Akashdeep Metal Industries Ltd Management Discussions.

IMPACT OF COVID-19 PANDEMIC AND LOCKDOWN IN THE INDUSTRY

The COVID-19 pandemic has brought untold suffering to people and to almost every part of the economy. While the pandemic was hitting and leading to nationwide bans to prevent the spread of disease, it was natural to fear that the global economy would remain extremely depressed of unprecedented proportions since the Great Depression and would have a long- lasting economic impact.

To combat the crippling impact of lockdown on economies, global policymakers have resorted to fiscal and monetary measures unprecedented in the history of the global economy. It remains to be seen whether these measures are adequate, and whether the steps taken by governments around the world have paid enough for the disruption to human life.

Given the impact of this pandemic, FY2021 was expected to be an extremely competitive year. The consensus was that GDP growth at FY2021 would not only be bad but would also have the biggest fall in growth from 1979-80. In fact, the decline in GDP was much larger than expected. In April-June 2020, real GDP contracted by a massive 24.4%. India has never recorded a quarter of negative growth since it began releasing such information publicly in 1996. No other major economy declined this much during the pandemic. In the second quarter, July-September 2020, GDP again contracted by 7.3%. The consensus was that growth in the second half of the financial year would be much lower than what was needed to erase the impact of the deep recession in the first half.

Fortunately, we began to witness the first signs of the resumption of economic activity in the second half of the year with a number of frequent indications that the economy is back to healthy growth. The third quarter (October-December 2020) recorded GDP growth of 0.4%. And, as mentioned earlier, the second preliminary estimates of the national revenue of FY2021 released by the CSO reflect the negative GDP growth of 8% of FY2021. While this was bad enough, the contraction will be much smaller than previously thought - and we should look at the fourth quarter (January-March 2021) showing strong growth.

INDUSTRY OVERVIEW

NBFCs have been key elements in the financial sector and have been recording higher credit growth than scheduled commercial banks (SCBs) over the past few years. The NBFCs continue to use their high understanding of regional operational capacity, an improved collection system and customized services to accelerate investment in India. Low transaction costs, quick decision-making, customer orientation and prompt service delivery have typically differentiated NBFCs from banks. Considering the reach and scope of NBFCs, this is well worth mitigating the financial gap. NBFCs are importantly organized to show speed, innovation and resilience in order to provide legal financial services to millions of Indians. Over the past decade, NBFCs have seen amazing growth. From about 12% of the bank balance sheet size in 2010, it is now more than a quarter of the size of banks.

Credit growth (YoY) for the NBFC sector was close to 3 percent in June 2020. In addition, credit growth was achieved in September 2020 with YoY growth of -6.6 percent. The bank credit to the NBFC sector was Rs.7.05 lakh crores in June 2020, Rs 8.0 lakh crores in September 2020 and Rs 7.9 lakh crores in December 2020 and Rs 8.9 lakh crores in February 2021. However mutual funds lending to NBFCs continued to contract in 2020-21 as well.

OPPORTUNITIES

• The Central Government, state governments have announced a series of measures to raise funds to support and promote economic recovery. The government has announced Rs. 1.70 lakh crores relief package under the Pradhan Mantri Garib Kalyan Yojana for the poor. Government has also increased its focus on the rural economy by increasing the Minimum Support Price and increasing the budget for the Mahatma Gandhi National Rural Employment Guarantee Scheme, or MGNREGA, to Rs.1 lakh crore. It also announced an additional Rs 30,000 crores emergency funding for farmers to be re-financed by NABARD. NBFCs have better access to the credit market because of the existing large customer pool. NBFCs also have strong credit under writing, risk management and collection process. Fintechs on the other hand uses its new age technologies and digital tools such as AI, machine learning, and data analysis to expand customized financial solutions to the retail segment in India. NBFCs can serve niche segments in partnership with fintechs. This will lead to increased collaboration between NBFCs and fintechs.

• Extended time limits for filing compliance and return documents under various laws, including the Income Tax Act, the CGST Act, and The Companies Act.

• Government and RBI have established the SBI Capital Market administered Special Purpose Vehicle (SPV) to acquire eligible NBFCs short-term papers for repayment of their short term liabilities.

• The RBI also announced various measures. Ensuring liquidity to the tune of 4.7 percent of Indias GDP, it has taken normal and new steps. Its measures ensured that Indian corporate bond issuance was 11% higher at Rs. 6.8 lakh crores. It announced mechanisms to assist MSMEs including new restructuring guidelines to maintain loans from banks and NBFCs in such eligible MSMEs are classified as standard within the regulatory framework. It has stated that the increase in the number of low-income districts will receive the highest PSL weighting. The PSL guidelines have been updated to include new types of renewable energy plants used in agriculture. Bank lending targets for small farmers were revised upwards. RTGS settlements were allowed on a round the clock basis every day.

THREATS

• All the risks associated with pandemic.

• Competition from captive financial companies, small banks.

• Inadequate availability of bank finance and increased borrowing costs.

• Sudden changes in regulations or increased regulatory restrictions may affect the way current products or services are produced or delivered.

