Rasandik Engineering Industries India Ltd Management Discussions

Overview and Profile of Automotive Industry

The Indian Automotive industry has made great strides over the past two decades, sufficient to be noticed and counted as a major global auto manufacturing hub. In terms of global rankings in manufacturing output, it is presently second largest in two wheelers, eighth largest in commercial vehicles, sixth largest in passenger cars and the largest in tractors. Over the past ten years, India has emerged as one of the most preferred locations in the world for manufacturing high quality automotive components and vehicles of all kinds, narrowing its gap over several established locations in the process.

Over the next decade, the automotive industry at a global level is likely to see significant transformation. Principal ones that are expected to witness such transformations include the shift of growth in demand for automobiles from developed nations making them a "computer on wheels"; a relentless pursuit of economies of scale and scope in design and engineering of automobiles and components, while also pursuing low cost manufacturing destinations.

Plans / Programmes Initiated by the Government

The National Institution for Transforming India or NITI Aayog, has launched a report on ‘India Leaps Ahead:

Transformational Mobility Solutions for All on 12 May, 2017 has set a target for a complete transformation of mobility to 100% electric vehicles in public and 40% in private sector by 2030. The report of the NITI Aayog envisioned a paradigm shift in mobility by adopting new and sustainable model for clean, cost-effective, efficient that is not only safe but job oriented, least energy intensive (translated into reduced oil import bill) but also have minimum adverse impact on environment and human health. The report envisages three phased roadmaps for Electric Mobility up to 2032. The 1st phase (2017-19) will focus on institutional capacity building and aggregating Interoperable Transport Data (ITD) with enabling mobility solutions. The 2nd phase (2020-23) focuses on the development of markets, infrastructure and production capabilities in tandem with innovative business models. In the last phase (2024-32), it is expected that the costs of EVs would come down significantly and achieve economies of scale.

All electric vehicles by 2030/32 will transform the way people will travel in future. The model shift benefits inter alia include drastic cut by 64% in energy demand and 37% in Carbon emission by 2030/32. Further, this shift can help India to save nearly Rs. 3.85 lakh Crs by 2032 in diesel and petrol cost and save one giga ton of carbon emissions between 2017 and 2032.

Transformational Regulatory Policies Initiated by the Government

The landscape of regulatory policies in automotive sector in India is highly dynamic and rapidly evolving. Like Information Technology and Telecommunication sectors, the future of automobile industry is at cusp of a complete transformation. So far, the policies and regulations under the automobile sector have been incremental and gradual, however, the recent decisions like leapfrogging to BS-VI emission norms, 100% electric vehicles by 2030 in public sector, methanol economy, fuel efficiency norms etc. are metamorphic with highly compressed transitional phases as compared to the transition time given to industry in other countries, and will have profound impact on entire automotive ecosystem. Some of the transformational regulatory policies that may have radical impact on the automotive sector.

The technological advancement in automotive space in India is evolving fast due to development of innovative and converging technological solutions. The ITS-enabled vehicles provide useful information like congestion, fuel consumption, emissions, accident prone areas, traffic flow etc. Further, application of the smart-phones is enlarging the horizon of applications of ITS. The recent advances in convergence of technologies (telematics) like telecommunication, vehicle technologies and ITS are further revolutionizing the performance of vehicles in terms of safety, driving, communication, storage of information for records and analysis of information for rectification and amendments. Currently, the shared, connected and autonomous vehicles are integral part of our priorities for developing affordable EVs. The Google self- driving car has completely changed the thought process of governments, auto-manufacturers and the public alike.

Impact Analyses

The Indian automobile industry is setting out on a journey with hopes for a sustained growth momentum in 2023 and further embracing clean technology amid the lurking speed breakers of rising interest rates and cost increases due to new emission and safety norms, having witnessed a strong comeback from the COVID-led downturn. Besides, rising interest rates and not so bright global economic situation and its impact on India in the days to come are some of the factors which are keeping the industry in a cautious mode. Automotive dealers body Federation of Automobile Dealers Associations (FADA) noted that the PV segment still continues to hold a strong order book for several models which is expected to continue for a few months. The capex outlay for OEMs is estimated to remain heightened with the OEMs also budgeting for a substantial outlay towards new product development, including development of capabilities/platforms for electric vehicles. As for the two-wheeler segment, an increase in interest rate can impact the demand trends for all vehicle segments, the government has also hiked the long-term insurance premium, which specifically impacts the two-wheeler segment.

