Tube Investments Director Discussions


Dear Shareholders,

The Directors take pleasure in presenting the 15th Annual Report together with the audited financial statements of the Company for the year ended 31st March 2023.

1. Business Environment

The financial year 2022-23 was a challenging year for the global economy starting with the conflict between Russia and Ukraine leaving the oil/energy prices to go up significantly. This was followed by inflation due to increase in the prices of commodities across the globe and energy crisis. Most of the major economies witnessed unprecedented inflation rates in its history and all the central banks started continuously raising the interest rates. Due to increasing oil prices, the US dollar had gained against all currencies which resulted in inflationary pressures on emerging economies who are import dependent and the chain effect continued. The aforesaid developments in the global economy influenced and posed a downside risk to the Indian economy. The erratic climate conditions including unseasonal rains also affected the food supply and resulted in increased food inflation in India during FY 2022-23. Consequently, Reserve Bank of India continued to increase the repo rates to tame the inflation within the upper tolerance limit. In spite of all the headwinds, India continued to be the fastest growing major economy for FY 2022-23 @ 7.2% as a result of the strong macro-economic fundamentals, domestic consumption and increase in exports. The Indian economy is projected to grow at around 6.3% in FY 2023-24 amid global headwinds and rising costs. This is mainly driven by private consumption and private investments backed by supportive Government policies to improve the infrastructure and business ecosystem. The Government has indicated that to sustain the current growth trajectory, structural changes for ensuring financial discipline and compliance will be introduced. The digital infrastructure expansion, implementation of production linked incentive schemes have incentivised the corporates for setting up of infrastructure for sustained growth in the future.

The latest episodes of banking sector crisis across the major economies have exposed the financial risks faced not only by these countries but also globally. Also, with the fear of recession looming large at the world, 2023-24 is expected to be an even more challenging and turbulent year. However, it is expected that the Indian economy will remain insulated to some extent due to its strong domestic demand and sound macro-economic fundamentals.

The automotive industry, a sector in which the Company has a large exposure, has witnessed a healthy revival in FY 2022-23 and is expected to carry forward similar momentum going forward. The Governments push for capital outlay of 2.4 lakh crores for railways as part of the Union Budget, will be favourable to the Company which expects its railways business to benefit out of this spend. Further, other announcements to boost domestic manufacturing, promote exports and green energy will be advantageous to the Company.

Reserve Bank of India has finally paused the rate hike after six consecutive increases in April 2023. It is an indicator of the strong resilience shown by the Indian economy. Though there appears to be a pause in the investment climate, it is expected that a mix of cautious and necessary investments will still continue through this financial year which may help the Indian economy to continue its growth momentum.

2. Standalone Financial Highlights

Rs in Cr.

Particulars

2022-23 2021-22

Sale of Products

6,791.61 5,986.79

Profit Before

Exceptional Items and

928.29 628.04

Tax

Exceptional Items (52.72) -

Profit Before Tax

875.57 628.04
Tax Expense (210.37) (152.87)

Profit After Tax

665.20 475.17

The Board of Directors has decided to retain the entire amount of profit for the financial year 2022-23 in the Statement of Profit and Loss.

3. Performance Overview

During 2022-23, the Company has achieved a turnover of 6,792 Cr., registering a growth of 13% over the previous year. The Profit before Depreciation, Interest, Exceptional Items and Tax was at 1,095 Cr. as against 785 Cr. in the previous year. The Profit before Tax and Exceptional Items was at 928 Cr. as against 628 Cr. in the previous year.

The Engineering segment registered a revenue of 4,562 Cr. as compared to 3,868 Cr. during the previous year, a growth of 18%. The operating profit before interest and tax stood at 549 Cr. as compared to 376 Cr. during previous year, a growth of 46%.

The Metal Formed Products segment recorded a revenue of 1,424 Cr. as compared to 1,240 Cr. during the previous year, a growth of 15%. The operating profit before interest and tax stood at 174 Cr. as compared to 136 Cr. during previous year, a growth of 27%.

The Mobility segment recorded a revenue of 800 Cr. as compared to 963 Cr. during previous year, a de-growth of 17%, due to adverse market conditions. The operating profit before interest and tax stood at 17 Cr. as compared to 55 Cr. during the previous year.

Other businesses segment including Industrial Chains registered a revenue of 768 Cr as compared to 562 Cr. during the previous year, a growth of 37%. The operating profit before interest and tax stood at 48 Cr. as compared to 36 Cr. during previous year, a growth of 31%.

4. New business initiatives

4.1. Clean Mobility business: TI Clean Mobility Private Limited

The Company had incorporated M/s. TI Clean Mobility Private Limited ("TICMPL") in February 2022 as a wholly-owned subsidiary to focus on clean mobility solutions. TICMPL is pursuing electric three-wheelers business and has launched the passenger three-wheeler in the market. TICMPL is also developing cargo and e-rick variants, which are expected to be launched in the second half of FY 2023-24. In March 2022, TICMPL had acquired 69.95% of M/s. Cellestial E-Mobility Private Limited ("CEMPL"), manufacturer of electric tractor, for 161 Cr. During the year, TICMPL had acquired the balance 30.05% for 51 Cr. making it a wholly-owned subsidiary. CEMPL is in the advanced stage of introducing electric tractors in the market. A new manufacturing facility is coming up at Poonamalle, near Chennai for electric tractors. During the year, TICMPL had acquired 65.2% of the equity share capital of M/s. IPLTech Electric Private Limited ("IPLT"), a company engaged in manufacturing of electric heavy commercial vehicles for 245 Cr., through a combination of primary and secondary purchase of shares. IPLT is the first manufacturer for 55T electric truck predominantly used in steel and cement industry for short haulages. IPLT is awaiting necessary approvals, under the new and revised guidelines, for launch of electric heavy commercial trucks and is expected to expand rapidly in FY 2023-24. A dedicated facility with automated assembly line is coming up near Manesar. The unique selling proposition offered by IPLT to its customers includes reduction in logistics cost, higher uptime and comprehensive annual maintenance. IPLT is working on development of other variants to cater to different customer segments and enhancing its presence. As of 31st March 2023, TII has invested 250 Cr. towards Equity Shares and 167 Cr. towards Compulsorily Convertible Preference Shares ("CCPS") in TICMPL. TII and TICMPL entered into definitive agreements with M/s. Multiples Private Equity Fund III

