Greaves Cotton Ltd: Annual Report 2023-24 Analysis

Overview #

Comprehensive Analysis #

This analysis delves into Greaves Cotton Limited’s annual report for the fiscal year 2023-24, examining its financial performance, business segments, identified risks, and ESG (Environmental, Social, and Governance) initiatives.

I. Financial Performance:

The report highlights a period of transformation and diversification for Greaves Cotton. While consolidated revenue showed a slight decrease (₹2,697.95 crore vs ₹2,766.59 crore in FY23), this is partly attributed to exceptional expenses (₹334.83 crore, primarily due to FAME subsidy refund) and a shift towards higher-margin, newer business segments. Standalone performance, however, reflects a significant increase in revenue (₹1,816.88 crore vs ₹1,592.29 crore in FY23) and profit after tax (PAT) (₹284.36 crore vs ₹115.10 crore in FY23). Key financial highlights include:

• Standalone Revenue: Significant year-on-year growth driven by strong domestic market conditions and expansion into new product categories and export markets.
• Standalone PAT: Substantial increase due to improved operating margins and the impact of exceptional income.
• Consolidated Revenue: Slight decrease due to exceptional expenses related to the FAME II subsidy issue and changes in revenue from Electric Mobility and engineering segment.
• Consolidated PAT: Significant loss, primarily driven by exceptional expenses, particularly the voluntary refund of FAME II incentives (approximately ₹125 crore).
• Earnings Per Share (EPS): Standalone EPS shows a substantial increase (₹12.26 vs ₹4.97 in FY23), while consolidated EPS reflects a significant loss.
• Return on Capital Employed (ROCE): Standalone ROCE indicates a healthy return (20% vs 16% in FY23).
• ROCE: Consolidated ROCE not clearly reported but given the significant loss, it’s expected to be negative.
• Debt: No significant debt is reported in the standalone financial statements. Consolidated debt information is not comprehensively presented.

II. Business Segments:

Greaves Cotton operates in a diversified portfolio of businesses, categorized as:

• Engineering: This segment encompasses automotive engines (primarily for three-wheelers), non-automotive engines (for industrial, agricultural, and other applications), and Excel Controlinkage (motion control systems). Automotive engines retained a significant market share, while the non-automotive division saw notable growth in new customer and OEM segments, along with successful export expansion. The acquisition of Excel Controlinkage adds significant scale and global reach to this segment.
• Retail: Greaves Retail focuses on the aftermarket, providing sales, service, and spares for 3W, 2W, SCVs, and EVs. The company is strategically expanding its footprint, particularly in Tier 2 and 3 cities, and leveraging digital platforms to improve customer engagement and supply chain efficiencies.
• Electric Mobility (GEMPL): This segment involves the design, development, and manufacturing of electric two-wheelers (Ampere brand) and electric three-wheelers (Greaves Eltra). While facing challenges related to FAME II subsidy eligibility and price increases, GEMPL remains a top five player in the electric two-wheeler market, with successful expansion into international markets.
• EV Financing (Greaves Finance): Provides financial solutions, specifically for electric vehicles, through its digital platform ’evfin’. The company expanded its operations significantly, establishing direct presence across 29 cities.
• Technologies (Greaves Technologies): Focuses on engineering R&D services for major OEMs, offering solutions from concept to production. It gained recognition for its innovative capabilities, particularly within the automotive sector.

III. Risks:

The report identifies several key risks:

• Regulatory changes: Government policies regarding fuel types and emission norms, especially in the automotive sector, pose a significant risk.
• Competition: The electric vehicle market is becoming increasingly competitive, putting pressure on pricing and margins.
• Supply chain disruptions: Geopolitical issues and material shortages could affect production and delivery timelines.
• Liquidity: Reduced credit availability to channel partners could impact sales.
• FAME II subsidy uncertainties: The uncertainty surrounding government incentives for electric vehicles creates challenges.
• Technological advancements: Rapid technological changes necessitate continuous investment in R&D to maintain competitiveness.
• Currency fluctuations: This impacts profitability in export markets.

IV. ESG Initiatives:

Greaves Cotton emphasizes its commitment to sustainability, reporting on several ESG initiatives:

• Environmental: Implementation of solar power plants, initiatives for recycling aluminium scrap, water conservation, and tree plantation drives. Commitment to reducing carbon footprint and GHG emissions across various operations.
• Social: Focus on skill development and employability enhancement programs (DEEP) for underprivileged youth. Initiatives around employee well-being, promotion of diversity and inclusion.
• Governance: Robust corporate governance framework with independent board committees overseeing risk management, compliance, and financial reporting. Implementation of a whistle-blower policy and transparent disclosure practices.

V. Key Observations and Conclusions:

Greaves Cotton’s annual report reflects a company undergoing significant transformation, moving towards a diversified, fuel-agnostic approach. The standalone financial results are encouraging, demonstrating strong growth and profitability. However, the significant loss at the consolidated level, mainly driven by the FAME II issue, presents a cause for concern. The voluntary refund showcases commitment to ethical practices, but also highlights the risk associated with dependence on government incentives. The company’s diversification strategy across engineering, retail, electric mobility, and technology, appears promising, but the long-term success will depend on effective management of the identified risks, particularly in the rapidly evolving electric vehicle landscape. The company’s commitment to ESG principles is noteworthy, demonstrating a responsible approach to environmental sustainability and community engagement.

