Remsons Industries Ltd Management Discussions.

1.BUSINESS OVERVIEW:

Industry and Company Trend Automobile industrys annual production volume was 226.52 lakh units and sales volume was 227.45 lakh units for the financial year 2020-21 as compared to 263.53 lakh units and 263.94 lakh units in the previous financial year indicating a decline of 14.00% in production volume and 13.50% in sales volume. The decrease was caused by the COVID 19 pandemic which hit the Indian Economy hard in Q1 of 2020-21, resulting in an estimated 11% GDP contraction for the year.

Performance of Auto Industry during 2020-21

Production

The industry produced a total 22,652,108 vehicles including Passenger Vehicles, Commercial Vehicles, Three Wheelers, Two Wheelers and Quadricycles in April-March 2021 as against 26,353,293 inApril-March 2020, registering a de-growth of (-) 14.04 percent over the same period last year..

Domestic Sales

The sale of Passenger Vehicles declined by 2.24 percent inApril-March 2021 over the same period last year. Within the Passenger Vehicles, the sales of Passenger Cars and Vans declined by 9.06 percent and 17.62 percent respectively while sales of Utility Vehicles increased by 12.13 percent in April-March 2021 over the same period last year.

The overall Commercial Vehicles segment registered a de-growth of 20.77 percent in April- March 2021 as compared to the same period last year. Within the Commercial Vehicles, Medium & Heavy Commercial Vehicles (M&HCVs) and Light Commercial Vehicles (LCVs) declined by 28.40 percent and 17.30 percent respectively in April-March 2021 over the same period last year.

Sale of Three Wheelers declined by 66.06 percent in April-March 2021 over the same period last year. Within the Three Wheelers, Passenger Carrier and Goods Carrier declined by 74.49 percent and 26.38 percent respectively in April-March 2021 over April-March 2020.

Two Wheelers sales registered a de-growth of 13.19 percent in April-March 2021 over April-March 2020. Within the Two Wheelers segment, Scooters, Motorcycles and Mopeds declined by 19.51 percent, 10.65 percent and 3.07 percent respectively in April-March 2021 overApril-March 2020.

Exports

In April-March 2021, overall automobile exports declined by 13.05 percent. Passenger Vehicles, Commercial Vehicles, Three Wheelers and Two Wheelers exports also declined by 38.92 percent, 16.64 percent, 21.67 percent, and 6.87 percent respectively.

2.INDUSTRYSTRUCTURE & DEVELOPMENTS

Auto industry is said to be the engine of growth in most developed countries, including in China and India today. Indian automobile industry which was at its nascent stage at the beginning of the 21st century has now become a huge industry that contributes majorly to growth and development of Indian Economy. Due to high development prospects in all segments of the vehicle industry, the auto component sector is expected to rise by double digits in FinancialYear 2021-22.

Auto-components industry account for 2.3% of Indias Gross Domestic Product (GDP) and employs as many as 1.5 million people directly and indirectly. A stable government framework, increased purchasing power, large domestic market, and an ever-increasing development in infrastructure have made India a favourable destination for investment.

3.OPPORTUNITIESANDTHREATS

Opportunities

In spite of the pandemic, Indian Government rolled out BS VI emission norms compliant vehicles, as planned, which is expected to make India a major auto exporter and drive strong export growth in the medium term.

The Company is also exploring exciting new opportunities to use its existing capabilities in composite materials without an active friction surface as well.

Given the increase in electronic content, OEMs need to collaborate with suppliers and experts outside the traditional auto industry. Accomplishing this will require changes in the way OEMs function. OEMs will be looking to their top suppliers to co-invest in new global platforms & this will be the driving force in the future.

Threats

International friction manufacturers recognize the restrictions of manufacturing in China and have decided to enter the large Indian market. Competition from these new friction material manufacturers in the organized sector is expected to increase over the coming months and years.

Key input raw material prices are volatile and some continue to escalate with some global economies pumping liquidity into their economies with no increase in output. Some raw materials neither offer long-term purchase contracts, nor can be hedged for-leaving your company exposed to significant price volatility. While your company has de-risked exports with a combination of off-setting imports and automatic forex and RM escalation clauses, we have approached all the domestic OEMs with similar requests to share the risk and rewards of volatility.

4.OUTLOOK

Indian economy is expected to grow better this financial year. With lower inflation, lower bank interest rates and expected normal monsoon, outlook for automotive industry appears to be satisfactory. Although, global economy continues to struggle, opportunities for business are significant considering current low market penetration. With focused customer service, the outlook for the Company appears satisfactory.

With the objective of delivering profitable growth, the company expect to leverage on the favourable demand environment and pursue market share improvements. Further, the Company continues to expand the international business with its existing customer base.