& M/s. State Bank of India (together "Investors") for raising about 600 Cr. through issue of Equity Shares and CCPS. The Investors have so far invested about 400 Cr. towards 100 Equity Shares and 4,00,00,000 Series A1 CCPS. Pursuant to the said agreement, TII has agreed to invest 425 Cr. towards CCPS and has already invested 167 Cr. 16700000 Series B CCPS. On 5th May 2023, TICMPL entered into definitive agreements with TII, M/s. Multiples Private Equity Fund III, M/s. Multiples Private Equity Fund IV, M/s. Multiples Private Equity Gift Fund IV and their co-investors (together "Investors") for raising about 600 Cr. through issue of Equity Shares and CCPS to Investors and 75 Cr through issue of CCPS to TII.

4.2. Foray into Contract Development and Manufacturing Services

The Company has identified contract development and manufacturing operation ("CDMO") and active pharmaceutical ingredients as a new line of business with the potential to grow and expand in the future. The approval of the Members was obtained for amendment to the Memorandum of Association of the Company on 16th April 2023 to include this business in the Objects Clause.

The Company had entered into an agreement with Mr. N Govindarajan, an experienced and well recognised professional in the Indian pharmaceutical industry to incorporate a subsidiary for pursuing the CDMO business. Pursuant to the said agreement, the Company proposes to invest up to 285 Cr. into this subsidiary in the form of equity and compulsorily convertible preference shares in tranches and Mr. N Govindarajan will be investing up to 15 Cr. in equity and compulsorily convertible preference shares in tranches. Subject to the performance and other terms and conditions specified in the agreement, Mr. N Govindarajan will be entitled to get up to 25% of the equity for his investment. The CDMO subsidiary, M/s. 3xper Innoventure Limited, was incorporated on 12th May 2023.

The CDMO subsidiary is finalising a strategic location for establishment of the manufacturing facility. The R&D facility is coming up at Chennai.

4.3. Acquisition of M/s. Lotus Surgicals Private Limited, a medical devices company

The Company joined hands with M/s. PI Opportunity Fund I Scheme II ("Premji Invest") to acquire M/s. Lotus Surgicals Private Limited ("Lotus"). TII acquired 33,61,902 equity shares representing 67% of the share capital for about 233 Cr. and Premji Invest acquired 16,55,862 equity shares representing 33% of the share capital for about 115 Cr. on 10th May 2023. Lotus is a subsidiary company under Section 2(87) of the Companies Act, 2013 with effect from the date of acquisition (10th May 2023). Lotus will be vehicle for medical devices business of TII.

Lotus was incorporated in 2005 and is engaged in the business of manufacturing and supply of surgical sutures & other medical devices. It has a comprehensive product portfolio focused on high end specialties such as cardiac, liver transplant, GI oncology and bariatrics. Lotus is the second largest domestic player in the aforesaid segments. The product portfolio includes sutures, mesh, skin staplers, laparoscopy instruments, energy devices etc. It has state of the art manufacturing facility and is also setting up in-house needle manufacturing capabilities.

4.4. Acquisition of M/s. Moshine Electronics Private Limited

The Company as part of its foray into electronics business, acquired 20,66,628 equity shares representing 76% of the share capital of M/s. Moshine Electronics Private Limited ("Moshine") on 23rd September 2022. Moshine is engaged in manufacture and sale of camera module for mobile phones. Moshine is engaging with new customers for growth in FY 2023-24.

5. Business Review – Standalone 5.1. Engineering TIs Presence

The Engineering segment of the Company consists of cold rolled steel strips and precision steel tubes viz., Cold Drawn Welded tubes (CDW) and Electric Resistance Welded tubes (ERW). These products primarily cater to the needs of the automotive, boiler, bicycle, general engineering and process industries. The Company is further engaged in the manufacture of large diameter welded tubes mainly for non-auto application which are largely imported.

Industry Scenario

During 2022-23, the automotive industrys production volume grew by 13%. Passenger vehicle and commercial vehicle grew by 25% and 29% respectively and two-wheeler segment grew by 9% over the last fiscal year.

Review of Performance

The Engineering segment was able to grow its volumes leveraging the growth of passenger vehicles and commercial vehicles. The business also focussed and realized the increased opportunities in the export market. The volumes of tubes grew by 13%, cold rolled steel strips business grew by 6% and large diameter tubes grew by 12%. The business continued to drive efficiency improvement and spending capital expenditure prudently on critical growth projects. The business is in the process of increasing capacities for large diameter tubes and Cold Rolled steel strips to meet the increased market demand.

The business started Lean implementation for eliminating/reducing wastes in the value chain by focussing on productivity & quality improvement, inventory reduction & creating a flow in production system using Lean tools & techniques.

Career path initiatives were taken up to provide opportunities to employees within the organization for new openings and to enable cross function exposure and growth.

The business continued to participate in the reviews of US Department of Commerce on complaint of alleged dumping of cold-drawn steel mechanical tubes from India and some other countries, the Countervailing Duty (CVD) and Anti-dumping Duty (AD) on the Companys exports to the US market, to reduce duty rates to enhance export volumes.

5.2. Metal Formed Products TIs presence

Automotive chains, fine blanked products, roll-formed car doorframes and shell sub-assemblies for passenger coaches constitute the Metal Formed Products segment.

