Sandhar Technologies Limited Management Discussions

Industry Snapshot:

The Indian automobile industry has been through a rollercoaster ride since the first lockdown due to Covid-19. The pandemic brought the industry to a standstill, with factories shutting down and sales plummeting. However, the industry has shown remarkable resilience and has bounced back stronger than ever.

FY 2022-23 has been a year of consolidation, post Covid. The year started with supply chain disruptions from the Ukraine conflict. However, with efficient management of supply chains better availability of commodities, especially for the electronics items, prices have moderated over the year though it remains a concern. Favorable policy initiatives ranging from impact of new PLI schemes, encouraging announcements in the Budget, forward-looking logistics and foreign trade policies and the recently announced gas pricing guidelines would go a long way in supporting the growth of the Industry.”

According to SIAM, the automobile industry experienced a significant 21% increase in domestic sales in FY 2022-23. Notably, the passenger vehicle sector achieved its highest sales figures, showcasing an impressive annual growth. Commercial vehicles and three wheelers also witnessed substantial growth, with respective increases of 34% and 87% primarily attributed to the higher demand for passenger carriers. The two-wheeler segment showed a moderate growth after experiencing a decline for three consecutive years. However, it is important to note that these segments have not yet reached the sales levels observed before the pandemic.

Production

The industry produced a total of 2,59,31,867 vehicles including Passenger Vehicles, Commercial Vehicles, Three Wheelers, Two Wheelers, and Quadricycles in April 2022 to March 2023, as against 2,30,40,066 units in April 2021 to March 2022 with an increase of 12.55%.

Domestic Sales

The sale of Passenger Vehicle has been 38,90,114 units in April-March 2023, compared to 30,69,523 units in April-March 2022, grown by 26.73%.

The overall Commercial Vehicles sales has been 9,62,468 units in April-March 2023 compared to 7,16,566 units in April- March 2022, increased by 34.32%.

Three-wheeler sales have been 4,88,768 units in April-March 2023 compared to 2,61,385 units in April-March 2022, increased by 86.99%.

Two-wheeler sales have been 1,58,62,087 units in April-March 2023, compared to 1,35,70,008 units in April-March 2022, increased by 16.89%.

Exports

The overall exports have been 47,61,487 units in April-March 2023 compared to 56,17,359 units in April-March 2022, decreased by 15%.

Passenger Vehicles exports increased by 14.71%. Commercial Vehicles, Three Wheelers and Two Wheelers decreased by 14.79%, 26.85% and 17.80% respectively in April-March 2023 over the same period last year.

The table below, gives the segment wise sales volumes of the industry:

Segment	FY23	FY22	Gr %
	Volume ( Nos.)	Volume ( Nos.)
Passenger Vehicles	21,61,163	18,42,025	17%
Utility Vehicles	22,51,211	16,90,255	33%
Vans	1,40,631	1,15,118	22%
Total : PVs + UVs	45,53,005	36,47,398	25%
M & HCVs	3,81,070	2,72,758	40%
LCVs	6,60,043	5,36,105	23%
Total: CVs	10,41,113	8,08,863	29%
Motorcycles	1,34,61,483	1,30,66,628	3%
Scooters	56,06,953	44,63,115	26%
Mopeds	4,45,773	4,83,396	-8%
Total: 2 Wheelers	1,95,14,209	1,80,13,139	8%
Three Wheelers	8,54,317	7,61,115	12%
Total	2,59,62,644	2,32,30,515	12%

The table below, gives the year to date sales volumes of the Companys major OEMs:

OEM Growth Rates		FY23	FY22	YoY
Hero Motocorp	Lacs (Vol.)	53.29	49.44	7.77%
TVS Motors	Lacs (Vol.)	30.67	31.38	(2.25%)
Honda Motorcycles	Lacs (Vol.)	43.51	38.02	14.45%
Bajaj Auto	Lacs (Vol.)	34.38	38.37	(10.40%)
Royal Enfield	Lacs (Vol.)	8.35	6.02	38.62%
Honda Cars	Lacs (Vol.)	1.14	1.05	8.76%
Tata Motors- CVs	Lacs (Vol.)	4.14	3.57	15.85%

FINANCIAL PERFORMANCE FY23

The performance of the Company for the year ended the 31 March 2023 is as per the summary given below:

STL Consolidated:

Total Revenue: Total Revenue (including inter-unit/inter-Company stock transfers) for the year ended the 31 March 2023 at Rs. 3,212.06 Crs as against Rs. 2,579.09 Crs in year ended the 31 March 2022, thereby representing a growth of 25%. After elimination of the inter-unit and inter-Company transactions, the Total Revenue at Consolidated level stood at Rs. 2,921.40 Crs for the year ended 31 March 2023 as against Rs. 2,330.68 Crs in the last year, thereby registering a growth of 25%.

