Endurance Technologies Ltd:Annual Report 2023-24 Analysis

Endurance Technologies Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Endurance Technologies Ltd. was established in 1985 by Mr. Anurang Jain. It initially started as a small-scale aluminum die-casting unit.

Headquarters Location and Global Presence:

The company’s headquarters is located in Aurangabad, Maharashtra, India. Endurance Technologies has a global presence with manufacturing facilities in India and Europe (Italy and Germany).

Company Vision and Mission:

• Vision: To be a globally respected and preferred automotive component supplier.
• Mission: Continuously improve performance by innovating and providing cost-effective solutions to meet customer requirements.

Key Milestones in Their Growth Journey:

• 1985: Commenced operations with aluminum die-casting.
• 1995: Entered the two-wheeler component market.
• 2006: Expanded into braking systems and suspension components.
• 2016: Initial Public Offering (IPO).
• 2018: Acquired Adler SpA (Italy) and subsequently added manufacturing facilities in Germany.
• Continuous expansion into new product lines and markets.

Stock Exchange Listing Details and Market Capitalization:

Endurance Technologies is listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). The stock symbol is “ENDURANCE”. Market capitalization fluctuates with market conditions.

Recent Financial Performance Highlights:

(This information needs to be updated with the most recent reports. Look for their latest annual report or quarterly results releases. Examples:)

• Consistent revenue growth over the past few years.
• Improved profitability margins due to operational efficiencies and cost optimization.
• Strong order book indicating future growth potential.
• Focus on debt reduction and maintaining a healthy balance sheet.

Management Team and Leadership Structure:

• Chairman: Anurang Jain
• Managing Director: Anurang Jain
• The company has a well-defined board of directors and a strong management team with experience in the automotive industry.

Any Notable Awards or Recognitions:

• Awards for quality and performance from various automotive OEMs.
• Recognition for their contribution to the Indian automotive industry.

Their Products #

Complete Product Portfolio with Categories:

Endurance Technologies manufactures a wide range of automotive components, broadly categorized as:

• Aluminum Die Casting: High-pressure die casting, low-pressure die casting.
• Suspension Products: Front forks, shock absorbers.
• Transmission Products: Clutch assemblies, CVT systems.
• Braking Systems: Disc brakes, drum brakes, anti-lock braking systems (ABS).
• Friction Plates: Clutch friction plates
• After Treatment Products: Selective Catalytic Reduction(SCR)
• Connectors: Connectors for electric vehicles and other automotive applications

Flagship or Signature Product Lines:

• Aluminum Die Casting
• Suspension Products (Front Forks and Shock Absorbers).
• Braking Systems

Key Technological Innovations or Patents:

• Patents related to suspension technology, braking systems, and die-casting processes.

Manufacturing Facilities and Production Capacity:

Endurance Technologies has multiple manufacturing facilities located in India and Europe, specifically:

• India: Aurangabad, Manesar, Pune, Pantnagar, Chennai.
• Europe: Italy, Germany

Production capacity varies by product line and is regularly expanded to meet growing demand.

Quality Certifications and Standards:

• IATF 16949: Quality Management System for Automotive Production.
• ISO 14001: Environmental Management System.
• ISO 45001: Occupational Health and Safety Management System.

Any Unique Selling Propositions or Technological Advantages:

• Vertically integrated operations, allowing for better control over quality and costs.
• Strong R&D capabilities, leading to innovative product development.
• Long-standing relationships with major automotive OEMs.
• Global presence with manufacturing facilities in key automotive hubs.
• Ability to offer customized solutions to meet specific customer requirements.

Recent Product Launches or R&D Initiatives:

• Development of components for electric vehicles (EVs), including battery management systems and electric motors.
• New generation of braking systems with enhanced safety features.
• Advanced suspension systems for improved ride comfort and handling.

Primary Customers #

Target Industries and Sectors:

• Automotive (Two-wheelers, Three-wheelers, Passenger Vehicles, Commercial Vehicles)
• Electric Vehicles (EVs)

Geographic Markets (Domestic vs. International):

• India (Significant domestic market share)
• Europe (Growing presence through acquisitions and expansion)

Major Client Segments:

• Original Equipment Manufacturers (OEMs) in the automotive industry.

Distribution Network and Sales Channels:

• Direct sales to OEMs.
• Strategic alliances and partnerships.
• Growing focus on exports.

Major Competitors #

Direct Competitors in India and Globally:

• India: Minda Corporation, Uno Minda, Bosch India, Motherson Sumi Systems, Sona BLW Precision Forgings
• Globally: ZF Friedrichshafen, Magna International, Robert Bosch GmbH, Continental AG

How they differentiate from competitors:

• Focus on cost-effectiveness.
• Strong engineering and design capabilities.
• Long-term relationships with customers.
• Vertically integrated operations.

Industry Challenges and Opportunities:

• Challenges: Fluctuations in raw material prices, increasing competition, technological disruptions (EV adoption), regulatory changes.
• Opportunities: Growing demand for automotive components, increasing localization, rising EV adoption, expansion into new markets, focus on advanced technologies.

Market Positioning Strategy:

Endurance Technologies positions itself as a reliable and cost-effective supplier of automotive components, with a focus on innovation and customer satisfaction. They aim to be a preferred partner for OEMs in both domestic and international markets.

