kalyani commercials ltd Management discussions

INDUSTRY OVERVIEW

Financial Year 2023 saw the effects of Covid abate significantly, with citizens as well as businesses finally reverting to normalcy. However, the flip side was the impact of inflationary trends, supply chain disruptions emanating from China, and the Russia-Ukraine conflict impacting commodity prices. Indias retail, or consumer price, inflation remained high and for much of the year was above 6%. To combat this, the RBI regularly raised its policy repo rate, starting May 2022, with cumulative increase being 250 basis points. In addition, thanks to higher global commodity prices and depreciation of the Indian rupee, the current account deficit increased. The industry operates in a highly competitive and dynamic market. During the past year, the industry witnessed various macroeconomic challenges, including fluctuating fuel prices, changes in regulatory policies, and increasing environmental concerns. However, despite these challenges, the industry demonstrated resilience and adaptability to emerging trends, such as the rapid adoption of electric vehicles, autonomous driving technology, and the integration of digital solutions.

OUR INDUSTRY SEGMENT

The automobile sector is one of the key segments of the economy having extensive forward and backward linkages with other key segments of the economy. The Indian automobile industry comprises of a number of Indian-origin and multinational players, with varying degree of presence in different segments. Automobile dealer Industry plays the vital role of link between the manufacturer of the automobile and the consumer. With large inventories of cars, dealers provide consumers with a wide array of vehicles to meet their needs at different price points.

However due to pandemic automobile dealers dont expect demand to recover anytime soon, especially in urban regions, despite lockdown curbs being eased.

Weak consumer confidence, especially in urban areas, continues to haunt as buyers stayed away from concluding their purchase due to threat of community spread [of virus] and return of the complete lockdown.

BUSINESS

The Company is engaged in trading of Heavy Commercial Vehicles, Three Wheelers and servicing (Dealership of Bajaj and TATA), Petroleum Product Dealership.

OPPORTUNITIES AND THREATS

India being one of the largest automobile markets in the world, has a bright future because of several factors like rapid urbanization, Car buyers getting younger, growing middle class, overall growth of other industries, infrastructure development and the improved road infrastructure. This along with rising disposable income, aspirations for a better lifestyle and a slew of new product launches lined up by companies would aid overall increase in sales volumes. The Company, with its wide portfolio is expected to benefit from the same. Further, per capital penetration at around eighteen cars per thousand is among lowest in the world. This growing consumerism is expected to lead to an increase in car penetration.

Threats

The industry company faces several challenges that could potentially impact its growth and profitability. Intense competition within the industry from established players and new entrants poses a risk to market share and revenue. Economic volatility and shifting consumer preferences may affect consumer spending patterns and demand for automobiles. Regulatory changes could lead to increased compliance costs and impact product offerings. Supply chain disruptions, cybersecurity risks, and technological advancements by competitors pose additional threats. Geopolitical uncertainties, environmental concerns, and the potential for health crises also add to the risk landscape. Your Company recognizes these threats and is committed to implementing proactive measures to mitigate their impact and ensure sustainable success in this dynamic market. In response to the various threats faced by our esteemed automobile industry company, we have devised a comprehensive set of proactive solutions. Embracing innovation and adaptability, we are determined to safeguard our growth and profitability while addressing potential challenges. To stay ahead in the competitive landscape, we will focus on innovative product development, investing in cutting-edge research and development to introduce vehicles that align with shifting consumer preferences. Through strategic pricing and targeted marketing campaigns, we aim to enhance our market presence and engage our customers effectively.

In anticipation of potential health crises and geopolitical challenges, we will develop comprehensive risk management strategies and contingency plans. By preparing for various scenarios, we aim to navigate uncertainties effectively.

In conclusion, these solutions reflect our unwavering commitment to resilience, sustainability, and customer-centricity. As we implement these measures, Your Company is confident in its ability to thrive in the ever-changing automotive landscape, ensuring a prosperous and transformative future for our company.

OUTLOOK AND FUTURE PROSPECTS

India is expected to emerge as the Third Largest Passenger Vehicle market by 2023; however, Auto industry body, Society of Indian Automobile Manufacturers (SIAM), has projected single digit growth in FY 2022-23. The Indian automotive sector has the potential to generate up to US$251.4-282.8 billion annual revenue by 2026. While automotive industry is likely to remain impacted in the short-term due to COVID-19 pandemic, encouraging recovery is seen in China. It is expected that other economies will follow a similar pattern in due course. Increased urbanization and localized transport policies have opened up new opportunities for Mobility as a service, most notably in cities. Electric vehicles are gaining a lot of traction in shared mobility space and TML has been a front-runner in this newly evolving segment, entering into various strategic partnerships.

