PPAP Automotive Ltd Management Discussions.

Economy Overview

The impact of the COVID-19 pandemic has created significant volatility in the global economy and led to reduced economic activity. The pandemic has resulted, and may continue to result, in significant economic disruption that has adversely affected businesses globally. According to the World Bank, the global economy is estimated to have contracted by nearly 3.5% in 2020, an outcome "far worse" than the 2009 global financial crisis. The global economy is expected to rebound by 5.6% in 2021 and 4.3% in 2022. The recovery will depend on how vaccination takes place across the globe.

Advanced economies such as US, Japan and Euro area are estimated to have contracted by 3.5%, 4.7% and 6.6% respectively during 2020 (Source: World Bank). However, economic activity is strengthening across major advanced economies, most notably in the United States, where the recovery is being fueled by substantial fiscal support. The Emerging Market and Developing Economies (EMDEs) is forecasted to grow by 6.0% in 2021 and 4.7% in 2022 (Source: Word Bank) respectively. Growth in China remains solid but has moderated as authorities have shifted their focus from buttressing activity to reducing financial stability risks. The global manufacturing Purchasing ManagersRs.in dex (‘PMI) stood at 55.0 in March 2021 (Source: Markit) on the back of robust growth across consumer, intermediate and investment goods sector. The manufacturing PMI is a result of various components such as output, new orders, new export orders, future output, employment input prices and out prices. Global output is rebounding gradually but remains below pre pandemic level.

Indian Economy Overview

The Indian economy is battling COVID-19 and several parts of the country witnessed high number of active cases during the second wave. The central and state government-initiated plethora of steps to contain the virus spread. To curb the pandemic, India began with the vaccination drive with a mantra of"Test,Track,Treat".Vaccination i s gaining momentum across states, cities, and villages.Vaccination access and pricing has also been deregulated to quicken the pace of vaccination across all age groups. Apart from vaccination, the government has ensured availability of adequate supply of oxygen, crucial medicines, and healthcare infrastructure etc. to everyone in the country. The economy has the resilience and the fundamentals to bounce back from the pandemic and unshackle itself from pre-existing cyclical and structural hindrances.

Indias gross domestic product (GDP) witnessed a contraction of 7.3% in FY21.

This is the first full-year contraction in the Indian economy in the last four decades since 1979-80, when GDP had shrunk by 5.2%. Indias GDP grew at 1.6% in the January-March quarter of FY21. According to the RBI, Indias GDP is expected to grow by 9.5% in FY22 led by strong rural demand and normal monsoon. (Source: MOSPI)

Indias PMI Manufacturing Index stood at 55.4 in March, 2021 indicated that prospects for Indias manufacturing sector remained favorable as companies scaled up production in line with a further improvement in demand. India has witnessed rise in the inflation in FY21. The Consumer Price Index (CPI) based inflation increased from 4.47% in FY20 to 6.16% in FY21 (Source: MOSPI). The Wholesale Price Index (WPI) based inflation had witnessed a de-growth from 1.68% in FY20 to 1.2% in FY21 (Source: Office of Economic Adviser). The rise in the retail inflation indicates rise in the prices of products. Index of Industrial Production (IIP) contracted 8.6% in FY21 against contraction of 0.8% in FY20 (Source: MOSPI). The output of eight core sectors de-grew by 6.5% in FY21 as compared to marginal growth of 0.4% in FY20 (Source: Office of Economic Adviser).

Indian Automobile Industry Overview

Indian automobile sector witnessed a strong pent-up demand in March 2021 with domestic sales of passenger vehicle and two & three wheelers growing at a strong 115% and 71% YoY respectively during March 2021 over the low base of March 2020. The industry produced a total 22.65 million vehicles including passenger vehicles, commercial vehicles, three wheelers, two wheelers and quadricycles in FY21 as against 26.35 million in FY20, registering a de-growth of 14.04% over previous year. The overall sales declined by 13.6% to 18.61 million in FY21 against 21.54 million in FY20. (Source: SIAM)

In the overall mix, the production of passenger vehicles declined by 10.6% in FY21 over last year. The sales of passenger vehicles declined by 2.24% in FY21 over the same period last year. The commercial vehicles production decreased by 17.4% in FY21. The overall commercial vehicles segment registered a de-growth of 20.7% in FY21 as compared to FY20.

