Sandhar Technologies Limited:Annual Report 2023-24 Analysis

Sandhar Technologies Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Sandhar Technologies Ltd. was founded in 1987 by Mr. Jay Kyal. The company started as a manufacturer of sheet metal components for the automotive industry.

Headquarters Location and Global Presence:

• Headquarters: Gurugram, Haryana, India.
• Global Presence: Sandhar has a significant presence in India and has expanded internationally through joint ventures and acquisitions. They have manufacturing facilities and offices in Spain, Mexico, Poland, and other countries.

Company Vision and Mission:

Information about the company’s specific vision and mission statements is not readily available publicly.

Key Milestones in Their Growth Journey:

• Early years focused on sheet metal components.
• Diversification into other automotive components like locks, mirrors, and stampings.
• Strategic acquisitions and joint ventures to expand product portfolio and geographical reach.
• Significant growth through partnerships with leading OEMs.
• Successful IPO in 2018.

Stock Exchange Listing Details and Market Capitalization:

• Listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).
• (Market capitalization data needs to be obtained from current financial data sources.)

Recent Financial Performance Highlights:

(Requires up-to-date financial data from their annual reports, investor presentations, and financial news sources. Include key metrics such as revenue, profit, EPS, and recent growth trends.)

Management Team and Leadership Structure:

• Mr. Jay Kyal is the Chairman and Managing Director.
• Other key management personnel include directors and senior executives heading various departments like finance, operations, and marketing.

Any Notable Awards or Recognitions:

(Information about awards and recognitions can be sourced from their website, press releases, or industry publications.)

Their Products #

Complete Product Portfolio with Categories:

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

• Sheet Metal Components: Includes brackets, stampings, and other metal parts.
• Locks and Security Systems: Includes automotive locking systems, latches, and related components.
• Mirrors: Interior and exterior automotive mirrors.
• Polymer Components: Plastic molded parts for various automotive applications.
• Operator Cabins: Primarily for the off-highway vehicle segment.
• Stamping: High-precision stamping solutions.
• Die Casting: Aluminum and zinc die casting.

Flagship or Signature Product Lines:

Automotive Locking Systems and Mirrors are considered core product lines contributing significantly to their revenue. Sheet metal components also remain a strong area.

Key Technological Innovations or Patents:

Details about specific patents are not readily available without accessing patent databases. However, they focus on technological advancements in their product lines, such as lightweighting of components and improved security features.

Manufacturing Facilities and Production Capacity:

Sandhar operates multiple manufacturing facilities across India and internationally. Specific production capacity figures are not usually disclosed publicly, but they have a significant production footprint to cater to their OEM clients.

Quality Certifications and Standards:

Sandhar holds various quality certifications, including:

• IATF 16949 (Automotive Quality Management System)
• ISO 14001 (Environmental Management System)
• OHSAS 18001 (Occupational Health and Safety Assessment Series) (transitioning to ISO 45001)

Any Unique Selling Propositions or Technological Advantages:

• Strong relationships with leading OEMs.
• Complete automotive solutions provider across multiple component categories.
• Vertical integration in some areas, offering cost advantages.
• Focus on quality and adherence to international standards.

Recent Product Launches or R&D Initiatives:

(Requires sourcing information from recent press releases, annual reports, or investor presentations regarding new product launches, technological developments, or R&D investments.)

Primary Customers #

Target Industries and Sectors:

Primarily serves the automotive industry, including:

• Passenger Vehicles
• Commercial Vehicles
• Two-Wheelers
• Off-Highway Vehicles (Construction Equipment, Agricultural Machinery)

Geographic Markets (Domestic vs. International):

Significant presence in the Indian market. Expanding its international footprint through exports and overseas manufacturing facilities.

Distribution Network and Sales Channels:

Primarily supplies directly to Original Equipment Manufacturers (OEMs).

Major Competitors #

Direct Competitors in India and Globally:

Key competitors include:

• Motherson Sumi Systems (now Samvardhana Motherson International Ltd.)
• Varroc Engineering Ltd.
• Lumax Auto Technologies Ltd.
• Magna International
• Valeo
• Plastic Omnium

Competitive Advantages and Disadvantages:

• Advantages: Broad product portfolio, strong OEM relationships, established brand reputation.
• Disadvantages: Dependence on the automotive industry’s cyclical nature, potential pressure on pricing from OEMs, competition from larger global players.

How They Differentiate from Competitors:

Sandhar differentiates itself through its diverse product range, offering a ‘one-stop shop’ for various automotive components. They also emphasize quality and customer service.

