ANNEXURE 1
ECONOMIC ENVIRONMENT
India is doing well in dif cult times
Indias continued high growth is driven by several
path-breaking-reforms including the following: (i) Implementation of Goods and Service
Tax(GST) (ii) National Logistics Policy (NLP) (iii) Amendments to Foreign Trade Policy
(FTP) (iv) Fast track of free trade agreement (FTA)
India aims to double its current annual GDP growth of close to USD 3.5
trillion to USD 7 trillion by 2027 and reach USD 10 trillion by 2030.
BUSINESS ENVIRONMENT
Welding can be traced back in its historic development to ancient
times, with the earliest examples dating back to the Bronze and Iron age. During the Iron
age, Egyptians and people in the eastern Mediterranean area learned to weld pieces of iron
together. This was followed by the art of blacksmithing and welding through hammering
during the middles ages. Since the 19th century, people have developed increasingly ecient
and effective welding techniques. Today, we even have robotic welding, a method growing in
popularity that uses computer control to weld metals much more quickly and accurately than
is possible through manual welding. With passing of each century, welding has become more
streamlined process with continual yet minimal innovations.
GLOBAL MARKET
Consumables
The global welding consumables market size reached US$ 11076.12 million
in 2022 and is expected to grow at a CAGR of 9.22% till 2030. It is expected to reach
value of US$ 18803.63 million by the end of 2030.
Equipment
The global welding equipment market size was valued at US$13066.96
million in 2022 and is expected to expand at a CAGR of 6.9% reaching US$19501.64 million
by 2028.
INDIAN MARKET
Consumables
The Indian welding consumables market size reached US$ 1,095 million in
2022. The International Market Analysis Research and Consulting Group (IMARC) Group
expects the market to reach US$ 1,570 million by 2028, exhibiting a growth rate (CAGR) of
6.1% during 2023-2028.
Equipment
The Indian welding equipment market size is forecast to reach US$23.1
billion by 2027, after growing at a CAGR of 5.9% during 2022-2027.
As regards Fabrication and Repair welding, both complement one another
and are corollary. While the market for fabrication industry is deterministic, that of
repair welding is deductive in nature, which depends on two parameters:
Weld defects as a process which happen during the course of fabrication
including (i) Lack of penetration or incomplete penetration (ii) Lack of fusion or
incomplete fusion (iii) Undercut (iv) Spatter (v) Slag inclusions (vi) Cracks (vii)
Porosity and (viii) Overlap.
Breakdown and maintenance requirement. As a thumb rule, market for
repair welding will be in the range of approximately fteen to twenty percent as that of
fabrication welding.
INDUSTRY STRUCTURE AND DEVELOPMENT
Repair welding
Although a weld repair may be a relatively straightforward activity, in
many instances it can be complex and various engineering disciplines may need to be
involved to ensure a successful outcome. It is recommended that ongoing analysis of the
types of defect is carried out to discover the likely reason for their occurrence
(material/process or skill related).
In general terms, a welding repair involves:
(i) A detailed assessment to nd out extremity of the defect. This may
involve the use of surface or sub-surface or non-destructive testing (NDT) method
(ii) Cleaning the repair area (removal of paint grease etc.)
(iii) Once established, the excavation site must be clearly identified
and marked out
(iv) An excavation procedure may be required to be carried out (method
used ie., grinding, arc/air gouging, preheat requirements etc.)
(v) A welding repair procedure/method statement with the appropriate
welding process, consumables, technique, controlled heat input and interpass temperatures,
etc. will need to be approved and implemented meticulously.
(vi) Use of approved welders to be deployed to undertake repair welding
(vii) NDT procedure/technique to be prepared & carried out to
ensure that the defect has been successfully removed and repaired.
While repair seems a logical outcome for problems, yet the amount of
times that a weld can be repaired is very much dependent on the type of weld that is that
needed for repairing. For example, Low Alloy Steel re-welds are dictated by the
heat-treated condition supplied. Whereas for Chromium-Molybdenum (Cr-Mo) steels, there can
only be two rewelds carried out. Consideration should be given to the post-weld heat
treatment operation, as well as any possible degradation of the joint weld.