Two Wheelers sales registered a de-growth of 13.2% whereas three wheelers reported a steep decline of 66% in sales in FY21 over FY20, The EV market is booming in India. Despite pandemic EV sales stood at 148837 as on FY21.

The Indian auto-components industry has experienced healthy growth over the last few years. The auto-components industry expanded by a CAGR of 6% over FY16 to FY20 to reach US$ 49.3 billion (Source: IBEF) in FY20. The industry is expected to reach US$ 200 billion (Source: IBEF) by FY26. Auto-components industry account for 2.3% of Indias GDP and employs as many as 15 lacs people directly and indirectly. A stable government framework, increased purchasing power, large domestic market, and an ever-increasing development in infrastructure have made India a favourable destination for investment.

Group Overview

PPAP group comprises of PPAP Automotive Limited, PPAP Tokai India Rubber Private Limited (joint venture) and Elpis Components Distributors Private Limited & PPAP Technology Limited (wholly owned subsidiary companies).

PPAP Automotive Limited ("PPAP" or "Company") is a leading manufacturer of automotive sealing systems, interior and exterior automotive parts in India. The Company started its association with the automotive industry more than 35 years ago with the first Maruti cars being launched in the country. The Companys state of the art manufacturing facilities are located across the automotive hubs in India. The registered office of the Company is located at New Delhi. All the facilities of the Company are equipped with the latest technology available today for polymer extrusion as well as injection molding, its areas of core competence.

The Company manufactures over 1,000 different SKUs and ships over 2,00,000 parts every day to its customers which include the Japanese OEMs, the local OEMs as well as other major OEMs in the passenger vehicle segment as well as the commercial and the two- wheelers segment. The product range offered by the Company are engine agnostic and can be used for assembly of both internal combustion engine and electric technology based vehicles.

Over the years, PPAP has been continuously adding products and expanding its customer base to enhance its per vehicle contribution, not only in passenger vehicle segment, but in two wheeler and commercial vehicle segment as well. The Company is focused on development of value added products through in house design and technology development capabilities. The Company continuously targets to achieve zero ppm in quality and delivery performance for all its customers.

PPAP has a technical collaboration with Tokai Kogyo Co. Limited, Japan since 1989, for development and manufacturing of automotive body sealing systems. PPAP also has a technical collaboration with Nissen Chemitec Corporation, Japan, since 2007, for development and manufacture of interior and exterior injection products. The Company also tied up with Tokai Kogyo Seiki Co. Limited, Japan for manufacturing of tools and dies. The Company enjoys a harmonious and mutually beneficial relationship with its technology partners.

The Company continues to unlock and commercialize its developed knowledge and know-how into new opportunities. The Company has restructured its captive tooling facility into commercial tooling facility which will design and develop plastic injection molds for customers in automotive as well as white goods and electric goods industry.

Leveraging the know-how developed in the plastic injection molding technology, the Company has also started developing Pail Containers for customers in agriculture, lubrication and paints sectors. These containers offer significant value addition to the customer and are used to store and transport fertilizers, paints and lubricants to the consumers.

The Company ventured into EPDM rubber based automotive body sealing systems by establishing a Joint Venture, PPAP Tokai India Rubber Private Limited ("PTI") with its Technology Partner Tokai Kogyo Co. Limited, Japan in 2012

The Company has ventured into the After Market business by establishing a wholly owned subsidiary Elpis Components Distributors Private Limited ("Elpis") in 2020. The focus of elpis is to promote spare parts as well as premium car accessories to the customer. Elpis is establishing a distribution network and foraying into e-commerce by promoting the products on e-commerce websites (Amazon) as well as its own online shopping portal (shopelpis.com)

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. PTech is developing battery pack solutions as its main product and intends to add more products in its product range for the customers.

