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Eco Recycling Ltd Management Discussions

740
(0.28%)
Jul 15, 2024|11:37:00 AM

Eco Recycling Ltd Share Price Management Discussions

1. E-waste Industry and Environment The year 2022-23 has been an eventful year for the Indian economy, as it became the fifth-largest economy in the world (by nominal GDP) and the third largest economy by purchasing power parity (PPP) in September 2022 according to a World Economic Forum report. As per the International Monetary Fund (IMF), India will maintain this position in 2023 and is well-placed on the path to become the fourth-largest economy by 2025. The Union Budget 2023-24 highlights that the current years economic growth is estimated to be at 7%, the highest among all the major economies.

Electronic equipment is no longer a signature statement of a select few; rather these are integral parts of everyones life now. Over a period, Computers have almost replaced pen & writing paper, mobile phones have replaced our memory to a great extent, we are unable to travel any distance without google map, we want to place orders and make payment online etc. and why not, because change is the only constant. Globally about 50 million tons of e-waste is generated annually which consists of close to 15 million tons of steel, practically equivalent to the annual production of SAIL, copper & aluminum is about 8 million tons, similarly plastic, glass etc over & above precious metals (gold / silver / platinum etc.) of more than 10,000 tons. According to one of the very recent studies "the developing world will generate more e-waste than the developed world. Global volumes of e-waste are expected to triple by 2025; the developing world will generate double the developed worlds e-waste." The United Nations Environment Program has stated that: "In many countries, as well as for the planet as a whole, demand for natural resources (ecological capacity) exceeds the amount available, countries unable to support their national consumption with their own natural resources at an ecological deficit. Therefore, these countries have to either import ecological capacity from other places or take it from future generations."

2. Opportunities and Threats

The growing consumption of electrical & electronic equipment has a direct co-relation with our socioeconomic growth and therefore, it is a growing opportunity for Ecoreco. It may not be out of place to mention that our Prime Minister, Niti Aayog, MoEF have also emphasized on e-waste recycling, Atmanirbhar Bharat, Sustainability & Make in India. WEEE foresee huge investment in Recycling & Refining Facilities to get established in India. Informal waste workers, who are spread over the nation have competitive advantages in case of B2C collection of e-waste but as far as B2B business is concerned formal recyclers have edge over them becauseoftheunderstandingoflegal & environmental compliances. At the same time, for the formalization of the e-waste recycling, as intended by the Environment Protection Act and the E-waste Management Rules, it is essential to enforce the above legislation very strictly & as fast as possible.

3. Outlook

We are pleased to mention that in the previous year ended on 31st March, 2023, your Company has performed exceedingly well with very clear focus on high value business as against high volume business. The Management of our Company does not hesitate to ignore low margin business which may eventually enhance Revenue but hardly adds to the Net Profit. Presently, your Company is debt free and have enough liquid assets, which may be liquidated and deployed for capacity & capability building and if need be, we will tap bank loans and strategic investment to enhance processing capacity to 50,000 MTPA of e-waste recycling & refining with proven technologies. In the interim, we see a significant growth in our fee based businesses, not only in India but in over 100 Countries, where Ecoreco is otherwise providing services to its global clients.

4. Segment–wise or product-wise performance

Presently, Eco Recycling Ltd is engaged in the business of recycling of electrical & electronic waste and affiliated services.

5. Risks and concerns

We do not see any specific risks & concerns except whatever is applicable to any other industry.

6. Internal control systems and their adequacy

The Company has enough internal control systems in place to ensure operational & reporting compliances on time.

7. The Companys financial performance for the year ended March 2023 was extremely satisfactory.

Key Financial Parameters:

Ratio Formula 2022-23 (working) 2021-22 (working) 2022-23 Ratio 2021- 22 Ratio Explanation where the ratio exceeds 25% as compared to the previous year.
Debt Service Coverage Ratio Earnings before Interest and Taxes (EBIT) / Interest Expenses 7,62,10,681/ 14,47,69,809/ 50.81:1 1.50:1 Your Company is no longer liable to pay Rs. 900 Lakhs as per the order of the Delhi High Court dated 17.07.2023 and due to its strong operating earnings, the DSCR Ratio is much higher.
15,00,000 9,65,00,000
Current Ratio Current Assets/ Current Liabilities 8.52,53,588/ 26,14,76,782/ 0.65:1 5.21:1 The Current Ratio decreased due to a short term liability arises with respect to purchase of an Immovable Property. During the FY 2023-24, the liability is property discharged from the Operating Income.
13,02,92,709 5,01,58,050
Debt Equity Ratio Total Debt/ Shareholders Equity - 9,65,00,000/ - 0.50:1 Your Company is no longer liable to pay Rs. 900 Lakhs as per the order of the Delhi High Court dated 17.07.2023 and due to its strong operating earnings, the DSCR Ratio is much higher.
19,29,67,500
Net Profit Ratio Net Profit/Total Revenue 6,16,87,676/ 12,49,25,440/ 29% 46% The Net Profit Ratio decreased due to reduction in the Other Income as the Liquid Assets had been liquidated to fund for the acquisition of the Immovable Property.
21,42,93,964 26,94,25,923
Return on Equity Ratio Net Income/ Shareholders Equity 6,16,87,676/ 12,49,25,440/ 13% 34% Net Income got reduced due to reduction in the Other Income as the Liquid Assets had been liquidated to fund for the acquisition of the Immovable Property.
47,89,39,902 50,92,36,424
Trade Receivable Turnover Ratio Net Credit Sale/ Average Account Receivable 17,73,36,832/ 15,10,47,926/ 12.90:1 14.35:1
1,37,43,196 1,05,22,822
Inventory Turnover Ratio Cost of Goods Sold/Average Inventory 5,97,23,218/ 5,87,64,703/ 1.40:1 1.78:1 High acquisition of the Inventory have been made at the end of the March 31, 2023.
4,24,82,872 3,29,04,901
Trade Payable Turnover Ratio Net Credit Purchase/ Average Trade Payable 4,72,05,053/ 7,52,21,250/ 0.75:1 7.62:1 The Ratio decreased due to a short term liability arises with respect to purchase of an Immovable Property. During the FY 2023-24, the liability is property discharged from the Operating Income.
6,30,14,683 98,73,570
Net Capital Turnover Ratio Net Sales/ Working Capital 17,73,36,832/ 15,10,47,926/ (3.93):1 0.71:1 Reduction in working Capital is due to a short term liability arises with respect to purchase of an Immovable Property. During the FY 2023-24, the liability is property discharged from the Operating Income.
(4,50,39,121) 21,13,18,733
Return on Capital Employed EBIT/ Capital Employed 7,62,10,681/ 14,47,69,809/ 16% 28% Net Income got reduced due to reduction in the Other Income as the Liquid Assets had been liquidated to fund for the acquisition of the Immovable Property.
47,89,39,902 50,92,36,424

8. Material developments in Human Resources / Industrial Relations front, including number of people employed.

The Company is proud of its team members at all levels. It considers manpower as its assets and that the people had been the driving force for the growth of the Company. The Company provides job role related training to each individual to perform his / her the best to achieve the desired targets set for the Company.

9. Cautionary Statement

Statement in this report on Management Discussion and Analysis relating to companys Objective, projections, estimates, expectations or predictions may be forward looking within the meaning of applicable laws and regulations. The Company assumes no responsibility in respect of forward-looking statement herein which may undergo changes in future based on subsequent developments, information or events.

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