ANNEXURE TO THE DIRECTORS REPORT
Further, depending on the specific application, all of the common
welding processes can be used for repair welding:
Shielded metal arc welding (SMAW),Gas-metal arc welding (GMAW),
Gas-tungsten arc welding (GTAW), Submerged arc welding (SAW) & Plasma arc welding
(PAW)
Many a times organisations are adopting newer technologies and
materials like ceramics, laser welding etc. to ensure longevity of weld parts and ease of
handling.
Project size (Ex. large or one-off versus small or mass production)
Production stage (early versus late in the project) Thickness/number of runs
Fabrication/inspection requirements Poor/incorrect t up Material grade Welding process
Welders skill Welding conditions (Ex. position, accessibility) No specific factor can be
indenti ed Inspection technique used Site welding conditions
CURRENT YEAR OUTLOOK
Current year outlook remains positive as the Government has placed
thrust on infrastructural developments as enunciated in the budget presented by the
Finance Minister.
Further, the Indian economy continues to perform well and remains one
of the fastest growing in the world, despite the fact that growth projection for 2023-24
has been slightly lowered to six percent.
OPPORTUNITIES
Welding industry has been one of the oldest and mature industry. While
there are no radical changes that can be expected in terms of technology, minor
improvements happen consistently.
Window of opportunities exits in varied types of repair welding
applications within India and offshore destinations like Middle East and African
countries. While it is rewarding, it poses equivalent challenges. It is important for
organisations to demark the choice of projects and ensure pro tability.
During the year 2023-24 major international expo in terms of Essen
Welding at Germany has been scheduled. This will provide great opportunities for
organisations across the globe to learn, share, compare and improvise as also look for
newer opportunities for growth.
RISKS, THREATS AND CONCERNS
Competition from organised and unorganised sectors exists, besides
overseas organisations setting up business establishments in India, offer a plethora of
challenges. Even in the case of B2B when there arises breakdown, Shop floor Authorities
generally use branded products, but may deploy nearby available Welder and Technician to
have the component(s) repaired, unless higher risk like breakage due to improper use of
high value components may be anticipated.
SEGMENT WISE AND PRODUCT WISE PERFORMANCE
As regards segment wise performance, the gamut of repair welding
largely encompasses provision of holistic solution. Depending on the requirement, it may
involve pure service or supply of materials or a combination of both. Further, depending
on the base materials there may be different varieties of products that may be offered.
Further, even though at revenue level categorisation is made in terms of Trading,
Manufacturing and Services; yet supply of raw materials, job works and deployment of other
resources being mutually inclusive ie., with extensive overlap, combined holistic analysis
is opined to facilitate rationale inference.
While there was an impasse during covid, post covid most of the
suppliers have raised their cost and passing of the same to ultimate customers largely
seems a major constraint due to competition.
BUSINESS ORGANISATIONS
Most business organisations are converging fabrication and repair
welding business under a single roof. This offers the advantage of increased scale of
business operations, resulting in cost savings by way of optimal use of resources, easy
customer recall and last but not the least, uni ed platform for a ‘single stop
solution.
INTERNAL CONTROL SYSTEM AND ITS ADEQUACY
To increase the operating effectiveness, automated IT systems are built
to control risk and monitor different phases of operations. During the year, the Company
migrated to Ramco Systems Accounting Software package. There were challenges at the
inception to adapt to the new system and over a period of time it has got smoothened.
Going forward, the seamless integration is expected to facilitate nesse in accounting
operations.
Further, the Company has various kinds of audits like Statutory,
Internal, Goods and Service Tax, Cost Audit etc. all of which are being undertaken by
distinct external team of Auditors to ensure fair and transparent disclosures in the
interest of all Stakeholders.
PERFORMANCE ANALYSIS
Details on performances are reflected in the statement of financial
results and ratio analysis.
