Delton Cables Ltd Management Discussions.

The year 2020-21 was marked by a global pandemic COVID-19, and has caused the global crisis, disrupting the economies of the world resulted in economic uncertainty across the globe. India followed the rest of the world in implementing a nationwide lockdown. While this helped curb the spread of the virus to some extent, it significantly impacted various facets of the society and economy, including consumer behaviour, logistics, industrial production, construction activities, government earnings and overall trade activities. The lockdown also exacerbated unemployment and dampened consumer spending, which contributes to nearly half of Indias GDP. Progressive unlocking from June 2020, along with initiatives undertaken by the government (and the Reserve Bank of India) such as the economic stimulus that amounted to more than 10% of the total GDP, liquidity support, lowering of interest rates and loan moratoriums aided a sequential revival of the economy. Consumer sentiment and demand witnessed a sharp recovery in the second half of the year, led by phased unlocking, decreasing number of infections and hopes created by the vaccination drive. The economic outcome of the ongoing crisis depends on various factors that interact in ways that are hard to predict.

These include the pathway of the pandemic, the efficiency and extent of containment efforts, supply disruptions, global financial market conditions, behavioural changes and spending patterns and decreasing confidence and market sentiments.

INDUSTRY STRUCTURE, OUTLOOK & DEVELOPMENTS

Due to COVID – 19 Pandemic and lockdown during the financial year 2020-21, all the nations witnessed the slowdown in their economy. The outbreak of the novel coronavirus and the consequent suspension of economic activities due to the pandemic-induced lockdown, coupled with muted consumer sentiment and investments, had a severe impact on the Indian economy as well during the year under review.

Delton Cables Limited being one of the leading manufacturer of cables, wires and switchgear products has responded to the pandemic situation with agility and adaptability. During the year under review, the performance of the Company is encouraging and achieved a net profit of Rs. 62.32 lacs.

The cables and wires sector has been a fast-growing industry over the past few years. It has grown from a small industry to a large one during this period. The Prospects of wire and cable industry are interlinked with the other industries such as telecommunication, automotive, railway, real estate and Infrastructure Sector etc. with investments across different infrastructure segments in the background of government initiatives, the demand for cables is expected to increase considerably. With the growth of other related industries, the Indian wire and cable industry is indeed bound to grow and prosper.

Incremental demand of wires and cables for expansion of residential and commercial infrastructure has been one of the primary drivers of the segment. Increasing urbanization and commercialization is expected to further bolster investments in the real estate industry, thereby, driving the demand for low voltage insulated wires and cables

The Company is further aiming to venture into home automation and other wiring accessories which would help customers to have a one-window shopping and which will save a lot of time and energy in sourcing from various vendors.

OPPORTUNITY & THREATS, RISK & CONCERNS Opportunities and Threats:

Rising demand for the EHV cables with growing EPC infrastructure projects, where The Company faces less competition

Growth in the exports revenues with increasing geographical presence and penetration

Increasing revenue share of retail segment due to its superior profitability

Reviving demand from sectors such as metro rail, fertilizers, steel, cement, IT and pharmaceuticals

Increasing urbanization is expected to drive the demand for housing sector, thereby, driving the demand of wires

Structural demand for more and efficient T&D infrastructure

Increasing renewable energy generation causing demand to rise for T&D for power evacuation

Government investments in key infrastructure sectors such as energy, transportation, and building materials.

Governments focus on Power for All, Rural Electrification, improving infrastructure, improved life-style has created new opportunities for wire and cables industry propelling the demand of domestic cables and wires and electrical items.

While there are plenty of opportunities, the threats on the way are not few either such as, Technology Changes, Capital expenditure, Government policies. COVID-19 too seems to have caused significant disruption in the industry. The worldwide lockdown announced by the Governments of various countries during the year led to the suspension of the manufacturing functions of all companies. Further, the global disruption of supply chains had an impact on the prices of raw materials, leading to higher production costs. However, your Company has systems and robust policies in place which will help in facing such risks and concerns. Your Company also recognizes the risks associated with business and takes adequate measures to address the associated risks and concerns.

With the Governments focus on accelerating the vaccination drive, the country is expected to fare better against future outbreaks of the COVID-19 pandemic, if any, than the second wave. This would also help the country sustain its economic growth. Also, as operations across various sectors head towards normalcy, pentup demand will drive the market for wires and cables. Further, the Governments strong thrust on infrastructure development, and the ever-increasing capital allocation towards the sector in budgets, continue to boost the demand for wires and cables.

Risks and Concerns:

There are always a risk associated with the opportunities in the industry such as non-availability of cheaper finances, logistics issues, policy concerns, taxation perils, availability of skilled workforce, foreign exchange fluctuations and high turn-over of workforce. COVID-19 Pandemic without any doubt, wreaked havoc to the entire economy, all across the world and a ‘New Normal is expected in the way of doing business. However, your Company has a robust risk management framework that facilitates a clear understanding of strategies, policies, initiatives, norms and controls to identify and evaluate risks. The framework ensures that the risk management discipline is initiated centrally by the senior management and progressively decentralized, extending to managers across hierarchies, for effective risk mitigation at the micro level.

