Magna Electro Castings Ltd Management Discussions

In three decades of progress, Magna Electro Castings Limited has carved out a niche for itself as a pioneer supplier of engineered cast products to multinational companies globally. Magnas unique selling proposition (USP) is supplying of technically challenging low to medium volume cast products. It has established itself as the ‘Go-To

Company for high-quality and technically challenging products in United States, Europe and India.

Magna adheres to high moral standards in its business practices and upholds equal treatment and dignity for all its employees, customers, partners and stakeholders. Magna is a transformative force in the industry which creates meaningful change, whether through its products, services or initiatives. Magnas Environment Social and Governance (ESG) initiatives, aims to meet the highest standards for sustainability and ethical conduct and create a positive impact on society and the environment while maintaining robust corporate governance.

The financial statements presented here have been prepared in accordance with the various regulatory enactments in force.

Industry structure and Development:

The foundry market stands as a cornerstone of industrial production, supplying essential components for a myriad of industries ranging from automotive to aerospace. The India foundry market is segmented by end-user (automotive, electrical and construction, industrial machinery, and other end -users) and by type (gray iron casting, non-ferrous casting, ductile iron casting, steel casting, and malleable casting). The Indian foundry industry has experienced consistent growth in recent years, driven by rising demand across various sectors such as automotive, engineering, energy, and infrastructure. The Indian Foundry Market size is estimated to be USD 19.46 billion in

2024. It is projected to reach USD 31.77 billion by 2029, growing at a CAGR of 10.30% during the forecast period

(2024-2029) as per research reports.

With an annual production of 12 million tons of castings, India is already in the second place in the world ranking behind China. There are approximately 4500 foundries in India. Last year, castings worth of 3.5 billion US dollars were exported all over the world. The signs point out a great growth potential through engineering capability, installed capacity and quality of the Indian Foundry Industry.

Indian foundries are also increasingly focusing on environmentally friendly materials, recycling, and waste reduction in order to keep an eye on their ecological footprint.

Operations:

The Company was able to maintain its profitabilitylevels despite decrease in Operating revenue by 12.72 % from ,

Rs. 16464.29 Lakhs in the previous year to Rs. 14369.78 Lakhs in the current year.

During the previous year, Profit Before Tax was Rs.2311.75 Lakhs which includes Operating profit of Rs 2140.94 Lakhs and One time profit from sale of asset of Rs. 170.81 Lakhs. During the year under review, Profit before tax was Rs 2040.61 Lakhs, the majority of which was derived from Operating Profit, amounting to

Rs 2039.39 Lakhs.

During the year under review, due to inventory adjustment and shorter transit time, export business decreased by 13.47 % over the previous year. However, the end customer demand remains the same. During the year, the domestic market also underwent a demand correction.

Despite decline in Operating Revenue, the Company has strived hard to maintain the operational profit margin to 17.44% as compared to previous year margin of 17.35%. This is mainly due to lower input cost, production efficiency and product mix. The raw material cost was relatively stable during the financial year ended 31st March, 2024.

During the year, 83% of the power consumption is sourced from green energy. This commitment to sustainability not only benefits the environment but also contributes to cost savings and a cleaner future. Our share of green energy input will help the Company to satisfy the upcoming Carbon Border Adjustment Mechanism (CBAM) Regulations in Europe.

The total energy generation from Windmills and Solar Plant was 10762257 units, out of which Wind energy has contributed 5407601 units (41.58% of Total Consumption) and Solar energy has contributed 5354656 units (41.17% of Total Consumption).

Opportunities:

The foundry market is undergoing a transformative phase, characterized by technological innovation, sustainability imperatives, and globalization. Agility, innovation, and a global outlook will position foundries for success in the evolving landscape. As we delve into the trends shaping the foundry market, it becomes evident that adaptability and innovation are paramount for sustained growth and competitiveness. Foundries that proactively embrace change, invest in research, and prioritize sustainability will continue to shape the future of industrial manufacturing. The Company foresees that the convergence of the “China Plus One” strategy, Rising manufacturing costs and Energy costs in Europe and Closure of foundries in the US presents, a tremendous growth opportunities for the Company.

