03.96)

During the year, the Company has paid almost all of its long term bank borrowings in the shape of term loan from Axis Bank Limited & Export Import Bank of India (EXIM Bank) However, due to repayment of long term bank borrowings along with the past few years losses, their remains liquidity tightness in the Company which is clearly reflected in the short term banking facilities.

Results of Operations:


(Rs.in lacs)

Particulars Financial Year -2018-19 Financial Year -2017-18 Inc/(Dec)
Amount % Amount % %
Revenue from Operations 15391.00 99.71 13416.45 98.69 14.71
Other Income 44.25 00.29 178.50 01.31 (75.21)
Total Income 15435.25 100.00 13594.95 100.00

The revenue from operations was higher by 14.71% as compared to previous year mainly on account of better product mix, better capacity utilization along with the benefits of introduction of GST. The decrease in other income as compared to previous year is on account of one time additional income of Rs.120.00 Lakhs, in the previous year, on account of partial withdrawal from key man insurance policy. The overall export sales are decreased by 47.65% as compared to previous year at Rs.315.83 Lakhs.


(Rs.in lacs)

Particulars Financial Year -2018-19 Financial Year -2017-18 Inc/(Dec)
Amount % to Revenues from operations Amount % to Revenues from operations %
Material Costs 7913.43 51.42 6364.85 47.44 03.98
Employee Benefits Expenses 2728.12 17.73 2779.81 20.72 (02.99)
Finance Costs 466.92 03.03 468.60 03.49 (00.46)
Depreciation & Amortization 428.66 02.79 470.54 03.51 (00.72
Other Expenses 3986.97 25.89 3619.08 26.97 (01.08)
Total Expenditure 15524.10 100.86 13702.88 102.13 (01.27)
Excise Duty 00.00 321.99

The total expenditure as a percentage to revenue from operations during the year has marginally decreased by 01.27% as compared to previous year primarily due to increase in the revenue from operations, better capacity utilization, better product mix coupled with the absorption of prices increase with all the customers.

Raw Material Cost

The overall Material Cost during the year has increased by 03.98% as compared to previous year due to steep increase in the prices of raw material. The increase in the prices of raw material is adequately compensated from the respective customers.

Employee Benefits Expenses:

The Employee benefits expenses, during the year are at 17.73 % as comparison to 20.72% of the previous year on account of Revenue from operations, which is quite satisfactory.

Finance Costs:

The overall finance cost during the year ended March 31, 2019 is Rs.466.92 lakhs, as compared to previous year of Rs.468.60 lakhs, which is almost of the same level as compared to previous year, however the overall finance cost will come down in the days to come in the light of reduction in the long term bank facilities. The financial cost for the year ended March 31, 2019 is 3.03%, as a % of the Revenue from operations, as compared to previous year of 03.49%, is quite satisfactory with the possibility of reduction in the days to come.

Depreciation and Amortization:

The Depreciation and Amortization for the year ended March 31, 2019 is at Rs.428.66 lakhs as compared to previous year of Rs.470.54 lakhs. The decrease in the depreciation and amortization is on account of sale of some of its old & not usable plant and equipment.

Other Expenses:

Other expenses of Rs.3986.97 lakhs, in the absolute part are on the higher side, as compared to the previous figures, however there is reduction to the extent of 1% as a % to revenue from operations.

Provision for Taxation:

The provision for taxation & deferred tax for the year ended March 31, 2019 is Rs. (14.39) lakhs as compared to previous year of Rs. (56.36) lakhs.

The performance highlights for the year 2018-2019 (in brief) are: -

• The overall revenue from operations of the Company shows a healthy growth of 14.72% mainly due to better products mix, better capacity utilization.

• During the year under review the Company has incurred a net foreign exchange gain on account foreign exchange rate fluctuation of Rs.18.15 Lakhs, as against net foreign exchange gains of Rs.16.80 Lakhs, for the previous year. During the year, your Company has not used hedging as tools, for all its normal foreign exchange transactions such as export & long term borrowings respectively.

• The Material Costs during the year constitutes 51.42% to the revenue from operations vis--vis to 47.44% as compared to the previous year, mainly due to higher prices of the raw material.

• Finance cost of the Company has marginally declined to Rs.466.92 lakhs from the previous year expenses of Rs.468.60 lakhs, mainly due to reduction in the long term liabilities.

