impex ferro tech ltd share price Management discussions


ECONOMIC OVERVIEW

The global economy enters 2022 in a weaker position than previously expected. As the new Omicron COVID-19 variant spreads, countries have reimposed mobility restrictions. Rising energy prices and supply disruptions have resulted in higher and more broad-based inflation than anticipated, notably in the United States and many emerging market and developing economies. Further, the ongoing retrenchment of Chinas real estate sector and slower-than-expected recovery of private consumption and the ongoing tension between Russia and Ukraine have limited the growth prospects. The imposition of economic sanctions by US and its NATO allies on Russia pushed up global energy prices.

Global growth is projected to slow-down from an estimated 6.1% in 2021 to 3.6% in 2022—0.8 percentage-point lower than what was envisioned in the last World Economic Outlook (WEO) of January 2022. Elevated inflation is expected to persist longer, with ongoing supply chain disruptions and high energy prices continuing in 2022. Risks to the global baseline are tilted to the downside which is primarily brought by the new COVID-19 variant which may prolong the pandemic and induce renewed economic disruptions. Moreover, supply chain disruptions, energy price volatility, and localized wage pressures have enhanced the uncertainty around inflation and policy paths. Other global risks may crystallize with the surging geopolitical tensions, and the ongoing adverse climate conditions leading to the probability for natural disasters.

With the pandemic continuing to maintain its grip, the emphasis on an effective global health strategy is more salient than ever. Worldwide access to vaccines, tests and treatments have become essential to mitigate the risks posed by new variants of COVID-19. Monetary policy in many countries will need to curb inflationary pressures, while fiscal policy will need to prioritize health and social spending.

FERRO ALLOYS INDUSTRY

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.

INDIAN FERRO INDUSTRY

The Indian ferro alloys production is gradually on increasing track in the year 2022-23 as compared to the year 2021-22 after the adverse effect of the COVID-19 pandemic. The Countrys export of annual ferro alloys is also showing a gradual increase. The socio-political relations with neighbouring countries is also expected to play an important part in the future for ferro alloys industry.

The demand for ferro alloys is expected to remain on increasing trend in the near future due to outbreak of COVID-19. 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 alloys depends upon the grade of stainless steel being produced which can be upto 30% of the total input of production. The demand for ferro alloys 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 of ferro alloy in eastern India. The Company currently operates a 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. 2021-22 F.Y. 2020-21 Change(%) Reason for change
Net Profit Ratio (%) (0.06) (0.09) 35.74 Due to exceptional items.
Current Ratio (X) 0.37 0.26 (40.01) Due to change in the classification of Borrowings from current to non-current.
Debtors Turnover Ratio (X) 65.21 12.43 (424.44) Improvement in realisation from customers
Inventory Turnover Ratio (X) 2.55 0.83 (207.13) Due to change in inventory cost
Debt Equity Ratio (1.19) (0.90) (33.40) Due to change in long term Debt & shareholders equity.

RISK, OPPORTUNITIES AND THREATS

Inflation concerns have been mounting globally particularly in the US and Europe. The recent war in eastern Europe has also disrupted supply chains and led to heightened volatility in financial markets which has further exacerbated the inflation concerns. Central banks throughout the world have begun hiking rates in response.

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 defaulted in payment of its financial commitments to the lenders and is working on means to settle the loan outstanding. 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 firmly taken incessant number of 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 producers to survive and grow in the markets.

SEGMENT PERFORMANCE

During the year under review the Company has produced 29729.83 MT of Ferro Alloys against 13865.74 MT of Ferro Alloys in previous year registering an increase of 114.42% 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:

• Adequate documentation of policies, guidelines, authorities and approval procedures covering all important functions.

• Deployment of an ERP system which covers most operations and is supported by a defined on-line authorisation protocol.

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

• Ensuring the integrity of the accounting system; the properly authorised recording and reporting of all transactions.

• 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.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

This has been dealt within the Boards Report.

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 31st March, 2022, the Company has 98 employees on its payroll.

CAUTIONARY STATEMENT

Statements made in the 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.