Bharat Wire Ropes Ltd Management Discussions.

1. Overview:

The objective of this report is to convey the Managements perspective on the external environment and steel industry, as well as strategy, operating and financial performance, material developments in human resources and industrial relations, risks and opportunities and internal control systems and their adequacy in the Company during the financial year 2020-21. This report should be read in conjunction with the Companys financial statements, the schedules and notes thereto and other information included elsewhere in the Integrated Report. The Companys financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) complying with the requirements of the Companies Act, 2013, (Act) and regulations issued by the Securities and Exchange Board of India (SEBI), each as amended from time to time.

2. Macroeconomic condition and Economic Outlook:

Global Economic condition witnessed sharp downfall of growth during the year 2020-21 as governments in both developed and emerging economies took measures to contain the spread of the COVID-19 virus.

The accelerating rollout of COVID-19 vaccines in many advanced economies has set the stage for rapid recovery. Global economy isexpected to recover to its pre-pandemic level of output in 2022-23, the emerging-market and developing economies are expected to take until 2023-24 to recover to the pre-pandemic level.

3. Indian Economy:

India witnessed a gradual resumption of economic activity in recent past. The initial recovery was driven by government spending on infrastructure, exports and rural economy. The recovery gained momentum since August 2020. However, the growth projections for FY 2021-22 have been revised to be below 11% due to the acute resurgence of the virus in the country, as many cities and states went into lockdown. While the growth will depend upon the trajectory of the pandemic, the overall impact on the economyis expected to be less severe than last year.

However, emerge of second wave of COVID – 19 pandemic and local lockdowns announced by various state governments from time to time from March 21 will have further adverse impact on the Indian economic in general and on the Company in particular during the FY 22.

India is expected to witness a full economic recovery FY 2022-23 driven by

(a) ongoing vaccination supporting the current recovery momentum;

(b) restart of investment cycle with significant spending on infrastructure and

(c) continued recovery in consumption supported by urban demand.

4. Industry Structure and developments:

Indias steel industry has also suffered the production loss due to lockdown last year and recovered gradually since then, initially driven by export followed by gradual recovery in domestic demand. It has been witnessed that Steel & Wire Manufacturing Industry is growing very fast. The demand of wires rope is expected to increase in the years to come. Steel Wire Rope industry in India has prospered owing to growth in infrastructure activities and demand in industrial sector. The primary growth drivers for steel wire ropes in India have been infrastructure development, increased industrial activity, enhanced emphasis on shipping and port sector along with growth in the mining industry. The resurgence in the Oil and Gas industry is expected to increase the number of oil rigs which will further add impetus to the growth of steel wire rope industry.

5. Our Business:

Wire ropes are a value-added product, formed from wire rods, which falls in the long steel category of steel products. Over the years, with significant improvement in the strength of steel wire ropes manufactured, the usage of these steel wire ropes has significantly increased in various diverse applications.

Wire rope consists of several strands of metal wire laid (twisted) into a helix. The term "cable" is often used interchangeably with "wire rope". Bharat Wire Ropes Limited ("the Company") is a leading steel wire rope manufacturing company established in the year 1986.

The Company has a diverse product mix which includes General Purpose Ropes, Fishing Ropes, Crane Ropes, Structural Ropes, Elevator Ropes, Mining Ropes, Oil& Gas Ropes & Shipping Ropes. In addition to the above Mechanically Spliced Slings, Hand Spliced Slings, Earth Wires, Stay Wires, Guy Wires and Spiral Strands. The Company caters to a rich mix of clients ranging from Overseas Consumers, Private Players, the entire Indian Defense Segment and Government and Semi – Government Organizations. Providing service to a variety of clients has helped the company develop versatility which makes it better equipped to handle diverse / heterogeneous kinds of enquiries.

Bharat Wire Ropes has a well-diversified customer base from different industries including oil & gas, mining, fishing, ports & marine, elevator, power transmission, railways, construction, infrastructure, defense, crane manufacturers, among others.

