Mahindra CIE Automotive Ltd Management Discussions.


Mahindra CIE Automotive Limited (Mahindra CIE or MCIE) is a multi-locational and multi-technology automotive components company with manufacturing facilities and engineering capabilities in India and in Germany, Spain, Lithuania, and Italy in the Europe as well as a plant in Mexico. It has an established presence in each of these locations and supplies to automotive Original Equipment Manufacturers (OEMs) and their Tier 1 suppliers. MCIE is listed on the BSE Limited (BSE) and the National Stock Exchange of India Limited (NSE) and currently has about 379 million shares listed.

MCIE is part of the CIE Automotive Group of Spain and is the CIE Automotive Groups vehicle for its forgings business globally and for all other technologies/processes in India and South East Asia. In the year 2020, CIE reinforced their faith in MCIE by increasing their shareholding in MCIE from 56.25% to 60.18% via open market transactions.

Set out below in Exhibit 1 is a graphical representation of MCIE and its subsidiaries.

Exhibit 1: Legal Structure of Mahindra CIE

The list of subsidiaries of Mahindra CIE Automotive and their ownership interest is provided in Exhibit 2. Exhibit 2: Mahindra CIE Automotive Limited Subsidiary Companies as on 31st December 2020

Subsidiary Companies Information
Sr. No. Name of the Subsidiary Proportion of Ownership Interest Business Description
1 CIE Galfor S.A.# 100% Forgings largely for passenger
1 UAB ClE LT Forge 100% vehicles from plants in
2 CIE Legazpi S.A. 100% Spain & Lithuania
3 Mahindra Forgings Europe AG 100%
1 Jeco Jellinghaus GmbH 100% Forgings largely for
2 Gesenkschmiede Schneider GmbH 100% commercial vehicles from
3 Falkenroth Umformtechnik GmbH 100% plants in Germany
4 Schoneweiss & Co. GmbH 100%
4 Metalcastello S.p.A. 99.96% Gears for offroad vehicles from plant in Italy
2 Aurangabad Electricals Limited 100%
3 Stokes Group Limited 100%
4 BF Precision Private Limited 100%
5 Bill Forge de Mexico S de RL de CV 100%

Please note: * - These are dormant companies


MCIE is a large, diversified auto-components company with presence across many processes/ product lines, geographies and customers. It manufactures parts; not systems and aggregates, but these parts are complex and value added thus differentiating it from other tier 2 parts companies. MCIE just like the CIE Automotive Group of Spain, is focused on the automotive market - cars, utility vehicles, commercial vehicles, two wheelers and tractors.

MCIE has 31 manufacturing facilities including 8 manufacturing facilities in Europe and 1 in Mexico. The manufacturing locations are generally located close to major automotive manufacturing hubs in order to facilitate supplies to customers. In certain instances, MCIE also provides services such as value analysis and value engineering to add value to the customers products. MCIEs unique combination of specialization in high value-added products, which is usually delivered directly to OEMs and presence across multiple production technologies, differentiates it from other component suppliers.

MCIE largely operates in the automotive markets of Europe and India. In Europe, MCIE supplies components mainly to the light vehicles and heavy truck markets with a comparatively small business in the off-road sector. In India, MCIE is more diversified and supplies components to the light vehicles segment (both passenger vehicles and light commercial vehicles), two wheelers, tractors, medium and heavy commercial vehicles, in order of dependence.

A brief description of the key businesses of MCIE is presented in Exhibit 3.

