samvardhana motherson international ltd share price Management discussions


1. Motherson 2.0 – "The best is yet to come"

The Board of Directors, in its meeting on July 02, 2020, had approved a group reorganisation plan with the objective of simplifying the corporate structure, thereby creating value for the shareholders of the Company ("MSSL"). The reorganisation plan among other things, entailed demerger of Domestic Wiring Harness ("DWH") business from MSSL into a new company Motherson Sumi Wiring India Limited ("MSWIL") with mirror shareholding and subsequent merger of Samvardhana Motherson International Limited ("SAMIL") into MSSL to consolidate 100% shareholding in Samvardhana Motherson Automotive Systems Group BV ("SMRP BV") as well as to bring all auto component and allied businesses in SAMIL under MSSL.

During the course of the ‘inancial year ended 31st March 2022 Samvardhana Motherson International Limited ("SAMIL", formerly Motherson Sumi Systems "MSSL") obtained all requisite approvals including from; f the minority shareholders in April 2021 (99.4% in favour)

f Honble National Company Law Tribunal, Mumbai Bench ("Honble NCLT") in December 2021 and all other requisite approvals

f Post the receipt of the necessary approvals, the record date for the demerger of DWH was set for 17th Jan 2022 and the record date for merger of SAMIL was set for 24th Jan 2022.

f The reorganisation has been completed now in all respects and there are two separate listed legal entities viz SAMIL (formerly MSSL) and MSWIL. Name of MSSL has been changed to SAMIL w.e.f 18th May 2022 as a consequence of the reorganisation. The number of shares of the company has increased from approx. 3,158 million shares to approx. 4,518 million shares.

f MSWIL got listed on BSE and National Stock Exchange India Limited ("NSE") from March 28, 2022. A pictorial representation of the business segments under various entities pre and post the completion of reorganisation is shown below:

Benefits of Reorganisation.

f Enable pursuance of independent strategic priorities for the listed entities, while at the same time these entities continue to enjoy the benefit of the parentage of the Motherson Group as well as its strategic partner Sumitomo Wiring Systems ("SWS")

f Simplifies the group structure and aligns the interest of all stakeholders as it brings all auto-component & allied businesses (of erstwhile SAMIL Businesses) under one Motherson umbrella thereby creating a strong platform for future growth.

f The reorganisation diversifies SAMIL revenue mix, product mix by addition of products like automotive lighting, shock absorbers, sheet metal, HVAC etc.

f The reorganisation also o‘ers greater operational and financial flexibility to pursue organic/inorganic opportunities. With the group reorganisation completed in FY22, the Company has embarked on a strong growth path called Motherson 2.0. All the group companies now under a simplified structure, with this unification we are very well positioned both financially and capability wise to undertake future growth prospects. This simplification not only unlocks value for shareholders but also unlocks larger set of synergies within the organisation enabling us to achieve our Vision 2025 targets.

2. Company Overview

1.1 SAMIL (formerly Motherson Sumi Systems Limited – "MSSL")

Samvardhana Motherson International Limited (formerly Motherson Sumi Systems Limited, hereinafter called, SAMIL or the Company) is a globally diversified manufacturer and a full system solutions provider to customers in automotive and other industries. The Company is one of the worlds largest and fastest-growing suppliers for Original Equipment Manufacturers (OEMs) in the automotive industry. The Company is listed on BSE (formerly Bombay Stock Exchange Limited) and the National Stock Exchange of India Limited (NSE). As on March 31, 2022, the Company had 903,613 shareholders (March 31, 2021: 462,862 shareholders). SAMIL supports its customers from over 300 facilities* across 41 countries. It today features amongst one of the largest auto ancillaries in India and globally with market leadership in many of its product segments. It has 27 joint ventures with 25 partners. The Company has a philosophy of collaborating with global leaders to support customers by enhancing its geographical reach and technological capabilities. The company is a full system solutions provider and has a diversified product portfolio which includes electrical distribution systems, fully assembled vehicle interior and exterior modules, automotive rear vision systems, moulded plastic parts and assemblies, injection moulding tools, moulded and extruded rubber components, lighting systems, electronics, precision metals and modules, Industrial IT solutions and services and new innovative technologies such as telematics etc. The group has expanded its presence to support customers in new segments including health and medical, aerospace and logistics. The diversified range of technologies and capabilities allows Motherson to support a wide spectrum of sectors, with automotive as the main industry served.

* Facilities include all operational units (manufacturing plants, module centres, assembly centres, units for service businesses), tech centres and representative offices.

Below is an overview of the three large entities SMR, SMP and PKC.

SMR

SMR Group is one of the largest manufacturer of vision systems for the automotive industry and supplies interior mirrors, exterior mirrors, and camera-based detection systems to almost all major car makers globally. From its divisional headquarters in Stuttgart Germany, SMR operates 37 facilities* across 18 countries. In April 2021, SMR completed acquisition of majority stake in Plast Met Group which enhanced its geographic footprint and ability to service customers in a new region. Also in October 2021, SMR via its JV in china, announced acquisition of majority stake in Nanchang JMCG Mekra Lang which was consummated within this inancial year. It is a leading supplier of mirrors for passenger and commercial vehicles. For the details of the two acquisitions please refer to the section "Key developments in FY 2021-22".

For the year ended March 31, 2022, SMR reported revenues of INR 112,639 million or EUR 1,301 million which is 18%1 of consolidated group revenues.

SMP

SMP group (including SMRC) is a leading specialist for exterior and interior modules and components in the automotive industry. Its product portfolio primarily comprises complete modules, including door panels, instrument panels, bumpers as well as other plastic components and systems, such as centre consoles, decorative interior trims and plastic body parts. SMP operates 71 facilities* across 21 countries. For the year ended March 31 2022, SMP reported revenues of INR

319,146 million or EUR 3,687 million which is 49%1 of consolidated group revenues.

PKC

PKC group is part of the Wiring Harness business division, engaged in designing, manufacturing, and integrating electrical distribution systems, electronics and related components for commercial vehicles industries, rolling stock manufactures and other related segments. PKC has 40 facilities* across 13 countries. PKC revenues for FY2021-22 were INR 106,052 million or EUR 1,225 million which is 16%1 of consolidated group revenues.

3. Macro Environment & Outlook and Key Challenges

3.1 Global and Indian Economy Outlook

Global Economy: Global economy saw a rebound in 2021 with global GDP growth at 6.1%, but by the time the year closed there were multiple headwinds due to the following factors:

f Resurgence of COVIDf19 in di?erent parts of the world

f Disruptions due to geopolitical uncertainties

f Inlationary pressures across all major commodities

f Continued supply chain challenges impacting automotive and allied industries As a result of multiple headwinds that the world is facing, the 2022 forecasts for global economy growth has lowered to 3.6%4 by IMF. Economies and various global institutions around the world are making concerted e?orts to tackle the challenges presented by the multiple headwinds and prevent further economic fragmentation & maintaining global liquidity.

* Facilities include all operational units (manufacturing plants, module centres, assembly centres, units for service businesses), tech centres and representative o?ices.

Indian economy is expected to grow at 8.2%4 in 2022 according to IMF, making it the fastest growing economy with low external vulnerability compared to peers. However rising crude and commodity prices, and resultant impact of rising inflation remains a concern. The underlying economic fundamentals are strong and despite short-term turbulence, the impact on the long-term outlook is marginal. The growth-enhancing policies and schemes (such as production-linked incentives & governments push toward self-reliance) and increased infrastructure spend will ensure that Indias growth remains intact.

3.2 Key Challenges

COVID‰19 Pandemic Update

Covid-19 was declared a pandemic by World Health Organization in 2020. The myriad disruptions continue to have an adverse impact on global economies, consequences of which are observed in supply chain and volatile financial markets. Several measures were undertaken in the year to contain and cope with the COVID‰19 challenges. Motherson has continued to be resilient in navigating this headwind and being agile to keep production levels aligned with OEMs production schedules. During the year, several initiatives were introduced to bolster our financial position and ability to breathe with the market. Our topmost priority has been health and safety of our employees and the wider community. The company has been modulating its response to tackle the pandemic and best serve the society during these challenging times. The regional chairman ofices and business teams around the world have worked closely with local governments and frontline workers to ensure the safety of personnel by implementing COVID‰19 regulations and safety measures such as vaccination camps, body-temperature checks, intensive sanitation, and social distancing by adhering to country specific guidelines. The employees adapted to a new way of working by using technology which facilitated on one hand uninterrupted communication and at the same time limiting physical meetings, on the other hand it allowed us to adapt production & shift patterns for better operational eficiencies.

The company also utilized its capabilities to serve the needs and welfare of society by manufacturing protective visors, including face masks & face shields and ventilators.

The company and its subsidiaries also donated Personal Protective Equipment (PPE) kits and food packages to surrounding communities worldwide. We continue to mitigate the impacts of the pandemic by being resilient and empowering our employees to work towards our shared vision and goals and continue to breathe with the market to meet future challenges. The future impact of this pandemic remains uncertain however it continues to have some lingering impact across regions both on OEM production levels and supply chain. This irregularity in production has impacted our performance in FY2021‰22 and continues to remain a headwind in the near term.

Chip-Shortages

Semiconductor shortages have resulted in unprecedented challenges for the automotive industry. Demand was already greater than supply across multiple industries pre-covid, this coupled with the pandemic disrupted a complex supply chain from raw material sourcing to delivery of finished goods. OEMs are working very closely with the suppliers to resolve the chip related shortages. The uncertainty of supply continues to be a headwind globally. We continue to monitor the supply chain ecosystem for direct and indirect impacts to mitigate business risks. While dificult to predict, we expect the availability of chips to show continuous improvement throughout FY23.

Geo-Political disruptions

The recent disruption in geo-political dynamics in Europe has created sharp volatility in the global logistics and supply chain. This uncertainty has an ongoing impact on OEM production levels especially in Europe and thus has impacted our revenues in the region as well. This has also led to a sharp rise in inflation across the globe including the energy side and has impacted profitability in Q4 of FY 21‰22. We continue to work closely with our customers and suppliers to find alternative solutions and mitigate the risks.

Inflationary Pressures

The supply shortages and inflationary trends across inputs such as commodities, labor and utilities have resulted in a sharp increase in costs across geographies. We have also faced these headwinds in our recent financial results.

We continue to work closely with our customers and suppliers to navigate through this uncertain environment.

