Sundaram Clayton : Transcript - 2022

Sundaram-Clayton Limited

60th Annual General Meeting

28th June 2022

• Moderator:
• I request the Chairman to read out the statutory requirement for this meeting.
• Mr. R. Gopalan - Chairman, SCL:
• In compliance with the circulars issued by Ministry of Corporate Affairs and SEBI, this AGM is being convened through video conferencing, and has engaged NSDL for this purpose. Soft copy of Register of Directors and Key Managerial Personnel and their shareholdings, Register of Contracts, Register of Members and Debenture Holders are accessible on the company's websitewww.sundaram-clayton.comduring the continuance of the AGM. As per the guidelines, the company has sent the Annual Report to its shareholders through email and hard copies of the Annual Reports were sent to those shareholders who requested for the same. Shareholders participating at the AGM, who have not cast their votes earlier through e-voting, can exercise their votes by using the link provided on the NSDL website. Now I request the directors to introduce themselves to the members.
• Moderator:
• Mr. Venu Srinivasan - Chairman Emeritus and Managing Director.
• Mr. Venu Srinivasan - Chairman Emeritus and Managing Director, SCL:
• I'm Mr. Venu Srinivasan - Chairman Emeritus and Managing Director. I'm attending this meeting for the corporate office in Chennai.
• Moderator:
• Thank you sir. Dr. Lakshmi Venu - Managing Director.
• Dr. Lakshmi Venu - Managing Director, SCL:
• I'm Dr. Lakshmi Venu - Managing Director of SCL.
• Moderator:
• Thank you ma'am. Mr. K. Gopala Desikan - Director and Group CFO.
• Mr. K. Gopala Desikan - Director and Group CFO, SCL:
• I'm Mr. K. Gopala Desikan - Director and Group CFO.
• Moderator:
• Thank you sir. Mr. Kamlesh Gandhi - Independent Director.
• Mr. Kamlesh Gandhi - Independent Director, SCL:

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• I'm Mr. Kamlesh Gandhi - Independent Non-Executive Director of SCL, participating in this meeting from my residence at Pune. Thank you.
• Moderator:
• Thank you sir. Vice Admiral P.J. Jacob - Independent Director.
• Vice Admiral P.J. Jacob - Independent Director, SCL:
• I'm Vice Admiral P.J. Jacob, participating in this meeting from my residence in Chennai. I'm an Independent Director and Chairman of the Audit Committee.
• Moderator:
• Mr. Rajesh Narasimhan - Non-Executive Director.
• Mr. Rajesh Narasimhan - Non-Executive Director, SCL:
• Good morning. I'm Mr. Rajesh Narasimhan - Non-Executive Director of the company. Thank you.
• Moderator:
• Thank you. Mr. S. Santhanakrishnan - Independent Director.
• Mr. S. Santhanakrishnan - Independent Director, SCL:
• Good morning. I'm Mr. S. Santhanakrishnan. I'm attending this meeting from my residence at Chennai. I'm also the Chairman of the Nomination and Remuneration
  Committee. Thank you
• Moderator:
• Thank you sir. Mr. V. Subramanian - Independent Director.
• Mr. V. Subramanian - Independent Director, SCL:
• Good morning everyone. This is Mr. V. Subramanian, participating in this AGM from my residence at Delhi. I'm a Non-Executive and Independent Director of the company. Thank you.
• Moderator:
• Thank you sir. Mr. R. Vijayaraghavan - Independent Director.
• Mr. R. Vijayaraghavan - Independent Director, SCL:
• I'm Mr. R. Vijayaraghavan - Independent Director of the company. Thank you.
• Moderator:
• Thank you sir.

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• Mr. R. Gopalan - Chairman, SCL:
• I would like to inform that Mr. Sudarshan and Ms. Sasikala Varadachari are not present due to personal reasons today in the meeting. They have expressed their regret in not being able to participate in today's meeting.
• Moderator:
• Thank you sir. Request Chairman to continue the proceedings.
• Mr. R. Gopalan - Chairman, SCL:
• The notice of the meeting has already been circulated to the shareholders. The Statutory Auditors Report and Secretarial Audit Report to the shareholders are available already with you, and both the reports are free from any qualifications or observations or any other remarks.
• Ladies and gentlemen, good morning. I have great pleasure in welcoming you all to the 60th Annual General Meeting of the company. As done over the last 2 years, this year as well we are holding the AGM virtually through video conferencing. Let's continue our fight against COVID-19 by adhering to wearing masks, social distancing, sanitisation of surroundings and personal hygiene as we go about our every day endeavours. I strongly urge everyone to get vaccinated for protecting oneself, your families and the society at large. I wish each of you and your families continued good health.
• The company has always recognised its social responsibility as an integral and critical part of its value system. The company and its CSR arm - The Srinivasan Services Trust, continued its contribution towards COVID-19 relief efforts and undertook various initiatives to support the safety and well-being of our employees, their families as well as the society at large.
• Some of the key actions I would like to highlight today are:
• Distribution of masks and gloves to government agencies and healthcare centres.
• Over 12.5 lakh food packets distributed.
• 30,000 manhours of community service.
• Sanitisation drives across 4,000 plus villages across the states.
• SCL health centres have been operating 24/7.
• Vaccination drives for all employees as well as their families.
• Best practices and SOPs designed to ensure safe working environment for all the employees across our plants.
• Before I speak about the company's performance, let me briefly highlight the industry scenario during the year under review.

