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Knowledge Marine & Engineering Works Ltd Management Discussions

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Apr 2, 2025|02:09:35 PM

Knowledge Marine & Engineering Works Ltd Share Price Management Discussions

BUSINESS OVERVIEW

Knowledge Marine & Engineering Works Limited is an India based company specializes in dredging and carries out Capital and Maintenance dredging works at various ports, rivers, lakes and fishing harbours.

KMEW also specializes in owning and chartering other port ancillary crafts such as pilot boats, patrol boats, survey boats, mooring boats, tugboats, and hopper barges.

Our clientele includes Inland Waterways Authority of India, Ministry of External Affairs, Dredging Corporation Of India, Kolkata Port, Visakhapatnam Port, Kandla Port, Paradip Port, V.O. Chidambaranar Port and Mumbai Port at domestic front and Myanmar Port and Bahrain at International front.

As on the date of financial year closing, we own and operate 16 Fleets out of which 3 are under construction. Out of 16 vessels, 6 are dredgers and 10 are port ancillary crafts.

KMEW subsidiaries and Associate Company include Knowledge Marine Co. W.L.L., Bahrain, Knowledge Dredging Co. W.L.L., Bahrain, Indian Ports Dredging Private Limited, Knowledge Infra Ports Private Limited and KMEW Offshore Private Limited.

DREDGING INDUSTRY STRUCTURE

Global Dredging Market

Source: futuremarketinsights.com

The global dredging market value is estimated to be US$ 16,684.12 million in 2024 according to the updated industry analysis report. The overall market is predicted to grow at a moderate CAGR of 2.15% during the forecast period. The global dredging industry share is estimated to reach a value of nearly US$ 20,638.92 million by 2034.

Report Attribute Details
Dredging Market Size (2024) US$ 16,684.12 million
Market Anticipated Forecast Value (2034) US$ 20,638.92 million
Market Projected Growth Rate (2024 to 2034) 2.15% CAGR

Dredging Market Trends & Analysis

• Increasing sea-borne trade is expected to propel the growth of the dredging market going forward. Seaborne trade refers to the transportation of goods that takes place through accessible water routes and ports. Dredging helps sea-borne trade by expanding existing ports, maintaining existing waterways, and building new ports and waterways. increasing water-borne trade is driving the growth of the dredging market. Product innovations have emerged as a key trend gaining popularity in the dredging market. Major companies operating in the dredging sector are focused on developing new innovative products to strengthen their position in the market. The dredging market includes revenues earned by entities through dredging services such as capital dredging, maintenance dredging, and inland water dredging. The global economy witnessed mixed trends during the fiscal year.

• Many maritime nations still are government-owned and operated dredging fleets. However, the commercial or privately-owned dredging companies are expanding fast these days. Dredging corporations are increasingly acting as the principal contractors for large-scale dredging projects and are in charge of engaging subcontractors to do particular tasks related to the overall construction.

• Innovations in dredging vessels and other machinery are required for a highly specialized business. Moreover, every harbor dredging project includes consideration of the environment, and pre - adaptive, and post-monitoring have developed into industry norms.

Recent Developments in the Global Dredging Market

• China Communications Construction Company Ltd. and China Construction Technology Consulting Co., Ltd. inked a framework agreement for strategic collaboration for international trade in Beijing in February 2022.

• Demand in Europe, which was formally concentrated in specific countries such as the Netherlands, Belgium and the United Kingdom, has spread throughout Europe in recent years.

• The Asia Pacific dredging market is experiencing growth largely due to the regions growing population. Since the water transport is cheapest form of channel of transportation of goods. Growing population, extending demands from consumers, and sustainability and reliability of the water transport for fulfilling the needs have been identified by the respective Governments and Port Authorities. In continuance of the same Singapore, Hong Kong and the Middle East have witnessed higher levels of growth in dredging operations, which is expected to continue in the coming years. Governments or Port Management Authority issue port maintenance contract for dredging which has given impetus to the dredging maintenance business in the coastal areas.

• Hegemann V, the companys new trailing suction hopper dredger, is almost finished, according to Hegemann Dredging, a significant German provider of a wide variety of dredging services. The dredger was manufactured specifically to carry out a variety of dredging operations and was developed in close cooperation with Kooiman Engineering.

Indian Dredging Market Source: Indian Infrastructure

The Indian maritime sector is witnessing rapid expansion, which, in turn, is boosting the need for dredging. Dredging has become an inevitable process for ports to sustain business, the economy and the environment.

