josts engineering company ltd share price Management discussions


Introduction

The FY 2022-23 commenced with the Indian economy facing headwinds in the form of inflationary pressures due to rising energy and food prices. Supply chain bottlenecks also remained a major constraint due to the protracted war in Europe and the accompanying global sanctions.

Despite a challenging start, the Indian economy has displayed resilience and grew 7.2% in FY 2022-23, aided by sound macroeconomic fundamentals and improved high frequency indicators. Sustained efforts taken by the Reserve Bank of India (RBI) to rein in inflation by increasing the repo rate by 250 basis points (bps) over the past year have been reasonably successful. The Governments continued thrust on infrastructure-driven, capex-led economic growth, together with signs of a revival of private sector investment in manufacturing and an improvement in capacity utilisation, has maintained the growth momentum.

The Governments push for growth through larger infrastructure spends continues in FY 2023-24. The private capex continues to provide tailwinds to the growth momentum. Buoyancy in tax collections during the current fiscal year supports the capex-led growth aspirations. A healthy balance sheet of private players, improving consumer confidence and investment activity, as well as growing demand conditions, will provide support to economic growth in the near term.

A. Industry structure & developments:

• Material Handling Division (MHD)

The MHD manufactures and distributes material handling equipment, such as electric pallet trucks, platform/tow trucks, racking systems, electric/diesel forklifts, and reach trucks.

The MHD provides innovative solutions to its customers to save on their labour costs, material costs and conserve time, thereby increasing the efficiency of their processes. Josts has been catering to various industries for their material storage and transportation needs; loading and unloading, stacking and retrieving operations for over fifty years.

• -Engineering Products Division (EPD)

The EPD of the company deals in various product lines such as sound and vibration, environmental simulation, process control instrumentation, components, electrical test and measurement, nanotechnology and analytical solutions, heat and combustion solutions. The company is committed to providing environment-friendly technology while assisting its customers to enhance the performance of its products and processes.

Josts is associated with some of the worlds leading brands that create cutting-edge engineering products for demanding industrial applications. We provide advanced solutions; a blend of innovation and technical expertise, and technical and commercial support in sales, commissioning, and post-sale services to these brands.

Infrastructure is one of the major supporting elements for the operation of industries. Accordingly, streamlining and upscaling of infrastructural facilities has been given a renewed thrust to achieve the avowed objectives of both economic growth and distributive equity. The higher budgetary allocation in improving infrastructure would give a major boost to generate more revenues by the engineering sector and the capital goods industry. The Government has allocated Rs99,107 crore (US$ 26.52 billion) in the Union Budget 2022-23 to improve transport infrastructure in the country so that the smooth movement of goods from one place to another can be made cost effective.

Josts Aerospace & Defense segment is expected to grow in accordance with the governments plans of executing its satellite launch missions and increasing expenditure on the modernization of aircraft & helicopter programs, various defense equipment, and system manufacturing projects. Increasing private ownership of the systems and components manufacturing sector and new product testing opportunities from both private and government labs, create a promising business potential for the company.

The power segment will continue to grow as the government and the private sector invest in Generation, Transmission, and Distribution companies for augmentation, upgrading and modernization of the network.

B. Opportunities and threats

With the Government of India initiating substantive policy reforms in the past 3 years and allocating higher budgets for indigenous procurement, the macro picture has become more positive for the business. The determined push by the GoI under the ‘Make in India initiative and ‘Atmanirbhar vision saw positive traction towards indigenous production. The material handling industry is expected to gain from robust demand for steel, power, mineral and other infrastructure industries.

Demand for Engineered Products from the capital goods sector is projected to remain high as the industry is demanding higher productivity, precision and accuracy and low-cost manufacturing solutions.

With the governments renewed focus on incentivizing the manufacturing sector, the logistics market will reap the benefits in the coming years. Growth in the e- commerce sector is also another significant demand driver for our products.

C. Risks and concerns

The Company faces various operational risks like geological risks, supply chain risk and procurement risks, client payment terms etc. Risk management has become an integral part of our strategy. We proactively identify potential risks and accordingly devise our short-term plans to mitigate any risk which could materially impact the company5s longterm goals.

Economic Risk: A slump in economic growth may severely impact the infrastructure sectors, and similarly, the company5 s performance.

Mitigation: Josts has strategies in place to counter this: efficient cost management and tweaking the marketing mix.

Credit Risk: Delayed payments from customers may hamper the companys cash flow. This could influence our finances, affecting several other capital- dependent activities.

Mitigation: Josts has put tremendous emphasis on controlling its working capital to overcome this by building strong processes to continuously track the debtor5s profile, and cash inflow to minimize such risks.

Cost Risk: The rise in the price of raw materials and competitive pricing may threaten the business.

Mitigation: To implement cost

optimization our company has built longterm relationships with our vendors over the years. In addition, we have created a team dedicated to tracking the pricing of various materials.

HR Risk: Tosts operation may be affected if the company does not have skilled employees that are motivated to compete, innovate or grow under pressure.

