Precision Camshafts Ltd Management Discussions

<dhhead-MANAGEMENT DISCUSSION & ANALYSIS</dhhead-

Economy Review

Economic Conditions

The global economy is estimated to continue its steady growth momentum for 2024 and 2025. Notably, the growth rate for the two years is projected at 3.2%, which would coincide with that for 2023. This progress can be vastly accredited to the developing markets of emerging economies, which have undergone significant expansion. The growth rate for such economies is expected to rise from 1.6% in 2023 to 1.7% in 2024, and elevate further to 1.8% by the year 2025.

The US economy exhibited tenacious growth in 2023, and is forecasted to advance at a rate of 2.4% in 2024. However, the countrys markets are likely to be hit by a decrease in the growth in 2025, which could lead the economy to slow down to 1.9%. This deceleration may be the result of gradual fiscal tightening and a softening of the labour market.

Noticeably, though the target reflects an upward revision of the growth in the US, there is an offset in the Euro zone as per the IMFs report.

The GDP growth in the Euro zone has stagnated over the past year, largely due to significant exposure to the ongoing Russia-Ukraine conflict. Despite this sluggishness, the growth estimates indicate an increase from 0.4% in 2023 to 0.8% in 2024, and further to 1.5% in 2025. This anticipated rise can be owed to stronger household consumption, bolstered by the easing impact of energy price shocks and a decline in inflation, which would support an increase in real income. However, in case of Germany, the growth forecasts for both 2024 and 2025 remain subdued due to persistently weak consumer sentiment. This projected trend is somewhat balanced by relatively better forecasts for several smaller economies, including Belgium and Portugal.

Global headline inflation is projected to decrease from an annual average of 6.8% in 2023 to 5.9% in 2024, and further to 4.5 percent in 2025. The decline in global inflation in 2024 can be credited to a widespread decrease in core inflation. This situation is in contrast with 2023, when global core inflation experienced a slight decrease on an annual average basis, while headline inflation witnessed a substantial drop. The latter trend may be attributed to lower inflation of fuel and food prices. In 2024, core inflation is anticipated to decrease by 1.2 percentage points, following a mere 0.2 percentage point contraction in 2023. Similar to headline inflation, the decline in core inflation is swifter for advanced economies.

Outlook

In 2024, global GDP growth is forecasted to slow down, although the likelihood of a global recession remains low. The US economy is anticipated to experience moderate growth, accompanied by a decrease in inflation and sustained low unemployment rates. However, there are persistent challenges including elevated levels of public debt and the potential for additional negative supply shocks. Central banks are expected to uphold a restrictive monetary policy stance to combat inflation. The US Federal Reserve is projected to commence normalisation of policy rates around the midpoint of 2024. Moreover, the ongoing decrease in global inflation is forecasted to prompt several central banks worldwide to implement interest rate cuts later in the year. This development would lay the foundation for stronger global growth in 2025.

(Source - https://www.imf.org/en/ Publications/WEO/Issues/2024/04/16/ world-economic-outlook-april-2024)

Indian Economy

India showcased exceptional economic resilience in FY 2023-24, achieving a noteworthy growth rate of 7.6% driven by various factors. These included improved corporate and bank balance sheets, a resurgence in rural consumption, and a slight uptick in private consumption. Additionally, the sustained growth in gross fixed capital formation maintained a double-digit rate, making a substantial contribution to the positive economic trajectory.

Notably, domestic demand conditions remained robust, despite the challenges prevailing in the global market. There was a significant rise in e-way bills and toll collections in February 2024. Furthermore, the Indian Government invested substantially in public infrastructure and towards the strengthening of the financial sector. These investments played a pivotal role in stabilising the economy amid several external uncertainties.

Outlook

Looking forward, Indias economic prospects remain optimistic, although there are hurdles yet to be overcome. Forecasts indicate that inflation is likely to hover around an average of 4.4% for FY 2024-25, presenting an ongoing challenge for the economy. Nonetheless, India is anticipated to maintain its strong growth momentum, with a predicted GDP growth rate of 7.4% for the same fiscal year. The World Banks projections suggest a slowdown in growth to 6.3% in FY 2023-24 due to external factors and decreasing pent-up demand. However, despite such projections, the service sector is expected to continue thriving, with an anticipated growth rate of 7.4%. Additionally, investment growth is forecasted to remain robust, at an estimated 8.9%.

