Hero MotoCorp Ltd:Annual Report 2023-24 Analysis

Hero MotoCorp Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History #

Hero MotoCorp Ltd. (formerly Hero Honda Motors Ltd.) was established in 1984 as a joint venture between Hero Cycles of India and Honda of Japan.

Headquarters Location and Global Presence #

Hero MotoCorp is headquartered in New Delhi, India. The company has a presence in over 40 countries across Asia, Africa, South and Central America, and the Middle East.

Company Vision and Mission #

• Vision: To be a global leader in providing mobility solutions.
• Mission: To be the best in terms of customer focus, manufacturing excellence, and stakeholder value creation.

Key Milestones in Their Growth Journey #

• 1984: Establishment of Hero Honda Motors Ltd.
• 2001: Becomes the world’s largest two-wheeler manufacturer.
• 2011: Hero Group acquires Honda’s stake, leading to the name change to Hero MotoCorp Ltd.
• 2014: Inauguration of Hero MotoCorp Global Centre of Innovation and Technology (CIT) in Jaipur, India.
• 2024: Celebrated 40 years of operation.

Stock Exchange Listing Details and Market Capitalization #

Hero MotoCorp Ltd. is listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). Market capitalization fluctuates; refer to current financial data for the most up-to-date figures.

Recent Financial Performance Highlights #

Recent financial data should be sourced from Hero MotoCorp’s official investor relations page and financial news outlets. Focus on key metrics like:

• Revenue
• Net Profit
• Earnings per Share (EPS)
• Sales Volume
• Market Share

Management Team and Leadership Structure #

The leadership structure typically includes:

• Chairman and CEO: (Refer to the official Hero MotoCorp website for the current leadership).
• Chief Financial Officer (CFO)
• Executive Directors and heads of various departments (Manufacturing, Sales & Marketing, R&D, etc.)

Any Notable Awards or Recognitions #

• Awards for product design and innovation.
• Awards for corporate social responsibility (CSR) initiatives.
• Recognition as a top company in India.

Their Products #

Complete Product Portfolio with Categories #

Hero MotoCorp’s product portfolio primarily consists of motorcycles and scooters. Categories include:

• Motorcycles: Commuter, Deluxe, Premium
• Scooters: Gearless scooters for urban mobility

Flagship or Signature Product Lines #

• Splendor Series: (Splendor+, Splendor iSmart, Splendor Pro) - Known for fuel efficiency and reliability.
• HF Deluxe: A popular commuter motorcycle.
• Passion Series: A stylish commuter motorcycle.
• Xtreme Series: A range of sporty and premium motorcycles.

Key Technological Innovations or Patents #

• i3S (Idle Stop-Start System): Technology that automatically switches off the engine when idle and restarts upon clutch engagement, enhancing fuel efficiency.
• XSens Technology: Advanced sensors to optimize engine performance and fuel efficiency.

Manufacturing Facilities and Production Capacity #

Hero MotoCorp has multiple manufacturing facilities in India. Total production capacity should be researched and updated periodically as it is a key competitive indicator.

Quality Certifications and Standards #

Hero MotoCorp adheres to international quality standards, including:

• ISO 9001: Quality Management System
• ISO 14001: Environmental Management System

Any Unique Selling Propositions or Technological Advantages #

• Fuel Efficiency: A key selling point for many of their commuter motorcycles.
• Reliability and Durability: Reputation for long-lasting vehicles.
• Extensive Service Network: Wide availability of service centers across India and other markets.

Recent Product Launches or R&D Initiatives #

• Details on the launch of new models, variants, or electric vehicles should be included.
• Information about R&D investments and focus areas.

Primary Customers #

Geographic Markets (Domestic vs. International) #

Hero MotoCorp has a strong presence in the domestic (Indian) market, which remains its largest. The company is also expanding its reach in international markets across Asia, Africa, South America, and other regions.

Distribution Network and Sales Channels #

• Extensive network of dealerships and service centers.
• Focus on rural and semi-urban areas through targeted marketing and distribution strategies.

