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PPAP Automotive Ltd Management Discussions

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Sep 23, 2025|03:15:46 PM

PPAP Automotive Ltd Share Price Management Discussions

Global Economy Overview

In the financial year 2025, the global economy experienced a modest growth of 3.3%. Despite the ongoing challenges from geopolitical issues and the shifting trade dynamics, inflationary pressures eased across most economies due to the stabilizing commodity prices and prudent monetary policies. Central banks remained cautious, focussed on supporting the growth and maintaining the price stability. Global trade continues to evolve, with a greater focus on supply chain optimisation, diversification, and regionalization thus creating opportunities for countries with strong manufacturing ecosystems and competitive advantages. According to the International Monetary Fund (IMF), global growth is expected to slow-down to 2.8% in the financial year 2025. The introduction of tariffs by the U.S. and the responses from its major trading partners are already impacting global trade, weakening business confidence, and adding to market uncertainty. Growth in emerging and developing economies is expected to be at 3.7%, with countries like China expected to be affected more due to their higher exposure to U.S. The unpredictability in trade policy is making businesses face uncertainty which is adding pressure on the foreign exchange rates.

Indian Economy Overview

Indias economy displayed resilience and consistent growth throughout FY 2024-25, continuing with its status as one of the worlds fastest-expanding major economies. As indicated by the Second Advanced Estimate (SAE) data released by the National Statistical Office (NSO), real Gross Domestic Product (GDP) is 6.5% for the FY 2024-25, following a notable 9.2% (per the First Revised Estimates) growth in the previous financial year.

This sustained momentum reflects the nations sound economic foundations, supportive government policies, an expanding services sector, and strong domestic demand, all of which contribute to increased confidence in Indias long-term growth potential. Government reforms, substantial investments in both physical and digital infrastructure, and initiatives like ‘Make in India and the Production-Linked Incentive (PLI) scheme have played a crucial role in improving the countrys growth path and encouraging self-sufficiency. Automobile Industry Overview

Indias automobile industry continues to be a key contributor to the countrys manufacturing growth and economic development. As the worlds fourth largest automotive market, India has benefitted from evolving consumer preferences and higher discretionary spending.

The Passenger Vehicle (PV) segment witnessed moderate growth of 3% and the demand for Utility Vehicles (UVs), grew by 14%. UV volume increase was fuelled by a slew of new model launches featuring advanced features and contemporary designs that resonated well with consumer preferences. In contrast, the Passenger Car segment (comprising sedans and hatchbacks) experienced a decline in production volume in FY25, with a drop of around 12%. Cleaner fuels like CNG and strong hybrids gained traction, while EV growth remained moderate.

Auto Ancillary Market Overview

The Indian auto ancillary industry has maintained healthy

momentum in FY25, with industry estimates indicating growth in the range of 8-10% over FY24, supported by robust OEM production, a growing aftermarket, and rising demand for EV components.

Passenger vehicle output is likely to remain moderate, primarily driven by SUV sales. The two-wheelers are seeing recovery in both rural and premium segments. Exports, projected at around USD 20-21 billion, remain a key growth driver.

Stable raw material prices and easing supply chain pressures are aiding margins, while policy measures such as the PLI scheme, scrappage policy, and stricter emission norms are boosting technology transformation.

Segments like electrical and electronic components, braking systems, and EV-ready parts are poised for above-average growth, positioning the industry for a positive but moderated growth trajectory compared to FY24 highs.

Group Overview

Established in 1978, PPAP began its operations by manufacturing custom-made extrusion products. The Company entered the automotive sector in 1985, initially supplying plastic profiles for the first generation of Maruti vehicles. Over the years, PPAP evolved into a full-fledged Tier-1 automotive supplier for plastic extrusions, injection mouldings, and rubber-based sealing systems. With strategic collaborations from global leaders such as Tokai Kogyo Co. Ltd. and Nissen Chemitec Corporation, PPAP has continued to invest in technology, talent, and processes to support Indias growing mobility ecosystem.

Today, PPAP is present across multiple business verticals—from automotive OEM parts to aftermarket solutions, toolings, industrial products, and energy storage systems—with a clear focus on de- risking and diversification.

The PPAP Group comprises of five entities:

• PPAP Automotive Limited - The parent company engaged in manufacturing automotive sealing systems and injection moulded plastic parts.

• PPAP Tokai India Rubber Private Limited - Joint venture with Tokai Kogyo Co. Ltd., Japan, for EPDM rubber sealing systems

• ELPIS Automotives Private Limited - Wholly-owned subsidiary is in the aftermarket and premium accessories business.

• Avinya Batteries Limited - Wholly-owned subsidiary is focused on energy storage solutions (formerly PPAP Technology Limited).

• Avinya Industrial Products Limited- Wholly-owned subsidiary is engaged in providing products for industrial application in India and Overseas.