6. Segment-wise or Product-wise performance:

The Company believes that its ability to cater a wider customer base on account of its diversified product offering has enabled the Company to provide customization options to its valued customers. To further strengthen the Companys product mix, efforts have been made to focus on productivity & right mix of orders to load and occupy the maximum number of machines with large order quantity niche sectors for providing wire ropes such as special ropes, suspension bridge ropes. The Company believes that its ability to provide a mix of products along with being active in the volume segments has helped in balancing the Companys revenues

7. Business Strategy:

A. Expansion of Companys presence in the domestic markets:

The Company is undertaking various marketing activities to expand and enhance its presence in the existing business segments by identifying markets where it can provide cost effective, technically advanced products to its clients. The Company envisages to have close contacts with major buyers and stockists, end-users to provide greater client-interfacing. Further, the Company has successfully been awarded and it has certified product approvals/registrations from BIS for steel wire ropes and strands etc., and with major engineering consultants and equipment suppliers

B. Focus on development of international markets for the Companys Products:

The Companys products are being supplied to approx 50 countries globally in European and Scandinavian Countries, Newzealand, African and the Middle Eastern markets, South East Asia, West Asia, Latin America and North America. With continued thrust to expand the company is developing Latin American market

C. Strengthening of product portfolio and developing capabilities to manufacture a wider range of products:

The company has strengthen the product portfolio by developing capabilities to manufacture a wider range of products. To provide quality product at reasonable prices has always been the ultimate aim of the Company. The Company manufacture all wires at its new plant in Chalisgaon, thereby eliminating the dependency on the limited types of wires available in the market and enabling the Company to manufacture and offer an increased range of wire rope products, including but not limited to marketing high performance crane ropes for ports, large diameter spiral strands for structures and bridges, elevator ropes, high performance mining ropes, long-life-cycle fishing ropes, onshore and offshore ropes, swaged ropes and special ropes for construction sector.

D. Meeting Quality Standards and developing customer focus:

Providing quality products at reasonable price has always been the ultimate aim of the Company. The Company has in place the strategy which supports Total Quality Management. Companys technically qualified persons are determined to achieve the objective of zero defects and minimal rejection. The Company has testing facilities to ensure that all our products are thoroughly tested prior to dispatch from our factory so that grievances can be minimized.

Chalisgaon Plant:

Company has been accredited with ISO 9001, ISO 14001 and ISO 45000 certifications by TUV SUD South Asia Private Limited. Company has achieved a major milestone by getting the approval of LLOYDS Register for the plant at Chalisgaon and approvals from Bureau of Indian Standards to put ISI mark on the products confirming to IS: 2266, IS:2365, IS: 4521, IS: 1835, IS: 1855, IS: 1856, IS: 10891 Part 1. It has also received approval from Powergrid Corporation of India Limited for manufacturing 7 strand G S Earth-wire." Company also has CE Certification for Chalisgaon Plant. Various approvals for Elevator industries are in place for supplies both in domestic and international markets

Atgaon Plant:

Company has been accredited with ISO 9001certification by TUV SUD South Asia Private Limited for our Atgaon plant. Plant is approved by Central Organization Railway Electrification (CORE) for Stranded Galvanized Steel Anti-creep wire (19/2.50 mm) and also approved by Research Designs &Standards Organization (RDSO) for Stainless Steel Wire Rope for different Regulating Equipments and Galvanized Stranded Wire for Traction Bond.

Plant has received approvals form Bureau of Indian Standards to put ISI mark on the products confirming to IS: 2266 & IS: 12776. It has also received Approval from Powergrid for manufacturing 7 strands & 19 Strands G S Earth-wire." Atgaon Plant has received Works Approval Certificate from Indian Register of Shipping for Manufacturer of Steel Wire Ropes for Life Boat Fall used on ships.

8. Opportunities and Threats

Governments initiative of expanding infrastructure under various schemes, will increase the demand for wire ropes in future. Increasing urbanization in India and growth of nuclear families has led to increase in residential development. This has further increased housing requirements, which will drive the demand for wire ropes. Rise in mining and quarrying sector will also augment the steel wire ropes in market in India.

The market for steel wire rope is at a matured stage, with a limited number of players dominating the market. Steel Wire ropes are used dynamically for lifting and hosting in applications, and for transmission of mechanical power. It has been anticipated that steel wire ropes production will meet the domestic market demand owing to year-on-year increase in production capacities of the companies.

The resurgence in the Oil and Gas industry is expected to increase the number of oil rigs which will further add impetus to the growth of steel wire rope industry. International customers have shown inclination to divert focus from China to India for procurement of wire ropes in view of recent political differences.