MATERIAL DEVELOPMENT IN HUMAN RESOURCE MANAGEMENT
The Company uses Human Capital Management (HCM) module of the Ramco
System. As part of the same, mobile app is made available to all employees, which is a
self-service-module. Employees can mark their attendance, apply & authorise leave and
access salary slips while on the move. In other words, it is HR on the Mobile.
SAFE HARBOR AND DISCLAIMER STATEMENT
Any statement(s) forming part of this document that are not
statement(s) of historical facts should be considered as forward-looking statement(s).
There are a number of important factors that could cause the Companys actual results
to differ materially, from those indicated by the forward-looking statements. Ador Fontech
Limited disclaims any obligation to update any forward-looking statement(s) to reflect
future events or circumstances unless required on to a do so by law.
HUMAN RESOURCE DEVELOPMENT
Human Resource is the most valuable asset of any organisation.
The growth of Ador Fontech can be largely attributed to the passion and
dedicated efforts of its employees. The staff strength as on March 31, 2023 was 166
besides 95 workers on contractual rolls.
Kudos!!! to the Employee Fraternity.
The contribution of employees may not have been possible, but for the
support from their families. Through the medium of this Annual Report Special Thanks
goes out to each of them.
RATIO ANALYSIS
|
2022-23 |
2021-22 |
| Particulars |
Standalone |
Consolidated |
Standalone |
Consolidated |
| Revenue from operations |
20,778 |
21,423 |
20,477 |
20,957 |
| Total income |
21,202 |
21,716 |
21,043 |
21,409 |
| Purchases |
12,024 |
12,244 |
11,015 |
11,226 |
| Earnings before interest, depreciation and tax (EBIDAT) |
3,569 |
3,050 |
3,776 |
3,281 |
| Depreciation |
312 |
358 |
271 |
316 |
| Earnings before interest and tax (EBIT) |
3,257 |
2,692 |
3,505 |
2,965 |
| Interest expense |
- |
3 |
- |
5 |
| Exceptional items |
|
|
|
|
| Pro t/(loss) before tax |
3,257 |
2,689 |
3,505 |
2,960 |
| Tax expense |
954 |
933 |
960 |
827 |
| Pro t/(loss) after tax |
2,303 |
1,756 |
2,545 |
2,133 |
| Total comprehensive income |
2,322 |
1,779 |
2,564 |
2,152 |
| Equity dividend (percent) |
250% |
- |
200% |
- |
| Share capital |
700 |
700 |
700 |
700 |
| Reserves and surplus |
14,191 |
11,957 |
13,269 |
11,578 |
| Net worth |
14,891 |
12,657 |
13,969 |
12,278 |
| Gross property (Plant, equipment and intangible assets) |
5,744 |
6,207 |
5,618 |
6,051 |
| Net property (Plant, equipment and intangible assets) |
2,809 |
2,926 |
2,810 |
2,921 |
| Total assets |
17,480 |
15,572 |
16,898 |
15,741 |
| KEY RATIOS |
|
|
|
|
| Working capital turnover ratio (Revenue/Working capital) |
2.0 |
2.3 |
2.0 |
2.4 |
| Trade receivables turnover ratio (Credit sales/Average
debtors) |
7.2 |
7.2 |
7.5 |
7.5 |
| Trade receivables turnover-No. of days ( Accounts
receivable/Credit sales*365) |
51 |
51 |
49 |
49 |
| Trade payables turnover ratio (Purchase/Average creditors) |
6.1 |
6.1 |
5.5 |
5.5 |
| Trade payables turnover-No. of days (Accounts payable/Cost of
goods sold*365) |
59 |
60 |
65 |
65 |
| Interest coverage ratio (EBIT/Interest expense) |