The Company has restructured its organizations and operations in the following segments:

• Automotive Parts Business:

Over the years, PPAP has emerged as one of the largest manufacturer of automotive sealing systems, interior and exterior injection moulded products. The Companys experience has helped it gaining trust amongst customers. The Company serves almost all major OEMs in the passenger vehicle segment and also 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, over the years, has built a strong customer base. It includes almost all the leading manufacturers of four-wheelers as an OEM like Maruti Suzuki India Limited; Honda Cars India Limited; Toyota Kirloskar Motor Private Limited; Renault Nissan Automotive India Private Limited; Tata Motors Limited; Ford India Private Limited; Mahindra and Mahindra Limited; SML Isuzu Limited; Isuzu Motors India Private Limited, Hyundai Motor India Limited, Suzuki Motor Gujarat Private Limited, MG Motor India Private Limited, Skoda Auto Volkswagen India Private Limited, Kia India Private Limited, Kia Motors Mexico. The Company customers base also includes two wheeler manufacture viz. Suzuki Motorcycle India Private Limited. The Company also caters to CKD parts export requirements of its customers. The Company also caters the requirement of OEMs and Two wheeler manufacture with their respective Tier 1 suppliers.

(The Companys product portfolio for Automotive Parts business is shown on page no 184-185)

• After market and spare parts business

The Company has restructured and consolidated its spare parts business in its facility located at Surajpur Industrial Area, Uttar Pradesh. This facility focus on supply of parts to its OEM customers as well as develop and supply parts for the Companys aftermarket initiatives.

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 business. Elpis started this business with a warehouse in Okhla, New Delhi. Due to good demand from customers, Elpis is in process to establish a new warehouse in Gurugram, Haryana to cater to the distribution requirements.

The focus of Elpis is to promote spare parts as well as premium car accessories to the customer. Elpis is establishing a distribution network and foraying into e-commerce by promoting the products on e-commerce websites (Amazon) as well as its own online shopping portal (shopelpis.com)

(The Companys product portfolio for premium car accessories business is shown on page no. 184)

• Commercial Tooling Business

The Company has commercialized its Tooling facility in 2019 to make plastic injection tooling upto 1.5 meter * 1.0 meter in size. The Tooling facility is situated at Surajpur Industrial Area, Uttar Pradesh. 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. This tooling facility is supported with latest CAD softwares for designing and analysis purpose.

The tooling facility has large size VMC machines (1.6 m * 1.2 m), High Speed VMCs (upto 36000 RPM), High precision EDM and WEDM, In-house Graphite electrode machining facility, validation equipments like portable scanner cum CMM, digital height master, precision 150T die-spotting for mold matching, profile projector for checking part thickness & rib sections. The facility is in the process of obtaining ISO 9001:2015 certification. The Company has a vast pool of experienced manpower to work on these tools and deliver a high-quality product exceeding the customers expectations.

This facility is manufacturing tools for customers in automotive as well as white goods and electronic goods segments.

(The Companys tooling portfolio is shown on page no. 185)

• Pail Container Business

The Company has ventured into development of pail containers. The facility is located at Surajpur Industrial Area, Uttar Pradesh. 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 Company is developing containers of various sizes (5 Liters, 10 Liters, 20 Liters and 25 Liters) in various shapes (round and square) to meet the customer requirements. These containers offer significant value addition to the customer and are used to store and transport fertilizers, paints and lubricants to the consumers.

(The Companys pail containers portfolio is shown on page no. 184)

• 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 facility is located in Noida, Uttar Pradesh.

The purpose of PTech is to develop solutions for the mobility as well as energy storage system customers. PTech is developing its in-house designing capabilities, currently focusing on the battery pack solutions. Apart from developing in house capability, PTech is also tying up with renowned institutions and technology start ups to develop value added solutions for its customers.

