Global economy
The macroeconomic challenges, such as continued geopolitical conflicts,
soaring inflation, the energy crisis, the resurgence of COVID in China, supply chain
disruptions and currency fluctuations, have had a substantial impact on the global
economy. Global growth is likely to decline to 3.0% in 2023 compared to 3.5% in 2022.
Global inflation is expected to fall from 8.7% in 2022 to 6.8% in 2023 and 5.2% in 2024.1
According to the IMF, India and China are predicted to contribute 50%
of the global growth in 23, while the rest of the Asian region will contribute 25%.
Pent-up demand following the pandemic has led to an increase in investment by businesses.
A recovery in formerly limited sectors, including the automotive industry, was made
possible by the removal of supply-side constraints and lowering transportation costs.
Favourable monetary policies, the conclusion of Russias invasion of Ukraine and the
elimination of supply chain restrictions brought on by the pandemic are all prerequisites
for the recovery of the global economy.
Indian economy
During the year the Indian economy has expanded significantly. With the
nation celebrating its 75th year of independence, it surpassed the United
Kingdom to become the fifth-largest economy in the world in terms of the US dollar.
According to the NSO the Indian economy is predicted to grow by 7.2% during the 2023.3
The rapid tightening of monetary policies in advanced economies has caused the
depreciation of the Indian rupee compared to the US dollar. The World Bank predicts that
India will rank among the top seven emerging market and developing economies (EMDEs) in
2023.3 Indias economy has outperformed other developing market economies as
far as facing external headwinds is concerned, on the back of its robust economic
fundamentals. However, it is projected that monetary and fiscal tightening will be less
pronounced in India than in the rest of the South Asian region over the forecast horizon.
Since the onset of the pandemic, labour difficulties have also been somewhat addressed.
Government initiatives, such as the Mahatma Gandhi National Rural Employment Guarantee Act
(MGNREGA) have strengthened the potential of rural areas to provide employment.
Business overview
Amid the grim global outlook, Indias automobile sector continues
to grow. The domestic automotive sector generates more than USD 222 billion, accounting
for 4.7% of total exports and 7.1% of GDP, contributing 35% of the nations
manufacturing GDP. The country is well on its way to having the third largest automotive
industry in the world, by 2030. 4
In 2022-23, the Companys standalone net profit witnessed a remarkable
surge of 118%, while its consolidated net profit displayed a notable growth of 56% when
compared to 2021-22. This positive performance was accompanied by a substantial increase
of 18% in standalone revenue and 9% in consolidated revenue on a year-on-year basis for
2022-23.
The Company exports to over 19 countries by focusing on expanding
customer outreach across the world, while also building enduring relationships with global
OEMs and collaborating with them.
Indias auto industry outlook
The automobile industry is expected to play a pivotal role in
accelerating the transition to green energy. The domestic electric vehicle (EV) market is
projected to expand between 2022 and 2030 at a compound annual growth rate (CAGR) of 49%,
achieving annual sales of 1 crore units. By 2036, the EV industry will create 5 crore
direct and indirect jobs. About 80% of the size of Indias retail vehicle finance
industry, which is currently worth USD 60 billion, has been estimated as the market size
for financing EVs in 2030, which is estimated to be USD 50 billion5 .
The Government has implemented several measures to promote and support
the development of the automobile industry. The major growth drivers are rising disposable
incomes, a wide range of credit and financing alternatives and population growth. Due to
the expansion of the public transportation sector and the rising demand for commercial
vehicles, Indias automotive industry has a significant potential for future growth.6
Also, the automobile sector received FDI inflows of USD 33.53 billion. 7
India exports a large number of automobiles and in the foreseeable
future, exports are expected to rise rapidly. The Governments emphasis on
infrastructure projects, an upsurge in construction activity and real estate as well as
robust demand from the auto industry will contribute to future growth. Nonetheless, the
global downturn may imply that export demand remains subdued. The automotive industry thus
faces significant challenges despite the upbeat outlook. A slowdown in global demand and
rising borrowing costs are challenges in the near term.
USD 33.53 billion
FDI inflows received by the automobile sector in 2023.
