tvs srichakra ltd share price Management discussions

Company Profile

TVS Srichakra Limited (hereinafter referred as "the Company" or "your Company") is one of Indias largest manufacturers and exporters of two-wheeler, three-wheeler and off highway tyres. Your Company produces 2.7 million Tyres and tubes per month. Domestically, the Company is a leading supplier of tyres to Original Equipment Manufacturers (OEM). The replacement market is supported through a network of depots, distributors and retailers. The Company accesses international markets through sales to more than 80 countries world-wide across all the major continents.

The Company manufactures tyres in two manufacturing sites - one in Tamil Nadu and the second in Uttarakhand. Products are precision engineered to provide superior performance in different conditions. The Companys product range includes two and three-wheeler tyres, industrial pneumatic tyres, farm and implement tyres, floatation and other multi-purpose tyres. The Companys tyres are designed to global standards with high quality and advanced technology and are sold under the brand names of "TVS Eurogrip", "TVS Tyres" and "Eurogrip".

Global Economy

The multiple waves of the Covid pandemic, the emergence of geopolitical tensions, and the economic stresses being seen in the United States and Europe have all affected the global economy over the past three years, increasing uncertainty in an already complex economic landscape. Resilient consumer spending in advanced economies and Chinas recovery have resulted in slight improvements to global economic projections for the year 2023-24. However, a sharp slowdown persists due to adverse economic conditions, a fragile financial environment and ongoing uncertainties. Further, the Russia-Ukraine conflict continues to affect economic activities at various levels globally.

The World Economic outlook report published by IMF in April 2023 projects that global growth will fall from 3.4 percent in 2022 to 2.8 percent in 2023 but rise to 3.0 percent in 2024. Advanced economies are expected to see an especially pronounced growth slowdown, from 2.7 percent in 2022 to 1.3 percent in 2023. Growth in Europes advanced economies will slow to 0.7 percent this year from 3.6 percent last year, while emerging economies (excluding Turkiye, Belarus, Russia, and Ukraine) will also see a sharp decline to 1.1 percent from 4.4 percent.

In a plausible alternate scenario, with further economic stress, global growth will decline to about 2.5 percent in 2023 with advanced economy growth falling below 1 percent. Global headline inflation in the baseline is set to fall from 8.7 percent in 2022 to 7.0 percent in 2023 to a further 4.3 percent in 2024 on the back of lower commodity prices but underlying (core) inflation is likely to decline more slowly. Inflations return to target is unlikely before 2025 in most cases. Against this somber backdrop, IMF has stated in their Regional Economic Outlook (Asia-Pacific) that, Asia-Pacific remains a dynamic region. Growth in Asia and the Pacific is projected to increase in 2023-24 to 4.6 percent, from 3.8 percent in 2022, an upgrade of 0.3 percent relative to the October 2022 World Economic Outlook. This means the region would contribute around 70 percent of global growth. Asias dynamism will be driven primarily by the recovery in China and resilient growth in India.

WORLD ECONOMIC OUTLOOK - A ROCKY ROAD TO RECOVERY:

With the recent increase in financial market volatility and multiple indicators pointing in different directions, the fog around the world economic outlook has thickened. Uncertainty is high, and the balance of risks has shifted firmly to the downside so long as the financial sector remains unsettled. The major forces that affected the world in 2022 central banks tight monetary stances to allay inflation, limited fiscal buffers to absorb shocks amid historically high debt levels, commodity price spikes and geo economic fragmentation with Russias war in Ukraine, and Chinas economic reopening seem likely to continue into 2023 (Source: IMF, World economic outlook).

Despite the US economy expanding at a rate of 2.1 percent in 2022, it is expected to drop down to 1.6 percent in 2023 and then to 1.1 percent in 2024 as a result of rising geopolitical and economic tensions between the US and China that may cause disruptions in the industrial value chain.

Share of each Segments in Total Production Volume (FY22)

The energy needs of Europe were catered to by Russia in recent years, but due to the conflict between Russia and Ukraine, the energy sourced from Russia has decreased to only 15% for petroleum liquids and natural gas, doubling the regions energy costs in CY 22. However, the IMF projects that Europe would grow by 0.8% in 2023.

Due to extremely high levels of public debt and inflation, Sub-Saharan Africas growth in 2024 is anticipated to fall to 3.6 percent, with double-digit inflation an issue in half of the countries. As a result, household purchasing power has declined, which has a detrimental impact on the poor and exacerbates societal tensions.

India is still a "bright spot" in the global economy having single handedly contributed to over 15 percent of the global growth in 2023.

Major economies across the globe are setting new targets to reduce emissions and adopting strategies for supply chain resilience, thereby expecting a rocky recovery in the second half of the year.

