1. CAUTIONARY STATEMENT
Statements in the Management Discussion and Analysis describing the Companys
objectives, projections, estimates, expectations may be "forward looking
statements" within the meaning of applicable securities laws and regulations. Actual
results could differ materially from those expressed or implied. Important factors that
could make a difference to the Companys operations include economic conditions affecting
demand/supply and price conditions in the domestic and international markets in which the
Company operates, changes in the Government regulations, tax laws and other statues and
another incidental factor.
2. OVERVIEW OF INDUSTRY
Keerthi Industries mainly operates in three business segments; (a) Cement (b)
Electronics and (c) Power.
a. CEMENT
We operate one integrated cement plants in the States of Telangana. This segment
contributes more than 90% of the total Turnover of the Company vis-a-vis other segments of
the Company. We sell cement under the brand "Suvarna Cements", one of the
leading brands in South India.
The Company has installed modern Vertical Raw Mills (VRM) in place of erstwhile Raw
Ball mills and run under trial basic it will benefited by save cost of production, low
pollution, less chances of accident as the VRM is operated from Control Room by skilled
employees, save running hours and it will consumes less power and fuels.
b. ELECTRONICS
Your Company is one of the few companies specialized in manufacturing flexible Printed
Circuit Boards (PCB) in India. The Electronic Industry is looking up and doing well,
giving a scope for PCB industry to expand. There appears to be some improvement in the
usage of flex circuits in India as new designers have started involving them for prototype
manufacturing. The segment has good improvement in its operations during the financial
year with strong demand from their regular consumers. Focus on quality and customer
service, improved supply chain mechanism is expected to give strong push to companys
operations in the upcoming years. The Board of Directors of the Company at their meeting
held on 14.08.2021 and 10.02.2023 have approved to modernize the process of manufacturing
Printed Circuit Boards with an estimated revised project cost from Rs. 6 Crores to Rs. 10
crores under the scheme for promotion of manufacturing of Electronics components and
Semiconductors (SPECS) of the Ministry of Electronics and Information Technology (MeitY)
of the Government of India.
c. POWER
Your company was having one 1.50 MW Wind Energy based Electric Generating Station
("the Plant") located at Koppalahlli village, Hassan (Taluk & District),
Karnataka and is being commissioning since September, 2007. The Power generated from the
plant was entirely sold to Chamundeshwari Electricity Supply Corporation Limited (CESC), a
Government of Karnataka Undertaking. Your Company had appointed Suzlon Energy Limited
(SEL), having registered office at Pune, Maharashtra, as Operation & Management
Service Contractor inter alia to look after, manage and operate the Wind Turbines
Generators (WTGs) and related equipments.
With the growing cut-throat competition in the market, the Audit Committee and the
Board at their meeting held on 13th November, 2021 have approved to sell the wind power
division on a slump sale basis to M/s. Mission Biofuels India Private Limited and the
undertaking was sold during the year with the total consideration of RS. 2.24 Crores.
d. OILFIELD AND NATURAL GAS
Under the existing circumstances, the Company is eying to explore the segment of
oilfield and Natural gas along with its existing business activities. These will enable
the Company to carry on its business economically and efficiently. The Company is looking
forward to take up and start new projects in this field.
3. OPPORTUNITIES & OUTLOOK
While global economic growth is expected to moderate further in 2023 before marginally
increasing in 2024, India is likely to grow 6.0%-6.5% in FY 2024, the fastest among major
economies in the world. Higher public sector capex, coupled with fresh capital investments
by the private sector, will help drive medium-term growth, while digitalisation and
efficiency-enhancing reforms will enhance productivity. Further, Indias transition to
clean energy and mobility through green hydrogen and electric vehicles provides
significant investment opportunities. Semiconductors and IT product manufacturing are
expected to position India attractively in global trade.
The long-term growth drivers of the economy remain intact coupled with a large and
fast-growing middle-class driving consumer spending. The rapidly growing domestic consumer
market as well as the large industrial sector have made India an important investment
destination for a wide range of multinationals across manufacturing, infrastructure, and
services. Further, India is fast becoming the start-up capital of the world, attracting
sizeable foreign investments, driven by its young population and technology edge. However,
a complex interplay of geopolitical events including the neighbouring countries, high
inflation and consequently elevated interest rates could pose risks to future economic
growth.
a. CEMENT DIVISION
Industry Structure and Developments:
India is the worlds second-largest cement producer, accounting for over 7% of the
global cement installed capacity. Cement production in India grew at 7.6% for FY 2023 (368
million tonne) driven by strong demand from housing and infrastructure sectors. The
housing sector accounts for majority of Indias cement consumption, followed by the
infrastructure sector, and commercial and industrial building constructions.
