Jash Engineering Ltd Management Discussions.

INDUSTRY STRUCTURE AND DEVELOPMENTS

The global water and wastewater treatment equipment market is expected to grow by USD 18.35 billion during 20202024, at a CAGR of over 4%, according to a report published by Technavio. Increasing usage of advanced and intelligent technologies in water and wastewater treatment is likely to aid the growth of the water and wastewater treatment equipment market. The disposal of wastewater generated from different industrial processes such as stormwater, sanitary wastewater, and process water into the water bodies is causing serious environmental concerns. Owing to the ever-growing demand for water which has become a scarce resource, companies across the world are looking at ways to limit the usage of water and treat and reuse water efficiently. This is driving the demand for water and wastewater treatment equipment to process and enable reuse.

Increasing population, rapid urbanization, rising focus on water quality and public health, increasing prevalence of water borne diseases, and infrastructure development have led to growing demand for clean water resulting in increased adoption of the water treatment equipment. The worlds wastewater which is released into the environment without adequate treatment is a valuable resource from which clean water, energy, nutrients, and other resources can be recovered, according to a World Bank report. Growing focus on sewage treatment in countries like the U.S., China, and India, and stringent governmental regulations on treating wastewater provide significant opportunities to leading established players.

Decreasing per-capita water availability and increasing pollution of fresh-water resources continue to be a global concern. Water pollution mostly occurs as a result of agricultural run-off, domestic sewage and industrial effluents and should be treated to make it suitable for end-use purposes. Demand for water for industrial purposes across the globe is increasing at a much faster pace as compared to available supply. Growing industrial activity in sectors such as food and beverages, chemicals, pulp and paper, pharmaceuticals, power, metal and mining, textiles, semiconductors, and oil and gas, have led to the installation of water and wastewater treatment equipment to ensure optimized usage of clean water during production process.

Attention towards water is gaining traction from citizens to policy makers given the rising concern on future availability as well as the deterioration in drinking water quality. Growing demand for clean and unpolluted water amid scarce availability has resulted in increased adoption of water and wastewater treatment equipment. Policymakers across the world have formulated policies to enable an improvement in their infrastructural capacity to treat wastewater and encourage the reuse of this water which will boost growth for this sector.

BUSINESS PERFORMANCE

Your Company is an an ISO 9001:2015, ISO 14001:2015 & BS OHSAS 18001:2007 certified firm engaged in manufacturing of water control gates, flap valves, knife gates valves, energy dissipating valves, water hammer control valves, fine and coarse screens, screening conveying, washing and compaction equipment, industrial valves for bulk solids handling, hydro power screw generator, screw pump and process equipment like detritors, clarifiers, clarifocculators, thickeners, decanters aerators, trickling filters, dissolved air flotation (DAF) units, rotary drum slackers, rake classifiers, pressure sand filters, etc.. The products of your Company find application in water intake systems, water and wastewater pumping stations and treatment plants, storm water pumping stations, water transmission lines, power, steel, cement, paper & pulp, petrochemicals, chemical, fertilizers and other process plants.

Your Company offers a one stop solution under one roof including Design, Casting, Fabrication, Assembly & Testing and provides vast range of these products in all possible sizes and in diversified material options unlike many of our peers. The Company has world class manufacturing facilities equipped with latest and modern manufacturing techniques enabling us to produce best quality products at competitive prices. Your Company continues to enjoy leadership position in most of the product groups in the domestic market. In the international markets, the Company is progressing towards leadership position in products like water control gates, screens and knife gate valves.

The Company has a diversified customer base spread across the globe with presence in countries like United States of America, UK, France, Germany, Austria, Qatar, Saudi Arabia, Bahrain, Oman, UAE, Hongkong, Singapore, Malaysia, Thailand and over 35 other Countries etc. The Company continues to undertake various development initiatives and reengineer its products as per the need of customers and deliver products adhering to best in class manufacturing standards. The Company is witnessing immense opportunities in developing countries where the markets are growing at a much faster pace as compared to developed countries.

The Company is not only engaged in providing machinery for Water treatment industry but also indulges in value added services which includes providing guidance to customers for proper utilization and installation of machinery in order to help them achieve desired output. Besides, the Company offers a range of support services on an ongoing basis and continuously monitors, audits and facilitates its customers in equipment maintenance by promptly supplying of parts and accessories and ensuring maximum machine uptime. In the financial year 2019-20, the Company has generated Net Profit of Rs. 2181.74 Lacs. as against Rs.1717.78 Lacs. in the previous year.

