FORWARD LOOKING STATEMENT
The report contains forward-looking statements, identified by words like ‘plans,
‘expects, ‘will, ‘anticipates, ‘believes, ‘intends,
‘projects, ‘estimates and so on. All statements that address expectations or
projections about the future, but not limited to the Companys strategy for growth,
product development, market position, expenditures and financial results, are
forward-looking statements. Since these are based on certain assumptions and expectations
of future events, the Company cannot guarantee that these are accurate or will be
realized. The Companys actual results, performance or achievements could thus differ from
those projected in any forward-looking statements. The Company assumes no responsibility
to publicly amend, modify or revise any such statements on the basis of subsequent
developments, information or events. The Company disclaims any obligation to update these
forward-looking statements, except as may be required by law.
GLOBAL ECONOMY OVERVIEW
The calendar year 2020 was a great disruption unleashed by a viral pandemic that hit
the world economy very hard. The pandemic spread like a forest fire, reaching every corner
of the world, infecting more than 90 million and killing close to 2.8 million people
worldwide (as of January 2021). For several months, uncertainties and panic paralysed most
economic activities in both developed and developing economies. The pandemic has exposed
the systemic vulnerability of the world economy. Building economic, social and
environmental resilience must guide the recovery from the crisis.
World gross product fell by an estimated 4.3 percent in 2020, the sharpest contraction
of global output since the Great Depression. The pandemic hit the developed economies the
hardest, given the strict lockdown measures that many countries in Europe and several
states of the United States of America imposed early on during the outbreak. The
developing countries experienced a relatively less severe contraction, with output
shrinking by 2.5 percent in 2020. Their economies are projected to grow by 5.7 percent in
2021.
Activity is expected to strengthen in the second half of this year and firm further
next year, as improved COVID-19 management aided by ongoing vaccination allows for an
easing of pandemic control measures. Global economic output is expected to expand 4
percent in 2021 but still remain more than 5 percent below pre-pandemic projections.
Global growth is projected to moderate to 3.8 percent in 2022, weighed down by the
pandemics lasting damage to potential growth. The global recovery, which has been
dampened in the near term by a resurgence of COVID-19 cases, is expected to strengthen
over the forecast horizon as confidence, consumption, and trade gradually improve,
supported by ongoing vaccination.
Sources: World Economic Situation and Prospects report by United Nations, World Bank
report
INDIAN ECONOMY OVERVIEW
Financial Year 2020-21 started with a Nation-wide lockdown in India although India
emerged as the fastest-growing major economy in the world and is expected to be one of the
top three economic powers in the world over the next 10-15 years, backed by its robust
democracy and strong partnerships. The Economic Survey has projected that the economy will
grow at 11 percent, up from an estimated historic decline of 7.7 percent 1 in 2020-21, on
account of the COVID-19 pandemic. Also, the vaccination drive is expected to provide an
impetus for the restoration of contact-intensive sectors and a leading edge to the Indian
pharma industry in the global market.
The fundamental of the economy remains strong as gradual scaling back lockdowns along
with astute support of Atmanirbhar Bharat Mission have placed the economy on the path of
revival. V-shaped economic recovery due to mega vaccination drive, robust recovery in the
services sector and robust growth in consumption and investment. V-shaped recovery is
mainly on account of resurgence in high frequency indicators such as demand of power, rail
freight, e-way bills, GST collection, steel consumption, etc.
As per the Governments vision for Atmanirbhar India, the PLI scheme is expected to
incentivize global and domestic manufacturers to engage in high-volume, high-value
production hereby increasing self-reliance and also, increasing exports.