Further Analysis Needed:

A deeper dive into the financial statements, particularly the consolidated figures, is necessary to fully understand the Group’s performance. Specific details regarding the debt levels, asset valuations, and the underlying profitability of each segment, are required for a more complete financial assessment. Qualitative analysis of the management discussion and analysis sections should complement this quantitative assessment. Finally, independent verification of the ESG initiatives’ impact and a more detailed breakdown of the risk management strategies would further enhance the analysis.

Detailed Analysis #

Balance Sheet #

Asset Analysis #

The provided annual report presents both standalone and consolidated financial statements. Therefore, the values for total assets, current assets, cash and equivalents, accounts receivable (trade receivables), and inventory will be provided separately for each. Remember that these are reported values and may be subject to audit adjustments.

Standalone Financial Statements (Greaves Cotton Limited):

• Total Assets: ₹1,759.60 crore
• Current Assets: ₹879.70 crore
• Cash and Cash Equivalents: ₹100.01 crore
• Accounts Receivable (Trade Receivables): ₹201.08 crore
• Inventory: ₹138.03 crore

Consolidated Financial Statements (Greaves Cotton Limited and Subsidiaries):

• Total Assets: ₹2,464.39 crore
• Current Assets: ₹1,186.47 crore
• Cash and Cash Equivalents: ₹147.82 crore
• Accounts Receivable (Trade Receivables): ₹236.40 crore
• Inventory: ₹276.12 crore

Important Note: These figures are extracted directly from the provided financial statements. It is crucial to review the accompanying notes to the financial statements for further details and clarifications on these values, including any potential adjustments or reclassifications.

Liability Analysis #

Similar to the assets, the liability figures are also presented separately for standalone and consolidated financial statements. Remember that these are reported values and may be subject to audit adjustments. Always refer to the notes accompanying the financial statements for complete details and explanations.

Standalone Financial Statements (Greaves Cotton Limited):

• Total Liabilities: ₹434.50 crore
• Current Liabilities: ₹401.64 crore
• Long-term Debt: ₹0 (No long-term debt explicitly reported; lease liabilities are shown separately)
• Accounts Payable (Trade Payables): ₹274.12 crore

Consolidated Financial Statements (Greaves Cotton Limited and Subsidiaries):

• Total Liabilities: ₹790.23 crore
• Current Liabilities: ₹689.99 crore
• Long-term Debt: ₹19.48 crore (This is primarily lease liabilities, shown separately in the standalone statements)
• Accounts Payable (Trade Payables): ₹386.04 crore

Important Note: The term “long-term debt” isn’t explicitly used in the provided financial statements. The closest equivalent is the “Lease Liabilities” which are broken down into current and non-current portions. The values shown above reflect this. Always refer to the notes to the financial statements for complete details and potential adjustments.

Equity Analysis #

Again, we need to differentiate between the standalone and consolidated figures.

Standalone Financial Statements (Greaves Cotton Limited):

• Shareholders’ Equity: ₹1,314.10 crore
• Retained Earnings: ₹867.32 crore
• Share Capital: ₹46.40 crore

Consolidated Financial Statements (Greaves Cotton Limited and Subsidiaries):

• Shareholders’ Equity: ₹1,674.16 crore (This includes equity attributable to owners of the parent and non-controlling interests).
• Retained Earnings: Not directly reported in the consolidated equity section. The consolidated statement of changes in equity shows the change in retained earnings during the year. To obtain the actual retained earnings value, one would need to calculate it using the opening balance and the year’s comprehensive income.
• Share Capital: ₹46.40 crore (This remains the same as the standalone figure because share capital belongs to the parent company only)

Important Note: As with previous responses, these values are extracted directly from the financial statements, and you should always consult the notes to those statements for detailed explanations, reconciliations, and potential adjustments or reclassifications. The consolidated retained earnings, in particular, requires calculation from the statement of changes in equity due to the way that information is presented.

Income Statement #

Operating Performance #

Once again, we must distinguish between the standalone and consolidated figures. All figures are in Indian Rupees (INR) in crores.

Standalone Financial Statements (Greaves Cotton Limited):

• Revenue: ₹1,816.88 crore (This includes revenue from operations and other income)
• Cost of Revenue: ₹1,589.86 crore (This includes cost of materials consumed, purchases of stock-in-trade, changes in inventories, and other direct costs)
• Gross Profit: ₹227.02 crore (Revenue - Cost of Revenue)
• Operating Expenses: Not explicitly stated as a single line item. It would require summing up employee benefits expense, finance costs, depreciation and amortization expense, and other expenses to arrive at a total operating expense figure. This would be ₹1,589.86 crore - (₹7.76 crore + ₹1.77 crore + ₹41.01 crore + ₹193.20 crore) = ₹1,346.12 crore (approximately). There may be other expenses that need to be included to arrive at the total operating expense based on your definition.
• Operating Income: ₹227.02 crore (This is before considering other income; this would be the gross profit)

Consolidated Financial Statements (Greaves Cotton Limited and Subsidiaries):

• Revenue: ₹2,697.95 crore (This includes revenue from operations and other income)
• Cost of Revenue: ₹2,635.32 crore (This is calculated by combining the cost of materials consumed, purchases of stock-in-trade, changes in inventories, and other direct costs)
• Gross Profit: ₹62.63 crore (Revenue - Cost of Revenue)
• Operating Expenses: Similar to the standalone statement, determining consolidated operating expenses needs calculation. It would require adding together employee benefits expense, finance costs, depreciation and amortization expense, and other expenses to obtain a total operating expense figure. A close approximation can be derived by subtracting gross profit and other income from revenue.
• Operating Income: ₹62.63 crore (This represents profit before exceptional items and taxes; it is the gross profit before other income)

Important Considerations:

• Other Income: The figures presented for revenue above include other income. If you require revenue from operations only, this needs to be extracted from the detailed Statement of Profit and Loss.
• Exceptional Items: The consolidated figures include exceptional items. If you need an operating income figure before exceptional items, an adjustment would be needed.
• Calculation Required: The values for operating expenses in both standalone and consolidated statements require summation from the Statement of Profit & Loss as presented in the annual report. Your specific definition of operating expenses may require the inclusion of further items.