Industry Challenges and Opportunities:

• Challenges: Increasing raw material costs, stricter emission norms, the shift towards electric vehicles, and global economic uncertainties.
• Opportunities: Growth in the automotive industry (especially in emerging markets), increasing demand for safety and comfort features, the transition to electric vehicles (requiring new components), and the “Make in India” initiative.

Market Positioning Strategy:

Sandhar positions itself as a reliable and innovative supplier of automotive components, catering to a wide range of OEMs.

Future Outlook #

Expansion Plans or Growth Strategy:

Focus on expanding its product portfolio, increasing its international presence, and investing in new technologies. This includes exploring opportunities in the electric vehicle (EV) component market.

Sustainability Initiatives or ESG Commitments:

(Information about ESG commitments and sustainability initiatives can be found on their website or in their annual reports. Examples include reducing carbon footprint, promoting water conservation, and ensuring ethical labor practices.)

Industry Trends Affecting Their Business:

• Electrification of vehicles
• Increasing automation and connectivity in vehicles
• Stringent safety and emission regulations
• Globalization of the automotive supply chain

Long-Term Vision and Strategic Goals:

To be a leading global supplier of automotive components, driving innovation and delivering value to its customers and stakeholders.

Financial Analysis: Sandhar Technologies Limited #

Balance Sheet Analysis #

Comparative Analysis of Assets, Liabilities, and Equity (Standalone & Consolidated) #

Standalone Financials (INR in Lacs) #

Consolidated Financials (INR in Lacs) #

Profit and Loss Analysis #

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

Standalone Statement of Profit and Loss (INR in Lacs) #

Consolidated Statement of Profit and Loss (INR in Lacs) #

Detailed Analysis #

Sandhar Technologies Limited FY2023-24 Performance Analysis #

Revenue and Profitability Metrics #

Sandhar Technologies Limited demonstrated robust financial performance in FY2023-24.

• Consolidated Performance:
  • Total Revenue: Rs. 3,531.90 Crores (up 21% from Rs. 2,921.40 Crores in FY2022-23).
  • EBITDA: Rs. 351.40 Crores (up 34.34% from Rs. 261.58 Crores in FY2022-23).
  • Total Comprehensive Income: Rs. 111.70 Crores (up 48% from Rs. 75.67 Crores in FY2022-23).
• Standalone Performance:
  • Total Revenue: Rs. 2,727.34 Crores (up 13% from Rs. 2,409.76 Crores in FY2022-23).
  • EBITDA: Rs. 263.44 Crores (up 21.43% from Rs. 216.95 Crores).
  • Total Comprehensive Income: Rs. 113.84 Crores (up 38% from Rs. 82.44 Crores).
• Dividend: The Board recommended a final dividend of Rs. 3.25 per equity share for FY2023-24 (up from Rs. 2.50 per share), reflecting a dividend payout of 32.50%.

Market Share and Competitive Position #

Sandhar aims to be the “Most Preferred Choice of Global Stakeholders” and a “leading player in Global Markets.” The company leverages shifts towards electric vehicles (EVs) and sustainable mobility solutions. Established relationships with major OEMs across 2/3 wheeler, 4-wheeler, CV & OHV, and EV segments underscore its competitive standing. Focus on R&D and intellectual property generation is for competitive advantage.

Key Products/Services Performance #

Sandhar Technologies operates through several divisions: Automotive, Components, Automach, and Cabins & Fabrication.

• Automotive Division: Manufactures and supplies auto components globally including lock assemblies, mirror systems, operator cabins, and precision-engineered aluminum components.
• Components Division: Supports internal requirements for key materials and processes.
• Automach Division: A player in the two-wheeler steel wheels market in India.
• Cabins and Fabrication Division: Offers products for the off-highway vehicle segment, including steel metal components.
• EV Sector: Sandhar Auto Electric Solutions Private Limited focuses on DC-DC converters, EV chargers, and motor controllers, with larger plans for FY25.
• New Product Development & R&D: The Sandhar Centre for Innovation & Development (SCID) focuses on enriching the product portfolio and developing futuristic products. In FY24, 6 patents were granted. New products include electronic handle locks, regulator rectifiers, DC-DC converters (isolated type), Type-C USB chargers, throttle assemblies, traction motor controllers, and off-board chargers. A technical collaboration was established with Aimvek Corporation, Taiwan, for Prismatic Inside Rear-View Mirrors.

Geographic Distribution and Market Penetration #

Sandhar Technologies has a global and domestic presence.

