Pritika Auto Industries Ltd Management Discussions.


Forward looking statement

Statements in this Management Discussion and Analysis of Financial Condition and Results of Operations of the Company describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable securities laws and regulations. Forward looking statements are based on certain assumptions and expectations of future events.

The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Company assumes no responsibility to publicly amend, modify or revise forward looking statements, on the basis of any subsequent developments, information or events. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Companys operations include changes in government regulations, tax laws, economic developments within the country and such other factors globally.

The financial statements are prepared as per the IND AS guidelines and comply with the Accounting Standards notified under Section 211(3C) of the Act read with the Companies (Accounting Standards) Rules, 2015. The management of Pritika Auto Industries Limited has used estimates and judgments relating to the financial statements on a prudent and reasonable basis, in order that the financial statements, reflect in a true and fair manner, the state of affairs and profit for the year.

The following discussions on our financial condition and result of operations should be read together with our audited consolidated financial statements and the notes to these statements included in the annual report. Unless otherwise specified or the context otherwise requires, all references herein to “we”, “us”, “our”, “the Company”, “Pritika” are to Pritika Auto Industries Ltd.

ECONOMIC OVERVIEW Indian Auto-Components Industry

The Indian auto-components industry has grown steadily over the last few years. Some of the factors driving investments in this sector include increased purchasing power, large domestic market, a stable government framework and rising development in infrastructure. The auto-components industry in India expanded by 18.3%to reach USD 51.2 billion in FY 2017-18.

The Indian auto-components industry can be broadly classified into the organized and unorganized sectors. The organized sector caters to the Original Equipment Manufacturers (OEMs) and comprises high-value precision instruments while the unorganized sector consists of low-valued products and caters mostly to the aftermarket category.

As per IBEF, the Indian auto-components industry is expected to have grown by 8-10% in FY 2018-19, based on higher localization by OEMs, higher component content per vehicle, and rising exports from India.

As per the Automotive Component Manufacturers Association of India (ACMA), the Indian autocomponents industry is forecast to register a turnover of USD 100 billion by 2020 backed by strong exports ranging between USD 80- USD 100 billion by 2026. (vis-a-vis USD 10.8 billion in 2015-16).

India exports auto components to several parts of the world, the major markets being developed countries such as the US, Germany and the UK. Some of the important Asian markets for auto components include Sri Lanka, Bangladesh and Thailand.

Source:/IBEF Indian Agriculture Industry - an overview

Agriculture plays a vital role in Indias economy. Over 58% of the rural households depend on agriculture as their principal means of livelihood. Agriculture, along with fisheries and forestry, are key contributors to the countrys Gross Domestic Product (GDP), The Gross Value Added (GVA) by agriculture, forestry and fishing is estimated at INR17.67 trillion (USD 274.23 billion) in FY2018.

During 2017-18 crop year, food grain production is estimated to have been 284.83 million tons. In 2018-19, Government of India is targeting foodgrain production of 285.2 million tons.

This growth is being driven by strong domestic demand (owing to rising population) as well as global exports. Total agricultural exports from India grew at a CAGR of 16.45% over FY2010-18 to reach USD 38.21 billion in FY2018. Spices, tea and coffee exports from India have also been on the rise during this period.

Consequently, investments into this sector have grown significantly. For instance, agri-food start-ups in India received funding worth USD 1.66 billion between 2013-17 in 558 deals.

The agriculture sector has received substantial support from the Government of India, some of the recent initiatives include:

• The Agriculture Export Policy, 2018 was approved by Government of India in December 2018. The new policy aims to increase Indias agricultural exports to USD 60 billion by 2022 and USD 100 billion in the next few years with a stable trade policy regime.

• In September 2018, the Government of India announced Rs 15,053 crore (USD 2.25 billion) procurement policy named Pradhan Mantri Annadata Aay SanraksHan Abhiyan (PM-AASHA), under which states can decide the compensation scheme and can also partner with private agencies to ensure fair prices for farmers in the country.

• In September 2018, the Cabinet Committee on Economic Affairs (CCEA) approved a Rs 5,500 crore (USD 820.41 million) assistance package for the sugar industry in India.

• With an aim to boost innovation and entrepreneurship in agriculture, the Government of India is introducing a new AGRI-UDAAN program to mentor start-ups and to enable them to connect with potential investors.

• The Government of India has launched the Pradhan Mantri Krishi Sinchai Yojana (PMKSY) with an investment of Rs 50,000 crore (USD 7.7 billion) aimed at development of irrigation sources for providing a permanent solution from drought.

