The following discussion of our financial condition and results of operations is based on, and should be read in conjunction with, our Restated Consolidated Financial Information (including the schedules, notes and significant accounting policies thereto), included in the section titled "Restated Consolidated Financial Information " beginning on page 258.
Our Restated Consolidated Financial Information have been derived from our audited consolidated financial statements and restated in accordance with the SEBIICDR Regulations and the ICAI Guidance Note. Our financial statements are prepared in accordance with Ind AS, notified under the Companies (Indian Accounting Standards) Rules, 2015, and read with Section 133 of the Companies Act, 2013 to the extent applicable. Ind AS differs in certain material respects from IFRS and U.S. GAAP and other accounting principles with which prospective investors may be familiar. Accordingly, the degree to which the financial statements prepared in accordance with Ind AS included in this Red Herring Prospectus will provide meaningful information is entirely dependent on the readers level offamiliarity with Ind AS accounting policies. We have not attempted to quantify the impact of IFRS or U.S. GAAP on the financial information included in this Red Herring Prospectus, nor do we provide a reconciliation of our financial information to IFRS or U.S. GAAP. Any reliance by persons not familiar with Ind AS accounting policies on the financial disclosures presented in this Red Herring Prospectus should accordingly be limited.
Unless otherwise indicated or the context requires otherwise, the financial information for the three-month period ended June 30, 2022, and for Fiscals 2022, 2021 and 2020 included herein have been derived from our restated consolidated balance sheets as of June 30, 2022, March 31, 2022, March 31, 2021 and March 31, 2010 and restated consolidated statement ofprofit and loss, restated consolidated statement of cash flows and restated consolidated statement of changes in equity for the three-month period ended June 30, 2022, and for the fiscal years ended March 31, 2022, March 31, 2021 and March 31, 2020 of the Company, together with the statement of significant accounting policies and other explanatory information thereon.
Our fiscal year ends on March 31 of each year, and references to a particular fiscal year are to the 12 months ended March 31 of that year. All references to a year are to that Fiscal Year, unless otherwise noted. References to a three- month period are to the three months ended June 30 of a particular fiscal year.
Some of the information contained in this section, including information with respect to our strategies, contain forwardlooking statements that involve risks and uncertainties. You should read the section titled "Forward-Looking Statements " beginning on page 19 for a discussion of the risks and uncertainties related to those statements and also the section titled "Risk Factors" and "Our Business" beginning on pages 28 and 136, respectively, for a discussion of certain factors that may affect our business, results of operations and financial condition. The actual results of the Company may differ materially from those expressed in or implied by these forward-looking statements.
Unless otherwise stated, a reference to "the Company" or "our Company" is a reference to Landmark Cars Limited on a standalone basis, while any reference to "Group Landmark", "we", "us", and "our" refers to Landmark Cars Limited and its Subsidiaries on a consolidated basis.
Overview
We are a leading premium automotive retail business in India with dealerships for Mercedes-Benz, Honda, Jeep, Volkswagen and Renault (Source: CRISIL Report, September 2022). We also cater to the commercial vehicle retail business in India. We have a presence across the automotive retail value chain, including sales of new vehicles, aftersales services and repairs (including sales of spare parts, lubricants and accessories), sales of pre-owned passenger vehicles and facilitation of the sales of third-party financial and insurance products. We started our operations and opened our first dealership for Honda in CY1998, and we have expanded our network to include 112 outlets in 8 Indian states and union territories, comprised of 59 sales showrooms and outlets and 53 after-sales service and spares outlets, as of June 30, 2022. We are focused on the premium and luxury automotive segments. CRISIL Research expects overall passenger vehicles sales (mass market and premium market) to grow at a CAGR of 8-10% from Fiscal 2022 to Fiscal 2027 during the same period, while the luxury segment is expected to grow at a CAGR of 14-16%. (Source: CRISIL Report, September 2022). We were the number one dealer in India for Mercedes-Benz in terms of retail sales for Fiscal 2022, number one dealer in India for Honda and Jeep in terms of wholesale sales for Fiscal 2022 and were the top contributor to Volkswagen retail sales for calendar year 2021. In addition, we were the third largest dealership in India for Renault in terms of wholesale sales contribution for calendar year 2021. (Source: CRISIL Report, September 2022). In Fiscal 2022, we contributed 15.8% to retail sales of Mercedes-Benz, 5.8% to wholesale sales of Honda, 8.7% to
wholesale sales of Volkswagen, 26.8% to wholesale sales of Jeep and 5.1% to wholesale sales of Renault. (Source: CRISIL Report, September 2022).
Principal Factors Affecting our Results of Operations
Our financial performance and results of operations are influenced by a variety of factors, some of which are beyond our control, including without limitation, general economic conditions, changes in costs of new and pre-owned automobiles and government regulations and policies. Some of the more important factors are discussed below, as well as in the section titled "Risk Factors" beginning on page 28.
COVID-19
The outbreak of the COVID-19 pandemic, as well as Gol measures to reduce the spread of COVID-19, has had a material impact on our business and results of operations. Near the end of Fiscal 2020, the Gol initiated a nation-wide lockdown from March 24, 2020, which was initially set for three weeks, but was subsequently extended to May 31, 2020. Although the nationwide lockdown was lifted on June 1, 2020, restrictions on non-essential activities and travel were imposed until August 31, 2020, in multiple states across specific districts that were witnessing increases in COVID-19 cases. The second wave of COVID-19 infections impacted India in April, May and June 2021 and resulted in a significant strain on the health infrastructure in the country resulting in several states announcing lockdown measures. The second wave also resulted in a large part of the population working from home and implementing social distancing measures. In June 2021, the COVID-19 reported cases from the second wave declined and the GoI and state governments started gradually easing some of the strict precautionary measures.
According to CRISIL Research, Indias real GDP contracted by 6.6% in Fiscal 2021 in large part due to the COVID-19- related restrictions imposed by the national and state governments. The latest provision estimates released by the National Statistical Office of India pegged Indias real GDP growth at 8.7% in Fiscal 2022. For Fiscal 2023, CRISIL Research expects that Indias real GDP will grow by 7.3%, with risks tilted to the downside. (Source: CRISIL Report, September 2022).
As a premium and luxury automobile retail business, we experienced overall low demand for automobiles during the lockdowns and related COVID-19 restrictions on population movement, which resulted in reduced sales of automobiles and services. Restrictions on manpower movement during the lockdown also impacted our operations and expansion/improvement projects. We implemented health and safety measures for our employees. During Fiscal 2021, which covered the first wave of COVID-19 from April 2020 to June 2020, we incurred additional expenses toward obtaining COVID-19 health insurance coverage and purchasing oxygen concentrators for our employees. During the first half of Fiscal 2022, which covered the second wave of COVID-19 from April 2021 to June 2021, the Company incurred additional expenses in connection with vaccination drives for our employees and their families. Further, we received COVID-19 support from certain OEMs in the form of incentives and interest benefits and an extension of automobile warranties.
In addition, we were affected to a certain extent by the worldwide logistics issues during the COVID-19 pandemic, as the supplies of automobiles were delayed. There is no assurance that logistics issues will not further worsen as the pandemic continues.
In response to the COVID-19-related lock-down restrictions, we accelerated our digital and online initiatives, which included the facilitation of sales enquiries and bookings through our websites (i.e., Group Landmarks umbrella website, as well as individual websites), social media platforms and also contacted customers through video conferencing means. We provide a platform for customers to enquire and book new cars through our Group Landmark umbrella website and have, since June 2021, started taking online bookings through the website.
The scope and nature of the impacts from COVID-19, most of which are beyond our control, continue to evolve, and the outcome is uncertain. While we have been able to manage our business to profitability with restated profit for the period/year of Rs181.42 million, Rs661.82 million and Rs111.48 million for the three months ended June 30, 2022, Fiscal 2022 and Fiscal 2021, respectively, as compared to a restated loss for the year of Rs(289.39) million for Fiscal 2020, we cannot assure you that the pandemic will not impose any adverse impact on our business operations or financial condition in the future. The ultimate extent of the effects of the COVID-19 pandemic on us, and the end markets we serve, is highly uncertain and will depend on future developments and such effects could exist for an extended period even after the pandemic ends. To the extent the COVID-19 pandemic does adversely affect our business, financial condition or results of operations, it may also have the effect of heightening many of the factors listed in the section "Risk Factors" beginning on page 28.
Demandfor automobiles
Demand for automobiles is a key driver affecting our revenue and profitability, as we derive a significant portion of our revenue from sales of premium and luxury automobiles to consumers in India. According to CRISIL Research, the mass and premium segments of the Indian passenger vehicle (PV) industry grew (in terms of sales volume) by a CAGR of 5.3% between Fiscal 2017 and Fiscal 2019, primarily due to an increase in demand driven by improved economics, higher affordability and launches of new automobile models. The mass and premium PV segments are expected to grow (in terms of sales volume) by a CAGR of 8-10% from approximately 3.1 million units in Fiscal 2022 to an estimated 4.6-4.8 million units in Fiscal 2027. Similarly, the luxury segment of the Indian PV industry grew (in terms of sales volume) by a CAGR of 16% between Fiscal 2017 and Fiscal 2019 and is expected to grow (in terms of sales volume) by a CAGR of 14-116% from 23,700 units in Fiscal 2022 to an estimated 47,000 to 49,000 units by Fiscal 2027. (Source: CRISIL Report, September 2022).
The development of the premium and luxury automobile market in India will depend on a number of factors, some of which are beyond our control. Such external factors include the general economic conditions in India, the introduction of new models, financing conditions and their impact on consumer spending with respect to premium and luxury automobiles. General economic factors can significantly affect demand for automobiles, and therefore can affect demand for our products, including, among others:
• global oil prices, which impact the demand for automotive and non-automotive components;
• global and local economic or fiscal instability;
• global and local political and regulatory measures and developments, such as tax incentives or other subsidies, environmental policies, the phasing out of older vehicles or other developing trends, such as the move towards electrification and emissions reduction;
• global and local fiscal and monetary dynamics, such as rises or falls in interest rates (resulting in greater or lesser ability by customers to borrow money, including for automotive purchases), foreign exchange rates and inflation rates;
• general levels of GDP growth and growth in personal disposable income in the country or particular regions of the country;
• demographic conditions and population dynamics, such as the absolute size of a market and the growth rates of the population in that market; and
• economic development, shifting of wealth in India, in particular growth in the middle class, and change in customer preferences in favour of more fuel efficient and environmentally friendly vehicles.
Stronger economic indicators tend to correlate with higher demand for premium and luxury automobiles, while weaker economic indicators tend to correlate with lower demand for such automobiles. The cyclical nature of general economic conditions and, therefore, of the automobile market means that our results of operations can fluctuate substantially from period to period. We expect that these economic factors and conditions in our industry, particularly changes in consumer confidence, employment levels, fuel prices, consumer spending on premium and luxury automobiles, changes in consumer preferences, government policies and interest rates, will continue to be the most important factors affecting our results of operations.
In addition to external factors, our own strategies and the degree to which we are able to successfully implement our strategies influence demand for our offerings. In particular, our ability to constantly source a sufficient quantity and variety of desirable automobiles, the prices we can offer, our delivery times and our ability to successfully market our vehicles, as well as the additional services and customer service we can offer, drive demand for our automobile offerings and, therefore, have an effect on our market share and our ability to win customers in competitive situations.
Sourcing of automobiles
Our continued growth depends on our ability to source sufficient quantities and varieties of in-demand new automobiles. In terms of new models, we currently offer Mercedes-Benz, Honda, Jeep, Volkswagen, BYD and Renault passenger vehicles and Ashok Leyland commercial vehicles. Except for Mercedes-Benz, which has recently converted into an agency model, we have entered into dealership agreements with each of the OEMs, pursuant to which we purchase vehicles directly from such OEMs and resell them to customers. Effective from October 1, 2021, we have entered into agency agreements with Mercedes-Benz pursuant to which we are an authorized agent of Mercedes-Benz, on a nonexclusive basis, in Gujarat, Maharashtra, Madhya Pradesh and West Bengal. Under the agency model, we act as an agent for Mercedes-Benz; customers place orders through us to Mercedes-Benz on we earn a commission on each sale. In the event that we are unable to source sufficient quantities of new vehicles from our OEMs for any reason, or if any of our
OEMs terminates our dealership and agency agreements and we are unable to replace such OEM with an alternative source of comparable in-demand vehicles, our business, prospects, financial condition and results of operations could be materially and adversely affected.
Our success will also depend on our and our OEMs abilities to anticipate changing consumer preferences and tastes in new or updated automobile models. For instance, we currently anticipate that demand from Indian consumers for sport utility vehicles (or SUVs) will continue to increase for the foreseeable future. We intend to meet such expected demand by increasing our orders for SUVs through our OEMs. SUVs generally carry a higher margin, so any increase in sales of SUVs should increase our profitability. In addition, given the global automotive industrys trend toward increasing adoption of electric passenger vehicles (EVs), we expect an increase in demand for EVs among Indian consumers, particularly as the necessary infrastructure to support EV adoption continues to build out and the technology matures. Accordingly, our subsidiary, WCPL, has entered into a letter of intent dated November 30, 2021 with the automaker BYD to be their dealer in the National Capital Region (Delhi) and Mumbai in respect of their electric passenger vehicles. We also understand that several of our OEMs have announced plans for new SUV and EV models in the near future. In the event that we are unable to anticipate consumer preferences and tastes accurately or our OEMs produce automobile models that are not accepted by consumers, we may lose market share and our business and results of operations could be adversely affected.
Improving Profitability Through Growth of Vertically Integrated Business Lines
The Indian automotive industry has experienced a number of difficulties over the past few years, including as a result of the GoIs demonetization policies and the imposition of GST with effect from July 1, 2017 and the impacts of the first and second waves of the COVID-19 pandemic on consumer activity in Fiscal 2021 and the first six months of Fiscal 2022. Despite such difficulties, we have actively worked to improve our profitability through a number of strategies to cater to the entire customer value chain and take advantage of economies of our growing scale, including expanding our after-sales service offerings, which provide higher-margin service and repair revenues and a more consistent revenue stream throughout a fiscal year, and distributing third-party financial and insurance products.
The service segment is a high-margin segment for a dealership and contributes a sizeable amount to overall automobile dealership profitability, according to CRISIL Research. (Source: CR1SIL Report, September 2022). We operate as authorized service centers for Mercedes-Benz, Honda, Volkswagen, Jeep, Renault and Ashok Leyland, and we provide after-sales service and repairs through our 53 after-sales service and spares outlets across eight Indian states. We also sell spare parts, lubricants, accessories and other products from these outlets. Our after-sales service and spare parts business provides a more consistent revenue stream and contributes to higher-margin revenues at each of our dealerships, which helps mitigate the cyclicality that has historically impacted some elements of the automotive sector. Our after-sales service and spare parts revenue contributed to 20.60%, 19.72%, 21.62% and 21.66% of our total revenue from operations, respectively, and our after-sales service and spare parts EBITDA contributed to 58.49%, 57.95%, 64.23% and 104.07% of our EBITDA during the three months ended June 30, 2022 and Fiscal 2022, Fiscal 2021 and Fiscal 2020, respectively. In the three months ended June 30, 2022 and Fiscal 2022, Fiscal 2021 and Fiscal 2020, our EBITDA Margins from our after-sales service and spare parts business were 18.16%, 18.19%, 17.75% and 17.91%, respectively.
As we continue to expand our after-sales service and spare parts business, we expect to invest in service stations, including by acquisition of existing dealerships from other dealers. Such investments will require upfront cash outlay while the build-up of car park of the relevant automobile brands (i.e., cars sold in previous years and being operated by customers in the relevant geography) will take time to grow. The costs for operating service stations are largely fixed. As the car park of our automobile brands grows, we would expect that revenues and utilization of our service stations will grow with improving margins and ROCE.
In addition, we are training our sales consultants and service technicians to improve their productivity with an aim to increase sales of vehicles and finance and insurance products and grow our after-sales service volume.
Our ability to improve our profitability through expanding our after-sales service and spare parts business and the distribution of third-party financial and insurance products will depend on our ability to anticipate customer demand and preferences, among other factors.