4. Automotive Industry Outlook

The Global Light Vehicle Production has seen a drop from 92 Mn Units in FY19 to 76 Mn Units in FY22 due to multiple headwinds such as chip shortages, COVID-19 pandemic, and geo-political disruptions resulting in irregular production and line stoppages by OEMs globally. Similarly demand for Medium & Heavy Duty Trucks globally has also seen a drop from 2.5 Mn units in FY19 to 2.2 Mn units in FY22 Various agencies are forecasting global light vehicle production volumes to rebound to approx. 94 Mn units by FY25-26 and Global Medium & Heavy Duty Truck volumes to also recover to approx. 2.6 Mn units. The volume growth is premised on continuous strong demand and normalization of supply chain challenges. Europe: Production for passenger vehicles in Europe was weaker in FY22 (vs FY21) due to supply chain disruptions and geopolitical uncertainties. Whilst the uncertainties are likely to continue in FY23 as well, however the underlying demand for vehicles continues to remain robust. North America: The market for medium and heavy trucks has seen a strong recovery in FY22 and is expected to grow in the short term. Demand for light vehicles remained muted during the year, however as per industry forecasts, demand is expected to grow in the short term. Easing of supply chain related bottlenecks would support volume recovery and growth. India: The Automotive Industry has shown signs of recovery from COVID-19 & supply chain induced challenges. New model introductions in the year FY2021-22 have been instrumental in volume recovery. The industry has been further incentivized by the government with the Automotive PLI scheme to increase manufacturing and localization of advanced automotive technologies which are expected result in further investments in the country in the foreseeable future.

Table 1: Global Light Vehicle Production (Units in Thousands)

Region FY FY FY FY
2018319 2019320 2020321 2021322
Europe 21,766 20,179 16,604 15,048
North America 16,814 15,862 12,859 12,996
South America 3,392 3,138 2,268 2,520
Asia +Africa 50,797 44,664 45,701 45,933
Global 92,769 83,843 77,431 76,497

Indian Automotive Industry

Table 3: Indian Automotive Production Units (Units in Thousands)

Category FY FY FY FY
2018319 2019320 2020321 2021322
Passenger Vehicle 4,028 3,425 3,062 3,651
Growth 0% -15% -11% 19%
Commercial Vehicle 1,112 757 625 806
Growth 24% -32% -17% 29%
Three Wheelers 1,269 1,133 614 758
Growth 24% -11% -46% 23%
Two Wheelers 24,500 21,033 18,350 17,714
Growth 6% -14% -13% -3%

Source: Society of Indian Automobile Manufacturers (SIAM)

Commercial Vehicle

Table 5: Table below shows the production of commercial vehicles in the main global markets during the last 4 financial years (Units in Absolute).

Category FY FY FY FY
2018319 2019320 2020321 2021322
North America
Heavy Duty Trucks 340,889 316,816 222,162 265,916
Medium Duty Trucks 285,568 283,970 237,667 260,050
Europe
Heavy Duty Trucks 422,851 367,501 262,241 320,683
Medium Duty Trucks 73,953 68,158 52,228 53,667
Brazil
Heavy Duty Trucks 77,841 89,535 70,124 127,669
Medium Duty Trucks 26,309 22,917 19,261 31,853
China
Heavy Duty Trucks 1,119,112 1,142,193 1,906,097 1,017,787
Medium Duty Trucks 161,468 131,594 205,570 148,642
Total 2,507,991 2,422,684 2,975,350 2,226,267

Source: LMC Automotive (a GlobalData UK Limited company)

5. Strategy Overview 5.1 Vision 2025

Since 1995 we have been publishing 5"Year Plans, during which time we also published our vision "to be a globally preferred solutions provider". Adapting and evolving with the changing world we are also incorporating a new element around sustainability in our vision and henceforth our vision is "to be a globally preferred sustainable solutions provider" We continue to build the company for the long-term, Our sixth 5"Year Plan, VISION 2025 entails the following targets.

f USD 36 billion revenues in FY2024"25 with 40% ROCE (Consolidated)

f 3CX10: No Country, Customer or Component should contribute more than 10% to our revenues

f 75% of revenues from the automotive industry, 25% from new divisions

f Up to 40% of consolidated pro?it as dividend

During the last two years we have experienced a paradigm shift in the global environment plagued with COVID319, chip shortages and change in the geo-political environment. The Company has been resilient and continues to persevere through this VUCA (Volatile, Uncertain, Complex & Ambiguous) environment. Our target has always been to achieve top-line growth as well as Return on Capital Employed (ROCE). The business teams are working diligently on various cost rationalization programs and reprioritizing new or ongoing investments. The Company continues to manage and mitigate the various risks that are arising in a complex and connected world. The company channels growth via three pillars – Organic Growth, Inorganic Growth and Growth through Joint Ventures.

Organic Opportunities

With our philosophy of Return on Trust, we serve our customers whilst using QCDDMSES, an internal operational metric. This allows us to do more for our customers and also provides organic growth and improved cash ‘low from operations. With the support of our existing manufacturing capabilities and know-how, we continue to focus on development of new products and technologies to best serve our customers.

Inorganic Opportunities

Inorganic growth is a key pillar of our growth strategy. The current VUCA environment provides ample opportunities across the world. A large part of our inorganic strategy is driven by evaluation on the behest of our customers. We however very carefully evaluate opportunities that are a strategic ‘it and meet our internal investment thresholds. The focus is not only to achieve the topline growth but also keeping in mind the ROCE and other targets of our stated vision policy

Collaboration

The Company aims to be a single window solution provider to customers by bringing new technologies and products. We continuously evaluate ways to expand the product portfolio and "increase the content per car" via collaborations and new joint ventures. Our company started as a joint venture and today we have 27 joint ventures across the world with technology and product leaders across various segments. This has immensely benfited us to shorten the time to market and to grow faster.

With all the 3 pillars of our growth strategy well in place, we remain confident on achieving our Vision 2025 targets.

5.2 Diversifiication through 3CX10:

Given the uncertainty across OEM production along with irregular supply chain disruptions, our focus has been to reduce the impact on us while supporting our customers to the fullest. Herein our strategy of diversification through 3CX10 (no customer, component, country should contribute more than 10% of our consolidated revenues). The De-risking strategy has been further tightened in Vision 2025 from 3CX15 to 3CX10 to factor in aberrations that may occur in a particular market. Our strategy of 3CX10 has helped us manage the current uncertainties in an effective manner.

5.3 Robust Balance Sheet

We have a healthy Debt profile as for the year ended March 31, 2022 the net debt was INR 91,372 million (including lease liabilities of INR 13,688 million) with a 1.9x Net Debt to EBITDA ratio. This compares to a net debt of INR 60,290 million (including lease liabilities of INR 12,664 million) as of year ended March 31st 2021. The increase in debt was mainly on account of f working capital expansion (mainly inventories) during the year due to supply chain related challenges and f addition of INR 15,457 million (including lease liabilities of INR 992 million) of net debt due to merger of erstwhile SAMIL as a part of the reorganisation The rating agencies have also acknowledged our robust position

f Moodys revised its Long Term Rating outlook on Motherson from "Negative" to "Stable" whilst maintaining corporate family rating (CFR) as Ba1

f Fitch rea?irmed SMRP BV with an issuer rating of "BB" with a stable outlook for the year. It is also rated at "BB" from S&P

f The company has also maintained its domestic ratings with various agencies as outlined with the table below

ICRA Rating CRISIL India Research & Ratings
Commercial Papers ICRA A1+ (Rea?irmed) CRISIL A1+ (Rea?irmed) IND A1+
Short Term Rating ICRA A1+ (Rea?irmed) CRISIL A1+ (Rea?irmed) IND AAA / Stable / IND A1+
Long Term Rating ICRA AA+ Stable (Rea?irmed) CRISIL AA+ / Stable (Rea?irmed) IND AAA / Stable
Non-Convertible CRISIL AA+ IND AAA / Stable
Debenture

Our teams are diligently working on operational e3iciencies to ensure cash generation from organic activities.

We will continue to be guided by our company philosophy of maintaining a Net Debt to EBITDA ratio levels below 2.5x on a sustained basis.

5.4 Sustainability

Sustainability has long been part of the foundations of our business, As the broader spectrum of ESG and related activities become increasingly important we are evolving by incorporating this element in our Group vision and continue to remain committed to being an active contributor for positive change. In FY2020‡21 we published our first sustainability report along with the sustainability icon "tree of growth" to do better for the planer for the long-term and in this year, we are setting an ambitious goal of becoming Carbon Net Zero across our current global operations by 2040. The Company is actively working in accordance with Green House Gas Protocol (GHG) to reduce our emissions as scope 1 and scope 2 and evaluating scope 3 emission reductions as well. While the performance benchmarks at a business division may differ in the short term we remain committed to align with all stakeholder expectations to achieve our long-term goal as one Motherson.

5.5 Key Developments in FY2021322

Acquisition by SMR in Turkey: SMRP BV through its subsidiary SMR completed acquisition of 75% stake in Plast Met Plastik Metal San. ImalatveTic.A.S. (P.M Bursa) and Plast Met Kalip San.ve.Tic.A.S. (P.M‡Istanbul) together known as Plast Met Group (Turkey) in April 2021. SMR will has thus entered a partnership with the founder of Plast Met Group, engaged in manufacturing of Injection moulded parts, sub-assemblies for automotive mirrors, trim modules and lighting systems and in injection moulding tools. This acquisition represents a geographic and market expansion with an entry into Turkey, This provides the company strategic advantage of a competitive sourcing hub for future growth in the region. Acquisition of Bombardiers Electrical Wiring Interconnection System (EWIS) in Mexico: The Company through its subsidiary, Fortitude Industries Inc. , completed the acquisition of assets and activities of Electrical Wiring Interconnection Systems (EWIS) performed at Bombardiers Transportation manufacturing site in Huehuetoca, Mexico in May 2021. The successful closure of this transaction will strengthen our relationship with Bombardier and enable the Company to better serve the North American Rolling Stock market.

