manugraph india ltd Management discussions

<dhhead>MANAGEMENTS DISCUSSION & ANALYSIS</dhhead>

Economic Overview FY 2022-23

For the entire fiscal 2022-23, the growth rate came in at 7.2 per cent underscoring the countrys economic resilience amid geopolitical conflicts and global headwinds. India is seeing its economic activity gaining momentum amid continuing global uncertainties.

PRINTING INDUSTRY

Indian commercial printing capacity is set to continue to rise in the current financial year from 1 April 2023 to 31 March 2024 with rising installations of both offset and digital presses.

The Industry is optimistic that the sectors challenging period has passed, newsprint prices too have stabilised and likely to drop further. The growth of digital and digital channels of communication are undeniable. However, there is also an equal realization that the impact marketers were able to create in the minds of consumers is lagging behind, in the hunger of chasing last mile and performance-led parameters on digital. There’s a big shift towards digital and other media, but print still carries the most impact. Reading newspapers is still a habit for a majority of people. Print is seeing some light at the end of the tunnel. Ad revenues and prospects are picking up.

COMPANY

The Company strived hard to increase its sales/turnover including exploring various national/international markets. In addition to web offset printing machines and the Company also diversified into 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.

The Company had 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 2022-23 were far better than previous year’s figures due to partial recovery from pandemic. The rising raw material cost and high ERE (labour cost) lead to higher running costs.

On a Standalone basis, the Company recorded total revenue from operations of Rs. 7957.39 Lakhs as compared to Rs. 4605.06 Lakhs in the previous financial year. The EBIDTA for the financial year ended March 31, 2023 is Rs. (1387.84) Lakhs as compared to Rs. (1070.95) Lakhs in the previous financial year ended March 3l, 2022. During the year, the Company incurred net loss (total comprehensive income, net of taxes) of Rs. 1048.86 Lakhs (after exceptional item for Rs. 699.95 Lakhs) as compared to loss of Rs. 1452.80 Lakhs in the previous year (after exceptional items for Rs. -112.83 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 (Auditor’s 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:

Sr. no.	Ratios/Measure	As At March 31, 2023	As At March 31, 2022	Variation	Reason for variance for change more than 25%
a)	Current ratio	1.43	1.8	-20.56%	Not applicable
b)	Debt-Equity ratio	0.11	0.16	34.47%	The improvement in the ratio is due to the reduction in debts.
c)	Debt Service Coverage Ratio	(5.42)	(4.88)	13.23%	Not applicable
d)	Return on equity %	(0.11)	(0.13)	15.38%	Not applicable
e)	Inventory turnover ratio	1.43	0.89	60.67%	The improvement in the ratio is due to increase in turnover.
f)	Trade receivables turnover ratio	44.54	20.30	119.41%	The improvement in the ratio is due to effective working capital management.
g)	Trade payables turnover ratio	4.45	3.24	37.35%	The increase in the ratio is due to increase in the credit line from the vendors.
h)	Net capital turnover ratio	3.65	1.56	133.97%	The improvement in the ratio is due to increase in turnover.
i)	Net profit %	(0.07)	(0.33)	78.65%	The improvement in the ratio is due to reduction in the loss.
j)	Return on capital employed %	-0.08	-0.11	27.27%	The improvement in the ratio is due to reduction in the loss.
k)	Return on investment	-0.22	-0.07	216.63%	The improvement in the ratio is due to reduction in the loss.