Major Competitors #

Direct Competitors in India and Globally #

• India: Honda Motorcycle & Scooter India (HMSI), Bajaj Auto, TVS Motor Company, Royal Enfield
• Globally: Yamaha, Suzuki, Kawasaki (depending on the specific market)

Comparative Market Share Analysis #

Market share data should be sourced from industry reports and financial news outlets for accurate and up-to-date information. Analyze Hero MotoCorp’s market share compared to its key competitors in both the domestic and international markets.

How They Differentiate from Competitors #

• Pricing: Competitive pricing, especially in the commuter segment.
• Fuel Efficiency: Focus on fuel-efficient motorcycles.
• Service Network: Extensive and accessible service network.

Future Outlook #

Expansion Plans or Growth Strategy #

• Expansion into new international markets.
• Investment in electric vehicle (EV) development and manufacturing.
• Strengthening its presence in the premium motorcycle segment.

Upcoming Products or Innovations #

• Details about planned electric vehicle launches.
• Development of new technologies and features for existing product lines.

Sustainability Initiatives or ESG Commitments #

• Efforts to reduce carbon emissions in manufacturing processes.
• Promoting sustainable mobility solutions.

Industry Trends Affecting Their Business #

• Shift towards electric vehicles.
• Increasing urbanization and demand for scooters.
• Government regulations regarding vehicle emissions and safety.

Long-Term Vision and Strategic Goals #

• To be a global leader in providing mobility solutions.
• To build a strong portfolio of electric vehicles.
• To enhance customer experience and build brand loyalty.

3-Year Trend Analysis of Key Financial Metrics #

• Revenue: FY24 revenue was ₹37,455.72 crore, an 11% increase from ₹33,806 crore in FY23, reflecting growth from ₹34,370.81 crore in previous reports.
• Profit Before Tax (PBT): PBT for FY24 was ₹5,258.36 crore, up 35.72% from ₹3,874.56 crore in FY23.
• Profit After Tax (PAT): PAT in FY24 increased by 36.33% to ₹3,967.96 crore, compared to ₹2,910.58 crore in FY23.
• Earnings Before Interest, Depreciation, and Taxes (EBITDA) Margin: EBITDA margin improved to 14.03% in FY24 from 11.79% shown in previous year report.
• Earnings per share: Basic EPS increased to ₹ 198.53 compared to last financial year’s value of ₹ 145.66
• Trade Receivables Turnover Ratio: Increased from 16.75 in FY23 to 17.34 in FY24.
• Inventory Turnover Ratio: Decreased from 18.66 in FY23 to 17.67 in FY24.
• Interest Coverage Ratio: Increased from 212.02 in FY23 to 309.12 in FY24.
• Operating Profit Margin: Increased from 9.85% in FY23 to 12.13% in FY24.
• Net Profit Margin: Rose from 8.47% in FY23 to 10.35% in FY24.
• Return on Net Equity: Improved from 17.92% in FY23 to 22.88% in FY24.

Business Segment Performance #

• Motorcycles: Accounted for 5.21 million units sold, forming a major part of the total sales.
• Scooters: 0.41 millions sold during the fiscal year, growing to 12% within the Indian Two-Wheeler Industry.
• Premium Segment: Significant growth in the 150cc and above categories, with the 200cc+ sub-segment growing at a 14% CAGR over the last three years.
• Entry Segment (100/110cc) remained the largest contributor.
• 125cc Segment: Showed signs of recovery and growth, with Hero MotoCorp focusing on increasing market share with a 3-brand strategy.
• Parts, Accessories & Merchandise (PAM) Business: Revenue of ₹5,387 crore in FY24, an 11.4% increase over FY23.

Major Strategic Initiatives and their Progress #

• ‘Changing Gears’ Strategic Framework: Focuses on the 4S mantra: Synergy, Speed, Scale, and Simplicity to improve efficiency.
• Grow the Core: Passion+ Relaunched to capture first time buyers, capturing around 71% of the segment.
• Win in Premium: Introduction of models like Xtreme 125R/160R 4V, Karizma XMR, Mavrick 440, and H-D X-440 and launch of ‘Premia’ showrooms for premium customer experience.
• Build EV Leadership: Expansion of VIDA, electric scooter, to over 100 cities and strategic partnerships with Ather Energy and Zero Motorcycles.
• Digital Initiatives: Implementation of the ‘One Hero app,’ Marketing Data Workbench, and Digi-finance aggregator platform to enhance customer engagement and operational efficiency.
• Global Business Expansion: FY24 Export growth was registered at 16.3%, with focus on 10 primary countries.

