Fiem Industries Ltd:Annual Report 2023-24 Analysis

Fiem Industries Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History #

Fiem Industries Ltd. was established in 1989 by Mr. J.K. Jain.

Headquarters Location and Global Presence #

The company’s headquarters is located in Haryana, India. They have expanded their presence to international markets through exports and collaborations.

Company Vision and Mission #

• Vision: To be a global leader in automotive lighting and signaling equipment, driven by innovation and customer satisfaction. (This may need to be verified with their official website for the most up-to-date statement).
• Mission: To provide high-quality, reliable, and innovative products and services to meet the evolving needs of the automotive industry. (This may need to be verified with their official website for the most up-to-date statement).

Key Milestones in Their Growth Journey #

• Early years focused on establishing a strong domestic presence in automotive lighting.
• Expanded product portfolio to include rear view mirrors, plastic molded parts, and other automotive components.
• Entered into technical collaborations with international companies to enhance technological capabilities.
• Increased exports to various countries.
• Continual investment in research and development to introduce innovative products.

Stock Exchange Listing Details and Market Capitalization #

Fiem Industries Ltd. is listed on the Bombay Stock Exchange (BSE: 526530) and the National Stock Exchange (NSE: FIEMIND). Market capitalization fluctuates based on market conditions.

Recent Financial Performance Highlights #

• Consistent revenue growth driven by increased demand from the automotive sector.
• Improved profitability through cost optimization and enhanced operational efficiency.

Management Team and Leadership Structure #

• Chairman & Managing Director: Mr. J.K. Jain.
• The company has a well-defined board of directors and a senior management team responsible for various functions such as finance, operations, marketing, and R&D.

Their Products #

Complete Product Portfolio with Categories #

• Automotive Lighting: Headlamps, tail lamps, signaling lamps, fog lamps, auxiliary lamps for two-wheelers, three-wheelers, and four-wheelers.
• Rear View Mirrors: Internal and external rear view mirrors for various vehicle types.
• Plastic Molded Parts: Instrument panels, bezels, consoles, and other plastic components.
• LED Luminaries: LED street lights, industrial lighting, and decorative lighting.

Flagship or Signature Product Lines #

Their automotive lighting solutions, especially headlamps and tail lamps, are considered their flagship products.

Manufacturing Facilities and Production Capacity #

Fiem Industries operates multiple manufacturing facilities across India.

Quality Certifications and Standards #

The company adheres to international quality standards such as ISO 9001, ISO 14001, and IATF 16949 to ensure the highest quality of its products.

Any Unique Selling Propositions or Technological Advantages #

• Strong focus on innovation and R&D.
• In-house design and development capabilities.
• Long-standing relationships with leading automotive manufacturers.

Recent Product Launches or R&D Initiatives #

• Development of LED-based lighting solutions for electric vehicles.
• Introduction of new designs for rear view mirrors to enhance aesthetics and functionality.

Primary Customers #

Target Industries and Sectors #

• Automotive industry (two-wheelers, three-wheelers, four-wheelers, commercial vehicles)
• LED lighting industry (municipal corporations, industrial units, residential complexes)

Geographic Markets (Domestic vs. International) #

• Domestic: India
• International: Exports to various countries in Europe, Asia, and the Americas.

Major Client Segments (agricultural, industrial, residential, etc.) #

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

Distribution Network and Sales Channels #

• Direct sales to OEMs.
• Network of distributors and dealers across India and overseas.

Major Competitors #

Direct Competitors in India and Globally #

• India: Lumax Industries, Minda Industries, Varroc Engineering.
• Globally: Koito Manufacturing (Japan), Stanley Electric (Japan), Valeo (France).

Competitive Advantages and Disadvantages #

• Advantages: Strong domestic presence, established relationships with leading OEMs, diverse product portfolio.
• Disadvantages: Susceptible to fluctuations in the automotive industry, dependency on key customers.

How They Differentiate from Competitors #

• Focus on technological innovation and R&D.
• Customer-centric approach.
• Commitment to quality and reliability.

Future Outlook #

Expansion Plans or Growth Strategy #

• Expanding manufacturing capacity to meet growing demand.
• Increasing exports to new markets.
• Investing in R&D to develop innovative products.

Upcoming Products or Innovations #

• Advanced lighting systems for electric vehicles (EVs) and autonomous vehicles.
• Smart lighting solutions with connectivity features.

Sustainability Initiatives or ESG Commitments #

Fiem Industries is likely focusing on sustainable manufacturing practices, energy efficiency, and reducing environmental impact.