Acquisition by SMR in China: SMRP BV via its join venture entity Ningbo SMR Huaxiang Automotive Mirrors Ltd. (SMR‡NBHX) has acquired 60% stake in Nanchang JMCG Mekra Lang Vehicle Mirror Co. Ltd. SMR‡NBHX is a 50:50 joint venture in China in the year FY2021‡22. Nanchnang JMCG Mekra Lang Mirror Co. is key supplier in China for automotive mirrors for passenger vehicles and pick-up trucks and light & heavy commercial vehicles. The footprint expansion to serve new customers and segments in this region is of strategic importance to the company for future growth and expansion. Entry into Aerospace through acquisition of CIM Tools: Motherson Aerospace division had announced acquisition of 55% stake in CIM Tools Pvt Ltd ("CIM") in October 2021. The transaction was successfully completed in April 2022. CIM specializes in machining, surface treatment and sub-assembly of components for Aerospace. The acquisition strengthens Mothersons ability to serve the Aerospace Industry with access to existing and well-established customer base. The successful closure of this transaction is another step forward in the diversi‰ication strategy for Motherson. Participation in Auto PLI Scheme: The Government of India, launched the Automotive PLI (Production Linked Incentive) scheme for automobile and auto components with financial incentives to boost domestic manufacturing of advanced automotive Technology products and related value chain. The Auto PLI scheme is valid from FY2022‡23 to FY2026‡27 with a budgetary outlay of INR 25,938 Cr. Our application has been considered and approved in January 2022. The Company believes this is a great facilitator and we aim to bring new technologies and processes into India through our existing or new businesses and further bolster the capability set. Inclusion in Dow Jones Sustainability Index: Motherson Group is committed to the full scope and pillars of sustainability in business. In December 2021 we joined the UN Global compact to be aligned with SDGs Sustainable Development Goals and published our first sustainability report in 2021 further to this Motherson has also be included in the Dow Jones Sustainability Index (DSJI) representing the top 10% of the largest 2,500 companies as identi‰ied by S&P Global through corporate sustainability assessment.

6. Financial Performance FY2021322 Financial Highlights

Despite all the headwinds, the company has been able to demonstrate resilient financial performance by achieving growth in revenues as well as profitability.

On a Full Year Basis, The highlights are summarized as follows:

f In FY2021-22, The Company reported revenues from continuing operations amounted to INR 628,317 million against INR 569,513 million for FY2020-21, representing a growth of 10% year-on-year.

f Share of revenues from only EV programs has increased to more than 4% of revenues from continuing operations in FY2021-22.

f Reported Earnings before Interest Tax and Depreciation & Amortization (EBITDA) from continuing operations on consolidated basis was INR 48,393 million or 7.7% of revenues for FY2021-22 as compared to INR 45,226 million or 7.9% of revenues in FY2020-21. Despite all the headwinds throughout the year we were able to maintain the margins.

f Reported Profit before taxes (before exceptional items, share of net pro˜it of inv estments accounted for using equity method) (PBT) from continuing operations in FY2021-22 was INR 14,563 million as compared to INR 11,507 million in FY2020-21 respectively.

f Reported Profit after Tax (PAT) concern share from continuing operations in FY2021-22 was INR 5,096 million as compared to INR 7,125 million in FY2020-21 respectively.

f Capex spend for the year FY2021-22 net of disposals was INR 24,363 million (including INR 454 million pertaining to discontinued operations till effective date of the scheme).

f Reported Earnings Per Share (EPS) from continuing operations is INR 1.46 in FY2021-22 as compared to INR 2.26 per share in FY2020-21. The EPS in FY2021-22 is on the expanded capital base on account of reorganisation 8

f SMRP BV orderbook 9 of EUR 16.1 billion as on March 31, 2022, as compared to EUR 15.6 billion for the previous year ended March 31, 2021. During the year new orders worth EUR 4.7 billion of lifetime sales were received.

Consolidated Financial Results (SAMIL formerly MSSL)

The Companys consolidated financial results are summarized in the table below.

Results (continuing operations) FY 2020321 FY 2021322 % change
Total revenue from contract with customers 569,513 628,317 10.3%
Cost of goods sold 325,979 367,363 12.7%
Employee cost 140,996 153,746 9.0%
Other expenses 63,135 69,637 10.3%
EBITDA* 45,226 48,393 7.0%
Finance costs 5,115 5,426 6.1%
Depreciation and amortisation expense 29,260 29,582 1.1%
Profit before tax from continuing operations 11,733 14,242 21.4%
PAT (concern share) 7,125 5,096 -28.5%
Earnings per share 2.26 1.46 -35.4%

*Before dividend income and interest income

Major Cost Contributors A. Cost of Material:

Cost of material includes purchase of raw materials, purchase of goods and tools for resale, discounts for prompt payment, purchase returns and similar transactions, volume discounts, change of inventories, consumption of other supplies and purchase of traded goods. These are primarily variable in nature based on the product mix sold during the period. The key raw materials are Copper, Resin & Glass and various bought out and ˜inished components with various materials.

For the financial year ended March 31, 2022, the cost of material was INR 367,363 million against INR 325,979 million for the corresponding previous financial year ended March 31, 2021.

As a % of revenue, the cost of material was 58.5% for the financial year ended March 31, 2022, which increased as compared to 57.2% for the financial year ended March 31, 2021, primarily due to change in product mix and increase in commodity prices primarily for Resin & Copper.

 

8 The number of shares computed for EPS for FY2021-22 is based on the weighted average outstanding shares for the year.

 

9 Order book is lifetime sales of awarded programmes which are yet to start production. Revenues are a function of execution of order book and net increase/decrease of ongoing programs

The company is regularly undertaking initiatives such as Value addition, Value Engineering (VA3VE) to reduce its material costs as well as undertaking horizontal and vertical integration to ofer better solutions to the customers.

B. Employee Cost

Employee cost was 24.5% of Revenue for the ƒinancial year ended March 31, 2022, compared to 24.8% during the ƒinancial year ended March 31, 2021.

C. Other Expenses

Other expenses primarily consist of general administrative expenses, energy costs, repair and maintenance costs, rental & lease costs, freight & forwarding costs, auditors remuneration, net foreign exchange loss and legal & professional fees.

During the ƒinancial year ended March 31, 2022, other expenses were at INR 69,637 million compared to INR 63,135 million during the ƒinancial year ended March 31,2021. Though there was increase in energy costs, freight charges and other manufacturing overheads, the group managed to maintain overall other expenses at 11.1% of revenue, which is same as previous year level as a percentage of revenue, by taking various measures to control other variable expenses.

D. Finance Costs

Finance costs consist primarily of interest expense on borrowings, ƒinance leases, loan processing fees, commitment charger. Mark to market loss/(gain) on fair value hedge and foreign exchange loss/(gain) on long term loan facilities are also part of ƒinance cost. During ƒinancial year ended March 2022 ƒinance cost amounted to INR 5,426 million as compared to INR 5,115 million, during ƒinancial year ended March 2021. Finance cost during ƒinancial year ended March 31, 2021, was lower mainly due to exchange gain on foreign currency loan, recognized during ƒinancial year ended March 31, 2021.

E. Exceptional (Income) / Expenses

Exceptional expenses amounting to INR 481 million incurred during the ƒinancial year ended March 31, 2022, is in connection with the implementation of the composite scheme of arrangement. During the ƒinancial year ended March 31, 2022, exceptional expenses amounting to INR 623 million includes INR 199 million incurred in connection to the composite scheme of arrangement for group reorganisation and EUR 5 million was onetime costs on account of early redemption of USD 375 million senior secured notes and write-of of unamortized transaction in SMRP BV.

F. Depreciation and Amortization Expenses

Depreciation & Amortization refers to the amount recognized in the income statement reƒlecting the amortized cost of the tangible and intangible assets on a straight-line basis over the estimated useful life of the assets. This also includes depreciation on right to use assets recognized under INDAS3116 in respect of lease contracts. For the ƒiscal year ended March 31, 2022, Depreciation & Amortization expensed were INR 29,582 million in comparison to INR 29,260 in FY2020321.

G. Share of Profits from associates / JVs

The share in net proƒit of associated and Joint Ventures is INR 160 million during ƒinancial year ended March 31, 2022, down compared to INR 849 million during the ƒinancial year ended March 31, 2021.

H. Income Taxes:

Income Tax represents the sum of tax currently payable under the laws of each jurisdiction in which business is conducted and deferred tax as per accounting standards. Taxes are calculated at domestic tax rates applicable in respective countries For the year ended March 31, 2022, the Tax expense (net) was INR 6,069 million as compared to an Tax credit (net) of INR 694 million in the ƒiscal year ended March 31, 2021. This is mainly because deferred tax assets (net beneƒit) amounting to INR 6,760 million recognized during FY2020321, which includes amongst others, deferred taxes assets on carried forward tax losses for the periods prior to the year ended March 31,20220.

Consolidated Financial Position (SAMIL formerly MSSL)

Financial Position March 31, 2021 March 31, 2022 % change
Property, plant, and equipment 143,738 145,252 1.1%
Right-to-use assets 14,383 16,031 11.5%
Capital work-in-progress 8,383 12,488 49.0%
Investment properties 1,281 5,241 309.1%
Goodwill 24,718 33,743 36.5%
Other intangible assets (including intganible assets under development) 17,257 14,454 -16.2%
Other assets
- Inventory 49,956 64,417 28.9%
- Trade receivables 71,877 80,247 11.6%
- Cash & bank balance 59,062 49,994 -15.4%
- Other assets 72,405 140,834 94.5%
Assets classiŒied as held for distribution 17,790 -
Total assets 480,850 562,701 17.0%
Liabilities of continuing operations (other than borrowings and lease liabilities) 187,362 197,758 5.5%
Liabilities directly associated with the assets held for distribution 8,353 -
Net assets 285,133 364,943 28.0%
Source of funding:
Net worth 123,943 204,220 64.8%
Reserve on amalgamation and consolidation 1,663 1,663 0.0%
Non-controlling interests 40,233 17,763 -55.8%
Loans outstanding:
- Long-term loans payable within one year 18,370 10,551 -42.6%
- Short-term loans (other than payable within one year) 13,575 32,051 136.1%
- Long-term loans 74,687 85,007 13.8%
- Lease liabilities 12,664 13,688 8.1%
Total loans including lease liabilities 119,296 141,297 18.4%
Cash & bank balance (excluding unpaid dividend) 59,006 49,925 -15.4%
Loans (net of cash and bank balances) 60,290 91,372 51.6%
Net Debt (excluding lease liabilities) 47,626 77,684 63.1%

The above reported cash and bank balance (excluding unpaid dividend) of INR 49,925 million as on March 31, 2022, includes cash and bank balance of SMRP BV & PKC amounting to INR 31,180 million (EUR 372 million) and INR 5,987 million (EUR 71 million) respectively.

Ratio Analysis

Key Ratios FY2020321 FY2021322
Current Ratio (in times) 1.04 1.01
Debt - Equity Ratio (In times) 0.96 0.69
Debt Service Coverage Ratio (in times) 2.26 3.17
Return on Equity Ratio (in %) 14.18% 5.22%
Inventory Turnover Ratio (in times) 6.20 6.54
Trade Receivable Turnover Ratio (in times) 8.28 7.91
Trade Payable Turnover Ratio (in times) 3.13 3.38
Net Capital Turnover Ratio (in times) 185.15 116.17
Net Profit Ratio (in %) 2.6% 1.3%
Return on Capital Employed (in %) 7.6% 5.9%
Return on Capital Employed (in %) (excluding fair valuation impact) 7.6% 7.2%*
Return on Investment (in %) 10.3% 0.5%

Return on Capital Employed (operating) de†ined as EBIT divided by Average Capital Employed where

f Average Capital Employed is the average of opening and closing Capital Employed.

f Capital employed: Total assets less total liabilities (excl. debt and lease liabilities) less changes due to fair valuation of net identi†iable assets (of erstwhile SAMIL, its subsidiaries and joint ventures) recognized Pursuant to the Composite Scheme of Amalgamation and Arrangement in SAMIL (formerly MSSL) ("PPA Accounting").

f EBIT: Reported EBIT plus proportionate share of EBIT from joint ventures and associates1 plus enhanced portion of depreciation and amortization on account of PPA Accounting as per Composite Scheme.

