Pritika Auto Industries Ltd Management Discussions

Forward looking statement

Statements in this Management Discussion and Analysis of Financial Condition and Results of Operations of the Company describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable securities laws and regulations. Forward looking statements are based on certain assumptions and expectations of future events.

The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Company assumes no responsibility to publicly amend, modify or revise forward looking statements, on the basis of any subsequent developments, information or events. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Companys operations include changes in government regulations, tax laws, economic developments within the country and such other factors globally.

The following discussions on our financial condition and result of operations should be read together with our audited consolidated financial statements and the notes to these statements included in the annual report. Unless otherwise specified or the context otherwise requires, all references herein to "we", "us", "our", ‘the Company", "Pritika" are to Pritika Auto Industries Ltd.

ECONOMIC OVERVIEW

Indian Economy Outlook

Ten years ago, India was the 10th largest economy in the world, with a GDP of USD 1.9 trillion at current market prices. Today, it is the 5th largest with a GDP of USD 3.7 trillion (est. FY24), despite the pandemic. The last few years journey is marked by several reforms, both substantive and incremental, which have significantly contributed to the countrys economic progress. These reforms have also delivered an economic resilience that the country will need to deal with unanticipated global shocks in the future.

In the next three years, India is expected to become the third-largest economy in the world, with a GDP of USD 5 trillion. The government has, however, set a higher goal of becoming a ‘developed country by 2047. With the journey of reforms continuing, this goal is achievable. The reforms will be more purposeful and fruitful with the full participation of the state governments. The participation of the states will be fuller when reforms encompass changes in governance at the district, block, and village levels, making them citizen-friendly and small business-friendly and in areas such as health, education, land and labour in which states have a big role to play.

The strength of the domestic demand has driven the economy to a 7 per cent plus growth rate in the last three years. As discussed in the previous sections, the robustness seen in domestic demand, namely, private consumption and investment, traces its origin to the reforms and measures implemented by the government. The supply side has also been strengthened with investment in infrastructure - physical and digital - and measures that aim to boost manufacturing. These have combined to provide an impetus to economic activity in the country. Accordingly, in FY25, real GDP growth will likely be closer to 7 per cent.

There is, however, considerable scope for the growth rate to rise well above 7 per cent by 2030. The speed with which physical infrastructure is being built will allow the ICOR to decline, translating private investments into output quickly. The introduction of IBC process has freed up economic capital that was otherwise rendered unproductive. The rapidly expanding digital infrastructure is continuously improving institutional efficiency. Technological progress is picking up pace with rising collaboration with foreign partners in the production of goods and services. Decisive steps have been taken to speed up human capital formation. Finally, the overall investment climate is increasingly becoming more favorable with sustained enhancement in the ease of doing business.

The expansion of the tax base that the GST facilitates will strengthen the finances of the Union and state governments, enabling growth-enhancing public expenditures. The rising credibility of the RBI in restraining inflation will anchor inflationary expectations, providing a stable interest rate environment for businesses and the public to make long-term investment and spending decisions, respectively.

According to the IMF, between 2012 and 2019, after die global economic crisis and the waning of the impact of the immediate stimulus measures taken by the affected countries in its wake, global economic growth at constant prices averaged 3.4 per cent. The growth rate was similar in die five-year period between 2014 and 2019. Between 2023 and 2028, the Funds projected growth for the world economy is around 3.1 per cent. Further, data from the World Trade Organization (WTO) show that, in value terms, world hade barely grew in either period (2012-19 or 2014-19). In volume terms, the growth rate averaged 2.4 per cent. Despite this insipid backdrop for global economic growth and trade growth, between 2014 and 2019, the compounded annual growth rate of the Indian economy at constant price was 7.4%. hi other words, these data demonstrate the internal strengths of the Indian economy, which bestow on it the ability to grow notwithstanding unfavorable global economic conditions. Therefore, it is eminently possible for the Indian economy to grow in the coming years at a rate above 7 percent on the strength of the financial sector and other recent and future structural reforms. Only the elevated risk of geopolitical conflicts is an area of concern. Priority areas for future reforms include skilling, learning outcomes, health, energy security, reduction in compliance burden for MSMEs, and gender balancing in the labour force. Furthermore, under a reasonable set of assumptions with respect to the inflation differentials and the exchange rate, India can aspire to become a USD 7 trillion economy in the next six to seven years (by 2030). This will be a significant milestone in the journey to delivering a quality of life and standard of living that match and exceed the aspirations of the Indian people.

