L G Balakrishnan & Bros Ltd Management Discussions

REPORT INDUSTRY STRUCTURE AND DEVELOPMENT

The automotive industry is undoubtedly coming out of one of the most challenging periods in history. Industry has faced a massive slowdown for the last couple of years due to the pandemic, global economic slowdowns as well as other macroeconomic and geopolitical factors. However, in the current scenario, the industry has witnessed recovery, recording growth, increasing demand, and improvements, that are yet to reclaim their pre-pandemic highs.

Indian economy, it is evident that the nations remarkable resilience, with interest rates stabilising coupled with lower inflation forecasts and commitment to growth have positioned it as a powerhouse in the global marketplace. The Indian economys vibrant sectors, expanding middle class and progressive reforms, increased government spending in infrastructure development continue to attract investments and create new avenues for business expansion. However, amidst the opportunities, we acknowledge the presence of challenges that demand our unwavering attention and adaptability.

COMPANY AND BUSINESS OVERVIEW

L.G.Balakrishnan & Bros Limited ("LGB") is a leading supplier of Transmission Chains, Sprockets and Metal formed Parts for automotive applications and Industrial Applications Manufacturing Company, established in the year 1956. LGB provides a comprehensive range of Products. LGB has a dedicated team supported by a commitment, and our continuous improvement programs combine to affirm the LGB reputation and "ROLON" brand for quality.

We committed ourselves to building strong, lasting relationships based on the quality of our products. Ongoing efforts to differentiate ourselves through high levels of service and customer satisfaction are a key corporate focus. One of our key strengths is our ability to form long-term, strategic partnerships with our clients, in some cases we have been working together for multiple decades.

OPPORTUNITIES / OUTLOOK

India has become the worlds most populous country backed by the twin forces of urbanization and industrialization. Indias auto component industry is an important sector driving macroeconomic growth, employment and market share has significantly expanded, led by increasing demand for automobiles by the growing middle class, growth of aftermarket is fueled by a steady increase in the vehicle sales and exports globally. Industry is broadly classified into organized and unorganized sectors. While the unorganized sector serves OEMs and includes high-value precision instruments. We along with our customers focus on product design, from raw materials to end -of- life recyclability, to optimize total cost of ownership and reduce negative environmental impacts across the product life cycle.

With sustained growth and efficient resource allocation, we have established ourselves as one of the leaders in the Auto Components Sector. Leveraging our manufacturing expertise and strategic decision making, we are will positioned to capitalize on the opportunities in this growing segment, by enhancing our portfolio by launching new products and further solidifying our position as Industry Leaders.

THREATS

After experiencing the sudden economic downturn, the automotive parts manufacturing industry still has plenty of new hurdles to overcome. Volatility in input prices and increased costs for fuel could slow down new investment in projects leading to diminishing opportunities. Further industry is also currently under constant pressure to adapt to new changes due to technological advancements and end-user preferences.

The same factors world wide are influencing the macroeconomic environment, recovery from the COVID-19 Pandemic has been better than expectation but accompanied with addition burden of Geo-political conflicts, some input price increase.

Against this backdrop, the International Monetary Fund (IMF) believes that overall economic development has proved to be remarkably resilient, global growth is sluggish and India is one amongst the best growth area among the World, uneven and increasingly divergent around the World. Global Economic activity bottomed out, but a full recovery toward pre-pandemic trends increasingly appears to be out of reach.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

The Company manufactures chains, sprockets and metal formed parts for automotive applications. Its business segments are transmission and metal forming. Its transmission products include chains, sprockets, tensioners, belts and brake shoe. It also offers metal forming products consisting of fine blanking for precision sheet metal parts, machined components and wire drawing products for internal use as well as for other chain manufacturing plants, spring steel suppliers and umbrella manufacturers.

The sales performance during the year is as follows:

RISKS AND CONCERNS

The Board of Directors has adopted and approved a Risk Management Policy for the Company to ensure the ongoing identification, evaluation, and mitigation of business risks, safeguarding the interests of its stakeholders. The Risk Management framework is designed to adapt to the evolving business environment and promptly address any emerging risks. The Risk Management Committee is updated on emerging risks and corrective actions every six months.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

LGB maintains an effective Internal Control System commensurate with its size and complexity, providing reasonable assurance of authorised and accurately recorded transactions. An independent Internal Audit function, coupled with extensive internal audits and periodic reviews, ensures the adequacy of internal control systems. LGB remains committed to minimising identified risks through continuous monitoring and mitigating actions.

FINANCIAL And OPERATIONAL PERFORMANCE

On consolidated basis, revenue from operations and other income for the financial year under review were Rs 2,39,547.19 Lakhs as against Rs 2,22,889.42 Lakhs for the previous financial year registering an increase of 7.47%. The profit before tax and exceptional item was Rs 35,790.67 Lakhs and the profit after tax, was Rs 27,149.58 Lakhs for the financial year under review as against Rs 32,001.19 Lakhs and Rs 25,232.80 Lakhs respectively for the previous financial year.

On standalone basis, revenue from operations and other income for the financial year under review were Rs 2,28,015.84 Lakhs as against Rs 2,11,156.93 Lakhs for the previous financial year registering an increase of 7.98%. The profit before tax and exceptional item was Rs 35,576.56 Lakhs and the profit after tax was Rs 26,950.33 Lakhs for the financial year under review as against Rs 31,517.13 Lakhs and Rs 24,769.58 Lakhs respectively for the previous financial year.

Details of significant changes (i.e., change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations thereof, including, are listed below:

health, safety, security environment

LGB is firmly committed to the policy of utmost safety in workplaces. The Company has all the required safety systems in place at all our facilities to ensure a high standard of safety and health of employees as well as the factory infrastructure. We have established all possible measures to remove/reduce risks to the health, safety and welfare of all the personnel at our facilities. The Company ensures all the safety equipment are in working condition, installed at appropriate locations and along with its user manual. All the employees are also periodically trained on health and safety initiatives. Our workplace culture promotes the use of personal protection equipment and apparel, as well as strict adherence to managements health and safety directives.

HUMAN RESOURCES / INDUSTRIAL RELATIONS

LGB foster a culture of inclusivity, collaboration, and continuous learning, where every employee is encouraged to reach their full potential. Our talent management initiatives focus on attracting and retaining top talent in the industry, nurturing their skills through training and development programs, and providing growth opportunities within the organization. We also emphasize employee engagement and work-life balance, ensuring a healthy and supportive work environment. By investing in our employees professional growth and well-being, we build a motivated and high-performing workforce that drives our success. The total number of permanent employees in the Company stands at 2,626.

CAUTIONARY STATEMENT

Statement in the Management Discussion and Analysis describing the Companys objectives, projections, expectations and estimates regarding future performance may be "forward-looking statements" and are based on the currently available information. The management believes these to be true to the best of its knowledge at the time of preparation of this report. However, these statements are subject to certain future events and uncertainties, which could cause actual results to differ materially from those, which may be indicated in such statements.