Bajaj Steel Industries Ltd Management Discussions

India is the fastest growing economy in the world. In the FY 2022-23, its gross domestic product or GDP grew by 7%. However, in the just-concluded scal year 2023-24, its economy has been expanding at an even faster pace. The global economy showed resilience in FY 2023-24, recovering modestly at an estimated growth rate of 3.2%, according to IMF projections. In the FY 2023-24, the GDP expanded at 7.6%. In comparison, other major economies are projected to grow at a much slower clip this year. According to the International Monetary Fund (IMF), Chinas GDP is expected to grow at 4.6% US at 2.1%, France at 1%, Japan at 0.9% and the UK at 0.6%. The Interim Union Budget for FY2024-25 emphasises on infrastructure development and inclusive growth. It has allocated 11.1 Lacs Cr. or 3.4% of the GDP for capital expenditure, 16.9% increase over the previous years estimates. The manufacturing sector has played a key role in driving Indias economic expansion. With strong backward and forward linkages, it has generated employment opportunities, fostered innovation, and improved its contribution to around 17% currently. This contribution is boosted by rising investments and initiatives like Make in India.

I. INDUSTRY STRUCTURE & DEVELOPMENT

The Company is aggressively expanding its business activities and continuously looking for the possible business avenues across all the concerned divisions. The forward looking and market oriented approach of the management has made this organisation a multi-product engineering Company over six decades since its inception.

From the year 1961, the Company manufactures / sells throughout the world machineries / system of Cotton Ginning, Cotton Cleaning, Cotton Conveying, Cotton Humidi cation System, Cotton Baling Presses, and allied machinery for Saw Ginning, Double Roller Ginning, Rotary Knife Rotobar Ginning, Single Roller Ginning, delinting & decorticating machinery, automation etc., and also manufactures spare-parts for Cotton Ginning

Equipments, delinting & decorticating machinery. From past two decades, the Company is diversifying its product portfolio and added the below products in addition to its core products:

Pre-Engineered Steel Buildings

Electrical Panels, and other ElectronicEquipments

General and Heavy Engineering Parts etc.

Passenger Boarding Bridge,

Duct System, Conveyors, Steel Doors, Suction

Fans & Blowers, Fire Fighting and Hydrant

Systems.

Further, under the strong leadership team, the Company is successfully working across the following six (6) divisions and is producing various engineering products:

Ginning Machinery Division

The Ginning Machinery Division of the Company manufactures and supply machineries, equipment, spare parts and other allied equipment related to cotton ginning and processing units of all the four cotton ginning technologies i.e. Single Roller Gins, Double Roller Gins, Rotary Knife Roller Gins (Rotobar Gins) and Saw Gins for different varieties of seed cottons, under one roof and has achieved the status of largest ginning machinery manufacturer in the world. The Company is having distinction of only company in the world with capabilities for manufacturing Cotton Ginning Machines for all the four major cotton ginning technologies being used in the world.

The Continental Eagle Corporation (CEC) Division that is a part of the Ginning Machinery Division manufactures & supply all the products based on CEC, USA design or Improved designs thereof including Saw Gins, Rotobar, Delinting, Decorticating, Cotton Cleaning, Cotton Conveying, Cotton Conditioning, Conveyors, Rotobar gin, spare-parts, high capacity humidi cation systems, dryers, and all other equipments required to be tted in saw gin, Rotobar gin based factories and Delinting and decorticating factories.

The Company is expanding its footprints in the export market of these machineries. Recently it has captured/tapped new geographical areas/countries like Brazil, Europe, and Mexico etc. Thus, in the medium and long term, the Company expects to enhance its export business for this division, contributing to its growth in a positive manner, due to existing exports to more than 20 countries and addition of above new markets i.e. Brazil, Europe, and Mexico etc.

Infrastructure Division

The Infrastructure division of the Company is engaged in the business of design, fabrication, manufacture and erection of Pre-engineered buildings, Civil Industrial Buildings, Warehouses, K-houses, solar module mounting structures, etc. This division has in-house design and engineering capabilities to scale new frontiers of technical excellence and is driven by its own sales, marketing, technical, and support team. The Company also provides customized solutions for pre-fabricated buildings, PEB industrial shed, pre-engineered school buildings, pre-engineered warehouse structures, agricultural warehouses, stadium, pre-engineered industrial sheds for pharmaceutical and food processing units etc. Over the period, it has successfully executed around 600 steel building projects (domestic and overseas). It is also executing EPC projects for clients like Indian Oil Corporation Limited., Maharashtra State Warehousing Corporation, Nuclear Fuel Complex and Maha-Metro projects etc.

Further, due to cost effectiveness, speed of construction and flexibility in design, customers are getting more inclined towards PEB buildings and structures rather than going for conventional civil structures. The Company is also making sincere effort s to tap the infrastructure market of Dubai and Middle East region and down the line these effort s are likely to fetch major client base of the said region in the next 3 to 5 years of the business.

