<dhhead>Management Discussions &
Analysis</dhhead>
The Management Discussion and Analysis (MDA)
should be read in conjunction with the Audited Financial Statements of Welspun Investments
and Commercials Ltd (Welspun or WICL or the Company), and the notes thereto for the year
ended 31st March, 2023. This MDA covers Welspuns financial position and
operational performance for the year ended 31st March, 2023. Currency for this
MDA is Indian Rupees unless otherwise indicated.
Forward-Looking Statements
This report contains forward-looking
statements, which may be identified by their use of words like plans, expects, will, anticipates, believes, intends, projects, estimates or other words of similar
meaning. All statements that address expectations or projections about the future,
including but not limited to statements about the Companys strategy for growth, product
development, market position, expenditures, and financial results, are forward-looking
statements. Forward-looking statements are based on certain assumptions and expectations
of future events. The Company assumes no responsibility to publicly amend, modify or
revise any forward-looking statements, on the basis of any subsequent developments,
information or events.
Welspun Investments & Commercials Ltd
(WICL) - A Business Overview
The Company is a Core Investment Company. WICL
focuses on the trading opportunities available in diverse sectors by leveraging the
position of Welspun Group. The Company also engages in investment segment, subject to RBI
guidelines, and relies on the economic developments and the performance of the investee
company - its profits, dividend and stock prices. The Company holds equity shares mainly
in Welspun Group companies which are engaged in the business of Line Pipes, Steel,
Infrastructure and Oil & Gas. The Companys revenue majorly depends on the dividend
declared and change in the stock market prices of the investee companies.
INDUSTRY STRUCTURE AND DEVELOPMENTS Global
Economic Overview
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. The major forces that affected the world in
2022 were the central banks tight monetary stances to allay inflation, limited fiscal
buffers to absorb shocks amid historically high debt levels, commodity price spikes and
geoeconomic fragmentation with Russias war in Ukraine, and Chinas economic reopening—seem
likely to continue into 2023. The rapid rise in interest rates and anticipated slowing of
economic activity to put inflation on a downward path have, together with supervisory and
regulatory gaps and the materialization of bank-specific risks, contributed to stresses in
parts of the financial system, raising financial stability concerns.
However, the world economy has shown nascent
signs of stabilizing in early 2023 after the adverse shocks of last year due to the
Russias invasion of Ukraine and the ongoing war caused severe commodity and energy price
shocks and trade disruptions, provoking the beginning of a significant reorientation and
adjustment across many economies. A key factor in the improvement in activity and
sentiment in early 2023 was the recent decline in energy and food prices. While levels are
still relatively high compared to pre-war, this is boosting purchasing power for most
firms and households and is helping to lower headline inflation. The earlier-than-expected re-opening in China
is also expected to have a positive impact on global activity, reducing supply chain
pressures and giving a boost to international tourism.
Indian Economic Overview
Concerns over demand conditions are
considerable in services and infrastructure. Tighter financial market conditions are
weighing on the demand for capital goods, a leading indicator for aggregate investment.
Growth in investments will be critical to meet Indias rising demand and ensure noninflationary growth in the long run. Headline
inflation remains above 6% going
beyond the central banks upper bound of the tolerance band. In line with the central
banks commitment to take calibrated action to bring headline inflation back within the
2-6% tolerance band and keep
inflation expectations anchored, policy rates are expected to rise in the future.
The Indian economy will not completely escape
the global slowdown and after hitting 6.6% GDP in FY 2022-23, it is expected the GDP
growth to slow in coming quarters, to 5.7% in FY 2023- 24, before reverting to around 7%
in FY 2024-25. The CPI inflation is expected to remain above the central banks upper
limit target of 6% at least until
early 2023 and then gradually recede as higher interest rates take effect. High inflation
will slow household consumption and delay investment, as financing becomes more expensive,
and exports will be affected by the economic slowdown in advanced countries and
geopolitical tensions.
OPPORTUNITIES AND THREATS
The Company depends on the dividends and
capital appreciation from the equities it is invested into, on the investment side. Better
performance of the investee companies can be beneficial for the Company while on the other
hand, any failure by any invested company to earn profits or distribute dividends or
provide capital appreciation can impact the revenue stream of Welspun.
