Jamna Auto Industries Ltd Management Discussions.

Indian Economy & Industry Overview

Demand of commercial vehicles in FY 2020-21 fell sharply due to movement of goods severely impacted by lockdown imposed across the country. Although, with improvement in economic activities, post lockdown early shoot of demand revival was visible in July 2020, firmness in demand was seen towards the end of second half of FY 2020-21. However, the demand was much lower than FY 2018-19 level. The Union Budget of 2021 is primarily focused on economic recovery and infrastructure push it augurs well for the industry. The government decision to invest heavily in road and other infrastructure will boost the demand for commercial vehicles. The budget has also announced vehicle scrapping policy to keep a check on old polluting vehicles to curb environment and air pollution. Once the policy is implemented it should gradually and systematically phase out old unfit vehicles which would eventually generate demand for new vehicles. The outbreak of Covid-19 pandemic had severally impacted supply chain causing un-availability of parts and components causing long lead-times mainly for imported parts. We expect localization of auto component manufacturing. However, threat of Covid-19 is not over yet. No country has fully recovered from the pandemic. In many countries, even a second or third wave of the pandemic has hit. India also slid into the second wave of the pandemic from March till early June, 2021. An immediate threat to current growth prospectus would be further spread of Covid-19. Much would depend as to how India minimizes impact of its second wave and in future years if it does continues. A lot will depend upon vaccine rollout, as per experts. Vaccine coverage of the population has since increased appreciably.

Company performance and overview

During FY 2020-21 the Company maintained its market position. Our cost rationalization plan has worked well and the Company has been able to reduce breakeven point less than 25% of capacity. This has helped the Company to improve margins during Covid-19 pandemic. The management continued its initiatives towards products diversification and markets expansion. We further strengthened our IT systems in After Market and also started to implement this in Chennai location. Going forward, digitization and IT integration with the existing widespread network for supplies in After-Markets will give a fillip to our Lakshya 50XT targets of new markets. To provide ease of doing business to our partners and customers we are focusing on technological advancement. We have built a digital platform for After Markets namely "Jai Digital Vistar" to empower our management, employees, fleet owners, distributors, retailers and mechanics. Jai Vistar is tailored to our needs to provide mobility solutions for all stakeholders to address their requirements and send real-time information. The platform through different mobile apps developed for each user i.e. management, sales team, distributors, retailers, mechanics and fleet owners and provides range of online services/solutions like view product catalogue, place order, track order, payments, targets, sale status, inventory status, vehicle tracking, view reports, manage and redeem rewards.

Performance of our Company during FY 2020-21 is in line with its four point Lakshya targets. For future growth and forecast details and understanding please refer to midterm plan i.e. Lakshya 50XT detailed in the Annual Report.

33% revenue from new products

In FY 2020-21, the Company achieved 34% revenue from new products as against 32% revenue in last year. During the year under review, we started manufacturing of Stabilizer Bars. Management has also launched springs and lift axle allied products in the after-market like U-Bolt, Center Bolt, Bush, Hanger Shackle/Bracket, Spring Pin and Air bellow. These allied products will also add to a robust product mix.

33% revenue from new markets

In FY2020-21, the Company achieved 29% revenue from new markets against 24% revenue in last year.

The managements continued efforts has been to expand Companys market share in the After-Markets. During the year under review, we have broad based the network for better supply penetration in the after-market by adding channel partners in the supply chain. The Company now cater to After Markets supplies through four regional plants respectively at Yamuna Nagar in north, Jamshedpur in east, Malanpur in west & center and Chennai in south.

33% Dividend Payout & ROCE

During the FY 2020-21 the Company improved RoCE at 23% as compared to 16% in last year. The Company continues to follow rule of funding capital expenditure through internal accruals, which supports the improvement in RoCE. FY 2020-21 is the 11th consecutive year of dividend payment. During the year also the Company exceeded Lakshya target of 33% dividend payout ratio and paid dividend of 41% of PAT against Lakshya target of 33%. The Company paid interim dividend of H0.25 on equity shares of H1 each. Directors have also recommend a final dividend of H0.50 per equity shares of H1 each. After payment of final dividend, the total dividend paid for FY 2020-21 would be H 0.75 per equity share.

Key Financials

Following are the key financials of the Company at standalone and consolidated levels. For details members are requested to see five years financial summary:

(Figures in H lakhs)

Standalone Consolidated
Particulars FY 2020-21 FY 2019-20 FY 2020-21 FY 2019-20
Revenue from Operation 1,05,270.66 1,05,882.11 1,07,947.84 1,12,895.15
EBITDA 14,106.49 12,009.25 14,239.28 13,026.89
PBT 10,265.11 6,855.49 10,088.18 7,164.12
PAT 7,671.81 4,792.40 7,296.29 4,787.97
Networth 58,871.67 52,175.35 58,000.66 51,670.65
Standalone Consolidated
Ratios FY 2020-21 FY 2019-20 FY 2020-21 FY 2019-20
Debtors Turnover (no. of days) 26.6 53.3 23.0 62.1
Inventory Turnover (no. of days) 54.9 55.6 57.5 58.0
Interest Coverage Ratio (in times) 24.2 6.40 18.0 5.2
Current Ratio (in times) 1.4 1.4 1.4 1.3
Debt Equity Ratio (in times) 0 0.30 0 0.3
EBITDA Margin (in %) 13.40 11.34 13.19 11.54
PAT Margin (in %) 7.30 4.50 6.8 4.5
Return on Net Worth (in %) 12.94 9.21 12.52 9.28

Risk Management

Risk management is an inherent part of the Companys business and management is proactive in terms of managing risks. The nature of its business makes the Company susceptible to various risks that might arise due to economic, political, legal, environment, people, operational, currency fluctuation etc. However, the Company has a risk management strategy that is governed and monitored by the Risk Management Committee. The Risk Management Committee regularly reviews the key risks and monitors the mitigating measures on a timely basis.

Internal Controls

The Company has put in place strong internal control, systems and processes and keeps reviewing their adequacy from time to time. The Company has also initiated digitization of standard and customized internal controls through RAMCO ERP with built in authority levels for access and master controls. All the business functions are being digitized and also it is all integrated which is giving us an edge to face the volatile market by having right information to right people to take right decision. The digitalization is helpful for diversifying business portfolio and also enhancing the horizon with ease and at the same time with all the controls in place. The Company places strong emphasis on best practices in corporate governance. There is a strong system of both internal review as well as review by external independent auditors i.e. M/s Protivity, Risk and Business Consulting who carry-out periodic audits of all locations and their reports are reviewed by Audit Committee.