Hindustan Tin Works Ltd Management Discussions.

The Company follows a closely defined business strategy to develop and increase market leadership positions in key products categories. On an ongoing basis, management focuses on a variety of key indicators to monitor business health and performance. These indicators include market share, net sales, gross profit margin, operating profit, net income and earnings per share. The monitoring of these indicators and the Companys Code of Conduct and Corporate Governance practices help to maintain business health and strong internal controls.

The investments needed to support the growth are developed through its funding the growth initiatives such as reduction in costs associated with direct materials, administration cost, distribution and logistics.

Before the COVID-19 pandemic and lockdown, both the RBI and the Central Statistical Office (CSO) of the Government of India had revised the GDP growth rate downwards. The RBI changed its full year GDP growth estimate from an initial 7.2% to 5% in December 2019, and ascribed the tapering of growth to a tight credit market impacting fresh investments, weak capital expenditure and a slowdown in manufacturing.

On 29 May 2020, the CSO released its estimates of GDP and GVA growth for FY2020 and the fourth quarter of FY2020. In this exercise, it also substantially revised downward its earlier estimates for the first three quarters of FY2020.

GDP growth was 5.7% in January-March 2019; fell to 5.2% in April-June 2019; then yet again to 4.4% in July-September 2019; followed by 4.1% growth in October-December 2019 and 3.1% growth in January-March 2020. GDP growth for FY2020 was 4.2% - the lowest in the last 11 years.

Despite all these, the Company believes that with its experience in operating in the challenging environment and continued focus to capture significant opportunities for growth by identifying and meeting consumer needs within its core categories, through its focus on continuing its productions being essential item and since June 2020 Company has started coming back on track.

THE COVID-19 PANDEMIC AND LOCKDOWN

The relatively slow GDP growth of around 4% in FY2020 now sounds like a miracle after being engulfed in the COVID-19 pandemic. On 25 March 2020, India went on to initiate the largest nation-wide lockdown in the world involving some 1.3 billion people. The full lockdown lasted up to 3 May 2020 and unlocking started from June 2020.

The 40-days continuous lockdown across India has probably played a significant role in limiting the number of COVID-19 infections. As of 4 August 2020, India has reported around 19 lakhs confirmed cases of COVID infections with recovery of around 13 Lakhs. But this may be an underestimate on account of the lack of sufficient testing, it is still true that, for its huge population, India has thankfully reported relatively few infections. Faced with COVID-19, the lockdown and then unlocking, the Company took immediate steps to handle this force majeure situation. Some of the initiatives were:

• Activated immediately business continuity plans being an essential items producer and now producing all items, with response teams monitoring the situation and implementing actions in real time.

• Continued operating under a well-defined Work-from-Home Protocol.

• Moreover, all employees were advised to strictly follow the lockdown guidelines of the central and state governments as well as local municipalities.

• Getting all business partners to quickly get on to digital platforms for two-way communication.

The situation is still evolving and it is difficult to hazard a guess on how this pandemic will evolve. The Company is focusing on profitability over growth, seeking to conserve cash, borrowing long-term, strengthening collections, reducing overheads including salaries and also utilizing excess inventories.

OPPORTUNTIES & THREATS

Our Company is one of the leading and established Companies in Metal packaging industry. We are keenly conscious of the emerging opportunities in the can-manufacturing sector in India as well as abroad and we shall endeavor to take benefit of every good opportunity in the very best interest of our members.

Following are the opportunity and threats of our Company:

OPPORTUNITIES

1. Historical established performance.

2. Established customer profile and wide customer base.

3. Reputation for quality, well established brand.

4. Edge in raw material procurement.

5. Ability to expand and diversify.

6. Expansion in export market.

7. Professionally & technically qualified Human Resource.

8. Priority of the Government to promote Food Processing Industry.

9. Innovation and new product development.

10. Environmental concerns against plastic products

THREATS

1. Global & Domestic competition

2. Lower recovery in Global Economy.

3. Volatility in exchange rate (with rupee depreciation).

4. Competition from unorganized sector.

5. Thin margin.

6. Development and innovation in alternate packaging materials

7. Uncertainty in availability of seasonal fruits & vegetables

8. Finance Cost

9. Increased cost of inputs like Tinplate & Labour Cost.

10. US & China Trade War

11. Anti Dumping proceedings initiated by Indian Tinplate Producers. 12. COVID-19 pandemic

PRODUCT WISE PERFORMANCE

The Company had been mainly focusing on food products and now gradually expanding its base in non food sector also. In addition Company is also developing new innovative products for domestic and global market.

