TVS Motor : TVSM Annual Report of Subsidiary Companies - 2021-22 June 2022

TVS MOTOR COMPANY LIMITED

Annual Report of Subsidiary Companies for the year 2021-2022

Contents
Indian Subsidiaries
Sundaram Auto Components Limited......................................................................	1
TVS Housing Limited.............................................................................................	46
TVS Motor Services Limited...................................................................................	64
Intellicar Telematics Private Limited.......................................................................	88
TVS Electric Mobility Limited................................................................................	111
TVS Credit Services Limited................................................................................	126
Harita ARC Private Limited..................................................................................	287
TVS Housing Finance Private Limited.................................................................	298
TVS Two Wheeler Mall Private Limited................................................................	309
Overseas Subsidiaries
TVS Motor (Singapore) Pte. Limited....................................................................	320
The Norton Motorcycle Co Limited.......................................................................	337
TVS Digital Pte Limited........................................................................................	349
TVS Motor Company (Europe) B.V.,....................................................................364
PT TVS Motor Company Indonesia.....................................................................	370
The GO Corporation.............................................................................................	396
Swiss E-Mobility Group (Holding) AG..................................................................	403
Sundaram Holding USA Inc.................................................................................	416

Sundaram auto components Limited

Board of Directors

VENU SRINIVASAN, Chairman

Dr. Lakshmi Venu

S. G. Murali

RAJESH OOMMEN, director & Chief Executive Officer

Chief Financial Officer

J. Ashok Chakravarthi

Company Secretary

G. SATHYAN

Auditors

V. sankar aiyar & co., Charterad Accountants, 2 C, Court Chambers,

35, New Marine lines, Mumbai - 400 020

Registered Office:

"Chaitanya",

No.12, Khader Nawaz Khan Road,

Nungambakkam Chennai-600006

E-mail: [e-mail]

Web site: www.sundaramautocomponents.com

CIN : U29249TN1992PLC051417

Bankers

State Bank of India

Industrial Finance Branch

Anna Salai, Chennai 600 002

HDFC BANK LIMITED

Chennai ITC Centre Branch

Anna Salai, Chennai 600 002

DBS BANK

Chennai Main Branch

806, Anna Salai, Chennai 600 002

AXIS BANK LIMITED

Corporate Banking Branch

No.3, Club House Road, Ground Floor,

Anna Salai, Chennai 600 002

ICICI Bank Ltd

Cenotaph road,

Teynampet, Chennai600 018

Plant Locations

1. Belagondapalli, Hosur 635 114.
2. Oragadam, Kancheepuram District 602 105.
3. Byathahalli Village, Kadakola Post, Mysore 571 311.
4. Bhatian Village, Solan District, Himachal Pradesh 174 101.
5. RIICO Chowk, Alwar District, Bhiwadi, Rajasthan 301 019.

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Sundaram auto components Limited

Directors' Report to the Shareholders

The Directors present the 30th annual report together with the audited financial statements for the year ended 31st March 2022.

1. Financial Highlights

			(Rs.in crores)
Details	Year ended		Year ended
31.03.2022	31.03.2021
Sales and other income (A)	607.95	462.69
Expenses
Cost of material consumed	431.57	307.48
Changes in inventories of finished goods,	(8.27)	3.75
stock-in-trade and work-in-progress
Employee benefit expenses	71.89	69.22
Finance costs	12.69	16.01
Depreciation and amortisation expense	20.88	19.85
Other expenses	68.89	56.10
Total expenses (B)	597.65	472.41
Profit before tax (A) - (B)	10.30	(9.72)
Exceptional items (Gain / Loss)	(6.00)	(9.36)
Less: Income tax expense:
Current Tax	0.56	(0.36)
Deferred Tax	1.43	(6.23)
Profit for the period	2.31	(12.49)
Other Comprehensive income/ (loss)	1.38	3.23
Total comprehensive income	3.69	(9.26)

Share Capital

The Company's paid-up Equity Share Capital as on 31st March 2022 is Rs. 44.57 Cr. During the year, there is no change in the Share Capital of the Company.

Dividend

In order to conserve the resources for its future business activities, the directors do not propose any dividend for the year under review.

