ECONOMIC OVERVIEW
Growth in CY 2023 is most likely to be impacted by three challenges that have shook the
global economy since 2020. It all started with the pandemic induced contraction of the
global output followed by the Russian-Ukraine conflict leading to a world-wide surge in
inflation and the central banks across economies, led by the Federal Reserve responding
with synchronised policy rate hikes to curb inflation.
While global inflation has declined, core inflation has not yet peaked in many
countries. IMF expects global inflation will decrease, albeit slowly than initially
anticipated from 8.7 percent in CY 2022 to 7.0 percent in CY 2023 and 4.9 percent in CY
2024. Tentative signs that the economy would improve with inflation coming down and growth
steadying have receded amid still high inflation and turmoil in the banking sector. Rate
hike and persistent inflation have led to a lowering of the global growth forecasts for CY
2022 and CY 2023 by the IMF in its October 2022 update of the World Economic Outlook.
IMF expects global growth will bottom out at 2.8 percent in CY 2023 before rising
modestly to 3.0 percent in CY 2024. For advanced economies, growth is projected to decline
to 1.3 percent in CY 2023before rising to 1.4 percent in CY 2024. For emerging markets and
developing economies,economic prospects are on an average stronger than for the advanced
economies. On an average, growth is expected to be 3.9 percent in CY 2023 and rise to 4.2
percent in CY 2024. In US, the labour market remains tight, but sentiment may improve with
inflation moderating. In China, the economy is expected to grow at 5.2% in CY 2023 after
the Chinese government announced some relaxations in Covid control measures.
Growth forecast for India looks much better and ranges between 6.0% - 6.8% in FY
2023-24.
Indian Economy
Economic Survey 2022-23 projects a GDP growth of 6.5 percent in real terms in FY 24.
The projection is broadly comparable to the estimates provided by multilateral agencies
such as the World Bank, the IMF, ADB and by RBI domestically. It says, growth in India is
expected to be brisk in FY 2023-24 as a vigorous credit disbursal and capital investment
cycle is expected to unfold in India with strengthening of balance sheets of the
corporates and banking sectors. The Survey says, in real terms the Indian economy is
expected to grow at 7 percent for the year ending March 2023.
The Indian economy has stayed on a steady growth path exhibiting strong resilience to
multiple headwinds stemming from the shocks of Covid -19, Russian-Ukraine conflict and
with Central Banks across economies led by Federal Reserve responding with synchronised
policy rate hikes to curb inflation.Rate hike by Federal Reserve has led to appreciation
of US Dollar and the widening of Current Account Deficit (CAD) in net importing economies.
Agencies worldwide however continue to project India as the fastest - growing major
economy at 6.5-7.0 percent in FY 2022-23.
Indias economic growth in FY 2022-23 has been principally led by private consumption
and capital formation and they have helped generate employment as seen in the declining
urban unemployment rate and in the faster net registration in Employee Provident Fund.
Worlds second largest vaccination drive conducted by Government of India involving
more than 2 billion doses served to lift the consumer sentiments. Vaccination also brought
people back to the streets to spend on contact based services. Vaccinations facilitated
the return of migrant workers to cities to work on construction sites as the rebound in
consumption spilled over in the housing market.
The Capital Expenditure of the Central Government, which increased by 63.4% in the
first eight months of FY 2022-23 was another growth driver of the Indian economy in the
current year. A sustained increase in private Capex is also imminent with the
strengthening of the balance sheets of the Corporates. The credit growth to the Micro,
Small and Medium Enterprises (MSME) sector has been remarkably high supported by the
extended Emergency Credit Linked Guarantee Scheme of the Union Government.
The Survey notes with optimism that Indian economy appears to have moved on after its
encounter with the pandemic, staging full recovery in FY 2021-22 ahead of many nations and
positioning itself to ascend to the pre-pandemic growth path in FY 2022-23.
Yet, in the current year, India did have to face the challenge of reining in inflation
that the European strife accentuated. Measures taken by the Government and RBI, have
finally managed to bring retail inflation below the RBI upper tolerance target in November
2022.
The Survey points out that factors like monetary tightening by the RBI, the widening of
the CAD, and the plateauing growth of exports have essentially been the outcome of
geopolitical strife in Europe. As these developments posed downside risks to the growth of
the Indian economy in FY 2022-23, many agencies worldwide have been revising their growth
forecast of the Indian economy downwards. These forecasts, including the advance estimates
released by the NSO, now broadly lie in the range of 6.5-7.0 percent. Despite the downward
revision, the growth estimate for FY 2022-23 is higher than for almost all major economies
and even slightly above the average growth of the Indian economy in the decade leading up
to the pandemic.