• The Government of India plans to triple the capacity of food processing sector in India from the current 10 per cent of agriculture produce and has also committed Rs 6,000 crore (USD 936.38 billion) as investments for mega food parks in the country, as a part of the Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters (SAMPADA).

Source: UBEFhttps://www,

Indian Tractor Industry

The tractor industry, a part of the farm equipment market, has been growing significantly in India. Demand for tractors has risen in tandem with increasing mechanization in farming across India. As per industry estimates, the tractor market in India registers annual sales of 600,000 - 700,000 units.

As per the Tractor Manufacturers Association, domestic sales volumes of tractors experienced a growth of 18.2% from April 2016-March 2017.Furthermore, according to India Ratings & Research, domestic sales grew by 17% to 6.59 lakh units between April 2017 and January 2018.

The domestic tractor market recorded a volume growth of approximately 12-13% during FY2018 with positive growth momentum also spilling over in the next fiscal. Most major manufacturers, including Mahindra & Mahindra, Sonalika ITL and Escorts, reported a rise in production volumes in FY2018, with strong outlook for Fy2019.

Overall, the industry is forecast to grow at a CAGR of 8-10% during 2017-22. A sustained focus by the government on the promotion of farmer welfare and rural development along with mechanization in agriculture, laid out in the Union Budget, would support this growth trajectory.

Moreover, the budgets emphasis on doubling farmers income by 2022, loan waivers and finance availability, as well as rising use of tractors in construction and other fields, would augur well for the production and sale of tractors going forward.

Source:IBEF, Government Initiatives

The Government of Indias Automotive Mission Plan (AMP) 2006-2016 has come a long way in ensuring growth for the sector. The Indian Automobile industry is expected to achieve a turnover of USD300 billion by 2026, and would grow at a CAGR of 15% from its current revenue of USD74 billion.

The Government has drafted the Automotive Mission Plan (AMP) 2016-26 which will help the automobile industry to grow and will benefit Indian economy in the following ways:

• Contribution of auto industry in the countrys GDP will rise to 13%, vis-a-vis the current 10%

• More than 100 million jobs will be created

• Companies would invest around USD80 billion as a part of their capital expenditure

• End of Life Policy would be implemented for old vehicles

Crisil, IBEFhttps://\vw\ About Pritika Auto Industries Ltd.

Pritika Auto Industries Ltd. is a flagship company of the Pritika Group of Industries which was set up in 1974 by Mr. Raminder S. Nibber, manufacturing small forgings. Over the last four decades and under Mr. Nibbers visionary leadership, the Company has established itself as a robust and reliable brand in its market, specializing in machined castings and automotive components. A quality driven organization, Pritika produces world class components from modern facilities. The merger process of Pritika Autocast Ltd. and Nibber Castings Pvt. Ltd (Wholly owned subsidiaries of Pritika Auto Industries Ltd.) was approved by the Honorable NCLT Bench, Chandigarh in February 2019. Pritika has manufacturing facilities situated at Derabassi and Hoshiarpur (Punjab), and Tahliwal (Himachal Pradesh) with a total capacity exceeding 50,000 metric tons per annum (MTPA) in FY19.

Catering primarily to tractors and commercial vehicles, Pritika focuses on expanding and diversifying its product portfolio. The Company manufactures a wide range of products such as axle housings, wheel housings, hydraulic lift housings, end cover, plate differential carrier, brake housings, cylinder blocks, and crank cases, among others. Pritika is one of the biggest component suppliers in the tractor segment of the automobile industry in India and supplies to OEMs like M&M Swaraj. Swaraj Engines Ltd, TAFE, Escorts, SML Isuzu, TMTL, Ashok Leyland, New Holland Tractors India Ltd., Brakes India etc. The Companys vision is to provide products which meet customers quality requirement constantly at competitive prices.


The consolidated performance of the Company for the financial year ended March 31,2019, is as follows: Total revenue from operations at Rs. 209.7crore for the year ended March 31, 2019, as against Rs. 170.0 crore (net of excise) for the corresponding previous period, an increase of 23.3%, mainly on account of addition and better utilization of new capacities.

The EBIDTA (earnings before interest, depreciation and tax, excluding other income) was Rs. 30.2crore for the year ended March 31,2019, as against Rs. 24.7 crore for the corresponding previous period, an increase of 21.9%.

The PAT (profit after tax) was Rs. 14.1 crore for the year ended March 31,2019, as against Rs. 11.1 crore for the corresponding previous period, an increase of 27.6% on account of higher efficiencies.

EPS was at Rs.8.03, YoY growth of 6.2% (7.56 in FY18).