Industry Performance

The domestic two-wheeler industry recorded a sale of 13.4 Mn units in 2021-22, a decline of 11% from 15.1 Mn units in 2020-21. It witnessed a growth of 85% in Q1 due to the low base factor in the previous year. However, for the rest of the year, the industry declined and did not recover. This decline was due to weakened demand in both urban and rural markets, however, it was the rural markets that was more severely impacted. While the monsoon remained favourable, the non-agri rural services sector underperformed significantly. This manifested itself in lower demand in the entry and mid-level segments of commuter motorcycles and moped. The rural markets felt the combined effect of savings depletion, income erosion, broad inflation, fuel inflation and rising vehicle prices due to commodity cost increases.

The overall three-wheeler small passenger industry (3 plus 1 segment) grew by 34% in 2021-22 (from 4.36 lakh units in 2020-21 to 5.82 lakh units in 2021-22). The domestic industry grew by 65% and exports market grew by 26% in 2021-22 over last year.

Production

The Auto Industry produced a total of 22.93 Million vehicles including Passenger Vehicles (PVs), Commercial Vehicles (CVs), Three-Wheelers,Two-Wheelers and Quadricycle during the year under review as against 22.65 Million in the previous year, thereby registering a growth of 1.2 % as compared to previous year.

Domestic Sales

On VAHAAN electric 2W today accounts for 4.5% of the total 2W registrations. However, this under- represents the consumer mindspace that it enjoys. The last year has seen the consumer perspective

of the transition to EV move from "IF" to "WHEN". Large numbers of consumers today are actively considering EVs for their respective needs.

The industry saw robust growth of 5.6X. The growing sensitivity to climate impact and the improved Total Cost to Operation (TCO) proposition considering rising fuel prices saw accelerated consumer interest in the category. The FAME II enhancement, PLI, state subsidy and other EV related infrastructure initiatives of the government reinforced consumer faith in the segment.

Exports

In the financial year 2021-22, overall automobile exports have grown by 35.9%. Two wheelers, Commercial Vehicles (CVs), Three wheelers and Passenger Vehicles (PVs) segments have grown by 35.3%, 83.4%, 27.2% and 42.9% respectively in the financial year 2021-22 over the corresponding previous year.

S.		Production	Domestic sales	Export sales
Segment
No	2020-		2021-	GOLY	2020-	2021-	GOLY	2020-	2021-	GOLY
		21		22	%	21	22	%	21	22	%
1	PVs	31		37	19%	27	31	13%	4	6	43%
2	CVs	6		8	29%	6	7	26%	1	1	83%
3	Three-	6		8	23%	2	3	19%	4	5	27%
Wheelers
4	Two-	183		177	-3%	151	135	-11%	33	44	35%
wheelers
	Total	263		227	1%	186	175	-6%	41	56	36%
UOM : No of units in Lakhs
Company Performance

Sales of the auto components division of the Company increased from Rs.454.7 Cr in the previous year to Rs.595.3 Cr in the year under review. Due to second wave of Covid-19 pandemic during May'21, there was a slight decrease in sales during Q1 FY21-22. The dependence of the company's sales on TVS Motor Company Limited (the holding company) has reduced from 58% of total sales during FY20-21 to 55% of total sales during FY21-22. During the year, the Company has entered into business with new EV OEM Ultraviolette.

SACL vs Industry growth - FY21-22

Segment	Industry growth	SACL growth
Passenger vehicles	19%	28%
Commercial vehicles	29%	63%
Two wheelers	-3%	31%

There is a significant increase in sales to EV OEM Ather energy of Rs. 11.9 Crs during FY21-22 compared to Rs. 3.2 Crs during the corresponding previous financial year. The Company has also obtained tool-transfer businesses to our Bhiwadi facility, which helped to increase the sales of Bhiwadi facility by three-fold from Rs. 6 Crs during FY20-21 to Rs.18.3 Crs in FY21-22.

The Company is currently undergoing the process of rationalizing the tail-end customers with low sales growth potential. Out of 12 customers identified, so far we have discontinued our sales to 7 customers. This helps the company to focus our efforts to accelerate further growth.

The Research and Development(R&D) team at the Company has been involved in implementing 220 new parts bringing in the NPD sales of Rs. 75 Crs from customers like Royal Enfield (45 parts), Tork motors (27 styling parts), Continental (12 cluster parts), Mando (8 fluid reservoir tanks). They have also designed parts like Air filter, Mud flap, Spoiler & Rain deflector.

