lumax auto technologies limited - Securities and Exchange Board of ...

Lumax Auto Technologies Limited
We have been an established player in the automotive lighting and component sector and we
are in this business for last 25 years. Our major customers are Bajaj Auto Limited and Lumax
Industries Limited and both are established players in the field having excellent track record.
We have built up strong strategic relationship with OEM suppliers and the company is also in
the process of increasing the customer base. In view of the above, in the normal course we do
not envisage any event significantly affecting the business of LATL.
We have not firmed up marketing arrangements
We are yet to firm up marketing arrangements for the products manufactured by the proposed
new units. Our ability to effectively market the products manufactured in the new units would
impact our revenues.
We are in the various stages of negotiation with the potential customers and would be firming
up supply arrangements in due course and we do not envisage any shortfall in demand.
Uptrend in the prices of certain raw materials / components
The prices of the raw materials used by us viz. steel sheet, tubes and polymers has been
witnessing upward trend in the prices and have increased around 35% – 40% over past one year.
The continuous price increase would impact our operating margins.
We use various raw materials including steel for manufacture of auto components. Despite of
the price increase in the past year, we have been able to maintain our profitability in the current
year as against previous financial year. To minimize the impact we have entered into long term
contract with direct manufacturers. Additionally, there are periodic price reviews by our
customers also wherein increase/decrease in input costs are discussed and factored in price
revisions. Hence, we do not foresee any significant pressure on operating margins.
Our customers may opt for backward integration
If our main OEM customers plan to adopt the backward integration strategy then it will
adversely affect the revenue and business of our company.
There is a trend in OEM customers to outsource the OEM activities to achieve cost benefit and
efficiency. In view of the same we do not foresee the risk of backward integration.
Restrictive covenants in agreements
There are restrictive covenants in the agreements for borrowings from banks, among other
things, which require us to obtain the approval of these banks or provide restrictions, namely
for, change in capital structure, invest by way of share capital in or lend or advance funds to or
place deposits with any concern, declaring dividends at any time while we are in default,
change in management set-up. Some of these borrowings also contain financial covenants,
which may limit our ability to borrow additional money.
We have taken no objection certificate from our existing bankers.
We will face competition from other auto component manufacturers
a) From domestic companies
,
We cater to OEM market and replacement markets for the automobile industry. In this industry
several existing players are present and there are chances of additional new players joining the
x