Mukand Engineers Management Discussions

1 Engineering Construction Division

1.1 industry Structure and Developments

The widening political differences with China and the international trade curbs with China has led to the realization in India and many other like minded nations that we need to look for local development of industry to be self-reliant. This augurs well for many industrial sectors in India including the capital goods industry and associated construction activities. The capital goods industry has a significant multiplier effect on the overall economic growth as it forms the basic building blocks for a large number of user industries by providing critical inputs, such as machinery and equipment, necessary for manufacturing. The government is also investing heavily in infrastructure projects, another major area of business interest for our Construction Division.

Your company is involved in offering engineering, procurement, construction, and allied services in the areas of capital intensive projects which encompasses the entire spectrum from feasibility studies to commissioning of projects across varied industrial sectors such as energy, oil and gas, power, metallurgical and heavy industry.

The target sectors of business of the Company continue to be in power and metallurgical sectors, mainly in the areas of Supply and Installation of equipments for Power Generation Plants & Integrated Steel Plants. The contracts cover erection of Mechanical Plant, Structural Works, Piping Works and Electrical Works. The Company also undertakes Engineering and Project Management jobs for Steel Plants and Electrical works at Power Plants.

1.2 opportunity and Threats opportunity

Growing Economy- There is some movement in expansion of steel plants and improvising power plants.

The Company has an order book of 41 crores executable mostly in F.Y. 2021-2022 & balance in F.Y. 2022-23. The emphasis for the coming year is therefore to book fresh orders during the year and to have a healthy order book at the end of the year.

threats

Delays in project completion due to prevailing pandemic situation and further delays due to postponement of commissioning by Clients.

1.3 Future outlook

Due to slowdown in the economy arising out of pandemic, expansion activities in existing facilities and creation of new capacities were given less priority resulting in delays in placement of new orders as well as delays in execution of ongoing projects. The management perceives that with the economy showing signs of revival in the current fiscal, the capital investments in the economic sectors of interest to the company can be reasonably expected. The Company has received enquiries for jobs in Power, Steel, which are in various stages of finalization. Many companies in the infrastructures space have closed down in the last three years giving us competitive edge & better pricing now.

1.4 Risk Management

As the contracts undertaken by the Company are generally in the Public Sector and in reputed Private Sector Companies, the risk of payment defaults by the clients is negligible. The Company evaluates project location environment risks while bidding and before accepting contracts. The provision for escalation in cost due to delays in execution of project is considered while quoting tenders. There are also escalation clauses in the major value contracts from Public Sector.

2 internal control System

The Company has instituted a system of internal control to safeguard and protect the assets of the Company. The Company has also appointed an Internal Auditor whose reports are regularly reviewed by the Management, and guidelines and procedures are formulated and monitored for proper controls.

3 Significant changes in key financial ratios as compared to the previous year

Revenue from Operations is Rs 2,529 lacs as compared to Rs 4,484 lacs in the previous year, a drop of 43.60%.

Net Profit / (loss) margin ratio is at (122.36%) as against (67.31%) for previous year. Interest coverage ratio is (1.25) as compared to (1.32) in the previous year.

Revenue is down by 43.60% due to non-availability of workable fronts from client viz. NTPC & NMDC. Delays in completion of projects have correspondingly affected the profit margins and interest coverage ratio.

Current ratio for the year under report is 0.69 as against

0.91 for the previous year. The inventory Turnover Ratio is 1.35 as compared to 0.95 in the previous year. This is high due to reduction in Operational Revenue Inventory. The Return on Net Worth in current year is (67%), previous year (207%) this is due to erosion of Net Worth. As regards debit equity ratio it is to be noted that to calculate this ratio both the numerator and denominator needs to be positive. As the denominator is in the negative it is not possible to calculate this ratio for the year under report.

4 Human Resource Management initiatives

The Company has adequate supervisory and managerial staff for execution of the present orders. Further recruitments shall be considered based on the skill set and volume of work that would arise out of fresh orders. Systematic training in site operational control and management are imparted regularly to ensure efficient execution.

5 cautionary Statements

Statements made herein describing the Companys expectations or predictions are "forward-looking statements". The actual results may differ from those expected or predicted. Prime factors that may make a difference to the Companys performance include market conditions, input costs, interest costs, Government regulations, economic developments within/outside the country.

on behalf of the Board of Directors

Rajesh V. Shah

chairman

DiN:00021752

Mumbai, May 25, 2021