Artson Engineering Ltd Management Discussions.

Forward-looking Statements

This document contains certain forward-looking statements based on the currently held beliefs and assumptions of the Management of ARTSON Engineering Limited, which are expressed in good faith, and in its opinion and judgment, are reasonable. For this purpose, forward looking statements mean statements, remarks, or forecasts that address activities, events, conditions, or developments that the Company expects or anticipates which may occur in the future. Because of the inherent risks and uncertainties in the social and economic scenarios, the actual events, results, or performances may differ materially and substantially from those indicated by these statements. Artson Engineering Limited disclaims any obligation to update these forward-looking statements to reflect future events or developments.

FY 22 outlook - a new beginning

Growth forecast for India is predicted to be around 8.3% from the earlier 10.1% as estimated in April, as the economic rebound in early part of this year collapsed amidst a devastating resurgence of corona virus infections. Following deteriorating pandemic-related developments, the Reserve Bank of India announced further measures to support liquidity provision to micro, small, and medium enterprises and loosened regulatory requirements on the provisioning for non-performing loans for banks and NBFCs.

Economic activity in FY22 will benefit from policy support, including higher spending on infrastructure, rural development, health, and a stronger-than-expected recovery in services and manufacturing, The Construction and Manufacturing sector outlook is "improving" for FY22 from "Negative" for FY21. Manufacturing Industry perceives higher cost pressures mainly stemming from purchase of inputs and salary expenses and some increase in selling prices during Quarter 1. In Q2 of FY 22, it is expected that production volumes, new orders, and job landscape will strengthen and an environment of optimism on the overall financial situation will prevail provided the pandemic does not re-surface as a third wave.

Enhanced outlays for key sectors like defense services, railways, and roads, transport and highways would provide impetus to steel consumption, which is expected to grow by 10-12% in FY22 to cross 100 million tons for the first time ever. An up-cycle in steel prices is expected to continue in FY22. Stimulus package unveiled by the Government will keep demand for steel high. Steel is a major raw material in operations of your Company and the dynamics of steel market will always have an impact.

Industrial Infrastructure sector is likely to recover post registering two consecutive years of revenue decline. The sectors execution profile was hindered in FY20, majorly on account of the general elections coupled with government changes in few states resulting in changes in the priorities. This, coupled with unseasonal rainfall and impact of pandemic, led to sector revenue falling 7.1% y-o-y during the year.

However, contracting Companies have been able to address the supply side issues such as manpower mobilization and logistics for raw material procurement in a quicker pace than anticipated, resulting in a faster than expected recovery in the order book execution. This is expected to continue in FY22, based on the union budgets proposal of higher allocations for infrastructure than in the past few years and that sector revenue is expected to grow by 15%- 20% YoY in FY22. Artson is now focused on tapping suitable business opportunities in the EPC sector.

The Oil Storage Tank market is anticipated to showcase moderate growth during 2021-2024, owing to increased demand for crude oil and gas and growing expenditure in onshore and offshore oil operations across India.

The Companys unit at Nashik is involved in manufacturing of complex process equipment such as cryogenic vessels, columns and large and high-pressure heat exchangers and other pressure vessels for process plants Space, Hydrocarbon and Oil and Gas industry. Precision fabrication in different materials such as Carbon Steel, Stainless Steel, Titanium and other specially cladded plates is handled from this manufacturing facility.

Heavy structural fabrication is undertaken at the work center located at Nagpur, which caters to fabricated structure requirements for the metallurgical, power, and nuclear sectors.

Several new prospects in manufacturing process vessels, heat exchangers, columns and industrial structures are visible in the near future. Your Company, being one of the key players in these sectors, expect to be largely benefited from these opportunities. The Company is also embarking on a drive to upgrade its manufacturing facilities at Nashik and Nagpur, to retain its competitive advantage and market leading position.

Risk Management

The major identified risk areas for Artson are input cost pressure, contract execution delays due to pandemic, stretched cash flows and personnel. The Company also seeks to protect its stakeholders interests through a robust Project Risk Management (PRM) framework enabling it to match risk profiles with the expected returns before making any financial commitment.

The contracts cell of the Company oversees the risks that may have adverse effect on the project cost and time schedule. The Operations and the Business Development teams of the Company, takes necessary steps to mitigate the risks by prudently bidding for tenders, considering, the various risks which are likely to be involved in project execution and making the business terms clear with the client before taking up the project. The Project Review Committee of Board periodically monitors, evaluates, and reviews strategy to eliminate and minimize risks in coordination with the respective departments.