Future Outlook #

Expansion Plans or Growth Strategy:

• Focus on increasing market share in both domestic and international markets.
• Expanding product portfolio to include components for electric vehicles.
• Investing in R&D to develop innovative technologies.
• Exploring strategic acquisitions and partnerships.

Upcoming Products or Innovations:

• Advanced braking systems for electric vehicles.
• Lightweight suspension systems for improved fuel efficiency.
• New die-casting technologies for complex automotive components.

Sustainability Initiatives or ESG Commitments:

• Reducing carbon emissions through energy efficiency measures.
• Implementing water conservation initiatives.
• Promoting responsible waste management.
• Ensuring ethical and fair labor practices.

Industry Trends Affecting Their Business:

• Increasing adoption of electric vehicles.
• Growing demand for lightweight and fuel-efficient components.
• Stringent emission norms and safety regulations.
• Increasing globalization of the automotive industry.

Long-Term Vision and Strategic Goals:

Endurance Technologies aims to be a leading global supplier of automotive components, known for its innovation, quality, and customer service. They are focused on sustainable growth and creating long-term value for their stakeholders.

Financial Performance Overview: FY2023-24 #

3-Year Trend Analysis of Key Financial Metrics #

• Consolidated Total Income: Increased by 16.7% to ₹103,264.86 million in FY2023-24, exceeding ₹100 billion for the first time, compared to ₹88,494.73 million in FY2022-23.
• Consolidated EBITDA: Increased by 30.7% to ₹14,135.99 million in FY2023-24, with an EBITDA margin of 13.7%, compared to 10,816.93 million the previous year.
• Consolidated Net Profit: Grew by 41.9% to ₹6,804.88 million in FY2023-24, with a net profit margin of 6.6%. This includes a mega project incentive of ₹792.35 million.
• Consolidated Net Worth: Reached the ₹50 billion mark.
• Cash Position: Consolidated positive cash available exceeded ₹5 billion, with no net debt.
• Earnings Per Share: Increased from 34.99 to 48.38.

Business Segment Performance #

• The Group operates in a single reportable business segment: the manufacture and sale of automobile components.
• Revenue, total expenses, and net profit as per the Consolidated Statement of Profit and Loss represent the performance of this sole reportable segment.
• Geographical revenue distribution shows Indian operations contributing 75,459.98 million and outside India contributing 25,349.18 million in FY 2023-2024.
• Outperformed industry’s overall growth rate.

Major Strategic Initiatives and Their Progress #

• 4-Wheeler and Non-Automotive Segment Expansion: Focused on expanding these segments as part of diversification efforts. 4-wheeler business wins constituted 23% (₹2,810 million) of total order wins (₹11,980 million) in FY2023-24.
• Electric Vehicle (EV) Focus: Total business wins for EVs to date are ₹7,145 million, in addition to ₹3,785 million won by the subsidiary, Maxwell.
• Backward Integration: Invested in backward integrations to manufacture import substitutes and technology components like valves, steel braided hoses for ABS, aluminum forged axle clamps for inverted front forks, and battery management systems.
• New Plant in AURIC: Established a foundation for a new plant on an 11-acre site in AURIC, scheduled to be operational in Q1 FY2025-26, to cater to 4-wheeler (including EV components) and non-automotive aluminum casting applications. Projected CAPEX is ₹4,009 million, with anticipated annual revenue exceeding ₹5,000 million.
• Aftermarket Presence: Increased penetration to 213 districts through 444 distributors in India and expanded presence to 34 countries.
• Technology Aquisition: Acquired 100% stake Frenotecnica Srl, Italy and New Fren Srl.
• Investment in Pierer Mobility AG: In FY 2023-2024, 25,768 equity shares were added.

Risk Landscape Changes #

• Foreign Currency Risk: Exposure primarily to EURO, with some exposure to USD, CHF, CNY, GBP, SGD, and JPY. The group uses derivative financial instruments. Foreign currency derivatives are not hedged.
• Interest Rate Risk: Exposure primarily to debt obligations with floating interest rates. Uses interest rate swaps.
• Commodity Price Risk: Exposure to fluctuations in prices of raw materials (ferrous and non-ferrous metals) and production costs. The group uses commidity swaps.
• Credit Risk: Primarily from trade receivables from OEMs and dealers. The Group uses a credit scoring system and continuously monitors credit limits.

ESG Initiatives and Metrics #

• Sustainability Strategy: Developed a 2030 strategy mapping out sustainability goals, with key metrics and annual targets for each plant.
• Carbon Neutrality: Achieved 35% carbon neutrality in FY2023-24, up from 22.6% in FY2022-23. Aims for 50% by 2030 through renewable energy sources and carbon sinks.
• Zero Waste to Landfill: Committed to achieving zero waste to landfill across all plants by 2030.
• Diversity: Targets 15% gender diversity by 2030 for white-collar employees and 10% for blue-collar employees.
• EHS (Environment, Health, and Safety): Prioritizes human lives, environment, health, safety, and sustainability. Implemented a management of change initiative and a contractor safety management program.