Source: Department of Economic Affairs - Government of India

(https://dea.gov.in/sites/default/files/The%20Indian%20Economy%20-%20A%20Review Jan%202024.pdf)

Indian Auto-Components Industry

The auto ancillary industry in India witnessed a significant growth trajectory, with a turnover of Rs. 5.6 lakh crore in 2022-23, marking a remarkable revenue increase of 32.8% compared to the previous year. This growth was primarily driven by domestic OEM supplies, which accounted for around 66% of the industrys turnover, followed by the domestic aftermarket contributing approximately 12%, and exports constituting about 22.3% in FY23. Despite challenges, such as import growth outpacing exports, the industry managed to maintain a surplus in exports, reflecting its competitive edge in international markets.

hi terms of employment and economic contribution, die auto ancillary sector plays a significant role, providing direct employment to 1.5 million people and contributing 2.3% to Indias GDP. Projections indicate that by 2026, the industrys contribution to GDP is expected to rise to 5-7%, with direct employment opportunities expanding to accoimnodate 3.2 million individuals, showcasing its potential as a key driver of economic growth and employment generation.

Looking ahead, the industry is poised for further expansion, with forecasts indicating a growth trajectory towards reaching a milestone turnover of US$ 200 billion by FY26. hiitiatives like the Production Linked hicentive (PLI) schemes and supportive policies from the government are fueling investments and driving growth. Major players in the sector, including Tata Motors, Ola Electric, Bosch, Apollo Tyres, among others, have announced substantial investment plans, underscoring the sectors attractiveness for both domestic and foreign hives tors.

hidias strategic positioning in the global automotive landscape is evident, with the country holding significant manufacturing prowess as the largest producer of tractors, second-largest of buses, and third- largest of heavy trucks globally. Furthermore, the emphasis on electric vehicles (EVs) is gaining traction, with substantial investments and policy support aimed at fostering EV manufacturing and infrastructure development. These developments, coupled with partnerships with international entities like JBIC and initiatives such as the FAME Scheme for EVs, are propelling the auto ancillary industry towards a dynamic and growth-oriented future.

Source: (https://www.ibef.ora/industrv/auto-components-presentationJ

Indian Agricultural Tractor Market

The India Agricultural Tractor Market is expected to grow from USD 2.37 billion in 2024 to USD 3.13 billion by 2029, with a CAGR of 5.80%. This growth is driven by factors such as increased demand due to higher Kharif sowing, good cash flows to farmers, normal monsoons, government rural spending, and exemptions from lockdowns. India is a major global tractor market, selling 600,000 to 700,000 tractors annually.

The market is dominated by Indian OEMs like Mahindra & Mahindra Limited, TAFE, International Tractors Ltd (Sonalika), and Escorts Limited. International players like Deere & Company and CNH also have a notable presence. Government initiatives, including subsidies and support for farm mechanization, contribute to market growth.

Farm mechanization trends show increased use of tractors, with subsidies shared between the central and state governments. Easy credit availability, low-interest loans, and concessions like tax exemptions for small tractors aid farmers hr purchasing equipment. Custom hiring services for tractors are becoming popular, supported by government schemes and initiatives across various states, leading to market expansion and increased adoption of tractors for agricultural practices.