The focus of PTech is to develop solutions for 2-wheeler and 3-wheeler customers. Apart from the mobility segment, PTech is also developing various solutions for energy storage systems like solar streetlights, back up power for telecom towers, UPS back up etc. PTech has installed its primary assembly line with a capacity of 150 MWh per year and is planning to increase this capacity to 250 MWh per year.

(The Companys product portfolio is shown on page no. 184185)

Awards & Recognition

The Company has been bestowed the following awards during FY21:

1. Quality by Toyota Kirloskar Motor Private Limited;

2. Fire Safety Management Award by Toyota Kirloskar Motor Private Limited; and

3. Zero PPM by Toyota Kirloskar Motor Private Limited.

Quality

The Company is IATF 16949:2016 certified Company for Quality Management System. These standards lay the foundation of a well established system which ensures that the Company achieves its quality targets. Apart from these standards, the Company endeavors to meet all the standards and systems of its customers in order to provide them with a quality product. The Company firmly believes that offering high quality products, which are benchmarked with the best in the world, is an integral part of the total customers satisfaction.

Outflow and occurrence prevention are the two pillars to achieve "Built in Quality". PPAP emphasis to establish non defective conditions in process by procedure controls, abnormality management, trainings and standardization. PPAP believe to develop an ownership driven work culture where quality of output is self-certified by each and every team member. Another important tool is management and checking of standardized non-defective conditions so that defects are not generated. Every team member is involved in quality upgradation by implementation of Jishuken and quality circles.

Establishing non-defective process and continuously improving them is the key to produce quality product. The Company has implemented many systems like FMDS, TPS, Cell evaluation system, IQC, Pro-qac in order to continuously upgrade its operations in terms of safety, quality, cost and productivity, in order to make them globally best.

Opportunities and threats Opportunities

• Global components sourcing hub

The Indian auto component industry is one of Indias sunrise industries with tremendous growth prospects. It has emerged, from being a low-key supplier of components to the domestic market, to a significant player in the global automotive supply chain. Several global suppliers are increasing procurement from their Indian subsidiaries or partners due to the cost competitiveness coupled with robust engineering capabilities and location advantage. Foreign manufacturers are also keen to set up their facilities in India due to the presence of a large pool of skilled and semi-skilled workers.

• Government Initiative

The government has placed a greater emphasis on curbing imports and growth of economy. The government has imposed customs duty on certain auto parts to promote domestic manufacture, which would lead to increased value addition and localization. The government has also announced capital investments of Rs.5.54 trillion for infrastructural development, which could catalyse automobile offtake. The Government FAME-II scheme with a fund requirement of Rs.10,000 crores for FY19-22, plan on introducing electrical vehicles into the public transport system, thereby driving demand of auto components.

The said scheme is a remarkable initiative of government which started from 1st April, 2019. Out of total budgetary support, about 86% of fund has been allocated for demand incentive to create demand for EVs in the country. The second phase of the scheme aims to generate demand by supporting 7,000 e-buses, 5 lakhs e-three wheelers, 55,000 e-four wheeler passenger cars (including strong hybrid) and 10 lakhs e-two wheelers. Further in November 2020, the Union Cabinet approved the production-linked incentive scheme in automobile and auto components with an approved financial outlay over a five-year period of INR 57,042 crore.

• Financial incentives by government

Each state in India offers additional incentives for industrial projects. Incentives are provided in the form of rebates in land cost, relaxation in stamp duty on sale or lease of land, power tariff incentives, a concessional rate of interest on loans, investment subsidies / tax incentives, backward areas subsidies, special packages for mega projects etc. A proposed ‘green tax on polluting cars and the implementation of a vehicle scrapping policy could accelerate vehicle replacements.

• Shift in automotive sector

The automotive value chain is likely to see significant shift to non-traditional sub-segments such as electric vehicles, advanced driver assistance systems (ADAS), data-enabled services, etc. in the coming future. Adapting to the required changes to seize these upcoming opportunities, the auto component manufacturers will be in a strategic position to leapfrog into the global arena.

Threats

Economic slowdown leading to contraction in demand remains one of the major threats which could lead to decreased volumes and capacity utilization. Moreover, technological changes and environmental regulation continue to weigh on sector.