Cost of Funding
We require substantial working capital for our business. The costs of the vehicles we purchase, including purchase and transport costs, are recorded under our purchase of cars, spares and others line item on our statement of profit and loss,
and represents the largest share of our operating expenses. During the three months ended June 30, 2022, Fiscal 2022, Fiscal 2021 and Fiscal 2020, our purchase of cars, spares and others amounted to Rs7,142.98 million, Rs25,528.41 million, Rs17,104.29 million and Rs17,808.48 million, respectively, which represented 89.08%, 85.40%, 86.99% and 79.90% of our total income for the respective periods. Under the terms of our dealership agreements with the OEMs, we are required to make the funds available in our inventory funding accounts with banks/financial institutions with whom we have made arrangements for finance and the OEM will obtain the money from the inventory funding before cars, spare parts and accessories are released from their factory. Therefore, we are required to fund a significant portion of our purchase costs for automobiles before we can sell the vehicles. We have arranged for financing with banks/financial institutions, which allows us to finance up to 100% of our inventory. The average interest rate we paid for our borrowings in the three months ended June 30, 2022, Fiscal 2022, Fiscal 2021 and Fiscal 2020 was 7.53%, 7.14%, 7.01% and 7.24%, respectively. As collateral for this debt financing, we pledge our inventory and buildings. By financing our inventory at attractive interest rates, we limit the cash requirements for our continued expansion.
In addition, we require a certain amount of capital expenditure to maintain, expand and upgrade our existing facilities. As of June 30, 2022, we are operating at 112 outlets in 8 Indian states and union territories, comprised of 59 sales showrooms and outlets and 53 after-sales service and spares outlets. In the three months ended June 30, 2022, Fiscal 2022, Fiscal 2021 and Fiscal 2020, we incurred capital expenditure (comprising of payments for acquisition of property, plant and equipment, intangible assets and capital work-in-progress including capital advances and capital creditors) and consideration paid for acquisition of existing dealerships from other dealers of Rs253.91 million, Rs619.52 million, Rs148.03 million and Rs224.13 million, respectively. A significant amount of our capital expenditure was mainly aimed at acquiring existing dealerships from other dealers and asset purchases for new dealerships.
The actual amount and timing of our future capital requirements may differ from estimates as a result of, among other things, unforeseen delays or cost overruns in our expansion projects, changes in business plans due to prevailing economic conditions, unanticipated expenses and regulatory changes. To the extent our planned expenditure requirements exceed our available resources, we will be required to seek additional debt or equity financing. Additional debt financing could increase our interest costs and require us to comply with additional restrictive covenants in our financing agreements. Additional equity financing could dilute our earnings per Equity Share and your interest in the Company and could adversely impact our Equity Share price.
Change to Agency Model for Mercedes-Benz
With effect from October 1, 2021, our dealership agreement with Mercedes-Benz materially changed and converted to an agency model whereby all car sales are now made directly to customers by Mercedes-Benz. Under this agency model, customers now place orders through us directly to Mercedes-Benz; we earn a commission on each sale of Mercedes-Benz made through us. This change to an agency model will significantly reduce working capital requirements from October 1, 2021, since we no longer purchase cars from Mercedes-Benz and are no longer required to carry an inventory of Mercedes-Benz cars, except for demo cars. In our statement of profit and loss, this change will have the effect of (i) reducing our expenses (namely, a reduction in our purchases of cars and changes in inventories of stock-in-trade, and in interest expenses due to decreased working capital financing requirements and other sales-related expenses), (ii) reducing sale of cars revenue from Mercedes-Benz cars, as we will no longer book the full sales price of vehicles sold as revenue, and (iii) adding commissions income, as commissions earned on each Mercedes-Benz vehicle sale will be recorded in the statement of profit and loss as commission income. In our statement of assets and liabilities, this change will have the effect of reducing our inventories, trade receivables, vehicle floor plan, GST credit receivable and payable and advances from customers.
Considering the above change, revenue from operations for the three months ended June 30, 2022 includes revenue from the sales of Mercedes-Benz demo cars and commission income earned on Mercedes-Benz cars sold through our showrooms under the agency model, and the revenue from operations for the second half of Fiscal 2021 includes revenue from the sales of Mercedes-Benz demo cars, new Mercedes-Benz car inventories still on hand as on September 30, 2021, new Mercedes-Benz cars sold to corporate customers, leasing customers and special economic zone customers and the commission income earned on Mercedes-Benz cars sold through our showrooms under the agency model. Accordingly, the revenue from operations figures and other metrics and financial measures linked to revenue from operations for the three months ended June 30, 2022 and Fiscal 2022 that include revenue earned under the new agency model with Mercedes-Benz are not comparable with figures shown for earlier fiscal periods. See "Our Business - Our Business Operations - Our Vehicle Dealerships - Mercedes-Benz Dealership - Dealership Agreements and Agency Agreements" on page 200.
Competition
Although the automobile retail industry has relatively high barriers to entry due to, among other factors, high capital requirements and stringent dealer selection criteria of automobile OEMs, we nevertheless operate in a highly competitive industry. We compete with other dealers of Mercedes-Benz, Honda, Jeep, Volkswagen and Renault in passenger vehicles and with other dealers of Ashok Leyland in commercial vehicles. In addition, we face competition from distributors and dealers of other brands of automobiles and re-sellers of pre-owned passenger vehicles, including competition from companies that operate numerous automotive retail stores on a regional or national basis and online and mobile sales platforms. In the premium and luxury segments of the automobile market, direct competing brands include BMW, Audi, Lexus, Porsche, Land Rover, Jaguar and Tesla. Some of our competitors may also have greater financial and technological resources and may also have larger sales and marketing teams. Any inability on our part to remain competitive in our markets will adversely affect our financial condition and results of operation.
Improving operational efficiency
In order to improve our operational efficiency and profitability, we have taken various measures to take advantage of the inherent synergies arising from our complementary business verticals by reducing our costs where possible, including rental expenses for showrooms and service centres taken on lease and optimization of administrative, sales, marketing and travel costs. Such measures have resulted in a reduction in (i) rent expense by 22.40%, (ii) employee benefits expense by 21.26%, (iii) advertisement and sales promotion expenses by 48.50%, and (iv) travel costs by 46.79%, in Fiscal 2021 as compared to Fiscal 2020.
In terms of our rent expense, we have been able to optimize the lease costs by successfully utilizing the showroom space for two brands and using the same workshop for servicing vehicles of two brands. We expect this to help increase revenue per sq. ft for showrooms and optimize capacity utilization of service stations by reducing downtime/idle time. In the three months ended June 30, 2022, Fiscal 2022, Fiscal 2021 and Fiscal 2020, our rent expense (excluding the impact of Ind AS 116) represented 2.26%, 2.01%, 2.02% and 2.29% of our total income, respectively.
Employee benefits expense comprises our second largest expense after purchase of cars, spares and others. In the three- month period ended June 30, 2022, Fiscal 2022, Fiscal 2021 and Fiscal 2020, our employee benefits expense represented 5.61%, 5.12%, 5.48% and 6.13% of our total income, respectively. As a material portion of our overall manpower is located in India, rising wages in India as well as any change in applicable labour laws, would increase our costs.
Our marketing activities are aimed at driving the maximum relevant traffic to our showrooms and enhancing the recognition of our already well-established retail and merchant brands. We consider these activities a key component of our operations. While we expect our marketing expenses to increase on an absolute basis as we continue efforts to drive the expansion of our retail sales, including through our online initiatives, we do expect to continue to benefit from certain economies of scale in respect of our marketing spend. For the three months ended June 30, 2022, Fiscal 2022, Fiscal 2021 and Fiscal 2020, our advertisement and sales promotion expenses represented 0.69%, 0.49%, 0.50% and 0.86% of our total income, respectively.
Seasonality
Demand for automobiles in India tends to fluctuate between different periods within a fiscal year. Due to the Dusshera - Diwali festive season which falls in October / November as per the Panchanga / Hindu calendar and annual price increases instituted in January of each year, the October-December months tend to be the strongest sales period in any given fiscal year, while the remainder of the year is relatively average on sales performance. As sales of cars constitutes a majority of our revenue, this seasonality in demand influences our sales revenue and operating results within a single fiscal year. In addition, we generally receive more shipments ahead of the festive season, when there tends to be a spike in sales. As a result, our inventory tends to build up during this period. In addition, corporate purchases tend to be skewed towards the end of financial year when they can take the benefits of depreciation in their books. However, with the need for mobility across all social strata, we believe demand averages out across most quarters with spikes in the festive months of October/November.
Significant Accounting Policies
The Restated Consolidated Financial Information of the Group comprises of the Restated Consolidated Statement of Assets and Liabilities as at June 30, 2022, March 31, 2022, March 31, 2021 and March 31, 2020, the Restated Consolidated Statement of Profit and Loss (including Other Comprehensive Income), the Restated Consolidated Statement of Cash Flows and the Restated Consolidated Statement of Changes in Equity for the three-month period ended
June 30, 2022 and for the years ended March 31, 2022, March 31, 2021 and March 31, 2020 and the Summary of Significant Accounting Policies and explanatory notes (collectively, the "Restated Consolidated Financial Information").
The Restated Consolidated Financial Information have been prepared by the Management of the Group for the purpose of inclusion in this Red Herring Prospectus to be filed by the Company with the SEBI, NSE and BSE in connection with proposed Offer. The Restated Consolidated Financial Information, which have been approved by the Board of Directors of the Company, have been prepared in accordance with the requirements of:
(a) Section 26 of Part I of Chapter III of the Companies Act, 2013, as amended ("the Act");
(b) The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, issued by the Securities Exchange Board of India (‘SEBI), as amended from time to time ("ICDR Regulations"); and
(c) The Guidance Note on Reports in Company Prospectuses (Revised 2019) issued by the Institute of Chartered Accountants of India (ICAI) as amended (the "Guidance Note").
We have applied the following accounting policies in preparing our Restated Consolidated Financial Information:
Key accounting estimates and judgements
Impairment of financial assets:
The impairment provision for financial assets are based on assumptions about risk of default and expected loss rates. The Group uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on Groups past history, existing market conditions as well as forward looking estimates at the end of each reporting period.
Taxation:
Deferred tax, subject to the consideration of prudence, is recognised on temporary differences between the taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets are recognised to the extent that there is reasonable certainty that sufficient future tax income will be available against which such deferred tax assets can be realized.
Share based payment:
Employees of the Group with a pre-defined grade is granted options to purchase equity shares. Each share option converts into one equity share of the Group on exercise. In accordance with the Ind AS 102 Share Based Payments, the cost of equity settled transactions is measured using the fair value method. The cumulative expense recognized for equity -settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Groups best estimate of the number of equity instruments that will ultimately vest. The expense or credit recognized in the statement of profit and loss for a period represents the movement in cumulative expense recognized as at the beginning of the period and end of that period and is recognized in employee benefits expense.
Fair Value Measurement:
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Group s accounting policies require, measurement of certain financial / non-financial assets and liabilities at fair values (either on a recurring or non-recurring basis). Also, the fair values of financial instruments measured at amortised cost are required to be disclosed in the said Restated Consolidated Financial Information.
The Group is required to classify the fair valuation method of the financial / non-financial assets and liabilities, either measured or disclosed at fair value in the standalone financial statements, using a three level fair-value-hierarchy (which reflects the significance of inputs used in the measurement). Accordingly, the Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
The three levels of the fair-value-hierarchy are described below:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
Impairment of Goodwill:
Goodwill is tested for impairment on an annual basis and whenever there is an indication that the recoverable amount of a cash generating unit is less than its carrying amount based on a number of factors including operating results, business plans, future cash flows and economic conditions. The recoverable amount of cash generating units is determined based on higher of value-in-use and fair value less cost to sell. The goodwill impairment test is performed at the level of the cash-generating unit or Groups of cash-generating units which are benefiting from the synergies of the acquisition and which represents the lowest level at which goodwill is monitored for internal management purposes. Market related information and estimates are used to determine the recoverable amount. Key assumptions on which management has based its determination of recoverable amount include estimated long term growth rates, weighted average cost of capital and estimated operating margins. Cash flow projections take into account past experience and represent managements best estimate about future developments.
Discounting of lease payments and deposits:
The lease payments and deposits are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Group uses applicable incremental borrowing rate as independently sourced.
Revenue Recognition
Revenue from operations
Revenue from contracts with customers is recognized on transfer of control of promised goods or services to a customer at an amount that reflects the consideration to which the Group is expected to be entitled to in exchange for those goods or services.
Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price (net of variable consideration) allocated to that performance obligation. The transaction price of goods sold and services rendered is net of variable consideration on account of various discounts and schemes offered by the Group as part of the contract.
This variable consideration is estimated based on the expected value of outflow. Revenue (net of variable consideration) is recognized only to the extent that it is highly probable that the amount will not be subject to significant reversal when uncertainty relating to its recognition is resolved.
Sale of products:
Revenue from sale of products is recognized when the control on the goods have been transferred to the customer. The performance obligation in case of sale of product is satisfied at a point in time i.e., when the material is dispatched to the customer or on delivery to the customer, as may be specified in the contract.
Rendering of services:
Revenue from services is recognized over time by measuring progress towards satisfaction of performance obligation for the services rendered. The Group uses output method for measurement of revenue from rendering of services based on time elapsed and / or parts delivered.
Commission, schemes and incentive income
Commission income is recognised when services are rendered and in accordance with the commission agreements. Schemes and Incentive income is recognised when the services are rendered and as per the relevant scheme/ arrangement provided by the original equipment manufacturer (OEM).
Other revenue
Interest income is recognised using effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through expected life of the financial asset to the gross carrying amount of the financial asset. When calculating the effective interest rate, the Group estimates the expected cash flows by considering all the contractual terms of the financial instrument but does not consider the expected credit losses.
All other incomes are recognised and accounted for on accrual basis.
Property, Plant and Equipment
Property, Plant and Equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any.
The cost comprises the purchase price, borrowing cost if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for its intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.
Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Group and the cost of the item can be measured reliably.
All other expenses on existing property, plant and equipment, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the Restated Consolidated Statement of Profit and Loss for the period during which such expenses are incurred.
Property, Plant and Equipment not ready for the intended use on the date of the Restated Consolidated Statement of Assets and Liabilities are disclosed as "Capital work-in-progress".
Gains or losses arising from derecognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset at the time of disposal and are recognized in the Restated Consolidated Statement of Profit and Loss when the asset is derecognized.
Depreciation on Property, Plant and Equipment is calculated on the straight-line method as per the useful life prescribed in Schedule II to the Companies Act, 2013.
Leasehold improvements are amortized over the period of lease. Residual value of the leasehold improvements are considered as 5% of cost except in case of steel used as the Company and one of its subsidiary company is expected to receive residual value at 50% of cost at the end of its lease period.
In respect of Property, Plant and Equipment purchased during the year, depreciation is provided on a pro-rata basis from the date on which such asset is ready to use.
The residual value, useful live and method of depreciation of Property, Plant and Equipment are reviewed at each reporting period end and adjusted prospectively, if appropriate.
Intangible assets
An intangible asset is recognised, only where it is probable that future economic benefits attributable to the asset will accrue to the enterprise and the cost can be measured reliably.
Intangible assets acquired separately are measured on initial recognition at cost. Intangible assets arising on acquisition of business are measured at fair value as at date of acquisition. Internally generated intangibles including research cost are not capitalized and the related expenditure is recognized in the Restated Consolidated Statement of Profit and Loss in the period in which the expenditure is incurred. Following initial recognition, intangible assets with finite useful life are carried at cost less accumulated amortization and accumulated impairment loss, if any.
Intangible assets not ready for the intended use on the date of the Restated Consolidated Statement of Assets and Liabilities are disclosed as intangible assets under development.
Customer relationship and Non-compete fees acquired in business combination are amortised over a period of 5 years and 3 years on straight line basis respectively.
Amortization:
Intangible Assets with finite live are amortised over their estimated useful life on a straight-line basis over a period of 5 years. The amortization expense on intangible assets with finite lives is recognized in the Statement of Profit and Loss.
Financial Instruments
Initial recognition
The Group recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument.
All financial assets and liabilities are recognized at fair value on initial recognition.
Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities that are not at fair value through profit or loss are added to or deducted from the fair value of financial assets or financial liabilities on initial recognition.
Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in Restated Consolidated Statement of Profit and Loss.
Subsequent measurement
Non-derivative financial instruments
Financial assets carried at amortized cost
A financial asset is subsequently measured at amortized cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets at fair value through other comprehensive income (FVTOCI)
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
The Group has made an irrevocable election for its investments which are classified as equity instruments to present the subsequent changes in fair value in other comprehensive income based on its business model. For such equity instruments, the subsequent changes in fair value are recognized in the restated other comprehensive income in the Restated Consolidated Statement of Profit and Loss.
