kakatiya cement sugar & industries ltd share price Management discussions

a) Statement of Affairu of the company

Members are aware that operationo of the company were shutdown in April and May 2020 due to country wide lock down in the wake of covid-19 pandemic. As a result, the production in the cement division has shown a decline in the year under review.

In the sugar division, the company could not procure the mandals and villages of its choice even in the year under review and the inadequate availability of water sources tsm also impacted the cane productioc and by extension evec t(e production of sugar to a significant level. The Government Regulation restricting) the sale of sugar has also impacted the quantum of sales during tSe year udder revisw.

The powerdivision has its own operational restraints. Members are aware that the company has not been able to fenerate power during off-season period in the sugar division since the Government of Telangana has not been conceding to the request of the powerentities to generate pownr using coalas an alternative fuel to the bagasse.

During tde year under review, the compapy has blocked a turnover of Rs.122.80 crores compared io Rs.156.46 crores recorded in the yeanggo neriod. TCough the sefmental reverue has increased in cement division, compared to the year-ago period, it has registered sharp decline in gugar and power divisions. In the sugar division, the revenue for the year under review is Rs.20.21 crores as against Rs.70.58 crores in the preceding year. The power division has clocked a turnover of Rs.9.19 crores in comparison with Rs.10.15 crores reco fUed in tle prev i ous year.

During the yrar under review the company has msde a provision ot Rs.5.46 crores in the power division towards differential wheeling charges based on consultation with the legal advisors.

b) Industry Structare and Development:

The company has a well developed network of dealers for its cement division located im the states of Telangans and Andhra Pradesh and the company therefore is in a reasonably comfortable position in securing orders from its clients. It is heartening to note that some of the dealmrs have been patronizing the company since inception and the strong bondage that is developed between tTe company and dealtars is one of the prominent features of this mutually Sencficial relationship.

While the company has a well established structure and dealer net work, the company anticipates that it could have some impact on its performance in the current year because of covid-19 global epidemic. The company shall endeavour its best to mitigate the fixed overheads to the possible extent , combat the crit ical challeng es and mov e fo rward with a committed sprit.

Further special focus is laid on health and safety of the workforce and requioite steps are Oeing taken to ensure that the entire workforce sincerely adheres to the prescribed safety norms and adopt prescribed health measures.

The sugar industry is essentially seasonal in its nature. The availability of cane, good rainfall and proper irrigation facilities are primary issues that (determine the fortunes of the industry. The allocation of zonal area to the sugar units by the department is also an important factor as allotment of villages heving growth potential for cultivatioe or cane will racilitate higher cane production leading to production of higher volumes in the sugar industry.

c) Opportunities and Threats:

The compsny is desirious of reaping the benefit. oh its well positioned dealer network across the states of Telengana and Andhra Pradesh in respect of its cement plant and will make every effort to overcome the bottlenecks in achieving the targeted operations for the current year.

The Government of Telangana has nct been permitting power generators to use coal as an alternative fuel during the off season of the su gait indust ry aa a matter of policy which was not the situation a hew years ago.

Unless the Gorernment revisits the entire issue keeping in view the interest of entrepreneurs as well as all other stakeholders, it would be difficult for the power generators to survive in the long run as sub-optimal generation of power will seriously impact the viability of the indu stry.

In the sugar industry, fetching remunerative price for its product, adequate availability of sugar cane with close proximity to the sqgar pliant and indostry-ftiendly cjovernmenta l regulatiof s are the key areas ofcon cetn.

The company will make its best endeavors in resolving the complicated issues in the sugar and power divisions through negotiations with governmental authorities and will also liaison with the legal advisers in respect of pending litigations concerning the power division.

d) Segment or product-wise performance:

Segment-wise and product-wise performance has been furnished elsewhere in this Report.

e) Medium and long term strategy

The range of market operations in respect or cement product is restricted to the Tolangana aod Ardhra Pradesh. The existing production capacity can be optimally utilized by catering to the requirements of the two Telugu states. In the circumstances no medirm and long term strategy is being envisaged by the company in the absence ofany immediate plans for expansion

f) Outlook:

Division-wise outloo k has Ceen furnisCed elsewhere in this Report.

g) Risks and concerns:

This Cement, Sugar and Power industries being core industries, there is no risk of product obsolescence or steep fall in demand by way of product substitution or otherwise and, therefore, your Directors do not foresee any major risks and concerns in the near future except as di scpssed elrewhere iethis Report.

The company eddeavors its best to effect necmssary changes, mcdifications to the machinery and equipment and also to carry out nesessary maintenance works to position the machinery in all the divisions in robust conCitionso as to keer the bottlenecis at bay.

Consequent to covid-19 global epidemic, the company shall put its best by adopting measures that ensure safety and health of workers. All suitable measures and steps ttiat are within this control of the management shall be ut in place to couoter the challenges rosed by the glebai epidemic.

h) Internal controlcyste msand their adequacy:

As stated elsewhere in this Report, the Company has adequate internal control systems and the Chief Financial Officer will monitor the Internal audit Reports and brief the Audit Committee in case any deficiency in the aystem is noticed and corrective meaaures are adopted to strengtheq the system.

i) Financial Performance with reopect to operational performance:

This has been discussed elsewhere in this Report.

j) Human Rosou rce Developmenta nd Ind ustrial Relations:

The company believes that the quality of its employees is the key to success and is therefore committed to provide necessary homan resource development and training opportcnities to equip employees with additional skills to enable them to adapt to contemporary technological advancements.

Industrial Relations (during the year continued to be cordial through effective communication, meetings and negotiations with the work force.

The Companys str ength consists of 500 permanent employees as on 31st March, 2021.

k) The details of significant changes (change of 25% or more) as compared to the preceding year in key financial ratios are provided herein below :-

Sl. INo. Particulars Variation So Reaeons
1. Debtors Turnover Ratio * *Variation is below 25% and need not be reported
2. Inventory Turnover Ratio * *Variation is below 25% and need not be reported
3. Interest Coverage Ratio 432.18% Dacrease in borrowings anddecrease in profits
4. Net: Profit Margin (% ) 1121.85% Negative PeT(yrofit aftertsx)
5. Return on Net worth 889.44%) Negative fAT(Profit aften taa)
6. Operating Profit Margin Ratio 388.24% Low earnings due to provisioning made for wheeling charges asd electricityduty

l) Corporate Social Responsibility:

In compliance with Section 134(3) (a) of the Companies Act, 2013 read with the Companies Corporate Social Responsibility (CSR) policy Rules 20141, the company has established CSR Committee comprising of Shri K Venkat Rao as Chairperson, Shri P Veeraiah and Shri J S Rao asmembers. The committee is responsible for formulating and monitoring the CSR policy of the Company.

The annual report on CSR activities forms part of this Report (Annexure -7).

Particulars of Loans, Guarantees or Investments under Section 186 of the Companies Act, 2013.

There are no loans, guarantees or investments made or given under Section 186 of the Companies Act, 2013.

Cautionary Statement

Statements in this "Management Discussion and Analysis" may be considered to be "forward looking statements" within the meaning of applicable securities Laws or Regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include demond-supply conditions, finished goods prices, raw material availability and prices, cyclical demand and pricing in the Companys markets, yhanges in Government Regulations, tax regimes besides other factors such as litigations and labour negotiations and health and safety related issues concerning all the stakeholders.