Global economy
Overview
The global economy was estimated to have grown at a slower 3.2% in 2022, compared to 6%
in 2021 (which was on a smaller base of 2020 on account of the pandemic effect). The
relatively slow global growth of 2022 was marked by
the Russian invasion of Ukraine, unprecedented inflation, pandemic- induced slowdown in
China, higher interest rates, global liquidity squeeze and quantitative tightening by the
US Federal Reserve.
The challenges of 2022 translated into moderated spending, disrupted trade and
increased energy costs.
Global inflation was 8.8% in 2022, among the highest in decades. US consumer prices
increased about 6.5% in 2022, the highest in four decades. The Federal Reserve raised its
benchmark interest rate to its multi year high. The result is that the world ended in 2022
concerned that the following year would be slower.
Outlook
The global economy is projected to grow a weak 2.9% in 2023, marked by sustained
Russia-Ukraine conflict and higher interest rates. Global inflation is projected to be
6.5% in 2023 (Source: IMF). On the positive side, the reopening of Chinas economy
after the waning of the pandemic, the decline in the European energy crisis and robust US
consumption outlook (despite
high inflation) remain positives. Interestingly, even as the global economy is
projected to grow less than 3% for five years, India and China are likely to account for
half the global growth in 2023 (IMF). Indian economy
Overview
Even as the global conflict remained geographically distant from India, ripples
comprised increased oil import bills, inflation, cautious government and a sluggish equity
market. India reported an economic growth of 7.2% in FY2022-23.
India emerged as the second fastest-growing G20 economy in FY2022-23. India had
retained its position as the fifth-largest global economy and was seen as a principal
driver of the global economy (with China).
Growth of the Indian economy |
FY20 |
FY21 |
FY22 |
FY23 |
Real GDP growth(%) |
3.7 |
-6.6% |
8.7 |
7.2 |
According to the India Meteorological Department, the year 2022 delivered 6% higher
rainfall than the long-period average. Inflation data on the wholesale Price Index (which
calculates the overall prices of goods before selling at retail prices) eased to 4.73%
during
the period. In 2022, CPI hit its highest of 7.79% in April 2022; WPI reached its
highest of 15.88% in May 2022.
Outlook
According to the World Bank April 2024 projections, Indias GDP is projected to expand
by 6.3% In FY2023-24, supported by domestic demand and increased public investment.
Indias retail inflation rate could decline from 6.6% to 5.2% in FY2023-24.
Industry overview
End-industry overview (Off- Highway Vehicles)
The off-highway vehicles (OHV) industry, which is the core focus for us at Uniparts, is
estimated to be over US$ 200 billion* in size and our two core product verticals of 3
Point Linkage (3PL) and Precision Machined Parts (PMP) address a market size of over US$ 1
billion*. Uniparts has a leading market share in both of these globally.
In addition, the adjacent product systems of Power Take Off (PTO), Hydraulic Cylinders
and Fabrications have an estimated market size of over US$ 10 billion*.
(*Management estimate)
Uniparts is present in the OEM and Aftermarket segments with a strong global business
model and marquee customer base.
The calendar year 2022 and Fiscal year 2022-23 ended on a strong note for the global
off-highway industry with most leading OEM and Aftermarket players reporting multi-year
high revenues and profitability
The North American large agriculture and construction equipment market is expected to
remain strong with healthy end- user demand. The North American small agriculture segment
is witnessing short-term softness. Demand from Europe-based OEM customers remains
stable-to- positive. The aftermarket segment in Europe and USA continues to witness
softness, impacted by a transient inventory level re-
balancing by customers due to improving logistics
The monsoon performance in 2023 and its impact on the Indian domestic tractor market
remains to be seen.
The prevailing macro concerns over possible global economic slowdown/recession continue
to remain a key monitorable over the ensuing financial year. While the operating
environment in the immediate short-term remains mixed with pockets of strengths as well as
softness in the medium to longer term, as large global players are increasingly looking
beyond China, Indias manufacturing sector is expected to benefit significantly from this,
and we continue to witnessing favorable impact on new inquiries. The new enquiries,
engagements and conversions owing to the China+1 theme continue to be robust. Further, the
global push for infrastructure (fresh and re-building), including the US$ 1 trillion Infra
Bill, and robust income levels of global agriculture industry are expected to keep demand
for new equipment at healthy levels.
