Automotive Axles Ltd

Dear Shareholders,

I am pleased to present to you our annual report for FY 2023-24, providing insight into the latest developments and performance highlights of Automotive Axles Limited.

Macro-economic perspective

The global economy continues to exhibit remarkable resilience, maintaining consistent growth, while inflation decelerates nearly as swiftly as it escalated. The journey has been marked by significant events, starting with supply chain disruptions in the aftermath of the Covid-19 pandemic, followed by an energy and food crisis triggered by the Russia-Ukraine conflict, and a substantial inflation spike, culminating in a globally coordinated tightening of monetary policy. Amidst global economic fluctuations and persistent geopolitical tensions, India's economy stands out, exhibiting robust resilience, while maintaining its status as the fastest-growing major economy in the world. This stability draws its strength from the strategic policy implementations and regulatory measures, invigorated by a revitalised private sector, infusing strong momentum. The nation leverages substantial investments in emerging sectors, bolstered by Governmental initiatives, enhanced efficiency through digitalisation, and improved physical connectivity to help maintain the momentum of anticipated sustained economic growth. Looking ahead, India is poised for continued expansion throughout the decade, propelled by prudent investments, innovative policies, and a commitment to harness technological advancements for sustainable development.

Industry review

The Indian automobile industry achieved notable growth, registering a 12.5% increase in domestic production for FY 2023-24, propelled by robust economic expansion and favourable Government policies. Indian automakers continue to prioritise customer-centric strategies, including product diversification, customisation, and digital sales and services to thrive in this dynamic landscape. Moreover, strategic partnerships and investments in emerging technologies further drive competitiveness and market leadership. Positioned for significant transformation, the industry adeptly navigates technological innovation, changing consumer trends, and regulatory shifts with resilience and adaptability. Despite global uncertainties, the Indian automobile industry's commitment to innovation and sustainability ensures a positive outlook. Notably, India's auto components industry is set to drive the future expansion of the automotive sector, with its sustained focus on competitive pricing, adherence to quality standards, and technological innovation, thereby creating a favourable outlook for robust growth expectation. Already a substantial contributor to India's exports, this projected surge highlights the industry's potential to emerge as a global leader in the automotive supply chain.

Performance for the fiscal

I am delighted to announce another fiscal year of sustainable progress for us. Our total revenue stood at Rs. 22,449 million in FY 2023-24, compared to Rs. 23,286 million in FY 2022-23. Additionally, our EBITDA was Rs. 2,620 million, compared to Rs. 2,624 million, while our PAT grew marginally by 2.6% to Rs. 1,662 million, in contrast with Rs. 1,620 million recorded in FY 2022-23. We invested in state-of-the-art equipment and upgrades across our production lines to bolster our capabilities, with a greater focus on technological advancements. This strategic move aims to accommodate new models and variants swiftly, thereby ramping up productivity, enhancing agility, and meeting fluctuating volume and variant demands effectively.

Operational achievements

I am glad to communicate that our Axle assembly line and Housing Line 1 are now equipped with Industry 4.0 capabilities. This advancement enables us to eliminate losses, enhance Overall Equipment Effectiveness (OEE), and ensure product and part traceability.

Meanwhile, our CNC gear line operates with cutting-edge manufacturing equipment, adhering to stringent global standards. Utilising a fully-closed loop system with predictive capabilities, we effectively mitigate heat treatment distortion, ensuring the production of top-quality gears. By leveraging digitised masters and precise heat-treated gear part mapping, we consistently deliver precision parts that meet exact specifications. Moreover, our collaborations with blade suppliers leads to the development of ultrafine carbide blade materials with special coatings, fortifying speeds, feeds, and overall productivity. In our endeavour to deliver best-in-class products to our esteemed clients, we continue to invest in capacity building. This is exemplified by our recent investment in a new bore turning machine, catering to the growing export demand for gear bore and back face grooving. This further reinforces our position as a premier provider of high-quality gears for global markets. Over the past three years, our Total Productive Maintenance (TPM) initiatives have yielded remarkable improvements in safety, quality, and productivity across our operations. Our Mysuru Plant received the prestigious TPM Excellence Award, affirming our dedication to continuous improvement and operational excellence

Responsible roadmap

We remain committed to deliver value-driven outcomes for all stakeholders. Leveraging our core capabilities and strengths, we continuously strive to produce high-quality products tailored to meet the needs of our OEMs.

We are dedicated to creating value through our sustainability strategy, placing a strong emphasis on conserving and responsibly using natural resources as a fundamental business imperative. Aligned with environmental sustainability goals, we actively work to mitigate environmental risks and drive positive impact including drive towards Net Zero, diversity. We play a crucial role in empowering our workforce by fostering an environment of respect, trust, inclusivity, and diversity, which in turn cultivates a motivated and adaptable work environment. Recognising the invaluable contribution of our employees to our success, we prioritise their wellbeing and holistic development, aligning our values and culture accordingly. Moreover, we are nurturing a workplace culture that embraces and celebrates diversity, promotes equity, and facilitates inclusion through our Diversity, Equity, and Inclusion (DEI) initiatives.

At the core of our business strategy lies our commitment to uplifting communities around our operating locations. Prioritising healthcare, including preventive care, we ensure access to essential medical services for individuals and communities. We understand the significance of nurturing a holistic society, while simultaneously augmenting shareholder value creation.

The Indian automobile industry achieved notable growth, registering a 12.5% increase in domestic production for FY 2023-24, propelled by robust economic expansion and favourable Government policies.

In fortifying our governance approach, we go beyond conventional norms, placing utmost importance on enhancing long-term stakeholder value and fostering ethical business conduct. This year, we have adopted a Tax Transparency Report as a good corporate governance practice. Our corporate governance framework encompasses various aspects, including ethical corporate policies, code of conduct, human rights, and social impact. Furthermore, we ensure active engagement from all Board committees, guaranteeing oversight across business and Environmental, Social, and Governance (ESG) criteria. Through strategic oversight and controls, we conscientiously amplify Board participation and effectiveness in upholding our values and driving sustainable business practices.

Acknowledgement

As a representative of the entire Board, I extend our heartfelt gratitude to all our partners, with special acknowledgment to our customers, business associates, vendors and bankers, for their unyielding trust and continuous collaboration. I convey our sincere appreciation to our dedicated employees for their persistent commitment and tireless efforts that drive our success forward every day. Additionally, I express deep gratitude to our shareholders for their firm confidence in our Company and extend our appreciation to the Board of Directors for their invaluable guidance and support. Together, we continue to navigate challenges and seize opportunities, driving our Company towards greater success.