Environmental Protection and Sustainability

As the Company operates in an increasingly resource-constrained world, being environmentally conscious and efficient are keys to its operations. The Company has a Corporate Environment, Health, Safety and Quality (EHSQ) Policy to articulate, guide, and adopt an integrated approach towards implementing EHSQ objectives and the Company remains committed towards the said policy. These established systems certified by reputed certifying agencies have helped to monitor and manage our operations systematically, safely and in an environment- friendly manner. The Company continues to abide by regulations concerning the environment by allocating adequate investment and resources on a continuous basis to adopt and implement pollution control measures. Our continuous endeavor to go beyond compliance and conserve natural resources helps to march towards attaining excellence in environmental management and efficient and sustainable operations as well.

Discussion and Analysis of Financial Condition and Operational Performance

The financial position as on March 31,2021, and performance of the Company during the FY ended on that date are tabulated hereunder:

Overview of our results of operations:

Amount (Rs. in Lakhs)

Particulars 2020-21 2019-20
Gross Turnover (including Other Income) 15232.17 16958.87
Profit before Interest and Depreciation (EBIDTA) 613.15 1805.96
Finance Charges 1018.17 1002.07
Depreciation and Amortization 106.16 181.23
Total Expenditure 15743.35 16336.21
Net Profit Before Tax (PBT) -511.18 622.66


Amount (Rs. in Lakhs)

Particulars 2020-21 2019-20
Less: Tax expense -56.7 -696.37
Net Profit After Tax (PAT) -567.88 -73.71
Other Comprehensive Income 7.07 5.99
Total Comprehensive income -560.81 -67.72
Balance of Profit brought forward 146.71 190.25
Balance available for appropriation -414.10 146.71
Surplus carried to Balance Sheet -414.10 146.71


Particulars 2020-21 2019-20
Total Income 15232.17 16958.87
EBITDA 613.15 1805.96
EBITDA as % of total Income 4.03% 10.65%
PAT -567.88 -73.71
PAT as % of total Income -3.73% -0.43%

In FY 2021, Company registered a total revenue from operation of 15,028.21 lakhs (FY 2020: Rs.16,300.21 lakhs), a 8.2% decline in growth over previous year. The reduction in total revenue was largely due to Covid-19 related lock down for 47 days, which has resulted in stoppage of work. This also resulted in cascading effect to EBIDTA year on year.

In FY 2021, the decline in cost of depreciation by 41.4% to Rs.106.16 lakhs (PY: Rs.181.23 lakhs) is due to change of depreciation method from Written Down Value to Straight-Line Method.

Internal Control System and Their Adequacy

The Companys internal control system is commensurate with the nature of its business and the size and complexity of its operations, which provide among other things, reasonable assurance of authorization, recording and reporting of the transactions of its operations in all material aspects. The internal control system is managed through continuous internal audit by outside professionals, duly supported by respective teams. The audit is carried out through an internal audit plan, which is reviewed in consultation with the Audit Committee, which reviews the adequacy of internal control checks in the system across all significant areas of the Companys operations. The Audit Committee also meets the Companys Statutory Auditors to ascertain their views on the financial statements, financial reporting system, internal control system and compliance to accounting policies and procedures. Significant observations made in the internal audit reports on internal control process improvements and the status on implementation of recommended measures are presented to and reviewed by the Audit Committee and the Board of Directors. The Company also has a documented comprehensive internal control manual for all the major processes, viz, payroll, contract labour, human resources, procurement and purchase of material, fixed asset, inventory control, cash management and foreign exchange transactions, etc., which have been designed to provide reasonable assurance with regard to recording and providing reliable financial information, complying with the applicable statutes, safeguarding of assets from unauthorized use or losses, authorization of transactions and adherence to corporate policies.

Human Resources & Industrial Relations

The human resources (HR) strategy at Artson is focused on introducing a performance-driven atmosphere in the Company, where innovation is encouraged, performance is pursued, and employees are motivated to realize the Companys goals. The Companys HR department co-creates all HR strategies along with the Senior Management and the Board to influence change, attract talent and build capabilities. The HR department responds to varied human resources needs of the Companys business to enable the human strategic advantage.

Talent Development and employee engagement

Key components of talent development at the Company are initiating various skill and leadership development program as well as creating a culture of continued employee engagement. During the year, the Company organized 150 training programs with a total attendance of 142 participants, covering 441 Training Man-days. Safety, Personality & Leadership development, and Statutory procedures were some of the key topics covered during these programs.

Talent Diversity

Artson aims to create healthy talent and gender diversity. The Companys human capital comprises of 178 employees (9 women) across its manufacturing units and at various construction sites. 50% of the Companys human resources is below 35 years. Artson is able to maintain an average employee tenure of 4 years and 5 months with overall average experience of 13 years and the annual attrition rate has been 24.3% in FY21. About 59% of the Companys work force comprises of technically qualified as well as engineers such as BE, B Tech, MBA, DCE, DME & ITI.