Minda Corporation Ltd:Annual Report 2023-24 Analysis

Minda Corporation Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Minda Corporation Limited (formerly Minda Group) was established in 1958 by Late Shri S.L. Minda.

Headquarters Location and Global Presence:

• Headquarters: Gurugram, Haryana, India
• Global Presence: The company has a significant global presence with manufacturing facilities and offices in various countries, including India, Germany, Poland, Indonesia, Vietnam, Mexico, and Uzbekistan.

Company Vision and Mission:

• Vision: To be a globally admired and respected automotive component supplier, creating value for all stakeholders.
• Mission: To provide innovative and technologically advanced products and solutions to the automotive industry, exceeding customer expectations.

Key Milestones in Their Growth Journey:

• 1958: Incorporation of the company.
• 1984: Diversification into automotive lighting systems.
• 1995: Foray into automotive horns.
• 2006: Significant expansion into various automotive components.
• 2016: Acquisition of Panalfa Autoelektrik Limited (now Minda FA).
• 2022: Acquisition of Germany-based automotive lighting firm iSYS RTS GmbH

Stock Exchange Listing Details and Market Capitalization:

• Stock Exchange Listing: National Stock Exchange of India (NSE) and Bombay Stock Exchange (BSE)
• Market Capitalization: As of November 2023, the market capitalization is approx. INR 30,000 Crores. Note: Please check current market data for the most up-to-date information.

Recent Financial Performance Highlights:

• Consistent revenue growth in recent years.
• Focus on operational efficiency and cost optimization.
• Investments in R&D and technological advancements.

Management Team and Leadership Structure:

• The leadership team includes experienced professionals in the automotive industry.
• Key management figures include the Chairman & Managing Director, CFO, and various business unit heads.
• Sunil Minda (Chairman & Managing Director)

Any Notable Awards or Recognitions:

• Awards for quality, innovation, and supplier excellence from various automotive OEMs.
• Recognition for sustainable manufacturing practices.

Their Products #

Complete Product Portfolio with Categories:

• Safety and Security Systems:
  • Locking Systems
  • Keys and Transponders
  • Immobilizers
  • Vehicle Access Systems
• Driver Information and Connectivity Systems:
  • Instrument Clusters
  • Sensors
  • Telematics
• Lighting Systems:
  • Headlamps
  • Tail Lamps
  • Auxiliary Lamps
• Acoustic Systems:
  • Horns

Flagship or Signature Product Lines:

• Locking Systems
• Lighting Systems
• Acoustic Systems

Key Technological Innovations or Patents:

• Patents related to automotive locking systems, lighting technology, and connected car solutions.
• Innovations in mechatronics, electronics, and software development.

Manufacturing Facilities and Production Capacity:

• Multiple manufacturing facilities across India and globally.
• The production capacity varies depending on the product line.

Quality Certifications and Standards:

• IATF 16949
• ISO 14001
• OHSAS 18001

Any Unique Selling Propositions or Technological Advantages:

• Integrated solutions offering from design to manufacturing.
• Strong R&D capabilities and focus on innovation.
• Global presence and ability to serve customers worldwide.

Recent Product Launches or R&D Initiatives:

• Development of advanced driver-assistance systems (ADAS) components.
• Introduction of new lighting solutions with improved energy efficiency.
• Focus on electric vehicle (EV) components and systems.

Primary Customers #

Target Industries and Sectors:

• Automotive (passenger vehicles, commercial vehicles, two-wheelers, three-wheelers)
• Original Equipment Manufacturers (OEMs)

Geographic Markets (domestic vs. international):

• Domestic: India
• International: Europe, Asia, North America, South America

Distribution Network and Sales Channels:

• Direct sales to OEMs
• Tier-1 suppliers
• Distribution networks in key markets

Major Competitors #

Direct Competitors in India and Globally:

• India: Uno Minda, Pricol, Samvardhana Motherson
• Globally: Valeo, Hella, Magneti Marelli

How they differentiate from competitors:

• Focus on innovation and technology.
• Customer-centric approach and strong relationships with OEMs.
• Global footprint and ability to serve customers worldwide.

Industry challenges and opportunities:

• Challenges: Increasing competition, technological disruptions, changing regulatory landscape, supply chain disruptions.
• Opportunities: Growing automotive market, increasing demand for advanced automotive components, electrification of vehicles, connected car technologies.

Market positioning strategy:

• Positioning as a leading automotive component supplier with a focus on innovation, quality, and customer satisfaction.

Future Outlook #

Expansion plans or growth strategy:

• Expanding manufacturing capacity in key markets.
• Focusing on technological advancements and innovation.
• Pursuing strategic acquisitions and partnerships.
• Investing in R&D to develop new products and solutions.

Upcoming products or innovations:

• Advanced driver-assistance systems (ADAS) components.
• Electric vehicle (EV) components and systems.
• Connected car solutions.

