Manugraph India Ltd Management Discussions.

Economic Overview FY 2020-21

On account of Covid-19 pandemic resulting in 68 day complete national lockdown and thereafter regional lockdowns and restrictions, affecting the performance of Indian economy and resulting in Indias Gross Domestic Product (GDP) contracted by 7.3% in 2020-21.

 

PRINTING INDUSTRY

The Indian newspaper industry faced an unprecedented crisis last year after the National Lockdown was declared at a very short notice. Circulation fell drastically when many subscribers, particularly housing societies, shut their doors for the newspaper delivery persons for the fear of the contagious virus being carried by the newspapers or the delivery folk, leading to change is consumption pattern of newspapers. In 2020, print media de-grew 36 per cent, and this unexpected plummet came at a time when the industry has been ceding ground to digital. During this period, digital print media gained surged immensely forcing many print media companies to shift to digital news publication including e-papers, apps based and websites.

Indias newspapers grew by relying on advertising, a dependence that began to unravel before the pandemic struck. Dailies have shut down and journalists have lost jobs. To revive their fortunes, they are now—belatedly—trying to build incomes from digital, which is affecting the Company directly.

Despite negative growth in overall printing industry, the demand for book printing businesses saw an upward trend.

 

COMPANY

The Covid-19 pandemic has affected many industries including the printing industry which was already facing challenges from digital printing. The Company is striving hard to increase its sales/turnover including exploring various national/international markets and also diversifying the machinery for packaging industry, which is growing at the rate of almost 15-20% per annum. Moreover, the technology that Manugraph has sourced from Italy is ideal for addressing this industry.

Thereafter the Company has already undertaken manufacturing of precision engineering components for key vendors in the heavy engineering industry. This kind of job work will increase the turnover gradually by additionally supplying these components to the prominent vendors in India.

Operations during the year 2020-21 were are far below previous years figures due to contraction in capex of the newspaper printing houses, shutting of print media companies on account of pandemic and increased focus on digital media. The rising raw material cost and high ERE (labour cost) lead to higher running costs. As a part of reducing employee costs, the Company has formulated a plan for employee separation. During the year ended March 31,2021, the Company had paid Rs 11.70 crores to such separated employees.

On a Standalone basis, the Company recorded total revenue from operations of Rs. 2968.51 Lakhs as compared to Rs. 12102.10 Lakhs in the previous financial year. The EBIDTA for the financial year ended March 31, 2021 is Rs. (1233.13) Lakhs as compared to Rs. (2643.65) Lakhs in the previous financial year ended March 3l, 2020. During the year, the Company incurred net loss (total comprehensive income, net of taxes) of Rs. 2893.93 Lakhs (after exceptional item for Rs. 1170.43 Lakhs) as compared to loss of Rs. 3637.35 Lakhs in the previous year (after exceptional items for Rs. 401.94 Lakhs).

 

Opportunities

In digital media, articles can be hidden away and authenticities of news are always questionable. Further, there are chances that smaller news is overlooked by readers. Also, irregular networks affect readers mindset. A print newspaper is everlasting and unchanging. The reach of print newspaper covers remote cities, towns and villages.

With rising literacy and regionalization of the newspapers offers different opportunities, the Company foresees subtle growth in print industry. Technology continues to be the prime focus for your company.

Increase in literacy rates across the country has created an interest amongst the young and old alike to stay up to date with the current affairs of the country and the globe. Unlike some other markets with more developed digital ecosystems, the newspaper revenue streams in the nation have not faced serious challenges from the digital innovations. Nonetheless, senior citizens prefer to keep it old school when it comes to getting their daily entertainment and information which is likely to keep the ink in the print sector flowing.

 

Threats

With higher costs of papers including levy of import duty and consumables, government initiatives of digitalization and environment friendly measures, the production of newspapers over the years will foresee a deep cut. Lower advertising revenue due to switch in digital media also add to mounting losses of printers.

However, expansion in market size and regionalization of printing is partly compensating this negative trend.

 

Outlook

The limitations of physical circulation of newspaper during this pandemic have also forced many newspaper printing houses to look for other popular and convenient options of digital media with more focus on e-papers, apps and online subscription.

However, with growing literacy rate and availability of newspapers in many regional languages, the print industry may survive this tide, albeit at a low rate.

 

Risk and concerns

High costs of production, geographical concentration and competition risk are few of the major concerns for the Company. The Company has taken various measures which help the Company to outline the principal risks and uncertainties and then take appropriate actions that could avert operating and financial performance.

Normal foreseeable risks of the Companys assets are adequately covered by comprehensive insurance. Risk assessments, inspections and safety audits are carried out periodically.

 

Internal Control System

Adequate Internal Control System helps to prevent and detect frauds & errors, safeguarding of assets and accuracy and completeness of accounting records.

The Companys well-structured internal control systems which are subjected to regular assessment for its effectiveness, reinforces integrity of Management and fairness in dealing with the Companys stakeholders.

Your company has appointed an Independent Internal Audit teams for conducting regular internal audits of the systems and procedures of financial reporting and operations of the Company. The Audit Committee periodically reviews the Internal Audit Reports, scopes and plans, significant findings and corrective actions, if any.

The Statutory Auditors have conducted a review of Internal Financial Control as required under the Companies (Auditors Report) Order, 2016 and have found the same to be very effective.

 

Key Financial Ratios:

In accordance with SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018, the details of significant changes (change of 25% or more as compared to the immediately previous financial year) are given below

Ratios 2021 2020 Explanation
Debtors Turnover 2.72 9.83 The reduction in the ratio is primarily due to lower credit sales during the year.
Inventory Turnover 1.54 9.70 The inventory turnover ratio is lower due to slow movement of the stock as the sales were impacted due to the COVID pandemic, as a result of which there was a significant reduction in the sales during the year.
Interest Coverage Ratio - - N.A. as the Company has no debt funds
Current Ratio 1.74 2.10 The ratio is lower than the previous year particularly due to lower:
i. Bank deposits and
ii. Trade receivables
Debt Equity Ratio N/A N/A This is not applicable since the Company does not have any long term borrowings
Operating Profit Margin (%) -76.35% -12.99% Due to lower operating revenue and high employee cost
Net Profit Margin (%) -96.69% 29.41% Due to lower revenue and high employee cost
Details of any change in Return on Net Worth as compared to the immediately previous financial year. The return is negative as the Company incurred losses due to lower sales as a result of COVID pandemic, whereas employee cost remained at higher levels.