Exhibit 3: MCIE - Lines of business

Geography Product Specialty Focus Areas Key Customers CY 2020 Revenue
India (Chakan) : Crankshafts - As forged and Machined, Stub Axles -As forged and Machined Passenger & Utility Vehicles and Tractors M&M, Maruti Suzuki India Limited, Tata Motors 2,911
(Bill Forge) 2 Wheelers: Steering races and engine valve retainers Pass Vehicles: constant velocity joints, tulips, steering shafts, steering yokes and wheel hubs Passenger Vehicles and Two Wheelers Hero, Bajaj, HMSI and TVS, Ford, GKN, NTN, Nexteer, RaneNSK 6,898
Germany Forged and Machined parts, Front Axle Beams and Steel Pistons Heavy Commercial Vehicles Daimler AG, Man, DAF, Volvo Group, KS, Linde, AGCO, ZF, Scania, Ford, SAF Holland, Robert Bosch 13,112
Spain + Lithuania Forged steel parts for Industrial Vehicles and Crankshafts, Common Rail, Stubs, Tulips for passenger cars Passenger Vehicles Renault, VW Group, Daimler, GKN, JLR, GM, Fiat, DAF, Bosch, NTN, Faurecia, Dana, ZF, BMW 15,037
Aluminum Castings
India (Aurangabad Electricals Ltd.) : Aluminum castings using High pressure or Gravity die casting specialized in Thin wall to thick wall parts viz- complex engine components, Brake system parts, Aesthetically sensitive parts OEM & Tier 1 supplier for 2&3 wheelers, Passenger Vehicles and Commercial Vehicles Bajaj, Nidec GPM, Ashok Leyland, Daimler, Brembo, KSPG, Bosch, Valeo, Mitsubishi 7,268
India Sheet Metal Stampings, Components and Assemblies Passenger & Utility Vehicles M&M, Tata Motors 5,265
India Turbocharger Housings, Axle & Transmission Parts Passenger & Utility Vehicles, Construction Equipment & Earthmoving, Tractors and Tier 1 M&M, Honeywell, Cummins, Hyundai, JCB, Automotive Axle, New Holland, Dana India CV, John Deere 3,152
Geography Product Specialty Focus Areas Key Customers CY 2020 Revenue
Magnetic Products
India Soft and Hard Magnets Tier 1 of Passenger Vehicles, Utility Vehicles, Two Wheelers Denso, Sumida, Varroc, Intica, Mitsuba 984
India Compounds, Components, and Products Electrical Switchgear, Auto Components L&T Switchgear, Phoenix Mecano, TVS, M&M, Volvo Eicher 746
India Engine Gears, Timing Gears, Transmission Gears, Transmission Drive Shafts Passenger & Utility Vehicles, Construction & Earthmoving Equipment M&M, Eaton, Caterpillar, NHFI, Turk Tractor (CNH), BEML, New Holland 1,717
Italy Engine Gears, Transmission Drive shafts, Crown Wheel Pinion Tractors, Construction & Earthmoving Equipment Caterpillar, CNH, Merritor, GDLS/ Mowag/Cormer, Argo, John Deere 3,411


The Economic Background

The year 2020 will go down as one of the worst in human history as the Covid19 virus pandemic left a trail of devastation unprecedented in sheer scale and speed. The pandemic affected almost every country (190-odd) on the planet to varying degrees, causing all round economic and social devastation (100mn+ infected, 2.2mn+ dead & around US$12 trillion worth of economic loss). IMF in its Jan 2021 global economic outlook report estimates the global growth contraction for 2020 to be -3.5%, 0.9% higher than projected in its previous forecast in Oct 20. This reflected a stronger-than-expected momentum in the second half of 2020 which brought in the new year with some light at the end of the tunnel.

The year 2021 thus is expected to usher in a change of gear and not just year, riding on a global push for anti-covid vaccination and strong policy support by governments across the globe. But the IMF cautions, "the strength of the recovery is projected to vary significantly across countries, depending on access to medical interventions, effectiveness of policy support, exposure to cross-country spillovers, and structural characteristics entering the crisis".

IMF in its Jan 21 report estimates that Europe contracted by 7.2% in 2020 but expects the region to grow by 4.2% in 2021 and 3.7% in 2022, almost 0.5% higher in both the years than what it estimated in its Oct 20 report. Similarly, IMF estimates peg Indias growth in 2020 to -8%, better than earlier estimates of -10.3%. IMF also expects India to grow at a rate of 11.5% in 2021, significantly higher than its earlier estimate of 8.8%. It estimates Indias growth rate in 2022 to be a healthy 6.8%. 2021 is expected to be a year of sharp turnaround, much faster than what most experts expected just a few months back.

There are significant risks that can cloud these rosy predictions. The threat of multiple waves of the virus is very real. We saw how the medical community and policy makers were left scrambling for new responses as Europe experienced a large second wave towards the end of 2020. The turnaround in the global economy is predicated on the rollout of the vaccination program on a scale and with such rapidity that has never been attempted before. In the euphoria of a turnaround, global policy makers should not prematurely withdraw support extended during the pandemic. For example, the relaxed monetary policy should not be tightened before recovery has happened.

While the Indian economy has shown great resilience through the pandemic, issues that predate the crisis still lurk. In our last annual report, we had talked about the quadruple balance sheet problem in India. Each of the four key stakeholders of the Indian economy -households, corporates, financial sector & the government - were facing balance sheet pressures that stymied their ability to drive growth. With a decline in income due to the pandemic, households have been further affected. Corporate profits have taken a nosedive in 2020 as the pandemic took its toll. The financial sector already reeling under an NPA (non-performing assets) problem has had to help its borrowers through the crisis, via a forbearance program. Once this program ends, the NPA crisis has the potential to get worse. Amidst all this, the Indian government has shown sagacity to prime growth via a capex, infrastructure and healthcare spend led boost in the 2021 budget. They have tried to do this without raising taxes that can hurt consumption. Instead, the investment plan will be financed by a mix of asset sales, disinvestment of public enterprises and public borrowing. Nevertheless, the projected fiscal deficit of the government is slated to be 9.5% in F21 and 6.8% in F22, much higher than what would be considered comfortable by global rating agencies. Inflationary pressures may also result, that may force the central bank to tighten monetary policy to the detriment of growth. The expected V shaped recovery in the Indian economy will hopefully enable bringing this deficit down as quickly as possible.