OUTLOOK

The outlook of the Company seems to be progressive. The management of the Company is engaged in the task of reducing overheads and other costs. Company has a vision to consolidate its position as leader in metal packaging segment.

RISK

There is a trend towards alternate packaging which is cheaper as compared to metal packaging with shorter shelf life inspite of the fact that metal packaging has an edge over them in terms of shelf life, sustainability etc.

CONCERN

The main concern is the high inflation in the Indian economy resulting into increase in cost of various inputs particularly Tinplate, rising interest rates and lower recovery in global economy. Further few export consignments were reportedly damaged in transit during the previous year. The consignments are insured and under investigation by the insurer, the impact of which is yet to be ascertained on the Company. Since the financial implication is yet to be quantified, no provision is made in the books.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has adequate internal control systems commensurate with its size and complexity of operations. The Internal Control systems are aimed at monitoring efficiency of operation, ensuring protection of resources, accuracy and promptness of financial reporting and compliance with statutes and regulations. All the vital internal control systems in the Company are working satisfactorily. Our statutory and Internal Auditors have not reported any serious departure in any of the internal control systems. The Audit Committee of the Company regularly reviews internal control systems of the Company and continuous improvements are being made in the same. Budgets are prepared every year and the actual performance is compared to the budgeted performance. The variances are reviewed on a monthly basis and corrective actions are taken accordingly.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE.

Inspite of fierce competition & extremely challenging domestic and international business environment, start of COVID-19 pandemic, your Company delivers and achieves (net of GST) Rs. 29768.16 lakhs as against the previous years revenue from operations (net of GST) of Rs. 33635.77 lakhs i.e. Decrease of Rs. 3867.61 lakhs (11.50%). The Export Sales has been decreased from Rs. 6775.52 lakhs in previous year to Rs. 4483.38 lakhs in current year i.e. Decrease of Rs. 2292.14 lakhs (33.83%).

The Company has achieved total comprehensive income of Rs. 751.14 lakhs as against the previous year of Rs. 792.98 lakhs i.e. Decrease of Rs. 41.84 lakhs (5.28 %).

STATUTORY COMPLIANCE

All the statutory compliance with respect to SEBI regulations, provisions of the Listing Regulations, 2015 with the Stock Exchanges, Income Tax Act, Goods and Services Tax Act, 2017, Companies Act, 2013 and all other applicable Acts, and Rules & Regulations are complied with.

HEALTH & SAFETY

The Company continuously focuses on the health and safety of all its workers and staff. Adequate safety measures have been taken at the plant for the prevention of accidents or other untoward incident. The necessary medical facilities are available for the workers and staff to maintain good health.

CORPORATE SOCIAL RESPONSIBILITY

The Company recognizes the fact that, beyond the day-to-day conduct of its business, as a responsible corporate citizen, it has to discharge its duties towards the larger society in which it operates.

The core areas identified by your Company and CSR Committee in order to improve the society are Promotion of education & skill development, Healthcare, Rural Development, Drinking Water Project and Clean Environment.

MATERIAL DEVELOPMENT IN HUMAN RESOURCES/INDUSTRIAL FUND

The Companys ability to deliver value products to clients depends largely on its ability to attract, train, motivate, empower and retain the best professionals. Annual performance appraisal system is already in place to evaluate the operational performance of each employee on the basis of predefined Key Responsibility Area. The Company has 466 permanent employees as on 31st March, 2020.

Industrial relation front continued to be peaceful with no working day loss due to any activity.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS, ALONG WITH DETAILED EXPLANATIONS THEREOF

2020 2019
Debtors Turnover 2.89 3.30
Inventory Turnover 6.28 5.57
Interest Coverage Ratio 1.88 2.31
Current Ratio 1.96 1.67
Debt Equity Ratio 0.75 0.92
Operating Profit Margin (%) 5.27 6.66
Net Profit Margin (%) 2.52 2.36

DETAILS OF ANY CHANGE IN RETURN ON NET WORTH

The return on net worth is in line with return on sales except impact of reduction in profit due to reduction of other income on account of decrease in foreign exchange gain in FY 2019-20.

Return on Net Worth (%) 4.98 5.49

CAUTIONARY STATEMENT

The statements in the "Management Discussion and Analysis Report" section describes the Companys objectives, projections, estimates, expectations and predictions, which may be "forward looking statements" within the meaning of the applicable laws and regulations. The actual performance may differ materially from those expressed or implied, depending upon the economic and climatic conditions, Government policies and other incidental factors. Such statements represent intentions of the management and the efforts put in to realize certain goals. The success in realizing these depends on various factors both internal and external. Investors, therefore, are requested to make their own independent judgment before taking any investment decisions.