The main threats to which auto component industry is exposed to are cost reduction demand from OEMs and increasing commodity prices and volatile forex movements

Risks

The growth opportunity in India is attracting global OEMs to establish their operations in the country. Along with the OEMs their entire global supply chain also has started to get attracted towards the Indian market and today most of the global component suppliers are present in India. These phenomena have led to a substantial increase in the automotive component industry which is driving superior performance by all the companies. The Indian companies which are able to upgrade their operations, in line with, global standards, will be able to secure future business with the OEMs. The companies which are not able to upgrade their process & systems, focus on R&D, upgrading their quality and cost competitiveness and those who do not have a track record of superior performance with their customers, will find it difficult to survive in the long term. The competition will drive many associations as well as mergers and sell offs leading to consolidation and survival of overall competitive companies.

The Company identifies the risks by each process and location. At the operational level there are several risks that are inherent to the business of the Company. These are typically transactional in nature. These risks are managed through internal processes and controls. In addition, the Company has to deal with certain major micro risks that affect the Companys strategy implementation, some of which are enumerated below:

• Raw material and supply risk

Procurement of raw material for the products of the Company is a very significant part of the cost of the final product. Substantial increase in current raw material prices may pose a threat to the margins of the Company in this competitive auto component sector. To mitigate the risk, the Company strives to improve its operational performance and develop new cost competitive materials, which are technologically superior and meet the customers specifications. The Company is also focusing on reducing the geographical risk by aggressively pursuing local sourcing of its raw materials and other components. The Company believes in building long-standing relationships with the suppliers and strong vendor management skills to secure an uninterrupted and timely supply of critical raw materials at competitive rates.

• Technology risk

The Company continues to be dependent on its technology partners for the products designed by them in collaboration with the global OEMs. In order to mitigate this risk, the Company is improving its R&D competence and is working on local design projects with the OEMs.

• Regulatory change

The new emissions norms and the focus on cleaner engine technologies might result in a reduction of vehicles in the short term. The frequent changes in policy may also restrict investments by the global OEMs to invest in the Indian market. The growth of the industry may get impacted due to these changes.

• Availability of unskilled and skilled labour

One of the key challenges faced by the Indian automotive industry is the availability of skilled manpower to support the operations. The Company also faces regional concerns in availability of skilled manpower. The industry is making a lot of efforts in partnering with the government in introducing skill programs like JIM and technical training institutes. The Company has established in house training centers known as DOJO centers to upgrade the skills of its workforce. The Companys prime focus is on development of its human capital by extensive training, focusing on development of mind, body and soul.

• Quality / Processes Risk

The quality and meeting delivery targets are the basic essence for the business of the Company. To mitigate this risk, the Company regularly impart job skill enhancement training, works on enhancing supplier capabilities, robust manufacturing processes and close monitoring of transporters. 0 COVID-19 Risk

The prevailing COVID-19 situation has brought in financial hardships and unprecedented risks for the Company. Goods and services markets are likely to suffer a setback as a result of poor consumer sentiments which may lead to lower retail footfalls and muted consumer demand.

Outlook

The industry which is in a sluggish growth is likely to witness a positive momentum on the back of revival in overall economy. Expected improvement in rural cash flows due to normal monsoon, will increase need for personal mobility. Introduction of schemes like production-linked incentive and vehicle scrappage policy is likely to increase the competitiveness of the Indian automotive industry globally. Furthermore, help is required to attract investments and boost exports. However, any future wave of COVID-19 and the consequent restrictive measures could derail growth prospects. On the other hand, widespread vaccination campaigns being run by the Government is likely to control the pandemic resulting in expanded economic activity.

Financial Performance Standalone

Profit and Loss statement analysis

• Revenue from operations decreased by 10.79% YoY to Rs.32,118.27 lacs in FY21, due to sluggish demand and COVID-19.

• EBITDA decreased by Rs.1,703.68 lacs YoY to Rs.3,370.72 lacs in FY21 due to lower sales and lower absorption of fixed cost.