• Depreciation and amortization during the year stand at Rs.428.66 lakhs as compared to previous year of Rs. Rs. 470.54 lakhs.

• Besides the continuous margin pressures coupled with rise in the prices of raw materials during the year ended March 31, 2019, the company has improved its performance of Profit before depreciation, interest and tax (PBDIT) at Rs.806.72 lakhs, as compared to the previous year PBDIT of Rs.509.22 lakhs, however we are taking all the necessary steps so to improve the overall margins as well overall performance of the company in the days to come.

• During the year under review the Company has made provision for current taxes (including deferred tax) of Rs. (14.39) Lakhs, as compared to previous year provision of Current Tax & deferred taxes expenses of Rs. (56.36) Lakhs).

• The net loss after tax (before other comprehensive income) for the year was at Rs.74.46 lakhs, as against the previous years (Loss) after tax (before other comprehensive income) of Rs.373.57 lakhs.

• Gross Fixed Assets (excluding capital work in progress) during the year under review, is at Rs. 9212.11 Lakhs as compared to previous year of Rs. 9319.55 lakhs.

Performance of Subsidiary:

During the year under review, the Company has no any subsidiary

Opportunities for longer term:

The long term growth forecast for the Indian economy remains healthy. The automotive industry in India is one of the largest in the world and one of the fastest growing globally. Indias passenger car and commercial vehicle manufacturing industry is the sixth largest in the world.

There is continuous pressure globally to reduce emissions from automobiles, leading to the need for ongoing investments in technology up gradation and alternate energy across the automotive value chain. Growing environmental consciousness among consumers, government regulations to manage traffic congestion, as well as improvement in public transport infrastructure are trends that will have a significant impact on the future of the automotive industry. For commercial Vehicles, the growth in agriculture and industrial production, the spread of organized retail and the growing prevalence of the hub-and-spoke model for transportation of goods will lead to a significant expansion of the overall market size. In the mid to long term, stricter implementation of norms related to overloading of goods vehicles and road worthiness will also lead to considerable expansion in the market for CVs.

Automotive Industry is the key driver of any growing economy. It plays a pivotal role in countrys rapid economic and industrial development. It caters to the requirement of equipment for basic industries like steel, non-ferrous metals, fertilizers, refineries, petrochemicals, shipping, textiles, plastics, glass, rubber, capital equipments, logistics, paper, cement, sugar, etc. It facilitates the improvement in various infrastructure facilities like power, rail and road transport. Due to its deep forward and backward linkages with almost every segment of the economy, the industry has a strong and positive multiplier effect and thus propels progress of a nation. The automotive industry comprises passenger cars; light, medium and heavy commercial vehicles; multi-utility vehicles such as jeeps, scooters, motor-cycles, three wheelers, tractors, etc; and auto components like engine parts, drive and transmission parts, suspension and braking parts , electrical, body and chassis parts; etc.

The Indian automobile industry is currently experiencing an unprecedented boom in demand for all types of vehicles. This boom has been triggered primarily due to increase in disposable incomes and standards of living of middle class Indian families estimated to be as many as four million in number; and the Indian governments liberalization measures such as relaxation of the foreign exchange and equity regulations, reduction of tariffs on imports, and banking liberalization that has fueled financing-driven purchases. As the market grows and customers purchasing abilities rise, there will be greater demand for higher-end models which currently constitute only a tiny fraction of the market.

The rapidly globalizing world is opening up newer avenues for the transportation industry, especially while it makes a shift towards electric, electronic and hybrid cars, which are deemed more efficient, safe and reliable modes of transportation. Over the next decade, this will lead to newer verticals and opportunities for auto-component manufacturers, who would need to adapt to the change via systematic research and development. The Indian auto-components industry is set to become the third largest in the world by 2025.

The growth of Indian middle class, with increasing purchasing power, along with strong macro-economic fundamentals has attracted the major auto manufacturers to Indian market. The market linked exchange rate, well established financial market, stable policy governance work and availability of trained manpower have also shifted new capacities and flow of capital to the auto industry of India. All these have not only enhanced competition in auto companies and resulted in multiple choices for Indian consumers at competitive costs, but have also ensured a remarkable improvement in the industrys productivity, which is one of the highest in Indian manufacturing sector. Now the focus of companies across the globe is on strategies to grow and prosper rather than to just survive. The formation of strategic alliances and partnerships is expected to be the most favored mode for consolidation in the global automotive industry. The significant drivers for consolidation in the next few years are likely to be technology acquisition, establishment of a robust global footprint and acquisition of brands that have high recognition and strong relationships with customers.

