Mazda Ltd Management Discussions

(a) Industry Structure and Developments:

As per the recent update from International Monetary Fund (IMF) there is a modest growth projection of 3.1% in 2024 marking an increase from previous forecast. Additionally, there is a decline to 5.8% in global inflation rates in 2024.The year 2024 also marks changing geopolitical situation for several nations which may introduce a degree of uncertainty. Despite potential challenges Indias economic resilience shines with a stable outlook.

Among the challenges, India stood out as a bright spot. The current focus on strengthening the manufacturing capabilities brought the capital goods sector into spotlight. In the engineering sector, demand is fueled by investment and capacity expansion in crucial areas such as power, infrastructure, mining, as well as in sectors like general manufacturing, automotive, process industries goods. The industry continues to invest in technology to enhance operational efficiency and maintain global competitiveness. The sector has witnessed increased in order booking on the back of increasing consumer demand and infrastructure development. The positive economic outlook is reinforced by the governments proactive measures, as evidenced by the interim budget for fiscal year 2024-25 which targets a capital expenditure more than previous years estimates.

The companys drive towards excellence continues persistently towards bringing innovative and various product offerings for the customers at the competitive prices.

Engineering Business - Driving Innovation and growth:

Engineering segment continues to be a cornerstone of our business, demonstrating resilience and adaptability in an evolving industrial landscape. Our commitment to innovation and delivering value-added solutions has enabled us to secure a strong market position.

a) Building on Recent Successes:

The successful industrial trials of our Non-Chemical Anti-Scaling and Descaling equipment (Smart Rod Systems) marks a significant milestone. Due to the products encouraging performance (exceeded our expectations) across diverse industries, we are of the opinion that it will be in the forefront of leading the drive for reasonable growth in the current financial year.

b) Strategic Focus on Innovation:

Aligned with our vision to be a pioneer in industrial solutions, we have intensified our R&D efforts. Our focus is on developing cutting-edge technologies that address critical industry challenges and create sustainable value. A few are listed as below:

• Ion Exchange Membrane Production: As a first-of-its-kind initiative in India, we are collaborating with a large research organization to develop Ion Exchange Membranes. This technology holds immense potential for various industrial applications, including EDI/EDR systems and niche segments.

• Advanced Evaporation Systems: We are in the process of developing ‘first of its kind and innovative hybrid MVR/TVR-based Evaporation Systems which is being patented by us. This will enhance energy efficiency and overall system performance and could propel us in becoming the leaders in the field of Evaporators.

• Revolutionizing Air Pollution Control: We are working on a ‘High Gravity based equipment to significantly reduce the operational and capital expenditure of scrubber/stripper systems while improving efficiency as specially for CO2, SO2 & NH3 capture.

• Chemical-Free / CIP Solutions: Also, we are currently conducting trails for developing a ‘Chemical-Free Cleaning-in-place (CIP) Solution for the Dairy Sector. Successful alpha trials are underway, paving the way for a transformative offering.

c) Embracing a Broader Innovation Eco system:

Your company is committed to exploring innovative technologies from across the globe. We are open to collaborations with Industry leaders to introduce groundbreaking products, even if they diverge from our current offerings. Our focus on sustainable green energy technologies aligns with this approach. We are particularly interested in exploring opportunities in Hydrogen-based technologies, Desalination Technologies that resonate with Mazdas philosophy.

Overall, we are confident that our ongoing initiatives will deliver exceptional value to our stakeholders and solidify our position as a preferred partner for cutting-edge engineering solutions.

Food Business:

The FMCG sector in India is thriving, fueled by rising consumer expenditure, rapid urbanization, and shifting lifestyle trends, positioning it as one of the most vibrant and fast-evolving segments in the economy.

Mazdas Food division met our sales targets this year and successfully crossed the Rupees Thirty crore milestone, reaffirming the effectiveness of our strategic investments in expanding production capacity and enhancing our product offerings. We continue to have suppressed profit margins due to the effects of depreciation resulting from our increased capital expenditures and investments in land and machinery. We are confident that as we continue to drive growth, we will see a corresponding enhancement in our profitability over time.

Key Drivers of Performance are listed below:

a) Expanded Product Line:

We have continued to develop new flavours and product lines, in our instant drinks range and in our food colouring range. These efforts have not only attracted new customers but also increased the average spending of our existing customer base. In the domestic segment, we have a few releases planned for 2024 which will open up new segments for our division.

b) Improved Marketing Strategies:

Our investment in optimizing the distribution network and expanding our retail presence has paid off. By partnering with new distributors and enhancing our domestic presence through targeted marketing and promotional campaigns, we penetrated previously untapped markets and achieved higher sales volumes. Additionally, we have expanded our domestic distribution reach in Gujarat by hiring our own sales team and appointing super-stockists.

c) Customer Acquisition:

We have been successful in finding new customers within the markets where we are already present, leveraging our strong brand reputation and extensive product range. Given the brand loyalty our Brands enjoy across the globe, we are attracting more traders and distributors internationally asking for our products.

d) Increased Capital Expenditures:

Our capital expenditures were focused on expanding production capacity and enhancing operational efficiencies. While these investments have resulted in higher depreciation and suppressed profit margins in the short term, they are crucial for our long-term growth strategy.

e) Future Outlook:

The strategic investments made by the Food Division have positioned us for sustained long-term success. With our expanded production capacity, diversified product portfolio, and enhanced operational efficiencies, we are well- equipped to capitalize on future market opportunities. The strong foundation laid in the previous years, evidenced by our increased turnover and expanded market reach, sets the stage for continued revenue growth and improved financial performance in the coming years.

