SM Auto Stamping Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

1. BUSINESS OVERVIEW:

We are in business of designing and manufacturing of sheet metal components and sub-assemblies requirements of automobile parts/equipment manufacturers. Our range of product primarily covers sheet metal pressed components for clutches, brakes, engine mountings, chassis, shaft drive, body trims, bearings etc. which are used in passenger cars, commercial vehicles and tractors. Our products such as deep drawn components and control panel components also find application in electrical equipments industry.We have in-house Design & Development facility for different processes involved in the manufacturing of products, we have a high precision Tool Room at our various Plants where activities related to designing and development of various products are undertaken.

We have three manufacturing units, all ideally located at Nashik, Maharashtra on leasehold industrial plots of total size admeasuring to over 5000 sq. meters. Our all three units comply with the IATF 16949:2016 standards. Apart from manufacturing, we also provide job work services in respect of blanking and forming process on metal components.

Our portfolio of products can be classified into following categories:

A. Components used in Automotive Power Train

i. Components for automotive clutches

ii. Components for automotive propeller shaft drive

iii. Components for automotive brake system

iv. Components for automotive engine mountings

B. Components used in Automotive Body

i. Components for automotive body trims

ii. High tonnage components

C. Components used in Automotive Chassis

D. Automotive welded assemblies

E. Deep Drawn Components

F. Components for electrical switchgear & heavy panels

2. OPPORTUNITIES & THREATS:

Strength:

In-house die making facilities and Press shop facility:

Our Company has its own in-house die making facilities and Machining Centre which enables us to maintain high quality production standards and also helps us in minimizing production time and bringing cost effectiveness. Our die making facility shop is capable of manufacturing press tools for small to medium range of automotive pressed parts. Our In-house press shop facility consists of Hydraulic power press machines, Pneumatic Power Press Machines, Mechanical Power Press Machines, SEW Machines and bearing cage machines.

Wide product range and customized product offering:

We have developed the infrastructure to customize our product offerings. This allows us to understand the customer requirement and offer the right product to exactly suit their need. In addition to this, we offer a wide product range i.e. wide range of Sheet Metal components including Precision Sheet Metal Fabrication, Finishing and Assemblies offered in a wide size range to enableus to cater to maximum requirement.

Vast Experience of Promoters:

Our Companys core strength lies in the extensive experience gained by our Promoters in this industry. Our Promoters, Mr. Suresh Gunwant Fedge and Mr. Mukund Narayan Kulkarni possess more than 21 years of experience in this field, which enables us to deliver quality products to our Customers and help us to gain expertise in the production.

Existing customer relationship:

We believe that we constantly try to address customer needs around a variety of products. Our existing customer relationships help us to get repeat business from our customers. This has helped us maintain a long term working relationship with our customers and improve our customer retention strategy. We believe that our existing relationship with our customers represents a competitive advantage in gaining new customers and increasing our business.

OUR BUSINESS STRATEGY: We intend to pursue the following principal strategies to leverage our competitive strengths and grow our business:

Utilization of Existing Installed Capacity:

Presently, Our Company has installed capacity of 7040p.a. for manufacturing of automotive components. For the year ended 31^st March 2024, our total production was 5,901, which constitutes 83.82% of the installed capacity. Considering the future demand potential, we intend to utilize our existing installed capacity to maximum level.

Improving operational efficiencies:

Our Company intends to improve operating efficiencies to achieve cost reductions so to have a competitive edge over the peers. We believe that this can be done through continuous process improvement, customer service and technology development.

Leveraging our Market skills and Relationships:

This is a continuous process in our organization and the skills that we impart in our people give importance to customers. We aim to do this by leveraging our marketing skills and relationships and further enhancing customer satisfaction. We plan to increase our customers by meeting orders in

hand on time, maintaining our customer relationship and renewing our relationship with existing buyers.

Focus on consistently meeting quality standards:

Presently, Our Company is certified from IATF 16949:2016& ZED Bronze by Quality Councial Of India, further, we intend to focus on adhering to the quality standards of the products. This is necessary so as to make sure that we get repeat orders from our customers. This will also aid us in enhancing our brand value.

Opportunity:

• Economic Growth of Domestic and International Market.

• Government policies to scrap the old vehicles.

• Our customers are keen on developing new supplies.

• Upcoming opportunities in export market.

• Government promotional scheme.

• Expanding aftermarket business with customers.

There are related expansions, growth prospectus and better opportunities in the SM Autovision Private Limited, the Associate Company of the Company, considering the same it will ultimately benefit our Company. We have started to export of sheet metal stamped parts.

3. SEGMENT /PRODUCT WISE PERFORMANCE:

The Company operates only in the Automobile Component Segment, i.e. development, manufacture and selling of automotive components mainly sheet metal components, welded assemblies and modules for automobiles. This year we have added electrical engineering and electronicsproduct from SIEMENS, Nashik.

4. OUTLOOK:

The growth of Auto Industry which is largely dependent on infrastructure building and financing options are expected to grow in line with the GDP growth estimated. All sub-sectors within the automobile industry are rebounding from the pandemic. The industry has shown resilience with both sales and values increasing. Innovation is continuing at a strong pace, investment in new capacity, particularly for electric vehicles (EVs), is soaring, and customer demand is increasing. Despite the pressures, the outlook for the industry is positive.

