Shriram Pistons & Rings Ltd Management Discussions

1. INDUSTRY STRUCTURE AND DEVELOPMENT

The expansion of the domestic automobile market is closely tied to the broader economic growth and the resulting rise in income levels among the population.

During the fiscal year 2024-25, production in various vehicle segments experienced growth as detailed below: -

Vehicle Segment	Production Change (in %)
Passenger Vehicles	3
Medium & Heavy Commercial Vehicles	(2)
Light Commercial Vehicles	1
Two wheelers	10
Small Commercial Vehicles	(7)
Tractors	6

However, in the case of Medium & Heavy Commercial Vehicles and Small Commercial Vehicles, there was a contraction in demand.

The Companys export revenue was at Rs. 4,840 Million, compared to Rs. 5,182 million in the previous year. This is due to the ongoing geopolitical issues, including Russia-Ukraine and Israel-Hamas tensions, high interest rates, and foreign exchange issues.

2. OPPORTUNITIES

The Indian automobile sector presents a significant opportunity for growth, driven by a burgeoning middle class, increasing urbanization, and enhanced connectivity across the country. With a young demographic profile and a rising disposable income, Indias appetite for vehicles is expanding, offering a vast market for both domestic and international automakers. The governments push towards electric vehicles (EVs) and sustainable transportation, coupled with incentives for manufacturing and infrastructure development, further bolsters the sectors prospects. Additionally, advancements in technology and the growing acceptance of shared mobility are creating new avenues for innovation and investment.

The Indian automobile industry is also witnessing a transformative shift towards digitization and automation, opening up a plethora of opportunities for companies to innovate and cater to a tech-savvy consumer base. Stakeholders who are agile and responsive to these changes, and who can effectively leverage Indias strengths, such as its skilled workforce, robust supply chain, and large domestic market, will be well-positioned to capitalize on the opportunities that lie ahead.

The integration of digital technologies in vehicles, such as connected car features, advanced driver-assistance systems (ADAS), and in-car infotainment, is becoming increasingly prevalent. This digital evolution is not only enhancing the driving experience but also paving the way for the development of smart mobility solutions. As a result, companies that invest in research and development (R&D) and embrace these technological trends are likely to gain a competitive edge in the market.

The Indian governments initiatives, such as the Automotive Mission Plan and the National Electric Mobility Mission Plan, aim to promote sustainable growth in the automotive sector and envisage India as a global manufacturing powerhouse. These initiatives are designed to attract foreign direct investment (FDI) and encourage collaborations between Indian and international players. The focus on building a comprehensive EV ecosystem, including battery manufacturing and charging infrastructure, presents additional opportunities for growth and collaboration.

The after market segment in India is another area with potential, as the vehicle population ages and the demand for maintenance, repairs, and customization grows.

Despite headwinds such as high fuel costs, increasing interest rates, and geopolitical tensions, the resilience of the Indian automotive industry is noteworthy. The medium to long-term outlook remains promising, with the growth of the automotive components industry anticipated to reflect the upward trend in vehicle production and the aftermarket sector.

The persistent demand for both personal and public transportation is underpinned by favourable factors, including expected normal monsoon patterns and increased financial accessibility, especially in rural regions. These elements are projected to stimulate further demand.

The Company is proactively engaging with leading Original Equipment Manufacturers (OEMs) to enhance its market share through innovative technology solutions. It is also refining its distribution network in the aftermarket and boasts a comprehensive market presence across various segments, including Commercial Vehicles, Cars/SUVs, Two & Three wheelers, Tractors, Off-highway vehicles, and Industrial Engines, catering to both OEMs and the Aftermarket. To augment operational agility, the Company is adapting its capacities to be interchangeable across different product segments.

In a strategic move to diversify and mitigate risk, the Company is exploring opportunities in non-automotive sectors such as compressors, marine engines, and snowmobile applications. Additionally, the Company is focused on increasing the sales of its recently acquired entities, SPR EMF Innovations Private Limited, SPR Takahata Precision India Private Limited and SPR TGPEL Precision Engineering Ltd.

On the international front, in the long-term, exports are expected to rise as India cements its position as a key auto exporter. The ‘China plus one strategy is likely to sustain this growth momentum. The Company is not only supplying to top-tier global OEMs with support from its Technology Partners but has also established a robust distribution network for aftermarket sales in various countries. Nevertheless, the Company remains vigilant of global economic fluctuations and geopolitical unrest, which pose considerable challenges to its export market performance.

The Company is navigating a landscape filled with both opportunities and challenges. By leveraging its strategic partnerships, diversifying its portfolio, and capitalizing on Indias growing role in the global automotive market, the Company is well- positioned to harness the potential for growth in the coming fiscal year and beyond.