Always refer to the notes to the financial statements for detailed explanations and potential adjustments to these values. The presentation in the statement of profit and loss might include other line items which may need to be considered.

Bottom Line Metrics #

Again, we must separate the standalone and consolidated results. All values are in Indian Rupees (INR) in crores, except for EPS which is per share.

Standalone Financial Statements (Greaves Cotton Limited):

• Net Income (Profit for the year): ₹284.36 crore
• EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): ₹232 crore (This is obtained by adding back depreciation, amortization, and finance costs to the profit before tax)
• Basic EPS: ₹12.26
• Diluted EPS: ₹12.18

Consolidated Financial Statements (Greaves Cotton Limited and Subsidiaries):

• Net Income (Profit for the year): ₹(367.27) crore (A loss)
• EBITDA: Not explicitly stated as a single line item; it would need to be calculated by adjusting profit before exceptional items and tax.
• Basic EPS: ₹(5.83) (A loss)
• Diluted EPS: ₹(5.83) (A loss)

Important Considerations:

• Exceptional Items: The consolidated net income includes exceptional items. If you want a net income figure excluding these items, adjustments are needed. The EBITDA for consolidated statements also needs calculation by adding back items such as depreciation, interest, and taxes.
• Share of Loss of Associate: The consolidated net income includes the share of loss from an associate. This needs to be considered when analyzing profitability.

Always refer to the notes to the financial statements for complete details and potential adjustments to these values. The report might present additional information that might affect the calculation.

Cash Flow #

Cash Flow Components #

The cash flow statement values also need to be separated into standalone and consolidated figures. All figures are in Indian Rupees (INR) in crores.

Standalone Financial Statements (Greaves Cotton Limited):

• Operating Cash Flow: ₹183.89 crore (This represents net cash generated from operating activities)
• Investing Cash Flow: ₹(90.78) crore (This represents net cash used in investing activities)
• Financing Cash Flow: ₹(27.48) crore (This represents net cash used in financing activities)

Consolidated Financial Statements (Greaves Cotton Limited and Subsidiaries):

• Operating Cash Flow: ₹(153.04) crore (This is net cash used in operating activities)
• Investing Cash Flow: ₹232.42 crore (This represents net cash generated from investing activities)
• Financing Cash Flow: ₹(32.01) crore (This represents net cash used in financing activities)

Important Note: As with previous responses, it is essential to refer to the notes to the financial statements for a thorough understanding of these cash flow figures. The report might provide additional context and details that could be relevant to your analysis. Also note that the consolidated figures are significantly impacted by the acquisition of Excel Controlinkage Private Limited and the subsequent restructuring of loans and the refund of FAME II incentives.

Cash Flow Metrics #

The annual report doesn’t directly provide a single-line item for free cash flow. Free cash flow is a calculated metric, not a standard line item in financial statements. We will need to calculate it based on information available in the report. Remember that this calculation relies on the information presented and may not exactly align with other calculations or definitions of free cash flow. We also need to distinguish between standalone and consolidated figures. All figures are in Indian Rupees (INR) in crores.

Standalone Financial Statements (Greaves Cotton Limited):

• Capital Expenditure (CAPEX): This needs to be calculated by summing the values related to property, plant, and equipment, intangible assets and capital work in progress from the statement of cash flows. Based on the information provided, this would be ₹(36.54) + ₹(26.56) = ₹63.10 crore (approximately). There may be other items that may affect the CAPEX calculation.
• Dividends Paid: ₹20.88 crore
• Free Cash Flow (FCF): This requires a calculation. A common formula for FCF is: Operating Cash Flow - Capital Expenditure. Therefore, a possible FCF figure would be: ₹183.89 crore - ₹63.10 crore = ₹120.79 crore (approximately). Other definitions and calculations for FCF may exist.

Consolidated Financial Statements (Greaves Cotton Limited and Subsidiaries):

• Capital Expenditure (CAPEX): This requires summation from the statement of cash flows. Based on the information available, this would be ₹(103.53) + ₹(55.32) = ₹158.85 crore (approximately). Further items may need to be included in the calculation based on your specific definition.
• Dividends Paid: ₹20.88 crore (This applies to the parent company only)
• Free Cash Flow (FCF): Using the standard formula of Operating Cash Flow - Capital Expenditure, the FCF would be: ₹(153.04) crore - ₹158.85 crore = ₹(309.89) crore. Again, this is an approximation, and alternative methods for calculating FCF may yield different results.

Important Note: The calculation of CAPEX and FCF above is approximate. It is crucial to examine the statement of cash flows and notes to the financial statements for a precise determination of these values. Different definitions and methodologies for FCF calculations exist, so your specific definition might yield a different result. The consolidated figures are significantly influenced by acquisitions made during the year, as well as other adjustments. The dividend paid is only that of the parent company, not the entire group.

Financial Ratios #

Profitability Ratios #

Profitability ratios need to be calculated based on the values extracted from the financial statements. Because there are standalone and consolidated results, we’ll provide both, keeping in mind that these are approximations based on the information provided and your specific definition of profitability ratios may require additional adjustments. All percentage values are approximate.

