Today's Top Gainer
Note:Top Gainer - Nifty 50 More
momentum than expected, as consumer and business confidence weakened and auto production in Germany was disrupted by the introduction of new emission standards. Investment dropped in Italy as sovereign spreads widened and external demand, especially from emerging Asia, softened. Natural disasters hurt activity in Japan. Trade tensions increasingly took a toll on business confidence resulting in worsening of financial market sentiment, with financial conditions tightening for vulnerable emerging markets in the spring of 2018 and then in advanced economies later in the year, further weighing on global demand.
The Indian economy grew by 6.8% for FY2019, mainly driven by the growth which came in during the first half of the year. FY2019 started with a strong first quarter where the growth was 8% and then it started to slow down and it further decelerated in the second half with a dismal growth rate of 5.8% for the fourth quarter. Private investment activity has been subdued for many years and in the second half, Government capital formation was low, in an attempt to meet fiscal deficit target. In H2
FY2019, liquidity issue of Non-Banking Financial Company also jeopardised the growth which was already getting impacted because of lower export.
Mirroring the Indian economy, the Indian automobile growth was also a story of two halves. While the auto sector had posted strong growth rate of 14.8%in FY2018, it posted a growth of 6.2% in FY2019. The auto sector faced multiple issues like NBFC liquidity concern and crunch, overall slowdown, inventory pile-up, mandatory insurance, uncertainty due to the general elections, etc. It is interesting to note that the first half of the financial year saw robust growth as production volumes increased by 14.3% on a year-on-year basis. However, as the effects of the above-mentioned issues started coming in, it impacted the sales and production in the second half of the fiscal year. The industry posted a decline of 1% year-on-year basis with passenger vehicles declining most in the second half of the year.
Within the industry, the commercial vehicle continued to show a strong growth of 24.2%. However, low consumer confidence and liquidity crisis impacted the passenger vehicle segment which despite multiple product launches could only grow by 0.1% for the year, against 7.9% a year ago. Three wheelers segment grew above the industry rate at 24.1% and the two-wheeler market grew by 5.8% for the year.
Minda Corporation at a Glance
The Company is a leading automotive component manufacturing company in India with significant international footprint. It has 28 manufacturing plants in India, three in Europe, two in South East Asia and one in the North America. The Company has multiple product lines and caters to almost all the Original Equipment Manufacturers (OEMs) and the aftermarket segment in the automobile industry. India continues to be the core market for the Company and accounts for around 70% revenue, followed by Europe and North America with around 26% and the balance is contributed by South East Asia. During the year under review, the Company posted an above industry growth rate of 19.2%, with a total income of Rs30,920 million. Profit after Tax grew by 18.2% to reach Rs1,675 million up from Rs1,417 million in FY2018.
The Company classifies its business in four board categories including Mechatronics (previously Safety, Security and Restraint System); Information and Connected System (previously Drive Information and Telematics); Plastics & Interiors (previously Interior System) and Aftermarket.
FY2019 witnessed a major transformational journey for the Company, which can be briefly summarised as below:
Transcend into New Horizons
Moving up the value chain, by creating a niche for itself, leveraging its technological expertise and the trust and relationships of customers, it has served since decades. The Company is strategically evolving from Build to Print or Component Supplier to Comprehensive Systems Provider or Solutions Provider
Augur Revenue Growth, inorganically
As a conscious strategic decision, the Companys leadership team will focus on inorganic growth opportunities through Joint Ventures and Alliances
Aiming Zero defects across product range - whether supplying to customers or receiving from vendors, thus driving excellence across the Company
Continuous investments in technology (e.g. SMIT) to innovate new products, upgrade existing ones by electronic integration
The transformation was carried out across the Company. Below are few highlights of this transformational voyage:
agile conduct, improved Responsiveness
To enable agility and thus improved market responsiveness to adapt to changing conditions, by clearly defining the role of the corporate and business for faster decision making
customer at the core
Adopted Key Account Management strategy, in order to increase existing customer penetration and help new customer acquisition
To enable the Company to expand through the various options, including but not limited to - inorganic route, new plants, new product categories, capacity expansion and backward/forward integrations.