• Depreciation stood at Rs.2,632.44 lacs in FY21 from Rs.2,577.37 lacs in FY20.

• EBIT stood at Rs.1,003.21 lacs in FY21 from Rs.2,577.39 lacs in FY20.

• PAT stood at Rs.483.61 lacs in FY21.

• Earnings per share stood at Rs.3.45 in FY21

Balance Sheet analysis

• Net worth increased to Rs.30,977.07 lacs from Rs.30,419.76 lacs in FY21. Equity share capital remained same to Rs.1,400 lacs whereas, reserves and surplus increased to Rs.29,577.07 lacs from Rs.29,019.76 lacs recorded in FY21.

• Book value per share increased to Rs.221.26 from Rs.217.28 in FY20.

• Net fixed assets stood at Rs.25,980.80 lacs in FY21 and in FY2023,805.86 lacs.

• Current assets stood at Rs.11,364.86 lacs in FY21.

• Borrowings decreased to Rs.4,958.96 lacs from Rs.2,217.06 lacs in FY20. Debt-Equity ratio stood at 0.16 times.

• Return on Net Worth (RONW) is 1.56% in FY21.

• Return on Capital Employed (ROCE) is 2.79% in FY21.

Consolidated

Profit and Loss statement analysis

• PAT stood at Rs.209.75 lacs in FY21.

• Earnings per share stood at Rs.1.50 in FY21.

Key Financial Ratios on standalone basis

Particulars FY21 FY20 Remarks
Debtors Turnover 6.24 8.77 Debtor turnover is lower this year on account of higher secured credit sales
Inventory Turnover 7.09 7.68
Interest Coverage Ratio 2.72 9.78 Interest coverage ration is impacted due to low profitability
Current Ratio 1.46 1.41
Debt Equity Ratio 0.16 0.07 Debt equity ratio is higher due to long term loans taken during the year
Operating Profit Margin 2.30% 6.95% Operating profit margin is lower due to decline in sales
*Net Profit Margin 1.15 5.35% Net Profit Margin is lower on account of drop in sales.
*Return on Net Worth 1.56% 6.30% Net Profit Margin and Return on Net Worth is lower on account of drop in sales.

Internal Control System and their adequacy

The Company believes that internal controls is one of the key pillars of governance. It judiciously provides freedom to the management within a framework of appropriate checks and balances. The Companys internal financial control framework is established in accordance with the size and operations of the business and is in line with requirements of the Companies Act, 2013.

The Company has a proper and adequate system of internal control to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and that all transaction are authorized, recorded and reported correctly. The internal control system is designed to ensure that financials and other records are reliable for preparing financial information and other data and for maintaining accountability of assets.

The internal control system is supplemented by an extensive programme of internal audits, reviews by management and documented policies, guidelines and procedures. The management monitors and evaluates the efficacy and adequacy of internal control systems in the Company, its compliance with standard operating procedures, accounting procedures and policies.

The Company has laid down transparent policies and procedures to ensure the independence and effectiveness of internal and external audit functions. The internal audit function provides assurance to the Board and management that a system of internal control is designed and deployed to manage key business risks and is operating effectively. The internal audit report is regularly placed before the audit committee of the Board. Based on the report of internal auditors, process owners undertake corrective action in their respective areas and thereby strengthening the controls continuously. Significant audit observations, if any, and corrective actions suggested and taken are presented to the audit committee of the Board.

The Company believes that every employee has a role to play in fostering an environment in which emphasis on compliance with regulations and ethical behavior is accorded due importance. The process controls are self-evaluated and the measurement plans are laid out and monitored regularly to overcome the deficiencies as detected during self-evaluation and confirmed by the auditors.

The Company also have ERP system i.e. SAP which will enable the Company to align all its processes and will result in better controls.

