B.C. Power Management Discussions


ANALYSIS REPORT

This Management Discussion and Analysis Report for the financial year ended 31st March 2023.

INDUSTRY STRUCTURE AND DEVELOPMENTS:

The metal industry is one of the most flourishing industries and one of the core industries of India contributing more than 2% to the total GDP of India. The metals industry meets the requirements of a wide range of important industries such as engineering, electrical and electronics, infrastructure, automobile and automobile components, packaging etc. The metal industry consists of two major groups: ferrous metals and non-ferrous metals.

Non-ferrous metals, which include aluminium, copper, zinc, lead, nickel and tin, are used to make alloys, castings, forgings, extrusions, wires, cables, pipes, etc., and find their application in a number of sectors such as agriculture, infrastructure facilities like power plants, automobiles, railways, telecommunications, building and construction and in engineering and chemical plants.

Ferrous metals primarily consist of iron and different varieties of steel. Indian steel industry has shown strong performance in the recent past in terms of production, capacity utilisation, exports and consumption. India is now a major competitor among steel producers in the world.

Indias key advantages in the sector include a liberalised overall policy regime and reduced customs duty on primary and secondary metals, growing market demand, favourable conditions for production, presence of related and supporting industries and state support for helping companies improve performance and stimulating industry environment. India is the second largest producer of aluminium after China. Governments projects like Make in India and Smart City are expected to give huge impetus to the demand for non-ferrous metals in the nation.

OPPORTUNITIES AND THREATS

Opportunities:

Key ingredients for the growth of the non-ferrous industry are strong demand, availability of raw materials, high entrepreneurial quotient of the country, development of the ancillary industry, technology, etc. The prevalence of most of these ingredients in India, provides strong and sustainable growth potential for the non-ferrous metals industry. In terms of demand, India has strong potential given that the country is

expected to be among the fastest growing large economies. Per capita consumption of non-ferrous metals in India is very low as compared to both developed and developing economies, thus leading to tremendous growth potential in the years to come. Furthermore, the boost to the Indian manufacturing sector due to the governments campaign Make in India is expected to provide an impetus to non-ferrous metals consumption.

The Make in India initiative has provided a boost to investments by allowing 100 per cent FDI in major areas of the infrastructure sector such as railways, roadways, ports and inland waterways, aviation, and power. Favourable investment policies will facilitate the growth in the sector which can increase the demand of non-ferrous metals as this sector consumes these metals in large volumes. Further, the enhanced growth in the 25 identified sectors due to the initiatives and policy changes under Make in India is expected to have a direct positive impact on the non-ferrous metals industry as these metals have widespread applications in these sectors.

Even though non-ferrous metals find applications across the spectrum, there are a few key sectors that contribute to the vast chunk of the consumption. These sectors, namely

b) transport (automotives),

c) electricals and

d) construction

have widespread application of the nonferrous metals and are major drivers of consumption led growth. Additionally, the steel sector consumes the majority of Zinc produced for the process of galvanisation.

The non-ferrous metals industry is witnessing a paradigm shift in the way metals will be consumed in the future. With steady growth in demand, producers should move beyond traditional strengths in the electricals, automotive and building segments and shift to emerging applications offered by defence and aerospace, hybrid and electric vehicles, railways, etc.

Threats:

The non-ferrous metals industry has following threats for which Government support is required to provide a level playing field for healthy growth in the coming years. Nonferrous metal industry is bracing for challenges such as:

• Environment issues

• Improper duty structure

• Dumping of goods under FT A

• Poor infrastructure

• Inadequate quality consciousness

• Rapid capacity expansion of input minerals

• Availability of indigenous technological expertise and need for cost reduction.

RISKS & CONCERNS AND INTERNAL CONTROLS SYSTEMS AND THEIR ADEQUACY:

The non-ferrous metals industry is facing the following challenges and your Company has adequate internal control system for mitigating their risk:

a. Fluctuation in non ferrous metal price: The prices of non-ferrous metals, such as copper, nickel, and gold, are determined by the London Metal Exchange (LME) and other international markets (hereinafter collectively referred to as "LME reference prices"). LME reference prices are influenced by various factors, including international supply and demand balances, the state of the foreign exchange, political and economic circumstances, speculative trading, and competition with substitute materials. The state of fluctuations and the period effected by these can have either positive or negative results on the business performance.

We use commodity futures to hedge the risks of fluctuations in non-ferrous metal prices

b. Fluctuation in exchange rates:

Not only the import prices of raw materials, such as copper concentrates and nickel mattes, but also the domestic prices of non-ferrous metal ingots are determined based on LME reference prices in U.S. dollars. Consequently, depending on the state of fluctuations in the foreign exchange and when they occur, it could have a positive or a negative effect on the business performance.

We responds to fluctuations in the foreign exchange rate as necessary through forward foreign exchange contracts and the utilization of foreign currency accounts.

c. Changes in Laws and Regulations: The business activities are exposed to various political and economic risks, changes in laws and regulations concerning the environment, labor, taxation, currency control, trade and exchange rate fluctuations.

We are ensuring that each decision is based on a careful assessment of risks inherent concerned to Laws and Regulation.

