sibar auto parts ltd Management discussions


[Pursuant to Regulation 34 (2) (e) of Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015]

(A) Business Overview:

Review of Operations:

Your directors wish to present the details of Business operations done during the year under review:

During the year under review your company reported growth in revenue from operations of 90.99% over the previous year. The Revenue from operations stood at Rs. 2258.54 lakhs compared with Rs.1182.53 lakhs in the previous year. The operations resulted in Net Profit of Rs. 12.17 lakhs against previous year net loss of Rs. 214.41 lakhs. The repeated waves of Covid-19, had a severe impact on the world supply chain, which extended its disruptions to rising energy prices and even rising inflation levels. The challenges posed upon the global economy urged for structural reforms and thereon, in order to overcome this situation, we have taken all measures to optimize our cash flows to sustain the situation

Your directors are hopeful of better results with increase turnover in the coming years.

INDUSTRY STRUCTURE AND DEVELOPMENTS

AUTO COMPONENTS INDUSTRY IN INDIA IN THE YEAR 2021-22

India is unlikely to achieve a growth rate of 8-8.5% in FY23, due to the impact of Russia-Ukraine conflict, aggressive FED rate hike cycle and China + global growth slowdown, but a 7-7.5% real GDP growth will still be a decent outcome under the circumstances. The bigger priority now is to reduce inflation, so that the ongoing growth recovery can be sustained on a durable basis.

From a slightly positive perspective, India remains relatively less vulnerable to global external shocks compared with the other open market emerging economies, which should help cushion downside growth risks. Fortunately, the impact of the third Covid-19 wave has also proven to be limited, with mobility improving back to pre-pandemic levels swiftly.

The overall automobile production volumes in FY22 marginally grew by +1% YoY, marred by several headwinds like supply chain bottlenecks and semi-conductor shortages. The impact caused by the successive waves of the pandemic and the consequent lockdown restrictions by various states across the country adversely affected the rural as well as the urban markets.

After achieving its peak in FY19, the domestic auto industry has seen two years of decline up to FY21, before recovering in FY22, over a very low base.

Risks and Concerns:

RISKS:

Financial Risk Management:

The Companys activities expose to a variety of financial risks viz., market risk, credit risk and liquidity risk. The Companys focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Company is credit risk and liquidity risk.

Management of Market Risk:

Market risks comprises of Price risk and Interest rate risk. The Company does not designate any fixed rate financial assets as fair value through Profit and Loss nor at fair value through OCI. Therefore, the Company is not exposed to any interest rate risk. Similarly, the Company does not have any Financial Instrument which is exposed to change in price.

Foreign Currency Risks:

The Company is exposed to foreign exchange risk arising currency exposure primarily with respect to the US Dollars (USD) for exports being made by the company and the details of the same have been given in notes forming part of financial statements.

Credit Risk:

Credit risk is the risk of financial loss to the Company if a customer fails to meet its contractual obligations. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables. The company operations

are with parent companies and hence no issues credit worthiness. The company considers that, all the financial assets that are not impaired and past due as on each reporting dates under review are considered credit worthy.

RISK MITIGATION:

The Company has appropriate risk management system in place for identification and assessment of risks, measures to mitigate them, and mechanisms for their proper and timely monitoring and reporting.

(B) Opportunities And Threats:

Opportunities:

The Company is carrying on the business of manufacturing of auto components such as Cylinder Heads, Crankcases for Three Wheelers, Aluminium parts for CAC tanks, Aluminium Parts in Electrical Segments such as Connectors, Core boxes etc.

As reported earlier we have given Nickel Silicon Coated Electro Plated Cylinder blocks for trails for two wheeler manufacturer and trial runs are delayed due to covid-19.

In todays parlance Auto component industry has growth potential as the population is increasing, demand of vehicle in all segment is increasing so the future of the Company seems bright.

THREATS:

While the Economy reeled under the grip of Covid-19 in the past two years and there has been substantial reduction in the number of active cases today, there are still uncertainties around robust economic recovery due various other influencing factors. The Ukraine crisis, Semiconductor shortages and the supply chain disruption continue to weigh on the Economy in general and the Automotive sector in particular. The Indian automotive industry has been witnessing roller coaster ride for nearly two years now and growth challenges still remain.

(C) Internal Control Systems:

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations.

(D) Outlook:

India, which is the fourth largest automotive market in the world, is set to see a sequential growth in 2022 on strong underlying demand reflecting the general economic recovery and consumers preference for personal vehicles over public transportation. On other hand, the sector is facing challenges of increase in fuel price, chip shortages, weak rural demand. Hence, we expect the overall growth to be muted in this financial year.

Deeply impacted by COVID 19, the Indian automotive industry has emerged stronger and shown remarkable resilience. Widespread digitization and technology adoption from source to delivery has played a crucial role in transforming the automotive industry.

Cautionary Statement:

Statements in the management discussion analysis describing the Companys objectives, projections, estimates, expectations are forward looking within the meaning of applicable security-laws and regulations. Forward-looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realised. Actual results may differ materially from these expressed in the statement. Important factors that could make difference to Companys operations include economic conditions, changes in the Government priorities/policies/ regulations, tax laws and other statutes and other incidental factors affecting the business environment. The Company assumes no responsibility to publicly amend, modify or revise forward-looking statements on the basis of any subsequent developments, information or events.

For and on behalf of the Board of Directors
Sibar Auto Parts Ltd
Sd/- Sd/-
Pemmasani Veeranarayana Pemmasani Madhu Pratap
Place: Tirupati Managing Director Whole-Time Directo
Date: 13.08.2022 DIN: 00644259 DIN: 00644254