Artefact Projects Ltd Management Discussions.

This analysis report briefly describes the Company, the industry and developments, the current business environment and the ability of the company to avail opportunities, exhibit strength, handling of threats/weaknesses, financial performance, internal controls and other related issues.

INDUSTRY DEVELOPMENTS:

As per the budget for FY 20-21, Finance Minister has allocated Rs . 1.70 lakh crore for accelerated development of infrastructure, covering strategic roads & highways, economic & green corridors, coastal & inland ports which has the potential to kick start the economy, boost capex cycle, and generate jobs outside urban centers, and boost consumption.

For NHAI, the Centre has proposed to monetize at least 12 lots of highway bundles, covering over 6,000 km before 2024. The Finance Minister announced that accelerated development of highways would be undertaken, including development of 2,500 km access control highways, 9,000 km of economic corridors, 2,000 km of coastal and land port roads and 2,000 km of strategic highways .

In a boost to regional connectivity in the NCR, the Centre has allocated Rs 2,487 crore to the countrys first Regional Rapid Transit System (RRTS) in the Budget. A total of Rs 20,000 crore has been allocated for the Mass Rapid Transit System, which includes all metro projects across the country and the RRTS projects.

BUSINESS OUTLOOK:

India had entered into 2020 with lower growth projections on the economic front led by global economic slowdown. The Coronavirus pandemic has further created challenges in the economy and growth prospects. However, to give a liquidity boost to the economy, since the lockdown on 25th March 2020, RBI has announced several measures infuse liquidity measures of Rs.20 Lac crores in economy and has also reduced interest rates . In order to mitigate the effects of slowdown, due to COVID, Indias GDP is expected to grow at 1.9 per cent which is still one of the highest amongst G20 countries.

There are numerous reforms initiated under ATMANIRBHAR BHARAT to encash the opportunity of migration of industries from china and to make India self-reliant by boosting domestic production and consumption.

THE INFRASTRUCTURE SECTOR - DEVELOPMENT, OPPORTUNITIES AND THREATS : DEVELOPMENT AND OPPORTUNITIES ;-

Infrastructure sector plays an important role in the growth and development of Indian economy .

The allocation of Rs.100 lakh crore for infrastructure development in next 5 years i.e. upto 2024 by the NIP announced by Central Government is a large step in the right direction to boost the economy.

More than Rs.19 lac crores will be spent on Roads, Highways and Transport Sector. The Budget also proposes accelerated development of highways.

Hence a long term sustained opportunity in the sector is envisaged .

THREATS;-

Major threat faced by the industry is imminent slowdown in the economy for 2020-21 and its aftereffects in subsequent years. The government response to the pandemic of COVID 19 and the need for coordinated monetary and fiscal policy actions will determine the speed of growth of economy. Further, constrained government revenue streams and lower tax collections may slow planned investment in infrastructure .

The businesses worldwide have been hugely impacted by the outbreak of COVID-19 epidemic which has resulted in significant reduction in economic activities across all sectors.

However the response of the Government is quite proactive and in right direction and Hence, the threats may ultimately turn out to be an opportunity.

However, The Company is serving government clients like NHAI, Ministry of Road Transport, State Government Road Development Corporations and local bodies.

These agencies have awarded long term contracts to the company which are time based and not directly linked with project progress and hence, there is no break in continuing contracts.

There is no disruption in the companys project activities, billing and claims for services even during the lock down period. The company has sufficient orders in hand to cater to next 2 to 3 years of projected turnover. Hence the company does not foresee any material adverse impact of Covid-19 on its current operations.

RISKS AND CONCERNS:

The Companys ability to foresee and manage business risks is crucial in its efforts to achieve favorable results. While management is positive about the Companys long-term outlook, it has been able to counter and overcome the possible short term risks.

Hence, your Company proposes to focus on its core strength in highways, mining and urban infrastructure to lower risks involved, and to focus in sectors where it has strong domain expertise.