Going forward, any improvement in the demand
and consumption scenario will increase the opportunities for the trading activities in the
country which will help the Company in increasing its operations. However, increased
competition and high inflation can act as a challenge for the Company.
Any increase in dividend distribution tax by
government can be an external threat to the Companys revenue stream. OUTLOOK
Despite the signs of moderation and the rising
inflation concerns, the Indias growth continues to be resilient. India is set to be the
second-fastest growing economy in the G20 in FY 2022-23, despite decelerating global
demand and the tightening of monetary policy to manage inflationary pressures. Export
growth remains well-oriented, especially for services, and the progressive entry into
force of comprehensive trade agreements with major partners is helping to improve
prospects. Owing to the uncertainty over the effects of Western sanctions on Russian crude
oil, Russia rerouted its oil, reportedly sold at a major discount to Brent oil prices, to
non-sanctioning countries, primarily India and China. The share of Indias oil imports
from Russia rose to 16% in
April-August 2022 from 2% in FY
2021-22 and is expected to grow further.
The next few months will be critical for
Indias economy as the government and the RBI work at balancing the stress on inflation,
currency, external accounts, and fiscal deficit. The good news is, India has endured the
pandemic for over two years and has come out of it more resilient.
(Source: Deloitte, India Economic Outlook)
Risk and Concerns
Risk is integral to any business and WICL is no exception. Following are the
external risks to which the Company is exposed to:
• Dividend fluctuation: Dividend received on
investments forms the major part of the business of the Company. Investee Company
distributes dividend to its shareholders based on its profitability, future strategy and
the dividend distribution policy. Thus, any change in these can affect the revenue stream
of Welspun.
• Economic environment:
Both streams of revenues of the Company depends on commodities trading and equity share
investments. Thus, any unfavorable changes in the domestic or global economic environment
can affect the revenue stream. Apart from these, liquidity risk, rising inflation,
pandemic risk, transaction risk and change in regulatory framework are the other risks to
which the Company is exposed to.
HUMAN RESOURCE
The Companys current activities do not require
engagement of significant human resource. However, requisite qualified and experienced
personnel have been engaged to take care of organization need of human resource. With the
sign of growth, if and when seen, the Company will engage requisite human resource.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The adequacy of the internal control system is
reviewed by the Audit Committee of the Board of Directors. The emphasis on internal
controls prevails across functions and processes, covering entire gamut of various
activities. Your Company has taken proper and sufficient care for the maintenance of
adequate accounting records as required by various statutes. Internal Auditors, the Audit
Committee and Statutory Auditors have full and free access to all the information and
records as considered necessary to carry out their responsibilities.
KEY RATIOS
Ratio |
Formula |
2023 |
2022 |
Change % |
Remark |
Debtors
Turnover |
Total Sales/ Trade receivables |
ign=top style=width:7.68%;padding:0cm 0cm 0cm 0cm;
height:23.5pt> NA |
NA |
NA |
No trade receivables at the end of
Financial Year |
Inventory
Turnover |
Cost of Goods Sold / Average Stock |
NA |
NA |
NA |
No Inventory at the end of
Financial Year |
Interest
Coverage Ratio |
Net Profit Before Interest &
Taxes (PBIT) / Fixed Interest cost & Charges |
NA |
NA |
NA |
No interest expense as the company
is debt-free |
Current Ratio |
Current Assets / Current Liabilities |
26.69 |
24.53 |
9% |
No material change |
Debt Equity Ratio |
Debt / Equity |
NA |
NA |
NA |
There is no Debt on the books of
the company. |
Operating Profit Margin (%) |
Net Operating Profit / Net Sales |
96% |
92% |
11% |
No material change |
Net Profit Margin (%) |
Net Profit / Net Sales |
72% |
59% |
22% |
This was higher as the share of
dividend income in revenues was higher |
Return on Net worth |
Net Profit/Net worth |
23.56% |
13.87% |
70% |
This was higher on account of the
Higher Net profit during the year |
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