India being one of the cheapest labour oriented country, as well as, with the growth in the demand of automobile sector in India, all the world class automobile manufacturers are making India as its manufacturing facilities, by setting up their manufacturing units, for all the segments of the automobiles Industry. Above all, the

Government of Indias major thrust towards building world class infrastructure in the country, by spending/allocating more money for the infrastructure sector and also making India as the hub for Small Car Segment, the automotives segment will see a huge surge in the overall growth rate of this sector. One of the major beneficiaries of the major spending in the infrastructure sector will be the commercial vehicles segment.

Growth Drivers of Auto Component Industry:

In Original Equipment Manufacturers:

Growth in Economic Activity, Increase in the Personal disposable incomes, Growth in Rural Economy, Multiple & easy finance options, Decline in tax rates and Economic vehicles.

After Sales Market (Replacement Market)

Old vehicle population, Life span of components (frequency of replacement), Average value of parts replaced, Share of genuine-branded components in the total aftermarket.


Despite a relatively small share of Asia in the global pie, India is now amongst one of the most preferred destinations and has come to occupy the image of an exporting hub for most of the major global OEM players. Almost all the big auto manufacturers of the world are either already or are in the process of outsourcing from the country.

Industry to take advantage of the transition that is taking place internationally and dominates the global supply chain in auto components due to reasonably priced skilled work force large population of technology workers established strengths in I.T. and electronics transformation of global auto component industry.

The Company:

The Company enjoys an unstinted confidence from its valued customers for providing quality products. With the widely recognized brand "GS", superior quality, strong distribution network and a committed team of employees, the "GSAIL" is well positioned to take the advantages of the opportunities and withstand market challenges.

The superior quality of product of the Company gives a competitive edge in the market place. The Company is committed to sustain its domestic market share by offering wide range of products at competitive rates.

We operate mainly in three segments i.e. Original Equipment Manufacturers, After Sales Market & Export Market. The Company has balanced approach to the Original Equipment Manufacturers, After Sales Market & Export Market, which helps us in capitalizing to our strength in all the three segments and to respond to market fluctuation and customer strategies.

With the overall growth rate in the Indian economy in the medium to long term and particularly the growth rate in the Indian automotive Industry, there is tremendous growth opportunities for Company like "GS" which has already a strong brand name in after sales market, a good & long standing relationship with all the Original Equipment Manufacturers and above all a dedicate team, however in short term there remains the challenges

Company has expanded its capacities by setting up new unit at Jamshedpur, for its Casting Auto Components for Original Equipment Manufacturers, After Sales Market & Export Market. Your Company is exploring other export market.


a. Higher cost of inputs such as power, raw materials. Higher import duties on raw materials such as pig iron as compared to in the competing countries. b. Lower productivity due to manual operations & low level of mechanization & old equipments.

c. Non availability of access to modern manufacturing techniques, design & in process quality techniques due to high capital cost & non availability of capital at Competitive cost as available in competing countries.

d. Poor & erratic power availability & low energy efficiency of SME units.

e. Lack of foundry specific training facilities & exposure to modern foundry manufacturing techniques & therefore unavailability of skilled manpower, cumbersome environmental clearance Procedures. (Source: Indian foundry Industry)

Any Increase in Commodity prices & Interest Rates, Infrastructure Bottleneck, Trained drivers for sophisticated vehicles and planned maintenance, Increased competition and expansion in capacity would pressure on margins leading to just a volume driven model, remaining cost competitiveness, access to and availability of cost effective capital, trade policies, access to world class technology and quality practices, scaling up the Industry.

The commercial vehicle market is purely an economic play and has moved cyclically, however India now established itself as a global manufacturing hub for sourcing and now proving a high growth market and also makes it surely a long term story for CV makers.