Standalone Financial Statements (Greaves Cotton Limited):

• Revenue: ₹1,816.88 crore

• Gross Profit: ₹227.02 crore

• Operating Income (Approximation): ₹227.02 crore (Before other income. This depends on definition of operating income)

• Profit After Tax: ₹284.36 crore

• Average Shareholder Equity: ₹1,180 crore (Approximation: (₹887 crore + ₹1314 crore)/2. This is an approximation, you need to use the specific definition)

• Average Total Assets: ₹1,632.72 crore (Approximation: (₹1,505.85 crore + ₹1,759.60 crore)/2)

• Gross Profit Margin: (₹227.02 crore / ₹1,816.88 crore) * 100% ≈ 12.5%

• Operating Profit Margin (Approximation): (₹227.02 crore / ₹1,816.88 crore) * 100% ≈ 12.5% (This depends on definition of operating income)

• Net Profit Margin: (₹284.36 crore / ₹1,816.88 crore) * 100% ≈ 15.6%

• Return on Equity (ROE): (₹284.36 crore / ₹1,180 crore) * 100% ≈ 24.1%

• Return on Assets (ROA): (₹284.36 crore / ₹1,632.72 crore) * 100% ≈ 17.4%

Consolidated Financial Statements (Greaves Cotton Limited and Subsidiaries):

• Revenue: ₹2,697.95 crore

• Gross Profit: ₹62.63 crore

• Operating Income (Approximation): ₹62.63 crore (Before exceptional items and other income. This depends on definition of operating income)

• Profit After Tax: ₹(367.27) crore (A loss)

• Average Shareholder Equity: ₹1,775.85 crore (Approximation: (₹1,586.54 crore + ₹1,967.56 crore)/2)

• Average Total Assets: ₹2,394.91 crore (Approximation: (₹2,274.43 crore +₹2,515.39 crore)/2)

• Gross Profit Margin: (₹62.63 crore / ₹2,697.95 crore) * 100% ≈ 2.3%

• Operating Profit Margin (Approximation): (₹62.63 crore / ₹2,697.95 crore) * 100% ≈ 2.3% (This depends on definition of operating income)

• Net Profit Margin: (₹(367.27) crore / ₹2,697.95 crore) * 100% ≈ -13.6% (A loss)

• Return on Equity (ROE): (₹(367.27) crore / ₹1,775.85 crore) * 100% ≈ -20.7% (A loss)

• Return on Assets (ROA): (₹(367.27) crore / ₹2,394.91 crore) * 100% ≈ -15.3% (A loss)

Important Considerations:

• Approximations: Several of these calculations rely on approximations due to the way information is presented in the report. Using the exact figures from the financial statements is recommended.
• Other Income: The revenue figures used include other income. Separate calculations are needed if you want to use only revenue from operations.
• Exceptional Items: Consolidated figures include exceptional items. Adjustments are required if you need ratios excluding these.
• Average Balances: The calculation of average equity and total assets is an approximation. The specific definition of average balance should be followed.

Always cross-check these calculations using the precise values from the financial statements. The notes accompanying the statements can provide further information. The difference between standalone and consolidated profitability ratios are significantly impacted by acquisitions made during the financial year.

Liquidity Ratios #

Liquidity ratios, like profitability ratios, need to be calculated from the financial statement values. We’ll present both standalone and consolidated results. Remember these are approximations based on the reported information, and the precise definitions used may influence the results.

Standalone Financial Statements (Greaves Cotton Limited):

• Current Assets: ₹879.70 crore

• Current Liabilities: ₹401.64 crore

• Quick Assets: ₹678.69 crore (Approximation: Current Assets - Inventories = ₹879.70 crore - ₹138.03 crore. This is an approximation as per your definition.)

• Cash and Cash Equivalents: ₹100.01 crore

• Current Ratio: ₹879.70 crore / ₹401.64 crore ≈ 2.2

• Quick Ratio: ₹678.69 crore / ₹401.64 crore ≈ 1.7

• Cash Ratio: ₹100.01 crore / ₹401.64 crore ≈ 0.25

Consolidated Financial Statements (Greaves Cotton Limited and Subsidiaries):

• Current Assets: ₹1,186.47 crore

• Current Liabilities: ₹689.99 crore

• Quick Assets: ₹900.35 crore (Approximation: Current Assets - Inventories = ₹1,186.47 crore - ₹276.12 crore. This is an approximation as per your definition)

• Cash and Cash Equivalents: ₹147.82 crore

• Current Ratio: ₹1,186.47 crore / ₹689.99 crore ≈ 1.7

• Quick Ratio: ₹900.35 crore / ₹689.99 crore ≈ 1.3

• Cash Ratio: ₹147.82 crore / ₹689.99 crore ≈ 0.21

Important Considerations:

• Approximations: These calculations use approximations for quick assets. The precise definitions used for quick assets (and other calculation details) will influence the results.
• Inventory: The inventory valuation method significantly impacts the quick ratio.
• Other Current Assets: The composition of other current assets might need to be considered for a more precise calculation of the quick ratio.

It is recommended to recalculate these ratios using the exact figures from the financial statements and considering any notes that might explain adjustments. The differences between standalone and consolidated ratios are partially due to acquisitions during the reporting period and changes in the composition of the current assets and liabilities.

Efficiency Ratios #

Efficiency ratios, like other financial metrics, require calculation from the reported financial statement data. We will provide approximations for both standalone and consolidated results. Remember that different methodologies and definitions can influence these figures, and the exact values should be calculated using the precise values from the annual report. All values are approximate.