INDIAN ECONOMY & OUTLOOK

During FY 2022-23, the Indian economy grew by 7.2% staging a broad-based recovery across sectors, positioning to ascend to the pre-pandemic growth path in FY 23. The Indian Government believes that India has recovered from pandemic-induced contraction, Russian-Ukraine conflict and inflation. Indias GDP growth is expected to remain robust in FY 24. GDP is forecast for FY24 to be in the range of 6-6.8%.(Ministry of Finance). Indias strong growth is driven by factors such as digitisation, prudent fiscal policy, push for infrastructure development, stabilising commodity prices and resilient supply chain.

Agencies worldwide continue to project India as the fastest-growing major economy at 6.5-7.0% in FY 23 - 24. (Ministry of Finance). The three shocks of COVID-19, Russian-Ukraine conflict and the Central Banks synchronised policy rate hikes to curb inflation economies, led by Federal Reserve have led to the appreciation of US Dollar and the consequent widening of the Current Account Deficits (CAD) in net importing economies. Growth in India, which withstood these shocks well, is underpinned by strong investment activity bolstered by the governments capex push and buoyant private consumption, particularly among higher income earners (Source: Worldbank).

In the current uncertain situation of geo-political tensions and a few factors contribute to the high growth forecast. They include (i) supportive government policies, (ii) sound macroeconomic fundamentals, (iii) lower nonperforming loans in banks, (iv) significant corporate deleveraging and (v) increasing corporate profitability. However, weak global demand and effect of monetary policy tightening to manage inflationary pressure will have a constraint on the economic growth. Nevertheless, moderating inflation and monetary policy easing in the second half of 2024 will help discretionary household spending regain momentum. This along with improved global conditions, will help economic activity to accelerate, with growth of 7% in real GDP in FY 24-25 (Source: OCED economic outlook).

With Indias CPI and WPI inflation easing out towards the end of 2023, the Index of Industrial Production (‘IIP) for manufacturing for 2023 saw a growth of 10.94% on a Y-o-Y basis. Moreover, rural demand is expected to provide as a backbone for improving economic activity as the government focuses on infrastructure development, revival in corporate investments and moderating commodity prices.

Despite the unprecedented turbulent situation, India continues to be resilient (Source: World Bank).

GLOBAL AUTOMOBILE INDUSTRY

According to S&P Global Mobility, global motor vehicle production experienced a 1% reduction in CY22 compared to the previous year. However, there is an anticipated growth of 3-4% over the next two years. The recovery process is ongoing, but the Russia/Ukraine conflict and adverse macroeconomic conditions are bringing uncertainties into the industry. Further, the global automotive industry faces a lot of problems such as ongoing energy crisis, slower global demand and continued supply-chain problems.

Despite challenges, there has been a strong rebound from the initial COVID lockdown in 2020, with further recovery observed in the later part of 2022. It is expected that global new-vehicle sales will remain relatively flat in 2023, while new-car sales are expected to rise by 0.9% and new Commercial Vehicle (‘CV) sales are projected to fall by 1.3%.

However, recurring outbreaks of the virus in China, continue to disrupt the global industry, while the relaxation of zero-COVID policies presents both opportunities and risks. Trade tensions, particularly regarding semiconductor capacity and technology, are likely to materialize, making certain export destinations more challenging for domestic and international brands.

The Asia-pacific Automotive industry is expected to grow at a CAGR of 7.4% from 2022 to 2030. This is due to the increasing governmental mandates for improving vehicle safety which has strongly contributed to the Asia-pacific automotive demand. Moreover, China Automotive industry held the largest market share, while the Indian Automotive Industry was the fastest growing market in the Asia-pacific region (Source: Market research future).

Electric Vehicle (‘EV) space is expected to experience continuous growth as sales of EVs are projected to grow by 25% in 2023, representing a bright spot.

India is on the cusp of revolutionizing its mobility system. The government has devised a twofold approach through the Faster Adoption and Manufacturing of Electric Vehicles (FAME) Scheme, which aims to benefit Indian industry and citizens. This Schemes second phase offers Rs.10,000 crores in incentives to spur electric vehicle (EV) growth in the country. The Government of Indias think tank, Niti Aayog, and Rocky Mountain Institute have jointly prepared a report that quantifies the energy and carbon savings that the vehicles eligible for FAME II will deliver over their lifetimes. Assuming all vehicles eligible for FAME II incentives are deployed, the net savings would be 5 million tons of oil equivalent (Mtoe) and 7 million tons of CO2 (Source: Rocky Mountain Institute)

INDIAN AUTOMOBILE INDUSTRY & OUTLOOK

The Indian automobile industry contributes around 7.1% of Indias Gross Domestic Product (GDP) and 49% of its manufacturing GDP. In December 2022, India became the third-largest automobile market in the world, surpassing Japan and Germany in terms of sales (Source: Nikkei Asia report). India is one the largest manufacturer of 2/3 Wheeler vehicles in the world. It is also ranked as the fourth-largest manufacturer of Passenger Cars.