The Automotive Market Europe

MCIE Europe supplies largely to the light vehicle and heavy truck market with a small portion of the revenue being supplied to the off-highway, farm equipment and tractors market. The COVID19 pandemic and related containment measures have plunged the European economy into a severe downturn that has had a cascading effect on the automotive demand.

Heavy Vehicles - Medium & Heavy Commercial Vehicles (MHCVs)

Heavy Vehicles (MHCVs>6T) - (Production Units)

Period 2020 2019 Change
Full Year 463,678 557,225 -16.8%
Oct-Dec 147,032 132,297 11.1%
Jul-Sep 121,161 122,971 -1.5%
Apr-Jun 77,506 153,897 -49.6%
Jan-Mar 117,979 148,060 -20.3%

Q1 CY20 continued from CY19, which was a bad year for MHCV production in Europe. This situation was further worsened by the steep fall in demand due to the CoViD induced lockdowns. As a result production fell drastically in H1CY20. However there has been a slowdown in the steep declining trend in H2CY20. For the full year CY20, the commercial vehicle production numbers for MHCVs in Europe has cumulatively fallen by ~17% as compared to the previous year as per IHS Global.

Source: IHS Global

The forecast for CV production in CY21 by IHS is 11.4% which might seem high but is on a lower base of CY20. IHS projects a decent recovery with MHCV production in Europe forecasted to grow at a CAGR of ~5% over the period of 2020-25. The point to be noted however is that the projected production in CY25 is still lower than the high seen in CY18.

While MCIEs CV Forgings Business in Germany supplies to OEM plants across Europe, the larger part of supplies is to OEMs in Germany. As per IHS, production of MHCV (>6T) in Germany is forecasted to drop by ~24% in CY20 on a y-o-y basis. Production in the year CY20 has also been consistently lesser than each quarter in the first half of CY19. Q3 CY20 was flattish at 0.2% over Q3 CY19. Q4 CY20 however is expected to grow by 15% over Q4CY19. This however does not mean that we have been able to recoup the fall in revenue for the year, but it does augur well for CY21 if this positive trend continues. IHS forecasts German MHCV production to grow by 18.3% yoy in CY21 and CAGR of 8.8% between 2020-2025. However, CY18 numbers will once again be achieved only in CY24.

Light Vehicles (Production Million Units)

Period 2020 2019 Change
Full Year 16.2 20.8 -22.1%
Oct-Dec 5.2 5.1 1.6%
Jul-Sep 4.3 4.6 -6.9%
Apr-Jun 2.2 5.5 -60.8%
Jan-Mar 4.6 5.6 -17.9%

Source: IHS Global

Light Vehicles

For Light vehicles (<3.5T incl. cars, Utility Vehicles & Light Commercial Vehicles), the data from IHS shows that the production in Europe has fallen by 22% in CY20 as compared to CY19. However Q4CY20 saw a reversal in the downward trend with a growth of 1.6%. With the European economy projected to recover well, light vehicles segment could benefit positively on a lower base of CY20 and grow by ~15% in CY21. As per IHS data the passenger vehicle market in Europe is forecasted to grow at a CAGR of 4.6% over the period of 2020-25, however the cumulative production in 2025 will be lower than the highs seen in CY17 and CY18. But the stable pattern of annual growth that is normally observed with this market will return C22 onwards.


The Indian automotive market also followed the automotive markets world over, seeing a steep drop in demand in Q2CY20 as the pandemic induced lockdown took effect. Vehicle sales were negligible in the months of April & May. Where the Indian automotive market differed was in demand recovery. There was a steep recovery since July 2020 as the lockdown was eased considerably.

OEMs have seen strong pickup in demand in Q3 and Q4CY20 as they built up inventory and aggressively pushed sales. Safety concerns attracted many first-time buyers looking to avoid public transport. Good monsoons helped improve rural sentiments. Banks which have been flush with liquidity and lacking avenues to deploy these funds made sure that loans were available for vehicle purchase. All these factors aided in strong demand during the festive season. The new year thus opened on a strong growth momentum in the Indian automotive market but the effect of the second wave of the virus could slow down this momentum considerably.