(b) Opportunities & threats:

Our future growth strategy is based on several initiatives. We are pursuing improvement in our machineries, improving our design modules, upgradation of use of information technology and product design improvements through various in-house research.

The growth in demand of our products is clearly visible, with more markets opening up for engineering sector, capacity addition in manufacturing of food products and, the overall food industry and engineering markets are expected to remain healthy in 2024-25.

Threats relating to changes in the global markets such as recent financial meltdown, regulatory or political changes and alteration in the government policies may affect the company outlook and performance. We acknowledge the existence of certain market challenges, including volatility in material prices and the availability of high-quality steel.

(c) Segment-wise Performance:

Your company has divided its business in two segments i.e., Engineering Division and Food division.

The company reported steady performance in the financial year 2023-24. During the year under review, the turnover of engineering business has increased by 18% and profits for the engineering division showed an increase of 3.40% compared to the previous financial year.

The food division has shown an increase in turnover by 13% and reduction in profits by 53% compared to the previous financial year mainly due to depreciation effect of the new factory set up.

(d) Outlook:

The Indian economy has been performing well, with robust consumption activity and increasing disposable income. Globally, the economic outlook is cautiously optimistic. The risks to global growth are broadly balanced, and a soft landing is possible. Amidst a challenging global scenario, India has emerged as a significant economic and geopolitical power. As per National Statistical Office (NSO), the real GDP growth is estimated at 8.2% for FY 2024 as compared to 7.0% in FY 2023.

The outlook of the company appears strong due to a healthy order book value.

(e) Risk and concerns:

The company could be susceptible to strategy, innovation and business or product portfolio related risks if there is any significant and unfavorable shift in industry trends, customer preferences and change in commodity prices of Raw materials.

Mazda does have the benefit of being well entrenched with many of its customers and getting repeat orders.

Risk emerging from global markets, regulatory or political changes could affect the companys operations and outlook. Pricing risks are their while quoting with lesser margins to obtain orders matching the prices of competition, leading to pressure on margins during execution. Such risks are averted by fixing minimum margins to be targeted and approval process for additional discounts, based on commercial justification and ensuring margin through back-to-back contracts wherever possible and with consent of client.

Process linkages right from obtaining orders to handing over to Client by planning effectively, timely deployment of resources, adherence to budgets and timelines. In the absence of proper linkage in this regard, actual cost and timelines may vary adversely.

(f) Internal control systems, its adequacy and risk management:

Your Company conducts its business with integrity, high standards of ethical behavior and in compliance with all applicable laws and regulations that governs its business. The company has in place a well-designed strong internal control system in accordance with the size and nature of business and complexity of operations. Internal Control Systems are implemented:

• To safeguard the Companys assets from loss or damage.

• To keep constant check on cost structure.

• To provide adequate financial and accounting controls and implement accounting standards.

• To detect and prevent fraud and to protect the resources of organization.

• To improve operational efficiency by improving the accuracy and timeliness of financial reporting.

• To set out rules and procedures to ensure the integrity of the financial statement.

During the year, the Company has taken steps to review and document the adequacy and operating effectiveness of internal controls. Nonetheless, your Company recognizes that any internal control framework, no matter how well designed, has inherent limitations and accordingly, regular audits and review processes ensure that such systems are reinforced on an ongoing basis.

Internal controls are continuously evaluated by the internal auditors and Management. Findings from the internal audits are reviewed by the management and the Audit Committee. The corrective actions and controls have been put in the place wherever necessary.

The Company ensures the periodical Internal Audit is conducted by an independent auditor, whose report is submitted to the Audit Committee and Board of Directors for consideration. During the financial year 2023-24, no significant deficiencies/ material weaknesses that might impact financial statements have been reported by the Internal Auditor as at the Balance Sheet date.

(g) Financial performance including Financial Ratios with respect to operational performance:

The discussion covers the financial results and other developments during the year under review in respect of the companys published result prepared as per Indian Accounting Standards (IND AS). Highlights below are given only for comparison.

Financial Highlights for operating performance of financial year 2023-24:

(Rs. In lacs)

Particulars	2023-24	2022-23
Total Income	23,201.07	19,385.80
EBITDA	4,634.95	3,950.47
PBT	4,179.00	3,572.23
PAT	3,152.03	2,662.64

Financial Ratios pursuant to Regulation 34 of SEBI (LODR) Regulations, 2015:

Ratios	2023-24	2022-23
(a) Current Ratio	6.82	4.25
(b) Debt-Equity Ratio	-	-
(c) Debt Service Coverage Ratio*	107.90	172.43
(d) Return on Equity (ROE) ratio (%)	15.83	15.22
(e) Inventory Turnover Ratio	5.08	4.38
(f) Trade Receivables Turnover Ratio	6.45	4.89
(g) Trade Payables Turnover Ratio	6.34	6.80
(h) Net Capital Turnover Ratio	1.64	1.73
(i) Net Profit Ratio (%)	13.98	13.90
(j) Return on Capital Employed (%)	19.29	18.89
(k) Return on Investment (%)	9.88	4.46

(h) Details of change in Return on Net Worth as compared to the previous financial year:

The Net Worth of the company stood at Rs. 18590.24 Lacs for the previous financial year as compared to Rs. 21,224.04 Lacs for the year 2023-24, whereas Return on Net Worth for the Year 2023-24 was 14.17% as compared to 14.32% for the previous financial year 2022-23.

(i) Material developments in Human Resources, Industrial Relations, and Health, Safety & Environment:

The company has a strong committed work force nurtured and backed by its professional culture coupled with innovative HR process aimed at strategic alignment with the business objectives.

The number of employees as on 31st March, 2024 was 233.

Your companys manufacturing facility at all five units and corporate office are ISO 9001:2015 & 14001:2015, and 45001:2018 certified.