Rico Auto Industries Limited (520008) Earnings Call Transcript & Summary

Dear shareholders, good afternoon. This is BM Jhamb, Company Secretary of your company. I am pleased to welcome you all to the 38th Annual General Meeting of Rico Auto. Dear shareholders, you may kindly note that in view of continuing COVID and pursuant to MCA, SEBI circulars and [ relaxations ], this AGM is being held through video conferencing over the facility provided by NSDL. Dear members, before we move on to business, I would like to introduce the directors attending the meeting, and we have with us Sri Arvind Kapur, Chairman and CEO and Managing Director of the company; Shrimati Upasna Kapur, non-Executive Director of the company; Sri Kanwal Monga, Independent Director of the company and Chairman of Nomination and Remuneration Committee; Sri Amarjit Chopra, Independent Director and Chairman of Audit Committee and Stakeholders Relationship Committee; Ms. Sarita Kapur, Independent Director. And we have a representative from Statutory Auditors. We have also with us KK Sachdeva, secretarial auditor and scrutinizer for the company's e-voting. We also have with us Sri Surendra Singh, Chief Operating Officer; and Sri Rakesh Kumar Sharma, Chief Financial Officer of the company. May I now request the Chairman to call the meeting to order. Over to Sri Arvind sir.

Thanks, Mr. Jhamb. Dear shareholders, good afternoon, and a warm welcome to the 30th Annual General Meeting of Rico Auto Industries Limited. As the company secretary informed me that the quorum for the meeting is present and with your permission, now I call the meeting to order. Due to COVID concerns, this is the second consecutive time we are holding the AGM through video conferencing, more to enable the members to participate from safety of their respective locations from all over. Hopefully, we won't have the third wave. And hopefully, by next year, we would have a hybrid model of the AGM, whereas people can actually physically be present and/or also be on the video. Dear shareholders, good afternoon. On behalf of the entire Rico family, it is a great pleasure to welcome you all to the 30th AGM of your company. Recent times have been very challenging with the onslaught of COVID-19 pandemic. The tough period tested our collective mettle in more ways than one as the COVID-19 pandemic raged across the globe. In India, we were hit by the ferocious second wave, causing a scale of suffering that was unparalleled. At Rico, we are committed to ensuring the safety and helping of our employees. We initiated our vaccination drive as a result of which almost 100% of our employees are vaccinated for the first dose. These include all permanent, contractual and also people who serve us. And we are hoping by 30th of November, we'll have 100% vaccination of the second dose as well. At the moment, the second dose, that has been given up to about 50%. It's a matter of great sorrow for us that we unfortunately lost 2 of our colleagues in the pandemic. I would like to extend my tribute to the families of our colleagues. We are doing our best to support the bereaved families and lead the financial requirements to the extent possible. Dear friends, despite the macroeconomic conditions and lockdown in the first quarter, the company -- the resilient performance of the company is reflected in the improvement of the consolidated revenues, which is up INR 1,488 crores -- it was actually 4.5% more than the previous year, and that was primarily because of the exports. And we had a positive cash flow of INR 13.9 crores in this year because of a lot of restrictions and a lot of challenges as far as shipments are concerned despite the force majeure that was to our advantage. We did make shipments to our customers, to BMW and to -- also to France, by air, just to meet the expectations and the requirements of the customers. This was primarily to meet the commitments of our customers. So the efforts that we said -- did impact the bottom line, but it was the commitment that we were very -- we were particular about. And so we did make a decision to make the shipments. In light of the company performance and also to maintain continuity, the Board has recommended a dividend of 20% for the year. Outlook for '21, '22, it started off well. And if you look at our first quarter, we had -- we did INR 144 crores this year compared to INR 131 crores last year. And this year, despite 6 weeks of lockdown in the first quarter, we did manage to do that. If you look at the passenger maker market, the market is good, the demand is good, but there's a challenge as far as the semiconductors are concerned. And we are hoping that there will be some solutions. All the companies are working very hard on it, and whichever company manages to get semiconductors, their productions are bouncing back very well. In 2-wheelers, there is a challenge that we've had and primarily because of the job losses in certain level of -- strata of society. And we are hoping that the festival season, we will see a turnaround, and we are hoping that the 2-wheeler market will also bounce back very soon. We -- this year, our budget is to cross INR 2,000 crores in consol. And we are hoping still achievement despite all the challenges that are there. In export, the exports in 2021, despite the COVID and despite 3 months of lockdown, we did achieve -- achieved an export of INR 359 crores, which is 13% higher than what we had done in the previous year. That was INR 311 crores. So our focus is on export. And the good news is that our growth has primarily come in -- a lot of our growth has come in electric vehicles and electrified vehicles. We are -- our focus is on that. And the new orders that we are getting are also on that and we are shipping to companies like BMW globally. Stellantis, which is earlier PSA, and Renault. For Toyota, we have just signed a contract, and we are expanding our Chennai facility to cater to the requirement of electrified vehicles from the plant in China. All the other plants are also standing to meet the requirement of the electric wins and we are hoping that the buzz that is there for the electric vehicles, soon, there would be the envying demand that has been created by the support that the government is actually extending to -- the incentives that the government is giving, the electric vehicle demand will go up. And your company is totally focused on expanding the capacities as far as electric vehicles are concerned. And also the other technologies that might come in later on. We acquired another company, which is a