ANNEXURE - II TO BOARDS REPORT
1. Industry Structure and Development
The growth of domestic automobile market is dependent on the growth of the economy and
consequent increase in income levels.
Production of all vehicle segments registered growth during 2022-23 i.e.
| Vehicle Segment |
Production Growth (in %) |
| Passenger Vehicles |
25% |
| Medium & Heavy Commercial Vehicles |
37% |
| Light Commercial Vehicles |
44% |
| Small Commercial Vehicles |
20% |
| Tractors |
11% |
| Two wheelers |
8% |
Companys exports increased from Rs. 4,010 Million to Rs. 4,841 Million. The trend of
increasing exports is expected to continue in this year as well. However, other global
headwinds and geopolitical challenges leading to uncertainties will critical factor for
sales in the exports market.
2. Opportunities
Overall growth momentum in the automobile sector in India, during 2023-24 is expected
to continue. Passenger Vehicle and Commercial Vehicle segments are expected to register
good growth. However, two-wheeler and three-wheeler segment is expected to register
marginal growth.
Automotive sector is still being challenged by various factors including semiconductor
chip shortages, high fuel prices, increase in interest rates and Russia - Ukraine
conflict.
The growth prospects in medium to long term remain positive and the automotive
component industry is also expected grow in line with the growth in automobile production
and growth in the aftermarket segment.
The latent demand for personal mobility and public transport remains strong. Going
forward, improvement in rural demand based on normal monsoon and availability of finance
will lead to improvement in demand. Government expenditure in Infrastructure projects will
also lead to increase in demand of Commercial Vehicles. Further, Government focus on Panch
tattva (five immediate measures) laid out recently will further fortify growth of
automobile industry.
The Company is closely working with key OEMs for improving its market share by
providing technology solutions. It is also focusing to improve distribution network in the
aftermarket and has presence in all segments of the market including Commercial Vehicles,
Cars/SUVs, Two & Three wheelers, Tractors, Off-highway vehicles and Industrial Engines
for both OEMs and After Market. In order to increase operational flexibility, the Company
is also trying to convert its 2 wheeler line into 4 wheeler production line. This
initiative is expected o save time and effectively fulfil customer demands.
In order to meet the vision of growth and de-risk its business model, the Company has
acquired majority stake in an e-Mobility company (EMF Innovations Pvt. Ltd.). Further as a
part of its diversification strategy the Company has into an agreement to acquire majority
stake in a Plastic Injection moulding part manufacturer (Takahata Precision India Pvt
Ltd.). The Company is also actively working on identifying further suitable opportunities
for diversification. Exports are likely to increase this year as well, as India has
emerged as prominent auto exporter and based on China plus one strategy, the growth
momentum is expected to continue in the near future. The Company is supplying its products
to leading global OEMs with the active assistance of its Technology Partners and has also
established effective distribution for sales in the Aftermarket in various countries.
However, other global headwinds and geopolitical challenges leading uncertainties will be
a critical factor for sales in the exportsmarket.
The Company is targeting to achieve growth, by increasing its market share with key
OEMs and increased focus on the Aftermarket both in domestic and exports market.
3. Threats
The economic situation in the country improved in the year 2022-23. However, this year
witnessed rising interest rates and high inflation levels which resulted in dampening of
market sentiment, this remains a cause of concern for the year 2023-24.
The Company is also taking several initiatives and time bound actions to meet the
changing expectations of especially zero defect quality, traceability, digitization,
automation and cost reduction measures across the organisation.
Volatile Exchange Rate due to uncertainty in global economy and intense competition may
also impact profits of Company in the coming year. The Company is taking all possible
steps to minimise the impact of forex fluctuation.
The Government is encouraging introduction of electric vehicles in the market by
offering various incentives. However, investment made by various OEMs for transition to
BS-6 Engines, coupled with inadequate infrastructure for charging, inadequate facilities
to manufacture batteries & motors, high cost structure for electric vehicles and
safety related issues, appears to be the limitation for faster penetration of e-mobility
especially for Passenger Vehicles and Commercial Vehicles. To further strengthen the
FAME-II subsidy scheme the Government is working towards making the whole process more
transparent and also ensuring that the EV manufacturers become more self-reliant thereby
able to make the product at the right cost, this however would take time. Hence,
e-mobility penetration in the market will be segment driven. Company is closely monitoring
e-mobility trends along with the global partners. On the e-mobility fronts the company has
made strategic investments to get a foothold in this sector and has invested judiciously.
Company is also working on identifying suitable products and technology partners to help
diversification into other adjacencies.
4. Segment-wise/ Product-wise performance
The Company deals principally in only one segment i.e. automotive components.
Therefore, segment-wise performance is not applicable.
5. Outlook
Growth of Automobile sector in India in 2023-24 is dependent on various factors
including geo-political situation. The long-term prospects for automobile production
appears to be good, due to latent demand for personal mobility, rapid urbanisation,
development of road infrastructure and focus on rural development.