Management Outlook #

• Aims to maintain leadership in the auto component space and grow in the non-automotive component landscape.
• Focus on enhancing product mix and profitability, particularly in the premium bike segment and embedded electronics products (e.g., BMS).
• Targeting a 45% share for 4-wheeler end-use in consolidated turnover by 2030.
• Target for aftermarket to be 10% of domestic sales by FY2027.
• Commitment to delivering value and being agile in order to quickly adapt.

Detailed Analysis #

Endurance Technologies Limited: Financial Position Analysis #

Balance Sheet Analysis (3-Year Comparative) #

(INR in Millions)

Significant Changes in Major Line Items (YoY > 10%) #

• FY2023-2024:
  • Total Assets increased by 14.7%.
  • Other equity increase by approximately 14.3%.
  • Non-current liabilities increased by 50%
  • Current Liabilities increased by 15.7%

Working Capital Trends #

(INR in Millions)

• Net working capital has increased, indicating enhanced liquidity. Significant rise in Cash and Cash equivalents is a major contributor.

Asset Quality Metrics #

• Property, Plant & Equipment (PPE) Growth: PPE (net of depreciation) increased from H 26,000 million in FY23 to H 31,000 million in FY24, an increase of about 19%.
• Goodwill remained relatively stable.

Debt Structure and Maturity Profile #

(INR in Millions)

• Non-current borrowings doubled, indicating potential long-term financing for expansion or investments.

Off-Balance Sheet Items #

• Contingent Liabilities: The company reported contingent liabilities related to excise, service tax, GST, VAT, income tax, and employee-related matters. Amounts are relatively low. The total for 2024 is ~H570 million.
• Commitments: Capital commitments not provided for amounted to approximately H 2,000 million as of March 31, 2024 down from 3,000 in the previous year.

Endurance Technologies Limited: Financial Analysis #

Revenue Breakdown by Segment/Geography #

• Segment: Automotive components.
• Geography (FY2023-24 vs. FY2022-23):
  • India: ₹75,368.45 million (FY24) vs. ₹64,414.33 million (FY23), representing a growth of 16.9%.
  • Outside India: ₹25,083.55 million (FY24) vs. ₹22,055.61 million (FY23), representing a growth of 13.68%.
• Product (FY2023-24 vs. FY2022-23):
  • Shock Absorbers: ₹27,981.91 million vs. ₹23,058.07 million, growth of 21.35%
  • Disc Brake Assembly: ₹11,385.24 million vs. ₹7,927.44 million, growth of 43.61%
  • Aluminum Die Casting Parts: ₹41,741.14 million vs. ₹38,014.26 million, growth of 9.80%
  • Alloy Wheels: ₹7,262.58 million vs. ₹6,654.55 million, growth of 9.13%
  • Clutch and Clutch Parts: ₹4,794.36 million vs. ₹4,166.60 million, growth of 15.06%
  • Others: ₹5,196.31 million vs. ₹5,073.27 million, growth of 2.42%.
  • Sale of Traded Components and Spares: ₹2,261.18 million vs. ₹1,581.38 million, growth of 42.98%.
  • Job Work Changes and Other Services: ₹461.65 million

Cost Structure Analysis #

• Cost of Materials Consumed: Increased to ₹59,194.64 million (FY24) from ₹53,345.44 million (FY23).
• Employee Benefits Expense: Increased to ₹8,584.96 million (FY24) from ₹7,394.44 million (FY23).
• Finance Costs: Decreased to ₹484.22 million (FY24) from ₹675.65 million (FY23).
• Depreciation and Amortization: Increased to ₹4,557.40 million (FY24) from ₹4,293.88 million (FY23).
• Other Expenses: Increased to ₹19,161.12 million (FY24) from ₹16,665.48 million (FY23).

Margin Analysis (Consolidated) #

• EBITDA Margin: Increased to 13.7%.
• Net Profit Margin: Increased to 6.6% (FY24) from 5.4% (FY23).

Operating Leverage #

• Improved due to revenue growth rate exceeding the total cost increase rate.

Non-Recurring Items #

• FY2022-23:
  • Exceptional item of ₹102.85 million related to a Voluntary Separation Scheme.
  • Mega project incentive of ₹792.35 million from the Maharashtra State government.

EPS Analysis (Consolidated) #

• Basic and Diluted EPS: ₹48.36 (FY24) vs. ₹34.04 (FY23).

Cash Management: Financial Analysis of Endurance Technologies Limited #

Cash Flow and Liquidity Analysis #

Detailed OCF, ICF, FCF Components (Consolidated) #

Operating Cash Flow (OCF) #

Increased from ₹8,804.17 million in FY2023 to ₹10,260.64 million in FY2024. Key drivers include higher profit before tax (₹8,541.50 million vs. ₹6,019.88 million) and significant working capital adjustments, notably a positive impact from increased trade payables (₹1,995.84 million) and Other current liabilities, offset by an increase in trade receivables(₹(1,743.41) million).

Investing Cash Flow (ICF) #

A net outflow increased from ₹(9,061.64) million in FY2023 to ₹(9,675.68) million in FY2024. Driven primarily by higher acquisition of property, plant, and equipment, and intangible assets (₹(8,134.33) million vs. ₹(6,669.04) million), net investment in mutual fund & other instruments (₹(1,784.71)million) and acquisition of subsidiaries.