Industry scenario

During 2022-23, production of two-wheeler segment grew by 9.2% and passenger cars grew by 18.4%. FY 2022-23 is the first full year of business without any disruption post pandemic. Continuing from the last year, the business was faced with increase in steel prices, increase in the input costs and inflation during first half of the year. During second half of the year, steel prices began softening. The business continued to prove its mettle by taking advantage of economies of scale, prudent capital spending, operating with an optimum working capital along with control on the costs through various cost reduction measures. Lean initiatives are being driven through inculcating kaizen culture in all the areas.

With international car majors continuing to invest in the country and increasingly using India as an export base, many component manufacturers have the opportunity to cater to the global needs of automobile manufacturers and their Tier 1 Suppliers. The Railways business continued to go through a subdued phase as demand continues to be at lower levels.

Review of Performance

Backed by the demand in the four-wheeler segment, the business dependent on these segments did extremely well. Despite the two-wheeler industry volume not reaching the pre-pandemic level, business maintained its market share in key segments. The Company continued to focus in the aftermarket segment benefiting from the two-wheeler population growth. The replacement market continues to provide opportunities for growth notwithstanding good competition and the business expects to strengthen on the sales structure, deepen its coverage and launch new products for new categories.

Fine blanking and Doorframe sales were higher by 26% during 2022-23 and the business manages to hold on to the market due to good traction seen in four wheeler segment. The businesses continue to gain additional market share by maintaining high quality standards and customer satisfaction. The focus has been on generating more new businesses from the Original Equipment Manufacturers (OEMs) / Tier 1 Suppliers to OEMs by value addition and cost competitiveness. The business is also focused on exploring new products / technologies for growth in the top line. In addition, increased volumes and increased price realisation in coach parts, focus on metros and expanding the customer/product base are some of the driving factors that will put the Railways business back on track.

5.3. Mobility Business TIs Presence

Mobility segment of the Company comprises of bicycles of Standards and Specials including alloy bikes & performance bikes, cycling accessories, bicycle components sold as spares and home/semi commercial fitness equipment. This year the scope of business has expanded by introducing SMART

- Spares Maintenance Accessories Recreational Toddler. Company has also embarked on the export business as a growth lever/strategy.

Industry Scenario

Bicycles fall under two distinct categories – Standards and Specials. While standard cycles are largely used for commuting, especially in small towns & rural areas, special cycles cater to recreational usage, where the product is used for fun, fitness, and leisure activities. During the financial year, the organised trade industry witnessed a decline of 12% as against the previous year. Standards segment dropped by 2% and specials segment by about 16%.

Consumer demand continued towards economy range of products and unbranded players with low priced products gained an edge in the industry. To counter the penetration of unbranded players, playing on price, the organised players i.e., AICMA (All India Cycle Manufacturers Association) have ventured into launching low priced products in Kids and Mountain Terrain Bikes ("MTB") segments. FY 2020-21 witnessed a pent-up demand in cycles due to lockdown of schools, workplaces, and fitness centres. However, in the current scenario, the usage of cycles has significantly reduced due to resumption of all activities leading to a drop in demand.

Over 60% of the countrys requirements are met by four major players. The smaller regional players and imports constitute the balance. TI Cycles enjoys a share of about 25.1% of the total organised trade market.

Review of Performance

TI Cycles sold 17 lakh bicycles during the year in trade, which was lower by 16% compared to previous year. Overall Trade bicycle industry itself registered de-growth of 12% over the previous year. The thrust on Specials segment was driven through frequent new product launches, product innovations, enhanced digital marketing and superior consumer experience through exclusive retail outlets under the exclusive retail brand ‘Track & Trail and a new concept "Star MBO"- a shop-in-shop experience leveraging multi-brand outlets. We have opened 45 of such shops during last year. Expansion of export business and domestic spares business are considered to be new avenues of business to the Company. To participate in the growing economy sub-segment, 5 economy products were launched in major categories like Kids and MTB.

In 2022-23, 49 new model bicycles were launched, and 55 models were refreshed. 33% of the trade sales volume came from new products. We have lined up 7 launch ready innovations - such as knuckle guard light, saddle sensor light, balenso, agresso, dirt tricks, buddy back rest, integrated utility solution slated to be launched during 2023-24.

On the consumer outreach front, we ran digital, influencer campaigns for its major brands, with BSA, Hercules, Roadeo, and Montra delivering a significant lift in brand awareness. We have started various demand generation offline activities. The objective of the campaigns/demand generation activities was to increase brand awareness and product consideration among the target group.

6. Dividend

The Board of Directors declared an Interim Dividend of 2/- per share (@ 200%) on equity share of face value of 1/- each for the financial year 2022-23, which was paid on 27th February 2023 to all the eligible shareholders. 1.50/- per share (@ 150%) of Final Dividend has been proposed by the Board for the said financial year and together with the Interim Dividend of 2/- per equity share, already declared and paid, in respect of the financial year 2022-23, 3.50 per share (@ 350%) will be considered as the total Dividend for the said financial year.

The dividend pay-out is in line with the Companys policy on Dividend Distribution. The Company has proposed to conserve cash for the capital expenditure and funding requirements. The said Policy as approved by the Board is uploaded and is available on the following link on the Companys website: https://tiindia.com/dividend-distribution-policy/

7. Share Capital

The paid-up Equity Share Capital of the Company as on 31st March 2023 was 19,31,21,076/- consisting of 19,31,21,076 Equity Shares of the face value of 1/- each fully paid up. During the financial year 2022-23, the Company allotted 1,70,855 equity shares consequent to exercise to employees stock options.

8. Finance

Cash and Cash Equivalents as at 31st March 2023 were 111 Cr. In addition, Company has investments in Liquid Schemes of Mutual Funds for 293 Cr.

The Company continues to focus on judicious management of its working capital. The Company has taken many steps during the year to improve the working capital turns. The working capital parameters were kept under strict check through continuous monitoring.

8.1. Non-Convertible Debentures

During the year, Non-Convertible Debentures (NCDs) aggregating 50 Cr. were redeemed by the Company. As at 31st March 2023, there are no NCDs outstanding.

