Rajratan Global Management Discussions


<dhhead>Management Discussion and Analysis</dhhead>


Businesses worldwide are already reeling under the impact of the energy crisis, rising inflation, tight financial conditions in most parts of the world and a hike in commodity prices. The conflict between Russia and Ukraine has exacerbated the problem, as has the resurgence of COVID-19 in China.

Poor consumer demand following the epidemic and rising prices continue to weigh severely on 2023 growth prospects. Policy paths in the largest economies could continue to diverge, leading to further US dollar appreciation and cross-border tensions in the days ahead. Energy and food price shocks might also add to inflationary pressures. Global tightening of financing conditions could trigger widespread distress for emerging market debt. On a positive note, the IMF has projected that the EMDEs are expected to expand at 5.3% in 2023, emphasising the fact that the economic headwinds faced by Asia and the Pacific region have begun to fade. Global Central Banks are closely monitoring liquidity positions and aiming to boost sentiments.

Southeast Asian countries

Even though economic development is expected to slow down slightly from 2022, the Southeast Asian region will continue to remain one of the worlds fastest-growing regions in CY2023 primarily due to the weakening state of the world economy and the tight monetary policy. In 2022, the growth rate more than doubled to reach 5.6%. CY2023. As of the third quarter of 2022, Indonesia received a total of USD 10.8 billion in FDI. The administration wants to enhance its international and domestic investment objective for FY 2023 to USD 92 billion.


The economies of Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam would grow at a rate slower than expected, from 5.6% in CY2022 to 4.4% in CY2023. The Southeast Asian countries continue to be desirable location for foreign investment since it exposes investors to one of the worlds rapidly growing economies. Southeast Asia’s growing popularity as an alternative production hub among multinational firms is backed by its elevated domestic demand, competitive salaries, improved infrastructure and business laws. In 2023, it is probable that the tourism industries in Malaysia, Philippines and Thailand will return to their pre-pandemic levels. 1


In CY22, the economy of Thailand experienced a growth of 2.6%, which was an acceleration from the 1.5% growth seen in CY21. The growth was primarily driven by the recovery of the tourism industry and an ongoing improvement in domestic demand, including both private consumption and investment. On the other hand, the export of goods grew by 1.3 %, a slower pace compared to 15.3% in CY21, and public investment dropped by 4.9%. 2

The manufacturing sector, witnessed a slower growth rate of 0.4%, compared to 4.7% in CY21, while the construction sector registered a decline of 2.7%. 3


The Thai economy is expected to grow between 2.7% and 3.7% in CY23, with a midpoint projection of 3.2%. This growth is supported by various factors, including the recovery of the tourism sector, the expansion of private and public investments, the continual expansion of private consumption, and the favourable growth of the agricultural sector. Private consumption expenditure is expected to increase by 3.2%, while private and public investments are projected to increase by 2.1% and 2.7%, respectively. However, the export value of goods in US dollar terms is anticipated to decline by 1.6%. Inflation is estimated to range from 2.5% to 3.5%, and the current account is projected to record a surplus of 1.5% of GDP.

Indian Economy

Indias economy has emerged as one of the fastest-growing economies in the world, surpassing other major emerging and developing economies like China. According to the final estimates from the National Statistical Office (NSO). The domestic economy is estimated to grow at a rate of 7.2% in FY23, amid challenges such as geopolitical concerns and inflation. This growth can be attributed to strong domestic demand, upbeat investment activity, and extensive expansion across various sectors. 4 The Indian governments impetus in the infrastructure and construction sector is also likely to bolster the economy. The construction industry has been particularly robust, with a significant rise in activity, contributing to the overall expansion of economic activity. While global commodity prices have eased slightly, they are still higher than pre-conflict levels. This has widened the Current Account Deficit (CAD). However, India has enough foreign exchange reserves to finance the 1ASEAN Economic Outlook 2023 (aseanbriefing.com)2https://www.techsciresearch.com/news/3604-thailand-tire-market-to-reach-3-billion-by-2023.html https://www.nesdc.go.th/ewt_dl_link.php?nid=13449&filename=QGDP_reportCAD and intervene in the forex market to cushion volatilities in the Indian rupee.