Challenges and Opportunities

While the automotive industry as a whole has continued to struggle, the consumer Electric Vehicle (EV) market (including Plug-in Hybrid Electric Vehicles (PHEVs)) has delivered a stellar performance. Consistent growth in excess of the total automotive market has driven electric powertrains to account for an anticipated 17.6% of total consumer vehicle sales in 2023—up from 15.7% in 2022.

Technological evolution and supply chain advantages are the main reasons why EV sales have prevailed, despite the larger automotive industry struggling recently. More specifically, the following trends have helped create a shield around EV automakers:

Improvements in EV battery density

Longer driving ranges for electric vehicles Growing availability of EV models in higher-volume vehicle segments EVs usually dont need larger process node/legacy technologies that can delay manufacturing completion and shipment Being high-margin models, EVs typically receive priority access to components that are in short supply For EV adoption to take off even further, the automotive industry must continue investing in public charging infrastructure and forward-looking technology like Vehicle-to-Grid (V2G) solutions. Rising middle-class income and a huge youth population will result in strong demand. Focus is shifting to electric vehicles to reduce emissions. According to NITI Aayog and the Rocky Mountain Institute (RMI), Indias EV finance industry is likely to reach Rs. 3.7 Lacs Crs (USD 50 Bilion) by 2030. The electric vehicles industry is likely to create five Crs jobs by 2030

Way Forward

India could be a leader in shared mobility by 2030, providing opportunities for electric and autonomous vehicles. The Government of India encourages foreign investment in the automobile sector and has allowed 100% FDI under the automatic route. Some of the recent initiatives taken by the Government of India are:

In July 2022, Gujarat government announced a semiconductor policy, where it will set up Dholera Semicon City and offered incentives for investment in this sector.

In July 2022, the Government amended the National Policy on Biofuels – 2018. The target of 20% blending of ethanol in petrol and 5% blending of biodiesel in a diesel by 2030 was brought forward to 2025-26.

As of 15 July, 2022, under the FAME India Scheme I & II, a total of 532 EV charging stations have been installed by oil companies under the Ministry of Petroleum and Natural Gas (MoPNG).

In February 2022, Shri Nitin Gadkari, Minister of Road Transport and Highways, revealed plans to roll out Bharat NCAP, Indias own vehicle safety assessment program.

In the Union Budget 2022-23, the government laid out the following initiatives:

- The government introduced a battery-swapping policy, which will allow drained batteries to be swapped with charged ones at designated charging stations, thus making EVs more viable for potential customers.

- Indias National Highways would be expanded by 25,000 km in 2022-23 under the Prime Ministers Gati Shakti Plan.

In August 2021, Prime Minister Shri Narendra Modi launched the Vehicle Scrappage Policy, which aims to phase out old polluting vehicles in an environmentally safe manner.

The Indian government has planned USD 3.5 Bilion in incentives over five years until 2026 under a revamped scheme to encourage the production and export of clean technology vehicles.

Growing Three-Wheelers EV Segment

One of the remarkable advantages of electric three-wheelers is their ability to offer substantial cost savings compared to their gas-powered counterparts, which currently dominate the market. Electric three-wheelers offer lower operating costs by eliminating the need for conventional fuel and reducing fuel expenses. As a result, customers can reduce their running costs by an impressive 70% to 80%. This cost efficiencyserves as a compelling incentive for consumers to embrace electric mobility.

Looking ahead, we have reason to be optimistic. The electric three-wheeler segment is projected to witness an impressive CAGR of 66.20% between 2022-23 and 2026-27 in terms of the number of units sold per year. This strong growth trajectory underscores the growing demand and acceptance of electric three-wheelers among customers.

The electric three-wheeler market is currently dominated by low-speed vehicles. However, we are witnessing a gradual emergence of the high-speed segment, particularly in the goods delivery or cargo sector. While it is still in its nascent stage, the high-speed market shows great promise and is steadily gaining traction.