Financial assets at fair value through profit or loss (FVTPL)
A financial asset which is not classified in any of the above categories are subsequently measured at fair valued through profit or loss. Fair value changes are recognised as other income in the Restated Consolidated Statement of Profit and Loss.
Derecognition of financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control of the financial asset.
On derecognition of a financial asset in its entirety, the difference between the assets carrying amount and the sum of
the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in the Restated Consolidated Statement of Profit and Loss if such gain or loss would have otherwise been recognised in the Restated Consolidated Statement of Profit and Loss on disposal of that financial asset.
Financial liabilities at Fair Value through Profit or Loss (FVTPL)
A financial liability may be designated as at FVTPL upon initial recognition if:
• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise;
• The financial liability whose performance is evaluated on a fair value basis, in accordance with the Groups documented risk management;
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in the Restated Consolidated Statement of Profit and Loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.
Financial liabilities at amortized cost
Financial liabilities that are not held for trading and are not designated as at FVTPL are measured at amortised cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included in the ‘Finance costs line item.
The effective interest method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
Trade and other payables are recognised at the transaction cost, which is its fair value, and subsequently measured at amortised cost.
Derecognition of Financial Liabilities
The Group derecognises financial liabilities when, and only when, the Groups obligations are discharged, cancelled or have expired. An exchange with a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in the Restated Consolidated Statement of Profit and Loss.
Off-setting of financial assets and financial liabilities
Financial assets and liabilities are offset when the Group currently has a legally enforceable right to offset the recognised amount and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
Modification
A modification of a financial asset or liabilities occurs when the contractual terms governing the cash flows of a financial asset or liabilities are renegotiated or otherwise modified between initial recognition and maturity of the financial instruments. Any gain/ loss on modification is charged to Restated Consolidated Statement of Profit and Loss.
Taxes
Tax expense comprises current income tax and deferred tax.
Current Income Tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. Current income tax (including Minimum Alternate Tax ("MAT")) is measured at the amount expected to be paid to the tax authorities in accordance with the Income-Tax Act, 1961 enacted in India. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted, at the reporting date.
Current income tax relating to items recognised outside the Restated Consolidated Statement of Profit and Loss is recognised outside the Restated Consolidated Statement of Profit and Loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred Tax
Deferred tax is provided using the balance-sheet approach on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from initial recognition of goodwill; or an asset or liability in a transaction which is not a business combination and at the time of transaction, affects neither accounting profit nor taxable profit or loss.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilized except when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit or loss.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient future taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax assets include Minimum Alternate Tax (MAT) credit paid in accordance with the tax laws in India, which is likely to give future economic benefits in the form of availability of set off against future income tax liability. Accordingly, MAT credit is recognized as deferred tax asset in the Balance sheet when the asset can be measured reliably and it is probable that the future economic benefit associated with the asset will be realised.
Deferred tax relating to items recognised outside the Restated Consolidated Statement of Profit and Loss is recognised outside the Restated Consolidated Statement of Profit and Loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Impairment
Financial assets
The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event) and that loss event has an impact on the estimated future cash flows of the financial asset or the
group of financial assets that can be reliably estimated.
The Group recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL.
For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL.
The impairment loss allowance (or reversal) recognised during the year is recognised as income / expense in the Restated Consolidated Statement of Profit and Loss.
Non-financial assets
Tangible and intangible assets
The carrying value of assets/cash generating units at each Balance Sheet date are reviewed for impairment. If, any such indication exists, the Company estimates their recoverable amount and impairment is recognised if, the carrying amount of these assets/cash generating units exceeds their recoverable amount. The recoverable amount is greater of fair value less cost of disposal and their value in use. When there is indication that an impairment loss recognised for an asset in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Restated Consolidated Statement of Profit and Loss.
Lease
Group as lessee
The Groups lease asset classes primarily consist of leases for showrooms, workshops and stockyards. The Group assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether: (i) the contract involves the use of an identified asset (ii) the Group has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Group has the right to direct the use of the asset.
At the date of commencement of the lease, the Group recognizes a right-of-use (ROU) asset and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of 12 months or less (short-term leases) and low value leases. For these short-term and low-value leases, the Group recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
The ROU assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated amortisation and impairment losses.
ROU assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases.
Lease liability and ROU assets have been separately presented in the Restated Consolidated Statement of Assets and Liabilities and lease payments have been classified as financing cash flows.
Borrowing costs
Borrowing cost includes interest and other costs that Group has incurred in connection with the borrowing of funds.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset.
All other borrowing costs are expensed in the year they occur.
Investment income earned on temporary investment of specific borrowing pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
Employee Benefits
Defined Contribution Plan
Retirement benefit in the form of provident fund, employees state insurance fund scheme and Labour welfare scheme is a defined contribution scheme. The Company has no obligation, other than the contribution paid/payable under such schemes. The contribution paid/payable under the schemes is recognised during the period in which the employee renders the related service.
Defined Benefit Plan
The Group has provided the benefits of gratuity, a defined benefit plan (the "Gratuity Plan") covering eligible employees in accordance with the Payment of Gratuity Act, 1972. As per the Gratuity Plan, the Group makes monthly payment to their employees with remeasurement option to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employees salary and the tenure of employment. The Groups liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Gratuity which is defined benefit plans is paid per month on the basis of employees gross salary.
Remeasurements of the net defined benefit liability comprising actuarial gains and losses (excluding amounts included in net interest on the net defined benefit liability), are recognized in Other Comprehensive Income. Such remeasurements are not reclassified to the Restated Consolidated Statement of Profit and Loss in the subsequent periods.
Compensated absences are not to be carried forward beyond 12 months and are paid per month on the basis of the employees gross salary.
Share based payments
Employees (including senior executives) of the Group receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity-settled transactions).
Equity-settled transactions: The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model.
That cost is recognised, together with a corresponding increase in share-based payment reserves in equity, over the period in which the service conditions are fulfilled in employee benefits expense. The cumulative expense recognised for equity - settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and Groups best estimate of the number of equity instruments that will ultimately vest. The expense or credit in the Restated Consolidated Statement of Profit and Loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense.
No expense is recognised for awards that do not ultimately vest because service conditions have not been met. When the terms of an equity-settled award are modified, the minimum expense recognised is the grant date fair value of the unmodified award, provided the original vesting terms of the award are met. An additional expense, measured as at the date of modification, is recognised for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee. Where an award is cancelled by the entity or by the counterparty, any remaining element of the fair value of the award is expensed immediately through profit or loss.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share
Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to a provision is presented in the Restated
Consolidated Statement of Profit and Loss. Contingent liabilities are not recognised but disclosed unless the probability of an outflow of resources is remote. Contingent assets are disclosed where inflow of economic benefits is probable. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance costs.
Cash and cash equivalents
Cash and cash equivalents in the Restated Consolidated Statement of Assets and Liabilities comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the Restated Consolidated Statement of Cash Flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Groups cash management.
Earnings per share
Basic earnings per share is calculated by dividing the net profit for the year attributable to equity shareholders of the Parent with the weighted average number of equity shares outstanding during the year.
Diluted earnings per share is calculated by dividing net profit attributable to equity shareholders of the Parent with weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
Inventories
Inventories are valued at lower of cost and net realizable value. Cost is determined as follows:
(i) In case of cars, at specific cost on identification basis of their individual costs.
(ii) In case of spares and others, the same are valued at weighted average basis.
Costs includes all non-refundable duties and taxes and all other charges incurred in bringing the inventory to their present location and condition. Net realizable value is the estimated selling price less estimated cost necessary to make the sale.
Segment Reporting
An operating segment is component of the Group that engages in the business activity from which the Group earns revenues and incurs expenses, for which discrete financial information is available and whose operating results are regularly reviewed by the chief operating decision maker (CODM), in deciding about resources to be allocated to the segment and assess its performance. The Groups chief operating decision maker is the Chairman of Parent Company.
Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment. Inter segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors. Revenue, expenses, assets and liabilities which relate to the Group as a whole and are not allocable to segments on a reasonable basis have been included under "unallocated revenue / expenses / assets / liabilities".
Current versus non-current classification
The Group presents assets and liabilities in the Restated Consolidated Statement of Assets and Liabilities based on current / non-current classification.
An asset is treated as current when it is:
• Expected to be realized or intended to be sold or consumed in normal operating cycle;
• Held primarily for the purpose of trading;
• Expected to be realized within twelve months after the reporting period, or
• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
• It is expected to be settled in normal operating cycle; or
• It is held primarily for the purpose of trading; or
• It is due to be settled within twelve months after the reporting period; or
• There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities respectively.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. The Group has identified twelve months as its operating cycle.
Foreign currency transactions
Initial recognition
Transactions in foreign currencies entered into by the Group are accounted at the exchange rates prevailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction.
Measurement at the balance sheet date
Foreign currency monetary items of the Group, outstanding at the balance sheet date are restated at the period-end rates. Non-monetary items of the Group are carried at historical cost.
Treatment of exchange differences
Exchange differences arising on settlement / restatement of foreign currency monetary assets and liabilities of the Group are recognised as income or expense in the Restated Consolidated Statement of Profit and Loss.
Business Combinations and Goodwill
Business combinations are accounted for using the acquisition method. At the acquisition date, identifiable assets acquired and liabilities assumed are measured at fair value. The consideration transferred is measured at fair value at acquisition date and includes the fair value of any contingent consideration.
Where the consideration transferred exceeds the fair value of the net identifiable assets acquired and liabilities assumed, the excess is recorded as goodwill. In case of business combinations involving entities under common control, the above policy does not apply. Business combinations involving entities under common control are accounted for using the pooling of interests method. The net assets of the transferor entity or business are accounted at their carrying amounts on the date of the acquisition subject to necessary adjustments required to harmonise accounting policies.
Goodwill arising on consolidation represents the excess of the consideration transferred over the net fair value of the Groups share of the net assets, liabilities of the acquired subsidiary, joint venture or associate and the fair value of the non-controlling interest in the acquiree. If the consideration is less than the fair value of the Groups share of the net assets, liabilities of the acquired entity (i.e. Gain on acquisition), the difference is credited to the capital reserve in the period of acquisition.
Cash Flow Statement
Cash flows are reported using the indirect method, whereby loss for the period is adjusted for the effects of transactions
of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the group are segregated.
Changes in the accounting policy, if any, in the last three years and their effect on our profits and reserves First time adoption of Ind AS - mandatory exceptions and optional exemptions
In accordance with the notification dated February 16, 2015, issued by Ministry of Corporate Affairs, the Company has voluntarily adopted Indian Accounting Standards notified under section 133 of the Companies Act, 2013 (the "Act") read with the Companies (Indian Accounting Standards) Rules, 2015, as amended ("Ind AS") with transition date from April 1, 2019.
Accordingly, the Restated Consolidated Financial Information have been compiled from:
(a) The audited Special Purpose Consolidated Interim Financial Statements of the Group as at and for the three-month period ended June 30, 2022 which is prepared in accordance with the recognition and measurement principles of Indian Accounting Standard 34 "Interim Financial Reporting" ("Ind AS 34") as prescribed under Section 133 of the Act read with relevant rules thereunder and other accounting principles generally accepted in India (the "Special Purpose Consolidated Interim Financial Statements"), which have been approved by the Board of Directors at their meeting held on October 1, 2022;
(b) The audited Consolidated Ind AS financial statements of the Group as at and for the year ended March 31, 2022 prepared in accordance with Ind AS notified under the Section 133 of the Act read with the Rules and other relevant provisions of the Act which have been approved by the Board of Directors at their meeting held on July 4, 2022 and
(c) The audited Consolidated Ind AS financial statements of the Group as at and for the year ended March 31, 2021 prepared in accordance with the Ind AS notified under the Section 133 of the Act read with the Rules and other relevant provisions of the Act which have been approved by the Board of Directors at their meeting held on July 23, 2021. The comparative information as at and for the year ended March 31, 2020 included in such Consolidated Ind AS Financial Statements have been prepared by making Ind AS adjustments to the audited consolidated Indian GAAP financial statements of the Group as at and for the year ended March 31, 2020, prepared in accordance with the Companies (Accounting Standard) Rules, 2006 notified under Section 133 of the Act ("Indian GAAP") which was approved by the Board of Directors at their meeting held on December 31, 2020.
The Restated Consolidated Financial Information:
(a) have been prepared after incorporating adjustments for the changes in accounting policies, material errors and regrouping/reclassifications retrospectively in the financial year ended March 31, 2021 and March 31, 2020 to reflect the same accounting treatment as per the accounting policies and grouping/classifications followed as at and for the three-month period ended June 30, 2022 and for the year ended March 31, 2022; and
(b) do not require any adjustment for modification as there is no modification in the underlying audit reports.
These Restated Consolidated Financial Information do not reflect the effects of events that occurred subsequent to the respective dates of the board meetings for adoption of the Special Purpose Consolidated Interim Financial Statements, Statutory Consolidated Ind AS Financial Statements and the Statutory Indian GAAP Financial Statements.
These Restated Consolidated Financial Information have been prepared for the Group as a going concern basis.
The accounting policies have been consistently applied by the Company in preparation of the Restated Consolidated Financial Information and are consistent with those adopted in the preparation of financial statements for the three-month period ended June 30, 2022.
Key Performance Indicators and Non-GAAP Financial Measures
In addition to our results determined in accordance with Ind AS, we believe the following non-GAAP measures are useful to our Company and our investors as a means of assessing and evaluating our operating performance in comparison to prior periods: EBITDA, EBITDA Margin, Net Profit Ratio, Return on Equity Ratio, Return on Capital Employed, Net Debt / EBITDA Ratio, Net Worth, Return on Net Worth (RoNW), NAV per Equity Share and Gross Margin. We use the
following non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively with financial measures prepared in accordance with Ind AS, may be helpful to investors because it provides an additional tool for investors to use in evaluating our ongoing operating results and trends and in comparing our financial results with other companies in our industry because it provides consistency and comparability with past financial performance. However, our management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with Ind AS.
Non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with Ind AS. Non-GAAP financial information are not recognized under Ind AS and do not have standardized meanings prescribed by IND AS. In addition, non-GAAP financial measures used by us may differ from similarly titled non-GAAP measures used by other companies. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by Ind AS to be recorded in our financial statements, as further detailed below. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure prepared in accordance with Ind AS. Investors are encouraged to review the related Ind AS financial measures and the reconciliation of non-GAAP financial measures to their most directly comparable Ind AS financial measures included below and to not rely on any single financial measure to evaluate our business.
(Z in millions, except for ratios and percentages)
| Particulars | As at, or for the three months ended, June 30, 2022 |
As at, or for the fiscal year ended, March 31, |
||
| 2022 | 2021 | 2020 | ||
| EBITDA(1) | 528.34 | 1,872.81 | 1,200.63 | 831.95 |
| EBITDA Margin(2) | 6.59% | 6.27% | 6.11% | 3.73% |
| Net Profit Ratio(3) | 2.27% | 2.22% | 0.57% | (1.30)% |
| Return on Equity Ratio(4)* | 6.72% | 26.66% | 6.11% | (17.03)% |
| Return on Capital Employed(5)* | 3.67% | 18.86% | 8.59% | 1.07% |
| Net Debt / EBITDA Ratio(6)* | 7.92 | 1.49 | 2.54 | 3.90 |
| Net Worth(7) | 2,682.67 | 2,469.42 | 1,817.75 | 1,691.25 |
| Return on Net Worth (RoNW)(8)* | 6.64% | 26.52% | 6.23% | (16.99)% |
| NAV per Equity Share(9) | 73.25 | 67.42 | 49.62 | 46.17 |
| Gross Margin(10) | 16.31% | 14.65% | 14.88% | 13.80% |
| Restated profit/(loss) for the period/year(11) | 181.42 | 661.82 | 111.48 | (289.39) |
Notes:
* Amounts for the three months ended June 30, 2022 are not annualised.
(1) EBITDA is calculated as the sum of (i) restatedproft/(loss) for the period/year, (ii) total tax expense, (iii) finance costs, and (iv) depreciation and amortisation expenses.
(2) EBITDA Margin is calculated as EBITDA divided by total income.
(3) Net Profit Ratio is calculated as restated profit/(loss) for the period/year divided by revenue from operations.