Policy initiatives by Govt. of India
Govt. of India has stressed on making India "Atmanirbhar" and has laid down
various incentives and policies. Further support to economic growth will come from the
expansion of public digital platforms and path-breaking measures such as PM Gati Shakti;
the National Logistics Policy and the Production Linked Incentive schemes to boost
manufacturing output. The Emergency Credit Line Guarantee Scheme introduced as part of the
relief package to MSME Industries was extended to boost credit growth
Global Steel Industry:-
According to World Steel Association, demand for steel worldwide will witness a 2.3%
growth in 2023 and 1.7% in 2024. The demand will increase to 1822 million tonnes in 2023
and 1854 million tonnes in 2024. Manufacturing is expected to lead the recovery but high
Interest rates will continue to weigh on steel demand.
In CY 2022 recovery momentum after the pandemic shock was hampered by high inflation
and increasing Interest rates, Russian invasion of Ukraine and the lockdowns in China. As
a result, steel using sectors activity went down in the last quarter of 2022. This,
combined with the effect of stock adjustments, led to worse than expected contraction in
steel demand.
As per World Steel association, persistent inflation and high Interest rates in most
economies will limit the recovery of steel demand in CY 2023 despite positive factors like
Chinas re-opening, Europes resilience in the face of energy crisis and the easing of
supply chain bottlenecks. Sustained inflation remains a downward risk, potentially keeping
interest rates higher.
Indian Steel Industry:-
During FY 2022-23, even though the production and consumption of finished steel
increased due to robust domestic demand, margins came under pressure due to high raw
material and energy costs.
Indias steel exports dipped largely due to weak global demand and the imposition of
15% export duty during the period May 2022- November 2022. The imposition of export duty
on steel led to the built up of domestic inventories.Despite these, India remained a
bright spot in the global steel Industry in FY 2022-23.
The residential real estate cycle has remained strong with new launches and high
affordability despite higher interest rates. Private Investments is improving on the back
of the Production Linked Investment schemes. Indias capital goods sector is expected to
benefit from the momentum in infrastructure and Investments in Renewable energy.
Automotive and consumer durables are expected to maintain healthy growth driven by
sustained growth in private consumption.Domestic consumption will continue to be robust.
With Governments increased investment on public infrastructure the demand for steel is
expected to be steady.
Strong positive trends are seen across real estate, infrastructure, automobiles, white
goods and solar energy sector. Policy Initiatives of Govt of India like PM AwasYojana,
expansion of National Highway Network would contribute to steady demand for steel. New
model launches and shift in customer preference towards SUVs are good indications of a
strong revival of automobile industry leading to increased demand for steel from
automobile sector. With large demand incentives for electric vehicles from both central
and state governments there is going to be a major shift towards EVs. The outlook for two
wheelers and tractors is also improving. The rural economy is expected to recover on
better winter crop, elevated reservoir levels and moderating inflation. Overall, the
future looks bright for Indias Steel Industry.
Product Portfolio:-
Your Company is engaged in the production and sale of
(a)- Metal Products: Galvanised Steel Sheets and Colour Coated ( Pre- Painted ) Steel
During the FY 22-23, the metal business has shown a steady growth with increased
profitability. The demand for metal products have increased and a good market exists -
both within the country and for exports. With imposition of Export duty @ 15% during the
period May 2022 to November 2022 the exports were adversely affected. However, your
Company did well to substitute the shortfall with domestic sales.
We also foresee a steady demand for Galvanised Steel Coils/Sheets during the FY 23-24
with increased investments in Infrastructure, and real estate.
Colour Coated Steel sheets are showing a consistent demand with their wide usage in
Industrial construction, Pre-Engineered Buildings, Cold storage facilities, Sandwich
Panels, False ceilings. Even in the appliance sector, the usage of Colour Coated Metal
Sheets is gaining wide acceptance.
We have a wide marketing network for our products on a Pan India basis and the demand
for our products is ever increasing.
We expect good growth in export sales for our Galvanised Steel Coils/ Sheets as well
Pre-Painted Coils /Sheets from the European markets.
Being located at Kutch, we are also in close proximity to the ports of Kandla and
Mundra. Both of these ports are well equipped to handle containerised export cargoes with
regular sailings for all our required destinations. This helps us logistically with our
export shipments at a very affordable cost.
Port of Mundra also has regular sailings for Inland Cargo to the ports located in
Southern India where a big market exists. This helps us immensely to cater to the markets
of South India at very affordable freight cost.
