MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Overview
The objective of this report is to convey the Managements perspective on the external
environment and forging 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 FY
2022-23.
This should be read in conjunctions 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,
20213 as amended and regulations issued by the Securities and Exchange Board of India
(‘SEBI) from time to time Global Economy
During the calender year 2022,strong private consumption and investment, greater fiscal
support, improved pent-up demand and consumer spending, among others, contributed to the
favourable growth globally. On the supply side, easing bottlenecks and lower
transportation costs reduced pressures on input prices and allowed for a rebound in
previously constrained sectors. Energy markets have adjusted faster than expected to the
shock from Russias invasion of Ukraine.
Global economy is expected to pick up modestly in CY 2023 and 2024 with subsiding
inflation and gradual recovery from the effects of Russia-Ukraine crisis. The emerging
economies will dominate global economic activity in CY 2023 with their growth estimated to
rise modestly from 3.9% in CY 2022 to 4% in CY 2023 and 4.2% in CY 2024. Growth in China
is expected to pick up with the reopening of economic activities and rapidly improving
mobility in CY 2023. (Source: IMF World Economic Outlook, January 2023).
Indian Economy
The Indian economy has seen a recovery after the damaging impact of the COVID-19
pandemic. However, the global slowdown, geopolitical tensions, stubbornly high inflation,
and rising interest rates have posed challenges to faster expansion. As per provisional
estimates, India recorded a GDP growth of 7.2% in FY 2022-23 as against 9.1% in FY
2021-22. Growth is estimated to decline to 6.1% in FY 2023-24 before picking up to 6.8% in
FY 2024-25 with resilient domestic demand despite external headwinds.
India has shown remarkable resilience to global headwinds in FY 2022-23 and remains in
a sweet spot owing to its strong macroeconomic fundamentals. Government initiatives such
as Make in India, production-linked incentive (PLI) scheme are expected to boost
manufacturing and accelerate economic growth. Along with this, efforts by the Reserve Bank
of India (RBI) have led to an improvement in the health of the financial sector and
sharply accelerated credit growth driving higher tax collections in a moderate inflation
environment. High-frequency indicators such as Goods & Services Tax (GST) collections,
manufacturing Purchasing Managers Index (PMI), pick-up in government spending and private
capital expenditure -all indicate healthy economic momentum (Source: IMF World Economic
Outlook January 2023,Union Budget 2023-24)
Outlook
The outlook of the Indian economy remains robust. Measures announced in the Union
Budget for the next fiscal such as increased capex, focus on infrastructure development,
boost to green economy and initiatives for strengthening financial markets are expected to
promote job creation and spur economic growth. However, there remains considerable
uncertainty due to the challenging global economic conditions. (Source: IMF World Economic
Outlook January 2023, Union Budget 2023 -24)
Indian Auto Industry
The governments strong push for domestic manufacturing has aided the growth of the
Indian automobile industry in FY 2022-23. The year gone by saw India becoming the 3rd
largest automobile market after China and US. The Indian automotive industry is expected
to sustain its growth momentum in 2023 despite the challenges such as escalating input
costs, increased cost of ownership due to regulatory issues and higher inflation which can
result in price hike of vehicles.
Factors such as improved consumer demand, wide availability of credit and financing
options, population growth, and integration of wireless technology in cars and popularity
of EVs are likely to fuel the growth of the automotive industry. Increased capital outlay
of 10 lakh crore on infrastructure development are also expected to create opportunities
for the automotive industry. Government policies such as Make in India, Production Linked
Incentive (PLI) scheme, Foreign Trade Policy (FTP) and schemes such as Advance
Authorization, and Export Promotion Capital Goods Scheme are expected to boost
manufacturing and export of automobiles.
Opportunities & Threats
The government has developed numerous programs to help manufacturers, such as the
Production Linked Incentive (PLI) Scheme, which is a cornerstone of the governments
endeavour to achieve an Atmanirbhar Bharat.
• The schemes goal is to stimulate domestic manufacturing in strategic and
emerging areas, improve the cost competitiveness of domestically-made goods, and increase
local capacity and economies of scale
• Domestic producers are given a preference in the defence sector which will
provide new opportunities to the industry .
A faster shift to electric vehicles, will have a impact on our business
• Several new companies are entering the market, and existing rivals in adjacent
product categories are also increasing their offerings. Under utilisation of the installed
capacity resulting in increasing fixed costs of the company, growing cost of key raw
materials may impact revenues and profitability of the company.
Risk Management
The Company has a well-devised risk management process aimed at identifying,
prioritizing, mitigating and monitoring risks. The key risks impacting its business
include economic, foreign exchange, raw material, technology, funding, talent and cyber
security risks. The Company has undertaken measures to mitigate these risks.
Commodity Price Risk
The Steel prices have increased substantially during the year and continues to be on
the upward spiral. The increases are compensated from customers. Other input costs are
also increasing and the company deals with obtaining compensation from customers on a case
to case basis.
Financial and Operational Performance:
The Company has undertaken numerous operational initiatives to improve performance and
reduce material loss. Undertaken impactful actions to make its quality control process
robust and reduce cost of production. We have implemented strict control on raw material
purchase and implemented productivity measures, both manpower and machine productivity.
Also a number of cost control and cost management measures were initiated during the
periods of slowdown this year to improve the financial performance.
Key Financial Ratios:
In accordance with the SEBI (listing Obligations and Disclosure Requirements) Amendment
Regulations, 2018 the Company is required to give details of significant changes (changes
of 25% or more as compared to immediately previous financial year) in financial ratios are
as follows.
| Particulars |
2022-23 |
2021-22 |
Reasons for deviation |
| Inventory Turnover Ratio |
28.53 |
25.20 |
Improvement in Turnover change in Collection pattern |
| Trade Receivables Turnover Ratio |
20.25 |
24.04 |
|
| Trade Payable Turnover Ratio |
10.11 |
8.11 |
Improvement in Payments |
Manpower Development in HR and Industrial relations:
Over the years Company has maintained consistency in its efforts in training and
developing its human resource with a view to face the competition. Industrial relations
were in order throughout the year and there was satisfactory co-operation between the
management and the workers in working towards the overall objectives of the Company.
Financial Review
| Particulars |
2022-23 |
2021-22 |
Increase / (Decrease) in% |
| Income |
|
|
|
| Revenue from operations (incl.excise duty ) |
5846.31 |
4033.62 |
44.94% |
| Land Income |
- |
- |
|
| Other income |
4.99 |
16.75 |
-70.21% |
| Total |
5851.30 |
4050.37 |
44.46% |
| Expenditure |
|
|
|
| Cost of materials and services consumed |
3216.78 |
2218.94 |
44.97% |
| Changes in inventories of finished goods, stock-intrade and work-in-progress |
-56.91 |
-30..72 |
85.25% |
| Total |
3159.87 |
2188.22 |
44.40% |
| Cost of Land Sold |
- |
- |
|
| Employee benefits expense |
965.45 |
750.51 |
28.64% |
| Finance costs |
39.77 |
43.28 |
-8.11% |
| Depreciation and amortisation expense |
488.71 |
617.30 |
-20.83% |
| Other expenses |
1335.01 |
991.08 |
34.70% |
| Total |
5988.81 |
4590.39 |
30.46% |
| Profit/ (Loss) before exchange gain/ (loss) on swap contracts, exceptional items
and tax |
-137.52 |
-540.01 |
-74.53% |
| Exchange gain/ (loss) on swap contracts |
0.00 |
0.00 |
0.00 |
| Profit/ (Loss) before exceptional items and tax |
-137.52 |
-540.01 |
-74.53% |
| Exceptional Items [ Income / (Expenses) ] |
93.15 |
143.16 |
-34.93% |
| Profit/ (Loss) before extraordinary items and tax |
-230.66 |
-396.85 |
-41.88% |
| Extraordinary Items |
0.00 |
0.00 |
0.00 |
| Profit/ (Loss) before tax |
-230.66 |
-396.85 |
-41.88% |
| Tax expense: |
|
|
|
| (a) Current tax expense |
0.00 |
0.00 |
0 |
| (b) (Less): MAT credit |
0.00 |
0.00 |
0 |
| (c) Short / (Excess) provision for tax relating to prior years |
0.00 |
0.00 |
0 |
| (d) Net current tax expense |
0.00 |
0.00 |
0 |
| (e) Deferred Tax |
0.00 |
0.00 |
0 |
| Tax expense |
0.00 |
0.00 |
0 |
| Profit for the year from continuing operations |
-230.66 |
-396.85 |
-41.88% |
| Basic Earning per Share |
-1.13 |
-1.95 |
|
| Diluted Earning per share |
-1.13 |
-1.95 |
|
| Face Value (Rs.). |
10.00 |
10.00 |
|
Revenues
The revenues are from the sale of forgings. During the year there has not been any
income from sale of land.
Costs
Material Costs :The material cost for the year remained the same at 55% of the sale
value as in the previous year.
Staff Cost : There is a marginal increase in the staff costs in order to maintain
and retain talent with the company.
Other expenses :The management has made constant efforts to bring down costs and as
a result other costs have also dropped during the year compared to the previous year.
Depreciation :
The depreciation has been charged according to the provisions of the companies Act,
2013.
Summary of Balance Sheet is given below :
| Particulars |
As At 31/03/2023 |
As At 31/03/2023 |
Inc/(Dec) % |
| Source of Funds |
|
|
|
| Share holders Funds |
-6080.44 |
-5849.78 |
3.94% |
| Non current Liabilities |
8736.13 |
8736.13 |
0.00% |
| Current Liabilities |
1056.05 |
804.40 |
31.28% |
| Total |
3711.74 |
3690.75 |
|
| Application of Funds |
|
|
|
| Fixed Assets |
2347.42 |
2656.23 |
-11.63% |
| Investments |
0.01 |
0.01 |
0.00% |
| Loans & other Non Current Assets |
86.66 |
68.61 |
26.31% |
| Current Assets |
1277.65 |
965.90 |
32.28% |
| Total |
3711.74 |
3690.75 |
|
Summary of Cash Flow Sheet is given below :
| Particulars |
2022-23 |
2021-22 |
| Profit / Loss (-) for the year |
230.66 |
(396.85) |
| Operating profit before working capital changes |
296.35 |
98.57 |
| Cash generated from operations |
(334.04) |
(1.58) |
| Income tax paid |
0.00 |
0.00 |
| Net cash flow from operating activities [A] |
(334.04) |
(1.58) |
| Net cash flow from investing activities [B] |
(203.93) |
100.95 |
| Net cash flow (used in) financing activities [C] |
(39.77) |
(43.28) |
| Net cash Inflow [A+B+C] |
90.33 |
59.24 |
| Opening cash and cash equivalents |
142.21 |
82.97 |
| Closing cash and cash equivalents* |
232.54 |
142.21 |
Human Resources
El Forge has always been a people driven Company and its employees remain its most
valuable asset. Our employees have always extended full cooperation and support in good as
well as difficult times, and have unstintingly helped to deliver on all our commitments.
The Human Resources practices at your Company empowers the employees through greater
knowledge, opportunity, responsibility, accountability and reward. Emphasis is laid on
identifying & nurturing talent. Continuous improvement techniques are followed for
betterment of the skills in the organisation by implementing TQM & other training
programs and there exists an excellent system of assessment of the employees based on the
sound HR practices.
During the year under review, there were 152 employees on the rolls of the company.
Foreign Exchange Risk
The Company is exposed to foreign exchange risks on account of its exports. Your
Company has formulated a hedging strategy for foreign currency exposures.
Internal control systems and their adequacy
The Company has an internal control system that is geared towards achieving efficiency
in operations, optimum utilisation of resources effective monitoring and applicable laws
and regulations.
The have in place adequate compliance with all company a proper and term an operations
provide reason of internal controls commensurate with its size nature to enable assurance
that all assets are safeguarded, transactions are authorised, recorded and stated properly
and applicable statues and corporate policies are duly complied with.
Cautionary Statement
The information and opinion expressed in this Report may contain certain
forward-looking statements, which the management believes are true to the best of its
knowledge at the time of its preparation.
The management shall not be liable for any loss, which may arise as a result of any
action taken on the basis of the information contained herein. Prior written permission of
the Company may be obtained for furnishing this information to any person.
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