MCIEs main target segments in India are passenger car & utility vehicle, tractors and two wheelers.

Light Vehicles

Data from the Society of Indian Automobile Manufacturers (SIAM) shows that Light Vehicle production has declined in CY20 by 23.4% over CY19. In CY 20, Q2 was the worst quarter and Q4 ended up showing growth of about 20% over the same period in the previous year. Most agencies have upgraded their forecasts with IHS in its latest update forecasting the Indian light vehicle to grow by 22% in CY 21 versus the 13% that they had forecasted a couple of months earlier. This is largely because the fall in urban incomes due to the pandemic has not been as steep as expected, first time buyers push up sales as they seek to avoid public transport and loans are readily available to buy cars. However, the market is facing a supply side crisis due to problems around availability of steel and semiconductors and these factors could negatively impact production by auto OEMs (original equipment manufacturers) in the first few months of 2020. Both these crises are expected to ease by the end of Q2C21. Given that the inventory in the automotive supply chain at the start of the year was lower than normal (15-20 days vs 25-30 days as per FADA, Association of dealers), it is expected that production numbers will get even better as supply side issues are sorted. On the other hand, increasing fuel costs and steel price increases being passed on to consumers by OEMs may depress retail demand.

Light Vehicles (Production Million Units)

Period 2020 20119 Change
Full Year 3.2 4.2 -23.4%
Oct-Dec 1.1 1.0 19.5%
Jul-Sep 1.0 1.0 -3.7%
Apr-Jun 0.2 1.0 -84.0%
Jan-Mar 1.0 1.2 -21.3%

Source: IHS

The long-term picture for the car market remains healthy, given the current low vehicle penetration levels and as per capita income continues to grow, it will increase the Indian households ability to afford a car. IHS global, expects the Indian light vehicles (less than 6T) to grow at a CAGR of 10.2% over a period of 2020-25.

Two Wheelers

The Two-Wheeler industry production has shown a second year of decline of about 23% in CY20 as compared to the previous year (source: SIAM) dogged by the Covid induced downturn as well as the BS6 related price hikes. The quarter wise performance however reveals that the decline was arrested in Q4CY20 which showed a strong growth of 17.7% driven by a good festive season demand, albeit on a low base. However, FADA reports that registrations (sales to customers) was lower than production in the festive season, driving up the supply chain inventory at the start of the year to more than normal (30-35 days vs 25-30 days). This may have a negative impact on production at the two wheeler OEMs in

the first few months of CY21. Overall, CRISIL research expects two -wheeler demand to grow by 18-20% in FY22 due to buoyant rural sentiments, new model launches in the economy and executive segments of motorcycles and scooters (125cc) and improving financing environment. The opening up of schools and offices coupled with the concerns on personal safety will also usher in new buyers in the segment. But increasing fuel costs and increase in steel prices being passed to consumers may further increase the cost of ownership and dampen the aforesaid growth factors in FY22.

Two Wheelers (Production Units)

Period 2019 2019 Change
Full Year 17,080,047 22,058,391 -22.6%
Oct-Dec 5,884,063 4,998,023 17.7%
Jul-Sep 5,566,642 5,847,893 -4.8%
Apr-Jun 1,250,032 5,807,593 -78.5%
Jan-Mar 4,379,310 5,404,882 -19.0%

Source: SIAM

In the long term as well CRISIL expects the domestic two wheeler market to grow by 5-7% CAGR between FY20-FY25. Cost of ownership of a two wheeler in India has gone up in the recent past due to the BSVI price hike, rise in petrol prices, RM price increase and high cost of loans and this is expected to attenuate the long term growth.


The cumulative Tractor industry production in India has shown a healthy increase by about 11% in CY20 (source: Tractor Manufacturers Association/ TMA). CY20 for tractors in India has been a growth story throughout, except for Q2CY20 which expectedly was down due to the lockdown. With rural incomes being positive due to a normal monsoon in CY20, the demand was very strong compared to CY19 which suffered from suboptimal distribution of monsoon. The implementation of TremIV pollution norms for tractors > 50hp raised prices but this segment is a small part (8%) of the overall market. The growth trend is expected to continue into CY21 with most agriculture sector indicators being positive viz. Minimum support prices (MSP), sowing rate and water table. Moreover, registrations outstripped production in Q4C20 and supply chain inventory levels were minimal at the start of the year (source: FADA). As tractor OEMs build the inventory, CY 21 is looking positive for the segment. Long term forecasts by CRISIL are also positive with CAGR between FY20-FY25 expected to be 4-6%. The level of farm mechanisation in India is still sub optimal and this will drive long term demand. It must be noted that these rosy predictions will go for a toss if future monsoons play truant. We need to be cognizant that cyclicality in demand has been a historical reality for the Indian tractor market.

