GLOBAL ECONOMY
The global economy made a robust recovery in 2022 after the Covid-19
pandemic, growing 3.6% according to IMF estimates. This rebound was fuelled by pent-up
demand and easing Covid-19 pandemic restrictions. However, growth was impacted by the
Russia-Ukraine war, rising inflation, supply shocks, and tightening monetary policy. While
it was slower than 2021s exceptional 6.1% growth, the expansion showcased the world
economys resilience amid multiplicate headwinds.
Looking forward, the IMF anticipates a consistent worldwide growth rate
of 3.2% in 2023 and 3.0% in 2024. The pressure from inflation is predicted to decrease
gradually as commodity prices normalise. Job markets are robust in numerous countries,
bolstering consumer demand. As supply chains stabilise, businesses are expected to ramp up
capital investment. While the growth rate might be lower than the rebound experienced in
2021, the global economy is on track for sustained growth. With coordinated policy support
and strengthening economic fundamentals worldwide, the expansion is forecast to continue
despite slower momentum. The global economy has proven its capacity to manage myriad
shocks and is positioned for continued growth ahead.
INDIAN ECONOMY
The Indian economy has firmly established itself as one of the
fastest-growing economies worldwide, achieving a robust 7.2% GDP growth in 2022-23,
despite global headwinds. This advancement was propelled by a robust internal demand, as
both private consumption and investments experienced a surge. Exports also performed well,
benefitting from the global rebound. The drivers of this impressive growth include
increased infrastructure spending, urban demand, digital adoption and supportive
Government reforms. India aims to sustain high growth by boosting manufacturing
competitiveness, job creation, and human capital development.
As per the IMF predictions, India is expected to achieve a growth rate
of 6.1% in 2023-24. This growth is anticipated to be primarily propelled by augmented
investments in infrastructure, a surge in urban consumption, expanded digital integration,
and reforms in policies. Nonetheless, there are still vulnerabilities stemming from
external market fluctuations, fluctuations in commodity costs, and inflationary pressures.
Through judicious fiscal and monetary measures, India is well-equipped to harness its
demographic advantage, domestic demand foundation, and skilled labour pool, solidifying
its position as one of the worlds fastest-growing major economies. Its growth
trajectory highlights the countrys resilience and reform orientation in the face of
global headwinds.
INDUSTRY OVERVIEW
In the dynamic landscape of the tractor and commercial vehicle
industry, GNA Axles continues to position itself as a pivotal player, manufacturing and
marketing rear axle shafts, spindles, and drive shafts for both tractors and commercial
vehicles. The Companys success is intrinsically intertwined with the prospects of
these industries, not only in its home market of India but also on a global scale. As we
delve into the industry overview, it becomes evident that GNA Axles has strategically
positioned itself to harness opportunities, while mitigating potential challenges.
The tractor and commercial vehicle industry showed strong growth in
2022-23, aided by robust rural demand, higher infrastructure spending, and improved
economic activity. In India, tractor sales grew 10% to 10.69 Lacs in 2023 compared to 9.71
Lacs in 2022, as per data from the Tractor Manufacturers Association. This growth was
driven by healthy crop prices, good monsoon rains, and higher rural incomes, which
stimulated tractor demand. Commercial vehicle sales also witnessed robust growth of 28% to
7,93,211 units in 2022, up from 6,17,944 units in 2021, as per the Society of Indian
Automobile Manufacturers.
Globally, the tractor and commercial vehicle market displayed a mixed
growth trend. The US and Germany saw 10% and 11% growth, respectively, in 2022, while
markets like the UK and Japan declined 6% and 4%, respectively (Source: International
Organisation of Motor Vehicle Manufacturers (OICA)). India was the fastest-growing market
globally for tractors and commercial vehicles.
Going forward, the outlook remains positive for tractors in India,
though threats of weather disruptions like El Nino pose risks. Commercial vehicle sales
are projected to register a CAGR of 8.7% globally by 2029, reaching USD 1.7 trillion,
buoyed by increasing regulations on emissions and vehicle safety (Source: Allied Market
Research).
BUSINESS OVERVIEW
A brief summary of the operational and financial performance of the
Company is given below:
Product-Wise Volume Distribution
(No. of Pieces in Lacs)
| Product Types |
2022-23 |
2021-22 |
|
domestic |
Exports |
domestic |
Exports |
| Rear Axle Shafts |
20.03 |
17.71 |
16.4 |
17.75 |
| Spindles |
3.32 |
4.83 |
2.09 |
4.61 |
| Drive Shafts |
1.94 |
1.67 |
2.07 |
1.68 |
| total |
25.29 |
24.21 |
20.56 |
24.04 |
Segment-Wise Distribution
(No. of Pieces in Lacs)
| Segments |
2022-23 |
2021-22 |
|
domestic |
Exports |
domestic |
Exports |
| Off-Highway |
19.57 |
2.61 |
17.28 |
3.50 |
| CV |
5.72 |
21.60 |
3.28 |
20.54 |
| total |
25.29 |
24.21 |
20.56 |
24.04 |
tr>
| Geography-wise revenue from operations |
2022-23 |
2021-22 |
| Exports |
838.91 |
760.52 |
| Domestic |
720.66 |
482.27 |
| total |
1,559.57 |
1,242.79 |
|
|
(? in Cr) |
| Financial Highlights |
2022-23 |
2021-22 |
| Total Operating Revenue |
1,582.93 |
1,270.47 |
| Profit Before Depreciation, Interest and Tax |
234.12 |
181.53 |
| Financial Costs |
10.96 |
11.23 |
| Depreciation |
48.51 |
49.71 |
| Profit Before Tax |
174.64 |
120.59 |
| Tax Expense |
44.41 |
31.8 |
| Profit After tax |
130.20 |
88.79 |
| Earnings Per |
|
|
| - Basic |
60.67 |
41.36 |
| - Diluted |
60.67 |
41.36 |
KEY FINANCIAL RATIOS
The Company identified the following ratios as key financial ratios:
| Sr. No Particulars |
2022-23 |
2021-22 |
Explanation for Significant Change |
| 1 Debtors Turnover Ratio (Times) |
3.01 |
2.72 |
N.A. |
| 2 Inventory Turnover Ratio (Times) |
8.29 |
6.69 |
N.A. |
| 3 Interest Coverage Ratio (Times) |
15.93 |
10.74 |
The increase in the ratio is on account of
increase in Profitability |
| 4 Current Ratio (Times) |
1.93 |
1.78 |
N.A. |
| 5 Debt Equity Ratio (Times) |
0.28 |
0.35 |
N.A. |
| 6 Operating Profit Margin (%) |
14.70 |
14.24 |
N.A. |
| 7 Net Profit Margin (%) |
8.35 |
7.15 |
N.A. |
| 8 Return on Net Worth (%) |
18.22 |
14.93 |
The increase in the ratio is on account of
increase in Profit Margins |
MARKET AND BUSINESS OUTLOOK IN 2023-24
The outlook for the tractor industry remains good in 2023-24, thanks to
Government endeavours aimed at enhancing agricultural productivity and profitability.