Industry Overview

Global Automotive Industry

The automotive sector is witnessing a wave of innovation in 2024, yet there is a notable air of caution amid the excitement. The sales figures for electric vehicles (EVs), which were soaring previously, are now experiencing a significant slowdown. For instance, in the U.S., EV sales are projected to grow year-on-year by only 16% in 2024. This marks a notable decrease from an approximate year-on-year (Y-o-Y) growth of 64% observed in 2023. Similarly, in China, the year-on-year growth in 2024 is predicted to be 11.1%, dropping from 36.5% in 2023. This deceleration can be attributed to various factors including reduced incentives, inadequate charging infrastructure, and market saturation among early adopters. In response, industry leaders are implementing strategies such as price reductions to attract the mass market, a move seen as favourable. Nonetheless, this slowdown is prompting major players like GM, VW, and Ford to reassess their strategies, resulting in production adjustments and delays in new model launches. Interestingly, while battery electric vehicles (BEVs) are witnessing headwinds, plug-in hybrid electric vehicles (PHEVs) are gaining traction due to their lower upfront costs and increased flexibility. These patterns are helping to address concerns surrounding range anxiety.

Indian Automotive Industry

For a considerable period, the Indian automotive industry has served as a reliable indicator of the economys vitality, mirroring its growth and technological advancements. With distinctions such as being the largest tractor producer, the second-largest bus manufacturer, and the third-largest heavy truck producer globally, India holds a formidable position in the international heavy vehicles market. According to the Society of Indian Automobile Manufacturers (SIAM), the industry witnessed a total unit sale of 2,38,52,738 in FY 2023-24,marking a significant increase from the previous year. The sector is poised for further growth, driven by trends such as vehicle electrification, particularly in three-wheelers and small passenger cars. One crucial trend that is visible is the transition towards electric vehicles (EVs). Additionally, with the Indian Government targeting a 30% EV penetration by 2030, a surge in demand is on the horizon.

Domestic Sales Trend for Automobiles

In FY 2023-24, the total domestic sales of passenger vehicles surged from 38,90,114 to 42,18,746 units. Additionally, the sales of commercial vehicles, including the medium, light and heavy variants, saw an increase from 9,62,468 to 9,67,878 units compared to the previous year. Moreover, three-wheeler sales witnessed a substantial rise from 4,88,768 to 6,91,749 units during the same fiscal period. There was a rise in the sales of two-wheelers as well, which escalated from 1,58,62,087 in FY 2022-23 to 1,79,74,365 units in FY 2023-24.

Category	FY 2018-19	FY 2019-20	FY 2020-21	FY 2021-22	FY 2022-23	FY 2023-24
Passenger Vehicles	33,77,389	27,73,519	27,11,457	30,69,523	38,90,114	42,18,746
Commercial Vehicles	10,07,311	7,17,593	5,68,559	7,16,566	9,62,468	9,67,878
Three -Wheelers	7,01,005	6,37,065	2,19,446	2,61,385	4,88,768	6,91,749
Two-Wheelers	2,11,79,847	1,74,16,432	1,51,20,783	1,35,70,008	1,58,62,087	1,79,74,365
Total	2,62,65,552	2,15,44,609	1,86,20,245	1,76,17,482	2,12,03,437	2,38,52,738

Growth Drivers

Growing Income: Indias per capita Net National Income (NNI) surged by 35.12%, from 72,805 in FY 2014-15 to

98,374 in 2022-23, indicating a significant growth in income.

Youngest Nation by 2025: India is set to become the youngest nation with an average age of 25 years by 2025, reflecting its youthful demographic profile.

Vehicle Penetration – Indias vehicle penetration rate is projected to reach 72 vehicles per 1000 people by 2025, highlighting the increasing adoption of automobiles in the country.

Expanding R&D Hub – India is emerging as a prominent R&D hub, accounting for 40% of the total global engineering and R&D expenditure of USD 31 billion. Moreover, 8% of the countrys R&D expenditure is directed towards the automotive sector, indicating a growing focus on innovation in this industry.