To apply a holistic approach for quality in the group to ensure sustenance of the business
To leverage synergies across the group, to manage costs and enhance market competitiveness
innovation and Technological Leadership
To drive focus on building new technologies and transform the Companys positioning from an ancillary supplier to a solutions provider
All the above transformations have resulted in translating the Company. Below are few of the benefits:
11 businesses consolidated into 4 broad business verticals
Building Key Account Management framework, for better and comprehensive Customer Service
SMIT to act as Technology Incubator
Paradigm shift in business development process and new customer additions
Programme Management function for managing new projects
Matrix interface between functions, for agile conduct and quick responsiveness
FY2019 marked a strategic transformation in the holding structure of Minda Corporation Limited with the amalgamation of 5 wholly-owned subsidiaries (Minda Management Services Limited, Minda SAI Limited, Minda Automotive Solutions Limited, Minda Autoelektrik Limited & Minda Telematics Electronics Mobility Solutions Private Limited) into Minda Corporation Limited.
The benefits of this transformation are as follows:
Leaner, Simpler Corporate Structure
The amalgamation will lead to a leaner and simpler corporate structure, making it easier for the investors to understand the business
Stronger standalone entity
The amalgamation will lead to a stronger standalone entity, as the five wholly-owned subsidiaries would add up to the strength on all aspects
Since the amalgamation is of wholly-owned subsidiaries, the same is classified as equity-neutral, as no fresh equity will be issued.
The amalgamation will result into consolidation of the businesses.
All-round stakeholders benefits
It is expected to be beneficial to all stakeholders of such companies, as such amalgamation would create greater synergies among the businesses and would enable them to have access to better financial resources, increase the managerial efficiencies, lowering of cost structure and higher transparency.
For the year under review, the Company achieved a standalone turnover of Rs23,708 mn as against Rs19,969 mn during the previous year, registering a growth of 19.7%.
The Company reported a Net Profit of Rs1,606 mn as against Rs1,026 mn in previous year registering a growth over 56.5%. The PAT margin for the year was 6.7% as against 5.1% last year.
The Company reported an EPS of Rs7.15 for the year under review.
For the year under review, the Company achieved a consolidated turnover of Rs30,920 mn, as against Rs25,934 mn
during the previous year registering a growth of 19.2%.
The Company reported an EBITDA of Rs2,923 mn as against Rs2,729 mn earned during previous year registering a growth over 7.1%. EBITDA margin for the year was at 9.5% as compared to 10.5% for the previous year.
The Company reported a Net Profit of Rs1,692 mn as against Rs1,427 mn earned during previous year registering a growth over 18.6%. PAT margin for the year was 5.4% which is in line when compared to last year.
The Company reported an EPS of Rs7.62 for the year under review.
The networth of the Company increased to Rs11,951 mn in FY2019 from Rs7,407 mn in FY2018 mainly due to issuance of fresh equity worth Rs3,100 mn under qualified institutional placement.
Electronic and Mechanical Security Systems including Ignition Switch Cum Steering Locks, Smart Key Systems, Mechatronics Handles and Immobilizers System;
Die Casting Components such as Aluminum Low Pressure and Gravity Die Casting;
Starter Motors and Alternators.
A. Safety Security Division
The need for differentiating products by OEMs is resulting into premiumization of safety security parts. Shifting from mechanical to mechatronics security system at low cost, with the help of innovation is the need of the hour, as the OEMs are facing cost pressures due to the shift from BSIV to BSVI. This division has been growing and gaining market share as it has:
In-house Design and Development capability for Mechanical Security Systems, with focus on Product Innovation which has been demonstrated by:
Fuel tank caps meeting BSVI regulations design activities started for Key Customers in 2-Wheelers.
Bayonet type Fuel Tank Cap with high pressure valve meeting BSVI norms, for overseas Customer - fully designed and validated.
Sealed Ignition switch for ATV - Product validated and regular supplies started.
New concept Steering lock for Exports Customer - Under development.
Ignition switch-cum-steering lock, with integrated connector & multi-function module - Regular supplies started.
New Product line of Mechanical Control Cables, added with complete plant and Lab testing facilities set up in Pant Nagar.
Strong patent portfolio
The Companys relentless focus on Intellectual Property Rights creation is the prime reason for the strength in the patent portfolio. The portfolio of patents till FY19 stands tall at 70 patents.
World class in-house R&D facility - SMIT
The investment in the state-of-the-art, in-house R&D facility Spark Minda Technical Centre (SMIT), Pune continues to yield rich dividends, in terms of enriching the IPR portfolio and enhancing product line.
