Impex Ferro Tech Ltd Management Discussions.

ECONOMIC OVERVIEW

Global growth of economy was remained steady at 3.6 % in 2018 and growth is expected to remain steady for the coming years. The Indias GDP growth for Financial year 2019-20 is expected to be 6%, boosted by conducive policy reforms and a credit rebound. The nation is currently experiencing a favourable phase of growth based on strong macro fundamentals of the economy, making growth prospects sustainable. Growth is expected to pick up in the second half of 2019. India also has an opportunity to strengthen its recent economic gains by initiating more integration in the global value chain. Factors such as a young working population, improving business climate and renewed focus on export expansion would support this opportunity. FERRO ALLOYS INDUSTRY

Ferro chrome is an alloy of chrome and iron which is primarily used in manufacturing stainless steel.

Ferro-alloys are critical additives in the production of Iron & Steel and the fortune of Ferro Alloys Industry is directly linked with the growth of Iron & Steel Industry. The Company produces Ferro Alloys.

GLOBAL FERRO ALLOYS SECTOR OVERVIEW

The global Ferro-alloys market is set to exceed US$70 billion by 2025. The growing construction industry in emerging economies of the Asia-Pacific region is a prominent factor influencing the growth of the Ferro-alloys market. Rising population levels along with growth in per capita income in the region, due to decisions by governments, have propelled construction sector growth. The construction industry accounts for almost half the steel consumption; the presence of enormous raw material reserves in Asia Pacific could augment product manufacture. In India, US$650 billion of investment is expected to be channelised towards urban infrastructure over the next 20 years. With improving construction methods, various steel products are expected to be consumed.

INDIAN FERRO INDUSTRY

The Indian Ferro chrome production is gradually on increasing track in the Year 2019 as compared to the growth of the Year 2018. The Countrys exports of annual Ferro chrome is also showing a gradual and significant value.

The demand for Ferro Chrome is expected to remain on increasing trend in the near future. Due to slowly revival of world economy high demand of infrastructure projects are expected to raise demand for Stainless Steel and Ferro Chrome.

The industry is expected to see substantial consolidations which will drive market discipline and cut down inefficiencies in the production capacity. India holds a lot of promise with government initiatives easing mining operations for consolidated Ferro Alloys producers OUTLOOK

The steel sector has been a major contributor to Indias manufacturing output which in turn depends on increase in automotive production and the development of construction sector.

The proportion of use of Ferro depends upon the grade of stainless steel being produced which can be upto 30% of the total input of production. The demand for Ferro is expected to increase gradually in future. Rising investment in the infrastructure and real estate sectors and increase in number of construction activities are promising a slow but gradually demand for stainless steel products.

Impex Ferro is the one of the significant manufactures Ferro alloy in eastern India. The Company currently operates one manufacturing complex at Kalyaneshwari plant in west Bengal and has an integrated management system that encompasses quality, environment and occupational health and safety certification.

DETAILS OF SIGNIFICANT CHANGE IN KEY FINANCIAL RATIO

The significant changes in the financial ratios of the Company, which are more than 25% as Compared to the previous year are summarised below:

Ratio F.Y.2018-19 F.Y. 2017-18 Change (%) Reason for change
Operating Profit Margin (%) (15.90) (47.30) 66.47 Better sales realisation and cost control
Net Profit Margin (%) (16.80) (51.20) 67.25 Better sales realisation and cost control
Current Ratio (X) 0.20 0.20 (17.55) Decrease in trade receivables, Loans and Advances and increase in current borrowings
Interest Coverage Ratio (X) (13.10) (10.40) 26.12 Increase in sales realisation and cost control
Debtors Turnover Ratio (X) 14.70 2.70 438.79 Provisioning of debtors, Increase in realisation and turnover
Inventory Turnover Ratio (X) 2.80 2.60 7.27 Lower stock level maintained and Just-In-Time approach

RISK, OPPORTUNITIES AND THREATS

The Company manufactures Ferro Alloys. In Financial Year 2018-19 the overall growth of ferro alloys business was satisfactory with slower increase in demand. Though increase of demand in year under review was satisfactory, the business was severely impacted by the increase in cost of raw material and oversupply by China. The domestic consumption of steel is likely to increase

2019-20 due to Government initiatives like make in India, building Smart Cities, focus on sanitation facilities, and development in areas of roads and railways etc.