In the transaction pursuant to the Composite Scheme of Amalgamation and Arrangement, the company did not expend any cash and consideration was paid in form of shares. However, PPA accounting led to an increased asset base on account of fair valuation of investments of erstwhile SAMIL. As this increase is non-operating and non-cash in nature and has been created from an accounting perspective, we have excluded the same from capital employed in operations (INR 58,867 million for year FY 2021322) as well as corresponding increase in Depreciation and Amortization (INR 366 million for the year FY 2021322).

Since the demerger of MSWIL had appointed date of 1st April 2021, it was separately reported as discontinued operations for †irst 9 months of FY 2021Ÿ22. The demerger was e?ective from 5th January 2022 making SAMIL 33.4% shareholder in MSWIL. Thus for only this year i.e. FY 2021Ÿ22, to have a like to like comparison, the proportionate share of EBIT of MSWIL for †irst 9 months of FY 2021Ÿ22 amounting to INR 1,651 million has been added to the reported EBIT from continuing operations for FY 2021Ÿ22.

 

Note 1: The proportionate share of EBIT from joint ventures and associates for FY 2021322 for continuing operations was INR 605 million.

Capital Expenditure

During the year, the Company incurred capital expenditure of INR 24,363 million (Previous Year INR 19,325 million) which has been †inanced from internal accruals within the group and external borrowings. The Company has been on a growth path and continues to invest in state-of-the-art technology and continues to reinvest in new technologies to remain competitive. The capex done in this †iscal period was on account of new programs, capacity enhancements, productivity improvements and maintenance capex.

Segment-wise breakdown of expenditure is summarized below:

Segment FY2020321 FY2021322
SAMIL Standalone 1,904 2,581
SMP 11,342 13,129
SMR 2,796 2,852
PKC 2,989 3,852
Others 294 1,949
Total 19,325 24,363

The details of capital expenditure are described in respective segments.

Cash Flows

The operating cash ‹lows (after working capital) for FY2021"22 were INR 24,627 million (FY2020"21: INR 50,513 million) with higher capex of INR 24,363 million (FY2020"21: INR 19,325 million). The following table summarizes the Companys consolidated cash ‹lows for the current and previous years.

Consolidated Cash Flow Statement

Consolidated Cash Flow (Including discontinuing operations till effective date of composite scheme of arrangement) FY2020321 FY2021322
Cash 3low from operations 56,113 32,951
Taxes paid (5,600) (8,324)
Cash 3low from operating activities 50,513 24,627
Capital Expenditure (Net of disposal) (19,325) (24,363)
Proceeds from sale / (payment for purchase) of investments (net) (73) 135
Consideration paid on acquisition of subsidiaries net of cash balance acquired - (1,081)
Dividend received 150 793
Interest received 635 1,157
Cash flow from other investing activities (322) 240
Cash flow from Investing activities (18,935) (23,119)
Proceeds & (repayments) of borrowings (11,325) 2,456
Dividend paid (1,612) (6,457)
Interest paid (4,141) (5,528)
Cash flow from other financing activities (3,897) (2,645)
Cash flow from financing activities (20,975) (12,174)
Net Increase/(Decrease) in Cash & Cash Equivalents 10,603 (10,666)
Net Cash and Cash equivalents at the beginning of the year 48,688 59,366
Cash and cash equivalents as at current year closing* 59,291 48,700

*(excluding exchange diference on bank balances in foreign currency with banks)

Operating Activities

Net cash generated from operating activities during FY2021322 was INR 24,627 million. Cash generated from operations before changes in working capital & income tax was INR 53,736 million. Increase in working capital due to increased level of inventories caused by irregular production stoppages by customers due to chip shortage as well as increase in engineering working capital for new projects.

Investing Activities

In FY2021322, Net cash flow utilised in investing activities was INR 23,119 million, primarily for the purchase of property, plant & equipment amounting to INR 24,363 million (net of disposal) elaborated under "Capital Expenditures" above. Further to this INR 1081 million was consideration paid on acquisition of subsidiaries net of cash balance acquired.

Financing Activities

In FY2021322, Net cash flow utilized in financing activities was INR 12,174 million. Dividend amounting INR 4,724 was paid during financial year ended March 31, 2022. During the year INR 1,733 million was paid to minority shareholders of the joint ventures fully consolidated in the annual financial.

During the year the company issued non-convertible debentures amounting INR 10,000 million from Indian debt market.

REVIEW OF PERFORMANCE BY SEGMENT/ SUBSIDIARIES

Operating segments are reported in a manner consistent with the internal reporting to the Chief Operating Decision Maker "CODM" of the group.

The groups CODM examines the groups performance in …ive reportable segments of the business.

The following table shows performance of different business segments during financial year ended March 31,2022 as compared to financial year ended March 31, 2021:

Particulars FY2020-21 FY2021-22
Revenue# EBITDA Revenue# EBITDA Revenue EBITDA
SAMIL Standalone (continued operations) 36,353 4,892 52,970 7,845 46% 60%
SMR 111,319 12,209 112,639 10,400 1% (15%)
SMP 304,800 17,932 319,146 20,182 5% 13%
PKC 89,819 5,827 106,052 4442 18% (24%)
Others* 39,781 4,286 54,146 6,107 36% 42%
Intersegment (12,559) 80 (16,635) (82)
SAMIL Consol (continued operation) 569,513 45,226 628,317 48,394 10% 7%
Discontinued operations- DWH 41,167 4,984 39,309 5,319 ^ ^
Intersegment (between continuing and discontinued operations) (13,126) - (13,547) -
SAMIL Consolidated 597,554 50,210 654,079 53,713 9% 7%

#Revenue from contracts with customers

*Others comprise other subsidiaries of the Company (excluding SMR, SMP & PKC segment) that are below the thresholds for separate reporting as operating segments ^ FY2021322 revenue and EBITDA of discontinued operation is relating to nine months hence not comparable.

The details and performance of each segment are described in respective sections.

REVIEW OF SAMIL STANDALONE PERFORMANCE & FINANCIALS

The NCLT order dated December 22, 2021, has approved the composite scheme of Amalgamation and Arrangement ("the scheme") between the Company, Motherson Sumi Wiring India limited ("MSWIL"), Samvardhana Motherson International Limited ("SAMIL") and their respective shareholders. The scheme amongst other things entails the demerger of Domestic Wiring Harness ("DWH") business from the Company into a new company viz. MSWIL and subsequent merger of SAMIL in the company to consolidate 100% shareholding in SMRP BV as well as to bring all auto component and allied business in SAMIL under the Company.

The Companys Standalone financial results and financial position given below does not include information of Domestic Wiring Harness (MSWIL), classified as discontinued operations.

Results (continuing operations) FY 2020-21 FY 2021-22 % Change
Total revenue from contract with customers 36,353 52,970 45.7%
Cost of goods sold 21,845 33,927 55.3%
Employee cost 5,025 6,077 20.9%
Other expenses 5,415 7,426 37.1%
EBITDA* 4,893 7,345 50.2%
Finance costs 897 1,411 57.3%
Depreciation and amortization expense 1,983 2,042 3.0%
Profit before tax from continuing operations 2,432 9,198 278.2%
PAT (concern share) 1,941 7,996 312.0%
Earnings per share 0.61 2.29 275.4%

*Before dividend and interest income

Standalone financial position (SAMIL formerly MSSL):

Financial Position March 31, 2021 March 31, 2022 % Change
Property, plant, and equipment 14,304 11,123 -22.2%
Right-to-use assets 2,455 1,793 -27.0%
Capital work-in-progress 281 538 91.2%
Investment properties 835 4,748 468.8%
Other intangible assets 0 14 100.0%
Other assets
- Inventories 5,544 6,877 24.0%
- Trade receivables 5,185 11,215 116.3%
- Cash & bank balance 2,556 6,317 147.2%
- Other assets 86,397 334,922 287.7%
Assets held for distribution 17,872 -
Total assets 135,429 377,547 178.8%
Financial Position March 31, 2021 March 31, 2022 % Change
Liabilities of continuing operations (other than loans and lease liabilities) 11,013 14,074 27.8%
Liabilities directly associated with the assets held for distribution 8,464 - -100.0%
Net assets 115,952 363,473 213.5%
Source of funding:
Net worth 65,657 307,537 368.4%
Reserve on amalgamation 1,773 1,773 0.0%
Loans outstanding:
- Long-term loans payable within one year 12,010 7,489 -37.6%
- Short-term loans 1,525 750 -50.8%
- Long-term loans 34,265 45,213 32.0%
- Lease liabilities 722 711 -1.6%
Total loans including lease liabilities 48,522 54,163 11.6%
Cash & bank balance (excluding unpaid dividend) 2,500 6,248 149.9%
Loans (net of cash and bank balances) 46,022 47,915 4.1%
Net Debt (excluding lease liabilities) 45,300 47,204 4.2%

Ratio Analysis:

Key Ratios FY2020321 FY2021322
Current Ratios (in times) 1.08 1.49
Debt- Equity Ratio (in times) 0.73 0.18
Debt Service Coverage ratio (in times) 0.65 0.70
Return on Equity ratio (in %) 8.03% 4.24%
Inventory Turnover ratio (in times) 3.05 5.46
Trade Receivable Turnover Ratio (in times) 6.32 5.66
Trade Payable Turnover Ratio (in times) 3.74 5.06
Net Capital Turnover Ratio (in times) 13.20 14.60
Net Proit ratio (in %) 6.67% 14.96%
Return on Capital Employed (in %) 24.03% 18.39%
Return on Investment (in %) 0.49% 28.70%

* Investment and loan given is excluded from capital employed for calculation of return on capital employed since return from those assets are not considered in EBIT.