friction material company. This was very important for your company, primarily because the clutch that we manufacture, we were dependent on our competition as far as the supplies are concerned. So we had to protect ourselves, protect our sales because -- and also our profit by developing the -- by taking over this company. We own 70% of this company, and this would be the ninth subsidiary of your company now. In the corporate social responsibility, besides the regular commitment towards the society, economy and the environment, given the COVID-19 second wave, which severely impacted the healthcare system of our country, your company has set up a COVID care center at the Dharuhera plant. It has 60 beds, expandable to 130 beds. We have facilities of oxygen concentrators and also an oxygen power plant which is there. And this is totally free of cost for the society as well as for all my colleagues and all the people working for us. Going forward, we are optimistic about the growth in the macroeconomic -- economy fueled by the progress of the nationwide vaccination drive. The yearly budget of 2021 also took several [ primary ] steps to incentivize investments and growth -- to boost economic growth as also to give stable climate for more investments in India and subsequently scrapping of the retrospective taxes. Future opportunities and challenges. The government has come out with a PLI scheme of INR 26,000 crores as an incentive for advanced automotive technology vehicles -- and also the component which we would be supplying -- to cater to the environmentally friendly and cleaner, sustainable, advanced and more efficient electric vehicles. Based on that, your company will definitely take advantage of the incentive that the government is offering and we will be getting into new technologies that are required. We've already started, like I mentioned, we have already started supplying components to the electric vehicle. These are highly high technology components, which require special expertise to meet the requirement of the customers. We are already producing them, and we are expanding further in these components. The big challenge, as I mentioned earlier, is the 2-wheeler market, and we are hoping that festival season, this market will also launch that very well. The other challenge I had mentioned earlier is the semiconductor shortage which is there, it might carry on for another year or so. And it is said that by end of '22 or beginning '23, the shortage will get over. And when I say shortage will get over, the [indiscernible] will be met by the middle of next year, but the increasing production of the automobile and also the increasing demand by the [ automobiles, ] that would be catered fully by the year '23. And all the companies are taking whatever steps there are required to be taken, they are taking those in that direction. And like I mentioned earlier, Mission 2K20, we should be able to achieve it in this current coming year. And Amalgamation, to achieve business synergies, the Board of the company in its meeting on 26th of July '21, approved a Scheme of Amalgamation of 3 wholly-owned subsidiary groups, namely Rasa Autocom Limited, Rico Aluminium and Ferrous Auto Components Limited and Rico Investments Limited with itself, subject to necessary approval from the concerned regulatory authorities and, of course, from our worthy shareholders. The application for this has already been filed with the honorable NCLT [ generic products ] approval. I would like to take this opportunity to thank all our stakeholders and our customers for their continued trust in us. Our employees are our biggest resource and our endeavor is to improve their competencies at all levels. I would also like to acknowledge the commitment and efforts of the entire Rico Team in adding value at each level of the value chain. I would also like to thank all local, state and national governments, the concerned bodies and the banks for their support. Last but not least, I thank you, all our shareholders -- for our shareholders for your continued support and faith in us. My best wishes to you and your families. Stay safe, stay healthy. Thank you once again. Mr. Jhamb?

Dear members, you have received the notice of this meeting, along with directors' report and annual accounts which I give you permission, take them as read and received. The report of Statutory Auditors and Secretarial Auditors are not qualified and do not contain any adverse remarks. Hence, there is no need to read the same -- I take them as read. Shareholders may note that link [ are ] inspecting the [ remuneration ] maintained under the Companies Act 2013 are now open by logging through shareholder section of e-voting platform provided by NSDL. As you are aware, according to the provisions of Companies Act 2013, the voting of business items of this AGM are being carried out through e-voting process. The remote e-voting through electronic means has been completed, which remained open from 27th September to 29th September. Mr. KK Sachdeva has been appointed by the Board as a scrutinizer to conduct the e-voting process. The result of the e-voting, along with scrutinizer report, will be declared in consolidation with e-voting at the AGM within 2 working days and same shall be placed on the website of the company, BSE and NSE and as well, NSDL. Members who could not exercise their vote in the self remote e-voting process are requested to cast their vote by way of e-voting at the end of this meeting within a period of 15 minutes, which will be allowed after the conclusion of the AGM. Now I will read out the proposed resolutions to be passed at this AGM. Resolution #1, adoption of audited financial statements standalone and consolidated of the company for the financial year ended 31st March 2021, including a report of Directors and Auditors thereon by way of organization. Second, declaration of 20% dividend for the financial year ended 31st March 2021, as recommended by the Board of Directors by way of ordinary resolution. Three, appointment of Sri Arun Kapur, DIN number 00100270, who retires by rotation and being eligible, offers himself for reappointment way of ordinary resolution. To ratify and approve the remuneration of the cost auditors and associated cost accountant appointed for the financial year '21/'22 by way of ordinary resolution. Now I request the IT team to start the speaker shareholder session as some shareholders has requested for speakers and allow the shareholder only 1 by 1 to express their views. Now over to IT team, Mr. Raghunath Kataria, please.

