Magna Eletrocasting Ltd Management Discussions.

Overview:

Magna’s corporate vision is to provide a business model which will enable it to build an inclusive, equitable, sustainable growth for all its stakeholders at large. This is sought to be achieved by empowering and prioritizing its focus on continuous process developments and conforming to ethical business standards.

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

Industry structure and Development:

The outbreak of the Covid 19 pandemic has brought the entire global economy to a grinding halt for the last eighteen months . All industries were severely impacted due to a two month long complete national lockdown which was followed by a gradual withdrawal of the lockdown. Apart from this, most of the countries were faced with a severe recession which compounded the problems further. India was no exception to the above economic crisis with a majority of the sectors of the economy witnessing lower than anticipated growth.

Our foundry industry also saw a steep decline in growth as sectors like auto which is its biggest consumer registered a sharp decline in volumes during FY 21. Further the auto sector also witnessed transition from BS IV to BS VI which will impact the foundry industry in the coming years.

Operations:

The Operating Revenue of the Company has remained more or less at the same level as in the previous year and increased only by about 1.55 % from Rs. 9632.13 Lakhs to Rs. 9781.88 Lakhs. Whereas the Profit Before Tax has reduced from Rs. 850.10 Lakhs in the previous year to Rs. 701.43 Lakhs in the current year.

The above decline in operating revenue and profitability was mainly because of the fact that the plant did not operate for almost six weeks during April and May 2021 due to the general lockdown arising out of the Covid 19 pandemic. As a result there was no production and dispatches during this period. In spite of this the Company was able to marginally increase the turnover compared to the previous year.

The key factors for the sharp decline in the profitability of the Company were because of

(i) decline in Export Incentive as the Government discontinued the MEIS scheme during the Financial year,

(ii) increase in Employee costs incurred during the pandemic period in order to retain the employees,

(iii) a one time expenditure incurred for Buy back of Equity Shares and

(iv) the unprecedented increase in prices of critical raw materials by almost 50% during the last quarter of the financial year. Though the Company has approached its customers for price increase, the compensation from the customers will come about only in the current financial year.

The Wind Energy Division generated a revenue of Rs. 488.47 Lakhs during the year as against Rs. 454.13 Lakhs, in the previous year. The marginal increase in revenue was because of better wind evacuation during the year.

Opportunities and Threats: Opportunities:

The focus and main thrust of the government is to improve the infra structure which will present opportunities to the foundry sector. The global economies are already showing signs of a major rebound in growth as the Covid 19 pandemic impact is slowly tapering off in most of the developed economies.

Threats:

The economic uncertainty presents a large threat as the basic raw material costs as well as prices of commodities are highly volatile.

The economic slowdown as a result of the Covid 19 pandemic poses a major threat to the foundry industry.

The switch over to the BS VI norms as well as advent of Electric Vehicles (EV) in the coming years poses a threat to the foundry industry.

Environment, Safety and Energy Conservation Policy:

The Company is committed to conserve natural resources and to protect the same for future generations. During the year, the Company installed Green Sand Reclamation plant, this will enable the Company to conserve precious natural resources apart from being environmental friendly. Further the Company is constantly taking necessary efforts to conserve energy by adopting new technologies to the extent possible.

Risks and concerns:

Cost of production is highly dependent on material and labour cost which is the major part of the expenses. Value addition is one of the solutions to mitigate the risk. The risk mitigation measures are placed before the Audit Committee and the Board for its periodical review and improvements.

Internal control systems and their adequacy:

The Company is having well established and adequate Internal Control Systems commensurate to the size of the business. The actual performances are reviewed and compared with budget, the deviations from there is addressed regularly. The Company is also having established internal audit team, statutory audit teams and Audit Committee of Board of Directors to control internal systems adequately.

Personnel:

Magna also concentrates on employees’ safety measures, good infrastructures, 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. During this pandemic period, the Company took various measures to protect life of employees.

Key Financial Ratios:

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

Particulars 2020-21 2019-20
Debtors Turnover Ratio 110 days 94 days
Inventory Turnover Ratio 11 times 10 times
Interest Coverage Ratio NIL NIL
Current Ratio 3.31 4.34
Debt Equity Ratio NIL NIL
Operating Profit Margin 11.70% 13.71%
Net Profit Margin 5.29% 6.79%
Return on Networth 7.26% 9.10%

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

Cautionary Statement:

Statements in this Management Discussion and Analysis describing the Company’s 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.

COMPLIANCE CERTIFICATE ON CORPORATE GOVERNANCE

To the members of Magna Electro Castings Limited

1. We have examined the compliance conditions of Corporate Governance by Magna Electro Castings Limited for the financial year ended 31st March, 2021 as stipulated in Regulations 17 to 27 and Clause (b) to (i) of Regulation 46(2), Schedule II and Schedule V of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements), Regulations, 2015.

2. The Compliance of conditions of Corporate Governance is the responsibility of the Management. Our Examination has been limited to a review of the procedures and implementation thereof adopted by the Company for ensuring compliance with the conditions of Corporate Governance as stipulated above. It is neither an audit nor an expression of opinion on the financial statements of the Company.

3. In our opinion and to the best of our information and according to the explanations given to us, and based on the representations made by the Directors and the Management, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in Regulations 17 to 27 and Clause (b) to (i) of Regulation 46(2), Schedule V and Schedule II of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements), Regulations, 2015.

4. We further state that such compliance is neither an assurance as to the future viability of the Company nor of the efficiency or effectiveness with which the Management has conducted the affairs of the

Company.

For Srikishen & Co.,
Chartered Accountants
( Reg.No.004009S)
K Murali Mohan
Proprietor
Place : Coimbatore Membership No.14328
Date : 25.06.2021 UDIN: 21014328AAAAJM5922