PPAP Automotive Ltd Management Discussions.

Economy Overview

India remains one of the fastest growing major economies in the world. Financial year 2018-19 turned out to be a challenging year for the Indian economy. As crude prices saw a significant uptrend in the first half of the year, rising by more than 40% before retracing back during the second half. The Indian currency also saw a major depreciation in mid-year and recovered at the end of FY19. Indias GDP growth rate is pegged at 7% in FY19 and expected to grow 7.3% in FY21. Despite softer growth, the Indian economy remains one of the fastest growing and possibly the least affected by global turmoil and is expected to be among the worlds top three economic powers in the next 10-15 years. The slowdown in economy is mainly on account of the agriculture sector, which is expected to grow at a lower rate of 2.7% in the current year with respect to 5% in the previous year. The drop off also derives from the consumption side. While the recovery in private consumption remains earnest, government consumption is expected to sharply slow down to 8.9% in the current year with respect to 15% in the last year. Indias GDP is expected to reach US$ 6 trillion by FY27 and achieve upper-middle income status on the back of digitization, globalization, favorable demographics and reforms. The Government of India has launched various reforms and initiatives like Make in India and Digital India and also focusing on renewable sources to generate energy. The government is also aiming to reorient policy of agriculture, focusing from production-centric to income-centric. India has climbed 23 places and ranked at 77th among 190 countries (Source: World Banks Ease of Doing Business 2019 survey).

Investment revival remains on track in line with the trends in capacity utilization. The governments focus on ease of doing business, low-cost housing and other key infrastructure projects, development of the roads and highway which appears to have a favorable impact on the construction sector and the positive momentum is likely to continue.

Today, India is the worlds seventh largest economy in real terms, backed by strong demand, positive consumption pattern and rising disposable income. The economy is expected to be among the top five global economies in terms of purchasing power parity terms by 2020.

Industry Review

Indian automotive and automotive components sector

The Indian automotive industry contributes approximately 7% to the GDP of the country. The sector is a driving force behind the dramatic modernization of the Indian manufacturing industries. The industry, as a whole contributes approximately 50% of the manufacturing GDP. In the next 10 years, the automotive industry is expected to contribute 12% to the countrys GDP.

India became the fourth largest automotive market in the world trailing behind China, USA and Japan. It continues to be the largest two wheeler market in the world and is expected to emerge as the worlds third largest passenger vehicle (PVs) market by 2021. By 2026, Indian passenger vehicle market is expected to increase to 10 million vehicles from the current size of 4 million vehicles.

In the short term, the industrys growth in sales has been sluggish in FY19 as compared to the previous years. The industry experienced a sales growth rate of about 10% in the first half of FY19, with the second half of the year experiencing a de-growth of about 1%. The demand for vehicles was hit due to natural calamities as well as macroeconomic factors.

The performance of automotive industry was largely impacted by high fuel prices, liquidity crunch in NBFCs and long-term insurance premium regulations. Two-wheelers market also continued to stay in negative territory, with demand staying weak in both rural and urban areas.

The Indian automotive industry produced a total of 30.92 million vehicles including PVs, commercial vehicles, two and three-wheelers in FY19 as against 29.07 million in the same period of FY18, registering a de-growth of 6.36% in FY19. The sale of PVs diminished by 2.70% in FY19 over the same period last year. Two-wheeler sales registered a drop off of 4.86% while the commercial vehicle segment stepdown by 17.55% year on year. Automobile exports from India has increased by 14.50% over the previous year. (Source: SIAM)

In FY19, a total of 4.02 million PVs were produced registering a minimal growth of 0.14% over the same period last year. However, the CAGR for vehicle production registered a growth of 6.96% between FY13 to FY19. (Source: SIAM) The global automotive industry is undergoing a cascade of disruptions. There are lot of developments regarding reducing the emissions of a vehicle and use of cleaner technologies like electric or fuel cells etc. There is also significant done on the autonomous and connected cars. Apart from making the vehicles more fuel efficient, work is being done to make them safer as well.

In India, the government is focusing on making adoption of Electric Vehicles (EVs) easier and lucrative. The government has taken many measures to make EVs affordable under its FAME (Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles in India) scheme. The Ministry of Heavy Industries has shortlisted 11 cities in the country for introduction of EVs in their public transport systems under the FAME.