Thanks, sir. It is my privilege to invite the shareholders who have registered themselves to speak at the AGM. The speakers are requested to limit their speech to 3 minutes time. Now I am requesting Mr...

[Foreign Language]

Thank you, Ajay Kumar Jain. Now may I request Mr. Manjit Singh to unmute yourself and...

Good afternoon. [Foreign Language].

[indiscernible] Manjit?

[Foreign Language] Thank you, chairman, sir. [Foreign Language]

May I request Mr. Kirti Shah to unmute yourself and ask your question, please.

Chairman, my name is Kirti Shah. [Foreign Language] March quarter, profit, INR 9.31 crores. [Foreign Language] June quarter [Foreign Language] loss of INR 2.33 crores, sir.[Foreign Language]. Turnover [Foreign Language] INR 339 crores [Foreign Language]. Net profit margin [indiscernible] minus 0.69% [Foreign Language]. The current quarter, September quarter [Foreign Language]. Thank you so much. [Foreign Language].

[Foreign Language]

Now may I request Mr. [ Rajendra Prasad ] to ask his question and unmute yourself.

[Foreign Language] We are pleased to start delivering electrical points -- parts, notably to global, but also local. [Foreign Language] India is the cheapest and best destination for investment. [Foreign Language]. You should appear to be good. [Foreign Language]. Let us not talk negative. [Foreign Language]. Good news for our company as well. [Foreign Language]. Thank you very much.

Now may I request Mr. Sarvjeet Singh to unmute himself and ask his question.

Mr. Chairman, can you hear my voice?

Very well.

Chairman, first of all, good afternoon to you, all the Board of Directors and all the staff of Rico Auto Limited and [Foreign Language] fellow shareholders. [Foreign Language]. Thank you, sir.

Now may I request Mr. Sandeep to ask his question.

Dear Chairman, sir, and all the Board of Directors. I'm the shareholder of the company, [Foreign Language]. Thank you, sir.

Now may I request Mr. [ Murli ] to ask his question?

[Foreign Language]

Now may I request Mr. [ Santosh ] Bhutani to ask his question.

[Foreign Language]

Now may I request Mr. Gagan Kumar to ask his question.

Am I audible?

Yes, very well.

Yes. Good afternoon, Mr. Chairman, Board of Directors and fellow shareholders. Myself, Gagan Kumar. My DP ID is 300206-11044542. I'm joining this meeting from Delhi. [Foreign Language]

Sir, all the speaker shareholders joined today have done now. The question session is over now. Over to Company Secretary, sir.

Thank you, Mr. Kataria, for conducting this question and answer session. May I now request Chairman to kindly address the queries of the shareholders one by one -- or you can address jointly because there are certain questions which are very common regarding electric vehicle. I think common answer can also serve the purpose instead of giving individual answers. Thank you, sir. Over to you.