Industry Trends Affecting Their Business #

• Growth of the automotive industry, particularly electric vehicles.
• Increasing demand for advanced lighting technologies.
• Stringent regulations on vehicle safety and emissions.

Long-Term Vision and Strategic Goals #

To strengthen their position as a leading supplier of automotive lighting and signaling equipment globally, driven by innovation and customer satisfaction.

Financial Analysis: FIEM Industries Limited (FY 2023-24) #

Key Financial Highlights (Consolidated) #

For the Financial Year Ended March 31, 2024 (FY24) compared to March 31, 2023 (FY23). All amounts in INR Lakhs unless otherwise stated.

• Revenue from Operations: Reached ₹2,02,878.06 lakhs in FY24, a growth of 9.79% from ₹1,84,805.99 lakhs in FY23.
• EBITDA: ₹28,806.13 lakhs in FY24, up from ₹26,091.80 lakhs in FY23.
• Profit After Tax (PAT): Increased to ₹16,570.51 lakhs in FY24 from ₹13,983.18 lakhs in FY23, a growth of 18.50%.
• Bonus Issue: The company issued bonus shares in the ratio of 1:1 in FY24, doubling the paid-up equity share capital from ₹1,315.98 lakhs to ₹2,631.97 lakhs.
• Fire Incident: A fire incident at the Rai factory in June 2023 resulted in write-offs of inventory (₹2,583.74 lakhs) and PPE (₹2,456.79 lakhs) on a standalone basis. An insurance claim of ₹4,973.36 lakhs has been recognized as recoverable.

Comparative Analysis of Assets, Liabilities, and Equity (Consolidated - 2 Years) #

Assets (Consolidated) #

Equity and Liabilities (Consolidated) #

Detailed Analysis #

Cash Management #

Cash Flow and Liquidity Analysis #

Cash Flow Analysis (Standalone Financials, FY2023-24) #

Operating Cash Flow (OCF) #

• Profit Before Tax: Rs. 22,047.32 Lakhs (FY23: Rs. 18,849.42 Lakhs).
• Adjustments included depreciation & amortization (Rs. 5,727.93 Lakhs), finance costs (Rs. 552.79 Lakhs), and interest income (Rs. -1,436.39 Lakhs). A significant adjustment relates to the fire incident, with the write-off of assets and recognition of insurance claims recoverable (insurance claim recoverable of Rs. 4,887.15 Lakhs appears as an inflow under investing activities in some formats or impacts working capital). The financial statements note the write-off of inventories (Rs. 2,583.74 Lakhs) and PPE (Rs. 2,456.79 Lakhs) due to fire.
• Operating Profit before Working Capital Changes: Rs. 25,849.09 Lakhs (FY23: Rs. 26,889.29 Lakhs).
• Changes in Working Capital: Net outflow of Rs. 6,249.41 Lakhs, primarily due to an increase in trade receivables (Rs. 5,298.83 Lakhs) and inventories (Rs. 2,797.32 Lakhs), partially offset by an increase in trade payables (Rs. 2,288.03 Lakhs).
• Cash Generated from Operating Activities: Rs. 19,635.37 Lakhs (FY23: Rs. 19,722.36 Lakhs).
• Income Tax Paid: Rs. 5,797.46 Lakhs.
• Net Cash from Operating Activities (OCF): Rs. 13,837.91 Lakhs (FY23: Rs. 13,422.92 Lakhs), an increase of 3.1%.

Investing Cash Flow (ICF) #

• Payments for Purchase of Property, Plant & Equipment (PPE), intangible assets, CWIP, and capital advances (Capex): Rs. 8,198.33 Lakhs (FY23: Rs. 5,096.14 Lakhs). This represents a significant increase in capital expenditure. The Director’s Report mentions a total capex of Rs. 85.86 Crores (Rs. 8,586 Lakhs) across different units.
• Proceeds from Sale of PPE: Rs. 148.79 Lakhs (FY23: Rs. 61.33 Lakhs).
• Net movement in Liquid Mutual Funds: Rs. 0.00 Lakhs (FY23: Rs. 5,031.54 Lakhs inflow from maturity).
• Interest Income Received: Rs. 1,436.39 Lakhs (FY23: Rs. 1,106.94 Lakhs).
• Net Cash used in Investing Activities (ICF): Rs. (6,613.15) Lakhs (FY23: Rs. 1,103.67 Lakhs inflow). The shift to net outflow is primarily due to increased capex and no large maturity of mutual funds in FY24 compared to FY23.

