Sansera Engineering Ltd Management Discussions

ECONOMIC OVERVIEW

GLOBAL ECONOMIC LANDSCAPE

The global economy is experiencing a fragmented recovery, despite the profound impact of the Covid-19 pandemic and the Russia-Ukraine war. The supply chain turmoil, that previously disrupted the energy and food markets, is diminishing, resulting in greater stability. Additionally, andnumerous central banks are engaging in a significant coordinated effort to tighten monetary policy, which is expected to yield positive results as inflation approaches its targets. The International Monetary Fund (IMF), in its World Economic Outlook (WEO) April 2023, predicts a slight decline in global growth, dropping from 3.4% in 2022 to 2.8% in 2023. However, as the IMF projects a rise of 3.0% in the subsequent year, the outlook stays positive for 2024.

Global inflation is anticipated to decline from 8.7% in 2022 to 7% in 2023 and further to 4.9% in 2024. This is owing to weaker global demand and the implementation of tighter monetary policies. The combination of supply chain bottlenecks, generous Government spending, tight labour markets, and a commodity shock triggered by Russia-Ukraine conflict has contributed to this trend. Recent banking instability is a reminder that the world economic outlook is fragile, with downside risks still dominating and uncertainty increasing.

Strong labour markets in most advanced economies suggest stronger-than-expected aggregate demand, which may require monetary policy to tighten further or to stay tighter for longer than anticipated. Persistent volatility surrounding high inflation, increasing recession risks, and monetary policy uncertainty has led to significant markets. However, there are signs of improvement in both inflation and core inflation as a result of concerted efforts.

OUTLOOK

The medium-term growth is anticipated to be lower in the future. Over the past decade, projections for growth rate have gradually decreased from 4.6% in 2011 to 3.0% in 2023. Although some of this economic deceleration can be attributed to the natural convergence of previously fast-growing economies such as China and Korea, there may also be more concerning factors contributing to the recent sluggishness. These include the lingering effects of the Covid-19 pandemic, a slow pace of structural reforms, rising trade tensions, declining direct investment, and slower adoption of innovation and technology in fragmented regions. Moreover, if the world continues to be divided and polarised, it is unlikely that it will achieve progress for all or effectively address global challenges, such as climate change or any pandemic preparedness.

(Source:https://www.imf.org/en/Publications/WEO Issues/2023/04/11/world-economic-outlook-april-2023)

INDIAN ECONOMIC LANDSCAPE

The Indian economy showed a remarkable performance during 2022-23, continued to maintain its position as one of the fastest-growing economies. The nations GDP growth has been revised to 7.2%, driven by private sector consumption and increased Government focus on infrastructure development. Despite global macroeconomic disturbances and tighter domestic monetary policies, aimed at addressing inflationary pressures, the growth momentum remained stable. This showcases the resilience of Indias economy in recovering and revitalising growth drivers.

Earlier, turmoil in the form of inflation, the Russia-Ukraine war, supply chain disruptions, and a shortage of semiconductor chips were major concerns in the economy. Despite these headwinds, the momentum of export growth has been sustained through the first half of FY 2022-23, increasing Indias share in the global market of merchandise exports. Gradually, as the growth of exports slowed down, the rebound in domestic consumption gained traction, further boosting the growth of Indias economy. Thus, leading to a rise in domestic capacity utilisation.

The Reserve Bank of India (RBI) anticipated a headline inflation rate of 6.8% for 2022-23, which falls outside its target range. However, this level of inflation is not expected to impact private consumption or discourage investments significantly. Inflation is likely to exceed the central banks upper target limit of 6% until early CY 2023, but it may gradually decrease with the control measures being implemented. Despite this volatility, the banking and non-banking financial service financial markets have evolved in an orderly manner.

Both direct and indirect taxes observed year-on-year growth of 16% and 7.2%, respectively during 2022-23. In the category of indirect taxes, Union excise duties were reduced by 15%, mainly due to a reduction in excise duties on fuel in May 2022. At the same time, GST collections (centre plus states) grew by 22%, benefitting activity. In the same period, the Central Governments revenue expenditure, which excludes interest payments and subsidies, grew by 2.5%, and capital expenditure increased by 21.7%. role in the development of countries, The Union Budget for 2023-24 has a primary objective of elevating the countrys status by allocating a capital expenditure of 10 Lacs Cr., indicating a 33% rise in capital outlay, in comparison to 2022-23. This development brings high optimism for core sectors.