Risk Landscape Changes #

• Geopolitical Tensions: Impacting global sales, logistics, and supply chains; mitigated by focusing on less impacted countries and building a strong domestic supplier base.
• Cost Pressure in Material Sourcing: Managed through cost optimization programs like LEAP and developing alternate technologies and vendors.
• Cybersecurity and Data Security Risks: Addressed by deploying measures like Next Gen Security Operations Centre, Cyber insurance, and a tested Business Continuity Plan (BCP).
• Shift to Electric Vehicles (EV): Potential impact on ICE engine two-wheeler sales; mitigated by strategic investments in EV products and infrastructure, including the VIDA brand and partnerships with Ather Energy and Zero Motorcycles.

ESG Initiatives and Metrics #

• Environmental Governance: 100% of sites maintain ISO 14001 certifications.
• Carbon Neutral Operations: Target of 100% carbon-neutral operations (Scope 1 & 2) by 2030, with current renewable energy consumption at 198.6 lakh kWh in FY24.
• Water Management: Achieved a water positivity rate of 455%, with a goal of 500% by 2025.
• Waste Management: Achieved 100% zero waste-to-landfill and single-use plastic-free certification for all facilities.
• Diversity and Inclusion: Increased gender diversity to 13.5%. Aims for 30% women in the workforce by 2030. Launched the “HERoes Network,” to support women.
• CSR Initiatives: Impacted over 1.4 million lives through initiatives in education, livelihood opportunities, road safety, and biodiversity conservation.
  • Renewable Energy Generated :198.6 lakh units
  • CSR Spend: ₹73.89 crore.

Management Outlook #

• The Indian two-wheeler industry is expected to continue its growth, driven by favorable indicators for the Indian economy, including resilience amid geopolitical challenges.
• The company plans to enhance its EV product portfolio and expand its global business, particularly in identified top 10 markets.
• Emphasis on customer experience through upgraded stores (Hero 2.0 and Premia) and premium customer service.
• Continued investment in digitalization and AI to enhance customer engagement and operational efficiency.
• Further development and expansion of the Parts, Accessories, and Merchandise (PAM) business.

Detailed Analysis #

Financial Position Analysis of Hero MotoCorp #

3-Year Comparative Analysis of Assets, Liabilities, and Equity (Consolidated) #

(Amount in crores of INR)

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

• Non-current Assets (FY 2023-24 vs. FY 2022-23): Increased by ₹ 1,355.64 crores (9.36%), primarily due to the rise in the value of property, plant and equipment, Right of Use of Assets, and other intangible assets, along with Equity Accounted Investments in Associates.
• Current Assets (FY 2023-24 vs. FY 2022-23): Increased by ₹879.89 Crores (9.33%) owing to a considerable increase in Current Investments.
• Current Liabilities (FY 2023-24 vs. FY 2022-23): Increased by ₹ 1,035.75 crores (17.23%).

Working Capital Trends #

• Working capital has decreased slightly from FY 2022-23 to FY 2023-24.
• The increase in current liabilities outpaced the increase in current assets.

Asset Quality Metrics #

• Allowance for Expected Credit Loss (ECL) on Trade Receivables: The ECL allowance increased from ₹ 121.26 crores (FY 2022-23) to ₹ 138.97 crores (FY 2023-24) to cover all outstanding dues.

Debt Structure and Maturity Profile #

(Amount in crores of INR)

• All borrowings as of March 31, 2024 are classified as current, indicating they are due within one year.
• The company doesn’t have debt obligations exceeding one year, other than lease liabilities.

Off-Balance Sheet Items #

• Contingent Liabilities (Income Tax Matters): ₹ 178 crores, related to prior period expenses, and is currently under appeal. The Company believes it has a strong case.