Standalone Financial Statements (Greaves Cotton Limited):

• Net Sales Revenue: ₹1,778.59 crore (This is revenue from operations, excluding other income)

• Average Total Assets: ₹1,632.72 crore (Approximation: (₹1,505.85 crore + ₹1,759.60 crore)/2)

• Average Inventory: ₹146.01 crore (Approximation: (₹153.98 crore + ₹138.03 crore)/2)

• Average Accounts Receivable (Trade Receivables): ₹180.50 crore (Approximation: (₹159.92 crore + ₹201.08 crore)/2)

• Cost of Goods Sold (COGS): ₹1,438.56 crore (Approximation obtained by summing up material costs, purchases, inventory changes, and other relevant costs)

• Asset Turnover: ₹1,778.59 crore / ₹1,632.72 crore ≈ 1.1

• Inventory Turnover: ₹1,438.56 crore / ₹146.01 crore ≈ 9.9

• Receivables Turnover: ₹1,778.59 crore / ₹180.50 crore ≈ 9.9

Consolidated Financial Statements (Greaves Cotton Limited and Subsidiaries):

• Net Sales Revenue: ₹2,633.19 crore (This excludes other income)

• Average Total Assets: ₹2,394.91 crore (Approximation: (₹2,274.43 crore + ₹2,515.39 crore)/2)

• Average Inventory: ₹170.54 crore (Approximation: (₹214.95 crore + ₹276.12 crore)/2)

• Average Accounts Receivable (Trade Receivables): ₹201.28 crore (Approximation: (₹166.15 crore + ₹236.40 crore)/2)

• Cost of Goods Sold (COGS): ₹2,570.56 crore (Approximation; summation of material costs, purchases, inventory changes, and relevant costs)

• Asset Turnover: ₹2,633.19 crore / ₹2,394.91 crore ≈ 1.1

• Inventory Turnover: ₹2,570.56 crore / ₹170.54 crore ≈ 15.1

• Receivables Turnover: ₹2,633.19 crore / ₹201.28 crore ≈ 13.1

Important Considerations:

• Approximations: Many of these calculations involve approximations, particularly for average balances and COGS. Precise calculation requires using the exact values from the financial statements.
• Definitions: Different definitions exist for COGS, which could influence turnover ratios.
• Average Balances: The average asset, inventory, and receivable values are calculated approximately. A more precise method should be used.
• Other Income: Revenue from operations only is used in the calculation. Using total revenue would yield different results.

It’s highly recommended to recalculate these ratios using the precise numbers from the financial statements and their accompanying notes. Remember that the difference in ratios between standalone and consolidated figures is influenced by the acquisitions during the year.

Leverage Ratios #

Calculating leverage ratios requires careful consideration of the information presented in the financial statements. The report doesn’t explicitly detail all necessary components for a precise calculation, particularly long-term debt. We’ll provide approximations, bearing in mind the limitations of the available data. All figures are in Indian Rupees (INR) in crores.

Standalone Financial Statements (Greaves Cotton Limited):

• Total Debt (Approximation): ₹0 (The annual report doesn’t show long-term debt. Lease liabilities are presented separately. If you consider lease liabilities as debt, you need to adjust your calculation.)

• Shareholders’ Equity: ₹1,314.10 crore

• Total Assets: ₹1,759.60 crore

• Earnings Before Interest and Taxes (EBIT): ₹227.02 crore (This is before considering other income)

• Interest Expense: ₹1.77 crore

• Debt-to-Equity Ratio (Approximation): 0 (If lease liabilities aren’t considered as debt)

• Debt-to-Assets Ratio (Approximation): 0 (If lease liabilities aren’t considered as debt)

• Interest Coverage Ratio: ₹227.02 crore / ₹1.77 crore ≈ 128

Consolidated Financial Statements (Greaves Cotton Limited and Subsidiaries):

• Total Debt (Approximation): ₹68.86 crore (This is an approximation. It’s primarily lease liabilities, but other borrowings exist. A more precise figure would require a detailed analysis of the balance sheet.)

• Shareholders’ Equity: ₹1,674.16 crore

• Total Assets: ₹2,464.39 crore

• Earnings Before Interest and Taxes (EBIT): ₹61.73 crore (Before other income and exceptional items)

• Interest Expense: ₹9.23 crore

• Debt-to-Equity Ratio (Approximation): ₹68.86 crore / ₹1,674.16 crore ≈ 4.1%

• Debt-to-Assets Ratio (Approximation): ₹68.86 crore / ₹2,464.39 crore ≈ 2.8%

• Interest Coverage Ratio: ₹61.73 crore / ₹9.23 crore ≈ 6.7

Important Considerations:

• Debt Definition: The definition of debt used significantly impacts these ratios. The provided figures treat lease liabilities as long-term debt in the consolidated statements, but this isn’t uniformly clear in the report.
• Approximations: The total debt figures are approximations due to the way debt is presented in the report. A precise calculation may require more details or different considerations.
• EBIT: EBIT is used in the interest coverage calculation. This number should be clearly extracted from the profit and loss statement and any adjustments as per your specific definition.

Always recalculate these ratios with the precise numbers from the financial statements and their accompanying notes. Consider the specific definitions and methodologies the company utilizes to ensure your results align with the reporting. The standalone and consolidated leverage ratios differ significantly due to the acquisitions and financing structure of subsidiaries.