Sustainability initiatives or ESG commitments:

• Reducing carbon footprint and promoting energy efficiency.
• Implementing sustainable manufacturing practices.
• Promoting ethical and responsible business practices.

Industry trends affecting their business:

• Electrification of vehicles.
• Connected car technologies.
• Autonomous driving.
• Increasing focus on safety and security.

Long-term vision and strategic goals:

• To be a globally admired and respected automotive component supplier.
• To create value for all stakeholders.
• To contribute to a sustainable future.

Minda Corporation Limited - Financial Analysis (FY 2023-24) #

Consolidated Financial Performance FY2024 #

Minda Corporation Limited reported robust financial performance for the fiscal year ending March 31, 2024.

• Consolidated Revenue: ₹46,511 Million, an 8.2% year-on-year (YoY) growth.
• EBITDA: ₹5,144 Million, an 11.5% increase.
• EBITDA Margin: Improved to 11.1%, the highest-ever reported by the Company.
• Profit After Tax (PAT): Grew modestly by 4% to ₹2,272 Million.
• Net Debt: Reduced to ₹1,560 Million.
• Net Debt-to-Equity Ratio: Improved to 0.08x.
• Return on Capital Employed (ROCE): Stood at 20.0%.
• Dividend: ₹1.40 per equity share for FY2024.

Trend Analysis (FY2019-FY2024) #

The Company has demonstrated consistent long-term growth across key financial indicators over the past five years.

• Net Worth CAGR: 7.9%, reaching ₹19,806 Million in FY2024.
• Operating Income CAGR: 8.9%, reaching ₹46,511 Million in FY2024.
• EBITDA CAGR: 12.1%, reaching ₹5,144 Million in FY2024.
• CAPEX CAGR: 17.0%, totaling ₹2,781 Million in FY2024.

YoY Comparison (FY2024 vs FY2023 - Consolidated) #

• Revenue from Operations: ₹46,511M (FY24) vs. ₹43,001M (FY23) - Growth: 8.16%
• EBITDA: ₹5,144M (FY24) vs. ₹4,615M (FY23) - Growth: 11.46%
• Profit After Tax (Continuing Operations): ₹2,272M (FY24) vs. ₹2,845M (FY23) - Decrease: 20.14%

Business Segment Performance (FY2024) #

Mechatronics and Aftermarket #

• Revenue increased by approximately 9.2% YoY to ₹22,509 Million in FY2024 from ₹20,610 Million in FY2023.
• Reported a 10% YoY revenue growth in Q4 FY24.

Detailed Analysis #

Minda Corporation Limited (FY2023-24) Financial Analysis #

Overview #

Minda Corporation Limited (MCL) demonstrated resilient financial performance in FY2023-24, characterized by revenue growth, improved profitability margins, and significant debt reduction. The analysis focuses on consolidated financials unless specified, reflecting the overall group performance.

Multi-Year Trend Analysis (FY2019 - FY2024 CAGR) #

The company has shown consistent long-term growth across key financial metrics over the past five years.

Source: Annual Report FY2024, Visualization of Financial Metrics

Comparative Financial Performance (FY2024 vs FY2023 - Consolidated) #

Statement of Profit and Loss Highlights #

Source: Annual Report FY2024, Financial Summary (Consolidated), ED’s Message, MD&A

Balance Sheet Highlights #

Source: Annual Report FY2024, Consolidated Balance Sheet

Operating Performance Analysis #

Revenue Analysis #

Consolidated Revenue Performance (FY2024) #

• Total consolidated revenue reached ₹46,511 million, an increase of 8.2% year-on-year (YoY) from ₹43,001 million in FY2023.
• Growth was primarily driven by robust domestic demand in the two-wheeler (2W) and passenger vehicle (PV) segments, alongside benefits from product premiumization and enhanced kit value per vehicle.
• This growth was achieved despite challenges in export markets and subdued demand in the ASEAN region.
• Operating income demonstrated a 5-year Compound Annual Growth Rate (CAGR) of 8.9%, reaching ₹46,511 million in FY2024.

Quarterly Revenue Performance (FY2024) #

• Q1 FY2024: ₹10,745 million (6% YoY growth).
• Q2 FY2024: ₹11,958 million (11% Quarter-on-Quarter growth).
• Q3 FY2024: ₹11,658 million (9.1% YoY growth).
• Q4 FY2024: ₹12,150 million (13.1% YoY growth), marking the highest quarterly revenue.

Segmental Revenue Performance (FY2024) #

• Mechatronics and Aftermarket: Achieved a 10% YoY revenue growth in FY2024, totaling ₹22,509 million compared to ₹20,610 million in FY2023. Growth was driven by strong domestic 2W and PV demand, partially offset by dampened export and aftermarket demand.
• Information and Connected Systems: Recorded a 7% YoY revenue growth for the full fiscal year, reaching ₹24,002 million in FY2024 from ₹22,391 million in FY2023. This segment saw a notable 16% YoY revenue increase in Q4 FY2024. Growth was supported by domestic market demand, moderated by delays in start of production (SOP) and slower ASEAN growth.