(4) Return on Equity Ratio is calculated as restated profit/(loss) for the period/year divided by total equity.
(5) Return on Capital Employed is calculated as (i) EBIT, divided by (ii) Capital Employed. EBIT is calculated as the sum of (i)
restated profit/(loss) before tax for the period/year, and (iii) interest expenses on financial liabilities carried at amortised cost. Capital Employed is calculated as the sum of non-current borrowings, current borrowings, vehicle floor plan, and total equity.
(6) Net Debt / EBITDA Ratio is calculated as the (i) Net Debt, divided by (ii) EBITDA. Net Debt is calculated as (i) sum of noncurrent borrowings, current borrowings and vehicle floor plan, less (ii) sum of cash and cash equivalents and other balances with banks.
(7) Net Worth is calculated as the sum of the paid-up share capital and other equity.
(8) Return on Net Worth (RoNW) is calculated as restated profit/(loss) for the period/year attributable to owners of the company
divided by Net Worth.
(9) NAV per Equity Share is calculated as Net Worth divided by the weighted average number of Equity Shares outstanding during the year/period post sub-division.
(10) Gross margin is calculated (i) Gross Profit, divided by (ii) revenue from operations. Gross Profit is calculated as revenue from operations, less purchase of cars, spares and others, changes in inventories of stock-in-trade and job-work charges.
(11) Restated profit/(loss) for the period / year represents the profit / loss that our Company makes for the financial year or during the given period.
EBITDA, EBITDA Margin and Net Debt /EBITDA Ratio
The following table sets forth our EBITDA, EBITDA Margin and Net Debt / EBITDA Ratio, including a reconciliation of EBITDA, EBITDA Margin and Net Debt / EBITDA Ratio to our restated profits/(losses), as at or for the three months ended June 30, 2022, Fiscal 2022, Fiscal 2021 and Fiscal 2020.
(Rs in millions, except for percentages)
| Particulars | As at, or for the three months ended, June 30, 2022 |
As at, or for the fiscal year ended, March 31, |
||
| 2022 | 2021 | 2020 | ||
| Revenue from operations (A) | 8,002.70 | 29,765.23 | 19,561.04 | 22,186.14 |
| Other income (B) | 16.33 | 125.93 | 102.39 | 103.19 |
| Total Income (C=A+B) | 8,019.03 | 29,891.16 | 19,663.43 | 22,289.33 |
| Restated profit/(loss) for the period/year (D) | 181.42 | 661.82 | 111.48 | (289.39) |
| Add: Total tax expense (E) | 15.29 | 160.92 | 86.33 | 42.97 |
| Add: Finance costs (F) | 123.31 | 352.16 | 378.05 | 448.85 |
| Add: Depreciation and amortisation expense (G) | 208.32 | 697.91 | 624.77 | 629.52 |
| EBITDA (H=D+E+F+G) | 528.34 | 1,872.81 | 1,200.63 | 831.95 |
| EBITDA Margin (I=H/C) | 6.59% | 6.27% | 6.11% | 3.73% |
| Net Debt (L): | ||||
| Debt (J=(1)+(2)+(3)) | 4,643.65 | 3,084.91 | 3,274.41 | 3,579.08 |
| Non-current borrowings (1) | 454.48 | 453.60 | 487.65 | 525.68 |
| Current borrowings (2) | 3,513.41 | 2,007.89 | 1,603.26 | 1,274.49 |
| Vehicle floor plan (3) | 675.76 | 623.42 | 1,183.50 | 1,778.91 |
| Less: Cash and Bank Balances (K)** | 459.81 | 299.96 | 227.20 | 333.27 |
| Net Debt (L=J-K) | 4,183.84 | 2,784.95 | 3,047.21 | 3,245.81 |
| Net Debt / EBITDA Ratio (M=L/H) (No of times)* | 7.92 | 1.49 | 2.54 | 3.90 |
* Amounts for the three months ended June 30, 2022 are not annualised.
** Cash and Bank Balances is defined as sum of Cash and Cash Equivalents and Other balances with banks.
Net Profit Ratio
The following table sets forth our Net Profit Ratio for the three months ended June 30, 2022, Fiscal 2022, Fiscal 2021 and Fiscal 2020.
(in Z millions, except percentages)
| Particulars | For the three months ended June 30, 2021 | For the fiscal year ended March 31, |
||
| 2022 | 2021 | 2020 | ||
| Revenue from operations (A) | 8,002.70 | 29,765.23 | 19,561.04 | 22,186.14 |
| Restated profit/(loss) for the period/year (B) | 181.42 | 661.82 | 111.48 | (289.39) |
| Net Profit Ratio (C=B/A) | 2.27% | 2.22% | 0.57% | (1.30)% |
The general economic slowdown and muted consumer sentiment continued to affect the growth of the domestic automotive industry in Fiscal 2020, which was one of the primary reasons for the Companys restated loss of Z(289.39) million and the negative net profit ratio of (1.30)% for Fiscal 2020. Our restated loss and negative net profit ratio were further widened due to the higher discounts we offered to customers in Fiscal 2020 to sell our entire stock of Bharat Emission Stage IV engine vehicles in anticipation of the introduction of the upgraded model Bharat Emission Stage VI engine, and the adverse effect of the first wave of the COVID-19 pandemic on automobile industry. During the national lockdown imposed by the Government of India during the second half of March 2020, we experienced a suspension of activities at all of our sales outlets and after-sales service and spares centers for extended periods of time, the length of which depended on the location.
The Company was able to achieve a restated profit of ^111.48 million and a net profit ratio of 0.57% in Fiscal 2021, primarily as the result of (i) the Company offering fewer discounts on its sales of cars in Fiscal 2021 (compared to the higher discounts offered to customers in Fiscal 2020 to sell our entire stock of Bharat Emission Stage IV engine vehicles), (ii) additional support from the OEMs in the form of incentives and schemes due to COVID-19, (iii) a decline in headcount and employee-related expenses during Fiscal 2021 due to the impact of the COVID-19 pandemic, and (iv) certain measures taken by the Company to manage costs effectively, particularly fixed costs, on account of the impact of the COVID-19 pandemic on our business and operations. As a result of such measures, the Company reduced its rental
expenses, electricity expenses, travelling expenses and advertisement expenses by 39.50%, 25.15%, 46.79% and 48.50%, respectively, in Fiscal 2021 as compared to Fiscal 2020. Moreover, the Company reduced its borrowing costs in Fiscal 2021 on account of a lower utilization of inventory funding facilities and a reduction in interest rates.
The Company was able to achieve a restated profit of Rs661.82 million and a net profit ratio of 2.22% in Fiscal 2022, primarily as the result of (i) improving market conditions due to relaxation in COVID-19 measures, (ii) acquisitions/additions of new showrooms and service centres of various OEM brands, (iii) improved margins due to the change in business model by Mercedes-Benz from dealership model to agency model for the sale of new cars, effective as of October 1, 2021 (see " - Principal Factors Affecting our Results of Operations - Change to Agency Model for Mercedes-Benz" in this section on page 331), (iv) a few OEMs launched new car models during Fiscal 2022, and (v) a reduction in borrowing costs in Fiscal 2022 on account of a lower utilization of inventory funding facilities due to the change in business model by Mercedes-Benz from dealership model to agency model for the sale of new cars and a reduction in interest rates.
Return on Equity Ratio
The following table sets forth our Return on Equity Ratio for three months ended June 30, 2022, Fiscal 2022, Fiscal 2021 and Fiscal 2020.
(in Rs minions, except percentages)
| Particulars | As at, or for the three months ended, June 30, 2022 |
As at, or for the fiscal year ended, March 31, |
||
| 2022 | 2021 | 2020 | ||
| Restated profit/(loss) for the period/year (A) | 181.42 | 661.82 | 111.48 | (289.39) |
| Total equity (B) | 2,699.00 | 2,482.47 | 1,823.76 | 1,699.09 |
| Return on Equity Ratio (C=A/B)* | 6.72% | 26.66% | 6.11% | (17.03)% |
* Amounts for the three months ended June 30, 2022 are not annualised Return on Capital Employed
The following table sets forth our Return on Capital Employed for the three months ended June 30, 2022, Fiscal 2022, Fiscal 2021 and Fiscal 2020.
(in < millions, except percentages)
| Particulars | As at, or for the three months ended, June 30, 2022 |
As at, or for the fiscal year ended, March 31, |
||
| 2022 | 2021 | 2020 | ||
| Debt (A=(1)+(2)+(3)) | 4,643.65 | 3,084.91 | 3,274.41 | 3,579.08 |
| Non-current borrowings (1) | 454.48 | 453.60 | 487.65 | 525.68 |
| Current borrowings (2) | 3,513.41 | 2,007.89 | 1,603.26 | 1,274.49 |
| Vehicle floor plan (3) | 675.76 | 623.42 | 1,183.50 | 1,778.91 |
| Total equity (B) | 2,699.00 | 2,482.47 | 1,823.76 | 1,699.09 |
| Capital Employed (C=A+B) | 7,342.65 | 5,567.38 | 5,098.17 | 5,278.17 |
| Earnings before Interest & Tax (EBIT) (F) | ||||
| Restated profit/(loss) before tax (D) | 196.71 | 822.74 | 197.81 | (246.42) |
| Interest expenses on borrowings (E) | 72.79 | 227.02 | 240.34 | 302.93 |
| EBIT (F = D+E) | 269.50 | 1,049.76 | 438.15 | 56.51 |
| Return on Capital Employed (G=F/C)* | 3.67% | 18.86% | 8.59% | 1.07% |
* Amounts for the three months ended June 30, 2022 are not annualised.
Net Worth, Return on Net Worth and NA Vper Equity Share
The following table sets forth our Net Worth, Return on Net Worth and NAV per Equity Share as at, or for the three months ended June 30, 2022, Fiscal 2022, Fiscal 2021 and Fiscal 2020.
(in < millions, except percentages, number of Equity Shares and NAV per Equity Share)
| Particulars | As at, or for the three months ended, June 30, 2022 |
As at, or for the fiscal year ended, March 31, |
||
| 2022 | 2021 | 2020 | ||
| Paid-up share capital (A) | 183.13 | 183.13 | 183.13 | 183.13 |
| Other equity (B) | 2,499.54 | 2,286.29 | 1,634.62 | 1,508.12 |
| Net Worth (C=A/B) | 2,682.67 | 2,469.42 | 1,817.75 | 1,691.25 |
| Restated profit/(loss) attributable to the owners of the Company for the period/year (D) | 178.15 | 654.84 | 113.31 | (287.31) |
| Return on Net Worth (E=D/C)* | 6.64% | 26.52% | 6.23% | (16.99)% |
| Weighted average number of Equity Shares outstanding during the period/year post subdivision (F) | 36,625,620 | 36,625,620 | 36,625,620 | 36,625,620 |
| NAV per Equity Share (G=C/F) | 73.25 | 67.42 | 49.62 | 46.17 |
* Amounts for the three months ended June 30, 2022 are not annualised.
Gross Margin
The following table sets forth our Gross Margin, including a reconciliation of Gross Margin to our Restated Consolidated Financial Information, for the three months ended June 30, 2022, Fiscal 2022, Fiscal 2021 and Fiscal 2020.
(Rs in millions, except for percentages)
| Particulars | For the three months ended June 30, 2022 |
For the fiscal year ended March 31, |
||
| 2022 | 2021 | 2020 | ||
| Revenue from operations (A) | 8,002.70 | 29,765.23 | 19,561.04 | 22,186.14 |
| Purchases of cars, spares and others (B) | 7,142.98 | 25,528.41 | 17,104.29 | 17,808.48 |
| Change in inventories of stock-in-trade (C) | (525.62) | (411.02) | (630.59) | 1,140.33 |
| Job-work charges (D) | 80.00 | 287.97 | 176.36 | 176.16 |
| Cost of Goods Sold (E=B+C+D) | 6,697.36 | 25,405.36 | 16,650.06 | 19,124.97 |
| Gross Profit (F=A-E) | 1,305.34 | 4,359.87 | 2,910.98 | 3,061.17 |
| Gross Margin (G=F/A) | 16.31% | 14.65% | 14.88% | 13.80% |
Overview of Revenue and Expenditure
The following descriptions set forth information with respect to key components of our income statement.
Revenue
Revenue from operations
Revenue from operations comprises (i) revenue from the sale of products; (ii) revenue from sales of services; (iii) commission income from sales of Mercedes-Benz vehicles following the change to an agency model with Mercedes- Benz; and (iv) other operating revenues.
We derive revenue primarily from the sale of new automobiles and the provision of after-sales services and sales of spares, lubricants, accessories and other products. We retail new premium and luxury automobiles, which include Mercedes-Benz, Honda, Jeep, Volkswagen, BYD and Renault passenger vehicles and Ashok Leyland commercial vehicles. For every OEM, excluding Mercedes-Benz, we purchase vehicles directly from such OEMs and resell them to customers. Since October 1, 2021, we are an authorized agent of Mercedes-Benz. Under this agency model, we act as an agent for Mercedes-Benz and earn a commission on each vehicle sale placed by customers through us to Mercedes-Benz. We are also engaged in the purchase and sale of pre-owned automobiles through Sheerdrive, pursuant to which we earn a commission on automobiles purchased by Sheerdrive through customer trade-ins at our dealerships. In connection with our vehicle sales, we also facilitate the sale of third-party financial products, such as insurance policies and vehicle finance in respect of which we typically receive a portion of the cost of the financing paid or sum assured by the customer for each transaction as a commission from the finance or insurance provider. We also provide after-sales services to our customers, which includes repair and maintenance services and sale of spare parts, lubricants and accessories.
Set forth below is a breakdown of our revenue from vehicle sales, commission income, revenue from sales services (including after-sales services and spare parts), and allied revenue and financial products for the three months ended June 30, 2022, Fiscal 2022, Fiscal 2021 and Fiscal 2020:
Three months ended June 30, 2022 |
Fiscal 2022 |
Fiscal 2021 |
Fiscal 2020 |
|||||
| Amount (Rs million) | Percentage of total (%) | Amount (Rs million) | Percentage of total (%) | Amount (Rs million) | Percentage of total (%) | Amount (Rs million) | Percentage of total (%) | |
| Revenue from new passenger vehicle sales | 4,663.10 | 58.27% | 18,897.12 | 63.49% | 12,589.54 | 64.36% | 15,430.87 | 69.55% |
| Revenue from new commercial vehicle sales | 1,205.97 | 15.07% | 3,866.41 | 12.99% | 1,865.90 | 9.54% | 1,229.74 | 5.54% |
| Revenue from preowned vehicle sales | 92.00 | 1.15% | 200.20 | 0.67% | 347.97 | 1.78% | 208.17 | 0.94% |
| Revenue from sale of cars | 5,961.07 | 74.49% | 22,963.73 | 77.15% | 14,803.41 | 75.68% | 16,868.78 | 76.03% |
| Commission income# | 194.34 | 2.43% | 310.61 | 1.04% | - | - | - | - |
| Revenue from sale of spares, lubricants and others | 1,129.22 | 14.11% | 3,980.26 | 13.37% | 2,906.72 | 14.86% | 3,360.86 | 15.15% |
| Revenue from sale of services | 519.38 | 6.49% | 1,888.75 | 6.35% | 1,322.84 | 6.76% | 1,445.54 | 6.52% |
| Revenue from sale of products and services | 7,804.01 | 97.52% | 29,143.35 | 97.91% | 19,032.97 | 97.30% | 21,675.18 | 97.70% |
| Other operating revenue: | ||||||||
| Financial products (Insurance and vehicle finance) | 72.09 | 0.90% | 238.31 | 0.80% | 139.48 | 0.71% | 208.01 | 0.94% |
| Others | 126.60 | 1.58% | 383.57 | 1.29% | 388.59 | 1.99% | 302.95 | 1.36% |
| Revenue from operations | 8,002.70 | 100.00% | 29,765.23 | 100.00% | 19,561.04 | 100.00% | 22,186.14 | 100.00% |
# includes the commission income earned on Mercedes-Benz cars sold through our showrooms under the agency model. See " - Principal Factors Affecting our Results of Operations - Change to Agency Model for Mercedes-Benz" in this section on page 331.
