Today's Top Gainer
Note:Top Gainer - Nifty 50 More
A. Economy and Industry Overview Global Economy:
The global economical growth at 2.6 percent for the year 2014 was at its lowest since 2009.
The financial year 2014-15 witnessed certain developments namely the rapid decline in oil prices, quick adjustments in exchange rates (with the US dollar appreciating and other currencies notably the euro weakening), and the new quantitative easing program of the ECB these being just a few examples of the economic factors at play. In addition, there is an increased geopolitical uncertainty related to the Russia- Ukraine and Middle East conflicts, as well as increased concern about the economic and political future of the Euro Area and European Union.
China continues its "soft fall" growth as already limited government stimuli having less effect despite recent monetary easing. Other major emerging markets will continue to grow, but their pace will vary depending on the net impact of declining oil prices and exchange rate depreciations, as well as progress of their own reform agendas. New geographies for growth, such as Africa and parts of Asia, offer opportunities to build sustainable growth models but they also bring challenges on economic, legal, and institutional fronts.
Hopes of a recovery in the US have gathered steam, especially after the economy added 295,000 jobs in February 2015, and that countrys unemployment rate fell to 5.5 percent, the lowest in the post-recession period. A full-blown economic recovery in the US, however, remains elusive. The US economy grew
2.4 percent in 2014, marginally up against 2.2 percent in the previous year.
India is set to become the worlds fastest growing major economy by 2016. GDP growth if pegged at 7.4 percent for FY 2014-2015 is up from 6.9 percent in FY 2013-2014 .
India now measures GDP by market prices instead of factor costs, to take into account gross value addition in goods and services as well as indirect taxes. The base year has been shifted to FY 2011-12 from FY 2004-05 earlier.
According to the International Monetary Fund, India is expected to grow 7.5 percent in FY 2015-2016.
The total trade deficit for 2014-2015 increased to $ 137.01 billion from $ 135.8 billion in 2013-2014.
Two major events impacted Rupee movement during the year 2014. During the first quarter of the year, Federal Open Market Committee effectively ended the quantitative expansion, while also assuring that easy money policy would continue till at least another year. The fear of shrinking dollar flows had a sobering effect on Indian economy, briefly pulling down the exchange rate. However by mid-May, the prospects of a stable Government in India, following the conclusion of general elections lifted the business sentiment, and also helped instill confidence in the foreign investors.
During April 2014 to January 2015, the foreign inflows have grown by 36 percent, year-on-year, to $ 25.52 billion against $ 18.74 billion during the same period a year ago.
Foreign portfolio flows have stabilised the Rupee, exerting downward pressure on long-term interest rates which is reflected in yields on 10-year Government securities and surge in equity prices.
Foreign Exchange Reserves in India increased to $ 341.38 billion on 27th March, 2015.
USD INR rate is influenced by multiple factors, most important being the index indicating the strength of USD, FII inflows and domestic macroeconomic factors, largely represented by GDP growth and inflation.
The Rupee which was Rs.59.90 to USD at the beginning of financial year ended with Rs.62.50 depreciating by 4.5 percent.
During the fiscal 2014-15, Sensex has gone up by 5,571 points i.e. an increase of 24.88 percent from a level of 22,386.27 at beginning of the year to 27,957.49 on 31st March, 2015. The Sensex had touched an all-time high of 30,024.74 on 4th March, 2015.
Monetary Policy :
Reserve Bank of India (RBI) delivered two successive rate cuts in January 2015 and March 2015 aggregating to 0.50 percent during the calendar year 2015 taking repo rate down to 7.50 percent as inflation eased. However, commercial banks did not reduce the lending rate during the year under review.
Over the year 2014, oil prices have steadily fallen from $ 110 bbl to below $ 50 bbl, with a positive impact on Indias balance of payments. The reduction in the cost of oil imports and the restrictions placed on gold imports helped a gradual fall in inflation levels. RBI with its conservative monetary policy also contributed to taming the inflation. Consumer price index has fallen from 8.8 percent in January 2014 to
4.5 percent and W P I from 5.1 percent to zero level as at end-November 2014. Overall the receding inflation levels contributed to relative stability of Rupee exchange rate.