The agricultural tractor market in India is characterized by consolidation, with major players like Mahindra & Mahindra Ltd leading the market. Investments in new products, expansions, acquisitions, and R&D are driving business growth and innovation in the industry.

Source: (https://www.mor dorintelligence.com/industry-reports/india-agricultural-tractor-machinery-marketl

About Pritika Auto Industries Ltd.

Pritika Auto Industries Ltd. is a flagship company of the Pritika Group of Industries which was set up in 1974 by Late Mr. Raminder S. Nibber, manufacturing small forgings. Over the last four decades and under Mr. Nibbers visionary leadership, the Company has established itself as a robust and reliable brand in its market, specializing in machined castings and automotive components. A quality driven organization, Pritika produces world class components from modem facilities. Pritika has manufacturing facilities situated at Mohali, Derabassi and Hoshiarpur (Punjab), and Tahliwal (Himachal Pradesh) with a total capacity exceeding 75,000metric tons per annum (MTPA)

Catering primarily to tractors and commercial vehicles, Pritika focuses on expanding and diversifying its product portfolio. The Company manufactures a wide range of products such as axle housings, wheel housings, hydraulic lift housings, end cover, plate differential carrier, brake housings, cylinder blocks, and

crank cases, among others. Pritika is one of the biggest component suppliers in the tractor segment of the automobile industry in India and supplies to OEMs like M&M ,Swaraj Engines Ltd, TAFE, Escorts, SML Isuzu, TMTL, Ashok Leyland, New Holland Tractors India Ltd., Brakes India etc., as well as exports casted products outside India. The Companys vision is to provide products which meet customers quality requirement constantly at competitive prices.

CONSOLIDATED FINANCIAL OVERVIEW

The consolidated performance of the Company for die financial year ended March 31, 2024, is as follows:

Total revenue from operations at Rs. 342.09crore for the year ended March 31, 2024, as against Rs. 362.03 crore (net of taxes) for the corresponding previous period, a decrease of 5.51%, mainly on account of challenging market conditions.

The EBIDTA (earnings before interest, depreciation and tax, excluding other income) was Rs. 52.48crore for the year ended March 31, 2024, as against Rs. 41.53 crore for the corresponding previous period, an increase of 26.35%.

The PAT (profit after tax) was Rs. 16,85crore for the year ended March 31, 2024, as against Rs. 15.69 crore for the corresponding previous period, a rise of 7.38%.

EPS was at Rs.1.18, YoY decline of 33.33% (1.77 in FY23) due to Challenging market conditions leading to lower volumes and increased equity capital.

RESOURCES AND LIQUIDITY

As on March 31, 2024, the consolidated net worth stood at Rs.224.42 crore and the consolidated debt was at Rs. 82.32 crore.

The consolidated net debt to equity ratio of the Company stood at 0.37 as on March 31, 2024.

BUSINESS PERFORMANCE

Pritika registered de-growth of 5.51% in revenue clocking a turnover of Rs.342.09cr in FY24. The Company produced 36,772 tons of machined casting during the year. About 92-93% of the revenue was contributed by the tractor components segment while the rest was from the commercial vehicle segment. With capacity in place, Pritika is focusing on higher production and better utilization in ftiture, based on a good order visibility. The Company is also adding high-value products and trying to improve operational efficiencies, while expanding export revenues.

The Company is dealing in single segment i.e. manufacturing of Automotive Components/parts.

DEVELOPMENTS IN BUSINESSES DURING THE YEAR:

• Pritika Industries Limited, wholly owned by the Promotor Family as an unlisted company, specializes exclusively in machining operations, sourcing castings from Pritika Auto Industries Limited (PAIL). Through a demerger process, the "Automotive/Tractor/Engineering Components Business Undertaking" of Pritika Industries Limited is transferred to Pritika Auto Industries Limited (resulting company). Pritika Auto Industries Limited expands its operations to include both castings and machining, leading to a more favorable margin outlook for the company.

