Jamna Auto Industries Ltd Management Discussions

Commercial Vehicle Industry overview

The commercial vehicle industry experienced almost flat growth in FY 2023-24. The industry started with a positive note supported by continued increase in infrastructure spending and overall healthy macroeconomic improvement. After the strong festive CV sales, the demand momentum slowed down on the backdrop of a pause in infrastructure spending. The industry is also shifting toward higher tonnage trucks trailers that can carry more cargo. As sales of heavy duty trucks has grown, this impacted demand growth in terms of the number of units but increased the overall load carrying capacity in the industry. Long-term CV demand looks positive given the strong macroeconomic outlook, good monsoon prospects and resumption of infrastructure spending. The governments scrapping policy, once implemented, will also further stimulate CV demand.

Companys performance

FY2023-24 was a good year for the Company, the Company maintained its market position. The Company achieved consolidated revenue of Rs 2427 crore, EBITDA of Rs 331 crore and PBT of Rs 283 crore as against consolidated revenue of Rs 2325 crore, EBITDA of Rs. 273 crore and PBT of Rs 229 crore in the previous FY.

Our focus on generating higher revenue from diversified markets and products provides the foundation for our continued growth momentum. We will continue to take measures to rationalize costs, diversify products and expand markets to achieve our Lakshya.

Markets

Aftermarket in India & Exports is core area of focus for us and we invest a lot of time & resources in our aftermarket operations. The results were encouraging, with our aftermarket operations growing by about 10% in FY24. FY2023-24, we achieved around 21% revenue contribution from new markets.

The Company has dedicated its Yamuna Nagar plant for production of aftermarket parts only, this will scale up our supplies in the aftermarket. The Company has a strong pan-India network to facilitate this centralized manufacturing.

Distributors, dealers, retailers and mechanics are important links in the product supply chain. An efficient supply chain enables companies to reach a wider customer base and helps in demand generation. In FY24, we continued to work with our partners to strengthen our supply chain and generate further demand.

To expand our reach in the market, we also plan to increase our partners from present level of 300+ distributors, 14000+ retailers and 16000+ mechanics.

In Exports we are expanding our customer base to support revenue diversification. Similar to our Yamuna Nagar plant for aftermarket, the Hosur plant caters exclusively to the export market. Our products are exported to 17 countries across the world and the export turnover in FY24 stood at Rs. 40 crores. In FY24, the company started exporting springs to UD Truck and discussions with some other overseas OEMs are at advance stages for product development. The company has added some large distributors in Europe to supply springs and parts.

Products

Going forward, with the introduction of advanced technology vehicles, the markets gradually shifting towards technology products. As a technology-driven company, we have an advantage over our competitors. Parabolic spring is one of technology products we offer. OEMs are converting conventional leaf springs to parabolic springs at a faster rate, which is also increasing the demand for parabolic springs in the aftermarket. Our Hybrid Springs and BS VI springs range have a distinct competitive advantage in the market.

Our air suspension, lift axles and allied products are witnessing increased market penetration. We are using our existing aftermarket network for distribution and sale of allied products. The Company has also recieved business from Ashoka layland to supply slipper suspension for their trucks as per specification and design shared by them. We have also got another buisness of drop axles for Lift axles kits from Ashoka Leyland. We have also recieved letter of intents for development of stabiliser barn for OEM customers of Daimler, Volvo and Mahindra & Mahindra.

We are concentrating on product diversification and moving towards various suspension products by adding new products. Our product range covers 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. The revenue contribution from these new products has been growing and in FY2023-24, we achieved 47% revenue contribution from new products. We are continuously expanding our supply of high value-added parabolic springs to OEMs and the aftermarket. Our plans to increase parabolic spring capacity are well on track, work on the proposed plant of Jai Suspensions Limited at Adityapur in Jharkhand is at an advanced stages and expansion at the Companys Chennai Unit is also completed. Plans are also there to set up parabolic spring manufacturing plant at Indore.