Outlook for cement sectors is favourable on the back of higher growth opportunities in
the housing and infrastructure segments. The Government in the Union Budget 2023-24 has
allocated $11.4 billion for the creation of safe housing (rural and urban), sanitation and
increase road connectivity. With a busy construction season ahead with the pre-election
spending kicking in, the Industry is expected to see a volume growth of 6-8% going forward
and is likley to reach ~390-400 million tonnes.
Opportunities:
India Ratings & Research forecasts that cement demand will grow by up to 9% in the
2024 financial year that started in April 2023, due to continued government infrastructure
spending. Despite mounting inflation and a large number of capital expenditure projects in
progress, it expects cement company profits to recover due to slowing increases in energy
costs, according to the Press Trust of India. The current prediction for the 2024
financial year follows a growth estimate of 9% in the 2023 financial year.
The primary demand driver for the cement industry will continue to be Indias expanding
housing sector, which normally accounts for 65% of the countrys total cement consumption.
The Union Budget for the year 2023-24 has an outlay for PM Awas Yojana, which is being
enhanced by 66% to over 79,000 Crores (US$ 9.6 billion) to build affordable houses in
urban and rural India. India built 12,000 kilometres of roadways in 2022, and this
momentum is projected to continue in 2023 and 2024, supported by a number of governments
programmes, which would further increase cement demand.
The cement demand in FY2023, though started on a mute note because of the inflationary
environment, picked up pace in the second half as global raw material prices stabilised.
Cement volumes grew by 8-9% in FY2023 to 380-385 million tonne, driven by housing demand,
both rural and urban, and the infrastructure sector. Cement manufacturers are wary of
further increasing their prices and this is leading to an impact on their profitability
margins. Cost optimisation through tech enablement and innovating manufacturing processes
have become extremely important for firms to sustain in the long run.
b. ELECTRONIC DIVISION:
Industry Structure and Developments:
The global PCB (printed circuit board) market size grew from US $ 62.18 Billion in 2022
to US $ 69.60 Billion in 2023 at a compound annual growth rate is 11.90%. and it is
expected to grew to US $ 104.99 Billion in 2027 at a compound annual growth rate is
10.80%.
Electronics industry is one of the largest global industries and form an integral part
of several industries including Consumer Electronics, Medical equipment, IT, Telecom,
Strategic Electronics (Defence, Space, and Aerospace), Industrial, & Mobility.
Indian PCB (Printed Circuit Board) Market:
The Indian PCB (printed circuit board) market size reached US$ 4.5 Billion in 2022.
Looking forward, the analyst expects the market to reach US$ 11.8 Billion by 2028,
exhibiting a growth rate (CAGR) of 16.6% during 2023-2028. The rising utilization in
consumer electronic products, increasing application in electric vehicles (EVs), and
favorable government policies represent some of the key factors driving the market. India
represents one of the largest and fastest growing consumer electronics market in the Asia
Pacific region The Government of India is strongly encouraging the manufacturing and usage
of PCBs in the country. It has launched many initiatives such as ‘Make in India,
‘Digital India Specs Scheme of Meity etc. Under these schemes, the government aims
to encourage manufacturers to set up more local plants in the country by easing tax
regime, reducing bureaucratic hurdles, etc. This is expected to bring in significant
achievement in various end-use industries (automotive, electrical, etc.), thereby creating
a positive impact on the overall PCB demand.
In line with the government initiative your company started modernising the process of
manufacturing Printed Circuit Boards with an estimated revised project cost of Rs. 10
crores under the scheme for promotion of manufacturing of Electronics components and
Semiconductors (SPECS) of the Ministry of Electronics and Information Technology (MeitY)
of the Government of India. Popularly known as 25% Subsidize Scheme.
Opportunities:
Electronics are a global driver for the worlds economy. They are present in everything
from life-saving medical equipment to safety and security systems, telecommunications, and
automobiles. Electronics manufacturing involves significant job creation within the
industry itself as well as in other industries through improved productivity and constant
innovation. Applications such as wearables, augmented and virtual reality, and high- end
graphics and video are just a few of the electronics-based innovations coming our way.
Favorable government policies represent one of the primary drivers increasing the sales
of PCBs in India. The Government of India is encouraging the manufacturing and utilization
of PCBs across the country by offering various initiatives, such as Make in India and
Digital India. In addition to this, it is supporting manufacturers to set up more local
plants in the country by providing easy tax regime and reducing bureaucratic hurdles.
India is one of the largest consumer of electronic products in Asia-Pacific region and
the third largest start-up hub coupled with strong research and development (R&D)
ecosystem. Bengaluru and Hyderabad are ranked among the top 50 start-up cities in 2021.