Two-wheelers occupy a dominant position in Indias automobile industry, constituting about 80% market share and overall passenger vehicles comprise 13%. The industry produced about 22.9 mn vehicles including Passenger Vehicles, Commercial Vehicles, Three Wheelers, Two Wheelers and Quadricycles in financial year 2021-22 (Source: Make in India).

Domestically, auto companies sold 37,92,356 passenger vehicles in 2022, highest in a year, eclipsing the previous high of 2021, according to data from the Society of Indian Automobile Manufacturers. Passenger vehicles sales in India grew by 26.7% in the fiscal year 2022-23 (Source: Auto industry body). Wholesale of passenger vehicles were at 38,90,114 units, as compared to 30,69,523 units in the previous year. Two-wheeler sales rose 16.9% in fiscal year 2022-23 according to SIAM.

The automobile sector received cumulative equity FDI Inflow of about US$ 33.77 billion between April 2000-September 2022. The Government of India expects the automobile sector to attract US$ 8-10 billion in local and foreign investments by 2023.

The passenger vehicle sector was the hardest hit in fiscal year 2022 due to semiconductor shortages on account of rising semiconductor intensity per vehicle and a shortage of chips. However, passenger vehicle volumes are expected to grow further during FY 2023-24 on the back of a healthy order book and ramp-up in production. Also, the prices for passenger vehicles are set to increase as companies prepare to conform to stricter emission norms which kick in from April 2023 and this may put some pressure on the consumers.

Demand for two-wheelers has been sluggish due to weakness in the rural segment. However, a gradual recovery is expected. For Tractors, volumes are likely to be better on improving customer sentiments and finance availability. The volatile geopolitical scenario has impacted the export tractors in Q4; however, the domestic market is expected to grow, in line with growth in agricultural sector.

What has helped the industry maintain growth momentum both domestically and in the export markets is the consistent support by raw material partners who have stood steadfastly with the industry at a time when supply chains were disrupted earlier due to Covid and then due to geo-political concerns (Source: ATMA)

India could be a leader in shared mobility by 2030, providing opportunities for electric and autonomous vehicles. The focus is shifting to electric vehicles to reduce emissions. The electric vehicles industry is likely to create five crore jobs by 2030. (Source: IBEF)

India is a signatory to the Paris Agreement under the United Nations Framework Convention on Climate Change. The country is also part of the EV30@30 campaign, targeting a 30% sales share for eVs by 2030. In CY 2022 EV sales surpassed one million units for the first time and marked a record 206% year on year growth over CY 2021 EV sales numbers. Indias EV industry hit a record sales accounting to 4.7% overall automobile sales. (Source: evreporter.com)

Opportunities for growth in the domestic automobile industry are attributable to:

? FDI investments in Automobile Industries

? Rise in the penetration of EVs

? Production linked incentives

? Extension of FAME-II scheme up to end March 2024.

? Autonomous vehicles

? Digital automobile Sales.

Various biofuels are in discussion for implementation by Government of India. EnC worked with MoPNG and Niti Aayog to draw a roadmap for shifting to higher blends of Ethanol. SIAM committed to timelines for launch of vehicles fully compatible to 20% Ethanol blended Gasoline by 2025 while introducing E20 material compliant vehicles as per MoPNG plan of launch of E20 from 2023 as well (Source: Emissions and conservative group of SIAM).

THE ELECTRIC VEHICLE (EV) SECTOR:

India has been making steady progress in the adoption of Electric Vehicles (EVs) as part of its efforts to reduce greenhouse gas emissions and air pollution. There have been multiple interventions across Central and State Governments in this regard. As an example, Tamil Nadu has announced its EV Policy CY 23, which aims to electrify public and commercial transport and promote the formation of EV cities.

Furthermore, the Indian government aims to install a total of 46,397 public charging stations for EVs in nine major cities by 2030, representing a nine-fold jump from the current levels. This could provide a significant boost to the adoption of EVs, as range anxiety is one of the major concerns among potential buyers. India has also set a roadmap to achieve 80% electrification of 2-wheelers by 2030, which could significantly reduce the countrys dependence on fossil fuels and the Union Budget 2023 also has several provisions to promote Electric Vehicle (‘EV) industry in the country.

One of the most significant announcements in the budget is the reduction in customs duty on lithium batteries from 21% to 13%. This move could significantly reduce the cost of manufacturing EVs in India, as lithium-ion batteries account for a significant portion of the total cost of EV. The government has also reduced the Goods and Services Tax (‘GST) on the sale of EVs from 12% to 5%, which is likely to make them more affordable for buyers.