Financing Cash Flow (FCF) #

• Repayment of Long-Term Borrowings: Rs. 0.00 Lakhs (FY23: Rs. 2,000.00 Lakhs). The company had no outstanding borrowings at year-end.
• Finance Costs Paid (excluding lease): Rs. 340.62 Lakhs (FY23: Rs. 346.32 Lakhs).
• Payment of Final Dividend on Equity Shares: Rs. 3,947.95 Lakhs (FY23: Rs. 2,631.97 Lakhs

Fiem Industries Limited - Financial Analysis Report (FY 2023-24) #

Revenue and Profitability Metrics #

• Consolidated Revenue from Operations: Achieved Rs. 2042.59 crore in FY24, a growth of 9.88% from Rs. 1858.86 crore in FY23. This includes Net Sales of Rs. 2015.29 crore and Other Operating Income of Rs. 27.30 crore.
• Consolidated EBITDA: Stood at Rs. 283.94 crore in FY24 (calculated as Profit from operations before other income, finance costs, depreciation and exceptional items of Rs. 267.97 crore plus Other Income of Rs. 15.97 crore). Standalone EBITDA was reported at Rs. 267.97 crore in FY24, up from Rs. 247.85 crore in FY23.
• Consolidated Profit After Tax (PAT): Increased by 18.50% to Rs. 165.71 crore in FY24.

Risk Analysis: Fiem Industries Limited (FY 2023-24) #

Strategic Risks #

Industry Concentration & Market Shifts #

• Description: Significant revenue reliance on the two-wheeler (2W) automotive segment (contributing to nearly 77% of total automotive sales volumes in India, with Fiem’s sales predominantly to 2W OEMs). The automotive industry is undergoing a transformative phase with a rapid shift towards Electric Vehicles (EVs) and technologically advanced models.

Fiem Industries Limited - Analytical Report FY 2023-24 #

Long-Term Strategic Goals #

Fiem Industries Limited (FIEM) aims to be a leader in automotive lighting by introducing niche, technologically advanced products for passenger cars (PV) and two-wheelers (2W). A key strategy is to penetrate the passenger car market, both domestically and internationally, while capitalizing on the Electric Vehicle (EV) and hybrid vehicle segments. Diversification into EV-specific components, such as Hub Motors and Motor Controller Units (MCUs), is a core element of its future growth plan.

Progress in FY 2023-24 #

• Achieved net revenue exceeding Rs. 2000 Crore.
• Secured a significant order for a Full LED Headlamp from a “prestigious European

ESG Analysis: Fiem Industries Limited - FY 2023-24 #

Environmental Metrics and Targets #

Energy Consumption & Intensity #

• Total energy from renewable sources: 38,569.50 GJ
• Total energy from non-renewable sources: 281,069.21 GJ
• Total energy consumed: 319,638.71 GJ
• Energy intensity per rupee of turnover: 0.000157 GJ/Rs.
• Optimizing energy consumption through equipment upgrades and measures like automated lighting, UPS optimization, servo motor integration in new machines, AC scheduling and temperature locking (25°C), sensor-activated lighting, interlocked air curtains, air recycling in hopper dryers, and DG set conversion to PNG with RECDs in select units.
• Capital investment in energy conservation equipment during FY24 was “not significant.”

Water Management #

• Total water withdrawal: 253,004 KL (groundwater: 131,974 KL; third-party: 121,030 KL)
• Total water consumption: 253,004 KL
• Water intensity per rupee of turnover: 0.000125 KL/Rs.
• Zero Liquid Discharge (ZLD) mechanisms are implemented across most units, with ETP/STP for wastewater treatment and reuse in production and gardening.

Emissions & Waste Management #

• Air emissions (NOx, SOx, PM) are monitored, with external agency assessments.
• Greenhouse Gas (GHG) Emissions (FY24):
  • Total Scope 1 emissions: 6,099.03 MtCO2e
  • Total Scope 2 emissions: 29,738.78 MtCO2e
  • Total Scope 1 & 2 emissions per rupee of turnover: 0.000018 MtCO2e/Rs.
• Waste Management:
  • Total waste generated: 5,337.94 MT
  • Hazardous waste: 1,559.86 MT (managed through authorized agencies)
  • Non-hazardous waste: 3,778.08 MT (scrap metal, paper, wood, etc.)
• Details specific initiatives for energy conservation (Annexure-III) but does not outline explicit, quantified future environmental targets (e.g., percentage reduction in emissions/water by a specific year).

Social Responsibility Programs #

CSR Expenditure & Focus #

• FY24 CSR obligation: ₹2,61,65,836
• FY24 CSR amount spent: ₹2,62,44,207
• Core CSR themes: Healthcare, Women Empowerment, support for underprivileged/marginalized populations, and awareness against drug addiction.