However, high debt levels of manufacturers and actual implementation of infrastructure projects remain a concern for the industry.

FY 2020-21 has begun with the COVID - 19 pandemic and gradually spreading across most parts of the world. The nationwide lockdowns to break the chain of transmission brought economic activities to a near halt, affecting the demand. Due to ongoing vaccination support and various steps taken by government the situation has started improving from May onwards.

9. Risks and Concerns

The Board of Directors regularly overview external and internal risks associated with the operations of the Company and carries out its impact assessment & effective implementation of the mitigation plans and risk reporting is conducted.

Growth of the sector is depended on the enlargement of allied sectors. Forecasted plans and projections are subject to risk. Various kinds of risk associated with the development are Liquidity Risk, Market Risk and Operational Risk. Other dominant threats faced by the Company are in the form of competition it faces in the industry. In particular, the Company competes with other wire rope manufacturing companies, both in India and abroad, on the basis of a number of factors, including but not limited to quality, time of delivery and price. Fluctuations in the price, availability and quality of raw materials used in our manufacturing process could have a material adverse effect on cost of sales or the Companys ability to meet customer demands. There can be no assurance that the Company will always be successful in its efforts to protect the business from the volatility of the market price of raw materials, and the business can be affected by dramatic movements in prices of raw materials.

Risk is the vital factor of every business. The Company has in place a Risk management Committee which outlines the amount of risk involved in the business and various techniques for risk mitigation & Risk minimization. The Company believes that managing risks helps in maximizing returns. The Companys approach for addressing business risks is comprehensive and includes identification of Risks, periodic review of such risks and measures to for mitigating such risks.

The outbreak of Corona virus (COVID-19) pandemic globally and in India is causing a significant disruption and slowdown of economic activity. Measures taken to contain the spread of the virus, including travel bans, quarantines, social distancing and closures of non-essential services and the uncertainty associated with the lifting or reimposition of these restrictions, have further aggravated the business environment.

Key Risks Impact on the Company Mitigation
A Slowdown in Economic Growth Economic factors like increase in rate of inflation, scarcity of credit, increases in commodity and energy prices other factors such as political or regulatory action, including adverse changes in liberalization policies, business corruption, social disturbances, terrorist attacks and other acts of violence or war, natural calamities may impede Company’s growth and expansion plans. Company’s operations and financial condition may be adversely affected by, conditions in financial markets in the global economy. To constantly review the changes in economic conditions and plan to mitigate the same.
Changes in Technology Inability to keep pace with the rapidly changing Technological Environment adversely affect the Company’s ability to compete efficiently, reduce competitiveness, ability to develop new products and the consequential quality of Company’s products, and could also adversely affect sales and profitability. • To anticipate and respond on a timely b a s i s a n d e c o n o m i c a l b a s i s t o technological advances in the sector which Company operates.
• Preventive maintenance activities will only be productive.
• Company needs to establish a process for monitoring life cycle stages of equipment.
Supply of Raw Material Disruption of supply of raw materials from our suppliers will adversely affect Company’s operations and ability to deliver products on a timely basis. To enter into an understanding with the suppliers in respect of long term supply of raw material. Monitor price movement regularly and keep inventories of 2-3 months
Fluctuation in Cost of raw Material The prices of Raw Material are subject to price fluctuation which may affect the Profitability and reduce supply leading to increase in supply costs due to which financial performance may be materially and adversely affected. • Timely anticipation of fluctuation in supply cost.
• Adapt to changing supply cost and adjusting purchasing practices accordingly to be able to negotiate favorable pricing terms with suppliers for such raw material.
Industrial Actions The Company is exposed to strikes, work stoppages or increased wage demands by the employees or any other kind of disputes with employees of the Company could adversely affect its business and results of operations. • Be Proactive in addressing disputes & grievances.
• Address the issue as soon as the employee raise them.
Maintenance of adequate health and safety standards Company is subject to the risk of industrial accidents which could have significant adverse consequences for Company‘s workers and facilities, as well as the environment. Such incidents could lead to production stoppages, the loss of key assets, or put at risk employees (including those of sub- contractors and suppliers) or persons living near the affected site. In addition, such incidents could damage Company‘s reputation, leading to the rejection of products by customers, These events could have a material adverse effect on the Company’s revenues, results of operations, profitability and cash flows and diversion of management time into rebuilding and restoring its reputation. • Prevent worker contact with all rotating or moving machinery by using guards, enclosures, or guarding devices between the worker and the machine.
• Implement a lockout procedure. This will ensure that power to equipment is completely disconnected and cannot be reconnected while someone is working on the equipment.

