Hind Aluminium Industries Ltd Management Discussions.

Industry Sector and Development

Your Company is primarily involved in three sectors of business, namely Aluminium, Minerals and Solar & Wind Power Generation.

Opportunities

Financial year 2020-21 is a year of pause, the ongoing COVID-19 pandemic has severely impacted FY21. Estimates on GDP contraction are even upto 10% in FY21. The Govt of India has announced a stimulus package of Rs. 20 lakh crore which is approximately 10% of its GDP. Going forward, this is likely to support the overall economic revival. However, in the short term, due to lockdown and recovery from COVID-19, domestic demand is likely to decline at the closing of FY 2020-21.

India is the worlds 3rd largest power consumer. The Govt of India has undertaken programs to provide 24X7 power to all. ICRA expects an investment of Rs. 1.8 lakh crore over the five-year period from financial year 2020-21 to FY25 in the power transmission segment at an all-India level. In terms of geography, North America is the demanding market for the potential growth of electrical conductors. Countries in Europe such as Germany, France, Sweden, and the U.K. are focusing on increasing their infrastructure investments for the development of renewable energy projects. It would ultimately create the need to connect renewable energy sources to the grid network, which will demand the usage of electrical conductors. Countries in Middle East and Africa are anticipated for the growth of electrical conductors market in the near future. This all may open several avenues for the Company in long term.

Threats

ICRA estimates DISCOM losses in FY20 to be around Rs. 30,000 crore. Lower power demand and logistical constraints in revenue collections due to the COVID-19 lockdown may result in losses of up to Rs. 50,000 crore in FY21. Additional shutdowns due to higher COVID-19 spread in India and other major markets may impact operations and demand. Your Company is exposed to volatility in the prices of raw materials and foreign exchange rates and competition. However, in order to mitigate risks, your Company continues to exercise prudence in inventory control and hedging strategies

Segment-wise performance

In the Aluminium division of the Company, there has been sluggishness in the transmission space despite very optimistic expectations. This has in resulted in this division contributing a total of Rs. 395.04 Cores in the revenue of Company as compared to Rs. 551.58 Cores in the previous year. In the mineral sector your Company is trying to look for good sources of mineral & at present the Company has restricted its operation in this segment.

The Company has two Wind Turbine Generators (WTG) & four Solar Power Plants with total power generation capacity of 4.18 Mega Watts and all are working well and contributed Rs. 3.08 Cores in the total revenue of the Company as compared to Rs. 3.82 Cores in the previous year.

Outlook

The government initiating investments in the power sector there seems to be a positive outlook for our products.

Risk and concern

The Company recognises that risk is an integral part of business and is committed to managing the risks in a proactive and efficient manner. As always, volatility in the price of aluminium will affect the performance of the Company.

Internal control system and their adequacy

The entire facility of both Wire Rods as well as Conductor manufacturing are ISO certified. Your Company has a real time system of monitoring its targets as well as expenditure. Your Company has been externally rated by CARE as "CARE BBB+".

Performance

Your Company has constantly trying to increase its sales as well as profitability.

Development in human resource / industrial relations

The company places high importance on the development of its human resources. It imparts regular training to its employees to make them more focused to adapt to the constant change in the business environment. Industrial relation in the units was satisfactory.

Key Financial Ratios with details of significant changes

The company has identified the following as key financial ratios:

Consolidated Ratio Consolidated
2019-20 2018-19
Debtors Turnover 5.37 4.65
Inventory Turnover 7.77 9.86
Interest Coverage (0.53) 1.04
Current 1.14 1.36
Debt Equity 2.74 2.53
Operating Profit Margin (%) (0.01) 0.02
Net Profit Margin (%) (0.026) 0.04
Change in Net Worth as compare to previous year (15%) 10%