Despite the worldwide economic downturn, there is a cautious sense of optimism in India. India is on track to maintain its position as the fastest-growing nation among the G-20 countries due to favourable economic conditions and overall macroeconomic stability. Its presidency of the G20 Summit in 2023 further strengthens its global positioning. With increased economic activity, a conducive demand environment, and positive outlook for the manufacturing, services and agricultural sectors, Indias growth momentum is likely to attract significant investments. The Reserve Bank of India predicts a growth rate of 6.5% in FY24, aided by increased consumer sentiment, investor confidence, credit expansion and the governments infrastructure and productive capacity investment incentives, which are expected to spur employment opportunities. 6


The development of the tyre industry, which is a critical component of vehicles, relies on two key aspects; one is the growth of the automobile sector (OEM demand) and the other being replacement demand. Unfortunately, the Russia-Ukraine war has significantly disrupted global supply chains impeding the sector’s growth. Despite these headwinds in the tyre industry, there are hopes for a strong rebound in the upcoming years.


The demand for tyres is anticipated to grow further between 2023 and 2028 at a CAGR of 6.3%, reaching roughly USD 453.13 billion in 2028.7 Businesses worldwide are growing more conscious of reducing their environmental footprint. The introduction of green tyres which have been developed, adhering to sustainability techniques based on ESG management, can prove to be beneficial in this scenario, as these tyres help to significantly lower the carbon footprint. The expansion of the global tyre market between 2023 and 2028 may be constrained due to the volatility in raw material costs. The production and sale of tyres are being hampered by the rising costs of raw materials because of their insufficient production. As a result, tyre prices have increased due to supply-side disruptions, making replacement costs unaffordable for many potential buyers.8


In 2022, as the pandemic led to manufacturing and supply chain disruptions across the globe, automakers were impelled to cut production. This led to a shortage of new cars, trucks and SUVs. Thailand produces 97% of the world’s natural rubber, followed by Indonesia, Vietnam and Malaysia. To increase local production at lower prices, prominent market players are expanding their manufacturing facilities in ASEAN nations, targeting to fuel the expansion of the ASEAN Commercial Vehicle Tyre Market during the course of the projected period. Southeast Asia’s tyre market was estimated to be worth USD 8.21 billion in 2020 and is anticipated to grow at a CAGR of 6.1% to USD 14.48 billion by 2030. Thailand became the largest source of revenue, contributing USD 2.68 billion in 2020 and is projected to reach USD 4.59 billion by 2030 with a CAGR of 5.8%. 9


The tyre market in Thailand is expected to exceed USD 3 billion throughout the course of CY2023 due to the increasing number of vehicles in the country. Additionally, the increasing production of automobiles in Thailand is anticipated to lead to an increasing demand for tyres, particularly from the original equipment manufacturer (OEM) segment. The readily available raw materials for tyre manufacturing in Thailand are attracting manufacturers to establish plants in the country, which is expected to contribute to the expansion of the tyre market. Moreover, the rising popularity of electric vehicles and the expansion of tyre distribution networks are likely to boost the growth of the tyre market in Thailand in the coming years.


India’s tyre manufacturing industry is aiming to become the world’s leading tyre manufacturer by 2026. The country’s automobile production is expected to witness an upsurge, driven by EV purchases and increased export activities of vehicles like tractors, buses and heavy trucks. The Indian government’s emphasis on growing output, expansion and modernisation of the road networks, , and various initiatives like PLI schemes, Make in India, and Atmanirbhar Bharat expected to directly or indirectly boost the demand and consumption of tyres. More than 170 countries, including some of the most affluent markets in North America and Europe, import tyres which are made in India. The USA still remains the biggest market for Indian tyres.10

4https://www.mospi.gov.in/sites/default/files/press_release/PressNoteNAD_28feb23final.pdf 4https://www.indiabudget.gov.in/economicsurvey/doc/echapter.pdf 6https://www.rbi.org.in/Scripts/BS_ViewBulletin.aspx?Id=21726

7https://www.expertmarketresearch.com/pressrelease/global-tire-market#:~:text=According%20to%20a%20new%20report,USD%20453.13%20 billion%20in%202028.