OUTLOOK

India has maintained its position as the worlds fastest-growing major economy in 2022-23 and is expected to retain this top spot throughout 2023-24, with a projected growth rate of 6.5%. The countrys economic prospects are optimistic, as an investment boom is expected to drive substantial increases in manufacturing output, bank lending, and consumer spending. This economic expansion is likely to enhance business confidence and encourage increased private-sector investment, further propelling the growth of the Indian economy.

Despite the moderation of consumer spending due to inflationary pressures and higher borrowing rates, the road to achieving a higher growth rate for the Indian economy is expected to be longer. Nevertheless, investments are anticipated to be the primary drivers of growth, with the

Governments capital spending playing a major role. The optimistic outlook and enthusiasm among investors are expected to fuel Indias growth story, fostering a positive momentum for sustained economic development.

(Source:https://www.indiabudget.gov.in/economicsurvey/ doc/echapter.pdf)

INDUSTRY OVERVIEW

GLOBAL AUTOMOTIVE INDUSTRY AND TRENDS

The automotive industry is a crucial sector that plays a significant its capital-intensive structure and the large volume of employment it generates. The global automotive industry has recently experienced substantial growth, driven by a revival in economic activity and increased mobility. Additionally, the rising demand for high-end passenger vehicles has also contributed to the industrys performance.

Overall, domestic auto sales have increased dramatically.

The year has marked remarkable growth on account of ease in the availability of semiconductors and increasing demand sentiments, owing to the festive season. The passenger vehicle segment recorded higher sales throughout the year, due to the increasing demand for luxury cars and the launch of new models.

Some of the key trends in the industry demonstrate that semi and fully-automated vehicle segments will grow in

2023, owing to the technological progress that will enhance

Advanced Driver Assistance Systems (ADAS) and self-driving algorithms. Electric Vehicle (EV) sales are anticipated to reach a record high in 2023, with 19% of the new passenger car registrations being in the categories of Electric, Battery Electric Vehicles (BEVs) and Plug-in Hybrid Electric Vehicles

(PHEVs), as compared to 14% in 2022. Continuing with the trend, China will remain the largest market for EVs in 2023, with 62% of global registrations, followed by 21% in Europe and 10% in the US. Growth for shared mobility is predicted to reach gross bookings of USD 214 bn in 2023 an uptick of 4.3% compared to 2022.

(Source:https://www.euromonitor.com/article/top-three-automotive-and-mobility-trends-in-2023).

OUTLOOK

The global automotive industry is currently experiencing a period of optimism. From a consolidated value of USD 3296.8 bn in CY 2021, followed by USD 3,566.5 bn in CY 2022, it is anticipated to grow to USD 6,070.4 bn till 2030, registering a compound annual growth rate (CAGR) of 6.9% during the estimated period 2023-30. The growth prospects are owing to the increasing demand for high-end passenger vehicles, urbanisation, and rising infrastructure spending in the economy.

(Source:https://finance.yahoo.com/news/automotive-industry-projected-reach-usd-071700105.html).

INDIAN AUTOMOTIVE INDUSTRY

The Indian automotive industry is a crucial pillar of the countrys economy, with strong backward and forward integration from businesses serving as the primary driver of growth. Over the past few years, liberalisation and deliberate policy interventions have led to the establishment of a dynamic and competitive market, attracting numerous new players, expanding the capacity of the automobile industry, and generating substantial employment opportunities. The contribution of this sector to the National GDP has grown to about 7.1% now from 2.8% in 1992-93. It provides direct and indirect employment to over 19 mn people. Two-wheelers account for 75% of the Indias automobile market followed by passenger cars at 18% during the year 2022-23. Passenger car sales are dominated by small and mid-sized cars and gradually transitioning towards compact SUVs. Exports of automobiles which accounted for 24% of the total production during the year 2021-22, decreased to 18% during 2022-23.. Buoyed bythestrongdomesticmarket transformations at a global traction, India aims to double its auto industry size to 15 Lacs Cr. by the end of 2024. There has been an FDI inflow of USD 33.77 bn in the industry from April 2000 till September 2022, which is around 5.48% of the total FDI inflow in India during the same period.