The Board of Directors have recommended, subject to the shareholders approval, a final dividend @ 5% i.e. Rs. 0.50 per equity share of Rs. 10 each for the financial year ended March 31,2019.


As on March 31,2019, the consolidated networth stood at Rs. 115.41 crore and the consolidated debt was at Rs. 55.8 crore. The net debt to equity ratio of the Company stood at 0.48as on March 31,2019.


Pritika registered a growth of 23.3% in revenue clocking a turnover of Rs. 209.7 cr in FY 19. The Company produced 33,110 tons of machined casting during the year. About 92-93% of the revenue was contributed by the tractor components segment while the rest was from the commercial vehicle segment. With incremental capacity, Pritika is focusing on higher production and better utilization for financial year 2019-20. The Company is also adding high-value products and trying to improve operational efficiencies.

The Company is dealing in single segment i.e. manufacturing of Auto Components/parts.


• Pritika won an initial order from TAFE and Eicher to supply 1,200 tons per annum of components for low horse-power tractors.

• In February 2019, the National Company Law Tribunal (NCLT) approved the Companys application for amalgamation of Pritika Autocast Ltd. and Nibber Castings Pvt. Ltd. with the company.

• Pritika acquired Amrit Duraparts plant and assets, adding 12,000 tons per annum of capacity, and bringing its total installed capacity to 50,000 tons per annum. In October 2018, the Company recorded its highest ever monthly production volume, at 3,299 tons.

• In 2018, the Company expanded its capacity at one of its facilities by 3,200 tons per annum.


There was no significant change i.e. 25% or more in Debtor Turnover Ratio, Inventory Turnover Ratio, Interest Coverage Ratio, Current Ratio, Operating Profit margin and Net Profit Margin, as compared to immediately previous year ended 31 th March 2018.

Return on Networth has increased from 11.72% in FY 2018 to 12.17% in FY 2019 due to higher rate of growth in Profit after tax.


Like every business, the company faces risks, both internal and external, in the undertaking of its day-to-day operations and in pursuit of its longer-term objectives. A detailed policy drawn up and dedicated risk workshops are conducted for each business vertical and key support functions wherein risks are identified, assessed, analyzed and accepted / mitigated to an acceptable level within the risk appetite of the organization. The risk registers are also reviewed from time to time.

The Company faces the following Risks and Concerns:

Economy and Market Risk

The Companys growth is linked to that of the agricultural and automotive industry, which is cyclical in nature. The cyclical nature of the Indian commercial vehicle industry and tractor industry impacts the demand for related components. Since the automotive industry plays a major role in determining the economic growth, any slowdown in the overall economy would affect the commercial vehicle industry.

Credit Risk

To manage its credit exposure, Pritika has determined a credit policy with credit limit requests and approval procedures. Company does its own research of clients financial health and project prospects before bidding for a project. Timely and rigorous process is followed up with clients for payments as per schedule. The company has suitably streamlined the process to develop a focused and aggressive receivables management system to ensure timely collections.

Interest Rate Risk

The Company has judiciously managed the debt-equity ratio. It has been using a mix of loans and internal cash accruals. The Company has well managed the working capital to reduce the overall interest cost.

Contractual Risk

Pritika follows a meticulous process to evaluate the legal risks involved in a contract and ascertain its legal responsibilities under the applicable law of the contract. All the worst possible scenarios are considered and as a strategic priority with consultation from advisors, stringent terms are inserted to restrict liabilities to the maximum extent possible.

Competition Risk

Like in most other industries, growth opportunities lead to a rise in competition. We face different levels of competition, from domestic as well as multinational companies. Pritika has created strong differentiators in project execution, quality and delivery which make it resilient to competition. Furthermore, the Company continues to invest in technology and its people to maintain a competitive edge. A stable and long-standing client base comprising large and mid-sized companies further helps maintain a strong order book and insulate the Company from this risk. We also mitigate this risk with the quality of our infrastructure, our customer-centric approach and our ability to innovate customer specific solutions, focusing on pricing and aggressive marketing strategy, disciplined project executions, coupled with prudent financial and human resources management and better control over costs. Thus, we do not expect to be significantly affected by this risk.

Input Cost Risk

Our profitability and cost effectiveness may be affected due to change in the prices of raw materials, power and other input costs. Some of these risks that are potentially significant in nature and need careful monitoring are raw material prices, and availability of power, among others.

Liability Risk

This risk refers to our liability arising from any damage to cargo, equipment, life and third parties which may adversely affect our business. The Company attempts to mitigate this risk through contractual obligations and insurance policies.