8.2. Deposits

The Company has not accepted any fixed deposits under Chapter V of the Companies Act, 2013 and as such no amount of principal and interest were outstanding as on 31st March 2023.

8.3. Particulars of Loans, Guarantees or Investments

As per Section 186 of the Companies Act, 2013, details of the loans, guarantees and investments made during the FY 2022-23 are given below:

Name of the

Nature of transaction - Rs in Cr.

Companies

Loans/Investments

TI Clean Mobility Private Limited

Investment in equity shares 150.00
Investment in Compulsorily Convertible Preference Shares 167.00
Inter-Corporate Deposits / Loans 325.00

Moshine Electronics Private Limited

Acquisition of equity shares from the existing shareholders 7.38
Inter-Corporate Deposits / Loans 3.75

X2Fuels and Energy Private Limited

Investment in equity shares 6.15

CG Power and Industrial Solutions Limited

Conversion of share warrants to equity shares 54.72

The aforesaid investments are in compliance with Section 186 of the Companies Act, 2013 and used for the business activities by the respective companies. Further details form part of the Notes to the financial statements provided in this Annual Report.

As part of treasury management, the Company also deploys any short-term surplus in units of mutual funds, the details relating to which form part of the Notes to the financial statements provided in this Annual Report.

8.4. Consolidated Financial Highlights

Rs in Cr.

Particulars

2022-23 2021-22

Revenue from contract with customers

14,430.95 11,982.53

(net)

Profit / (Loss) Before share of Profit /

Loss of Associates / Joint Ventures,

1,592.51 1,111.15

Exceptional Items and Tax

Exceptional items 8.06 20.21

Profit / (Loss) Before share of Profit / Loss

1,600.57 1,131.36

of Associates / Joint Ventures and Tax

Tax Expense 422.59 160.83

Profit / (Loss) Before share of Profit /

1,177.98 970.53

Loss of Associates / Joint Ventures

9. Business Review – Subsidiaries and Joint Venture 9.1. Shanthi Gears Ltd (SGL)

SGL, a subsidiary of the Company, recorded revenue of 446 Cr. in 2022-23 against 337 Cr. in the previous year. Profit before tax was 90 Cr. (Previous year: 59 Cr.). During the year, SGL renewed its focus on re-establishing itself in the market and gaining new customers. SGL continued to look at enlarging its market presence, create a robust channel, enhance its process capabilities and launch new products to meet the growing expectations of customers.

SGL also declared and paid an Interim Dividend of 3/- per share for the financial year 2022-23.

9.2. Financi?re C10 SAS (FC10)

FC10, the Companys wholly owned subsidiary in France, recorded consolidated revenue of Euro 39 Mn in 2022 (previous year: Euro 33 Mn). The profit after tax for the year was Euro 0.39 Mn as compared with the profit after tax of Euro 0.25 Mn. in the previous year. The consolidated results of FC10 include results of its subsidiaries viz., Sedis SAS, Sedis GmbH and Sedis Co Ltd in UK.

9.3. Great Cycles (Private) Limited (GCPL)

GCPL is the Companys subsidiary in Sri Lanka acquired in March 2018. The Company holds 80% of GCPLs equity capital. During the year under review, GCPL recorded revenue of 6 Cr. (Previous year: 32 Cr.) and registered loss before tax of 1 Cr. (previous year profit before tax: 9 Cr.)

9.4. Creative Cycles (Private) Limited (CCPL)

CCPL is the Companys subsidiary in Sri Lanka acquired in March 2018. The Company holds 80% of CCPLs equity capital.

During the year under review, CCPL recorded revenue of 32 Cr. (Previous year: 77 Cr.) and registered profit before tax of 3 Cr. (Previous year loss before tax: 14 Cr.).

9.5. CG Power and Industrial Solutions Limited (CG Power)

CG Power is the Companys subsidiary acquired in November 2020. The Company holds 58.05% of CG Powers equity capital. During the year under review, CG Power at a consolidated level recorded revenue of 6,973 Cr. (previous year: 5,484 Cr.) and registered profit before tax & exceptional items of 950 Cr. (Previous year: 504 Cr.) CG Power has registered an impressive turnaround which only reaffirms the confidence of the Board at the time of acquisition that CG Power would create better value for itself and the Company in the coming years.

CG Power also declared and paid an Interim Dividend of 1.50 per share for the financial year 2022-23.

9.6. TI Clean Mobility Private Limited (TICMPL)

TICMPL, the Companys subsidiary was incorporated on 12th February 2022.

During the year under review, TICMPL on a standalone basis registered a loss before tax of 79 Cr.

During the year under review, IPLTech Electric Private Limited registered a loss before tax of 33 Cr. from acquisition date.

During the year under review, Cellestial E-Mobility Private Limited registered a loss before tax of 11 Cr. and Cellestial E-Trac Private Limited registered a loss before tax of 13 Cr. from acquisition date.

9.7. Moshine Electronics Private Limited (MEPL)

During the year under review, MEPL recorded 6 Cr as revenue and registered a loss before tax of 1 Cr. from acquisition date.

9.8. X2Fuels and Energy Private Limited (X2Fuels)

During the year under review, X2Fuels registered a loss before tax of 0.06 Cr. from acquisition date.

10. Financial Review 10.1. Profits & Profitability

The Profit before Tax and exceptional items has registered a growth by 48%. All the business segments of the Company maintained their focus on servicing customers, improving efficiencies, controlling working capital and reducing resources employed in the business.

10.2. Capital Expenditure

The Company continues to assess the trends emerging in the industry and the changing requirements of its customers and invests appropriately for the long-term, with a view to servicing its customers in a more timely and efficient manner.

10.3. Interest Cost

The Companys interest cost during FY 2022-23 was 22 Cr. compared to 12 Cr. in the previous year. The Company had a net debt of 69 Cr. (Net of Cash & Cash Equivalents and investment in mutual funds) as on 31st March 2023 as compared to 65 Cr. as on 31st March 2022.