3. THREATS

The fiscal year 2024-25 proved to be a strenuous period for the Indian economy, which faced an array of economic challenges that led to a deceleration in GDP growth compared to the previous year. The confluence of rising interest rates and persistent inflation created a challenging environment for businesses and consumers alike, reshaping market dynamics and tempering economic activity. As the Company looks toward FY 2025-26, it is acutely aware of the ongoing economic volatility and its capacity to disrupt operations. Exchange rate fluctuations, stemming from global economic instability and intense market competition, pose a significant threat to the Companys financial health. In response, the Company is fortifying its financial strategies, employing hedging techniques, broadening its currency portfolio, and enhancing fiscal management to buffer against the unpredictability of forex markets.

Adapting to the changing consumer landscape, the Company is recalibrating its operational focus. This recalibration is centered on a persistent commitment to achieving quality excellence, with an emphasis on zero defects, bolstered product traceability for heightened accountability, and a push towards digitization to optimize operational efficiency. The integration of advanced automation technologies is expected to elevate productivity, while comprehensive cost-reduction initiatives are being rigorously applied to safeguard the Companys competitive edge and financial margins.

The governments advocacy for electric vehicles (EVs) through various incentives marks a positive stride for the industry; however, the Company is cognizant of the hurdles impeding the widespread adoption of EVs. Challenges such as the scarcity of charging infrastructure, constrained domestic production of batteries and motors, the premium cost structures of EVs, and ongoing safety concerns could potentially hinder the pace of e-mobility adoption, particularly within the Passenger and Commercial Vehicle segments that are integral to the Companys business model.

In preparation for the industrys transition towards e-mobility, the Company is actively tracking market trends and forging strategic alliances with international partners to secure a technological and supply chain advantage. These partnerships are designed to bolster the Companys preparedness for the burgeoning EV market and to address the evolving needs of the automotive sector.

With a forward-looking perspective, the Company has made deliberate investments in the e-mobility domain, seeking out synergistic partnerships with product and technology firms that resonate with its strategic vision. These investments are carefully planned to contribute to the Companys long-term resilience and expansion, striking a balance between immediate market demands and the anticipation of future industry shifts.

As the Company advances, it remains dedicated to fostering innovation, championing sustainability, and pursuing strategic growth. By remaining responsive to market indicators, adapting to consumer trends, and making judicious investments in emergent technologies, the Company is well-equipped to tackle the economic complexities and emerge as a stronger entity in FY 2025-26 and in the years to follow. The Companys proactive and adaptable approach is a demonstration to its commitment to not just weather the economic storms but to emerge from them with new strengths and opportunities for growth.

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

The fiscal year 2024-25 presents a complex outlook for the automobile sector, with its trajectory influenced by a confluence of factors including geopolitical developments, persistent inflation, and evolving consumer preferences. Despite these headwinds, the long-term prospects for automobile production remain robust, buoyed by the growing demand for personal mobility, rapid urbanization, enhancements in road infrastructure, favourable agricultural conditions, and concerted efforts towards rural development.

The Companys strategic blueprint is anchored in several key pillars designed to navigate these challenges and capitalize on emerging opportunities:

Market Expansion: The Company is poised to consolidate its presence in the domestic market, broadening its product offerings and venturing into non-automotive segments to capture new business opportunities. Efforts are underway to augment the distribution network, ensuring wider reach and accessibility. Geographical diversification is also a priority, with a focus on penetrating emerging markets where the appetite for automotive components is escalating. In the Aftermarket, the Company is dedicated to expanding its product range and achieving deeper market penetration.

Innovation and Technology: A firm commitment to innovation and technological advancement underpins the Companys strategy. The Company takes pride in manufacturing products that are at the forefront of technological advancement, ensuring that every aspect, from design to production, reflects the Companys commitment to innovation. Emphasis is placed on developing products that align with the industrys pivot towards electric vehicles and alternative greener fuels such as CNG, LNG, H-CNG, other flex fuels, and hydrogen.

Each product is crafted using state-of-the-art components and materials, which also enhance performance and durability. These technologically advanced features not only elevate the quality of the Companys offerings but also contribute to sustainability by significantly reducing the carbon footprint associated with the lifecycle of the products.

The Companys access to cutting-edge technology is complemented by four long-standing technology collaborations with prominent global leaders in the automotive components. These include collaboration with Kolbenschmidt Group for pistons, Honda Foundry for pistons specific to Honda requirements globally, Riken Corporation for rings production and with Fuji Oozx for engine valves.