Any delay in the recovery of the world economy adversely affects the commercial vehicle segment, as commercial vehicle segment is a face of revival in the economy. Further any increase in the prices of commodities be it rise in the steel prices, rise in crude prices along with the rise in the interest rate in the domestic market will cause to slow down in the Indian economy as well as in the World economy. Rise in the crude prices coupled with the rise in the interest cost ultimately will affect the demand of commercial vehicles as financing will be not be easy for the purchase of new vehicles. Further, as the entire major auto component manufacturer are now tapping the untapped after sale market, there will increase in the competition which will ultimately reduce the margin in the after sale market in the days to come. However, your Company is well positioned in the after sale market and has a huge network of distributors and retailers along with a reputed brand name "GS", which will counter any increase in the competition in the aftermarket sale segment.

Cyclical nature of the Industry:

Our Companys fortune is linked to those of the automobile industry, which is cyclical in nature. The demand for automobiles has a significant impact on the demand and prices of the products manufactured by the Company. A fall in the demand and/or prices would adversely impact the financial performance of the Company.

Human Resource Development:

To meet the long term growth plans of the Company, a structured organization with succession planning and strategies for development of the technical and managerial skills within the organization are being developed. Yours Company is following the most favorable human resources policy as prevailing in the industry. The Company believes in peaceful and harmonious relationship with the personnel of all the levels to achieve the targeted goal of the Company. Yours Company is firmly believes into involvement of personnel into decision-making process of the Company. The management have decentralized the decision making process so to achieve the self-satisfaction at the decision making level. The Company continues to provide growth opportunities to its employees by way of training workshop and by that way to retain efficient and talented eemployees in the Company.

Human rresource is one of the key assets of any organization. The Company believes that human resources enable the Company to consistently meet customer requirements and deliver exceptional performance for growth. To strive for success and growth in any organization, human resource will have to play a key role in the overall development of the organization. We feel that the organization will grow, only & only if, each & every employee of the organization will grow with regards to their personal developments, as well as, at organization level, along with the organization. The Company provides ample opportunity to employees to enhance their knowledge & skill, which will ultimately contribute to the growth of the organization. Your Company considers its human resource as "the most valuable asset", is thus committed to the welfare of its employees and their families, and by recognizing this devotes a considerable part of its time and resource in motivation, training & development of its employees in various traits, a part from job related skills, over the years, your Company has benefited from a pool of committed and dedicated employees. In an environment of general workforce shortages, retaining and motivating talent has become a key challenge. However, attrition in "GS" has been less as compared to the Industry average, which reflects the loyalty of your Companys employees. Recruiting & retaining qualified skilled manpower poses to be a great challenge due to rapid growth in the economy. The Company has undertaken special HR initiatives with a view to develop strong and stable organization having intrinsic strength to meet the current business challenges.

The Company organizes celebration of festivals at various locations. Employees families participate in large numbers and appreciate the opportunity provided by the Company. In the year under review given the changes in the external environment there was a significantly different challenge on the human resource management front. Using the dual responsibility mythology, scope of existing Employees roles is being widened.

• Workmen trainees who have successfully completed their training with us are being absorbed on Company rolls.

• To attract and retain talent, ggraduate engineer trainees recruited from engineering colleges and also from campuses of premier educational institutions across Punjab, which have completed their training, have been absorbed as Engineers and have also tied up with the colleges from where it is recruiting entry level employees.

• Employee satisfaction survey was carried out and based on the feedback received, corrective actions have been initiated which ultimately effect the morale booster of the employee.

• Communication meeting is being organized every month to appraise all the employees on the major development on various fronts such as market, supply chain as well as feedback cum suggestions etc. and also for any new suggestion as well as new initiatives.

• Near- misses / incidents reporting has been encouraged and investigation for each of these occurrences are carried out to deploy preventive measures. The ratio of near misses to accidents has improved considerably over the last year. Structured problem-solving technique is adopted to investigate accidents. Lessons learnt are shared with all the divisions for implementation.

• Internal and external safety audits and inspections are carried out regularly and the compliance of audit action points is monitored.


As a business enabler, "GS" people practices are geared towards delivering three corporate objectives:

• Identify and induct the most appropriate human talent- based on long term business plans.

• Develop the competencies and skill sets of the entire people force-work force and management alike-and synchronize these with long term business objectives.

• Ensure that existing people within the organization have a clearly defined growth and business delivery path, based on their competencies, delivery potential, previous track record and appetite for growth.

To achieve these three objectives, the Company, during the year has put into place key organizational changes.


