Foundry Fuel Products Ltd Management Discussions.

The Companys performance during the year ended 31st March, 2021 and the Managements views on future outlook are discussed below:

Cautionary Statement

Statements in the Management Discussion & Analysis covers the Companys expectations, projections, predictions, estimates and so on about the future of the Company are forward looking statements. The Companys actual results, performance or achievements could thus differ from those projected in any forward-looking statements. Since these are based on certain assumptions and expectations of future activities or events, the Company cannot guarantee the accuracy or realization of the same. The Company assumes no responsibility to publicly revise, change or adjust any such statements on the basis of subsequent developments, information or events. The Company disclaims any obligation to update these forward-looking statements, except as may be required by law.

The global growth contraction for 2020 is estimated at -3.5 percent, 0.9 percentage point higher than projected in the previous forecast (reflecting stronger-than-expected momentum in the second half of 2020) while the United Nations mid-2021 World Economic Situation and Prospects report pointed to the rapid vaccine rollout in a few large economies led by the U.S. and China and an increase in global trade in merchandise and manufactured goods that has already reached its pre-pandemic level. The ongoing pandemic, COVID-19 has triggered the deepest global recession in Centuries.

As per United Nations forecast vaccination is probably the last resort to curb the pandemic as well as the number one issue to put the world economy on a steady path of recovery. But it will become a lengthy time to get the entire population vaccinated. Day by day the pandemic is showing deadlier with new variants of Covid-19. The entire world is traumatized with the pandemic. While the ultimate outcome is still uncertain, the pandemic will result in contractions across the vast majority of emerging market and developing economies. It will also do lasting damage to labor productivity and potential output. COVID-19 has delivered an enormous global shock, leading to steep recessions in many countries.

India has implemented the most stringent nationwide lockdown measures in the world, bringing industrial operations to a standstill. Construction activity was halted entirely at the end of March, and recovery is expected to remain slow due to the slow return of labour. Supply chain disruption coupled with slower demand recovery will hit the automotive sector hard.

Metallurgical coke is made by destructive distillation of a blend of selected bituminous coals (called cooking coal or metallurgical coal) in special high temperature ovens in the absence of oxygen until a greater of the volatile matter is driven off. It is one of the most important and critical raw materials for the steel industry. The steel industry in India having large blast furnaces requires met coke with high ash content and moisture content of less than 5% to run efficiently. This demand is met through imports from other countries as the domestic met coke has low ash content and high moisture content along high phosphorous and sulpher content. The resulting product Coke consists principally of carbon. The Indian Steel Association (ISA) has asked the Central Government not to impose any anti-dumping duty on Metallurgical Coke (met coke) fearing cost escalation.A levy of anti-dumping duty on met coke will have a cost-push effect on. the steel sector. It will fuel further the cost of steel making, resulting in an increase in the cost of finished steel Metallurgical coke market based on present industry situations, market demands, business strategies adopted by Metallurgical Coke market players and their growth scenario. The Asian region is heavily reliant on blast furnace technology, providing solid support for regional demand of coke and metallurgical coal. The dominant position of Asia is effectively supported by Chinas vast steel industry and followed by Indian Steel Industries also.

Your Companys businesses are subject to a variety of risks and uncertainties. Among those are price risk, production risk, risk from natural calamities, political risks etc. Your Company is not free while competing with the indigenous industries as well as with imported coal. Although the coke market is not doing well but your Companys working are below expectation due to shutdown of operation of factory since the year 2010, working capital shortage & carry forward losses of the previous years. In between these limiting factors your Company makes losses. Your Company presently is in a very critical position to revive & the same is continued since a decade. The Board of Directors of the Company during the previous years have streamlined and restructured its share capital base by both reduction of as well as increase in equity share capital by conversion of loans as per the BIFR Order. Your Company is looking for a turnaround so that the operations of the Company may be resumed.

The Companys internal control systems are commensurate with the nature, size and complexities of its business and ensure proper safeguarding of assets, maintaining proper accounting records and providing reliable financial statements.

Your Companys loss during the period under review stood at Rs.27.13 Lakhs against loss of Rs. 23.21 Lakhs comparing with the previous year. Your promoters are taking positive steps for restarting of the operations.

Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations thereof is provided in table below:

Ratio FY 2020-21 FY 2019-20 Variance Explanation for variance wherever applicable
Interest coverage ratio (6.49) (16.00) (59.45) Reduction in variance is due to nil revenue during the current year resulting in decline in Interest Coverage Ratio
Current ratio 0.02 0.03 (41.96) Reduction in variance is due to decrease in Bank Balance (No Revenue) & fresh loan taken during the year.
Debt equity ratio (1.26) (3.79) (66.84) Reduction in variance is due to increase in fresh loan & negative reserve during the year.
Return on Net Worth 81.53% 484.14% (83.16) Increase in Net loss in FY 20-21 as compared to net loss in FY 19-20

Note: Following ratios are not applicable both in year ending 31st March 2021 and 31st March 2020. Hence, not disclosed in above table: a. Debtors turnover ratio b. Inventory turnover ratio c. Operating profit margin d. Net profit margin

Your Companys business was dependent on the commencement of mining operation by its holding company. However, the Honble Supreme Court had passed an order cancelling coal block allocations of various companies including the holding company. Considering the aforesaid cancellation, the Company is planning to initiate the process of searching another project. The Company is also evaluating the option to sell or lease or transfer the entire business assets or undertaking comprising of all movable and immovable properties for which members have duly accorded their approval to the board. Further, in the opinion of the management, fixed assets are sufficiently and substantially depreciated / amortized and hence no adjustment would be required to its carrying value. For the purpose of payment to the trade liabilities, Company will be able to get sufficient funds from holding Company. Considering the same, accounts are prepared on going concern basis.