CFO’s Perspective

Dear Stakeholders,

India’s economy has scripted a robust recovery in FY 2021-22 where India’s GDP grew by 8.7% at its fastest pace in nearly 22 years. To put the numbers in context, the 8.7% expansion comes against the backdrop of a very low base as the economy contracted by 6.6% in the previous period due to one of the strictest lockdowns in the world to prevent the spread of the Covid-19 pandemic. Recovery is broad based with pre pandemic levels of activity captured in several sectors.

India is on track to become the fastest-growing major economy, driven by robust exports, reviving consumer demand, and supportive fiscal and monetary policies once again. This has been further catalysed by a rebound in the Service sector, Mining sector, and a complete recovery of the Manufacturing sector.

Industry

The overall automobile domestic production volumes in FY 2021-22 registered only 1% growth YoY basis. However, except 2-wheeler category, the other three major categories i.e. Passenger vehicles, Commercial vehicles and 3-wheelers have registered a remarkable growth of 19%, 29% and 23%, respectively on the low base of FY 2020-21. Despite this growth, production of all four major vehicle segments is even below the FY 2018-19 level marred by several headwinds like supply chain bottlenecks and semiconductor shortages. The increased cost of ownership, driven by higher commodity prices (both raw material prices and oil prices), insurance costs and geopolitical tensions, further disrupted the momentum. The impact caused by the successive waves of the Covid-19 pandemic and the consequent lockdown restrictions by various states across the country, adversely affected the rural and urban markets.

The Indian automotive industry is driving into FY 2022- 23 with a positive mindset in its quest to reach the pre pandemic level in terms of volume as semiconductor supply constraints have eased up with pick up in private consumption and rising discretionary spends. Domestic auto industry is poised for strong growth in the coming years.

Financials

Showcasing great resilience and strength, we navigated successfully through the challenges during the financial year. Further, we seized better opportunities during the year’s second half, backed by strong revival of the industry. The second wave of the pandemic did bring a new set of challenges but we continued to move ahead with the same vigour as last year.

During the year, we continued to strengthen our balance sheet and recorded a sales growth of 30% at ₹ 8,313 Crores as compared to FY 2020-21. Our Switches business has been the largest contributor with 28%, followed by the Lighting business at 22% of revenue this year. We recorded an EBITDA of ₹ 885 Crores, higher by 22% YoY from ₹ 725 Crores in FY 2020-21. Our EBITDA margins were seen at 10.7%, while PAT margins improved by 104 bps, reaching 4.3%. These margins were achieved by the continuous backing from business enhancement and higher capacity utilisation. We believe that these margin levels are sustainable, and hence we continue to focus on managing the costs while ensuring profitable growth.

Segmental Highlights

Switching Systems

This segment generated a top line of ₹ 2,324 Crores in FY 2021-22, led by strong growth in export of 2-wheelers switches and an increase in content per vehicle consequent to an increase in the number of switches in both 2-wheelers and 4-wheelers. It further, won multiple orders for the generation switches — sunroof, cruise control, paddle switches and vehicle stability switches, among others. Building on our growing export momentum, we started supplies to marquee American 2-wheeler OEM and won a key order from an Italian 2-wheeler OEM. Over the years, switches have become a lot smarter, with an ability to communicate with other parts, such as in-built diagnostics, connectors, and boot loaders. The continuing incremental orders for these next generation switches validate our ability to innovate and stay ahead of the technology curve.

Lighting Systems

Our Lighting business contributed ₹ 1,847 Crores to the total revenue, thereby, contributing 22% of our consolidated revenue. The Lighting segment has become one of the most exciting segments with very promising growth outlook. With the augmented lighting technologies and capabilities added through the Delvis GmbH acquisition, Uno Minda has secured several key order wins in LED head lamps and tail lamps over the last few quarters aggregating to ~₹ 400 Crores which will ramp up over the next two to three years.

Acoustic

Our Acoustic business achieved a revenue of ₹ 656 Crores for FY 2021-22, contributing 8% of our consolidated revenue. The performance of our European subsidiary Clarton Horn, which contributes majority of the Acoustics revenue, remained subdued as it was significantly impacted due to shortage of semiconductors that resulted in dropping the volume of the European auto industry. While there was a little recovery in FY 2021-22 Q4 but it still isn’t out of the woods. The Russia-Ukraine conflict may further dent the revived hopes.

Casting business

Our Casting business continues to grow exponentially with expanding capacities. Castings Division achieved a revenue of ₹ 1,467 Crores in FY 2021-22, as compared to ₹ 748 Crores in FY 2021-21, registering a staggering growth of 96%. Casting division now contributes 18% of our total turnover as against 12% in FY 2020-21. The Casting division achieved an outstanding growth with the commissioning of the 2-wheeler Alloy Wheel plant and increasing penetration of the 4-wheeler Alloy Wheel business resulting in large orders for us.

