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ANNEXURE TO THE BOARD REPORT
The following discussion and analysis is intended to convey the Managements perspective on the financial and operating performance of the Company at the end of Financial Year 2018-19. This Report should be read in conjunction with the Companys financial statements, the schedules and notes thereto and other information included elsewhere in the Report. The Companys financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) complying with the requirements of the Companies Act, 2013 and guidelines issued by the Securities and Exchange Board of India (SEBI).
This report is an integral part of the Directors Report. Aspects on industry structure and developments, outlook, risks, internal control systems and their adequacy, material developments in human resources and industrial relations have been covered in the Directors Report.
B. INDUSTRY STRUCTURE AND DEVELOPMENTS :
Aditya Ispat Limited (Aditya) is one of the leading manufacturers of Bright Bars at Hyderabad and has produced 2502.185 Tons as compared to previous year production of 2262.731 Tons of Bright Bars and Wire during the year under review. This output is slated to grow with increased working capital availability in the coming years.
The Company has received the necessary Consent for Establishment (CFE) from the Commissioner of Industries,Telangana for setting up of Unit-II at KamaramVillage,Shankarampet (R) Mandal at Medak District, StateTelangana for producing Steel Wire Products and Fasteners. Construction of the project has commenced and the commercial productions is expected to start within the last quarter of the Financial Year 2019-20, after the receipt of consent for operation (CFO) by the said authorities.The approximate production capacity of the Unit-II will be 3000 TPA , and the capital outlay for the same is around Rs 11 Crores.
i. Outlook - Global Steel Industry
According to International Monetary Fund (IMF), global growth is projected to rise to 3.9% in 2018 and in 2019, moving closer to the long-term growth trend of 4%. The outlook indicates a likely up cycle of modest recovery after three successive shocks the global financial crisis of 2007-09, the Eurozone crisis of 2009-13 and decline in commodity prices during 2014-15. However, the uncertainty with respect to sustainable growth remains. While the continued recovery and gradual closing of output gaps are likely to maintain growth momentum in the advanced economies over the next few years, supportive policy and adjusting to current price levels by commodity exporting countries are expected to aid growth in emerging and developing economies.
US economy is expected to grow at a faster rate of 2.7% in 2018. The euro area recovery is expected to proceed at a broadly similar pace in 201819 as in 2016 and 2017. The modest recovery is projected to be supported by a mildly expansionary fiscal stance, accommodative financial conditions and a weaker euro. The medium-term outlook for the euro area is likely to be impacted by weak productivity, adverse demographics, and, in some countries, unresolved legacy problems of public and private debt overhang, with a high level of non-performing loans. Further, uncertainty about the European Unions future relationship with the United Kingdom (UK) is expected to weigh on economic activity. China is expected to continue its gradual economic transition to a more service economy and coupled with partial recovery in commodity prices, it is expected to drive growth in certain emerging and developing economies.
Among other key regions, Chinas GDP growth is likely to moderate to 6.5% in 2018 as the policy makers continue their efforts to promote quality growth. Supply side reforms through capacity cuts, rural revitalisation, urbanisation& housing reform and controlled pace of credit growth are likely to determine domestic demand and potential movement in commodity prices. Outlook for Middle-East and North Africa is gradually improving on the back of higher commodity prices.
ii. Outlook- Steel Industry in India
As per IMF, India is expected to grow between 7.0% to 7.5% in FY 2018-19. The macro-economic stability with inflation continues to be the foundation of economic success which is reflected by growth in its key sectors - agriculture, industrial and services. Government initiatives like Make-in-India, Invest India, Start Up India and e-biz Mission Mode Project under the national e-governance plan are helping to improve ease of doing business in the country. In addition, the biggest tax reform since Independence, Goods and Services Tax (GST) will help simplify Indias tax regime and is likely to boost GDP and reduce inflation in the long-term despite the slowdown in economic activity during the transition to the GST.
Iron ore prices were positively affected by growth in China and increased demand for higher quality raw material. Along with these factors, weather disruptions and production outages have contributed to coking coal price movements. Chinas steel net exports were down 20% to 0.08 billion tonnes. Low level of exports coupled with volatile raw material prices have led to increase in prices in domestic market due to demand pull and cost push for steel prices at various times during the year.
During the year, India witnessed steel (including alloy and stainless steel) demand growth of approximately 7.8% in apparent steel use terms, aided by strong demand in steel consuming sectors i.e. Auto, Construction and Consumer durables etc. The Indian steel industry has witnessed improved utilisation levels (approximately 80%) even as the resolution process under Insolvency and Bankruptcy Code, 2016 paves way for further consolidation within the industry. This is likely to ease the financial stress and further improve utilisation levels within the industry.Growth in automotive sector is likely to moderate while machinery sector is expected to benefit from rising investment. At the same time, the construction sector is likely to witness growth in 2018 and 2019 on back of rise in consumer confidence and access to low cost finance
C. OPPORTUNITIES, THREATS, RISKS AND CONCERNS OPPORTUNITIES:
The demand of Bright Steel Bars is increasing and the company has opportunity to expand its capacities.