The Company had an operational profit of Rs. 17.5 Crs during the year 2021-22.

Business outlook

Overall, India GDP growth forecasts range between 6%-7% for 2022-23, which builds in the possible adverse impact from the war, supply disruptions and economic sanctions. The service sector is likely to grow by 7%-8 % in FY23 supported by growth in tourism and travel which has been laggard for the last two years. The industry is expected to grow by 5% - 6% pushed by 35% increase in Capex. Estimates have taken on a moderated impact due to supply-chain disruptions leading to higher input cost.

The outlook is decidedly optimistic but with a note of caution. Due to the strong product line-up, unwavering focus on consumer, quality, cost, and the strong new launches the company is confident about outperforming the industry, inspite of the global challenges and tough business environment.

On the rural front, 2022-23 is likely to witness a normal monsoon, this would be the 4th year of favourable monsoons for India. Agriculture is expected to grow by 3%-3.5%. While the price of fertilizers is likely to go up due to various factors including global supply chain disruptions. It is also expected that food inflation will occur globally, especially in grains and wheat, as the affected regions (especially Ukraine) is one of the largest suppliers of food grains.

Due to raise in crude oil prices, most of the primary polymer producers including company's key

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Sundaram auto components Limited

suppliers in China and South Korea region are planning to operate at 80% capacity till Apr'22 to reduce their losses. The geo-political factors will also cause shortage of rare metals like Neon & Palladium (key ingredients in semi-conductor chip manufacturing), since Ukraine is the key producer of these metals (45% of global production).

By the end of FY21-22, Covid pandemic has re-started in China & Europe. Several cities in China has gone under lockdown. If not controlled by proper measures, the economy will remain pessimistic in FY22-23, as the events of FY20-21 may repeat again.

Passenger vehicle segment has always seen a positive growth since the beginning of the Covid-19 pandemic, due to need of personal mobility, crisis effect and improvement in availability of finance. There is a visible shift between the sub-segments (Passenger Cars & Utility Vehicles) with increase in demand for Utility vehicles. During 2022-23, the above drivers will continue and passenger vehicle segment is expected to grow.

During FY21-22, Commercial vehicle industry has bounced back from the hit due to Covid-19 pandemic. The growth outlook for FY22-23 is around 11%. LCV segment is expected to grow by 6% in FY22-23 due to last mile connectivity of e-commerce goods and migration of workforce. M&HCV segment is expected to grow by 20% due to infrastructure improvement and increase in industrial output.

The Company has planned to start the process of manufacturing from its Sanand facility for supplying to customers in Gujarat & Maharashtra states like Hanon, Toyota Gosei, Sanko Gosei, Tork motors & KEMET.

With the overall growth of the automotive industry coupled with new products planned by the Company for its customers, the Company's overall sales during 2022-23 is expected to grow by approximately 24%.

RISKS AND CONCERNS

Environmental & Geopolitical Factors:

COVID remains a potential risk with any resurgence from a new variant leading to hospitalisation, lockdowns could cause hardship for the populace and disruption to the progress of the build back

The Geopolitical strife while currently localized remains volatile, economic sanctions and other disruptions to global supply chains or escalation of scale could adversely impact the economic resurgence across the world.

Country specific risk factors may also impact like socio economic & political factors in Sri Lanka, Afghanistan, Myanmar and regulatory framework & duty structure risks in Egypt and Iraq.,

Audits / awards

The Company's Mysuru plant has received "TPM Excellence - Category A" award from CII & JIPM. This is the result of 4.5 years long TPM excellence journey under the guidance of external TPM consultant.