8https://www.marknteladvisors.com/research-library/global-tire-market.html 9https://www.alliedmarketresearch.com/southeast-asian-tire-market-A14286


According to ICRA, growth in tyre demand in India is predicted to grow at 6-8% in upcoming financial years. Demand will be fuelled by robust growth in the sales volume of original equipment manufacturers, modest growth in replacement volumes and softening prices of natural rubber and crude oil derivatives since July 2022. Replacement demand, which accounts for nearly two-thirds of the tyre demand, is expected to register mid-single-digit growth in FY24. 11

Favourable Government Initiatives

• By 2026, the Production-Linked Incentive (PLI) Scheme for the Automobile and Auto Components Industry will likely generate new investments totalling more than INR 42,500 crore, increased production of more than INR 2.3 lakh crore and over 7.5 lakh new jobs. Consequently, this will raise India’s market share in the world’s automotive trade. 12

• The Government amended the National Policy on Biofuels-2018, attempting to move the 20% ethanol blending objective for petrol up to ESY 2025–2026 from 2030 and to support domestic biofuel production through the Make in India programme. 13

• To help customers of electric vehicles who are concerned about mileage, the FAME India Scheme is supporting the development of charging infrastructure. In accordance with Phase I of the FAME India Scheme, 520 charging stations have been approved. 452 EV charging stations have been installed out of 520 charging stations.

• A budget of INR 1000 crore has been allocated, which is enough for the construction of charging infrastructure in Phase II of the FAME-India Scheme. In 68 cities across 25 States/UTs, the Ministry has authorised 2,877 electric vehicle charging stations. Additionally, under Phase II of the FAME India Scheme, 1576 charging stations have been authorised on 9 expressways and 16 highways. 14

Gross block (in crore) Capex as percentage of revenue (in %)

Source: CareEdge (sample set of seven listed tyre companies), CMIE, Ace Equity

Tyre manufacturers are investing towards expanding their production capacities to meet the increasing demand from customers. The proposed capital expenditure focuses on various initiatives such as increasing manufacturing capacity, improving factory efficiency, modernising operations, upgrading technology, and investing in research and development.15


Rajratan Global Wire Ltd (Rajratan), is a global trusted bead wire manufacturer. Bead wire is an essential component in the production of tyres. Beginning its journey in the early 1990s, Rajratan has been supplying bead wire to exclusive clients worldwide. Rajratan has a total capacity of 72000TPA (60000 TPA in bead wire) in India, with its major manufacturing facility in Pithampur, Indore, Madhya Pradesh. Rajratan is the only bead wire manufacturer in Thailand with a production facility of 60000TPA capacity. In Chennai, Tamil Nadu, the Company is also establishing a greenfield unit with 60000TPA capacity.

Highlights for FY22-23

Throughout the course of FY2023, the Company focused on improving capacity utilisation. It is upgrading the utility and building infrastructure, following which the Wire Drawing Capacity will be increased in a phased manner. The Company


11https://www.livemint.com/economy/easing-rubber-crude-prices-to-support-tyre-companies-margin-recovery-in-h2-fy23-icra-11669028609692.html 12https://pib.gov.in/PressReleasePage.aspx?PRID=1757651 13https://www.pib.gov.in/PressReleasePage.aspx?PRID=1826265 14https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1778958

15 Tyre makers line up H 5,000 crore capex to boost capacity (moneycontrol.com) also inaugurated the TPM Technical Training Centre in the year under review. With technologies and digital tools gaining prevalence, the Company has implemented several initiatives to adopt digitalisation to achieve operational efficiency.


Increased government initiatives towards auto industry- Indian government’s Production-Linked Initiatives (PLI) schemes are driving the growth of auto and component manufacturers, with the FAME India Scheme focusing on EV infrastructure development. Green tax and vehicle scrap policies will cause old cars to be thrown out, thereby increasing the demand for new automobiles. This will act as a tailwind to the tyre and component industries.

