Arfin India Management Discussions

Industry Structure and Developments

Indias economy has significant growth potential driven by various factors, i.e. urbanization, growing digital economy, initiatives like "Make in India", increase of infrastructure projects, agriculture modernization, attracting foreign investment, ease of doing business, healthcare and pharmaceuticals services, expanding international trade and participating in global supply chains, tourism and advancements in space technology & satellite communication. India is one of the fastest growing economies globally, in addition to also being one of the fastest emerging markets. Thus, there is a vast scope for the industry to develop under the current scenario.

The Indian economy performed exceptionally well compared with the rest of the world. India is set to remain the bright spot in CY 2023 with a potential to contribute 15% to the global GDP growth, according to IMF. In December 2022, India also assumed G20 presidency with an ambition to unite the world under the theme "Vasudhaiva Kutumbakam" or "One Earth - One Family - One Future". This is an opportunity to showcase the nations global leadership amidst growing uncertainty and economic crisis.

The Company is involved primarily in segment of manufacturing and trading of non-ferrous metals although major part of the business is covered by aluminium products. Companys main products line includes Aluminium Wire Rod, Aluminium Deox, Cored Wire, Aluminium Alloy Ingots, Ferro Titanium, and Conductor & Cables. The Company is operating in multiple products of aluminium and this multiplicity of operations minimizes the operating eventualities. A considerably wide geographical presence and reach, both domestic and international, have helped the Company to attempt de-risking its business and meet the risks with suitable precaution. Your company is well positioned to capitalize on emerging opportunity due to significant competitive strength, acquired over the years.


India continues to forge ahead on its path of progress, creating remarkable opportunities for the non-ferrous metal sector. Non-Ferrous Metal Industry is one of the key sectors of Indian economy contributing significantly to nations GDP and providing employment to large number of people, directly or indirectly as it meets the requirements of wide range of key industries and also plays vital role for countrys vision for Aatmanirbhar Bharat. The Government of India continues to enhance international co-operation for promoting FDI and improve ease of doing business in the country.

GDP growth rate in FY 2024 expected to be 5.9%, lower than the FY 2023 growth of 6.8% due to subdued external demand and tightening monetary policy. However, India will remain the fastest growing major economy. Brent oil prices are expected to remain range bound in 2023, given the continuing war in Ukraine and sanctions imposed in response by the USA and European Union. India meets nearly 80% of its oil needs through imports. High oil prices will also have a trickledown effect on the prices paid by consumers for goods and services. Persistent inflation resulted in RBI to increase the repo rate by 250 basis points throughout FY 2022-23. Further rate hikes are expected in the coming year, despite no rate hike in the April-23 Monetary Policy Committee meeting.

Indias manufacturing sector also outperformed the rest of the world, projecting the country as a potential manufacturing hub. Stable political conditions, supportive policy schemes, strong domestic consumption and growing presence of skilled professionals support this ambition. The GOIs focus to make the country an attractive destination for business has been a key enabler of robust economic performance.

In FY 2022-23, the Company delivered a resilient and strong performance, despite macroeconomic challenges, tough market conditions and global uncertainties. The Company has achieved sales of 24,766 metric tons worth 62,362 Lakhs. The Company has inbuilt production capacity of 71,000 metric tons per annum. Considering the installed capacity of 71,000 metric tons, the Company has significant spare capacity to increase its production and sales level. Accordingly, the Company has geared-up its marketing and production activities. The Company has increased its export sales through addition of more overseas customers and thus the Company has been able to achieve Gross Export Sales of 15,179 Lakhs during the financial year ended March 31, 2023, which is higher by 39% in compare to Export Sales of 10,914 Lakhs during previous financial year ended March 31,2022. This performance was mainly driven by higher volumes and better product mix, lower input costs, stability in operations and cost-saving actions.

Our business strategy prioritizes reaching our goals in a maximally responsible manner. We recognise the value of a diverse workforce. We remain committed to make an even bigger difference by reimagining and improving our work, investing in our people and welding a sustainable future.


When you grab the opportunities based on your strength, you are bound to be accompanied by the risks and threats attached with them. The Company is exposed to the following type of risks.