Tractors (Production Units)

Period 2020 2019 Change
Full Year 863,125 775,085 11.4%
Oct-Dec 291,169 179,628 62.1%
Jul-Sep 266,311 217,392 22.5%
Apr-Jun 112,450 187,537 -40.0%
Jan-Mar 193,195 190,528 1.4%

Source: TMA

Medium & Heavy Commercial Vehicles (MHCV)

MHCV (Production Units)

Period 2020 2019 Change
Full Year 139,414 303,110 -54.0%
Oct-Dec 58,198 47,773 15.5%
Jul-Sep 28,810 49,133 -40.8%
Apr-Jun 6,669 90,580 -92.5%
Jan-Mar 45,737 115,624 -60.3%

Source: IHS

MHCV production in India which had seen a large drop of 33% in CY19 was further hit by a steep drop of ~54% in CY20. Strong recovery is expected on the low base of CY20. IHS has forecast that in CY21, MHCV production in India would grow by ~67% albeit on a low base. While long term forecasts for the next 5 years made by different agencies are quite divergent, they all forecast a sharp recovery from the low of CY20.

Future optimism is supported by the pickup in agriculture activities as well as Infrastructure building. The growth of E-Commerce is also expected to drive demand for 7-12T vehicles (~1/3 of MHCVs).

The newly announced Scrappage policy which imposes a green tax (10-25% of road tax) on transport vehicles >8 years may spur demand for new vehicles. The dedicated freight corridor of the Indian railways may shift some demand from road transport to rail but this shift will largely affect tractor trailers which are a small segment (~1/6th) of MHCV sales.


2020 was the year of the pandemic but all our plants have been functioning normally since May of last year once the lockdown opened. Post the easing of lockdown restrictions, there has been a focus on renewing and continuing operations in a safe and sustainable manner. The reopening of plants post lockdown has been done in a manner that provides a safe working environment for the workforce. All Safety protocols mandated by local authorities at the different plant locations have been followed. A much better than expected recovery in demand in the second half of the year has been a challenge for operating teams at the plants. The operational challenges in the second half of the year were enhanced due to manpower shortages in India where migrant workers returned home during the lockdown. The workforce showed great resilience in the face of an unprecedented pandemic demonstrating its ability to adapt to new circumstances. They ensured that your company was quickly on its way to normalcy and well placed to exploit opportunities in favorable market conditions.


As on 31st December 2020, there were 1,778 employees on the rolls of CIE Galfor S.A. and the Step down subsidiaries in Europe. The company continues to maintain harmonious relations with its employees at all plants in Europe.


As on 31st December 2020 there were 6,670 employees on the rolls of MCIE in India, including Bill Forge and AEL. A portion of our permanent labor workforce in certain locations is part of labor unions. We have signed collective bargaining and other agreements with labor unions at several plants where we have agreed to certain guaranteed bonuses, guaranteed wage increases, and wages linked to productivity. This year we have concluded wage agreements at Pune Plant of Gears and Stampings plant at Rudrapur. In addition to our own employees, we also employ additional workers who are hired on a contract labor basis through registered contractors for ancillary activities. Our human resources ("HR") policies are designed to meet the specific requirements at each plant location, are comprehensive and based on the prevailing HR practices. Considering the strategic priorities of the divisions, we have implemented capability building model to improve capabilities of the employees in our continued endeavor to improve long term operational results. We are also providing our employees with ongoing career development opportunities. Our performance evaluation and management processes continue to be the backbone of all our HR activities and is based on an appropriate goalsetting process. The employee relationship with employees & labor unions were cordial.


The market demand at the start of 2020 remained sluggish, continuing the trends from the second half of 2019. The effect of the CoViD started being felt towards the end of Q1 2020 when many of the countries went into lockdown to counter the spread of the virus. Q2 2020 saw the impact of CoViD induced downturn on MCIEs operations worldwide. Q3 and Q4 of 2020 have seen a sharp recovery in India and a slow & steady one in Europe. Overall, most of the key segments that your company serves declined by more than 20%. One exception was the tractor market in India. This is reflected in the performance of your company. MCIE Consolidated revenues declined by 24% in line with the market drop.

To counter the pandemic driven downturn, the company initiated a program for cost reduction and cash protection. This has ensured that MCIEs EBITDA margins did not drop drastically (9.6% in C20 vs 13.2% in C19). It has also made sure that your companys net profits after tax remains positive despite such a drop in revenues.


