jamna auto industries ltd share price Management discussions

Commercial Vehicle Industry overview

In FY 2022-23, the commercial vehicle sector performed well as demand grew approximately by 34% over previous year, close to pre-Covid peak level of FY 2018-19. Growth in infrastructure development spending, road construction projects, mining, e-commerce and construction activity is primarily driving demand for commercial vehicles. The industry ended the year on a strong note, with impressive growth among OEMs as well as after-market. The scrappage policy is also likely to generate further demand for CV sales. However, supply chain disruptions and fluctuation in commodity prices remain a challenge which company has been managing it well.

Companys performance

FY2022-23 was another good year for the company, with consolidated revenue of Rs.2,325 crore with EBITDA of Rs.273 crore and PBT of Rs.229 crore. We will continue to improve our ability to outperform the market and achieve leadership through continuous innovation, improved product design, value engineering, and the addition of new markets and products.

JAI has been the pioneer in introducing parabolic springs in India. The parabolic penetration rate of the Indian CV industry is expanding rapidly. We have converted many of our production capacity of conventional springs into parabolic springs. The major advantages of parabolic springs include weight reduction, ride comfort and longer life span. Due to the advantages of parabolic springs, original equipment manufacturers are converting traditional leaf springs to parabolic springs at a faster pace leading to opening of new avenue for the company which has better margin potential. The Company is by far one of the largest suppliers of parabolic springs in the market. In order to take advantage of the increased market share, the Company is working on increasing its production capacity by adding new parabolic machines in existing plants and setting up new plants for parabolic springs. Work has been ongoing on a proposed factory of one of our wholly owned subsidiary i.e. Jai Suspensions Limited (JSL) in Adityapur (Jharkhand). After establishing its position in leaf and parabolic spring products, the Companys focus is to expand in the new products and markets. We are concentrating on product diversification to address all kinds of suspension products. Our diverse product portfolio now covers a wide range of product categories including leaf springs, parabolic springs, Z springs, lift axles, trailer suspension, air suspension, springs allied products, lift axles allied products, suspension allied products, stabilizer bars, agriculture implements, machined products and other high consumption parts i.e. brake linings, clutches, water pumps, bearings, jack roads, universal joints cross. In FY 2022-23, 44% of the revenue came from new products. JAIs, air suspension and lift axles are witnessing increased market penetration. We have recently introduced range of suspension solution and axles for air suspension. We are focusing on maximizing load-carrying capacity of trailers. With lift axles, we have improved the load distribution of the 55 ton trailer and now the trailer can run on two axles, saving four tyres.

In February, 2023, our another wholly owned subsidiary i.e Jai Automotive Components Limited (JACO) started supply of Nodo Brackets i.e. machined products, from its first factory at Rudrapur, Uttrakhand, to Ashok Leyland and sample order expected to be received for Bogie Bracket. In April 2023, JACO also started production of agriculture implements i.e., rotavator & cultivator at its second factory in Dera Bassi, Punjab. This enables us to penetrate deeper into different markets with broader range of new products, as well as new segments.

In order to flow effortlessly in the automotive industry which is cyclical in nature, JAI invests a lot of resources in the aftermarket not only in India but on foreign shores too. The aftermarket in India & export are estimated to be larger than the domestic OEM market and is largely unstructured. This is a core area of our focus today which has lot of growth potentials. JAI has expanded its distribution network in India and abroad and adopted new branding strategies. In the aftermarket export segment, during FY 2022-23 we have added two new countries Portugal & Hungry and new distributors in Germany, Russia, Turkey and the United Kingdom for springs and allied products. Trademark "JAI" is registered in 15 countries across the world. The JAI brand is fast becoming the most reliable and dependable option in the after markets both in india as well as overseas. Brand- building and promotion in the after markets have been in full swing. JAI actively participated in the best of auto-component industrys events and received a good response. ‘JAI Shoppe opened in Delhi Transport Nagar is fully operational and we have organised mechanic-meet in order to have direct interaction. JAI brand is now fully recognized in the after-market domain. Our air suspension and lift axles are witnessing increased market penetration and sale of allied products in after market has started to pick up. In FY 2022-23, around 20% of the revenue came from new markets.

During FY 2022-23, an interim dividend of Rs.0.80 per equity share was paid. A final dividend of Rs. 1.10 per equity share of Rs.1 each is also recommended by the Board of Director for approval in forth coming annual general meeting. With payment of final dividend, the total dividend payout for FY 2022-23 would be 45% of the PAT. In the FY 2022-23, the RoCE is increased to 30% (34% of Net of Bill Discounting). We follow the rules of funding capital expenditures through internal accruals. As a result, all planned capital investments and expansions are funded solely through internal accruals, which helps the company to keep at a healthy leveraged level.

ICRA Limited ("ICRA") has maintained long term credit rating of the company as [ICRA]AA- (pronounced ICRA double A minus) and short term rating as [ICRA]A1+ (pronounced ICRA A one plus). ICRA has also given Commercial Paper (CP) issue of the Company rating as [ICRA] A1+ (pronounced as ICRA A one plus).

Key Financials

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

Standalone Consolidated
FY 2022-23 FY 2021-22 FY 2022-23 FY 2021-22
Revenue from Operation 2231.83 1649.04 2325.32 1717.88
EBITDA 251.02 211.51 272.89 230.80
PBT 212.81 174.53 229.38 191.27
PAT 157.76 130.46 168.37 140.80
Net Worth 771.97 683.08 784.27 684.68
Standalone Consolidated
Ratios FY 2022-23 FY 2021-22 FY 2022-23 FY 2021-22
Debtors Turnover (no. of days) 28.0 51.0 28.8 42.4
Inventory Turnover (no. of days) 49.4 54.3 50.3 57.5
Interest Coverage Ratio (in times) (1341.6) 92.8 93.0 18.0
Current Ratio (in times) 2.0 1.5 2.1 1.3
Debt Equity Ratio (in times) 0.0 0.2 0.0 0.2
EBITDA Margin (in %) 11.25 12.83 11.74 13.19
PAT Margin (in %) 7.07 7.91 7.24 6.76
Return to Net Worth (in %) 20.44 19.10 21.47 20.56

Risk Management

The management has an ongoing approach to risk management, i.e. identifying, analyzing, mitigating or reducing risks and implementing an effective risk management framework for this purpose. The risk management policy for the company is designed to review risks on a regular basis and provides a risk management framework for the timely and effective monitoring and implementation of risk mitigation measures. Risk management policy is governed and overseen by the Risk Management committee. One of the major objectives of the Companys 5 year plan namely "Lakshya 50XT" is to de-risk the Company from cyclical CV market and product.

Internal Controls

The Company has in place appropriate internal financial controls, as well as other controls systems and procedures to safeguard its assets, prevent and detect fraud and errors, ensure accuracy and completeness of accounting records and timely preparation of reliable financial information. M/s Protiviti Risk & Business Consulting is Companys internal auditor. Internal auditor independently assesses the adequacy of internal controls, procedures and concurrently audit majority of the transactions in value terms. The internal auditors report is submitted to the Audit Committee.