The government is also implementing stringent emission standard from 01st April, 2020. The BS-VI emission standards will be in effect whereby reducing the emission from traditional gasoline and diesel engines. The implementation of these standards has seen a major disruption for the vehicle manufacturers. While most of the manufacturers have invested in upgrading their engine technologies to meet these standards, some of them plan to change their vehicle line up including stopping production of old vehicles as well as stoppage of production of diesel engines. In short term, the demand for vehicles is likely to be effected due to the implementation of these standards.

The Indian automotive industry is expected to remain amongst the prime manufacturing sectors for the country. Favorable government policies such as Auto Policy 2002, Automotive Mission Plan 2016-2026, National Automotive Testing and R&D Infrastructure Projects (NATRiPs), have helped the Indian auto components industry to achieve considerable growth. The rapidly globalization is opening up newer avenues for the transportation industry, especially while it makes a shift towards electric, electronic and hybrid cars, which are deemed as more efficient,safe and reliable modes of transportation. Over the next decade, this will lead to newer verticals and opportunities for auto component manufacturers.

India is emerging as global hub for auto component sourcing. The industry over the years has proved its strength in meeting the global expectations of vehicle manufacturers by continuously upgrading their products, services and know how to global levels.

Company Overview

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 PVs automotive hubs in Northern, Southern and Western 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 PVs segment as well as the commercial and the two-wheelers segment. The Company was established in 1978 for the manufacture of custom-made extrusion products, the Company commenced the automotive parts business in 1985. Over the years, PPAP has been continuously adding more and more products for its ever expanding customer base to enhance its per car contribution. 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 for development and manufacturing of automotive sealing systems. The relationship between both the companies started in 1989 and since then both the companies enjoy a harmonious and mutually beneficial relationship with each other.

PPAP also has a technical collaboration with Nissen Chemitec Corporation, Japan, for development and manufacture of interior and exterior injection products. The Companys technical association commenced in 2007.

PPAP also has a technical collaboration with Tokai Kogyo Seiki Co. Limited, Japan for manufacturing of tools and dies.

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

Product details

The Companys core competence is in polymer extrusion based automotive sealing systems and injection molded products. The product details are as follows:

1. Automotive sealing products

a. Plastic extrusion

PVC / TPO / PP (with / without metal insert) - Weather Strip Outer, Weather Strip Inner Molding Roof, Molding Windshield, Air Spoiler, Trim Door Opening, Rail Component Side Door, Sun Roof Drain Hose etc.

b. EPDM rubber and TPV extrusion (Products made by Joint Venture) EPDM Rubber (with / without metal insert) - Trim Door Opening, Back Door Opening, Weather Strip Trunk Lid, Door Seal, Secondary seal, Hood seal, Air DAM, Seat Liners etc. TPV Extrusion-Glass Run Channel

2. Automotive plastic injection molding products

a. Interior parts

Door Trims, Pillar Garnishes, Lining Rear Panel, Rear Tray, Trunk Side, Tail Gate, Weather Strip Partition, Instrument Panel, Cover Engine Upper / Under, Cover ECU, Box Battery, Molding Hood, Fender Inner, Splash Guard, Duct Cooling, Fuel Pipe etc.

b. Exterior parts

Bumper, Fog Lamps Garnish, Radiator Grill Garnish, Body Side Molding, Rear Bumper Garnish, Wheel Cover, Door Sash etc. The Company has in house design and development center for products, mold, machines & fixtures. The tools and fixtures are produced at its in house tool manufacturing faciltity. The products made by the Company are tested and validated to meet customer specifications at its in house testing and validation facility, thereby, providing customers with end-to-end solutions.

The Company is a key supplier to all the major automotive manufacturers in India. PPAPs customers profile include all the major car manufacturers 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 Limited, Hyundai Motor India Limited, Suzuki Motor Gujarat Private Limited, MG Motors India Private Limited and two-wheeler manufactures viz. Suzuki Motorcycles India Private Limited. The Company also caters to CKD parts export requirements of its customers. The Company also caters the requirements of their respective Tier 1 suppliers. During the year under review, the Company has expanded its customer portfolio with the addition of Volkswagen India Private Limited. The Companys key objective is to become a global level company operating in India. This mission is enabling the Company to focus on achieving excellence in all the facets of the organization. PPAP continued its efforts to reduce waste and energy consumption in its own manufacturing processes.