• With rapid technological change and innovation, companies need to increase their focus on design goals and business growth objectives. Increasing performance expectations related to quality, time and cost, keeping technology in mind is very important to keep up with competitors, especially new "digital-born" competitors with a low-cost base of their operations. The danger of disruptive innovations enabled by new and emerging technologies is always present.

OUTLOOK FOR THE INDUSTRY AND THE COMPANY

Technology-driven financial services or digital financing is one of the most important ways to work for low-income clients in India Digital tools have encouraged rapid growth by significantly reducing the cost of financial services providers and making services easier and more accessible to users. The need for customers to find digital solutions for seamless financial services with ease, security and safety has taken precedence over the pandemic. In response, management has been using the pandemic to consolidate and transform the Companys digital processes in an efficient manner in order to keep it competitive as the business resumes. The company will continue to explore various ways to strengthen the capital and its balance sheet to maximize long-term resources to meet the financial needs of its business operations, financing for future growth opportunities, overall business objectives and other goals including successfully addressing the uncertainties and disruptions caused by the COVID-19 pandemic.

The disease continues to pose a major challenge worldwide, including in India. However, it seems that countries have now learned the process of adaptation - a new way of life. The timing and magnitude of the second wave of pandemics, the introduction of two new vaccines (according to a recent announcement by the Union Department of Health) in addition to the two existing vaccines released in February, 2021, the scale and effectiveness of implementation of the continued vaccination application and the efficacy of economic and monetary policy actions of Indian authorities are the important elements to impacting the pace of economic restoration.

RISK MANAGEMENT

Risk management is important for any business in general, and especially for the financial services industry. The company has intensified its system of risk identification, materiality assessment and mitigation. The company has a built-in risk of "non-payment of unsecured loans provided to customers" and "risk of dealing in the security market" due to its nature of business without considering other common risks including changes in management / personnel and policies, interest rates, government regulations, competition from others working in the same business, etc. The company has a policy of risk assessment and management of its business. The company operates with a well-defined plan and strategy; that is why we believe, we are ready to face any change in the regulatory environment.

FINANCIAL PERFORMANCE

Please refer to point no. 1 of the Boards report for financial performance of the company. Segment/ Product wise performance is not applicable to the company.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The company has a satisfactory internal control system. Please note the point no. 24 Board reports on internal control system and adequacy.

HUMAN RESOURCES

The pandemic has brought about dramatic changes in all of our lives highlighting the importance of social isolation, wearing masks, use of sanitation facilities, hygiene to reduce the spread of Corona virus and making living habits with the Corona virus, for an indefinite period of time. The Company continued to urge employees to adhere strictly to the Social Distancing Protocol and reduce health risks during the pandemic by adapting to new working conditions, balancing work life balance, switching to Work from Home (WFH) whenever necessary. Lockdown provided a lot of new learning, ideas and experience regarding effective communication strategies, effective time management, thereby improving overall efficiency, cost-effectiveness. The importance of focusing on digital payments and the use of advanced customer service strategies has gained great prominence. Our company is well-suited to adapt to hybrid work cultures - a combination of WOF and Work from Office / sector, as and when necessary, to address the challenge of strong pandemic conditions.

CAUTIONERY STATEMENT

The report may contain certain statements that the Company believes are, or may be considered to be "forward looking statements" that describe its objectives, plans or goals. All these forward-looking statements are subject to certain risks and uncertainties, including but not limited to Government action, economic developments, risks inherent to the Companys growth strategy and other factors that could cause the actual results to differ materially from those contemplated by the relevant forward-looking statements.

DETAILS OF SIGNIFICANT CHANGES

The details of significant changes in financial ratios, along with detailed explanation there of as per the SEBI (LODR) Amendment Regulations, 2018:

Particulars FY2021 FY2020 Variation Reason
Key Financial Ratio
Debtors Turnover* As there is no trade receivables during the year under review. Therefore, debt or turnover ratio is nil.
Inventory Turnover Ratio There is no inventory during the year under review. Therefore, Inventory turnover ratio is nil.
Interest Coverage Ratio* There is no interest expense during the year under review. Therefore, Interest Coverage ratio is nil.

Current ratio 2.35 429.23 (426.88) Current Ratio has been affected due to increase in short term borrowing in the financial year 2020-21

Debt Equity Ratio 24.71 0.47 24.24 -

Operating Profit 24.01% 52.40% (49.59%) Due to Covid Pandemic, the Margin(%)* Company could not perform well

i.e., Profit Before Tax has reduced in the financial year 2020-21.

Net Profit 2.27% 38.67% (36.4%) As the net profit of the company

Margin(%) has been decreased during the financial year 2020-21 as compared to net profit in the previous financial year, Net Profit Margin also decreases.

Return on 0.04% 0.88% (0.84%) NetWorth

By the Order of the Board For Akashdeep Metal Industries Limited
Rajesh Gupta Yash Pal Gupta
Managing Director Director
DIN:00006056 DIN:00013872
Date: 01.09.2021 Add: 25, Hargobind Enclave, Add: 306, Jagriti Enclave,
Place:Delhi Delhi-110092 Delhi-110092