5.RISKAND CONCERNS

The second wave of COVID-19 pandemic, the increased infectiousness, the even higher number of people infected and the disunity in fighting the current and potential future strains of COVID-19 is a worrying factor and remains a significant risk. The speed of vaccination of the vulnerable sections of society, followed by the reduction in the size of the potentially infectable pool getting subverted by calls to indiscriminately vaccinate everyone can slow down the pace at which we are able to eliminate the pandemic. Rich nations that have horded far more doses of the vaccine and its pre-cursor materials than their population wants or needs may further slow the ability for our nation to appropriately vaccinate and avoid a destructive cycle of lock-downs. On the non-pandemic front, significant liquidity injected into multiple global economies may cause volatility in forex movements and RM price increases. The sudden popping of a US asset bubble may cause significant slowdowns and protectionism from a formerly open nation that was our largest export market. While increased customer orders will necessitate increased capacity investment, your companys management will work to ensure that all outlays are covered by internal accruals rather than relying on highly volatile and uncertain environment.

6.QUALITYAND QUALITYMANAGEMENTSYSTEMS

Your Company is continuing its focus on improvements to sustain quality management systems through total employee involvement at all levels with a view to achieve enhanced level of customer satisfaction in domestic as well as Overseas markets. Your company continues to closely monitor and focus on various cost reduction activities and cost control initiatives to achieve planned targets during the year.

7.INTERNALCONTROLSYSTEMSANDTHEIRADEQUACY

The Company continues to maintain a system of internal control including adequate monitoring procedures. The internal auditors ensure operational control at various locations of the Company on a regular basis. Any irregularity or significant issues are brought to the attention of the Audit Committee of the Board and Managing Director of the Company and countermeasures are taken for complying with the system.

8.DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

Accounting Treatment

The Company has followed all the applicable Indian Accounting Standards (Ind AS) issued by the Ministry of Corporate Affairs (MCA) in the preparation of financial statements.

Financial highlights with respect to operational performance.

(Rs. In Lakhs except EPS)

Standalone Consolidated*
Particulars 2020-21 2019-20 2020-21
Total Revenue 19742.48 16088.13 22856.19
EBITDA 1191.79 1312.26 1257.21
Profit Before Tax 882.19 741.24 791.99
Profit After Tax 665.55 533.66 448.51
EPS 11.65 9.34 7.85

*Consolidation became applicable for the first time during this financial year, hence previous financial year figures are not applicable.

9.HUMAN RESOURCES MANAGEMENT

Human Resource base is the greatest asset of the Company. Shortages and challenges of retaining skilled manpower have to be addressed to on a continual basis.

The Company has spent significant resources to ensure the health, safety, and well being of our employees- at home, at work, and in between the two. We have attempted to overcome barriers to vaccine adoption, announcing reimbursement of any charges for vaccination, provided for safe, capacity controlled company specific transportation, and redesigned workplaces, processes, and common areas to minimize numbers.

As on 31st March, 2021, the Company had total 273 (previous year 274) permanent employees.

10. DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS, ALONG WITH DETAILED EXPLANATIONS THEREFOR:

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018, the Company is required to give details of significant changes (change of 25% or more as compared to the immediately previous financial year) in key sector specific financial ratios. The Company has identified following ratios as key financial ratios.

Ratios 2020-21 2019-20 % change
Debtors Turnover 7.20 6.57 9.58%
Inventory Turnover 3.98 3.21 23.90%
Interest Coverage Ratio 3.01 5.26 -42.70%
Current Ratio 1.02 1.18 -13.19%
Debt Equity Ratio 1.55 1.19 30.16%
Operating Profit Margin % 6.04% 8.16% -26.02%
Net Profit Margin % 3.37% 3.32% 1.59%

The changes in the ratios are due to negative financial performance of the Company during the financial year 2020-21 due to adverse impact of the COVID-19 pandemic on the performance of businesses of the Company.

11. DETAILS OF ANY CHANGE IN RETURN ON NETWORTH AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR ALONG WITH A DETAILED EXPLANATION THEREOF:

Return on Net Worth in the financial year 2020-21 is 21.20% as compared to 21.59% in the financial year 2019-20. During the financial year under review, return on Net Worth decreased by 1.71% as compared to immediately previous financial year due to decrease in profits before exceptional items.

12. CAUTIONARYSTATEMENT

Certain statements in the "Management Discussion and Analysis Report" may be forward looking and are as required by applicable laws and regulations. Many factors may affect the actual results, which could be different from what the Directors envisage in terms of the future performance and outlook.

For and on behalf of the Board of Directors of Remsons Industries Limited
Krishna Kejriwal Chairman and Managing
Director DIN: 00513788
Place: Mumbai
Date: 13 August, 2021