• Meraki Precision Tool Engineering Limited - Wholly- owned subsidiary is in the commercial toolings business.

PPAP places a strong emphasis on product innovation and process excellence. PPAPs in-house R&D capabilities support the development of engine-agnostic components, battery pack solutions, and high-performance plastic molds. Close collaboration with OEMs and technology partners has enabled the Company to stay ahead of evolving vehicle platforms.

The Company is committed to responsible manufacturing practices with an emphasis on waste reduction, energy efficiency, and workforce development. Environmental and social considerations are embedded into our plant operations, while governance standards align with regulatory norms and stakeholder expectations.

Automotive Parts Business

The Automotive Parts segment is the cornerstone of PPAPs operations. The Company is a leading supplier of automotive body sealing systems, interior trims, and exterior plastic components using polymer extrusion and injection molding technology. These components are supplied to Indias top OEMs across passenger vehicles (PV), commercial vehicles (CV), and two-wheelers (2W). The products are engine-agnostic, making them compatible with both internal combustion engine (ICE) and electric vehicles (EV). PPAP has seven dedicated OE manufacturing units in Noida, Greater Noida, Pathredi (Rajasthan), Viramgam (Gujarat), Sanand (Gujarat), Pune (Maharashtra) and Vallam Vadagal (Tamil Nadu). PPAPs customer list includes Maruti Suzuki, Tata Motors, Hyundai, Toyota, Honda, Renault-Nissan, Kia, MG Motor, Skoda- Volkswagen, Isuzu, and several Tier-1 suppliers.

FY25 Performance

• The Automotive Parts business accounted for ~89.4% of the consolidated revenue in FY25.

• Secured new lifetime orders worth Rs. 601 crores of which Rs. 208 crore were from the EV vehicles.

• Successfully onboarded Mahindra & Mahindra as a direct OEM customer.

• Increased content per vehicle with OEMs like Kia Motors.

• Daily dispatches exceeded 2.25 lakh parts per day.

• SKU count rising to 2,600+.

Outlook & Strategic Focus

• Targeting execution of the Rs. 3439 Crores lifetime orders over the next 3-5 years.

• Focus on increasing per vehicle content and winning more EV programs.

• Enhancing product offerings through value-added components.

• Driving operating leverage through better asset utilization and yield improvement.

Aftermarket Business

PPAPs aftermarket operations are managed through its wholly owned subsidiary ELPIS Automotives Private Limited, established in 2019. ELPIS caters to both B2B and B2C segment offering a broad product portfolio and addressing the growing demand for high-quality spare parts, accessories, and car care solutions in India and in select international markets.

The product range includes:

• Engineering Plastics: Components essential for various automotive applications.

• Rubber Sealing Products: Ensuring reliable vehicle sealing and performance parts.

• Car Accessories: Enhancing aesthetic and functional appeal of the vehicles.

• Car Care Products: Maintenance and protection solutions for vehicles.

• Automotive Glass Care Products: Enhancing visibility and safety for road users.

To support this growing business, ELPIS started with a warehouse in Okhla, New Delhi. Later it consolidated its operations at a centralized spare parts facility in Greater Noida, Uttar Pradesh. This hub now serves as a distribution base for domestic and international aftermarket covering regions including Nepal, Bhutan, and GCC countries via Dubai, UAE. The setup facilitates efficient logistics and timely delivery.

ELPIS is also aggressively expanding into digital retailing with product listings on Amazon and its own e-commerce portal, shopelpis.com. Elpiss distribution network continues to evolve, supported by growing warehousing capacity, channel partnerships, and brand building initiatives.

FY25 Performance

• In FY25, the aftermarket business delivered a robust performance registering a 15% year-on-year revenue growth and contributing 4% to the consolidated turnover.

• The Company launched over 550 new SKUs during the year taking the total portfolio to more than 1,271 SKUs

Outlook & Strategic Focus

• Aftermarket to contribute 10 % + of group revenues by FY27.

• Building a pan-India distribution network supported by regional warehouses.

• Target direct exports to Middle East, Africa, and South Asia.

• Focus on brand equity, premium offerings, and tech-enabled distribution.

Commercial Tool Room Business

PPAP Automotive commercialized its tooling operations in 2019, marking a strategic pivot into the development and manufacturing of plastic injection tooling. To enhance focus, scale, and market responsiveness, this business was carved out into a dedicated subsidiary—Meraki Precision Molds Private Limited in FY25.

The tooling facility, located at Greater Noida, Uttar Pradesh, is equipped with advanced capabilities and serves a wide spectrum of industries including Automotive, Electrical, and White Goods. It manufactures a range of high-precision moulds, including:

• Gas-assist moulds.

• Multi-cavity moulds.

• Hot runner systems.

• Specialized techniques such as 2K molding and overmolding.