(Source:https://static.pib.gov.in/WriteReadData/specificdocs/ documents/2023/feb/doc2023217160601.pdf)

OUTLOOK

The Indian automotive industry has shown significant progress over the last two decades, capturing global attention and positioning itself as a potential frontrunner in the industry.

In the global rankings scale, India has a robust presence in terms of manufacturing output. This is evident from the fact that the nation is the second-largest manufacturer of two-wheelers, the seventh-largest manufacturer of commercial vehicles, and the sixth-largest manufacturer of passenger vehicles. Moreover, India is also the largest manufacturer of tractors worldwide. Over the past decade, the nation has positioned itself as one of the most sought-after locations worldwide for manufacturing high-quality automotive components and vehicles of all types. It has also made significant progress in closing the gap with several established countries in the industry.

Over the next decade, the automotive industry is likely level. to undergo significant

The transformations are owing to the growth in demand for automobiles in the developing nations, mainly from

Brazil, Russia, India, China, and South Africa (BRICS); and a considerable rise in the share of electronics in automobiles, turning them into ‘Computers on Wheels and Connected to the Internet. Moreover, an unwavering pursuit of economies of scale and scope in the design and engineering of automobiles & components, and a quest for low-cost manufacturing locations are driving the change.

(Source:https://static.pib.gov.in/WriteReadData/specificdocs/ documents/2023/feb/doc2023217160601.pdf)

AUTOMOBILE PRODUCTION TRENDS

The domestic industry produced a total of 25.93 mn vehicles during the year 2022-23, as against 23.03 mn units during previous year registering a 12.6% growth aided by 20% expansion in domestic sales.

AUTOMOBILE DOMESTIC SALES TRENDS

Domestic sales of vehicles reached 21.2 mn units during 2022-23, closer to the pre-pandemic level of 21.54 mn units in 2019-20 registering a growth in every vehicle segment. During this period, the share of passenger vehicles increased by 5.4% from 12.8% to 18.3% with a proportionate decrease in the share of two-wheelers and three-wheelers.

AUTOMOBILE EXPORT TRENDS

Passenger vehicle exports increased by 15% from 0.58 mn to 6.63 mn units, while all other segments experienced a degrowth in exports as compared to last year - commercial vehicle -15%, , Three-wheeler -27%, and two- wheeler -18%.

INDIAN ELECTRIC VEHICLE (EV) MARKET

The Indian electric vehicle market was valued at USD

7,025.56 mn in 2021, and is anticipated to reach USD 30,414.83 mn by 2027, registering a CAGR of 28.93% during the estimated period. The growing demand for fuel-efficient, high-performance, and low-emission vehicles, increasingly strict laws and regulations on vehicle emissions, lowering battery costs, and rising fuel costs are expected to drive the growth.

Moreover, the rapidly escalating year-on-year adoption rate of mild-hybrid electric vehicles, favoured electric vehicle policies, and improved Government initiatives across India are fuelling the growth of electric vehicle market in India.

Moreover, the demand for electric vehicles was relatively less affected during the Covid-19 pandemic as compared to other segments, which helped maintain the growth momentum.

The Government has reduced the amount of subsidy provided on electric two-wheeler vehicles. On June 2022, the Government reduced the subsidy incentive cap from 40% of a vechicles value to 15% and capped the subsidy of 10,000 per kWh of battery.

INDIAN TWO-WHEELER INDUSTRY

The Indian two-wheeler market refers to the vehicles such as Motorcycles, bicycles, mopeds, scooters etc. They can be operative either electric or fuel-based. Two-wheelers have several benefits over three or four-wheeled vehicles, including maneuverability, higher fuel efficiency, cost-effectiveness, lower carbon emissions, etc. Additionally, they reduce dependency on public transit systems and decrease travel time. The market size of the two-wheeler industry reaches a volume of 18 mn units. Going ahead as per IMARCE group, the market will reach a volume of 48.1 mn units by 2028, showcasing a CAGR of 17.80% during 2023-2028. This growth is primarily driven by increasing urbanisation, rising disposable incomes, and improving living standards, which have led to higher demand for two-wheelers due to their maneuverability, fuel efficiency, cost-effectiveness, and lower carbon emissions. Additionally, the growing number of female drivers, environmental awareness, and popularity of electric and hybrid two-wheelers further contribute to the positive outlook for the market. The expansion of the tourism industry has also fuelled demand for two-wheeler rentals, adding to the products popularity. Moreover, the market is witnessing advancements in technology that are likely to drive its growth in the future.

