Talbros Automotive Components Ltd

Dear Stakeholders,

I am honoured to present the Annual Report for Talbros Automotive Components Limited for 2023-24.

This report reflects the resilience and innovation that have guided our journey over the past year. It highlights the strategic initiatives, key achievements, and milestones that have fuelled our growth, strengthened our market position, and prepared us for the future.

Macroeconomic Landscape

The fiscal year 2024 was marked by a dynamic and evolving macroeconomic environment. Global economic activities saw a gradual recovery, with notable growth in various sectors, particularly in the automotive industry. The resurgence of consumer demand, coupled with significant technological advancements, fuelled the expansion of the automotive market globally. The increasing inclination towards electric vehicles (EVs) and sustainable solutions has also been a key driver, positioning the industry for substantial long-term growth.

Industrial Overview

The automotive industry witnessed significant momentum during 2023-24, with a significant increase in vehicle sales across all segments. The Indian automotive sector, in particular, showed remarkable resilience, with a total of 23.8 Mn vehicles sold, representing a 12.5% growth over the previous year.

The passenger vehicle (PV) segment saw an 8.4% increase, while two-wheelers grew by 13.3%. The commercial vehicle segment remained stable, indicating a balanced growth trajectory. The rapid adoption of electric vehicles was a standout trend, with EV sales rising by 41%, surpassing 1.6 Mn units, and increasing their penetration rate to 6.8%.

(Source: https://economictimes.indiatimes.com/industry/auto/auto-news/passenger-vehicle-wholesales-surge-up-by-8-4-in-fy24-siam-data-shows/articleshow/109238215.cmsRsfrom=mdr https//www.business-standard.com/industry/auto/electric-vehicle-penetration-touches-6-8-mark-in-fy24-shows-data-124040200970_1.html)

EV sector

India has experienced a remarkable shift in EV perception, from 'green premiums' to 'green discounts,' driven by government initiatives, consumer acceptance, and technological advancements, significantly impacting the country's climate strategy. With projections indicating EVs could comprise over 40% of India's automotive market by 2030, this growth promises substantial revenue and job creation. The year 2023-24 saw EV sales surpassing 1.7 Mn units, led by electric two-wheelers at 55% and passenger electric three-wheelers at 32%, with Uttar Pradesh, Maharashtra, Karnataka, Tamil Nadu, and Rajasthan emerging as top-selling states, and collectively accounting for over 50% of the market share, showcasing widespread adoption. This transformative journey signifies a shift towards sustainable mobility, offering opportunities for growth, innovation, and environmental stewardship, with immense potential for collaboration and advancement towards a greener future.

(Source: https//energy.economictimes.indiatimes.com/ tag/bain+%26+company

https://energy.economictimes.indiatimes.com/news/power/indias-ev-revolution-green-premiums-turn-to-green-discounts-as-market-matures/110192146Rsutm_source=top_news&utm_medium=tagListing

https://energy.economictimes.indiatimes.com/news/power/electric-two-wheelers-lead-as-indias-ev-sales-cross-1-7-million-in-fy2024/109810098)

Operational Highlights

Talbros Automotive Components Limited demonstrated robust operational performance during the period, driven by its diversified product portfolio and strategic collaborations. The Company continued to optimise its manufacturing processes, ensuring high-quality output while maintaining operational efficiency. Talbros successfully expanded its customer base, catering to both domestic and international markets, and sustained strong relationships with OEMs.

Our focus on expanding our EV portfolio has been fruitful, contributing to a growing share of our revenue. Our heat shields and gasket divisions showed strong performance, supported by key orders from leading OEMs such as Maruti, Kia, and Hyundai. Additionally, the Company focused on innovation and technology upgrades, reinforcing its position as a leading supplier in the automotive components industry. Continuous improvements in supply chain management and strategic cost control measures also contributed to the Company's operational resilience during the year.

Business Review

Our Gasket and Heat Shield business continues to demonstrate robust performance, reaffirming its leadership position in the market. For 2023-24, we achieved a remarkable total income of Rs 515 Crores, up from Rs 434 Crores in the previous year. This impressive growth underscores the strength of our product portfolio and our deep commitment to innovation. With a 50% market share, it remains a significant contributor to the Company's consolidated revenue, delivering consistent financial results. Looking ahead, we aim to sustain this momentum, targeting a 13% CAGR in revenue growth through 2026-27 by expanding our gasket and heat shield business, increasing exports, and diversifying our portfolio.