This facility has aligned its offerings with the evolving needs of OEMs and Tier-1s by maintaining industry-specific technology and quality standards and offering complete design-to-validation services. This transformation into Meraki Precision Molds reflects our strategic commitment to diversification, innovation, and customer-centric manufacturing.

FY25 Performance

• Tooling revenue grew by 75% year-on-year, contributing ~4% to group revenues.

• Delivered over 120 moulds worth approximately Rs. 25 crore across a 12-18-month period.

• Achieved 80% capacity utilization.

• Served customers across automotive, white goods, and the appliance sector.

Outlook & Strategic Focus

• Strong order pipeline to be executed over FY26-FY27, positioning the division for sustained growth.

• Plans to scale export capabilities and serve international tooling demand.

• Continued investment in high-speed machining, CAD/CAM design, and validation systems.

• Strategic goal: position PPAP as a precision tooling leader within India and in key export markets.

Industrial Product Business

PPAPs Industrial Product Division is focused on extending its core capabilities in plastic extrusion, injection molding, and rubber extrusion to sectors beyond the automotive industry. This division caters to a variety of industries including infrastructure, renewable energy, consumer appliances, construction, and agriculture.

Key product offerings include Pail containers (5L to 25L) in round and square formats Parts for solar panel cleaning robots, Paint dispensers and paint buckets, housing components and building materials, Parts for AHU systems (Air Handling Units), components for electrical and modern bath fittings, Plastic and rubber parts for white goods and consumer appliances.

These products are manufactured at the Surajpur Industrial Area facility in Uttar Pradesh. The division is positioned as a strategic diversification lever for PPAP to address non-automotive markets, using the same principles of precision engineering, tooling expertise, and quality control that define its automotive operations. FY25 Performance

• Revenue contribution stood at ~2% of consolidated revenue.

• Revenue more than doubled YoY, driven by strong growth in containers, dispensers, and white goods applications.

• Successfully developed new parts for solar robotics, AHU systems, and modern bath fittings.

• Export trial orders completed for global customers, validating capabilities for overseas markets.

Outlook & Strategic Focus

• The division is actively expanding into international markets, with a focus on B2B clients in the US, Middle East, and Southeast Asia.

• Aims to become a significant contributor to the Groups revenue over the next 2-3 years.

• Continued focus on custom toolings, application-specific designs, and long-term client relationships.

• Strengthening PPAPs visibility in non-auto industrial applications by leveraging shared R&D and infrastructure.

Battery and Energy Storage Business

Rebranded as Avinya Batteries Limited, the business shifted its focus from mobility to stationary energy storage systems— telecom, solar, and industrial ESS.

Avinya Batteries specializes in the manufacturing of high-quality lithium-ion battery packs, including Pouch Cell, Cylindrical Cell, and Prismatic Cell varieties.

Apart from developing in-house capability, Avinya Batteries is also tying up with renowned institutions and technology startups to develop value added solutions for its customers.

FY25 Performance

• In FY25, Avinya Batteries successfully narrowed its losses, setting a strong foundation for future growth.

• Cost efficiencies were achieved in several areas, notably in inventory management and employee benefits.

• Looking ahead, the business is well positioned to capitalize on the increasing demand in its sector, driven by expanding market opportunities and a focus on innovation, quality etc.

Outlook & Strategic Focus

• Turn losses into profits by focusing on premium customers.

• Leverage operational synergies across functions to improve efficiency and margins.

• Implement minor operational changes to enhance productivity and profitability.

• Achieving growth with existing investments, avoiding additional capital expenditure.

Opportunities and Threats

• Growth in EV and Sustainable Mobility:

The increasing adoption of electric vehicles presents a significant growth avenue. With Rs. 208 crore in EV-related orders booked in FY25, PPAP is well-positioned to serve new-age OEMs and electrified platforms with engine-agnostic products.

• Aftermarket Expansion and Digital Penetration:

The Companys aftermarket division (Elpis) is scaling aggressively through e-commerce platforms, pan-India offline distribution, and new warehousing infrastructure. Entry into export markets, such as the GCC, opens high-margin growth potential.

• Export Opportunities in Parts and Industrial Products:

Initial exports commenced in FY25 for both the Automotive and Industrial Product Divisions. As global OEMs look to diversify supply chains amid tariff disruptions, PPAP can become a reliable alternate source.

• Stationary Energy Storage:

Avinya Batteries has repositioned into telecom, solar, and industrial ESS segments. As India accelerates its grid storage investments, the division is poised to benefit from early mover capabilities.

Risks and Challenges

• Automotive Industry Cyclicality:

The automotive industry remains inherently cyclical and sensitive to broader economic factors, policy changes, and interest rate movements. Any prolonged downturn, particularly in the passenger vehicle or commercial vehicle segments, may impact overall component demand.