The Companys M.O.U/ Long term relation with the main steel producers R.I.N.L. Vishakhapatnam give an edge over manufacturers of other states.
Demand can be increased by spreading the areas of operations into other parts of the South and Western States.
The Company is facing competition from small players.
The Company is facing demand crunch due to global recession in Steel Industry.
RISKS &CONCERNS :
The Company is mainly dependent for its raw material requirement on R.I.N.L (a public sector undertaking). The pricing and availability of raw material is completely dependent on government policies.
The competition from the small players from the unorganized sector posed a threat to its margins.
D. INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY :
The Company has adequate internal control procedures with all safeguards for protection of assets and that all transactions are authorized, reported and recorded properly. The internal control procedures stem from continuous perusal of records and procedures by the Internal Auditors and the Audit Committee of Directors, who meet regularly. There are adequate Budgetary control mechanism established and practiced by the Company. The Code of Conduct also plays an effective role in utilization of energies of people involved.
E. PERFORMANCE OF THE COMPANY
The company is engaged in the manufacture of single product i.e Bright Bars and its activities are confined to India. During the year 2018-19, the Company has posted a net turnover of Rs.3962.44 lakhs higher by 36.68% over last year (Rs. 2899.10 lakhs in the F.Y. 2017-18) Since the Company has concentrated more on value based manufacturing activities, resulting in increased production in term of quantity manufactured during the year.The additional quantities are being sold by meeting the increased demand in existing customer and addition of new geographies
F. HUMAN RESOURCES
The Company has under its employment, 22 officers and workmen as on 31st March, 2019.
Increase in value of Human Capital through development of individual and collective skills and knowledge is essential to any Company for its growth. Your Company lays great emphasis on building a motivated work force, which can participate constructively in the growth of the Company. Innovative ideas are regularly received from the officers and staff of the Company, many of which were implemented for improvement in areas of quality, cost savings and increased productivity.
G. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE FINANCIAL INFORMATION
Sales: The Company has generated sales revenue of Rs. 3962.44 lakhs from manufacturing and trading revenues which is higherthan last fiscal. The revenues arelikely to improve in the next year as GST will simplify Indias tax regime and is likely to boost GDP and reduce inflation in the long-term.
Fixed Assets: The Company has added fixed assets of Rs. 104.8 lakhs. The Gross block of Capital Assets stood at Rs.931.13 lakhs as at 31st March 2019 against Rs 826.33lakhs as at 31st March 2018, with Net block of Rs.594.63lakhs after depreciation compared to 533.08 lakhs of the previous year.
Inventory: The inventory at the end of the current year stood at Rs636.08 lakhs against Rs 562.52lakhs at the end of previous year. Increase in inventory is in line is due to higher purchases to meet the demands and fluctuation in prices.
Sundry Debtors: Sundry Debtors at the end of the year stood at Rs.1057.05 lakhs against Rs.1190.18 lakhs at the end of previous year.
|RESULTS OF OPERATIONS||( Rs. in Lakhs)|
|Income From Operations(Net of Excise)*||3962.44||2899.10|
|Profit before Interest, Depreciation and Tax||224.40||216.62|
|Profit Before Tax||59.88||52.70|
|Profit after Tax for the Current Year||41.57||47.64|
*To the extent applicable
Your Company continues to take steps to optimize costs of production which contributed to the profitability of the Company. The cost saving exercise is an ongoing one with emphasis on savings in energy consumption and cost,and reduction of wastes.
|H. KEY FINANCIAL MEASURES|
|Particulars||2018-19||2017-18||Detailsof Significant Changes|
|Interest Coverage Ratio||1.50||1.44||-|
|Debt- Equity Ratio||1.83||1.43||II|
|Operating Profit Margin(%)||4.51||5.95||III|
|Net Profit Margin(%)||1.10||1.66||III|
|Book Value Per Share||17.55||16.78||-|
|Earnings Per Share||0.78||0.89||-|
|Return on Networth(%)||4.43||5.31||-|
I. Due to effective working capital management , the company was able to control its debtors position , hence improvement in the ratios.
II Due to ongoing capital commitment the company has borrowed addional term loan facility which has resulted in significant increase in the ratio.
III Due to adverse market condition in the second half of the financial year and the heavy competition faced by the company resulted in low profit and hence significant decrease in the ratio of Operating Profit Margin and Net Profit Margin.
I. STATUTORY COMPLIANCE
The Managing Director/Executive Director makes a declaration at each Board Meeting regarding compliance with provisions of various statutes. The Company Secretary ensures compliance with the SEBI regulations and provisions of the Listing Agreement. The Compliance Officer ensures compliance with the guidelines on insider trading for prevention of the same.
J. CAUTIONARY STATEMENT :
Statement made in Management Discussion and Analysis report which seeks to describe the objectives, projections, estimates, predictions may be considered to be forward looking statements and are stated as required by applicable laws and regulations. Actual results could differ from those expressed or implied and are determined by many factors including global and domestic demand supply conditions, process, raw materials availability, tax laws, governmental policies and other statutes which may affect actual results which may be different from what the Directors envisaged in terms of future performance and outlook