The Indian maritime sector offers a plethora of opportunities for dredging. The yearly maintenance dredging requirement at major ports is approximately 86.06 million cubic metres (mcum). The dredging quantity carried out at major ports is 84.20 mcum, 10 mcum at inland waterways and over 80 mcum at non-major ports. During 2017-18 and 2018-19, dredging (maintenance and capital) of about 159.36 mcum was carried out in the country. Moreover, it is estimated that another 100 mcum capital dredging will be carried out in the coming years.

Approximate siltation at Indian ports
Port/Client Approximate siltation (mcum)
Major ports
Syama Prasad Mookerjee Port Trust 11.10
Pradip Port Trust (including sand trap) 7.00
Visakhapatnam Port Trust 0.28
Kamarajar Port Limited (Ennore) 0.70
Cochin Port Trust 22.20
New Mangalore Port Trust 6.50
Mormugao Port Trust 2.20
Mumbai Port Trust 3.33
Jawaharlal Nehru Port Trust 10.00
Deendayal Port Trust 14.95
Chennai Port Trust 0.2
Subtotal (major ports) 78.46
Other
Director General Naval Projects, Visakhapatnam 0.40
South Naval Command, Mumbai 1.80
Western Naval Command, Mumbai 1.60
Cochin Shipyard Limited & KLPL 2.00
Subtotal (Other): 5.80
Grand total 84.26
Source: MoPSW

The Dredging Guidelines issued by MoPSW in June 2021 are based on the scientific mode of "working dredging rate" for minimising associated costs and include detailed technical investigation for dredging projects. Survey and geotechnical investigation are two crucial aspects of a dredging project. Detailed investigations are prerequisites for equipment planning, rate determination and avoiding conflicts between the contractor and the port authority. Besides, these guidelines highlight the importance of reusing dredged material.

In fact, recycling and reusing dredging material has been a key focus area for the MoPSW. The utilisation of these materials results in saving a significant amount of resources, thereby contributing to environmental conservation.

The 12 major ports under the administrative control of the MoPSW undertake dredging activity for the removal of dredged material to maintain navigable depth for vessel movement. The material comprises a mixture of silt, clay, sand, gravel and other impurities. Typically, this material is either disposed of to the deep sea or used for reclamation purposes, if suitable.

The MoPSW guidelines call for major ports and the Inland Waterways Authority of India to incorporate suitable provisions in dredging contracts for promoting the reuse/recycling of generated dredged material. This also rationalises the cost of dredging through the monetisation of the dredged material, resulting in the creation of "wa ste to wealth". Moreover, the utilisation of these materials contributes to resource sustainability, thereby aiding environmental conservation efforts through the recycling of waste and the conservation of fresh resources.

Several major ports are already utilising dredged soil for beneficial purposes. For instance, Cochin Port is incorporating it into construction activities (approximately 30 to 40 mcum). Visakhapatnam Port and Jawaharlal Nehru Port Authority use dredged soil for beach nourishment while the V.O. Chidambaranar Port Authority utilises it for reclamation purposes. Paradip Port is also utilising dredged soil for land reclamation for Numligarh Refinery Limited and at a storage terminal complex at Paradip.

Ministrys focus areas and priorities

The MoPSW formulated the Maritime Vision for 2030 with the objective of propelling India to the forefront of the global maritime sector. It is aimed at developing a roadmap for undertaking projects, including dredging initiatives, to create infrastructure to accommodate larger vessels. The vision also envisages the development of major ports as transshipment hubs wherever possible.

In the coming years, the major ports sector will take further measures to deepen ports, allowing them to receive more container parcel vessels. This includes having at least one berth with a draft of 16-16.2 metres and a maximum berth over 14 metres of draft for bulk (panamax compliant). Additionally, some major ports are planning to increase the draft to at least 18 metres at one of their berths. To this end, the Paradip Port, Kamarajar Port, Jawaharlal Nehru Port and Cochin Port have already prepared proposals. Furthermore, other ports, excluding the V. O. Chidambaranar Port and Kolkata Port, have been preparing technical studies for taking up draft enhancement projects.

Going forward, increasing the dredging capacity across the country will remain a key focus area of the ministry. India has a huge potential for this, with approximately 200 mcum of capacity for maintenance dredging.