(b)- Household Products:- Domestic Insecticides- Mosquito repellent coils &Fabric
whitener.
Your Company is also engaged in the manufacture of Mosquito repellent coils and fabric
whitener to cater to house hold requirements.
Your Company has a state-of-the-art facility in Bhopal, Madhya Pradesh for the
production of Ultramarine Blue Powder. There is a consistent demand for this product and
is continually increasing. This product is manufactured under 100% buy back arrangement
with Reckitt Benckiser.
Business of your Company mainly consists of Galvanized Steel Sheets/Coils Pre-Painted
Steel Coils/Sheets, Household Products as Domestic Insecticides in the form of Mosquito
Repellent Coils, Vaporizers and Ultramarine Blue Powder.
Overview of Operations :- Results :-
During the year under review, the revenue of your Company stood at Rs. 65,160.61 lacs
as compared to Rs. 64,773.34 lacs during the year ended on March, 31, 2022.
The Company earned a Profit of Rs. 502.04lacs during the year as compared to a Profit
of Rs. 894.84 lacs during the year ended on March, 31, 2022.
Key Financial Ratios :-
Key Financial Ratios of the Company during the year under review in comparison with the
immediately previous financial year.
Description |
FY 22-23 |
FY 21-22 |
Change (%) |
Debtors Turnover |
15.37 |
13.69 |
12.33 |
Inventory Turnover |
2.56 |
3.24 |
(20.92) |
Interest Coverage Ratio |
1.34 |
1.51 |
(11.13) |
Current Ratio |
1.10 |
1.13 |
(2.56) |
Debt Equity Ratio |
3.58 |
3.22 |
11.32 |
Profit Margin Before Tax % |
1.14 |
1.81 |
(37.05) |
Net Profit Margin Ratio % |
0.77 |
1.38 |
(44.23) |
Return on Net worth |
6.46 |
10.67 |
(39.44) |
Debtors Turnover Ratio increased from 13.69 times in FY 21-22 to 15.37 times in FY
22-23 and represents better realization of debtors during the year.
Inventory Turnover Ratio decreased from 3.24 times in FY 21-22 to 2.56 times in FY
21-22. This was mainly due to high level Inventory due to poor demand, Export restrictions
and enhanced capacity utilization of Galvanizing Line
Profit Margin Ratio before tax decreased from 1.81% in FY 21-22 to 1.14% in FY 22-23.
This was on account of Increase in marine freight cost and increases in the cost of Raw
materials/Finished Goods and restriction of Exports sales.
Interest Coverage Ratio decreased from 1.51 times in FY 21-22 to 1.34 times in FY
21-22. Decreased primarily on account of better negotiation with bank and institutions
along with decrease in the term loan interest.
Return on Net Worth decreased from 10.67% in FY 21-22 to 6.46% in FY 22-23, this
represents increase in process cost, marketing and administration cost, increase in
working capital cycle, thin margin due to Export restrictions and in-house competition
etc., contributes to decrease in returns of the companys net worth.
Segment wise Performance
Metal Products- Galvanized Steel Sheets/ Coils/ Colour Coated (Pre-Painted) Steel
Sheets/Coils
Your Company has shown profitability for the year ended as on 31/33/2023. The metal
business is showing a steady growth with increased turnover and profitability over the
last years performance. We see a robust demand for metal products with increased
profitability. The Company is also regularly devising strategies for effective Cost
Control measures and we could very successfully reduce costs due to stringent internal
controls on quality assurance/ process wastage and an effective procurement policy.
Household Products:-
Mosquito repellent Coil business is consistent as per market requirements. Production
facility at Mandideep -Bhopal is fully operational for manufacture of Ultramarine blue.
Business of Ultramarine blue is under contract manufacturing agreement with Reckitt
Benckiser (India) Pvt. Ltd for their brand "Robin Blue" with 100% buy-back
arrangement .
Risks & Concerns:-
Your Company is cautious while looking for growth opportunitiesin new markets/ product
segments. The Company faces several market risks arising out of availability of material,
changes in raw material prices in the shorter run, fluctuations in exchange rates,
revision in bank interest rates, unexpected rise in fuel costs, other market risks, which
may have an adverse effect on the Companys financial assets, liabilities, and / or future
cash flows. The Company tries to mitigate these attendant risks by a very careful planning
of its inventory requirements, optimum sales mix, product diversification, market
penetration- both domestic and International and active treasury management. Further, cost
saving measures in all segments of the Company helps in improving margins in an otherwise
difficult market. The pandemic is almost over, however your Company is ensuring that all
precautions/ safety measures continue to be in place ensuring health and safety of all
personnel at work place.
