29th Annual Report 2020-21

CFO Speaks

The global economic order underwent significant transformations due to disrupted supply chains and other movement-limiting restrictions. This crisis made us perceive the same world and activities differently, resulting in newer innovations.

Dear Investors, The global economic order underwent significant transformations due to disrupted supply chains and other movement-limiting restrictions. This crisis made us perceive the same world and activities differently, resulting in newer innovations. The Indian economy was already facing slowdown and deceleration when the pandemic hit us. The public health crisis not only led to a weak start to the calendar year 2020 but also unfolded the rest of the year quite dramatically. Right from recording the slowest GDP growth rate at the beginning to entering a technical recession towards the end, the year was one-of-its-kind for more reasons than one.

The Indian Government’s prompt response helped the country avoid unmitigated disaster, considering the pandemic’s ramifications on the global front. After two consecutive quarters of contraction, the country’s Gross Domestic Product (GDP) entered positive territory, registering a growth of 0.4% in the October-December quarter of the previous fiscal. India not only sustained the momentum built in Q3FY21, but also led to a steady recovery in the last quarter. This growth was attributed to various reforms undertaken by the Government during the fiscal, along with a demand-boosting and investment-inducing Union Budget. The country’s foreign exchange reserves (steadily increasing over the last few months) touched an all-time high at USD 590 Billion in January 2021. These proved to be a clear sign of confidence, indicating how the global funds and investors perceived India as an investment destination. But, while the economy showed green shoots in various sectors and the country was heading towards a ‘V-shaped’ recovery, a second wave of the pandemic hit the nation.

Financial Highlights

We witnessed growth across all product portfolios. Healthy demand coupled with a higher kit value per vehicle allowed us to perform better than the industry. MIL reported annual revenue of ₹6,374 Crore for FY21 as against ₹6,222 Crore for FY20, registering a growth of 2.4% year-on-year. EBITDA for the full year was at ₹725 Crore in comparison to EBITDA of ₹672 Crore for FY20. EBITDA margin also improved for year-on-year basis from 10.8% to 11.4%. The Profit before Tax for the full year FY21 was at ₹325 Crore as against ₹244 Crore in FY20, registering a growth of 33%. The Profit after Tax after minority was at ₹207 Crore as against ₹155 Crore in FY20.

Besides industry growth, demand for premiumisation in switches continued to drive our growth along with booking of new orders. We added new customers for switches, which earlier we were not serving. In our 2-wheeler switch, we acquired new customers with orders for USB chargers and ignition switch.

The switching system business recorded a revenue of ₹1,868 Crore contributing to 29% to the full year revenue. We onboarded some of the marquee clients serving as a big breakthrough for MIL during the year.

Moving to the Lighting business, while we continued to receive more orders for LED lighting, we also entered the global market through a European automaker. The full-year contribution was also 22%, amounting to ₹1417 Crore.

Our Casting business’ full-year contribution was 12%, amounting to ₹748 Crore. For the 2-wheeler alloy wheel project, three lines were commissioned during the year. While we are commissioning the remaining line, we have already started recording sales from the earlier commercialised lines. The fourth line of the project is anticipated to be commissioned in Q2FY22. The capacity expansion for Four-Wheel alloy wheel at Bawal is under progress.

Moving to Acoustics or Horn Business, it achieved a revenue of ₹634 Crore for the full-year, contributing 10% of our total turnover. Our European subsidiary Clarton Horns continued receiving new orders for electronic horns from global customers, including Korean, Japanese and US OEMs. While the Seating business achieved revenues ₹650 Crore for FY21, contributing 10% to the full-year revenue.

In our other product businesses, the business achieved a revenue of ₹1,058 Crore, contributing 17% of the overall topline. The other product revenue mainly comprises sales from sensor business, blow molding parts business, iSYS and battery business.

During the year, we also received orders for our recently commissioned temperature sensor product, for wheel speed sensors. Going forward, we have a healthy order pipeline for a blow molding part business with new orders from another Japanese customer.

Mitigating Risk

The pandemic’s supply chain disruption did cause cost challenges, particularly with commodity prices, but we actively mitigated the higher side of the risk. Availability of raw material constraints was mitigated by a higher inventory of the finished goods, but it drove up our costs indirectly. We were also able to bring in more efficiencies on the operational front and strengthen our balance sheet. We diligently worked on improving working capital efficiency while the strong free cash flow helped us reduce our net debt. We relied on best practices in daily work management, including tracking permissible purchase limits and assessing stocks and balances at an all-India level. This ensured our preparedness for any unprecedented demand in future.

Electronic content is increasing in every vehicle. It is increasing in 2-wheelers, telematics, connectivity and we look forward to increasing our kit value in all these segments in the electronics items in our product line. We look forward to find ways to provide new technologies and solutions to our customers.

During the year, we undertook a realignment of business domains based on similar technologies and created domains to drive synergies between related business. As part of this initiative, we have focused on strengthening the realignment of our business verticals to drive synergy among similar products and technologies. We have recalibrated certain functions like procurement, R&D and marketing to bring in increased control and efficiency. More emphasis will be given to international export sales. We are exploring certain steps like opening offices in international locations closer to the global OEMs so that it help establish better understanding and relationships.

Responsible Governance

MIL’s robust operating model, governance structure, effective risk management and ethical practices represent a robust platform for long-term stakeholder value-creation. Our rigorous market scanning and risk review process facilitate responsiveness. MIL invested in responsible business practices to promote operational excellence and reinforce stakeholder trust. We continued to deepen our environmental social governance (ESG) culture and appointed an external agency to conduct an ESG audit

During the year, we undertook a realignment of business domains based on similar technologies and created domains to drive synergies between related business. As part of this initiative, we have focused on strengthening the realignment of our business verticals to drive synergy among similar products and technologies. We have recalibrated certain functions like procurement, R&D and marketing to bring in increased control and efficiency.

Going Forward

In FY22, we will pursue strategic priorities, focus on financial and ESG priorities while building growth momentum. MIL thanks all its stakeholders, internal and external, for their support towards our vision and related initiatives. I would like to thank the team for the passion and perseverance and assure them that we will remain engaged in delivering profitable growth and societal value.

Best regards,

Sunil Bohra

Group CFO