INDIAN PASSENGER VEHICLE INDUSTRY

The Indian passenger vehicle industry accounts for 18% of the total automobile industry in India in terms of domestic sales volume. The Indian passenger vehicle industry is grouped into three major categories: passenger cars, vans, and utility vehicles. The domestic sales in the passenger vehiclesegment 34.8% YoY grew by 27% y-o-y in 2022-23, driven by the improvement in sentiments and ease in supply of semiconductors. Growth in passenger vehicle sales volumes reflected a strong bounce-back after the Covid-19 pandemic.

A low base also contributed to this growth as sales in 2021-22 witnessed disruption amid severe headwinds, in the form of the second wave of Covid-19 pandemic, semiconductor shortage, and supply chain issues. This robust post-Covid-19 pandemic demand for passenger vehicles has been driven by a strong preference for personal mobility and by new launches across Original Equipment Manufacturers (OEMs).

WAY FORWARD

In the past few quarters, the demand for passenger vehicles has remained robust, primarily driven by the launch of new models by OEMs. In recent times, with the increased availability of semiconductor chips, growth in this subsegment has accelerated, leading to domestic sales surpassing pre-Covid-19 pandemic levels. Furthermore, the utility vehicle sub-segment (within the passenger vehicle segment) witnessed significant the changing preference towards utility vehicles which now constitute 51.2% of the total passenger vehicle domestic sales. However, continued high rates of inflation, coupled with increasing interest ratesspace,in the economy, with supplierscan potentially intensifying impact consumer sentiments on account of the increased cost of ownership.

Overall, the sales volume of the domestic automobile industry grew by 20% in FY 2022-23. The passenger vehicle sub-segment is expected to exhibit growth, led by product mix, ease in supply chain issues and discounts & offers. Furthermore, the utility vehicle sub-segment is anticipated to experience growth due to the rising preference for larger-sized and feature-rich vehicles. Looking ahead, the demand outlook is anticipated to improve on the back of investments from the PLI scheme, the introduction of new vehicle models, the better traction of its ICE (Internal Combustion Engine) models, and a robust order book. Add reference to 2W sector outlook.

(Source:CARE Edge Report, January 2023)

AUTO COMPONENTS INDUSTRY

According to the Automotive Component Manufacturers Association of India (ACMA), the Indian auto components industry is well-positioned to experience growth with an optimistic outlook. The nations automobile component market is bifurcated between organised and unorganised sectors. Original Equipment Manufacturers (OEMs) are a part of the organised sector, which looks after the production of premium precision devices. In contrast, low-value products, that are geared towards after-market services, are found in the unorganised industries. The industry is leveraging a stronger domestic market, which enabled it to nine months uptick revenues of 2.65 Lacs Cr. in the first

. of 2022-23, registering a significant

The industry is anticipated to record a growth of 10-15% in FY 2023-24, owing to the sustained momentum in Indias domestic vehicle market. The industry is also anticipated to incur a capex of over 20,000 crore in FY 2023-24, with incremental investments towards new product additions, product development for committed platforms, development of advanced technology and EV components.

In India, the domestic auto component market continues to register robust growth, driven by the passenger vehicle, tractor, and commercial vehicle segments. Despite being a cyclical industry, the tractor segment has held up well over the last three years. The two-wheeler segment is also anticipated to register growth, based on the economic bounce back in rural India, which determines the bulk of the two-wheeler sales in the country. In addition, there is strong growth momentum in the Medium and Heavy Commercial

Vehicles (M&HCV) category, owing to the Governments push on infrastructure development.

The Indian automotive industry has stood the test of time. However, the increasing incorporation of electronic chips in every vehicle is likely to unfold various challenges, necessitating the industrys adaptation to this new dynamic.

The industry is bullish on increasing investments in the electrification capex towards localisation of EV-related products as well as developing the entire EV ecosystem. The Indian Governments push, in the form of automotive PLI schemes (Production Linked Incentive), to encourage local manufacturers to adopt advanced automotive technologies is poised to benefit the local EV market significantly. In addition, it is also set to enhance exports of these advanced components from India.