PORT ANCILLARY CRAFTS

Port ancillary crafts, often referred to as port service vessels or port operations crafts, are essential for the efficient functioning of port operations. They include various types of vessels such as tugboats, pilot boats, mooring boats, and barges. These crafts assist in navigation, docking, cargo handling, and general port operations.

Global Outlook

Globally, the port ancillary crafts market is also experiencing growth due to increasing global trade and the expansion of port capacities to handle larger volumes of cargo. The Asia-Pacific region, particularly China and India, is leading this growth due to their rapid industrialization and urbanization, which necessitate enhanced port infrastructure and operations.

The global port ancillary crafts market is driven by the need for advanced and efficient service vessels that can support the operations of modern ports. This includes not only tugs and pilot boats but also specialized crafts for environmental protection, security, and firefighting. Innovations in vessel design and propulsion systems are also contributing to the market growth, with a focus on sustainability and reducing the carbon footprint of maritime operations (PwC).

Globally, port ancillary crafts are vital to the smooth functioning of maritime trade. Major ports around the world rely on these crafts for various tasks.

India Outlook

In India, the port ancillary crafts market is poised for significant growth due to robust economic activities and governmental focus on improving maritime infrastructure. This growth is partly driven by the governments focus on capital spending and infrastructure development, which includes substantial investments in ports and related facilities (Goldman Sachs).

The Indian government has been actively promoting initiatives like the Sagarmala Programme, which aims to enhance the performance of the countrys logistics sector by unlocking the potential of waterways and the coastline. This includes developing new ports, improving existing ones, and ensuring the availability of modern port ancillary crafts like tugs, dredgers, pilot boats, and other service vessels necessary for efficient port operations.

As per the latest data, India has around 12 major ports and approximately 200 non-major ports. Each of these ports operates a fleet of ancillary crafts tailored to its specific needs.

PERFORMANCE OVERVIEW

Operational Highlights

During the year under review, company has achieved various milestones. Few of them are as under:-

1. Bahrain Sand Mining Business:- KMEW has achieved a noteworthy milestone by successfully entering into the Bahrain Sand Mining market. Till now all the dredged materials were being disposed off in the open seas but with the Bahrain Sand Mining business, the same dredged material is sold off to the Construction Companies in Bahrain aligning with the concept of transforming waste into wealth. The total order book of the sand mining business in Bahrain totals to Rs. 450 crores for the next five years.

KMEW has incorporated a wholly owned subsidiary company in Bahrain in the name of Knowledge Marine Co. W.L.L, and a subsidiary company M/s Knowledge Dredging Co. W.L.L, to execute works in Bahrain.

Furthermore, in continuance of these efforts, Knowledge Dredging Co. W.L.L. situated in Bahrain, has been granted a commercial registration with License by the Bahrain Ministry of Industry and Commerce, specifically for the extraction of marine sand. Securing the License for the extraction of marine sand marks a significant milestone for the KMEW, making the first Indian entity in Bahrain to achieve this recognition. Attaining this position in Bahrain underlines KMEWs global competence and showcases its ability to compete on an international scale. Moreover, the License also underscores KMEWs execution capabilities in the mining and supply of sand, making a direct contribution to its revenue.

To execute the said project in Bahrain, Knowledge Marine Co. W.L.L, Bahrain, acquired a Trailing Suction Hopper Dredger River Pearl 18 of 1,890 Cubic Meters hopper capacity. The vessel is built in Krupp, Germany in the year 1974 but rebuilt in 2010 and is registered under Bureau Veritas (IACS Class) with the inbuilt pump ashore facility which is very crucial for discharge of sand. This vessel boasts advanced capabilities, allowing for the efficient extraction of sand from the seabed and seamless transportation over extensive distances. With a projected operational lifespan of approximately 15 years, River Pearl 18 represents a valuable addition to the existing fleet.

2. New Segment:- Inland Waterways Authority of India (IWAI), set up under the Ministry of Ports, Shipping and Waterways, Govt. of India, is entrusted with development, maintenance and management of National Waterways for shipping and navigation. KMEW has successfully secured its first contract with the Inland Waterways Authority of India of Rs. 83 Crores for river dredging in River Ganga. This underscores unwavering commitment to this sector wherein KMEW will deploy its first Cutter Suction Dredger.

KMEW has secured the work of 146 kms out of the total focus of Government of India approx. 20,000 kms plus river length. The potential is immense and KMEW intends to further its efforts towards securing more business with IWAI in the coming year. This contracts represent a significant milestone for KMEW and will become its next key focus and growth area. This adds a new revenue stream to the dredging business of KMEW. With a strong emphasis on execution, KMEW is poised to capitalize on further opportunities within this segment.