The Company continuously scouts for new opportunities by the way of addition of customers and expansion of its product range to its existing customers. The Company continue to challenge the status quo and are committed to achieve excellence in all business practices. It is our endeavor to improve the efficiency of each and every business process of the Company.

Awards & recognition

PPAP continues its track record of superior performance with all its customers. The Company has been bestowed upon the following awards during FY19:

1. Overall Performance Shield by Maruti Suzuki India Limited;

2. Silver Award for Delivery by Honda Access India Private Limited;

3. First Runner-Up Award in National Level Quality Circle Competition by Honda Cars India Limited;

4. Supplier- Gold Award by Toyota Kirloskar Motor Private Limited;

5. Zero PPM Award by Toyota Kirloskar Motor Private Limited;

6. Achieving Quality Target Award by Toyota Kirloskar Motor Private Limited;

7. Achieving Delivery Target Award by Toyota Kirloskar Motor Private Limited;

8. Zero Defect Supplies from Toyota Kirloskar Motor Private Limited;

9. Award for Quality by Tata Motors Limited;

10. Appreciation Award by Hyundai Motor India Limited;

11. Appreciation Award for Partnership Day by Hyundai Motor India Limited;

12. Delivery Performance 2018 by Asahi India Glass Limited;

13. Appreciation for continued support 2018 by Asahi India Glass Limited; and

14. Excellence in Plastics Award 2019 by Economic Times Polymers.

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 strengths

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 global suppliers are increasing procurement from their Indian subsidiaries or partners due to the cost competitiveness coupled with robust engineering capabilities.

Product development capabilities

Due to the change in expectations from the end consumer, automotive industry continuously needs to improve the technology as well as design of components used in their vehicles. There is a substantial enhancement in research and development investment over the past few years and many laboratories are being setup to conduct analysis, simulation and engineering animations. The increased sourcing and investment from global OEMs from India is turning the country into a preferred designing and manufacturing base for them. Auto component supplier, who have in house capabilities to offer a complete print to build solution for their customers, will be given preference henceforth.

New technology

The industry is undergoing many disruptions in drivetrain technology as well as autonomous and connected cars. The industry is moving towards reduction of emissions by improving the efficiencies of the IC engine as well as development of alternative energy efficient modes of transportation. The drive towards the technology change requires significant investments in well as infrastructure development. The new technologies need special promotion in form of rebates or subsidies by the government. shared mobility, as a concept, is also gaining popularity and is expected to drive significant volumes going forward products are neutral to the engine technology and hence can be used by any auto maker.

Risks and concerns

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. This phenomena has lead 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 management, 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. Besides the disruptions in the industry, the government is also tightening compliances framework as well as ensuring that rules and regulations are implemented in letter as well as spirit. These compliances are also changing the way business was being done in the past and are driving global practices in the way transactions are being done.

The Company believes in strict compliances of all laws of the land, both in letter and spirit and ensures the highest governance practices are in place. The Company is also continuously investing to upgrade its products and services in order to remain attractive for the customer.

However, the following are some risks, identified to maintain the performance of the Company:

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.

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.

Infrastructure challenges

The Indian auto components industry faces problems for basic infrastructure needs like power and transportation cost. The non availability of uninterrupted power is also a big challenge. The Company is focusing on reduction of its carbon footprint and also considering investing in renewable sources of energy for its captive usage.

Availability of competent 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.

Financial performance Standalone

Profit and loss statement analysis

Revenue from operations increased by 3.4% YoY to Rs. 41,098.04 lacs in FY19, on account of increase in customers demand.

EBITDA decreased by Rs. 767.94 lacs YoY to Rs. 7,719.96 lacs in FY19 due to increase in material cost & employee cost.

Depreciation stood at Rs. 2,599.53 lacs in FY19 from Rs. 2,598.96 lacs in FY18.

EBIT stood at Rs. 5,227.49 lacs in FY19 from Rs. 6,147.5 lacs in FY18.

Finance cost decreased by Rs. 37.68 lacs to Rs. 404.71 lacs in FY19. Finance cost to net sales ratio stood at 0.9% in FY19 from 1.1% in FY18.

The Company repaid term loan of Rs 1,000 lacs in FY19.

PAT stood at Rs. 3,341.63 lacs in FY19.

Earnings per share decreased by Rs. 2.85 to Rs. 23.87 in FY19.