The individual Companys Total Revenue (including Other Income), net of Inter-Unit, stood as below:

Company Name	FY23	FY22	Act Gr Vs LY
	(Rs. In Crs)	(Rs. In Crs)	%
STL	2,409.70	1,946.17	23.82%
STB (WOS) including its subsidiaries	433.06	370.87	16.77%
STPL	19.33	14.42	34.05%
SEPL (WOS)	46.71	0.10
SASPL (WOS)	60.43	10.53	473.88%
SACPL (WOS)	0.60	-
Inter Companies elimination/adjustments	(48.43)	(11.41)
Total	2,921.40	2,330.68	25.35%

The total contribution of the Subsidiaries to the consolidated Revenue has been Rs. 511.70 Crs in the year ended March 2023 as compared to Rs. 384.51 Crs in the previous fiscal year, constituting 17.52% and 16.50% of the Total Revenue, respectively.

EBITDA: At the Consolidated level, the Company registered an EBITDA of Rs. 261.58 Crs in the year ended March 2023 as compared to Rs. 213.01 Crs in the previous year, thereby registering a growth of 22.80%. The individual Companys performance stands as below:

Company Name	FY23	FY22	Act Gr Vs LY
	(Rs. In Crs)	(Rs. In Crs)	%
STL	216.95	171.11	26.79%
STB (WOS) including its subsidiaries	41.65	39.02	6.74%
STPL	5.34	3.40	57.06%
SEPL (WOS)	(4.61)	(0.80)	(476.25%)
SASPL (WOS)	2.94	1.28	129.69%
SACPL (WOS)	(0.24)	-
SAESPL (WOS)	(0.05)	-
Inter Companies elimination/adjustments	(0.40)	(1.00)
Total EBITDA	261.58	213.01	22.80%

The total contribution of the subsidiaries in the Consolidated EBITDA increases to Rs. 44.63 Crs for the year ended March 2023 from Rs. 41.9 Crs for the year ended March 2022 thereby contributing 17.06% to the total Consolidated EBITDA as against 19.67% in the in same period in the last year.

Total Manufacturing Cost

At Consolidated level, the manufacturing cost as a % to Total Net Revenue from Operations (net of GST) stood at 84.06% in the FY23 as compared to 83.41% in the FY22.

At Standalone level, the manufacturing cost as a % to Total Net Revenue from Operations (net of GST) stood at 85.70% in the FY23 as compared to 85.30% in the FY22.

Personnel, Selling and Admin & General Costs:

At Consolidated level, Personnel, Selling, Admin & General Cost are lower at 8.98% in the FY23 as compared to 9.50% in the FY22.

At Standalone level, Personnel, Selling, Admin & General Cost are lower at 7.49% in the FY23 as compared to 8.03% in the FY22.

Foreign exchange loss arising out of trade operations amounted to Rs. 0.91 Cr. in the year FY23 as compared to loss of Rs. 0.02 Cr. in the previous year.

Finance Costs:

At Consolidated level, the Finance Costs increased to Rs. 35.78 Crs (1.23% of Net Revenue) for FY23 versus Rs. 17.71 Crs (0.76% of Net Revenue) in the FY22.

At Standalone basis, the Finance Costs increased to Rs. 15.51 Crs (0.65% of Net Revenue) for the FY23 versus Rs. 9.43 Crs (0.49% of Net Revenue) in the FY22. The interest cost on working capital loans and bill discounting charges stood at Rs. 7.01 Crs for the FY23 as compared to Rs. 6.46 Crs in the FY22.

The average working capital borrowing at Standalone level, decreased by Rs. 138.70 Crs (from Rs. 148.51 Crs in March 22 to Rs. 9.81 Crs in March 23.