IWAI has invited several bids for different stretches of National Waterways 1 (known as Jal Marg Vikas Projects) in the past one year. KMEW is regularly participating in these bids and successfully won the first stretch of 146 KM award. Two Nos. of Cutter Suction Dredgers will be mobilized by KMEW for the said project.

3. Myanmar International Contract: KMEW has secured its second international contract from the Myanmar Port for the work of maintenance dredging of Yangon River Channel for a period of 6 months at a contract value of 2.2 million USD. This is first independent international contract of the Company distinct from its initial collaboration with the Government of India.

4. Customer Base Expansion:- On the ancillary crafts business, KMEW has successfully expanded its customer base by adding the contract from Mumbai Port and Paradip Port. KMEW has secured an order from the Mumbai Port Trust for the hire of two dock tugs valued at Rs. 34.49 crores for a period of seven years while at Paradip Port KMEW has secured a contract value of Rs. 5 Crores for the supply of 20 knots speed patrol boat for a period of 5 years.

5. Successful Execution:- KMEW has also successfully executed various projects during the year. First one being rock dredging project at Mangrol Fishing Harbour for Rs. 78 crores by completing rock dredging quantity of 1.25 lakh cubic metres such completion enables KMEW to participate singly in the further rock dredging contracts. Secondly, execution of first year capital and maintenance dredging at Sittwe Port, Myanmar at an amount of Rs. 248 crores with an executed dredging quantity of 16.73 Million Cubic Meters enables KMEW to get qualified to bid singly for the dredging contracts amounting to INR 300 crores.

Financial Highlights

The Consolidated revenue of your Company stood at Rs. 163.58 Crores for FY 2023-24 as against Rs. 201.52 Crores in the FY 2022-23. The revenue dropped by 17.28%. The decrease in the revenue is due to external factors which were beyond the control of the management. However, the management is of the view that it is delayed revenue recognition.

The Companys PAT stood at Rs. 3,300.29 crores in FY 2023-24 as against Rs. 4,719.93 crores in FY 2022-23. Even after decline in the revenue, the Company is able to maintain its consistent record of PAT Margins at the rate of 20%.

Financial Results Standalone for the Year Ended 31st March Consolidated for the Year Ended 31st March
2023-24 2022-23 2023-24 2022-23
Turnover (including Other Income) (Rs. in Lakhs) 14,235.09 19,596.95 16,670.88 20,291.18
PAT (Rs. in Lakhs) 2,724.40 4,659.91 3,300.29 4,719.93
EPS 25.22 44.83 30.63 45.26

Key Financial Ratios

Particulars 2023-24 2022-23 % Change between Current
Current Financial Year Previous Financial Year FY and Previous FY
Debtors Turnover Ratio 3.28 6.38 (48.63)%
Interest Coverage Ratio 12.18 29.79 (59.11)%
Current Ratio 3.16 2.01 57.22%
Debt-equity Ratio 0.06 0.18 66.66%
Operating Profit Margin Ratio 0.37 0.39 (3.88)%
Net Profit Margin Ratio 19.56 23.93% (18.26)%
Return on Net worth 0.17 0.36 (52.77)%

Notes: a. The above ratios were based on Consolidated Financial Statements of the Company. b. Definitions of ratios:

1. Debtors turnover: The revenue from operations divided by the average accounts receivable.

2. Interest coverage ratio: earnings available for debt service (PAT + Interest cost +Depreciation) to interest cost.

3. Current ratio: Current assets by current liabilities.

4. Debt-equity ratio: Total debt by shareholders equity.

5. Operating pro_t margin: EBITDA by Revenue from Operations.

6. Net pro_t margin: Profit after tax by Revenue from Operations.

7. Return on average net worth: Profit for the year by average net worth for the year.

Human Resource Development

Your Company treats its "human resources" as one of its most important assets. Your Company continuously invests in retention and development of talent on an ongoing basis. A number of programs that provide focused people attention are currently underway. Your Company thrust is on the promotion of talent internally through job rotation and job enlargement.

The Company articulates the culture of the entire workforce both onshore and offshore employee as a one Team. The Company sets out the theme of "One Team – One Plan – One Goal" which resulted in cutting edge over competition. Further, KMEWs team lead by youngsters (Naval Architect, Marine Engineer, Mechanical Engineer, Company Secretary, Lawyer and Chartered Accountant) running the show on the ground.