Operating Performance #

Income Statement #

Revenue Breakdown by Segment/Geography with Growth Rates #

• Motorcycles and Scooters: FY23-24: 5.62 million units sold; Growth: 5.5% YoY (from 5.3 million in FY22-23).
• Domestic Sales: Accounted for 5.42 million units, 30.9% market share, 43.2% market share in the domestic motorcycle market.
• Segment-wise Domestic Sales:
  • Entry segment 1.03 million units.
  • 100cc Deluxe Segment; 3.36 million Units.
  • 125cc Deluxe Segment: 0.54 million units
  • Premium segment 0.09 million units.
  • Scooter segment 0.38 million units.
• Global Business: FY23-24: 200,923 units; Growth: 16.3% YoY. Geographic Focus: Top 10 markets include Bangladesh, Colombia, Turkiye, Mexico, Nepal, Guatemala, Nigeria, DRC, and the Philippines. Market share increased from 4.7% to 5.8% (Exports from India)
• Parts, Accessories & Merchandise (PAM): FY23-24 Revenue: ₹5,387 crore; Growth: 11.4% YoY.

Cost Structure Analysis #

• Cost of Materials Consumed & Changes in Inventories: FY23-24: ₹25,431 crore, representing 67.9% of total revenue.
• Employee Benefit Expenses: FY23-24: ₹2,402 crore, representing 6.4% of total revenue.
• Other Expenses: FY23-24: ₹5,097 crore, representing 13.6% of total revenue, inclusive of Advertisement and publicity spend.
• Total expenses: FY 2023-24, ₹32,930, increase of 7.9% from FY 2022-23.

Margin Analysis (Gross, Operating, Net) with Trends #

• Operating Profit Margin: FY23-24: 12.13%; Trend: Increased from 9.85% in FY22-23, stable commodity costs and better returns on spending.
• Net Profit Margin: FY23-24: 10.35%; Trend: Increased from 8.47% in FY22-23, due to improved operating margins and higher other income.

Non-Recurring Items #

• VRS Expenses: FY23-24: ₹159.99 crore recognized as an exceptional item.

EPS Analysis (Basic/Diluted) #

• Basic EPS: FY23-24: ₹198.53; Trend: Increased from ₹145.66 in FY22-23.
• Diluted EPS: FY23-24: ₹198.18; Trend: Increased from ₹145.52 in FY22-23.

Quarterly Trends #

• Specific quarterly breakdown data of the segments is not available, but a robust double-digit growth in Q3 and Q4 of FY 2023-2024 were mentioned for the Indian two-wheeler industry.

Strategic and Management Analysis of Hero MotoCorp #

Long-Term Strategic Goals and Progress #

• Goal: Achieve carbon-neutral operations (Scope 1 & 2) by 2030.
  • Progress: Reached 40% carbon neutrality.
• Goal: Achieve 500% water positivity by 2025.
  • Progress: Achieved 455% water positivity.
• Goal: Zero waste-to-landfill by 2025.
  • Progress: Achieved 100% zero waste-to-landfill across all facilities, ahead of the target year.
• Goal: Achieve 30% female workforce by 2030.
  • Progress: Gender diversity rate is at 13.5%
• Goal: Expand global business.
  • Progress: Entered the Phillippines and is preparing to enter Brazil. Realigned and increased investments in the top 10 global markets.

Competitive Advantages and Market Positioning #

• Retained its position as the world’s largest two-wheeler manufacturer for 23 consecutive years.
• Holds a dominant 30.9% market share in the domestic two-wheeler market and 43.2% in the motorcycle segment, underscoring strong brand equity and customer loyalty.
• Showed strong growth in Global Business, growing 16.3% year on year.
• Expanded its presence to nearly 50 countries.

Innovation Initiatives and R&D Effectiveness #

• Launched a record number of new products in FY 2023-24, addressing portfolio gaps, especially in the premium and EV segments, that contributed to 11% of total sales.
• R&D investments are driving the development of new platforms (e.g., X440, Mavrick, Xoom, VIDA) and continuous upgrades of existing ones (e.g., Splendor XTec, Glamour Revamp), resulting in multiple patents filed and granted.
• Partnerships with Harley-Davidson, Ather Energy, and Zero Motorcycles enhance innovation capabilities and accelerate entry into new segments.
• Introduced the world’s first class-convertible vehicle, the Surge S32.