Performance of the auto industry during 2022-2023
Production
During the period spanning from April 2022 to March 2023, the
automotive industry in India witnessed a cumulative production of 2,59,31,867 vehicles,
comprising various categories such as passenger vehicles, commercial vehicles,
three-wheelers, two-wheelers, and quadricycles. This figure marks a notable increase when
contrasted with the production of 2,30,40,066 units during the corresponding timeframe of
April 2021 to March 2022.
Domestic sales
In 2022-2023, there was a noteworthy growth in total passenger car
sales, which rose from 30,69,523 to 38,90,114 units. This upward trend was also observed
in the sales of individual segments, with passenger cars, utility vehicles, and vans
witnessing an increase from 14,67,039 to 17,47,376 units, 14,89,219 to 20,03,718 units,
and 1,13,265 to 1,39,020 units, respectively, as compared to the previous fiscal year
2021-2022.
In parallel, the overall sales of commercial vehicles displayed a
significant rise, surging from 7,16,566 to 9,62,468 units. This growth was particularly
evident in the sales of Medium and Heavy Commercial Vehicles, which increased from
2,40,577 to 3,59,003 units, and Light Commercial Vehicles, which increased from 4,75,989
to 6,03,465 units, during 2022-2023 compared to 2021-2022.
Furthermore, three-wheeler sales experienced substantial growth,
escalating from 2,61,385 to 4,88,768 units in 2022-2023, in comparison to the preceding
year. Additionally, two-wheeler sales also witnessed a noteworthy surge, rising from
1,35,70,008 to 1,58,62,087 units in 2022-2023, as compared to 2021-2022.
Domestic sales (in units)
Category |
2017-18 |
2018-19 |
2019-20 |
2020-21 |
2021-22 |
2022-23 |
| Passenger Vehicles |
32,88,581 |
33,77,389 |
27,73,519 |
27,11,457 |
30,69,523 |
38,90,114 |
| Commercial Vehicles |
8,56,916 |
10,07,311 |
7,17,593 |
5,68,559 |
7,16,566 |
9,62,468 |
| Three Wheelers |
6,35,698 |
7,01,005 |
6,37,065 |
2,19,446 |
2,61,385 |
4,88,768 |
| Two Wheelers |
2,02,00,117 |
2,11,79,847 |
1,74,16,432 |
1,51,20,783 |
1,35,70,008 |
1,58,62,087 |
| Quadric cycles |
0 |
627 |
942 |
-12 |
124 |
725 |
Grand Total |
2,49,81,312 |
2,62,66,179 |
2,15,45,551 |
1,86,20,233 |
1,76,17,606 |
2,12,04,162 |
Exports
During April 2022 and March 2023, there was a notable escalation in the
export of passenger vehicles, surging from 5,77,875 units to 6,62,891 units. Conversely,
the export figures for commercial vehicles witnessed a decline, decreasing from 92,297
units to 78,645 units. Similarly, exports of three-wheelers experienced a downturn,
decreasing from 4,99,730 units to 3,65,549 units. Additionally, two-wheeler exports also
registered a decrease, declining from 44,43,131 units to 36,52,122 units during the fiscal
year 2022-23. 8
A. Industry structure and developments
The automobile industry has a major effect on both macroeconomic growth
and technological innovation. In Indias automobile market, two-wheelers and passenger
automobiles accounted for 76% and 17.4% of the market share, respectively. India accounts
for 40% of the total USD 31 billion in global engineering and R&D spending. The
automotive industry accounts for 8% of the countrys R&D expenditure.9 India
is the worlds largest tractor manufacturer, second-largest bus maker and third-largest
heavy truck producer. The sectors growth is driven by the growing interest of firms in
investigating rural markets. The demand for commercial cars is increasing as the logistics
and passenger transportation sectors expand. Future market expansion is anticipated to be
bolstered by innovations, such as the electrification of vehicles, notably three-wheelers
and small passenger cars.
B. Opportunities and threats
Opportunities
Technological advancement
The auto industry in India leverages technology to enhance productivity
and profitability across all processes and platforms, from production and sales to
distribution. For the auto industry, digital integrations increase operational efficiency.
To derive value from data, the industry must accelerate the digital transformation process
while maintaining a sharp focus on integrated systems solutions, data management and
analytics. The market is evolving as a result of the development of digital distribution
channels and the entrance of well-known global corporations.