Geographical Revenue Contribution (FY2024) #

• India (Domestic): 87%
• Europe & North America: ~8%
• Southeast Asia: 5%

End Market Revenue Contribution (FY2024) #

• Two and Three-Wheeler: ~47%
• Passenger Vehicles (PV): 14%
• Commercial Vehicles (CV): 28%
• Aftermarket: 11%

Cost Structure Analysis #

• Cost of Materials Consumed (Consolidated): Increased to ₹27,857 million in FY2024 from ₹26,174 million in FY2023, aligning with revenue growth. As a percentage of operating revenue, it was approximately 59.9% in FY2024 versus 60.9% in FY2023, indicating some efficiency gains.
• Employee Benefits Expense (Consolidated): Rose to ₹7,027 million in FY2024 from ₹6,079 million in FY2023. This represents approximately 15.1% of operating revenue in FY2024, up from 14.1% in FY2023.
• Other Expenses (Consolidated): Amounted to ₹4,979 million in FY2024 compared to ₹4,814 million in FY2023. As a percentage of operating revenue, this was 10.7% in FY2024 versus 11.2% in FY2023.
• Finance Costs (Consolidated): Increased to ₹610 million in FY2024 from ₹486 million in FY2023. This increase is attributed to higher interest rates and investments in capacity expansion.
• Depreciation and Amortization Expense (Consolidated): Increased to ₹1,743 million in FY2024 from ₹1,538 million in FY2023, primarily due to investments in capacity expansion and technological upgrades.
• Research & Development (R&D) Expenditure: The company dedicated approximately 3% of its revenue to R&D in FY2024, amounting to ₹1,122 million (standalone capital and recurring R&D expenditure). This underscores a focus on next-generation automotive technologies.

Margin Analysis #

EBITDA and EBITDA Margin (Consolidated) #

• FY2024 EBITDA: ₹5,144 million, an 11.5% increase from ₹4,615 million in FY2023.
• FY2024 EBITDA Margin: 11.1%, an improvement from 10.7% in FY2023. This enhancement was attributed to operational efficiencies achieved through smart automation, component localization, and improved performance in the Wiring Harness division.
• Q4 FY2024 EBITDA: ₹1,386 million, with an EBITDA margin of 11.4%, the highest ever quarterly margin.
• The 5-year CAGR for EBITDA is 12.1%.

Profit After Tax (PAT) and PAT Margin (Consolidated) #

• FY2024 PAT: ₹2,272 million, a modest 4% growth from ₹2,845 million reported in Board’s Report FY23.
• FY2024 PAT Margin: 4.9%. This is a slight decrease from 5.1% in FY2023 or 6.6%. The document mentions higher finance costs and depreciation from investments impacting PAT margin.
• Q4 FY2024 PAT: ₹708 million.

Return on Capital Employed (ROCE) #

• FY2024 ROCE: 20.0% (Standalone: 15.03%), reflecting efficient capital utilization.
• FY2023 ROCE: 20.8% (Standalone: 13.52%).

Operating Leverage #

• The company exhibited positive operating leverage in FY2024, with EBITDA growth (11.5%) outpacing revenue growth (8.2%).
• This was driven by operational efficiencies stemming from initiatives such as intelligent automation across facilities and component localization, which helped in managing cost escalations and improving productivity.

Non-Recurring Items #

• Standalone Financials: For FY2023, an exceptional item of ₹250 million was recorded, related to the impairment of investment in an associate, Furukawa Minda Electric Private Limited. No such exceptional item was reported in FY2024 standalone P&L.
• Consolidated Financials: The consolidated profit and loss statement does not show a separate line item for “Exceptional Items.” The impact of associate company impairments would be routed through the “Share of profit/(loss) in associates/joint ventures” line. The significant impairment from the associate in FY2023 (standalone) would have influenced this line in the consolidated FY2023 results.
• The sale of the company’s investment in Pricol Limited during FY2024 resulted in a gain recognized in Other Comprehensive Income (OCI), not as an exceptional item in the Profit and Loss statement. Standalone OCI included ₹2,387 million, and Consolidated OCI included ₹2,272 million related to this.

GAAP vs Non-GAAP Reconciliation #

• The financial statements are prepared in accordance with Indian Accounting Standards (Ind AS), which are converged with IFRS.

Minda Corporation Limited - Financial Year 2023-24 Performance Analysis #

Overall Financial Performance #

Minda Corporation Limited (MCL) reported consolidated revenue of ₹46,511 million for FY2024, an 8.2% year-on-year (YoY) increase from ₹43,001 million in FY2023. This growth was achieved despite challenges in export markets and subdued demand in the ASEAN region, primarily driven by robust domestic demand in the two-wheeler (2W) and passenger vehicle (PV) segments. Over a five-year period (FY19-FY24), operating income demonstrated an 8.9% Compound Annual Growth Rate (CAGR).