Financing Cash Flow (FCF) #

Changed from outflow of ₹(1,368.77) million in FY2023 to inflow of ₹1,981.36 million in FY2024. Key drivers are proceeds from long term borrowings and short term borrowing(net) against payments of principle & interest portion of lease liabilities, dividend paid, finance cost paid.

Working Capital Management Efficiency (Consolidated) #

Trade Receivables #

Increased from ₹11,620.29 million in FY2023 to ₹12,623.80 million in FY2024, suggesting a potential slight lengthening of the collection period or increased sales. The detailed aging schedule indicates the vast majority (over 99%) are undisputed and considered good.

Inventories #

Decreased slightly from ₹8,056.98 million to ₹8,029.00 million.

Trade Payables #

Increased from ₹14,068.42 million in FY2023 to ₹16,044.66 million in FY2024, potentially indicating extended payment terms with suppliers.

Dividend and Share Buyback Trends #

Dividends #

A dividend was paid during both FY2023 (₹984.63 million) and FY2024 (₹984.64 million).

Liquidity Position and Cash Conversion Cycle #

Cash and Cash Equivalents #

Increased significantly from ₹2,794.84 million in FY2023 to ₹5,118.24 million in FY2024. Suggests a strengthening liquidity position.

Cash Conversion Cycle #

Not directly computable, but the increase in trade receivables and decrease in inventory, combined with a larger increase in trade payables, imply a potentially reduced cash conversion cycle.

Financial Analysis of Endurance Technologies Limited #

Profitability Ratios #

• Return on Equity (ROE):
  • FY24: 13.85% (Calculated: Net Profit attributable to equity holders 6,804.88 / Average Equity (49,681.62+44,121.29)/2)
  • FY23: 11.25% (Calculated)
  • FY22: Not directly calculable.
• Return on Assets (ROA):
  • FY24: 8.7% (Calculated: Net Profit attributable to equity holders 6,804.88/ Average Total Assets (78,017.84+68,151.52)/2)
  • FY23: 6.9% (Calculated)
  • FY22: Not directly calculable.
• EBITDA Margin:
  • FY24: 13.7%
  • FY23: 12.2% (Calculated: 10,816.93/88,494.73)
  • FY22: Not directly provided.
• Net Profit Margin:
  • FY24: 6.6%
  • FY23: 5.4% (Calculated:4,794.67/88,494.73)
  • FY22: Not directly provided.

Liquidity Metrics #

• Current Ratio:
  • FY24: 1.71 (Calculated: Current Assets 37,336.22 / Current Liabilities 21,966.54)
  • FY23: 1.62 (Calculated)
• Cash Ratio:
  • FY24: 0.24 (Calculated: Cash and Cash Equivalents 5,236.46 / Current Liabilities 21,966.54)
  • FY23: 0.14 (Calculated)

Efficiency Ratios #

• Asset Turnover:
  • FY24: 1.41 (Calculated: Revenue from Operations 102,174.42 / Average Total Assets)
  • FY23: 1.38 (Calculated)
• Inventory Turnover:
  • FY24: 7.70 (Calculated: Cost of Materials Consumed + Purchases of stock-in-trade 60,797.71 / Average Inventory (8,325.62 + 7,501.64)/2)
  • FY23: 7.04 (Calculated)
• Receivables Turnover:
  • FY24: 8.24 (Calculated: 102,174.42 / (Average of (12,623.80 + 11,620.29)
  • FY23: 7.57 (Calculated)

Leverage Metrics #

• Debt-to-Equity Ratio:
  • FY24: 0.13 (Calculated: (Total Non-Current Liabilities 6,369.63 + Total Current Liabilities 21,966.54 - Other current liabilities 1,660.11) / Total Equity 49,681.62)
  • FY23: 0.12 (Calculated)

Working Capital Ratios #

• Working Capital Turnover:
  • FY24: 6.49 (Calculated: Net Sales 102,174.42 / (Current Assets 37,336.22 - Current Liabilities 21,966.54))
  • FY23: 5.75 (Calculated)
• Days Sales Outstanding (DSO):
  • FY24: 44.29 days (Calculated: (Average Trade Receivables / Revenue from Operations) * 365)
  • FY23: 48.19 days
• Days Inventory Outstanding (DIO):
  • FY24: 47.38 days (Calculated)
  • FY23: 51.83 days
• Days Payable Outstanding (DPO):
  • FY24: 97.11 days (Calculated: Average Trade Payables * 365 / (Cost of Materials Consumed + Purchases of stock-in-trade))
  • FY23: 93.42 days

Overall Assessment #

The metrics indicate positive trends, with improvements in profitability, efficiency, and liquidity. The company’s ROE and ROA are increasing, suggesting effective asset and equity utilization. Efficiency ratios are growing, while DSO and DIO are decreasing, indicating efficient cash collection, also reflecting in increase in Cash Ratio of the company. The debt ratio remains consistently low, which is favorable for a manufacturing company. Overall, the company demonstrates strong performance.

Endurance Technologies Limited - Financial Analysis FY2023-24 #

Revenue and Profitability #

• Consolidated Total Income grew by 16.7% year-over-year, reaching ₹ 103,264.86 million.
• Consolidated EBITDA increased by 30.7% to ₹ 14,135.99 million, with an EBITDA margin of 13.7%.
• Consolidated Net Profit increased by 41.9%, reaching ₹ 6,804.88 million, with a net profit margin of 6.6%. This includes a one off of Mega project incentive.