Steel Industry :
In 2014, the world crude steel production reached 1,661.5 Million Tonnes (MT) and showed a growth of 1.2 percent over 2013.
China remained the worlds largest crude steel producer in 2014 (823 MT) followed by Japan (110.7 MT), the USA (88.3 MT) and India (83.2 MT) at the 4th position.
India is expected to become the worlds second largest producer of crude steel in FY 2015-16, moving up from the fourth position.
With infrastructure development and automotive industry driving steel demand, production is expected to hit 140 MT by the end of 2016.
Iron ore :
The Supreme Court (SC) appointed Central Empowered Committee (CEC) has recommended grant of approval to the Karnataka Governments proposed scheme of e-auction and re-allotment of 51 cancelled mines in Category CRs.in three districts Bellary, Chitradurga and Tumkur of the state. In its report, the panel has also recommended to the apex court that the existing statutory approvals/clearance may also be transferred in favour of the new lessees and a direction should be given to the authorities concerned to take expeditious action for the grant of statutory approvals like environmental clearances and Temporary Working Permission under the Forest (Conservation) Act, 1980.
Pursuant to the apex court order of April 2013, around 51 C-Category mining leases were cancelled and are now being allotted to the highest bidders from among end-users.
For the best competitive bids, the SC-appointed panel has recommended that all end users, including state-owned pellet manufacturing units like KIOCL, should be eligible to participate in the e-auction.
The Karnataka Government had asked the Apex Court to give its approval to conduct auction for six mines for the CRs.category in the first phase and another nine mines in the second phase as the assessment of ore left in the nine mines was yet to be ascertained. The reports of M/s MECL in respect of six mining leases have already been received; the reports for the balance nine mining leases are expected shortly.
The Central Empowered Committee (CEC) has stipulated the ore produced be used only for captive use . A consortium of two or more end-users may be formed for making applications.
According to the CEC, the successful bidder should be asked to pay every month an amount equal to the sum total of the quantities of iron ore of each grade of fines/lumps produced multiplied by the IBM published average price of the corresponding grade multiplied by the quoted percentage price (premium amount).
It further stated that the lessees will have to pay the royalty, forest development tax, VAT and other applicable taxes, cess, etc (such as contribution to the National Mineral Exploration Trust) at the prescribed rates. The successful bidders will be required to deposit interest free security deposit equivalent to the premium amount payable for two years of approved permissible production 50 percent by cheque/draft and the balance in the form of bank guarantee.
The auctioning of mines is likely to benefit end users who are not having captive iron ore mines and depend on e-auction of iron ore for their raw material requirements.
The Apex Court has capped the production of iron ore at 30 Million Tonnes per annum in the state of Karnataka as against the steel industrys annual requirement of 35-50 Million Tonnes. Till now, only 23 mines have started production with a combined production of 10 Million Tonnes per annum. Besides, NMDC Limited is producing another 9 Million Tonnes per annum.
The new mining act has been passed by both the houses of the Parliament.
In the case of metallurgical coke, unrestricted imports from China (after the removal of export duty and quota restrictions), has helped manufacturers to import coke for their manufacturing operations at competitive prices.
Coking coal prices and coke prices came down marginally in the year under review.
Auto Industry :
The car sales ended in positive territory during FY 2014-15 after two consecutive years of decline basically fuelled by excise duty cuts (till December), new launches, reduced fuel prices and high levels of discounting. Passenger car sales recorded a growth of 4.9 percent from 1.78 Million units in FY 2013-14 to 1.87 Million units in FY 2014-15.