WAY FORWARD

The outlook of the Indian auto components industry remains optimistic in terms of exports. However, ACMA anticipates adopting a wait-and-watch approach as uncertainties continue to loom large in Europe due to the prolonged Russia-

Ukraine conflict. This cautious approach is notwithstanding the robust export performance of the component industry in FY 2022-23. Going ahead, Indian auto component manufacturers endeavour to offer high-quality, technology-led components at a competitive price. As India is scaling up its capacity, tapping emerging opportunities globally, and serving demand, Indian auto components industry is further going to be benefitted from the presence of numerous global players – planning to expand capacities in India – creating employment opportunities.

(Source:https://www.autocarpro.in/news/yokohama-off-highway-tires-appoints-mihir-modi-as-cfo--114357).

AEROSPACE AND DEFENCE INDUSTRY

The Aerospace and Defence industry in India is at a turning point, given the modernisation and indigenisation programmes being undertaken by the largest military forces in the world. With the global economy gradually recovering from the disruptive impact of the Covid-19 pandemic, the

Aerospace and Defence (A&D) industry has shown signs of bouncing back in 2022. The robust recovery in air travel is leading to increased aircraft orders and aftermarket activity. Leading global commercial aerospace original equipment manufacturers (OEMs) anticipate that global passenger traffic will return to pre-Covid-19 pandemic levels by the end of 2023 or early 2024.

However, supply chain and talent issues continue to limit the industrys growth prospect. According to Deloittes Outlook

Survey, supply chain disruptions and talent shortages will be the biggest challenges for the Aerospace and Defence industry in 2023. Furthermore, inflation continues to be a challenge for the entire industry, with price hikes being one of the significant risks anticipated in 2023.

The demand for passenger travel is correlated to ticket prices, which, in turn, depend on jet fuel prices. Thus, a quick and sustained rise in jet fuel prices can affect traffic and increase market volatility. To address this challenge, aircraft manufacturers are investing in aircraft and engine design to make them more fuel-efficient. Furthermore, they are looking to lower operating costs, and explore lower- and zero-emission commercial aircraft for the future.

The Ministry of Defence in India has laid out an expansive plan for modernising obsolete equipment through long-term perspective plans, capability plans, and capital acquisition plans. The Government of India has also identified the

Aerospace and Defence sector as a focus area for the

‘Make in India (‘Aatmanirbhar Bharat) programme. It has taken considerable steps to push forth the establishment of indigenous manufacturing infrastructure, complemented by a robust R&D ecosystem.

WAY FORWARD

The defence segment remained stable through 2022 and is anticipated to outperform the commercial aerospace segment, buoyed by an increase in defence budgets in the wake of the Russian invasion to Ukraine, boosting demand for military equipment globally. As per Deloittes Outlook

Survey, the general business outlook for the Aerospace and Defence industry for the next year is ‘somewhat to very positive. The reasons for this optimistic outlook include growth in new technologies and segments, such as AAM, evolving business models in areas, such as space, and the use of digital thread and smart factories. In the years to come, these factors are anticipated to facilitate industry growth and pave the way for the creation of new markets.

BUSINESS OVERVIEW

Sansera Engineering Limited (referred to as ‘Sansera or ‘The Company) is a trailblazer in the manufacturing and supplying of a broad spectrum of high-precision machined components for the automotive and non-automotive industries. These components and assemblies are critical for the engine, transmission, suspension, brake, chassis, and other systems for two-wheeler, passenger vehicle, and commercial vehicle verticals. In addition, within the non-automotive sector, the Company manufactures and supplies a range of components for aerospace, off-road, agriculture, and other sectors, including engineering and capital goods. Sansera has a strong research team comprising 277 experts in design, engineering, machine building, and automation.

Among the Companys 17 state-of-the-art manufacturing facilities, 16 are strategically located across India and one is in Sweden. This operational prowess enables it to serve customers in 27 countries globally. Way back in 2014, Sansera forayed into the Aerospace sector and has consistently grown its presence and scale. During 2021, the Company started receiving orders from customers in the Defence sector. To meet the growing demand from

Aerospace and Defence, it completed construction of a new dedicated plant during the year at Jagani Hobli, Bangalore, which has started its operations in Q1 of FY 2023-24.