Increasing demand- The demand for both personal and commercial automobiles is rising as a result of the nation’s steadily growing population and accelerating per-capita income. The Original Equipment Manufacturers (OEMs) are expecting to witness an increase in production and sales volumes, which will boost demand for tyres and other related component goods.

Declining imports- Many leading tyre and automotive businesses have commenced operations in India as a result of the government’s Make in India Scheme and the government’s prohibition on the import of tyres beginning in June 2020. In response to this, Rajratan seeks to grow its market share in India, becoming the exclusive provider of bead wire to some of the major tyre manufacturers.

Challenges / Threats

Volatile raw material and import cost- The output of the overall performance of the automotive and tyre sectors are being adversely affected by the price fluctuations of natural rubber, steel and other commodities across diverse regions. The cost of importing raw materials has increased as a result of geopolitical unrest in Europe and America, which has further contributed to the raised operational costs.

Increase import prices- Entry of larger bead wire companies- There is always the chance that a major player would enter the bead wire market and deliver products at a lower price, gaining a dominant market share as well as international customers.

New market penetration- As bead wire is a very niche product along with huge capex requirements, it is quite challenging to expand business in a new geography due to uncertainty of demand, supply and government regulations.

Risks and concerns

The Companys operations include risk management and the management is actively involved in risk management and mitigation. Due to the nature of its operations, the Company is exposed to a variety of risks that may arise as a result of environmental, operational, political, legal, human and other factors. On the other side, the Companys risk management strategy is governed and overseen by the Risk Management Committee. The Committee monitors the mitigating measures and regularly assesses the major hazards.




Supply Chain Risk Increase in price and import cost of raw matrials, energy and other overheads

Geopolitical unrest and inflationary pressure are the main causes of rising prices of raw materials

Developing local raw material sources; reducing costs for specialised products without compromising quality. Creating an

Supply disruptions

and logistics which may directly impact the cost of production.

Energy Conservation Committee with the goal of reducing power usage by reducing wastage; the team is actively working on cost reduction projects, particularly those related to gas and electricity.

The Company is adopting a strategy to supply its customers either from India or Thailand, wherever the raw material and the overall production cost is less.

Long-term contracts with supply partners, just-in-time approach are followed along with proper freight control.




Financial Risk Foreign currency fluctuations Interest rate volatility Liquidity crisis

Revenue, profitability and capital expenditure plans may suffer as a result of rising inflation, currency instability, along with interest rate fluctuations and liquidity crisis.

Along with strong forex management, the Company is also focusing on sourcing raw materials from domestic markets. By nurturing solid relationships with many banks and financial institutions, the Company mitigates the risk and can borrow money at lower interest rates. The Company prioritises a balanced financial position by ensuring there is enough liquidity for both working capital and future capital expenditures.

Operational Risk Technology gap Machinery malfunctions

Gaps in adopting the latest technology in the opera- tional activities may slow down the production efficiency, impact the qual- ity control measures, there- by affecting the output.

The Company has adopted advanced digitisation to enhance its operating system through which information will be received in real time, in case of any possible or actual breakdown. JH Step 1 qualified machines are used. A strong OEE level of the


Frequent disruption in the operational workflow of the Company may result in delay in production and order supply.

Company prevents any significant interruptions in the production process.

Environmental Risk Climate change Shortage of natural resources

Environmental variables due to global warming and pollution are closely related to the production processes in the manufacturing in- dustry. Production could be stopped if there is any un- favourable climate change and in case of shortage of natural resources like water, energy or crude oil.

The Company has implemented a robust system wherein a remark- able 80% of the raw material is made out of recycled steel in Thailand.


To cut down on industrial waste, the Company is recycling chemi- cals. 80% of the water used for produc- tion, is being recycled. Collaboration with world-wide clients to create green tyres for OEMs.

Social and Safety Risk Accidents Quality standard

Manufacturing industry workers are more likely to experience workplace accidents. Additionally, maintaining the necessary quality standards during production is important because letting them slip might damage client rela- tionships.

