Swaraj Engines Management Discussions


Swaraj Engines Ltd. ("SEL") is primarily manufacturing diesel engines for fitment into "Swaraj" tractors being manufactured by Mahindra & Mahindra Ltd. ("M&M"). SEL is supplying diesel Engines in the range of 20 HP to 65 HP. Since the start of commercial operations in 1989-90, your Company has supplied around 1.45 million engines for fitment into "Swaraj" tractors.


The Companys operations have been characterised by a lean organisation structure, continuous improvement in process efficiencies and optimised resource utilisation.

The financial statements have been prepared in accordance with Ind AS as per the Companies (Indian Accounting Standards) Rules, 2015 as amended and notified under section 133 of the Companies Act, 2013 ("the Act") and other relevant provisions of the Act. While details of financial position and performance are available in the Balance Sheet, Statement of Profit & Loss, alongwith related notes, key aspects are highlighted in the following paragraphs:

(A) Statement of Profit & Loss Income:

Total revenue for the year was Rs. 1433.77 crores (previous year - Rs. 1147.81 crores) with the following breakdown:

(Rs. in Crores)

2022-23 2021-22
Engines 1388.37 1111.44
Engine Spares/Parts 26.08 21.42
Scrap etc. 7.37 5.29
Net Revenue from Operations 1421.82 1138.15
Other Income 11.95 9.66
Net Total Revenue 1433.77 1147.81

The domestic tractor industry after registering de-growth during FY 2021-22 witnessed increase in demand during FY 2022-23. In this backdrop, the Companys engines supply during fiscal 2023 stood at 1,37,005 units against 1,16,811 units sold in previous year - up 17%.

Other income primarily includes interest and dividend etc. on the surplus funds. The fund position also remained comfortable during the year.


Material Cost

Material cost as a percentage of net revenue from operations was 79.7% against previous years 78.2%. The same was higher primarily due to increases witnessed in prices of related commodities.

Personnel Cost

Personnel cost for the year at Rs. 43.71 crores against Rs. 43.85 crores of previous year remained almost at same level.

Other Expenses

With continuous focus on cost control coupled with better spread of fixed cost at higher activity level, the other expenses (consisting of manufacturing, administrative & marketing expenses etc.) as percentage of net operating revenue reduced to 4.1% against previous years level of 4.3%.

Depreciation and Amortisation

Depreciation and amortisation for the year was Rs. 18.54 crores against previous years Rs. 18.10 crores.

Reflecting the above, Profit before tax for the year stood at Rs. 179.74 crores (previous year - Rs. 146.86 crores) - up 22%. While profit after tax (excluding other comprehensive income) was Rs. 133.61 crores (previous year - Rs.109.47 crores), the total comprehensive income (net of tax) stood at Rs. 133.52 crores against previous years Rs. 108.63 crores - up 23%.

(B) Balance Sheet Equity

The Companys net worth on 31st March, 2023 stood at Rs. 342.21 crores (previous year - Rs. 305.68 crores) comprising of an Equity Share Capital component of Rs. 12.15 crores and Other Equity of Rs. 330.06 crores - a book value of Rs. 282 per share. The total equity is inclusive of two Bonus Issues made in 1997 (1:1) and 2005 (2:1) and net of buy-back of 2,94,746 equity shares during FY 2017-18. With increase in net profit, Return on Net Worth as on 31st March, 2023 stood at 39.0% against 35.8% of previous year.

Pursuant to the inter se transfer of shares amongst the promoters of Swaraj Engines Limited ("the Company"), Mahindra & Mahindra Limited ("M&M") acquired 21,14,349 equity shares constituting 17.41% of the paid up equity share capital of the Company from Kirloskar Industries Limited ("KIL") on 27th September, 2022. Post this acquisition, the shareholding and voting rights of M&M in the Company increased from 34.72% to 52.13% of the equity share capital of the Company. Consequently, the Company, which was earlier an Associate Company of M&M, became its subsidiary with effect from 27th September, 2022.

Non-Current Assets

Out of the total non-current assets of Rs. 147.44 crores (previous year - Rs.133.42 crores), 61% is represented by property, plant and equipment (including capital work in progress) and 35% is represented by Fixed Deposits having maturity period more than 12 months.


Total inventory including work-in-progress and finished stock at the end of the financial year stood at Rs. 69.61 crores (previous year - Rs. 62.07 crores) and in terms of number of days, the same improved to 18 days against previous years 20 days.

Trade Receivables

The year-end trade receivables were Rs.128.09 crores (previous year - Rs. 103.61 crores) and in terms of number of days, it remained at last years level of 33 days.

Trade Payables

The year-end total trade payables stood at Rs. 166.08 crores (previous year - Rs. 130.04 crores). In terms of number of days, it remained at last years level of 53 days of purchases.