Mitigation: We focus on creating a group of driven people who are passionate and zealous about working hard and excelling in the industry. We pay attention to each employee5s needs and ensure a good working environment. Training and teambuilding exercises are carried out regularly to minimize fatigue and increase performance.

D. Financial and operational performance

• Material Handling Division (MHD)

The performance of the material handling division has improved drastically during the year. MHD has shown tremendous growth in the Financial year 2022-23. Revenue for the material handling division has increased by 32 % against last years revenue mainly on account of increased demand and government initiative for the make in India movement. Profit before tax has increased by 59 % against last year due to cost optimization and an increase in volume.

Operational Review:

During the year, revenue has increased by 32%.

Profit before tax has increased to 5% IN FY23 against 4% in FY22.

Financial Review:

Particulars

FY23 FY22

Revenue (Rs in lacs)

10,025 7,572

Profit/Loss before tax (Rs in lacs)

487 307

Profit before tax (%)

5% 4%

• Engineering Products Division (EPD)

EPDs revenue increased by 57% in FY23. Our expected orders were on time due to proper movement. The delivery of imported materials was delayed because of the global supply chain disruption caused by the pandemic. Due to supply chain disruption, our margin has been impacted and reduced from 21% to 16% during the year.

Operational Review:

During the year, revenue increased by 57%. Profit before tax marginally reduced to 16% in FY 23 against 21% in FY22.

Financial Review:

Particulars

FY23 FY22

Revenue (Rs in lacs)

5,944 3,776

Profit before tax (Rs in lacs)

966 797

Profit before tax (%)

16% 21%

E. Outlook

The Indian Railways has undertaken several railway station redevelopment projects across the country.

The Rail Land Development Authority (RLDA) has been entrusted with the responsibility to upgrade and modernise major railway stations across India.

The Government aims to transform India into a global sporting powerhouse by undertaking mega-sports infrastructure projects that will have a long-term impact on health, education and tourism. The Indian Government has proposed a sports budget of Rs 3,397 crore for FY 2023-24. This is an increase of 11% over the previous years budget.

The Health sector has garnered significant attention from the Government after the pandemic. Both the Central and State Governments are focusing on building new hospitals and allied medical services like medical colleges on a large scale. We are also seeing significant investments from private players in the healthcare sector.

There is increased optimism about the strong revival of the aviation industry. With many major international airports under construction across the country, the handling capacity across airports is expected to increase substantially in the next 2-3 years. Further investments are planned in the second half of FY 2023-24 by the Government and private players to augment the facilities and infrastructure of airports.

Josts Engineering Product division has a good presence in both private and government sectors. Capacity creation in sectors such as infrastructure, power, mining, oil & gas, refinery, steel, automotive, and consumer durables will certainly benefit this division.

Internal control systems and their adequacy

Josts has an adequate system of internal controls that ensure the efficacy of all operations and assure timely preparation and delivery of accounting records in adherence to the companys policies. It plays a significant role in the process of risk identification and mitigation. During the year, such controls were tested, and no material weaknesses in the design or operation were reported.

External auditors appointed by Josts monitor the internal control system and report to the senior management to ensure that corrective actions can be taken in case of any deficiencies. Furthermore, a risk-based program of internal audits assures the adequacy and effectiveness of internal controls.

F. Material developments in Human Resources / Industrial Sustainable, profitable growth can only be achieved in an organization that focuses on the culture of performance; where employees are engaged and empowered to do their best.

We ensure that the work environment is conducive to the growth of employees. Significant HR initiatives were taken to ensure that the business operates without any impediments. Josts has 227 permanent employees as of 31st March 2023.

G) Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor, including details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof

Particulars

FY 23 FY 22 % change Y-o-Y

Debtors Turnover Ratio

4.11 3.45 19%

Inventory Turnover Ratio

13.66 8.94 53%

Interest Coverage Ratio

19.59 7.88 148%

Current Ratio

1.43 1.8 -20%

Debt Equity Ratio

0.02 0.03 -19%

Net Profit Margin (%)

4.32 3.95 9%

Return on Networth (%)

25.53 18.29 -30%

Inventory Turnover Ratio- Revenue from operations has increased from Rs 11,348 lakhs to Rs 15,968 lacs hence the ratio has increased.

Interest Coverage Ratio - Increase in interest coverage ratio is due to increase in EBIT from Rs 592 lacs to Rs 899 lacs.

Return on Networth - Due to increase in sales, the profitability has increased during the year in comparison to previous year which further resulted in increase in return on networth.

H. Cautionary Statements

Statements made in Management Discussion and Analysis are only predictions within the meaning of applicable securities laws and regulations. Many factors may affect the actual results, which could be different from what the Directors envisage in terms of future performance and outlook.

The Company assumes no responsibilities for the predictive statements herein, which may undergo changes in the future based on subsequent developments, information or events.

For and on behalf of the Board

Sd/-
Jai PrakashAgarwal

Date: 14th August, 2023

Chairman and Whole Time Director

Place: Goa

DIN: 00242232