Threats:

Economic fluctuations and market uncertainties can affect the demand for castings across various industries. The highly volatile raw material cost coupled with lack of skilled workers is a persistent challenge.

The ongoing crisis in the Red Sea shipping route is having significant implications for the global economy, including

Indias export market. The change in trade routes results in longer travel distances and operational shifts for ships, leading to additional costs such as fuel expenses and lost value for time-sensitive cargo.

The Company needs to capitalize on the high demand for low and medium cast components, which requires vast engineering resources with the right mix of skills, experience and innovation to meet complex manufacturing challenges. The ability of the Company to ensure proper engineering capabilities and scale will be a determining factor in whether the Company can successfully capture these emerging opportunities.

Environment, Safety and Energy Conservation Policy:

The Company commits to environmental stewardship by minimizing its impact on natural resources, ecosystems and air quality. It adheres to all applicable environmental laws, regulations, and standards. During the year, the

Company has satisfying milestone towards utilisation of renewable energy. It establishes safety protocols, conducts regular training, and ensures compliance with safety regulations. The Company has Wind Energy Generators and also invested in Solar Power Generation Project. The Company has also invested in Sand Reclamation Plants as a part of its drive to preserve precious natural resources.

Risks and Concerns:

The Company anticipates significant opportunities in the low to medium volume engineered castings. However, to take up this opportunity availability of skilled engineers and ability to scale engineering workforce has to be addressed. Timely action on addressing the engineering capability and scale will decrease these risks. The Company has cyber security systems in place. As a proactive measure, the Company is planning to take cyber security audits to enhance and strengthen cyber security defenses.

Internal control systems and their adequacy:

The Company has adequate Internal Financial Control Systems in place. It has also engaged third party consultants to assess the adequacy or otherwise of its Internal Control Systems and to suggest various measures to improve the controls. This is also been monitored at periodical intervals by the Audit Committee of the Board.

Personnel:

Magna believes that by embracing Human resource development, the Company can build a more agile, responsive and people-centric organization. Magnas focus is on inspiring employees, fostering collaboration and ensuring a positive work environment. Magna concentrates on employees safety measures, good infrastructure, healthy food and sanitation facilities etc., at its workplace. Further, the Company ensures utmost care for employees safety at workplace by providing necessary equipments and safety measures and guidelines at regular intervals.

Key Financial Ratios:

There is significant change in some key financial ratios when compared with previous year and below are ratios;

Particulars	2023-24	2022-23
Trade Receivables Turnover Ratio	3.85	4.26
Trade Payables Turnover Ratio	4.63	4.87
Inventory Turnover Ratio	14.30	15.79
Working Capital Turnover Ratio	2.59	3.22
Interest Coverage Ratio	83.60 times	67.89 times
Current Ratio	4.07	3.24
Debt Equity Ratio	0.001	0.01
Operating Profit Margin	17.44%	17.35%
Net Profit Margin	10.51%	10.40%
Return on Net worth	13.94%	18.15%
Return on Capital Employed	19.01%	24.86%

Further the Company confirms that there is no different accounting treatment has been followed than prescribed in accounting standard while preparing financial statements.

Detailed explanations for significant changes in key financial ratios:

The difference in Interest Coverage Ratio and Debt Equity Ratio is due to decrease in utilization of Cash Credit Limit.

As of date, there is no long term debt in the Company.

The difference in Inventory Turnover Ratio is due to improvement in inventory management.

The difference in Profit Margin is due to increase in profitability percentage of the Company. The difference in return on networth & capital employed are due to decrease in profitability.

The difference in Interest Coverage Ratio and Debt Equity Ratio is due to decrease in utilization of Cash Credit Limit.

As of date, there is no long term debt in the Company.

The difference in Inventory Turnover Ratio is due to improvement in inventory management.

The difference in Profit Margin and Returns are due to increase in profitability of the Company.

Cautionary Statement:

The statements in this Management Discussion and Analysis Report describing the companys views, 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. Any investment by shareholders/ investors should therefore be based on their individual analysis.