Key Initiatives & Impact (FY24) #

• Women Empowerment & Menstrual Hygiene Management (MHM): Continued support for 9 existing Sanitary Pad Projects and established 3 new ones (Kotdwar, Faridabad, Anantnag). These projects involve machine provision, raw materials, operational support, and aim for free pad distribution and MHM awareness. The model emphasizes community engagement and is “for the Women and by the Women,” generating local employment.
• Swavlamban Project: Provided Sewing Machines, Paper Plate Making Machines, and Millet/Muri Roasting Machines to support livelihoods, particularly for women in rural areas.
• Medicare Support: Provided five ambulances (one for animal services) to enhance medical accessibility in rural/remote areas and support NGOs. Conducted Comprehensive Eye Care Camps in Kutch, Gujarat, benefiting villagers with examinations, glasses, and cataract operations.
• PITHU-FIEM (Armed Forces Veterans Support): Continued and completed this project (started March 2022, closed March 2024), providing ration kits to non-pensioner ex-servicemen/widows. Initial outlay ₹10.59 Lakh, additional ₹3.36 Lakh allocated in FY24, total spent ₹13.95 Lakh.
• Har Ghar Tiranga: Participated in the campaign.

Employee & Worker Well-being (BRSR Data FY24) #

• Permanent Employees: 92.87% covered by health insurance (company-facilitated); 100% by accident insurance; 7.13% eligible for maternity benefits received them; day care facilities available to 7.13% (relevant female employees).
• Permanent Workers: 69.70% covered by ESI (health); 100% by accident insurance; 27.21% eligible for maternity benefits received them; day care facilities available to 27.21% (relevant female workers).
• Cost incurred on well-being measures as % of total revenue: 0.40% in FY24.
• Trainings conducted on health & safety, skill upgradation, and human rights issues.

Governance Structure and Effectiveness #

Board Structure (as of March 31, 2024) #

• 14 Directors: 7 Promoter/Executive Directors and 7 Independent Non-Executive Directors (fulfilling the 50% independence criteria).
• One Woman Independent Director (Ms. Shobha Khatri).
• Upcoming changes post-FY24: 5 new Independent Directors proposed; Ms. Shobha Khatri proposed for re-appointment.

Committees #

• Audit Committee: 3 members, all Independent.
• Nomination & Remuneration Committee: 3 members, all Independent.
• Stakeholders’ Relationship Committee: Chaired by an Independent Director, with two Executive Directors as members.
• CSR Committee: Chaired by a Joint MD, with one Executive Director and one Independent Director as members.
• Risk Management Committee: Chaired by a Joint MD, with two Independent Directors as members.
• A Bonus Shares Committee was constituted on Jan 15, 2024, and dissolved on May 21, 2024, after completing its mandate.

Effectiveness Indicators #

• Independent Directors provide annual declarations meeting independence criteria.
• All recommendations of the Audit Committee were accepted by the Board during FY24.
• A formal performance evaluation mechanism for the Board, its Committees, and individual Directors is in place.
• Vigil Mechanism (Whistle Blower Policy) is established and functional; no personnel were denied access to the Audit Committee.
• Statutory Auditors issued an unmodified opinion on both Standalone and Consolidated Financial Statements for FY24.
• Secretarial Auditor issued a Secretarial Audit Report for FY24 with no qualifications, reservations, or adverse remarks.
• A certificate of non-disqualification of directors was obtained.

Future Outlook for Fiem Industries: FY 2023-24 Analysis #

Management Guidance and Assumptions #

Management’s perspective, gleaned from the Chairman’s Message and Directors’ Report, suggests a positive trajectory following FY24’s achievement of exceeding Rs. 2000 Crore in net revenue. Key guidance points include:

1. Sustained Growth: Leveraging emerging market opportunities, specifically in the Electric Vehicle (EV) 2-Wheeler (2W) sector, and the new venture into Passenger Car (PC) lighting.
2. Passenger Car Segment Penetration: Securing a full LED headlamp contract for a high-end European car represents a “first big step” toward market share gains in the PC segment. Active progress with Indian PC OEMs is also underway.
3. Operational Excellence and Frugality: Continued commitment to these principles to deliver superior products and maintain competitiveness.
4. Innovation and Technology: Emphasis on robust in-house R&D and Design & Development capabilities to introduce niche products.