Opportunities& Threats
The product portfolio and wide geographical reach and presence, both within and outside
the country, have helped the Company to try and de risk its business and meet such risks
with suitable safe guards. Improvement in safety performance is of the highest priority,
for which the Company has regularly been taking steps to avert accidents. The Company has
wide network of sales both for domestic and export markets.
Future Outlook:-
Your Company has taken steps in strict negotiation for raw materials sourcing,
Inventory Management, focus on sales of value added products and increasing export sales.
Your Company is also in the process of making modifications in the existing Galvanising
line for making it suitable to process Steel coils with Aluminium-Zinc Alloy.We are also
making substantial investment for this modification in the existing Galvanising line and
expect this to be completed very soon. The line will become operational for manufacturing
this new product in the current financial year 2023-24. The capacity is also being
enhanced by additional 33%. This would help us with increased production and
profitability.
The value addition in the new product shall be much more vis-a-vis sales of traditional
galvanised steel. With few manufacturers in India making this product, there exists a very
good scope for increased sales and profitability.
Aluminium Zinc Alloy offers many advantages. The durability of this product is much
more when compared to Galvanised Metal.Aluminium -Zinc Coated material provides
exceptional heat and corrosion resistance typically 4-6 times greater than the galvanised
metal. Aluminium Zinc Alloy coated steel is now very extensively used in the manufacture
of Pre-Engineered Buildings due to much superior long term corrosion resistance in most
atmospheric conditions. The combination of Zinc and Aluminium enhances the positive
attributes of both metals- barrier corrosion resistance and heat resistance similar to
aluminized material and good bare edge galvanic protection and forming qualities like Zinc
galvanized material.With all these positive attributes, Aluminium- Zinc Alloy coated steel
have a very wide usage. It is also now the preferred choice of most OEM manufacturers
engaged in manufacture of sandwich panels for roof, cold storages, AHUs, False Ceilings
as well in the Appliance sector. We therefore see a very positive outlook in sales with
our new product.
We also have a very well developed network of customers in the European market who are
widely using Aluminium-Zinc alloy coated steel. Our sales to these buyers would also
increase manifold with introduction of our new product.Withdrawal of export dutyand easing
of economic situation in the European market would also help us with increased demand in
the current year. Our proximity to the Ports of Mundra&Kandla give us an added
logistical support to cater to these markets. Ocean freights are also showing a downward
trend and exports would become much more profitable.The Company is also following strict
Quality Control measures and we are accredited with ISO: 9001:2015.
Internal Control Systems :-
The Company has an effective internal control system which helps it to maintain both
internal control and procedures to ensure that all transactions are approved, recorded and
reported correctly and also ensures disclosures and protection of physical and
intellectual property. The Company has appointed Chartered Accountants firm as Internal
Auditors who independently evaluate the adequacy of the internal controls on a regular
basis. The management duly considers and takes appropriate action to maintain transparency
and effectiveness, based on the recommendations made by Statutory Auditors, Internal
Auditors and by Management Committee/ Audit Committee of the Board of Directors. The
Company is operating on SAP platform in order to have proper internal control procedure
with required approvals and "maker and checker" concept. This helps in correct
recording of transactions, timely rectification and elimination of errors. The Company has
appointed consultants/ professionals to conduct Secretarial Audit and Cost Audit and their
observations, if any are reviewed by the Management periodically and remedial actions
taken.
Human Resources:-
Employee relations have generally remained cordial throughout the year and recruitments
were made commensurate with the needs of the business. The Company employs about 331
personnel in all its facilities.
Finance Cost:-
Finance Cost during the year under review stood at Rs. 2183.54 lacs as compared to Rs.
2308.50 lacs during the year ended as at 31st March 2022.The decrease in cost incurred
due to multiple sourcing and proper working capital utilisation of sanctioned limits. The
availability of material during the year under review was under severe pressure however
our day to day monitoring of cost control measures helpedus to restrict the financial cost
and thereby achieve improved profitability.
Cautionary Statement :-
Statements in the "Management Discussion" and Analysis, on the Companys
objectives outlook, and expectation may constitute "Forward Looking Statements"
within the meaning of applicable laws and regulations. Actual results may differ from
those expressed or implied expectations, projections, etc. Several factors make a
significant difference to the Companys operations, including climatic conditions,
economic scenario affecting demand and supply Governments regulations, taxation, natural
calamity and other such factors over which the Company does not have any direct control.
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