A stretched working capital cycle and slow recovery of debts may be an area of concern, which is addressed by mitigating the risk of shortage of working capital finances by augmenting it provided by 20% of working capital as per RBIs guidelines on COVID emergency finance.

Management intervention and strong contract management shall reduce the risk of slower revenues receipts. The Company has also monetized a part of its non-core assets to reduce its debt burden by repayment of Term loans during the year and to save interest costs. The company has undertaken several cost saving measures and embarked upon total automation of its working and processes to rationalize its manpower costs and increase efficiency.

INTERNAL CONTROLS AND THEIR ADEQUACY:

Your Company has adequate system of internal controls to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and that the transactions are authorized, recorded and reported correctly. Such internal controls are supplemented by Internal Financial Control Manual and Programme of internal audits, review of documented policies, guidelines and its procedures. These are designed to ensure that financial and other records are reliable for preparing financial information and other reports and for maintaining regular accountability of the Companys assets. The internal auditors of your Company present their report on a quarterly basis to the Audit Committee of the Board.

A Management Information System covers major operating parameters and is monitored regularly by the Board of Directors. Any material change in the business outlook is considered and a response is prepared by the Management. Material deviations from planning and budgeting are reviewed on a quarterly basis by the Board for corrective actions.

NET WORTH:

As on 31st March, 2020, the Net Worth of the Company stood at Rs.3947.49 Lacs as compared to Rs.3367.72 lacs during the previous financial year. This was mainly due to profits for the year and increase in Equity Capital of the Company and issue of share warrants. There is significant change in the Net worth as compared to the previous financial year. The Book value of the equity shares of the company stood at Rs. 68.05 per share.

SECURED LOANS:

Total Secured Loans outstanding of the Company stood at Rs. 950.69 Lacs as against Rs.1598.13 Lacs for the previous year. This comprised of Bank working capital Rs.947.94 Lacs and Vehicle Loan of Rs.2.75 Lacs.

During this year there is decrease in secured loan on account of repayment of Balance due of LAP Term Loan out of Rs.10 crores of sanctioned loan to company. The company plans to further consolidate its finances by gradual reduction of loan to achieve a status of debt free company.

FIXED ASSETS:

The gross block of fixed assets stood at Rs.2731.76 Lacs as against Rs. 3148.14 Lacs for the previous year. The decrease is on account of sale of one of the building block and separation of Assets Held for Sale (Rs.29.69 Lacs) from Fixed Assets to Other Non-Current Assets.

CURRENT ASSETS: SUNDRY DEBTORS:

Sundry Debtors stood at Rs. 1466.15 Lacs, being decrease of about 35.20% as compared to previous year. Debtors are mainly due to project billings largely outstanding of last quarter of the year, pending approvals. With all clients being Government/ PSU Clients, and considering their procedure for approvals, the formal approval based recovery makes it a business practice to sustain higher levels of Sundry Debtors as a normal business feature. The Company however continues to make efforts to reduce the level of debtors constantly.

Note: The Company has provided for write off of Trade Receivables amounting to Rs. 429.22 Lacs outstanding for more than 6 months, which are pending approvals by the Client, without prejudice to the Claims against the Clients already made thereof, as a measure of prudent accounting policy.

CASH & BANK BALANCES:

The Cash and Bank Balances stood at Rs. 147.21 Lacs mainly consisting of balance with Bank and fixed deposits, being margins for Bank guarantees issued by the company.

LOANS & ADVANCES:

Current Loans and advances stood at Rs. 1081.07 Lacs (Previous year Rs. 704.31Lacs).

CURRENT LIABILITIES & PROVISIONS (EXCLUDING CURRENT MATURITY OF SECURED LOAN):

The current liabilities and provisions stood at Rs.1562.05 Lacs (previous year Rs.2327.60 Lacs). This mainly consists of Trade Payables of Rs. 301.02 Lacs, Statutory Liability of Rs 431.32 Lacs and other payables and provisions amounting to Rs.829.71 Lacs.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS:

The Company continues its continued committed importance on its Human capital. Your company enjoys cordial relations at all level.

