STRUCTURE OF THE INDUSTRY:
Your Company is in manufacturing of auto components such as Pistons, Gudgeon Pins,
Rings, Auto shafis required for commercial vehicles, tractors and heavy duty stationery
engines. The market is divided into many segments such as export market, replacement
market, OEM market. These are distinct from one another and have distinct advantages and
plights. The auto component manufacturers mainly cater to two types of buyers, i.e. the
original equipment manufacturers (OEMs) and the Engine Overhauling segment. While demand
in the former is dependent on the production of new vehicles, the later, i.e. the Engine
Overhauling segment, is lucrative due to its size and unlike the OEM segment, it is not
cyclical.
INDUSTRY OVERVIEW:
The Indian automotive sector is a vital growth driver of the Indian economy, with
valuable contribution to GDP and creating jobs for millions. e Indian automobile industry
has historically been a good indicator of how well the economy is doing, as the automobile
sector plays a key role in both macroeconomic expansion and technological advancement.
Major four wheeler companies recorded highest growth in annual sales in 2022. The Indian
auto components industry is expected to grow to US$ 200 billion by FY26. is growth will be
backed by strong export demand which is expected to rise at an annual rate of 23.9% to
reach US$ 80 billion by 2026.
The scrap page policy and strict inspection of Pollution under Control (PUC)
certificates would boost the auto component industry. With plans to reduce auto
components import dependence domestic players are expected to witness a demand surge.
DEVELOPMENTS:
During the year the company has acquired 100% shareholding of Lunar Enterprise Private
Limited. is company is engaged in the manufacturing of wide range of Precision Engineering
Products like Automotive turned parts, CNC turn parts, precision turned parts and
precision Automotive parts which will help to diversify into new segments. In order to
meet the vision of growth and de-risk its business model, the Company started
diversification by acquisition of Rapid Machining Technologies Pvt Ltd and Lunar
Enterprise Pvt Ltd.
The Company has very good opportunities because of long term business relationship with
valued customers both in domestic OEMs and export and also timely supplies, superior
quality products. The Company continues its drive for sustainable growth in this growing
domestic automotive industry. In view of strong support of OEMs and because of
establishing good distribution network, the Company is poised for good growth.
GOVERNMENT INITIATIVES:
The Indian automobile industry is one of the largest in the world and plays a critical
role in the countrys economic development. India has overtaken Japan as the 3rd largest
light vehicle market in the world in 2022, led by a strong demand for last-mile deliveries
and personal mobility after Covid-19. e Indian government has sought to further boost the
industry in its recent budget for 2023-24.
Government has come out with Automotive Mission Plan (AMP) 2016-26 which will help the
automotive industry to grow and will benefit Indian economy in the following ways: -
ContributionofautoindustryinthecountrysGDPwillrisetoover12%
Around65millionincrementalnumberofdirectandindirectjobswillbecreated
EndoflifePolicywillbeimplementedforoldvehicles
ROAD AHEAD:
The growth prospects in medium to long term remain positive and the automotive
component industry is also expected to grow in line with the growth in automobile
production. Due to a shifi in supply chains, India can possibly increase its share in the
global auto component trade to 4-5% by 2026. India surpassed Japan in new auto sales in
2022, making it the third largest market for the first time. The growth of global original
equipment manufacturers (OEM) sourcing from India and the increased indigenisation of
global OEMs is turning the country into a preferable designing and manufacturing base. The
Company is targeting to achieve growth, by increasing its market share with key OEMs and
increased focus on the afiermarket both in domestic and exports market.
OPPORTUNITIES:
India has taken steps to improve its infrastructure, develop port facilities, develop
agricultural industry and focus on developing manufacturing. Due to these developments,
many foreign companies have increased their investments in Indias auto industry; they
have discovered that it ofiers a competitive environment for their business plans while
still being able to take advantage of Indias labor force.
Growth in working population and middleclass income will drive the market. With the
Self-Reliant India mission, the auto industry is looking to half its Rs. 1 trillion (US$
13.6 billion) worth of auto component imports over the next 4-5 years. is will provide
significant opportunities for existing and new auto components players to scale up.
Indian auto-component makers are well positioned to benefit from the globalisation of
the sector as exports potential could be increased by up to US$ 30 billion by 2021E. A
cost-efiective manufacturing base keeps costs lower relative to operations in other
countries.
CHALLENGES:
The auto industry is highly competitive, consisting of organized as well as unorganized
sectors and is highly fragmented with a significant number of small and medium-sized
companies because of which the business rules are changing to meet the tough competition
prevailing in the industry. Innovation, technological upgradation and cost saving hold the
key to success to meet the expectations of the exigent competitive circumstances. However,
the Indian auto component industry has been navigating through a period of challenges.
The major challenges faced by the Indian auto component industry are pressures on sales
and margins, stringency in regulation, technology up gradation, discerning customer
demand, shift in global markets, and disintegration of global barriers. Continuously
increase in raw material and consumables in both the global as well as domestic markets
led to the drop in margins for auto component manufacturers. Further the Russia-Ukrain war
is into several weeks and increase in prices of commodities that we consume, will
definitely impact the profitability of the industry and Its a concern for the entire
industry.
OUTLOOK:
Though the year 2022-23 started on an optimistic note, auto industry continues to
witness challenges emerging from the on-going global geo-political situation viz.