By maintaining a pulse on technological trends, the Company is poised to address the dynamic needs of customers and secure a competitive advantage. Investments in state-of-the-art manufacturing technologies and processes are pivotal, enabling the delivery of sophisticated solutions that resonate with the markets direction.

By integrating cutting-edge technologies into its products, the Company is not only meeting the demands of modern consumers but also playing its part in fostering a more sustainable future.

Solidifying relationships: The Companys enduring relationships with global OEMs are a testament to its success. These strategic alliances have not only fortified the Companys domestic standing but have also paved the way for international expansion. The Companys reputation for delivering quality, reliability, and innovation continues to be a linchpin in fostering these partnerships, establishing the Company as a preferred supplier for leading OEMs worldwide.

Operational Excellence: The pursuit of operational excellence is relentless, with a focus on refining manufacturing processes, curtailing costs, and elevating efficiency. Through operational streamlining, the Company aims to bolster its market competitiveness and enhance profitability.

Customer-Centric Approach: The Company is doubling down on its efforts to understand and meet the evolving needs of consumers. By leveraging data analytics and customer feedback, the Company is tailoring its products and services to deliver enhanced value and a superior customer experience. This customer-centric approach is critical in fostering brand loyalty and driving repeat business in a market where consumer preferences are rapidly changing.

Global Supply Chain Resilience: In an era marked by supply chain disruptions, the Company is working to build a more resilient and responsive supply chain network. This involves diversifying sourcing strategies, investing in supply chain technologies, and building stronger relationships with key suppliers. By enhancing supply chain agility, the Company can better manage risks associated with global trade uncertainties and maintain uninterrupted production.

Digital Transformation: The Company is accelerating its digital transformation journey, implementing tools and platforms that facilitate better decision-making and operational efficiency. From digital design and simulation in product development to automation in manufacturing and AI in quality control, the Company is harnessing the power of digital technologies to stay ahead of the curve.

Workforce Development: Recognizing that its workforce is a key driver of success, the Company is investing in talent development programs to enhance skills and foster a culture of continuous learning. Initiatives such as leadership training, technical upskilling, and cross-functional team collaborations are designed to empower employees and prepare them for the challenges of tomorrow.

Regulatory Compliance and Advocacy: As regulations become more complex, the Company is not only ensuring compliance but also actively participating in industry dialogues to shape policy outcomes. By engaging with regulators and industry bodies, the Company aims to advocate for policies that support innovation and sustainable growth in the automotive sector.

Financial Stability and Growth: The Company is maintaining a strong focus on financial health, optimizing capital allocation, and pursuing strategic investments that promise long-term returns. Prudent financial management, coupled with a clear vision for growth, positions the Company to capitalize on market opportunities and navigate economic cycles with resilience.

Community Engagement and CSR: Beyond its business operations, the Company is deeply committed to corporate social responsibility (CSR) and community engagement. Initiatives aimed at education, healthcare, environmental conservation, cultural and community development are integral to the Companys ethos, reflecting its dedication to making a positive impact on society.

Sustainable Development: The Companys commitment to sustainable development is steady, with sustainability principles integrated throughout its value chain. Significant strides have been made in the Companys ESG initiatives, with three plants achieving zero liquid discharge status and the implementation of advanced ETP and STP systems. The Company has also made commendable progress in reducing Scope I & II emissions by over 20% in a span of 3 years, increasing the mix of renewable energy sources such as solar and wind power by 20%, and enhancing the utilization of recycled materials by 30%.

With its strategic pillars firmly established, the Company is ready to navigate the complexities of the automotive components industry. Its focus on expanding the market, embracing innovation, maintaining strong relationships with OEMs, striving for operational excellence, and committing to sustainability sets the stage for continued growth and success. Looking ahead, the Company is confident that its well-rounded approach and flexible strategies will lead to a prosperous and environmentally responsible future in the automotive sector. By adding new strategic elements to its framework, the Company is not only addressing the challenges of the industry but is also becoming a leader in excellence, innovation, and corporate responsibility. This approach, which balances short-term business goals with long-term planning, positions the Company to succeed in the competitive automotive landscape.

6. RISK & CONCERNS

Risk is an inherent aspect of business, and the Company is no stranger to the challenges posed by a dynamic and competitive environment. The industry landscape is marked by relentless innovation and fluctuating resource availability, which can create disparities among market participants. The volatility in raw material costs, exacerbated by inflation, presents additional hurdles. However, the Company has demonstrated resilience through strategic raw material procurement and cost management, effectively managing the rise in manufacturing expenses.

