Automotive Axles Ltd Management Discussions

Global Economy

The world economy is projected to maintain a growth rate of 3.2% throughout CY2024 and CY2025, consistent with the pace observed in CY2023, as stated by the International Monetary Fund (IMF). Advanced economies are expected to undergo a slight acceleration, while emerging market and developing economies may experience a modest slowdown. Global headline inflation is forecasted to moderate, declining from an annual average of 6.8% in CY2023 to 5.9% in CY2024 and further to 4.5% in CY2025. This decline is attributed to a more front-loaded decrease in advanced economies, with inflation expected to return to near pre-pandemic levels sooner than in emerging market and developing economies.

Advanced economies are poised for a slight uptick, primarily driven by the euro areas recovery, with growth rates projected to climb from 1.6% in CY2023 to 1.7% in CY2024 and 1.8% in CY2025. In contrast, emerging market and developing economies are expected to sustain stable growth at 4.2% during CY2024 and CY2025, although regional disparities exist, with growth moderation in Asia counterbalanced by growth in the Middle East, Central Asia, and sub-Saharan Africa.

		Year-on-Year
Global Economic	Estimate	Projections
Growth (% change)	CY2023	CY2024	CY2025
World	3.2%	3.2%	3.2%
Advanced Economies	1.6%	1.7%	1.8%
Emerging Markets and	4.3%	4.2%	4.2%
Developing Economies

Source: International Monetary Fund (IMF)

The global economic outlook is expected to remain steady, with growth hovering around 3.2%. This stability is underpinned by several key factors. The rebound in labour supply, fuelled by robust immigration flows in advanced economies, contributes to economic resilience. Additionally, the gradual fading of earlier energy price shocks alleviates pressure on inflation. Decisive monetary policy actions, coupled with improved frameworks, particularly in emerging markets, have been instrumental in stabilising inflation expectations.

Looking ahead, certain actions are crucial for enhancing medium-term growth prospects globally. Rebuilding fiscal buffers is essential, as it helps lower funding costs and improves financial stability. Facilitating faster resource allocation can boost growth by enhancing efficiency and productivity. Addressing geoeconomic fragmentation is imperative to mitigate potential losses in efficiency and foster greater global cooperation. Moreover, intensifying efforts towards a green and climate-resilient future is critical for sustainable economic development, necessitating substantial investments in green technologies and initiatives. In navigating these challenges and seizing opportunities, multilateral cooperation is crucial for addressing complex global issues to drive progress and economic stability.

Indian economy

In FY 2023-24, India exhibited remarkable economic resilience, achieving a notable growth rate of 7.6%. This achievement was driven by various factors contributing to the nations economic vigor. Improved corporate and bank balance sheets provided a stable foundation, instilling confidence in the financial sector. Additionally, a resurgence in rural consumption, supported by favorable agricultural conditions and government initiatives, significantly bolstered economic momentum.

Moreover, there was a distinct increase in private consumption, reflecting heightened consumer confidence and purchasing power. This resilience in domestic demand was evident despite challenges posed by the global economic landscape. Evidence of this resilience was seen in the notable rise in e-way bills and toll collections observed in February 2024, signaling sustained economic activity and trade flows within the country.

Furthermore, proactive investments by the Indian Government in public infrastructure and the financial sector played a crucial role in enhancing economic stability amidst external uncertainties. These investments not only stimulated economic growth but also strengthened the nations capacity to withstand global shocks, ensuring continued progress and development.

Looking ahead, the Indian economy is poised for further growth and advancement. Projections indicate a trajectory towards reaching the USD 7 trillion milestone by 2031, solidifying Indias position as the worlds third-largest economy. Capital and productivity enhancements, facilitated by a comprehensive integration of digital and physical infrastructure, will drive this growth. Additionally, the manufacturing sector is expected to undergo a revival, leveraging global opportunities, domestic policy support, and a focus on transitioning to green energy.

Indian Automobile and Industry

Against the backdrop of robust economic growth driven by favourable government policies, the Indian automobile industry demonstrated a satisfactory performance in FY 2023-24. The domestic industry witnessed a significant upsurge, growing by 12.5% to reach 2,38,53,463 units, compared to 2,12,04,846 units in the previous year. Leading the growth trajectory was the Passenger Vehicle segment, which recorded overall sales of nearly five million units, including 4.2 million domestic sales (an 8.4% increase) and 0.7 million units in exports.