RISKS & CONCERNS

Risks Associated with Companys Business and the Automotive Industry Company has been, and may in the future be, adversely affected by the COVID-19 pandemic, the duration and economic, governmental and social impact of which is difficult to predict, and which may significantly harm Companys business, prospects, financial condition and results of operation.

Since the end of 2019, a disease caused by a novel strain of coronavirus (COVID-19), has spread in China and throughout the world, and the World Health Organization declared the COVID-19 outbreak a pandemic in March 2020. No fully effective treatments or vaccines have been developed as of the date of this Annual Report, and such development of treatments or vaccines may take a significant amount of time. The COVID-19 pandemic and associated governmental responses have adversely affected workforces, consumer sentiment, economies and financial markets. Such adverse effects, along with decreased consumer spending, have led to a global economic downturn.

The COVID-19 pandemic and the resulting business disruptions in several jurisdictions where Company operates could have a material adverse impact of Company operations, liquidity, business, financial conditions

Any future impact on the Companys business may take some time to materialize and may not be fully reflected in the results for the last quarter of FY 2022-23. Even after the COVID-19 pandemic subsides, Company may continue to experience an adverse impact to the business as a result of its global economic impact, including any recession that has occurred or may occur.

Deterioration in global economic conditions could have a material adverse impact on Companys sales and results of operations.

The automotive industry could be materially affected by the general economic conditions and developments in India and around the world and investors reaction to such conditions and developments. The automotive industry, in general, is cyclical, and economic slowdowns in the recent past have affected the manufacturing sector in India, including automotive and related industries. Deterioration of key economic Metrics, such as the growth rate, interest rates and inflation, reduced availability of competitive financing rates for vehicles, implementation of burdensome environmental and tax policies, work stoppages and increase in freight rates and fuel prices could materially and adversely affect Companys automotive sales and results of operations.

Intensifying competition could materially and adversely affect Companys sales, financial condition and results of operations.

HUMAN RESOURCES

The Companys relations with the employees continued to be cordial.

FINANCIAL RESULTS

The Financial performance of the Company for the Financial Year ended 31^st March, 2023 is summarized below:-

	Standalone
	For the year Ended
Particulars	31.03.2023	31.03.2022
Total Revenue	3,32,23,80,688.06	2,30,68,30,628.63
Total Expenses	3,27,82,58,091.64	2,27,99,19,575.21
Profit Before Tax & Extraordinary Item	4,41,22,596.42	2,69,11,053.42
Extraordinary Item	0.00	60,13,653.25
Tax Expenses
- Current Tax	1,20,00,000.00	72,00,000.00
- Deferred Tax Liability(Net)	4,28,247.00	8,46,261.00
- Income Tax Earlier Year	1,66,284.93	0.00
Profit / Loss For The Year After Tax	3,15,28,064.49	2,48,78,445.67
Share of Profit or loss from Associate	-	-
Total Other Comprehensive Income / Loss	1,35,487.00	44,76,787.00
Total Comprehensive Income / Loss	3,16,63,551.49	2,93,55,232.67
Profit attributable to
c) Parent	-	-
d) Non-Controlling	-	-
Other Comprehensive Income for the year attributable to	-	-
(a) Parent	-	-
(b) Non-Controlling Interest
Earnings Per Share (EPS) (in Rs.)
c) Basic	31.53	24.88
d) Diluted	31.53	24.88

SEGMENT-WISE OR PRODUCT WISE PERFORMANCE

The company operates in two segments. Hence segment wise performance is discussed as follows:

Primary Segment: Business Segment

Based on the guiding principles given in "Ind Accounting Standard 108 Operating segment" notified under

Companies (Accounting standard) Rules 2006, the Companys operating business are organized and managed separately according to the nature of product of Trading and Services provided.

The Two identified reportable segments. One is Automobile segment in which trading of vehicle and servicing and other which includes retail outlet of petroleum products (BPCL).

Secondary Segment: Geographical segment

The analysis of Geographical segment is based on the geographical location i.e. domestic and overseas markets of the customers,

Secondary Segment Reporting (By Geographical segment)

The following is the distributions of the companys consolidated revenue from operation (net) by Geographical markets, regardless of where the goods were produced:

Particulars	2022-23	2021-22
Revenue from Domestic Market	33198.48	22966.45
Revenue from Overseas Market	0.00	0.00
Total	33198.48	22966.45

Geographical segment wise receivables:

Particulars	2022-23	2021-22
Receivables from Domestic Market	3586.97	3366.31
Receivables from Overseas Market	0.00	0.00
Total	3586.97	3366.31

Geographical segment wise Fixed Assets:

Particulars	2022-23	2021-22
In India	274.09	250.07
Outside India	0.00	0.00
Total	274.09	250.07

