Honda India Power Products Ltd Management Discussions

domestic business generator

• India today is the 5^th largest economy in the world and is striving to become 3^rd largest economy by 2027. Governments initiative to digitalize the economy and create a world class infrastructure to support the fastest growing economy in the world has driven the need for uninterrupted power for all segments in the society. While power outages related to weather disturbances continued to fuel the demand for generators for backup power, usage of portable generators for primary applications like mobile care vans, OB vans and drone charging in the agricultural fields used for Pesticide spraying is on the increasing in line with Governments vision to "Double farmers incomes by 2030" by increasing mechanization to drive efficiency in production. As a result of these factorsing generator sales could increase over last year.

Corporate and Institutional demand was up in the year due to enhanced spending on infrastructure and agriculture spraying.

Opportunities

• Demand for portable generators for applications like Drone charging, camping for leisure and recreational purposes besides weather related disturbances is expected and will help your company to maintain its dominant position in the portable generator category and continue to offer optimal power solutions to a diverse group of customers across India.

• Economic activities and operations, especially in small and medium size businesses, with expected portable power back up, demand is on the growth path.

• The Companys promotions focus mainly on urban, semi-urban & rural markets to leverage pent up lifestyle / comfort requirements by consumers is expected to help in the Company penetrate in fuel efficient and reliable offerings.

Concerns

• Peak power deficit continues to be within acceptable levels, primarily due to adequate power generation. Interim demand for our products in urban areas driven by long-haul power cuts has thus been on reducing trend.

• Consumer spending is low due to high CPI inflation and higher interest rates.

Outlook

• Normal portable power back up demand and use of generators for new applications will help your Company to maintain its leadership position in the generator category.

GENERAL PURPOSE ENGINES AND WATER PUMPING SETS

• Unseasonal and uneven stretches of monsoon led to a rise in Water Pump sales in the financial year 2023-24, especially in eastern, central, and southern markets. State and Central Governments ongoing support programs towards farming and fisheries sectors were within acceptable levels but the overall process was slow with respect to release of funds by the Government.

• Two new water pump models launched in previous financial year, helped the Company to strengthen its market leadership position with the existing setup of 1.5 inch & 2-inch water pumps.

• 2-inch water pump sales in the financial year crossed a milestone of 50K+ units which has helped the Company to maintain its leadership position in water pump segment.

• Construction segment mechanization, primarily towards small, portable, and compact machines was good due to focus on overall infrastructure growth.

• In the month of March 2024, your Company launched concrete vibrator for the construction industry thereby providing a standardized solution for a critical construction process. The Company is making efforts to increase its footprint in the construction segment by introducing more of such engine driven applications based on its success in other global markets and improve the efficiency and speed of construction in line with Governments direction to create a world class infrastructure to maintain the momentum of fastest growing economy in the world.

• The Companys targeted reach in coastal areas and waterways, by expanding engine driven long tail boat application for small and medium sized boats navigating the inland waterways and offshore fishing besides power winch application for retraction of the fishing nets, helped to accelerate shift from manual to mechanized process.

• Company focused on introduction of dual fuel (Petrol & CNG) engine for conversion of polluting diesel engines to environment friendly CNG fuel powered engines for boat application in the holy city of Varanasi to support Governments pilot project to clean Ganga River and will continue to work in this direction to expand the scope of this application in other parts of the country and contribute towards sustainable development of the inland waterways.

• The Governments planned investment in irrigation projects is expected to help fuel-based engine demand. Continued supply chain requirements towards agriculture produce / products ensured demand and need for farm operation products and services. Companys demonstration activities, supported through vans and manpower deployment, for new products recently launched in the agricultural markets are well received and is helping the farmers to reap the benefits of portable and cost effective solutions for their timely land preparation, deweeding and irrigation needs.

Opportunities

• Increasing investments in infrastructure was one of the key factors bolstering the growth of the construction market in India.

• Harnessing available surface water for irrigation of agricultural crops will continue to drive demand for portable water pumps in the agricultural segment.

• Construction mechanization, through portable engines run applications and farm mechanization products such as engines, water pumps, brush cutters, power tillers and crop harvesters will accelerate shift to mechanization with decreasing farm labour and will fuel the demand of portable machinery. Expected continuity in Government support will provide much needed support for our product portfolio and offerings.

• Growing awareness to address environmental concerns brings in demand for more fuel-efficient 4 stroke engine powered applications.

Concerns

• Subsidy policy by the State and Central Government and its operational complexities is a point of concern leading towards delay in purchase by end customers. Your Company endeavors to closely engage with various stake holders in Government through its field teams to have a much deeper understanding of the process and contribute towards acceleration of the implementation of Government schemes to help farmers in their buying decision to acquire portable farm solutions for their various agricultural processes.

Outlook

The infrastructure sector in India is expected to generate better momentum in the next few years due to increased investment in infrastructure such as national highway facilities, warehousing, airports and urban/rural housing projects.

The Company is pursuing to develop multi-channel structure in the country across various segments to develop application related products and equipment. Tying up with small, medium and specialized partners and OEMs is expected to build much-needed ecosystem of cost competitiveness and application specific product, sales and services.

brush cutters

• Hondas range of fuel efficient and reliable 4 stroke Brush cutters are specifically suited for optimal solution for various farm activities like de- weeding and crop harvesting.

The Company maintained its leadership position in 4stroke Brush cutter segment with major stronghold in North & South India markets.

• Our complete portfolio of fixed shaft, flexible shaft and high-powered variants provide matched solutions to the needs of professional users.