In the Commercial Vehicles segment, the industry experienced marginal growth, reaching 9.7 million units. However, there was a slight decline in the Light Commercial Vehicles (LCVs) and Small Commercial Vehicles (SCVs) categories, attributed to a decrease in demand for CNG vehicles. Additionally, the migration towards higher tonnage trucks, providing increased payload capacity, impacted the growth in CVs, although not reflected in the number of units sold. The Three-Wheeler industry also witnessed significant growth, nearing the peak of 0.7 million units seen in 2018-19.

Optimism abounds within the industry as the macroeconomic outlook remains positive. Enhanced by a promising monsoon forecast, the industry anticipates sustained growth in the coming year. Furthermore, increasing interest from companies in penetrating rural markets has further propelled sectoral growth. The burgeoning logistics and passenger transportation industries are driving the demand for commercial vehicles, indicating a promising future for the market.

Looking ahead, the industry foresees growth opportunities stemming from emerging trends, particularly the electrification of vehicles. The focus on electrification is expected to be particularly pronounced in segments such as three-wheelers and small passenger automobiles, shaping the future trajectory of the automotive market in India.

Indian Automotive Component Industry

Indias automotive industry plays a pivotal role in the countrys manufacturing economy, with the auto component manufacturing (ACM) segment providing crucial support. Over recent years, India has witnessed a significant increase in the number of Original Equipment Manufacturer (OEM) suppliers in the ACM segment, positioning the country as a prominent player in the global automotive supply chain. Domestically, the ACM market has made substantial strides within the automotive sector, contributing over 2.3% to Indias Gross Domestic Product (GDP). Furthermore, it directly and indirectly employs upwards of 1.5 million individuals, making it a vital source of employment nationwide.

As of 2023, the Indian auto component industry boasts a valuation of approximately US$57 billion, with projections indicating a climb to US$85 billion by 2026, as reported by the Indian Investment Grid. This growth trajectory is fuelled by escalating demand, advancements in product quality, and bolstered competitiveness.

Internationally, there has been a notable shift in sentiment towards sourcing from India. Despite recessionary trends in key markets, export growth surged due to this positive sentiment, bolstered further by the adoption of diversification strategies such as "China+1." Moreover, there are emerging opportunities for export-oriented production in India, particularly for traditional components like castings, forgings, and injection modules, which may not be as viable in Western markets but hold promise in Indias manufacturing landscape.

Furthermore, several factors are expected to positively impact Indian auto component suppliers in the medium to long term. These encompass increased supplies to new platforms, higher value addition, and the potential for aftermarket demand in overseas markets. Additionally, opportunities in the EV segment, vehicle premiumisation, localisation efforts, and evolving regulatory norms are anticipated to contribute to stable growth for auto component suppliers, driven by higher content per vehicle.

(Source: https://www.india-briefing.com/news/indias-auto-component-manufacturing-success-and-its-vision-for-ev-adoption-29651.html/)

Welcome to the World of Automotive Axles Limited

Automotive Axle Limited (AAL) is a distinguished joint venture between the esteemed Kalyani Group and Meritor Inc., USA, established in 1981. As a prominent entity in India, we specialise in manufacturing Rear Drive Axle Assemblies, S-Cam actuated quick-change air brakes, and trailer axles catering to vehicles within the 10 to 13 tonnes gross vehicle weight (GVW) range.

Throughout our journey, we have cultivated unparalleled expertise, positioning us as a leader in both domestic and international markets. Our clientele spans across various segments, including light, medium, and heavy commercial vehicles, military vehicles, and off-highway vehicles. Our extensive product lineup encompasses front steer axles, defence axles, off-highway axles, drive and non-drive axles, drum brakes, and gear sets.

With manufacturing facilities strategically located across India in Mysuru (Karnataka), Rudrapur (Uttarakhand), Jamshedpur (Jharkhand), and Hosur (Tamil Nadu), we ensure adherence to top-tier manufacturing standards at every step. Our commitment to quality is ingrained in our processes, ensuring that our products meet global benchmarks. Furthermore, our association with Meritor Heavy Vehicle Systems LLC USA,being a technology partner, enhances our capabilities in product engineering, validation and testing, and aftermarket re-engineering.

Listed on the National Stock Exchange of India Limited and BSE Limited, AAL stands as a beacon of excellence in the automotive industry, poised for continued growth and innovation.

Our Vision

To be a world-class quality manufacturer of axles, providing innovative solutions to customers at competitive price that enhance mobility, safety and environment and retain leadership.