Advancements in tractor technologies, such as GPS and telematics, are expected to further
accelerate demand. The commercial vehicle segment is set to experience robust expansion,
primarily fuelled by the flourishing e-commerce and logistics industries. The increasing
need for effective goods transportation, coupled with ongoing Government infrastructure
development projects, is expected to drive a surge in sales of commercial vehicles.
Overall, both tractors and commercial vehicles are likely to witness
single digit growth in 2023-24. Favourable Government policies aimed at agriculture and
infrastructure enhancement, combined with the adoption of cutting-edge technologies, will
serve as significant drivers. Although the risks associated with unfavourable weather
conditions remain, the encouraging momentum established in recent years is projected to
endure. Tractor and commercial vehicle manufacturers are well-positioned to capitalise on
these industry tailwinds.
OPPORTUNITIES AND THREATS
GNA Axles has significant opportunities for growth and expansion, given
the expected increase in demand for tractors and commercial vehicles in India and
globally. Rising farm mechanisation, infrastructure development, and growth of
transportation services provide promising prospects to increase GNA Axles customer
base and market share. However, the Company faces stiff competition from established
players and new entrants in the automobile components industry. Fluctuations in commodity
prices, foreign exchange rates, and changes in Government policies and regulations could
adversely impact raw material costs and affect GNA Axles profitability.
human resource
GNA Axles believes its employees are the foundation for creating
endless possibilities for the business. The employees are the Companys most valued
assets and are vital to its success. It nurtures its workforce by investing in employee
empowerment through learning, development, wellness and safety initiatives, as well as
providing contemporary workplace facilities. The Company is committed to fostering a
professional culture that enables employees to grow in their careers alongside the
organisation. It continues to accelerate its value-based growth strategy and the overall
development of its personnel. It engages employees through various development and
learning opportunities, reward and recognition programmes, and career growth initiatives.
As of the end of 2022-23, the Company employed 1,421 workers. The Company aims to be an
employer of choice by building an inclusive, engaging and positive work culture that helps
employees thrive. The Company will continue investing in its people, empowering them to
reach their full potential for the mutual benefit of the employees and the Company.
quality, efficiency & delivery
Quality, efficiency and on-time delivery remained key priorities this
past year. We brought more manufacturing in-house to control quality and costs, while
meeting delivery schedules. Numerous employees were trained and certified as Six Sigma
Black Belts to drive continuous improvement across operations. Forging efficiency
enhancements helped increase capacity utilisation. Through regular vendor audits and
centralised sourcing, we optimised procurement costs, especially for steel. Packaging
initiatives focussed on meeting customer needs based on transportation mode and
destination. Overall, our multifaceted approach to elevating quality, optimising costs,
and enabling responsiveness continues to strengthen our value proposition.
technology and automation
The Company acknowledges that technology plays a pivotal role in
determining a competitive edge within the market. And so, the Company has allocated
resources for technological enhancements and processes to align with technology platforms.
This enables the Company to meet a variety of customer specifications. The Companys
forging facilities are supported by robots, and it plans to invest in automating most
production processes. This automation will optimise resource use, reduce industrial risks
to human workers, provide economies of scale, and significantly improve overall
manufacturing and product design accuracy.
INTERNAL CONTROL SYSTEM
The Company has designed and implemented internal control systems
tailored to its size and operations. These controls are integrated with financial and
operational systems to enable effective management. The Companys internal audit team
regularly reviews adherence to established internal controls, identifying potential
shortcomings or concerns, and monitoring the implementation of corrective measures where
needed. The Company provides summaries of internal audit findings and the status of risk
mitigation action plans to the Audit Committee quarterly for their oversight. Any residual
risk concerns are also presented to the Board by the Company.
CAUTIONARY STATEMENT
The Companys discussion of its objectives, projections, estimates
and expectations in this Management Discussion and Analysis may contain forward-looking
statements. Actual results could differ from those statements due to various factors like
the global economy, political stability, stock market performance, Government regulations
and taxes, economic developments and other unpredictable events. The Company is not
obligated to update any forward- looking statements unless required by law. Investors
should exercise caution when interpreting these statements.
+91-9892691696