Improving urban sentiments, increased public mobility with reopening of educational institutions and offices and positive rural sentiments backed by a regular monsoon and increased minimum support prices (MSPs) across crops, coupled with improved model availability and demand for electric vehicles (EVs), are expected to drive two-wheeler sales to 21-23% in fiscal 2023. Sales in fiscal 2024 are likely to be driven by expectations of a normal monsoon, coupled with improved model availability and demand for EVs.

India, today, has the second largest road network in the world, and it is growing rapidly. This will enhance interstate road-based commerce business and travel as it makes inroad to connect rural areas. This would also increase the number of vehicles on the roads, including primary and secondary demand.

GLOBAL TYRE INDUSTRY

The last seventy years have been characterized by rising population levels, urbanization and increasing disposable income. Greater consumer purchasing power has fueled demand for cars, which in turn has driven steady growth in the global tyre market.

However, in light of the ongoing global economic unrest, 2023 appears to be going to bring a similar, if not more difficult, set of issues for the biggest tyre makers (LMC Tyre and Rubber Research). Due to the global pandemic, overall light vehicle sales have been under pressure over the last 18 months to two years. China dominates the global tyre market, making up around 50% of the sector, followed by Europe, US, India and Japan. Indias tyre business has showed strong resilience and is anticipated to develop at 7-9% from 2020 to 2024 and overtake US to become the third-largest market worldwide. The global tyre market size reached 2,321.3 million Units in 2022. Looking forward, it is expected that market will reach 2,741.2 million Units by 2028, exhibiting a CAGR of 2.81% during 2022-2028.

Key trends and drivers for the global tyre industry over the next five years include:

(i) Increasing sales of passenger, luxury, and electric vehicles (EVs) on account of rapid urbanization and expanding purchasing power of individuals represent one of the major factors positively influencing the demand for tyres around the world.

(ii) Rising focus on driver and passenger safety and the growing number of fatal road accidents are catalyzing the demand for premium quality tyres that have a longer operational life, enhanced stability and reliability, and high puncture resistance.

(iii) Replacement demand is supported by a wide variety of growing end uses.

(iv) Transport and Tyre regulations will continue to drive innovation and technology adoption.

(v) Adaption and evolution of tyres and related services to better meet end-use requirements such as fuel efficient, performance durability, and intelligence/data/predictive analytics will accelerate.

(vi) Focus on sustainability across the lifecycle, from raw materials to recycling. Greater automation and efficiency in production, pursuit of zero waste and defects.

Further, the industry is also experiencing the effects of Industry 4.0, as digital transformation influences all aspects of corporate operations. Companies are adopting technologies like digital simulation, virtual reality, collaborative robotics, additive manufacturing, the Internet of Things (‘IoT), Artificial Intelligence (‘AI), data-driven management and data protection to enhance productivity, flexibility, responsiveness and personalised solutions. This transformation is reshaping traditional job roles, organisational structures and collaboration methods in the tyre industry.

INDIAN TYRE INDUSTRY, OUTLOOK & COMPANY PERFORMANCE (Source: ATMA)

The Indian tyre industry is expected to grow in the coming years due to increasing demand for vehicles and government focus on infrastructure development. The planned spending in the tyre industry is aimed at adding manufacturing capacity, modernisation, upgrading technology and research and development (R&D). With growth and expansion of the automobile sector, demand for replacement tyres is also increasing. Moreover, increasing acceptance of Indian tyres in the overseas markets is leading to a sharp growth in tyre exports from India to destinations such as the US and Europe. The creation of high-speed corridors and governments infrastructure efforts will lead to an increase in the use of radial tyres. The shift towards radialisation will provide a further growth opportunity for the industry. The incorporation of Industry 4.0 and automation in the tyre industry is also expected to improve productivity and quality.

Demand from the two/three-wheeler OEM segment (38-42% of two-wheeler tyre demand in fiscal 2022) is expected to grow 6-10% in fiscal 2024 following a 11-13% growth in fiscal 2023 amid improving income sentiments. OEM tyre demand from PVs (49-51% of PV tyre demand in fiscal 2022) is expected to grow 7-11% in fiscal 2024, after a strong 28-30% growth in fiscal 2023, amid improving supply of semiconductors, pent-up demand and multiple models launches by OEMs. PV OEM demand showed a robust 25-27% on-year growth in fiscal 2022, owing to preferred personal mobility amid safety concerns and import substitution. Better financial conditions, increase in the launch of higher end of utility vehicle models by OEMs, and improving demand sentiments will support growth, going forward. Higher sales in the fleet and cab aggregator segments in fiscals 2017 and 2018 is expected to contribute to replacement demand in fiscals 2023 (considering the pandemic- induced delay in fiscal 2021 and replacement cycle of 3-4 years). Postponement of tyre purchases during the pandemic helped in clocking 24-26% growth in PV replacement market in fiscal 2022.