Fiem Industries Limited (FY 2023-24) - Audit and Regulatory Analysis #

Auditor’s Opinion and Qualifications #

• Standalone Financial Statements: M/s Anil S. Gupta & Associates issued an unqualified opinion, stating the statements give a true and fair view in conformity with Ind AS. No qualifications, reservations, or adverse remarks were noted.
• Consolidated Financial Statements: The Independent Auditors issued an unqualified opinion, stating that the consolidated financial statements give a true and fair view.
  • Other Matter: The audit report includes an “Other Matter” paragraph concerning the financial statements of two overseas 50:50 Joint Ventures (Centro Ricerche Fiem Horustech Srl and Fiem Kyowa (HK) Mould Company Limited). The auditors state that these financial statements are not material to the Group, and their opinion on the consolidated financial statements is not modified in respect of this matter.

Key Accounting Policies and Changes #

• The financial statements (standalone and consolidated) have been prepared in accordance with Indian Accounting Standards (Ind AS) on a historical cost basis, except for certain financial instruments measured at fair value.

Key Accounting Policies Applied: #

• Revenue Recognition (Ind AS 115): Revenue from contracts with customers is recognized when control of goods or services is transferred to the customer, measured at the transaction price net of variable considerations.
• Property, Plant & Equipment (PPE): Stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over useful lives generally in accordance with Schedule II of the Companies Act, 2013. Freehold land is not depreciated.
• Intangible Assets: Acquired intangibles (e.g., computer software) are carried at cost less accumulated amortization on a straight-line basis over their estimated useful lives.
• Financial Instruments: Initial recognition at fair value. Subsequent measurement depends on classification. Trade receivables follow a lifetime Expected Credit Loss (ECL) model.
• Leases (Ind AS 116): Applied using a modified retrospective approach. Right-of-Use (ROU) assets and lease liabilities are recognized for most leases, except short-term and low-value asset leases.
• Inventories: Valued at the lower of cost (moving weighted average method) or net realizable value.
• Foreign Currency Transactions: Recorded at exchange rates prevailing on the transaction date. Monetary assets/liabilities are translated at year-end rates. Exchange differences are recognized in profit or loss.
• Employee Benefits: Short-term benefits recognized as incurred. Defined contribution plans (PF, ESI) charged to P&L. Defined benefit plans (Gratuity, Earned Leave) are actuarially valued using the Projected Unit Credit method.
• Provisions and Contingent Liabilities: Provisions recognized for present obligations from past events where an outflow is probable and estimable. Product warranty provisions are based on historical data.
• Taxation: Current tax based on taxable profit. Deferred tax recognized on temporary differences using the balance sheet approach.
• Fire Incident Accounting: Carrying value of damaged PPE and inventories written off. Insurance claim recognized as receivable to the extent recoverable.

Changes in Accounting Policies: #

• No new standards or amendments to existing standards notified by MCA were applicable to the company for FY 2023-24, indicating no significant changes in accounting policies due to regulatory mandates.

Internal Control Effectiveness #

• The Directors’ Responsibility Statement affirms that internal financial controls were laid down, are adequate, and operate efficiently.
• The Independent Auditors’ Report on Internal Financial Controls states that the Company has, in all material respects, adequate internal financial controls with reference to financial statements, and such controls were operating effectively as at March 31, 2024.
• The Management Discussion & Analysis report also reiterates the adequacy and effectiveness of the internal control systems.

Regulatory Compliance Status #

• The Secretarial Audit Report states that the Company has complied with the applicable statutory provisions and has proper Board-processes and compliance mechanisms in place. The report contains no qualifications, reservations, or adverse remarks.
• The Directors’ Report confirms that no fraud was reported by the statutory or secretarial auditors under Section 143(12) of the Act.
• The Company has confirmed compliance with various acts, including the Sexual Harassment of Women at Workplace Act, 2013, and that no proceedings are pending under the Insolvency and Bankruptcy Code, 2016.
• The Business Responsibility & Sustainability Report (BRSR) indicates compliance with applicable environmental laws and no fines/penalties related to NGRBC principles.
• A minor procedural lapse regarding the gap between Board meetings exceeding 120 days occurred in FY 2020-21, which is a prior period matter.
• The company confirms compliance with applicable Secretarial Standards (SS-1 & SS-2).

Legal Proceedings and Their Potential Impact #

• Contingent Liabilities:
  • Custom Duty disputes:
    • Demand regarding imported capital goods sold (FY 2007-08) - Appeal with CESTAT Chennai.
    • Demand regarding short payment on imported raw material (FY 2020-21) - Appeal with Commissioner of Customs Appeals, Chennai.
  • Sales Tax disputes:
    • Demand for FY 2014-15 (TNVAT Act) - Appeal with High Court, Chennai.
    • Demand for FY 2010-11 - Appeal with High Court of Punjab & Haryana.
  • Income Tax: A demand of Rs. 617.71 Lakhs for A.Y. 2017-18, decided in favor of the company by CIT (