Our Strengths

Our commitment to delivering world-class quality products is unwavering, supported by key pillars that drive our business forward:

• Rich experience: With over 42 years of experience, particularly in the Indian and Asian markets, we possess invaluable market insights and a keen understanding of customer requirements. Our emphasis on innovation and cost-effective solutions ensures that our customers can trust in the reliability of our offerings.

• Competitive Edge: Our skilled workforce and technical prowess empower us to provide tailor-made products and services to our clientele. Additionally, our joint venture with Meritor Heavy Vehicle Systems LLC, USA, positions us at the forefront of technological leadership. During FY 2023-24, weve introduced several Value Engineered products and variants, providing our customers with a competitive edge.

• Quality-Driven: We continuously elevate our quality standards through the adoption of internationally acclaimed methodologies such as Built in Quality, 5S, and Six Sigma processes. Our commitment to zero tolerance for defects is ingrained within our teams, ensuring that only the highest quality products reach our customers. We have embraced Total Productive Maintenance (TPM) as a cultural ethos to improve process consistency and, consequently, enhance quality.

• Best in-Class Facilities: With state-of-the-art manufacturing facilities boasting advanced gear cutting technology such as Face Hob machines and Robotic Welding processes, along with a new axle assembly line integrated with Industry 4.0 technologies featuring digital interlocks and robotic painting, we remain committed to delivering products of unparalleled quality and reliability.

• Esteemed Clientele: With a broad client base across India and an expanding foothold in global markets such as China, USA, France, Italy, Brazil, and beyond, we are committed to nurturing strong partnerships. We leverage the latest technological solutions, including e-Axle, to support the manufacturing of electric vehicles, thus staying ahead of industry trends and meeting evolving customer needs.

Our Certifications

Certified with ISO 14001: 2015 for Environmental Management and ISO 45001:2018 for Occupational Health and Safety, showcasing our dedication to sustainability and workplace safety.

• Awarded Level-2 certification from JUSE, Japan for adhering to the 5S Standard, with our commitment to excellence reaffirmed through a re-certification audit by QCFI in collaboration with JUSE, Japan in December 2023.

Certified for IATF 16949: 2016 – Quality Management System.

• Total Heat Treatment Process is certified with CQI 9.

• Overall Welding processes certified with CQI 15.

SWOT Analysis

Strength

• T echnology integrated into product design with state-of-the-art manufacturing facilities.

• Leadership in Axles & Brakes design.

• Recognised as one of the leading manufacturers of Rear Drive Axle Assemblies in India, experiencing steady growth in exports.

Enhanced product quality achieved through the adoption of global best practices on the shop floor.

• Boasting a diverse customer base and fostering strong relationships with clients.

Opportunities

• Increasing sophistication of vehicles, including the production of alternative fuel-enabled vehicles.

• Rapidly growing domestic and overseas demand and market expansion.

• Anticipated rise in installed capacity among many OEMs, leading to increased auto-component sales.

Weakness

• Slowdown in the automotive industry may have adverse impacts.

• High capital and interest costs pose challenges.

II Threats

• Increase in import costs for the auto-component industry due to rupee depreciation.

• Competition from parent International Equipment Manufacturers (IEMs) establishing manufacturing units in India.

• Disruption caused by technological advancements.

Awards and Recognitions

We have been acknowledged by various institutions and customers for our ongoing endeavours to enhance operational excellence and provide top-tier products:

• Successfully achieved TPM Excellence Category A Award-2023 after completing both First Stage Assessment on July 14^th, 2023, and Second Stage Assessment on January 8^th, 2024. Honored at the ceremony held in Kyoto, Japan on March 20^th, 2024.

• Recognised as the Supplier Samrat Regional Competition Runner-up by Ashok Leyland.

• Received Gold Award for Best Performance in ESG from Ashok Leyland

• Secured 20 Gold Awards and 1 Silver Award at the Mysuru Chapter Convention on Quality Concept-CCQC Kaizens competition organised by Quality Forum of India-QCFI (CCQC-2023).

• Received 5 Excellence Awards in the NCQC-2023 Allied Case Study Presentation competition during the National Convention on Allied Concepts.

• Received Gold Awards with 2 teams in the ICQCC-2023 Allied Case Study Presentation competition at the International Convention on Allied Concepts.

Operational Highlights of FY 2023-24

At AAL, we have adopted cutting-edge equipment and technology to deliver world-class products that meet global requirements. During the year under review, we have invested in advanced technology equipment and equipment upgrades for our production lines to meet new models and variants, with a focus on improving productivity, maintaining flexibility, and quickly responding to varying volume and variant demands.

