Business Filing

Business Filing Anand Mando e-Mobility

Anand Group and Mando Corporation have entered into a JV. Prateek Pardeshi looks at the growth potential tied to the demand for e-mobility.

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ndia, as a signatory to the Paris Agreement, is prioritising electrification on a national level. This national mission is backed by the Government of India’s (GoI) FAME scheme. Known to have sold 1,05,268 EVs till date, from Tamil Nadu to Jammu Kashmir, as per the Ministry of Heavy Industries statistic, there are no two ways about the GoI led, and state followed focus on emobility. For instance, through the FAME II scheme, the aim is to generate demand through the sale of an estimated 7,000 e-buses, five lakh electric threewheelers, 55,000 electric four-wheelers, passenger cars including strong hybrids, and 10 lakh electric two-wheelers.

To leverage the government’s provisions for intra and inter-segment wise fungibility that is extended to privately-owned registered vehicles up to vehicles used for public transport and commercial vehicles, Anand Group and Mando Corporation have entered into a Joint Venture (JV). Here, the ANAND Group will hold a majority stake of 60 per cent in the JV formed

Anjali Singh, Executive Chairperson, ANAND Group

Jaisal Singh, Co-Chairman, Mando Automotive India Pvt. Ltd.

with Mando Corporations holding a 40 per cent stake. In a company release Anjali Singh, the Executive Chairperson of ANAND Group said, “The collaboration with Mando Corporation is in line with the key ethos of the ANAND Group’s vision, to create value sustainably through the pursuit of excellence. I am confident that this long-term association will continue to evolve by leveraging the synergies and mutual strengths to successfully create efficient products and systems for the Indian Electric Vehicle industry.” The JV-Special Purpose Vehicle (SPV) is expected to deepen the historic ties between the two entities and propel forward the growth aspirations. The SPV - Anand Mando e-Mobility Pvt. Ltd. will have the partners leverage existing synergies, respective capabilities, and their diverse experiences in the auto component industry. ANAND Mando eMobility will focus on manufacturing and marketing EV components and systems for the two- and three-wheeler applications.

Product segmentation

ANAND Group and Mando Corporation will supply motors and controllers for the emerging two- and three-wheeler EV market. Through ANAND Mando eMobility, the two entities will address the varied and complex Indian driving conditions by catering to vehicles from low-speed scooters at the bottom end of the spectrum to high-speed motorcycle and passenger transporters and cargo carrier three-wheelers. Jaisal Singh, Co-Chairman, Mando Automotive India Pvt. Ltd. commenting on the future plans focused on the growth and financial investments of JV stated, “The market for EV components is expected to grow at a CAGR of approximately 22 per cent till 2030. ANAND Mando eMobility clearly has the engineering capability and technological know-how to service the growing demand for motor and controller components in India.” The target set by the Government of India for the electrification of the automobile sector in India has led to the Electric Vehicle market in India gaining momentum, especially after the implementation of the FAME India scheme. And, it is only natural for us to be a part of this exciting story that will be a key factor in ensuring a cleaner and healthier planet for future generations”

The focus will remain on manufacturing robust, reliable, and efficient powertrains using inhouse components. In line with the ‘Atmanirbhar Bharat’ vision of the government, the company will offer clean and sustainable solutions built

using localised cost-effective, alternatives to imports. Setting up a base in Rajasthan, the manufacturing unit for the SPV is known to be planned for an expanse of 60,000 sq. ft. with scope for further capacity expansion. It will aim for a quick turn-around, from commissioning to product rollout. The SPV could extend openings to an additional 350-450 employees. “With the kind of investments we are making in establishing a worldclass production facility, and, of course, recruiting top human talent, I am confident that we will be a preferred supplier and shall achieve a turnover of rupees 500 crores by 2025,” added Singh.

Using the available ecosystem and incentives offered at the state and the national level, the state government had recently announced incentives on the lines including subsidies on the upfront cost of EVs for early adopters subject to meeting the eligibility criteria. The SPV will also benefit from the recent order issued by the Rajasthan government’s transport department. As per the order, Rs.10,000 will be reimbursed on the purchase of a three-wheeler with a battery capacity of 3 kWh; Rs.15,000 for 4 kWh battery capacity; Rs.20,000 for a battery capacity of over 5 kWh; for twowheelers, Rs.10,000 for battery capacity of more than 5 kWh; Rs.9,000 for battery capacity up to 5 kWh, Rs.7,000 up to 4 kWh and Rs.5,000 up to 2 kWh.