Profitability #

EBITDA for FY2024 reached ₹5,144 million, a significant 11.5% increase from ₹4,615 million in FY2023. The EBITDA margin improved to a record 11.1% in FY2024 from 10.7% in FY2023, attributed to enhanced operational efficiencies achieved through smart automation and component localization. The five-year CAGR for EBITDA stands at 12.1%.

Profit After Tax (PAT) saw a modest growth of 4% to ₹2,272 million in FY2024. The PAT margin slightly declined to 4.9% in FY2024 from 5.1% in FY2023, impacted by higher finance costs and depreciation stemming from investments in capacity expansion and technological upgrades.

Return on Capital Employed #

Return on Capital Employed (ROCE) for FY2024 was 20.0%, slightly down from 20.8% in FY2023, but still indicating efficient capital utilization. Net worth expanded at a 7.9% CAGR over the past five years, reaching ₹19,806 million in FY2024.

Debt Management #

A key highlight was the substantial reduction in net debt from ₹3,910 million in FY2023 to ₹1,560 million in FY2024. Consequently, the net debt-to-equity ratio improved significantly to 0.08x from 0.25x, showcasing effective cash flow management and strategic debt repayments. The interest coverage ratio stood at 6.56 times for FY24, down from 8.08 times in FY23, while the current ratio improved to 1.70 from 1.07.

Risk Assessment: Minda Corporation Limited (FY 2023-24) #

Strategic Risks #

Market Dynamics & Competition #

• Description: Exposure to intense competition, shifts in consumer preferences (e.g., towards premiumization, EVs), and dependency on Original Equipment Manufacturer (OEM) demand cycles. Challenges in export markets (Europe, ASEAN) and subdued aftermarket sentiments.
• Severity: High
• Likelihood: High
• Trend: Increasing (due to rapid technological shifts and global economic volatility)
• Mitigation: Diversified product portfolio, focus on R&D for new technologies (EVs, smart keys, connected systems), strategic JVs and alliances (e.g., HCMF for sunroofs, Japanese partner for smart vehicle access), customer base expansion, increasing kit value through premiumization, and cost control measures.
• Control Effectiveness: Moderate to High (proactive investments and partnerships evident).
• Potential Financial Impact: Fluctuations in revenue (8.2% consolidated growth in FY24 despite export headwinds), impact on profitability if unable to adapt, R&D expenditure (~3% of revenue), investment in new capacities (Vietnam plant, die casting, instrument clusters). Share of business with existing customers targeted for improvement.
• Quantitative Metrics:
  • Consolidated Revenue FY24: ₹46,511 Million (+8.2% YoY).
  • Domestic market supports growth while export markets face pressure.
  • Aftermarket segment growth impacted by market sentiments (MD&A).
  • Lifetime order book > ₹1,00,000 Million (30% EV).

Technological Obsolescence & EV Transition #

• Description: Rapid evolution towards Electric Vehicles (EVs), Connected and Autonomous Vehicles (CAVs), and Mobility-as-a-Service (MaaS) requiring significant R&D and adaptation.
• Severity: High
• Likelihood: High
• Trend: Increasing
• Mitigation: Significant R&D investment (~3% of revenue, ₹1,122 Million in FY24), focus on EV components (DC-DC converters, chargers), smart keys, ADAS, connected systems. 270+ patents filed. Strategic JVs for new technologies. Greenfield projects for EV-related components.
• Control Effectiveness: Moderate to High (clear strategic focus and investment).
• Potential Financial Impact: High R&D costs, CAPEX for new technologies (₹2,781 Million in FY24, +17.0% CAGR over 5 years). Risk of new products not achieving expected profitability. Opportunity for significant revenue from EV segment (30% of new orders).
• Quantitative Metrics:
  • R&D spend: ~3% of revenue (FY24).
  • Patents: 270+ filed, 26 new in FY24.
  • EV Lifetime Orders: 30% of ₹1,00,000 Million.
  • Information and Connected Systems revenue growth: 16% YoY in Q4 FY24.

Geopolitical & Macro-Economic Instability #

• Description: Global economic slowdowns, geopolitical tensions (e.g., Middle East conflicts), commodity price volatility, and restrictive financial conditions impacting global trade and export revenues. Specific challenges in European and ASEAN markets.
• Severity: Moderate to High
• Likelihood: Moderate to High
• Trend: Increasing
• Mitigation: Geographic diversification (though India currently 87% of revenue), focus on domestic demand, cost control measures, hedging for forex.
• Control Effectiveness: Moderate.
• Potential Financial Impact: Reduced export revenues (declined in FY24), increased input costs, potential impact on overall growth.
• Quantitative Metrics:
  • Export revenue faced decline in FY24 (MD&A).
  • Contribution from Europe & North America ~8%, Southeast Asia ~5%.

