klrf ltd Management discussions

Capital Investment

OPPORTUNITIES, THREATS, RISKS & CONCERNS

Food Division

India, one of the largest producers of wheat globally, recorded an output of 112.8 million tons in FY 2022-2023 as against 107.74 million tons in the precious year.

Wheat prices continued to remain unpredictable last year with the introduction of the OMSS (Open Market Sales Scheme) by FCI, the ban in export of wheat and wheat flour globally, and water levels that dipped below the preceding 10-year average. The socio-economic climate, specifically the Ukraine-Russia War, has led to an increase in wheat prices globally. The Indian government continued to influence policy in its attempt to curb domestic wheat prices and these policies will continue to influence wheat prices going forward.

The forecasted wheat harvest for FY 2023-24 in India is expected to be higher than the previous year as climatic conditions have remained favorable for the upcoming Rabi crop. The MSP for wheat being relatively higher than other grains has encouraged seeding.

The outlook for packaged wheat flour remains positive as Indian consumers continue to migrate away from the unorganized market and towards the organized packed, and branded wheat flour market.

Engineering Division

The Indian foundry industry is one of the oldest and largest with over 5000 foundries spread across the country. India is now the second largest producer of castings in the world after China. The industry is estimated to grow at a CAGR of between 10% and 12% between 2023 and 2026.

The industry caters to various segments such as but not exclusive to; Railways, Machine Tool Building Equipment, Sanitary fittings, Defense, Aerospace, Earth Moving Machinery, Energy related equipment, Pumps & Valves, etc., While the automotive sector continues to be the largest consumer of castings the industry is seeing growth in demand from sectors such as Railways, Defense, and Power.

The Indian foundry industry continues to innovate in its adoption of energy-efficient technologies reducing the consumption of energy within the industry. Despite the adoption of new technologies the industry faces challenges in the forms of increasing energy costs, lack of infrastructure, inadequate R&D, and increasing competition globally. These challenges must be addressed to sustain the Indian Foundry Industries growth momentum.

The industry has the potential for continuous growth and innovation with increasing demand from various sectors and the adoption of new technologies.

SEGMENT-WISE AND PRODUCT-WISE PERFORMANCE

Segment-wise and product-wise results are stated separately under the relevant notes on accounts to the financial statements.

ECONOMIC OUTLOOK FOR THE YEAR

The global economy has been adversely impacted due to the geopolitical conflicts in Europe which has also led to inflation within the global economy. As per IMFs world economic outlook report, the global economy will grow between 2.8% and 3% in FY 2023-24.

PM Gati Shakti (National Master Plan), the National Monetization Plan (NMP), and the Production Linked Incentive Plan (PLI) helped the economic growth in India and supported Manufacturing, Agriculture, and related industries. Consistent growth leads to better productivity, infrastructure spending, and opens up new employment opportunities.

Indian experts project that consumer spending will increase due to modest growth in the economy and a reduction in gas prices. The Reserve Bank of India (RBI) has kept its forecast on GDP growth at 6.5% for FY 2023-24, whereas International Monetary Fund (IMF) has raised Indias GDP growth forecast to 6.3% for FY 2023-24, which is 50 bps higher than its earlier forecast.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

Planned periodic reviews are carried out resulting in the identification of deficiencies and formulation of time bound action plans to improve efficiency. The adequacy of the internal control systems is periodically reviewed by the Audit Committee. This, supplemented with existing periodical management reviews, will enable the Company to improve its monitoring system at all levels.

The Company has internal control procedures commensurate with its size and the nature of its business for purchase of raw materials, plant and machinery, components, other items and sale of goods.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The financial performance of the company during the financial year 2022-2023 has been discussed in the Directors Report and the audited financial statements, which has been prepared in accordance with the requirement of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, 2015, discloses a true and fair view of the performance of the company during the said period.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

The Company believes that its people are a key differentiator, especially in knowledge driven, competitive and a global business environment. Adapting work culture to suit the dynamic balancing of people requirements and employee needs is an ongoing process. Fundamental HR processes which enable higher performance orientation, speed, skill and competency development, talent management are corner stones for the success of any organization. The Company is giving direct employment to 190 employees as in the past, the industrial relations continued to remain cordial at all the divisions of the Company.

CAUTIONARY STATEMENT