(C) Key Ratios

The key financial ratios are given below :

Unit 2022-23 2021-22 Change over
previous year
Debtors Turnover Times 12.3 10.5 17.1%
Inventory Turnover Times 21.6 18.4 17.4%
Current Ratio Times 2.1 2.2 -4.6%
Debt Equity Ratio Times
Interest Coverage Ratio Times
Operating Profit (EBIDTA) Margin % 13.1 13.7 -0.6%
Net Profit Margin % 9.4 9.6 -0.2%


1. Debtors Turnover Ratio - This ratio is used to quantify a Companys effectiveness in collecting its receivables. It is calculated by dividing turnover by average trade receivables.

2. Inventory Turnover Ratio - Inventory Turnover is the number of times a Company sells and replaces its inventory during a period. It is calculated by dividing turnover by average inventory.

3. Current Ratio - Current Ratio is a liquidity ratio that measures a Companys ability to pay short-term obligations, due within one year. It is calculated by dividing the current assets by current liabilities.

4. Debt Equity Ratio & Interest Coverage Ratio - Not applicable in view of NIL borrowings.

5. Operating Profit (EBIDTA) Margin - Operating Profit Margin is a profitability or performance ratio used to calculate the percentage of profit a Company produces from its operations. It is calculated by dividing the EBIDTA by turnover.

6. Net Profit Margin - Net Profit margin is equal to how much net income or profit is generated as a percentage of revenue. It is calculated by dividing the profit for the year by total turnover.

7. There is no significant change (> 25%) in the above ratios over previous year.


There are established procedures for internal control on a Company-wide basis. Policies and procedures have been laid down to provide reasonable assurances that assets are safeguarded from risks of unauthorised use / disposition and transactions are recorded and reported with propriety, accuracy and speed. These aspects are regularly reviewed during internal audit and statutory audits. The Company has also laid down adequate internal controls for financial reporting. During the year, such controls were tested and no material weakness in their operating effectiveness was observed. Finance and Accounts function is well staffed with experienced and qualified personnel. This team participates in the preparation & monitoring of budgets. Internal Audit Reports are reviewed by the Audit Committee of the Board from time to time. The use of SAP ERP system also helps to strengthen the controls.


The Company continued with its practice of a lean organisation manned by involved and motivated employees with team orientation. The atmosphere encourages learning and informal communication.

The Company is having Performance Management System (PMS) to objectively measure the performance of the individual and the organization. The overall remuneration structure is linked with PMS.

To further increase the competency level of the employees, systematic and structured training is provided at different levels. Such trainings cover aspects related to leadership development, communication effectiveness and team building etc. This has made a significant contribution to the Companys business.

Industrial relations remained cordial throughout the year under review.

Regular employee strength (excluding apprentice) as on 31st March, 2023 stood at 310 (31st March, 2022 - 335).


Since Companys principal business is selling diesel engines for tractors manufactured by M&M-Swaraj Division, it would be appropriate to take note of developments in the tractor industry.

Indian tractor industry (the worlds largest by volume) has a mix of Indian origin and international manufacturers and is traditionally segmented by horsepower broadly - the low horsepower upto 30 HP segment, the mid segment of 30 HP - 50 HP and the higher segment of above 50 HP. While most of the major players cater to all three segments, their relative strengths and market positions differ from segment to segment. Over a period of time, the medium and higher HP segments have become popular owing to tractor versatility and the evolution of farming practices, especially for farmers with large land holdings. Further, the growing horticultural segment in the country also offers good opportunities to increase tractor penetration in the lower segment of the market with cost effective products.

After witnessing a de-growth in FY22, the domestic tractor industry posted a solid growth of 12.2% in FY23 and touched the highest ever tractor sale of 9,45,300 units by crossing the 9 lakh milestone for the first time.


The factors like increase in crop output, hike in MSP for major crops, good water reservoir levels, and adequate availability of financing are likely to help to sustain the tractor demand momentum. Further, the Governments continued thrust to enhance farmers income through various initiatives like improving irrigation facilities, crop insurance, periodic revision in minimum support price (MSP), monetary support to marginal farmers, promoting rural development besides other industry growth drivers such as agri mechanisation, scarcity of farm labour especially during the sowing season and momentum in infrastructural projects etc., it is expected that the tractor industry will continue witnessing growth in medium to long term. In this backdrop, engine business of the Company is likely to move in tandem with industry.


As a supplier to M&M, your Company would be directly affected by factors impacting tractor industry. These would include issues like the rain-dependent nature of our agriculture, Government policy on procurement, credit availability, commodity price trends, new regulations for tractors etc.


Statement in the Management Discussion and Analysis Report describing companys objectives, projections, estimates and expectations may constitute "forward looking statements" within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied.