MANAGEMENT DISCUSSION AND ANALYSIS REPORT
INDUSTRY STRUCTURE & DEVELOPMENTS
The Managements perspective on performance of the Company for financial year 2021-22
is given in this report, should be read in conjunction with the Companys financial
statements, the schedules and notes thereto and other information included elsewhere in
the Annual Report. The Companys financial statements have been prepared in accordance
with Indian Accounting Standards (Ind AS) complying with the requirements of the
Companies Act, 2013, as amended and regulations issued by the Securities and Exchange
Board of India (SEBI) from time to time.
Electrotherm (India) Limited an engineering, steel and EV company engaged in
manufacturing of capital equipment for steel industry, TMT Bar, Ductile Iron (DI) Pipes
and battery-operated electric vehicles. The Company is one of the largest manufacturers of
induction melting furnace and refining equipment for steel making and currently has more
than 6000 installations operating in more than 71 countries around the world. The Company
is a leading engineering company in India and one of the strongest steel brand in Gujarat
with a proven track record of operational excellence, cost efficiency, and high-quality
products.
A. ENGINEERING & TECHNOLOGIES DIVISION:
Leadership in energy efficient equipment solution
Eletrotherm is Indias leading and one of the worlds most efficient steel melting
equipment manufacturer, contributes in production of thousands of tons of steel every day.
Electrotherm is one of the handful of steel meting equipment manufacturers who are
providing complete solution in terms of EPC projects of fully integrated steel plants -
capable to process ex-mine material to finished rolled products. We are progressing
responsibly across the market with innovative solutions towards energy efficient melting
equipment to scale new heights in the global engineering industry.
Post the period of COVID-19, the ENT division successfully seized the opportunities in
growing steel industry and performed well in financial year 2021-22 despite second wave of
COVID-19 and travel restrictions in export market. Currently, ENT division holds orders of
more than INR 800 Crores and also having customers advance of more than INR 200 Crores
which confirms stakeholders strong confidence and trust in the engineering products of
the Company.
Focusing on innovation, digitalization, sustainability and people, we strive to become
the most respected and valuable engineering company globally. We are strengthening our
position through our Services and Complete Melting Solutions. Our customized technical
solutions to mid-sized steel companies embedded Electrotherms presence in 71 countries
globally.
B. SPECIAL STEEL DIVISION:
Electrotherms Special Steel Division is strategically located in Kutch with proximity
and well connection to port, rail and NH road networks, it gives advantage of
cost-effective logistics. The efficient fully integrated plants, operational excellence
and young dynamic team empowers Electrotherm to run operations successfully against all
odds be it COVID-19 or otherwise.
Post COVID-19, amidst the after challenges like disruption in supply chain and high
material prices hurt steel operations of the company in financial year 2021-22. To curb
surging steel prices, the Indian Government introduced various policies to cushion the
impact on the domestic economy and aggressively implemented supply-side measures to
prepare the steel sector for a sustained long-term expansion. The Indian economy is
expected in a good position to witness GDP growth of around 8.0%-8.5% in 2022-23 wherein
the steel demand will see increase of 2.2% in 2022 against 4.5% in 2021 as forecasted by
Worldsteel reports.
The division suffered on account of yearlong volatility in coal and coke prices,
impacting input costs severely. Coke, a key raw material for production of hot metal and
so DI Pipe, wherein the prices increased substantially from US$370/t levels in April 2021
rising to US$632/t in November 2021 and finally closing the year over US$700/t CFR India.
The company requested difi• erent Government departments to escalate the DI Pipe
contract price as high-cost raw material impeding production viability. However, there
were some contracts which were honoured by the company despite of very low realization.
Currently, the orderbook of DI Pipe business is promising good realization in the
business and also in financial year 2022-23, the DI pipe demand should get a major thrust
due to significantly increased outlay in this years Govt of Indias budget for the water
sector. In upcoming years, the country is expecting very strong demand in DI Pipe business
as Government is very keen on robust investment in its flagship Scheme of Jal Jevons
Mission both for Rural and Urban areas.
Continuous improvement, best in class products and services have always been key
factors to make ET TMT as a very reputed premium brand in Gujarat. With operations
excellence and a clear vision for the future, we are executing our strategic growth plan
in line with Indias increasing appetite for quality steel. The goal is to be a part of
the journey that helps India "Build It Right" and to become a reliable partner
in nation building.
The Company has increased its supply of value-added ET TMT to projects alongwith strong
association with some of the best distributors in western India. "ET TMT" is
approved brand in prestigious infrastructure projects and Government departments and has a
long successful record of timely delivery of premium quality products.
In financial year 2021-22, the steel division performance was impacted due to high coal
prices and ensuing more working requirement. However, we are expecting better performance
in financial year 2022-23 with our marketing strategy of selling more high value premium
products over retail and also stability in raw material prices.
C. ELECTRIC VEHICLE DIVISION:
The Electric Vehicle Division witnessed 55% growth in terms of revenue growth in FY
2021-22 vs 2020-21. Gradually increasing fuel cost and increased adaptive mindset of
customers towards Electric vehicle preference of personal mobility post COVID-19 pandemic
saw strong customer demand of electric two wheeler leading to sales uptake.
The E2W industry saw and is seeing a positive sentiment and a high level of interest
from the customers due to environment awareness; encouragement from the Government in
terms of EV incentive policies & schemes; improved battery technology and growing
charging facilities across the nation.
India saw a 132 per cent increase in electric two-wheeler sales in year 2021. Between
January-December 2021, the electric two- wheelers (E2W) industry, including high-speed
(HS) and low-speed E2W, registered sales of 2,33,971 units against 1,00,736 sold in 2020.
While as a segment, the Indian electric vehicle market was valued at USD 1,434.04 million
in 2021, and expected to reach USD 15,397.19 million by 2027, registering a CAGR of 47.09%
during the forecast period (2022-2027).
Infrastructure development for battery & vehicle manufacturing, charging
infrastructure, and scrapping centres will definitely lead to growing EV market. In
Electrotherm, the high-speed and low-speed electric two-wheelers will continue to
contribute positively in net earnings of the Company. However, our focus shall continue to
grow in High speed models of two wheelers segment with hundreds of thousands happy
customers towards Governments mission Electric Vehicles 2025 onwards.
FINANCIAL LIABILITY STATUS:
Originally the Company had 19 lenders and ten of them have assigned their debts to
Edelweiss Asset Reconstruction Company Limited ("EARC"), Invent Assets
Securitisation & Reconstruction Pvt. Ltd. ("Invent") and Rare Asset
Reconstruction Limited ("Rare ARC").
While as a part of debt resolution with other nine lenders, the Company has One Time
Settlement arrangement. Wherein entire settlement amount had been paid to ICICI Bank, UCO
Bank, Vijaya Bank, Syndicate Bank, International Finance Corporation and Standard
Chartered Bank while the company has ongoing OTS with Union Bank of India (including debt
of Corporation Bank) and Central Bank of India.
Post COVID-19, the Company has not paid some of the installment and interest due
thereon and has requested respective lenders/ ARCs for revised restructuring.
Segment-Wise Performance:
The Business segment of the Company comprises of Engineering & Technologies
Division, Special Steel Division and Electric Vehicle Division. The Segment wise
performance of the Company for all the three divisions for the year ended on 31st March,
2022 is as under:
|
|
|
(Rs. In Crores) |
| Particulars |
Engineering & Technologies Division |
Special Steel Division |
Electric Vehicle Division |
| Revenue from operations |
975.32 |
1893.90 |
55.68 |
| Segment Profit/(Loss) Before Financial Cost & Other Unallocable Item |
62.91 |
(48.44) |
(1.17) |
| Capital Employed |
(219.65) |
(390.27) |
25.71 |
DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:
Revenue from operations:
The revenue from operations of the Company for the financial year ended on 31st March,
2022 was Rs. 2830.28 Crores as compared to Rs. 2526.79 Crores of previous financial year.
Cost of Materials consumed including purchase of traded goods:
The cost of materials consumed including purchase of traded goods for the financial
year ended on 31st March, 2022 was Rs. 2129.45 Crores as compared to Rs. 1697.38 Crores of
previous financial year.
Depreciation and amortization:
Depreciation and amortization for the financial year ended on 31st March, 2022 is Rs.
85.78 Crores as compared to Rs. 116.85 Crores of the previous financial year.
Finance Costs:
Finance costs for the financial year ended on 31st March, 2022 is of Rs. 45.35 Crores
as compared to Rs. 49.89 Crores of previous financial year.
Loan accounts of the Company have been classified as Non-Performing Assets by the
Central Bank of India and Rare Asset Reconstruction Limited (being debt assignee of Indian
Overseas Bank) and the Bankers have not charged interest on the said accounts and
therefore provision for Interest (Other than upfront charges) has not been provided in the
books of accounts and to that extent profit has been overstated and bankers loan liability
has been understated. The extent of exact amount is under determination and reconciliation
with the banks, however as per the details available with the company, the amount of
unprovided interest, on approximate basis, on the said loans is Rs. 213.81 Crores for the
financial year 2021-22 and total amount of Rs. 1435.54 Crores upto 31st March, 2022.
Profit/(Loss) Analysis:
The Loss for the financial year ended on 31st March, 2022 is Rs. 54.32 Crores as
compared to profit of Rs. 63.30 Crores of previous financial year.
Key Ratios:
Pursuant to Regulation 34 of the Listing Regulations, the details of the key financial
ratios of the Company and comparison to previous year has been provided in Note No. 49 to
standalone financial statements of the Company.
RISK AND CONCERNS:
The Company has established a well-defined process of risk management, wherein the
identification, analysis and assessment of the various risks, measuring of the probable
impact of such risks, formulation of risk mitigation strategy and implementation of the
same takes place in a structured manner. Though the various risks associated with the
business cannot be eliminated completely, all efi• orts are made to minimize the
impact of such risks in the operations of the Company.