We are very optimistic with increasing demand for both 2-wheeler and 4-wheeler Alloy Wheel. We are also enhancing our 2-wheeler and 4-wheeler Alloy Wheel capacities by almost 50% to serve these increasing demand. The expansion is expected to be commissioned in a phased manner over the next two years.

Seating business

Our Seating business revenues stood at ₹ 902 Crores for FY 2021-22 contributing 11% of our total turnover. Seating division registered YoY growth of around 19% on account of further diversification of customers and increase in exports. Revival of CV segment and better volumes from 2-wheeler has supported the growth of the Seating business. We are pleased to inform you that we have added 3 (three) new age EV 2-wheeler OEM and one EV Bus OEM as our customers for seating business during the years

The growth of our aftermarket business continued in FY 2021-22, with a revenue of ₹ 826 Crores, upto 11% growth YoY. We continued to strengthen our aftermarket presence with the launch of new products as well as new branding and marketing initiatives.

We reported the highest ever share of profits of associates and joint ventures at ₹ 65.2 Crores in FY 2021-22 backed by good performance from our infotainment joint venture with Denso Ten, our safety system joint venture with Toyoda Gosei, our CNG product joint venture with Westport and our filter product joint venture with Roki.

Electrification

Electrification will play an important role in the transformational journey of the Mobility industry and will present major opportunities for the entire ecosystem. While almost all of our existing products can be fitted in EV vehicles, we still have been developing EV specific components to capture this fast-growing market. During the year, in our pursuit towards becoming a technology leader in EV components as well, we entered into a joint venture agreement with FRIWO AG Germany – a global manufacturer of innovative power supply units and e-drive solutions – to manufacture and supply various electric vehicle components for 2-wheelers and 3-wheelers in the Indian Subcontinent. The joint venture now has one of the most formidable EV-specific production portfolio in the entire industry. Our potential kit value for EV 2-wheelers has increased from ₹ 7,300 for ICE engine to ₹ 25,000+ with our in-house developed products and further improved to ₹ 50,000+ with FRIWO joint venture.

We target to achieve annual revenues of around ₹ 1,500 Crores plus from FRIWO joint venture in the next 5-6 years.

Besides EV-specific products, we have also been actively engaged by the top six to seven new age 2-wheeler EV OEMs for supply of EV and our traditional products. During the year, we secured orders of more than ₹ 400 Crores of peak annual sales value from these new age OEMs. The peak sale is expected in the FY 2024-25, as our Company ramps up the production with an increased adoption of 2-wheeler EVs.

Strategic Business Update

During the year, we enhanced our stake in one of our most profitable subsidiary, Minda Kosei Aluminium, from 70% to 77.35% by subscribing to rights issued at a face value of ₹ 10 per share, in total getting an investment of ₹ 61.2 Crores. Minda Kosei Aluminium has significant growth opportunities with increasing penetration of 4-wheeler Alloy Wheel coupled with import substitution opportunities.

Uno Minda has also completed the acquisition-cum consolidation of four partnership firms by acquiring remaining stakes of the promoters. In line with the commitment, the transaction is being done at book value by the promoters. The move will further simplify the holding structure and improve transparency with significant reduction of related party transactions. This concludes our consolidation exercise, initiated five years back, by bringing all group companies and all auto components under a listed entity now.

ESG

Uno Minda is committed towards creating a value for all our stakeholders in a sustainable manner. We endeavour to empower the communities we live and work within. We run more than 15 centres across India which provide support to underprivileged communities through means of education and vocational trainings.

In our journey towards being a global sustainable organisation, we have recognised the importance of minimising the negative environmental impact of our operations. To this end, we have adopted new technologies and best practice initiatives that have enabled us to improve our performance with respect to energy and water consumption and waste generation. We have installed roof top solar power plants at almost all our plants and have now also set up solar parks for captive use. We meet around 20% of our power requirements through renewable energy source and intend to increase the same to 40% by 2024-25.

Effective corporate governance is the foundation upon which our organisation is built. It has been our constant endeavour to incorporate, demonstrate and live up to the highest standards of corporate ethos and governance in all our policies and practices for an inclusive growth.

People

Our employees are an integral part of our growth journey. We consistently strive to create an inclusive and safe work environment where all employees have an equal opportunity to grow. To this end, we have developed a comprehensive training and diversity strategy for our organisation. We are pleased to announce that as a testament of our efforts, we have been featured in the Wall of Fame of the Great Place to Work Institute’s Top 30 Best Workplaces amongst manufacturing companies in India.

Looking Ahead

Uno Minda will continue its transformational journey to be global technology leader in Auto component industry. We are well positioned for a consistent and sustainable growth in the coming years on the back of expected recovery in Auto industry. We are continuously expanding our product and technological capacities and capabilities to enable us to outperform the industry.

We are thankful for the support of all our stakeholders, and our management is optimistic about retaining leadership across the business segments, with the objective of enhancing shareholders’ value sustainably.

Best regards,

Mr. Sunil Bohra

Group Chief Financial Officer