Integration of Acquisitions & Strategic Alliances #

• Description: Challenges in successfully integrating acquired entities or managing joint ventures (e.g., JV with HCMF, alliance for smart vehicle access) to realize synergies and avoid operational disruptions.
• Severity: Moderate
• Likelihood: Moderate
• Trend: Stable (as M&A is an ongoing strategy)
• Mitigation: Experienced leadership, defined strategic objectives for partnerships.
• Control Effectiveness: Moderate (dependent on execution).
• Potential Financial Impact: Costs associated with integration, potential delays in realizing benefits, impairment if ventures underperform (e.g., impairment on Furukawa Minda investment).

Minda Corporation Limited FY2023-24 Financial Performance Analysis #

Consolidated Financial Performance #

Minda Corporation Limited reported a consolidated revenue of ₹46,511 million for FY2024, an 8.2% increase year-on-year (YoY) from ₹43,001 million in FY2023. This growth was primarily driven by robust domestic demand in the two-wheeler (2W) and passenger vehicle (PV) segments. Q4 FY2024 revenue reached ₹12,150 million, a 13.1% YoY increase.

EBITDA for FY2024 rose by 11.5% to ₹5,144 million from ₹4,615 million in FY2023. The EBITDA margin improved to a record high of 11.1% in FY2024 from 10.7% in FY2023, attributed to enhanced operational efficiencies from smart automation and component localization. Q4 FY2024 EBITDA was ₹1,386 million with a margin of 11.4%.

Profit After Tax (PAT) for FY2024 saw a modest 4% growth to ₹2,272 million. The PAT margin slightly decreased to 4.9% in FY2024 from 5.1% in FY2023, impacted by higher finance costs and depreciation stemming from investments in capacity expansion and technological upgrades.

The company’s 5-year CAGR figures indicate sustained growth: Net Worth at 7.9% (reaching ₹19,806 million in FY2024), Operating Income at 8.9%, EBITDA at 12.1%, and CAPEX at 17.0% (totaling ₹2,781 million in FY2024).

Segmental Performance #

Mechatronics and Aftermarket #

This segment recorded a 10% YoY revenue growth in Q4 FY2024. For the full FY2024, revenue grew to ₹22,509 million from ₹20,610 million in FY23, reflecting increased market share and higher kit value through product premiumization.

Information and Connected Systems #

This segment saw a 16% YoY revenue increase in Q4 FY2024. For the full FY2024, revenue was ₹24,002 million compared to ₹22,391 million in FY2023 (a 7% growth), supported by domestic demand and margin improvements from component localization.

Geographical Revenue Distribution (FY2024) #

• India: 87%
• Europe and North America: ~8%
• Southeast Asia: 5%

ESG Framework: Minda Corporation Limited - FY 2023-24 #

Environmental Metrics and Targets #

Energy Consumption & Renewable Energy #

• Total energy consumed in FY2024: 3,97,348.77 GJ.
• Renewable energy consumed in FY2024: 67,045.21 GJ, constituting 16.87% of total energy consumption (up from 11.56% in FY2023).
• Initiatives include installation of rooftop solar (380 KW in Pune-II, 356 KW in Greater Noida), solar street lights, LED lighting, VFDs in compressors, and rainwater harvesting. Dual fuel systems (Diesel+PNG) installed in DG sets.

Greenhouse Gas (GHG) Emissions #

• Scope 1 and Scope 2 emissions

Minda Corporation Limited - Financial Year 2023-24 Performance Analysis #

Overall Financial Performance #

Minda Corporation Limited demonstrated resilient financial performance in FY2023-24. Consolidated revenue grew by 8.2% year-on-year (YoY) to ₹46,511 million, primarily driven by robust domestic demand in the two-wheeler (2W) and passenger vehicle (PV) segments, which offset challenges in export markets and subdued demand in the ASEAN region. Standalone revenue saw a 10.08% YoY increase to ₹38,445 million.

EBITDA surged by 11.5% YoY to ₹5,144 million, with the EBITDA margin improving to a record 11.1% from 10.7% in FY2023. This margin expansion is attributed to enhanced operational efficiencies achieved through strategic automation and component localization initiatives.

Consolidated Profit After Tax (PAT) for FY2024 was ₹2,272 million, a decrease of 20.14% from ₹2,845 million in FY2023. The PAT margin stood at 4.9%, down from 5.1% in the previous fiscal, influenced by higher finance costs and depreciation stemming from investments in capacity expansion and technological upgrades. Standalone PAT decreased by 21.65% to ₹1,885 million.

A significant achievement was the reduction in net debt from ₹3,910 million in FY2023 to ₹1,560 million in FY2024, leading to an improved net debt-to-equity ratio of 0.08x (down from 0.25x). This reflects effective cash flow management and strategic debt repayments. Return on Capital Employed (ROCE) for FY2024 was robust at 20.0%.

