Bharat Wire Ropes Ltd Management Discussions.

1. Overview of the Economy:

India has emerged as the fastest growing major economy in the world as per the Central Statistics Organisation (CSO) and International Monetary Fund (IMF) and it is expected to be one of the top three economic powers of the world over the next 10-15 years, backed by its strong democracy and partnerships. Indias GDP is estimated to have increased 6.6 per cent in 2017-18 and is expected to grow 7.3 per cent in 2018-19. Corporate earnings in India are expected to grow by 15-20 per cent in FY 2018-19 supported by recovery in capital expenditure. With the improvement in the economic scenario, there have been various investments in various sectors of the economy.

2. Industry Structure and developments:

It has been witnessed that Steel & Wire Manufacturing Industry is growing very fast. The demand of wires is expected to increase in leaps and bounds in the years to come. Steel Wire Rope industry in India has prospered owing to growth in infrastructure activities and demand in industrial sector. This growth was witnessed majorly due to government initiatives such as Pradhan Mantri Awas Yojana, Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Smart Cities Mission, Delhi Mumbai Industrial Corridor (DMIC) and others. 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.

3. 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 commenced commercial production on March 22, 2017 at its Chalisgaon factory which has an installed capacity of 66,000 MTPA which is further enhancing its capacity to manufacture wire ropes, structural strands and slings.

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 of more than 500 large and medium size customers across the globe and country from different industries including oil & gas, mining, fishing, ports & marine, elevator, power transmission, railways, construction, infrastructure, defense, crane manufacturers, among others.

4. 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, the efforts have been made to focus on niche sectors for providing wire ropes such as non-rotating ropes, suspension bridge ropes. The Company believes that its ability to provide a mix of high-value niche products along with being active in the volume segments has helped in balancing the Companys revenues. With the proposed capacity expansion and commissioning of chalisgaon plant, the Company envisages the strengthening of its ability to provide value-added products by having a greater range as well as capture a larger customer base with such increased range.

5. Business Strategy:

I. 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 major focus of the Company would be to focus on conducting technical workshops, seminars for customers/ large scale end users to enhance their knowledge of rope applications and technical characteristics of ropes. The Company envisage to have close contacts with major end-users to provide greater client-interfacing. For the purpose of catering to a large customer base, the Company proposes to increase its distribution network by identifying and appointing dealers across all major cities. Further, the Company has successfully been awarded and it has certified product approvals/registrations from BIS for all types of steel wire ropes and strands etc and with all major engineering consultants and equipment suppliers. The Company has already strengthen and build-up its sales force which will enable the Company to effectively market their products in the domestic markets.

The Company has proper planning and execution system to achieve the target in shorter span. Planning strategy and other essentials to achieve the target are reviewed by Board of Directors of the Company at regular interval.

The Companys vision is to be "Worlds Leading Steel

Wire Rope Company" and Management is discharging its responsibilities diligently.

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

At present, the Company is focusing majorly on strategy to enhance its presence in the International Market segment. The Company serves the European and Scandinavian Countries, South African, African and the Middle Eastern markets through many of the local wire rope dealers. Company has recently made entry into South East Asia and USA. Our other target markets are Latin American Countries Brazil, Russia, Australia, China, etc.

The Company also intends to enter the Russian and strengthen the European markets by establishing a network of dealers.

In a major way, company has been able to leave a strong footprints in terms of its capabilities and Quality in the International markets thereby achieving a major milestone by joining hands and entering into an MOU with Bridon Bekaert Ropes Group Ltd (BBRG) - a 200 hundred year old company with 600 million euro sales who in turn is a part of 4 Billion USD Bekaert group for extending cooperation in sale of its products in international markets with their vast network of offices and penetration which will lead to quick acceptance of its products.

The company has dedicated cell of marketing personnel for export and domestic markets.

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

The Company is utilizing its existing plants at optimum capacity in order to facilitate efficient utilization of resources. Management is planning to 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 intends to manufacture wires independently 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 and special ropes for construction sector.

IV. 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.

Company has been recently accredited with ISO 9001, ISO 14000 and ISO 18000 certifications by TUV SUD.

Company has also achieved a major milestone by getting the approval of LLOYDS Registrar UK for the plant at Chalisgoan.