The Company aim to foster with every member of the workforce to generate ideas from all levels, emphasize on continuous improvement, and implement valuable inputs across the Company. This bottom-up approach making KMEW more resilient.

This approach also helps in creating more opportunities and strengthen uniform implementation of the ideas and Innovation practices across the organization.

CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT

Corporate Social Responsibility (CSR) is a broad concept that encompasses various ways businesses that can contribute positively to society and the environment.

At KMEW, we believe that our success is intrinsically linked to the well-being of the communities we serve and the environment we operate in. Our commitment to Corporate Social Responsibility (CSR) is a core component of our business strategy, guiding our actions and decisions throughout the year.

During the Financial Year 2023-24 the Company has spent INR 65.20 Lakhs on promoting education and promoting health care including preventive health care such through Information, Education and Communication material, creating awareness and taking appropriate measures for the availability of the medical and educational equipment and other resources through Anvi Medical and Educational Foundation. This makes a clear statement of KMEWs dedication towards uplifting the weaker section of the Society.

During the Financial Year 2022-23 the Company has spent INR 26.33 Lakhs on Birds and Animal Hospital at Sunpura, Noida & Shahada and Maharashtra marking KMEWs conviction towards Animal Husbandry.

Sagarmala Project

? India has 7,517 Km long coastline with 14,500 Km of potentially navigable waterways and strategic location on key international maritime trade routes.

? To promote port-led development in the country, the goverment has introduced Sagarmala Programme.

? 802 projects totaling Rs. 5.54 Lakh Crore worth of invesment have been indentified to be implemented under the Programme by 2035.

Total Completed Under Implementation
Project Theme No. of Project Project Cost (Rs. Cr.) No. of Project Project Cost (Rs. Cr.) No. of Project Project Cost (Rs. Cr.)
Port Modernization 241 2,60,419 68 27,019 56 35,471
Port Connectivity Enhancement 208 1,36,331 35 19.489 69 84,410
Port Led Industriallization 33 1,19,846 2 45,865 21 72,706
Coastal Community Development 76 8,434 16 1,423 15 1,373
Coastal Shipping & IWT 244 28,918 24 993 50 15,869
Total 802 5,53,948 185 94,789 201 2,09,829

Maritime India Vision 2030

Maritime India Vision (MIV) 2023 - taking India to Global Maritime Leadership

? The countrys maritime sector plays a crucial role in its overall trade and growth, with 95% of the countrys trade volume and 65% of the trade value being undertaken through maritime transport.

? with the objective of propelling India to the forefront of the Global Maritime Sector, Ministry of ports, Shipping and Waterways has formulated Maritime India Vision 2030 (MIV 2030), a blueprint to ensure coordinated and accelerated growth of Indias maritime sector.

? MIV 2030 identifies over 150 initiatives across 10 themes covering all the facets of the Indian maritime sector and is a comprehensive effort to define and meet national maritime objectives.

Develop Best-in-class Port Infrastructure
Category KPI Metric Current Target (2030)
World class Mega Ports No. of Major ports with 300 MTPA+ cargo handling capacity - 3 ports
No. of ports with 18m+ draft availability to handle main line calls 5 9 ports
Transshipment hub % of Indian cargo transshipment handled by Indian ports 25% >75%
Infrastructure modernization % of cargo handled by ppp/ Captive/ O&M parties across Major Ports 51% >85%

Inter – Linking of Rivers Boost to Dredging Activity

? The Indian Rivers Inter-link is a large-scale civil engineering project that aims to effectively manage water resources in Indian by linking Indian rivers by a network of reservoirs and canals to:

- Enhance irrigation and groundwater recharge,

- reduce persistent floods in some parts and water shortages in other parts of India.

? under the National Perspective Plan (NPP), the National Water Development Agency (NWDA) has identified 30 likns (16 under Peninsular Component & 14 under Himalayan Component) for preparation of Feasibility Reports (FRs).

? Estimated cost for all Inter Linking of Rivers projects is Rs. 8.44 lakh crore.

? Ken-Betwa Link project is the first ILR project under NPP, that is under implementation.

Inland Water Transport Boost to Dredging Activity

? The Inland Water Transport (IWT) mode is widely recognized as a fuel efficient, environment friendly and cost-effective mode.