Indian market is showing very good progress, in view of the governments thrust on high localization, high export and high technology absorption. India has become the fifth largest economy in the world. India has also become the third largest automobile market in the world in 2022 calendar year. The countrys exports are at a historic high level. Overall, India is increasingly becoming a promising destination for the manufacturing sector given a growing domestic market and good export potential (Quoted by: Mr Hisashi Takeuchi, MD & CEO, Maruti Suzuki India Ltd.)

While the Indian tyre exports had witnessed a growth rate of 9% in FY 23, tyre Imports in India went up by 15% in value terms in FY 23. The Indian tyre industrys topline is expected to double by fiscal 2032. Its contribution to Indias manufacturing GDP will grow 1.5x and is expected to be 3.2-3.5% (from 2.1% currently). In terms of employment, it is expected to contribute by employing ~3.7 million persons by fiscal 2032. The cumulative R&D expenditure is expected to be $0.8-1 billion. The GST contribution would double to $4 billion. Investments by the industry is expected to increase to $12-13 billion from $5 billion currently. Indias share in global tyre exports would be ~$4 billion, which is 4-5% of the total exports.

COMPANY INITIATIVES DURING 2022-23

A. Overall : During 2022-23, your Company sustained market share to remain a leader in the OE segment despite intense competition, while gaining share in the replacement market. More than 60 new customers were added in the E-scooter segment. Your Company also achieved significant share in the growing E-rickshaw segment. Your Company also continued to grow its presence in the global markets - for the full range of its products.

B. Product Development : Your Company has a proactive approach towards expanding its product portfolio to meet market requirements. Every year, the Company introduces a new range of tyres in critical cohorts, ensuring a comprehensive offering. In FY 23 alone, the Company introduced more than 20 SKUs, including the Europe-inspired Beamer and Duratrail range for motorcycle tubeless tyres, the e-Torq pattern for electric scooter tyres, and the extension of the Remora range for scooter tubeless tyres.

In addition to the FY 23 launches, your Company has also introduced a range of superbike radial tyres in FY 24, further enhancing our product offerings and catering to specific customer segments. These new additions demonstrate the Companys commitment to continuous innovation and addressing evolving market demands. To further enhance our focus on Export markets, in FY 23, your Company has launched Climber XC tyres, designed for off-road Enduro and Motocross applications, as well as the Roadhound range, available in both bias and radial options. These export-focused products aim to capture international market opportunities and cater to specific customer needs.

To streamline the new product development (NPD) process and ensure efficient execution, your Company implemented a new product development tracking software. This software enables effective monitoring and management of the NPD process, ensuring timely execution, coordination, and successful product launches.

Your Companys commitment to expanding its product portfolio, launching new SKUs, and investing in software tools for NPD demonstrates the Companys dedication to innovation, market responsiveness, and delivering products that meet the diverse needs of customers in both domestic and export markets.

Your Company introduced over 40 products for the European market including widest and lowest aspect ratio tyres, using cross ply technology. More than 25 products were specifically designed and introduced for Indian and other global markets. Your Company has received approval of 10 products from OE customers.

C. Market and Channel Development

Your Company has been proactive in expanding its presence and opening new markets across the globe. In order to augment its global business the Company has appointed 25 new channel partners. This strategic move aims to strengthen our distribution network and increase market penetration. Furthermore, your Company has successfully entered several new countries, including Maldives, Afghanistan, Cambodia, and Lebanon, adding to the list of countries where our products are now available.

In the ASEAN region, your Company has made significant progress by expanding into Singapore and Thailand. These new market entries present valuable opportunities for the Company to tap into the growing demand for its products in these dynamic markets.

Moreover, your Company has further expanded in the European Union (EU) market by adding France and Croatia to its our list. By entering these markets, the Company aims to capitalize on the strong demand for its products in the EU and further strengthen the Companys position in the region. These strategic moves to open new markets highlight your Companys commitment to expanding its global footprint and catering to the needs of customers in diverse regions. By appointing channel partners, entering new countries, and expanding into key markets such as ASEAN and the EU, we are well-positioned to capture new business opportunities and drive sustainable growth in the international market.

In the Aftermarket (AM) segment, we have made significant strides in expanding our channel partner network. The Company has successfully added new distributors, strengthening distribution reach and enhancing the ability to serve customers effectively. In addition to distributors, we have expanded the retailer network by adding an impressive almost 2500 new retailers. This expansion enables the Company to establish a wider retail footprint Pan India, ensuring that our products are easily accessible to customers across various locations. Furthermore, we have achieved extensive district coverage, with approximately 430 districts covered as of March 2023. This wide district coverage allows the Company to cater to the diverse needs of customers in different regions, ensuring that its products are available in both urban and rural areas.