In Europe, the focus has been to restructure operations in Germany & Italy and bring them in line with the reduced demand. The heavy truck and off-road markets which these operations serve were suffering even pre pandemic, a trend that got exacerbated in 2020. In Spain & Lithuania, the performance returned to pre pandemic levels in the last quarter. The focus in Europe is to sustain & gradually improve profitability in the face of a slowly recovering market demand.

It must be noted that MCIEs European margins were aided by programs like Cassa Integrazione in Italy and similar programs in Germany & Spain wherein individual governments gave wage support equivalent to 70-80% of the cost of the employee for the days the plants were shutdown.


In the case of the Indian operations, efforts were accelerated to reduce the Break-Even level of the plants to make them more efficient and future ready. The plants also focused on improving Capacity Utilization through reduced Outsourcing and by automation projects to improve Manpower Productivity. Organisational improvements and new management structures were also introduced at certain divisions to effectively sharpen management bandwidth and focus. Among them was the plan to concentrate the activities of the composites division at one location. Focus on generating new orders increased and was aided by some customers choosing to shift sourcing from China to India. These efforts have ensured that EBITDA margin in the Indian margins during Q4C20 exceeded the pre pandemic levels.


Your companys strategy road map encompasses the following principles and sets it apart from the competition: make operations world class; diversify customer base, plant locations & technologies; invest in a disciplined manner; focus on continuous improvement in profitability and decentralize plant management.

MCIEs European operations are gradually returning to normal in line with the market. As mentioned last year, MCIE had set in motion plans to rationalize its product portfolio in Germany to improve margins. Accordingly, the Commercial vehicle forgings business in Europe has seen some business downsizing and layoffs to improve profitability. The strategy of reducing unprofitable business to improve profitability will continue in Germany. Gears, Italy also went through some restructuring costs to align with the market drop as the off-highway market it serves started declining in 2019 and hit rock bottom last year. The market is expected to start a steady recovery in 2021. The car forgings business based out of Spain and Lithuania have normalized and margins in Q4CY20 are also back to pre-CoViD levels. The aim is to sustain these margins.

In India, all the market segments that your company operates in are expected to experience good growth in the short and medium term. MCIEs Indian operations plan to make use of these opportunities and grow faster than the underlying market segments. The order book situation is such that many verticals are going in for capacity expansion viz. foundry, magnets, gears, Bill Forge & Aurangabad Electricals divisions. Many divisions are increasing value added products e.g., foundry is targeting increasing their machine value add, magnetic division is aiming for better grade magnets, gears division has benefited from more complex gears due to BSVI transition etc. All the business verticals in India are making a push to increase exports. This requires a continued focus on operational excellence that can make sure that your companys operations in India are world class and meet the global standards in manufacturing excellence that CIE pursues.

While the market forecasts are healthy, your company is aware that there could be uncertainty going forward based on the risks discussed in the section on economic analysis. For example, the adverse supply demand situation in the steel sector in India may result in steel price increases that could increase the price of vehicles and depress demand. Your company aims to navigate any demand turbulence in a way that the financials are least affected. This entails accelerating the efforts to reduce the Break-Even level of all the businesses to make them more efficient and future ready. There has been significant movement during this year to reduce the break-even levels. Some of these savings have been eroded by the pleasantly higher level of activity due to strong customer schedules in the last quarter. But your company management is confident that they will retain most of these savings when things normalize fully.

A long-term change that the industry has to take into account is the change from Internal Combustion Engine (ICE) vehicles (ICE) to Electric vehicles (EV). This change has been accelerated especially in Europe as introspection about the pandemic has led to a greater focus on green transport strategies. A point to be noted here is that a shift to plug in hybrid EVs (PHEVs) as compared to pureplay Battery EVs (BEVs), will actually be beneficial to your company as number of parts available increases.

In Europe, your company has a strong position in car crankshafts (roughly a third of MCIE Europe revenues) that could be under threat from this change to BEVs. While BEVs currently constitute roughly 5% of European car sales, MCIE projects their share to increase to 15% by 2025. Your company intends to utilize the next few years to implement a strategy that will help maintain capacity utilisation at MCIEs European forgings plants even after this change happens - increase share of business at existing crankshaft customers, focus on non engine parts & introduce Aluminum forgings. In India, this change will be more gradual with the first segments to make the transition being 3Wheelers, scooters and buses. MCIE India dependence on these segments is not very large.

EVs will mean a greater emphasis on stamped, plastic and aluminum parts compared to forged, cast or machined parts. MCIE being a player with a presence across different processes especially in India, is also well placed to tackle this change. MCIE is also able to learn from CIE Automotive with respect to any of the strategic issues discussed above. In particular, CIEs experience with EVs will be very useful as and when they become more mainstream.