The Government of India, under its Make in India initiative, is trying to boost the
contribution made by the manufacturing sector with an aim to take it to 25% of the GDP
from the current 17%. Besides, the Government has also come up with the Digital India
initiative, which focuses on three core components: the creation of digital
infrastructure, delivering services digitally and increasing digital literacy. Indias
Index of Industrial Production (IIP) for October 2020 stood at 128.5 2, against 123.2 for
September 2020. Consumer Food Price Index (CFPI) – combined inflation was 9.43% 2 in
November 2020, against 11.07% in October 2020. Consumer Price Index (CPI) – combined
inflation was 6.93% 2 in November 2020, against 7.61% in October 2020.
The government has the ambition of making India a USD 5 trillion economy by 2024 for
which various initiatives have been undertaken in the last few years to improve ease of
doing business, encourage Make in India, invite foreign companies to India with schemes
like PLI (production-linked incentive) and tweak the legacy labour laws, Agri policies,
etc.
With the shift in sentiment to reduce dependence on a single country i.e., China, we
are seeing increasing interest from international companies wanting to invest in India.
Interest is largely from Asia led by Japan, Korea and Thailand although we are also seeing
interest from Europe. Some of these enquiries are in sectors such as agrochemicals,
building products, logistics, packaging, and new-age technology including electronics,
sectors where we have not seen significant interest in the past.
Sources: Economic Times, IBEF report
SECTOR OVERVIEW
AUTOMOBILE SECTOR INDUSTRY -
Source: IBEF report- Automobiles
AUTO COMPONENTS INDUSTRY -
Indias domestic market for auto components was worth USD 49.30 billion in FY20 and is
expected to reach USD 200 billion by FY26. Exports will account for 26% of the market by
2021. Both domestic and export markets are almost similar in terms of potential share by
different product types. Engine and Exhaust components along with Body & Structural
parts are expected to make up nearly 50% of the potential domestic sales as well as export
in 2020. A cumulative investment of ~Rs 12.5 trillion (USD 180 billion) in vehicle
production and charging infrastructure would be required until 2030 to meet Indias
electric vehicle (EV) ambitions. This is likely to boost the demand of auto components
from local manufacturers. This industry saw FDI inflows in the automotive sector which
stood at USD 25.39 billion from April 2000 to December 2020. With the "Make in
India" initiative, the Government is expected to vitalize substantial investment in
the auto components sector. In addition, Top private equity (PE) firms such as Temasek,
Blackstone, Goldman Sachs, Samara Capital, and Baring Private Equity Asia are actively
exploring investment opportunities in Indias auto parts manufacturing sector.
Turnover of the automotive components industry stood at Rs 1.19 lakh crore (USD 15.9
billion) from April to September 2020, registering a decline of 34% over the first-half of
the previous year. The domestic OEM supplies contributed ~56% to the industry turnover,
followed by exports and domestic aftermarket at ~25% and 20%, respectively, in FY21. The
export of automobile components from India in FY21 stood at Rs 39,003 crore (USD 5.2
billion). As per the Automobile Component Manufacturers Association (ACMA) forecast,
automobile component exports from India are expected to reach USD 80 billion by 2026.
RECENT TRENDS
Global components sourcing hub -
Major global OEMs have made India a component sourcing hub for their global operations.
Several global Tier-I suppliers have also announced plans to increase procurement from
their Indian subsidiaries. India is also emerging as a sourcing hub for engine components
with OEMs increasingly setting up engine manufacturing units in the country. For companies
like Ford, Fiat, Suzuki and General Motors (GM), India has established itself as a global
hub for small engines.
Improving product-development capabilities -
Increased investments in setting-up R&D operations & laboratories to conduct
activities such as analysis, simulation & engineering animations. The growth of global
OEM sourcing from India & increased indigenization of global OEMs is turning the
country into a preferred designing & manufacturing base. Faurecia, a global automotive
equipment leader, has partnered with the Indian Institute of Science (IISc) to develop new
technologies and solutions in three areas - online air quality monitoring, data analysis
and algorithms for driver behavior and artificial intelligence for industrial design. In
July 2020, Bridgestone, a tyre maker, partnered with Microsoft to develop tyre damage
detecting system on a real-time basis.
