Foundry Fuel Products Ltd Management Discussions.

The Companys performance during the year ended 31st March, 2020 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.

Against the backdrop of a raging and devastating pandemic, the world economy is projected to shrink by 3.2 per cent in 2020. According to the World Economic Situation & Prospect (WESP) ,the global economy suffered its lowest growth in a decade. The World GDP growth is now expected to go down from 2.7 per cent in 2019 to 5.2 percent contraction in 2020, reflecting a downward revision. COVID-19 has triggered the deepest global recession in decades. 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. Per capita incomes in most emerging and developing economies will shrink this year

The global steel demand has been contracted due to the COVID-19 crisis. In developed economies, steel demand is expected to decline by 17.1% in 2020. Although the downturn is led by consumer and service sectors, massive dislocations in spending, labour markets, and confidence are fuelling broad-based declines in steel-using sectors. A spillover from substantial job losses and bankruptcies, weak confidence and continued social distancing measures suggest only a partial recovery of 7.8% in 2021. As the worlds third largest economy in purchasing parity terms, India aspires to better the lives of all its citizens and become a high-middle income country by 2030. The Indian economy grew at 4.2 per cent in 2019-20, lower than the 6.1 per cent figure registered in 2018-19, as the Covid-19 pandemic adversely impacted economic activity in the last month of the fiscal year, especially manufacturing and construction. The Reserve Bank of Indias monetary policy committee refrained from providing any growth projections for the first time in its history, citing the huge uncertainties around the pandemic and its impact on various sectors. Exports and imports also contracted by 3.6 per cent and 6.8 per cent respectively. Nominal GDP growth for the full year also slowed to 7.2 per cent to Rs 203 lakh crore in the fiscal, as against 11 per cent growth the previous year. Manufacturing and construction, considered to be labour-intensive, were both impacted by the pandemic and lockdown, contracting by 1.4 per cent and 2.2 per cent respectively. The growth in Trade, Hotels, Transport, Communication and Services related to Broadcasting also decelerated to in the fourth quarter comparing with the previous year, with tourism being one of the worst-hit sectors due to the pandemic. Financial,

Real Estate & Professional Services also affected a lot. During Q4-FY20 & Q1-2020-21 also witnessed lower economic activity due to the restrictions and lockdowns, owing to Covid-19 pandemic, which typically tends to be a month which sees increased output with businesses trying to meet targets before the end of the financial year. Overall, the pace of growth across key sectors, private consumption and investment saw a sharp decline during the quarter and was a drag on growth for the full year.

The Indian economy witnessed series of challenges given the decline in overall investments, private consumption and regulatory uncertainty. To counter these challenges, the Central Government announced a series of structural reforms. The Prime Minister of India, MrNarendraModi announced various economic packages comprising mainly credit support measures to different sectors, having a cumulative worth of around Rs 20 lakh crore (US$ 283.73 billion) and being almost 10 per cent of Indias GDP

Global Coronavirus pandemic has impacted all industries across the globe, Metallurgical Coke market being no exception. The increased spending on oil and gas across the world is another factor likely to drive the Metallurgical Coke Market. Rising investments in energy efficiency projects backed by governments may also stimulate growth in the market. The penetration of renewable sources is increasing, fueling demand for energy and which is expected to drive the Metallurgical Coke Market.

Metallurgical coke is made by destructive distillation of a blend of selected bituminous coals (calledcoking coal or metallurgical coal) in special high temperature ovens in the absence of oxygen until a greater of the volatile matter is driven off. Metallurgical coke, also known as coke/ met coke, is a carbonaceous material manufactured by the destructive distillation of high carbon content coal, such as bituminous coal, in high-temperature ovens in the absence of air. Metallurgical coke is a basic raw material used for the production of pig iron and steel. Based on the end user, iron & steel production segment commanded significant growth during the forecast period is due to growing investments for infrastructural development and government-led initiatives for economic diversification are fuelling the market. Most metallurgical coke is used in iron and steel industry processes such as blast furnaces, sinter plants, and foundries to reduce iron ore to iron.

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 credit risk, liquidity risk, 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 incurred a loss of Rs.23.21 Lakhs during the period under review against a profitof Rs.56.44 Lakhs comparing with the previous year. Your promoters are taking positive steps for restarting of the operations. The Promoters of the Company are awaiting a turnaround for the Company.

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 2019-20 FY 2018-19 Variance Explanation for variance wherever applicable
Interest coverage ratio (16.00) 13.74 (216.47%) Reduction in variance is due to nil revenue during the current year resulting in decline in Interest Coverage Ratio
Current ratio 0.03 0.35 (90.85%) Reduction in variance is due to decrease in Bank Balance (No Revenue) & fresh loan taken during the year.
Debt equity ratio (3.79) Reduction in variance is due to increase in fresh loan & negative reserve during the year.
Return on Net Worth 484.14% 306.51% 58.02% Net loss in FY 19-20 as compared to net profit in FY 18-19

Note: Following ratios are not applicable both in year ending 31st March 2020 and 31st March 2019. 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.