rolcon engineering company ltd Management discussions

Pursuant to Schedule V to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a Management Discussion and Analysis Report covering business performance and outlook (within limits set by Companys competitive position) is given below:

1. I N D U S T R Y S T R U C T U R E A N D DEVELOPMENT

Global Economy

As per IMF World economic Outlook (Apr-2023), The global economy is yet again at a highly uncertain moment, with the cumulative effects of the past three years of adverse shocks, most notably, the COVID-19 pandemic and Russias invasion of Ukraine manifesting in unforeseen ways. Spurred by pent-up demand, lingering supply disruptions, and commodity price spikes, inflation reached very last year in many economies, leading central banks to tighten aggressively to bring it back toward their targets and keep inflation expectations anchored.

The recent financial sector turmoil is increasingly elusive.The recent tightening in global financial conditions is also hampering the recovery. As a result, many economies are likely to experience slower growth in incomes in 2023, amid rising joblessness. Moreover, even with central banks having driven up interest rates to reduce inflation, the road back to price stability could be long. Over the medium term, the prospects for growth now seem slow.

The global economy recorded a robust growth of 2.8

% in FY2022, against the 3.8% in FY2021. This forecast for the coming years is well below what was expected before the onset of the adverse shocks since early 2022.

Indian Economy

According to Asian Development Bank, despite the global slowdown, Indias economic growth rate is stronger than in many peer economies and reflects relatively robust domestic consumption and lesser dependence on global demand. The Government of Indias strong infrastructure push initiative, logistics development, and industrial corridor development will contribute significantly to raising industrial Competitiveness and boosting future growth. As per Budget speech the central governments commitment to significantly increase capital expenditure in FY2023 despite targeting a lower

fiscal deficit of 5.9% of GDP, will also spur demand. Manufacturing growth in FY 2023 is expected to be tamped down by a weak global demand, but it will likely improve in FY2024.

Industrial & Engineering Market

Indias engineering sector has witnessed a remarkable growth over the last few years driven by increased investment in infrastructure and industrial production. The engineering sector, being closely associated with the manufacturing and infrastructure sectors, is of strategic importance to Indias economy. The engineering sector in India attracts immense interest from foreign players as it enjoys a comparative advantage in terms of manufacturing cost, technology, and innovation.

Finance Budget 2023-24: Capital investment outlay is being increased steeply for the third year in a row by 33 per cent to Rs. 10 Lakhs crore, which would be

3.3 per cent of GDP. This will be almost three times the outlay in 2019-20. The ‘Effective Capital Expenditure of the Centre is budgeted at Rs. 13.7 Lakhs crore, which will be 4.5 percent of GDP. One hundred critical transport infrastructure projects, for last and first mile connectivity for ports, coal, steel, fertilizer, and food grains sectors have been identified. They will be taken up on priority with investment of Rs. 75,000 crore, including Rs. 15,000 crore from private sources. Hoist and Material handling products will have good growth due to improved market situation.

2. OPPORTUNITIES AND THREATS Opportunities

• Due to Infrastructure and transportation

growth and strong projection by the government will be rise robust demand for Cement, where Conveyor Chain is mainly used.

• E t h a n o l b l e n d i n g p ro m o t i o n b y t h e government will boost the sugar production and OEM related business.

• The Engineering Manufacturing Companys Demand for spare would increase slowly in respond to the overall manufacturing growth in the Country and outside and as such business of industrial chain sprocket is expected to rise.

Threats

• Global geopolitical tension: the Conflict among the countries like US, China, Taiwan, Russia and Ukraine are likely to be remain there for longer term.
• Economic uncertainty: Based on the current and future market environment estimates, the base cost of material is expected to be volatile.

• Inflation in USA and central banks hike to the interest rate.

1. OUTLOOK

A relentless focus on cost management, fiscal prudence, value engineering and customer partnering has enabled the Company to record a creditable performance.

