PPAP Automotive Management Discussions

Global Economy

FY22 marked the global economy recovery from the Covid-19 pandemic with many parts of the world lifting restrictions and several economies returning to their pre-Covid-19 position. However, Russias invasion on Ukraine and economic sanctions resulted in escalated energy costs, supply-chain disruptions and record high inflation. As a result, the world economy is going through an uncertain period.

Indian Economy

Indias GDP grew at 8.7% in the FY22, as per the data released by the National Statistical Office (NSO). GDP shows growth after the Covid-19 pandemic in 2020.

Among the G-20 economies, India is the fastest growing economy. It has the capability to prove it is a ‘reliable partner for the world. India is currently No. 2 on the Global Retail Index.

In the recent turn of events, the Reserve Bank of India (RBI) raised the repo rate - the rate at which it lends money to commercial banks - by 40 basis points to 4.4% in May 2022. The rate had been reduced to a record low of 4% during the Covid-19 pandemic.

Auto Industry

The Indian automotive industry is one of the key drivers of economic growth in India and contributes to 7.1% of the GDP Due to its deep integration with other industrial sectors, it is a major driver of exports and employment.

The transition from Internal Combustion Engine (ICE) to battery powered electric vehicle (EV) is happening at a rapid pace. The Government has made a significant policy push by promoting the upcoming EV segment. Huge investments in electrical architecture are getting in place, such as battery development, electrification, e-motors, and power electronics.

Although the automotive industry and the auto component industry have been recovering from a difficult challenge including high raw material prices, logistic issues, and semiconductor shortage but with the help of the Government and innovation, this sector will soon have a bright future.

Group Overview

PPAP Automotive Limited commenced its business in 1978 and entered the automotive component business in 1985 with the start of operations of Maruti Suzuki in India. Since then, the Company has been expanding its customer base and adding new products to its portfolio. The focus of the Company is to become a global level excellence company which can inspire people to outperform their potential to by exceeding the expectations set forth by customers, society as well as stakeholders.

With over four decades of responsible business practices, our businesses have grown into wide range including automotive sealing system, interior and exterior automotive part, rubber automotive sealing system, commercial tool room, pail containers, etc.

The company has a Joint Venture with Tokai Kogyo Company Limited for manufacture of rubber automotive sealing system.

The products manufactured by us are all engine-agnostic products and can be extended to the electric vehicles as well.

The global automotive industry is undergoing a paradigm shift towards less energy intensive options. India, too, is investing in this electric mobility shift. We have established 100% subsidiary known as PPAP Technology Limited to focus on this enormous opportunity.

The Company also rolled out aftermarket business named Elpis Components Distributors Private Limited, which is 100% subsidiary of PPAP The focus is to develop and supply spare parts as well as premium car accessories and cleaning products for automobiles.

Automotive Parts Business:

Over the years, PPAP has emerged as one of the largest manufacturers of automotive sealing systems, interior, and exterior injection moulded products. The Companys performance has helped it gaining trust amongst customers. The Company serves almost all major OEMs in the passenger vehicle segment and caters the need of commercial and two-wheeler segment.

The Company has 5 manufacturing facilities for its OE business located at Noida (Uttar Pradesh), Surajpur (Uttar Pradesh), Pathredi (Rajasthan), Vallam Vadagal (Tamil Nadu) and Viramgam (Gujarat). The Company has also established three sales office for OE Business in Gurugram, Pune and Chennai. (The Companys product portfolio for Automotive Parts business is shown on page no ?)

Aftermarket business:

The Company has ventured into the after-market business as part of its growth and de-risking strategy. The Company through its wholly owned subsidiary company, namely Elpis Components Distributors Private Limited ("Elpis") is engaged in this aftermarket business. The cornerstone of Elpis is to supply sustainable & reliable products. Elpis supplies spares as well as premium car accessories to the customer. Elpis is establishing a distribution network and has forayed into e-commerce by promoting the products on e-commerce websites (Amazon, Bodmo) as well as its own online shopping portal (shopelpis.com).

Elpis started this business with a warehouse in Okhla, New Delhi and currently spread to Dadri, Greater Noida for storage & distribution to PAN India and nearby countries like Nepal and Bhutan. (The Companys product portfolio for premium car accessories business is shown on page no ?).

Commercial Tooling Business:

The Company commercialized its Tooling facility in 2019 to make plastic injection tooling. The tooling facility can develop Gas assist moulds, multi cavity moulds, hot runner with / without sequential valve gate etc. for the products having special requirements like chrome plating, painting, high gloss and graining. The commercial tooling facility is developing tooling for Automotive, Electrical, White Goods and Medical sector.

The Tooling facility is situated at Surajpur Industrial Area, Uttar Pradesh. (The Companys tooling portfolio is shown on page no.). Electric Vehicle Component Business

The Company has also ventured into the electric vehicle market by establishing a wholly owned subsidiary PPAP Technology Limited ("PTech") in 2020. The purpose of PTech is to develop solutions for the mobility as well as energy storage system customers. PTech has in-house designing capabilities for battery packs. Apart from developing in house capability, PTech is tying up with renowned institutions and technology start-ups to develop value added solutions for its customers.

Our focus is on the enhancement of our in-house ‘R&D Testing facilities to conduct testing for batteries, Cells, Chargers, BMS etc. We are also working to strengthen our ‘After sales service by establishing service centres in North, South & East zones. The facility is in Noida, Uttar Pradesh. (The Companys product portfolio is shown on page no.)

Pail Container Business

The Company has ventured into development of pail containers. Leveraging the know-how developed in the plastic injection molding technology, the Company realized this opportunity for customers in agriculture, lubrication, and paints sectors. The facility is located at Surajpur Industrial Area, Uttar Pradesh. (The Companys pail containers portfolio is shown on page no.)