Gear Line Key Improvements

Our CNC gear line is equipped with cutting-edge gear manufacturing equipment that adheres to global standards. We have implemented a fully-closed loop system with prediction to counter heat treatment distortion, allowing us to produce gears that meet the highest standards. With digitised masters and the ability to map heat-treated gear parts, we are able to produce precision parts that meet exact specifications.

We have also collaborated with blade suppliers to develop special ultrafine carbide blade materials with special coatings, improving speeds and feeds and significantly enhancing productivity. Additionally, we have installed a new bore turning machine for gear bore and back face grooving to support our growing export demand. These investments in equipment and processes have enabled us to maintain our position as a leading provider of high-quality gears for global markets.

Industry 4.0 Implementation

Our Axle assembly line and Housing Line 1 has been enabled with Industry 4.0. This enhances our capability to eliminate potential losses and improve Overall Equipment Effectiveness (OEE) and also supports in product and Part traceability.

TPM Implementation

Over the course of the last three years, we are adopting the principles and practices of Total Productive Maintenance (TPM) to bolster Safety, Quality, and Productivity by systematically identifying and mitigating losses across our operations. Our commitment to TPM practices has yielded significant results, culminating in the successful completion of both first and second stage assessments by the Japan Institute of Plant Maintenance (JIPM). With the two stage of assessment by JIPM our Mysore Plant has been awarded TPM excellence award in March 2024.

Our Mysore Plant received TPM Excellence

Award, affirming our dedication to continuous improvement and operational excellence.

Market and Business outlook

Indias burgeoning auto market is on track to achieve a significant milestone, with forecasts indicating a staggering value of USD 300 billion by 2026. This growth trajectory is propelled by several factors, including escalating income levels, rapid urbanisation, and the expanding purchasing power of the middle class. Leveraging our profound understanding of real-world applications, we are poised to capitalise on this market expansion. By introducing key new products, we anticipate not only bolstering our market share but also gaining a competitive edge. Furthermore, investments in the modernisation of our gear and housing manufacturing lines will enhance productivity and optimise costs, enabling us to meet peak market demands. Implementation of TPM activities at our JSR and PNR plants is poised to yield long-term benefits. Our overarching objective is to surpass market growth by introducing innovative products while maintaining a steadfast focus on cost competitiveness, productivity, and quality.

Financial performance

Key highlights	FY 2023-24	FY 2022-23	FY 2021-22	FY 2020-21	FY 2019-20
Total Income (Rs. Million)	22,448.83	23,286.20	14,948.78	9,126.48	9,596.81
Profit before Depreciation & Tax (Rs. Million)	2593.40	2,594.67	1,364.68	661.68	971.76
Profit After Tax(Rs. Million)	1,661.55	1,620.29	743.58	227.30	411.34
Earnings Per Share (Rs. )	109.95	107.22	49.20	15.04	27.22

 

Key financial ratios	2023-24	2022-23	If there is change of 25% or more as compared to the immediately previous financial year, detail explanation is provided
Debtors Turnover	5.17	5.23
Inventory Turnover	6.6	7.7
Interest Coverage Ratio	99	90
Current Ratio	2.92	2.3
Debt Equity Ratio (%)	0.01	0.01	The percentage clause does not equal to or more than 25% as compared to the immediately previous financial year
Operating Profit Margin (%)	20.9	20.01
Net Profit Margin (%)	7.0	7.0
Return on Capital Employed (%)	25.1	28.7
Return on Net Asset (%)	25.6	28.9
Return on Net Worth (%)	18.83	21.19	While the profitable performance is maintained at the same level compared to previous year, there is increase in net worth due to current year profit.

Tax Transparency and Reporting

We began publishing an annual ‘Tax Transparency Report from this financial year. The Tax Transparency Report is a voluntary disclosure we publish on our website to cater to the information needs of all our stakeholders. We prioritize corporate governance and transparency in managing our tax affairs. Tax transparency report can be accessed in our website https://www.autoaxle.com/Governance.aspx

Quality Management

Our dedication to achieving the utmost production quality is reflected in our adoption of modern manufacturing techniques. Through the implementation of the Quality Management System (QMS) and Lean Manufacturing System (LMS), we reinforce our commitment to the Built-In Quality (BIQ) approach while minimising coolant, oil, and chip (COC) waste. The Automotive Axles Production System (APS) has been integrated into our operations to streamline processes, alongside the application of principles such as Gemba, Six Sigma, and 5S to optimise manufacturing procedures. To uphold stringent quality standards, we have established robust quality systems including IATF 16949:2016, CQI9 for heat treatment processes, CQI15 for welding processes, and OHSAS for environmental, occupational health, and safety management.