Outlay

Over the next three years, capital expenditure of more than 50 crore INR will be made in the fields of product engineering and testing, as well as manufacturing equipment. ANAND Mando eMobility aspires to achieve a turnover of 500 Crore INR by 2025. The Hub Motor will be ready to be launched for two leading 2 - Wheeler EV Original Equipment Manufacturers (OEMs) by October 2021. The product launches will continue with the Center/Mid-Drive Motor in mid- 2022 followed by a stream of variants thereafter. ACI

Adopting Global Best Practices

With the collaborative effort of trained personnel and the adoption of global best practices, ANAND Group, the majority stakeholder (60 per cent) in the new JV - ANAND Mando e-Mobility is banking on its agility led by a responsive workforce. 15 per cent of the Operating Engineers (OEs) specialise in specific duties, such as maintenance (STOE). Through the ANAND Heijunka manufacturing system, the company is claimed to have a strong framework for shopfloor excellence. The Quality Management System (QMS) outlines the processes, methods, and responsibilities involved in meeting qualitative goals. To tackle qualitative discrepancies, opaque customer communications, and unsystematised techniques, the management has put in place a zero-tolerance policy. There are Quality Circles (QCs) where employee workgroups gather on a regular basis to discuss and address quality concerns. Fundamental causes are identified and solutions are provided to implement corrective actions. The goal at ANAND is to ensure that all OEs participate in all QCs in order to better quality on an ongoing basis. Every year, this group of firms are encouraged to compete at national and international contests to represent such QCs.

cover Story The Explicit Manufacturing Goals

Auto component manufacturers continue to strive for business development and continuity. Ashish Bhatia draws attention to the explicit manufacturing goals for long term stability.

Auto component manufacturers continue to strive for excellence as much for business development and continuity. The explicit goals on the anvil form the basis of a long-term stable outlook. To attain stability, the groundwork in the near to medium term must encompass survival, revival and growth strategies. Collaboration at the value chain level is proven to have been a stepping stone for the industry. All collaborators, it is unanimously agreed upon, must demonstrate agility, flexibility, and customer-centricity. Speaking at the 61st Auto Component Manufacturer Association (ACMA) annual conclave, Deepak Jain, Ex-President, ACMA said, “Despite several challenges the industry has displayed remarkable resilience with a collaborative spirit. We are now witnessing a gradual resurgence of demand for vehicles, and I am hopeful that we will be able to ensure business continuity and return to pre-covid levels of performance, sooner rather than later.” Concluding a successful term ridden with unprecedented challenges as ACMA President, Jain advocated for the need to plan not just for today and tomorrow but keeping in mind the longterm prospects. Including tapping new business wins in a constantly evolving technological landscape.

On the anvil

ACMA and PricewaterhouseCoopers (PwC) through a joint study, urged the stakeholders of the industry to change their operating model in order to be agile, flexible and customer-focused, and succeed in the new normal. “Our study shows that companies with robust financial management capabilities and a focus on growing value-added per employee and strong alliances with suppliers and customers will emerge successfully,” said Kavan Mukhtyar, Partner and Leader - Automotive, PwC. “Attracting and retaining top talent, building and nurturing a core leadership, and separating ownership from company management are some of the other best practices that will help companies thrive amid volatility,” he mentioned. Market volatility, he cited, would become more frequent and only intensify going forward driven by both domestic and global events. Notably, the underpinnings of the business models known to have helped the automotive industry sustain over the last century, are undergoing transformational changes as per the study.

Dealing with the compliance burden, price increases, capex commitment and increased accountability, component manufacturers are required to step up. Manufacturers are building supply redundancies to deal with unpredictable tariff regimes, attain a state of agreement with OEMs aiming to balance costs and parts availability. The supplier’s fate on the OEM exposure front today rests with OEM expansion plans. The latter depends on the permissibility to cater to both the domestic and global markets. The supplier ecosystem, notably, must grow in conjunction with OEM location preferences. To deal with the supply chain volatility, case-inpoint, the much talked about semiconductor shortages, in the near term the focus stays on catering to highly profitable and in-demand

Sunjay Kapur, President, ACMA

Deepak Jain, Ex-President, ACMA Kavan Mukhtyar, Partner and Leader - Automotive, PwC.

vehicles as per the IHS 2021 February release, PwC Autofacts. With electronic content in cars of the future pegged at greater than 40 per cent on fronts like Human-Machine Interface, Infotainment, Advanced Driver Assistance Systems (ADAS), connectivity computing, cloud-based enablement, the industry is required to re-evaluate their CASE strategies. Available technology, value pool size and unit economics are expected to take precedence going forward. The study estimates traditional profit share from supplier business to halve from 71 per cent to 41 per cent.