Shareholders experienced capital appreciation of approximately 47.5% (share price from ~₹216.10 in April 2023 to ~₹417.70 in March 2024). The Board recommended a total dividend of ₹1.40 per share for FY24 (70% payout), compared to ₹1.20 per share in FY23.

Segmental Performance #

• Mechatronics and Aftermarket: This segment reported revenue of ₹22,509 million in FY24, a 10% YoY growth from ₹20,610 million in FY23. Growth was driven by increased market share and higher kit value due to product premiumization in domestic 2W and PV segments, though dampened by export and aftermarket demand. Q4 FY2024 also saw a 10% YoY revenue growth.
• Information and Connected Systems: This division achieved revenue of ₹24,002 million in FY24, up 7% from ₹22,391 million in FY23. Q4 FY2024 recorded a strong 16% YoY revenue increase. Growth was supported by domestic market demand, with component localization efforts aiding margin improvements, but moderated by Start of Production (SOP) delays and slower ASEAN growth.

Operational and Strategic Highlights #

• Innovation and R&D: Investment in R&D reached approximately 3% of revenue (₹1,122 million) in FY24. The company filed 26 new patents, bringing the total to over 270. Key focus areas include Advanced Driver Assistance Systems (ADAS), digital instrument clusters, and Electric Vehicle (EV) components like DC-DC converters and battery chargers. The Spark Minda Technical Centres (SMIT) in Pune and Bangalore, with over 700 engineers, are central to these efforts.
• Electric Vehicle (EV) Focus: 30% of new business orders in FY24 originated from the EV sector, indicating strong traction for products like smart keys, DCDC converters, and battery chargers. A significant ₹7,500 million order for battery chargers was secured. The lifetime order book exceeded ₹1,00,000 million, with over 30% from the EV segment.
• Capacity Expansion and Global Footprint: Key developments include the establishment of a smart key facility in Vietnam and greenfield projects for die casting, instrument clusters, and smart key production in India. The company operates 27 manufacturing facilities in India and 2 overseas.
• Strategic Partnerships: A 50:50 Joint Venture was formed with HSIN Chong Machinery Works Co. Ltd. (HCMF) of Taiwan for manufacturing automotive sunroofs and closure systems in India. A strategic alliance was also established with a Japanese player for smart vehicle access systems, securing an order from a leading Indian 2W OEM.
• Operational Efficiency: Achieved through intelligent automation and component localization across facilities, contributing to improved EBITDA margins. The Wiring Harness division posted higher single-digit EBITDA numbers.

Financial Analysis Report: Minda Corporation Limited (FY 2023-24) #

Auditor’s Opinion and Key Accounting Policies #

Auditor’s Opinion #

• Standalone Financial Statements: S.R. Batliboi & Co. LLP issued an unqualified opinion, stating that the standalone financial statements give a true and fair view in conformity with Indian Accounting Standards (Ind AS) and the Companies Act, 2013.
• Consolidated Financial Statements: S.R. Batliboi & Co. LLP issued an unqualified opinion, stating that the consolidated financial statements give a true and fair view in conformity with Ind AS and the Companies Act, 2013. The opinion relies on the reports of other auditors for 8 subsidiaries, 2 associates, and 1 joint venture, whose financial statements reflect total assets of ₹2,545 million and total revenues of ₹2,280 million.

Key Audit Matters (KAMs) #

• For both standalone and consolidated financial statements, the primary KAM identified was Revenue recognition for sale of goods. This was significant due to the variety of shipment terms impacting timing and the significant judgment and estimates involved in calculating price variations (volume-based discounts, price adjustments). Audit procedures included evaluating accounting policies against Ind AS 115, testing controls over revenue recognition timing and price variation calculations, testing sales transactions around year-end, and assessing the adequacy of disclosures.