The Company proposes to enhance its efficiency by introducing advanced machinery and reducing its dependency on manual labour thereby capitalizing Companys method of production. For servicing the Companys growing need for a standard grade of wire rods, the Company proposes to establish formal tie-ups under rate contracts with reputed wire rod manufacturers. This will enable the Company to achieve Companys aim of providing quality products on a continuous basis. The Company has a team of well qualified persons to look after the grievances of customers.

6. Opportunities and Threats

Governments initiative of expanding infrastructure under various schemes, such as Housing for All, AMRUT, 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 ANNUAL REPORT 2017 - 18 5 applications, and for transmission of mechanical power. The primary drivers of wire rope market in future will be "Housing for all by 2022" project. This will require a series of government projects to be launched which can provide impetus to the construction and allied industries and consequently to the steel wire rope market. 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. "Smart Cities Mission" has planned to invest INR 1 Billion for each smart city. The aim of the mission is to improve living standards across major cities in India. The mission also aims at improving infrastructure facilities in urban areas in the country which will drive the demand of steel wire ropes in India.

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.

The production capacity in India has increased from FY 2013 till FY 2018, which would allow manufacturers to cater to the expected growth in demand for steel wire ropes.

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

India steel wire rope market is expected to register positive CAGR of around 5.3% during the period 2019-2023. The demand for specialized wire ropes for niche applications and with better distribution channel & marketing strategies used by organized players is expected to have positive impact on the overall revenue of steel wire rope market.

The crude oil prices are not expected to rise significantly in the near future, due to introduction of shale gas in the major markets such as US and Canada. Decreasing cost of solar energy as well as rising environmental concerns further enhances the interest in renewable energy sources which subsequently reduces the growth in demand for conventional sources such as oil and gas. This is expected to constrain the demand for steel wire rope from oil and gas sector.

The Indian steel wire rope market is an extremely competitive market due to a mixture of increasing production of manufacturers and declining demand from user industries. The competition is more pronounced in the domestic market, due to a drastic reduction in the number of mines during FY2015.

7. Risks and Concerns

Your Company falls under the manufacturing of wire & steel segment which is quite cyclic. The demand for wire ropes is highly dependent on the growth & development of Infrastructure and Real estate sector, Oil and Gas sector.

Elevated growth is expected in the upcoming financial year due to the bold move of Demonetization.

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.

The Company is investing adequate amount in technology to keep pace with the swiftly changing technological environment in order to compete efficiently, reduce competitiveness, and increasing the ability to develop new products and the consequential quality of the companys products. The Company expects competition in the business and pricing terms to increase and such competitive pressures could also lead to increases in expenses such as advertising and sales promotion and marketing expenses. Further, the Company may be required to undertake effective marketing initiatives to deepen the presence of our brand and differentiate it from competition.

The Company has in place a Risk Management Committee which monitors risk tolerance limits, reviews and analyzes risk exposure related to specific issues and provides oversight of risk across the organization. The Board of Directors of your Company has in place a Risk Management Policy, which lays down guidelines in identifying, assessing and managing risks that the businesses are exposed to.

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.

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 Companys growth and expansion plans. Companys 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 Companys ability to compete efficiently, reduce competitiveness, ability to develop new products and the consequential quality of Companys products, and could also adversely affect sales and profitability. To anticipate and respond on a timely basis and economical basis to technological advances in the sector which Company operates. Preventive maintenance activities will only be productive.
Company needs to establish a process for monitoring lifecycle stages of equipment.
Supply of Raw Material Disruption of supply of raw materials from our suppliers will adversely affect Companys 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- 3months
Fluctuation in Cost of raw Material The prices of Raw Material are subject to price fluctuation which may affect the Profitability andreduce 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 Companys 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.

8. Internal Control System and their adequacy:

Your Company has in place robust Internal Control system to maximize the effectiveness and efficiencyby 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.

9. Financial Performance:

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

During the year, the total turnover of the Company stood a Rs. 167.92 crores, which is 136.26 higher than Rs. 71.07 crores in the previous year.

Profit after tax was lower by 89.80% at 0.25 crore as against

10. Human Resource:

Human Resources are capital of the 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.

The total strength of permanent employees as on March 31, 2018, is 512.

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.

For Bharat Wire Ropes Limited For Bharat Wire Ropes Limited
Murarilal Mittal Venkateswararao Kandikuppa
Managing Director Whole Time Director
DIN: 00010689 DIN: 06456698
Date: May 30, 2018
Place: Mumbai