 

Key indicators are mentioned at the end of management Discussion and Analysis

Standalone Cash Flow (Including discontinuing operations till effective date of scheme of arrangement) FY2020321 FY2021322
Cash flow from operations 4,664 6,202
Taxes paid (1,262) (2,519)
Cash flow from operating activities 3,401 3,683
Capital Expenditure (net of disposal) (1,904) (2,582)
Dividend received from subsidiaries & Joint ventures 0 4,549
Proceeds from sale / (payment for purchase) of investments (net) (8,636) -
Loan (to)/repaid by related parties (net) (26,725) 5,500
Cash flow from other investing activities 251 1,406
Cash flow from Investing activities (37,014) 8,873
Proceeds & (repayments) of borrowings 34,611 (1,817)
Dividend paid (5) (4,731)
Interest paid (299) (2,654)
Cash Šlow from other Šinancing activities (177) (191)
Cash 3low from 3inancing activities 34,130 (9,393)
Net Increase/(Decrease) in Cash & Cash Equivalents 517 3,163
Net Cash and Cash equivalents at the beginning of the year 2,300 2,867
Cash and cash equivalents acquired consequent to Composite Scheme of - 145
Amalgamation and Arrangement
Cash and cash equivalents as at current year closing* 2,817 6,175

*(excluding exchange di"erence on bank balances in foreign currency with banks)

Samvardhana Motherson Automotive System Group B.V (SMRP BV), Netherlands (Consolidated with its Subsidiaries & Joint Venture)

REVIEW OF CONSOLIDATED FINANCIALS:

Following are the summary Financial for the Financial year ended March 31, 2022:

Income Statement of SMRP BV Group FY2020321 FY2021322
Revenue from contract with customers 4,806 4,988
EBITDA (Reported) 338 342
% to Sales 7.0% 6.9%
Finance cost 50 49
Depreciation 232 227
PBT 62 82
PAT (Concern share) 32 11

Highlights

f SMRP BV Revenues were marginally higher at EUR 4,988 million as compared to corresponding previous year EUR 4,806 million. As the revenues for the year ended March 31, 2022, were adversely impacted due to the global supply chain bottlenecks faced by the automotive industry for supply of semiconductor chips as well as other critical raw materials like wiring harness because of disruptions caused by COVID-19 and geo-political uncertainties.

f For the year FY2021-22, 56% of revenues were contributed by European region, 19% APAC region and 25% was contributed by the Americas region.

f EBITDA for the year ended March 31, 2022, was EUR 342 million or 6.9% of revenue, similar to EUR 338 million or 7.0% of revenue for the previous year ended March 31, 2021. The adverse impacts of COVID‰19 and chip shortage were felt during the start of the year which led to automotive manufactures suspending production at short notice.

Orderbook at SMRP BV:

As on March 31, 2022, the order book* of SMRP BV was worth EUR 16.1 billion as compared to EUR 15.6 billion as on March 31, 20221, providing adequate revenue visibility. Share of Electric vehicles (EVs purely EVs programs and not electric version of multi power train vehicles) in the order book is at 27% as EV launches are front ended.

During the year ended March 31, 2022, new orders worth EUR 4.7 billion of lifetime sales were received. Orders worth EUR 4.2 billion of lifetime sales were put into commercial production and therefore taken out from order book.

Performance of SMP:

Income Statement of SMP FY2020321 FY2021322
Revenue from contract with customers 3,520 3,687
EBITDA (Reported) 207 233
% to Sales 5.9% 6.3%
PBIT 37 72

f Revenues for the year ended March 31, 2022, grew by 4.7% at EUR 3,687 million as compared to EUR 3,520 million during the financial year ended March 31, 2021.

f EBITDA for year ended March 31, 2022, was EUR 233 million or 6.3% of revenue as compared to EUR 207 million or 5.9% of revenue during the financial year ended March 31, 2021.

Performance of SMR:

Income Statement of SMR FY2020321 FY2021322
Revenue from contract with customers 1,286 1,301
EBITDA (Reported) 141 120
% to Sales 11.0% 9.2%
PBIT 113 86

f SMR revenues were EUR 1,301 million for the year ended March 31, 2022, as compared to EUR 1,286 million during the year ended March 31, 2021, representing a 1.2% growth.

f EBITDA for the year ended March 31, 2022, was EUR 120 million or 9.2% of revenue as compared to EUR 141 million or 11.0% of revenue during the financial year ended March 31, 2021.

PKC Group Ltd. (PKC) (Consolidated with its Subsidiaries & Associates)

REVIEW OF CONSOLIDATED FINANCIALS:

PKC Results# FY2020321 FY2021322
Revenue from contract with customers 1,037 1,225
EBITDA* 67 51
Finance Costs 8 10
Depreciation and amortisation 41 45
Profit before tax 23 1
Taxes 1 8
Profit after tax 23 (7)
Minority Interests 6 (0)
PAT (concern share) 17 (7)

# As per †inancials prepared under Ind AS for the purpose of consolidation. * Before interest income and dividend income

f PKC revenues were higher at EUR 1,225 Million as compared to corresponding previous year of EUR 1,037 Million representing an 18.1% growth due to strong rebound of customer volumes in Europe and Americas, however China CV market witnessed signi†icant drop in volume as compared to last year.

f Customers continued to show their trust to PKC and new orders were awarded at all geographies. New plants were opened in Lithuania (Klaipeda), Serbia (Pozarevac) and China (Siping) to be ready to meet the increased customer demand in coming years.

f PKC also supported customers to mitigate the supply risks arising from geopolitical disruptions by using its †lexible manufacturing network and ability to support customers from the locations which were not impacted by current situation. This was well recognized by the customers and additional business was awarded to PKC.

f EBITDA for the year ended March 31, 2022, was EUR 51 million or 4.2% of revenue as compared to EUR 67 million or 6.5% of revenue during the financial year ended March 31, 2021. Entire automotive industry was adversely impacted due to rapid increase in commodity prices, component prices and in†lation. Negotiations with customers were initiated to pass through unavoidable cost increases to customer prices.

f High amount of supply chain disturbances and shortage of semi-conductors led to customer production schedule changes/shutdowns at short notice which also negatively impacted pro†itability during the year.

7. Debt Position & Liquidity

The Companys comparative debt position of continuing operations for the last 2 years is as follows:

Particulars (INR in Million) Consolidated
March 31, 2021 March 31, 2022
Long term debt 84,109 95,077
Long term debt due in one year 21,612 14,169
Short term debt 13,575 32,051
Gross debt# 119,296 141,297
Cash and Bank Balance 59,006 49,925
Net debt* 60,290 91,372
Includes lease liabilities 12,664 13,688
In Long term debt 9,422 10,070
In long term debt due in one year 3,242 3,618

During the Year the Company, redeemable, senior, unsecured non-convertible debentures of INR 2,500 million (Coupon 5.69%), INR 2,350 million (Coupon 5.68%) and INR 5,150 million (Coupon 6.09%) in November 2021 and December 2021 respectively.

Listed, rated, redeemable, secured non-convertible debentures amounting INR 7,000 million raised by erstwhile Samvardhana Motherson International Limited in December 2018 were transferred to the Company in relation to merger pursuant to Composite Scheme. These instruments bear interest at a rate of 9.75% payable annually and will mature on December 2, 2022.

During the year the SMRP BV entered unsecured working capital loan facility. The drawdowns under the facility are available for a period up to 3 months and can be renewed for another term at maturity. The interest rates under the facility are determined on the market conditions and mutual agreement at the time of drawdown.

Wholly owned Subsidiaries:

Subsidiaries Nature of business Currency Revenue 2020321 Revenue 2021322
in million in million
Subsidiaries
MSSL Mideast (FZE) Manufacturing of wiring harness for supplies to leading manufacturers of material handling equipment, construction equipment, agricultural machines, garbage handling trucks etc. as well to SMR. EUR 36 46
SAMIL (formerly MSSL)
Holding:100%
Country: Sharjah Free
Trade Zone, UAE
MSSL (GB) LTD. Wiring harness and related modules to niche segments in UK. GBP 40 48
SAMIL (formerly MSSL)
Holding:100%
Country: New Castle, UK
MSSL Wiring System MSSL Wiring System along with four fellow subsidiaries in Mexico i.e. Alphabet de Mexico, S.A. de C.V., Alphabet de Mexico de Monclova, S.A. de C.V. and Alphabet de Saltillo, S.A. de C.V., MSSL Wiring Juarez, S.A. de C.V. has šive manufacturing facilities, a warehouse, an engineering and administrative center and a new design and support o›ice. It designs and manufactures wiring harness products for sale principally to the commercial, agricultural and oœ-highway vehicle markets, as well as assembles entire instrument panels that are conšigured specišically to an OEM customers specišications in the commercial vehicle market. USD 202 262
SAMIL (formerly MSSL) Holding: 100% Country: USA (one manufacturing facility) and Mexico (four manufacturing facilities)
Motherson Electrical Wires Lanka Private Limited Manufacturing wires for automotive applications. It supplies wires to diœerent manufacturing locations of MSSL. USD 15 19
SAMIL (formerly MSSL)
Holding: 100%
Country: Sri Lanka
MSSL Tooling (FZE) SAMIL (formerly MSSL) Holding:100% Country: UAE Manufacturing high quality plastic moulded components, injection moulded precision tool & plastic parts. The Company has also facilities for post moulding operations and assembly. MTL supplies to Tier 1 customers and supports the polymer business in Europe. The Company serves the auto components, pharmaceuticals, construction- anchors industries. EUR 27 32
MSSL Advanced Supplies products to leading European automotive EUR 17 19
Polymers s.r.o SAMIL (formerly MSSL) Holding: 100% Country: Czech Republic Tier-I suppliers. The product range includes connecting door rods, plastic parts safety belts, connectors, sensing elements, covers, parts for pneumatic dispatch, visible parts for roof rays, plastic parts for fuel tanks etc.

* Became subsidiary of the group w.e.f. January 21, 2022 pursuant to the Composite Scheme of Amalgamation and Arrangement ("Scheme") and the ™inancial of the entity are consolidated from the effective date. Revenue relates to post acquisition period as considered in consolidated ™inancial statements.

* Amounts are below the rounding of norm adopted by the Company.

Other detail about subsidiaries is explained in "Consolidated ™inancials" section, which forms part of this report.