Strengthened R&D capabilities
The automotive industry seeks to enhance its R&D capabilities to
increase the number of innovative and competitive automotive-specific products. As most
auto manufacturers invest in R&D centres in India, the country is evolving into a
global R&D hub for the automotive and auto component sectors.
Implementation of government initiatives
The Production Linked Incentive (PLI) Scheme for Automobile and Auto
Components aims to encourage domestic production of Advanced Automotive Technology
products and draw investments into the automotive manufacturing value chain. From 2019 to
2024, there is a budget allocation of INR 10,000 crore. It is intended for the
manufacturing of 55,000 cars, 7090 buses, 0.5 million three-wheelers, 1 million
two-wheelers and 7.1 lakh electric vehicles (EVs). 7210 electric buses have been approved
for deployment during December 2022, as have 2,877 charging stations in 68 cities and
1,576 charging stations on highways and motorways.
Enhanced focus on OEM
The OEM components are sold to an automobile manufacturer. These OEM
parts add value to the original product when they are incorporated into a vehicle. OEM
manufacturers have a strong desire to make a mark in the OEM industry, owing to the tough
competition in this sector.
Increasing investment in the EV market
EVs are offering a lot of prospects and assisting the nation in quickly
setting new sales records. The introduction of new models will modify the segments
appearance. The advancements in battery technology and the availability of leasing options
will greatly increase the segments potential for innovation. The shift to EVs is mostly
brought about by evolving physical infrastructure and supply chains, which encourage EV
adoption in India.
Threats
Disruptions in the supply chain
Higher demand and insufficient supply in the markets resulted in a
nightmare for suppliers and original equipment manufacturers (OEMs). Some of the other
headwinds such as microchip shortages, logistics bottlenecks and energy price hikes also
contributed to supply chain constraints. As supply chains are disrupted, material and
component prices continue to rise.
Highly competitive market
The automobile industry is pitching in more investment, which is
leading to intense competition in the market. The dominance of the local players creates
fierce competition, including the entry of foreign firms into the domestic market.
Economic slowdown
The global auto sector has been adversely impacted by the slowdown in
the world economy. Financial instability, job losses and liquidity crisis will have a
detrimental effect on consumer preferences, causing a shift in demand toward less
expensive and smaller automobiles as well as a greater emphasis on energy efficiency.
Fuel price volatility
From the consumers perspective, the cost of fuel is always a
major consideration. It plays a significant role in the market, especially in developing
nations where vehicles are mostly used for daily transportation. Moreover, various
government regulations involving alternative fuels may have an impact on inventories.
Rising fixed costs and R&D spending
Due to an exceedingly competitive market, firms are attempting to
increase their R&D spending. By building facilities, they are striving to gain a
foothold in the market. However, it will be difficult to earn profits from this
investment. The Return on Investment must be capitalised but given the unpredictability of
the world and the future, it could pose a threat.
C. Segment-wise or product-wise performance
The Company is engaged in manufacturing and trading of automotive
cables and components. The Company has identified a single business segment and that being
manufacturing and selling of automotive and other components. The internal reporting and
performance of the Group is assessed by the top management as single segment.
D. Outlook
The Indian market is again expected to be an exception to the gloomy
global outlook with over 6% growth in GDP. The 33% growth in Governmental budget
allocation to infrastructure augurs well for commercial vehicle demand. The highly
disciplined budget promises a deficit of only 2-2.5% and thus frees up the RBI to deal
with monetary policy without having the headache of mopping up fiscal indiscipline that
other central banker have had to.
While Governmental schemes of production linked incentives and
subsidies to select areas of the economy remain a concern in terms of ensuring a level
playing field, the overall automotive outlook is positive with sales growth of 10%
industry wide expected.
E. Risk and concerns
Soaring prices of essential raw materials and fuels pose a serious
concern. It is not possible to alter the input raw materials in the Companys goods
without a great deal of effort and testing. Due to Remsons in-house material knowledge
department, the Company has a greater ability to recommend alternative materials and
illustrate trade-offs under real-world driving circumstances and duty cycles.
Exports have declined as a result of supply chain disruptions caused by
geopolitical conflicts. The energy crisis and rising fuel prices have been major sources
of concern. However, Remsons Industries Ltd. is expanding its global presence while
entering new geographies, increasing exports and mitigating the associated risks.