Electrical Division

The Company has in place Electrical Panel Division that manufactures & sells Electrical Panels including Power Control Centres, Motor Control Centres, APFC Panels, LT & HT Panels, IMCC Panels, Drive Panels, PLC & SCADA Panels, AMF Panels, Synchronization Panels, Control Panels, Lighting Panels, Power Distribution Boards, Customized Panels and Panel Cabinets. The Company also manufactures and supply Bus Truncking System, Intelligent Motor Control Centre, SVGR System for Harmonic Control etc. The said division of the Company has gained incredible reputation due to its quality products and unique designs. Further, the said Division has manufacturing/quality certi cations such as IEC 61439 Part 1 and 2, UL certi cation and IS 8623 certi cation. During the FY 2024, the Company has witnessed significant growth in the revenue of the electrical division comparing to previous financial year. The growth primarily stemmed from a favourable business environment and a strategic approach tailored to serve the market eectively through appropriate channels and product oerings.

Heavy Engineering Division

The Company is also engaged in the manufacturing and supply of heavy equipment and structural fabrication for various steel and power plants and provides other customised fabricated structures, as per the clients requirement. The heavy equipment division (HED) is capable enough to fulfill the customized fabrication/structural requirements of any original equipment manufacturer (OEM) belonging to various sectors like Steel, Cement, Mineral, Power etc. Further, the said division is also involved in the manufacturing of its new product line of Aerobridges and Passenger Boarding system. Due to the availability of infrastructure and the Companys expertise in heavy fabrication and designing, we have started manufacturing and fabricating the components for the Torre-faction plants on the design provided by the customers that enhances the quality of biomass by converting it into a more energy-dense, storable, and transportable form. This business vertical of Biomass, Biofuel and Pellets will open potential avenues for the Company to enter into the new business domain that will significantly elevate the Companys overall revenue over the coming period.

Fire Fighting Division

This division is carrying the business of designing and Installation of Fire ghting systems i.e. Fire extinguishers, Hydrant systems, Sprinkle systems and Fire Diversion Systems etc. With the increased compliances of the relevant laws for re safety, the demand in this Industry is expected to grow.

Other Products

The Company also manufactures various ancillary and other products such as Specialty Conveyors, Oce Furniture, Steel Doors, Industrial Fans and Impellers, Hydraulic Cylinders, Ducting System, cutting of steel and other material on job-work basis and also for the Internal purposes. Further, the Company is putting its effort s in growing the business of these products.

II. FINANCIAL OVERVIEW

(Rs. In lakhs)

Particulars	Standalone		Consolidated
	31.03.2024	31.03.2023	31.03.2024	31.03.2023
Net Revenue from Operation	50,837.28	50,384.15	56,660.56	56,354.84
(Including Other Income)	44,404.59	42.841.53	48,700.02	47,411.54
Less: Expenditure
Operating Profit (PBIDT)	8,046.58	9,217.56	9,614.64	10,649.59
Less : Interest	464.57	721.82	464.57	721.82
Depreciation	1,149.33	953.12	1,189.53	984.47
Profit before Tax & Exceptional item	6,432.68	7,542.62	7,960.54	8,943.30
Add : Exceptional Item	-	456.35	-	456.35
Profit/Loss Before Tax	6,432.68	7,998.97	7,960.54	9,399.65
Provision for Taxation:
Current Year :	1,630.76	1,975.00	2,007.99	2,313.15
Deferred Tax :	51.44	336.29	51.04	336.00
Profit/Loss for the year	4,750.48	5,687.68	5,901.51	6,750.50
Other comprehensive income/ Loss for the year	13.53	(19.03)	13.53	(19.03)
Profit/Loss after other comprehensive income	4,764.01	5,668.65	5,915.04	6,731.47
Earnings Per Share Basic & Diluted	91.62	109.01	113.75	129.45

 

Ratios on Standalone Basis	FY 2023-24	FY 2022-23
Operating Profit Margin (%)	16.00	19.00
Net Profit Margin (%)	9.34	11.29
Debt Equity Ratio (x)	0.19	0.15
Interest Coverage Ratio (x)	1.55	2.06
Return on Equity (%)	18.00	26.00
Current Ratio(x)	1.62	1.96

II. OPPORTUNITIES AND THREATS

Opportunities

Products Expansion through Research &

Development

The Company has carried out R&D over Cotton Seed Dryer, Gin Moisture Management System and Cotton classier to e effively detect and reduce moisture content in raw cotton and this has resulted into following benefit:

Improved cottonseed procuring capacities;

Enhanced quality and quantity of output products such as oil and cake; and

Reduction in Free Fatty Acids

Additionally, the Company has successfully manufactured and supplied passenger boarding bridges, an essential equipment at airports that enables passengers to board aircraft seamlessly. These new product offerings is expected to contribute to the Companys growth and has diversified its presence in various markets.

Technology

The Company being into manufacturing domain is driven by the innovations & technology and research thereof. The innovation and technology has become a sharp edge weapon for the Company that helps in tapping the global market for its multi engineering products and is able to bring more revenue across all the business divisions.

The Ginning Machineries/Equipments are manufactured under Companys own developed models / drawings and technology acquired from Continental Eagle Corporation, USA. Further, the Company has Technical Collaboration with Central Institute for Research on Cotton Technology (CIRCOT) that helps the Company in terms of continues research and innovation.