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• India's GDP grew by 8.9% in FY22 after having contracted by 7.3% in FY21. FY22 continued to be a challenging year for the Indian automobile industry with the continuation of the COVID-19 pandemic. The 1st Quarter saw the impact of wave 2. This was more severe than wave 1, and brought in uncertainty in demand. Quarter 2 saw good recovery in domestic demand upto the festival season. Quarter 3 witnessed steep rise in the commodity prices. This coupled with shortages in semiconductor availability, posed challenges for the automotive industry. The high freight rates which were expected to ease by December, continued unabetted impacting supply chain costs. Despite these challenges, Quarter 4 was a period where demand improved despite the high base effect of FY21.
• The Indian auto industry overall, both domestic and export sales, posted a significant growth across almost all segments. Segment-wise growth rate in FY22, both domestic and export sales, are as follows:
• The commercial vehicles had a growth of 52.8% in FY22, 2.89 lakh numbers as compared to a degrowth of 27% in FY21, 1.95 lakh numbers.
• Passenger vehicles had a growth of 16.5% in FY22, 36.3 lakh numbers as compared to a degrowth of 9% in FY21, 31.15 lakh numbers.
• Two-wheelersegment had a degrowth of 3% in FY22, 1.78 crore numbers as compared to a degrowth of 12% in FY21, 1.84 crore number.
• After hitting bottom of $1,457 per ton in April 2020, LME aluminium prices crossed $3,000 per ton in December 2021 and breached $3,200 per ton mark in March 2022, the highest in a decade due to curtails in output from China and depleted stock levels at the LME due to non-availability of Russian aluminium.
• Aluminium prices are expected to be on the higher side during the initial part of the year, but could remain elevated due to non-availability of Russian aluminium and the demand from other markets like Europe, US and India.
• The US market recorded a GDP growth of 5.5% in 2021 from a contraction of 3.4% in 2020. The US market witnessed strong order bookings due to the continued demand for goods over services. But, the factory outputs were slightly scaled back due to component shortages and port congestions. Freight rates continued to be high throughout the year as driver unavailability due to imposed vaccination mandate. This helped the North American commercial vehicle industry.
• Overall, North American truck segment-wise growth rates are as follows:
• NA classic trucks saw a growth of 13% in FY22, 2.7 lakh numbers as compared to 25% degrowth in FY21, 2.39 lakh numbers.
• NA class 4 to 7 trucks saw growth of 8.2% in FY22, 2.65 lakh numbers as compared to 12% degrowth in FY21, 2.45 lakh numbers.
• The EU economy ended in 2021 with a GDP growth of 5.5% from a record contraction of 7.8% in 2020. Strong demand for movement of goods drove demand heavy commercial vehicles. All the 27 EU markets, including the 4 largest ones -

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France, Germany, Spain and Italy, saw positive growth in demand. EU heavy commercial vehicles saw growth of 20% in FY22, 2.67 lakh numbers, as compared to 23% degrowth in FY21, 2.23 lakh numbers.

• Our performance in the year 2021-22 continued to be challenging, but successful for our company. The year started with the 2nd wave of COVID-19, which was more severe than the 1st wave. This saw the demand in Quarter 1 FY22 being impacted. Post this period, demand picked up till the festival season on the lower base of the previous year. In the 2nd half, the industry witnessed a decline due to continued shortage of semiconductors which impacted production. Despite this volatile and uncertain environment, the company improved on its performance significantly by continuing its sharp focus on systemic improvement, actions to control costs, improve its productivity and quality. FY22 was a challenging year for logistics costs mainly due to the following reasons:
• Shortages of shipping containers.
• Shortage of shipping crew due to COVID-19 protocols.
• Congestions at various ports throughout the year.
• Sudden increase in demand for goods post pandemic.
• Consolidation of various freight lines leading to oligopoly.
• Due to the above, spot rates for containers shipped from ports like Shanghai, Mumbai, Chennai, were multiple times the pre-pandemic level - 5 to 10 times in the US, 2 to 3 times in the EU. The freight forwarders could not honour pre-signed contracts which led to a significant impact to our company.
• I'm very glad to note that our company team faced these challenges with alacrity and came up with various innovative solutions to overcome them. The team worked on additional profit improvement projects such as energy savings, material cost savings and productivity improvements which brought in significant reduction in the operational costs during the year. Re-energising 14.38 practices, implementing flow manufacturing principles, initiating Industry 4.0 projects through connected machines and improvements on its systems and processes were key focus areas in the company. The company also continued to prioritise capex and improvements in working capital to boost the cash flows.
• TQM is a way of life in the company. Employees have completed 310 projects by applying statistical tools through quality control circles in 2021-22. 100% employee involvement has been successfully achieved for the 21st consecutive year. The company's overall sales increased by 48% amounting to Rs. 1,606 crores in 2021-22, as against Rs. 1,087 crores in 2020-21. Domestic sales increased by 42% accounting for Rs. 825 crores in 2021-22 as against Rs. 582 crores for 2020-21. Export sales increased by 52% accounting for Rs. 767 crores as against Rs. 505 crores in 2021-22 over 2020-21.
• All the above, enabled your company to post the best profit performance. I would like to appreciate the leadership team at our company for their sustained efforts,

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