Our lift axles, trailer axles and air suspensions have been widely accepted in the market, including OEM customers of Ashok Leyland, Mahindra & Mahindra, Volvo Eicher Commercial Vehicles and Daimler India Commercial Vehicle. In FY24, we optimized trailer air suspension and developed a new friction welded trailer axle. Optimization of air suspension resulted in weight reduction of about 30kg per suspension, which will help customers to carry additional cargo. The friction welded trailer axle has successfully been tested and approved on rigs. These trailer axles are currently under field validation. Compared to rigid truck, trailer offers long distant large volume delivery at low cost. Improved road quality has supported transportation through trailers. Logistics companies now offer specialized transportation in a hub-and-spoke model, creating demand for trailers.

One of our subsidiaries, i.e. Jai Automotive Components Limited is setting up a plant at Indore, M.P. for manufacturing U-bolt, Hanger Shackles, Spring Brackets and Spring Pin/King Pin. Work on the proposed plant is at an advanced stage. These products will increase our content per vehicle.

Credit Rating & ROCE

Jamna Auto Industries Limited at standalone and consolidated level maintain a strong credit profile. In April, 2024, the ICRA Limited re-affirmed the Companys rating as follows:

Instruments Rating

Long term Fund based- Term Loan [ICRA]AA- (Stable) Long term/Short term- Fund based/ [ICRA]AA- (Stable)/ Non fund based working capital [ICRA]A1+ Commercial Paper [ICRA]A1+

The rating reaffirmation underlines the Companys strong credit strengths and adequate liquidity position. In the FY24, the RoCE is 31% (34% of Net of Bill Discounting). The Company does not have any long-term debt and continues to enjoy healthy free cash flow. We follow the rules of funding capital expenditures through internal accruals. All our capital expenditure plans are being funded from internal accruals.

Dividend

During FY24, the Company paid an interim dividend of Rs.1.10 per equity share. A final dividend of Rs 1.30 per equity share of Rs.1 each is also recommended by the Board of Directors for approval in forth coming annual general meeting. With payment of final dividend, the total dividend payout for FY 2023-24 would be 46.60% of the PAT.

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: Rs. in crore

	Standalone		Consolidated
Particulars	FY	FY	FY	FY
	2023-24	2022-23	2023-24	2022-23
Revenue from	2360.95	2231.83	2426.77	2325.32
Operation
EBITDA	358.01	251.02	331.29	272.89
PBT	324.28	212.81	283.26	229.38
PAT	249.95	157.76	205.41	168.37
Networth	935.43	771.97	903.18	784.27

 

	Standalone		Consolidated
Ratios	FY	FY	FY	FY
	2023-24	2022-23	2023-24	2022-23
Debtors	21.4	28.2	20.7	27.5
Turnover (no. of days)
Inventory	49.6	49.4	51.5	50.1
Turnover (no. of days)
Interest	(48.0)	(1341.6)	75.8	93.0
Coverage Ratio (in times)
Current Ratio	1.6	2.0	1.6	2.1
(in times)
Debt Equity	0.2	0.0	0.2	0.0
Ratio (in times)
EBITDA Margin (in %)	15.16	11.25	13.65	11.74
PAT Margin (in %)	10.59	7.07	8.46	7.24
Return to Net Worth (in %)	26.72	20.44	22.75	21.47

ESG

ESG principles play an important role in our planning and work, and we will continue to adopt sustainable business practices. As a responsible corporate citizen we ensure and take efforts for natural resource conservation, reuse, recycle, waste minimization.

Toward energy savings, our R&D team continuously works on bringing value engineering through product design optimization, leading to lower fuel consumption, less raw material requirement and lower carbon footprint. As previously informed, our new friction welded trailer axle has reduced the vehicle weight by 30 kg. To address the problem of machine idling during shift changes and breaks, timing circuit is installed in the PLC so that whenever the machine is idling, all motors are automatically turned off, reducing power consumption by approximately 2%. We changed the trial runs of DGs from once per shift to once per day, reducing diesel consumption by about 66% in trial runs. By selecting burners with lower gas consumption, we reduced the gas consumption in the process by approximately 2%. Use of poly carbonate roof sheets has maximized the natural lights in the plants. To save energy, overrated motors are being replaced with more efficient ones. Likewise, all HPMV lights are being replaced with LED lights. The cranes used for lifting assembly have been upgraded to pneumatic cranes, saving energy and reducing breakdowns. Heating temperature reduced in the metal forming machine from 960 degrees to 720 Degrees which reduced the energy consumption.