Segment accounting polices:

In addition to the significant accounting policies applicable to the business segment, the accounting policies in relation to segment accounting are as under:

i) Segment revenue & expenses:

Joint revenue and expenses of segments are allocated amongst them on a reasonable basis. All other segment revenue and expenses are directly attributable to the segments.

ii) Segment assets and liabilities:

Segment assets include all operating assets used by a segment and consist principally of operating cash, receivables, inventories and fixed assets, net of allowance and provisions, which are reported as direct off sets in the balance sheet. Segment Liabilities include all operating Liabilities and consist principally of trade payables & accrued liabilities. Segment assets and liabilities do not include deferred income taxes except in the division of Commercial Vehicle. While most of the assets/liabilities can be directly attributed to individual segments, the carrying amount of certain assets/liabilities pertaining to two more segments are allocated to the segments on a reasonable basis.

iii) Inter segment sales:

Inter segment sales between operating segments are accounted for at market price. These transactions are eliminated in consolidation. The main division is Ganganagar Motors (A division of Commercials Vehicles) and funds provided by the Ganganagar Motors to other division and interests on such balances are not charged.

Other segment having revenue from sale of external customers in excess of 10% of total revenue of all segments is shown separately and others are shown in other segment.

iv) Information about business segments:

For the year ending as on 31^st March, 2023.

	Automobile		Others		Total
Particulars	Curr. Year	Prev. Year	Curr. Year	Prev. Year	Curr. Year	Prev. Year
Segment Revenue :	31081.04	22113.36	2117.44	853.09	33198.48	22966.45
External sales/income (Net)
Other receipt	25.32	101.85	0.00	0.00	25.32	101.85
	31106.3	22215.2	2117.4		33223.8	23068.3
Total Revenue	6	1	4	853.09	1	1
Segment Results :	743.59	498.33	5.95	5.19	749.54	503.52
Segments results
Operation profit before Interest	743.59	498.33	5.95	5.19	749.54	503.52
Financial exp.	(308.31)	(234.39)	0.00	(0.03)	(308.31)	(234.42)
Exceptional Item	0.00	60.14	0.00	0.00	0.00	60.14
Income tax current/Earlier Year	(121.66)	(72.00)	0.00	0.00	(121.66)	(72.00)
Deferred tax Liability	(4.28)	(8.46)	0.00	0.00	(4.28)	(8.46)
OCI (Net)	1.35	44.77	0.00	0.00	1.35	44.77
Net Profit	268.58	210.49	5.95	5.16	316.64	293.55
Other Information :	6322.41	6790.60	167.20	161.31	6489.60	6951.91
Segment Assets
Total Assets	6322.41	6790.60	167.20	161.31	6489.60	6951.91
Segments Liabilities :
Share Capital	100.00	100.00	0.00	0.00	100.00	100.00
Reserve & Surplus	1281.02	970.33	152.31	146.36	1433.33	1116.69
Secured & Unsecured Loan (including current maturity)	4437.57	2254.68	0.00	0.00	4437.57	2254.68
Segment liabilities	503.81	3465.59	14.90	14.95	503.81	3480.54
Total Equity/ Liabilities	6322.41	6790.60	167.20	161.31	6489.60	6951.91
Capital Expenditure	59.58	40.69	0.00	0.00	59.58	40.69
Depreciation	41.46	41.98	0.00	0.00	41.46	41.98

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUENCY

Your Company has an effective system of accounting and administrative controls supported by an internal audit system with proper and adequate system of internal check and controls to ensure safety and proper recording of all assets of the Company and their proper and authorized utilization.

As part of the effort to evaluate the effectiveness of the internal control systems, your Companys internal audit department reviews all the control measures on a periodic basis and recommends improvements, wherever appropriate. The internal audit department is manned by highly qualified and experienced personnel and reports directly to the Audit Committee of the Board. The Audit Committee regularly reviews the audit findings as well as the, an Information Security Assurance Service is also provided by independent external professionals. Based on their recommendations, the Company has implemented a number of control measures both in operational and accounting related areas, apart from security related measures.

CAUTIONARY STATEMENT

This report describing the Companies activities, projections about future estimates, assumptions with regard to global economic conditions, government policies, etc. may contain "forward looking statements" based on the information available with the company. Forward-looking statements are based on certain assumptions and expectations of future events. These statements are subject to certain risks and uncertainties. The company cannot guarantee that these assumptions and expectations are accurate or will be realized. The actual results may be different from those expressed or implied since the companys operations are affected by the many external and internal factors, which are beyond the control of the management. Hence the company assumes no responsibility in respect of forward-looking statements that may be amended or modified in future on the basis of subsequent developments, information or events.