Concerns

• Subsidy policy by the state and Union Government and its operational complexities is leading to delay in purchase by the end customers.

• Influx of low cost imported brush cutters mainly from China has destabilized the pricing in the market. As Company, we would again try to explain about our 4 stroke advantage, delivering unmatched savings from total cost of operation point of view besides highlighting the product quality aspects through a proactive marketing campaign in focus markets, that will support us to stabilize the market price & maintain leader position.

tillers

• The Companys focus towards agriculture mechanization was strongly led with its expanding line-up of Power Tillers.

• The financial year 2023-24 was very challenging for the overall tiller market due to delay in implementation of various subsidy schemes of Central & State Governments due to complex disbursal process leading to lower end customer purchase. End customers with-held their purchases in anticipation of scheme release in season time which got delayed.

export business

• Overall Export Business was 99% of the plan .

• Engine-OEM application business from North America was 100% and as per plan and 4% over last year.

• Generator business from USA, Europe & Canada was major business driver amongst genset-category. Genset business from Europe, South America, Africa, and Japan has also grown over last year.

• The Company introduced 2-3KVA genset model in Nepal and Sri Lanka.

• Water Pump and Tiller are still in introductory stage in Asia Oceania Region. Concerns

• Political uncertainty in certain countries may affect export business.

• Stricter CARB/EPA /CPSC regulations are impacting the prospect sales.

• Competing with global supply chains and various accessibility routes, especially in new and emerging markets continues to place price competitiveness a major driver and challenge for success.

• Overall reduction in demand in US market for Engine based products like High Pressure Washer may affect the demand of engines being exported by the Company.

Outlook

• Company is engaging with channel partners to develop and nurture the gasoline fueled Tillers, Engines and Water Pumps.

internal control system

Your Company remains committed to continually improve the effectiveness of internal control systems for business processes and has adequate internal controls in place, in line with the size and operation of the Company, designed and developed to safeguard its assets from unauthorized use or losses, conduct its business operations efficiently in line with companys policies, maintain accuracy, completeness & reliability of the financial and accounting records and compliance with laws and regulations.

The Company oversees the efficacy and functioning of its internal financial controls through periodic internal audits and multiple checks and balances for expenditures and budgetary controls.

financial performance

Profit before Tax and Exceptional Items for the year was Rs. 11,975 Lakh as against Rs. 13,290 Lakh in 2022-23.

Key Financial Ratios of the Company which has significant change (i.e., more than 25% change) compared to last year are as follows:

The return on net worth during the financial year 2023-24 was 11.91% as compared to 12.10% in the financial year 2022-23.

For a detailed explanation of above change please refer to Note 34 of notes to Financial Statement.

human resources

Our Company, for more than 38 years, is focussed towards realizing individuals aspirations while simultaneously broadening and intensifying our commitment to fostering greater positive impact. The business landscape around the world is constantly evolving. Organizations have become more responsive to change - be it climatic, political or economic. Your company remains equitable by its strategic emphasis on Environmental, Social, and Governance (ESG) considerations by promoting responsible manufacturing practices, and conducting conscientiousness business operations meticulously integrated with sustained and targeted initiatives.

Your Company is powered by people. We constantly strive to stimulate and harness a critical competitive edge. Nurturing talent for the future is essential for our continued success. We create ample opportunities for our people to learn and grow in their careers by consistent investment to unlock the leadership potential and help drive excellence at the company. With the objective of capability building, developing a future ready workforce, and fostering togetherness at the workplace, your Company implements multiple training and engagement programs on an ongoing basis.

Our employees are our brand ambassadors of our culture and values. The vigour, dynamism, energy and ideas brought in by our employees every day delivers not only, service excellence, but also play a significant role in fulfilling our organizations aspirations. In turn, we engage with our employees, by focus on their health & safety, celebrate innovation and out-of-the-box thinking and reward our employees for their performance.

The recent implementation of SAP online system has reaped better results in terms of employee experience and overall management of the process. This year further enhancement has been made by introducing online compensation statements for all employees. This enhancement has made our appraisal process completely paperless.

The industrial relations scenario continued to be largely positive across the Organization. The sustained efforts towards building a congenial work culture resulted in zero production loss in the Financial Year 2023-24 and helped create a collaborative, healthy and productive work environment.

The Company is an equal opportunity provider with a strong focus on fostering Diversity and Inclusion (D&I) at the workplace. There is no unfair treatment concerning employment, for reasons of gender or disability with a focus to constantly strive for improved gender diversity. Your Company promotes a collaborative, transparent and participative culture with a stronger focus on well-being, which has consistently helped your Company build trust and harmony. Our CSR approach is to bring sustainable and inclusive change in society, through our various long-term social initiatives, positively impacting child education & environment.

The Company as on March 31, 2024, had 742 associates.

information technology

Your Company is comprehensively embracing information technology to leverage its potential and sail through the changes. Business operations continuity being the utmost priority is focused through synergetic initiatives towards internal as well as external multi-level security through data encryption. Our robust IT management system minimizes threats and prevents attacks, through a continuous cycle of vulnerability assessment

and remediation, During the Financial Year 2023-24 the Company did not

face any cyber threats or data, breaches to safeguard our data and brand reputation.

cautionary statement

Statements in this Management Discussion and Analysis Report describing the Companys objectives, projections, estimates and expectations may be forward looking statements within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied. Important developments that could affect the Companys operations include significant changes in political and economic environment in India and key markets abroad, tax laws, litigation, labor relations and interest costs.