These factors can be main drivers behind the pressure on the Company in terms of operation and profitability.

Product / Plant Wise Performance

The Company is engaged only in one segment of manufacturing and trading of non-ferrous metal and does not have any other segment or activity. Hence segment wise reporting is not required to be given. Product / Plant wise performance is as follows:

Aluminium Wire Rod

The Company has installed capacity of 15,000 metric tons per annum in the business of aluminium wire rod. The Company has sold 5,445 metric tons of aluminium wire rod worth 14,113 Lakhs in compare to 4,104 metric tons worth 11,225 Lakhs during previous year 2021-22. It reflects year on year increase in sales volume at the rate of 33% in terms of quantity and 26% in terms of sales amount. The Company expects aluminium wire rod product sales volume to increase by around 5 to 10% during FY24.

Aluminium Deox

The Company is having installed capacity of 20,000 metric tons per annum in aluminium deox. The sales during the financial year under report was 5,855 metric tons amounting to 13,290 Lakhs in compare to 4,231 metric tons worth 9,517 Lakhs during previous year 2021-22. It reflects year on year increase in sales volume at the rate of 39% in terms of quantity and increase of 40% in terms of sales amount. The Company expects to grow this business at 5 to 10% during FY24.

Cored Wire

The Company is having cored wire plant with capacity of 3,500 metric tons per annum. The sales quantity during the financial year under report was 1,259 metric tons worth 5,814 Lakhs in compare to 1,296 metric tons of goods worth 7,960 Lakhs during previous financial year 2021-22. It reflects year on year decrease in sales volume at the rate of 3% in terms of quantity and 27% in terms of sales amount. The Company expects to grow this business by 5 to 8% during FY24.

Aluminium Alloy Ingots

The Company is having installed capacity of 18,000 metric tons per annum of aluminium alloy plant. The sales during the financial year under report stood at 6,919 metric tons amounting to 14,833 Lakhs in compare to 7,460 metric tons of goods worth 14,801 Lakhs during previous financial year 2021- 22. It reflects year on year decrease in sales volume at the rate of 7% in terms of quantity and increase of 0.21% in terms of sales amount. The Company expects to grow this business by 2 to 5% during FY24.

Conductor and Cables

The Company is having installed capacity of 12,000 metric tons per annum of conductor and cables plant. The sales during the financial year under report stood at 2,128 metric tons amounting to 4,933 Lakhs in compare to 2,642 metric tons of goods worth 5,689 Lakhs during previous financial year 2021-22. It reflects year on year decrease in sales volume at the rate of 19% in terms of quantity and 13% in terms of sales amount.

Ferro Alloys

The Company is having installed capacity of 2,500 metric tons per annum of Ferro Alloys plant. The sales during the financial year under report stood at 881 metric tons amounting to 5,899 Lakhs in compare to 725 metric tons of goods worth 2,882 Lakhs during previous financial year 2021-22. It reflects year on year increase in sales volume at the rate of 21% in terms of quantity and 105% in terms of sales amount. The Company expects to grow this business also at 5 to 10% during FY24.


Global Outlook

As per latest June 2023 Report by ICRA, International prices of the three non-ferrous metals viz. aluminium, copper and zinc witnessed corrections of 11%, 8% and 30% respectively in the last six months, owing to global macroeconomic uncertainties and weaker- than-earlier expected recovery in Chinese demand. While the calendar year commenced with a recovery in metal prices in January 2023 following the lifting of lockdowns in China, the rally was short-lived as metal prices plummeted again in subsequent months, due to an uncertainty over the strength of Chinas recovery. Global consumption growth of these metals registered a slowdown in H1 CY2023 and, going forward, growth is expected to remain muted in the current calendar year as well. However, weakening global demand amid recession concerns in the rising interest rate environment have pulled down prices. Significant metal price corrections remain the key headwind affecting the margins, with no immediate relief in sight.

Domestic Outlook

Current outlook remains uncertain amid high inflation, tight monetary policy, the ongoing Russia- Ukraine conflict, Rupee Depreciation and the lingering impact of three years of COVID-19.

