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Chennai Ferrous Industries Ltd Management Discussions

122.9
(0.86%)
Jul 12, 2024|03:41:00 PM

Chennai Ferrous Industries Ltd Share Price Management Discussions

Pursuant to Regulation 34(3) and Para B of Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the amendments thereof, details of the Management discussion and analysis are given below:

Industry Structure & Development

Coal has historically fuelled Indias rise, bringing energy to millions of households and generating useful economic activity. It continues to be the mainstay of Indias energy mix, even as concerns over climate change and air pollution have highlighted the need to pursue a more sustainable path forward.

As per IEAs India Energy Outlook 2021, even though coals share in Indias total primary energy demand will steadily decline in percentage terms from 44 per cent in 2019 to 34 per cent in 2040 (stated policies scenario), demand for coal will still grow by 31 per cent over the same period in absolute terms, from 413 million tonnes of oil equivalent (mtoe) in 2019 to 541 mtoe in 2040.

Opportunities and Challenges, Risks and Concerns

The Government of India has projected that the overall demand for coal would far exceed the domestic supply in the current financial year. The development assumes significance in the wake of certain parts of the country grappling with power outages in the wake of coal shortage, which has compelled companies to import dry fuel for the first time in seven years to meet the demand of power plants. With the demand for coal expected to rise in future, Company expects to tap the demand, leading to potential growth opportunities.

The Company moved to trading of steel and coal as the Demand for steel and coal is expected to rise in future with economic and Industrial growth. Growing infrastructural developments in like roads and highways, railways, aviation, shipping, energy, power or oil & gas will boost the demand for specialized steel and the Company also expects to revive the manufacturing operations as the demand for sponge iron products seems better in the future with economic and Industrial growth.

Product wise performance

The Company was engaged in the manufacture of Sponge Iron. However, in view of sluggish demand, fluctuating volatile raw materials prices, regional demand & supply imbalances, the Company moved to trading of steel and coal as the Demand for steel and coal is expected to rise in future.

During the year under review, the Company generated revenue through trading of iron and coal. The company has leased its Sponge Iron Plant to MTC Business Pvt. Ltd and source of income from the said lease has been accounted for.

Outlook

The International Energy Agency (IEA), in its World Energy Outlook has said that India is likely to see the worlds biggest rise in energy demand this decade, with demand climbing 3 per cent annually due to urbanisation and industrialisation,. While the push for renewable energy will see it meeting as much as 60 per cent of the growth in demand for power, coal will continue to meet a third of overall energy demand by 2030 and another quarter will be met by oil.

In India, coal is expected to meet a third of growth with demand rising above 770 million tonnes of coal equivalent (Mtce) by 2030, and continuing thereafter before peaking in the early 2030s.

Internal Control Systems

Internal control systems continued to function as effectively as in the past. Top management and the Board of Directors and the Committees thereof continue to be actively involved in ensuring that all controls work as intended.

Financial and Operations Performance

The Companys review from operations for the year under review is Rs.1,412,492,922 as compared to Rs. 958,613,315 in the previous year. The Profit After Tax is at Rs. 32,939,904 as compared to Rs. 253,035,801 in the previous year. The net profit generated during the year has been transferred to Retained Earnings under Reserves & Surplus.

The Company has identified the following as Key Financial Ratios:-

Sl.No Key Financial Ratios 2022-23 2021-22 Variance in %
1. Debtors Turnover Ratio (in days) 2.22 7.21 (5.00)
2. Net Profit Margin (%) 2.33 26.40 (24.06)
3. Current Ratio (times) 1.02 1.52 (0.50)
4. Return on Capital Employed (%) 91.39 702.00 (610.61)

The Debt-Equity ratio and Debt-Service Coverage ratio are not applicable to the Company since there are no borrowings.

Decline in net profit has resulted in the lower Net Profit margin and Return on Equity.

Human Resource Development

There have been no material developments in the Human Resource.

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