Atmanirbhar Bharat Abhiyaan – Self-Reliant India:

The Government has introduced a special economic and comprehensive package under the Atmanirbhar Bharat Abhiyaan (Self-Reliant India Initiative), which amounts to

20 Lakhs Crores. This initiative is aimed at providing a boost to the countrys manufacturing sector, emphasising self-reliance and economic resilience.

Industry Trends

Transitioning towards Electric Vehicles

Over the past few years, the Government has implemented several initiatives aimed at cultivating a conducive policy environment to encourage the adoption of electric vehicles (EVs).

Voluntary Vehicle Fleet Modernisation Programme (V-VMP)

The Government provides tax incentives and discounts for upgrading from old vehicles to new ones.

Bharat Stage VI Norms by 2020

India is striving to slash its carbon footprint by 33-35% by the year 2030.

Positive GST Impact

There has been a decrease in the overall cost framework of the Indian automobile sector.

Outlook

India has set an ambitious target to double its auto industry size to 15 Lakhs Crores by the end of 2024. Within the Indian automobile market, two-wheelers hold a commanding 76% market share, reflecting the countrys extensive mobility needs. On the other hand, passenger cars account for 17.4% of the market, with a preference for small and mid-sized models.

The growth of the automobile industry hinges on several factors, including the availability of skilled labour at competitive rates, robust R&D centres, and cost-effective steel production. This industry not only offers substantial investment opportunities but also generates significant direct and indirect employment opportunities for both skilled and unskilled workers.

Furthermore, the electric vehicle (EV) sector holds immense potential for job creation. As per the forecasts, the sector has the potential to generate five crore jobs by 2030. With the industry continuing to evolve and embrace new technologies, it remains a vital contributor to Indias economic growth and employment scenario.

Auto Component Industry

Global Perspective

The global auto components industry encompasses a diverse array of players, including manufacturers, aftermarket parts suppliers, dealers, and retailers. While China has historically dominated the auto component manufacturing industry, theres now a gradual shift towards other Asian nations. India is a noteworthy instance, with the countrys performance driven by increased market potential and cost advantages in manufacturing.

Over the past decade, the global exports of auto components have seen growth across various subcategories. This boost in exports reflects the industrys expanding reach and demand. The rapidly globalising business scenario presents new opportunities for the industry, particularly with the ongoing shift towards electric and hybrid vehicles. This trend is expected to reshape business models, opening up newer verticals and opportunities for auto component manufacturers.

Such developments are likely to spur higher volumes of international trade in the short term. The new technologies will take time to establish their manufacturing bases in low-cost countries. As the industry adapts to these changes, it is poised to capitalise on emerging opportunities in the evolving automotive sector.

Indian Perspective

The forecast for the upcoming fiscal year indicates a moderation in annual revenue growth for leading auto-component manufacturing companies. Notably, the estimates for the sector range from 5-7%, with the adjustment driven by anticipated declines in both domestic volumes and exports.

Notably, the industrial outlook for FY 2024-25 appears relatively subdued. This is despite a robust overall performance projected for the year, characterised by healthy domestic demand and an expected resultant growth of 9-11% for a sample of 45 auto ancillaries. The projection stems from the anticipated moderation in domestic volume growth and a weaker outlook for exports.

In FY 2023-24 the industry witnessed increased investment in capacity enhancements and technological development, a trend expected to persist into FY 2024-25. Significant capital expenditure is anticipated for the upcoming fiscal year, which would be directed towards a range of initiatives. Some of these include new product additions, product development for committed platforms, and advancements in technology, including electric vehicle components and capacity enhancements to align with upcoming regulatory changes.

Furthermore, several factors are expected to positively impact Indian auto component suppliers in the medium to long term. These encompass increased supplies to new platforms, higher value addition, and the potential for aftermarket demand in overseas markets. Additionally, opportunities in the EV segment, vehicle premiumisation, localisation efforts, and evolving regulatory norms are anticipated to contribute to stable growth for auto component suppliers, driven by higher content per vehicle.

