suprajit engineering ltd share price Management discussions

MANAGEMENT DISCUSSION & ANALYSIS REPORT

a) INDUSTRY STRUCTURE AND DEVELOPMENT:

Your Company continues to be the market leader in Automotive Cables and Halogen Lamps in India, both in the Original Equipment Manufacturing (OEM) and Aftermarket segments. Company also exports to many countries for original fitment as well as in the aftermarket. While the current COVID-19 outbreak is a major dampener for growth in business, your Company is in a much better position compared to its peers, due to its diverse presence in products, customers and segments. Continued efforts to find new markets & customers and focused attention on cost optimization, which will help Company recover quickly from the significant damage created by the pandemic.

b) OPPORTUNITIES AND THREATS:

OPPORTUNITIES:

1. Reducing capacities world over for the Halogen Bulbs and vacated by some of the bigger players, provides your Company to expand into these territories and grown the market share in a dwindling market.

2. Significant potential for additional business from customers who may resource from current geography to India.

3. Good export potential for cables and halogen lamps in the OEM business.

4. Good potential to grow in the domestic business and in the aftermarket.

5. Potential to secure additional business from new models launches in the OEM segment in India and overseas.

6. Potential to grow aftermarket through OLM brands as well.

7. Introduction of additional products for the aftermarket.

8. Strategic opportunities in inorganic space considering the COVID-19 pandemic and resultant financial difficulties for certain strategic assets.

9. Global consolidation in the Cable Industry provides opportunity for your Company to be a Consolidator and enhance its Global position in the Light Duty Cable segment.

10. Added geographical manufacturing footprint creates an advantage to work with OEMs and tier1s at platform level with global development and local delivery.

THREATS:

1. COVID-19 and the war in Ukraine continues to be major threat which has led to economic slowdown and uncertainties.

2. Global Chip shortages is disrupting the supply chain for many of the OEMs worldwide and also in India. That could impact the volume offtakes and new product launches.

3. Service quality and delivery issues can lead to costs and margin erosion.

4. Increase in commodity prices and availability.

5. Currency fluctuations.

6. Labour shortages.

7. LED replacing the Halogen Bulbs continues to be a threat in the OE segment

8. Electrical and Electronics could pose a threat to the fit and form of the current Cable requirements and will need more innovative functioning in these vehicles with the Cables.

c) SEGMENT WISE OR PRODUCT WISE PERFORMANCE

As at March 31, 2022, the Company is engaged in manufacturing and trading of automotive cables and components, Non Automotive Cables and Components & Halogen lamps predominantly.

The Company is identified as single business segment and that being manufacturing and selling of automotive and other components. The internal reporting and performance of the Group is assessed by the Chief Executive Officer as single segment. However for the purpose of explaining the performance of the Company to investors, the management provides further break down at product and customer level.

d) OUTLOOK:

Business outlook from the customer is not clear and hence it is difficult to estimate at this moment. While your company is ready for taking any increased volumes, the risks like COVID-19 related, Escalating Commodity prices, Container shortages for shipping and the widespread Integrated Chip shortages could prove a damper.

e) RISKS AND CONCERNS:

The major concerns for the current year are the continued COVID-19 pandemic, and the war in Ukraine leading to economic disruption and uncertainty of the future. This is compounded by severe material shortages of Integrated Chips, Resins, steel and such other commodities and price escalations of many of the Commodities.

The Companys risk management strategy encompasses in-depth identification, assessment and Prioritization of risk, followed by speedy mobilization of resources to minimize, monitor, and control the losses of unfortunate events.

f) INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

The Company has an adequate system of internal controls commensurate with its size to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition. All the transactions are authorized, recorded and reported correctly.

The Companys internal control systems are further supplemented by an extensive program of internal audit by a firm of Chartered Accountants and periodic review by the Management. The internal control system is designed to ensure that all financial and other records are reliable for preparing financial statements and for maintaining accountability of assets.

Over and above these, an Internal Controls department was formed to ensure roll out of "Standard Operating Procedures", address the points raised by the Internal auditors and to strengthen the overall systems, controls and processes.

g) MATERIAL DEVELOPMENTS IN HUMAN RESOURCES & INDUSTRIAL RELATIONS FRONT INCLUDING NUMBER OF PEOPLE EMPLOYED:

Employees continue to be the key for the continued success of Organization. Industrial relations have been generally harmonious in all units. The COVID period provided an opportunity to upskill our personnel and many on-line training sessions were conducted to ensure that the employees are kept engaged and get trained in the process.

Special efforts were made to minimize the "labour migration" during the pandemic and they were supported by the Human resources staff with the help of the local Government authorities. Sound human resource development policies of the Company ensure that each employee grows as an individual and contributes to the performance and growth of the Company. Regular in-house training programs for employees at all levels help in this objective. While getting skilled manpower at various levels in the operations continues to be a challenge and employee turnover remained low during the year. The Company has satisfactory recruitment system in place to address every challenging requirement of the Company at all levels of the organization.

(h) Details of Key Financial Ratios and changes thereto, if any, during the year:

Standalone

Particulars	March 31, 2022	March 31, 2021	Reason for variance
Current ratio	1.86	2.07	-
Debt- Equity Ratio	0.23	0.2	-
Debt Service Coverage ratio	6.99	6.37	-
Return on Equity ratio	12.14	16.29	Refer note: a
Inventory Turnover ratio	4.4	4.3	-
Trade Receivable Turnover Ratio	4.73	4.51	-
Trade Payable Turnover Ratio	5.7	4.97	-
Net Capital Turnover Ratio	3.87	2.76	Refer note: b
Net Profit ratio	8.84	12.4	Refer note: a
Return on Capital Employed	18.35	17.41	-
Return on Investment	5.18	7.69	Refer note: c

Note:

a) Decrease an account of exceptional items

b) Revenue growth along with higher efficiency on working capital improvements

c) Decrease in return on investment from Mutual funds are on account of fluctuation in market yields.

Consolidated

Particulars	March 31, 2022	March 31, 2021	Reason for variance
Current ratio	2.02	1.76	-
Debt- Equity Ratio	0.31	0.35	-
Debt Service Coverage ratio	3.18	2.34	Refer note: a
Return on Equity ratio	16.69	15.48	-
Inventory Turnover ratio	3.28	3.23	-
Trade Receivable Turnover Ratio	5.85	5.41	-
Trade Payable Turnover Ratio	5.62	4.78	-
Net Capital Turnover Ratio	3.27	3.58	-
Net Profit ratio	9.40	8.70	-
Return on Capital Employed	18.57	18.20	-
Return on Investment	5.11	7.50	Refer note: b

Note:

a) Increase on account of repayment of debts and exceptional income during current year.

b) Decrease in return on investment from Mutual funds are on account of fluctuation in market yields.

	For and on behalf of the Board
	K. Ajith Kumar Rai
	Chairman
	DIN: 01160327
Place: Bengaluru
Date : May 25, 2022