NDR Auto Components Ltd Management Discussions

OUTLOOK

India has been one of the fastest-growing major economies in the world. Its GDP growth rate has averaged around 6-7% per annum over the past few decades. Indias young and growing population is often seen as a potential demographic dividend, with a large workforce providing opportunities for economic growth and productivity gains, provided adequate employment opportunities and skill development measures are in place.

The Indian government has implemented various structural reforms to boost economic growth, including measures to improve ease of doing business, initiatives to attract foreign investment and investments in infrastructure. Indias rapidly expanding digital economy, driven by the proliferation of smartphones, increasing internet penetration, and government-led initiatives like Digital India, has contributed significantly to economic growth, innovation, and job creation.

The outlook of the automobile industry in India has also witnessed significant growth and transformation driven by various factors such as rising income levels, urbanization, infrastructure development, and favorable government policies. Our Country is one of the largest automobile markets globally, with a diverse consumer base comprising of both urban and rural populations. The growing middle class and increasing disposable incomes have fueled demand for passenger vehicles, motorcycles, and commercial vehicles. The Governments initiative by introducing battery-swapping policy, expansion of Indian National Highways and adding advanced technologies including alternate fuel systems such as compressed natural gas (CNG), Bharat Stage VI compliant flex-fuel engines, electronic control units (ECU) for safety, advanced driver assist systems and e-quadricycles, under the Production-linked incentives(PLI) scheme for automobiles has attracted new investment and has further provided boost to the industry.

Introduction of Artificial Intelligence in the automotive industry helps optimize manufacturing processes, reduce costs, and improve supply chain management. The data from vehicles and sales can help model and regulate the production process with real-time data. Indian auto industry has kickstarted 2024 on a positive note. The Electric Vehicle market expanded significantly in 2022. This growth accelerated in 2023 and it is expected to grow even further in 2024.

INDUSTRY STRUCTURE AND DEVELOPMENT

The automobile industry has experienced significant growth and transformation over the past few decades, becoming one of the largest automotive markets globally. The Indian automobile industry is segmented into various categories including passenger vehicles, commercial vehicles, two-wheelers, and three-wheelers. Passenger vehicles consist of cars, utility vehicles, and vans, while commercial vehicles include trucks, buses, and other utility vehicles. Rapid urbanization, rising disposable incomes, and a growing middle class have fueled the demand for automobiles in India. Increasing urbanization due to infrastructure development has led to greater demand for personal mobility and contributed to the growth of the passenger vehicle segment.

The Governments "Make in India" initiative aims to boost domestic manufacturing across sectors, including automobiles, by promoting indigenous production and attracting foreign investment. The Government is also promoting electric mobility as part of its efforts to reduce pollution and dependence on fossil fuels. Incentives such as subsidies, tax benefits, and incentives for electric vehicle manufacturing have been introduced to encourage the adoption of electric vehicles. Several automakers are investing in electric vehicle technology and launching EV models in the Indian market.

OPPORTUNITIES AND THREATS

There are ample opportunities for growth, particularly in the electric vehicle segment, where the government is offering incentives and subsidies to promote adoption. Over the next decade, this will lead to newer verticals and opportunities for auto component manufacturers.

Despite advancements in electric vehicles, the majority of the industry still relies on gasoline, which is subject to price volatility. The development of smart mobility solutions, including ride-sharing services, car rentals and mobility-as-a-service (MaaS) platforms, presents new avenues for innovation and investment.

Despite challenges, a convergence of factors such as focus on improved vehicle performance and heightened safety standards is driving the adoption of new materials in automotive components. Industry is committed to a greener, safer and more innovative future, embracing ECG measures for sustainable ecosystem.

The Indian automotive sector is poised to rank number three globally by 2030, led by initiatives such as the PLI for Automobile and Auto Components.

The growing working population and expanding middle class are expected to remain key demand drivers.

India is emerging as a global hub for auto component sourcing and the industry exports over 25% of its production annually.

India is emerging as a global auto component sourcing hub due to its proximity to key automotive markets such as ASEAN, Europe, Japan and Korea.

Incentives are applicable for determined sales of products manufactured in India from April 1, 2022, for a period of five consecutive years. The Ministry of Heavy Industries has announced the extension of the tenure of the Production Linked Incentive (PLI) Scheme for Automobile and Auto Components by one year with partial amendments. Under the amended scheme, the incentive will be applicable for a total of five consecutive financial years, starting from the financial year 2023-24. The disbursement of the incentive will take place in the financial year 2024-25. Rising EV startup ecosystem, focus on localization and conducive Govt. policies are acting as a booster to EV ecosystem.

