MAHINDRA & MAHINDRA LTD. | Integrated Annual Report 2022-23

57 COMPANY OVERVIEW BOARD’S REPORT MANAGEMENT DISCUSSION AND ANALYSIS CORPORATE GOVERNANCE BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT STANDALONE ACCOUNTS CONSOLIDATED ACCOUNTS Back home, the sustained focus on capital and infrastructure spending in the Union Budget 2023-24 along with continuing fiscal consolidation and strong credit growth creates space for private investment and supports domestic economic activity. However, there are early forecasts of a probable El Nino and external demand is likely to be dented by a slowdown in global activity. Taking all these factors into consideration, the RBI projects real GDP growth for 2023-24 at 6.4%. Finance Financial Year 2022-23 saw the global outlook deteriorating markedly as inflation across the world surged to levels not seen for generations and the rising cost of living hit consumer confidence. As soaring food and energy prices threatened to trigger a global crisis, central banks around the world responded by aggressive monetary tightening and increased interest rates in the fastest and most synchronized tightening cycles on record. Due to the aggressive interest rate hikes, easing of global supply chain bottlenecks and lower commodity prices, global headline inflation is set to fall from 8.7% in 2022 to 7.0% in 2023 (IMF estimates), however inflation is expected to remain well above central bank target levels till 2025 in most countries. Record high interest rates and a resurgence of COVID-19 in China weighed on global growth during the financial year. Tentative signs in 2023 show that the world economy could achieve a soft landing. As per International Monetary Fund (“IMF”), global growth is expected to fall from 3.4% in 2022 to 2.8% in 2023 with advanced economies expecting to see an especially pronounced growth slowdown, from 2.7% in 2022 to 1.3% in 2023. Side-effects from the fast rise in policy rates in the form of banking turmoil in the US and Europe and the accompanying financial stability concerns weigh on the outlook going forward. In the currency markets, the US dollar hit a two-decade high with the dollar index touching 112 in September 2022. The US dollar has since weakened against most currencies. Volatility impacted emerging market currencies in an environment of risk aversion, safe haven demand and correction in global equity markets. In contrast, domestic financial markets evolved in an orderly manner. India’s economic activity exhibited resilience with GDP growth for FY 2022-23 pegged at 7%, driven by private consumption and investment. Consumer price index inflation (CPI) persisted at elevated levels during the year, impacted by a series of adverse supply shocks and the continuing pass-through of high input costs. The RBI Monetary Policy Committee increased the policy repo rate by 250 bps during May 2022-February 2023 taking the policy Repo rate to 6.5%. RBI also sucked out liquidity from the system with the system liquidity falling from Rs. 7.8 lakh crore in April, 2022 to Rs. 1.4 lakh crores in March, 2023. Money market rates and short-term bond yields hardened in tandem with policy rate increases and tightness in liquidity, while long term bond yields were largely range-bound. CPI has since eased substantially and is well within RBI’s medium-term 4+/- 2% target. The Indian rupee (INR) depreciated vis-à-vis the US dollar buffeted by global spillovers. The INR touched an all-time low of 83.2 during October, 2022 but has recovered since then on a depreciating US dollar and net inflows through foreign portfolio investments. India’s foreign exchange reserves were placed at US$ 578.4 billion as on 31 st March, 2023. Amidst the aforesaid backdrop, the Bankers continue to rate your Company as a prime customer and extend facilities / services at prime rates. Your Company follows a prudent financial policy and aims not to exceed an optimum financial gearing at any time. The Company’s gross Debt to Equity Ratio is 0.11 as at 31 st March, 2023. Further, your Company continued to focus on managing cash efficiently and ensured that it had adequate liquidity and back up lines of credit. During the year, your Company repaid total borrowings of Rs. 1,861.43 crores whilst maintaining an optimum liquidity level of Rs. 14,410 crores as at 31 st March, 2023. Further, your Company has been rated by CRISIL Ratings Limited (“CRISIL”), ICRA Limited (“ICRA”), India Ratings and Research Private Limited (“India Ratings”) and CARE Ratings Limited (“CARE”) for its Banking facilities. All have re-affirmed the highest credit rating for your Company’s Short-Term facilities. For Long Term facilities and Non-Convertible Debentures, CRISIL, ICRA, CARE and India Ratings have re-affirmed their credit ratings of CRISIL AAA/Stable, [ICRA]AAA (stable), CARE AAA; Stable, and IND AAA/Stable for the respective facilities rated by them. With the above rating affirmations, your Company continues to enjoy the highest level of rating from all major rating agencies at the same time. The AAA ratings indicate highest degree of safety regarding timely servicing of financial obligations and is also a vote of confidence reposed in your Company’s Management by the rating agencies. It is an acknowledgement of the strong credit profile of your Company over the years, resilience in earnings despite cyclical upturns / downturns, robust financial flexibility arising from the significant market value of its holdings and prudent management.