Imperatives for EV component suppliers

EV adoption will be driven by cost economics, availability of infrastructure and state-level EV policies. Suppliers are increasingly focusing on EV skateboards. They are looking at collaborations to bring down development costs and build capabilities. The high-voltage architecture is presenting suppliers with opportunities to work on different sub-components. This is besides the business models of product sales, charging infrastructure and other monetisation avenues. This wave of opportunity has made suppliers hopeful of growth.

Educated decisions

Manufacturers are required to build business forecasts for multiple scenarios. The study advocates the need to apply the most relevant assumptions for the base inputs to their forecast models. A plan of action must be laid out for each of the scenarios and the same must be communicated to all the stakeholders. There is a need to ensure adequate resource allocation for scaling up of assets. One must evaluate the restart of halted projects for delivering future growth. The study advocates suppliers to maintain strong linkages in turn with tier2 suppliers and refrain from spreading too thin. Break-Even Point (BEP) reduction found a special mention too. A case study of a piston manufacturer, using a financial risk dashboard with a built-in escalation workflow is highlighted. The thresholds defined, drive escalations to essential stakeholders, in time to review key metrics and control the possibilities of incurring financial losses.

For BEP reductions, the study cites a case study of an auto-electronics manufacturer known to have revisited its contracts and reviewed the expenditure on non-core assets. The manufacturer is known to have benefitted from renegotiating its leases to obtain a more favourable pricing and tenures. While fixed-cost cutting programmes must be run, firms must also monetise non-core assets and explore innovative ways of asset sharing to achieve break-even reduction, cites the study. A shared assetlight model is opined to translate into better cost-control. With fast-evolving business conditions and disruption in business models, manufacturers must accelerate their pace of digital adoption too. Key business enablers such as analytics dashboards, remote work and customer preferences will find a greater say going forward.

Firms are advised to keep a hawk-eyed view of both supply and demand to overcome the shortcomings of traditional predictive models. Leading indicators must be identified, points out the study. Co-creation and venture funds are said to allow manufacturers to assess, build and scale new solutions quickly and cost effectively. Time-to- market can be detrimental to a firm’s success, it reiterates. Frequent evaluation of tradeoffs requires identified leaders within an organisation to be empowered to make these decisions. Apex body ACMA is working on building a startup platform aimed at understanding, developing information about, and assessing the start-up ecosystem relevant to auto and mobility players. It is indeed an imperative for ACMA to drive change through entire component manufacturing ecosystem and help members to stay relevant with increased focus on localisation and indigenous technology development, mentioned the incoming ACMA President, Sunjay Kapur. ACI

cover Story Safeguarding

The Bottom Line

Pricol Limited is banking on evolution for sustainable growth. Prateek Pardeshi looks at how the manufacturer is safeguarding the bottom line.

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ricol Ltd. has continued to evolve for sustainable growth since it first commenced operations in 1975. The automotive components and precision-engineered product manufacturer is coming off a tough pandemic marred fiscal with an even greater determination to succeed. It is determined to safeguard the bottom line with refined and well-oiled processes and practices with the help of its in-sync human capital. In a company release, stated Vikram Mohan, Managing Director, Pricol Limited, “We are going through challenging times in the automotive industry thanks to the lockdowns due to the pandemic compounded by the acute shortage of electronic components globally which is taking its toll on the company’s performance. Nevertheless, with prudent cost control and continual new business wins we are confident of delivering above-market growth rates and maintaining the bottom lines despite these challenges.”

A testimony to the company doing everything in its capacity to safeguard the bottom line is the recent financial performance of the company. The first quarter of the financial year 2022 (Q1FY22) shows a marked improvement over

Q1FY22 v/s Q1FY21 (Figures in crores)