At present, the Company is at risk with regards to recovery proceedings, attachment of
properties and petition filed by financial creditor under section 7 of the Insolvency and
Bankruptcy Code, 2016 which may threaten the existence of your Company.
INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:
The Internal Control System is designed to prevent operational risks through a
framework of internal controls and processes. The Company has in place adequate system of
internal control and internal audit commensurate with its size and the nature of its
operations. Our internal control system ensures that all business transactions are
recorded in a timely manner, resources are utilized effectively and our assets are
safeguarded. Internal Audit is conducted by experienced Chartered Accountants in close
coordination with companys Finance, Accounts and other departments of the Company. The
findings of the Internal Audit team are discussed internally with the Executive Directors
as well as in Audit Committee Meetings and their suggestion for improvement &
strengthening is reviewed by the Audit Committee/Board. The Company is in process to
strengthen its internal control system by implementing Standard Operating Procedures (SOP)
for all its major areas in under the guidance of Audit Committee/Board.
DEVELOPMENT IN HUMAN RESOURCES/INDUSTRIAL RELATIONS:
The employees are the most valuable assets of Electrotherm. The Company on regular
basis takes initiatives to provide training to its employees on environment, health and
safety and also provide training on soft skill up-gradation to improve their skills as may
be relevant to the respective functions. We are sincerely grateful to all employees for
their close and constructive cooperation in 2021-2022 despite of second wave of Covid-19
pandemic. We were able to achieve progress against many strategic priorities despite our
challenges. Continuing that partnership will be a key to implementing the significant
changes announced under Human Resource Development Strategy. The Company also hire
contract labour on time-to-time basis for success and growth of the Company. As on 31st
March, 2022, there were 2094 permanent employees employed by the company.
The Human Resources Development Strategy provides transparency on the companys
employee metrics and how we are translating our strategic priorities into action. It
helped to achieve the goals in organizational culture; diversity and inclusion; talent and
development; talent acquisition; compensation and benefits; managing change; and
collaboration with our social partners.
Electrotherm (India) Limited is simplifying its business model and global footprint,
realigning its business divisions, reducing complexity, investing in technology and
cutting costs as part of the Human Resource Development Strategy.
For Electrotherm, investing in our employees remains of paramount importance. The
success of Human Resource Development Strategy will depend in part on our ability to
retain, motivate, develop, and continue to attract employees with the skills and
experience to help the challenges and make the most of opportunities.
HEALTH & SAFETY
We value the human life and believe, all injuries are preventable. Our aim is zero
accident. We are committed to conduct all our operations in a manner, so as to avoid harm
to employees, contractors, workmen, visitors, local public and the environment. This
responsibility starts with each one of us.
The Company take necessary precautionary measures of health and safety at all the
plants against the spread of second wave CoVID-19 and has prepared Standard Operating
Procedure (SOP) in accordance with various advisory/notifications of the Central and State
Government. The Company has made necessary arrangement to ensure that the employees and
stakeholders are safe and comfortable at work place.
We Provide safe machines and need based Personal Protective Equipments to employees to
reduce risk at work place. We Create awareness among employees/vendors/contractors through
training and partner to demonstrate our commitment and involvement, responsibility and
accountability to archive HSE performance and provide a safe and healthy work environment
for all employees.
CORPORATE SOCIAL RESPONSBILITY
The Company strives to be a socially responsible company and strongly believes in
development which is beneficial for the society at large. We also wish to keep the
environment clean and safe for the society by adhering to the best industrial practices,
adopting best technologies and investing in greener initiatives, and so on. It is our
intent to make a positive contribution to the society in which the Company lives and
operates. CSR is an evolving business practice at Electrotherm that incorporates
sustainable development into a companys business model and leaving a positive impact on
social, economic and environmental factors.
At Electrotherm our purpose is to improve the quality of life of the communities, we
serve and we also believe in returning to the society, what we earn. We also focus
majorily on rural development and environment friendly initiatives, providing healthcare
facilities to nearby villagers, focusing on education, and much more. Our CSR approach
stands for eradicating extreme poverty & hunger, health & sanitation, basic needs
fulfillment (sharing & caring), ensure environment sustainability, animal welfare
activities in nearby villages etc.
CAUTIONARY STATEMENT:
Statements in this Management Discussion and Analysis detailing Companys objectives,
projections, estimates, expectations or predictions may be "forward looking
statements" with the meaning of applicable securities laws and regulations. Actual
results could differ materially from those expressed or implied. Important factors that
could make a difference to the Companys operations include global and Indian demand
supply conditions, finished goods prices, raw material availability and prices, cyclical
demand and pricing in the Companys principal markets, changes in Government regulations,
tax regimes, economic developments within India and the Countries within which the company
conducts business and other factors such as litigation.
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