Capitalising on its design and engineering capabilities, Sansera has made a strategic investment and entered into the high-technology space. The Company has access to a formidable R&D and engineering team that will focus on the priority market segment for Aerospace and Defence, while simultaneously developing a product portfolio to contribute to the vision of ‘Aatma Nirbhar Bharat.

Sansera is going through a transition from automotive components supplier to a provider of precision forged and machined components across industry sectors and application globally, supported by its ability to adapt to the changes. The Company is aiming for substantial growth in its non-automotive markets, securing new orders for engine-agnostic components, and increasing its market share across geographies. During the year, the Company has bagged a platinum award from Bajaj for quality, another award from Toyota for quality-month award ‘My product, ‘My responsibility, and earned a ‘Hero-Next sustainability award.

GROWTH STRATEGIES

Diversify into tech-agnostic products and cater to the xEV opportunity

Consolidate and strengthen global market share in the existing portfolio and diversify into technology- agnostic products

Continue to leverage existing capabilities to diversify further into non-automotive businesses and expand the addressable market

Retain and strengthen technological leadership through continued focus on engineering capabilities

OPERATIONAL REVIEW

For 2022-23, Sansera generated 88.1% of its revenue from the automotive sector and the remaining 11.9% from the non-automotive sector. As a global supplier, the Company derived 71.6% of its revenue from India, while the remaining 28.4% of the revenue came from the sale of products in Europe, the US, and other foreign countries.

Sansera, with a strong history of producing complex precision engineered components for the Automotive sector, aims to expand its manufacturing capabilities to cater to Non-Automotive segments like aerospace, off-road, agriculture, and engineering and capital goods. The Company is already supplying components for new non-automotive applications, including defence. Additionally, Sanseras existing key product families in the Automotive sector have potential applications in various Non-Automotive sectors.

In the Non-Automotive segment, the Company emphasises manufacturing precision engineered components that demand complex engineering skills, leading to significant value addition.

Sanseras emphasis on a diversified business model remains a crucial aspect of its operations. The Company has added 14 customers for xEV (electric and hybrid vehicles) across two-wheeler, passenger vehicle, and commercial vehicle segments. It has also developed a strong pipeline of future orders, of which approximately 33% come from the automotive sector (xEV and tecology-agnostic) and the other 26% from non-automotive businesses.

Sansera is witnessing a rising demand for higher performance and top quality products, promoting the Company to prioritise continuous improvement in design and engineering capabilities. By focussing on delivering high value-added and technology-driven components, Sansera aims to seize opportunities arising from shifting customer preferences and evolving regulatory requirements, such as heightened emissions control standards.

ORDERBOOK SUMMARY AS AT MARCH 31, 2023

As of March 31, 2023, the order book for new business with an annual peak revenue stood at 13.3 bn. This amount reflects a post-reset state. The company resets its figures at the beginning of each year, moving products that have entered mass production into the mass production cycle. Within this order book, the auto ICE segment contributes 5.5 billion, accounting for approximately 41% of the total order book. Auto tech agnostic and xEV components contribute 4.3 bn, constituting around 33% of the total order book.

The non-auto sector accounts for approximately 3.5 bn of the order book, making up about 26%. Furthermore, the international order book has expanded due to a good recovery across all geographical regions.

FINANCIAL REVIEW

CONSOLIDATED INCOME STATEMENT SUMMARY

Sanseras consolidated performance for 2022-23 has demonstrated significant growth, with a total revenue of

23,383 mn, representing a 18% increase over 2021-22. The Companys earnings before interest, taxes, depreciation, amortisation (EBITDA), and profit after tax (PAT) also exhibited strong momentum, reaching 3,770 mn and 1,483 mn, respectively, which is an uptick of 13% and 12% compared to the previous year.