Camshaft Industry

The global automotive camshaft market was valued at USD 3.8 billion in 2022, and at USD 3.9 billion in 2023. Moving forward, the market size is predicted to reach USD

5.99 billion by 2032, with a compound annual growth rate (CAGR) of 5.20% from 2023 to 2032. The Indian market for automotive camshafts saw a significant growth of 20.09% in 2022 compared to 2021, with a 5.81% CAGR from 2017. However, the competitiveness of the market has decreased, as indicated by the increase in the Herfindahl-Hirschman Index (HHI) from 1,858 in 2017 to 2,369 in 2022. A lower HHI suggests a more competitive market with more players, whereas a higher index indicates fewer competitors. This shift suggests that India is increasingly relying on domestic production to satisfy the demand for automotive camshafts in the country.

In 2023, the Herfindahl-Hirschman Index (HHI) for Indias automotive camshaft market stood at 2,369, up from 1,858 in 2017. This increase indicates a shift towards moderate competitiveness within the market. The HHI is used to measure market competitiveness, with a range from 0 to 10,000.

Note: HHI Index which is also known as Herfindahl–Hirschman index measures the competition in the country where, HHI less than 1500 means highly competitive; 1500-2500 means moderately competitive; 2500-6000 means concentrated and more than 6000 means highly concentrated

( Source: https://www.marketresearchfuture.com/reports/automotive-camshaft-market-11576 https://www.6wresearch.com/industry-report/india-automotive-camshaft-market-outlook)

Outlook

Looking ahead, the accelerating trend towards vehicle electrification presents promising opportunities for companies in the automotive camshaft market. The emergency of new technologies is necessitating innovative designs and components, including camshafts, further driving the demand. Additionally, the extensive use of camshafts in heavy-duty diesel engines for mining and construction equipment contributes to a positive outlook for future growth in this sector.

Product Linked Incentive Scheme (PLI)

The Union Cabinet, led by the Prime Minister, has launched a Production-Linked Incentive (PLI) Scheme for the automobile and auto components sectors, with a budget allocation of USD 3.5 billion. This initiative aims to stimulate the domestic production of advanced automotive technology by offering financial incentives of up to 18%. In the process, it targets to facilitate significant investments into the automotive manufacturing value chain. Eligible products manufactured in India from 1st April 2022 onwards, will benefit from these incentives over a span of five consecutive years.

The Ministry of Heavy Industries recently extended the tenure of the PLI Scheme by one additional year, incorporating a few amendments. Now, the incentives will apply across five consecutive fiscal years starting from 2023-24, with the incentive payments commencing in the fiscal year 2024-25. An approved applicant is entitled to these benefits for five years, extending no further than 31st March 2028.

Notably, the scheme has already attracted proposed investments totaling 67,690 Crores, significantly surpassing the target of 42,500 Crores over five years. The approved applicants for the Champion OEM Incentive include diverse international groups from countries like the Republic of Korea, USA, Japan, France, Italy, the UK, and the Netherlands, underscoring the global interest and confidence in this initiative.

( Source: https://www.investindia.gov.in/sector/auto-components#:~:text=100%25%20FDI%20in%20the%20 automotive,allowed%20under%20the%20automatic%20 route.&text=The%20rapidly%20growing%20auto%20market,5X%20 in%20next%2010%20years.)

Opportunities

Building Support Infrastructure and Advancing the Research & Development Hub

India has become a leading destination for automotive R&D, attracting global players due to its skilled workforce, cost advantages, and Government incentives. With a large domestic market and the widespread access to neighboring regions, investments in Indias automotive sector are on the rise. Government initiatives like the Automotive Mission Plan (AMP) 2026 and the National Electric Mobility Mission Plan (NEMMP) 2020 further support the industrys growth, focussing on sustainable technologies.

Electric Vehicle Surge: Meeting the Demand

Electric vehicles (EVs) are fuelling innovation in the auto component industry, particularly in electrical distribution systems. The shift towards these vehicles is giving rise to more intricate and high-voltage electrification systems. These are needed for accommodating the growing number of electrical components in EVs. Decreasing ownership costs and stringent emissions regulations have amplified interest in EVs. This surge in EV sales presents promising opportunities for Indias auto components industry.