M&A Strategy and Execution #

• Partnered with Harley-Davidson to co-develop and market premium motorcycles, such as the X440.
• Strategic investment in Ather Energy to build charging infrastructure.
• Collaborating with Zero Motorcycles to develop premium EV motorcycles.
• Acquired additional equity stake in Ather Energy for better reach in the electric scooter market.

Management’s Track Record in Execution #

• Delivered the highest-ever revenue and profits in FY 2023-24, with an 11% revenue growth and a 36% profit growth.
• Successfully navigated global economic headwinds, achieving 16.3% growth in global business volume.
• Achieved key sustainability targets ahead of schedule.
• The Raman Munjal Memorial Hospital and Raman Munjal Vidya Mandir were inaguarated.

Capital Allocation Strategy #

• Invested H 600 crore in setting up a new Global Parts Center (GPC 2.0) in Tirupati to enhance operational capabilities.
• Significant R&D spending of H 826 crore in FY 2023-24 is directed towards new product platforms, technology upgrades, and operational efficiency.
• Company has negative net working capital.

Organizational Changes and Their Impact #

• Established Centers of Excellence and a Business Unit structure to enhance internal synergy, productivity, and efficiency.
• Decentralized decision-making to improve speed and responsiveness.
• Launched Project Saksham, in partnership with the Automotive Skills Development Council (ASDC), that will train 100,000 women as two-wheeler technicians in the next 5 years.
• The Executive Chairman’s initiative, ‘Hero Hatch’ in 2018 as an internal incubation center, resulted in the launch of ‘Surge’ for sustainable innovation.

Environmental Metrics and Targets #

• Consumed 19.86 million kWh of renewable energy in FY 2023-24.
• Achieved a fresh water intensity of 0.14 KL/vehicle, a 13.8% reduction compared to FY 2022-23. The Company is 455% water positive. The stated goal is achieving 500% water positivity by 2025.
• Scope 1 and 2 carbon emission intensity was 18.61 KgCO2/vehicle. The Company is aiminig for 100% Carbon Neutral Operations (Scope 1 &2 ) by 2030.
• Achieved 100% zero waste-to-landfill across all facilities and is 100% single-use plastic free.
• 23.64 Kg/vehicle - recycled material used intensity and 18.3% recycled input materials used in product manufacturing.

Social Responsibility Programs #

• ₹ 73.89 crore (₹ 738.9 million) was spent on CSR initiatives in FY 2023-24.
• 1.4 million+ Lives Impacted through CSR Initiatives in FY 2023-24.
• 5,00,000 people took a pledge on road safety. 2,17,434 People were educated on safe road behavior, 50,000 Kid’s helmets are distributed.
• 704 Students were provided scholarships to pursue B.Tech, LLB, and MBA. 91,672 people were able to access health care.
• Project Saksham aims to empower 1,00,000 women to become Two wheeler technicians in five year, 4000 women enroled in the FY 2023-24.

Governance Structure and Effectiveness #

• The Board has 30% diversity representation, 3 out of 10 are women directors.
• Balanced mix of Executive (2), Non-Executive (3), and Independent Directors (5).
• Audit Committee, Nomination and Remuneration Committee, Risk Management Committee, Stakeholders’ Relationship Committee, and Sustainability and Corporate Social Responsibility Committee are functional.
• Policies are up to date.
• Code of conduct was updated in 2020.
• Zero-tolerance policy on bribery and corruption across all operations.
• Enterprise Risk Management (ERM) framework is in place. The Risk Management Committee (RMC) oversees risk mitigation.
• All recommendations of the Audit Committee were accepted by the Board.

ESG Ratings and Peer Comparison #

• Received the CII National Award for Excellence in Water Management for the Gurugram facility. Awarded ‘Outstanding Accomplishment in Corporate Excellence Category’ at the CII Sustainability Awards. Received GreenCo Champion Award.
• Achieved 100% Zero Waste-to-Landfill certifications for all facilities, and all manufacturing locations are GreenCo rated.