( in mn)

Particulars	Consolidated
	2022-23	2021-22	YoY%
Revenue from Operations	23,383	19,890	18
Operating Expenses	19,613	16,554	18
EBITDA	3,770	3,336	13
Other Income	178	155	15
Finance Charges	615	510	21
Depreciation and Amortisation	1,301	1,197	9
Profit Before Tax	2,032	1,784	14
Tax Expenses	549	465	18
Profit After	1,483	1,319	9
EPS (Basic)	27.74	25.27

DETAILS OF SIGNIFICANT RATIO CHANGES

The key financial ratios of Sansera are given below:

Key Financial Ratios (Standalone)	2022-23	2021-22	Variance (%)
Current Ratio	1.20	1.18	1.69
Debt-to-Equity Ratio	0.55	0.58	(5.17)
Debt Service Coverage Ratio	1.75	1.75	-
Return on Capital Employed	13.33%	12.70%	0.63
PAT Margin	7.19%	7.34%	(0.15)
Return on Equity	13.56%	13.34%	0.22

Current Ratio = Current Assets / Current Liabilities

Debt-to-Equity Ratio = Total Debt / Shareholders Equity

Total Debt include Non-Current Borrowings, Current Borrowings, Current Maturities of Non-Current Borrowings, Lease Liabilities and Accrued Interest

Debt Service Coverage Ratio = Earnings Available for Debt Servicing

Earning for Debt Servicing = Net Profit After Taxes + Non-Cash Operating Expenses like Depreciation and Other Amortisation + Interest - Other Adjustments like Gain on Sale of Fixed Assets, Income from Government Grants and Dividend Income Share of Profit from Investment Debt Servicing = Interest and Lease Payments + Principal Repayments EBITDA Margin = EBITDA / Total Revenue. EBITDA = Earnings Before Interest, Tax, Depreciation and Amortisation and Other Income Return on Capital Employed = EBIT / Capital Employed. Capital Employed = Tangible Net Worth + Borrowings + Deferred Tax Liabilities PAT Margin = Net Profit After Taxes / Total Income. Return on Equity = Net Profit After Shareholders Equity = Equity Share Capital + Other Equity

Operating Expenses excludes Depreciation and Amortisation

RISKS AND MITIGATION STRATEGIES

Sansera is committed to identifying and mitigating potential business risks through effective risk management strategies. The

Company has established a comprehensive risk management framework, policies, and procedures to evaluate, identify, mitigate, and report risks. Its Risk Management Committee, under the oversight of the Board, is responsible for identifying and evaluating various risks and developing appropriate mitigation strategies. This proactive approach helps the Company to minimise the impact of any unforeseen risk events that may occur.

GLOBAL ECONOMIC AND GEOPOLITICAL RISK

An economic slowdown initiated by high inflation or a geopolitical event like the Russia-Ukraine war might have an adverse effect on the Companys business. Sansera conducts regular review of its order book, execution strategies, market opportunities, and changes in the business environment in various markets to develop effective growth strategies. By analysing these factors, the to capitalise on opportunities and adjust its strategies to Companycantailoritsapproachon sector/geographic diversification meet new challenges as they arise.

MARKET AND TECHNOLOGY RISK

Changes in consumer preferences and the emergence of new competitive technologies may impact the attractiveness of certain products. Furthermore, stricter Government regulationsandvolatilefuelpriceshaveplacedsignificantpressure on the automotive industry to reduce carbon dioxide emissions. This has resulted in the growth of electric vehicles (EVs). Sansera is actively engaged in diversifying its product offerings to meet the needs of technology-agnostic applications within the automotive sector. These include suspension, chassis, driveline, and braking systems for ICE and EV powertrain technologies. The Company is also catering to its customers in non-automotive sectors, such as aerospace, defence, agriculture, industrial automation, and stationary engines. It regularly monitors progress in its diversification efforts and evaluates the impact of new orders on its product portfolio.

TALENT ACQUISITION AND RETENTION / SUCCESSION FOR KEY RESOURCES AND ROLES

Human capital is a key resource for the Company and crucial for its sustained business growth and profitability. The Company is committed towards building and sustaining a high-performance culture and ensuring development of employees along with its strategic growth. The Company undertakes regular assessment of skill sets for current and emerging roles required to manage its business growth and complexity, identify potential candidates for each role within the organisation, implement training and development plans including soft skill training, shadowing leads, coaching and mentoring, leadership programmes, etc. and track progress.

At times, for newly created roles where talent is not available internally, the Company takes recourse to hiring external candidates.

The Companys HR policies and ongoing initiatives, including regular trainings, skill upgradation, competency development and work recognition help provide learning and development opportunities for the employees and control attrition.