In our pursuit to become a benchmark organisation in the industry, we have initiated a company-wide Total Productive Maintenance (TPM) excellence programme to focus on operational excellence which serves as a key differentiator in the marketplace, positioning us as leaders in our field.

Human Resource Management

Our employees are the lifeblood of our organisation. We are focused on creating a positive work environment by addressing employee concerns, promoting a culture of open communication which shapes & maintains the company culture. We are keen in identifying & attracting right & skilled individuals who help us build a workforce that is both dynamic & dedicated. We also intensively guide our organisation through the change management processes during any significant changes. This not only helps our organisation & our employees but engage them to contribute on value creation and strategy.

Our focus continues to rely on:

• Building a diverse talent is a key priority as diversity brings a wealth of perspectives, enhances creativity and drives innovation.

• Comprehensive employee development initiatives are aimed at enhancing the skills, knowledge and capabilities of our workforce through structured onboarding programmes, continuous learning opportunities and career development plans.

• Fostering agile, ethical & positive culture that encourages inclusiveness, innovation, resilience & cohesive mindset.

• Elevating performance by creating an environment that encourages innovation & creativity which fuels our ability to develop new products, services & solutions.

• Building strong employee relations and promoting engagement as they become more approachable, empathetic, and skilled in conflict resolution, which helps in maintaining a harmonic work environment. This significantly boosts our employee morale and loyalty.

Culture at AAL

At the heart of our organisation lies a vibrant and inclusive culture that we uphold at every juncture. Our core cultural objectives serve as guiding principles, shaping our interactions and operations. Foremost among these objectives is our unwavering commitment to treating all employees with respect and dignity, fostering an environment where every individual feels valued and empowered. Embracing the ethos of continuous improvement, we strive for excellence in all facets of our endeavours, consistently seeking innovative solutions and refining our processes. Central to our culture is the promotion of a collaborative and performance-driven ethos, where teamwork and innovation are celebrated as drivers of success. Through these foundational values, we cultivate a dynamic and supportive culture that propels us towards our collective goals and aspirations.

Moreover, we recognise that diversity and inclusion are integral to our success. We champion diversity in all its forms, embracing unique perspectives and experiences to drive innovation and creativity. By fostering an inclusive environment where every voice is heard and respected, we harness the full potential of our diverse workforce, enabling us to thrive in an ever-evolving global landscape.

Acquiring and Retaining Talents

Onboarding diverse talents is foundational to our organisations success and growth. We are dedicated to promoting diversity and inclusion as core principles, fostering a culture of creativity and innovation by embracing unique perspectives and ideas.

Central to our sustained growth is the development and retention of our talent pool. We conduct rigorous skill assessments and competency mappings to ensure everyones strengths are utilised effectively. We collaborate with employees to create personalised career development plans aligning their goals with organisational needs. Comprehensive training programmes covering technical and soft skills facilitate continuous learning and upskilling. Furthermore, we value exposure and diverse experiences, encouraging job rotations to broaden skill sets. We invest in nurturing future leaders through executive mentorship and coaching programmes aimed at developing leadership skills. In essence, our commitment to diversity, talent development, and inclusive leadership propels our organisational success and resilience in a dynamic business landscape.

Employee Engagement

We prioritise fostering a collaborative and motivated work environment, exemplified by our commitment to the One AAL concept across all our locations.

Employee Surveys: Regular surveys are conducted to gauge employee satisfaction levels, identify their needs, and gather suggestions for improvement.

Inclusive Culture Initiatives

• Family Day: We organised Family Day events to promote an inclusive workplace culture, inviting employee families to visit the workplace. This fosters transparency and trust, allowing families to witness firsthand the work environment and celebrate employee milestones and achievements.

• Cultural Celebrations: We celebrated cultural diversity through local festivals, highlighting various traditions and customs.

• Recreational Activities: Annual sports and cultural days are organised, featuring a range of indoor and outdoor activities. These events encourage interaction among employees from different departments, fostering a more cohesive and integrated work environment.

Health & Wellness Programmes

• Saamarasya: A NLP-based programme aimed at enhancing positivity and solution-based thinking. This programme has benefited over 300 employees.

• Soukhya: A wellness initiative featuring fitness sessions conducted by a dedicated expert team. Customised fitness tips are provided to employees to improve their physical well-being.