Your Company had done well in kaizens by implementing kaizens, resulting to savings and lot of improvements in 5S ,Systems, Process, Safety, Morale, Methods, Productivity, reducing wastages, energy savings etc.

Industrial Relations: The total numbers of permanent employees on the roll of the Company were 867 as on March 31, 2019 (previous year 967). However it is pertinent to mention here that the company had leased out its third unit to one of its group concern on dated 01st December, 2015, hence the figures of the current year are not strictly comparable. Your Company had maintained its excellent industrial relations records of not losing even a single day due to industrial action since its inception, which further shows the relation of the Company with its workmen. This facilitated the following:

• Leadership development programme planned for office bearers at each and every level of the organization and for Executive committee members.

Employee Welfare:

• On April 1st, of every year, Annual day is being celebrated and all the employees and their family members are attending the function. This is an occasion of family get together. Various cultural and religious activities were conducted for employees and their family members.

Health, Safety, Security and Environment:

Health, Safety, Security and Environment is at the core of our business and all employees are accountable for it. "GS" operations follow the best industry practices as regard to Health, Safety, Security and Environment. The

Company is committed to achieving these goals through a structured "HSE" management system that has been put in place and is being followed in letter and spirit as well as is rigorously monitored for continuous improvements. "GS" considers it is a responsibility to its stakeholders to clearly stipulate measures and polices that can be proposed to the third parties and are in line with global benchmarks.

The Company follows a policy of zero tolerance towards accidents. The Company provides all facilities for fatigue-free working. We have always focused on safety with a view to maintain an awareness of the importance of safety at work place.

During the year under review, safety audit were carried out by the in house staff members and all observations/ suggestions were implemented. Hazardous waste which generated during the process is being disposed off as part the statutory guideline.

"GS" carried out the following activities as part of its annual plan:

• Basic safety training was imparted to all the factory employees including temporary workers. Safety and technical competency development programmes were carried out to improve competencies of employees for safety critical jobs.

• Work place inspections were carried out by executives and managers at all level. Senior management team members demonstrated leadership commitment through work place inspections.

• Reduced waste generation and improved waste management by collecting and disposing all the waste in an environment friendly manner.

• Tree plantation across premises and factories.

o Reduced level of sound pollution by providing acoustic enclosures on certain set of machinery and DG/ compressor sets.

• When risk assessment is carried out, proactive ‘accident control measures are factored into the scope in order to mitigate human accident and damage to property.

• Safety Equipments (e.g. safety helmets safety shoes etc) for "GSAIL" employees and subcontractors have been standardized and are in place.

• Comprehensive training programs were regularly conducted to ensure strict adherences to safety procedures. These are conducted by both in-house trainers as well as by outsides "HSE" experts.

o Safety handbooks are also given i.e. on the safety oath, emergency preparedness, instruction to fight against fire, emergency phone numbers,

o Reported near miss safety incidents are being investigated and immediate corrective and preventive actions are being initiated.

• Work permit system is followed strictly for hazardous work in nature, both for internal and sub contract works.

o External & Internal periodical safety audit is being carried and the corrective and preventive actions are being initiated on the observations made.

• Periodical general health checkup was carried out for all the employees and particularly, audiometric tests, pulmonary function test, eye checkup were also conducted by the doctors employed by the company.

• Employees working in canteen have been medically examined periodically for the hygiene.

During the year, "GS" had no fatal accidents.

Information Technology:

"GS" has been adapting IT, to pay an increasingly strategic role in business role in the business process by providing cutting-edge technologies needed to create values and competitive advantages. These range from advanced sales force automation, engineering design and collaboration tools. IT also helps to ensure the sustainability of its various businesses compliances and enhanced information security systems. The major initiatives can be grouped under the following categories.

• Leveraging Technology: - Major initiatives in this have been launched across the Company, focusing on creating value through business process re-engineering. The objective is to seamlessly synchronize system to best-in-class business process, thereby improving controllership and data quality.

• Consolidation: - As a step forward in consolidating group IT infrastructure, Data center resources of all the entities are being aggregated at one place. Storage Area Network (SAN) has been implemented across group offices to consolidate corporate and project data into a central repository. This will link up with the ongoing knowledge management initiatives. Newer technologies like virtualization for desktops and servers are being piloted to identify efficiencies to move toward a green data centre environment.

• Disaster Recovery: - the group has a comprehensive disaster recovery plan closely linked with a business continuity plan.