Market Share and Competitive Position #

• Management claims to be the preferred partner, QCDDM and order wins suggest it is gaining or holding substantial market share.
• Total order wins reported are ₹ 11,980 million.

Key Products/Services Performance #

• Aluminium Die Castings: A major product category, with significant order wins. Focused on both 2-wheeler and 4-wheeler applications, with a growing 4-wheeler share.
• Suspension Products: There is strong focus and outperformance of suspension products.
• Brake Assemblies: A core product, with a focus on increasing market share in the premium bike segment, including ABS assemblies.
• Transmission: The company manufactures driveshafts.
• Embedded Electronics (including BMS): Identified as a growth area, with substantial business wins through the Maxwell subsidiary.
• Sales growth reported for all major products.

Geographic Distribution and Market Penetration #

• India: Primary market, with 20 manufacturing facilities. Aftermarket penetration in India reaches 213 districts through 444 distributors.
• Europe (Italy & Germany): Significant presence with 11 manufacturing plants and 2 tech centers.
• Revenue from India is 75% and outside India revenue is 25%.

CAPEX and ROIC #

• A new plant is being established in AURIC, Dist. Chh. Sambhajinagar, with a projected CAPEX of ₹ 4,009 million, operational in Q1 FY2025-26.
• Total consolidated capex of the company is reported to be ₹ 8,000 Million.

Operational Efficiency #

• Focus on enhancing operational efficiencies, asset utilization, and plant optimization.

Growth Initiatives and Strategic Outlook #

• The company has made a strategic roadmap to achieve in 2030.
• 4-Wheeler Market Expansion: A strategic priority, aiming for a 45% share of consolidated turnover by 2030, including EV components.
• Non-Automotive Sector Growth: Identified as a significant strategic opportunity. The new plant in AURIC will cater to non-automotive aluminium casting applications.
• Aftermarket Growth: A strategic focus, aiming for 10% of domestic sales. Expanding internationally, now present in 34 countries.
• Electric Vehicle (EV) Focus: Actively exploring opportunities in the EV space, leveraging both existing and new product lines.
• Strategic Backward Integrations: Investments in manufacturing import substitutes and technology components (valves, steel braided hoses, axle clamps, BMS) to enhance competitiveness and margins.
• Acquisitions and Strategic Technology Collaborations: Part of the growth strategy, along with the introduction of proprietary products.

Risk Assessment: Endurance Technologies Limited #

Strategic Risks #

• Severity: Potentially high, given the company’s stated ambition to significantly increase its 4-wheeler and non-automotive segment share by 2030, and expansion into Battery Management Systems (BMS) and embedded electronics. Failure to achieve these goals could substantially impact long-term growth.
• Likelihood: Moderate. The company has demonstrated outperformance of the industry and strong order wins, but success in new segments and technologies is not guaranteed.
• Trend: Increasing, The company’s vision 2030 plan is to achieve a larger presence in 4-wheeler space and electric vehicles.
• Mitigation Strategies: Diversification of product portfolio (4-wheeler, non-automotive), backward integration for technology components, strategic collaborations, and potential acquisitions.
• Control Effectiveness: Appears moderate to high, based on historical financial performance and strategic initiatives, but needs continuous assessment as the company pursues new ventures.
• Potential Financial Impact: Significant. Failure to execute the 2030 strategy could lead to lower revenue growth and profitability than projected. Success could lead to substantial revenue and profit increases, as evidenced by the projected CAPEX and revenue for the new AURIC plant.

Operational Risks #

• Severity: Moderate to High. Reliance on OEMs and the cyclical automotive industry poses operational risks. Disruptions in supply chains or changes in OEM demand could significantly affect production and sales.
• Likelihood: Moderate. The automotive industry is known for fluctuations, and Endurance’s close ties to OEMs increase its vulnerability.
• Trend: Stable, but constant monitoring is needed due to external factors like geopolitical events and economic conditions.
• Mitigation Strategies: Maintaining strong relationships with OEMs (QCDDM emphasis), agile manufacturing facilities, and a robust vendor base (EVA - Endurance Vendor Association).
• Control Effectiveness: Appears high, as evidenced by the company’s track record of delivering high performance and maintaining quality.
• Potential Financial Impact: Moderate. Operational disruptions could result in lost sales, increased costs, and reduced profitability. The text provides no specific quantitative measures of operational efficiency or disruptions.

Financial Risks #

• Severity: Low to moderate.
• Likelihood: Low.
• Trend: Improving. The company’s financials show strong growth in revenue, EBITDA, and net profit. Debt is mentioned as being very low (no net debt, positive cash exceeding H 5 billion).
• Mitigation Strategies: Maintaining a conservative financial profile, managing working capital efficiently. Hedging: The Company uses interest rate swaps, commodity swaps to hedge variability in its cash flows.
• Control Effectiveness: High. Credit ratings of AA+ Stable (long-term) and A1+ (short-term) indicate strong financial management.
• Potential Financial Impact: Low, for the period covered in the report. The company’s strong balance sheet and cash position mitigate financial risks.
• Quantitative risk metrics:Debt-to-equity ration is negative as the company is net debt-free.