Feedback & Communication: Organised regular town hall meetings for employees to voice their opinions and engage in discussions with the leadership team regarding company updates and initiatives.

Work-Life Balance Initiative: Introduced a 5-day working policy for staff members facilitates a healthier balance between personal and professional commitments, supporting employee well-being.

Employee Recognition and Rewards

Employee Appreciation Day: Recognising and rewarding our employees is a crucial element in the workplace as it significantly contributes to employee motivation, performance, and overall job satisfaction. Therefore, we continue to host our "Employee Appreciation Day" every month to honour employees who have demonstrated continuous improvement in productivity, quality, cost, delivery, safety, environment, and morale. This programme provides an opportunity for all employees to showcase their achievements to the leadership team. The appreciation day acknowledges various award categories such as On-the-Spot Awards, Kaizen Awards,

Quality Awards, Safety Awards, etc., to recognise their efforts across various pillars.

Best Employee of the Year Award: The Best Employee of the Year award is presented to the top performer of the year. A panel consisting of cross-functional leaders selects the top performer from the nominated list of employees across all functions based on their technical competence, achievements, and team management skills. This award serves as motivation for the employee to strive towards excellence in their roles, knowing that outstanding performance will be acknowledged. Additionally, it inspires other employees to put in extra effort, fostering a more engaged and enthusiastic workforce.

Learning and Development

Learning and Development are indispensable in todays fast-paced and ever-evolving business landscape. To ensure our workforce remains skilled and adaptable to meet current and future challenges, we persist in investing in talent development through comprehensive training programmes encompassing both technical and soft skills at various levels. In FY 2023-24, we introduced the Campus to Corporate Training initiative aimed at facilitating a seamless transition for campus recruits into the corporate mindset. This programme equips them with the necessary skills and knowledge to excel in their roles from the outset.

Furthermore, we recognise the importance of nurturing key talents for managerial and leadership roles. To support their growth and retention, we offer developmental trainings such as Supervisory Development, Managerial Development, and Leadership Development programmes. These initiatives not only enhance their skill sets but also empower them to take on greater responsibilities and contribute to the organisations success.

Diversity, Equity & Inclusion Initiatives (DEI)

Our Diversity, Equity, and Inclusion (DEI) initiatives are central to cultivating a workplace culture that celebrates diversity, promotes equity, and fosters inclusion. We prioritise DEI efforts to unlock the full potential of our employees, drive innovation, and cultivate stronger connections with employees, customers, and communities. Our commitment to DEI has led to employees feeling more valued, respected, and empowered to contribute their best.

As a major and long-term initiative, we have embarked on deploying women in core shop floor production activities since last few years. This strategic move not only promotes gender diversity but also creates opportunities for women to thrive in traditionally male-dominated roles. As a result of our concerted efforts, diversity (i.e. women being part of our workforce) representation growing from 8% to 13%.

Policy for Women Employees

We are steadfast in our commitment to fostering an inclusive and diverse workplace, where every employee is treated with equality and respect, irrespective of their gender, caste, creed, or background. To uphold these values, we have implemented robust policies aimed at addressing issues related to women in the workplace, ensuring a safe and secure environment for all employees.

Regular communication channels are established between women employees and management to effectively address concerns and enhance the overall workplace experience. International Womens Day, celebrated on March 8^th, 2024, under the theme "Invest in women: Accelerate progress," provided a platform for women employees to engage with senior management, sharing their perspectives on equity, career growth, and the necessary support for their professional development. Additionally, we organised training sessions on self-defense to further enhance personal safety for women employees.

In line with our commitment to diversity and inclusion, we conduct special focus group meetings for all diverse employees to engage with the senior women leaders. These meetings serve as a platform for employees to share their perspectives, experiences, and career aspirations transparently. By investing in such focus groups, we foster a positive environment where all employees feel valued and supported in their professional journey.

Occupational Health Centre (OHC)

Prioritising the health and safety of our employees, AAL maintains a dedicated Occupational Health Centre (OHC) staffed with qualified medical professionals and equipped with emergency medical resources to address industry-specific health and safety concerns. Monthly health programmes conducted by our doctors educate employees on work-related health hazards and promote a healthy work-life balance. Our fully equipped state-of-the-art OHC facilities ensure prompt response to emergencies, including those arising from pandemic-related health challenges. Additionally, we have a company-owned ambulance ready for transportation in case of any casualties, with tie-ups established with major hospitals in Mysuru for referred cases treatment.