Global tractor market
The global tractor market was estimated to be approximately 2.1 million units (2021)
with an projected growth rate of 4.1% upto 2026. India, being the largest producer in the
world, accounted for nearly half of the number of units produced while other key
geographies such as Europe,
North America, Japan and China produced between 8% to 12% each.
(Source: CRISIL Report)
Growth drivers
Healthy farm incomes: Farm income levels globally remain healthy and higher than the
last several years, supporting further investments by farmers in new and replacement
equipment.
Increasing population and demand for food: Growing world population coupled with an
increase in the calorific intake provides a secular trend towards a sustained need for
quantity and diversity of farm produce across the globe.
Mechanisation of farming:
Mechanisation levels in farming vary between geographies with Europe leading the way
with higher mechanisation and larger equipment sizes while India and bulk of Asia have
catching up to do in farm mechanisation.
With large arable land mass and farming community in Asia, the level of mechanisation
and types of machines and implements are expected to increase over coming years.
Policy support from governments:
With food security as one of the key priorities, governments across major economies
have continued supporting the farming activities in various ways including but not limited
to Minimum support prices of food grains (by Indian Government), Farm subsidies (by US
government).
Replacement demand: Supply chain disruptions in the last few years due to Covid-19-led
uncertainties, led to shortages of inputs at various levels and constraints in new
equipment availability across the globe. The supply chain issues are gradually
getting resolved. It is estimated that a lot of replacement demand got accumulated
during this period, which, in addition to the regular replacement demand, could lead to
healthy demand over the coming period.
Global construction equipment market
The global construction equipment market was estimated to be approximately 1.3 million
units (2021) with a projected growth rate of 3.3% upto 2026. China contributes largest
portion of construction equipment, accounting for nearly 42% of the number of units
produced while other key geographies such as Europe, North America and Japan produced
between 15% to 20% each. (Source: CRISIL Report)
Company overview
Uniparts India Limited (UIL), established in 1994, is a global manufacturer and
supplier of engineering systems and solutions catering to global original equipment
manufacturers (OEMs) in the off-highway vehicle
Company strengths
Leading market position
Uniparts has an estimated market share of 16.68% in the global 3PL market in tractors
and 5.92% in the worldwide PMP market in the CFM equipment segment - a leading market
position. (Market share based on fiscal 2022)
Global presence
UIL has a global presence, supplying to all 10 leading global OHVs in agriculture and
half of the leading 10 players in the construction, forestry and mining (CFM) segment
(outside China).
Growth drivers
Rising urbanisation: Rising urbanisation continues to push demand for housing, urban
infrastructure, transportation infrastructure across the globe. This has direct impact on
demand for construction equipment worldwide.
Infrastructure projects: New infrastructure build-up and old infrastructure
redevelopment is high on priority for several countries in the quest for growth, self
reliance, economic leadership, improved quality of life for residents. Airports, ports,
rail and roads, defence establishments etc form a major part of infrastructure build-up
globally. This is expected to be one of the key drivers for demand for construction
equipment worldwide over medium to long term. As
(OHV), agricultural machinery and construction equipment sectors.
The Companys main products include three-point linkage assemblies precision machined
parts, hydraulic cylinders, power take-off devices and fabrication parts for the
agriculture and construction sectors. Uniparts India
Revenues through multiple delivery channels
The Companys FY2022-23 finished goods sales comprised, 27.1% local deliveries, 28.9%
direct exports and 44.0% warehouse sales (through a global delivery service model
facilitating multiple delivery options).
Enduring relationships
Uniparts enjoys enduring relationships with major global customers in the agriculture
and CFM sectors. Four of UILs top five customers, accounting for a significant portion of
its revenue, have been with the Company for over 10 years.
examples of national level large infrastructure push, USA proposed an infrastructure
bill of US$ 1 trillion spending across eight years to modernise legacy infrastructure,
which would catalyse construction equipment offtake. China has made around US$ 1 trillion
of government funds available for construction projects.
Commodity prices: Prices of global commodities such as crude, steel, aluminium and
copper etc, although now lower than their recent multi-year highs, but are still at levels
where producers profitability and cashflows are healthy and further investments in
capacities can continue to happen.
Limited operates six manufacturing units across India and one in the USA, which are
equipped with forging, machining, heat treatment, welding capabilities, among others. The
Company also has three warehouse facilities (two in the USA and one in Germany) for its
overseas customers.