Loans (Borrowings):

At Consolidated level, the Term Loans as at the 31 March 2023 stood at Rs. 391.96 Crs versus Rs. 273.15 Crs as at 31 March 2022. Outstanding working capital loans at the Consolidated level stood at Rs. 155.47 Crs as against Rs. 248.09 Crs as at the 31 March 2022.

Outstanding Term Loans on Standalone basis, stood at Rs. 110.31 Cr as at the 31 March 2023 vs Rs. 95.05 Cr. as at the 31 March 2022.

Outstanding working capital loans on Standalone basis have been Rs. 9.81 Crs as at 31 March 2023 versus Rs. 148.51 Crs as at the 31 March 2022.

Capital Expenditure/Addition in Gross Block:

At STL Standalone level, Company increased asset base by Rs. 93.54 Crs as at 31 March 2023.

Capital Expenditure
Addition in Property, Plant & Equipment (a to f)	78.18
a) Buildings	1.87
b) Plant and Equipment	70.06
c) Office equipment	2.50
d) Vehicles	0.45
e) Freehold land	2.02
f) Furniture and Fixtures	1.28
Addition in Intangible assets	1.65
Addition in Right of use assets	13.71
Total additions in Gross Block	93.54
Capital Creditors	1.08
Decrease in CWIP	(21.58)
Increase in Capital Advance	0.86
Less:- Addition in Right of use assets	(13.71)
Total Capex as per cash flow	60.19

Investments:

The Total Investments made during the period in various subsidiaries and joint ventures aggregated Rs. 35.75 Crs. The Total Investments in such subsidiaries and joint ventures stood at Rs. 194.59 Crs.

S. No.	Name of Subsidiary/ Joint Venture	Total Investment as at 31st March, 2023 (Rs. In Crs)	Addition during the year (Rs. In Crs)
1	Sandhar Engineering Private Limited	64.50	29.50
2	Sandhar Amkin Industries Pvt. Ltd.	26.62	-
3	Sandhar Technologies Barcelona S.L.	20.29	-
4	Sandhar Han Sung Technologies Pvt. Ltd.	19.56	-
5	Sandhar Automotive Systems Pvt. Ltd.	16.66	-
6	Jinyoung Sandhar Mechatronics Pvt Ltd.	12.27*	-
7	Kwansung Sandhar Technologies Private Limited	10.08	0.0009
8	Sandhar Whetron Electronics Pvt. Ltd.	6.74**	-
9	Winnercom Sandhar Technologies Private Limited	4.00	-
10	Sandhar Tooling Pvt. Ltd.	3.87	-
11	Sandhar Han Shin Auto Technologies Private Limited	2.75	-
12	Kwangsung Sandhar Automotive Systems Private Limited	0.99	-
13	Sandhar Auto Castings Private Limited	6.25	6.24
14	Sandhar Auto Electric Solutions Private Limited	0.005	0.0049
15	Sandhar Han Shin Automotive Private Limited	-***	-
	Total	194.59	35.75

* The original cost of investment in Jinyoung Sandhar Mechatronics Pvt Ltd is Rs. 13.37 Crs, company noted an impairment loss of Rs 1.10 Crs, fair valued at Rs. 12.27 Crs.

** The Original cost of investment in Sandhar Whetron Electronics Private Limited is Rs. 9.78 Crs, company noted an impairment loss of Rs 3.04 Crs, fair valued at Rs. 6.74 Crs.

*** Sandhar Han Shin Automotive Private Limited is under striking off.

Sundry Debtors:

At Consolidated level, the Receivables as at the 31 March 2023 stood at Rs. 355.36 Crs versus Rs. 445.37 Crs as at the 31 March 2022.

The Receivables for the Company on Standalone basis, stood at Rs. 293.01 Crs as at the 31 March 2023 as against Rs. 406.59 Crs as at 31 March 2022. This represented 45 days of average collection period as against 60 days as at the 31 March 2022. No provision is required to be made, as the receivables are all good and recoverable.

Inventories:

At Consolidated level, the inventories as at the 31 March 2023 stood at Rs. 300.45 Crs versus Rs. 259.69 Crs as at the 31 March 2022.