Proximity to Customers
The facilities are strategically located in close proximity to customer locations, providing us with an inherent edge by saving on valuable time and transportation costs.
The Company is the second largest safety security maker in 2 wheelers globally. It has also maintained a firm grip on market share in the domestic market and continue to show good growth in exports.
The focus is to expand this division by
Market penetration in domestic, as well as International
Product development i.e. Mechanical to Mechatronic
Market Development i.e. entry into ATV/Off-Road in various overseas market and also into E-Bike/E-Rickshaw
Expanding SOB with existing global customers.
The division is also building strong supplier base and capability for reduction in raw material through Value Addition /Value Engineering and also looking to save cost by sourcing from FTA countries.
B. Die-Casting Division
The die-casting division, a vital part of the Mechatronics business, hosts all the die-casting facilities under one roof - LPDC, GDC, HPDC - Aluminium and Zinc. Its cost competitive manufacturing process and in-house state-of-the-art testing facilities are helping the division to grow both in domestic and overseas markets at a much faster rate.
It has 3 plants located at Greater Noida (established in 2006), Pune (2007 and 2017). Its design and engineering capabilities are helping the Company to meet the audits of major customer and garner more business for future. The product range it manufactures is:
GDC : Upper Bracket & Handle holders for 2-Wheelers, Compressor Housings for Turbochargers, Engine Mounting Brackets for 4-Wheelers, Intake Manifolds, Brake Calipers, Tandem Master Cylinders for brake application, Housings for steering mechanism, Thermo Housing for water & Oil pump application
LPDC : Cylinder Heads and Upper Bracket for 2-Wheelers
HPDC : Master Cylinders for 2-Wheeler brake application, Seal plates for Turbochargers, Starter motor cover, Head Cover
Zinc : Ignition lock, Fuel Tank cap parts for 2-Wheelers and 4-Wheelers
The division is geared up to diversify its business into other area like Aerospace, Rail, Defence and Marine because of the deep
understand and knowhow. It is also helping the OEMs and Tier 1 supplier to meet the change in regulations, which are taking place in fuel injection, braking and emission system.
C. Starter Motors & Alternators Division
Minda Autoelektrik Limited (formerly known as Panalfa Autoelektrik Ltd.) (MAEL) is engaged in the business of manufacturing and selling of starter motors and alternators. The Company is a leading manufacturer of GRS Starter Motors and Alternators with technology from Magneton, Czech Republic. It is the pioneer in India to introduce Starter Motors with Offset Gear Reduction Technology, which gives technical edge over conventional starter motors like more power in compact size, high efficiency and reliability and less current drainage from battery. It caters to a range of sectors including tractors, agriculture machinery, stationary engine and construction equipment in India and Europe.
The division has huge opportunities
Diversification into new segments - LCV, Off Road, stationary engine and 3-Wheelers
New business acquisition in tractors segment, with introduction of low-cost Alternator and Permanent Magnet Gear Reduction Starter Motor.
Opportunity to increase Export Business with existing and new customers/new territories
Opportunity to increase business in the After Market segment by leveraging support of Aftermarket Sales & Service network for its child parts
The division is further developing new products to have sustainable growth and enhance profitability. Some of the products under developments towards this are highlighted below:
Permanent Magnet Planetary Gear Starter Motor for Tractor & LCV
24 Volt 55 Amps 5" Internal Fan Alternator for LCV
Volt 1.8Kw Starter Motor for LCV
12 Volt 55 Amps 4" Internal Fan Alternator for LCV and Tractor
12 Volt 210 Amps 5.5" Internal Fan Alternator for Tractor
D. ASEAN Business
PT Minda Automotive (indonesia)
Minda Vietnam Automotive Co. Ltd
These Companies cater to the large and growing markets in the ASEAN region, with its Greenfield manufacturing facilities in Indonesia and Vietnam. This helps the Company to live up to its core philosophy of being near to the customer and supplying the best quality products The supplies to the OEMs not only in Indonesia, Malaysia, Vietnam, Singapore, Philippines, China, Japan, etc., but also to OEMs in distant Brazil and Columbia, are a testimony to the success of the vision of the Company.
The Companies supply a wide range of products to its customers including Ignition switch (with or without Magnet Shutter), Fuel Tank Cap, Side Cover Lock, Seat Latch / Locks.