Compliance/Regulatory Risks #

• Severity: Moderate. The automotive industry is subject to various regulations (environmental, safety, etc.).
• Likelihood: Moderate. Changes in regulations could increase compliance costs.
• Trend: Stable, but requires ongoing monitoring, especially with the evolving focus on EVs and sustainability.
• Mitigation Strategies: The report highlights an “EHS and sustainability-first culture” and mentions a “management of change initiative” requiring EHS certification for material changes.
• Control Effectiveness: Appears to be moderate to high, given the emphasis on EHS.
• Potential Financial Impact: Moderate. Non-compliance could lead to fines, penalties, and reputational damage. Increased regulations could raise operating costs.

Emerging Risks #

• Severity: Potentially High. The rapid evolution of electric vehicles (EVs) and related technologies presents both opportunities and risks.
• Likelihood: Moderate to High. The automotive industry is undergoing significant transformation.
• Trend: Increasing, due to the global push towards electric mobility.
• Mitigation Strategies: The company is actively exploring opportunities in the EV space, developing EV-agnostic product verticals, and investing in BMS and embedded electronics.
• Control Effectiveness: Early stage, but proactive. The company’s focus on EV components demonstrates an awareness of this emerging risk/opportunity.
• Potential Financial Impact: Significant. The success or failure of adapting to the EV transition could have a major impact on long-term growth and profitability.

Strategic and Management Analysis of Endurance Technologies Limited #

Long-Term Strategic Goals and Progress #

• Goal: To be a complete solutions provider with a global footprint, focusing on evolving technologies for continuous value creation.
• Goal: Achieve a 45% share for 4-wheeler end-use in consolidated turnover by 2030. Progress is demonstrated by 4-wheeler business wins representing 23% of total order wins in FY2023-24 (₹2,810 million out of ₹11,980 million).
• Goal: Substantial growth in non-automotive sector. A new plant is being built in AURIC.
• Goal: Aftermarket to be 10% of domestic sales by FY2029-30.
• Goal: To become a major player in Battery Management Systems (BMS) and embedded electronics.
• Progress: Total business wins for electric vehicles are ₹7,145 million, plus ₹3,785 million won by subsidiary Maxwell. New plant construction for 4-wheeler and EV components, operational in Q1 FY2025-26, supports this goal. CAPEX of ₹4,009 million, with projected annual revenue of ₹5,000 million.
• Goal: Carbon neutrality 50% target.

Competitive Advantages and Market Positioning #

• Outperformed industry growth rate in FY2023-24.
• Strong brand equity, customer-centricity, and a “Quality first” culture (“CITTI Values”).
• Complete solutions provider with a diverse product portfolio.
• Established relationships with major domestic and global OEMs.
• Strong financial position: AA+ Stable (long-term) and A1+ (short-term) credit ratings. No net debt.
• Global footprint with 31 plants and multiple R&D facilities.
• Focus on vertical integration makes the company manufacture products like steel braided hoses for ABS and aluminum forged axle clamps.

Innovation Initiatives and R&D Effectiveness #

• Focus on technology leadership and product reliability.
• Strategic backward integrations to manufacture import substitutes and technology components (valves, steel braided hoses for ABS, aluminium forged axle clamps, BMS).
• R&D facilities in India and Europe.
• Embedded electronics products ABS Modulator.
• Embedded electronics transmission.
• Embedded electronics BMS.

M&A Strategy and Execution #

• Growth strategy includes inorganic growth through acquisitions and strategic technology collaborations.
• Acquired Maxwell Energy Systems Private Limited (increased stake to 56% in FY23-24).
• Acquired Frenotecnica Srl (Italy) and New Fren Srl (Italy) with its subsidiary, GDS Sarl (Tunisia) in prior years, expanding product portfolio and geographic reach.
• Strategic investment of equity shares of Pierer Mobility AG, Austria.

Management’s Track Record in Execution #

• Consistent revenue and profit growth: Consolidated total income grew by 16.7% in FY2023-24, exceeding ₹100 billion. Consolidated EBITDA increased by 30.7%. Net profit increased by 41.9%.
• Successful integration of acquisitions (Maxwell, Frenotecnica, New Fren).
• Maintained a strong balance sheet with no net debt and consolidated positive cash available exceeding ₹5 billion.
• Mega project incentive of ₹792.35 Million.

Capital Allocation Strategy #

• Significant CAPEX investment in a new plant (₹4,009 million) for future growth.
• Investments in strategic acquisitions (Maxwell, etc.) and partnerships.
• Dividend payments to shareholders (₹7 per share for FY23).
• Maintaining a strong balance sheet with no net debt.

Organizational Changes and Their Impact #

• Retirement of two whole-time directors (Group CFO and COO) and their replacement with industry veterans.
• Continuity is provided by the retiring Group CFO continuing as a non-executive board member, and the retiring COO providing consulting services.
• Potential for fresh perspectives and innovation with new leadership.
• Focus is given to establish an EHS and sustainability.