Your Company is one of the few companies specialized in manufacturing flexible printed
circuit boards in South India. Your company has shown a raising tone even in this hardship
time Your Company is focusing on modernizing the manufacturing processes thereby aiming to
take up new projects to improve the revenue in this segment.
c. OILFIELD AND NATURAL GAS:
Industry Structure and Developments:
India is the worlds third largest energy consumer globally. Demand for primary energy
in India is expected to increase threefold by 2035 to 1,516 million tonnes of oil. The oil
and gas sector is among the eight core industries in India and plays a major role in
influencing decision making for all the other important sections of the economy. Indias
economic growth is closely related to energy demand; therefore, the need for oil and gas
is projected to grow more, thereby making the sector quite conducive for investment. India
is expected to be one of the largest contributors to non-OECD petroleum consumption growth
globally.
In November 2021, India announced its target of achieving Net Zero emissions by 2070.
Prior to this, earlier in the year, India had targeted the goal of being energy
Independent by 2047. In relation to this, significantly, during the year, the Government
of India launched its National Hydrogen Mission, advanced its ethanol blending target and
launched mega production-linked incentive schemes for Solar PV, Advanced Batteries and the
automotive sectors. This was followed by the announcement of Green Hydrogen/ Green Ammonia
Policy that aim to boost production of ‘Green Hydrogen to 5 million tonnes by 2030
and make India an export hub for the clean fuel.
Opportunities:
25% of the global energy growth between 2020 and 2040 is envisaged to come from India
due to the fastgrowing economy and demographic dividend, so Indias energy demand Expected
to grow at about 3% per annum by 2040, compared to the global rate of 1%. Early production
royalty concession of 10%, 20% and 30% for different Category producer. Any entity can set
up LNG stations in any Geographical Area in India^^
even if they do not have a City Gas Distribution license. Liberal government policies
in getting Environmental clearance also stimulates to concentrate in this field of
Exploration & Production of Oilfield and Natural Gas.
4. RISKS, CONCERNS & THREATS:
a. CEMENT DIVISION
Concerns of the Cement division are high cost of Power and Coal, high freight cost,
inadequate infrastructure, non-availability of Wagons, and poor quality of coal and heavy
taxes / royalty levies and heavy finance cost as the cements industry is the capital
intensive industry. The Operations of Cement companies in Telangana and Andhra Pradesh
suffer due to availability of Coal, Fuel, lower realizations and lower demand in the
state.
b. ELECTRONIC DIVISION
The complexity of the PCB design and manufacturing processes means there are numerous
opportunities for PCB failure issues to arise. Some of these failures are a result of
design oversights, such as insufficient clearances or incorrect measurements, which can
negatively affect the functionality of the finished product. Others may result from
problems in the manufacturing process, such as drilling errors or over-etching, which can
be equally catastrophic.
There is a threat from major domestic and foreign competitors who, in order to maintain
their scale of production, have installed higher production capacity, offer lower prices,
better payment terms and other incentives. Due to delay in upgrading our manufacturing
facilities because of financial constraints our market share may be affected.
The company is also exposed to risks across its entire range of business operations
i.e. Loosing of major customers due to inability to meet the customer demands on time due
to lack of modern machinery and equipment.
c. OILFIELD AND NATURAL GAS
The oil and gas industry easily have a large impact on the mass populations of the
world, as they supply many useful products, the main one being gasoline. Though this
industry is a large and prosperous one, it also has a lot of risk involved with it. As
with any product, there is always the concern that the supply wont meet the demand, or
that the demand wont meet the supply, which results in wasted resources. Your company is
looking avenue in this segment.
5. OUR BUSINESS
The breadth and depth of ‘Keerthi expertise has been built over last 10 years
through a unique combination of longstanding customer relationships, investments in people
and through continuous investments in new technologies.
The Company has been steadily expanding its customer base, infrastructure, service
lines and industries. The growth momentum of the Company continues to deliver strong
financial results, attract top domestic talent and win new customers and strengthen
existing customer relationships. The Company has decided to concentrate and put the
resources of the Company is its core business and in those segments which are likely to be
profitable in coming years.
6. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:
The company is following a proper and adequate system of internal controls in respect
of all its activities including safeguarding and protecting its assets against loss from
unauthorized use of disposition. Further all transactions entered into by the company are
duly authorized and recorded correctly. M/s. Pavuluri & Co., Chartered Accountants,
Hyderabad has been working as the Internal Auditors of the company. The Internal Auditors
are submitting reports to the Audit Committee on a Quarterly basis.
7. SEGMENT WISE OR PRODUCT WISE PERFORMANCE:
It is discussed in the Directors Report under the head operations in the Directors
Report.
8. HUMAN RESOURCES, INDUSTRIAL RELATIONS
The company enjoys very cordial industrial relations, due to which there is very low
employee/ labour turnover in the company. You will be happy to note that ever since the
inception of the Company, there were no strikes, lockouts, lay-offs, retrenchments, etc.
9. SENIOR MANAGEMENT DISCLOSURES
The Companys senior management makes disclosures to the Board relating to all material
financial and commercial V transactions as and when they occur.
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