Russia-Ukraine war and lockdown in China. Supply chain of parts continues to be a key
concern. e auto sector is expected to bounce back but the pace could be slower compared to
the previous year. To remain competitive in the challenging and demanding environment, the
benchmark needs to be kept high in anticipation of the stated and unstated need of the
customers and markets.
Factors like normal mansoon, increasing infrastructure and overall economic growth
indicators shall strengthen the positive outlook and will help the industry to perform
better.
RISK & CONCERNS:
The Company operates in an environment, which is afiected by various risks, some of
which are controllable while some are outside the control of the Company. However, the
Company has been taking appropriate measures to mitigate these risks on a continuous
basis.
The auto sector is grappling with rising raw material prices of steel, aluminum, copper
and precious metals and increasing fuel prices which are likely to impact the growth.
Continuous demand from customers for price reduction along with increase in price of raw
materials may afiect the margins of the Company.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:
The Companys internal control system has been designed in order to provide the
directors and the audit committee with reasonable assurance that its assets are
safeguarded, transactions are properly authorized and recorded, material errors and
irregularities are either timely prevented or detected. The internal controls system
provides the board an independent, reasonable assurance of the adequacy of efiectiveness
of the organizations risk management, control and governance process.The board of
directors continuously assesses opportunities for improvements in business process,
systems, control and also putting in place standard operating practices. The Company has a
well-defined internal control system, which aims at protection of Companys resources,
eficiency of operations, compliances with the legal obligations and Companys policies and
procedures. us efiective internal control structure has been set up in the company to
enhance organizational performance and contribute towards accomplishment of its
objectives.
ENVIRONMENT:
The Company believes that, by nature, our operations have a minimal impact on the
environment. However, we acknowledge that there are inevitable environmental impacts
associated with daily operations. We strongly encourage the internationally established 3
Rs reduce, re-use, recycle. In the course of our operations we seek to identify
opportunities to reduce/keep it at minimum consumption of energy, water and other natural
resources. We also strive to re-use and recycle where possible and dispose of
non-recyclable items responsibly, thereby minimizing impact on the environment.
HUMAN RELATIONS, WORKERS WELFARE, INCLUSIVE DEVELOPMENT ACTIVITIES:
At your Company, we assure to provide environment for continuous innovation and
improvement by rewarding the employees for the dedicated efforts made by them in achieving
Companys goal. We believe whatever we achieved from where we started our journey long
back is the result of our team. So, we consistently aim to provide a sustainable
environment for learning right from the stage of recruitment to retention.
FINANCIAL STATEMENTS:
The financial statements have been prepared in accordance with the requirements of the
Companies Act, 2013 and Indian Accounting Standards as prescribed by the Government. The
Board of Director believes that it has been the objective and prudent in making estimates
and judgments relating to the financial statements and confirms that these financial
statements are a true and fair presentation of the companys operations of the year.
KEY FINANCIAL RATIOS:
S. N. |
Particulars |
2022-23 |
2021-22 |
Reasons For variance more than 25% |
| 1 |
Debtors Turnover Ratio |
4.04 |
4.20 |
N.A. |
| 2 |
Inventory Turnover Ratio |
9.44 |
9.16 |
N.A. |
3 |
Interest Coverage Ratio |
12.10 |
18.17 |
33.40% Interest Coverage ratio has been improved because of repayment
of long term debts |
| 4 |
Current Ratio |
2.05 |
2.41 |
N.A. |
5 |
Debt Equity Ratio |
0.14 |
0.28 |
50% Debt equity ratio has been improved because of repayment of long
term debts and increasing Net worth. |
| 6 |
Operating Profit Margin |
15.95 |
12.80 |
N.A. |
| 7 |
Net Profit Margin |
11.36 |
8.90 |
N.A. |
| 8 |
Return on net worth |
20.43 |
19.95 |
N.A. |
STATUTORY COMPLIANCE:
The Chairman & Managing Director and Chief Financial Oficer makes a declaration at
each Board Meeting regarding the compliance with provisions of various statutes after
obtaining confirmations from all the units of the company. The Company ensures compliance
with SEBI regulations and provisions of the listing agreement.
SEGEMENTWISE AND PRODUCTWISE PERFORMANCE:
The Company has only one segment of activity namely "Automotive Component".
erefore, segment-wise performance is not applicable
DISCUSSION ON FINANCIAL AND OPERATION PERFORMANCE:
During the year, Company has made turnover of Rs.208.21 Crores as compared to Rs.201.05
Crores during the previous financial year whereas profit afier tax for the year is
Rs.23.64 Crores as against Rs.17.88 Crores in the previous financial year.
CAUTIONARY STATEMENT:
Statements made in this Management Discussion Analysis report describing the Companys
projections expectations, estimates, global conditions, government policies etc contain
forward looking statements based upon the data available with the Company. The Company
cannot guarantee the accuracy of assumptions and perceived performance of the company in
future based on this data and the assertions made in the report. erefore it is cautioned
that the actual results may materially difier from those expressed or implied in and
through this analysis.
|
For and on Behalf of e |
|
Board of Directors |
|
Sachin Menon |
| Place: Kolhapur |
Chairman & Managing Director |
| Date: 20.05.2023 |
DIN: 00134488 |
+91-9892691696