Safety, Health and Environment (SHE)

At AAL, our commitment extends to ensuring the safety, health, and environmental well-being of our workforce and surroundings. Our SHE measures encompass a comprehensive approach, starting from identifying and assessing risks associated with work activities, to devising strategies for risk management, implementing stringent safety protocols, providing personal protective equipment, maintaining a healthy work environment, and formulating emergency response plans.

We firmly believe that prioritising SHE is not only vital for the success and longevity of businesses but also essential for mitigating costs related to accidents and environmental harm, enhancing the overall health and wellness of employees, and fostering sustainable development. Furthermore, adherence to SHE standards is crucial for meeting legal and regulatory obligations, as well as fulfilling the expectations of stakeholders, including customers, investors, and the broader community.

Safety

We consistently implement a range of safety measures, building upon existing protocols and introducing new initiatives to enhance safety standards. Some notable initiatives include:

• Improved and enhanced the existing LockOut & TagOut system during servicing and maintenance activities with a scientific and engineering structured approach and a detailed roadmap.

• Undertook blind corner mapping to assess risks associated with forklift turning and movement, followed by the installation of convex mirrors at critical locations to improve visibility and prevent accidents.

• Implemented several initiatives as part of our significant emphasis on preventing slip, trip, and fall hazards across the plant. These include identifying mobile usage zones, labeling hazards on staircases, installing handrails at plant peripherals, providing secondary safety wire rope for overhead industrial fans, and removing protruding grouting bolts from the floor, install antiskid rubber mats.

• Observed Safety Day and Chemical Disaster Prevention Day to create awareness among employees about the importance of safety and safe chemical management.

Health

• Each year, we prioritise the health of our workforce by conducting annual and bi-annual medical check-ups for all employees, including new recruits, to ensure their well-being. These comprehensive check-ups encompass vision and colour vision tests, audiometry, skin assessments, and ENT examinations.

• Emphasised on holistic wellness, we organised a dedicated awareness session for women employees, enlightening them on the significance of proper nutrition and fitness. We believe such initiatives empower employees to excel in both their professional and personal lives.

Environment

We consistently uphold our environmental protection practices year after year while continually enhancing our efforts. Some recent initiatives include:

• Constructed an additional rainwater harvesting storage pond with a capacity of 1,000 KL, in addition to our existing capacity of 1200 KL, to increase harvested rainwater capacity and reduce freshwater consumption, aiming to achieve and sustain 70% water positivity.

• Implemented a scientific approach for the Storage, Handling, and Disposal of waste at the Scrap Yard Roofing and Other Waste storage area to prevent accidental spillage, land contamination, and rainwater-induced pollution.

• In line with our long-term sustainability goals and net-zero objectives, we have achieved a significant milestone with 70% of our energy consumption now coming from renewable energy sources. These initiatives underscore our commitment to environmental stewardship. Additionally, our sustained ISO 14001:2014 Environment Management System certification reaffirms our dedication to environmental excellence.

Corporate Social Responsibility (CSR)

At AAL, we are dedicated to making a positive impact through our business practices, recognising that our responsibility extends beyond mere profitability. Our overarching goal is to contribute meaningfully to the ecosystem, ensuring equitable access to resources and opportunities for all individuals to flourish.

We take immense pride in reflecting on our journey, celebrating milestones, and reaffirming our commitment to fostering a brighter future for generations to come. As a responsible corporate entity, we acknowledge the symbiotic relationship between our success and the well-being of the communities we serve. Therefore, we are honoured to give back to these communities in various impactful ways, including:

Skill Development and Infrastructure Development in Academic Institutions

Our CSR initiatives from the past year underscore our commitment to improving educational infrastructure and fostering skill development within our communities. Through our support of local primary schools, we strive to create lasting positive impacts on the educational landscape. Our partnerships with implementing agencies ensure that our efforts reach those most in need, providing every deserving student with the opportunity to succeed.

In line with our commitment to skill development, weve partnered with Vidyavardhaka College of Engineering to establish a Skill Development Centre. This initiative aims to equip students with the technical and soft skills necessary to excel in todays rapidly evolving job market. The centre offers hands-on training in emerging technologies, including metallurgy.

Sponsorship for Annadana Hall Construction – An ISKCON Mysore Initiative

Last year, our company took a significant step by sponsoring the construction of part of an Annadana Hall, led by ISKCON Mysore. This initiative aligns with our dedication to social welfare and community development. The primary objective of the Annadana Hall is to provide free, nutritious meals to those in need. Our collaboration with ISKCON Mysore ensures that the project is managed by an organisation with a proven track record in community service and food distribution. Their expertise is crucial in making the Annadana Hall a sustainable and impactful endeavour.