In the commercial vehicle segment, sales of medium and heavy commercial vehicles grew by 16.02 percent from 2.00 Million units in FY 2013-14 to 2.32 Million units in FY 2014-15 on the back of pent-up demand, anticipated increase in infrastructure spending, replacement of ageing inefficient fleet and recently lifted mining bans; however sales of light commercial vehicles showed a decline of 11.57 percent over the preceding year.
The car companies have announced a price hike owing to higher inputs costs. The prices of cars will go up, with expected regulations on having mandatory safety gears in all cars.
Auto Industry outlook:
A major thrust on infrastructure spending and road development augurs well for automotive industry, especially M&HCV and earth-mover industry as well as their suppliers.
The privatisation of ports, setting up of ultra mega power projects and increased allocation to roads and highway sector will definitely spur demand for commercial vehicles.
The industry is gearing up for a new start with a slew of next generation vehicles expected to rev up optimism and increase sales. The year 2015 can witness important launches and exploring newer territories by entering new segments.
Auto companies are already gearing up to enhance their capacities in anticipation of positive market conditions. Further expected decline in interest rates and fall in fuel prices, will drive the growth for the industry.
The outlook for current fiscal looks bright with passenger vehicles clocking a growth of 5 to 8 percent building on the momentum of low interest rates, fuel prices and new launches.
The M&HCV (Truck) segment is likely to register a growth of 12 to 14 percent in FY 2015-16 driven by continuing trend towards replacement of ageing fleet and expectations of pick-up in demand from infrastructure and industrial sectors in view of reforms being initiated by the Government.
Unlike M&HCVs, it is expected that the LCV segment will grow at modest pace (i.e. 4 to 6 percent) in FY 2015-16 as segments prospects continue to be influenced by overcapacity issues and constrained financing environment amidst rising delinquencies.
The tractor industry has shown a sale of around 0.55 Million units during FY 2014-15 showing a decline of 13 percent.
Sharp contraction in domestic tractor sales during the five months i.e. October 2014 to February 2015 lead to a decline of 11.6 percent during 11 months of FY 2014-15. Decline in crop output, lower yields and weakening crop prices during FY 2014-15 have negatively impacted farm sentiments with dip in farm incomes.
In addition to the above factors, production cuts and the inventory correction in the channel undertaken by key players have also contributed to sharper decline in sales volumes. However, export demand remains robust on back of growing demand from U.S, near-by markets- especially Sri Lanka, Bangladesh and parts of Africa, albeit on a small base.
Tractor industry Outlook:
The tractor industry is expected to grow at around 7 percent during the FY 2015-16. It is expected that tractor industry will grow at a pace of CAGR of 2.3 percent upto 2019.
Prediction on normal rain fall and increased expenditure in infrastructure for the year 2015, may boost the tractor sales.
Crude oil prices:
After touching the prices below USD 50 per barrel, the prices have recovered to USD 55 per barrel. The increase in prices of crude oil may not be a good news for India, as it may fuel the inflation. The International Energy Agency (IEA) has also predicted a recovery in global oil prices.
B. Company Performance
Your Company achieved net sales of 13,650 Million (previous year Rs.12,321 Million). Sales value has shown a growth of 10.78 percent.
In terms of volume growth in sales, Pig Iron sales has increased by 15.35 percent, while Castings sales decreased by 5.19 percent compared to previous year.
The profit before tax for the year under review stood at Rs.718.44 Million as compared to Rs.579.86 Million of the previous year after providing for depreciation and amortisation.
C. Operational Performance
Your Company sold 318,023 MT of pig iron valued at Rs.8,436.59 Million during FY 2014-15 as compared to 275,692 MT of pig iron valued at Rs.7,173.87 Million in the previous year.
Both the Mini-blast furnaces were operational throughout the year other than stoppage for Robo-gunning of one of the furnace for a week. Sinter plant was also operational throughout the year which enabled the Company to reduce the operational costs. Your Company was able to sell the pig iron produced maintaining the sales realization.
The slowdown in tractor industry has impacted the demand for castings. However, your Company managed to maintain sales.