ESG Framework #

Environmental Metrics and Targets #

• The company aims for 50% carbon neutrality by 2030, utilizing renewable energy sources (solar, wind, LPG, and natural gas) and carbon sinks.
• In FY2023-24, the company achieved 35% carbon neutrality, up from 22.6% in FY2022-23.
• A target of zero waste to landfill across all plants by 2030 has been set.
• The Company recognized grant of H 18.29 million for utilization of solar power and production of surplus energy

Social Responsibility Programs #

• The company has a CSR and Facility Management, headed by Mrs. Varsha Jain, a Director.
• Expenditure on corporate social responsibility is reported, but the specific programs are not detailed.
• The document mentions a focus on diversity and inclusion. Endurance aims to improve gender diversity to reach 15% for white collar employees and 10% blue collar employees by 2030.
• Significant investments in leadership development are highlighted, including personalized coaching and growth plans.
• An EHS (Environment, Health, and Safety) and sustainability-first culture is emphasized.
• The company has announced VSS and provided compensation of amount H 102.85 million.

Governance Structure and Effectiveness #

• The Board of Directors monitors return on capital employed quarterly.
• The Company is using the debt ratio as capital managment index.
• Key Management Personnel (KMP) compensation and related party transactions are disclosed.
• The Company uses internal and external scoring credit system to assess customers’ credit quality.

Sustainability Investments and ROI #

• The Company has an Investment in equity shares of TP Green Nature Limited for solar power generation.
• Investment in 31,654 equity shares (0.09% stake) in Pierer Mobility AG, Austria at a cost of H 162.20 million and has invested in 25,768 equity shares (0.076% stake) during the year, at a cost of H 175 million.

ESG Ratings and Peer Comparison #

• CRISIL and ICRA have reaffirmed the Company’s creditworthiness with a strong AA+ Stable rating and A1+ rating.

Regulatory Compliance and Future Preparations #

• The company is subject to income tax, excise, service tax, GST, and VAT matters, with some under dispute.
• The financial statements comply with Indian Accounting Standards (Ind AS) notified under the Companies Act, 2013.
• The company is monitoring the impact of The Code on Social Security, 2020.
• Several disclosures are made as required by Schedule III, confirming no involvement in Benami property, transactions with struck-off companies, unregistered charges, cryptocurrency trading, or undisclosed transactions.
• The company provides for product warrenties which are accounted for under Ind AS 37.

Endurance Technologies Limited: Financial Outlook and Analysis #

Management Guidance and Assumptions #

• Long-term vision to become a significant player in Battery Management Systems (BMS) and embedded electronics, targeting EVs and other applications.
• Target of 45% consolidated turnover share from 4-wheeler end-use by 2030.
• Aftermarket sales targeted to reach 10% of domestic sales by FY2029-30.
• Assumption of continued outperformance of the automotive industry’s growth rate.
• Achieving 50% carbon neutrality by 2030, with zero waste to landfill across all plants by the same year.
• 15% gender diversity target by 2030 for white-collar employees and 10% for blue-collar employees.
• Growth through both organic and inorganic (M&A, strategic technology collaborations) means.
• Value-in-use calculations for goodwill impairment testing are based on 5-year financial budget projections, with a terminal growth rate.
• For Maxwell, key assumptions are: 18% discount rate, 5% terminal growth rate, and EBITDA margins of 5.00% to 14.00%.
• For European business, key assumptions are: 10.23% discount rate, 0% terminal growth rate, and EBITDA margins of 13% to 17%.

Market Growth Forecasts #

• India’s GDP growth of 8.2% in FY2023-24.
• Terminal growth rate for Maxwell (5%) consistent with industry forecasts for the EV market.
• Terminal growth rate for European business (0%).
• Budget EBITDA based on expectations of EV market Development.

Planned Strategic Initiatives #

• Increase market share in the premium bike segment for various components (brake assemblies, ABS, front forks, shock absorbers, clutch assemblies).
• Focus on expanding the 4-wheeler and non-automotive segments.
• Strategic backward integrations to manufacture import substitutes and technology components (valves, steel braided hoses for ABS, aluminum forged axle clamps, BMS).
• Enhance operational efficiencies, sweat assets, and optimize plants (multi-product, multi-customer).
• Expansion of offerings for electric vehicles, using both existing and new product lines.
• New plant construction in AURIC, Chh. Sambhajinagar, for 4-wheeler and non-automotive aluminum casting applications, operational by Q1 FY2025-26.
• Increased penetration in the aftermarket segment, both domestically and internationally.

Capital Expenditure Plans #

• Projected CAPEX of H 4,009 million for the new plant in AURIC, with anticipated annual revenue exceeding H 5,000 million.
• CAPEX in property, plant and equipment, and intangible assets were at (H 8,193.07) million and (H 6,783.10) million for the years ending 31st March 2024 and 2023.

Efficiency Improvement Targets #

• Drive operational efficiencies, asset utilization, and plant optimization.
• Strategic backward integrations are intended to improve margins.
• Focus operational excellence, innovation, agility and adaptable manufacturing facilities.

Potential Challenges and Opportunities #

• Challenges:
  • Exposure to inflation and global uncertainties.
  • Fluctuations in foreign currency exchange rates (primarily EURO, USD, CHF, CNY, GBP, SGD and JPY).
  • Fluctuations in interest rates, primarily on floating-rate debt.
  • Fluctuations in commodity prices, especially ferrous and non-ferrous metals.
  • Dependence on major OEM customers with some customer contributing more than 10% of total revenue.
• Opportunities:
  • Growing market share in chosen product verticals.
  • Increasing content per vehicle.
  • Focus on premiumization.
  • Expansion into 4-wheeler and non-automotive segments.
  • Growing electric vehicle market, driving demand for BMS and other components.
  • Strategic acquisitions and technology collaborations.
  • Aftermarket growth potential.