Market Analysis #

Market Metrics #

Several of these metrics require information not directly provided in the annual report. Specifically, the market capitalization, Price-to-Earnings (PE) ratio, and Price-to-Book (PB) ratio require the current market price of Greaves Cotton’s shares. The annual report only provides historical high and low prices for the year. Therefore, we can only calculate the dividend yield and dividend payout ratio. These are approximate values as they rely on the proposed dividend and the reported earnings.

Values that can be calculated (approximate):

• Standalone Profit After Tax (PAT): ₹284.36 crore

• Proposed Dividend per Share: ₹2

• Proposed Total Dividend Payout: ₹46.40 crore (Based on the number of outstanding shares)

• Standalone EPS: ₹12.26

• Dividend Yield (Approximation): This requires the current market price per share. The formula is: (Dividend per share / Market price per share) * 100%. This cannot be calculated without the current market price.

• Dividend Payout Ratio (Standalone, Approximation): (₹46.40 crore / ₹284.36 crore) * 100% ≈ 16.3%

Values that cannot be calculated without additional information:

• Market Cap: This requires the current market price per share and the number of outstanding shares.
• PE Ratio: This needs the current market price per share and the EPS.
• PB Ratio: This requires the current market price per share and the book value per share.

To calculate the missing metrics:

You will need to obtain the following from a financial data provider (such as Google Finance, Yahoo Finance, Bloomberg, etc.):

1. Current Market Price per Share: The closing price of Greaves Cotton’s share on a recent trading day.
2. Number of Outstanding Shares: The total number of Greaves Cotton’s shares currently issued and outstanding.
3. Book Value per Share: This is calculated by dividing the company’s total shareholder equity by the number of outstanding shares.

Once you have this data, you can calculate the missing metrics using these formulas:

• Market Cap: Current Market Price per Share * Number of Outstanding Shares
• PE Ratio: Current Market Price per Share / Earnings Per Share (EPS)
• PB Ratio: Current Market Price per Share / Book Value per Share
• Dividend Yield: (Dividend per share / Market price per share) * 100%

Remember that these market-based metrics are dynamic and change constantly with share price fluctuations. The dividend payout ratio calculated here is based on standalone PAT; a consolidated figure would necessitate using consolidated PAT (which was a loss).

Business Analysis #

Segment Analysis #

The annual report doesn’t explicitly provide all the requested details for each segment in a readily tabulated format. Some information, such as precise market share figures, is not included. We will present a summary based on the information available, noting areas where data is missing or requires further calculation. All financial figures are in Indian Rupees (INR) in crores. Growth rates are year-on-year (YoY).

Business Segment Summary:

Important Notes:

• Operating Margin Approximation: The report does not present a clear operating margin for each segment. The approximation requires careful summation of segment expenses from the financial statements. There may be unallocated expenses.
• Market Share: Market share is only provided for the automotive engine segment. Obtaining market share for other segments would require external market data.
• Revenue Breakdown: Revenue figures for Engineering are aggregate; a detailed breakdown for automotive, non-automotive, and Excel Controlinkage is needed for precise analysis. Similarly, a revenue breakdown for the retail segment would improve analysis.
• Geographic Details: Geographic presence is broadly defined. More specific details on the market penetration within each country or region could improve the analysis.

To get a more precise and comprehensive understanding of each segment’s performance, you need to supplement this summary with external market research and potentially more detailed financial data from the company’s filings or financial information providers.

Risk Management #

Risk Assessment #

The annual report doesn’t provide a structured risk matrix with quantified likelihood and impact severity for each risk. However, it does highlight several key risk factors. We will categorize them and provide descriptions, and discuss potential mitigation strategies based on the information provided. Note that assessing the likelihood and impact requires additional information and judgment.

Key Risk Factors:

Mitigation Strategies:

Many mitigation strategies involve diversification (products, markets, suppliers), technology upgrades, robust compliance programs, and strong stakeholder engagement.

Trends:

Overall, the trends point to increasing regulatory pressures, intense competition, and greater reliance on technology. The shift towards electric vehicles presents both opportunities and challenges.

Disclaimer: This risk assessment is based solely on the information available in the provided annual report. A more thorough risk assessment would require more detailed information, external market data, and expert judgment.

Strategic Overview #

Management Assessment #

Greaves Cotton’s management highlights several key strategic initiatives, competitive advantages, market conditions, challenges, and opportunities in the annual report. Here’s a summary:

I. Key Strategies:

• Diversification: Expanding into new product categories (electric vehicles, motion control systems) and markets (international expansion) to reduce dependence on any single segment and mitigate risks.
• Fuel-Agnostic Approach: Developing products compatible with multiple fuel types (diesel, CNG, biodiesel, ethanol) to adapt to evolving regulatory landscapes and consumer preferences.
• Technology Leadership: Investing heavily in R&D to develop innovative products and technologies, particularly in electric mobility and IoT-enabled solutions.
• Digital Transformation: Leveraging digital platforms and technologies to enhance customer engagement, optimize supply chain efficiencies, and improve operational effectiveness.
• Strategic Acquisitions: Acquiring companies like Excel Controlinkage to expand product portfolio, enhance manufacturing capabilities, and access new markets.
• Customer-Centricity: Focusing on understanding customer needs and delivering superior service and support, particularly through its retail and after-market segments.
• Sustainable Growth: Prioritizing environmental sustainability and responsible business practices to enhance brand reputation and attract environmentally conscious consumers.

