ncl industries ltd share price Management discussions

The Companys performance during the year ended 31st March, 2023 and the Managements view on future outlook are detailed below:

A. INDUSTRY STRUCTURE AND DEVELOPMENT

Your Company has five operating Divisions with Cement being the major revenue contributor. The Industry Structure and Developments in respect of each of the Divisions are briefly discussed below:

Cement

India is country which continues to have the distinction of being one of the largest cement producer, and yet being one of the low per capita consumer of cement. This paradox is probably because of the high population accompanied by the relatively less developed infrastructure and infrastructure. The emphasis and focus of successive Governments on infrastructure development in the form of housing, highways, ports and irrigation projects continues to offer a good prospect for cement industry, since a viable and visible alternative for cement is yet to emerge to make a significant dent on the demand for cement.

This optimism is reinforced by the statements of the Union Finance Minister while presenting the Union Budget with a major infrastructure-intensive sectors like roads and highways, railways, and housing and urban affairs, With this as the backdrop, the outlook of the cement industry continues to be encouraging, The demand for cement in 2023-24 onwards is expected to accelerate.

Ready Mix Concrete (RMC)

RMC is a natural adjunct to the cement industry. Over the past decade, more and more cement manufacturers have been opting for setting up their in-house RMC units as an outlet for their main product of cement, and also to retain and propagate their brand image. RMC is also eco-friendly as it reduces the noise and air pollution because mixing is done in closed chamber as compared to site mix concrete. The relatively low shelf life of RMC – 3 to 5 hours- imposes severe restrictions on the distance between the end user and plant site. In spite of this handicap, RMC industry is likely to witness a steady growth in the next few years.

Boards

Your Company is the only manufacturer of Cement Bonded Particle Boards (CBPB) in the country, marketed under the brand name Bison Panel. Bison Panels are normally used for construction of prefab structures and have been extensively used in the infrastructure and housing sectors. As reported in the previous year, several new and innovative applications are being found for the Bison Boards, like false ceilings, kitchen platforms, fixed furniture etc; enhancing the demand potential. The increased awareness and discovery of new applications results in increased demand for the products, as evidenced by the growth in the sales.

Your company is manufacturing these panels at three different locations having a total installed capacity of 90,000 Mt per annum are performing satisfactorily. Your company is looking for opportunities to set up additional capacities for the product.

HYDEL ENERGY (Small Hydro)

In India, hydro projects up to 25 MW station capacities have been categorized as Small Hydro Power (SHP) projects. The estimated potential for power generation in the country from such plants is about 20,000 MW. Projects in this segment, in which your company is operating, are normally economically viable. However, the viability is dependent upon the release of water in the reservoirs by the Government. With an installed capacity of 15.75 MW your company is a marginal player in this field.

B. OPPORTUNITIES AND THREATS

As already mentioned, continued focus of the Central and State Governments on infrastructure projects offer an ongoing opportunity to cement manufacturers. However, availability of new limestone mines at reasonable cost is the current challenge and obstacle for further growth and emergence of new capacities. This acts as a deterrent for medium sized units seeking opportunities for enhancing their capacity in their quest to seek economies of scale. Consolidation of capacities of major players in the industry also poses a challenge for medium sized players. Your company could capitalize on the opportunities for growth in the infrastructure sector and bagged substantial orders from housing, airports, and construction sectors. This trend is likely to continue in the medium term. However, increased R & D activities and emergence of alternative products to replace the Boards pose a challenge. Your Company is a relatively small player in the Hydel Energy and RMC segments. The company is looking other alternates to increase the present Hydel Energy capacity by infusing new investments to increase its profitability. As of now these divisions do not constitute a significant part of the companys overall activity. Your company is looking for opportunities for mergers and acquisitions in hydro and other eco-friendly avenues for generation of power.

C SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS AS COMPARED TO THE PREVIOUS YEAR

During the year under review there were no significant changes in key financial ratios as compared to the previous year. Close monitoring on debtors reduced the debtors turnover ratio during the year under review. Key Ratios are as under

S.No Ratios	2022-23	2021-22	% of Change
1 Inventory Turnover Ratio	13.48	15.74	(14.36)
2 Interest coverage Ratio	12.59	13.48	(6.60)
3 Current Ratio	1.72	2.03	(15.27)
4 Debt Equity Ratio	0.38	0.45	(15.55)
5 Return on capital employed (%)	10.00	15.00	(33.33)
6 Debtors Turnover Ratio	11.51	11.11	3.60
7 Net Profit Margin (%)	0.02	0.05	(60.00)
8 Operating Profit Margin (%)	5.26	7.84	(32.91)

Increase in cost of materials in comparison with previous financial year which directly affected the operating margins and as a consequence the variance in ratios as reported above. pl. refer notes on key financial ratios financial statements 2022-23

D. SEGMENT–WISE OR PRODUCT-WISE PERFORMANCE.

The performance of the various segments during the period under review is as follows:

Segments	%age contribution to total turnover	Quantity of production	Gross Turnover (Rs. Lakhs)	Segment Profit before Interest & Tax (Rs. Lakhs)
Cement	84.75	26,28,737Mt	1,95,942.30	9,558.60
Boards	8.66	76,817 Mt	20,035.75	2,128.31
Energy	0.34	39.51 MU	785.63	420.00
Ready Mix Concrete	4.80	2,24,762 (Cu.Mtrs)	11,104.12	(100.64)
Readymade Doors	1.45	19,618 (Nos)	3,357.20	(540.21)

E. OUTLOOK

As already stated earlier, the outlook for the cement and building materials industry looks promising medium term despite the uncertainty caused by steep increase in coal and other input costs.

F. RISKS AND CONCERNS.

Your Company does not perceive any serious risks and concerns apart from the normal business risks connected with the industries in which it operates. The recent steep fluctuations in the prices of major raw materials like steel, coal, wood, and other building materials poses a severe challenge. A steep increase in the input costs followed by a gradual return to normalcy impacted the prices and profitability. Recurrence of such fluctuations are bound to introduce an element of uncertainty in the outlook of the industry as a whole. Global events like the Ukraine conflict also pose risks in terms of stability of the markets.

G. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY.

The Company has proper and adequate systems for internal controls in place. The Company has appointed independent Internal Auditors to conduct the internal audit across all plant locations whose reports are regularly monitored by the management. Statutory Auditors of the company independently examine the adequacy of the internal control procedures commensurate with the size of the company. Both these Auditors attend the audit committee meetings and express their opinion on issues of concern. The Management continuously reviews the internal control systems and procedures to ensure orderly and efficient conduct of business. Emphasis on internal controls prevails across functions and processes covering the entire gamut of activities including finance, supply chain, sales, distribution, marketing etc.

H. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE.

This aspect has been covered in the analysis of the Segment-wise performance in the previous paragraphs.

I. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT,

INCLUDING NUMBER OF PEOPLE EMPLOYED.

The senior management team has been strengthened with the recruitment of additional personnel to provide leadership below the executive director level. Systematic training in site operational control and management are imparted regularly to ensure efficient execution. The Company has cordial relations with employees and staff. As on 31^st March 2023, the company has 966 employees working in its factories and various offices.

J. CAUTIONARY STATEMENT

Some of the statements made in this Report are forward looking, based on the perceptions and views of the management. The projections or expectations are subject to market uncertainties and vicissitudes. Shareholders and investors are advised to form their own opinion, and management assumes no responsibilities for the variances if any in the actual scenario emerging