Regulatory Compliance and Future Preparations #

• Compliant with all material regulations (SEBI, Companies Act). The Company has an automated compliance framework.
• Proactive risk mitigation strategies are in place for geopolitical tensions, material sourcing cost pressures, data security, and the shift to EV.
• Focused on building capabilities in product portfolio, customer experience and process.
• Actively adapting to shifts in consumer preferences, particularly the rise of electric two-wheelers, through investments in EV products (VIDA), partnerships (Ather Energy, Zero Motorcycles), and charging infrastructure.
• Hero MotoCorp is the first auto company in the country to join the Open Network for Digital Commerce (ONDC)

Forward Outlook: Future Projections and Guidance #

Management Guidance and Assumptions #

• Management anticipates a continued shift in the two-wheeler industry towards premiumization, as reflected in multiple product launches.
• There is an expectation of robust coexistence between EV and ICE segments, that Hero MotoCorp will transform both segments.
• Management guidance is for an increased focus on the top 10 global markets.
• Management assumes they can leverage scale advantages including the largest distribution network and production capacities.
• Management, in the context of employee benefit plans, has used assumptions, mortality rate and withdrawal rate.

Market Growth Forecasts #

• The Indian two-wheeler industry is expected to witness substantial expansion in the next decade.
• The 125cc and above premium segment, in both motorcycles and scooters, is projected to experience highest growth rates.
• The EV two-wheeler segment is positioned for accelerated growth, driven by increasing environmental consciousness, lower ownership costs, and government incentives.
• The global two-wheeler market is projected to grow from US $123.54 billion in 2024 to US $215.96 billion by 2032.

Planned Strategic Initiatives #

• Core Segment Growth: Launch of models like Passion+, HF Deluxe, and Splendor Xtec to attract first-time buyers. Relaunch of the Glamour with the aim to regain 125cc segment share. Expansion of the scooter segment with new Xoom models.
• Premium Segment Focus: Development of power brands (Xtreme, Xpulse, Karizma, Mavrick, and X440), with four out of eight products launched in premium segments. Introduction of Hero Premia outlets for premium customer experience.
• EV Leadership: Expansion of VIDA’s presence to over 200+ cities, development of charging infrastructure in collaboration with Ather Energy, and partnership with Zero Motorcycles for premium EV motorcycles.
• Global Business Expansion: Increased investment and refined strategies for strategic top 10 markets (Bangladesh, Colombia, Turkiye, Mexico, Nepal, Guatemala, Nigeria, DRC, Philippines, and soon, Brazil). Entry into the Philippines and planned entry into Brazil.
• Digital Transformation: Integration with the Open Network for Digital Commerce (ONDC), implementation of a Lead Management System, Dealer Management Systems and a Generative AI-based Dealer Sales Executive App.
• Parts, Accessories & Merchandise (PAM) Business Growth: Increased breadth, depth, and efficient logistics to make PAM a major revenue driver.

Capital Expenditure Plans #

• Investment of ₹600 crore in Andhra Pradesh to establish a Global Parts Center 2.0 in Tirupati over the next two years.

Efficiency Improvement Targets #

• Cost optimization programs (e.g., LEAP, LEAD, Smart Cell and Utility Cockpit) aimed at reducing work content and optimizing variable manufacturing costs.
• Targeting higher process capability (Cpk of 1.67) for Critical to Quality (CTQ) parameters in machine shops.
• Digital initiatives such as the ‘One Hero app’, industry 4.0, a cloud based data ecosystem to enchance customer engagement, operational efficiency, and decision making.

Potential Challenges and Opportunities #

• Challenges:
  • Geopolitical tensions and supply chain disruptions could impact market position, profit margins, and sourcing costs.
  • Shifting consumer preferences to EVs pose a potential risk to the sale of ICE engine two-wheelers.
  • Rising pollution levels and the need for stricter emissions compliance
• Opportunities:
  • Category expansion in the entry-level segment and fortifying brands.
  • Significant growth potential in the premium motorcycle segment, especially 200cc and above.
  • Expansion in the scooter segment.
  • Growing global business with a focus to top 10 markets.
  • Growth in the burgeoning emerging mobility sector.
  • Development of allied businesses, particularly the Parts, Accessories, and Merchandise (PAM) business.
  • Leveraging digital-first approaches and AI to streamline processes and improve customer experiences.
  • Expansion into new markets (e.g., Philippines, Brazil, Southeast Asia, Europe).