Quality and quality management systems
The Company concentrates on strategies to sustain quality management
systems through comprehensive employee involvement at all levels, raising customer
satisfaction in domestic and international markets. With the esteemed suppliers of the
Company, there will be a long-term collaboration and steps will be taken to reduce waste
through systematic control. Implementation of Cloud based Quality Management Systems shall
commence in the coming year. In the past year, the Company has been able to maintain
extremely good quality ratings at all its customers thereby receiving multiple awards from
customers and increasing wallet share.
F. Internal controls systems and their adequacy
The Company remains committed to upholding a comprehensive system of
internal control, which includes implementing sufficient monitoring procedures. The
internal auditors diligently oversee operational control at multiple Company locations on
a consistent basis. In the event of any irregularities or significant matters, they
promptly report such issues to the audit committee of the board and the Managing Director
of the Company. Subsequently, appropriate measures are taken to ensure compliance with the
established system.
G. Discussion on financial performance with respect to operational
performance
Financial highlights with respect to operational performance.
(H in Lakh except EPS)
Particulars |
Standalone |
Consolidated |
|
2022-23 |
2021-22 |
2022-23 |
2021-22 |
| Total revenue |
26,566.04 |
22,444.60 |
31,439.54 |
28,719.09 |
| EBITDA |
2,196.46 |
1,518.98 |
2,753.69 |
2096.71 |
| Profit before tax |
1,057.59 |
520.29 |
1,205.58 |
734.30 |
| Profit after tax |
775.56 |
354.83 |
837.01 |
536.25 |
| EPS |
13.57 |
6.21 |
14.65 |
9.39 |
H. Material developments in human resources/ industrial relations
fronts, including number of people employed
All of the Companys plants maintain ethical employment practices. The
Company is undertaking a number of HR initiatives to address the ongoing challenge of
talent retention. As on 31st March, 2023 there were 246 employees, including
the managerial staff, and so on. The Company has invested funds to ensure employees
health, safety and well-being both at work and at home as well as in the transitional
period between the two. The Company ensures equal opportunities and employee diversity.
Programmes for skill improvement and leadership development are also offered by the
Company.
246
Total employees strength
2 years in row
GPTW certified
I. Details of significant changes in key financial ratios, along with
detailed explanations, therefore:
In accordance with the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015, the Company is required to give details of significant
changes (change of 25% or more as compared to the immediately previous financial year) in
key sector specific financial ratios.
The Company has identified following ratios as key financial
ratios.
Particulars |
Standalone |
|
Consolidated |
|
|
2022-2023 |
2021-2022 |
% Change |
2022-2023 |
2021-2022 |
% Change |
| Debtors Turnover |
6.10 |
6.06 |
0.63 |
5.84 |
6.03 |
(3.07) |
| Inventory Turnover |
4.94 |
4.30 |
14.79 |
4.18 |
3.87 |
7.84 |
| Interest Coverage Ratio |
4.37 |
3.03 |
44.47 |
4.39 |
3.17 |
38.75 |
| Current Ratio |
1.01 |
1.00 |
1.40 |
1.15 |
1.10 |
4.73 |
| Debt Equity Ratio |
1.43 |
1.90 |
(17.02) |
1.95 |
2.35 |
(17.02) |
| Operating Profit Margin % |
8.27 |
6.77 |
22.21 |
8.76% |
7.30% |
19.96 |
| Net Profit Margin % |
2.92 |
1.58 |
84.90 |
2.66% |
1.87% |
42.53 |
The percentage of Interest Coverage Ratio and Net Profit Margin has
improved due to positive financial performance of the Company during the financial year
2022-23.
J. Details of any change in return on net worth as compared to the
immediately previous financial year along with a detailed explanation thereof:
Return on Net Worth in the financial year 2022-23 is 18.60% as compared
to 10.25% in the financial year 2021-22. During the financial year under review, return on
Net Worth increased by 81.46% as compared to immediately previous financial year due to
increase in profits.
K. Cautionary statement
Some statements in the ‘Management Discussion and Analysis
Report may be forward-looking and are required by applicable laws and regulations.
Several factors may influence the actual outcomes, which may differ from what the
Directors anticipate in terms of future performance and outlook.
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