OPPORTUNITIES AND THREATS

Growing municipal waste, expanding manufacturing industry, urbanization, and regulatory requirements are the primary drivers of the wastewater treatment services market. Initiatives by manufacturing industries and state bodies for low waste generation and growing awareness about new water treatment technologies are some of the factors which are likely to boost the wastewater treatment services market.

Water and wastewater systems are vital to the nations public health, protecting the environment, and supporting economic activities. However, water treatment infrastructure in most of the developed countries is aging and in urgent need of repair and/or replacement to address the effects of a changing climate and new generation of man-made contaminants. Huge investments are needed in reinstalling and upgrading the aging water infrastructure. The U.S. Environmental Protection Agency (EPA) continues to provide funding to improve and upgrade their water infrastructure. The renovation or rebuilding of aging such dated water plants present lucrative opportunity.

The generation of wastewater has increased globally mainly due to urbanization and industrialization. The scarcity of pure water in areas including refineries, manufacturing plants, and power plants is driving the deployment of wastewater treatment plants. Moreover, driven by the stringent laws enacted by governments across the world for environment preservation, many small and medium sized business units are installing wastewater treatment systems.

With rising scarcity of water, municipalities are confronted with the challenge of identifying innovative yet cost-effective solutions to meet rising demands of urban, industrial, and agricultural communities. To provide affordable, clean, and reliable water to its constituents, municipalities have begun to acknowledge the growing economic and environmental benefits they can receive by retrofitting or optimizing their systems to enable wastewater reuse.

Indias water scarcity issues are now becoming prominent in urban cities where the costs of freshwater production and industrial water tariffs have risen due to water shortage. Only one-third of Indias wastewater is currently treated, leading to the high burden of water-borne diseases. As Indias cities run out of water, water-intensive industries like manufacturing and hospitality are investing in better effluent treatment. Also, implementation of strict government regulations, like zero liquid discharge regulation, for the treatment of sewage before discharging into the water bodies is expected to augment demand for wastewater treatment plants.

Under the piped drinking water for all plan, also termed as "Nal Se Jal", the government is planning an aggressive target of providing piped water to all households by 2024. This is likely to lead to doubling of spending on water related infrastructure creation over the next 5 year. Similarly, on the sanitation front as well the government is determined to get all the citys sewage treated.

Competition and high overheads cost are a threat in this business. The rise of competition is inevitable as foreign companies want to enter India owing to its high growth potential. Installation of water & wastewater treatment equipment is expensive and operating and maintaining costs is also high. This acts as restraining factor because it leads to increase in cost of product thereby putting pressure on sales as well as on margins. However, with rising water scarcity and increasing water prices, water and wastewater treatment has the potential to mature as a profitable undertaking.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

The business activities of the Group predominantly falls within a single primary business segment viz "Manufacturing and trading of varied engineering products for general engineering industry, water and waste water industry, power plant and bulk solids handling industry". There is no separate reportable business segment.

As part of secondary reporting for geographical segments, the Group operates in two principal geographical areas i.e. in India, its home country, and other countries. The following table presents revenue from operations, segment assets and capital expenditure regarding geographical segments:-

Particulars Current year end ed 31 March 2020 Previous year ended 31 March 2019
(Audited) (Aud ited)
Segment revenue from external
customers
Within India 15,114.16 17,838.84
Outside India 12,659.63 6,993.84
Revenue from operations 27,773.79 24,832.68
Segment assets
Within India 22,517.63 20,791.30
Outside India 5,949.76 6,008.79
Total assets 28,467.39 26,800.09
Capital expenditure
Within India 1,217.37 1,266.06
Outside India 40.86 349.47
Total capital expenditure 1,258.23 1,6 15.53

FUTURE OR FORWARD OUTLOOK

Treating wastewater for reuse has become an accepted and reliable technical solution to address water scarcity problems around the world and can provide a reliable water source for industry, irrigation, and municipal use.