The automotive industry, in particular, is grappling with the rising costs of essential materials such as steel, aluminium, copper, and precious metals. Fuel prices are climbing, and regulatory demands are intensifying. The sector must also adapt to rapid technological advancements, evolving consumer preferences, and the diminishing barriers to global trade, all of which could potentially constrain growth and squeeze profit margins.

External economic forces, including higher vehicle and fuel prices, increasing interest rates, and global economic uncertainties, are suppressing consumer demand. Yet, there is a silver lining: government initiatives promoting semiconductor production are poised to invigorate the industry.

In response to these multifaceted challenges, the Companys management has taken decisive action, implementing strategies to strengthen liquidity and profitability. These strategies encompass productivity improvements, reduction of rejections, digitization of operations, and a suite of cost-efficiency measures.

Despite the current headwinds, the medium to long-term prospects for the automotive sector are encouraging, fuelled by a growing preference for personal transportation. The Company has crafted a comprehensive risk mitigation strategy, ensuring a diversified presence in various market segments, including OEMs and the Aftermarket, as well as in both domestic and international markets.

With the support of its technology partners, the Company is well-positioned to satisfy the markets appetite for innovative products and to broaden its range of models and variants. The Companys ongoing investments in state-of-the-art technology and manufacturing infrastructure are anticipated to deliver substantial returns in the future.

While the Company recognizes that these risk factors could influence its profitability, it remains confident in its ability to navigate these challenges without jeopardizing its long-term viability. The Companys proactive and adaptive approach, combined with its diversified operations and technological prowess, provides a solid foundation for enduring success in the face of potential risks.

7. INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY

The Company has established a comprehensive internal control framework designed to authorize, document, and accurately report transactions, as well as to protect assets from unauthorized access or disposition. These control measures are critical for ensuring the reliability of financial data and information, as well as for upholding accountability for the Companys assets.

The Audit Committee, an integral part of the Board, actively engages in reviewing significant audit observations and the subsequent remedial measures. It also oversees the progress of managements responses to internal audit findings. The Internal Audit function, working in tandem with external auditors, has been instrumental in fortifying the Companys processes to boost efficiency and productivity. This includes the adoption of state-of-the-art analytical tools within the audit field to deepen the scope, extend coverage, and enhance precision.

The Companys internal financial controls over financial reporting are robust and effective, offering reasonable assurance across all financial and operational activities, as well as adherence to legal mandates. Comprehensive business planning, investment analysis, annual reviews, and regular financial and operational planning are embedded practices. Monthly performance tracking is a routine procedure for all operational and service departments.

The integration of Enterprise Resource Planning (ERP), supplier relationship management, and customer relationship management systems facilitates seamless communication across various locations, dealers, and vendors, optimizing the exchange of information. The Company leverages data analytics and advanced IT resources to broaden and refine the internal audit functions scope and efficacy.

In response to the growing cybersecurity concerns in todays digital landscape, the Company is proactively implementing robust systems and protocols to safeguard its assets and data. The Company is committed to ensuring the highest level of security by conducting thorough risk assessments and deploying advanced technologies to detect and mitigate potential threats. The team is continuously monitoring the Companys systems and networks, while also providing ongoing training and awareness programs to all the employees.

Additionally, the Company has implemented systematic procedures to periodically evaluate a spectrum of risks, assess their probability and potential impact, and devise proactive strategies to mitigate the effects of these risks.

8. FINANCIAL/ OPERATIONAL PERFORMANCE

The Companys consolidated revenue from operations during the year ended March 31, 2025, was Rs. 35,498 Million, which increased by 15% from Rs. 30,893 Million for the year ended March 31, 2024. Consequently, the consolidated total income during the year ended March 31, 2025 also grew by 15% over the previous year, to Rs. 36,612 Million, from Rs. 31,746 Million in fiscal year 2024-25. The Company has achieved growth and delivered a strong overall performance, despite a turbulent year for the industry both domestically and internationally, thereby outgrowing the end markets.

Consolidated net profit after tax (before OCI) of the Company during the year ended March 31, 2025, was Rs. 5,156 Million as against Rs. 4,387 Million during the year ended March 31, 2024, which was a year-on-year growth of 18%.

Consolidated earnings per share in fiscal year 2024-25 was at Rs. 115.02 per share, as compared to Rs. 100.47 per share in the fiscal year 2023-24, marking a year-on-year growth of 14%.

On a standalone basis, the Company recorded revenue from operations of Rs. 31,795 Million in fiscal year 2024-25, as compared to Rs. 29,537 Million in fiscal year 2023-24. Total income during the year ended March 31, 2025, stood at Rs. 32,827 Million, growing by 8% from Rs. 30,351 Million for the year ended March 31, 2024.