Bridging the Local Manufacturing void

Leading global manufacturers are increasingly eyeing auto component production in India. The approved 18,100 Crores PLI scheme for battery manufacturing by the Government aims to boost local production, cutting reliance on imports and reducing EV costs. Moreover, a proposed 76,000 Crores incentive for semiconductor development seeks to attract companies to set up plants in India with competitive packages.

Challenges

Shortage of Semi-Conductors

The auto component industry is grappling with a shortage of semiconductors amid geopolitical tensions, thereby impacting the margins for OEMs. With automotive segments accounting for 11% of the semiconductor demand and electronics now comprising 40% of vehicle functions, the shortage persists. Disruptions resulting from the Covid-19 pandemic and geopolitical tensions have exacerbated supply chain challenges, prolonging the six-month chip-to-vehicle production timeline. The return to stable production remains uncertain, necessitating ongoing monitoring.

Shortage of Semi-Conductors

Automobile Original Equipment Manufacturers (OEMs) are facing the hurdle of soaring raw material prices due to ongoing geopolitical tensions. Particularly, the costs of aluminum and steel have surged, leading OEMs to hike vehicle prices. However, these substantial price hikes are expected to dampen consumer demand, and lead to a potential clouding of the industrys outlook.

Technical Transformations

The automotive industry is grappling with technological shifts like emission regulations and electric mobility. Transitioning to the BS-VI norms posed challenges for Indian auto component manufacturers due to technology complexities and reliance on imports. Joint ventures with leading firms offer a solution, granting access to new technologies and broader markets. Efforts towards technology upgrades include modular platforms and platform sharing initiatives by both Indian and foreign firms.

High and Non-uniform Taxes

Indias auto components industry grapples with high and non-uniform tax rates, ranging from 18% to 28% GST, along with compensation cess ranging from 1% to 22%. This lack of uniformity discourages domestic production, particularly in certain sub-segments. Additionally, auto components for EVs come with high GST rates, which can hinder domestic production. Streamlining taxes and duties on auto components is crucial to foster indigenisation and attract investments, especially in critical areas like batteries and power electronics.

Company Overview

Precision Camshafts Limited (also referred to as ‘PCL or ‘The Company) has earned global recognition as a leading manufacturer of camshafts, producing a comprehensive range of camshafts under one roof. Since its inception in 1992, the Company has emerged as a dominant player in the camshaft manufacturing industry. Its achievements are the result of its unyielding dedication to maintaining a robust quality management system, adhering to world-class production standards, and undertaking continuous efforts for improvement.

With a strong emphasis on engineering, research & development (R&D), PCL has broadened its capabilities to become a self-reliant provider of automotive solutions. The PCL Group of companies, including Memco Engineering Private Limited, MFT Motoren und Fahrzeugtechnik GmbH, and Emoss Mobile Systems B.V., enables the Company to offer essential automotive and non-automotive components. Additionally, it provides electric mobility solutions, to top-tier automotive original equipment manufacturers (OEMs).

PCL takes pride in its ability to promptly address customer needs. The Company highly values its employees and emphasises sustainability through its corporate social responsibility initiatives.

PCLs inaugural annual offsite meet, ‘Lakshya 2030, held from 4th to 8th March 2024, in Solapur and Mahabaleshwar, aimed to set a bold course for PCL and its subsidiaries till 2030. In Solapur, the focus was on operational excellence and collaboration, while in Mahabaleshwar, the Company built team cohesion and crafted a shared vision for the future. The second part of the offsite took place in the scenic hill-station of Mahabaleshwar. Amid stunning landscapes, team-building exercises were conducted, bonds were strengthened, and the Companys vision and mission statements were crafted collectively. These sessions aligned with the Company goals and solidified the commitment to a shared vision, propelling the group towards a prosperous future.