However, the rising inflation poses a serious threat to both demand and prices. In order to control inflation, the Government of India has taken various measures like ban on export of wheat, reduction in excise duty on petroleum products, imposition of export duty on steel products etc. RBI has also hiked the key policy interest rates during the last few weeks, which are likely to control inflation. However, this may prove to be detrimental to demand scenario in near time. Your Company has decided to pursue aggressive growth by strengthening our hold on domestic market and embark on value added export in future.

Business Highlights

Aluminium Wire Road, Aluminium Deox and Aluminium Alloy business has contributed significantly along with Cored Wire, Ferro Alloys and Conductor verticals during the year.

The salient points for the business overview of the Company during the financial year 2022-23 are as follows:

; Total net revenue from operations of 54,411 Lakhs in compare to 52,611 Lakhs during the previous financial year ended March 31,2022.

• EBIDTA of 2,892 Lakhs

• EBIDTA Margins of 5.31% of Net Sales

• PAT of 1,032 Lakhs

• Basic and diluted earnings per equity share for the year was 0.65 per share

Risks and Concerns

The Company recognizes that risk is an integral part of business and it is committed to manage the risks in a proactive and efficient manner. Risk evaluation and management is an ongoing process within the Organization. The state of external environment, including factors like interest rates, inflation, and growth in economic activity, rationalization of tax structure, job creation & retention of manpower and consumer sentiment continues to be the biggest source of threat as well as opportunity for the Company. Any slowdown in the economic activity in the Country, significant job losses or high rates of inflation can severely impact the consumption and therefore growth of the Company.

The Companys business is exposed to many internal and external risks and it has consequently put in place robust systems and processes along with appropriate review mechanism to actively monitor, manage and mitigate these risks. The Company takes a structured approach to the identification, quantification and hedging of such risks by developing comprehensive Risk Management Policy of the Company which is periodically reviewed by the management.

Risks classified as per Companys Risk Management Policy are:

• Strategic risk

• Operational risk

• Financial risk

• Hazardous risk

Other risks include employment risk, industry risk, raw material risk, regulatory risks, cyber security risk, economic uncertainty and price volatility resulting from demand uncertainty etc. Although the Board recognizes presence of these risks, but there are no risks which in the opinion of the Board threaten the existence of the Company.

Internal Control Systems and its Adequacy

The Companys internal control systems are commensurate with the nature of its business and the size and complexity of its operations and are in line with requirements of the Companies Act, 2013. These are routinely tested and certified by Statutory as well as Internal Auditors and cover all offices, factories and key business areas. Significant audit observations and follow up actions thereon are reported to the Audit Committee.

The Audit Committee reviews adequacy and effectiveness of the Companys internal control environment and monitors the implementation of audit recommendations, including those relating to strengthening of the Companys Risk Management Policies and Systems. The Audit Committee of the Board keeps a close eye on business operations and functioning of the internal audit function. The findings of the audit function are reviewed by the Committee at regular intervals. Appropriate actions, as deemed necessary to ensure sustainability and future growth prospects of the Company, are taken in a timely fashion. The internal controls facilitate prompt detection and redressal of any deviations in business operations.

The Company has well designed policies, procedures & guidelines in place to ensure control of its different areas of business operations and reporting. This includes delegation of powers, various manuals, rules, policies and guidelines formulated by the Company from time to time. The approved policies, procedures & guidelines are effectively and responsibly being used while executing business of the Company. The Company has developed & implemented an Internal Financial Control framework duly approved by the Audit Committee which includes internally entity level policies / processes and operating level standard operating procedures primarily aiming at bringing awareness amongst the officials dealing with affairs of the Company so as to ensure adherence of the policies, procedures, guidelines designed and put in place for effective control. This provides the Directors with reasonable assurance regarding the adequacy and operating effectiveness of controls with regard to reporting, operational and compliance risks.

"The Company has well established internal control procedures across all business verticals commensurate with the size and nature of operations."