Healthcare Projects

Last year, our company remained dedicated to improving public health by maintaining the Public Convenience Facility at Chamundi Hills, Mysuru. This facility, established by our company in previous years, plays a crucial role in promoting hygiene and public health in this renowned tourist destination. We ensure timely repairs and upgrades to keep the facility functional and inviting. This initiative not only provides essential sanitation services but also enhances public health and improves the overall visitor experience. By investing in such projects, we contribute to creating a safer, healthier, and more welcoming environment for both the community and visitors.

Carbon Sequestration

We initiated a substantial sustainability endeavour cantered on carbon sequestration through an extensive tree planting campaign in the vicinity of Mysuru. This initiative underscores our dedication to environmental stewardship and our efforts to mitigate climate change by augmenting the green canopy and fostering biodiversity in the area. Beyond its environmental impact, this initiative actively involves and educates the community, nurturing a shared sense of responsibility for preserving our planet. During the year, we have planted approximately 1000 saplings.

Animal Welfare

Weve extended financial support to animal welfare organisations and implementing agencies dedicated to animal rescue, shelter management, and veterinary care. This funding sustains their crucial operations, enabling them to provide enhanced medical care and nutrition to animals in need. Through our contributions, our partner agencies can further their mission of safeguarding animal welfare. These efforts underscore our commitment to nurturing a humane and compassionate society, where the well-being of all living beings is cherished and safeguarded.

Risks and Concerns

We understand the vital role of a robust risk management structure in realising our strategic goals and ensuring sustainable development. Emphasising the importance of risk management, we have established a framework to mitigate and minimise both inherent and operational risks effectively.

Risk	Mitigation
Industry risk	• Regular review of markets across the globe
A slowdown in the automobile markets where our customers operate could significantly affect our sales.	• Implementation of a resilient business model
	• Long-term contracts that enable us to navigate short-term market fluctuations
	• Introduction of value-based products to cater to our customers needs
	• Enhancement of our market share through superior performance in quality, delivery,
	and cost-effectiveness
Cost inflation risk	• Strategic sourcing partnerships to negotiate favourable terms and pricing with suppliers
Rising costs of essential raw materials may affect the organisations revenue and net profitability.	• Implementing cost-saving measures such as lean manufacturing practices and process optimisation
	• Ongoing efforts to consistently reduce costs
Technology risk	• Monitoring emerging trends in the global automotive industry
Failure to innovate or adapt to changing customer behaviour could adversely impact our business.	• Commitment to continuous improvement initiatives
	• Investment in cutting-edge product technology
People risk	• Emphasising on nurturing and retaining key talent
Difficulty in attracting, recruiting, retaining, and motivating highly skilled employees may lead to the loss of key talent.	• Implementing of a pay-for-performance culture
	• Cultivating of a strong, value-driven culture evident in recruitment, induction, and training processes
	• Implementing of employee engagement activities and incentive plans to foster motivation and loyalty

Internal Control Systems

Your Company has established adequate internal control procedures, commensurate with the nature of its business and size of its operations. These controls have been designed to provide reasonable assurance regarding the maintenance of proper accounting controls for ensuring orderly and efficient conduct of its business, monitoring of operations, reliability of financial reporting, accuracy and completeness of the accounting records, the timely preparation of reliable financial information, protecting assets from unauthorised use or losses, prevention and detection of frauds and errors, and compliances with regulations. Your Company has continued its efforts to align all its processes and controls with global best practices.

To provide reasonable assurance that assets are safeguarded against loss or damage and that accounting records are reliable for preparing financial statements, the Management maintains a system of accounting and controls, including an internal audit process. Internal controls are evaluated by the Internal Audit team and supported by Management reviews. All audit observations and follow-up actions thereon are tracked for resolution by the Internal Audit function and reported to the Audit Committee. Continuous training for the enforcement of AAL Code of Business Conduct is conducted across the organisation. The Code covers transparency in financial reports, ethical conduct, regulatory compliance, conflicts of interest review and reporting of concerns. Anti-fraud programmes including whistle blower/vigil mechanisms are operative across the Company.

Cautionary Statement

Statements in the Management Discussion and Analysis describing the Companys objective, projections, estimates and expectations may be ‘forward-looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the companys operations include, among others, economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the company operates, changes in government regulations, tax laws and other statutes and incidental factors.