Performance Overview

Financial Overview

Standalone and Consolidated

	Standalone		Consolidated
Particulars	For the Year Ended 31st March 2024	For the Year Ended 31st March 2023	For the Year Ended 31st March 2024	For the Year Ended 31st March 2023
Total Revenue	70,0026.71	65,432.41	1,05,976.30	1,10,979.40
Total Expense	56,063.45	53,635.16	93,094.37	96,953.17
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)	13,963.26	11,797.25	12,881.93	14,026.23
Profit before Tax
(PBT) and Exceptional Items	9,950.99	8,341.06	4,187.98	6,027.80
Exceptional Items	0	0.00	1,829.19	0.00
PBT	9,950.99	8,341.06	6,017.17	6,027.80
Total Tax Expense	2,110.00	2,246.24	1,981.86	1,399.21
Profit/Loss for the Year	7,840.99	6,094.82	4,035.31	4,628.59
EPS (Basic)	8.25	6.42	4.25	4.87
EPS (Diluted)	8.25	6.42	4.25	4.87

Performance Overview

During the financial year under review, the Company recorded a total revenue of 70,026.71 Lakhs on a standalone basis, compared to 65,432.41 Lakhs in 2022-23. The profit after tax (PAT) for the year amounted to 7,840.99 Lakhs, as opposed to

6,094.82 Lakhs recorded in the previous year.

Consolidated

On a consolidated basis, the total revenue amounted to 1,05,976.30 Lakhs, compared to 1,10,979.40 Lakhs in the previous year. The PAT for the year was 4,035.31 Lakhs, in contrast to the profit of 4,628.59 Lakhs earned in the previous year.

Disclosure of Accounting Treatment

During the preparation of its financial statements, the Company adhered to the accounting treatment as prescribed in the applicable Accounting Standards. Therefore, no additional disclosure or explanation from management is required in the financial statements.financial statements.

Key Financial Ratios on Standalone Basis

Ratio	FY 2023-24	FY 2022-23	% Change	Reasons for Change by 25% or More
Debtors/Trade Payables Turnover ration	4.75	5.63	2.71	NA
Creditors/Trade payables Ratio	4.94	4.93	0.27	NA
Inventory Turnover Ratio	2.86	3.38	-15.51	NA
Net Capital Turnover Ratio	2.07	2.08	-0.29	NA
Return on Investment	9	4	110.66	The variance in ratio is due to market fluctuations.
Debt Service Coverage Ratio/ Interest Coverage Ratio	36.96	43.50	19.63	NA
Current Ratio	3.12	2.89	7.89	NA
Debt Equity Ratio	0.07	0.05	31.12	The variance in ratio is mainly on account of increase in borrowings due to increase in business operations.
Operating Profit Margin	14.00	15.00	-6.67	NA
Net Profit Ratio	12.00	11.00	9.88	NA
Return on Net Worth	9.17	7.66	19.63	NA

Risks and Concerns

In the course of its operations, Precision Camshafts Limited is likely to encounter various risks that can affect both its traditional and modern operations. To address these risks effectively, PCLs Board prioritises risk management and develops strategies for risk mitigation.

As part of this approach, the Company has established a Risk Management Committee (RMC). The primary responsibility of the RMC is to identify and mitigate risks specific to the listed entity. These risks may encompass financial, operational, sectoral, sustainability (including ESG-related), information, cybersecurity, or any other risks deemed relevant by the Committee. By proactively addressing these risks through the efforts of the Risk Management Committee, PCL aims to ensure the continuity of its operations and safeguard the interests of its stakeholders.

