Global economic overview:
The global fight against inflation, Russia-Ukraine War, and a
resurgence of COVID-19 cases in China weighed on global economic activity in CY 2022. The
International Monetary Fund (IMF), has estimated that the global economy has grown by 3.4%
in CY 2022 as compared to 6.2% in CY 2021. Growth is projected to fall to 2.9% in CY 2023
before rising to 3.1% in CY 2024. High energy prices have pushed up inflation from 4.7% in
2021 to 8.8% in 2022, before softening to 6.5% in 2023 and 4.1% in 2024.
On the supply side, easing bottlenecks and lower transportation costs
reduced pressures on input prices and allowed for a rebound in previously constrained
sectors. Energy markets have adjusted faster than expected to the shock from Russias
invasion of Ukraine
Global economy is expected to pick up modestly in CY 2023 and 2024 with
subsiding inflation and gradual recovery from the effects of Russia-Ukraine crisis. The
emerging economies will dominate global economic activity in CY 2023 with their growth
estimated to rise modestly from 3.9% in CY 2022 to 4% in CY 2023 and 4.2% in CY 2024.
Indian Economy:
The Indian economy has been scripting a recovery after the bruising
impact of the COVID-19 pandemic. However, the global slowdown, geopolitical tensions,
stubbornly high inflation, and rising interest rates have posed challenges to faster
expansion. As per provisional estimates, India recorded a GDP growth of 7.2% in FY 2022-23
as against 9.1% in FY 2021-22. Growth is estimated to decline to 6.1% in FY 2023-24
Government initiatives such as Make in India, production-linked incentive (PLI) scheme is
expected to boost manufacturing and accelerate economic growth. High-frequency indicators
such as Goods & Services Tax (GST) collections, manufacturing Purchasing Managers
Index (PMI), pick-up in government spending and private capital expenditure - all indicate
healthy economic momentum.
The outlook of the Indian economy remains robust. Measures announced in
the Union Budget for the next fiscal such as increased capex, focus on infrastructure
development, boost to green economy and initiatives for strengthening financial markets
are expected to promote job creation and spur economic growth. However, there remains
considerable uncertainty due to the challenging global economic conditions and seasonal
high Inflation.
Business and Industry Environment :
Defence sector is witnessing significant surge in India, led by
Government of Indias efforts over the last decade to put in place policies to reduce
imports and drive self-reliance, focus on developing indigenous world-class products and
encourage exports. In FY 2022-23, the Defence sector in India achieved a significant
milestone, with defence production crossing Rs. 1 lakh crore mark on the back of
consistent effort by the Ministry of Defence (MoD). This is a rise of more than 12% as
compared to FY 2021-22.
The Government is continuously working with defence OEMs and their
suppliers to remove the challenges faced by them and promote defence production in the
country. These proactive initiatives along with a conducive environment for promoting
Indian made platforms globally have resulted in Indias Defence exports surging
23-fold to nearly Rs. 16,000 crores over the last nine years. Additionally, in the Def
Expo 2022, the Government released the fourth positive indigenization list with 101
defence items such as highly complex systems, sensors, weapons, and ammunitions to be
procured from indigenous sources. The MoD estimates projects worth over Rs. 175,000 crores
in the next five to ten years will be reserved exclusively for domestic procurement.
Nibes defence activities are primarily focused on precision weapons,
surveillance communication equipment, Protective Vehicles, Defensive/ Deterrence Systems
and Components. It has made significant breakthroughs in its Advanced Towed Artillery Gun
System (ATAGS) program and has completed the final revalidation trial post five years of
rigorous testing.
In FY 2022-23, the company has strategically expanded its operations
has already set-up Two plants and one more plan is going to be operation by the end of
financial year 2024. All the 3 plants are within the MIDC area of Chakan. Plant 1 is
dedicated to serving L&T Defence, underlining the Companys commitment to delivering
high-quality products and services in this sector.Plant 2 is dedicated to the production
of heavy fabricated structures and machinery. Plant -3, which is going to operational by
the end of March and will manufacture,fabrication, machinery and integration.
During the year, the Company has formed the two subsidiaries as
detailed below;
• Nibe Defence & Aerospace Limited to set-up to undertake,
engage in, conduct, carry on the business of manufacturing, building, repairing,
refitting, inventing, experimenting, testing,originating, fabricating, sub-contracting,
importing, exporting, dealing in sale of all kinds of naval, land, air, space defence
systems, homeland security systems, navigation systems, precision weapons, surveillance
communication equipment, armaments, simulators, training systems, electronic, computer
enabled/ controlled, engines, propellers and other equipments used therein.
• Nibe E-Motors Limited to manufacture bikes, automobiles,
motorcars, Lorries, buses, vans, motorcycles, cycle-cars, motor, electric bikes, all types
of bikes, Scooters, carriages, amphibious vehicles, and vehicles suitable for propulsion
on land, Sea, or in the air or in any combination thereof.
Commercial productions at the aforesaid subsidiaries are expected to
commence during the third quarter of the current financial year.
Nibe will continue to adhere to the highest standards of ESG and will
steadfastly stay away from weapons of mass destruction or any other platform which is
banned by various multilateral organizations. Further, Nibe or its subsidiaries will not
engage in research, manufacture or be a part of the supply chain for controversial weapons
like Anti-Personnel mines, Biological and Chemical weapons, cluster munitions, incendiary
weapons, white phosphorus ammunition, or blinding laser weapons.
Operational Performance
FY 2022-23 was filled with challenging environment, supply chain
concerns, steep rise in few commodities, increase in input raw material cost etc. However,
better management of volatile prices, cost reduction initiatives & quality improvement
helped the Company to make profit.