The inventories for the Company on Standalone basis as at the 31 March 2023 stood at Rs. 164.97 Crs as against Rs. 156.30 Crs as at the 31 March 2022. This represented 34 days of inventory holding period as against 39 days as at the 31 March 2022. No provision is required in the inventory against any slow moving inventory as their dispatch is in accordance with the customer offtake plan.

Current Liabilities:

At Consolidated level, the Current Liabilities & Provisions as at the 31 March 2023 stood at Rs. 540.84 Crs versus Rs. 494.40 Crs as at the 31 March 2022.

The current liabilities & provisions for the Company on Standalone basis, stood at, the Rs. 305.36 Crs as at 31 March 2023 as against Rs. 337.32 Crs as at 31 March 2022. This includes Rs. 254.44 Crs trade payables as at 31 March 2023 and represented 49 days of average payable as against 70 days as at 31 March 2022.

Cash flow from Operations:

The Companys Cash Flow (Consolidated & Standalone level) as at 31 March 2023 stood as under:

(Amount in Rs. Crs.)

Particulars	Consolidated		Standalone
	FY23	FY22	FY23	FY22
Cash Flows from Operating Activities
Profit before tax	100.36	81.44	113.95	86.32
Depreciation and amortization expense	121.52	100.03	84.44	74.26
Other adjustments	34.33	28.68	13.20	8.02
Operating profit before working capital changes	256.22	210.15	211.59	168.60
Movements in working capital:	78.76	(141.98)	61.34	(131.55)
Cash generated from operations	334.98	68.18	272.93	37.05
Taxes Paid	27.08	19.55	26.32	19.19
Net cash inflow from operating activities ( A )	307.90	48.62	246.61	17.86
Cash Flows from Investing Activities
Capital Expenditure	(256.65)	(297.03)	(60.19)	(143.48)
Investments in joint ventures & subsidiaries	(0.09)	(15.24)	(35.75)	(50.24)
Purchase of investments	(0.21)	(3.73)	-	-
Other Receipts	9.32	4.77	8.92	2.22
Net cash used in investing activities ( B )	(247.54)	(311.23)	(87.02)	(191.49)
Cash Flows from Financing Activities
Borrowings/Repayment	26.94	295.37	(123.43)	194.66
Payment of lease liabilities	(19.66)	(16.09)	(9.38)	(8.72)
Dividend Paid	(13.57)	(6.08)	(13.54)	(6.02)
Interest paid	(30.60)	(13.50)	(13.34)	(6.93)
Net cash flow generated from / (used in) financing activities ( C )	(36.89)	259.70	(159.70)	172.99
Foreign currency translation gain	(21.06)	1.03	-	-
Net increase/(decrease) in cash and cash equivalents (A+B+C)	23.47	(2.90)	(0.11)	(0.63)
Opening Cash Balance	4.10	5.97	0.24	0.87
Cash and equivalents at the end of the year	6.51	4.10	0.13	0.24

Contingent Liabilities:

The Companys Contingent Liabilities as at the 31 March 2023 stood as under (all Fig. in Rs. Lacs):

Particulars	31 March 2023	31 March 2022
a. Claims against the Company not acknowledged as debts
- Service tax matters	310.55	310.55
- Income tax matters	259.79	259.08
- Custom act matters	6.94	6.94
- Demand notice against Land (Chakan & Pathredi)	837.52	837.52
- Other matters	53.78	46.50
Total (a)	1,468.58	1,460.59
b. Guarantees given by the Company	23,797.73	16,728.15
Total (a+b)	25,266.31	18,188.74

Outlook:

Given the current momentum, FY2024 is looking good at this stage albeit the rate of growth will moderate from the high double digits to single digit on the high base of FY2023.

India Ratings and Research (Ind-Ra) has maintained a neutral outlook for the auto sector for FY24, as domestic industry segments are likely to continue to recover, although growth rates could moderate on a yoy basis. Ind-Ra believes exports could remain subdued in FY24, especially in 1H, mainly on account of the import ban/restrictions implemented in some Asian / African countries.

According to SIAM president Vinod Aggarwal, “While there are challenges, we expect the entire automobile industry to overcome them and grow in FY2024. The governments move to lower CNG prices is a positive move as it will now drive more sales of CNG trucks and cars, as their operating cost will be lesser, and customers will increasingly opt for this greener fuel option.”