Majority of countries across the world are investing in water treatment infrastructure owing to scarcity of clean water. Recently, the Asian Development Bank (ADB) and the Government of India signed a $206 million loan to develop water supply and sewerage infrastructure in 5 cities of Tamil Nadu and strengthen capacities of urban local bodies (ULBs) for improved service delivery. The project is aimed at improving the lives of the urban people in the identified cities of Tamil Nadu by providing universal access to water supply and sanitation and improving sewage treatment and drainage systems.

Jash enjoys a strong market position in the water and wastewater management industry with a diverse range of product portfolio and has a wide geographical presence which would enable the Company to maintain positive growth momentum by capitalizing on the upcoming demand arising from both domestic and international industries.

RISKS AND CONCERNS, INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has developed and implemented a risk management policy for the Company with a forward-looking approach that allows it to maintain a medium-low risk profile, through a risk appetite as may be defined by board of directors and the identification and assessment of all risks. The Company will continue to improve its risk framework through technology to suit its remodeled business as described herein.

We are subject to foreign currency exchange rate fluctuations which could have a material impact on our results of operations and financial conditions. The Company has a well-defined Policy for Risk Mitigation on foreign exchange by adopting hedging strategies. Global as well as Indian economic and political factors that are beyond our control, influence forecasts and may directly affect our business operations.

The Company has initiated process re-engineering to introduce in-built process elements to monitor and comply with various internal and external requirements for various aspects of conducting business. Compliance beyond prescribed will continue to be underlying principle for business processes. The Company will strive to be the best by increasing role of technology in monitoring and fulfilling compliance requirements.

The Indian infrastructure industry is limping due to cash flow crisis partially inflicted by banks and partially by delayed payment by executing agencies. This can lead to projects getting stuck and deliveries getting delayed. Nearly 55% of

our revenues are still coming from Indian business and so some part of our growth will be affected if higher percentage of Indian projects are affected by this crisis. We are looking at overall year on year growth between 17% to 23% in next 3 years but if many Indian projects are affected then projected growth will come down to 14%-20% range.

Internal control systems play a crucial role in the health of a Company in every industry. An effective system of internal control is a backbone, necessary for building, maintaining and improving shareholders confidence and value as well as helps to enhance the overall quality of the business and the enterprise.

The Company has an adequate internal control system commensurate with the size of the Company and the nature of its business. The Company also has internal control system for speedy compilation of accounts and Management Information Reports and to comply with applicable laws and regulations.

The effectiveness of the internal control mechanism is reviewed by an independent professional internal audit function and by the statutory auditors. The Audit Committee of the Board periodically reviews the functioning of the internal audit and the implementation of the recommended measures to improve the internal control mechanism.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The Financial performance of the Company for the year 2019-20 is described in the Directors Report under the headings Summarized Profit & loss Account and State of Companys Affairs & Review of operations.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

We believe that our employees are key contributors to our business success. We focus on attracting and retaining the best possible talent. Our Company looks for specific skill-sets, interests and background that would be an asset for our business.

Many initiatives were taken to support business through organizational efficiency, process change support and various employee engagement programs which has helped the organization to achieve higher productivity level. A significant effort has also been undertaken to develop leadership as well as technical/ functional capabilities in order to meet future talent requirement.

Focused attention on management of available human resources by training, retraining, incentivizing, and a fair policy of promotion, transfer and equal pay for equal work played a significant role in achieving the desired objective and remained competitive in terms of product quality, price pattern, brand equity and service deliverables. Nurturing of talent and best HR practices will continue to differentiate and provide strength to company.

As on March 31,2020 we have over 537 employees on payroll as well as contractual. Company is committed to provide necessary training / conducts development programmes to imbibe necessary skills required within the employees. The management of the Company enjoys healthy and cordial relations with its employees at all levels. The management and the employees are dedicated to achieve the corporate objectives and the targets set before the company.

CAUTIONARY STATEMENT

The statements contained in the Boards Report and Management Discussion and Analysis contain certain statements relating to the future and therefore are forward looking within the meaning of applicable securities, laws and regulations. Various factors such as economic conditions, changes in government regulations, tax regime, other statues, market forces and other associated and incidental factors may however lead to variation in actual results.

For and on behalf of Board of Directors of
Jash Engineering Limited

 

Date : 28.8.2020 Sd/- Sd/-
Place : Indore Pratik Patel Suresh Patel
Chairman & Managing Director Executive director
DIN - 00780920 DIN:00012072