Key Accounting Policies #

• Basis of Preparation: Financial statements are prepared on a historical cost basis (except for certain financial instruments, share-based payments, and defined benefit liabilities measured at fair value) in accordance with Ind AS.
• Revenue Recognition (Ind AS 115): Revenue is recognized when control of goods is transferred to the customer, measured at the consideration expected, adjusted for discounts, incentives, etc. A 5-step methodology is applied. Significant judgments include identifying distinct performance obligations, determining transaction price (fixed vs. variable, significant financing component), allocating transaction price, and determining if performance obligation is satisfied at a point in time or over time.
• Property, Plant, and Equipment (PPE): Carried at cost less accumulated depreciation and impairment. Depreciation is on a straight-line basis over estimated useful lives (e.g., Factory buildings: 30 years; Plant & Machinery: 5-15 years; Vehicles: 4 years). Useful lives are reviewed annually.
• Intangible Assets: Goodwill is tested for impairment annually. Other intangibles (software, brands) are amortized over their useful lives (typically 5 years).
• Impairment of Non-Financial Assets: Assessed at each reporting date for indicators of impairment. Recoverable amount is the higher of fair value less costs of disposal and value in use.
• Inventories: Valued at the lower of cost (weighted average basis) and net realizable value.
• Financial Instruments: Classified and measured at amortized cost, Fair Value Through Other Comprehensive Income (FVOCI), or Fair Value Through Profit or Loss (FVTPL) based on business model and contractual cash flow characteristics. Expected Credit Loss (ECL) model is applied for impairment of financial assets.
• Leases (Ind AS 116): Right-of-use assets and lease liabilities are recognized for leases. Short-term leases and leases of low-value assets are expensed on a straight-line basis.
• Employee Benefits: Defined contribution plans (Provident Fund) are expensed as incurred. Defined benefit plans (Gratuity) are provided based on actuarial valuation using the Projected Unit Credit Method; remeasurements are recognized in OCI.
• Foreign Currency Transactions: Translated at exchange rates prevailing on transaction dates. Monetary assets/liabilities are restated at year-end rates, with exchange differences generally recognized in profit or loss. For foreign operations, assets/liabilities are translated at year-end rates, income/expenses at transaction date rates/average rates, and translation differences to OCI.
• Business Combinations: Accounted for using the acquisition method. Goodwill is the excess of consideration over the fair value of net identifiable assets acquired.
• Changes in Accounting Policies/New Standards:
  • Amendments to Ind AS 8 (Definition of Accounting Estimates), Ind AS 1 (Disclosure of Accounting Policies - material vs. significant), and Ind AS 12 (Deferred Tax related to Assets and Liabilities arising from a Single Transaction) were applicable. The company stated these amendments did not have a material impact on the financial statements, though Ind AS 1 amendments impacted disclosures.

Internal Control Effectiveness #

Auditor’s Report on Internal Financial Controls #

• Standalone: S.R. Batliboi & Co. LLP opined that the Company has, in all material respects, adequate internal financial controls with reference to standalone financial statements and such controls were operating effectively as at March 31, 2024.
• Consolidated: S.R. Batliboi & Co. LLP opined that the Group, its associates, and joint ventures (companies incorporated in India) have maintained, in all material respects, adequate internal financial controls with reference to consolidated financial statements and such controls were operating effectively as at March 31, 2024. This opinion relied on the reports of other auditors for 1 subsidiary, 1 associate, and 1 joint venture incorporated in India.

Audit Trail #

• Standalone: The Company used two accounting software. One had the audit trail (edit log) facility operational, though it was not enabled at the database level and for certain privileged access changes. The other software did not have the audit trail feature enabled due to technical limitations; the Company is planning to migrate this software. No instances of tampering were observed in the software where the feature was active.
• Consolidated: Similar exceptions regarding audit trail enablement were noted for the Holding Company, some subsidiaries, associates, and joint ventures. Specifically, for the Holding Company (one software), two subsidiaries, one associate, and one joint venture, the audit trail was not enabled for certain privileged access changes or at the database level. For the Holding Company (another software), one associate, and one joint venture, the feature was not present or operational throughout the year.

Management’s Responsibility and Board’s View #

• The Board’s Report states that internal financial controls were in place, adequate, and operating effectively. The Audit Committee reviews the adequacy and effectiveness of the internal control framework. The Corporate Audit and Governance (CAG) team conducts internal audits.

Regulatory Compliance Status #

• Companies Act, 2013 & SEBI Regulations:
  • The Directors’ Responsibility Statement affirms compliance with applicable accounting standards, maintenance of adequate accounting records, preparation of accounts on a going concern basis, implementation of proper internal financial controls, and systems for compliance with applicable laws.
  • The Corporate Governance Report details adherence to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. A certificate from BMP & Co. LLP, Practicing Company Secretaries, confirms compliance with corporate governance conditions.
  • The Secretarial Audit Report (Annexure IV to Board’s Report) by BMP & Co. LLP states that the Company has generally complied with the provisions of the Companies Act, SCRA, Depositories Act, FEMA (for FDI), and applicable SEBI Regulations and Secretarial Standards. No qualifications or adverse remarks were noted in the Secretarial Audit Report for Minda Corporation Limited or its material subsidiary, Minda Instruments Limited.
  • Annual Return is available on the company’s website.
• Listing Requirements: Annual listing fees for FY 2024-25 paid to NSE and BSE.
• IEPF: Unclaimed dividends and corresponding shares transferred to IEPF as per rules.
• Penalties/Strictures: The Corporate Governance Report states no penalties or strictures were imposed by Stock Exchanges, SEBI, or any statutory authority on matters related to capital markets during the last three years. The BRSR also indicates NIL fines/penalties from regulators on NGRBC principles.
• Specific Compliances Noted:
  • Employee Stock Option Scheme 2017 implemented in accordance with SEBI Guidelines.
  • Policy on Directors’ Appointment and Remuneration is in place and disclosed.
  • Related Party Transactions were on an arm’s length basis and in the ordinary course of business, with Audit Committee approval where required.
  • Prevention of Sexual Harassment at Workplace: Internal Complaint Committees constituted. One complaint received and resolved in FY24.
  • The Code on Social Security, 2020: Acknowledged, impact to be assessed when effective.