• Company announced plans to raise Rs. 30.40 cr. by issuance of 1,60,00,000 fully convertible warrants to non-promoter category on preferential basis, at Rs. 19/- per warrant.

KEY FINANCIAL RATIOS:

EBITDA margin and PAT Margins improved 387 bps and 59 bps, respectively, as compared to immediately previous year ended 31^st March 2024.

Return on Equity has decreased to 6.53% in FY 2024 due to Challenging market conditions leading to lower volumes and due to increased equity capital.

There was no significant change i.e. 25% or more in the key Financial Ratio except in the following:

Particulars	Year ended 31.03.2024	Year ended 31.03.2023	Change
Debt Equity Ratio (in times)	0.18	0.14	30.92%
Trade Receivables Turnover Ratio (in times)	5.66	4.31	31.31%
Net Capital Turnover Ratio (in times)	5.40	4.28	30.84%

The change in the above ratios is due to implementation of Scheme of Arrangement between Pritika Industries Limited (the Demerged Company) and Pritika Auto Industries Limited (the Resulting Company) by which "Automotive/Tractor/Engineering Components Business Undertaking" of the demerged company was merged with Pritika Auto Industries Limited (the Resulting Company). The Scheme was approved by Honble NCLT, Bench Chandigarh vide its order passed on 04/12/2023.

RISKS AND CONCERNS

The company encounters various risks, both internal and external, as it conducts its daily operations and works towards its long-term goals. A comprehensive policy is developed, and dedicated risk workshops are conducted for each business vertical and key support fimctions. These workshops focus on identifying, assessing, analyzing, and either accepting or mitigating risks to a level deemed acceptable within the organizations risk appetite. The risk policy undergoes periodic reviews to ensure its effectiveness and relevance.

The Company faces the following Risks and Concerns:

Economy and Market Risk

The Companys expansion is closely tied to the cyclical nature of the agricultural and automotive sectors. The fluctuations in the Indian commercial vehicle and tractor industries directly influence the demand for associated components. Given the significant impact of the automotive sector on economic growth, any downturn in the overall economy would have repercussions on the commercial vehicle industry.

Credit Risk

Pritika has established a credit policy to handle its credit exposure, including procedures for credit limit requests and approvals. Before bidding on projects, the company conducts thorough research on clients financial health and project potential. It diligently follows up with clients to ensure payments are made according to schedule. The company has optimized its processes to create a targeted and proactive receivables management system, ensuring collections are received on time.

Interest Rate Risk

The company has effectively handled its debt-equity ratio by employing a combination of loans and internal cash flows. It has also efficiently managed its working capital to maximize cost optimization in terms of overall interest expenses.

Contractual Risk

Pritika adheres to a rigorous procedure for assessing the legal risks associated with contracts and determining its legal obligations according to relevant contract laws. It meticulously evaluates worst-case scenarios and, as a strategic measure with input from advisors, incorporates stringent terms to limit liabilities to the fullest extent feasible.

Competition Risk

As is typical across industries, growth prospects bring about increased competition. We encounter competition at various levels, including from domestic and multinational firms. Pritika has established distinct advantages in project execution, quality, and timely delivery, making it resilient against competitive pressures. Additionally, the company maintains a competitive edge through ongoing investments in technology and employee development. Our robust and enduring client base, consisting of both large and mid-sized enterprises, contributes to a healthy order backlog and shields the company from this risk. We also mitigate this risk through our focus on infrastructure quality, customer-centric approach, and innovative solutions tailored to customer needs, supported by competitive pricing and an assertive marketing strategy. Our disciplined project management practices, along with prudent financial and human resource management and cost control measures, further strengthen our resilience against competitive challenges. Therefore, we anticipate minimal impact from this risk.

Input Cost Risk

Changes in raw material prices, power costs, and other input expenses could impact our profitability and cost efficiency. These risks, particularly those related to raw material pricing and power availability, are potentially significant and require vigilant monitoring.