10.4. Financial Ratios

The key financial ratios of the Company during the financial year compared to the previous financial year are as under:

Sl. No.

Financial Ratio*

FY 2022-23 FY 2021-22 % change over previous year
1 Interest Coverage Ratio (times) 50.7 60.4 (19.2%)
2 Debt-Equity Ratio (times) 0.1 0.1 11.5%
3 Net Profit Margin 9.2% 7.5% 23.0%
4 Return on Net Worth 20.2% 17.6% 12.9%
5 Return on Capital Employed 27.6% 22.6% 22.2%
6 Revenue Growth 13.8% 49.4%
7 Debtors Turnover (times) 10.4 9.9 4.7%
8 Inventory Turnover (times) 7.5 7.1 4.5%
9 Current Ratio (times) 1.1 1.1 2.9%
10 Operating Profit Margin 13.0% 10.9% 16.0%

*Ratios are tracked by the Company on a standalone basis

10.5. Internal Control Systems

Internal control systems in the organisation are looked at as the key to its effective functioning. The Company believes that internal control is one of the key pillars of governance which provides freedom to the management within a framework of appropriate checks and balances. Given the nature of business and size of operations, the Company has designed and instituted a robust internal control system that comprises well-defined organisation structure, roles and responsibilities, documented policies and procedures to reduce business risks through a framework of internal controls and processes. These controls ensure:

• Recording of transactions are accurate, complete and properly authorised;

• Adherence to Accounting Standards, compliance to applicable Statutes, Company policies and procedures and timely preparation of financial statements;

• Effective usage of resources and safeguarding of assets;

• Prevention and detection of frauds/errors; &

• Efficient conduct of operations.

To ensure efficient internal control systems, the Company has a well-established, independent and multi-disciplinary Internal Audit function that carries out periodic audits across locations and functions. The scope and authority of the Internal Audit function is derived from the Internal Audit charter duly approved by the Management. The Internal Audit function reviews compliance vis-a-vis the established design of the internal control, as also the efficiency and effectiveness of operations. Internal Audit function is responsible for providing, assurance on compliance with operating systems, internal policies and legal requirements as well as suggesting improvements to systems and processes. It reviews and reports to management and the Audit Committee about compliance with internal controls, and the efficiency and effectiveness of operations as well as the key process risks. The Company also has established whistle-blower mechanism operative across the Company.

In its continued efforts to further strengthen its Internal Audit process through utilizing the services of a specialist agency in order to benefit from the best of practices available (including the use of analytical tools) to monitor various processes, the Company has re-appointed M/s. Pricewaterhouse Coopers ("PwC") as Internal Auditors of the Company for the financial years 2023-24 and 2024-25. The Company is seeing benefits from the professional approach and practises adopted by the said Internal Auditors. The Audit Committee of the Board of Directors, comprising of independent directors, regularly reviews the audit plans, significant audit findings, adequacy of internal controls, compliance with accounting standards as well as reasons for changes in accounting policies and practices, if any. The summary of the Internal Audit findings and status of implementation of action plans for risk mitigation are submitted to the Audit Committee every quarter for review, and concerns if any, are reported to the Board. This process ensures robustness of internal control system and compliance with laws and regulations including resource utilisation and system efficacy. Revenue and capital expenditures are governed by approved budgets and the levels are defined by a delegation of authority mechanism. Review of capital expenditure is undertaken with reference to benefits expected in line with the policy for the same.

Investment decisions are subject to formal detailed evaluation and approved by the relevant authority as defined in the delegation of authority mechanism. The Audit Committee reviews the plan for internal audit, significant internal audit observations and functioning of the Companys Internal Audit department on a periodic basis.

10.6. Internal Financial Control Systems with reference to the Financial Statements

The Company has complied with the specific requirements of the Companies Act, 2013 which call for establishment and implementation of an Internal

Financial Control framework that supports compliance with requirements of the said Act in relation to the Directors Responsibility Statement.

The Companys business processes are enabled by an Enterprise-wide Resource Platform (ERP) as its core IT system. The operating management is not only responsible for revenue and profitability, but for also maintaining financial discipline and accountability. The systems and processes are continuously improved by adopting best in class processes, automation and implementing latest Information Technology tools. The Company has a formal system of internal financial control to ensure the reliability of financial and operational information, and regulatory and statutory compliances. This is reviewed regularly and tested by Internal Audit Team. The Companys business processes are enabled by the ERP for monitoring and reporting processes resulting in financial discipline and accountability.

11. Enterprise Risk Analysis and Management

The Company has an established risk assessment and minimisation framework. This framework provides a mechanism to identify the risk, evaluation of likelihood of happening and consequences. It also provides for assessment of options to mitigate the risk and develop appropriate risk management plans. There are normal constraints of time, efficiency and cost.

The Risk Management Committee of the Board of Directors reviews the risk mitigation plans periodically to monitor the key risks of the Company and evaluate the management of such risks for effective mitigation. During the year under review, the Risk Management Committee met on 1st August 2022, 4th November 2022 & 22nd March 2023 and reviewed the risks and mitigation plans of the divisions. Some of the risks associated with the business and the related mitigation plans are discussed hereunder. The risks given below are not exhaustive and the evaluation of risk is based on managements perception.

