Jullundur Motor Agency (Delhi) Ltd Management Discussions

The statements contained in this section describing the Companys objectives, projections, estimates, expectations may be considered to be ‘forward looking statements which the management believes are true to the best of its knowledge at the time of preparation within the meaning of applicable laws, rules and regulations. Actual results may differ materially from those expressed or implied. The Company assumes no responsibility to amend, modify or revise any forward looking statements on the basis of any subsequent development, information or events.

OVERVIEW

The Company is engaged in the business of distribution of auto spares parts across India through network of branches since 1927. The Company deals in products such as brakes, bearings, clutches, cooling system, engine components, suspension, power steering, oil & lubricants, filters etc. Most of Companys suppliers are original equipment manufacturers (OEMs) to vehicle manufacturers.

The Company is predominately in a single reportable segment viz., distribution of auto parts.

INDUSTRIAL STRUCTURE AND DEVELOPMENT OVERVIEW

With the GDP expected to grow in Financial Year 2024-2025 there might be continued movement in the commercial vehicle segment. Given the inflation in new vehicle pricing it is expected that this would lead to continued use of older vehicles.

FY 2023-2024 was relatively slower than the last year and the same reflection can be seen in the financial results. There is increased competition in the market and coupled with the increased interest rates, the parts dealers are likely to hold lower levels of inventory. Raw material pricing was stable as expected at the beginning of the year, and thereby, the increase in revenue due to price increases was minimal in FY 2023-2024.

The beginning of the first quarter of FY 2024-25 looks encouraging as compared to last year on the back of a relatively difficult first quarter in FY 2023-24. Gross Profit was under pressure last year and shall continue to be under pressure due to enhanced competition in the aftermarket. Raw material prices are expected to be stable and the increase in revenue due to price rise will be negligible in the FY 2024-25.

Most automobile vehicles and spare parts are attracting the highest rate of Goods and Services Tax i.e., 28%. Transport has become an integral part of our daily activities. We are hopeful that the GST council may take steps earlier to bring down the GST rates from 28% to give much needed relief to the automobile industry.

FINANCIAL REVIEW

The Company registered a turnover of Rs.42,332.28 lakhs at a growth rate of 3.58% in F.Y. 2023-2024. The profit before tax was Rs.2,763.98 lakhs decreased by 8.91% as compared to Rs.3,034.23 lakhs in last financial year. The Company is a debt free company. A chart containing the details of financial performance in past 6 years is appended with this Annual Report.

FUTURE PLANS & OUTLOOK

The Company is in the process of adding more products / lines in product mix and focusing to open of new outlets/ sales units in potential tier-II & tier-III cities / towns across the country to cater to the areas which have remained uncovered so far. The Company will continue to invest in technology to help increase efficiency.

With the OEMs being more active in the aftermarket spares Gross Margins will continue to be under pressure. We see an opportunity in increase in consumption of spare parts as due to increased cost of purchase of new vehicles we expect continued use of older vehicles.

With the increased investment in infrastructure, vehicular movement is expected to increase which will lead to increase in sale of spare parts.

OPPORTUNITIES

The management of the Company expects that there would be an increase in demand on account of continued use of old vehicles. This will lead to an increase in requirement of auto parts both on Commercial vehicles and passenger vehicles.

THREATS AND RISKS

Aftermarket demand of spare parts / auto components in secondary market is going down due to aggressive posture shown by OEMs. Many additional players are coming in (new entrants or expansion of product lines for existing players) thereby, leading to increased competition. Working capital has increased considerably for the entire distribution chain, due to higher prices and larger range of products thereby affecting the cash flows in the market.

With the continuous improvement in technology and quality of parts, the replacement window for aftermarket spares is only widening. With the improvement in roads and other infrastructure the wear and tear on the vehicle is also reduced, leading to high life expectancy of parts.

SUBSIDIARY AND ITS PERFORMANCE

As at 31st March, 2024, your Company has one material subsidiary Company i.e. JMA Marketing Limited, which is engaged in the business of distribution of auto spare parts in different regions of India. During the year under review, the sales turnover of the material subsidiary Company was Rs.11,062.91 Lakhs and it managed to earn Net Profits (after tax) of Rs.597.83 Lakhs. The Company has bagged the supply rights of one of the key products in the Western region of the country.

KEY FINANCIAL RATIOS

During the year under review, there was no significant change (i.e. change of 25% or more as compared to the immediately previous financial year) in the key financial ratios. Key financial ratios, along with detailed explanations thereof are given in notes to accounts of annual audited financial statements forming part of this Annual Report.

RETURN ON EQUITY

There is a drop in Return on Equity from 13.42% to 11.11% as compared to last fiscal year on account of reduction in gross margin. INTERNAL CONTROL SYSTEMS

The Company has an adequate and effective control system to commensurate with its size and complexity. The internal control system is supplemented through an extensive internal audit program and periodic review by management and audit committee.

DISCLOSURE OF ACCOUNTING TREATMENT

In the preparation of the financial statements, the Company has followed the Indian Accounting Standard (IND AS). The material accounting policies which are consistently applied are set out in the Notes to the Accounts.

RISK MANAGEMENT

The Company monitors and reviews the risk management activities on regular basis. There are checks and balances which are embedded in the ERP system.

CORPORATE SOCIAL RESPONSIBILITY

The Company is committed to make contribution to the society as part of our social initiatives. Special focus made on the education to overcome the illiteracy in small cities and villages. The Company is contributing to different NGOs and organizations which are progressively working on education programs and women empowerment in urban slums, rural and backward areas of the country, contributing towards welfare of abandoned senior citizens and disabled people and promoting National/Olympic Sports.

HUMAN RESOURCE DEVELOPMENT AND INDUSTRIAL RELATIONS

The Company had extensively focused on leadership development and employee engagement initiatives. During the period under review, multi-product and sales training program were conducted across the Company. Employees were encouraged to participate in sports and other fitness related programmes to promote individual wellness and to achieve a sense of balance life. Total Employees on Payroll of the Company are 547.