10. Internal Control System and their adequacy:

Company has in place robust Internal Control system to maximize the effectiveness and efficiency by including activities that are tailored to the nature, size and complexity of the entity. The Company follows proper hierarchy for reporting of routine activities. Direct access to the senior Management is available in extreme cases. The Company has framed whistle blower policy to report concerned areas to the Management.

Management is responsible for establishing and maintaining internal financial controls. The Company has adequate Internal Control system with reference to financial statements and to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition. During the year, such controls were tested and no reportable material weaknesses in the design or operation were observed.

11. Financial Performance:

The Financial statements of the Company are prepared in Compliance with the Companies Act, 2013 and significant accounting policies used for the preparation of financial statements are disclosed in the notes to financial statement. (Amount in Lakhs)

Particulars 2020 - 21 2019 - 20
Total Revenue 25,068.56 25,803.54
Profit before Depreciation, Financial Cost, Exceptional Items and Tax 3,295.58 2,927.25
Depreciation 2,168.70 2,180.45
Finance Cost 3,407.12 8,946.95
Exceptional Items - -
Taxation (Net) (601.52) (2,104.40)
Net Profit After Tax (1,678.72) (6,095.77)
Total Comprehensive Income for the Year 20.56 0.96
Earnings per share (Rs.) (3.73) (13.56)

Net Revenue from Operations:

Net revenue for the year is decreased by 2.85% on account of loss of productivity during lockdown.

Profit before Depreciation, Financial Cost, Exceptional Items and Tax (PBIDT): P B I D T h a s improved on account of effective cost control.

Finance Cost: Finance cost has decreased in view of Restructuring of loans. Ratios:

Ratio FY 20-21 FY 19-20 Remarks
1 Debtors Turnover Ratio 6.26 8.32 Reduced due delays in collection on account of covid pandemic
2 Inventory Turnover Ratio 2.46 2.1 Improved on account of better Inventory Management
3 Interest Coverage Ratio 0.97 0.33 Improved on account of restructuring of debts
4 Current Ratio 1.73 0.35 Improved on account of restructuring of debts
5 Debt Equity Ratio 0.63 17.26 Improved on account of restructuring of debts
6 Operating Profit Margin (%) 4.74% 2.93% Improved on account of cost controls
7 Net Profit Margin (%) -6.71% -23.65% Improved on account of restructuring and cost controls
8 Return on Net worth -3.87% -156.08% Improved on account of conversion of debts into CCPS.

12. Human Resource:

Human resource has always been one of the most valued stakeholders and a key differentiator for our Company. It could be invested through education and training which leads to an improvement in the quality and level of production. The Company has always given importance for developing individuals as well as teams. The system followed is transparent and performance based and it endeavors to retain, develop and provide better working environment to the employees by providing an atmosphere of trusteeship, competition and challenge, thereby providing opportunities for personal and professional growth through training and ample career enhancement opportunities. As on March 31st, 2021, the number of permanent employed is 486 and there were 415 employees in contract basis.

Bharat Wire Ropes Limited has shown full commitment towards employees, investors, contractors, consultants and all related personnel by providing safe-working conditions along with other welfare measures.

13. Cautionary statement :

Statements in this report on Management discussion and analysis relating to the Companys objectives, projections, estimates, expectations or predictions may be forward looking statements within the meaning of applicable security laws or regulations. These statements are based upon certain assumptions and expectations of future events. Actual results could however differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include global and domestic demand-supply conditions, selling prices, raw material costs and availability, changes in government regulations and tax structure, general economic developments in India and abroad, factors such as litigation, industrial relations and other unforeseen events. The Company assumes no responsibility in respect of forward looking statements made herein which may undergo changes in future on the basis of subsequent developments, information or events

For Bharat Wire Ropes Limited For Bharat Wire Ropes Limited
Murarilal Mittal Mayank Mittal
Managing Director Joint Managing Director
DIN: 00010689 DIN: 00127248
Date: June 25, 2021
Place: Mumbai