Ankit Metal & Power Ltd Management Discussions.

Management Discussion and Analysis

ECONOMIC OVERVIEW

The world economy was exceptionally subdued in the year 2020-21 due to the outbreak of Covid- 19 pandemic resulting in significant challenges to the public health, and disruption of the global supply chains. There was a decline of 3.3% in the global GDP for the year 2020-21. The IMF expects global growth to touch 6% in 2021 which may then moderate to 4.4%. However due to implementation of various government schemes and initiatives the growth is expected to rise rapidly in the upcoming years.

While China is forecasted to continue its rapid growth in 2021, Indias economy rebounded quickly from one of the worlds longest and most stringent lockdowns. The accelerating rollout of COVID- 19 vaccines in many advanced economies has set the stage for rapid recovery in the second half of this year. While, the global economy is expected to recover to its pre-pandemic level of output in 2022, the emerging-market and developing economies like India is expected to take until 2023 to recover to the pre-pandemic level. Factors such as a young working population, improving business climate and renewed focus on export expansion would support this opportunity.

STEEL INDUSTRY

The Indian steel industry is modern with state-of-the-art steel mills. It has always strived for continuous modernisation of older plants and up-gradation to higher energy efficiency levels. In FY21, the production of crude steel and finished steel stood a 102.49 MT and 94.66 MT, respectively. Indias current steel producing capacity of is ~140 mtpa (Approx.) and the figure is anticipated to rise to 300 mtpa by 2030-31. Increased steel demand from sectors including infrastructure, oil, gas and automotive will drive the growth of the industry.

The industry is witnessing consolidation of players, which had led to investment by entities from other sectors. Government route for investment on infrastructure and projects such as affordable housing, railway line, metro rail, shipbuilding oil & gas distribution pipeline projects etc should boost the consumption.

During the year, disruption on both demand and supply resulted in the global steel demand to fall significantly. India also contributed to the global decline, as steel consumption fall due to the stringent lockdowns. However, the recovery in automotive production and white goods manufacturing was quicker than expected when the strictest lockdown measures were lifted. The construction sector was less affected, as it was supported by government stimulus schemes in many regions as a result, steel prices rallied in all regions in late 2020.

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 Indias 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.

OUTLOOK

The iron & steel sector has been a major contributor to Indias manufacturing output which in turn depends on increase in automotive industry production and development. Rising investment in the infrastructure and real estate sectors and increase in number of construction activities are promising a slow but gradual increase in demand for the steel products. Due to growth potential in developing country like India, the demand for stainless steel will continue to be robust in future. Moreover, a recovery in the stainless steel and infrastructure sectors is expected starting from the year 2021-22.

Ankit Metal & Power Limited is one of the significant manufacturers of Iron and Steel in Eastern India. The Company currently operates an integrated iron and steel plant at Jorehira, Dist., Bankura in West Bengal and has a dynamic 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 2019-20 Change (%) Reason for change
Operating Profit Margin (%) (16.08) (5.73) (180.63) Increase in raw material prices
Net Profit Margin (%) (21.31) (13.93) (53.05) Increase in Raw Material cost
Interest Coverage Ratio (X) (3.06) (0.70) (338.79) Decrease in margin due to increase in operational cost
Inventory Turnover Ratio (X) 0.65 1.01 36.43 Increase in stock level maintained and fall in sales

RISK, OPPORTUNITIES AND THREATS

The Company manufactures iron and steel. In the financial year 2020-21 the overall growth of iron and steel business was not up to the mark due to impact of Covid-19 virus and resultants Lock down and disruption of supply chain. With the increase in input cost and decline of demand, the company is facing stringent difficulties to cope up the present situation. The domestic consumption of steel is likely to increase 2021-22 due to Government stimulus package in different sectors of Industries.

The Company has defaulted in payment of its financial commitments to the lenders and is working on means to settle the loan outstanding. 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 many steps for the upliftment of Indian economy and has provided stimulus package to different sectors of industries to revive the economy to pre covid-19 pandemic level which would certainly be favourable towards the growth of the Company.

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. During the year under review the Company has produced 3.25 Lacs MT of Iron & Steel as against 3.98 Lacs of MT of Iron & Steel in previous year registering a decrease of 18.34% over previous year. This is mainly account of shortage of working capital, disruption in supply chain and running of plant at reduced level. being faced by the Company. Also, the Covid-19 pandemic and lockdowns declared by Central Govt and State Govt has dented the production during the current Financial Year.

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 Companys Integrated Management System comprises of quality, environment and occupational health and safety certification. The Company has also taken the safety measures for the protection of health to the employees as advised by Government agencies in this regard. 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 Companys 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 Companys 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, 2021, the Company has 1,019 employees on its payroll.

CAUTIONARY STATEMENT

Certain statements in the Management Discussion and Analysis Report describing the Companys 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 Companys business as well as its ability to implement the strategy. The Company doesnt undertake to update the statements.