• Security: - Company has upgraded its corporate office network by adopting industry best practices and best of breed technologies. This provides adequate IT controls to reduce current risk of loss of sensitive commercial and technical data through mail and internet by employees.

Corporate Social Responsibility (CSR):

"GS" has always considered itself as a responsible corporate citizen. It cares for the well-being of society. CSR represent an interesting culmination of philanthropy and ethics. "GSAIL" believes that it is not only accountable to its shareholders but it is also accountable to the society in which it operates. With a true corporate vision, the Company embraces a wider community rather than just its shareholders, customers and suppliers.

Corporate social responsibility (CSR) at "GS" is focused on making over business practices more environmentally and socially responsible. This is affected by (i) assessing and mitigating the environmental & social impacts and (ii) Minimizing the environmental impact and carbon footprints of our operations though resource of efficiency & conservation. CSR also includes an active volunteering program aimed at increasing our employees environmental and social sensitivities, besides high standards of Corporate Governance, maintaining our reputation for ethical and fair business practice and improving transparency in our interaction with all our stakeholders.

Corporate Social Responsibility (CSR) is not a public relations exercise for us. "GS" denotes CSR as conducting business in ways that provide social, environmental and economic benefits for the communities and geographies where we operate. The greatest value is in making a difference in the lives of people. A beginning has been made, but there still miles to go before the huge disparity is bridged and a better future delivered to every child. The ultimate aim is to put a smile on every face.

The Company has an innate desire and zeal to contribute the welfare and social up liftment of the society. "GS" continues to support the society by way of contributing in the field of education, sports, environment etc.

Highlights of performance of "GS" for the welfare of Society are as follows:

(i) (a) Company contributes to NGOs to empower children and community for understanding their rights as equal citizens and demand for schools and health centres in their villages.

(b) Establish unity by destroying the differences of caste, gender and class.

(c) Identify and tackle root causes that continue to keep children uneducated, unprotected and hungry & push for child friendly government policies.

(ii) Installed Water & Sewage Treatment Plant and Effluent Plant of 100000 ltrs per day and 60000 ltrs per day capacity respectively to provide better and healthy working conditions.

(v) Company launched its internal environment policy aimed at minimizing its environmental impact and carbon footprints under the "Go Green" initiatives. Company has made contribution from time to time to Divisional Forest Officer, Ludhiana, for participating and taking initiative with the forest Division, in their efforts for plantation in Go Green drive. "GS" continuously contribute in Go Green scheme by planting various plants to keep the environment green & healthy.

(vi) Company regularly contributes for up-liftment of the various games of the state.

(vii) During the year under review, the company has taken initiatives for the enhancement of happiness and better health in of its employees. The company organized stress management seminar and free eye checkup camp for "GS" employees and also provides free aids to its employees in the factory premises.

An essential component to your Company‘s Corporate Social responsibility is to care for the community. Your

Company endeavors to make a positive contribution towards social cause by supporting a wide range of socioeconomic and education initiatives and committed to address important societal needs extends through philanthropic outreach programs under the aegis of "GS Foundation". Your Company has established a charitable trust, "GS Foundation" as part of its Corporate Social Responsibility. "GS Foundation" has been paying the fees of poor & needy students, of any class & any religion, for the required education of the particular students.

In "GS", we are enhancing corporate value by deepening awareness that honest action with responsibility leads to sustainable operations fulfilling our responsibilities in a well-balanced way with respect to economic, environmental and social matters and achieving symbiosis with all our stakeholders. "GS" is very responsive towards all stakeholders viz. shareholders, employees, customers, suppliers, society at large etc., and create value for all of them. Further, your Company in a move towards the better working culture & environment always make an atmosphere, for asking suggestions from all the employees regarding suggestions for improving the working atmosphere & working culture and for improvement in the production processes of the Company.

Dividend Policy:

Companys main emphasis is to work, for & on, behalf of the benefits of all its stakeholders of the Company,

Keeping this in view and to creating long term value creation for our Shareholders, Board of Directors of "GS" has formulated a dividend policy to pay dividend to shareholders, every year, at the rate, to be decided by the Board, from time to time, keeping in mind the distributable profits of the Company, during that particular year. However, as all the shareholders of the Company, is well aware, that your Company is in expansion phase and further, is re-investing its profit for the various expansion plans of the Company, for the benefits of all its shareholders, provided that, if in any year, it needs funds to expand its business, then the discretion regarding declaration of dividend for that particular year, will be of the Board of Directors of the Company.