OUTLOOK GOING AHEAD -
It is expected that there will be a robust growth in domestic automotive industry. The
increase in investment in infrastructure, growth in working population & in income of
middleclass population, will drive growth in the automotive market. With the Self-Reliant
India mission, the auto industry is looking to reduce by half its present Rs 1 trillion
(USD 13.6 billion) worth of auto component imports over the next 4-5 years. This will
provide significant opportunities for existing and new auto components players to scale
up. Competitive advantage will facilitate the emergence of outsourcing hub, followed by a
technological shift in product manufacturing and focus on R&D.
Policy support will emerge as a key growth driver. Initiatives such as ‘Make in
India, ‘Automotive Mission Plan 2026, and ‘National Electric Mobility Mission
Plan 2020 (NEMMP 2020) will give a huge boost to the sector. In Union Budget 2021-22, the
government introduced the voluntary vehicle scrappage policy, which, when implemented, is
likely to boost demand for new vehicles after removing old unfit vehicles currently plying
on the Indian roads. To install electric vehicle supply equipment (EVSE) infrastructure
for EVs, various public sector firms, ministries and railways have come together to create
infrastructure and manufacturing of components.
The Automotive Mission Plan 2016-26 (AMP 2026) -
It targets a four-fold growth in the automobile sector in India which include
manufacturers of automobiles, auto components & tractors over the next 10 years. The
plan is a mutual initiative by the Government of India and Indian Automotive Industry to
lay down the roadmap for development of the industry as the Government aims to develop
India as a global manufacturing center.
Production-linked incentive (PLI) SCHEME -
On November 11, 2020, the Union Cabinet approved production-linked incentive (PLI)
scheme across 10 key sectors (including automobiles & auto components) to boost
Indias manufacturing capabilities, exports and promote the ‘Atmanirbhar Bharat
initiative. The Union Cabinet has provided for an outlay of Rs 57,042 crore (USD 7.81
billion) for automobiles & auto components sector under the Department of Heavy
Industries.
Faster Adoption and Manufacturing of Hybrid and Electric Vehicle (FAME) -
The Government approved FAME and plans to cover all vehicle segments and all forms of
hybrid & pure EVs. FAME-I scheme started in 2019 was supposed to end by 2022. In June
2021 the scheme was extended until March 31, 2024. In February 2019, the Government of
India approved FAME-II scheme with a fund requirement of Rs 10,000 crore (USD 1.39
billion) for FY20-22.
Other growth drivers -
Dept. of Heavy Industries & Public Enterprises created a USD 200 million fund to
modernize the auto components industry by providing interest subsidy on loans &
investments in new plants & equipment. This also provided export benefits to
intermediate suppliers of auto components against Duty-free Replenishment Certificate
(DFRC).
India has significant cost advantages. Auto firms save 10- 25% on operations vis-a-vis
Europe and Latin America. The industry has witnessed a cumulative FDI inflow of about USD
25.40 billion in the automobile sector between April 2000 and December 2020. The
Government of India expects automobile sector to attract USD 8-10 billion in local and
foreign investments by 2023. The vision of National Electric Mobility Mission Plan (NEMMP)
2020 is for faster adoption of EVs and their manufacturing in the country; aims at
achieving sales of 6-7 million units of hybrid and EVs by 2020.
Source: IBEF report - Auto Components
COMPANY AND PERFORMANCE OVERVIEW:
Your Company mainly caters to the domestic OEM buyers in automotive segment like Maruti
Suzuki Limited, Mahindra & Mahindra Limited, Bajaj Auto Limited and Fiat India
Automobiles Private Limited. We have an in-house dedicated Research & Development team
and have been developing new products in engines, transmission systems and body chassis
for OEMs and Tier-1 customers. The main product line of the Company is manufacturing of
high strength structural sintered components of Engine and Transmissions. One of our Body
Corporate Promoter, MIBA Sinter Holding GmbH & CO KG, which is part of MIBA group, has
track record of more than five decades in sintered technology.