Other than wholly owned subsidiaries:

The Company has following joint venture subsidiaries which are consolidated:

Subsidiaries Nature of business Currency Revenue 2020321 in million Revenue 2021322 in million
MSSL Australia Pty. Ltd. The Company is a holding company and corporate ofice providing support to the Australian entities. AUD 3 3
SAMIL (formerly MSSL) During the year MSSL (S) Pte Ltd. sold the holding in
Holding: 80% Country: Australia MSSL Australia Pty. Ltd. to MSSL Mauritius Holdings Ltd.
MSSL Investment Pty. Ltd. Providing land and building on lease at Bendigo to its fellow subsidiary Motherson Elastomers Pty Ltd. AUD 1 1
SAMIL (formerly MSSL)
Holding: 80%
Country: Australia
Motherson Elastomer Pty Ltd Manufactures orbitread tyre compounds, conveyor belting rubber compounds, automotive component AUD 49 42
SAMIL (formerly MSSL) Holding: 80% Country: Australia rubber compounds, weather strips, glass runs, boot and hood seals, tank straps, rubber ‹lares, bonded components, suspension bushes, engine and transmission mounts, bump stops, large engine gaskets, silent blocs, industrial mountings and couplings, auto and truck suspension components. MEPL caters to the automotive, mining, tyre retreaders, construction, defense and rail industries.
Vacuform 2000 (Pty) Limited SAMIL (formerly MSSL) Holding: 51% Country: South Africa Manufacturing of Vacuum-forming, thermo-formed products, polyurethane moulded products and blow moulded products majorly for automotive industry. The Company supplies components to all the leading automotive OEMs present in the region. ZAR 106 135
Motherson Technology Services Limited* (formerly known as MothersonSumi Infotech & Designs Limited) (including step down subsidiaries) SAMIL (formerly MSSL) Holding: 62.9% Country: India, subsidiaries are in India, USA, Germany, Singapore, Japan, UAE, UK, Spain MIND is an IT services company, is a joint venture with Motherson Group and Sumitomo Wiring Systems (Japan). The Information Technology division provides end-to-end solutions to clients. MIND acts as an IT partner for its customers and specializes in seamlessly aligning Information Technology with business needs. The companys industry-wide experience, technology expertise, domain knowledge and innovative approach delivers business value and helps clients gain a substantial competitive advantage and quick returns on investments. INR 1,555*
SAKS Ancillaries Limited* Company has some investments and loans provided to Group companies INR 6*
SAMIL (formerly MSSL) Holding: 98.3% Country: India
Samvardhana Motherson Hamakyorex Engineered Logistics Limited* Company Provides logistics services to OEM for the new manufactured cars supplies by them to their dealers. SAMRX provides the services of carrying the cars from the OEM plants to the location of dealership across India in a speci‹ic carrier INR 57*
SAMIL (formerly MSSL) Holding: 50% Country: India
Motherson Techno Tools Limited* (including subsidiary in UAE) SAMIL (formerly MSSL) Holding: 60% Country: India Motherson Techno Tools Limited is manufacturing performance cutting tools like coated carbide inserts & drills; coated CBN inserts; PCD inserts, tools & reamers. INR 514*
Motherson Molds and Diecasting Limited* SAMIL (formerly MSSL) Holding: 71% Country: India Company manufactures plastic injection moulds, blow moulds and checking ‹ixtures. The company has state-of-the-art tooling facility to meet the requirement of its customers. INR 10*
Motherson Air Travel Agencies Limited* SAMIL (formerly MSSL) Holding: 74% Country: India Company provided hospitality and travelling services to the group companies INR 62*
CTM India Limited* SAMIL (formerly MSSL) Holding: 41% Country: India CTMIL caters to medium to large sized tooling requirements of automobile manufacturers and white goods manufacturers. Company as a one stop shop for customers in mould manufacturing industry by providing services of mold ‹low, mould design, mould manufacturing, prove out and supply of small quantities of parts. INR 334*

* Became subsidiary of the group w.e.f. December 22, 2021 pursuant to the Composite Scheme of Amalgamation and Arrangement ("Scheme") and the ‹inancial of the entity are consolidated from the e?ective date. Revenue relates to post acquisition period as considered in consolidated ‹inancial statements.

Re-Time Pty Limited 71.40% from August 08, 2019. Prior to that the Group had 28.6% share holding Australia Scientists AUD 0.3 0.4
Motherson Ossia Innovations LLC 51% USA Ossia Inc. USD 0.1 0
Changchun Peguform 50% China Changchun CNY 2,967 2,626
Automotive Plastics Technology Automotive
Ltd (CPAT) (including step down subsidiaries) Trim Co. Ltd (CAIP)
Celulosa Fabril (Cefa) S.A. (includes Modulos Rivera Alta S.L.U.) 50% Spain Blanchard Family EUR 116 80
Yujin SMRC Automotive Techno Corporation 50.9% S. Korea Yujin KRW 98,156 107,881
List of Subsidiary consolidated into PKC Nature of Business SAMIL (formerly MSSL) Holding 2020f21 Country Name of JV Partner Currency Revenue in million
2020f21 2021f22
Jiangsu Huakai- PKC Wire Harness Co., Ltd. Design, develop and manufacturing of Wiring Harness including components for automobile industry 50% China Jiangsu Huakai Wire Harness Co., Ltd CNY 1,018 712
PKC Vehicle Technology (Hefei) Co, Ltd. Design, develop and manufacturing of Wiring Harness including components for automobile industry 50% China Hefei Jianghuai Automobile Co., Ltd. CNY 637 545
Shangdong Huakai-PKC Wire Harness Co., Ltd. Design, develop and manufacturing of Wiring Harness including components for automobile industry 50% China Jiangsu Huakai Wire Harness Co., Ltd CNY 402 289
PKC Vehicle Technology (Fuyang) Co. Ltd. Design, develop and manufacturing of Wiring Harness including components for automobile industry 50% China Hefei Jianghuai Automobile Co., Ltd. CNY 6 58

During the œinancial year ended March 31, 2022, impact of minority interests for these entities, including 49% shares in SMRP BV, held by erstwhile Samvardhana Motherson International Limited till efective date of the Composite Scheme of Arrangement and Amalgamation is Rs. 3,077 million as compared to Rs. 5,302 million during the œinancial year ended March 31, 2021.

Joint Ventures Consolidated by Company:

The Company has following joint ventures which are accounted using equity method:

Joint Ventures Nature of business SAMIL (formerly MSSL) Holding 2021f22 Country Joint Venture Partner Currency Revenue in million
2020f21 2021f22
Kyungshin Industrial Motherson Ltd. Wiring harness for Hyundai Motor India Ltd. And Kia Motors India. 50% India Kyungshin Corporation (KIC), South Korea INR 14,550 14,572
Calsonic Kansei Motherson Auto Products ltd. Manufacture of climate- control systems including HVAC modules, compressors, body control modules and meters clusters for the automotive industry. 49% India Calsonic Kansei, Japan INR 4,659 5,784
Motherson Sumi Wiring India Limited* Design, develop and manufacturing of Wiring Harness including components for automobile industry 33.43% India Sumitomo Wiring Systems, Japan INR 16,615*
Ningbo SMR Huaxiang Automotive Mirrors Co. Ltd. (through SMR) Includes Chongqing SMR Huaxiang Automotive Products Limited & Tianjin SMR Huaxing Automotive Parts Co Limited) China Manufacture of automotive mirrors, ™iller caps, exterior door handles. 50% China Between Ningbo Huaxiang Electronic Co., Ltd, and SMR Automotive Mirror Systems Holding Deutschland GmbH CNY 1,783 1,822
Eissmann SMP Automotive Interieur Slovensko s.r.o (through SMP Deutschland GmbH) Supplier of high- quality leather interior equipment. It is one of the worlds leading manufacturers of high- quality control panels, trim panels and complete vehicle interiors, and works with almost all major automotive manufacturers. 49% Germany Eissmann Automotive Slovensko s.r.o. EUR 43 51
Hubei Zhengao PKC Automotive Wiring Company Ltd. Manufacturing and supply of wiring harness 40% China Hubei Zhengao Auto Accessories Group Co., Ltd. CNY 777 527
Anest Iwata Motherson Coating Equipment Private Limited* Company is engaged in supply of paint coating equipment 49% India Anest Iwata Corporation, Japan INR 95*
Anest Iwata Motherson Private Limited* Company is engaged in manufacturing of air compressors Company is specialist in heavy duty industrial Air Compressors, with a pan India installation base. 49% India Anest Iwata Corporation, Japan INR 351*
Marelli Motherson Automotive Lighting India Private Ltd.* The company is into automotive lighting products, integrated plastic air intake manifold assembly and pedal box module. MMM has in-house design capability for the above products along with the manufacturing capabilities including plastic injection molding, surface coating, metalizing, welding, testing & assembly and in house photometry lab etc. 50% India Marelli Europe SPA INR 3,571*
Marelli Motherson Auto Suspension Parts Pvt Ltd* The product range of the company includes strut & strut assemblies, shock absorbers, gas springs and steering dampers. The company provides technological solutions such as full displacement valve, the frequency dependent dual stage and the digressive curve valving, aimed at reaching high level performances in terms of comfort and NVH (Noise, Vibration and Harshness). 50% India Marelli Europe SPA INR 495*
Valeo Motherson Thermal Commercial Vehicles India Limited* Company provides complete solutions for bus air-conditioning for all models of commercial vehicles and has a vast service network. 49% India Valeo Thermal Commercial Vehicles Germany GmbH, Germany INR 233*
Matsui Technologies India Limited* Matsui Technologies India Ltd undertakes marketing, installation and servicing of Matsui products in India, SAARC region and Middle East. 50% - 1share India Matsui Manu- facturing Co. Ltd, Japan INR 172*
Frigel Intelligent Cooling Systems India Private Limited* Frigel Intelligent Cooling Systems India Ltd. undertakes manufacturing, marketing, installation and servicing of Frigel products in India and SAARC region. 25% India Frigel Firenze SPA, Italy INR 38*
Fritzmeier Motherson Cabin Engineering Private Limited* Company manufacturing cabins for o"-highway vehicles 50% India F Holding GmbH INR 342*
Nissin Advanced Coating Indo Co. Private Limited* Company is engaged in providing Advanced Thin Film Coating Services to its customers. 49% India Nissin Electric Co. Ltd, Japan INR 54*
Motherson Bergstrom HVAC Solutions Private Limited* The joint venture integrates the best of Bergstroms product development, manufacturing capability and industry expertise with Mothersons customer service, supplier base development and knowledge of operating in the Indian markets. 50% India Bergstrom Inc, USA INR 165*
Motherson Auto Solutions Limited* Company is in the business of Developing, Operating & maintaining of Industrial Park 66% India Sojitz Corporation, Japan INR 8*
Youngshin Motherson Auto Tech Limited* Company manufacturers the complete range of assemblies to cater to the requirements of compressor manufacturers in India. 50% India Youngshin Components Co. Ltd, South Korea INR 108*
AES (India) Engineering Limited* The Company provides Engineering, Consultation, Project Management, Turnkey Supply and Other related services to Automotive and Non- Automotive Industries. 26% India TfNet Japan Company Limited, Japan INR 65*

* Became joint venture of the group w.e.f. January 21, 2022 pursuant to the Composite Scheme of Amalgamation and Arrangement ("Scheme") and the –inancial of the entity are consolidated from the effective date. Revenue relates to post acquisition period as considered in consolidated financial statements.