Total Standalone Revenue from operations for FY 2022-23 stood at Rs.
10495.28 Lakhs as against Rs. 2,124.37 Lakhs in FY 202122 registering a growth of 394.04%.
Profit before taxation for FY 2022-23 stood at Rs. 627.27 Lakhs as against loss of Rs.
33.27 Lakhs in FY 2021-22.
Total Consolidated Revenue from operations for FY 2022-23 stood at Rs.
10530.29 Lakhs and Profit before taxation for FY 2022-23 stood at Rs. 329.38 Lakhs.
Nibe has received new orders worth of Rs. 2,13,56,24,337 in the year
2022-23 and as on March 31, 2023 85 number of orders worth of Rs. 1,31,12,29,662 are under
execution.
Key Financial Ratios
The Key Financial Ratios for FY 2022-23 and FY 2021-22 along with
explanation for significant changes (change of 25% or more, if any) are as follows:
| Particulars |
2022-23 |
2021-22 |
Change (%) |
Reason of change |
| Debtors Turnover |
5.50 |
9.92 |
(45%) |
Increase in Turnover |
| Inventory Turnover |
7.56 |
1.31 |
479% |
Substantial Increase in Turnover |
| Interest Coverage Ratio |
2.15 |
1.37 |
0.78% |
Increase in Interest Expenses |
| Current Ratio |
1.43 |
0.97 |
48% |
Increase in Current Asset |
| Debt Equity Ratio |
0.27 |
0.02 |
1045% |
Increase in Debt |
| Operating Profit Margin (%) |
0.09 |
0.04 |
125% |
Increase in Revenue |
| Net Profit Margin (%) |
0.04 |
(0.02) |
308% |
Increase in Net Profit |
| Net Worth (In crores) |
77.50 |
9.96 |
678% |
Increase in Share Capital and Reserves & Surplus |
| Return on Net Worth (%) |
0.10 |
(0.04) |
339% |
Increase in Share Capital and Reserves & Surplus |
The Company is committed to increase the shareholders value through
its cost-effective business structure, improvement in quality, continuously enhancing
energy efficiency etc. Initiatives in these areas have always helped the Company to stand
out among its peers.
Risk Management
The Company has a well-devised risk management process aimed at
identifying, prioritizing, mitigating and monitoring risks. The key risks impacting its
business include economic, foreign exchange, raw material, technology, funding, talent,
changes in Government policies and cyber security risks. The Company has undertaken
measures to mitigate these risks.
Risks
• Challenges on inflation and supply chain persists globally.
These macroeconomic conditions remain critical to business growth of the Company.
• Central banks globally are increasing rates to cool down
inflation. This may have an adverse impact on the Companys end customers demand and
subsequently impact growth.
• Ensuring proper working of all our equipment is a key
operational risk. Any shortfall on that front may impact the Companys ability to
meet customer requirements on time.
• With rising shortage of skilled labour, retaining workers
remains a risk for the Company to mitigate.
• Ensuring worker safety remains a critical operational risk
across the Companys plants.
• Changing technology paradigm and dynamic customer needs are
important to remain relevant and sustain business growth.
• Given the global nature of the Companys business, any
disruption of movement of goods to its customers is a key operational risk.
Opportunities
• The government has developed numerous programs to help
manufacturers, such as the Production Linked Incentive (PLI) Scheme, which is a
cornerstone of the governments endeavor to achieve an Atmanirbhar Bharat.
• The schemes goal is to stimulate domestic defence manufacturing
in strategic and emerging areas, improve the cost competitiveness of domestically-made
goods, and increase local capacity and economies of scale.
• Increase in defence spending by all major countries and the
focus on infrastructure globally is acting as a tailwind for the Companys industrial
business.
• Domestic producers are given a preference in the defence sector
which will provide new opportunities to the industry.
Threats
• Any shift of Government policies may have a meaningful impact on
our business.
• Several new companies are entering the market, and existing
rivals in adjacent product categories are also increasing their offering.
Internal Control Systems and their Adequacy
The Company has a robust internal control system that authorizes,
records, and reports transactions to safeguard assets and protect against loss from
unauthorized use or disposition. The internal controls ensure the reliability of data and
financial information to maintain accountability of assets. These internal controls are
supplemented by extensive internal audits, management review, and documented policies,
guidelines, and procedures.
Human Resource Development
The Company believes that human capital is a critical factor of success
and hence constantly strives to strengthen its work ethics, work culture and align the
workforce towards the common goal. Current workforce of the Company is rightly poised to
navigate through the current Volatile, Uncertain, Complex situation and to always maintain
industry leading quality standards while maintaining the highest service levels.
The Company continues to focus on upgrading knowledge and skill levels
among its employees through various Learning & Development, training activities to
enable them to move up the ladder. The Company has well defined HR policies in place which
enables it to build a strong performance-oriented culture, belongingness to work and
commitment to work.
Cautionary Statement
The statements within this Management Discussion and Analysis report,
articulating the Companys objectives, projections, estimates, expectations, or
predictions, are considered forward-looking in compliance with applicable laws and
regulations. These statements rest upon specific assumptions and anticipations of
forthcoming events. However, it is crucial to acknowledge that actual results may
substantially deviate from both expressed and implied expectations.
Several pivotal factors have the potential to significantly impact the
Companys operations. These encompass fluctuations in finished goods prices, raw material
costs and their availability, fluctuations in global and domestic demand-supply dynamics,
shifts in exchange rates, alterations in Government regulations and tax structures, as
well as economic developments within India and the nations with which the Company
maintains business ties.
It is essential to note that the Company disclaims any responsibility
concerning the forward-looking statements presented herein, as they may evolve in the
future due to subsequent developments, additional information, or unforeseen events.
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