Many global auto OEMs (original equipment manufacturers) are following a China plus one strategy when it comes to their supply chain. The Indian government has announced a Production Linked Incentive (PLI) for the automotive industry aimed at boosting manufacturing in India, the details of which are awaited. This is expected to help high quality automotive component manufacturers in India. Many European auto OEMs are also looking to offshore some part of their component requirements to low cost countries. MCIE India is working in tandem with their European counterparts both at MCIE Europe and CIE to take advantage of these opportunities.

The manufacturing industry finds itself in the midst of what is euphemistically called the fourth industrial revolution. As the physical and digital worlds become increasingly intertwined, your company aims to follow the CIE Automotive approach to Industry 4.0 as identified in their Annual report 2019, "CIE Automotive aims to achieve maximum productivity, flexible automation, maximum quality, zero defects, large-scale personalisation, maximum reliability, unit traceability, proactive anticipation, digitalisation of its operations and new know-how." Your company is working on multiple fronts - - strategy, organisation, technology, industrial processes, etc. - in order to model and simulate its processes using smart connection and collaboration modes.


The financial performance of the entity for the year ended 31st December 2019 and 31st December 2018 is presented below: MCIEs abridged P&L Statement for the Financial Year 2020

( in Millions)

Sr. No. Particulars

Standalone Year Ended

Consolidated Year Ended

December 20 December 19 December 20 December 19
Audited Audited Audited Audited
1 Income from operation
(a) Net sales 20,166 26,979 58,181 75,660
(b) Other operating income 1,282 1,966 2,320 3,418
Total Income from operation 21,448 28,945 60,501 79,078
2 Expenses
(a) Cost of material consumed 10,186 14,247 26,791 36,590
(b) Change of inventories of finished goods and work-in progress (149) 314 1,272 896
(c) Employee benefit expenses 3,712 3,834 12,618 13,080
(d) Depreciation and amortization expenses 1,084 1,127 3,064 3,161
(e) Other Expenses 5,678 7,096 14,804 18,834
Total expenses 20,511 26,618 58,549 72,561
3 Profit/(loss) from operation before other income finance cost and exceptional items (1 - 2) 937 2,327 1,952 6,517
4 Other Income 197 326 549 331
5 Profit/(Loss) from ordinary activities before finance cost and exceptional items (3 +4) 1,134 2,653 2,501 6,848
6 Finance cost 119 136 548 523
7 Profit/(Loss) from ordinary activities after finance cost but before exceptional items (5-6) 1,015 2,517 1,953 6,325
8 Exceptional items - (119) - 46
9 Profit/(Loss) from ordinary activities before tax (7-8) 1,015 2,636 1,953 6,279
10 Current Tax (86) (72) 457 710
Deferred Tax (Credit) / Charge 361 985 430 2,031
11 Net Profit/(Loss) from ordinary activities after tax (9-10) 740 1,723 1,066 3,538
12 Net Profit/(Loss) for the period 740 1,723 1,066 3,538
13 Minority Interest
14 Net Profit/(Loss) after taxes, Minority Interest (12-13) 740 1,723 1,066 3,538
15 Paid - Up equity share capital (Face value of Rs 10 per equity share) 3,790 3,790 3,790 3,790
16 Earnings per share (after extraordinary items) (of Rs 10/- each)
(a) Basic 1.95 4.55 2.81 9.34
(b) Diluted 1.95 4.55 2.81 9.33

Information for our Indian and Overseas operations are summarized in the table below: Segment wise results for 2020

Sr. Particulars

Year ended

No. 31st December 2020 31st December 2019
Audited Audited
1 Segment Revenue
a) India 29,704 36,508
b) Europe 31,200 43,123
Total 60,904 79,631
Less: Inter Segment Revenue (403) (553)
Net Sales / Income from Operations 60,501 79,078
2 Segment Profit/(Loss) before tax and interest from
a) India 1,577 3,048
b) Europe 923 3,754
Total 2,500 6,802
(i) Un-allocable expenditure 548 523
(ii) Un-allocable income
Total Profit Before Tax 1,953 6,278
3 Capital Employed
(Segment Assets- Segment Liabilities)
a) India 49,618 46,471
b) Europe 45,480 40,399
Total 95,098 86,870
4 Segment Liabilities
a) India 17,320 14,942
b) Europe 28,697 25,591
Total 46,017 40,533

The Key Financial Ratios of the company are given as below:




CY 20 CY 19 CY 20 CY 19
Debtors Turnover (Days) 74 71 44 36
Inventory Turnover (Days) 59 39 63 53
Interest Coverage Ratio (times) 10 20 5 13
Current Ratio (times) 1.4 1.5 0.9 0.8
Debt Equity Ratio (times) 0.02 0.03 0.3 0.3
Operating Profit Margin (%) 10.3 14.5 9.6 13.2
Net Profit Margin (%) 3.7 6.4 1.8 4.7
Return on Net Worth (%) 1.9 4.4 2.2 7.6

Working Capital

Receivables and Inventory have gone up in number of days as annual sales were impacted significantly in the 2nd Quarter due to COVID-19. To maintain liquidity, in India segment, non-recourse factoring was done to the tune of Rs 1,852 million during the last quarter.