11.1. Engineering Risk

Why considered as Risk

Mitigation Plan/Counter Measure

User Industry • Significant exposure to auto sector • New products/applications to existing customers
Concentration Risk • Time lag in pass through of input cost changes • Introduction of new products catering to non-auto users
• Increase in exports volume with focused business development on select product segments
• Leverage application engineering skills for tubular solutions
• To study the new opportunities that will emerge with the launch of electric vehicles and plan for participation in the same
• Drive efficiency improvement through Lean approach for sustainable competitive advantage.
Technology • Cheaper alternatives for auto applications affecting revenue streams • Imbibing new and relevant technologies
Obsolescence Risk • Equipment upgradations to address emerging demand for light weighting and high strength tubes (stabilizer bar tubes)
Raw Material Risk • Volatility in steel price • Alliance with steel producers
• Inconsistency in quality • High inventory holding • Back-to-back arrangement with customers to ensure timely recovery of steel price increases
• Global sourcing
• Strategic sourcing including developing new grades by suppliers
• Rationalization and standardization of grades
• Move to products with higher value addition
Competition Risk • Competition from integrated steel mills • Consistent quality and timely delivery
• New entrants with financial strength • Imports • Import substitution, development of new grades
• Product range of offering leveraging all businesses of the Company
• Innovate on products, process and applications
• Leveraging metallurgy skills
• Regional balancing and common capability across all plants
• Digital initiatives for faster response
Export related risks • Increased trade protectionism and import tariff • Global competition • Identification of new export markets and customers
• Need for higher capability • Capability building
• Focussing on new product categories and newer markets across geographies
• Continue participation in US AD/CVD reviews to reduce duty rates
• Efficiency improvement through Lean approach for sustainable competitive advantage

11.2. Metal Formed Products

Risk

Why considered as Risk

Mitigation Plan/Counter Measure

Product Risk

• Slowdown in 2W industry growth

• Widen profile across product and customer portfolio.

• Continue to focus on cost reduction opportunities.

• Improving focus on exports.

Pricing Risk

• Year-on-Year price reduction expectation

• Relationship building and joint / dynamic estimation of cost with OEMs leading to smooth price increase settlement.

• Arrangement with customers for the timely recovery of steel price increases in line with the industry standards.

• Maximize the benefit from sourcing and consolidated buying to reduce impact

• Value Analysis / Value Engineering (VAVE) initiatives.

• Optimal investment and reduced cost of operations.

Product Risk • Revenues are model specific • Continuous engagement with customers
• Risk of product failures • Indigenization of equipment

• Pursue options for other business using the same facilities

• Model specific investments to be done by OEMs

• More rigorous analysis of risks before taking up the project

Technology Risk • Adoption of Electric Vehicles • Engagement with major EV manufacturers.
• Focus on adjacencies and exports.
• Identification of new business opportunities.
Employee Risk • Increase in labour cost and non-availability of • Identifying talent and training for critical roles.
skilled resource • Skill development of employees.
• Gap in talent availability • Process automation
Sourcing Risk • Availability of raw material • Vendor relationship building

• Dependency on few vendors

• Strengthening planning system to ensure timely availability.

• Identification of alternate source for critical items.

11.3. Bicycles and Components

Risk

Why considered as Risk

Mitigation Plan/Counter Measure

Product • Decline in sales, revenue and profitability • Adapt to product alternatives like E-bikes
Obsolescence Risk • Increase in inventory • Export markets
• Activations to promote cycling as a lifestyle/ fitness category
• Monitor NPD (new product development) cycle and address the exceptions periodically
Sourcing Risk • Raw material supply chain issues due to pandemic • Continuous upgrading of vendor capability through vendor score card rating and closing the gaps, implementing Kaizens and ensuring timely delivery.
• Volatility in volumes • Relationship building and ensuring stable volumes to keep the supplier operations running through altering SoBs and rationalizing the supply base continuously.
• Continuous increase in raw material price • Reduce import dependency and pass on the increase to market, ensuring commodity settlement to suppliers every month.
Competition Risk • Competitors investing in capacity expansion • Investment in e-Cycle manufacturing plant to capitalize on domestic and exports volume • Increase focus on brand awareness & visibility initiatives
• Launch of e-cycles targeting global market
• International range licensing • Introducing new models with a healthy innovation funnel
• Consistent quality and timely delivery
Volume & Profitability • Shift to mass premium from Premium • Be price competitive and leverage innovation
Risks • High price competition in specials • Premium imagery and designs at competitive price points
• Increase in number of unbranded players with competitive offering • Star Multi Brand Outlets with a vision to enhance consumer in-store experience and store footprint
• Focus on optimized sourcing thereby have price competitive products
• Increase focus on brand awareness & visibility initiatives
Technology Risk • Lack of capacity and capability to handle large scale shift to alloy bikes • Capability building for manufacture and assembly of alloy bikes
• Frame alloy manufacturing
• Water Decal establishing
• Support Indigenization for all imported components except gears & shifters
• Establishing reliable source for high end bikes by approval of alloy tube manufacturer
• Development of alloy child parts

11.4. General Risk

Why considered as Risk

Mitigation Plan/Counter Measure

Human Resource Risk • Build Talent Pipeline for meeting growth aspirations • Conceptualize and implement TI Talent Management approach as a key focus area
• Retention of talent • Coaching and team building
• Availability and skill upgradation of • Individual career and development plan
non-permanent workforce • Effective communication exercises
• Continuous engagement with identified talent pool
• Deskill operations
• Continuously engage with contractors and contract labour for their wellness & engagement.
Currency Risk • Foreign currency exposure on exports, imports • Early identification and monitoring of exposures
and borrowings • Hedging of exposures based on risk profile.
IT/Cyber Related • Confidentiality, integrity and availability • Access controls
Risk • Secure Network Architecture
• Infrastructure redundancies & disaster recovery mechanism
• Audit of controls
Project Management • Delay in implementation • Effective project management
Risk • Increase in cost • Pre-implementation planning
• Potential delay in stabilization of production. • Deployment of adequate resources
• Effective monitoring

12. Corporate Social Responsibility (CSR)

The Company, being part of the Murugappa Group, is known for its tradition of philanthropy and community service. The Companys philosophy is to reach out to the community by establishing service-oriented philanthropic institutions in the field of education and healthcare as the core focus areas. The CSR Policy of the Company is available on the Companys website at the following link: https://tiindia.com/csr-policy/. As per the provisions of the Companies Act, 2013, the Company was required to spend 9.09 Cr. and had also carried forward an excess balance of 0.31 Cr. After adjustment of the said excess carried forward balance, the minimum mandatory amount required to be spent during the financial year 2022-23 was 8.78 Cr, against which, the Company spent 9.04 Cr. towards identified CSR projects in the fields of education, health care and community development during the year.