• Manufacturing Footprint: The company operates 41 manufacturing facilities globally.
  • Overseas: Romania, Poland, Mexico, and Spain.
  • India: Facilities are spread across Uttarakhand, Haryana, Maharashtra, Gujarat, Tamil Nadu, Himachal Pradesh, Rajasthan, and Karnataka.
• Revenue Distribution: 86% of revenue is derived from the domestic market, while 14% comes from overseas markets.
• Market Reach: The company serves customers across India, Europe, and NAFTA regions.
• Technical Collaborations & JVs: Engages in strategic collaborations in Japan, South Korea, and Taiwan.
• Recent expansions include consolidation of manufacturing facilities in Mysuru, Karnataka and acquisition of factory premises in Himachal Pradesh. The Romania plant has also started production.

Segment-wise Capex and ROIC #

• Consolidated Capex & Investments: In FY2023-24, the company spent Rs. 165.07 Crores towards Capex and Investments in Subsidiaries.
• Standalone Capex: Additions to the standalone asset base aggregated Rs. 115.55 Crores as of March 31, 2024. Total investments in various subsidiaries aggregated Rs. 40.27 Crores during the period.
• Specific Capex Initiatives:
  • Consolidation of assembly and sheet metal business into a single facility in Mysuru (Sandhar Engineering Private Limited).
  • Acquisition of factory premises in Nalagarh, Himachal Pradesh.
  • Sandhar Engineering Private Limited (SEPL) inaugurated its Mysuru plant, with commercial production from October 2023. SEPL also leased premises in Halol, Gujarat for future expansion.
• Return on Invested Capital (ROIC): “Return on capital employed” ratio at the standalone level was 10.12% for FY24 (up from 7.69% in FY23), and “Return on investment” was 0.24% (up from 0.14% in FY23).

Operational Efficiency Metrics #

• Cost Management:
  • Consolidated manufacturing cost as a % of Total Net Revenue improved to 82.89% in FY24 from 84.06% in FY23.
  • Standalone manufacturing cost as a % of Total Net Revenue improved to 85.22% in FY24 from 85.70% in FY23.
  • Consolidated Personnel, Selling, Admin & General Costs were marginally higher at 9.00% of revenue in FY24 compared to 8.98% in FY23. Standalone figures showed improvement to 7.23% from 7.49%.
• Working Capital Management (Standalone):
  • Inventory Turnover Ratio: 10.53 times in FY24 (vs. 10.06 times in FY23).
  • Trade Receivables Turnover Ratio: 9.04 times in FY24 (vs. 7.93 times in FY23). Average collection period improved to 40 days from 45 days.
  • Trade Payables Turnover Ratio: 6.59 times in FY24 (vs. 6.44 times in FY23). Average payable period was 48 days (vs 49 days).
• Energy Conservation & Technology Absorption:
  • Total energy savings impacted 10,08,235 Kwh.
  • Solar plant installed capacity of 2832 KWp, generating 27,52,061 Kwh. Further PPA signed for 1849 KWp and 1704 KWp under finalization.
  • Capital investment in energy conservation equipment: Rs. 1.38 Crores.
  • Adoption of robotic technology for 3D model sheet & pipe cutting, 2K Pro-mixing system in paint shop, and IOT implementation for plant capacity utilization.
• IT Infrastructure: Upgraded ERP platform to Cloud-based Oracle Fusion Technology Platform.

Growth Initiatives #

• EV Focus: Actively pursuing the EV market through its subsidiary Sandhar Auto Electric Solutions Pvt. Ltd., with products like DC-DC converters, EV chargers, and motor controllers.
• Capacity Expansion: Inauguration of a new manufacturing plant in Mysuru for sheet metal components and acquisition of land in Himachal Pradesh for future growth and consolidation. International operations in Romania have commenced production.
• R&D and Innovation: Strong focus on R&D, evidenced by 6 new patents in FY24 and development of new products for both conventional and EV segments.

ESG Framework #

ESG and Sustainability Analysis #

Key Corporate Actions & 32nd Annual General Meeting (AGM) Agenda #

AGM Details #

• The 32nd AGM is scheduled for Tuesday, 24th September 2024, at 11:30 A.M. (IST) via Video Conferencing (VC) / Other Audio Visual Means (OAVM).

Record Date #

• Tuesday, 17th September 2024, for determining eligibility to vote on AGM resolutions.

Book Closure #

• Wednesday, 18th September 2024, to Tuesday, 24th September 2024 (inclusive), for AGM and final dividend.

Remote E-voting #

• Commences Saturday, 21st September 2024 (09:00 A.M.) and ends Monday, 23rd September 2024 (05:00 P.M.).

