GNA Axles Ltd Management Discussions.


In 2018, the global economy began its journey on a firm footing with estimated global economic growth of 3.6%. (Source: World Economic Outlook by International Monetary Fund (IMF). During the second half oHf 2018, the global economic activity slowed notably which affected major economies of the world. The decline in this rate of development was also owing to impending US-China trade dispute and some slowdown across developed markets.

The Asian economies showed growth at 6.4% thus showing their steady growth in 2018. The Growth of China declined from 6.9% on 2017 to 6.6% in 2018. (Source : IMF) whereas Indias economy expanded at 7.1% in 2018.

Indian Economy

India remains one of the important growth drivers of the world. The Indian economy recorded a growth rate of 6.8% during 2018-19 compared to 6.7% in the previous fiscal (Source: The Economic Times). Although, the GDP has increased from the last fiscal, the overall momentum witnessed a temporary slowdown owing to declining growth of private consumption, tepid increase in fixed investment, and muted exports. Despite this, India has emerged as the fastest growing major economy in the world and is expected to be one of the top three economic powers of the world over the next 10-15 years, backed by its strong democracy and partnerships (Source : IMF).


Commercial Vehicles

Commercial Vehicle sector, mostly a cyclical industry, for the first time crossed one million domestic sales mark in FY18-19, even as the party seemed over in the second half of the fiscal. The segment was mainly driven by demand due to new infrastructure projects and fleet replacement. With a growth of 17.6%, the commercial vehicle manufacturers dispatched 1,007,319 units from their factories across India in the mentioned period compared to 856,916 units in FY18, says the latest data released by Society of Indian Automobile Manufacturers (SIAM).

Interestingly, the two halves of the year experienced sharpest contrast. The H1 of FY19 saw the segment obtaining a strong double-digit growth of 37.82% which shrank to 3.3% in the H2 of the fiscal. The growth rate in the H2 moderated mainly due to revised axel norms, liquidity crunch at NBFCs, higher interest rates coupled with increase in insurance costs and uncertainties due to upcoming general elections. The axle norm increased the freight carrying capacity of medium and heavy commercial vehicles (M&HCV) by 20% that led to lower demand for new trucks.


The Indian tractor industry witnessed a double-digit growth for the third consecutive year in financial year 2018-2019. However, the pace was slowest in the last three years. In FY19 tractor sales grew by 10.24% at 878,476 units as compared to 20.52% and 15.74% in FY18 and FY17 respectively. On a yearly basis the growth rate was almost halved in FY19 over FY18. The growth was marred due to weak sentiment in later part of the year as sales slipped into negative in February and March 2019 on year-on year (y-o-y). This ensued into the fourth quarter performance posting a year on year decline of 5.78%.

Financial year Total Sales % Change
FY17 661,195 15.74
FY18 796,873 20.52
FY19 878,476 10.24

Tractor sales that mirrors rural sentiment was struck due to erratic rainfall coupled with delayed sowing and low production of rabi crops in the last fiscal. According to National Bulk Handling Corporation (NBHC) report, the rainfall during the June-September 2018 monsoon season in the country was ‘below normal with quantitatively 91% of the long period average. Deficient northeast monsoon rains and dry conditions led to decline in sowing of rabi crops by 4%. Scanty rainfall resulted in significant fall in sowing areas of major crops in states of Gujarat, Maharashtra, West Bengal, Rajasthan, Karnataka, Andhra Pradesh, Telangana and Tamil Nadu," NBHC report said. Low crop yield means dampened rural sentiment and reduced farmer income, which thereby means less expenditure on farm machinery and equipment. Another report that tracked region wise sales of tractor pointed out that weak demand was observed majorly in the western and southern pockets of the country in FY19. Volume in western states (including Gujarat and Maharashtra) declined by 8% while it went up by merely 4.4% in southern states, said Kotak Institutional Equities report.

Future outlook:

Crisil expects to have a healthy growth rate for CV in the year 2019-2020 on the back of implementation of BS-VI emission norms w.e.f April 2020 which we expect will result in pre buying of the Commercial Vehicles and thus will agur demand for the Companys products. With the formation of stable government at the centre and the continuity of the thrust of the government on the infrastructure development, roads, mining activities and construction will also help the CV sector to grow and thus will be beneficial for the Company. As your company caters to the tractor segment also, any increase or decline in the tractors has an impact on the Companys revenue. The tractor industry is expected to grow at a CAGR of 6-7% in next 4-5 years, as more and more farmers will come under mechanised farming and a governments support through farm loan waiver, direct farm income support, increase in the MSP will help the domestic tractor industry which in turn will help the Company in increasing its revenue.