INFLATION RISK

The increase in the prices of key inputs like steel, energy, etc. has the potential to increase the overall cost of inputs, which could impact Sanseras margins. Sansera continuously monitors the price movement of key raw materials and, accordingly, adjusts its product prices for domestic customers. For export contracts, the Company may track inflation at the time of finalisation and regularly reviews and adjusts prices for exceptional movements. Furthermore, Sansera has implemented several cost improvement initiatives, that include process automation to optimise manpower, transitioning to cheaper renewable energy sources, enhancing supply chain efficiency, and improving material yield. These measures have helped the Company to reduce costs and improve its bottom line.

CREDIT RISK

The slowed performance in the automotive, non-automotive, or aerospace sectors as well as global economic environment may weaken Sanseras sales and profits and make it difficult for it to repay its debts. Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and others, foreign exchange transactions and other financial instruments. The carrying amount of financial assets represents the maximum credit exposure.

COMPETITION RISK

Increasing rivalry within the industry, both at the global and domestic levels, can put pressure on pricing and margins. Sanseras exceptional expertise and solid reputation have enabled it to establish an unparallel position in the market, while forging strong and long-lasting customer relationships. The Companys commitment to offer innovative and superior-quality products and services provides it with a significant competitive edge.

LIQUIDITY RISK

The risk may impact the Company in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial assets. The Companys approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Companys reputation.

PROCUREMENT RISK

Any adverse fluctuations in market prices or the financial distress of Sanseras suppliers can potentially impact its financial position and earnings. Sansera recognises these risks and takes proactive steps to mitigate them. The actions in this direction include close monitoring of market prices, development of contingency plans, and ensuring optimal supply of goods and services to the Company.

INTEREST RATE RISK

The jitters in the economical environment may have adverse effects on the interest rate which further impact the borrowings of the Company. The Companys exposure to risk of changes in market interest rates relates primarily to the Companys long-term debt obligations with floating interest rates.

CYBERSECURITY RISK

A probable exposure, loss of critical assets and sensitive information, or reputational harm as a result of a cyber-attack or breach within Sanseras IT network. Sansera follows a cybersecurity risk management strategy to constantly evaluate the network vulnerability and deploy/upgrade tools to protect against presently known and evolving cyber threats.

HUMAN RESOURCES

Sansera understands that a strong Human Resources department is crucial to fostering a healthy organisational culture. Hence, the Company ensures that its HR team is aligned with its goals. It is committed to developing its employees expertise and skills. Sanseras personnel policies prioritise the recruitment of talented individuals and the promotion of skill development through both in-house and external training programmes.

With a robust team of 2,109 permanent employees and 6,644 contractual employees as of March 31, 2023, Sansera depends on its workforce to deliver high-quality products, while maintaining the highest standards of health and safety.

The Company also values diversity and strives to ingrain a culture of mutual respect. It fosters a culture of employee engagement, where individuals are encouraged to take ownership of their roles and contribute actively towards a positive work environment. This includes promoting personal development opportunities, as well as ensuring a workplace that is free from all forms of discrimination and harassment.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Sanseras internal control systems and audit processes are designed to safeguard its assets and resources, while providing reasonable assurance on the reliability of financial reporting and other operational data. The Company ensures compliance with established policies, procedures, and statutory requirements for all its processes. It has developed well-documented guidelines, and procedures for authorisation and approval, including regular audits.

Moreover, Sanseras internal audit system encompasses financial and operational controls across all its divisions, functions, and departments. The internal audit team reviews the Companys various functions on a regular basis and identifies opportunities for further improvement.

CAUTIONARY STATEMENT

The statements in the Management Discussion and Analysis section describing the Companys objectives, projections, estimates, and predictions may be considered as forward-looking statements. All statements that address expectations or predictions about the future, including, but not limited to, statementsabouttheCompanysstrategyforgrowth,product development, market positioning, expenditures, and financial results, are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptionsandexpectationsareaccurateorwillberealised. The Companys actual results, performance, or achievement may, thus, differ materially from those projected in such forward-looking statements. The Company assumes no responsibilitytopubliclyamend,modify,orreviseanyforward-looking statement based on any subsequent developments, information, or events. To avoid duplication and repetition, certain heads of information required to be disclosed in the Management Discussion and Analysis, have been included in the Boards Report.