Achieved dust and fume free shop floor for sharp vision which will prevent accidents. Also, the Company scores high in following the 5S strategy. The Company continually con- ducts research and development to raise the calibre of its output. In order to enhance procedures and delivery, the Company has also implemented finest quality management systems. As a result, there has been a reduced number of consumer complaints.




Industry Risk Economic instability Demand fluctuation

Tyre demand and the automotive industry may suffer as a result of the US, Europe and other major international economies facing severe geo-political instability and entering into a recessionary phase, which can further affect the demand for bead wire.

The Company is expanding its customer base by serving new markets in Southeast Asia and the European region and growing the wallet share of its existing clients.

Regulatory and Legal Risk Government policies Legal factors

Government and legal regu- lations are always changing, imposing limitations that might impair a business’s ability to operate without disruption. Strict government restric- tions and ecological factors can pose hindrance towards business expansion. Also, the diversity of the world makes it difficult to enter and launch business- es in new geographies.

The decrease in revenue and profitability is addressed by optimising manufacturing costs through enhanced inventory and logistics management.


The government’s initiative of ‘Make in India’ along with the PLI scheme will significantly drive the manufacturing sector.


Trend towards promoting EV, sustainable mobility and building green automotive solutions will become an advantage for the Company. Continuous monitoring of the change in regulations and policies are conducted along with timely action. Compliance with government rules and policies has improved as a result of investments in better management systems. Constant engagement with the concerned authorities.

Market Risk Barrier to entry Business expansion


The Company is initiating its market expansion in the entire Europe region along with initia- tives targeted to promote new customer acquisition from Korea, Vietnam and Europe. The Company received environment impact assessment approval for the expansion of the Thailand capacity.

Financial Overview

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations 2018, the Company is required to provide details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor. The key financial ratios are given below:







FY 2022-23

FY 2021-22

Change in %

FY 2022-23

FY 2021-22

Change in %

Reason for change

Debtors Turnover







Improved on account of faster recovery from debtors

Inventory Turnover







decrease on account of Increase in average Inventory

Interest Coverage Ratio







decrease on account of Lower PBDIT in current year







FY 2022-23

FY 2021-22

Change in %

FY 2022-23

FY 2021-22

Change in %

Reason for change

Current Ratio







decrease on account of Investment of profits into Capex

Debt Equity Ratio







Improved on account of repayment of borrowings and Increase in net worth

Operating Profit Mar- gin Ratio







decrease on account of lower realisation and higher cost

Net Profit margin %







decrease on account of lower realisation and higher cost

Return on Net worth (%)







decrease on account of lower realisation and higher cost

Human resource

Rajratan believes that its employees are its biggest differentiators and key to their enduring success. For the professional skill development of its people, the Company is committed towards conducting frequent training programmes to improve technical and behavioural skills, foster business excellence, management and leadership skills. Along with offering numerous opportunities to promote career growth, it also raises awareness of the Companys values and code of conduct. The business upholds a safety culture and implements programmes and procedures to protect the health and welfare of its employees. Additionally, it aims to establish a diverse and inclusive workplace that accepts individuals from distinct backgrounds, acknowledges individual preferences, cultural or gender preferences and so on.

Internal control systems and their adequacy

The Companys internal audit system has been reviewed and updated to ensure that assets are safeguarded, established regulations are followed and outstanding issues are promptly remedied. The audit committee regularly looks over the internal auditors reports, notes any findings from the audit and takes corrective action, whenever necessary. To ensure the proper implementation of the internal control systems, it maintains constant communication with external as well as internal auditors.


In accordance with applicable laws and regulations, certain comments in the management discussion and analysis report that include the Companys goals, projections, expectations and estimates may be deemed to be forward-looking. The remarks in this management discussion and analysis report may not exactly match with what is explicitly stated or implied. Raw material availability and prices, cyclical demand and pricing in the Companys main markets, changes to the governmental regulations, tax regimes, currency markets, economic developments in India and the nations with which the Company conducts business, as well as other incidental factors could have a significant impact on the Companys operations.