5. RISK AND CONCERNS:

Supply Chain Management: The risk associated with supply chain disruptions remains a key concern for the sheet metal stamping industry both domestically and globally. Delays in the supply chain can significantly impact project timelines, costs, and quality standards, thereby affecting revenue and profitability. Our company has proactively addressed this risk by establishing strong commercial relationships with reputable suppliers, ensuring a continuous and reliable flow of raw materials.

Raw Material Price Volatility: The unpredictable nature of global markets continues to pose challenges for manufacturers, particularly in terms of raw material price fluctuations. Sudden changes in raw material prices can escalate production costs, affecting profitability. To mitigate this risk, our company has adopted a proactive approach by securing supply agreements with suppliers, thereby providing stability and predictability in raw material procurement.

Government Policy and Duties: Regulatory changes and government policies remain significant risk factors that can impact economic conditions and business operations in India. Our company acknowledges the potential adverse effects of such changes and remains vigilant in monitoring regulatory developments. Additionally, taxes, levies, and other financial regulations imposed by the government could affect our financial performance. We are committed to staying informed and adapting our strategies accordingly to navigate any potential challenges arising from government policies and duties.

In summary, while the sheet metal stamping industry faces various risks and concerns, our company has taken proactive measures to mitigate these risks and ensure resilience in the face of challenges. Through strategic supplier relationships, proactive risk management practices, and a vigilant approach to regulatory changes, we remain well-positioned to navigate the evolving business landscape in the financial year 2023-24.

6. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has in place adequate internal control systems covering all its operations. Proper accounting records highlight the economy and efficiency of operations, safeguarding of assets against unauthorized use or losses, and the reliability of financial and operational information.

Some of the significant features of internal control system are:

• Financial and Commercial functions have been structured to provide adequate support and control of the business.

• Risk Management policy has been adopted by the Company.

• The Company has an Internal Audit System conducted by the Internal Auditor of the Company. Standard operating procedures and guidelines are reviewed periodically to ensure adequate control.

7. OVERVIEW AND ANALYSIS OF FINANCIAL CONDITIONS:

During the year under review, your Company has achieved total revenue from operations of Rs. 67,56,36,526 as compared to Rs. 68,66,32,860/- in the Previous Year. After providing for taxes and other adjustments, Profit after tax is Rs. 3,49,58,832 as compared to Rs. 3,08,69,468/- during the Previous Year..

The Management believes that it has been objective and prudent in making estimates and judgments relating to the Financial Statements and confirms that these Financial Statements are a true and fair representation of the Companys Operations for the period under review.

8. DEVELOPMENT ON HUMAN RESOURCE FRONT:

At SM Auto Stamping Limited, our human resources are critical to our success and carrying forward our mission. With their sustained, determined and able work efforts we were able to cruise smoothly through the hard time of the economic volatility and rapidly changing market conditions. The requirement of the markets given the economic scenario has made this even more challenging. Attracting new talent with the drive, training and upgrading existing skill sets and getting all to move in a unified direction will definitely be a task in the company. By creating a conducive environment for career growth, Company is trying to achieve the maximum utilization of employees skills in the most possible way.

There is need and the company is focused on retaining and bringing in talent keeping in mind the ambitious plans despite the market and industry scenario. The company also believes in recognizing and rewarding employees to boost their morale and enable to achieve their maximum potential.

The Company has also indulged Life Catalyst India Private Limited, a Company involved in training activities to conduct monthly sessions for the employees to enhance their overall performance for their individual as well as organizational goals.

9. INDUSTRIAL RELATIONS:

In order to continue delivering quality products to our key customers, our Company shall further strengthen its relationship with key vendor i.e. sub-contractors. Our Company is also working on strategy to develop more and more vendors who can deliver product and services in line with Companys philosophy and product offerings, Industrial Relations throughout the year continued to remain very cordial and satisfactory.

10. KEY FINANCIAL RATIOS:

Sr. No	Particulars of Ratio	31.03.2024 (In %)	31.03.2023 (In %)	Explanation for change in Ratios
1.	Inventory Turnover	10.05	11.85	There is a decrease in sales with considerable increase in stock, thereby decreasing Inventory Turnover ratio.
2.	Interest Coverage Ratio	21.70	9.53	Increasing profits is improving the financial health of the Company has led to improved interest coverage ratio.
3.	Current Ratio	0.88	0.89	Decreased inventory, increased current maturities of long-term loans for express repayment of debts and comparative lower increase in current assets has resulted in decrease current ratio.
4.	Debt Equity Ratio	0.03	0.13	Ratio has improved due to decrease in debt on account of regular repayment and increase in equity due to improved profitability.
5.	Operating Profit Margin (%)	0.06%	0.06%	-
6.	Net Profit Margin (%)	4.45%	4.57%	Decreased gross margin, increased administrative expenses, increased tax expenses have led to reduced bottom line.

11. DETAILS PERTAINING TO NET-WORTH OF THE COMPANY:

Particulars	31.03.2024 (In Rs in lacs .)	31.03.2023 (In Rs.) In Lacs	Explanation for change in Net- worth
Net-worth	1701.86	1840.54	The company has done buy back of total 6 lacs shares amounting to Rs 3.5 Cr for hence to that extent the paid up share capital is reduced also securities premium account and free reserve was utilized for buy back purpose .