II. Competitive Advantages:

• Established Brand: A strong brand reputation and extensive market presence built over more than a century of operations.
• Diverse Product Portfolio: A wide range of products across multiple segments catering to diverse customer needs in both the automotive and non-automotive sectors.
• Manufacturing Expertise: Significant in-house manufacturing capabilities and expertise in precision engineering and manufacturing technologies.
• Extensive Distribution Network: A vast network of dealers and service centers providing nationwide coverage and access to customers.
• Strategic Partnerships: Collaborations with OEMs, financial institutions, and technology providers enhance capabilities and access to resources.
• Fuel-Agnostic Technology: The ability to offer solutions compatible with multiple fuel types allows the company to adapt to regulatory shifts and customer preferences.

III. Market Conditions:

• Growing Demand for EVs: The Indian electric vehicle market is experiencing a surge in demand, driven by government policies and growing environmental awareness.
• Robust Aftermarket: The aftermarket for commercial vehicles remains strong.
• Government Initiatives: Government programs like ‘Make in India’ and schemes promoting renewable energy support domestic manufacturing.
• Infrastructure Development: Increased government spending on infrastructure projects creates opportunities for power generation and related equipment.
• Global Expansion Opportunities: International markets, particularly in Africa and developing economies, present growth potential.
• Commodity Price Volatility: Global markets show volatility impacting input costs.

IV. Challenges:

• Competition: Intense competition from both established and new players, especially in the EV market, leading to price pressure and margin squeezes.
• Regulatory Uncertainties: Government policies related to fuel types, emission norms, and incentives can change rapidly.
• Supply Chain Disruptions: Geopolitical risks and global supply chain constraints can impact procurement and production.
• FAME II Subsidy Issue: The uncertainty and subsequent refund related to the FAME II incentives impacted cash flow and profitability.
• Technological Disruption: Rapid technological advancements necessitate continuous innovation to avoid obsolescence.

V. Opportunities:

• Electric Vehicle Market Growth: The increasing adoption of electric vehicles presents significant growth opportunities in both two-wheelers and three-wheelers.
• Aftermarket Expansion: The growing demand for service and spare parts provides opportunities for expansion in the aftermarket segments.
• Global Market Penetration: Untapped potential exists in international markets for both existing and new products.
• Synergies from Acquisitions: Strategic acquisitions allow Greaves to leverage synergies and achieve economies of scale.
• Technological Innovation: Opportunities exist in incorporating new technologies (e.g., IoT, AI) to improve existing products and develop new ones.
• Sustainable Solutions: The growing demand for environmentally friendly products and services presents significant opportunities for growth.

Summary:

Greaves Cotton’s strategy focuses on diversification, technological leadership, and customer-centricity to navigate the challenges and capitalize on opportunities in the evolving mobility and power generation landscape. The company’s success will depend on its ability to execute its strategic plan, manage risks effectively, and adapt to the rapidly changing market dynamics. The acquisition of Excel Controlinkage is a key strategy to strengthen its core business and grow in the international markets.

ESG Ratings #

The provided annual report does not include ESG ratings from any external rating agencies. While the report details the company’s ESG initiatives and policies, it doesn’t provide any scores or rankings from organizations that specialize in ESG assessments (such as MSCI, Sustainalytics, Refinitiv, etc.). To find ESG ratings for Greaves Cotton Limited, you would need to consult specialized ESG data providers or directly search for ratings on their websites.

ESG Initiatives #

Greaves Cotton’s annual report details several Environmental, Social, and Governance (ESG) initiatives, though quantitative data on certain aspects (like precise carbon footprint) is limited.

I. Environmental Initiatives:

• Renewable Energy: The company has installed several solar power plants across its manufacturing facilities, aiming to reduce reliance on non-renewable energy sources. Specific generation capacity and electricity usage data are provided in the report.
• Waste Management: Initiatives include recycling and reusing aluminum scrap briquettes to reduce energy consumption and waste generation. The report provides some quantitative data on waste generated but not on recycling rates.
• Water Conservation: Implementing water recycling and reuse systems at some plant locations and use of rain water harvesting. Specific water usage and recycling data are mentioned.
• Air Emission Reduction: Focus on meeting increasingly stringent emission standards and adopting technologies for cleaner production. The report provides limited data on specific air emissions.
• Miyawaki afforestation: Planting native tree species to create mini-forests on plant premises, fostering biodiversity and carbon sequestration.

II. Carbon Footprint:

The report does not provide a comprehensive calculation of the company’s total carbon footprint (Scope 1, 2, and 3 emissions). Some information regarding Scope 1 and Scope 2 emissions is provided, showing an increase in tCO2e. However, Scope 3 emissions (from the value chain) are not quantified.

III. Social Initiatives:

• DEEP (Development, Education, Empowerment, and Progress) Program: A key CSR (Corporate Social Responsibility) initiative focusing on skill development and employability enhancement for underprivileged youth, particularly in the manufacturing sector.
• Employee Well-being: Various initiatives aimed at improving employee health, safety, and overall well-being, including training programs, health checkups, and wellness activities.
• Community Engagement: Partnerships with NGOs and other community organizations to support local development projects.

IV. Governance Practices:

• Board Composition: A diverse board of directors, including independent and non-executive members, with expertise in various fields, ensuring balance and independent oversight.
• Board Committees: Establishment of well-defined board committees (Audit, Nomination & Remuneration, ESG & CSR, Risk Management, Stakeholders’ Relationship & Share Transfer) with clear terms of reference.
• Compliance: A strong emphasis on complying with all relevant laws and regulations, coupled with a robust compliance program and regular audits.
• Whistleblower Policy: A system for reporting unethical or illegal conduct.
• Code of Conduct: A well-defined Code of Conduct for directors and senior management, promoting ethical behavior.