Interest Coverage, Current and Debt Equity Ratios

The change over 2019 in interest coverage is due to profit dropping as a result of COVID-19.

Profit Margin and Return on Net Worth

Margins and Return on Net Worth were significantly impacted due to COVID-19. However, they have shown significant improvement in Q4 of CY2020 with actions taken on cost and customer demand coming back sharply. ROE was also impacted due to deferred tax write off in Germany and non-creation of deferred taxes on losses for the year in Germany and Mexico.


The business has a specific set of risk characteristics which are managed through an internal risk management practice. MCIE senior executives participate in the annual risk assessment survey carried out by CIE Automotive to identify key risks associated with the business in each of the key geographies that CIE operates in. This is supplemented by periodic internal assessment to identify risks under different categories - strategic & reputational, operational, financial, regulatory/compliance and ESG (Environmental, Social & Governance). Risks under these categories are classified as short term and long term and monitored periodically via a risk management committee that reports to the audit committee of the board.

Some of the risks identified are as follows:

• MCIE is highly dependent on the performance of the automotive industry in India and Europe. Any adverse changes in the conditions affecting these markets may negatively affect business, results of operations, financial condition and prospects.

- MCIE is monitoring the situation so that corrective actions are immediately taken in response to any demand movements e.g. in 2020, MCIE has introduced cost reduction and cash protection programs as the pandemic induced a downturn - Break Even Point reduction was one of the key outcomes under this program.

• Raw material availability for your company as well as its customers.

- E.g., in 2020, steel availability in India took a hit as demand exceeded supply and steel procurement became much more expensive. This trend is expected to continue for the initial part of 2021.

- Similarly, a global semi-conductor shortage is causing supply disruption at some of our OEM customers and may stretch into the first few months of 2021

• Potential inability to pass-through to its customers via a price increase the cost increases, in labor, energy, etc. could reduce future profitability.

• The loss of certain principal customers or a significant reduction in purchase orders from certain customers could adversely affect business, results of operations, financial condition and prospects.

• The dependence on a few key customers in some business verticals is high and leaves these verticals reliant on the performance of these OEMs - the stampings business in India and Gears business in Italy are particularly vulnerable. •

• As part of its growth strategy, MCIE India aims to develop many new parts for both existing and new customers. Managing the new product development process in an efficient manner is a key challenge.

• The lockdown across the globe in response to the globe resulted in work from home arrangements for many companies. This has led to a growing concern about cybersecurity and data security .

• MCIE will need to be ready for changes in its product portfolio to counter the impact of changes in automotive technology like hybrids and electrical engines.

- Electrification will mean a greater emphasis on stamped, plastic and aluminum parts compared to forged, cast or machined parts. MCIE being a player with a presence across different processes is well placed to tackle this change.

- While the pace of electrification is going to be slow in India, it could be much faster in Europe. Battery Electric Vehicles (BEVs) which constitute roughly 5% of European car registrations in Q3C20 is expected to grow to 15% by 2025.

- A shift to plug in hybrid EVs (PHEVs) as compared to pureplay Battery EVs (BEVs) will actually be beneficial to your company as number of parts available increases.


In the opinion of the Management, MCIE has adequate internal audit and control systems to ensure that all transactions are authorized, recorded and reported correctly. The internal control systems comprise extensive internal and statutory audits. The Corporate Governance practices instituted by the Company are discussed in detail in the chapter on Corporate Governance which forms part of the Annual Report. This year your company has also started using the compliance portal to track all management decisions using a compliance portal.


CY20 has shown us more than ever, that we operate in a world which is unpredictable. Your company has also shown that it is capable of meeting any challenge that is thrown its way. While focusing on cost reduction and cash protection programs to counter the pandemic led downturn, your company never lost sight of its journey to become a world class supplier and continued its focus on improving operations to become more efficient and profitable. The MCIE team is confident that it can utilise future opportunities and face future challenges with agility in order to meet the shareholders expectation of sustainable growth and profitability.


Certain statements in the Management Discussion & Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ from those express or implied. Important factors that could make a difference to the Companys operations include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries in which the Company conducts business and other incidental factors.