Liability Risk

This risk pertains to our responsibility for any harm caused to cargo, equipment, lives, or third parties, potentially impacting our business negatively. The company seeks to mitigate this risk through contractual commitments and insurance coverage.

OPPORTUNITIES

• Rising Agricultural Sector Growth

• Supportive Government Policies for Agriculture

• Expanding Commercial Vehicle Market

• Favorable Export Conditions

• Utilization of Tractors Beyond Agriculture

• Investment Opportunities and Increased FDI

THREATS

• Competitive pressure from both local and global competitors

• Economic volatility and regulatory shifts affecting market demand and profitability

• Technological progress potentially rendering current products outdated

• Vulnerability of the agricultural sector to adverse weather conditions and monsoons

• Fluctuating labor and raw material expenses posing risks

• Challenges in attracting and retaining skilled workforce

• Potential slowdown across the agricultural industry

INTERNAL CONTROL SYSTEMS AND ADEQUACY

For the purposes of effective internal financial control, Pritika has adopted various policies and procedures to ensure orderly and efficient conduct of its business, including adherence to companys policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and timely preparation of reliable financial information.

There has not been any significant change in such control systems. The control systems are reviewed by the management regularly. The same are also reviewed by the Statutory Auditors and Internal Auditors from time to time. Additionally, the Company has adopted various policies and procedures to safeguard its interest. These policies and procedures are reviewed from time to time. A proper reporting mechanism has been implemented in the organization for reporting any deviation from the policies and procedures. Compliance audit is conducted from time to time by exter nal agencies on various areas of operations.

HUMAN RESOURCES

Pritika has Human Relations and Industrial Relations policies in force. These are reviewed and updated regularly in line with the Companys strategic plans. The human relations team continually conducts training programs for talent development. The Company aims to develop the potential of every individual associated with it as a part of its business goal. Pritika leverages a mix of experienced as well as young talent to drive growth.

The company values its human resources as the principal drivers of change. The Company focuses on providing individual development and growth in a work culture that encourages team work and high performance.

As on March 31, 2024, the Company had a workforce of 1364 (permanent and contractual).

OUTLOOK

Pritika Auto Industries Limited is positioned for a promising outlook in the automotive and agricultural sectors, driven by anticipated market expansion and demand growth. The company foresees significant opportunities in these sectors, attributed to government initiatives, technological advancements, and increasing investments. These factors are expected to fuel market expansion and create avenues for sustainable growth.

A key strength for Pritika Auto Industries lies in its competitive advantage and differentiation strategies. The company has established strong credentials in project execution, maintaining high-quality standards, and ensuring timely delivery. These aspects serve as robust differentiators, enabling the company to withstand competition from both domestic and multinational players.

Strategic partnerships and a diversified client base contribute significantly to Pritika Auto Industries positive outlook. The companys long-standing relationships with large and mid-sized companies not only bolster its order book but also provide resilience against market fluctuations and competitive pressures. This client base serves as a solid foundation for sustained growth and profitability.

Risk mitigation and operational efficiency are integral to Pritika Auto Industries strategic framework. The company has proactively addressed various risks, including raw material price fluctuations, regulatory challenges, and potential market slowdowns. Robust risk mitigation strategies, combined with disciplined project execution, prudent financial management, and a focus on innovation, enhance operational efficiency and profitability.

hi conclusion, Pritika Auto Industries Limited maintains an optimistic outlook, driven by market demand, strategic investments, risk management practices, and a customer-centric approach. The company is poised to sustain its growth trajectory, enhance profitability, and deliver^- consistent value to stakeholders in the automotive and agricultural industries.

	For and on behalf of the Board of Directors
	Sd/-
Date: 15.06.2024	Harpreet Singh Nibber
Place: Mohali	Chairman & Managing Director DIN: 00239042