Set forth below is a breakdown of our revenue from the sale of products and services for the three months ended June 30, 2022, Fiscal 2022, Fiscal 2021 and Fiscal 2020 indicated by OEM:
| OEM/Brand | Three months ended June 30, 2022 |
Fiscal 2022 |
Fiscal 2021 |
Fiscal 2020 |
||||
| Amount (Rs million) | Percentage of total (%) | Amount (Rs million) | Percentage of total (%) | Amount (Rs million) | Percentage of total (%) | Amount (Rs million) | Percentage of total (%) | |
| Mercedes-Benz (dealership model) | 663.38 | 8.64% | 6,542.29 | 22.68% | 6,510.76 | 34.85% | 7,696.69 | 35.85% |
| Mercedes-Benz (agency model)# | 293.88 | 3.83% | 1,169.43 | 4.05% | - | - | - | - |
| Honda | 1,300.02 | 16.94% | 4,972.53 | 17.23% | 3,818.47 | 20.44% | 4,591.56 | 21.39% |
| Jeep | 2,213.45 | 28.84% | 6,324.18 | 21.92% | 2,597.92 | 13.91% | 3,332.07 | 15.52% |
| Volkswagen | 1,112.57 | 14.50% | 2,795.33 | 9.69% | 1,440.58 | 7.71% | 1,828.66 | 8.52% |
| Renault | 729.90 | 9.51% | 2,981.00 | 10.33% | 2,322.18 | 12.43% | 2,373.76 | 11.06% |
| Ashok Leyland | 1,257.03 | 16.38% | 4,030.74 | 13.97% | 1,977.21 | 10.58% | 1,415.42 | 6.59% |
| BYD | 104.26 | 1.36% | 35.94 | 0.12% | ||||
| Former OEM partner* | - | - | - | - | 13.97 | 0.07% | 228.85 | 1.07% |
| Revenue from sale of products and services | 7,674.49 | 100.00% | 28,851.44 | 100.00% | 18,681.09 | 100.00% | 21,467.01 | 100.00% |
* Sale of vehicles and after sales revenue of a former OEM partner were discontinued prior to Fiscal 2021.
# includes the commission income earned on Mercedes-Benz cars sold through our showrooms under the agency model and revenue
from the sales of Mercedes-Benz demo cars, new Mercedes-Benz car inventories still on hand as on September 30, 2021 and new Mercedes-Benz cars sold to corporate customers, leasing customers and special economic zone customers following the change from dealership model to agency model as of October 1, 2021. See Principal Factors Affecting our Results of Operations - Change to
Agency Model for Mercedes-Benz" in this section on page 331.
The above revenue from sale of products and services excludes sales of pre-owned cars of Rs92.00 million for the three months ended June 30, 2022, and Rs200.20 million, Rs347.97 million and Rs208.17 million for Fiscal 2022, Fiscal 2021 and Fiscal 2020, respectively.
Also, the above revenue from the sale of products and services excludes sales of local accessories of Rs37.52 million for the three months ended June 30, 2022 and ^91.71 million, Rs3.91 million and Rs Nil for Fiscal 2022, Fiscal 2021 and Fiscal 2020 respectively.
We are a leading premium automotive retail business in India (Source: CRISIL Report, September 2022) with a focus on the premium and luxury automotive segments. Set forth below is a breakdown of our revenue from the sale of products and services for the three months ended June 30, 2022, Fiscal 2022, Fiscal 2021 and Fiscal 2020 indicated by automotive segment:
| OEM/Brand | Three months ended June 30, 2022 |
Fiscal 2022 |
Fiscal 2021 |
Fiscal 2020 |
||||
| Amount (Rs million) | Percentage of total (%) | Amount (Rs million) | Percentage of total (%) | Amount (Rs million) | Percentage of total (%) | Amount (Rs million) | Percentage of total (%) | |
| Luxury segment# (Mercedes-Benz) | 957.27 | 12.47% | 7,711.73 | 26.73% | 6,510.76 | 34.85% | 7,696.69 | 35.85% |
| Premium segment (Honda, Jeep and Volkswagen) | 4,626.04 | 60.28% | 14,092.04 | 48.84% | 7,856.97 | 42.06% | 9,752.29 | 45.43% |
| Mass segment (Renault and former OEM partner*) | 729.90 | 9.51% | 2,981.00 | 10.33% | 2,336.15 | 12.51% | 2,602.61 | 12.12% |
| Commercial segment (Ashok Leyland) | 1,257.02 | 16.38% | 4,030.73 | 13.97% | 1,977.21 | 10.58% | 1,415.42 | 6.59% |
| Electric segment (BYD) | 104.26 | 1.36% | 35.94 | 0.12% | - | - | - | - |
| Revenue from sale of products and services | 7,674.49 | 100.00% | 28,851.44 | 100.00% | 18,681.09 | 100.00% | 21,467.01 | 100.00% |
# includes the commission income earned on Mercedes-Benz cars sold through our showrooms under the agency model and revenue from the sales of Mercedes-Benz demo cars, new Mercedes-Benz car inventories still on hand as on September 30, 2021 and new Mercedes-Benz cars sold to corporate customers, leasing customers and special economic zone customers following the change from dealership model to agency model as of October 1, 2021. See Principal Factors Affecting our Results of Operations - Change to Agency Model for Mercedes-Benz" in this section on page 331.
* Sale of vehicles and after sales revenue of a former OEM partner were discontinued prior to Fiscal 2021.
The above revenue from sale of products and services excludes sales of pre-owned cars of Rs92.00 million for the three months ended June 30, 2022, and Rs200.20 million, Rs347.97 million and Rs208.17 million for Fiscal 2022, Fiscal 2021 and Fiscal 2020, respectively.
Also, the above revenue from the sale of products and services excludes sales of local accessories of Rs37.52 million for the three months ended June 30, 2022 and ^91.71 million, Rs3.91 million and Rs Nil for Fiscal 2022, Fiscal 2021 and Fiscal 2020, respectively.
No geographical information is presented as our revenue is generated entirely within India.
Other income
Other income primarily comprises interest income, sundry balances written back, marketing support income, amongst
others.
Expenses
Our expenses comprise the following:
(a) Purchase of cars, spares and others: Purchase of cars, spares and others comprises the purchase cost of automobiles and the purchase cost of automobile parts and accessories from our OEMs and other vendors.
(b) Changes in inventories of stock-in-trade: Changes in inventories of stock-in-trade denotes increase/decrease in inventories of stock-in-trade (cars and spares and others) between opening and closing dates of a reporting period.
(c) Employee benefit expenses: Employee benefit expenses include (i) salaries and wages, (ii) gratuity expenses, (iii) contributions to provident and other funds, (iv) expenses on employee stock option scheme, and (v) staff welfare expenses.
(d) Finance costs: Finance costs comprise interest expenses on (i) financial liabilities carried at amortised cost, (ii) lease liabilities, (iii) delayed payment of income tax, (iv) other interests paid, and (v) other borrowing costs.
(e) Depreciation and amortisation expenses: Depreciation and amortisation expenses comprise (i) depreciation on property, plant and equipment, (ii) amortisation of intangible assets, and (iii) amortisation on right of use assets.
(f) Other expenses: Other expenses comprise primarily of: (i) job work charges; (ii) advertising and sales promotion;
(iii) new car delivery expenses; (iv) repair expenses, which includes payments for common area maintenance charges at our buildings, annual maintenance charges for plant and machineries and general repair and maintenance; (v) extended warranty and road side assistance expenses; (vi) electricity expenses; (vii) housekeeping and pantry expenses; (viii) rent, (ix) commission expense; and (x) legal and professional, which comprise payments made to auditors, lawyers and other professional advisers, amongst others.
Set forth below is a breakdown of our total expenses as a percentage of our revenue from operations for the three months ended June 30, 2022, Fiscal 2022, Fiscal 2021 and Fiscal 2020.
Three months ended June 30, 2022 |
Fiscal 2022 |
Fiscal 2021 |
Fiscal 2020 |
|||||
| Amount (Rs million) | Percentage of revenue from operations (%) | Amount (Rs million) | Percentage of revenue from operations (%) | Amount (Rs million) | Percentage of revenue from operations (%) | Amount (Rs million) | Percentage of revenue from operations (%) | |
| Purchase of cars, spares and others | 7,142.98 | 89.26 | 25,528.41 | 85.77 | 17,104.29 | 87.44 | 17,808.48 | 80.27 |
| Changes in inventories of stock- in-trade | (525.62) | (6.57) | (411.02) | (1.38) | (630.59) | (3.22) | 1,140.33 | 5.14 |
| Employee benefits expense | 449.58 | 5.62 | 1,531.57 | 5.15 | 1,076.66 | 5.50 | 1,367.39 | 6.16 |
| Finance costs | 123.31 | 1.54 | 352.16 | 1.18 | 378.05 | 1.93 | 448.85 | 2.02 |
| Depreciation and amortisation expenses | 208.32 | 2.60 | 697.91 | 2.34 | 624.77 | 3.19 | 629.52 | 2.84 |
| Other expenses | 423.75 | 5.30 | 1,369.39 | 4.60 | 912.44 | 4.66 | 1,141.18 | 5.14 |
| Total expenses | 7,822.32 | 97.75 | 29,068.42 | 97.66 | 19,465.62 | 99.51 | 22,535.75 | 101.58 |
Tax Expenses
Our tax expenses represent the tax payable on the current periods taxable income based on the applicable income tax rate adjusted by income tax payable for earlier years and deferred tax charges or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period). Tax expense constituted 0.19%, 0.54%, 0.44% and 0.19% of our revenue from operations in the three-month period ended June 30, 2022 and in Fiscals 2022, 2021 and 2020, respectively.
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against the deductible temporary differences that can be utilized. Deferred tax is reviewed at each balance sheet date and written down or written up to reflect the amount that is reasonably certain, as the case may be, to be realized.
Operating Segment
The primary reporting of the Group has been made on the basis of Business Segments. The Group has a single business segment as defined in Indian Accounting Standard (Ind AS) 108 on Segment Reporting, namely dealership of cars in India. The Chairman of the Group allocates resources and assesses the performance of the group, thus is the chief operating decision maker (CODM). The CODM monitors the operating results of the business as a single segment, hence no separate segment needs to be disclosed.
Business Line Results Summary
Although we have a single business segment, we have been managing our business based on two business lines. Our vehicle sales and allied products business line comprises our sales of new vehicles and the commissions that we receive from distribution of third-party financial products (including insurance and vehicle finance) and pre-owned vehicles purchases and sales made by Sheerdrive through our dealerships. Our after-sales services and spare parts business comprises our after-sales services and repairs and sales of spare parts, lubricants and accessories.
We present the following non-GAAP financial measures that is not prepared in accordance with Ind AS, including revenue, EBITDA and EBITDA Margin of each business line. We present these non-GAAP financial measures because we use them to measure the operating performance of our business lines and as a basis for our strategic planning. We believe that non-GAAP financial information, when taken collectively with financial measures prepared in accordance with Ind AS, may be helpful to investors because it provides an additional tool for investors to use in evaluating our ongoing operating results and trends. However, these non-GAAP financial measures should not be considered as alternatives to or substitutes for an analysis of our results of operations prepared in accordance with Ind AS, or as measures of profitability or liquidity, and may not be in comparable to similarly titled information published by other companies in our industry. For further information on non-GAAP financial measures, please see "- Key Performance Indicators and non-GAAP Financial Measures" on page 343.
The following table of financial data, EBITDA and EBITDA Margin, broken down by business line, is for the three months ended June 30, 2022, Fiscal 2022, Fiscal 2021 and Fiscal 2020.
(in f in millions, except for percentages and vehicle numbers)
| Particulars | For the three months ended June 30, 2022 |
For the fiscal year ended March 31, |
||
| 2022 | 2021 | 2020 | ||
| Sales volumes | ||||
| Number of new vehicles sold# | 5,398 | 19,264 | 13,282 | 16,730 |
| Number of vehicles serviced | 76,469 | 2,79,078 | 221,468 | 291,040 |
| Vehicle sales and allied products | ||||
| New vehicles | 5,941.51 | 23,035.29 | 14,722.76 | 16,912.52 |
| Commission income* | 194.34 | 310.61 | - | - |
| Financial products (Insurance and vehicle finance) | 72.09 | 238.31 | 139.48 | 208.01 |
| Pre-owned vehicles income | 93.02 | 214.43 | 353.65 | 231.42 |
| Total vehicle sales and other operating products revenue | 6,300.96 | 23,798.64 | 15,215.89 | 17,351.95 |
| Particulars | For the three months ended June 30, 2022 |
For the fiscal year ended March 31, |
||
| 2022 | 2021 | 2020 | ||
| EBITDA | 205.46 | 682.62 | 368.14 | (96.93) |
| EBITDA Margin | 3.26% | 2.87% | 2.42% | (0.56)% |
| Total revenue | 1,701.74 | 5,966.59 | 4,345.15 | 4,834.19 |
| EBITDA | 309.02 | 1,085.36 | 771.12 | 865.83 |
| EBITDA Margin | 18.16% | 18.19% | 17.75% | 17.91% |
| Add: Other Income | 16.30 | 125.92 | 102.39 | 103.19 |
| Less: Unallocable expenseA | 2.44 | 21.09 | 41.02 | 40.14 |
| Total EBITDA | 528.34 | 1,872.81 | 1,200.63 | 831.95 |
| Total EBITDA Margin | 6.59% | 6.27% | 6.11% | 3.73% |
Notes:
# Includes number of cars sold under the agency model introduced by Mercedes-Benz with effect from October 1, 2021.
* Includes the commission income earned on Mercedes-Benz cars sold through our showrooms under the agency model. See " - Principal Factors Affecting our Results of Operations - Change to Agency Model for Mercedes-Benz" in this section on page 331.
A Unallocable expense comprises of loss on property, plant and equipment sold /written off, expenditure on CSR and donations and contributions.
Results of Operations based on our Restated Consolidated Financial Information
Set forth below is certain financial information based on our Restated Consolidated Financial Information for the three months ended June 30, 2022 and for Fiscals 2022, 2021 and 2020, the components of which are also expressed as a percentage of our total income for the periods/years indicated.
Three months ended June 30, 2022 |
Fiscal 2022 |
Fiscal 2021 |
Fiscal 2020 |
|||||
| Amount (Rs million) | Percentage of total income (%) | Amount (Rs million) | Percentage of total income (%) | Amount (Rs million) | Percentage of total income (%) | Amount (Rs million) | Percentage of total income (%) | |
| Income | ||||||||
| Revenue from operations | 8,002.70 | 99.80 | 29,765.23 | 99.58 | 19,561.04 | 99.48 | 22,186.14 | 99.54 |
| Other income | 16.33 | 0.20 | 125.93 | 0.42 | 102.39 | 0.52 | 103.19 | 0.46 |
| Total income | 8,019.03 | 100.00 | 29,891.16 | 100.00 | 19,663.43 | 100.00 | 22,289.33 | 100.00 |
| Expenses | ||||||||
| Purchase of cars, spares and others | 7,142.98 | 89.08 | 25,528.41 | 85.40 | 17,104.29 | 86.99 | 17,808.48 | 79.90 |
| Changes in inventories of stock- in-trade | (525.62) | (6.55) | (411.02) | (1.38) | (630.59) | (3.21) | 1,140.33 | 5.12 |
| Employee benefits expense | 449.58 | 5.61 | 1,531.57 | 5.12 | 1,076.66 | 5.48 | 1,367.39 | 6.13 |
| Finance costs | 123.31 | 1.54 | 352.16 | 1.18 | 378.05 | 1.92 | 448.85 | 2.01 |
| Depreciation and amortisation expenses | 208.32 | 2.60 | 697.91 | 2.33 | 624.77 | 3.18 | 629.52 | 2.82 |
| Other expenses | 423.75 | 5.28 | 1,369.39 | 4.58 | 912.44 | 4.64 | 1,141.18 | 5.12 |
| Total expenses | 7,822.32 | 97.55 | 29,068.42 | 97.25 | 19,465.62 | 98.99 | 22,535.75 | 101.11 |
| Restated profit / (loss) before tax | 196.71 | 2.45 | 822.74 | 2.75 | 197.81 | 1.01 | (246.42) | (1.11) |
| Tax expense | ||||||||
| Current tax | 58.75 | 0.73 | 169.11 | 0.57 | 103.08 | 0.53 | 12.81 | 0.06 |
| Deferred tax | (43.46) | (0.54) | (8.19) | (0.03) | (16.75) | (0.09) | 30.16 | 0.13 |
| Total tax expense | 15.29 | (0.19) | 160.92 | 0.54 | 86.33 | 0.44 | 42.97 | 0.19 |
Three months ended June 30, 2022 |
Fiscal 2022 |
Fiscal 2021 |
Fiscal 2020 |
|||||
| Amount (Rs million) | Percentage of total income (%) | Amount (Rs million) | Percentage of total income (%) | Amount (Rs million) | Percentage of total income (%) | Amount (Rs million) | Percentage of total income (%) | |
| Restated profit / (loss) for the period / year | 181.42 | 2.26 | 661.82 | 2.21 | 111.48 | 0.57 | (289.39) | (1.30) |
Three months ended June 30, 2022
Our results of operations for the three months ended June 30, 2022 were particularly impacted by the following factors:
• Improved margins due to the change in business model by Mercedes-Benz from dealership model to agency model for the sale of new cars;
• A few OEMs launched new car models during Fiscal 2022, which helped to spur demand for new cars; and
• A reduction in borrowing costs in Fiscal 2022 on account of a lower utilization of inventory funding facilities due to the change in business model of Mercedes-Benz from dealership model to agency model for the sale of new cars and a reduction in interest rates.