Our Forging Business has remained a cornerstone of our growth, demonstrating remarkable performance throughout the year. For 2023-24, it achieved a noteworthy revenue increase, reaching Rs277 Crores, up from Rs 219 Crores the previous year, and representing 28% of our total revenue. The division's success in securing new international orders has significantly bolstered our financial strength. Looking ahead, we are poised to drive revenue growth with a targeted 23% CAGR through 2026-27, focusing on expanding our presence in the electric vehicle sector, enhancing our export capabilities, and strengthening our Agri and Off-Highway portfolios.

The Company took a strategic decision to divest its complete 40% ownership interest in its joint venture entity, Nippon Leakless Talbros, constituting 48,00,000 fully paid-up equity shares of ' 10/- each for ' 81.80 Crores. The stake sale was successfully completed on January 25, 2024. TACL plans to allocate the proceeds from the sale towards expansion initiatives aiming to further strengthen and grow its business.

Marelli Talbros Chassis Systems has consistently demonstrated strong performance, highlighting its pivotal role in our diverse business portfolio. For 202324, the division recorded a total income of Rs 260 Crores, showing a solid year-on-year growth compared to Rs 210 Crores in the previous year. This joint venture continues to enhance our capabilities in the chassis systems sector, delivering advanced solutions that address the evolving needs of the automotive industry. Moving forward, we are committed to further advancing the operational efficiencies and market reach of Marelli Talbros Chassis Systems, ensuring continued growth and value creation for our stakeholders.

Talbros Marugo Rubber Private Limited (TMR) has exhibited impressive growth and resilience throughout 2023-24, solidifying its role as a vital component of our business ecosystem. The division reported a total income of Rs 123 Crores, a significant increase from Rs 85 Crores in the previous year, reflecting a steady upward trajectory.

As we continue to drive innovation and technological advancements, TMR is strategically positioned to seize emerging opportunities within the automotive sector, contributing to our overarching goal of pioneering growth and enhancing value.

Consolidated Financial Performance

Our financial performance in 2023-24 has been an exceptionally strong, underscoring Talbros Automotive's continued growth and financial robustness. At the group level, including all joint ventures and fully consolidated entities, we achieved a notable revenue of Rs 1,258 Crores, reflecting a solid 21% year-on-year increase. This growth highlights our successful strategies and the expanding reach of our operations.

Our EBITDA for 2023-24 soared to Rs 127 Crores, representing a remarkable 36% improvement from Rs 94 Crores the previous year. This significant rise underscores our operational efficiency and the effectiveness of our cost management strategies.

In terms of profitability, our PAT before exceptional items reached Rs 83 Crores, marking a striking 49% increase from Rs 56 Crores in 2022-23. This exceptional growth in net profit demonstrates our ability to enhance shareholder value and sustain robust financial health.

Moreover, our Return on Capital Employed (ROCE) for 2023-24 rose to 20.4%, compared to 16.6% in 2022-23, highlighting improved efficiency in utilising our capital. Similarly, our Return on Equity (ROE) increased to 20.2% from 16.5%, reflecting our strong financial performance and effective management.

Maintaining a prudent financial structure, our debt-to-equity ratio for 2023-24 stands at a conservative 0.17x, reinforcing our commitment to a balanced and sustainable growth trajectory. Overall, 2023-24 has been a testament to Talbros Automotive's strategic execution and operational excellence, positioning us well for continued success.

Outlook

Looking ahead, we remain optimistic about the future of the automotive industry. The ongoing shift towards electric vehicles, coupled with the increasing demand for sustainable automotive solutions, presents numerous opportunities for growth. Talbros is well-positioned to capitalise on these trends, with a strong order book, strategic partnerships, and a diversified product portfolio. We aim to increase our export share from 25% to 35% over the next three years, focusing on expanding our presence in international markets. Our commitment to innovation, quality, and customer satisfaction will continue to drive our success in the coming years.

In conclusion, I would like to extend my gratitude to our stakeholders, including our customers, partners, employees, and shareholders, for their continued support. Together, we will continue to build on our successes and pursue new opportunities to drive sustainable growth and value creation.

Sincerely,