Dividend Declaration #

• Proposal to declare a final dividend of INR 3.25 per equity share (face value INR 10/- each) for FY 2023-24. This represents a 32.5% dividend on face value. The total cash outflow for the dividend, if approved, will be INR 19.56 Crores.

Financial Analysis Report: Sandhar Technologies Limited (STL) #

Auditor’s Opinion and Qualifications #

Standalone Financial Statements (FY 2023-24) #

• M/s. BSR & Co. LLP expressed an opinion that the standalone financial statements give a true and fair view in conformity with Indian Accounting Standards (Ind AS) and the Companies Act, 2013.
• Observations:
  • Backup of one accounting software was not kept on servers physically located in India on a daily basis from April 1, 2023, to May 5, 2023.
  • Unable to comment on whether the audit trail feature was enabled and operated throughout the year at the database level for general ledger accounting software operated by a third-party service provider.
  • The audit trail (edit log) facility for the general ledger accounting software was not enabled at the application level for part of the year (enabled from July 21, 2023).
  • Unable to comment on whether the audit trail facility operated throughout the year for payroll accounting software operated by a third-party.
• The Annexure A (CARO report) to the Standalone Auditor’s Report did not contain qualifications concerning the Company’s immovable properties not held in its name.

Consolidated Financial Statements (FY 2023-24) #

• M/s. BSR & Co. LLP opined that the consolidated financial statements give a true and fair view.
• Observations:
  • Similar observations regarding accounting software backup and audit trail functionalities as noted in the standalone report were made for the Holding Company and its Indian subsidiaries/joint ventures.
  • The auditors relied on the reports of other auditors for eight subsidiaries and the Group’s share in three joint ventures.
  • Financial information for one subsidiary and three joint ventures was unaudited but deemed immaterial by management and auditors.
  • The Annexure A (CARO report) to the Consolidated Auditor’s Report mentioned unfavourable remarks, qualifications, or adverse remarks by respective auditors of Sandhar Technologies Limited (Holding Company - Clause 3(i)(c)), Sandhar Engineering Private Limited (Clause 3(xvii)), and Sandhar Auto Electric Solutions Private Limited (Clause 3(xvii)). CARO reports for certain other JVs/Subsidiaries were noted as not issued by their respective auditors as of the principal auditor’s report date.

Analysis #

While the auditors have provided an unqualified opinion on the “true and fair view” of both standalone and consolidated financial statements, significant internal control weaknesses pertaining to IT General Controls (ITGCs) specifically around accounting software backups and audit trail functionalities have been highlighted. These control deficiencies, while not altering the overall fairness of the reported financials for FY24, pose risks to data integrity and reliability if not remediated. The reliance on other auditors and unaudited components (though immaterial) in the consolidated accounts is a standard disclosure. The CARO qualifications by other auditors on specific entities within the group warrant attention to the specific issues raised in those individual reports.

Key Accounting Policies and Changes #

• The standalone and consolidated financial statements are prepared in accordance with Indian Accounting Standards (Ind AS).

Change in Disclosure Policy #

• Effective April 1, 2023, the Company adopted “Disclosure of Accounting Policies (Amendment to Ind AS 1)”. This amendment requires the disclosure of ‘material’ rather than ‘significant’ accounting policies and provides guidance on the application of materiality.

Key Material Accounting Policies #

• Revenue Recognition: Revenue from sale of goods is recognized when control is transferred, based on contract terms (point in time). This is identified as a Key Audit Matter due to its significance and potential pressure to meet expectations.
• Property, Plant and Equipment (PPE): Measured at cost less accumulated depreciation and impairment. Useful lives are generally aligned with Schedule II of the Companies Act, 2013, with some exceptions (e.g., temporary erections, specific computer hardware, non-commercial vehicles) where management estimates shorter lives based on technical assessments.
• Intangible Assets: Measured at cost less accumulated amortization and impairment. Technical know-how is amortized over 60-72 months; software over 4-5 years. Goodwill is tested annually for impairment.
• Impairment of Non-Financial Assets: Assessed at each reporting date. For goodwill and investments in subsidiaries/JVs, impairment assessment is a Key Audit Matter due to significant judgments and estimates involved in determining recoverable value (value in use).
• Leases (Ind AS 116): Right-of-use assets and lease liabilities are recognized, except for short-term and low-value leases.
• Financial Instruments (Ind AS 109): Classified and measured at amortized cost, Fair Value Through Other Comprehensive Income (FVOCI).