Auto Components Industry

The $ 51.2 bn Auto Components industry in India is expected to grow to $ 200 bn by 2026 (Source: Invest India).The growing presence of global automobile Original Equipment Manufacturers (OEMs) in the Indian manufacturing landscape has significantly increased the localization of their components in the country. India has become the preferred designing and manufacturing base for most global auto OEMs for local sourcing and exports. Further, the consumption of auto components has been tremendous in a country, valuing at Rs 3.2 trillion mainly driven by passenger vehicles and two-wheelers (Source: Systematix research). The future of the auto component industry is being shaped by multiple trends, policies and discontinuities. The factors that propel the growth are favorable trade policy, 100% FDI allowed and no restrictions on import-export, cost competitive advantage among others.

Business Overview

A brief summary of the operational and financial performance of the Company is given below:

Product wise volume distribution

No. of pcs in Lacs


Product types Domestic Exports Domestic Exports
Rear Axle Shafts 15.14 11.51 14.12 8.61
Spindes 1.72 4.14 0.77 2.93
Drive Shafts 2.03 1.34 2.11 0.90
Total 18.89 16.99 17.00 12.44
Segment-wise Distribution
No. of pcs in Lacs


Segments Domestic Exports Domestic Exports
Off Highway 14.50 2.72 13.82 8.61
Commercial Vehicles 4.39 14.27 3.18 9.50
Total 18.89 16.99 17.00 12.44


(Rs. in Crs)
Geography-wise revenue 2018-19 2017-18
Domestic 436.63 369.82
Exports 491.65 300.31
Total 928.28 670.13
(Rs. in Crs)
Financial Highlights 2018-19 2017-18
Total Revenue from Operations 928.28 670.14
Profit before Interest, Depreciation and Tax 145.48 105.92
Interest 8.10 7.09
Cash Profit
Depreciation 34.73 24.80
Profit Before Tax 102.64 74.02
Tax Expense
- Current 35.50 23.60
- Deferred 1.28 -0.46
Profit after Tax 65.86 50.88

Human Resource

The Company believes that human resources is the strong foundation for creating many possibilities for its business. With the robust mix of experience and young talent Company emphasis on continuous enrichment of knowledge of employees. We nurture our people by investing in their empowerment through learning and development, wellness and safety besides providing contemporary workplace facilities. Continuous emphasis is laid on training and development of all the employees. The skill levels of the workforce have been honed continuously by conducting in-house training programmes. The skills, experience and passion of our people facilitate deeper customer understanding and engaging relationships and strengthen our brand value as a preferred employer. We continue to step up efforts to accelerate our value-based growth strategy and the overall development of our employees.

Quality, Efficiency & Delivery

During the year under review, we undertook various measures to reflect our strong endeavour towards quality commitment, efficiency and deliveries.

In-house execution of manufacturing processes to monitor product quality, control production costs and maintain delivery schedules Trained and certified several employees with Six Sigma Certified Black Belts (Level I) Improving forging efficiency to increase capacity utilisation Better relations with vendors for achieving quality, costs and delivery objectives with the help of regular vendor audits Centralised approach towards sourcing and vendor management ensuring economies of scale in raw material procurement, especially steel Special focus on products packaging to meet customers requirements. Due consideration given to the mode of transportation and destination, ensuring timely deliveries.

Technology and Automation

Technology define ones competitive edge in the market. The Company realizes that and has been investing in technological upgradation and also fine-tuning the systems and processes to ensure that those are in sync with the technology platforms. Thus, helping us provide a variety of customer specifications. The forging facilities are supported by robots. We intend to invest in automation for most stages of production process. This will help ensure optimal use of resources, reduction of industrial risk to human workers, economies of scale and significantly higher accuracy in the overall manufacturing and design of products.

Internal Control Systems

The Company has devised and designed proper and adequate Internal Control Systems which are commensurate with its size and nature of operations to ensure that: a. All the Accounting Standards and other applicable laws and statutes, policies of the Company are followed; b. The Transactions that are recorded are authorized, accurate and complete in all respects; c. All the available resources of the Company are put to most effective use while safeguarding all the assets of the Company. The Company has complied with the specific requirements as laid out under Section 134(5)(e) of the Companies Act, 2013, ("Act")which calls for establishment and implementation of an Internal Financial Control framework that supports compliance with requirements of the Act in relation to the Directors Responsibility Statement. The Internal Audit plan as approved by the Audit Committee of the Board and then the same it implemented at various levels in the organization. The Internal Audit function of the Company reviews the Compliance of the established designs of Internal Control and the shortfalls and discrepancies, if any, are looked upon into and tracked for closure. The summary of the Internal Audit findings and status of implementation of action plans for risk mitigation, are submitted to the Audit Committee every quarter for review, and concerns around residual risks if any, are presented to the Board.

Cautionary Statement

Statements in this Management Discussion and Analysis Report describing the Companys objectives, estimates etc. may be "Forward looking statements" within the applicable laws and regulations. Actual results may vary from these expressed or implied; several factors that may affect Companys operations include, Government policy and several other factors. The Company takes no responsibility for any consequences of the decisions made, based on such statement and holds no obligation to update these in future.