Your Company sold 57,257 MT castings aggregating to Rs.4,744.56 Million during FY 2014-15 as compared to 60,396 MT castings aggregating to Rs.4,600.37 Million in the previous year.
Your Company was able to source the iron ore at reasonable prices by strategically sourcing through e-auction and beneficiated iron ore.
Coke prices at the beginning of the year was at US$ 246 per MT and the prices have come down to a level of US$ 189 per MT by the end of the year. Although Rupee did not depreciate substantially yet the premium paid for hedging the risk was on higher side thereby resulting in higher input cost. Hence the benefit of coke price reduction did not materialise.
Your Company faced a challenging task of managing both the production and the cost of production in these adverse conditions and took appropriate and timely decisions to ensure uninterrupted production and also ensured that the cost of production was also kept reasonably under control.
Your Company is productionising castings for the Euro VI series engine block and heads and is stabilizing the process to get stability in quality and delivery.
D. Cost Control
Your Company adopted following measures to reduce cost:
increased use of sinters to reduce operational cost.
iron ore and coke procurement strategies.
improvement projects through Kaizens to bring cost reductions.
Improved operational efficiencies and cost control measures at both Koppal and Solapur Plant.
E. Concerns and Threats
Demand for the auto and tractors have a direct impact on the performance of your Company and any adverse market condition for these sectors will result into reduced capacity utilisation and profitability.
Further, depreciation of Rupee vis-a-vis US dollar can lead to an increase in price of coke and in the price of crude oil, resulting in increased input costs, thereby putting pressure on profitability.
F. Prospects for the Current Year
As per the Mines Act, only end users for their captive use only can participate in the e-auction for iron ore mines. Your Company being the manufacturer of pig iron and grey iron castings is eligible to participate in the e-auctioning of iron ore mines. Your Company will participate in the e-auction to get suitable iron ore mine for its captive use.
Demand for pig iron is expected to remain stable considering the growth projections by auto sector and tractor sector.
Productionisation of castings on the new moulding line is in progress and can bring increase in volume of casting production progressively.
Statements in this report, particularly those which relate to Management Discussion and Analysis, describing the Companys objectives, projections, estimates and expectations may constitute "forward looking statements" within the meaning of applicable laws and regulations. Actual results may differ materially from those either expressed or implied.
G. Internal Control Systems and their adequacy
The Company has a proper and adequate system of controls in order to ensure that all assets are safeguarded against loss from unauthorised use or disposal. All transactions are properly checked, verified, recorded and reported correctly.
Regular Internal Audit checks are carried out to ensure that the responsibilities are executed effectively and that proper and adequate systems are in place.
H. Safety, Health and Environment
Your Company believes in "Safety First" and is committed to provide "Safe Workplace" by addressing safety, health and environment related issues. Employees are regularly trained to update their awareness and skills. New employees are being given intensive safety induction training. All the statutory requirements related to safety, health and environment are being complied with. As a proactive approach, the periodical safety audit is being conducted to identify unsafe conditions and take proper safety measures. Near miss accidents are recorded and investigated to prevent their occurrence. During the year under review, 15 safety coordinators have been appointed and they are involving themselves in ensuring 100 percent PPE usage, reporting unsafe conditions and near misses in shop floor.
Your Company is having an "Occupational Health Centre" with a full-time Doctor and qualified nurses. The pre-employment medical check-up of the employees is being conducted and also thereafter during the continuance of the employment. The Company is having well equipped ambulance which is available at all times.
Your Company is certified for Quality Management Systems under ISO TS 16949:2009, Environmental Management System under ISO 14001:2004 and also certified for Occupational Health and Safety Assessment Series (OHSAS 18001:2007) by Indian Register Quality Systems (IRQS).
Requirements of environmental acts and regulations are complied with. Monitoring and analysis of water, stack emissions and ambient air quality etc., are undertaken periodically to verify whether the level of environmental parameters are maintained, well within the specified limits.