Company has been awarded various new programs as under –
- DANA Graziano for the sintered synchro rings. This is strategically important for us
as it make our entry into Off Highway segment and opens big opportunity for us in near
future.
- PSA/AVTEC for the mass balancer assembly can now be confirmed as awarded. This begins
our journey with the PSA group and plays an important role as this supply is for their
global engine Euro 6 & Euro 7 and opens opportunities for us to access the European
market.
- Saleri Italo group, has awarded pulley for the VW MQB India 2.0 platform.
In the financial year 2020-2021, your Company recorded net sales of Rs. 471.99 million
as against Rs. 535.23 million in the previous year and thereby recorded decrease of 10.93%
in the net sale.
For the financial year 2020-2021, the Company incurred loss before tax of Rs. 61.92
million as against loss of Rs. 34.35 million for previous financial year. This was mainly
due to the pandemic and effected supply chain during the start of the year. The loss was
offset partially due to our immediate reductions in all variable costs related to lower
production volumes. These actions included reductions in the productions shifts, planned
production shut down of certain lines etc. In addition, we also took action to reduce our
fixed costs structure in the areas of management and employee costs.
During the fiscal year 2020-2021, your Company completed the raising of funds on a
preferential private placement basis in the form of equity shares and compulsory
convertible debentures (CCDs) from one of its promoters Miba Sinter Holding GmbH & CO
KG (Miba), for an aggregate amount of approximately INR 222 million, after taking the
necessary approvals from the Board, shareholders and other regulatory bodies. The proceeds
of the Preferential Issue will be used to help facilitate the Company with additional
funds necessary for working capital management, acquisition of capital goods and
machinery, operation and management of the Company.
OPPORTUNITIES AND THREATS: a) Opportunities
• With the introduction of new BS VI models, there could be an increase in
production, leading to an increased demand for automotive parts.
• Increasing demand for lightweight sintered components in vehicles to meet BS VI
- II standards
• De-risking of global supply chain from one geographical country to multiple
countries could open up further opportunities in Global market.
b) Threats
• The lockdown due to the pandemic could affect all business aspects including
manufacturing, exports, raw material procurement, distribution network etc.
• An ensuing negative consumer sentiment could moderate spending due to lockdown.
RISKS AND CONCERNS:
In accordance with the SEBI Listing Regulations, the Board of Directors of the Company
is responsible for framing, implementing and monitoring the risk management plans of the
Company. The Company does identify risks associated with the Company, assess its impact
and take appropriate corrective steps to minimize the risks that may threaten the
existence of the Company from time to time.
Annual risk assessment exercise is conducted in line with the framework, existing
risks, their mitigation actions are evaluated and new risks are identified. The Audit
Committee has additional oversight over financial risks and controls. During the year
under review, the Directors reviewed the potential impact of COVID-19 on the Companys
critical areas of operations like health & safety, customer, supplier, manufacturing,
liquidity risk, etc. It also reviewed the mitigating factor and action initiated by the
management to minimize the impact on the Company.
Risk Mitigation
To mitigate various risks significant to its business, your Company took several
strategic initiatives during the year, such as:
• Implementing effective COVID-19 guidelines for all its employees, vendors,
customers
• Putting in place monitoring and control mechanism to ensure availability of
critical resources like manpower, material and power
• Focused on manufacturing cost reduction
• Implementation of S/4 HANA
• Formation of a special task force to develop alternative sources for its
critical supplies
These initiatives have helped minimize the impact of uncertainties and helped the
Company achieve its planned business objectives during the year.
SEGMENT WISE OR PRODUCT WISE PERFORMANCE
The Company works only in one segment i.e. manufacturing of sintered auto components.