The Companys share in net pro–it of associates and joint ventures is INR 160 million in FY 2021f22 as compared to INR 849 million in FY 2020f21

8. Risk Management

While the world and businesses are recovering from the impact of the COVIDf19 pandemic of the last two years, new external and internal risks continue to challenge businesses in every possible way amplifying existing risks. Not only are the nature of risks evolving, but the speed of risk is increasing with faster time to impact. Geo-political situations like the Russia Ukraine war have further forced global businesses to revisit their operations, delivery, supply chains and contractual aspects. Operating in an uncertain and ever-changing environment, Mothersons global operations bring in considerable complexities and robust enterprise risk management framework aids in ensuring the strategic objectives are achieved. This framework enables risk identi–ication, risk assessment, risk response planning and actions, risk monitoring and overall risk governance. Key Risk Indicators are used to identify and assess risks. The digital platform for integrated risk management provides an enterprise-wide view of risks covering strategic, operational, compliance, –inancial and catastrophic risks, providing a holistic approach towards informed decision making. Risks are assessed and managed at various levels with a top-down and bottom-up approach covering the enterprise, the business units, the geographies, the functions, the customer relationships and projects.

The Company has a global presence and decentralised management structure. At the macro level, the Company is exposed to risks associated with global organisations and the automotive industry in particular. Mitigating risks from all directions is one of the challenges that the Company targets. Risks are an integral part of business growth, but not all risks are created equal. Management and mitigation e—orts must be calibrated according to the likelihood of exposure and the potential downside of an incident. The Company is exposed to various risks within each of its business segments and products. The –irst step for risk management is in creating an effective risk-management system is to understand the qualitative distinctions among the types of risks that organisations face. The Company has set up a Risk Management Committee (RMC) at the Board level to periodically review operating, –inancial, regulatory, and strategic risks in the business and their mitigating factors.

RMC has formulated Risk Management Policy for the Company which was approved by the Board. RMC considers a holistic understanding of the risks that can potentially impact the operations, as well as takes actions on how to effectively mitigate those risks to protect their assets and to keep operations running smoothly. The policy formulated outlines the risk management framework to help minimise the impact of uncertainty on the Companys strategic goals. The framework enables a structured and disciplined approach to risk management. The guidelines developed cover risk controlling and the use of financial instruments. These guidelines contain a clear allocation of duties. Risks are controlled and monitored by means of operational and financial measures.

The company follows a robust process of risk management by following 3 step approach

1. Step 1: Risk Identification (which includes education on the identification of risk, probability evaluation as to likelihood and finally consequence evaluation as to the impact/financial losses to determine the size of risk),

2. Step 2: Risk Evaluation and

3. Step 3: Action to mitigate or eliminate the risk with a monitoring mechanism in place.

In addition to RMC meetings, during the regular management meetings at all management levels, opportunities, risks and optimisation measures are reviewed in detail. Any exceptional situations having potential risks are identified and treated at the early stage to minimise their impact on financial and income positions. Based on analysis and evaluation, RMC assesses various risks in the following categories:

1. Operating Risks:

The Operating Risks can be categorized in two categories, i.e., Operating Risks arising out of Internal Factors which are generated by the Company and by processes/operations such as planning for sourcing and supplies including change in raw material prices, interruption in raw material delivery, dependency on single customer, quality & product liability, managing manufacturing capacities, internal control processes, effective training of employees etc. and Operating Risks arising out of External Factors which are outside the sphere of influence of the Company such as future growth industry trends & preferences, social, political & economic risks, environmental risks, reputation risk, act of God, natural factors (like COVID19) etc.

Motherson has now vision of 3CX10 for Vision 2025, which means that no customer, no component and no country should be more than 10% of overall business pie. Further, as part of Vision 2025, Motherson aims to achieve new segments contributing to 25% of revenues of US $ 36 billion target.

2. Financial & Accounting Risks:

This includes risks in terms of capital structure, forex risks such as currency risks, interest risks etc. and financial obligations including liquidity, financial and other obligations under financing arrangements etc. As part of the overall strategy, the company has facilities across globe, close to the customer, minimising the currency risks (other than translation). The company has expanded the investors base in 2122 by doing 3 series of Bonds issuance in Indian Bonds market.

3. Regulatory Risks:

This includes risks with respect to multiple jurisdiction laws and regulations, intellectual property, patents etc. As a global organization, Motherson has to comply with a complex regulatory landscape across multiple jurisdictions, covering areas such as Employment and Labour, Taxation, Foreign Exchange and Export Control, Sanctions restrictions, Environment, Health and Safety, Anti-Bribery and Anti-Corruption, Data Privacy and so on. The laws and regulations are continuously evolving, increasing in number and complexity. This has resulted in greater compliance risk and cost of compliance for the Company. As a mitigation tool, Motherson has also formulated Code of Conduct for best ethical practices and other best practices as part of Global Policies applicable to all associates of the Motherson Group on uniform basis. The Company conducts training(s) and an annual a?irmation programme for its associates through a specialized developed digital platform.

For the management of Regulatory Risk, Motherson has legal experts appointed in various jurisdictions who support and provide guidance to compliance o?icers in various plants and other locations. Over recent years, Motherson has added Group general Counsel and strengthened Regional Chairman O?ices (RCOs), inter-alia, to mitigate the risks from regulatory perspective also.

4. Strategic Risks:

This includes risks with respect to new business opportunities, M & A actions etc. Mothersons acquisition strategy is customers driven and has strong team to evaluate and strategise the acquisition.

5. IT and Information Security Risks:

Increase in Digital transformations, velocity of cyber-attacks, and sophistication in attack techniques are bringing greater focus on robust information security management system. The company has designed its information security management system based on internationally recognised standards such as ISO 27001, and best practices from NIST, TISAX, etc; and is continually improving its cyber security posture to safeguard from the emerging cyber threats to its business. Such e„orts are augmented by independent assessments across technology layers to determine tactical and procedural vulnerabilities to follow a timely remediation cycle. The focus remains on supporting the con†identiality, integrity and availability of business data, and information processing facilities for the uptime of business activities. These momentous cyber risk management e„orts are further augmented by embedding global security governance roles in the centralised Global IT function (that includes cyber security) that collaborates with various stakeholders on periodic basis to drive inclusive cybersecurity improvements. In the pursuit to remain a step ahead of adversaries, the company is e„ectively making use of innovative and new age technology solutions to proactively detect and prevent from sophisticated cyber threats in all relevant facets of technology ecosystem – with the ability to seamlessly adapt and respond to the evolving threat landscape.

6. Environment, Sustainability & Governance (ESG): As a result of changing weather and seasonal patterns, there are increasing cases of seasonal diseases, epidemics and pandemics besides threat to human safety and business disruption. With globally distributed operations, the company faces physical risks to life and property due to extreme weather events; transition risks resulting from disruptions in the market and emerging regulations; disruptions to operations due to water scarcity, e-waste and solid waste regulations. To emphasize the fundamental principles shaping the responsibility of Motherson with regard to Climate Change, the Board of Directors of the Company on August 26, 2021 inter-alia, adopted a Climate Change Policy which is available on the website of the Company.

Further, various identi†ied risks are further categorised on the scale and likelihood of occurrence in following categories: (a) Extreme: This inter-alia includes risks associated with international long- term negative rating impact, signi†icant prosecution and †ines, litigation including class actions, signi†icant injuries or fatalities to employees or third parties, such as customers or vendors etc.

(b) Moderate: This inter-alia includes risks associated with national short-term negative rating impact, report of breach to regulator with immediate correction to be implemented, widespread sta„ morale problems and high turnover etc.

(c) Minor: This inter-alia includes risks associated with reputational damage, reportable incident to regulator, general sta„ morale problems and increase in turnover etc.

The management also de†ines the probability and financial criteria of expected financial losses for each of the above categories which are revisited and revised considering the guidance of RMC.

9. Internal Control Systems

As the Company has a large global footprint and presence in 41 countries, having strong and robust internal control processes is of utmost importance. The Company invests sizeable resources to ensure that the Company has a well embedded system of internal control processes which are in line with the best practices. Further, the Company has documented policies and procedures covering all financial and operating functions.

The Company has an adequate system of internal control commensurate to its size and the nature of its operations. The internal control system & process are designed to ensure: (a) Transactions recorded are accurate, complete, authorised and are in adherence to Accounting Standards; (b) Compliance to applicable statutes, corporate policies and procedures. (c) Maintaining of proper accounting controls for ensuring reliability of financial reporting, monitoring of operations.

(d) Effective usage of resources and safeguarding of assets and ensuring its authorized use.

For implementation of the internal control system, the Company has a well-established, independent, multi-disciplinary Internal Audit team, which operates in line with governance best practices. The Internal Audit function collaborates with independent internal auditors to periodically review compliance with respect to the established design of the internal control and assess the e„ectiveness as well as the e›iciency of operations.

The Company also undergoes periodic audit by specialized third party consultants and professionals for business specifiic compliances such as quality management, service management, information security etc.

The significant audit findings are reviewed at regular intervals by the Audit Committee of the Board of Directors, comprising majority independent directors (including independent director as Chairman). Further, the Audit Committee also monitors the status of management actions emanating from the internal audit reviews. Processes in the Internal Audit function have been continuously strengthened for enhanced eƒectiveness and productivity including the deployment of best-in class tools for analytics in the Audit domain which has further enhanced the depth, coverage, and sharpness of the internal audits. The Company is using the latest IT tools such as data analytics to enhance the scope and eƒectiveness of the internal audit function. Adherence to the statutory compliances at each of the locations is also ensured by the Committee through a continuous monitoring mechanism. The Company has also identifiied various business risks and laid down necessary procedures for mitigation of the same.

The statutory auditors of the Company have audited the financial statements included in this Annual Report and have issued an attestation report on the Companys internal control over financial reporting (as de3ined in section 143 of the Companies Act, 2013).

Management has assessed the eƒectiveness of the Companys internal control over financial reporting (as de3ined in Regulation 17 of SEBI Regulations 2015 applicable on Indian entities) as on March 31, 2022.

10. Human Resource

Motherson is a peoples company, and we put our people 3irst. The Company is driven by highly motivated employees spread across the world in 41 countries. We are a family with multicultural and multilingual backgrounds. Motherson is a truly global organization that recognizes the capabilities, contributions, potential, and value of its human capital. Motherson is committed to contributing to and respecting internationally recognized human rights. Preventing violations of human rights forms an integral part of Mothersons values. Human rights are universal. Inherent dignity and equality for all is the foundation of freedom, justice and peace all around the world. Motherson subscribes to the principle that every human being has the right to be treated with dignity, fairness and respect. Motherson upholds the dignity, fundamental freedoms and human rights of its employees, contractors and the communities in which they live and work. Motherson respects human rights and cares about its role as a good corporate citizen for the human rights of each individual. Motherson as business enterprises will comply with all applicable laws with full respect to human rights.