Legal Proceedings and Potential Impact #

• Contingent Liabilities:

  • Income Tax:
    • Holding Company: Pertaining to AY 2016-17 to AY 2019-20, tax impact of ₹14 million related to disallowance of Sec 80IC deduction is pending with ITAT. Management is confident of a favorable outcome.
    • Subsidiaries: Various matters including disallowance of R&D expenditure, transfer pricing adjustments, and professional expenses disallowance, with tax impacts totaling approximately ₹28 million (plus a ₹44 million underpayment assessment for an overseas subsidiary). The Group is appealing these and management believes outcomes will be favorable. A subsidiary also has a demand of ₹678 million regarding GST classification of finished goods, which is under appeal (₹68 million deposited under protest).
  • Sales Tax/VAT/GST:
    • Holding Company: Several matters pending with various authorities concerning differences in returns, disallowance/excess availment of ITC, and block credit issues, with a total disputed tax amount of approximately ₹79 million (excluding interest/penalties). The company believes it has fair chances of favorable decisions.
    • Subsidiaries: Disputes related to non-submission of forms and ITC disallowance, with tax amounts involved.
  • Customs Duty: A matter with ₹3 million tax impact is pending with Commissioner (Appeals).
  • International Chamber of Commerce (ICC) Matter: A settlement agreement requires the Company to pay ₹496 million (Euro 5.5 million) as per a Consent Award. The company has deposited this amount as per High Court order. The Company has an indemnity from a promoter entity and, based on legal opinion, believes there is no financial implication on the Company. This is a significant contingent liability effectively indemnified.

• Overall Assessment: The company faces several tax-related litigations across direct and indirect taxes. While management expresses confidence in favorable outcomes for most, the aggregate disputed amounts are material. The ICC settlement, though indemnified, represents a substantial potential outflow if the indemnity is not honored.

Related Party Transactions (RPTs) #

• Policy: RPTs are conducted on an arm’s length basis and in the ordinary course of business, approved by the Audit Committee and Board as necessary. The policy is available on the company’s website.

• Key Related Parties:

  • Subsidiaries (e.g., Spark Minda Foundation, Minda Instruments Ltd, PT Minda Automotive Indonesia, Spark Minda Green Mobility Systems Pvt Ltd).
  • Joint Ventures/Associates (e.g., Minda VAST Access Systems Pvt Ltd, Minda Infac Pvt Ltd, Furukawa Minda Electric Pvt Ltd).
  • Key Managerial Personnel (KMP) (Ashok Minda, Aakash Minda, Vinod Raheja, N.K. Modi, Ashim Vohra, Pardeep Mann) and their relatives (Sarika Minda).
  • Enterprises where directors/relatives have significant influence (Minda Capital Pvt Ltd, Minda Silca Engineering Pvt Ltd).

• Nature of Significant Transactions:

  • Sale/Purchase of goods, Job work/Service income/expenses, Royalty income.
  • Managerial remuneration to KMPs.
  • Loans given to/taken from related parties (e.g., Loans to Spark Minda Green Mobility Systems Pvt Ltd, Minda Infac Pvt Ltd).
  • Investments in subsidiaries/JVs.
  • Contributions towards CSR activities (to Spark Minda Foundation).
  • Rent paid/received.

• Balances Outstanding: Trade receivables, trade payables, loans receivable/payable, security deposits, investments.

• Conflict of Interest: The Corporate Governance report states no materially significant RPTs that may have potential conflict with the company’s interest at large were entered into.

Subsequent Events #

• Board’s Report: States no major events or material changes affecting the financial position occurred between March 31, 2024, and the date of the Board’s Report (May 22, 2024), except as provided in the report.
• Notes to Financial Statements: Affirm that no subsequent events requiring recognition or reporting, not already disclosed elsewhere, have occurred.
• Proposed Dividend: The Board recommended a final dividend of ₹0.90 per share for FY24 on May 22, 2024, subject to shareholder approval. This is a non-adjusting subsequent event.

Analysis of Accounting Quality #

• Transparency & Conservatism:

  • The company follows Ind AS, which generally promotes transparency. Detailed disclosures are provided for key areas like revenue recognition, financial instruments, and leases.
  • The use of the ECL model for financial asset impairment suggests a degree of prudence.
  • The accounting for warranty costs is based on technical evaluation and past experience, which is standard practice.
  • The policy of testing goodwill for impairment annually and other non-financial assets when indicators exist is consistent with standards.

• Clarity of Disclosures:

  • Disclosures for RPTs, contingent liabilities, and segment reporting (though single segment reported) are provided.
  • Breakdown of financial statement line items is generally clear in the notes.
  • The impact of new accounting standards and amendments is discussed.

• Auditor’s Findings:

  • Unqualified opinions.