- |
- |
- |
- |
| Inventory turnover ratio (Cost of goods sold/Average
inventory) |
6.2 |
6.2 |
5.4 |
5.4 |
| Current ratio (Current assets/Current liability) |
5.4 |
4.2 |
4.5 |
3.6 |
| Debt/Equity ratio (Debt/Shareholders equity) |
- |
- |
- |
- |
| Earnings per share (Pro t after tax/Number of equity shares) |
6.6 |
5.0 |
7.3 |
6.1 |
| EBIDAT/Sales ratio |
17% |
14% |
18% |
16% |
| Return on year end capital employed (EBIT/Capital employed) |
22% |
22% |
27% |
25% |
| Return on equity (Net income/Shareholders equity) |
15% |
14% |
18% |
17% |
| Return on investment (Interest income/Cost of investment) |
9% |
6% |
9% |
7% |
| Debt service coverage ratio (EBIT/Debt service) |
- |
- |
- |
- |
| Capital turnover ratio (Total income/Shareholders equity) |
142% |
172% |
151% |
174% |
| Gross profit margin ratio (Gross pro t/Trunover) |
32% |
33% |
36% |
37% |
| Gross profit ratio (Pro t before tax/Total income) |
15% |
12% |
17% |
14% |
| Net profit ratio (Pro t after tax/Total income) |
11% |
8% |
12% |
10% |
RATIO ANALYSIS
Rupees In Lakhs
|
2022-23 |
2021-22 |
| Particulars |
Standalone |
Consolidated |
Standalone |
Consolidated |
| PARAMETERS |
|
|
|
|
| (a) Average debtors |
2,903 |
2,985 |
2,739 |
2,788 |
| Opening debtors |
2,755 |
2,821 |
2,722 |
2,754 |
| Closing debtors |
3,051 |
3,148 |
2,755 |
2,821 |
| (b) Average creditors |
1,962 |
2,006 |
1,998 |
2,042 |
| Opening creditors |
2,131 |
2,182 |
1,865 |
1,901 |
| Closing creditors |
1,793 |
1,829 |
2,131 |
2,182 |
| (c) Average capital employed |
14,516 |
12,514 |
13,107 |
11,671 |
| Opening capital employed (Total assets less current
liabilities) |
13,969 |
12,337 |
12,244 |
11,005 |
| Closing capital employed (Total assets less current
liabilities) |
15,062 |
12,690 |
13,969 |
12,337 |
| (d) Working capital |
10,528 |
9,307 |
10,184 |
8,786 |
| Current assets |
12,946 |
12,189 |
13,113 |
12,190 |
| Current liabilities |
2,418 |
2,882 |
2,929 |
3,404 |
| (e) Borrowings |
|
|
|
|
| (f) Gross margin |
6,736 |
7,144 |
7,430 |
7,702 |
| Sales |
20,778 |
21,423 |
20,477 |
20,957 |
| Cost of goods sold |
14,042 |
14,309 |
13,047 |
13,255 |
| (g) Average inventory |
2,256 |
2,322 |
2,399 |
2,459 |
| Opening inventory |
2,274 |
2,350 |
2,523 |
2,567 |
| Closing inventory |
2,238 |
2,294 |
2,274 |
2,350 |
| (h) Interest income |
350 |
241 |
292 |
215 |
| Average investment |
3,898 |
3,903 |
3,231 |
3,235 |
| Opening investment |
3,817 |
3,822 |
2,644 |
2,648 |
| Closing investment |
3,978 |
3,983 |
3,817 |
3,822 |
| (i) Computation of gross margin |
|
|
|
|
| Turnover |
20,778 |
21,423 |
20,477 |
20,957 |
| Expenses |
|
|
|
|
| Material cost |
12,060 |
12,300 |
11,265 |
11,443 |
| Consumable and stores |
9 |
17 |
11 |
17 |
| Power, fuel and utilities |
92 |
96 |
80 |
87 |
| Security charges |
39 |
39 |
29 |
29 |
| Subcontracting of job works |
1,319 |
1,319 |
1,215 |
1,215 |
| Labour |
268 |
268 |
186 |
186 |
| Freight and forwarding |
255 |
270 |
261 |
278 |
| Total expenses |
14,042 |
14,309 |
13,047 |
13,255 |
| Gross pro t |
6,736 |
7,114 |
7,430 |
7,702 |
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