The Annual Report on CSR for 2022-23 is annexed to and forms part of this Report (refer Annexure-B) as well as on the Companys website at the following link: https://tiindia.com/wp-content/uploads/2023/07/CSR-Annual-Report-2022-23.pdf

13. Corporate Governance

The Company is committed to maintaining high standards of corporate governance. The Company was wholly in compliance with the requirements of the Listing Agreement with the Stock Exchanges as well as the SEBI Listing Regulations. A report on corporate governance together with a certificate from the Practising Company Secretary is annexed in accordance with the terms of the SEBI Listing Regulations and forms part of the Boards Report (refer Annexure-C). The Managing Director and the Chief Financial Officer have submitted a certificate to the Board regarding the financial statements and other matters in terms of Part B of Schedule II [Corporate Governance] of the SEBI Listing Regulations. The Report further contains details as required to be provided in the Boards Report on the policy on Directors appointment and remuneration including the criteria, annual evaluation by the Board and Directors, composition and other details of Board committees, implementation of risk management policy, whistle-blower policy/vigil mechanism, dividend policy etc.

14. Business Responsibility and Sustainability Reporting

As required under the SEBI Listing Regulations which mandate the inclusion of a Business Responsibility and Sustainability Report as part of the Annual Report for the top 1000 listed entities, the Business Responsibility and Sustainability Report forms part of the Annual Report (refer Annexure-D).

The Business Responsibility Policy of the Company is displayed on the Companys website at the following link: https://tiindia.com/business-responsibility-policy/ The report emphasises reporting on the ESG (Environmental, Social and Governance) matters and describes the initiatives taken by the Company with specific focus on ESG.

15. Human Resources

This year the focus has been on continuing the journey towards nurturing a high performing work culture to achieve organisational goals. We continued to march ahead with process discipline, creating more and more oneness across all verticals of TII and driving a culture of high drive for achievement.

To foster the organisational oneness the theme of "One TII - Many possibilities - Ample opportunities" was unveiled at the Annual Communication meeting. Employees can aspire to grow within TII as the organisation itself is in the precipice of exploring possibilities in newer business areas. A core focus of the organisation has been towards employee engagement and well-being. Several focussed group discussions, manager conversations have helped the organisation to move forward with a concrete plan to drive engagement as a key metric. Insights from all the conversations have been translated into tangible actions which are being deployed across various employee groups. Safety and employee involvement continues to be a focus areas and in that regard various trainings, audits and corrective actions are implemented across all Business units.

Company continues to lay emphasis on the initiatives that are part of its long-term Human Resources Strategy. Significant work towards driving High Performance Work Culture through standardization of metrics across various business units and arriving at consistent People Productivity Index has helped identify various avenues to improve the same. TI Way of working, by standardizing various policies and processes, is progressing across all work locations. The adoption of TI Way will be a game changer as the Company continues to pursue aggressive growth paths through several green field and M&A activities.

Consistent and significant efforts have been put in place to ensure that the TI Talent Development Engine (TDE) supports the growing needs of the leaders as the company progresses ahead.

As part of the TDE, three senior leaders were nominated for the Harvard AMP to make them future ready to take on leadership roles in existing as well as new businesses. 11 leaders have graduated this year from the groups Business Leadership Program and were assigned additional responsibilities or new roles. A total of 20% of overall Managers are going through development journeys to move to next level roles. The Talent Board continues to guide, support and mentor the various developmental actions, interventions and suggest appropriate next steps for accelerated talent development in TI. Lot of focus this year has also been on improving the digital capabilities of the HR functions. A new system is being implemented in phases and the journey towards paperless HR has started. These are steps that the organisation is taking towards sustainable practices. The Company embarked on its Lean (Kaizen) journey with the guidance from Japanese consultants in order to be competitive, adapt changes to market & economy. The focus was to eliminate/reduce waste in the value chain, create value to customer and be more productive in "what we do" & the "way we do". The main focus will be on improving productivity (daily despatches), quality improvement, reducing inventory & lead time, creating a flow in production processes using lean tools like Takt time production, line balancing, operator load balancing (Yamazumi), standard work combination, levelled production, operator & machine cycle time reduction.

The total number of permanent employees on the rolls of the Company as on 31st March 2023 is 3,038. Industrial relations continued to remain cordial at all the Companys units during the period under review. The information relating to employees and other particulars required under Section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 will be provided upon request. In terms of Section 136 of the Companies Act, 2013, the Report and Accounts are being sent to the Members excluding the information on employees, particulars of which are available for inspection by the Members at the Registered Office of the Company during business hours on all working days of the Company up to the date of the forthcoming Annual General Meeting. If any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary in the said regard.

The disclosure with regard to remuneration as required under Section 197 of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached and forms part of this Report (refer Annexure-E).

16. Prevention of sexual harassment at workplace

The Company has policy on prevention of sexual harassment at workplace in line with the requirement of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. An Internal Complaints Committee (ICC) to redress complaints received regarding sexual harassment has been constituted in compliance with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The policy extends to all employees (permanent, contractual, temporary and trainees). Employees at all levels are being sensitized about the Policy and the remedies available thereunder. No complaints were received by the ICC during the year under review and no complaint was pending as at the end of the year.