During the year, the organization structure of all key functions have been reviewed and strengthened so as to facilitate delivery of business goals.

The Company has adopted Indian Accounting Standard (IND-AS), notified under the Companies (Accounting) Rules, 2015.

At the end of the Year 2019-2020, the break-up of Human Resource was employment of 182 Technical, 145 Non-Technical and 45 Supporting Staff, total being 372 number of staff.

DETAILS OF SIGNIFICANT CHANGES IN FINANCIAL RATIOS :

Particulars 2020 2019
Operating Ratio 25.62% 23.45%
PBIDT Ratio 24.38% 22.66%
PBT Ratio 13.29% 3.59%
PAT Ratio 10.71% 5.86%
Net Worth (Rs.) 3947.49 lacs 3367.72 lac s
Return on Networth 9.09% 3.93%
Return on Equity (PBT/Equity) 6.38% 2.40%
Interest Coverage Ratio 3.02 1.24
Debt Equity Ratio (Secured Loan/Equity) 0.24 0.47
Current Ratio 1.48 1.21
Debtors Turnover Ratio 217.55% 99.70%
Inventory Turnover Ratio 1974% 878%
EPS (Basic)* 6.58 2.38
EPS (Diluted)* 6.58 2.38

CAUTIONARY STATEMENT:

Statement in this Management Discussion and Analysis report describing the Companys objectives, projections, estimates and expectations may be ‘forward looking statements with the meaning of applicable laws and regulations. Actual results might differ.

Key Managerial Personnel & Leadership Te am

Sr. No. Name of Key Profession als Designatio n
1. Mr. Siddharth Sha h Whole Time Directo r
2. Mrs. Ankita Shah Non - Executive Directo r
3. Mr. Sandeep Batta Independent Director
4. CA Ashok Karwa Chief Financial Office r
5. Mr. S.C Gupta Sr. Quality Cum Material Expert
6. Mr. Amarendra Jaltare Senior Bridge Design Engineer/Vice President
7. Mr. Mahesh Utag e Resident Engineer
8. Mr. Prateek Thakkar Environmental Speciali st
9. Mr. Santosh Akotka r Senior Quantity Surveyor
10. Mr. Mohammad Abdu 1 Aleem Arzoo Team Leader cum Senior Highway E ng.
11. Mr. Nandkumar Sing h Team Leader
12. Mr. A.K. Goyal Team Leader
13. Mr. D. Nagendra Rao Senior Quality Cum Material Expert
14. Mr. A.K. Ismaili Resident Engineer
15. Mr. Ramashankar Jha Team Leader
16. Mr. Himanshu Dhari Sharma Senior Quality cum Material Engineer
17. Mr. Jivan Nikose Senior Bridge Design Engineer
18. Mr. Mahendra Suryawanshi Team Leader
19. Mr. A.K. Shrivastav Team Leader
20. Dr. Pratap Sing h Team Leader
21. Mr. Pramod Yadav Resident Engineer
22. Mr. Jitendra Awasthi Resident Engineer
23. Mr. Bhoomi Obul Redd y Team Leader
24. Mrs. Snehal Jaiswal Company Secreta ry
25. Mrs. Pooja Parekh Manager-Human Resources
26. Mr. Ranjeet Pande Manager-Admin
27. Mr. Mahendra Chako l e Manager-Tender
28. Mr. Pramod Wadibhasme Sr. Manger - Highway
29. Mr. Subhash Kolhekar Manger - Electrical Engineer
30. Mr. Sameer Rokde Sr. Manager-Highway
31. Mr Chandrashekhar Baseshankar Senior ManagerAccounts
32. Mr .Tapan Suryawan shi Manager-EDP

Place: Nagpu r

Date: 1st September, 2020