[Foreign Language]. Let me start with -- there are some common questions like water harvesting as solar harvesting. [Foreign Language]. [Foreign Language] renewable energy, not necessarily solar [Foreign Language]. Coming to dividends, the dividend [Foreign Language]. [Foreign Language] 20% of the profits [Foreign Language]. Last couple of years, we've had some challenges, partly because of the sudden increase in exports, et cetera, and certain premium expenses that we had to incur [Foreign Language] and we are very confident [Foreign Language]. That, we are very confident. Market share price [Foreign Language]. Regarding taking care of the COVID cases that we had. [Foreign Language] And unfortunately, [Foreign Language] who passed away. And we are taking care of the families. We have formed a policy by which the [Foreign Language] till the age of retirement. [Foreign Language]. And secondly, we have also offered employment to their wives and/or their children. So the company is taking care of the -- all the people who were impacted in COVID. And during the time of COVID [Foreign Language]. The company tirelessly worked to collect cylinders and give the people -- passed on the cylinders and/or the concentrates to all the colleagues and wherever possible medical help, whatever required was given to all the colleagues where -- it was a big stretch. Many people sacrificed that time and took many risks because [Foreign Language]. Besides that, [Foreign Language]. Fortunately, [Foreign Language] with oxygen and everything that was required there. [Foreign Language]. And we are very proud of it for the society and for my colleagues and everybody else. It's absolutely free of cost. That is part of the commitment that we have towards anybody impacted with COVID. Property modernization [Foreign Language] and we are very aware of it [Foreign Language]. That is always in our mind. [Foreign Language]. Turnover was near INR 1,480 in consolidation. [Foreign Language] that we would cross INR 2,000 crores, which is a very major jump, which is a jump of almost 140%. [Foreign Language]. And vehicle productions have started, component prices has started, and we are delivering to our customers. And fortunately, the component [Foreign Language] and we are very happy that we have associated with those companies. And besides that, [Foreign Language]. Our deliveries are better despite the problem of containers. My colleagues are working very hard on that to manage containers and better staffing so that [Foreign Language] and container prices are almost 5 to 7x [Foreign Language] in some cases 10x [Foreign Language]. Despite that, my colleagues are working to reduce the overall cost by better utilization of containers and also by better packing methods that we are doing. [Foreign Language] 40% of growth [Foreign Language] despite all the challenges of chips, et cetera, we will -- you will see a very good performance from the company this year. [Foreign Language]. So we are very happy and proud of our teams and who actually got us out of this -- the last 2 years where the turnover was also suppressed and also the profitability wasn't up to the mark. Electric vehicles [Foreign Language] the government is promoting electric vehicles. And we have been on electric vehicle supply [Foreign Language], we are supplying to the best in the world, which is BMW. And we have supplied for almost about 1.5 year, 2 years now. [Foreign Language]. We were single source supply to those companies. And further also, [Foreign Language] and start selling locally [Foreign Language] that is for Toyota in India for electrification of vehicles. And the plant is getting ready and which should [Foreign Language]. And our focus is on local as well, [Foreign Language]. Toyota is the best company in the world and we are very proud to be associated with Toyota with the electrification of vehicles [Foreign Language]. And besides that, [Foreign Language] 2-wheelers that are coming up and we are negotiating with everybody. So this year, it will be a better year. Hopefully, we will cross INR 2,000 crores in consolidation and the margin will be definitely better because [ your margin losses will ] [Foreign Language] decision, obviously can be things. We are looking at where is possible [Foreign Language]. So electric vehicles, the government [Foreign Language] PLI scheme [Foreign Language]. [Foreign Language] higher technology items. And [ personally, ] I'm definitely participating currently because [ our ] company is always making components for the best in the markets and the best components that are possible to be made. And they are all high technological components. We are very confident that we will be able to take advantage of the scheme that the government has initiated for investments and also for expansion and also for development of these complicated components. So we are there. Our teams are excited about how they can participate in the whole thing. [Foreign Language] And also, the performance of the company in the past, [Foreign Language]. We will recover. [Foreign Language]. And we are very happy with the performance, the development that took place. So it is almost 1.5 years to 2 years to [Foreign Language]. On Toyota [Foreign Language]. So these are [Foreign Language], I think I've answered all the questions.

Thank you, sir. Since all the questions have been answered by the Chairman -- and now I request the Chairman to kindly conclude the meeting. And over to Chairman, sir.

Thank you so much, Jhamb. I express my sincere gratitude to all the directors for the continued guidance and participation in the AGM. And I also like to thank auditors for the participation in the AGM. I'd also like to thank the auditors for their presence in the AGM. One of the questions was that I should be thanking my directors. I must be honest, we did get a lot of direction from my directors and also my senior colleagues and colleagues who are in the company. And for the last 2 years, which have been very, very challenging -- and so they gave us direction and they gave us motivation also to continue with whatever tough times we were facing. I must thank them all. I would like to thank all the members for their continued support and faith in the management of the company. With this, I declare the 38th Annual General Meeting of the company as concluded. Thank you all. Goodbye. Stay safe and stay healthy. Thank you so much. See you next year, and hopefully, it will be hybrid, and we would have both video as well as a physical meeting. Looking forward to seeing all of you. Over to you, Mr. Jhamb.

Thank you, sir. Concluding the 38th Annual General Meeting, may I again request the shareholders who have not yet voted to cast their vote. Early voting is now open and will close after 50 minutes. Thank you. [Voting]

And I also would like to inform you that we are -- our colleagues have been vaccinated for this -- against COVID.

Yes, yes. We've done 100% of the first dose, 50% second dose and by end of November, the dates should also come and everybody would be 100%. We'll have 100% vaccination.

Thank you.

Thank you so much.

Thank you.