Scenario Analysis and Sensitivity to Key Assumptions #

• Sensitivity to Market Fluctuations: Hero MotoCorp’s export performance has shown vulnerability to economic slowdowns (e.g., Bangladesh) and forex shortfalls, highlighting the sensitivity of revenue to macroeconomic stability in export markets.
• Discount Rate Sensitivity-If the discount rate is 50 basis points higher or lower, the defined benefit obligation would decrease by ₹15.92 crore or increase by ₹17.04 crore.
• Salary Growth Sensitivity: If the expected salary growth increases or decreases by 0.5%, the defined benefit obligation would increase by ₹16.97 crores or decrease by ₹15.99 crores.
• NAV price Sensitivity-If NAV prices had been 1% higher/lower, profit for the year would increase/decrease by ₹ 65.19 Crore.
• FX Rate Sensitivity: A 5% strengthening/weakening of the INR against relevant foreign currencies would lead to fluctuations of ₹16.82 in Profit or Loss and 12.69 in total equity.

Audit & Compliance Analysis #

Auditor’s Opinion and Qualifications #

• The auditor’s report expresses an unmodified opinion on the standalone and consolidated financial statements.
• Emphasis of Matter paragraphs were included in the auditor’s report, but the opinion remains unmodified.
• There were no qualifications or adverse remarks reported by the statutory auditors.

Key Accounting Policies #

• The financial statements have been prepared in accordance with the indian Accounting Standard.
• The financial statements are prepared on a historical cost basis, except for certain financial instruments, and defined benefit plans, which are measured at fair value.
• Revenue is recognized upon the transfer of control of promised products or services to customers.
• There were no mention of any changes in the Key Accounting Policies.

Internal Control Effectiveness #

• The Company maintains adequate internal financial controls with reference to financial statements, and these controls were operating effectively.
• The company utilizes an automated compliance framework and the board of directors receives compliance certificates.
• An Internal Audit is in place.

Regulatory Compliance Status #

• The Company is fully compliant with the applicable Secretarial Standards (SS-1 & SS-2).
• The Company is fully compliant with the applicable mandatory requirements under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
• No penalties or strictures have been imposed on the Company by stock exchanges, SEBI, or any statutory authority on matters related to capital markets in the last three years.
• Company has complied with Cyber Security regulations.

Legal Proceedings and Potential Impact #

• The Income Tax Department conducted a search under Section 132 of the Income Tax Act, 1961, with reassessment orders resulting in a rectified demand of ₹177.96 Crore. The Company has filed an appeal.
• The Ministry of Corporate Affairs initiated an investigation regarding the Company’s beneficial ownership in a former vendor(s). The Company has provided the requested information, and there have been no further proceedings.
• The Enforcement Directorate visited the Company’s premises in relation to alleged violations of the Customs Act 1962. Information was provided, and the matter has been stayed by the Delhi High Court.
• There are pending legal proceedings, but the management believes they will not have a material effect.

Related Party Transactions #

• All related party transactions during FY 2023-24 were in the ordinary course of business and on an arm’s length basis.
• There were no materially significant related party transactions that might have a potential conflict with the interest of the Company.
• Related party transactions were disclosed to the Audit Committee and the Board as per regulations.

Subsequent Events #

• Two apartments have been registered in the name of the company subsequent to balance sheet date.

Accounting Quality and Regulatory Risk Assessment #

• Accounting quality appears strong, as indicated by an unmodified audit opinion, compliance with Ind AS, and maintenance of adequate internal financial controls.
• Regulatory risk exists due to ongoing investigations by the Income Tax Department and Enforcement Directorate, but management and external legal advice suggest a probable favorable outcome.
• Compliance efforts are significant, including a robust internal audit system and adherence to regulatory disclosures, reducing overall regulatory risk.