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.
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