Sewage Treatment Plant (STP) with 250 KLD (kilo liters per day) capacity is operated to treat domestic wastewater with extended biological aeration system. Sludge generated from STP is being used as manure for garden and treated wastewater is used for gardening.
For effective suppression of dust emissions, jet type fixed sprinklers are provided.
Under ISO:14001 and OHSAS:18001, the following management programs have been taken-up and completed during FY 2014-15 at its plant at Koppal.
1. Erected Porous fence (mesh) of 42 meters length and of 12 meters height in the north boundary to prevent the fugitive dust emission going out to nearby settlement taking total length to 210 meters.
2. Construction of around 700 meters of concrete roads inside plant premises to prevent dust emission due to vehicular movement; till date total of 1,500 meters concrete road has been provided.
3. Installation of Fume Extraction System (FES) in MBF 1 and 2 to control emission of Kish Graphite during hot metal tapping and pouring activities.
4. Installation of two Continuous Stack Emission Monitoring Systems for Sinter Plant ESP and bag filter stacks for effective monitoring.
5. Provision of additional three Jet type fixed sprinklers in raw material yard 1 to suppress dust emission during material handling.
6. Plantation of around 8,000 Tree Saplings in and around the plant premises to increase the green belt taking the total tally to around 138,000.
I. Social Responsibility :
Your Company has taken following measures as a part of its corporate responsibility to the society. The Company focuses on rural education, health and hygiene to serve the society in the local vicinity of the plant. Major activities undertaken during the year are as follows:
Provided bags and note books to the students of Government Higher Primary Schools of Bevinahalli, Lingadalli and Guddadalli villages.
Constructed Ranga Mandira at Government Higher Primary School Bevinahalli.
Steel plates donated to Bevinahalli school children for mid-day meals.
Provided benches (desk) to Evergreen School Kukumpalli.
Financial assistance to Annadaneshwara Education Trust for construction of college building. Rural Health and Hygiene:
Implementing Kirloskar WaSH initiatives at Koppal and Solapur for two Schools (clean and Beautiful School) each.
Financial assistance to Srinivas Ram Morarka School Hitnal for construction of toilet block.
Conducted Health Camp for Bevinahalli School children.
Organised Pulse Polio program in co-ordination with Health Department Koppal at Bevinahalli.
Visit of specialist doctors to Bevinahalli village once in a week and Company medical officer twice in a week including medicine expenses.
Renovation of toilet blocks of Bevinahalli Higher Primary School.
Construction of concrete road at Bevinahalli village in various areas.
Reconstruction of Hontamma temple at Lingadalli village (1st phase).
Organized SWACHA BHARTH abhiyana at Bevinahalli village in co-ordination with Gram Panchayat, Hitnal.
To create environmental awareness amongst the people and school children, 4 days "Vasundhara Film Festival" was organized in Koppal, Hospet and Solapur.
Under Kirloskar Vasudhara Club "Plastic Free Hosapete" JATHA was organised.
J. Human Resource
Your Company considers human resource to be an important and valuable asset for the organization. Therefore, it constantly strives to attract and retain best "Talents" for the present and future business needs.
The Company has taken-up the following initiatives:
As a part of identifying future leaders, the Company through selection process selects young professionals for the Company level "Fast Trackers" scheme. The identified Fast Trackers shall be given intensive training through internal and external faculty, to help them to acquire required skills for taking up new role in the Company.
In order to upgrade the skills on continuous basis necessary training programmes i.e., technical and soft skills have been organized with the help of internal as well as external experts.
More focus is being given to "Work Life Balance" of the employees through various initiatives.
The action plan on feedback report on Employee Engagement Survey has been chalked out. The actions will be undertaken through various initiatives which shall improve the employee engagement.
The Talented employees are continuously recognized and are motivated through rewards and awards.
Performance of employees is monitored through an effective Performance Management System.
As on 31st March, 2015 the total number of salaried employees stood at 1,266. The Employer- Employee relations have been generally cordial throughout the year.