Internal Controls over Financial Reporting

The Companys internal financial controls over financial reporting is a process designed to provide reasonable assurance regarding the liability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Over time, the Company has built systems of internal control which are in syncronised to its size and the nature of its operations. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorized use, executing transactions with proper authorization and ensuring compliance of corporate policies. The Company has periodic internal audits in collaboration with independent internal auditors to carry out both system and financial audit of its activities. The Audit Committee of the Board of Directors, comprising of independent directors reviews the audit plans, significant audit findings and adequacy of internal controls at regular intervals.

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 is developing the mind and intellect by explanation and application of the principles set out in the ancient vedic systems. This initiative is paving way for identifying the right path for success for the people. This initiative also trains people in identifying the right way of life ensuring a stronger intellect and emotion for the people. Along with this, the Company also teaches western best practices for problem solving. These practices have been derived from Toyota Production System as well as Toyota Business Practices. The unique combination of our ancient learnings with modern problemsolving techniques is the training mantra for the Company.

The Company endeavors to implement best health and safety practices across all the operating facilities. This sense of safety ensures that the people working in the environment can dedicate 100% of their mind towards the purpose of their job.

The Company has a strong and diverse workforce where every employee is involved as "partners in progress" of the Company. PPAP believes in building a capable and agile workforce to achieve its business objectives. The Company motivates its employees to work according to its purpose and its values. It continuously trains and prepares its people for the changing market scenario, maintain its competitive edge and unleash their full potential.

The Company maintains the right capabilities across all level of the organization through different modules of learning and development programs on fundamental skills, knowledge, attitude, management and capability enhancement, etc.

PPAP has a legacy of nurturing and promoting talent from within the organization to create a healthy and vibrant work culture. The Company believes in enhancing employees everyday experiences and in building meaningful workplace relationships. The Company relies on leveraging the skills and experience of the people available within the organization. We continuously identify the capabilities for long term sustainable performance and prepare successors for the next generation.

The Company takes initiatives like regular health check-up, visit by ayurveda doctor, conduct health awareness sessions, better food habits, yoga sessions, meditation sessions, spirituality sessions, cultural programs etc. for the better mind and health of our employees.

The Company has channelized its communication processes so that the voice of the management reaches the last employee and the voice of the last employee, reaches to the top management. This ensures harmony, focused working and enables the Company to achieve impossible tasks.

The Company puts special emphasis on employee communication through town hall meetings, celebration of festivals, leadership interactions and promotional activities to ensure alignment with Companys mission. Employee feedback surveys and discussions also help the Company in providing insights on what is important to employees. The human resource function of the Company is committed to improve all its processes based on the results and feedback and ensures that the Companys human resource will remain its greatest asset.

Training and Development

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. Immediate senior plays a leading role in developing this culture. We have developed a vibrant work culture by adopting "learn, perform and drive" thinking way. Training and development enable employees to expand their knowledge, acquire new skills, sharpen existing ones, perform better, increase productivity and become better leaders. Trainings are based on 70-20-10 principle i.e. 10% of the time of trainee goes in classroom, 20% learning is supported by the coach and 70% action on projects which enable an employee to complete the learning cycle and understand the processes in depth.

The Company imparts induction training to all fresh recruits to ensure that they work to achieve Companys goals and be a part of our journey to take the organization to new heights. Refresher training is also imparted to existing employees as per need. PPAP promotes a self-learning culture in which subordinates are encouraged to inculcate reading habits of a variety of books, reports and articles on the latest trends and global practices. Employees are encouraged to share learnings with their peers. The Company constantly engages its employees in various other learning and development programmes like TBP projects (systematic problem-solving skills along with drive and dedication), Jishuken, Quality circle, Interplant quiz competition and Kaizens, etc. to improve work efficiency and build collective skill and intelligence.

The team members are continuously trained at the shop floor for SOP adherence, quality and technical aspects viz. Advanced product quality planning, production part approval process, failure mode and effects analysis, measurement system analysis, statistical process control, PROQAC etc., on system needs and safety. At shop floor level, a unique ownership development programme is practiced where high potential blue-collar employees are identified and groomed for upward mobility.