The technological capability of the Companies are backed up by a strong R&D teams in India, with Design office in Japan.
It remains a one-stop solution for Lock, Wiring Harness, Speedometer, EV and other group products from one facility in ASEAN. In order to support the future growth, the Company is focusing in introducing Gravity Die Casting and EV Products in the ASEAN region.
E. Minda VAST Access Systems
Headquartered at Pune, Minda VAST Access Systems Private Limited is a 50:50 joint venture between VAST, USA and Minda Corporation Limited. Minda VAST is a leading supplier in the Indian OEM space and the after markets for security/access control products and supplies to leading segments of the auto industry including passenger vehicle and commercial vehicle. Minda VAST manufactures lockset and door handles.
With new technologies, the automotive industry is witnessing structural and rapid changes. It is imperative to match these structural changes with innovation across product segments to remain relevant. Minda VAST has been successful in moving with the changing trends, i.e shift from Mechanical to Mechatronics; and developing products with the help of SMIT and VAST like iRIS 1, iRIS 1.5 & iRIS 2, ESCL, Immobilizer and other electronic parts. It has also developed products like Bracket-less handles, in line with the Governments stringent regulatory requirements and the need for weight reduction in products.
New product development and penetration to new customers - both in the domestic and global markets, remain the key strategies for growing this business.
Wiring Harness and Components
Sensors Including Speed and Exhaust Gas Temperature;
Innovative Technology Solutions and IOT Solutions.
A. Wiring Harness Division
The regulatory tightening measures, along with customer preferences for comfort, safety and feature-rich mobility, is bringing a sea change in the use of wiring harnesses. The content in the wiring harness, in terms of no. of circuits, connectors have been increasing steadily, but with BSVI coming to play from 1 April 2020, the industry shall witness enormous increase in the content of wiring harness, especially for 2-Wheelers, where the engine is moving from carburetor to Electronic Fuel Injection (EFI). With BSVI regulations, the import content will increase. The Company is in a constant endeavor to optimize the wiring harness design through frugal engineering, to reduce the import content and improve the productivity of labour, so that we are able to supply a world-class, reliable product at minimum cost. Other than passenger vehicles, this division has more than 30% market share in 2-Wheelers, 3-Wheelers, Commercial Vehicles and Tractors in India. It is also exploring the potential of exporting Wiring Harness to global OEMs, who are its customers for other products. Pan-India presence near automotive hubs, along with consistent quality is helping it retain strong customer relationships and enhancing the brand image of the group.
Expanding market by adding new customers domestically, as well as globally and enhancing the core competency, by locally developing various components required in Wiring Harness, remains the key to sustainably grow the business.
Development of Modular Fuse Box, waterproof connectors, PCB Junction Box and Aluminum Battery Cable testify the capability of the team in localizing. However, investments in technology and automation is the need of the hour, in order to increase productivity.
B. Telematics & electric mobility division
Minda Corporation, through its subsidiary Minda SAI, has acquired
Bengaluru-based EI Labs during FY2018. This division delivers interdisciplinary products in the connected mobility and IoT arena. This acquisition has enabled Minda Corporation to develop latest devices and solutions, bringing in state-of-the-art technologies in the automotive connected mobility management devices and solutions domain. Spark Minda would be bringing a full spectrum of solutions, to reinforce developments in next-generation connected mobility and IoT space.
C. Minda Stoneridge
Minda Stoneridge (MSIL) is a 51:49 joint venture between Minda Corporation Limited and Stoneridge Inc, USA, a leading manufacturer of electronic instruments and automotive sensors. More than 80% of the revenue of the JV comes from cluster, whereas the remaining is driven by the Sensor business. Premiumization of product, due to safety and aspirational needs of the customers will be the driving factor for volume growth in the cluster segment, whereas regulatory push i.e. movement from BSIV to BSVI is going to result in increase in revenue from Sensor business.
Focus on cost leadership by design and material optimization has helped it to retain market leadership in commercial vehicles, tractors and 3-Wheelers in the cluster segment. The company is working to increase its penetration in 2-Wheelers along with Passenger vehicles, as the trend towards connected mobility increase over the coming years. The Company is working with Telematics and Electric Mobility division of Minda Corporation and Stoneridge, for integrating the cluster with telematics.
