Menon Pistons Ltd Management Discussions.

STRUCTURE OF THE INDUSTRY:

Your Company is in manufacturing of auto components such as Pistons, Gudgeon Pins, Rings required for commercial vehicles, tractors, passenger cars 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.

INDUSTRY OVERVIEW:

The Indian auto-components industry has experienced healthy growth over the last few years. Some of the factors attributable to this include: a buoyant end-user market, improved consumer sentiment and return of adequate liquidity in the financial system.

The auto-components industry accounts for almost seven per cent of Indias Gross Domestic Product (GDP) and employs as many as 25 million people, both directly and indirectly. A stable government framework, increased purchasing power, large domestic market and an ever increasing development in infrastructure have made India a favorable destination for investment.

Major global OEMs have made India a component sourcing hub for their global operations. India is also emerging as a sourcing hub for engine components, with OEMs increasingly setting up engine manufacturing units in the country.

DEVELOPMENTS:

The Companys strategy is based on the principle that creating value for its customers and gaining their trust requires consistent outstanding performance and a broad product portfolio, continuously upgraded through technical and process innovations.

GOVERNMENT INITIATIVES:

Increased government spending on rural development, investment in infrastructure, lower inflation leading to lower interest rates and implementation of GST are expected to have positive impact on growth of automobiles production in 2018-19.

The Govt. of Indias Automotive Mission Plan (AMP) 2006-2016 has come a long way in ensuring growth for the sector. Indian Automobile industry is expected to achieve a turnover of $ 300 billion by the year 2026 and will grow at a rate of CAGR 15 per cent from its current revenue $ 74 billion. Government has drafted Automotive Mission Plan (AMP) 2016-2026 which will help the automobile industry to grow.

ROAD AHEAD:

The rapidly globalising world is opening new avenues for the transportation industry, generating the need for more efficient, safe and reliable modes of transportation, which is subsequently adding to the auto component industrys growing opportunities. According to a report by the Confederation of Indian Industry (CII), the Indian auto component industry is set to become the third largest in the world by 2025. Also, by that time, newer vehicles and opportunities for component manufacturers will open up as the automobile market will shift towards electric, electronic and hybrid cars, and newer technologies will have to be adopted via systematic research and development.

OPPORTUNITIES AND THREATS:

Increasing automotive production and various plans initiated by the Government are likely to boost the Indian auto component industry. The industry is expected to have promising huge opportunity by the 2019.

Increase in prices of raw materials, power cost and increase in labour cost creates a threat in the minds of auto component manufacturers. Indian players have obsolete technologies which are not as competitive as compared to the technologies of global players which hinder the growth of Indian auto component industry. The industry needs to work towards upgrading technologies to meet the global standards. The low-cost advantages associated with Indian auto component industry are anticipated to continue attracting new investors.

The Company has diverse product portfolio, spread across all market segments i.e. OEMs and After market, both in domestic and export markets and across all vehicle segments i.e. Commercial Vehicles, Cars, & Tractors and stationary engines. Therefore, the Company is well positioned to take advantage of the growth in demand in various vehicle and customer segments.

The Company is targeting to achieve higher growth rate than industry growth in 2018-19, based on new business acquired from key OEMs and increased focus on Aftermarket, both Domestic & Exports.

OUTLOOK:

The domestic Commercial Vehicle industry gradually came out of the down cycle during FY 2017 after two years of demand contraction

The sentiment has definitely improved through the past few months. As far as passenger vehicles are concerned, sales have started picking up after a gap of two years. But only certain manufacturers are seeing a rise; the recovery isnt across the board.

Auto component production is forecasted to rise at a steady pace in 2018-19, mainly due to improved demand from OEMs and healthy growth in exports. Demand for auto components recovered in 2017-18, helped by a modest rise in domestic automobile production and strong pick up in exports. The industrys long-term growth prospects remain healthy as domestic and global OEM demand continues to rise.

ROAD AHEAD:

The rapidly globalising world is opening new avenues for the transportation industry, generating the need for more efficient, safe and reliable modes of transportation, which is subsequently adding to the auto component industrys growing opportunities. According to a report by the Confederation of Indian Industry (CII), the Indian auto component industry is set to become the third largest in the world by 2025. Also, by that time, newer vehicles and new opportunities for component manufacturers will open up as the automobile market will shift towards electric, electronic and hybrid cars and newer technologies will have to be adopted via systematic research and development.

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 effectiveness 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.

Thus effective internal control structure has been set up in the company to enhance organizational performance and contribute towards accomplishment of its objectives.

RISK & CONCERNS:

The Company has now a separate risk management committee devoted for the subject. The risk management is periodically reviewed as per the Risk management policy through its meetings to ensure that your company identifies its risks through means of properly defined framework and mitigate the identified risks through proper action plans and reviews.

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 & 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.

STATUTORY COMPLIANCE:

The Chairman & Managing Director and Chief Financial Officer 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.

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. Therefore it is cautioned that the actual results may materially differ from those expressed or implied in and through this analysis.

SEGEMENTWISE & PRODUCTWISE

PERFORMANCE:

The Company has only one segment of activity namely "Automotive Component". Due to weak market conditions for the automotive industry, the Company tried to perform well and achieved comparatively lower turnover of pistons/pistons rings, rings, gudgeon pins, Circlips during the year.

DISCUSSION ON FINANCIAL & OPERATION PERFORMANCE:

During the year, Company has made turnover of Rs. 149.47 Crores as compared to Rs. 148.16 Crores during the previous financial year whereas profit after tax for the year is Rs. 6.85 Crores as against Rs. 7.12 Crores in the previous financial year.

FOR AND ON BEHALF OF
THE BOARD OF DIRECTORS
Sachin Menon
Place : Kolhapur Chairman & Managing Director
Date : 18.05.2018 DIN: 00134488