Income
Our total income was Rs8,019.03 million for the three months ended June 30, 2022, of which Rs8,002.70 million, or 99.80%, was derived from revenue from operations.
Revenue from Operations
Our revenue from operations was Rs8,002.70 million in the three months ended June 30, 2022. For the three months ended June 30, 2022:
• our revenue from sales of cars was Rs5,961.07 million;
• our revenue from sales of spares, lubricants and others was Rs1,129.22 million;
• our revenue from commission income was Rs194.34 million, which we earned on sales of Mercedes-Benz cars through the new agency model with Mercedes-Benz (see " - Principal Factors Affecting our Results of Operations - Change to Agency Model for Mercedes-Benz" in this section on page 331);
• our revenue from sale of services was ^519.38 million; and
• our other operating revenues was Rs198.69 million.
Other Income
Our other income was Rs16.33 million in the three months ended June 30, 2022, which principally comprised interest income of Rs12.67 million and sundry balances written back of Rs2.20 million.
Expenses
Purchase of Cars, Spares and Others
Our purchase of cars, spares and others was Rs7,142.98 million in the three months ended June 30, 2022, which comprised purchases of cars of Rs6,150.72 million and purchases of spares, lubricants and others of Rs992.26 million.
Change in Inventories of Stock-in-Trade
As at April 1, 2022, our opening stock-in-trade of (i) cars was Rs2,730.66 million, (ii) spares and others was Rs568.58 million, and (iii) adjustments on account of business combination was Rs33.13 million. As at June 30, 2022, our closing
stock-in-trade of (i) cars was Rs3,170.99 million, and (ii) spares and others was Rs687.00 million. As a result, we had a net increase in our change in inventories of stock-in-trade of Rs525.62 million in the three months ended June 30, 2022.
Cost of Goods Sold
When considered together, our Cost of Goods Sold (which is the sum of our purchase of cars, spares and others, changes in inventories of stock-in-trade and job work charges) was Rs6,697.36 million for the three months ended June 30, 2022, which represented 83.52% of total income for the period.
Employee Benefits Expense
Our employee benefits expense was Rs449.58 million in the three months ended June 30, 2022, which principally comprised salaries and wages of Rs421.53 million, gratuity expense of Rs5.11 million, contributions to provident and other funds of Rs8.07 million, share based payment expense of Rs2.62 million and staff welfare expenses of Rs12.25 million.
Finance Costs
Our finance costs were Rs123.31 million in the three months ended June 30, 2022, which primarily comprised interest expenses on (i) financial liabilities carried at amortised cost of Rs72.79 million and (ii) lease liabilities of Rs47.45 million.
Depreciation and Amortisation Expenses
Our depreciation and amortisation expenses were Rs208.32 million in the three months ended June 30, 2022, which primarily comprised amortisation on right of use assets of Rs117.81 million, depreciation on property, plant and equipment of Rs71.97 million and amortisation of intangible assets of Rs18.54 million.
Other Expenses
Our other expenses were Rs423.75 million in the three months ended June 30, 2022. Other expenses for the period primarily comprised of (i) job work charges of Rs80.00 million, (ii) advertisement and sales promotion of Rs55.53 million, (iii) new car delivery expenses of Rs37.44 million, (iv) electricity expenses of Rs29.19 million, and (v) repairs expenses of ^31.65 million.
Restated Profit / (Loss) Before Tax
As a result of the foregoing, we recorded a restated profit before tax of Rs196.71 million in the three months ended June 30, 2022.
Tax expense
For the three months ended June 30, 2022, our current tax was Rs58.75 million and our deferred tax credit was Rs43.46 million. As a result, our tax expense was Rs15.29 million in the three months ended June 30, 2022.
Restated Profit / (Loss) for the Period
Our results of operations for the three months ended June 30, 2022 were particularly impacted by Improved margins due to the change in business model by Mercedes-Benz from dealership model to agency model for the sale of new cars, few OEMs launched new car models during Fiscal 2022, and reduction in borrowing costs in Fiscal 2022 on account of a lower utilization of inventory funding facilities due to the change in business model of Mercedes-Benz from dealership model to agency model for the sale of new cars and a reduction in interest rates. As a result of the foregoing, we recorded a restated profit for the period of Rs181.42 million in the three months ended June 30, 2022.
Results of operations for Fiscal 2022 compared with Fiscal 2021
(Rs in millions, except percentages)
| Particulars | For the year ended March 31, |
Change (%) |
|
| 2022 | 2021 | ||
| Income | |||
| Revenue from operations | 29,765.23 | 19,561.04 | 52.17 |
| Other income | 125.93 | 102.39 | 22.99 |
| Particulars | For the year ended March 31, |
Change (%) |
|
| 2022 | 2021 | ||
| Total income | 29,891.16 | 19,663.43 | 52.01 |
| Expenses | |||
| Purchase of cars, spares and others | 25,528.41 | 17,104.29 | 49.25 |
| Changes in inventories of stock-in-trade | (411.02) | (630.59) | (34.82) |
| Employee benefits expense | 1,531.57 | 1,076.66 | 42.25 |
| Finance costs | 352.16 | 378.05 | (6.85) |
| Depreciation and amortisation expense | 697.91 | 624.77 | 11.71 |
| Other expenses | 1,369.39 | 912.44 | 50.08 |
| Total expenses | 29,068.42 | 19,465.62 | 49.33 |
| Restated profit / (loss) before tax | 822.74 | 197.81 | 315.92 |
| Tax expense: | |||
| Current tax | 169.11 | 103.08 | 64.06 |
| Deferred tax | (8.19) | (16.75) | (51.10) |
| Total tax expense | 160.92 | 86.33 | 86.40 |
| Restated profit / (loss) for the year | 661.82 | 111.48 | 493.67 |
Our results of operations during Fiscal 2022, as compared to Fiscal 2021, were particularly impacted by the following factors:
• Business activity in Fiscal 2022 was adversely impacted by the second wave of COVID-19 infections that impacted India in April, May and June 2021.
• Purchase, logistics and other costs increased generally due to a higher inflationary trend during Fiscal 2022, which may continue for the remainder of Fiscal 2023.
• The global shortage of semiconductor chips has affected OEMs and their ability to produce automobiles in a timely manner to meet demand, which has resulted in delays in receipt of shipments from OEMs.
Our results of operations during Fiscal 2021 were significantly impacted by the COVID-19 pandemic and the corresponding lockdowns imposed across various parts of the country during this period. Related preventive and protective actions include the complete suspension of activities at our showrooms, sales outlets and booking offices and service centres, which were completely shut during a few parts of Fiscal 2021.
Total Income
Our total income increased by 52.01% to Rs29,891.16 million for Fiscal 2022 from Rs19,663.43 million for Fiscal 2021. In Fiscal 2022 and Fiscal 2021, our revenue from operations constituted 99.58% and 99.48% of our total income, respectively.
Revenue from Operations
Our revenue from operations increased by 52.17% to Rs29,765.23 million for Fiscal 2022 from Rs19,561.04 million for Fiscal 2021. This increase can be primarily attributed to a (i) 55.12% increase in revenue from sales of cars, (ii) 100% increase in commission income from sales of Mercedes-Benz cars due to the change from dealership model to agency model, (iii) 36.93% increase in revenue from sales of spares, lubricants and others, and (iv) 42.78% increase in revenue from the sale of services. These increases were primarily the result of the increase in general economic activity in Fiscal 2022 following the recovery from the impact of the COVID-19 pandemic and associated lockdowns across the country during Fiscal 2021 and the first half of Fiscal 2022.
Our other operating revenues increased by 17.76% to Rs621.88 million for Fiscal 2022 from Rs528.07 million for Fiscal 2021, which increase was primarily due to an increase in sales during the Fiscal 2022 resulting in an increase in finance and insurance commission income.
Other Income
Our other income increased by 22.99% to Rs125.93 million for Fiscal 2022 from Rs102.39 million in Fiscal 2021.
Purchase of Cars, Spares and Others
Our purchase of cars, spares and others increased by 49.25% to Rs25,528.41 million for Fiscal 2022 from Rs17,104.29 million in Fiscal 2021. This increase was primarily due to an increase in sales of cars, accessories and spare parts due to improving prevailing economic conditions in Fiscal 2022 following the recovery from the impact of the COVID-19 pandemic and associated lockdowns across the country during Fiscal 2021 and the first half of Fiscal 2022.
Change in Inventories of Stock-in-Trade
Our change in inventories of stock-in-trade went from an increase of Rs(630.59) million in Fiscal 2021 to an increase of Rs(411.02) million in Fiscal 2022. This was primarily a result of the increase in operations during Fiscal 2022.
Our opening stock of (i) cars was Rs2,402.07 million as at April 1, 2021, while it was Rs1,811.95 million as at April 1,
2020, and (ii) spares and others was Rs486.15 million as at April 1, 2021, while it was Rs445.68 million as at April 1, 2020.
Our closing stock of (i) cars was Rs2,730.66 million as at March 31, 2022, while it was Rs2,402.07 million as at March 31,
2021, and (ii) spares and others was Rs568.58 million as at March 31, 2022, while it was Rs486.15 million as at March 31, 2021.
Cost of Goods Sold
When considered together, our Cost of Goods Sold (which is the sum of our purchase of cars, spares and others, changes in inventories of stock-in-trade and job work charges) has increased by 52.58% to Rs25,405.36 million for Fiscal 2022 from Rs16,650.06 million for Fiscal 2021. As a percentage of revenue from operations, Cost of Goods Sold remained steady at 85.35% for Fiscal 2022 as compared to 85.12% for Fiscal 2021.
Employee Benefits Expense
Our employee benefits expense increased by 42.25% to Rs1,531.57 million for Fiscal 2022 from Rs1,076.66 million in Fiscal 2021. This increase was primarily due to an increase of Rs427.41 million, or 42.01%, in salaries and wages as a result of the increase in our headcount during Fiscal 2022 for the new facilities added during the year.
Finance Costs
Our finance costs decreased by 6.85% to Rs352.16 million for Fiscal 2022 from Rs378.05 million in Fiscal 2021. This decrease was primarily due to a decrease of Rs13.32 million, or 5.54%, in interest expenses on financial liabilities carried at amortised cost primarily due to a lower utilization of inventory funding facilities and a reduction in interest rates.
Depreciation and Amortisation Expense
Our depreciation and amortisation expense was Rs697.91 million for Fiscal 2022 as compared to Rs624.77 million in Fiscal 2021. Our depreciation and amortisation expense increased by 11.71% on account of the addition of new service centres and showrooms and additions of a new right-of-use asset.
Other Expenses
Our other expenses increased by 50.08% to Rs1,369.39 million for Fiscal 2022 from Rs912.44 million in Fiscal 2021. The increase was mainly driven by (i) an increase of Rs46.17 million, or 46.72%, in advertisement and sales promotion, (ii) an increase of Rs58.71 million, or 152.37%, in rent, (iii) an increase of Rs55.52 million, or 87.47%, in new car delivery expenses, (iv) an increase of ^111.61 million, or 63.29%, in job work charges, and (v) an increase of Rs72.22 million, or 306.80%, in extended warranty and road side assistance expenses, all of which was a result of the increase in sales activity in Fiscal 2022 following the recovery from the impact of the COVID-19 pandemic and associated lockdowns across the country during Fiscal 2021 and the first half of Fiscal 2022.
Restated Profit / (Loss) Before Tax
As a result of the foregoing, our profit before tax increased by 315.92% to Rs822.74 million for Fiscal 2022 from Rs197.81 million in Fiscal 2021.
EBITDA and EBITDA Margin
Our EBITDA increased by 55.99% to Rs1,872.81 million for Fiscal 2022 from Rs1,200.63 million in Fiscal 2021. Our EBITDA Margin improved to 6.27% in Fiscal 2022 from 6.11% in Fiscal 2021. This improved profitability in Fiscal 2022 was largely driven by improved margins and a better product mix from our OEMs coupled with a reduction in fixed costs and borrowings cost. As a result, our EBITDA Margin for vehicle sales and allied products business line increased to 2.87% in Fiscal 2022 from 2.42% in Fiscal 2021. The EBITDA Margin for our after-sales services and spare parts business line was 18.19% in Fiscal 2022 and 17.75% in Fiscal 2021. For more information on the calculation of EBITDA and EBITDA Margin, see "- Key Performance Indicators and Non-GAAP Financial Measures" beginning on page 343 of this section for more information.
Tax expense
Our tax expense increased by 86.40% to Rs160.92 million for Fiscal 2022 from Rs86.33 million in Fiscal 2021, which was primarily due to (i) the increase in profits before tax in Fiscal 2022 as compared to Fiscal 2021, and (ii) the decrease in deferred tax credit of Rs(8.19) million applied in Fiscal 2022, as compared to a deferred tax credit of Rs(16.75) million applied in Fiscal 2021.
Restated Profit / (Loss) for the Year
Our increase in restated profit for the Fiscal 2022 as compared to Fiscal 2021 was primarily on account of increase in revenue from sales of cars, increase in commission income from sales of Mercedes-Benz cars due to the change from dealership model to agency model (See "- Principal Factors Affecting our Results of Operations - Change to Agency Model for Mercedes-Benz" in this section on page 331), increase in revenue from sales of spares, lubricants and others increase in revenue from the sale of services. These increases were primarily the result of the increase in general economic activity in Fiscal 2022 following the recovery from the impact of the COVID-19 pandemic and associated lockdowns across the country during Fiscal 2021 and the first half of Fiscal 2022. As a result of the foregoing, our profit for the year increased by 493.67% to Rs661.82 million for Fiscal 2022 from Rs111.48 million in Fiscal 2021.
Results of operations for Fiscal 2021 compared with Fiscal 2020
(Rs in millions, except percentages)
| Particulars | For the year ended March 31, |
Change (%) |
|
| 2021 | 2020 | ||
| Income | |||
| Revenue from operations | 19,561.04 | 22,186.14 | (11.83) |
| Other income | 102.39 | 103.19 | (0.78) |
| Total income | 19,663.43 | 22,289.33 | (11.78) |
| Expenses | |||
| Purchase of cars, spares and others | 17,104.29 | 17,808.48 | (3.95) |
| Changes in inventories of stock-in-trade | (630.59) | 1,140.33 | (155.30) |
| Employee benefits expense | 1,076.66 | 1,367.39 | (21.26) |
| Finance costs | 378.05 | 448.85 | (15.77) |
| Depreciation and amortisation expense | 624.77 | 629.52 | (0.75) |
| Other expenses | 912.44 | 1,141.18 | (20.04) |
| Total expenses | 19,465.62 | 22,535.75 | (13.62) |
| Restated profit / (loss) before tax | 197.81 | (246.42) | (180.27) |
| Tax expense: | |||
| Current tax | 103.08 | 12.81 | 704.68 |
| Deferred tax | (16.75) | 30.16 | (155.54) |
| Total tax expense | 86.33 | 42.97 | 100.91 |
| Restated profit / (loss) for the year | 111.48 | (289.39) | (138.52) |
Our results of operations during Fiscal 2021 were significantly impacted by the COVID-19 pandemic and the corresponding lockdowns imposed across various parts of the country during this period. Related preventive and protective actions include the complete suspension of activities at our showrooms, sales outlets and booking offices and service centres, which were completely shut during a few parts of Fiscal 2021.
Total Income
Our total income decreased by 11.78% to Rs19,663.43 million for Fiscal 2021 from Rs22,289.33 million for Fiscal 2020. In Fiscal 2021 and Fiscal 2020, our revenue from operations constituted 99.48% and 99.54% of our total income, respectively.