The Company has also received multiple awards from customers during financial year 2021-22

Daimler India	:	Zero defect achiever award, Chennai plant, Nov'21
Commercial
Vehicles
Denso Kirloskar	:	Zero ppm & OTIF delivery performance award, Hosur plant, Dec'21
TVS Motor	:	Platinum award for quality rating, Mysuru plant

During the financial year 2021-22 upcoming EV OEM Ultraviolette has conducted audit in SACL

Ultraviolette	:	Customer conducted audit in Hosur plant
		(Score : 85%)

Financial performance of the Subsidiary

As on the date of the report, the following are the Subsidiaries of the Company:

Sundaram Holding USA Inc. (SHUI) & its subsidiaries:

The Company along with its holding Company, viz., Sundaram-Clayton Limited has made an investment of 93.35 Mn USD in SHUI a Company established under the applicable provisions of Laws of United States of America. SHUI's wholly owned subsidiaries are:

1. Green Hills Land holding LLC, South Carolina, USA
2. Component Equipment Leasing LLC, South Carolina, USA
3. Sundaram-ClaytonUSA LLC, South Carolina, USA
4. Premier Land Holding LLC, South Carolina, USA

During the year 2021-22, the Company has not made any further investment in SHUI and presently holds 50.35% of the total capital of SHUI as on 31st March 2022.

As per Section 129 of the Companies Act, 2013 read with the Companies (Accounts) Amendment Rules, 2014, an intermediate subsidiary is exempted to prepare consolidated financial statements, as its intermediate holding Company viz., TVS Motor Company Limited prepares and files consolidated

financial statements with the Registrar of Companies. However, the salient features of the financial statement of the Subsidiaries in Form AOC-I, are annexed as Annexure II of the Report, in terms of Section 129(3) of the Companies Act 2013 (the Act, 2013) read with Rule 5 of the Companies (Accounts) Rules, 2014.

Risk Management

The Board has established a sound Risk Management framework to identify, monitor and minimize risks as well as to identify business opportunities.

Risk evaluation and management is an ongoing process. As a process, risks associated with the business are identified and prioritized based on the Company's overall risk appetite, tolerance, strategy, severity and taking into account the current and prospective economic and financial environment.

The Board is satisfied that there are adequate systems and procedures in place to identify, assess, monitor and manage risks. The Company's Audit Committee is overseeing all the risks that the organization faces such as strategic, financial, market, IT, legal, regulatory, reputational and other risks and recommends suitable action. Risk minimization policy has already been approved by the Board.

Directors' responsibility statement

To the best of their knowledge and belief and according to the information and explanations obtained by them, the Directors have made the following statement in terms of Section 134 of the Companies Act, 2013 (the Act):

1. that in the preparation of the annual accounts for the year ended 31st March 2022, the applicable accounting standards had been followed along with proper explanation relating to material departures, if any;
2. that the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;
3. that the Directors had taken proper and sufficient care for maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
4. that the Directors had prepared the accounts for the financial year ended 31st March 2022 on a going concern basis; and
5. that the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Directors

Mr. Venu Srinivasan, was appointed as Director and also Chairman of the Board of the Company at the Board meeting held on 28th March 2022. The approval of the shareholders for his appointment as Director was received at the Extra Ordinary General Meeting held on 29th March 2022.

Mr. Rajesh Oommen, Chief Executive Officer was elevated as Director & CEO in the rank of Whole- time Director for a period of 5 years, effective 28th March 2022 at the Board meeting held on 28th March 2022. His appointment was subsequently approved by the shareholders at the Extra Ordinary General Meeting held on 29th March 2022.

Mr H Lakshmanan and Mr C N Prasad, Directors, resigned as directors effective 28th March 2022.

The Board placed on record their sincere appreciation and thanks to both Mr H Lakshmanan and Mr C N Prasad for their contribution to the growth of the Company during their tenure as Directors.

Directors liable to retire by rotation

In terms of Section 152 of the Act 2013, two-third of the total number of Directors i.e., excluding IDs, are liable to retire by rotation and out of which, one-third is liable to retire by rotation at every annual general meeting.

Dr. Lakshmi Venu and Mr S G Murali, non-executive and non-independent Directors, who have been the longest in office are liable to retire by rotation and are proposed to be re-appointed at the ensuing Annual General Meeting (AGM).

Both the directors, being eligible, offer their candidature for re-appointment.

Policy on Directors appointment and remuneration of Directors and Key Managerial Personnel

In accordance with Section 178 of the Act 2013, the Company has formulated a Nomination & Remuneration Policy (NRC Policy) to ensure that Directors and KMPs are sufficiently remunerated for their performance. The Policy seeks to provide criteria for determining qualifications, positive attributes and independence of a Director.

Nomination and Remuneration Policy

Directors:

NRC will recommend the remuneration for executive and non-executive Directors. This will be then approved by the Board and shareholders.

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