Analysis and Comments on Key Business Risks:

Risk and Concerns:

The Company has developed built-in procedures and a practice to effectively mitigate the adverse effects of the risk involved in the business and has laid down procedures for handling risks in carrying out the business to the best advantage of all the stakeholders and to improve the stakeholder value and ensure continuity of business.

Risk Management:

The Company is committed to high standards of business conduct and the risk management with a view to

• Protect the Companys Assets

• Achieve sustainable business growth

• Avoid major surprises related to the overall control environment

• Safeguard Shareholder investment; and

• Ensure compliance with applicable legal and regulatory requirements

Further the Company has divided the overall risk into following categories:

i) Risk of concentration in one segment:

The Company right now operates in one sector and the commitment of investments being irreversible process and always has a risk of demand projections not materializing. However, historical perspective has been that the excess capacities get consumed eventually, may be after a lag of couple of years. The commercial vehicle segment is a cyclical sector in India. Accordingly; there is a risk that if the commercial vehicles sector experiences a period of sustained low growth or negative growth, our business is very likely affected.

The diversified customer portfolio of the Company with business share not exceeding 15% from any one customer and with good market share in all the segments i.e Passenger Vehicles, and Commercial vehicles, enhances its ability to face any fluctuations.

The Companys market share is likely to be sustained over the next few years by virtue of the new investments it has made and is planning for the same. The Companys efforts on growing after market as well as exports would reduce the risk of fluctuations in the domestic Original Equipments Manufactures Market.

ii) Global Competition Risk:

International OEMs seeking to introduce global platforms prefer to source the products for that platform from a global supplier having the ability to supply same product (same specification and quality) at all locations where the platform is planned for manufacturing.

In case of direct imports of products, particularly from China, the Company has built up its capacity to compete at cost level while providing value added services to customer to continue being a preferred supplier.

iii) Procurement and Supply Chain Risks:

During the year, the prices of commodity and base metal remained on the lower side along with the prices of crude. However any increase in the prices of commodity & crude will poses serious risk of profits erosion in case of inadequate compensation from its customers.

However, the Company has addressed this risk by way of an understanding with most customers for adjusting the prices of our products in tandem with the movement of raw material cost. To avail the benefit of economy of scales the Company has opted for centralized sourcing with better vendor management. The movement in the material prices in the domestic as well as international market is closely monitored to ensure procurement at competitive prices.

iv) Exchange Fluctuations Risks:

The companys policy has been to avoid speculation in foreign exchange. The Company is right now, not using the hedging as a tool for booking forward for their regular business requirements. As of date the Company has not hedged its Foreign Currency Term loan exposure and its revenue from exports.

The current forex volatility can impact sales realizations & depreciation of assets, therefore it is critical to continuously review the latest foreign exchange rates while quoting for orders, which the company is already doing. Hence the Companys overall exposure for all its exports and the exposure to the extent of above said Foreign Currency Term loan will continue to bear the risk of exchange rate fluctuations.

v) Commodity Risk:

The Input prices in general are very volatile along with the prices of Crude & power. Any rise in the price of Commodity & Crude, will adversely impact the overall margins of the company. What poses even greater challenges from the risk management perspective is the sharp volatility in prices."GS" addresses it by sharing the prices with its ultimate customers beyond certain rate of increase, along with buying the material in bulk when there is considerable reduction in the prices.

vi) Talent and Attrition Risk:

The Management closely reviews the attrition risk and talent availability risk-in term of head count and competence. Due to the boom in the auto sector the attrition risk is high. The Company being sensitive to this concern has proactively engaged itself in hiring and developing talent with special focus on HR activities for ensuring retention of its people. Availability of knowledgeable work force is also key concern, which has been addressed by wide spread engagement with technical schools for direct recruitment and offering them well define growth paths.

vii) Interest Rate Risk:

Due to pressures in the overall margins of the company from the last two to three years, temporary delay in the collection of receivables and pending value added tax refunds with the state government, there is increase in working capital requirements of the Company. Any increase in the interest rate by the central bank, will increase the interest cost, which will cause further pressure on the margins of the Company.

viii) Risk related to safe operations:

Your company is committed to the safety of its people and continues to strive for making workplaces safe. The complexity and spread of operations make this task even more daunting. There is a dedicated team of safety officers reporting to the head of safety who continuously review the implementation of policies and procedures especially at the site and factories. They also conduct periodic safety audits to measure and improve compliance. Continuous efforts and programmers are on for enhancement of safety awareness at all levels through.

