Dear Shareholders,
I am pleased to report that INEL has delivered a robust performance for
the year against the backdrop of a tough operating environment. We also continued to
invest in our core competencies to capitalise on the significant long-term growth
drivers and build a more broad-based business.
Operating environment
The COVID-19 pandemic continued to cast a shadow on the complete
recovery of the Indian automotive sector, which has been facing disruption since early
2020. Supply-side constraints, particularly the shortage of semiconductors and a steep
rise in commodity prices, further exacerbated the challenges being faced by the sector. As
per the estimates of the Society of Indian Automobile Manufacturers (SIAM), while the
Indian automotive sector witnessed a de-growth of 6% in FY 2021-22, the two-wheeler
segment was more harshly impacted with a decline of 11% from the previous year.
Performance review
Overcoming the numerous external headwinds, we delivered a strong
performance for the year. Our total revenue for FY 2021-22 stood at 580 Crores, an
increase of 17% over the previous year. This was achieved on the back of stellar exports
and aftermarket growth of 44% and 43%, respectively. The year also saw us achieving the
highest ever sales in our corporate history and growing our market share for our core
products of electronic ignition solutions. This reflects our agility in effectively
manoeuvring through a demanding environment and the trust we have built for our products.
Our sales performance also benefited from new customer wins and the launch of new products
in the market.
Despite our best efforts, however, we were not able to fully offset
commodity inflation with operational efficiency. Our gross margins thus declined
marginally to 29.9% from 31.9% in the previous year. A lag in compensation from customers
for the rise in input costs also impacted our gross margin performance.
Commodity price recovery efforts have been initiated across our
customer base and we expect to realise the additional revenue during the first half of
fiscal 2022-23. Procurement efficiency, implementation of value analysis and value
engineering (VA/VE) techniquesandimprovement in plant efficiency are other measures being
pursued to optimise costs.
Operational highlights
During the year, we completed the setting up of our new Technology
Centre in Hosur, Tamil Nadu. This state-of-the-art facility provides an inspiring
environment for developing futuristic products. The automotive sector is steadily pivoting
from internal combustion engines to electric propulsion; our Technology Centre will play a
critical role in helping us introduce innovative products to support our customers in this
transition.
The Centre will also provide a thrust to the development of BS-VI
compliant products, technologies for emission control, and mechatronic products.
Furthermore, it will drive the R&D of products that serve sectors beyond automotive to
support business diversification. We have successfully partnered with companies from the
renewable and FMCG sectors and are confident of further broadening the applications for
our products through our R&D expertise.
In another significant development, we entered into a technical
licensing partnership with a global European company focused on control units for
Electronic Fuel Injection (EFI ECU). This partnership will enable us to enter a new
product segment of the EFI system and serve our customers for two & three-wheeler
applications. We have set up state-of-the-art emission and vehicle tests and plan to
expand our electronic manufacturing capability for EFI ECU production.
People and culture
At its heart, INEL is a business built on the efforts of its people,
and it is the talent and dedication of our team that continues to reinforce our confidence
in an exciting future. We provided several training opportunities to our people so that
they have the right skillsets to meet the evolving needs of our customers and business. We
also continued to encourage the hiring of apprentices and training them in vital industry
skills, making it a win-win situation for the local community and our Company.
We believe that our values-based culture breeds success. We continued
to strengthen this culture by improving the way we work together in support of our
customers and one another. Our approach to investing in the growth of our employees,
together with our multiple engagement initiatives and competitive pay policies, has made
us the employer of choice. This is reflected in INEL securing the Great Place to Work?
Certification for the second consecutive year. This prestigious recognition has further
reinforced our credentials as an employer, enabling us to attract and retain talent.
The road ahead
Consumer and business sentiments have improved with pandemic anxieties
receding. The economy finally seems to be moving along the path of accelerated growth
supported by the government?s encouraging schemes and sustained infrastructure
investments.
This is expected to drive the demand for vehicles. Another factor that
augurs particularly well for the demand for personal transport is that employees are
steadily returning to offices.
As a trusted manufacturer of electronic ignition solutions for internal
combustion engine vehicles, we are confident of exploiting the opportunities in our legacy
business. Our focus on broadening our business horizons – through technology,
geographies, customer base, and sectors – should also serve us well for long-term
growth. Our debt-free balance sheet further underpins our ability to invest in technology,
new product development, and infrastructure and pursue an exciting growth trajectory.
Acknowledgements
I would like to extend my sincere thanks to our employees for their
unwavering commitment. On behalf of the Board of Directors, I take this opportunity to
acknowledge the continued support received from Lucas TVS Limited, Lucas Indian Service
Limited, Mahle Electric Drives Japan Corporation, and Mahle Holding (India) Pvt Limited.
We thank our business partners for their contribution to our shared success. We also
express our sincere appreciation to our customers, bankers, financial institutions, and
Central and State government bodies for their steadfast support. Finally, thank you to our
shareholders for reposing their trust in our business. With your continued support, INEL
remains committed to creating better value for all.
Yours sincerely,
Arvind Balaji
Managing Director