Risk	Impact	Mitigation
Economic Turmoil	PCLs routine operations and plans for business expansion may be impeded by shifts in the social, geopolitical, legal, or economic framework, either domestic or international.	The Company diligently monitors the evolving business environment and takes proactive measures, including strategic adjustments, to safeguard its interests in order to mitigate the risk.
Technology Risk	The automotive industry is undergoing a significant transformation as a result of Industry 4.0 and the widespread digitisation of the entire value chain. Hence, these recent changes also bring potential risks and hazards.	PCL employs various strategies to mitigate the impact of market trends, with a focus on innovating and implementing new products and services throughout. In the process, the Company aims to improve efficiency, protect its market position, and stimulate growth.
Intense Competition	PCLs market share, its margin structure, and the returns on its invested capital may be impacted by the heightened competition in the automotive supplies sector.	The Company utilises its market leadership, technological expertise, established strategic alliances, and strong customer relationships to mitigate this risk. Additionally, its early engagement with customers for design and development solutions further keeps it ahead of its competitors.
Climate Change	PCL faces significant threats due to global environmental challenges, such as extreme weather events, climate action failure, the loss of biodiversity, and man-made environmental disasters.	PCL remains firmly committed to reducing its environmental footprint, continually striving to develop and implement innovative production techniques. Its vehicle-related products are specifically designed to encourage lower fuel consumption. As such, these products play a vital role in advancing the Companys overall environmental sustainability initiatives.
Procurement Risks	PCL may face procurement risks arising from volatile raw material prices and its suppliers incapacity to meet delivery deadlines while upholding product quality standards. Any unfavourable price fluctuations or supplier difficulties may affect the Companys financial standing and revenue.	PCLs procurement department prioritises quality, cost, and performance deliveries to ensure optimal supplies of goods and services. Moreover, the Company actively seeks out alternative sources and prioritises localisation efforts to decrease reliance on single suppliers or regions.
Labour Dispute Risks	PCLs capability to meet stakeholder demands can be potentially affected due to industrial action resulting from industrial disputes.	The Company fosters an open and constructive relationship with its employees, unions, subcontractors, and other stakeholders by maintaining consistent, transparent, and ongoing communication.

Human Resources Development

Precision Camshafts Limited has an extensive Human Resources (HR) policy encompassing various aspects, such as the code of conduct, working hours, probation requirements, internal transfers, promotion, and misconduct. PCL acknowledges the inclusive development of its stakeholders, and endeavours to foster growth for everyone through a conducive work environment. The Companys talent management and leadership development are integral to its dedication to being an attractive workplace. With the aim to facilitate personal and professional growth, PCL regularly organises training sessions and seminars to ensure employees can enhance their skills at all career stages. The Company aims to establish a workplace that attracts and retains talent, enhancing the productivity of all its employees. Moreover, PCL is committed to providing equal opportunities to its employees, regardless of their race, colour, religion, gender, marital status, age, ethnicity, or disability. As on 31st March 2024, the Company had a total of 904 employees.

Internal Control Systems and their Adequacy

To enable proper financial management and circumvent fraud, PCL maintains effective internal control systems at par with its size and operations. These systems comprise policies and procedures, which are designed to ensure the orderly and efficient conduct of business, safeguard business assets, prevent and detect fraud, ensure the accounting records are complete and accurate, and prepare financial information in a timely manner. Furthermore, the system is reviewed and updated continually based on the recommendations made by the Statutory Auditors, Internal

Auditors, and the Independent Audit Committee of the Board of Directors of the Company.

PCL works under the SAP environment and helps gain control of every stage, from procurement to manufacturing and sales. Additionally, the Company has in place adequate controlling systems to curb production wastage and inculcate processing efficiency.

Some features of internal control systems include: -

The Audit Committee of PCL comprises Independent Directors and Executive Director who regularly review a range of critical attribute of the Company. These include significant audit findings, the adequacy of internal controls, compliance with accounting standards, and the reasons for changes in accounting policies and practices, if any.

PCL consistently maintains comprehensive information security and undertakes continuous upgrades to the Companys IT systems. Its supplier and customer relations management departments are also regulated well through the connection of its different locations, dealers and vendors for efficient and convenient information exchange.

The Companys team of internal auditors operates in line with the best governance practices. It reviews and reports to the Management and the Audit Committee about compliance with internal controls. Additionally, it apprises them about the efficiency and effectiveness of the Companys operations as well as the key process risks.

PCL also maintains controls by keeping unpublished price sensitive information as confidential. All the directors of the Board, the Senior Management, the Auditors (Internal, Statutory and Secretarial) team, and the employees of the Company listed as insiders comply with code of conduct of insider trading and Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information.

Cautionary Statement

The information and opinion expressed in this report as well as the Boards Report describing the Companys objectives, projections, estimates, and expectations may be ‘forward-looking statements within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied. Important developments that could affect the Companys operations include a downtrend in the spend by the Government in agriculture and infrastructure, significant changes in political and economic environment in India, volatility in the prices of major raw materials and its availability, taxation laws, exchange rate fluctuations, interest, and other costs.