Quality Management System:

From the very beginning "GS" has always shown incessant thirst for Product Quality and Customer Satisfaction. At "GS", each component passes through series of stringent tests of quality from design stage to manufacturing. Conformance to the quality is just not restricted to the shop floor of the Company but also throughout the supply chain. After having conferred ISO 9002 certification in 1997 and QS 9000 certification in 1999 by BVQI, U.K. the Company had taken leaps by implementation of 5 S, TPM, TQM concepts i.e. Total Productive Maintenance / Total Quality Management and Lean Manufacturing. The Management of "GS" feels that these are essential ingredients of success and sustenance in the present times due to fierce competition offered by Global Companies. The Quality Movement in "GS" has achieved its next milestone ISO/TS 16949. Your management is working on certain initiatives to encourage Quality circle to promote internal customer concept and also to reduce drastically the PPM levels for all the operations.

Internal Control System:

The Companys internal audit department is regularly reviewing the adequacy of the internal control systems and suggests corrective measure, wherever found necessary. Review mechanisms are in place to monitor & improve the internal control systems. The internal audit department draws up yearly plans keeping in view the complexities of the businesses. All areas are covered periodically & report submitted to the departmental heads. Corrective actions, if any, are taken within an agreed time frame. The audit committee of the board periodically reviews the report & recommendations and follows up with necessary actions. Statutory auditors also review the adequacy of internal audit system and suggest improvements wherever feel necessary, at regular intervals.


Companys abridged Statement of Profit and Loss:

(In Rs. Lakhs)

Particulars 2018-19 2017-18
Revenue from Operations 15391.00 13416.45
Total Expenditure 14628.52 13085.73
(a) Consumption of Raw Material 7913.43 6364.85
(b ) Employee Benefit Expense 2728.12 2779.81
(c) Other Expenditure 3986.97 3619.08
(d) Excise duty on Sales 0.00 321.99
OPBDIT 762.48 330.72
Depreciation & Amortization 428.66 470.54
OPBIT 333.82 (139.82)
Finance Charges 466.92 468.61
OPBT (133.10) (608.43)
Other Income 44.25 178.50
PBT (88.85) (429.93)
Current Tax 00.00 00.00
Deferred Tax (14.39) (56.36)
PAT (74.46) (373.57)
Comprehensive Income-Actuarial gain/(loss) on employee defined benefit plan reclassified to other comprehensive income (5.39) (7.00)
Comprehensive Income for the year (69.07) (380.57)
EPS (Rs.) :- Basic & Diluted(face value of Rs.5/- each) (00.51) (02.57)

Note:-Previous year figures have been regrouped / rearranged wherever found necessary.

Indicators of Profitability

2018-2019 2017-2018
(%) (%)
PBDIT/Total Income 05.23 03.75
PBIT/Total Income 02.44 00.28
PBT/Total Income (00.57) (03.16)
PAT/Total Income (00.48) (02.75)
Return on Capital Employed (10.31) (00.94)
Return on Net Worth (02.28) (11.21)
EPS (Rs.) :- Basic & Diluted (face value of Rs.5/- each) (00.51) (02.57)
Capital Structure Ratio
2018-19 2017-18
Debt Equity Ratio 03.56 03.71

The Company has almost pays off all of its long term bank facilities

Cautionary Statement:

Certain Statements in this Management Discussion and Analysis describing yours Companys objectives, projections, estimates, expectations or predictions may be ‘forward looking statements within the meaning of applicable securities laws and regulations. Forward looking statements are based on certain assumptions and expectation of future events. The Company cannot guarantee that those assumptions and expectations are accurate or will realize. Actual results could differ substantially or materially from those expressed or implied. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events. Important developments that could affect your Companys operations include a downtrend in the Automobile Industry- global or domestic or both, significant changes in political and economic environment in India or key markets abroad, tax laws, litigation, labour relations, exchange rate fluctuations, interest rate and other costs including commodity prices.