PIONEERING FUTURE-FOCUSED MOBILITY SOLUTIONS

Rasandik, with a strong commitment to promoting electric mobility, has bolstered its futuristic product portfolio to meet the evolving demands of the industry. In response to the increasing market for electric vehicles in the L5 category, Rasandik proudly presents SAMRAT Electric Three-Wheeler vehicles. Designed to cater to a wide range of needs, the SAMRAT portfolio encompasses various variants, tailored for passenger transportation, load carrying, and garbage collection services. Through this diverse and innovative product range, the Company showcases its dedication to excellence and continuous advancements in the field of electric mobility.

With zero pollution emissions and no permit requirements, SAMRAT portfolio offers a reliable and environmentally friendly mobility solution. The Company prioritizes customer satisfaction through its dedication to delivering products of the highest Quality, Reliability, and Economy. It understands the significance of meeting customer expectations and strives to exceed them by ensuring Timely Delivery and providing Exceptional Service. As Rasandik takes this exciting stride into the EV market, its aim is to provide an outstanding experience and contribute to a sustainable future with the following products:

Leveraging Growing Opportunities in EV Market

The Company delighted to share an exciting development in our pursuit of capturing the growing opportunities in the EV market. In the year 2022, after months of dedicated design and development, your Company has successfully launched a range of products under the L5 category vehicle, with the brand name ‘SAMRAT. These products have been meticulously crafted to meet the highest standards of Quality, Reliability, and Economy, while ensuring Timely Delivery and providing Exceptional Service.

Under the SAMRAT brand, we have developed a diverse range of variants to cater to different needs. In the Passenger segment, we offer a unique variant that can accommodate ‘Driver+6 passengers, in addition to the traditional configuration of ‘Driver+3 passengers. This innovative flexibility allows us to address the varying requirements of our valued customers, providing them with options that suit their specific transportation needs.

Furthermore, SAMRAT is available in both Load Carrier and Delivery Van variants, providing efficient and reliable solutions for commercial purposes. These variants have been specifically designed to meet the demands of businesses, ensuring seamless transportation of goods with utmost convenience.

One of the key highlights of the ‘SAMRAT range is its commitment to sustainability. These electric vehicles are driven by electric motors, resulting in zero pollution and minimal environmental impact. Additionally, ‘SAMRAT vehicles do not require any special permits to operate, making them an attractive and hassle-free choice for our customers.

PRODUCT ANALYSIS & REVIEW

Your Company caters to the following Product Sectors:

Electric Vehicles

Sheet Metal Components

Die & Tools

TWB

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has a proper and adequate system of internal controls to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition, and that transaction are authorized, recorded and reported correctly.

The Company has established the internal control system by standardizing and documenting policies and procedures for all the major processes and associated key controls, for credible reporting of the financial and operating results

OPERATING RESULTS AND PROFITS

Strong economic growth, low interest rates and continued focus on several measures undertaken by the Company like new product introductions, cost cutting and quality and process improvements have all resulted in the Company achieving a satisfactory performance.

Finance Charges

The Finance Costs were Rs. 106.79 Million in the year 2022-23 as against Rs. 112.86 Million in the year 2021-22.

Depreciation

Current Year Depreciation was at Rs. 70.89 Million in comparison to Rs. 83.76 Million in previous year.

Tax

Deferred Tax amounting to (-Rs.14.21) Million as compared to (-Rs.9.74) Million in the previous year.

Net Profit

Net Profit/(Loss) after tax for the year 2022-23 is (-Rs.317.71) Million as compared to Net Profit/(Loss) after tax for the year 2021-22 is (-Rs. 25.56) Million in the previous year.

PERSONNEL

Industrial Relations at all the plants remained cordial and peaceful throughout the year. The focus of the previous year was continuous organizational development and various training programmes introduced for skill up-gradation.

The Companys focus during the year has been to improve productivity and information sharing.

CAUTIONARY STATEMENT

Statements in this Management Discussion & Analysis that describe the Companys objectives, expectations and predictions may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors could make a difference to the Companys operations include raw material availability and price, demand and pricing by the Companys major customers, change in the Government regulations, tax regimes, economic development and other incidental factors.