Balance sheet analysis

Net worth increased to Rs. 29,511.04 lacs from Rs. 26,970.67 lacs in FY19. Equity share capital remained same to Rs. 1,400 lacs whereas, reserves and surplus increased to Rs. 28,111.04 lacs from Rs. 25,570.67 lacs recorded in FY19.

Book value per share increased to Rs. 210.79 from Rs. 192.65 in FY19.

Net fixed assets increased by Rs. 1,668.25 lacs to Rs. 23,951.72 lacs in FY19.

Current assets increased by Rs. 1,381.68 lacs to Rs. 11,722.14 lacs in FY19

Borrowings decreased to Rs. 2,459.32 lacs from Rs. 2,960.07 lacs in FY19. Debt-Equity ratio stood at 0.08 times.

Return on Net Worth (RONW) was 11.3% in FY19 as compared 13.9% in FY19.

Return on Capital Employed (ROCE) increased to 16.4% in FY19 as compared 20.5% in FY19.

Consolidated

Profit and loss statement analysis

PAT stood at Rs. 3,373.85 lacs as against Rs. 3,931.05 lacs in FY19.

Earnings per share decreased to Rs. 24.10 from Rs. 28.08 in FY19.

Key financial ratios

Particulars FY19 FY18
Debtors Turnover 7.30 7.64
Inventory Turnover 8.68 11.36
Interest Coverage Ratio 12.92 13.90
Current Ratio 1.29 1.24
Debt Equity Ratio 0.08 0.11
Operating Profit Margin 12.5% 14.8%
Net Profit Margin 8.1% 9.4%
Return on Net Worth 11.3% 13.9%

There is no significant change (i.e. change of 25% or more as compared to the immediately previous financial year) ratios.

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 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 are presented to the audit committee of the Board. The Company is willing to take in order to achieve its long-term strategic objectives. 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.

A new ERP system i.e. SAP has been initiated in the Company, which results in better, internal, operational, financial and sustainable control.

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. The Companys internal control over financial reporting includes those a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; b) provide reasonable assurance that transactions are recorded as necessary to permit preparations of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and Directors of the Company; and c) provide reasonable assurance regarding or timely detection of unauthorized acquisition, use, or disposition of the Companys assets that could have be a material effect on the financial statements.

Human resources

Human resource plays a pivotal role in an organizations health, its sustainability and its growth. 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 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 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. Apart from other types of employees, every year management trainees and graduate engineer trainees are inducted into the Company to take senior management posts in the future. 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. Employees safety is a major priority of the Company. Inside Company and road safety training is regularly imparted to all employees. The Company encourages the employees to participate in various safety promotional activities to shift their mind set towards safety. 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.

Training and development

PPAPs basic policy for training and development is the cultivation of "Teach and be Taught" culture and to 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 enables 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 class room, 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). The Company also sends its employees to Japan, Thailand and Indonesia for benchmarking and subsequent upgradation. Our employees also get trained at Maruti Suzuki Centre for Excellence (MACE). The Company has ‘DOJO Centre to ensure zero defects for its customers. 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.

In our mentorship programme, mentors are assigned to millennial and graduate engineers or management trainees who act as a guide to provide psychological support, career guidance, role modelling, communication, additional support, encouragement in order that they function with ease. The mentors take full responsibility for the learning and professional development of the mentees.

Environment, Health and Safety

The Company is committed to provide a safe, secure and healthy workplace. Environment, Health and Safety (EHS) is one of the primary focus area 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 audits, safety meetings and take necessary safety measures on the identified unsafe conditions and acts (Hiyari Hato Points) so that it cannot leads to any near miss or accident. 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 : 2004 OHSAS 18001 : 2007 ISO 50001 : 2011
PPAP
Plant I (Noida) Y Y Y Y
Plant II (Noida) Y Y Y Y
Plant III (Surajpur) Y Y Y Y
Plant IV (Pathredi) Y Y Y Y
Plant V (Vallam Vadagal) Y # # #
Plant VI (Viramgam) Y # # #
JV Company
Plant I (Surajpur) Y # # #
Plant II (Viramgam) Y # # #

# under process

PPAP is endeavour to protect the environment planet by combining the modern ways of living with a deeper understanding of nature. PPAPs continuously ensures that the environment in all its plants and surroundings nearby 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 generation 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.