Particulars Q1FY21 Q1FY22 Per centage Growth

Total Income

117.36 306.52 260.64

Revenue from Operations 103.97 292.75 281.57

Operational EBITDA 2.40 32.70 136.25

Profit Before Tax (PBT) (31.22) 4.06 NA

Profit After Tax (PAT) (28.93) 2.41 NA

Vikram Mohan, Managing Director, Pricol Limited

the same period a year ago (Q1FY21) when lockdown restrictions rendered plants inactive, forcing production to come to a standstill (Refer to the table above). Despite comparing on a lower base, the recent turnaround assumes significance. The focus of Pricol, like peer manufacturers, has been on fast-tracking its recovery from the recent degrowth. The focus is to attain a growth momentum akin to the pre-Covid19 levels on a sequential basis before setting sight on new milestones. According to Mohan, the company is well aware of the need to keep strengthening its existing processes and practices to succeed on a mid to long-term horizon, excel and

support the mid to long-term outlook. “Loss of sales due to potential further lockdowns and shortage of electronic components we believe will continue to impact the automotive industry in India for a few more quarters. But we remain bullish about the mid to long term prospects for our company due to the new business wins especially in the Electric Vehicle (EV) segment and growth in market share of the company.” As per the table above, Pricol in Q1 FY22 registered a total income of ANNUAL REPORT 2021 Rs.306.52 crore compared to Rs.117.36 crore in Q1FY21. Here, revenue from BUSINESS WINS NEW operations was pegged at Rs.292.75 crore compared to Rs.103.97 crore

2W CONNECTED, LCD & TFT CLUSTERS

EV CLUSTERS

2W ELECTRONIC DIGITAL CLUSTERS in the same period the previous year. Operational Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) accounted for Rs.32.70 crores over Rs.2.40 crore. Profit Before Tax (PBT) turned positive to Rs.4.06 crore as against degrowth of (-) 31.22 crore. Profit After Tax (PAT) turned positive to Rs.2.41 crore over degrowth of (-) 28.93 crores in comparison. Setting aside the low-base effect of FY21 on the quarterly performance, on comparing Year-over-Year (YoY) growth of 2021 with 2020, ANNUAL REPORT 2021 the company’s net sales witnessed degrowth of (-) 11.67 per cent. The consolidated net profit grew by 142.03 per cent. The operating profit (PBDIT) BUSINESS WINS NEW exclusive of other income grew by FUEL PUMPS & E-PURGE VALVE 109.55 per cent positively impacting the consolidated net profit which in turn grew by 142.03 per cent. The company also fuelled its growth plans by investing higher. Investments rose from Rs.9.52 crore in 2020 to Rs.15.03 crore in 2021. On a standalone basis, the company witnessed a 17.3 per cent growth in revenue from operations in HEAVY DUTY EXPORT PUMPS FY21 compared to the previous year

Strategic moves

The company is also known to have benefitted from hiving off the bleeding overseas operations known to have had a major impact on the bottom line right before the pandemic hit

NEW over StoryC BUSINESS WINS

FUEL PUMPS & E-PURGE VALVE

HEAVY DUTY EXPORT PUMPS

SPEED SENSORS

business. The strategic move is claimed to have been in line with the objective to become leaner and focus more on profitable geographies. With the business restructuring, the profitability of its business is banking on dashboard instruments majorly. A look at the pre-Covid19 contribution of finished goods to the sales turnover shows dashboard instruments accounted for a majority in the overall sales turnover at 55.70 per cent as of March 2019 superseding other products and service income, oil pumps, and other auto components (The figure stood at 38.60 per cent as of March 2018).

Fast forward to 2021, the trend continues. The new business wins are led by dashboard instruments too. These include two-wheeler connected LCD and TFT clusters; EV clusters;

09 two-wheeler electronic digital clusters; passenger vehicles and commercial vehicles clusters. The company has also witnessed a pull for fuel pumps, e-purge valves, heavy-duty export pumps especially for export markets, and speed sensors. Today the company is banking on its high-value and high margin products for fast-tracking its growth trajectory. Low value and low volume products are known to have been discontinued in a bid to reduce the resources utilised for the same. Notably, new products are claimed to have accounted for ~ 40 per cent of the revenue driven by R&D spends at 1.80 per cent of sales. Pricol is also evaluating and adopting the global engineering process (like ASPICE) to enhance the product quality of all our electronic products. The company also continues to strategically align with new partners to further its aspirations. Recently, the company inked a strategic alliance with Candera, known for HumanMachine Interface (HMI) tools to cater to its global automotive and industrial customers. This strategic technology partnership with Candera is expected to enable Pricol to get access to global HMI solutions for its next-generation connected Driver Information System (DIS) products serving across all vehicle segments. “We are delighted to be partnering with Candera to enhance our capability to deliver nextgeneration connected high-end Thin Film Transistor (TFT) based Digital Information Archiving System (DIAS) (single and multi-display) that meet our customer’s ever-evolving technological needs,” concludes Mohan. ACI