Financial Statements are prepared in compliance with applicable Accounting Standards & on the basis of the Significant Accounting Policies as adopted by the Company and duly approved by the Audit Committee and the Board. These Policies apply uniformly across the Company. The Accounting Policies supported by standard operating procedures are reviewed and updated from time to time. The Company uses ERP Systems as a business enabler and also to maintain its books of account. The Standard Operating Procedures and transactional controls built into the ERP Systems ensure proper recording, approval mechanisms and maintenance of records. The systems, standard operating procedures and controls are reviewed by the management from time to time.

During FY 2022-23, we assessed the effectiveness of the Internal Control over Financial Reporting and has determined that our Internal Control over Financial Reporting as at March 31,2023, is effective.

Financial Performance vis-a-vis Operational Performance

Details with respect to financial performance vis-a-vis operational performance are given at the end of this Management Discussion and Analysis Report.

Human Relations / Industrial Relations

Our people are our best assets. Their caliber and commitment are our inherent strength. Manpower strength of the Company as on March 31,2023 was 310 as against 286 at the last day of the previous financial year. People are at the centre of driving excellence at Arfin.

The HR policies are based on fair practices, which continually strive towards attracting, retaining, and developing the best talent required for the business to grow and accelerate the journey in the next normal scenario. All employees exhibit unparalleled commitment, competence and dedication towards this journey. The Company boasts of well-defined HR policies which take care of both personal and professional growth of its employees.

Culture is a key enabler to optimize potential, retain and also attract top talent to fuel performance within the organization. Policies nurture a culture that leads to alignment of employee goals with that of the Company. The HR initiatives strive to groom future leaders.

Acquiring diverse experiences, accomplishing challenging tasks and continually learning and upskilling is enabling them to deliver their best. By identifying, developing and nurturing quality talent at every stage of the employee lifecycle, we are empowering them to become future ready and build rewarding careers.

The Company ensures a safe, conducive and productive work environment for the employees through following steps:

• Providing workplace Health & Safety Training to workers

• Employee incentive programs

• Weekly review meeting, Knowledge sharing sessions and feedback system

• Wellness Initiatives, Fun Activities,

The Company focuses on four aspects of well-being - physical, Mental, Emotional and purposeful. A safe work environment is non-negotiable, for which the Company being a responsible corporate citizen always gives utmost importance to Safety, Occupational Health and Environment and is committed to maintain sustainable work environment across all its manufacturing units. The Company places high importance on the development of its human resources.

Key Financial Ratios

The Company has identified the following ratios as its key financial Ratios:

Particulars 2022-23


Debtors Turnover (Days) 33 44
Inventory Turnover (Days) 75 70
Interest Coverage Ratio (PBIT / Finance Cost) 1.76 1.79
Debt-Service Ratio (PBDIT / Finance Cost) 2.01 2.06
Cost of Goods Sold / Net Sales (%) 85.34 84.55
Current Ratio (Current Assets / Current Liabilities) 1.41 1.43
Debt Equity Ratio (x) 1.27 1.44
Operating Profit Margin (PBDIT / Net Sales) 5.31% 4.84%
Net Profit Margin (Net Profit / Net Sales) 1.90% 1.75%

Return on Net Worth

The detail of return on net worth is given below:

Particulars 2022-23


Return on Net Worth (Net Profit / Average Net Worth) 12.45% 12.58%

Return on Net worth (RONW) is a measure of profitability of a Company expressed in percentage. It is calculated by dividing Net profit by average capital employed during the year. Net profit has increased from 919 Lakhs to 1,032 Lakhs for the reasons of increase in sales and operating profit.

Cautionary Statement

Statements in the Management Discussion and Analysis Report describing the Companys objectives, projections, estimates and expectations which may be forward-looking statements. These statements are made within the meaning of applicable securities laws, and regulations are based on informed judgements and estimates. Past performance of the Company is not necessarily indicative of its future results, and actual results could materially differ from those expressed or implied. Important factors that could make a difference to its operations may include but are not limited to economic conditions affecting demand / supply, price conditions in the domestic and international markets in which it operates, changes in Government regulations, tax laws and other statutes. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements based on any subsequent development, information or events.