Further, the electrical energy is one of the major inputs in production of ferro alloys and high power tariff is a great threat for the Ferro alloys industry. High power cost has already impacted us severely.

The Company has a Risk Management framework in place which is designed to identify, assess and monitor various risks related to key business and strategic objectives. All identified risks are categorised based on a matrix of likelihood of occurrence and impact thereof and a mitigation plan is worked out to extent possible

The government has already initiated so many steps for the betterment of Indian economy and has also undertaken two large initiatives viz. putting more money into the rural economy especially after demonetisation and putting a renewed focus on infrastructure development and this would certainly enable the ferro alloys to survive and grow in the markets.

SEGMENT PERFORMANCE

During the year under review the Company has produced 14,857.34 MT of Ferro Alloys against 18,219.55 MT of Ferro Alloys in previous year registering an decrease of 18.45% over previous year.

HEALTH, SAFETY AND ENVIRONMENT

The Company is committed to conducting its activities in a manner that promotes the health and safety of its employees, assets and the public, as well as protection of the environment. The Companys Integrated Management System comprises of quality, environment and occupational health and safety certification. New employees are being given intensive safety induction training and are being issued with "Safety Passports" related to their work area. All the statutory requirements related to safety, health and environment are being complied with.

Requirements of environmental acts and regulations are complied with. Monitoring and analysis of water, stack emissions and ambient air quality etc., are undertaken periodically to verify whether the level of environmental parameters are maintained and are well within the specified limits.

INTERNAL CONTROLS SYSTEMS AND THEIR ADEQUACY

Your Company maintains adequate Internal Control Systems in all areas of operation. Services of Internal and External Auditors are utilized from time to time, as also in-house expertise and resources. The Company continuously upgrade these systems in line with the best available practices. An independent Audit Committee of the Board reviews the adequacy of Internal Control. Some significant features of Internal Control Systems are :

i Adequate documentation of policies, guidelines, authorities and approval procedures covering all important functions. i Deployment of an ERP system which covers most operations and is supported by a defined on-line authorisation protocol.

i Ensuring complete compliance with laws, regulations, standards, and internal procedures and systems.

i Ensuring the integrity of the accounting system; the properly authorised recording and reporting of all transactions. i Ensuring a reliability of all financial and operational information.

The Company has an Audit Committee with majority of independent directors as members. The committee periodically reviews significant audit findings, adequacy of internal control and compliance with Accounting Standards, amongst others. The Internal Audit Reports are placed before the Audit Committee for consideration. The management duly considers and takes appropriate action on the recommendations made by the Statutory Auditors, Internal Auditors and the independent Audit Committee of the Board of Directors. The Company also takes quarterly compliance certificate in respect of various applicable laws from the concerned departmental heads and place the same before the board.

INDUSTRIAL RELATIONS AND HUMAN RESOURCES

Human Resource management is not only important but also a critical asset for a Companys growth. The Companys human capital comprises a prudent mix of youth and experience. The Company employs contract labour in its manufacturing facilities. The Company partners with its employees to ensure a highly engaged and motivated workforce dedicated to achieving the Companys goals. We ensure a safe work environment for all our women employees. We also promote gender equality. Abiding by the Sexual Harassment Policy, we have a Complaint Committee which addresses any complaint from women employees in this relation and take necessary action. The Policy is being reframed as per the provision of Sexual Harassment of Women at the Work Place (Prevention, Prohibition & Redressal) Act, 2013. During the year the Company has not received any complaints of sexual harassment. As on date of this report, the Company has 294 employees on its payroll.

CAUTIONARY STATEMENT

Certain statements in the Management Discussion and Analysis Report describing the Companys objective and predictions may be "forward-looking statements" within the meaning of applicable laws and regulations. Actual results may vary significantly from the forward looking statements contained in this document due to various risks and uncertainties. These risks and uncertainties include the effect of economic and political conditions in India, volatility in interest rates new regulations and government policies that may impact the Companys business as well as its ability to implement the strategy. The Company doesnt undertake to update the statements.