Government Policies

The Governments at the Central and State levels, respectively, have put in place favourable policies that aid the overall development of the textile industry in India.

Threats

Forex and Currency Fluctuation: The Company is an Export oriented organisation that supplies its products to the customers throughout the world. Therefore, forex market and fluctuation thereof plays a pivotal role in the Companys business considering its export front, which becomes a threat for the Company in the situation of uncertainties created by trade war or Diplomatic relations.

Geographical Insecurity: The Company is working across different geographical sphere. Its containers, shipments passes through various commercial corridors such as air-ways and sea-ways, which occasionally results into transit turbulence that occurs due to global disagreement, con icts or Maritime piracy in International waters.

Technological Obsolescence: The significant efforts are being made on a continuous basis to align the existing technology with the latest technological innovations. Technological progress can make certain technologies or manufacturing methods outdated. It is therefore imperative for the Company to allocate resources for research and development (R&D). This will enable them to keep up with technological advancements and stay ahead in the market. To overcome this kind of threat, the Company is continuously undertaking innovation, research and development practices. Cotton Production: The Cotton Ginning business is dependent upon the condition of cotton production and climate during the year. If cotton production is adversely affected, it may affect the operation of the related division of the Company.

Fluctuating Cotton Prices: Cotton prices can be volatile due to various factors such as weather conditions, international demand, and market dynamics. The price fluctuations may impact the pro tability of ginning and pressing business. The sudden changes in cotton prices can create challenges for the business, aecting its revenue, operational costs, and overall financial stability. As a result, ginning and pressing business need to carefully monitor market trends and adopt strategies to mitigate the risks posed by price volatility in order to maintain their competitiveness and sustainability in the industry.

IV. RISK & CONCERNS

Every Industry is exposed to certain business risk such as procurement risk, financial risk, market risk etc., and the Industry makes sincere effort s to address such risk from time to time, to protect its business from the consequences of these risk. However, considering the present situation and market outlook, there does not seem to be any major risk, threat and concern for the business for the FY 2024-25.

The Company has implemented a thorough and well-rounded risk assessment, mitigation, and management procedure. The Board is periodically presented with the Companys risk mitigation strategies for evaluation and enhancement.

V. MATERIAL DEVELOPMENT IN HUMAN

RESOURCES

The Company continues to make a conscious effort to enhance the skills of its people through its comprehensive Learning and Development calendar and challenging projects that push its people to think and act beyond their preconceived mental boundaries.

To sustain the growth momentum of the expanding business operations, the HR team continues to work on enhancing the leadership pipeline within the Company. Also, the HR team worked on further digitising the HR function to build speed, efficiency and transparency in the HR processes.

The Company maintained cordial relations with its employees. As a result, the Company did not lose a single day of business operations owing to sta-related issues.

Outlook

The global economy will continue to grow but at a slow pace. Much of the weakness is attributable to the weak economic environment in China and Europe. However, emerging economies will do better to the extent of 4% in 2024 and beyond. However, the prime risks remain, namely a renewed uptick in consumer price inflation and increasing geopolitical risks.

Initiatives like Atmanirbhar Bharat and Make-in-India have also spurred demand for the heavy engineering and other engineering products used in transportation and Industrial applications and generally facilitated higher institutional sales.

The Company is aggressively expanding its business activities to become a multi-product engineering organisation, guided by its vision to lead the industry with innovation and sustainable growth. It is further enhancing its export footprint for the machinery division by entering new geographies and down the line in next three to ve years the Company will achieve substantial increase in the turnover.

Internal control system & adequacy

The Companys internal control mechanism is well documented. It is a common practice in the Company to lay down well-thought-out business plans for each year. From the annual business plan, detailed budgets for revenue and the capex for each quarter are determined. The actual performance is reviewed in comparison with the budget, and deviations, if any, are addressed adequately.

The Company also has an internal audit system commensurate to the size and volume of the business. The internal audit programme covers all the functions and activities of the Company. A statutory compliance audit team is constituted to check compliance in all areas and reports to the management. This facilitates corrective measures to be taken eciently and wherever required. The Audit Committee of the Board of Directors meets every quarter to review the reports of the Internal and Statutory Audit and to verify all financial statement for ensuring compliance.

Environment Health and Safety

The Company is aware of its role in protecting the environment. It works towards minimising its environmental impact by using sustainable practices and technologies.

The Company has been certified under ISO 14001:2015 and upholds various environmental standards. Aggressive Plantation activity is being carried out by the Company across all its Industrial divisions to protect and prevent the vicinity from the Industrial impacts of the various Industrial units.

Cautionary Statement

The Management Discussion and Analysis Report includes statements that pertain to the Companys objectives, projections, estimates, and expectations. It is important to note that these statements may be considered ‘forward-looking statements under applicable laws and regulations. It should be understood that the actual results may differ from what is either explicitly expressed or implied in these statements. Various factors can significantly impact the Companys performance, such as economic developments within the country, demand and supply conditions in the industry, changes in government regulations and tax laws, as well as other factors including litigation and industrial relations.