Emissions, Safety and Fuel Economy are driving the growth in Sensor business. Regulation driven Sensors, as the industry moves from BSIV to BSVI is going to accelerate the growth of EGT, EGRT and SOOT sensor. Addition of new customers for existing sensors will also help in increasing the revenue.
The JV is working very closely with Stoneridge to explore other products which can be moved to the JV, so that it can continue to supply global customers of Stoneridge and explore penetrating into the domestic customers with whom it has strong relationships.
D. Furukawa Minda
Furukawa Minda is a 75:25 joint venture between Furukawa Group of Japan and Minda Corporation. The Company develops and produces the entire range of Wiring Harness and components related to wiring harness e.g. relay box, junction box and Steering Roll Connectors used for the airbag systems etc.for Japanese 4-Wheeler customers. In addition to the Wiring Harness, it is a pioneer in Steering Roll Connectors (SRC) technology in India.
After successfully implementing the revival strategy, the Company divested some of its stake to the JV partner and reduce its stake from 51% to 25%. The Company is optimistic about its future growth potential, as regulations becomes more stringent and demand improves.
The product range comprises of Glove Boxes, Centre Consoles, Cup Holders, Ash Trays, Louvers, Steering Column Shrouds, Air vents, Seat Panels, Structural Parts, Oil Slumps, Cylinder Heads, Quick Connectors and Battery Trays. In addition to this, Minda KTSN also design and develop tools for the products it manufactures.
Minda KTSN has manufacturing units in Germany, Mexico, Poland and Czech Republic, where it produces and develops both kinetic and non-kinetic plastic interior parts. It also produces some under bonnet and structure parts. The revenue is also driven by business from tooling, mainly from the Volkswagen Group. Other customers include BMW and Daimler, as well.
Last year was a challenging one for the business, as sales in the European operations had reduced, due to a subdued market environment and WLTP norms. Things began to worsen as the raw material price also started to inch up, due to higher crude
prices, which unlike in India is not a pass-through to the OEMs. Higher customer concentration also impacted the revenues.
To overcome the challenges, the Company has strengthened the management in Minda KTSN and is in process to reduce the breakeven levels, along with diversifying its customer base. The focus remains to bring Minda KTSN back into profitability and acquire new businesses which are profitable. The Company now has more rigorous focus on operational excellence, system improvement and better sourcing to reduce cost so as to stabilise the business.
Key R&D initiatives
With a growing demand for electric cars, the technology is shifting towards weight reduction. Along with the esteemed customers, it has developed some innovative solutions like Mucell, an alternative to some major raw material
Create technology and process expertise in a product category (Eg Glove Box) to be a premium, niche player
Working towards developing innovative products in collaboration with SMIT
The Company markets all products manufactured by the Group Companies and certain outsourced products in the aftermarket segment.
Aftermarket products include products manufactured by the Group Companies along with certain outsourced products, such as filters, clutch plates, bearings, wiper blades, brake shoes and cables.
The Company provides aftermarket sales and services to the 2-Wheeler segment, contributing more than 80% of its revenue and other segments like, 3-Wheelers, Passenger vehicles, tractors, Commercial vehicles and off-road vehicles contributing the balance. It has well distributed network across various regions not only in India, but also in Sri Lanka, Nepal, Bangladesh and Bhutan.
It has more than 500 business partners covering various vehicle segments including 2-Wheelers, Passenger vehicles, Commercial vehicles and off-road vehicles. The Company intends to capitalize its extensive distribution network and global presence to expand its aftermarket sales and services to other international markets, such as South East Asia. To strengthen the brand image, it is connecting with retailers and mechanics, along with providing favourable polices like warranty response within 48 hours. To further strengthen its distribution channel by having the right
policy and working at ground-level and delivering the best- in-class service by leveraging digital tools. Aftermarket helps our business partners to mitigate the risk of slowdown in the automobile industry. It is focusing on growth and looks forward to strengthen this vertical by maintaining the leadership position in its legacy products, consolidate and then expand the market share in products launched in last few years. The Company is also looking at opportunities to introduce new products at regular interval.
Technological Advancement & Technology Edge
The Spark Minda Technical Centre (SMIT) is the core of its technological innovation and the hub for its futuristic technological development. SMIT supports the technological innovation ambitions and helps drive the vision of the company. SMIT supports the Companys objective of Electronification and in a year or so has enriched the groups footprints in its traditional legacy space with new technological offerings to meet the world-class expectations of the market.