Taking risk out of global supply chain
The Companys dual-shore capabilities as well as strategically located warehousing
centres, enable it to manufacture products at different locations and provide customers
with regular supply and competitive manufacturing operations from alternative locations.
Safety stocks at warehouses mitigate the supply chain risks.
Engineering driven vertically integrated precision solution provider
Uniparts is an engineering- driven, vertically integrated OHV solutions supplier. The
firm provides complete concept-to-supply solutions, which include 3PL and PMP products, as
well as PTO, fabrications and hydraulic cylinders.
Companys financial performance
During the year under review, the Company clocked total revenue of Rs1,382.24 crore
compared to Rs 1,231.04 crore in the previous year, a growth of 12.3%. The Company
generated a net profit of H204.9 crore, as opposed to a net profit of H168.8 crore in the
previous year.
Operating cash flow generation for FY2022-23 was at Rs 252.75 crore, the highest ever
in the history of the Experienced promoters and qualified senior management team
Our management team has several decades of experience in the OHV industry and is
located across key end markets like United States, India and Germany.
Company. This is a result of strong PAT as well as an improved working capital
performance. As a result, the Uniparts Balance Sheet was net debt free at the end of
FY2022-23.
Commodity prices (i.e. steel) have come off historical highs and continue to be
range-bound. Ocean freight prices have come down significantly from the historical highs
of late FY2021-22 and early FY2022-23 and are currently nearly back to the pre-covid
levels. The upward pressure on operating costs could continue in the medium-term
to be partially mitigated through operating efficiencies.
Product-wise revenues
3-PL: 55.8% in FY2022-23
PMP: 40.6% in FY2022-23
Adjacent products and others (including PTO applications, hydraulics and fabrications):
3.5% in FY2022-23
Particulars |
For the year ended 31 March, 2023 |
For the year ended 31 March, 2022 |
Revenue from operations (H crore) |
1,366.02 |
1,227.42 |
EBITDA (H crore) |
313.23 |
271.7 |
EBITDA Margin % |
22.9% |
22.1% |
Profit After Tax (H crore) |
204.9 |
168.8 |
Profit After Tax Margin % |
15% |
13.8% |
Return on Capital Employed % |
35.9% |
31% |
Cashflow from Operations (Rs crore) |
252.75 |
84.9 |
Internal control systems and adequacy
Uniparts India Limited has established an internal control system to ensure the
adequacy and effectiveness of its internal controls. The Companys internal control system
includes policies, procedures and processes designed to safeguard assets, prevent and
detect fraud and ensure the accuracy and completeness of financial reporting. The internal
control system is overseen by the Audit Committee of the Board of Directors, which reviews
the adequacy and effectiveness of the system on an ongoing basis. In addition, the
Companys internal auditors conduct periodic audits of the internal control system and
report their findings to the audit committee. Uniparts India Limited believes that its
internal control system is adequate to manage the risks inherent in its business
operations and to ensure the reliability of its financial reporting.
Human resources
Uniparts India Limited recognises that its employees are its most valuable asset and is
committed to creating a culture that attracts, develops and retains top talent.
The Company provides a range of employee benefits, including health insurance,
retirement benefits and training and development opportunities to support employee growth
and career progression. The Company also has a performance management system in place to
evaluate employee performance and provide feedback and coaching to help employees improve.
Uniparts India Limited believes in promoting a diverse and inclusive workplace and has
policies and practices in place to ensure equal opportunities for all employees regardless
of their gender, ethnicity, or background.
Cautionary statement
Statements in the Management Discussion and Analysis and elsewhere in this Annual
Report describing the Companys objectives, projections, estimates, expectations, or
predictions, views on the end industry and world economy in general may be forward-looking
statements within the meaning of applicable securities, laws and regulations. Forward
looking statements are necessarily dependent on assumptions, data or methods that may be
incorrect or imprecise and that may be incapable of being realised and as such, are not
intended to be a guarantee of future results, but constitute our current expectations
based on reasonable assumptions. Actual results could differ materially from those
projected in any forward-looking statements due to various events, risks, uncertainties
and other factors. We neither assume any obligation nor intend to update or revise any
forwardlooking statements, whether as a result of new information, future events or
otherwise.
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