• Raw Material Price Volatility:

Fluctuations in global crude oil and commodity prices affect input costs such as polymers and rubber. Although industry players adopt pass-through mechanisms, volatility in raw material prices can create margin pressures across the value chain.

• Global Trade Uncertainty:

Evolving global trade dynamics, including rising protectionism and tariff regimes, introduce unpredictability into export

opportunities and global sourcing strategies for OEMs and suppliers alike.

• Macroeconomic and Policy Risks:

Unforeseen changes in fiscal or monetary policy, inflationary trends, or geopolitical developments can affect demand patterns, capital investment cycles, and overall economic stability, thereby impacting industry growth.

Financial Highlights-Standalone basis

• Revenue stood at INR 537.6 Cr in FY25, + 6.7% YoY, supported by a strong order pipeline and stable execution across key verticals.

• Gross margins improved significantly to 42.8% in FY25 from 40.6% in FY24, indicating better product mix and raw material cost efficiencies.

• EBITDA stood at INR 60.6 Cr, up by 38.2% YoY, with EBITDA margin expanding to 11.3% from 8.7%, driven by operating leverage and continued focus on cost optimization.

• PAT stood at INR 14.1 Cr versus a loss of INR 4.7 Cr in FY24, reflecting improved profitability due to better execution and operating efficiency.

• With fundamentals intact, PPAPs continued emphasis on working capital discipline, execution efficiency, and margin preservation will play a pivotal role in sustaining growth momentum.

Note: Significant changes in key financial ratios along with explanation forms part of note no. 46 of standalone financial statements.

Outlook and Guidance

PPAP enters FY26 with strong momentum and a healthy order book of Rs. 3439 Crores providing multi-year revenue visibility. While the overall industry is expected to witness modest growth, PPAPs management remains confident of outperforming its peers by:

• Enhancing asset utilization across parts, tooling, and battery operations.

• Improving material yield efficiency (targeting 88-90%).

• Scaling aftermarket and exports.

• Achieving margin expansion through better manpower productivity and cost discipline.

PPAP has provided revenue guidance of Rs. 600-660 crore for FY26, along with a targeted PAT of Rs. 20-25 crores.

PPAP is focused on building a resilient diversified business model combining core auto parts with high-potential adjacencies in tooling, energy storage, aftermarket, and industrial components. Internal Control System and their adequacy The Company has a robust internal control framework, designed to ensure the orderly and efficient conduct of its business operations, safeguard its assets, prevent and detect frauds and errors, ensure accuracy and completeness of accounting records, and facilitate timely preparation of financial information.

The internal control systems are aligned with statutory requirements as well as industry best practices. These systems are continuously reviewed and monitored by the management, and their effectiveness is periodically evaluated by the Internal Auditor, which reports directly to the Audit Committee of the Board. The Audit Committee reviews the internal audit findings, monitors the implementation of audit recommendations, and ensures that

corrective actions are taken promptly to strengthen the control environment.

The internal control framework is adequate and effective in mitigating operational, compliance, and financial risks, thereby supporting the achievement of the Companys objectives.

Human Resource

Our people are the cornerstone of our success, and we remain committed to fostering a workplace culture built on trust, respect, and continuous learning. The Human Resource function plays a pivotal role in aligning talent management strategies with the Companys long-term business objectives, ensuring that we attract, develop, and retain the best talent in the industry. As on 31st March 2025, PPAP has employed a total of 1295 employees across its operations.

During FY25, the HR team focused on strengthening employee engagement, enhancing leadership capabilities, and implementing structured training programmes to upskill our workforce in line with evolving technological and market needs. Special emphasis is placed on health, safety, and well-being initiatives, ensuring a safe and supportive environment for all employees.

We continued to promote diversity, inclusion, and equal opportunity across all levels of the organisation. Digital HR tools were integrated into our processes to improve efficiency and transparency.

Going forward, our HR strategy will continue to focus on nurturing talent, fostering a culture of performance and collaboration, and equipping our people with the skills needed to meet the challenges of a dynamic business environment. We believe that empowering our employees will directly contribute to achieving sustainable growth and long-term value creation for all stakeholders.

Safety, Health, and Environment

We are strongly committed to safeguarding the environment in which we operate for the benefit of current and future generations. As a responsible business, we adhere to and follow all the applicable environmental laws and regulations. We strive to make the best use of our resources while minimizing operational impacts and reducing our environmental footprint.

Our commitment to reduce freshwater consumption, energy consumption, mindful resource utilization, and waste generation exemplifies our efforts to address climate threats to become a low- carbon organization.

PPAP conforms to all key international standards — ISO IATF 16949:2009, ISO 14001:2015, ISO 45001:2018, and ISO 50001:2018 — to achieve world-class benchmarks in quality, environmental management, and occupational health & safety. These standards are regularly verified and certified by reputed third-party agencies.

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. Crucial 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.

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