Standalone net profit after tax (before OCI) for the year ended March 31, 2025 grew by 11% to Rs. 4,978 Million as compared to Rs. 4,468 Million for the year ended March 31, 2024.

Standalone earnings per share in fiscal year 2024-25 was at Rs. 113.01 per share, as compared to Rs. 101.42 per share (post bonus issue of 1:1) in the fiscal year 2023-24, marking a year-on-year growth of 11%.

Thus, the Company concluded the fiscal year 2024-25 with a robust performance across all metrics. This performance is a testament to the leading market position and strategic approach adopted by the Company to navigate market complexities, enabling the Company to continuously outgrow the industry.

9. HUMAN RESOURCES/ INDUSTRIAL RELATIONS

The Company firmly believes that its human resources are the bedrock of its success. Embracing a value-driven culture, the Company has consistently invested in its people, fostering a sense of community and belonging. Management acknowledges the critical role of its workforce and is committed to their development through a spectrum of training initiatives and welfare programs. The aim is to cultivate an environment that encourages continual innovation and progress, where employees are recognized and rewarded for their contributions towards the Companys goals. Efforts are continually made to reinforce the management framework, promoting both stability and advancement within the organization.

The collective achievements of the Company are attributed to the teamwork and collaborative spirit of its employees. The Company is dedicated to maintaining a nurturing learning atmosphere that supports employees from the moment they are hired through to their retention. Core values such as dignity, respect, fairness, and transparency are at the heart of the Companys ethos, alongside providing equal growth opportunities for all staff members. Internal mobility is actively promoted, allowing employees to pursue a variety of career paths and aiding in the cultivation of a strong talent reservoir.

The Company has successfully completed several strategic acquisitions over the last few years, enhancing the Companys capabilities and expanding market presence. The Company has made significant strides in integrating the teams from the group companies, fostering collaboration and synergy across all levels. This has been done by rolling out common culture across the group Companies. With a clear vision set forth by the management, all teams are aligned on a unified path, working cohesively towards common goals. This collaborative spirit among the group companies is driving the Company towards greater success, as the Company leverages the collective strengths to achieve outstanding results in the future.

The Company is committed to the principles of equal opportunity employment, with policies that encompass all aspects of diversity, including but not limited to gender, marital status, religion, caste, color, age, ancestry, language, socio-economic background, physical appearance, disability, and any other categories safeguarded by law. Recognizing the skills, contributions, potential, and intrinsic worth of its human capital, the Company maintains the highest regard for the dignity, basic freedoms, and human rights of its employees, contractors, and the communities where it operates. As a conscientious corporate entity, the Company adheres to all relevant legal requirements and upholds human rights standards.

As of March 31, 2025, the Company is proud to have a dedicated team of 3,857 permanent employees.

10. CHANGES IN KEY FINANCIAL RATIOS ARE AS UNDER:

S. No. Ratios	Unit	2023-24	2024-25	Variance (%)
i Debtors Turnover	Times	6.94	6.56	(5.51)
ii Inventory Turnover	Times	6.04	5.76	(4.55)
iii Interest Coverage Ratio	Times	25.15	28.21	12.16
iv Current Ratio	Times	2.32	2.46	6.26
v Debt Equity Ratio	Times	0.17	0.15	(15.50)
vi Operating Profit Margin	%	18.66	18.87	1.10
vii Net Profit Margin	%	15.36	15.89	3.46

Return on Net worth of the Company during Financial Year 2024-25 was 20.89% as compared to 23.25 % last year.

CAUTIONARY STATEMENT

This document, part of the Management Discussion and Analysis Report, contains forward-looking statements. These statements, which may include projections, expectations, and assessments of market conditions and regulatory frameworks, are developed under the framework of applicable securities laws and are grounded in the data currently accessible to the Company. Such forward- looking statements are speculative by nature and are subject to inherent uncertainties and reliance on assumptions made by the Company.

The Company urges readers to exercise caution with respect to these forward-looking statements. It is possible that actual outcomes, future results, and events may deviate significantly from what is projected or anticipated due to a variety of influential factors. Key elements that could impact the Companys performance include, but are not limited to, economic trends influencing supply and demand dynamics, pricing in both local and international markets, legislative changes, modifications in tax regulations, and other unforeseen variables.

This cautionary statement serves to remind readers that the forward-looking statements should not be seen as guarantees of future performance and that they are subject to risks, uncertainties, and assumptions that are detailed in the Managements Discussion and Analysis section of the Boards Report for the fiscal year 2024-25. This section provides a comprehensive context and should be consulted to fully understand the qualifications and risk factors associated with the forward-looking statements made herein.