Scenario Analysis and Sensitivity #

• Goodwill Impairment (Maxwell): Sensitivity analysis performed. Management believes reasonable changes in discount rate, terminal growth rate, or EBITDA margins would not cause the carrying value to exceed its recoverable amount.
• Goodwill Impairment (European Business): Similar sensitivity analysis performed, with the same conclusion.
• Interest Rate Sensitivity: A 100 basis point increase/decrease in interest rates would impact pre-tax profit on debt obligations, with variable rate WCDL/CC balance/ECB. For Example, for year end March 31st, 2024 a 100 basis points increase would reduce profit before tax by H 57.96 million.
• Foreign Currency Sensitivity: A 10% change in USD, EUR, GBP, and CNY exchange rates would have a stated impact on pre-tax equity.
• Defined Benefit Obligation Sensitivity: Sensitivity analysis on gratuity obligations provided, showing the impact of changes in discount rate, salary escalation, and withdrawal rates.

Audit & Compliance Analysis: Endurance Technologies Limited #

Auditor’s Opinion and Qualifications #

• Standalone Financial Statements: The auditor, S R B C & CO LLP, issued an unmodified opinion, stating the financial statements present a true and fair view in conformity with Indian Accounting Standards (Ind AS). One key audit matter was impairment assessment for investment in Maxwell Energy Systems Private Limited.
• Consolidated Financial Statements: The auditor, S R B C & CO LLP, issued an unmodified opinion. They relied on the reports of other auditors for ten subsidiaries located outside India. One Key Audit Matter reported was the Impairment testing of Goodwill pertaining to acquisition of Maxwell Energy Systems Private Limited.

Key Accounting Policies and Changes #

• Revenue Recognition: Revenue is recognized upon transfer of control of goods or services to the customer, net of GST. Variable consideration (rebates, incentives, discounts) is estimated and constrained.
• Leases: The single recognition and measurement approach is applied for most leases.
• Foreign Currency Translation: Transactions are recorded at exchange rates prevailing on the transaction date. Monetary assets and liabilities are translated at the balance sheet date exchange rate.
• Borrowing Costs: Costs directly attributable to qualifying assets are capitalized.
• Government Grants: Recognized at fair value when receipt and compliance with conditions are reasonably assured.
• Employee Benefits: Defined contribution plans are expensed as incurred. Defined benefit plans are valued using the Projected Unit Credit Method.
• Impairment: Financial assets are assessed using the simplified approach for trade receivables (lifetime expected credit losses). Non-financial assets are assessed for impairment indicators at each reporting date.
• Business Combinations: Accounted for using the acquisition method.
• Changes: Amendments to Ind AS 1 (Disclosure of Accounting Policies) impacted disclosures, but not measurement, recognition, or presentation. Amendments to Ind AS 8 and 12 had no impact.

Internal Control Effectiveness #

• Standalone & Consolidated: The auditor’s report states that the Company has, in all material respects, adequate internal financial controls over financial reporting with reference to standalone and consolidated financial statements, and such controls were operating effectively as of March 31, 2024.

Regulatory Compliance Status #

• The financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015, as amended.
• All information and explanations were obtained for the purpose of the audit.
• The Company has complied with the number of layers prescribed under the Companies Act.
• The balance sheet, statement of Profit and loss, Cash flow statement and statement of changes in equity are in agreement with the book of accounts.
• There is a modification on maintaining an audit trail in the accounting software.

Legal Proceedings and Their Potential Impact #

• Contingent Liabilities: Exist for excise, service tax, GST, VAT, income tax, and employee-related matters. Specific amounts are disclosed, but the potential impact is not quantified in the provided text.

Related Party Transactions #

• Key Management Personnel (KMP): Transactions include remuneration, directors’ sitting fees, commission, lease rent, expense reimbursements, and dividends.
• Balances outstanding show payables and security deposit receivable.
• Relatives of KMP: Transactions involved individuals related to Mr. Anurang Jain (Managing Director). Specific transactions and amounts are detailed.

Subsequent Events #

• Proposed Dividend: The Board of Directors proposed a dividend of H 8.50 per equity share on May 16, 2024, subject to shareholder approval.
• Code on Social Security, 2020: The Group will assess the impact of the Code.

Accounting Quality and Regulatory Risk Assessment #

• Accounting Quality: The use of estimates (impairment, defined benefit plans, useful lives) introduces inherent uncertainty. The unmodified audit opinions and disclosure of key audit matters provide some assurance of accounting quality. Reliance on external actuaries and valuation specialists for key estimates enhances reliability.
• Regulatory Risk: Exposure exists related to contingent liabilities from various tax and employee matters. Compliance with SEBI regulations and the Companies Act is stated, with specific disclosures made regarding related party transactions and other statutory information. The unquantified potential impact of contingent liabilities and pending finalization of the Code on Social Security, 2020 introduce areas of regulatory risk.