D. Raw material trends

Raw material prices account for about 60 - 70% of the turnover of tyre manufacturers. Natural rubber (NR), carbon black, nylon tyre cord fabric (NTCF), styrene butadiene rubber (SBR) and polybutadiene rubber (PBR) are among the the main raw materials used to manufacture tyres.

Due to the global economys impending recession, the drop in Brent crude prices, and the increased production and supply of natural resources, raw material prices reduced in the second half of in 2022. Demand was also influenced by the protracted geopolitical war between Russia and Ukraine. Crude oil prices increased in 2022 due to demand-supply tightness. Geopolitical tensions between Russia and Ukraine had wider implications on energy prices. Prices averaged $98-103 per barrel in 2022 versus $70.4 per barrel in 2021, up 39-46% year-on-year. Crude price has since declined, with the consensus outlook being a range price of USD 70 -75 per barrel. The rise in yield, tappable area growth, and improvement in the fraction of area tapped during the year all contributed to an increase in NR output in fiscal 2022. Despite the rise in output, supply restrictions and a rise in global crude prices as a result of the crisis in the Ukraine and Russia caused domestic NR prices to rise 21% year over year to an average price of Rs 171/kg in fiscal 2022.While NR and crude prices are beyond the control of the Company, the Company explored new sources, worked extensively with strategic partners, entered long term contracts for inputs to protect price volatility. Adequate inventory was maintained to ensure regular material availability and supply security.

E. Capacity expansion

The Company progressed well on its expansion program in the OHT segment, where capacity is being more than doubled. Phase 1 of the project was completed during the year gone by.

F. Technology, Research & Development

Your Companys dedication to technology absorption and research and development has propelled development of innovative products, expanded market presence, and improved product offerings. During 2022-23, your Company made significant efforts in this area, resulting in a host of achievements and benefits in the form of product development and innovation. We have successfully developed and launched over 26 products for the global market, including the widest and lowest aspect ratio tyres using radial technology. In addition, we introduced a new range of "Motocross" tyres for the on/off and enduro segments, catering to the global market demand. Our unwavering focus on research and development has yielded remarkable results, with 22 patents published and 9 patents granted. We take pride in the establishment of a state-of-the-art tyre characterization laboratory, enabling us to meticulously test tyre properties for advanced tyre-road bike simulation studies. Through our dedicated R&D efforts, your Company has been able to successfully launch an innovative product with Low Rolling Resistance (LRR) and higher grip, effectively meeting the needs of the emerging premium segment motorcycle and electric vehicle markets.

Furthermore, we have developed a new range of futuristic sporty products specifically tailored for the Indian market. To cater to global markets, we have developed a full range of zero-degree steel belted high performance radial tyres. We have also launched the widest zero-degree steel belted radials in Europe for high-performance bikes. Moreover, your Company has developed more than 100 products in radial and bias construction for the global off highway tyre market, including steel belted agri radials and flotation tyres. These technology absorption efforts have resulted in significant benefits, such as product improvement, cost reduction, product development, and import substitution. We have successfully launched 60 new products in the standard crossply technology in the Indian, EU, and Asian markets. Our focus on the original equipment (OE) segment has led to receiving over 8 new product approvals from our OE customers. Furthermore, we have leveraged the results of new test equipment to enhance product improvement initiatives.

Overall, these achievements demonstrate our commitment to staying at the forefront of the industry and meeting the evolving needs of our customers.

G. OPPORTUNITIES

The Indian tyre export market is experiencing exciting times, as indicated by the latest statistics from the Ministry of Commerce, Government of India. During the period of April to December 2022, tyre exports from India witnessed a notable increase of 15%. The value of exported tyres during this period amounted to Rs 17,816 crore, compared to Rs 15,507 crore in the same period the previous year.

The growth in demand and the potential for further expansion in the Indian tyre export market are evident. This surge in demand can be attributed to several factors. Firstly, there is a rising demand for tyres due to the increased production of automobiles. Additionally, the growing export activities of vehicles, including tractors, buses, heavy trucks, and cars, contribute to the markets growth. Furthermore, the escalating sales of cars and two-wheelers, driven by the rise in individual income levels across the country, and high quality expressways that encourage road travel, create a favorable market outlook. The lack of public transport in rural areas has also led to an increased demand for vehicles, further boosting the market for tyres.