SEGMENT WISE/ PRODUCT WISE PERFORMANCE

The Company is currently operating primarily under single business segment manufacturing seat frames and seat trims for passenger Cars as well as Utility Vehicles.

Also, the Company will start its operation for new product "Sunshade" for its existing customers Maruti Suzuki India Limited and Toyota Kirloskar Motor Private Limited in January, 2025. This new product will be manufactured at the Companys Plant situated at Bengaluru.

RISK AND CONCERNS

The Company is exposed to external and internal risks associated with the business.

BUSINESS RISK

The operations of the Company are directly dependent on the growth of the Indian automotive industry.

FINANCIAL RISK

Any disruption of supply chain, availability of raw material could potentially impact the financial position and earnings of the Company. Both the operational and financial risks are constantly assessed, and adequate steps are taken from time to time to mitigate them successfully.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an adequate system of internal controls to ensure that transactions are properly authorized, recorded, and reported, apart from safeguarding its assets. The internal control system is supplemented by well-documented policies, guidelines and procedures and reviews carried out by the Companys internal audit function, which submits reports periodically to the Management and the Audit Committee of the Board.

Your Company has a favorable work environment that motivates performance, customer focus and innovation while adhering to the highest degree of quality and integrity.

DISCLOSURE OF ACCOUNTING TREATMENT

The Company has complied with all the provisions of the accounting standards in accordance with Section 133 of the Companies Act, 2013.

HUMAN RESOURCES/ INDUSTRIAL RELATIONS

Your Company believes that employees are key for our success, have immense knowledge and power of innovation. Your Company aims to create an environment where every employee can contribute to the companys performance, excel and grow in their respective jobs. Our focus is to recruit employees with right skills and talent, raise competency through training and development, recognize and reward leadership and performance. Several measures are implemented to retain the talent within the organization. At each location, the work force goes through a mandatory training plan including the vision, mission and company values which forms a base for treating everybody with dignity and respect. To further strengthen and motivate our employees, several initiatives are taken on a continuous basis to foster teamwork, trust and communication across the organization. Employees are encouraged to have a passion for excellence and focus on the customer with a performance goal of doing things right first time and every time. Your Company provides challenging and fulfilling opportunities to maximize employee potential so that every employee excels and grows along with Companys growth.

Your Company ensures quality at our suppliers and service providers by horizontal deployment of learnings and training at our supplier partners.

In addition to timely delivery and quality, your Companys utmost focus is on safety of its workforce.

Health, Safety and Environment remains our top priority. Periodic audits are carried out both internally as well as through external agencies to identify gaps and to define action items for continuous improvement, ensuring a safe workplace for employees. Total number of permanent employees on the rolls of Company as on 31st March, 2024 is 273.

FINANCIAL PERFORMANCE

The financial statements of the Company in accordance with the requirements of applicable corporate laws of India. The management of your Company accepts the integrity and objectivity of these financial statements as well as the various estimates and judgments used therein.

The details of the financial performance of the Company are appearing in the Balance Sheet, Profit & Loss Account and other financial statements forming part of this Annual report. For financial highlights please refer heading ‘FINANCIAL RESULTS of Boards Report.

KEY FINANCIAL RATIOS

Changes in key financial ratios are as under:

Ratios	Unit	2023-2024	2022-2023	% change	Reason
1 Debtors Turnover	Days	35.86	28.60	25.39%	-
2 Inventory Turnover	Days	21.01	28.16	-25.38%	-
3 Interest Coverage Ratio*	Times	28.06	18.02	55.73%	-
4 Current Ratio	Times	1.47	1.39	5.61%	-
5 Debt Equity Ratio	Times	0.16	0.20	-21.46%	-
6 Operating Profit Margin**	%	7.74%	7.70%	0.57%	-
7 Net Profit Margin	%	5.44%	5.34%	1.81%	-
8 Return on Net worth	%	16.50%	12.57%	31.31%	-

DISCLAIMER

Statements in this Report, particularly those which relate to Management Discussion and Analysis as explained in the Corporate Governance Report, describing the Companys objectives, projections, estimates and expectations may constitute ‘forward looking statements within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied in the statement depending on the circumstances.