Jyoti Ltd Management Discussions.

Industry Structure and Developments

Jyoti Ltd., is a leading engineering ISO-9001:2015 certified Company, serving the core sectors of Power and Water. It offers a wide range of reliable quality hydraulic and electrical products and services. From providing customized solutions to handle liquids, Jyoti, over the years has emerged as a Total Solution Provider by designing and manufacturing wide range of pumps and EPC Pumping Systems by undertaking turn-key projects from concept to commissioning.

The Company has taken several bold steps to remain competitive and to ensure survival by reducing cost and streamlining the overall operations process.

Opportunities and Threats

As India is slowly but steadily moving towards development under the present Government, Power and Water sectors are prime movers for its economic and social development and growth. Considering the 70 years-old presence of the Company in the Power, Hydel and Lift Irrigation Sectors, which are of National Importance, a huge business potential is anticipated.

The Company continues to be very selective in taking orders as the price realisation still remains very low. The challenge to manage the orders within the budgeted costs continues and high volatility in the prices of major raw materials is a matter of concern.

The credit extended to the customers is not honoured, which has resulted in high levels of receivables which have in turn strained the cash flow to a very large extent. Barring unforeseen circumstances, the Company expects to increase its volume of business in the current year.

Outlook

Water and Power sectors are of National Importance, and for a developing country like India, the demand for energy and water is expected to grow at a steady rate. Keeping in view the above, the long term outlook for these sectors appears to be bright. There is ample scope and opportunity for companies having businesses in these sectors not to mention the potential of your Company and its large presence in these sectors for many years.

Risk and Concerns

It must be clearly understood that each industry in particular and each industry segment in general has its own risk, from which it cannot be fully isolated but mitigated by means of proper risk management. Your Company foresees certain areas of risk, concerns and threats in its arena of operations.

The present challenge for the Company is to successfully execute low price orders, within the budgeted cost. The availability and cost of the funds remain very important factors impacting on the plans of the Company and threatening the viability itself. Unless the Government takes strong measures to boost the industrial activity and stimulate the industries by reducing the interest rates and making funds available, it will be difficult for the Capital Goods Industry in India to achieve the targets. Project execution is largely affected by non-availability of skilled and unskilled manpower. Competency-management and retention of employees is becoming increasingly critical. EPC Projects are generally exposed to risk of delay in execution due to factors like right of way, obtaining of various approvals in time, environmental factors, resistance from locals, etc.

Segment-wise Performance

This is not applicable to the Company as there is only one identified reportable segment.

Internal Control Systems

The Company has an adequate system of internal control procedures, which is commensurate with the size and nature of business. Detailed procedural manuals are in place to ensure that all the assets are safeguarded, protected against loss and all transactions are authorised, recorded and reported correctly. The internal control systems of the Company are monitored and evaluated by internal auditors and their audit reports are periodically reviewed by the Audit Committee of the Board of Directors. The observations and comments of the Audit Committee are placed before the Board.

Financial Performance and Operational Efficiency

The Companys revenue from operations was Rs.107.47 crores in the Financial Year 2019-20 as compared to Rs.169.80 crores for the previous year. Company is continuing various corrective measures to reduce the material cost and other overheads. The Companys EBITDA was Rs.(7.19) crores in the Financial Year 2019-20 as compared to Rs.2.23 crores during the previous year. The Loss for the year before exceptional items was at Rs.13.27 crores as compared to Loss of Rs.4.98 crores for the previous year.

The lenders of the Company have not charged interest on outstanding bank facilities, since the dues from the Company were categorized as a Non-Performing Asset with all banks from December 2015 onwards. The Company, therefore, had represented to its lenders to restructure its debts to a sustainable level including seeking waiver of full unpaid interest. In view of this, the Company has not provided interest amounting to Rs.57.19 crores for the year ended on 31st March, 2020. However, the said interest has been recognized as a Contingent Liability in the financial statements.

Details of Significant Changes in the Key Financial Ratios & Return on Net Worth

Pursuant to amendment made in Schedule V to the Listing Regulations, details of significant changes (i.e. changes of 25% or more as compared to the immediately previous financial year) in KeyFinancial Ratios and any changes in Return on Net Worth of the Company (on standalone basis) including explanations therefore are given below:

Sr. No. Particulars FY ended 31st March, 2020 FY ended 31st March, 2019 Explanations
i DebtorsTurnover Ratio 0.35 0.57 Due to lower Turnover, Ratio shows reduction. However, overall there is good amount of liquidation in Inventory & release of outstanding receivables.
ii InventoryTurnoverRatio 4.78 7.16
iii Interest Coverage Ratio -16.46 -7.13 Due to lower Turnover, the Company could not absorb overheads fully. The Company has incurred heavy losses and thereby impacting ratio negatively.
iv Current Ratio 0.57 0.58 Not Applicable
v Debt Equity Ratio -1.61 -1.69 Not Applicable
vi Operating Profit Margin (%) -6.70% 1.31% Due to lowe r Turn ove r, the Co mpa ny could not absorb overheads fully. The Company has incurred heavy losses and thereby impacting ratios negatively.
vii Net Profit Margin (%) -11.44% -3.26%
viii Return on Net Worth (%) -3.80% -1.78%

Human Resource

The Company considers its employees as its valuable assets, hence the key focus is to train and develop its employees. The Company aims to create a motivated team and to provide them with good opportunities for career growth.

The Company has undertaken continuous interaction with all employees by frequent visit of Senior Executives to the project sites have brought the employees closer and thereby developed a transparent system of communication. Industrial Relations with the employees remain cordial throughout the year. The work and jobs at all levels in the Company are designed, organized and managed effectively by interaction between the management and employees. The employees have been able to meet the challenges from time to time to improve upon performance of plants through efficiency, productivity and economy.

In view of the Companys growth plans and current requirements, the primary emphasis is on the quality of talent and multitasking of workforce. The Company has a total manpower of 259 as on 31st March, 2020.

Cautionary Statement

The statements in the Boards Report and the Management Discussion and Analysis describing the Companys objectives, explanations and predictions, may be forward looking within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed in the statements. Important factors that could influence the Companys operations include global and domestic demand and supply conditions affecting selling prices, new capacity additions, availability of critical materials and their cost, changes in government policies and tax laws, economic development of the country, and other factors which are material to the business operations of the Company.