The management periodically reviews the risk and suggests steps to be taken to control and mitigate the same through a properly defined framework. In line with the new regulatory requirements, the Company has formally framed a Risk Management Policy to identify and assess the key risk areas, to monitor and report compliance and effectiveness of the policy and procedure.

SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

Ratios 2020- 21 2019- 20 Variation (in %) Reason for change
Inventory Turnover Ratio (in days) 233 186 25.09 The increase in inventory turnover ratio is due to u n d i s p a t c h e d finished goods and material in WIP which could not be completed due to spread of Covid-19 and enforcement of lockdown by Government.
Interest Coverage Ratio (in %) 134.75 192.79 (30.10) The decrease in Interest coverage ratio is due to lesser profitability on account of increased cost of input materials in the financial year 2020- 21
Operation Profit Ratio (in %) 1.00 4.69 (78.71) The decrease in the operating profit ratio is due to lesser profitability on account of increased cost of input materials in the financial year 2020- 21
Return on Net Worth (in %) 0.96 10.10 (90.48) Return on Net worth Ratio and Net Profit ratio has decreased in comparison to last year as the companys profit has gone down due
Net Profit Ratio (in %) 0.51 4.68 (89.19) to increased cost of input materials.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company adheres to and complies with all the prescribed norms as specified under the Company laws, industry regulations and securities market rules. The internal control systems are designed to ensure that the financial and other records are reliable for the preparation of financial statements and for maintaining assets. Delton has also appointed reputed statutory and established internal audit mechanisms for conducting regular audits of its business functions and books of accounts. Various committees, including the audit committee, the Board of Directors, meet every quarter and on a need basis to thoroughly oversee and monitor their areas of the mandate. This is further strengthened by the Internal Audit done concurrently. Besides, this the Internal Auditors regularly brief the Management and the

Audit Committee of the Company on their findings and on the steps to be taken with regard to deviations, if any. The Company also continues its efforts to align all its processes and controls with best practices.

ENIVRONMENT AND SAFETY

The Company successfully continued with the implementation of occupational health and safety, quality and environment protection measures and these are ongoing processes at the Companys plant and facilities. In view of the COVID -19 Pandemic, various protective measures have also been adopted which interalia includes adoption of cleaner/sanitizer technologies, wherever feasible and training of employees focusing on healthy and safer standard of living and improving standard on occupational health & safety and environment protection. As recognition of these objectives, the entire range of products of the Company continues to remain certified to the requirement of International Standard ISO 9001:2015, ISO 14001:2015 by SWISS CERT Pvt. Ltd and Health and Safety system has been certified to OHSAS 18001:2007.

HUMAN RESOURCES AND CORPORATE SOCIAL RESPONSIBILITY

The Human Resource Management function at Delton Cables Limited is a strategic partner in achieving the goals set for the organisation. The HR teams work towards the objective of strengthening and ensuring the availability of organisational capabilities to meet business challenges and to create a welcoming and productive work environment. The Company firmly believes that the human capital built up by it over the years is its most valuable asset and key resource of the Company. All efforts are made to empower them continuously through greater knowledge, team spirit and developing greater sense of responsibility. The Company has steadily built up human resources and trained them well to take on enlarged operations so as to take advantage of the opportunities thrown open by the market.

The Company is dedicated to do the welfare of its employees and committed to improve quality of the life of its employees by providing safe and clean working atmosphere.

The Company recognizes the importance of human resources in realising its growth ambitions and believes in nurturing talent within the organization to take up leadership positions. During the year Company continued to maintain healthy and cordial relationship with its employees.

CAUTIONARY STATEMENT

Certain statements contained in this section may be ‘forward looking statements within the meaning of applicable laws and regulations. Such statements involve several risks and uncertainties that could cause actual performance to differ materially from that suggested or implied in forward looking statements. Major developments that could affect the Companys operations to cause such a difference include factors such as risks inherent in Companys growth strategies; general economic & business conditions in India and other countries; regulatory changes and its ability to respond to them; its ability to implement the strategy successfully, its growth & expansion plans; technological changes; exposure to political risks; unanticipated turbulence in interest rates, foreign exchange rates, etc.; changes in domestic and foreign laws, regulations and taxes; changes in industry competition, and many other factors. The following discussions and analysis should be read in conjunction with the Companys financial statements included herein and the notes thereto. The Company may, from time to time, make additional written and oral forward looking statements to shareholders. The Company does not undertake to update any forward looking statement that may be made from time forward to time by or on behalf of the Company.

The Management Discussion and Analysis Report may contain objectives, projections, estimates, expectations and predictions that might be considered forward looking. These statements are subject to certain risks and uncertainties. Actual results may differ materially from those expressed in the Statement as important factors could influence the Companys operations such as Government policies, local, political and economic development, industrial relations, and risks inherent to the Companys growth and such other factors and the Company owns no obligation to publicly update these forward looking statements to reflect subsequent events or circumstances. Market data and product analysis contained herein has been taken from internal Company reports, Industry & Research publications, but their accuracy and completeness are not guaranteed and their reliability cannot be assured.