Ankit Metal & Power Ltd Management Discussions.

ECONOMIC OVERVIEW

The Global growth of economy has decreased to a level of 2.9% in the year 2019-20 from 3.7% in 2018-19 and growth is expected to fluctuate in the upcoming years.

The IndiaRs.s GDP growth for Financial year 2020-2021 is expected to be negligible. The nation is currently experiencing a phase of depression because of the Covid-19 pandemic which has adversely affected all sectors and specially the steel sector which is highly dependent on foreign markets like China. Growth is expected to pick up towards the end of 2020 and the market may stabilize from early 2021. India also has an opportunity to strengthen its recent economic gains by initiating more integration in the global value chain. Factors such as a young working population, improving business climate and renewed focus on export expansion would support this opportunity.

STEEL INDUSTRY

The growth in the Indian steel sector has been driven by domestic availability of raw materials such as iron ore and cost-effective labour. Government of IndiaRs.s focus on infrastructure and undertaking road projects is aiding the boost in demand for steel and is expected to increase the demand post the pandemic from early part of the year 2021.

STAINLESS STEEL INDUSTRY

IndiaRs.s per capita consumption for stainless steel products is continue to be below the world average which may cause a massive unrealised potential for steel demand growth. There is an ongoing thrust for infrastructure development which will further boost the demand for stainless steel in the country post the effects of the pandemic is over. The growth in the Indian steel sector has been driven by domestic availability of raw materials such as iron ore and cost-effective labour. Moreover, growing urbanisation and disposable income will also enhance demand of stainless steel. Consequently, the steel sector has been a major contributor to IndiaRs.s manufacturing output.

OUTLOOK

The iron & steel sector has been a major contributor to IndiaRs.s manufacturing output which in turn depends on increase in automotive production and development. Rising investment in the infrastructure and real estate sectors and increase in number of construction activities are promising a slow but gradually demand for steel products.

Ankit Metal & Power Limited is one of the significant manufactures of Iron and Steel in eastern India. The Company currently operates at Jorehira, dist, Bankura in West Bengal and has an integrated management system that encompasses quality, environment and occupational health and safety certification.

DETAILS OF SIGNIFICANT CHANGE IN KEY FINANCIAL RATIO

The significant changes in the financial ratios of the Company, which are more than 38% as Compared to the previous year are summarised below:

Ratio Financial Year 2019-20 Financial Year 2018-19 Change (%) Reason for change
Operating Profit Margin (%) (5.73) (22.81) 74.88 Better sales realisation and cost control
Net Profit Margin (%) (13.93) (23.47) 40.67 Better sales realisation and cost control
Interest Coverage Ratio (X) (0.70) (33.76) 97.93 Increase in sales and cost control
Debtors Turnover Ratio (X) 4.17 2.65 57.22 Increase in sales realisation and turnover
Inventory Turnover Ratio (X) 1.02 0.73 38.91 Increase in revenue and better Sales realisation

RISK, OPPORTUNITIES AND THREATS

The Company manufactures iron and steel. In the financial year 2019-20 the overall growth of iron and steel business was not satisfactory with slower increase in demand. Also, the effect of the Covid-19 pandemic has further put a halt on all production activities for almost four months. All construction sights and other areas of infrastructure was also put on halt and the country faced acute crisis of labour as most of them returned to their native places in view of the pandemic and lockdown being announced by the Government of India. The business was severely impacted by the increase in cost of raw material. The domestic consumption of steel is likely to increase 2021-22 due to Government initiatives like make in India, building Smart Cities, focus on sanitation facilities and development in areas of roads and railways etc.

Further, the electrical energy is one of the major inputs in production of iron and steel and high power tariff is a great threat for the industry.

The Company has a Risk Management framework in place which is designed to identify, assess and monitor various risks related to key business and strategic objectives. All identified risks are categorised based on a matrix of likelihood of occurrence and impact thereof and a mitigation plan is worked out to extent possible

The government has already initiated so many steps for the betterment of Indian economy and has also undertaken two large initiatives viz. putting more money into the rural economy especially after demonetisation and putting a renewed focus on infrastructure development and this would certainly enable the steel producers to survive and grow in the markets.

SEGMENT-WISE PERFORMANCE

The business activity of the Company primarily falls within a single business segment-Iron and Steel. The Company also generates power from Captive Power Plant, which is entirely consumed in manufacturing of iron and steel without any sale to third parties.

HEALTH, SAFETY AND ENVIRONMENT

The Company is committed to conducting its activities in a manner that promotes the health and safety of its employees, assets and the public, as well as protection of the environment. The CompanyRs.s Integrated Management System comprises of quality, environment and occupational health and safety certification. All the statutory requirements related to safety, health and environment are being complied with.

Requirements of environmental acts and regulations are complied with. Monitoring and analysis of water, stack emissions and ambient air quality etc., are undertaken periodically to verify whether the level of environmental parameters are maintained and are well within the specified limits.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company maintains adequate Internal Control Systems in all areas of operation. Services of Internal and External Auditors are utilised from time to time, as also in-house expertise and resources. The Company continuously upgrade these systems in line with the best available practices. An independent Audit Committee of the Board reviews the adequacy of Internal Control. Some of the significant features of Internal Control Systems are:

• Adequate documentation of policies, guidelines, authorities and approval procedures covering all important functions.

• Deployment of an ERP system which covers most operations and is supported by a defined on-line authorisation protocol.

• Ensuring complete compliance with laws, regulations, standards, and internal procedures and systems.

• Ensuring the integrity of the accounting system; the properly authorised recording and reporting of all transactions.

• Ensuring a reliability of all financial and operational information.

The Company has an Audit Committee with independent directors as members. The committee periodically reviews significant audit findings, adequacy of internal control and compliance with Accounting Standards, amongst others. The Internal Audit Reports are placed before the Audit Committee for consideration. The management duly considers and takes appropriate action on the recommendations made by the Statutory Auditors, Internal Auditors and the independent Audit Committee of the Board of Directors. The Company also takes quarterly compliance certificate in respect of various applicable laws from the concerned departmental heads and place the same before the board.

INDUSTRIAL RELATIONS AND HUMAN RESOURCES

Human Resource management is not only important but also a critical asset for a Companys growth. The CompanyRs.s human capital comprises a prudent mix of youth and experience. The Company employs contract labour in its manufacturing facilities. The Company partners with its employees to ensure a highly engaged and motivated workforce dedicated to achieving the CompanyRs.s goals. We ensure a safe work environment for all our women employees. We also promote gender equality. Abiding by the Sexual Harassment Policy, we have a Complaint Committee which addresses any complaint from women employees in this relation and take necessary action. The Policy is being reframed as per the provision of Sexual Harassment of Women at the Work Place (Prevention, Prohibition & Redressal) Act, 2013. During the year the Company has not received any complaints of sexual harassment. As on 31st March, 2020, the Company has 1,068 employees on its payroll.

CAUTIONARY STATEMENT

Certain statements in the Management Discussion and Analysis Report describing the CompanyRs.s objective and predictions may be "forward-looking statements" within the meaning of applicable laws and regulations. Actual results may vary significantly from the forward looking statements contained in this document due to various risks and uncertainties. These risks and uncertainties include the effect of economic and political conditions in India, volatility in interest rates new regulations and government policies that may impact the CompanyRs.s business as well as its ability to implement the strategy. The Company doesnRs.t undertake to update the statements.