Increasing mechanization in agriculture: With the agriculture sector witnessing significant technology enhancements, the demand for higher efficiency tractors and farm equipment is likely to increase in India as well as globally. Adoption of such equipment over traditional farming methodologies in rural parts of the country would benefit ancillary companies catering to this sector, such as Pritika.

• Support from Government Policies:

- Establishment of special auto parks & virtual SEZs for auto components.

- Lower excise duty on specific parts of hybrid vehicles.

- Policies such as Automotive Mission Plan 2016-26, Faster Adoption & Manufacturing of Electric Hybrid Vehicles (FAME, April 2015), NMEM 2020, likely to infuse growth in the auto component sector of the country.

• Investments:

- Investments in the auto components sector touched USD 372.44 million in 2016-17.

- With the launch of Make in India initiative, the government is expected to mobilize substantial investments in the auto component sector.

- The auto components sector is expected to witness investments up to USD 4.5 billion for upgradation of products and keeping up with new industry regulations.

• Export Advantage: India is a leading auto exporter and has strong near-term export growth expectations. As per Automobile Component Manufacturers Association (ACMA) forecasts, automobile component exports from India are expected to reach USD 70billion by 2026 from USD 10.9 billion in FY17. The Indian auto component industry aims to achieve USD 200 billion in revenues by 2026.

Source: IBEF,

Union Budget 2019: increased duties of customs on imports of Auto Parts, which is expected to boost domestic manufacturing.

- Reduction of tax to 25% for companies with turnover up to Rs 400 crore (USD 58.02 million) was also announced in the Union Budget.


• Competition from domestic and multinational players

• Regulatory changes impacting the automotive and agricultural sectors

• Unfavourable volatility in labour and raw material costs

• Attraction and retention of skilled human capital

• Risk from unforeseen impediments in execution


For the purposes of effective internal financial control, Pritika has adopted various policies and procedures to ensure orderly and efficient conduct of its business, including adherence to companys policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and timely preparation of reliable financial information.

There has not been any significant change in such control systems. The control systems are reviewed by the management regularly. The same arc also reviewed by the Statutory Auditors and Internal Auditors from time to time. Additionally, the Company has adopted various policies and procedures to safeguard its interest. These policies and procedures are reviewed from time to time. A proper reporting mechanism has been implemented in the organization for reporting any deviation from the policies and procedures. Compliance audit is conducted from time to time by external agencies on various areas of operations.


Pritika has Human Relations and Industrial Relations policies in force. These are reviewed and updated regularly in line with the Companys strategic plans. The human relations team continually conducts training programs for talent development.

The Company aims to develop the potential of every individual associated with it as a part of its business goal. Pritika leverages a mix of experienced as well as young talent to drive growth.

The company values its human resources as the principal drivers of change. The Company focuses on providing individual development and growth in a work culture that encourages team work and high performance.

As on March 31,2019, the Company had a workforce of 815 (permanent and contractual).


The tractors (and corresponding ancillary sub-sectors) industry is expected to expand in the next year, supported by a normal/good monsoon, increased focus on infrastructure spending, and continuing favorable monetary policy changes. The long term outlook remains positive for the automotive industry with all major global players having a base in India for engineering, manufacturing and global sourcing. Regular product launches by OEMs, driven by technological advancements and rising demand, is likely to bode well for overall industry growth. India now supplies a range of high-value and critical automotive components to the global auto market.

Pritikas periodical capacity expansion initiatives reflect in the Companys robust and growing order book. The Company is well positioned to cater to the strong demand expected over the short and medium-term by various tractor manufacturers.

Pritikas long-standing relationships with its clients demonstrates the continued faith the OEMs have in the Companys expertise and capability.

The Company continues to improve capacity utilization while looking to expand total installed capacity, driven by a strong order pipeline. Margins are also expected to improve with addition of new capacity, export opportunities, high-margin product mix, value added services and better operating efficiencies.

This years achievements are in line with our Vision 2020 targets. The growth potential for the Indian auto component industry is tremendous and the Company is well positioned to leverage these opportunities.

Road Ahead

The transport industry is making a gradual shift towards electric and hybrid cars, which are deemed more efficient and environment-friendly modes of transportation. Over the next decade, this is likely to give rise to newer verticals and opportunities for auto-component manufacturers, who would need to adapt to this change with R&D and product innovation.

The Indian auto-components industry is expected to become the third largest in the world by 2025.Consequently, strong export potential in the coming years would open up more avenues for Indian auto-component makers.

For and on behalf of the Board of Directors

Date: 05/08/2019 Sd/- Sd/-
Place: Mohali Harpreet Singh Nibber Ajay Kumar
Managing Director Whole Time Director