The utilization of tyres in various types of vehicles, such as passenger cars, buses, military vehicles, motorcycles, and trucks, further contributes to the markets expansion. Moreover, Indian tyre manufacturers benefit from reduced logistics costs that enhance their competitiveness globally and enable increased exports. The ongoing automation advancements and modernization in tyre manufacturing present attractive growth opportunities for industry investors in India. The Indian governments initiatives, such as the Atmanirbhar Bharat Abhiyan, aimed at promoting domestic automobile manufacturing, further support the growth of the industry. In addition to the export market, domestic sales of tyres are expected to benefit from higher GDP growth, lower inflation, and increased disposable incomes. Improved affordability, driven by rising income levels, better rural connectivity, and an increase in the women workforce in both urban and rural areas, will contribute to higher domestic sales. The under penetrated rural market is anticipated to be a key growth segment for the two-wheeler industry.

Overall, the Indian tyre industry is witnessing a period of growth and opportunities, driven by increased demand, export potential, favorable market conditions, government initiatives, and a positive economic outlook.

H. CHALLENGES

While the broader outlook is positive, the near term may see challenges. In the domestic market, while the signs of growth are imminent, rural markets continue to see challenges. In the global markets, uncertain economic conditions in Europe and USA, coupled with the conflict in Europe, has the potential to result in suppressed demand in these areas important markets for your Company. While the outlook for raw material prices remain stable, global market volatility has the potential to see sudden and sharp changes.

I. RISK MANAGEMENT

In compliance with Regulation 21 of the SEBI (LODR) Regulations, the Board has established a Risk Management Committee. This committee has been set up to effectively address the evolving and dynamic risks prevalent in the current business environment. The dimensions of risk include areas such as cyber security, information security, business continuity, data privacy, and the execution of large deals.

To proactively manage and mitigate these risks, your Company has implemented a robust risk management framework. This framework aids in the identification, prioritization, and mitigation of risks, enabling the organization to effectively navigate potential challenges. The Risk Management Committee has formulated a comprehensive risk management policy that encompasses both internal and external risks faced by the Company. This policy provides a structured approach to address the aforementioned risks and ensures that appropriate measures are in place to mitigate their impact. Furthermore, the committee collaborates with other committees within the organization, following the framework established by the Board of Directors.

By establishing the Risk Management Committee and implementing a well-defined risk management policy, one that combines strategic and operational risk assessment, your Company demonstrates its commitment to proactive risk management and ensuring the resilience of its operations in the face of evolving threats. These measures help to safeguard the Companys interests and enhance its ability to navigate the complex and dynamic business landscape effectively.

Details of the potential risks the Company faces are in the BRSR section of this report. A summary is shown in the table below.

S. No. Risk Area	Nature of Risk	Risk Mitigation Actions
1 Business concentration	In the past the Companys operations have been concentrated in a few segments and geographies	The Company has embarked on a program to enlarge its presence in a larger number of segments (product as well as customer). In addition, greater focus on global markets has also been initiated.
2 Management of cost	The recent past has seen significant cost inflation - especially in the cost of raw materials as well as fuel.	The Company has been working on measures to contain costs through a program of alternate sourcing strategic build up of inventory, use of alternate fuels, and internal actions to improve operating efficiencies.
3 Global economic conditions	The Companys operations are increasingly influenced by global conditions. The conflict in Europe and the outlook of depressed economic conditions in some major economies has the potential to impede the Companys growth	The Company is working to spread its presence to a larger global footprint, to mitigate against the effect of poor economic conditions in select economies.

J. Energy

During the year, your Company invested in a 5.4 MWp roof top solar power Plant to conserve energy and increase the use of renewable energy sources. Your Company employs wind power and solar power in addition to obtaining power from the grid. Renewable energy usage has climbed over 70% this year. With coal costs rising, the use of biomass fuel in the boilers was increased.

As part of Environmental Management system (EMS), environmental risks are identified and assessed through environmental aspect and impact assessment form. Based on this environmental management programs (EMP) are initiated are continuous ongoing activities.

Several successful energy conservation projects have been implemented to conserve both electrical and thermal energy. As an example of some of the actions on the electrical energy front, compressed air power consumption has been reduced, energy savings have been achieved by implementing VFD drives as needed, mercury vapor vamps have been replaced with LED lamps. This has contributed to further energy conservation.

In terms of thermal energy conservation, efforts have been made to improve alternate fuel usage in the boiler by modifying the furnace and installing a flue gas heat recovery system. These measures have resulted in enhanced boiler efficiency. Additionally, the insulation system for curing presses and steam distribution lines has been revamped with upgraded insulation material, aiming to minimize thermal losses.

K. Quality Assurance

As in the past, your Company continues to be a preferred supplier for 2 wheeler manufacturing OEMs. In addition to this, your Company has been assessed and cleared for supplies by a number of major EV companies.

Your Company ensures the highest quality for its products by enforcing quality standards at all phases of manufacturing and logistics.