Towards a green environment, we are moving to cleaner fuels to reduce air emissions during our manufacturing processes. Use of furnace oil is stopped in furnaces and gas or LPG based furnaces are being used. Generator Sets with standard Acoustical Solution are installed in plants to help control noise pollution and emission. Retrofit emission control devices have been fixed in the DGs to reduce emission. To promote biodiversity, green areas are developed and plantation has been increased in all locations. Periodical monitoring of air emission from stacks connected to the furnace and paint booth are carried out. Turbo ventilators and dust containment & suppression system are in place to maintain plants environment clean.

Towards water conservation, water flow meters are set up in borehole wells to monitor water usage. Disposable waste water from manufacturing process/sewage is treated through ETP & STP and recycled for use in toilet flush and irrigating garden. Common types of faucets are being replaced with self-closing basin taps to prevent careless drainage of water. Rainwater harvesting systems is set up in the units to capture and utilize rainwater for non-potable purposes and maintain water table of the area. Ground recharge earth ponds are constructed within the plant to conserve natural water sources and maintain water levels. We are switching to powder coating paint process to eliminate water based liquid paint. In liquid painting process we are switching to robotic painting to reduce paint consumption, thereby reducing the generation of hazardous waste and water pollution.

Towards waste management & reduction, hazardous waste generated by the plants is handled and disposed through authorized dealers and recyclers in accordance with hazardous waste authorization issued by the State Pollution Control Board. Non-hazardous waste is reused or disposed of with minimal impact on the environment. The Company is registered as a brand owner and importer under the Plastic Waste Management Rules and fulfills its EPR obligations for plastic usage. The quenching oil is separated from the scales by a centrifugal machine and reused, which reduces the consumption of quenching oil by about 12%, thereby reducing waste. As a measure to reduce the use of plastic, jute bags are being used in the plants as an ideal alternative to plastic bags.

Business Responsibility & Sustainability Report of the Company is separately presented at Annexure-2 to the Directors Report. Members are requested to refer to the BRSR for an overview of our environmental, social and governance activities in FY24.

Risk Management

The objective of risk management is to protect the companys assets and people from the threats or risks that have potential to endanger them. The Company has a Risk Management Policy in place that provides a framework for regular risk assessments to safeguard and maintain the sustainability and resilience of the Company. Management continually identifies and analyzes risks and threats that could affect our assets, property, personnel, and profits and applies resources to mitigate, control or reduce such risks and threats. The Risk Management Policy is available on the Companys website. The policy is monitored and supervised by the Risk Management Committee. Composition and details of the Committee are contained in the Corporate Governance section of the Annual Report. One of the major objective of our 5 years plan namely "Lakshya 50XT" is to de-risk the Company from cyclical CV market and product.

Internal Controls

The Company has established appropriate and adequate systems of internal controls, procedures and policies to ensure the accuracy, efficiency, timely preparation and completeness of accounting records and financial information and to prevent and detect fraud and errors. Given the dynamic of todays business environment and the evolving regulatory landscape, we are adapting to technology and digitization to strengthen our internal control systems and to ensure adherence to applicable laws, regulations, and internal policies.

M/s Protiviti Risk & Business Consulting is Companys internal auditor to provide assurance on the effectiveness of Companys internal controls. Internal auditors conduct concurrent audits and reviews to evaluate the adequacy and effectiveness of Companys internal controls and examine transactions to detect fraud and errors. They verify the status of Companys compliance with laws and internal policies and recommend corrective actions as needed.

The internal auditors report to the Audit Committee of the Board. The Committee approves the appointment of the internal auditor and oversees the internal audit work. The Committee reviews and approves the annual internal audit plan. Reports of the internal auditors and their recommendations are placed before the Committee to review significance of audit points, adequacy of managements responses, and status of corrective actions taken.

Human Resource

We view our employees as a valuable resource and ensure that our HR practices are aligned with our goals. We have worked hard to create a team of professionals committed to achieving our goals. We rejuvenate the competence of our workforce through training and personal development. During the year, units held 35 training sessions on various topics covering code of conduct, prohibition on insider trading, health & safety, skill development, wellbeing of employees and workers and POSH trainings. Through these trainings and organizational policies and practices, we focus on achieving our goals through personal growth and development. We also want to improve gender diversity in our workforce, so we hired more female workers on the shop floor. During the FY24, our relations with our employees and workforce remained cordial throughout the year.