IN ACCORDANCE WITH THE SEBI (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS 2018)
(AMENDMENT) REGULATIONS, 2018, THE COMPANY IS REQUIRED TO GIVE DETAILS OF SIGNIFICANT
CHANGES (CHANGE OF 25% OR MORE AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR) IN
KEY FINANCIAL RATIOS
| Sr. No Key Financial Ratios |
2021 |
2020 |
Remark |
| 1 Debtors Turnover |
1.96% |
2.36% |
No Material Change |
| 2 Inventory Turnover |
1.05% |
1.29% |
No Material Change |
| 3 Interest Coverage Ratio |
(0.60%) |
0.10% |
Due to loss incurred by the Company |
| 4 Current Ratio |
1.51% |
1.05% |
Due to funds raising of Rs. 222 million. |
| 5 Debt Equity Ratio |
0.20% |
0.40% |
Due to repayment of debt from the funds raised |
| 6 Operating Profit Margin (%) |
8% |
13.00% |
Due to lower volumes leading to underutilization of capacity. |
| 7 Net Profit Margin (%) |
(9.80%) |
(5.30%) |
Due to lower volumes leading to underutilization of capacity. |
| 8 Return on Net Worth |
(5.31%) |
(4.00%) |
Due to loss incurred by the Company |
MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER
OF PEOPLE EMPLOYED:
The Company believes and recognizes that its employees are important resource in its
growth and to give competitive advantage in the present business scenario. Ensuring
business operations, employee safety and welfare became the foremost concerns for the
Company.
1. Initiatives for Safety and Welfare
Work from Home: The Company introduced the work from home policy that met both the
objective of employee safety as well as business continuity. Use of virtual platform was
made mandatory for all the meetings and interactions with employees. All external
interactions were mandated to be conducted online to ensure safety and social distancing.
Employee trainings and classes were moved to an online learning platform.
Safe Environment at Workplace: The Company followed a strict ‘no visitor policy
keeping in mind the social distancing norms. Physical meetings or visitors in exceptional
cases were allowed only with a negative RT-PCR report valid for 48 hours. For the safety
of employees, 100% temperature screening and masks at each entry point of plant and office
was installed along with daily monitoring of oxygen levels and pulse rates of each
department. To maintain safe hygiene levels, employee transport vehicles, shop floor and
canteen were disinfected multiple times in a shift while all its offices were disinfected
daily. As per GOI norms RT-PCR tests were conducted on regular basis for all its employees
and contract worker. Virtual trainings were conducted for prevention of COVID. Special
trainings were given to the security staff regarding COVID-19 and the security procedures
to be followed.
2. Online Training and Skill Enhancement
During the pandemic, the management of the Company precisely focused on online training
and skill enhancement of its employees. Its primary focus was to deploy various trainings
online which would lead to increase in competency level of our employees. Focused training
was imparted pertaining to Manufacturing Engineering and powder metallurgy.
The Company leveraged online learning methodology to help employees understand advance
engineering concept and transform their knowledge into day-to-day activity
Total 87 employees are on the payroll of the Company.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has in place a well-framed internal control system that authorizes,
records, and reports transactions to safeguard assets and protect against loss from
unauthorized use or disposition. The internal controls ensure the reliability of data and
financial information to maintain accountability of assets. These internal controls are
supplemented by extensive internal audits, management review, and documented policies,
guidelines, and procedures.
DISCLOSURE OF ACCOUNTING TREATMENT
The Company has followed all the treatments in the Financial Statements as per the
prescribed Accounting Standards.
Note:
For sake of brevity the items covered in Boards Report are not repeated in the
Management Discussion and Analysis Report.
Cautionary Statement:
Certain Statements in the Management Discussion and Analysis describing the companys
objectives, projections, estimates and expectation or predictions may be forward looking
statements within the meaning of applicable laws and regulations. It cannot be guaranteed
that these assumptions and expectations are accurate or will be realized. Actual results
could differ from those expressed or implied. Important factors that could make a
difference to the Companys operations include economic conditions affecting demand/
supply and price conditions in the domestic markets, changes in the Government
Regulations, tax laws and other statues and incidental factors.
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