17. Employee Stock Option Scheme

During the year under review, the Company had granted 1,89,800 options to eligible employees under its Employee Stock Option Plan viz., ESOP 2017. Details in respect of the ESOP 2017 as required under the relevant SEBI Regulations are displayed on the Companys website at the following link: https://tiindia.com/esop/

18. Directors Responsibility Statement

The Board of Directors confirm that the Company has in place a framework of internal financial controls and compliance system, which is monitored and reviewed by the Audit Committee and the Board besides the statutory, internal and secretarial auditors. To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134(3)(c) of the Companies Act, 2013: a) that in the preparation of the annual Financial Statements for the year ended 31st March 2023, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; b) that such accounting policies as mentioned in the Notes to the Financial Statements have been selected and applied consistently and judgment and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March 2023 and of the profit of the Company for the year ended on that date; c) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) that the annual Financial Statements have been prepared on a going concern basis; e) that proper internal financial controls to be followed by the Company have been laid down and that the financial controls are adequate and were operating effectively; & f) that proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

19. Auditors

M/s. S R Batliboi & Associates LLP, Chartered Accountants (LLP Identity no.AAB-4295) were appointed as Statutory Auditors at the 14th Annual General Meeting held on 2nd August 2022 for a period of four years viz., from the conclusion of the said 14th Annual General Meeting till the conclusion of the ensuing 18th Annual General Meeting. The remuneration payable to them for the financial year 2022-23 has already been fixed at the 14th Annual General Meeting.

The Company is required to maintain cost records in respect of Steel Products, Metal Formed Products and parts & accessories of auto components of the Company and such accounts and records are made and maintained. M/s. S Mahadevan & Co. (firm no.000007), Cost Accountants were appointed as the Cost Auditors of the Company for auditing the cost accounting records maintained by the Company in respect of the applicable products for the financial year 2023-24. Necessary resolution for ratification of their remuneration in respect of the aforesaid terms of appointment for the financial year 2023-24 forms part of the Notice for the ensuing Annual General Meeting, which the Board recommends for the shareholders approval.

20. Related Party Transactions

All related party transactions that were entered into during the financial year under review were on an arms length basis and were in the ordinary course of business. The Company did not enter into any materially significant related party contracts or arrangements or transactions during the financial year which may have a potential conflict with the interest of the Company at large or which is required to be reported in Form No. AOC-2 in terms of Section 134(3) (h) read with Section 188 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014.

Necessary disclosures as required under the Indian Accounting Standards have been made in the notes to the Financial Statements.

The policy on Related Party Transactions as approved by the Board is uploaded and is available on the following link on the Companys website: https://tiindia.com/rpt-policy/ None of the Directors had any pecuniary relationships or transactions vis-?-vis the Company.

21. Directors

During the year under review, the following key Board level changes were effected to evolve and realign the senior management team after considering the growth aspirations in the existing businesses, the number of new initiatives/businesses in the anvil and towards long-term succession planning:

- Mr. M A M Arunachalam was appointed as a Whole-time Director (Key Managerial Personnel), designated as the Executive Chairman for a 5-year term of Office from 1st April 2022 to 31st March 2027 (both days inclusive);

- Mr. Vellayan Subbiah was appointed as a Whole-time Director (Key Managerial Personnel), designated as the Executive Vice Chairman for a 5-year term of Office from 1st April 2022 to 31st March 2027 (both days inclusive); and

- Mr. Mukesh Ahuja was appointed as Managing Director (Key Managerial Personnel) for a 5-year term of Office from 1st April 2022 to 31st March 2027 (both days inclusive).

- Mr. Vellayan Subbiah, Executive Vice Chairman retires by rotation at the ensuing Annual General Meeting to facilitate the compliance of the requirements of Section 152 of the Companies Act, 2013 ("the Act") and being eligible, he offers himself for re-appointment. The Board, based on and after taking into consideration the recommendations of the Nomination and Remuneration Committee, recommends the re-appointment of Mr. Vellayan Subbiah as Director, liable to retire by rotation only to comply with the provisions of the Act, at the forthcoming Annual General Meeting.

All the Independent Directors of the Company have furnished the necessary declaration in terms of Section 149(6) of the Act affirming that they meet the criteria of independence as stipulated thereunder. In the opinion of the Board, all the Independent Directors have the integrity, expertise and experience including the proficiency as required to effectively discharge their roles and responsibilities in directing and guiding the affairs of the Company and, are independent of the management.

- Mr. Sanjay Johri will be retiring at the conclusion of the ensuing Annual General Meeting on completing his term of office as an Independent Director. The Board places on record its grateful appreciation for the distinguished services rendered by Mr. Sanjay Johri during his association, since August 2018, as an Independent Director of the Company.

22. Declarations/Affirmations

During the year under review:

- there were no material changes and commitments affecting the financial position of the Company, which have occurred between the end of the financial year of the Company to which the financial statements relate viz., 31st March 2023 and the date of this Report; & - there were no significant material orders passed by the regulators or courts or tribunals impacting the Companys going concern status and its operations in future.

23. Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. R Sridharan of Messrs R. Sridharan & Associates, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed herewith and forms part of this Report (refer Annexure-F).

The Company has ensured compliance of the Secretarial Standards issued by the Institute of Company Secretaries of India during the period under review. Accordingly, no qualifications or observations or other remarks have been made by the Secretarial Auditor in his said Report.

24. Annual Return

A copy of the Annual Return of the Company is placed on the website of the Company and the same is available on the following link: https://tiindia.com/financial-information/.

25. Key Managerial Personnel

Mr. M A M Arunachalam, Executive Chairman, Mr. Vellayan Subbiah, Executive Vice Chairman, Mr. Mukesh Ahuja, Managing Director, Mr. K R Srinivasan, President & Whole-time Director, Mr. AN Meyyappan, Chief Financial Officer and Mr. S Suresh, Company Secretary are the Key Managerial Personnel (KMPs) of the Company as per Section 203 of the Companies Act, 2013.

Mr. K Mahendra kumar ceased to be the Chief Financial Officer with effect from the close of business hours on 8th September 2022.

26. Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of The Companies (Accounts) Rules, 2014 is annexed herewith and part of this Report (refer Annexure-G).

The Directors thank all Customers, Vendors, Financial Institutions, Banks, State Governments, Investors for their continued support to your Companys performance and growth. The Directors also wish to place on record their appreciation of the contribution made by all the employees of the Company resulting in the good performance during the year under review.

On behalf of the Board
Chennai M A M Arunachalam
15th May 2023 Executive Chairman