Further, the Company has a proper and adequate internal control system to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and those transactions are authorized, recorded and reported correctly. The internal control is exercised through documented policies, guidelines and procedures. It is supplemented by an extensive program of internal audits conducted by Internal Auditor appointed in pursuance of applicable Laws. The audit observations and corrective action taken thereon are periodically reviewed by the audit committee to ensure effectiveness of the internal control system. The internal control is designed to ensure that the financial and other records are reliable for preparing financial statements and other data, and for maintaining accountability of persons.

MARKET REVIEW:

Global Economy:

The global economy faced several challenges in year 2022-23, starting from the initiation of the Russia-Ukraine war, supply chain disruption, high inflation, and high key policy rates by the central banks. Global inflation remained a matter of concern in most of the economy, which reached a multi-year high of 8.7% in year 2022-23. Monetary tightening by the central banks across the world helped bring the trajectory downwards. The unwinding economic events weighed down global economic growth prospects. World economic growth in year 2022-23 is estimated to have declined from 6% in CY 2021-22 to 3.4%, as per IMF. Commodity prices eased the early gains of year 2022-23 amidst supply chain issues and Chinas Zero Covid policy due to the demand slowdown. Metal prices, however, stabilized following Chinas reopening and measures to revive its economy and retracing inflation in advanced economy like USA and EU.

Global consumption growth of these metals registered a slowdown in the first half of year 2023-24 and, going forward, growth is expected to remain muted in the current calendar year as well.

India Economy:

Earnings of domestic non-ferrous metal industry players remain under pressure in the ongoing fiscal amid weak demand.

The earnings of the industry would remain under pressure in FY2023-24, after a lackluster performance in the last fiscal. Significant metal price corrections remain the key headwind affecting the margins, with no immediate relief in sight.

The moderation in earnings, combined with the committed expansion plans of the players, is expected to increase the industrys leverage in FY2023-24.

OVERALL REVIEW OF OPERATIONS OF THE COMPANY:

The company is in the business of Manufacturing and Trading of Ferrous and Non Ferrous Metals. The Company has achieved a turnover of Rs. 511.04 Crores. The operational profit was bit reduced on account of expending customer base by selling goods at least margin.

OUTLOOK:

The company is taking all efforts to improve the quality of its products, timely delivery, to get more orders at competitive rates. Due to bulk orders and bargain power Company is able to quote better rates and maintain high quality & productivity of the products traded. Barring unforeseen circumstances the company is confident of achieving better results in the current year.

In trading segment also the Company is emphasizing on dealing on quality product, timely delivery of the goods and after sale services.

FINANCIAL AND OPERATIONAL PERFORMANCE:

The financial statements have been prepared in compliance with the requirements of the Companies Act, 2013 and Generally Accepted Accounting Principles in India. Please refer Directors Report in this respect.

HUMAN RESOURCES/INDUSTRIAL RELATIONS:

The Companys HR philosophy is to establish and build a high performing organization, where each individual is motivated to perform to the fullest capacity to contribute to developing and achieving individual excellence and departmental objectives and continuously improve performance to realize the full potential of our personnel.

SIGNIFICANT CHANGES

Details of change significant changes in key financial ratios during the year as compared to previous year are given hereunder:

Ratio Numerator Denominator March 31, 2023 March 31, 2022 Variance Reasons
Current ratio (in times) Total current Assets Total current liabilities 1.53 1.97 -22.35%

Debt-equity ratio (in times)

Long term liabilities +short term borrowings

Total equity

-

-

#DIV/0!
Debt service coverage ratio (in times) Earnings before debt service = Net profit after taxes + non cash operating expenses + Interest + Other non cash

adjustments

Debt service = Interest + principle repayments #DIV/0! #DIV/0! #DIV/0!
Return on equity ratio (in %) Profit for the year Average total equity 1.91 4.87 -60.77% Decrease in

Ratio

primarily

due to

decrease in

profitability

because of

poor

market

conditions

Inventory turnover ratio (in times) Revenue from operations Average total inventory 26.78 18.35 45.93% Increase in Ratio is primarily on account of Decrease in average Inventory
Trade receivables turnover ratio (in times) Revenue from operations Average trade receivables 127.48 14.87 757.26% Increase in Ratio is primarily on account of Increase in

Receivable

realisation

Trade payables turnover Purchase

Expenses

Average trade payables 47.66 37.12 28.40% Increase in Ratio is primarily on account of Decrease in average Trade Payables

Net capital turnover ratio

Revenue from operations

Average working capital (Total C.Assets (-)Total C.Liabilities)

1.67 2.25 -25.96%

Decrease is primarily on account of Decrease in sales in the current year

Net profit ratio (in %) Profit for the year Revenue from operations 0.74 1.48 -49.75% Net Profit Ratio is lower due to decrease in

profitability because of poor market conditions

Return on capital

employed (in %)

Earning before tax

and finance cost

Capital employed

Total Assets (-) Current Liabilities

0.03 0.06 -44.20% Return on

capital

Employed

is lower

due to

decrease in

profitability

because of

poor

market

conditions

Return on Investment Inome

generated

from

invested funds

Average invested funds in treasury investmens - - #DIV/0!

CAUTIONARY STATEMENT:

Statements made herein describing the Companys expectations or predictions are "forwardlooking statements". The actual results may differ from those expected or predicted. Prime factors that may make a difference to the Companys performance include market conditions, input costs, govt, regulations, economic development within/outside country etc.