Factors like normal monsoon, increasing infrastructure and overall economic growth
indicators shall strengthen the positive outlook and will help the industry to perform
better.
However, other economic measures like rationalising the GST rates on automobiles,
increase in direct incentives on Exports and signing of bilateral treaties with other
countries are needed to boost the demand.
With support of Technology Partners, export sales of Companys products to global OEMs
are expected to further increase in the current year.
The domestic Aftermarket is growing and with increased focus, itis expected to
contribute to Companys sales and profits. The medium to long term outlook for automotive
sector in India is positive. As mentioned above, introduction of e-in near future has
various limitations and may not have significant impact on the operations of the Company
in the next years.
6. Risk & Concerns
Increase in price of automobiles and fuel prices, shortage of semi-conductors, increase
in interest rates and global headwinds are affecting demand. However, favourable
Government policies to promote semiconductor manufacturing will provide fillip to the
Industry.
Demand from customers for price reduction, increase in fuel prices, volatility in raw
material prices due to geopolitical issues and impact on supply chain are the major
concerns for the Company. Management continues to work on various options to improve the
profitability levels.
The Company is taking various steps in a focussed manner to strengthen liquidity and to
increase profitability by productivity improvement, rejection reduction, digitization of
Business Processes and other Cost reduction measures.
The medium to long term outlook for the automotive sector remains positive, with
increasing preference for personal mobility. The Company has developed and implemented
risk mitigation plan by being present across all market segments OEMs and Aftermarket,
both in domestic and export markets across all vehicle segments to optimise Plant
utilisation and continuous drive for cost reduction. Company has a healthy mix of
customers in OEMs, Aftermarket and Exports.
With strong support from our technology partners, the Company is fully geared to meet
customer demand for latest technology products and to increase the number of models/
variants. Company expects to realize ongoing benefits of investments in world class
technology and manufacturing systems in the years to come.
The Management is of the opinion that while risk factors may impact the profitability
of the Company, however the same do not threaten the existence of the Company.
7. Internal Control Systems & their adequacy
The Company has an adequate internal financial control system over financial reporting
and such internal financial are operating effectively and provide reasonable assurance
regarding all financial and operating functions and with statutory provisions.
The Company has an internal audit section besides external firms which are carrying out
internal audits. The internal auditors reports are regularly reviewed by Senior
Management and Audit Committee of the Board.
The Company endeavours to constantly upgrade internal controls and periodic evaluation
of the same is being undertaken. Company has in place adequate systems to periodically
assess various risks, its likelihood and impact and an action plan to pro-actively
mitigate the impact of various risks.
8. Financial/ Operational performance
Companys revenue from operations during the year ended March 31, 2023 were Rs. 26,050
Million. Net profit after tax (before OCI) of the Company during the yearended 31st March,
2023 was Rs. 2,956 Million. Earnings per share was Rs. 134 in 2022-23.
9. Human Resources/ Industrial Relations
The Management considers People as its key resource and provides development
opportunities through various training and welfare programs for employees and their
families.
Various steps are being undertaken on a continuing basis, for maintaining excellent
industrial relations which are helping to strengthen cordial relations with employees and
motivate them tocontribute to the growth of the Company.
The Company is continuously taking steps to strengthen its Management structure to
ensure Stability and Growth. Dignity, respect, fairness, transparency and opportunity of
growth for all employees are the core values of the Company and these are being reinforced
continuously, through many initiatives.
As of 31.3.2023, numbers of permanent employees on rolls of the Company are 3907.
10. Changes in key financialratios are as under:
| S. No. |
Ratios |
Unit |
2021-22 |
2022-23 |
%age change |
| i |
Debtors Turnover |
Times |
5.97 |
6.82 |
14% |
| ii |
Inventory Turnover |
Times |
4.99 |
5.67 |
14% |
| iii |
Interest Coverage Ratio |
Times |
20.45 |
22.90 |
12% |
| iv |
Current Ratio |
Times |
2.31 |
2.50 |
9% |
| v |
Debt Equity Ratio |
Times |
0.11 |
0.19 |
81% |
| vi |
Operating Profit Margin |
% |
10.44 |
14.87 |
42% |
| vii |
Net Profit Margin |
% |
8.08 |
11.55 |
43% |
Return on Net worth of the Company during Financial Year 2022-23 was 20.02% as compared
to 13.15% last year.
11. Cautionary Statement
Statements in the Management Discussion and Analysis Report describing the Companys
objectives, projections, estimates, expectations may be "forward looking
statements" within the meaning of applicable securities laws and regulations. results
could vary materially from those expressed or implied. Important factors that could make a
difference to the Companys operations include, among others, economic conditions
affecting demand/supply and price conditions domestic and overseas markets in which the
Company operates, changes in the Government regulations, tax laws and other statutes and
incidental factors.
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