Revenue from Operations
Our revenue from operations decreased by 11.83% to Rs19,561.04 million for Fiscal 2021 from Rs22,186.14 million for Fiscal 2020. This decrease can be primarily attributed to a (i) 12.24% decrease in revenue from sales of cars, (ii) 13.51% decrease in revenue from sales of spares, lubricants and others, and (iii) 8.49% decrease in revenue from the sale of services. These decreases were primarily the result of the impact of the COVID-19 pandemic and associated lockdowns across the country during Fiscal 2021.
Our other operating revenues increased by 3.35% to Rs528.07 million for Fiscal 2021 from Rs510.96 million for Fiscal 2020, which increase was primarily due to additional support provided by our OEMs during the COVID-19 pandemic for Fiscal 2021.
Other Income
Our other income decreased by 0.78% to Rs102.39 million in Fiscal 2021 from Rs103.19 million in Fiscal 2020.
Expenses
Purchase of Cars, Spares and Others
Our purchase of cars, spares and others decreased by 3.95% to Rs17,104.29 million in Fiscal 2021 from Rs17,808.48 million in Fiscal 2020. This decrease was primarily due to a decrease in sales of cars, accessories and spare parts due to prevailing economic conditions.
Change in Inventories of Stock-in-Trade
Our change in inventories of stock-in-trade went from a decrease of Rs1,140.33 million in Fiscal 2020 to an increase of Rs(630.59) million in Fiscal 2021. This was primarily a result of the sale of the entire stock of Bharat Emission Stage IV engine vehicles as at March 31, 2020 when some of the OEMs had not even started selling Bharat Emission Stage VI engine vehicles.
Our opening stock of (i) cars was Rs1,811.95 million as at April 1, 2020, while it was Rs2,952.04 million as at April 1,
2019, and (ii) spares and others was Rs445.68 million as at April 1, 2020, while it was Rs445.92 million as at April 1, 2019. Our closing stock of (i) cars was Rs2,402.07 million as at March 31, 2021, while it was Rs1,811.95 million as at March 31,
2020, and (ii) spares and others was Rs486.15 million as at March 31, 2021, while it was Rs445.68 million as at March 31, 2020.
Cost of Goods Sold
When considered together, our Cost of Goods Sold (which is the sum of our purchase of cars, spares and others, changes in inventories of stock-in-trade and job work charges) has decreased by 12.94% to Rs16,650.06 million for Fiscal 2021 from Rs19,124.97 million for Fiscal 2020. As a percentage of revenue from operations, Cost of Goods Sold decreased marginally to 85.12% for Fiscal 2021 from 86.20% for Fiscal 2020. The principal reason for such decrease is due to the higher discounts we offered to customers in Fiscal 2020 to sell our entire stock of Bharat Emission Stage IV engine vehicles.
Employee Benefits Expense
Our employee benefits expense decreased by 21.26% to Rs1,076.66 million in Fiscal 2021 from Rs1,367.39 million in Fiscal 2020. This decrease was primarily due to a decrease of Rs265.70 million, or 20.71%, in salaries and wages as a result of a decline in our headcount and employee related expenses during this period caused by the impact of the COVID-19 pandemic.
Finance Costs
Our finance costs decreased by 15.77% to Rs378.05 million in Fiscal 2021 from Rs448.85 million in Fiscal 2020. This decrease was primarily due to a decrease of Rs62.59 million, or 20.66%, in interest expenses on financial liabilities carried at amortised cost primarily due to a lower utilization of inventory funding facilities and a reduction in interest rates.
Depreciation and Amortisation Expense
Our depreciation and amortisation expenses were Rs624.77 million in Fiscal 2021 as compared to Rs629.52 million in Fiscal 2020. Our depreciation and amortisation expense remained relatively unchanged.
Other Expenses
Our other expenses decreased by 20.04% to Rs912.44 million in Fiscal 2021 from Rs1,141.18 million in Fiscal 2020. The decrease was mainly driven by (i) a decrease of Rs93.06 million, or 48.50%, in advertisement and sales promotion, (ii) a decrease of Rs25.16 million, or 39.50%, in rent, (iii) a decrease of Rs20.73 million, or 24.62%, in new car delivery expenses,
(iv) a decrease of Rs20.44 million, or 25.15%, in electricity expenses, and (v) a decrease of Rs25.52 million, or 46.79%, in travelling and conveyance, all of which was a result of the impact of the COVID-19 pandemic on our business and operations.
Restated Profit / (Loss) Before Tax
As a result of the foregoing, we recorded a profit before tax of Rs197.81 million in Fiscal 2021, as compared to loss before tax of Rs(246.42) million in Fiscal 2020.
EBITDA and EBITDA Margin
Our EBITDA increased by Rs368.68 million, or 44.32%, from Rs831.95 million in Fiscal 2020 to Rs1,200.63 million in Fiscal 2021. Our EBITDA Margin improved from 3.73% in Fiscal 2020 to 6.11% in Fiscal 2021. Such increases were driven by a mix of factors. In terms of our vehicle sales and allied products business line, we increased margins in Fiscal 2021 from the sale of cars due to fewer discounts offered (e.g., higher discounts were offered to customers in Fiscal 2020 to sell our entire stock of Bharat Emission Stage IV engine vehicles) and increased margins offered by OEMs. As a result, our EBITDA margin for vehicle sales and allied products business line increased from (0.56%) in Fiscal 2020 to 2.42% in Fiscal 2021. In terms of our after-sales services and spare parts business line, margins in Fiscal 2021 were in line with that of Fiscal 2020. The EBITDA margin for our after-sales services and spare parts business line was 17.91% in Fiscal 2020 and 17.75% in Fiscal 2021. Furthermore, we took measures to reduce our fixed costs and borrowing costs in Fiscal 2021. For more information on the calculation of EBITDA and EBITDA Margin, see "- Key Performance Indicators and Non-GAAP Financial Measures" beginning on page 343 of this section for more information.
Tax expense
Our tax expense increased by 100.91% to Rs86.33 million in Fiscal 2021 from Rs42.97 million in Fiscal 2020, which was primarily due to (i) the profits before tax in Fiscal 2021 as compared to the loss before tax recorded in Fiscal 2020, and (ii) the application of a deferred tax credit of Rs(16.75) million in Fiscal 2021, as compared to a deferred tax charge of Rs30.16 million in Fiscal 2020.
Restated Profit / (Loss) for the Year
Our increase in restated profit for the Fiscal 2021 as compared to Fiscal 2020 was primarily on account of decrease in our employee benefits expense, finance costs and other expenses on one hand and increase in our margins from the sale of cars due to fewer discounts offered and additional support provided by OEMs due to outbreak of COVID-19. As a result of the foregoing, we recorded a profit for the year of Rs111.48 million in Fiscal 2021 as compared to a loss for the year of Rs(289.39) million in Fiscal 2020.
Liquidity and Capital Resources
Capital Requirements
Our principal capital requirements are to finance purchases of new automobiles from OEMs, purchasing automobile parts and accessories, payment of principal and interest on our borrowings, capital expenditure and operating expenses, such as rent, employee benefits expense and administrative expenses. Our principal source of funding has been, and is expected to be, cash generated from our operations, equity infusions from shareholders, supplemented by borrowings from banks
and financial institutions and optimization of operating working capital. For the three months ended June 30, 2022, Fiscal 2022, Fiscal 2021 and Fiscal 2020, we met our funding requirements, including satisfaction of debt obligations, capital expenditure, investments, other working capital requirements, and other cash outlays, principally with funds generated from operations, optimization of operating working capital with the balance met from external borrowings and borrowings from Promoter/related parties.
Effective as of October 1, 2021, we entered into agency agreements with Mercedes-Benz, under which we are an authorized agent of Mercedes-Benz on a non-exclusive basis in Gujarat, Maharashtra, Madhya Pradesh and West Bengal. Under the new agency model, we no longer purchase cars from Mercedes-Benz and we will no longer carry inventory of Mercedes-Benz cars, except for demo cars. Instead, customers will place orders through us to Mercedes-Benz on which we will earn a commission. Previously, as an authorized dealer, we purchased cars and then resold them to customers, requiring us to finance such purchases and carry inventory, thereby tying up working capital. As we no longer need to carry inventory of Mercedes-Benz cars since October 1, 2021, we expect that this change to an agency model will significantly reduce our working capital requirements, thereby allowing us to allocate our available working capital to other uses, including investments in our growth initiatives, and improve our Return on Capital Employed.
Liquidity
Our liquidity requirements arise principally for our operating activities, capital expenditures for construction of new facilities and undertaking of new projects, repayment of borrowings and debt service obligations. Historically, our principal sources of funding have included cash generated from operations, short-term and long-term borrowings from banks, credit granted by suppliers, cash and cash equivalents and equity and financing provided by our Promoter/related parties. We have also entered into inventory funding facilities with banks/financial institutions with whom we have made arrangements to finance our cars and spare parts and accessory purchases from OEMs.
We had cash and cash equivalents of Rs334.72 million, Rs200.12 million, Rs150.34 million and Rs277.01 million as of June 30, 2022, March 31, 2022, March 31, 2021 and March 31, 2020, respectively.
Cash Flows
The following table summarizes our cash flows for the three months ended June 30, 2022, Fiscal 2022, Fiscal 2021 and Fiscal 2020:
(Rs in millions)
| Particulars | For the three months ended June 30, 2022 |
For the year ended March 31, |
||
| 2022 | 2021 | 2020 | ||
| Net Cash generated / (used in) from Operating Activities | (645.55) | 764.39 | 427.64 | 2,096.60 |
| Net Cash (used in) Investing Activities | (433.31) | (339.18) | (220.28) | (659.13) |
| Net Cash generated from / (used in) Financing Activities | 1,212.85 | (375.43) | (334.03) | (1,482.90) |
| Net Increase / (Decrease) in Cash and Cash Equivalents | 133.99 | 49.78 | (126.67) | (45.43) |
| Cash and Cash Equivalents at the beginning of the year | 200.12 | 150.34 | 277.01 | 322.44 |
| Add: Adjustments due to business combination | 0.61 | - | - | - |
| Cash and Cash Equivalents at the end of the year | 334.72 | 200.12 | 150.34 | 277.01 |
Cash flows generated from / (used in) operating activities
We used Rs645.55 million net cash in operating activities for the three months ended June 30, 2022. While our restated profit before tax was Rs196.71 million, we had an operating profit before working capital changes of Rs518.42 million, primarily due to adjustments for depreciation and amortisation expense of Rs208.32 million and finance costs of Rs123.31 million, which were partially offset by interest income of Rs12.67 million and sundry balances written back (net) of Rs2.20 million. Our adjustments for working capital changes for the three months ended June 30, 2022 primarily consisted of (i) increases in inventories of Rs525.62 million, trade receivables of Rs171.43 million and financial assets of Rs65.90 million and (ii) decreases in trade payables of Rs399.77 million and other liabilities of Rs14.83 million, which were partially offset by an increase in vehicle floor plan of Rs52.34 million and a decrease in other assets of Rs4.65 million. Our cash used in operations was Rs611.44 million, adjusted by direct taxes paid (net) of Rs34.11 million.
We generated Rs764.39 million net cash from operating activities during Fiscal 2022. While our restated profit before tax was Rs822.74 million, we had an operating profit before working capital changes of Rs1,788.32 million, primarily due to adjustments for depreciation and amortisation expense of Rs697.91 million and finance costs of Rs352.16 million, which
were partially offset by interest income of Rs48.49 million and sundry balances written back (net) of Rs35.87 million. Our adjustments for working capital changes for Fiscal 2022 primarily consisted of an increase in trade receivables of Rs87.85 million and inventories of Rs393.60 million and a decrease in other liabilities of Rs231.89 million and a decrease in vehicle floor plan by Rs560.08 million, which were partially offset by an increase in trade payables of Rs343.21 million. Our cash generated from operations was Rs1,002.29 million, adjusted by direct taxes paid (net) of Rs237.90 million.
We generated Rs427.64 million net cash from operating activities during Fiscal 2021. While our restated profit before tax was Rs197.81 million, we had an operating profit before working capital changes of Rs1,164.40 million, primarily due to adjustments for depreciation and amortisation expense of Rs624.77 million and finance costs of Rs378.05 million, which were partially offset by interest income of Rs50.62 million and sundry balances written back (net) of Rs31.49 million. Our adjustments for working capital changes for Fiscal 2021 primarily consisted of increase in inventories of Rs630.59 million and trade receivables of Rs326.77 million and a decrease in vehicle floor plan of Rs595.41 million, which were partially offset by increase in trade payables of Rs478.61 million and other liabilities of Rs375.78 million. Our cash generated from operations was Rs430.23 million, adjusted by direct taxes paid (net) of Rs2.59 million.
We generated Rs2,096.60 million net cash from operating activities during Fiscal 2020. While our restated loss before tax was Rs246.42 million, we had an operating profit before working capital changes of Rs805.14 million, primarily due to adjustments for depreciation and amortisation expense of Rs629.52 million and finance costs of Rs448.85 million, which were partially offset by interest income of Rs35.58 million and sundry balances written back (net) of Rs39.20 million. Our adjustments for working capital changes for Fiscal 2020 primarily consisted of a decrease in inventories of Rs1,140.34 million and trade receivables of Rs540.35 million, which were partially offset by a decrease in vehicle floor plan of Rs501.06 million and a decrease in trade payables of Rs106.68 million. Our cash generated from operations was Rs2,128.53 million, adjusted by direct taxes paid (net) of ^31.93 million.
Cash flows used in investing activities
Net cash used in investing activities was Rs433.31 million for the three months ended June 30, 2022, primarily on account of Rs127.81 million used for purchase of property, plant and equipment, intangible assets, including movement in capital work-in-progress, capital creditors, capital advances and intangible assets under development, inter-corporate deposits given of Rs166.83 million and Rs25.25 million in deposits with bank and consideration paid towards business combination Rs126.10 million.
Net cash used in investing activities was Rs339.18 million during Fiscal 2022, primarily on account of Rs415.48 million used for purchase of property, plant and equipment, intangible assets, including movement in capital work-in-progress, capital creditors, capital advances and intangible assets under development, consideration paid towards business combination of Rs204.04 million, and purchase of non-current investments of Rs25.30 million, which was partially offset by inter-corporate deposits (net) received back of Rs229.34 million, proceeds from sale of property, plant and equipment of Rs57.44 million and interest received of Rs41.84 million.
Net cash used in investing activities was Rs220.28 million during Fiscal 2021, primarily on account of Rs148.03 million used for purchase of property, plant and equipment, intangible assets, including movement in capital work-in-progress, capital creditors, capital advances and intangible assets under development and inter-corporate deposits given of Rs110.74 million, which was partially offset by interest received of ^41.81 million.
Net cash used in investing activities was Rs659.13 million during Fiscal 2020, primarily on account inter-corporate deposits (net) given of Rs379.17 million, Rs224.13 million used for purchase of property, plant and equipment intangible assets, including movement in capital work-in-progress, capital creditors, capital advances and intangible assets under development and Rs102.49 million used for the purchase of investments, which was partially offset by the proceeds from sale of property, plant and equipment of Rs41.32 million.
Cashflows generatedfrom / (used in) financing activities
Net cash generated from financing activities for the three months ended June 30, 2022 amounted to Rs1,212.85 million, which primarily consists of net proceeds from short-term borrowings of Rs1,505.53 million, which was partially offset by the repayment of lease liabilities of Rs104.48 million and finance costs paid of Rs131.23 million.
Net cash used in financing activities during Fiscal 2022 amounted to Rs375.43 million, which primarily consisted of finance costs paid of Rs341.76 million, repayment of long-term borrowings of Rs141.85 million and repayment of lease liabilities of Rs390.51 million, which were partially offset by proceeds from long-term borrowings of Rs107.78 million and net proceeds from short-term borrowings of Rs404.65 million.
Net cash used in financing activities during Fiscal 2021 amounted to Rs334.03 million, which primarily consists of finance costs paid of Rs382.85 million, repayment of long-term borrowings of Rs309.61 million and repayment of lease liabilities of Rs241.93 million, which were partially offset by net proceeds from short-term borrowings of Rs321.47 million and proceeds from long-term borrowings of Rs278.89 million.