Establishment of Spark Minda Technical Centre was a significant step to propel Spark Minda Group towards attaining technology leadership in automotive sub systems domain. SMIT leads the technology journey of the Spark Minda Businesses apart from steering the Group towards a generation of new and future technologies.
Technology is a key driver to success in the global automotive and transportation sector. Its challenging for businesses to ramp up quickly to address the emerging disruptive technologies without the right tech minds. At the SMIT hub, We Do Just That- by providing the right talent to bridge the gap from being a Tier 1 Auto Component player to a Technology driven complete system solution provider for e Mobility, always the Right minds and the Right Technology.
To the millions of Indians intimately familiar with the challenges of traveling through their crowded cities and around the vast, large nation, it might seem unrealistic, even idealistic, to comprehend building a comprehensive, modern transport network that will deploy the latest technologies in electric mobility, clean rapid transit and cloud based digital controls. The truth of the matter is that these are leapfrog technologies that are poised to change the face of India.
SMIT strives to strengthen and expand the Groups presence in automotive systems area as a complete System Solution provider. The centre nurtures innovations to create breakthrough solutions tailored to address the market requirement, pursues opportunities in the area of new generation technologies like Connected, Autonomous, Electrified Mobility Solutions, Body control and Multi-function controllers, Smart security and Vehicle access solutions, etc.
Additionally, SMIT also explores incubation of future technologies like deep learning, artificial intelligence, internet of things (IoT), smart vehicles technologies, prognosis and diagnosis, etc. In essence, the SMIT Centre is a prime example of being powered by the passionate spirit of the Group, creating a vibrant work environment which thrives on passion in engineering and technology.
SMITs traditional offerings have been enriched with new technologies to meet the world-class expectations of the market. SMIT has also charted out a technology road-map in line with the technology expectations of the future vehicles. The centre has facilitated in positioning the Spark Mindas brand image as technology partner of choice for our global customers. Further, the young and vibrant work-force stimulated by the culture of innovation at our SMIT Centre has already started showcasing results.
Although technology and automation stand front and centre in todays corporate world, yet every part of the business boils down to people. In a complex and competitive world, the Company strongly believes that people are the reason for its success in the national and international markets and an important factor to achieve business and social objectives. Thus, its Human Resource initiatives are focused towards further strengthening and nurturing its vast and diverse employee base of more than 2600 permanent employees.
The Company has well-crafted and employee friendly HR policies, and hence it enjoys cordial relationship with its employees and have not experienced any major work stoppages due to labour disputes or cessation of work in the last many years.
It continues to emphasise and focus on safety and security at the workplace by prescribing policies and procedures, creating awareness and imparting trainings to the workforce. It also has an established mechanism that fosters a positive workplace environment which is free from harassment of any nature. An Anti-sexual harassment initiative framework is in place in the organisation to addresses complaints of sexual harassment at the workplace.
The organisation has a diverse workforce, product range and is spread across various locations, and hence to establish synergy between different business verticals it has recently restructured the organisation and established new systems and processes and
thus providing bigger and larger platforms for the employees to grow as a leader within the organisation.
Multiple workshops were conducted to communicate the new organisation structure to the employees. Also, to ensure transparency and effective communication, its senior management team regularly connects with the leadership team to discuss about the on-going operations of the business and the upcoming projects and strategies. All the employees are considered as part of the business and are updated about
Risks and Concerns
Outside India, the Companys businesses are concentrated in Europe and ASEAN. Not only the Company has manufacturing footprint, but also exports to these regions. Any unexpected uncertainties and volatilities in these economies may have an adverse impact on profitability. Such uncertainties may be in the nature of any new regulation or norms, affecting the automobile industry, climate change regulations, political or trade disruptions, etc.
Mitigation: The Company has started diversifying operations into other geographies. It has set up manufacturing footprint in Mexico. Minda Corporation is also focused on enhancing exports of legacy products like Wiring Harness, cluster etc.
Foreign Exchange Risks
The Company has operations in many countries and is prone to the currency fluctuations due to export and import transactions. Currency fluctuations are likely to impact the products pricing and profitability.
Mitigation: The Company tries to have back-to-back arrangement with customer for currency fluctuations. Wherever not possible, it keeps track of currency risk and takes appropriate positions in
the current market situation and the challenges being faced along with the strategy to overcome it.