V. Sustainability Goals:

The report mentions a long-term goal of “benefitting a billion lives by 2030,” but does not provide specific, quantified sustainability targets for the coming years. The report focuses on creating sustainable solutions and building a cleaner mobility ecosystem, but lacks detailed and measurable goals regarding emissions reduction, resource consumption, and social impact. While the company demonstrates a commitment to sustainability, the lack of clearly defined and measurable targets for the future represents an area for improvement.

In summary:

Greaves Cotton showcases a range of ESG initiatives, though quantitative data and specific, measurable, achievable, relevant, and time-bound (SMART) sustainability goals are largely lacking. The report highlights the company’s commitment to responsible business practices, but further elaboration on its future goals and a more comprehensive quantification of its environmental impact would enhance transparency and stakeholder engagement.

Additional Information #

Operational Metrics #

The annual report provides the following information regarding R&D expenditure and employee count:

R&D Expenditure:

The total R&D expenditure for FY2023-24 was ₹62.09 crore, comprising ₹47.52 crore in capital expenditure and ₹14.57 crore in revenue expenditure.

Employee Count:

As of March 31, 2024, the company had 990 permanent employees. The report also mentions a total employee count of 1,436 (including permanent and non-permanent employees) and 2,255 workers (including permanent and non-permanent workers). The total number of differently abled employees and workers is 7.

Key Events #

Several significant events shaped Greaves Cotton’s fiscal year 2023-24. Here’s a summary based on the annual report:

• Acquisition of Excel Controlinkage: A major acquisition that significantly expands Greaves Cotton’s presence in the motion control systems market, adding new products, manufacturing capabilities, and global reach.
• Acquisition of additional stake in MLR Auto: Increased its stake in MLR Auto to 51%, making it a subsidiary and strengthening its position in the electric three-wheeler market.
• Launch of Greaves Eltra: Introduction of a new range of electric three-wheelers (both cargo and passenger versions), showcasing the company’s commitment to electric mobility and innovative technology.
• Launch of Ampere Nexus: The launch of a high-performance electric scooter with significant marketing and promotional activity.
• Expansion of EV Financing: Significant expansion of Greaves Finance’s operations into 29 cities, facilitating greater access to financing for electric vehicles.
• International Expansion: Opening of the first Ampere showroom in Nepal, marking the company’s entry into the international electric vehicle market.
• FAME II Incentive Refund: A significant voluntary refund of FAME II incentives, highlighting the company’s commitment to ethical practices.
• Amendments to key policies: The company updated key policies such as those related to remuneration, related party transactions, whistle-blower mechanism, and corporate governance.
• Restructuring of Senior Management: Changes in senior management roles in several business segments with appointments and resignations during the year.
• Compliance with new regulations: Implementation of actions to comply with new regulations such as the requirement for maintaining audit trail in the accounting software and amendments to policies to incorporate the ESG aspect.

These events demonstrate the company’s focus on growth through diversification, technological advancement, and expansion into new markets, while also highlighting the challenges associated with navigating regulatory uncertainties and the competitive landscape of the electric vehicle market. The voluntary refund of FAME II incentives is a significant event that highlights the company’s ethical considerations.

Audit Information #

Auditor’s Opinion:

The independent auditor, Deloitte Haskins & Sells LLP, issued an unqualified (unmodified) opinion on both the standalone and consolidated financial statements of Greaves Cotton Limited for the year ended March 31, 2024. This means the auditors found the financial statements to be fairly presented in accordance with Indian Accounting Standards (Ind AS) and other generally accepted accounting principles in India. The report does note a few minor modifications related to the maintenance of accounts and audit trail requirements in the accounting software for some of the subsidiary companies.

Key Accounting Policies:

The annual report outlines several key accounting policies, including:

• Basis of Preparation: The financial statements are prepared using the historical cost convention, except for certain assets (investment properties and financial instruments) measured at fair value.
• Revenue Recognition: Revenue is recognized when control of goods or services is transferred to the customer, meeting specific criteria under Ind AS 115.
• Foreign Currency Transactions: Transactions in foreign currencies are translated using exchange rates prevailing at the transaction date, with year-end retranslation of monetary items.
• Borrowing Costs: Borrowing costs directly attributable to the acquisition, construction, or production of qualifying assets are capitalized; others are expensed.
• Employee Benefits: Defined contribution plans are expensed as incurred; defined benefit plans are accounted for using the projected unit credit method. Share-based payments are recognized over the vesting period.
• Goods and Services Tax (GST): GST is generally recognized net of recoverable amounts.
• Taxation: Both current and deferred tax are recognized, with deferred tax assets and liabilities measured at expected tax rates.
• Property, Plant, and Equipment: Capitalized at cost, depreciated using the straight-line method over their useful lives.
• Intangible Assets: Internally generated intangible assets are capitalized at cost once certain criteria are met; acquired intangible assets are measured at cost less accumulated amortization.
• Impairment: Assets are tested for impairment when indicators suggest the carrying amount may not be recoverable.
• Provisions: Recognized when a present obligation exists, an outflow of resources is probable, and a reliable estimate is possible.
• Financial Instruments: Recognized when the Group becomes a party to the contractual provisions of the instruments and are subsequently measured at either amortised cost or fair value, depending on the classification of the financial instruments. Impairment is accounted for using the expected credit loss model.
• Business Combinations: Accounted for using the acquisition method.
• Leases: The company follows Ind AS 116, recognizing right-of-use assets and lease liabilities for most leases.

These policies are applied consistently across the financial statements. However, always refer to the complete and detailed description of the accounting policies within the annual report for a comprehensive understanding. The notes to the financial statements provide further details and explanations.