The Company is confident that it can utilise future opportunities and face future challenges with agility in order to meet the shareholders expectation of sustainable growth and profitability. The key focus areas are:

• Increasing the value addition per product
• Atomisation of production process as much as possible
• To Sustain the EBITDA levels
• Retaining the existing Customer base and attract new OEMs
• More Focus on Marketing all over the globe along with domestic footprint
• To explore Export sales
•  
• Growth oriented Investment

1. DISCUSSION ON FINANCIAL

performance with respect to operational performance

The Highlights of the Companys performance is provided below:

• Turnover increased by 13.49 % and stood at 4754.90 Lakh due to fast recovery in economy and increases overall demand from all sectors in the country (YoY).
• PBT grown by 16.95 % from 398.80 Lakh to

466.40 Lakh

• PAT grown by 11.45 % from 289.72 Lakh to

322.88 Lakh

• EBITDA has Increased by 22.53 % from

475.88 Lakh to 583.08 Lakh

• Long term borrowing has down by 24.13 % from 23.46 Lakh to 17.80
• Operating cash flow now stands at 1.18 Crs as against 3. 29 Crs in LY

Segment: The Company has identified its business of Manufacturing ‘Engineering Goods which is only ‘operating Segment as primary reportable segment.

1. KEY FINANCIAL RATIOS:

Ratios	Units	FY 2022-23	FY 2021-22	% Change
Debtors Turnover	Times	7.29	6.97	0.32
Inventory Turnover	Times	6.33	6.25	0.08
EBIDTA margin	%	12.26	11.36	0.90
Net Profit margin	%	6.79	6.91	(0.12)
Return on Net worth	%	17.25	19.70	(2.45)
Current Ratio	Times	1.97	1.67	0.30
Debt Equity Ratio	Times	0.52	0.71	(0.19)

2. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company maintains adequate and e f f e c t i v e i n t e r n a l c o n t ro l s y s t e m s commensurate with its size and complexity. It also ensures that they are recorded in all material respects to permit preparation of financial statements in conformity with established accounting principles, along with the assets of the Company being adequately safeguarded against significant misuse or loss.

In the opinion of the Management, the Company has adequate internal audit and control systems to ensure that all transactions are authorized, recorded and reported correctly. An independent internal audit function is an important element of the Companys internal control systems. This is supplemented through an extensive internal audit program and periodic review by the management and the Audit Committee. The Corporate Governance and compliance

practices are well formed with internal and independent professional consultancy practice from time to time review and on periodical requisites amendments as and when require as per the Companies act 2013, and SEBI regulations.

3. RISKS AND CONCERNS

The Management maintains an active oversight of the risk and the effectiveness of the risk mitigation strategies and plans put in place by the Company specially, define and implement strategies to address uncertain or contingent risk as one of the key business risks facing the Company. The Company has appropriate mitigation plans to protect margins while continuing to grow and transform the business. While the Companys focus on long term strategic drivers and brand building continues.

Strategic and pricing interventions as well as cost and efficiency management programs were undertaken keeping in mind input costs, competitive positioning and product brand strategy. The Company has a robust risk mitigation plan to minimize identified risks through continuous monitoring and mitigating actions as may be required.

4. HUMAN RESOURCE AND INDUSTRIAL RELATIONS

Human Resource development continues to be our top focused area which will ensure intentions are converted to realities. The emphasis was on reskilling and up skilling to enable the teams in navigating change and remaining compliant withe volving processes. Industrial Relations with employees remained cordial throughout the year under review. The Company extensively invests in training programmes and learning modules. The Company consciously works and maintains harmonious industrial relations at its offices and plants. It believes and nurtures a culture of complete transparency through open communication channels with easy access. The Company further refines its policies in alignment with its organizational interest, benefitting everyone at the same time. As on March FY 2023, the Company had a total team of 196 employees adding value to the organization.

CAUTIONARY STATEMENT

The statement forming a part of this Report may

contain certain forward-looking remarks with the meaning of applicable Securities Law and Regulations. Many factors could cause the actual results, performances, or achievements of the Company to be materially different from any future results, performances, or achievements. Significant factors that could make a difference to the Companys operations include domestic and international economic conditions, changes in government regulations, tax regime and other statutes.

For and on behalf of Board of Directors of

Rolcon Engineering Company Limited

Sd/- Suresh H. Amin Chairman & WTD DIN: 00494016

Vallabh Vidyanagar May 19, 2023.