Opportunities and threats Opportunities

• "Electrification" - Capturing market opportunity in the growing EV space

Electrification of vehicles is beneficial for the environment and is further likely to expand in the overall industry, promoting growth. The increasing number of electric vehicles is an indicator of the changing customer perception and will encourage OEMs and OEM partners to invest significantly. Moreover, India could be a leader in shared mobility by 2030, providing increased opportunities for electric and autonomous vehicles.

• Affirmative Government Policies

Government policies such as the recently announced 76,000 Cr. for the semiconductor manufacturing scheme, the extension of the FAME-II scheme till 2024, improved incentives for the 2-Wheelers segment, production-linked incentive (PLI) scheme for the Auto and Auto Component sector for 26,000 Cr., and PLI for advanced chemistry cell for 18,000 Cr. will provide enormous support as it implements innovative technologies.

• Continue to focus on R&D to develop new and innovative systems and components

With deep emphasis on R&D and innovation, we aspire to enhance and adopt newer technologies consistently.


• Rise in Inflation

Increase in borrowing cost and inflation has led to the increase in the cost of production of vehicles which may result in demand slow down and erosion in margins.

• Product Complexity and Ever-changing Market Dynamics

Product cycles are shrinking due to shortening technology cycles and rapidly changing customer needs, requiring real-time agility and visibility across the participants in the entire value chain. These are the most important factors capable of changing the demand or supply scenario in the market dynamics. Thus, several other digital & connected services have become the key value driver for automotive players.

• Change in regulations and industry trends

The automotive industry is subject to environmental and other regulations, and therefore any adverse impact on the industry in general and the Companys customers, due to any change in such rules, can affect its business.


• Obsolescence in Technology

The risk of obsolescence in technology is prominent. The Company manufactures a range of vehicle components that require ongoing technical updates to meet customer requirements.

• Volatility in the Raw Material Prices

The Companys business could be affected by commodity price volatility which could affect the overall cost of manufacturing operations.

• Risk of losing the opportunity to alternate mobility solutions

With the rise of electric cars as customers preferred mode of transportation, the automotive sector is undergoing significant transformations, with new development areas in high-tech and electronic products and services. Similarly, auto-ancillary enterprises must engage in research and development to produce goods for the burgeoning growth area or risk becoming obsolete.


Globally, the automobile industry is experiencing progressive changes that will result into a major transformation, resulting in high technological investments and higher consumer costs. Additionally, these adjustments have reached a point of inflexion. As a result, the industry would be disrupted, providing Indias automotive component sector with a chance to innovate and produce high-quality goods at low rates, paving the path for the country to dominate in such an unpredictable scenario.

However, due to geopolitical concerns, supply-side restrictions caused by semiconductor shortage, rising inflation, and central bank monetary policy tightening, the domestic and global economic outlook will remain unclear in FY23. The Indian government is concentrating on growing the economy through various indigenous projects that will help India become AtmaNirbhar. Furthermore, these initiatives will assist the economy in overcoming and capitalising on the opportunities presented.

Financial Performance

Despite the challenging operational environment, the Company reported a revenue growth of 27.4% on stand-alone basis and 30.9% on a consolidated basis.

The consolidated EBITDA witnessed an increase of 17% during FY22 and stood at 38.6 Crores. The operating profit margin in FY22 is 2.94% against 3.10% in FY21. Significant changes in key financial ratios along with explanation forms part of Note no. 45 of standalone financial statements.

Internal Control System and their adequacy

The Indian industry has witnessed a major shift towards better internal controls with mandatory implementation of internal financial controls (IFC). The Company has put in place strong internal control, systems and processes and keeps reviewing their adequacy from time to time. There is a strong system of both internal review as well as review by external independent auditors.

Human Resources

Human Development is the key foundation of growth for the Company. The Company has embarked on a journey to develop the mind, body, and intellect of the people.

The Company has a strong and diverse workforce where every employee is involved as "partners in progress" of the Company. The Company believes in building a capable and agile workforce to achieve its business objectives. It continuously trains and prepares its people for the changing market scenario, maintain its competitive edge and unleash their full potential. PPAPs basic policy for training and development is the cultivation of "Teach and be Taught" culture to learn and pass on this knowledge and skills to the next generation. The Company has total 1830 employees as on March 31,2022.

Safety, Health, and Environment

PPAP continually strives to accomplish ESG (Environment, Social and Governance) parameters.

PPAP is undertaking various environment management programmes & projects to reduce GHG footprints, energy & water intensity and waste reduction from its manufacturing operations aligning the SDGs (Sustainable Development Goals).

The key areas are:

• Prevent pollution and reduce environmental impacts.

• Waste optimization regulations.

• Governing chemicals; and

• Contribution towards global SDG

Several certifications adopted by PPAP in this area as elaborated below:

Location ISO IATF 16949: 2009 ISO 14001: 2015 ISO 45001: 2018 ISO 50001: 2018
Plant at (Noida) Y Y Y Y
Plant at (Surajpur) Y Y Y Y
Plant at (Pathredi) Y Y Y Y
Plant at (Vallam Vadagal) Y Y Y *
Plant at (Viramgam) Y Y Y *
JV Company
Plant at (Surajpur) Y Y Y *
Plant at (Viramgam) Y Y Y *

Cautionary Statement

Statements in the management discussion & analysis report describing the Companys objectives, expectations or forecasts may be forward looking within the meaning of applicable laws. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Companys operations include global and domestic demand and supply conditions affecting selling prices, raw material availability and prices, changes in government regulations, tax laws, economic developments within the country and other factors such as litigation and industrial relations.