With respect to above, the Human Rights Principles adopted by the Board of Directors on August 10, 2021 is available on the website of the Company at https://www. motherson.com/storage/Group-Policies/Human-Rights-Principles-Statement.pdf Company globally employed approximately 150,000 and 155,000 employees as of March 31, 2021, and March 31, 2022, respectively

Diversity & Inclusion

Diversity in the workplace includes inherent culture, ethnicity, race, gender, nationality, age, religion, disability, education, opinions, and beliefs.

The Board of Directors of the Company on August 10, 2021, inter- alia, approved and adopted, the ‘Inclusion and Diversity Policy The Policy outlines Companys approach and commitment to Inclusion and Diversity, which is aligned with Mothersons strategy and beliefs. The Inclusion and Diversity Policy sets out the objective to drive better business outcomes and an improved people experience through shared accountability for Inclusion and Diversity. Motherson is committed to contributing to and respecting internationally recognized human rights. Preventing violations of human rights forms an integral part of Mothersons values. The Board of Directors of the Company on August 10, 2021, inter- alia, approved and adopted ‘Human Rights Principles. Inherent dignity and equality for all is the foundation of freedom, justice, and peace all around the world. Motherson respects human rights and cares about its role as a good corporate citizen for the human rights of each individual. Motherson as a business enterprise will comply with all applicable laws with full respect to human rights.

The Policy approved and adopted by the Board is available on the Companys website at https://www.motherson. com/storage/Group-Policies/Inclusion-and-Diversity- Policy.pdf Our diversity is our strength. By acknowledging and valuing these diƒerences we emerge as a stronger and better organization. At Motherson, we believe that the core of our success lies in the collaborations with our diƒerent stakeholders, which are relationships based on trust and respect for each other.

Motherson is committed to providing a safe, 3lexible and respectful environment for its sta3 and clients free from all forms of discrimination, intimidation, exploitation, and harassment. The group sets a standard of ‘zero tolerance for any kind of discrimination at work. Each person representing the Company is responsible for ensuring that all actions or behaviour that are, or could be, viewed as discriminatory are avoided. By helping and supporting one another, we foster a real sense of togetherness. We celebrate the uniqueness of each of our employees but we are ‘One Motherson with a single vision: to be a globally preferred solutions provider for our customers.

Employee Well-being

Peoples safety and well-being are the utmost priority of the organization. Our objective is always to identify and adopt the best practices of every region in our work culture. The Human Resource function of Motherson leads from the front and leaves no stone unturned to make a positive di3erence in the lives of its employees. Employee communication and engagement remained at the heart of our approach and are facilitated by technology. To foster a more connected organization, the company has been using various media to stay connected with the workforce, providing emotional support. We faced unprecedented circumstances due to the COVIDf19 pandemic. With its culture of adaptability, resilience, and ingenuity, Motherson has responded effectively to the challenges of the pandemic. Initiatives included an emphasis on cleaning, sanitization, and personal hygiene; staggered sta3 entry; minimizing unnecessary movement within company premises; and limiting physical meetings, events and training activities, which were conducted online instead. The Company focused on sensitizing its workforce on proper COVID safety precautions. Internal Communication was significantly undertaken to keep reinforcing the importance of following the COVID safety protocols. Working from home was not a common concept in the manufacturing setup. However, in view of the pandemic, the Company adapted to ensure the well-being of employees while maintaining business continuity. Employees who could work remotely have been provided with the infrastructure necessary for smooth and agile collaboration internally within a team as well as between teams. Teams have now adjusted to "working from anywhere", and in some cases meet daily virtually without travel costs or loss of travel time.

Learning and Development

At Motherson, our success stems from the success of our people. We aim to help each employee reach their fullest potential, and thus employee development strategy is aimed at creating a dynamic talent pipeline, capable of supporting the organization to meet evolving business challenges in the long run.

We educate our employees through regular training which helps them acquire new skills, increase their productivity, climb the corporate ladder and take up bigger responsibilities and above all keep them motivated and aligned to organizational goals.

A step forward in this direction has been the development of a web-based e-learning platform that has also been developed and deployed across the organization. This digital model of learning has ensured the collaboration of a larger audience while being seated and learning from anywhere. Leadership development is important for every organization, and at Motherson we initiated a pilot programme for our leaders. The program aims to familiarise future leaders of the group with the Motherson philosophy and to acquaint them with all main areas of expertise within the group. The 3irst pilot included participants from across several continents who participated in an 18-month training and practical programme in which emphasis was placed on enhancing their knowledge of the various aspects of the business and building their leadership skills. Now the same program is being emulated regionally across the group.

We closely monitor the skill matrix of all our people and ensure their personal goals are mapped with their professional grooming to help them live ful3illed professional lives and better enhance their tenure at the company. Quality Circles are another vital employee development activity where employees come together as a team and work towards solving work-related problems. They are encouraged to present their innovative project ideas and methods of implementation to the larger team.

We have been successfully involving and evolving employees in this movement for the past two decades. This is a great way to develop a solution-oriented approach in our employees and teach them di3erent problem-solving techniques.

As of December 31st, 2021, there are 1451 Quality Circles actively operating within the Motherson Group. 3497 quality projects have been completed by the Quality Circles, in the year that has gone by.

Opportunity to grow

The organization believes in providing Equal Growth Opportunities to all those who have the ability and willingness to perform. Meritocracy is the only criteria to rise in rank. All employees have documented key result areas for performance, which are set based on work profile and business requirements through discussion with respective reporting managers. The annual performance appraisal cycle helps to set the expectation via defined targets and objectives along with stating the development needs of the employees. Constant focus on improving over past performance is what is driving the growth in the organization.

The Company is committed to the growth and development of its employees to strengthen their functional, managerial, and leadership capabilities. We have a focused approach with the objective of addressing all capability gaps and preparing our employees to adapt to the fast-changing external environment to meet the Companys strategic objective. The organization follows the mantra of BY‡BY (By Yourself, Better Yourself), which says "Be your own benchmark, set it high, and constantly beat it. Even a small improvement every day will take you to whole new levels". Continual improvement in all areas is our way of life.

Open Door Communication to Create Trust & Transparency

We harbour a culture of trust and transparency by following an Open-Door Policy. We have various policies that work towards open communication and transparency like ‘WE‡Listen, ‘Whistle-Blower, and ‘Make a di"erence named di"erently in di"erent companies but all with the common objective of having an all-encompassing platform for both management and employees that extends to the realms of establishing a system of fair practices and guiding principles for everyone to abide by. The organization has several ways to engage with employees. Interaction sessions, communication meetings, work councils, and various forums are interactive engagement channel that enables two-way communication with employees. Various Cross-Functional Teams (CFT) are in place to collectively brainstorm on practices and improve the process and policies based on the suggestions received. To address any grievance of its workmen, including the temporary workforce, the Company has a well-structured grievance redressal mechanism. Technology has reshaped the way we think, live, and connect. Digital engagement tools have been designed and developed for employees convenience. This group intranet is a connecting highway that facilitates mutual support to move ahead together, encourages collaboration, increases efficiency, and enables the exchange of ideas, and information.

An employee engagement survey is also conducted to gauge the satisfaction levels among the workforce. Based on employee feedback, initiatives have been taken for strengthening communication and workplace improvements.

In short, employee-centric policies and communication forums ensure a safe and secure working environment for all employees.

Health & Safety

The organization regards health and safety as a high priority and a fundamental value to be upheld at all times by all persons. Inspired by the organizations philosophy of ‘Safety First, strong processes and systems are in place to minimize risks and ensure the safety and well-being of the workforce. All employees, right from the shop floor up to the top management, are trained to execute their work safely and responsibly.

Further, the best safety measures by the companies/units are recognized by awards, and such measures are shared on the intranet electronically amongst all the companies/ units.

Safety committees with representation from the management and associates are formulated which ensures that safety is everybodys responsibility. Scheduled Safety Walk-Throughs, Regular Risk assessments, Corrective actions Implementations, and Leadership Commitments instill a safety culture in the organization. Every employee is made aware of raising the flag in case any unsafe act or situation is noticed. Our e"orts to minimize the near-misses ensure that we all work safely and responsibly to have zero accidents and zero work-related fatalities.

Environmental Responsibility

Motherson Environment Stewardship conveys organisations efforts to minimize the environmental footprint. Motherson complies with regulations, advocates for progressive environmental policies, and protects workers safety as part of its corporate responsibility. The Company recognises its corporate responsibility to carry out its operations whilst minimising the impact on the environment. It also aims to comply with all applicable environmental legislation to prevent pollution and to minimise environmental damage occurring as a result of its activities. Across the Motherson Group, alongside IATF16949 accreditation, the organisation is duly certified with ISO14001:2015 accreditation across the business focusing on environmental aspects. We are carefully monitoring all aspects of the environmental footprint of our operations and our products. From the choice of materials and product design to management of our supplier base, from energy use and waste handling to product delivery, there are great sustainability initiatives taking place across the group. The organisation is progressively increasing the share of solar power and wind power in its energy consumption and is graduating to energy-eficient lighting with the adoption of LED lights across its facilities. The United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Climate agreement provide the framework of a collective commitment to minimize the eŒects of global warming. The Paris Agreement acknowledges the urgent need to scale up global response to climate change. This requires international business across all industries to play their part in addressing the challenge. We at Motherson are committed in contributing to passing on to our next generation a clean environment and making every eŒort in preserving earths future by adopting environment friendly technologies, business practices and innovation which lead to a clean and green future. For Motherson and our stakeholders this is an issue of very high material importance where we have the ambition to make a positive contribution. In this respect, Motherson is actively working on following Principles to minimize the environmental impact of its current operations and supply chain, focusing on the following areas:

(a) Minimise and wherever possible eliminate the emission of greenhouse gases.

(b) Improve energy eficiency in all areas and maximise access to sources of renewable energy.

(c) Improve water utilisation eficiency and harvesting.

(d) Minimise and wherever possible eliminate waste focusing on the increased application of recycling solutions.

(e) Focus on climate positive actions and maximising economic circularity.

(f) Adapt and maintain compliance to evolving regional and country specific environmental goals.

Further, to emphasize the fundamental principles shaping the responsibility of Motherson with regard to Climate Change, the Board of Directors of the Company on August 26, 2021 inter-alia, adopted a Climate Change Policy which is available on the website of the Company at https://www.motherson.com/storage/Group-Policies/ Climate-Change-Policy.pdf