It has worked towards becoming a performance driven organisation. Detailed discussions with the employees were conducted to clarify their roles and responsibilities and build cross functional teams to further clarify their key result areas and performance indicators.
To keep pace with the changing times and based on the needs of the employees and business standards, It has identified and revised few HR policies to ensure the well-being and growth of the employee. The Company has introduced a Higher Education policy to support the employees to learn and grow.
The Company continued its policy of handholding new employees via a strong orientation and induction program and focus on hiring the right person for the right job. To build leaders within the group and harness the energy of young minds it hired Graduates, CAs, and Management Trainees from reputed institutes like IIM Indore, ICAI, XIMB and IMI, New Delhi.
The HR practices are aimed at recruiting talented individuals,ensuring continuous development and addressing their grievances, if any, in a timely manner. It is also in process of centralizing the HR processes at the group level, which will have both long-term tangible and intangible benefits.
forward contracts and hedging currencies to mitigate the risk in the jurisdictions where it has facility to do so, as per its risk management policy.
Technology innovation Risks
Minda Corporation manufactures different auto components that need continuous technological upgradation.
Mitigation: The Company has been investing in R&D and have joint ventures with leading global automotive companies, which have access to the latest technologies. It has also established Spark Minda Technical Centre (SMIT) in Pune, which is helping it in upgrading its legacy products (Safety and Security products) with the help of technology and also help in building non-legacy products (products required for connectivity and electrification).
Raw Material and supply Risks
The Company purchases raw materials for various manufacturing processes which are prone to price fluctuations in global markets. The increase in the cost of raw materials can have an adverse impact on profitability.
Mitigation: The Company also has back to back arrangements with most of its customers for change in the commodity price and is in process to add more customers in this kind of arrangement. Moreover, the Company tracks the changes in the prices of raw materials and maintains an inventory for the operating cycle to avoid purchasing them at high prices.
Human Resource Risks
Attrition of key people and leadership team members could impact business operations and growth.
Mitigation: The Company addresses this risk with the help of its peoples team (HR). The peoples team ensures best-in-class remuneration, ample learning and development opportunities, effective work-life balance through various festive celebrations, regular management communications through town-halls and newsletters, in order to keep the workforce engaged and in high spirits.
Global auto ancillary companies are setting up plants in India to ensure that the upcoming regulatory requirements are met and they come with deep pockets.
Mitigation: The Company addresses this risk with the help of sizeable investments required for new technology, R&D, joint ventures or technology licensing. The company is also working to localize the components required for various products through frugal engineering, so that the solutions provided to the OEMs not only meet stringent quality, but is also cost effective. The balance sheet is very strong and the focus remains that the entire Capex requirements should be met through
Internal Control Systems
Minda Corporations internal control systems are commensurate with the nature of its business and the size and complexity of its operations. The Company follows a strong system of internal controls to ensure that all assets are safeguarded and protected against loss from any unauthorized use or disposition and that the transactions are authorized, recorded and reported quickly.
operating cash flow and the Company should generate enough free cash flow.
Vendor rationalization Risks
OEMs are reducing the number of platforms and are building new platforms which are modular in nature. This is helping them to rationalize the number of vendors with whom they have to deal with.
Mitigation: The Company addresses this risk by early engagement with the OEMs and help in providing cost-effective technological solutions for their requirements. Moreover, the Company is moving up the value chain, from sub-component provider to modular vendor and system supplier.
Customer Concentration Risks
High dependency on few OEMs result into its fortune being tied with the performance of those OEMs.
Mitigation: None of the OEMs with whom the Company deals with give more than 15% of its total revenue. The Company does have customer concentration in relation to any product or division, but the Company is aware of the same and looking to add more OEMs or increase its SOB with existing OEMs, where it is low with the help of Key Account Management. The Company has also identified Aftermarket as a division which helps the company not only to mitigate the risk arising out of customer concentration, but also helps in mitigate the cyclicity associated with the demand of OEMs product.
It reviews the adequacy of internal control systems from time to time. The internal controls are designed to maintain the transparency and adequacy of the financial and other records, which are reliable resources for preparing financial reports and other data.
The Audit Committee reviews adequacy and effectiveness of the Companys internal control environment and monitors the implementation of audit recommendations, including those related to strengthening of the Companys risk management policies and systems.