? India has total of 111 National Waterways with total length of 20,375 Kms spread across 24 atates. 23 National Waterways with 5,200 Km have been identified with potential for mechanized crafts and 17 are currently operational.

? Key focus areas are for development of National Waterways are

- Navigation channel with adequate depth and width for movement of reasonable size of inland vessels.

- Navigation aids for day and night nagigation.

- Terminals to provide berthing of vessels, loading and unloading of cargo/passengers and road/rail connectivity

Various Government initiates for infrastructure development

? Jal Marg Vikas Project for capacity augmentation.

? Arth Ganga and Arth Brahmaputra for holistic and sustainable development leveraging NW2 for freight and passenger movement.

? Inland Vessels Bill, Land Use Policy for IWs.

? Dredging Policy for IWs, and promoting private participation in terminal operations and maintenance.

Tra_c on National Waterways (in million tonne)

Risk and Concerns

Your Company has in place a mechanism to identify, assess, monitor, and mitigate various risks to key business objectives that may threaten the existence of the Company. Major risks identified by the various functions are documented along with appropriate mitigating controls on a periodic basis. The risk management framework is reviewed periodically by the Board and Risk Management Committee.

The Company is exposed to normal industry risk factors. The Company manages these risks, by maintaining a prudent financial profile and by following healthy business and risk management practices.

1. Growth risk: The Company faces intense domestic competition and have capital restrictions which can restrict Companys growth.

2. Strategic and economic risk: The Company faces various challenges, including economic uncertainty, a potential slowdown, trade policy changes, excessive concentration of business with a few dredging companies or customers, and the need for geographical expansion.

3. Political risk: The Company faces the risk of delays in project award and project execution due to review of existing policies and approvals.

4. Operational risk: The Company may face various operational risks, such as mobilization penalties, Depth penalties and other penalties, if any while carrying out the operations.

5. Reputational risk: The Company may face a cynical perspective from stakeholders, particularly in the event of any unforeseen event, external factors.

6. Technology risk: The Company faces risks related to data recovery, system interruptions, cyber security intelligence and robotic process automation.

7. Projects completion-related risks: The company may face risks related to weather conditions, import permissions, regional crisis and pandemic which can risk the project completion on time.

In FY 2023-24, KMEWs Audit Committee and Risk Management Committee regularly reviewed the risk management reports and suggested corrective actions.

Regular audit for Health & Safety risk evaluation was also done as per OHSAS 18001 standards and reviewed periodically.

KMEW manages risks through long-term contracts, cost optimization, proper planning, Site visits, carrying out Pre and Post surveys, identification of equipments as per the site conditions, placing order of the equipments on intimation of the orders in order to curtail mobilization time, minimizing the penalties by operational efficiency and planning, bidding only for the tenders with good margins etc.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has a proper and adequate system of internal financial controls commensurate with its size & scale of operations, procedures, policies ensuring the effective, efficient and orderly conduct of the business and meets the following objectives:

(a) Providing assurance regarding the effectiveness and efficiency of operations;

(b) Efficient use and safeguarding of resources;

(c) Control on Capex Cost

(d) Proper Planning and bidding for the tenders having minimum 30% EBITDA Margins.

(e) Carrying out site visits and pre and post surveys before carrying out any project.

(f ) Compliance with policies, procedures and applicable laws and regulations; and

(g) Transactions being accurately recorded and reported timely.

(h) The Company has a budgetary control system to monitor expenditures and operations against budgets on an ongoing basis.

The internal audit function is carried out by an independent firm of Chartered Accountants who carry out an in-depth review of internal control systems in critical areas based on the audit programme approved Audit Committee headed by an Independent Director. During the year under review, the Company had engaged M/s. RSSA & Associates, Chartered Accountants, Mumbai for reviewing adequate Internal Financial Controls and to ensure proper and adequate systems for compliance with the provisions of all applicable laws. Such controls were tested and no reportable material weakness in the design or operation was observed. The system of Internal Control comprises well defined organization structures, preidentified authority level and procedure issued by management covering all vital and important areas of activities which includes Purchase, Inventory consumption, Fixed Assets, Cash & Bank management and Treasury, Payroll, Statutory Compliance, Personnel & all other activities involved in financial statement closing process.

The implementation of Proper systems has helped to strengthen the Internal Control Systems with its in-built checks and balances at various level of operations.

There were no instances of fraud that necessitates reporting of material misstatements to the Companys operations.

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