Total Employment Involvement (TEI) has been used as a tool to motivate employees towards a culture of quality consciousness and continuous improvement.

L. Environment, Occupational Health & Safety

Your Company recognizes that occupational health and safety (OHS) and environmental safety are critical aspects of its operations. Failure to comply with safety norms can pose risks to the workforces well-being and have a negative impact on the Companys brand image. However, by establishing strong internal controls and governance mechanisms, the Company has been able to enhance the safety and well-being of its employees and workers, ultimately leading to a more productive workforce. Further to mitigate risks, your Company adopts proactive measures in assessing health and environmental risks. This includes methods such as Hazard Identification and Risk Assessment (HIRA), Preliminary Hazard Analysis (PHA), Job Safety Analysis (JSA), and Environmental Impact Assessment (EIA). These assessments help identify potential hazards and risks associated with the work environment based on which we have been able to develop appropriate remedial action plans and implementation strategies to address these risks effectively. Regular review mechanisms are in place to ensure that the action plans are being implemented and that the risk mitigation efforts are on track.

Each unit has established a robust Occupational Health and Safety (OHS) management system in accordance with ISO 45001:2018 and ISO 14001 standards, as well as relevant legal requirements such as the Factories Act/Rules, Indian Boilers Act, and Environment Protection Act. This comprehensive system covers all units and employees, ensuring a 100% coverage. The implementation includes conducting pre-employment and periodic medical examinations, providing EHS training (induction, PEP talks, OJT, fire safety, etc.), conducting safety audits, enforcing a work permit system, developing emergency preparedness plans, and conducting thorough incident investigations. These measures demonstrate your Companys commitment to prioritize employee health and safety, comply with regulations, and create a secure work environment within the manufacturing operations.

M. Awards And Recognition

Your Company was honoured to receive the prestigious E4M Pride of India Brands Award in 2022. This distinguished award recognizes companies that have demonstrated excellence across various domains, including marketing, branding, innovation and business growth. Some noteworthy awards and recognition which were won during the year are mentioned below:

? 11th CII National Poka Yoke Competition - Gold

? 13th Edition of CII National 3M Competition - Gold

? CII National Technology Competition - Gold

? CII National Level Kaizen Competition - Gold

? 30th CII Excellent Summit - Best practice in TEI - 1st Prize

? National Level Technology Competition Challengers Trophy - Gold

N. Internal Control & Systems

Your Company maintains risk management processes, protocols and maintains adequate internal controls to safeguard stakeholders interest and the Companys assets. Processes exist to identify, evaluate and manage risks that impede the realization of the Companys objectives. The Company has also established an Internal Financial Control Framework which addresses internal controls over financial reporting and operating controls. This framework is duly supported by well-defined policies, processes, and procedures. This control framework is reviewed periodically by the management, audited by an Independent Internal Audit team, and placed before the Audit Committee and the Board. The CEO and CFO Certification provided in the Annual Report also discusses in detail the adequacy of Internal control systems and procedures.

O. Financial Performance

In accordance with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company is required to give details of significant changes in key financial ratios. The Company has identified the following as key financial ratios:

Particulars	Units	31st March, 2023	31st March, 2022
(i) Debtors Turnover	Times	13.70	10.76
(ii) Inventory Turnover	Times	3.68	4.05
(iii) Current Ratio	Times	1.05	1.31
(iv) Debt Equity Ratio	Times	0.61	0.61
(v) Net Profit margin	%	2.45	1.69
(vi) Debt Service Coverage	Times	2.40	1.65
(vii) Return on Investment	%	0.07	152.91
(viii) Return on Equity Ratio	%	6.92	4.55
(ix) Net Capital Turnover	Times	18.56	11.92

The Companys revenue from operations increased to Rs.2856.39 Crores in the year 2022-23 in comparison to Rs.2462.06 Crores in the previous year, an increase of 16.38% over the previous year. Your Company has increased its profit before tax to Rs.91.29 crores from Rs.56.94 crores, an increase of 60.33% year on year. EPS has increased to Rs.91.57 in March 2023 from Rs.54.29 in March 2022 a 68.68% increase year on year. There has been an increase in the borrowings of the Company from Rs.598.42 Crores in the previous year end to Rs.636.94 crores during the current year end coupled with an increase in networth from Rs.984.80 Crores to Rs.1040.36 Crores. Finance cost has increased from Rs.30.75 Crores to Rs.38.40 Crores on the back of increased borrowings.

P. Cautionary Statement

Statements in the Management Discussion and Analysis describing the Companys views, projections and expectations may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions, geopolitical uncertainties, macro-economic conditions, global and domestic supply and demand situations, input prices and their availability, changes in government regulations, tax laws and other factors such as industrial relations, economic developments among others. This may influence the Companys operations or performance in the final analysis.