International Combustion (India) Ltd Management Discussions

The Management Discussion & Analysis Report for the Financial Year ended 31st March, 2024 as required under Regulation 34 of the Securities & Exchange Board of India (Listing Obligations & Disclosure Requirements) Regulations, 2015, read with Schedule V to the said Regulations, is presented below:

1. Industry Structure & Developments

The revenue from operations during the year under review increased to Rs. 296.78 crores as against Rs. 222.56 crores during the previous year, registering a growth of over 33%, which in turn resulted in a profit before tax of Rs. 32.07 crores during the year under review as against Rs. 12.10 crores during the previous year, registering a growth of over 165%.

The growth in business was primarily on account of much higher investment - both Government investment and private investment - in various core sector industries where the Company is active and this buoyancy in the market is expected to continue.

2. Strength & Opportunities

For the products manufactured by Heavy Engineering Division & Gear Box and Geared Motor Division, your Company is recognised as a technology leader. The Company, however, is consistently upgrading its technology for the products of these divisions.

The manufacture of various building material products such as Dry Mortars with advanced technology under licence agreement from CAPA, Spain, have received excellent market response and acceptance, which has resulted in the increase in turnover of the Building Material Division during the year under review, though the Division is yet to break-even. The requirement of such high end products are expected to grow further in the coming years.

3. Threats

One has to recognise that a big part of the operations of the Company is supply of capital machinery to various projects in the core sector industries such as steel plants, mining industry, etc. Unfortunately, the time lag between finalisation of order, supply of the machinery and commissioning of the same is substantial and the unstable and rising input costs always poses a big challenge before the Company.

However, since the last quarter of the Financial Year 2022-23, the prices of most of the input material is showing a trend of stabilising and significant improvement has been noticed with regard to reliability of supply chain infrastructure.

4. Risks & Concerns

The Risk Management Plan adopted and updated by the Board specifies periodic identification of risks likely to affect the business adversely, rating the risks, their importance, risk identification procedures and implementation of risk mitigation plans. The executive management is continuously monitoring the identification of the risks in various business areas & is also developing various mitigation strategies & plans in these areas to reduce the adverse effects of such risks.

The presence in India of players with low cost products has intensified the competition in the large domestic market consequently shrinking the margin for the Companys products.

Managing the Companys funds and liquidity is also a key factor. Therefore, collection of sale proceeds promptly from the customers is also considered as an area where risk is involved.

5. Outlook

The Company has three different business segments / operating divisions and apart from the overall buoyancy mentioned earlier, each division also has different future outlook as mentioned below:- Heavy Engineering Division - The expansion programme initiated at Nagpur Plant for increasing the manufacturing capacity by adding additional manufacturing halls as well as augmenting other related manufacturing infrastructure has been completed and the capacity of Nagpur plant has thus been enhanced by around 30%.

Bauer Division, Aurangabad - There existed a capacity constraint in the plant to meet the growing demand of the business and to meet the current and future demand, investments were initiated by the Company for construction of new halls and additional manufacturing facility. This phase of expansion has been completed and the capacity of Aurangabad plant has been enhanced by around 40%.

Building Material Division, Ajmer - The products manufactured by this division under license from CAPA, Spain, is recognized by the market to be of highest quality standards. In addition to the retail market, the products are now being used by some of the leading builders and contractors. The market of construction adhesives and chemicals in India is large and growing at a rapid pace and the Company expects significant increase of business in this division. The current installed capacity of the division is adequate to meet the expected future demand.

One of the major challenges that is foreseen to the business of all the divisions is the effect of weakening of global economy, for multiple reasons, on the supply chain side. The imported supplies currently require long lead time and the delivery time has also become unreliable. To meet such challenges, larger inventory has to be maintained, which makes the operations more expensive. The Company expects significant improvement in this situation in the months ahead.

6. Internal Control Systems and their Adequacy

The Company has an established Internal Financial Control System commensurate with its size and nature of operations to ensure that all assets are safeguarded and the system has been designed in order to ensure orderly and efficient conduct of its businesses, the accuracy and completeness of its accounting records and timely preparation of reliable accounting and financial information.

The system also ensures compliance with applicable statutory / corporate policies, viz. the Code of Conduct of the Company, Vigil Mechanism (Whistle-Blower Policy), the Related Party Transactions Policy and the Risk Management Plan and other corporate policies.

The Internal Control Systems are routinely tested by the Management, the Statutory Auditors and the Internal Auditors, who submit their Reports on half-yearly basis to the Management and the Audit Committee. The Audit Committee reviews the reports of the Internal Auditors and addresses significant issues raised by both the Internal Auditors and the Statutory Auditors.

The Committee also follows up on the implementation of the corrective actions suggested by the Auditors in order to ensure the adequacy of the Internal Control Systems.

7. Financial /Operational Performance

( in lakh)

8. Segment-wise Performance

9. Details of Key Financial Ratios & Return on the Net Worth

Details of Key Financial Ratios, alongwith detailed explanations for significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) and Return on Net Worth, alongwith detailed explanations for any changes in the same as compared to the immediately previous financial year are given below:-

Notes:

1. The above ratios are based on the financial statements of the Company.

2. Previous years figures have been rearranged wherever necessary.

3. Interest Coverage Ratio improved substantially during the Financial Year 2023-24 despite the higher interest costs, due to the higher Earnings before Interest & Taxes during the said financial year.

4. Debt-Equity Ratio has deteriorated during the Financial Year 2023-24, both due to the higher working capital / cash credit/ overdraft requirements during the said financial year, which was necessitated on account of the higher sales turnover & higher level of volume / activity during the said year as well as due to the term loans availed for necessitating expansion of the Nagpur and Aurangabad Plants.

5. Due to the much higher sales turnover during the year under review resulting in substantially higher profits, the operating profit margin during the said year showed significant improvement.

6. Due to the much higher sales turnover during the year under review resulting in substantially higher profits, the net profit margin during the said year showed significant improvement.

7. Due to the much higher sales turnover during the year under review resulting in substantially higher profits, the return on net worth during the said year showed significant improvement.

8. Thus, almost all the ratios, except Debt-Equity Ratio, have shown significant improvement during the year under review due to the much better financial performance of the Company.

10. Human Resources/Industrial Relations

The various Human Resources development programmes undertaken by the Company for all its Divisions and operational areas would lead to development, optimization and efficient engagement of the human resources.

Industrial Relations for the year under review at all units of the Company remained cordial.

The number of personnel employed by the Company across all its units and offices was 552 as on 31st March, 2024.

11. Cautionary Statement

Certain statements in this reports relating to Companys objectives, outlooks, projections, expectations etc. may be "forward looking statements" within the meaning of the applicable laws and regulations. Although the Company believes that the expectations reflected in such "forward looking statements" are reasonable, the Company does not and cannot guarantee the accuracy of various assumptions underlying such expectations. Accordingly, actual results or performance could differ materially from such expectations, projections etc., whether expressed or modified, due to changes in global economy and business conditions, changes in political environment, changes in Government regulations, tax laws, external economic condition affecting demand and supply, price conditions in the market in which the Company operates, natural phenomena such as flood and earthquake, customers strategies etc. over which the Company does not have any control. The Company does not assume any responsibility/ obligation in respect of such forward-looking statement which may undergo changes in future on the basis of subsequent developments or events.