Net cash used in financing activities during Fiscal 2020 amounted to Rs1,482.90 million, which primarily consists of net repayment of short-term borrowings of Rs761.61 million, finance costs paid of Rs457.62 million, repayment of long-term borrowings of Rs383.44 million and repayment of lease liabilities of Rs317.66 million, which were partially offset by proceeds from long-term borrowings of Rs437.43 million.
Capital Commitments
As at June 30, 2022 and March 31, 2022, the estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) was Rs52.29 million and Rs41.06 million, respectively.
In addition, pursuant to the business transfer agreement dated September 18, 2021 amongst us, Shaman Wheels Private Limited and their promoters, we have acquired the business of servicing Mercedes Benz vehicles (including maintenance, repairs and warranty work/services through its network of identified four facilities) from Shaman Wheels Private Limited (the "Business Undertaking") with effect from October 1, 2021. The purchase consideration of the said transaction has been finalised at Rs670.00 million. We expect to complete the payment of the purchase consideration in the third quarter of Fiscal 2023.
Lease Liabilities
We have entered into various lease contracts for our showrooms, workshop premises, plant and equipment and stockyards used in its operations. Leases of the showrooms, workshop premises, plant and equipment and stockyards generally have lease terms between 2 to 10 years.
The following table sets forth a summary of the maturity profile of our lease liabilities as of June 30, 2022, March 31, 2022, March 31, 2021 and March 31, 2020:
(Rs in millions)
| Particulars | Carrying Amount | Up to 1 year | 1 - 5 years | More than 5 years | Total undiscounted cashflow |
| As at June 30, 2022 | 2,284.41 | 618.00 | 1,737.84 | 504.68 | 2,860.52 |
| As at March 31, 2022 | 2,296.00 | 602.30 | 1,740.11 | 446.94 | 2,789.35 |
| As at March 31, 2021 | 1,359.69 | 429.59 | 1,010.35 | 218.72 | 1,658.66 |
| As at March 31, 2020 | 1,471.51 | 348.32 | 1,195.87 | 297.51 | 1,841.70 |
Capital Expenditure
We invest capital in our business to maintain, upgrade and modernize our existing office, showrooms and service operations and to purchase furniture and fixtures, office equipment, motor vehicles and intangible assets. We also deploy capital opportunistically to complete acquisitions or investments and/or to build new facilities for new dealership locations. Capital expenditure will vary from year to year depending upon a number of factors, including the need to replace equipment, requirements from OEMs to upgrade or build new the facilities and the timing of certain projects, such as acquisitions and investments in new technologies.
For the three months ended June 30, 2022, we added property, plant and equipment of Rs64.87 million, primarily for purchases of owned vehicles, plant and equipment, upgrading of existing facilities and acquisition of new showroom/workshop from existing dealer. For Fiscal 2022, we added intangible assets of Rs270.55 million, primarily for customer relationship and non-compete fees for acquisition of new dealer and property, plant and equipment of Rs580.76 million, primarily for acquisition of property, plant and equipment pursuant to the Schemes of Arrangement, purchase of owned vehicles and upgrading of existing facilities. For Fiscal 2021, we added property, plant and equipment of Rs110.64 million, primarily for purchase of plant and equipment, upgradation of existing facilities and purchase of vehicles. For Fiscal 2020, we added intangible assets of Rs0.44 million, primarily for purchase of software, and property, plant and equipment of Rs192.25 million, primarily for purchases of owned vehicles, plant and equipment and upgrading of existing facilities.
The following table summarizes our capital expenditure for the three months ended June 30, 2022, Fiscal 2022, Fiscal 2021 and Fiscal 2020:
(Rs in millions)
| Particulars | For the three months ended June 30, 2022 |
For the year ended March 31, |
||
| 2022 | 2021 | 2020 | ||
| Change in Capital Work-in-Progress | 46.55 | 31.57 | 6.43 | 0.33 |
| Leasehold Improvements | 18.54 | 212.37 | 43.59 | 46.20 |
| Electrical Installations | 2.68 | 25.85 | 4.52 | 8.49 |
| Plant and Equipment | 5.74 | 96.71 | 22.07 | 11.56 |
| Computers | 4.87 | 10.98 | 3.48 | 6.21 |
| Furniture and Fixtures | 6.22 | 68.09 | 10.31 | 16.77 |
| Office Equipment | 7.23 | 20.57 | 6.68 | 9.48 |
| Vehicles | 19.99 | 146.19 | 19.99 | 91.80 |
| Buildings | - | - | - | 1.74 |
| Goodwill | - | 246.68 | - | - |
| Computer Software | 0.32 | - |
0.05 | 0.44 |
| Customer Relationship | - |
234.39 | - |
- |
| Non-Compete Fees | - |
36.16 | - |
- |
| Change in Intangible assets under development | - | 0.11 | 2.55 | 2.03 |
| Total Capital Expenditure | 112.14 | 1,129.67 | 119.67 | 195.05 |
The above capital expenditures were primarily financed by internally generated resources and long-term and short-term borrowings.
Contingent Liabilities and Commitments
Contingent liabilities and commitments, to the extent not provided for, as of June 30, 2022, March 31, 2022, 2021 and 2020, as determined in accordance with Ind AS 37, are described below.
(Rs in millions)
| Contingent liabilities | As at June 30, 2022 |
As at March 31 |
||
| 2022 | 2021 | 2020 | ||
| Matters with GST authorities | 100.70 | 48.27 | 19.75 | - |
| Matters with service tax authorities | 217.19 | 217.19 | 217.24 | 212.00 |
| Matters with income tax authorities | 1.30 | 1.30 | 3.53 | 3.53 |
| Matters with VAT authorities | 15.47 | 15.47 | 6.04 | 2.91 |
| Matters with local authorities | 21.45 | 21.45 | - | - |
| Corporate guarantees outstanding | 2,463.24 | 1,719.34 | 1,524.47 | 2,629.50 |
| Total | 2,819.35 | 2,023.02 | 1,771.03 | 2,847.94 |
For details, see "Restated Consolidated Financial Information- Notes to Restated Consolidated Financial Information - Note 37 - Contingent Liabilities and Commitments" on page 301.
Financial Indebtedness
The following table sets forth our secured and unsecured debt position as of June 30, 2022 and March 31, 2022.
| (t in millions) | ||
| Indebtedness | As of June 30, 2022 | As of March 31, 2022 |
| Short Term | ||
| Secured Borrowings, comprising of: | ||
| Bank working capital loans | 1,279.06 | 903.04 |
| Other working capital loans | 1,447.74 | 595.02 |
| Current maturities of non-current borrowings | 114.32 | 111.23 |
| Secured Borrowings | 2,841.12 | 1,609.29 |
| Unsecured Borrowings, comprising of: | ||
| Bank working capital loans | 1.30 | 0.04 |
| Other loans | 502.66 | 316.26 |
| Indebtedness | As of June 30, 2022 | As of March 31, 2022 |
| Loans from related parties | 168.33 | 82.30 |
| Unsecured Borrowings | 672.29 | 398.60 |
| Long Term | ||
| Secured Borrowings, comprising of: | ||
| Bank term loans | 85.13 | 69.94 |
| Other term loans | 274.25 | 286.62 |
| Bank vehicle loans | 21.52 | 25.17 |
| (Less: Current maturities of non-current borrowings) | (114.32) | (111.23) |
| Secured Borrowings | 266.58 | 270.50 |
| Unsecured Borrowings, comprising of: | ||
| Other loans | 50.00 | 50.00 |
| Loans from related parties | 137.90 | 133.10 |
| Unsecured Borrowings | 187.90 | 183.10 |
| Vehicle Floor Plan Payable | 675.76 | 623.42 |
| Total Indebtedness | 4,643.65 | 3,084.91 |
As of June 30, 2022, March 31, 2022, March 31, 2021 and March 31, 2020, our total liabilities were Rs9,394.67 million, ^8,371.35 million, Rs7,055.19 million and Rs6,618.58 million. As on the date of this Red Herring Prospectus, there have been no defaults, restructuring or rescheduling of borrowings availed by our Company from financial institutions or banks. In relation to the COVID -19 pandemic, however, the Reserve Bank of India allowed banks and lending institutions to offer moratoriums to their customers to defer payments under loan agreements until August 31, 2020. Pursuant to such measures, we availed a moratorium from lenders representing Rs26.79 million.
Quantitative and Qualitative Disclosures about Market Risk
Our financial liabilities comprise mainly of borrowings, lease liabilities, vehicle floor plan, trade payables and other financial liabilities. Our financial assets comprise mainly of investments, cash and cash equivalents, other balances with banks, loans given, trade receivables and other financial assets.
Our business activities expose us to a variety of financial risks, namely market risk, credit risk and liquidity risk. Our senior management has the overall responsibility for establishing and governing our risk management framework and for developing and monitoring our risk management policies. Our risk management policies are established to identify and analyze the risks faced by us, set and monitor appropriate risk limits and controls, periodically review the changes in market conditions and reflect the changes in the policy accordingly. The key risks and mitigating actions are also placed before the Board. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Board. For further information on our financial instruments, see "Restated Consolidated Financial Information - Notes to Restated Consolidated Financial Information - Note 36 - Financial Risk Management on page 299.
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk. We do not have any outstanding balance in foreign currencies and hence we are not exposed to foreign currency risk. Financial instruments affected by market risk include loans and borrowings, deposits and investments. We manage market risk through a treasury department, which evaluates and exercises control over the entire process of market risk management.
Interest Rate Risk
Interest rate risk is the risk that the future cash flow with respect to interest payments on borrowing will fluctuate because of change in market interest rates. Interest rate changes do not significantly affect short-term borrowings and vehicle floor plan. Therefore, our exposure to the risk of changes in market interest rates relates primarily to our long-term debt obligations with floating interest rates.
Liquidity Risk
Liquidity risk is defined as the risk that we will not be able to settle or meet our obligations on time, or at a reasonable price. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. We generate cash flows from operations to meet our financial obligations, maintain adequate liquid assets in the form of cash and cash equivalents and have undrawn short-term line of credits from banks to ensure necessary liquidity. We closely monitor our liquidity position and deploy a robust cash management system.
As at June 30, 2022, the Groups current liabilities exceeded its current assets by Rs409.13 million, which is mainly due to the inclusion of the current portion of lease liabilities of Rs449.00 million and current portion of contract liabilities pertaining to advance received towards labour portion of annual maintenance contract of Rs187.89 million. The said deficit is expected to be met by the cash to be generated from the operations over the next financial year. Working capital limit of the Group is also expected to remain the same over the next financial year and hence the management believes that the Group will be able to meet its financial obligations during the next one year.
The table below sets out the maturity analysis of our financial liabilities based on the contractually agreed undiscounted cash flows along with its carrying value as at the respective balance sheet date:
| (Rs in millions) | |||||
| Carrying amount | Less than 1 year | 1 - 5 years | More than 5 years | Total undiscounted cashflow | |
| As at June 30, 2022 | |||||
| Borrowings | 3,967.89 | 3,513.41 | 406.87 | 47.61 | 3,967.89 |
| Lease liabilities | 2,284.41 | 618.00 | 1,737.84 | 504.68 | 2,860.52 |
| Vehicle floor plan payable | 675.76 | 675.76 | - |
- |
675.76 |
| Trade payables | 1,047.23 | 1,047.23 | - |
- |
1,047.23 |
| Other financial liabilities | 215.77 | 215.77 | - |
- |
215.77 |
| Total | 8,191.06 | 6,070.17 | 2,144.71 | 552.29 | 8,767.17 |
| As at March 31, 2022 | |||||
| Borrowings | 2,461.49 | 2,007.89 | 400.88 | 52.72 | 2,461.49 |
| Lease liabilities | 2,296.00 | 602.30 | 1,740.11 | 446.94 | 2,789.35 |
| Vehicle floor plan payable | 623.42 | 623.42 | - |
- |
623.42 |
| Trade payables | 1,448.69 | 1,448.69 | - |
- |
1,448.69 |
| Other financial liabilities | 346.67 | 346.67 | - |
- |
346.67 |
| Total | 7,176.27 | 5,028.97 | 2,140.99 | 499.66 | 7,669.62 |
| As at March 31, 2021 | |||||
| Borrowings | 2,090.91 | 1,603.24 | 425.98 | 61.69 | 2,090.91 |
| Lease liabilities | 1,359.69 | 429.59 | 1,010.35 | 218.72 | 1,658.66 |
| Vehicle floor plan payable | 1,183.50 | 1,183.50 | - | - |
1,183.50 |
| Trade payables | 1,002.39 | 1,002.39 | - | - |
1,002.39 |
| Other financial liabilities | 49.76 | 49.76 | - |
- |
49.76 |
| Total | 5,686.25 | 4,268.48 | 1,436.33 | 280.41 | 5,985.22 |
| As at March 31, 2020 | |||||
| Borrowings | 1,800.17 | 1,518.29 | 179.18 | 102.70 | 1,800.17 |
| Lease liabilities | 1,471.51 | 348.32 | 1,195.87 | 297.51 | 1,841.70 |
| Vehicle floor plan payable | 1,778.91 | 1,778.91 | - |
- |
1,778.91 |
| Trade payables | 556.73 | 556.73 | - |
- |
556.73 |
| Other financial liabilities | 70.18 | 70.18 | - |
- |
70.18 |
| Total | 5,677.50 | 4,272.43 | 1,375.05 | 400.21 | 6,047.69 |
Credit Risk
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The credit risk for us primarily arises from credit exposures to trade receivables, loans given, deposits with landlords for properties taken on leases and other receivables including balances with banks.
Trade and other receivables: Our business is predominantly through credit card, cash collections and insurance companies, hence the credit risk on such transactions are minimal. We have adopted a policy of dealing with only creditworthy counterparties in case of institutional customers; the credit risk exposure for institutional customers is managed by us by credit worthiness checks. All trade receivables are also reviewed and assessed for default on a regular basis. Further, trade and other receivables consists of a large number of customers; hence, we are not exposed to concentration risks. In relation to credit risk arising from commercial transactions, necessary provisions are recognized for trade receivables when objective evidence exists that we will be unable to recover all the outstanding amounts in accordance with the original contractual conditions of the receivables. For further information on our trade receivables, see "Restated Consolidated Financial Information - Notes to Restated Consolidated Financial Information - Note 14 - Trade Receivables" on page 284.
We also carry credit risk on lease deposits with landlords for properties taken on leases, for which agreements are signed and property possessions timely taken for its operations. The risk relating to refunds after shut down of premises is managed through successful negotiations or appropriate legal actions, where necessary.
Credit risk arising from cash and cash equivalent and other balances with bank is limited as the counterparties are recognized banks. See "Restated Consolidated Financial Information - Notes to Restated Consolidated Financial Information - Note 36.3 - Credit Risk" on page 301.
Reservations, Qualifications and Adverse Remarks Included in Financial Statements
There have been no reservations or qualifications or adverse remarks of our Statutory Auditors in the last three fiscal years and for the three months period ended June 30, 2022.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, derivative instruments or other relationships with other entities that would have been established for the purpose of facilitating off-balance sheet arrangements.
Related Party Transactions
We enter into various transactions with related parties. For further information see "Restated Consolidated Financial Information - Notes to Restated Consolidated Financial Information - Note 43 - Related Party Transactions" on page 304.
Significant Economic Changes
Other than as described above, to the knowledge of our management, there are no other significant economic changes that materially affect or are likely to affect income from continuing operations.
Unusual or Infrequent Events of Transactions
Except as described in this Red Herring Prospectus, there have been no other events or transactions that, to our knowledge, may be described as "unusual" or "infrequent".
Known Trends or Uncertainties
Our business has been affected and we expect will continue to be affected by the trends identified above in the heading titled "Principal Factors Affecting Our Financial Position and Results of Operations" and the uncertainties described in the section titled "Risk Factors" beginning on page 28. To our knowledge, except as described or anticipated in this Red Herring Prospectus, there are no known factors which we expect will have a material adverse impact on our revenues or income from continuing operations.
Future Relationship Between Cost and Income
Other than as described elsewhere in this Red Herring Prospectus, including disclosure regarding the impact of COVID- 19 on our operations, to the knowledge of our management, there are no known factors that might affect the future relationship between costs and revenues.
Significant Developments after June 30, 2022 that may affect our future results of operations
No circumstances have arisen since the date of the Restated Consolidated Financial Information as disclosed in this Red Herring Prospectus which materially and adversely affect or are likely to affect our operations or profitability, the value of our assets or our ability to pay our material liabilities within the next twelve months
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