Every year, PPAP sends few employees for one year training at Toyota Kirloskar Motor, Bangalore for learning Toyota Production System (TPS). Our employees also get trained at Maruti Suzuki Centre for Excellence (MACE). The Company has ‘DOJO Centre to train its new work force.

Sustainability initiatives

PPAP endeavours to protect the environment of our planet by combining modern ways of living with a deep understanding of nature. The Company is undertaking the various environment management programs and projects to reduce our carbon emissions, energy consumption, water consumption and waste generation from manufacturing operations which lead to a reduction in our carbon footprint.

PPAP has aligned itself with the Sustainable Development Goals (SDGs) set by the United Nations General Assembly 2015. We strongly believe that SDGs are the blueprint for achieving a better and more sustainable future for our planet. We continuously sensitise our employees about the environmental elements across all our plants and projects to enable them to be focussed on protecting our planet. Using energy more efficiently and opting for renewable energy sources is essential for combating climate change and lowering our overall environmental footprint. As part of the sustainability approach, we prioritised energy consumption by renewable sources with the adoption of solar power. The Company has currently installed 495 KW rooftop solar power in its plants to reduce the non-renewable energy consumption.

Although our manufacturing facilities are located in industrial areas, we are well aware of the impacts our operations have on the local biodiversity. To meet these concerns, we have undertaken tree plantation drive in our Plants and nearby areas to increase the local green cover. As a part of our CSR initiatives, we are supporting biodiversity parks in the NCR with the plantation of native species trees and shrubs. We are ensuring their sustainability by maintaining these parks till such time the shrubs and plants have a dependence upon human beings.

PPAP is committed to improving waste management practices at the plant continually in order to minimise our wastages. The safe and responsible management of hazardous, non-hazardous, and high-volume low-toxicity waste is crucial for our business. We dispose off waste in compliance with operating permits and hazardous waste authorisations. The hazardous waste is sent for disposal to the treatment, storage, and disposal facilities whereas the non-hazardous waste is sold to authorised recyclers. We have also installed organic bio composter is at our Noida plant to treat domestic waste and prepare manure to be used in gardening.

With water scarcity posing a social issue worldwide, water resource management has become vital for the Company. The water is required at the manufacturing plant for industrial and gardening purposes. We aim to reduce water consumption and continuously attempt to improve our efficiencies through the use of water saving devices and tools.

We reuse / recycle wastewater within the factories. We have installed automated filling system for the cooling tower tank through corporation water leading to zero water wastage. To meet our water needs, we rely on government supplied water sources. We also collect water through rainwater harvesting to recharge our groundwater.

Safety, Health and Environment

The Company is committed to provide a safe, secure and healthy workplace. Environment, Health and Safety (EHS) is one of the primary focus areas for PPAP Safety is treated as the first step in every activity for the Company. The Company has well defined safety organization, which is responsible to carry our all safety, electrical and fire audits, risk assessment, safety meetings and take necessary safety measures on the identified unsafe conditions and acts (Hiyari Hatto Points) so that it cannot leads to any near miss or accident with the hierarchy of control i.e. hazard elimination, substitution, engineering control, administrative control and provision of personal protective equipment. Safety team of PPAP conducts mock drills and educates employees from time to time. The Company ensures that the safety standards and norms are adequately complied with.

The details of certifications are as follows:-

Locations ISO IATF 16949 : 2009 ISO 14001 : 2015 ISO 45001 : 2018 ISO 50001 : 2018
PPAP
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 # # #
Plant at (Viramgam) Y # # #
JV Company
Plant at (Surajpur) Y # # #
Plant at (Viramgam) Y # # #

* under process

PPAP endeavours to protect the environment by combining the modern ways of living with a deeper understanding of nature. PPAP strives that the environment is safe and healthy for everyone. The Company is undertaking numerous environment management programmes and projects to minimize environment footprint, energy and water consumption as well as waste reduction from manufacturing operations. The key focus areas are:

• Efforts to reduce environmental impact;

• Regulations governing waste;

• Regulations governing chemicals; and

• Pollution prevention.

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.