Opportunities, Strategy and Outlook
Minda Corporation finds opportunities in challenges, through its relentless focus on technological innovation. The Company has consolidated its operations with the merger of its subsidiaries and strengthening the balance sheet. The Company has focused on providing comprehensive solutions, rather than mere component supply, which has led to its transformation from Mechanical supplier to Mechatronics solution provider. The solutions in both legacy and non-legacy products are appreciated by the market as pioneering products, enabling the first-mover advantage.
Minda Corporation focuses on premiumization of its existing offerings. With a focus on increasing the content per vehicle, it is deepening penetration in existing customers and is progressing well to supply to newer customers, with its Key Account Management initiative. The Company has established itself in the exports market where the growth and visibility is much higher. With more vehicles coming on road, there shall be more demand for aftermarket in the future. Minda Corporation is well equipped to grab this opportunity.
B. Business Strategy
Continuously upgrade ourselves by benchmarking against the best in "whatever we do"
Expanding our reach to new geographies and customers to provide global solutions locally
To provide plug and play solutions to all future vehicles in the connected environment
State of art technical centre to develop solutions for the future needs of global OEMs
C. Business Outlook
The slow momentum is expected to continue as the IMF estimates that the world economy will grow by 3.2% in 2019, the weakest since 2009, when the world economy shrank. Global growth is expected to pick up in the second half of 2019 driven by monetary easing in China, improvement in overall market sentiment led by a recovery in Europe and stabilization of conditions in strained emerging economies. With improvement expected in second half of 2019, world economy is expected to growth by 3.6% in 2020.
However, all the agencies are unequivocal in their outlook about the India story. IMF estimates Indias growth to accelerate moderately to 7.0% in FY2019 and further to 7.2% in FY2020 from 6.8% in FY2018, which will be led by strong domestic consumption, improved export performance, normal monsoon and the consequent impact on agriculture and the rural economy, etc.
Despite the strong growth, Indian auto industry remains bearish about its growth. SIAM estimates that FY2020 will be slow for the Passenger vehicle sales and estimates the year to end with 5% growth over FY2019. With BS-VI coming into play in FY2021, the industry is gearing for a significant jump in prices. It is hoped that customers will pre-pone buying thus boosting demand in the second half of FY2020.
Production cuts are expected by OEMs, in order to align with the market demand. Globally, Worldwide Harmonised Light Vehicle Test Procedure (WLTP) is expected to impact demand, in addition to the slowdown in China.
Minda Corporation is prepared to face these challenges and come out as a winner. The Company continues to be bullish of its business prospects in FY2020 and beyond for its multiple business segments. The switch over from BS-IV to BS VI will create a huge opportunity for its Information and Connected System business and its products like wiring harness and sensors.
The Company continues to offer world-class, futuristic product lines to grab this business due to the change. The Company has already started the transformational journey by strategically focusing on...
internal Collaborations: Alignment at all levels, mutual trust and respect, flexible approach, integrity and loyalty, teamwork and transparency, adaptability to change. In one sentence Do what you say, say what you do
Clarity in Strategy: New technological advance products, technological upgradation of legacy products, increased focus on exports, inorganic growth in adjacent areas
identifying the Opportunities: Increase content per vehicle, premiumization of products, technological collaboration, new account acquisition and enhance current account penetration
Tapping to Changing Trends: Organizational transformation
1) Key account Management
2) Project Management Group
3) Vertical Approach; Industrialization of EV products; Product to System Supplier; Cross selling of products.
Growth in the Die-Casting through export focus
Increasing electronic content per vehicle and technologically advanced products in non-legacy business
New customer additions
information & connected systems
Amplify export of wiring harness
Increasing market share
Adding new customers
Pursuing inorganic growth opportunities in wiring harness
Plastics & interiors
Focus on lowering costs in Minda KTSN
Diversification of customer base
New product additions to augment growth
Upgrading of legacy products
Development of new products in un-addressed vehicle segments (Off-road Vehicles) and emerging market segments (EVs)
Minda Corporation has also identified catalysts for enabling higher profitable growth
People Focus - Great place to work
Customer Focus - Key Account Management
Research Focus -Continuous investments in SMIT
Management Focus - Strong Leadership
The above strategies will help us to
Enhance shareholders wealth by having higher growth, better than industry
Revenue Growth > Market Growth
EBITDA Margin and ROCE improvement
Optimization of Working Capital
Substantiated with Value creating Non-Organic growth strategies