Management Discussions and Analysis forming part of Directors Report for the year ended 31st March, 2023
Industry Structure and Development
India is the worlds third-largest casting producer after China and the U.S. While China accounts for 40% of the worlds 105 million tonnes casting production, the U.S. and India each do between 11 and 12 million tonnes per year. With manufacturing gradually picking up and several emerging sectors opening up new opportunities, the more than $18 billion Indian foundry or casting industry is looking to double growth rates. Steel Castings Industry is considered to be the backbone of engineering industry serving Automotive, Agriculture, Mining and Earthmoving Equipment Industry and almost all downstream engineering industry. A couple of years ago, the industry was passing through a tough time with many units shutting down due to lack of business. But now, there is optimism. Rising input costs, slow pace of industrial production, infrastructure development and the impact of global slowdown constrained the performance of the industry. In spite of such deficiencies, your company has done well business & earned good profit during the year.
Opportunities & threats
In the future there are more opportunities and people have understood that they would focus on technology as new opportunities are going to provide growth. The Company is undergoing expansion through another plant for increase in production during the financial year 2022-2023. With the opportunities, there is possibility of doubling the growth targets.
The global economy is reviving from slowdown and would offer better business opportunities in near future. Further, stable government placed in India would indicate positive growth signal for an Indian Industry though in near term some short term challenges. Likely increase in the Government spending towards various infrastructure sectors would create a rise in the demand in several sectors of the economy, of which the company would be a beneficiary. Planning Commission, Government of India, has also emphasized on infrastructure development to achieve GDP growth and this would open new opportunities for the business. The company has incurred major capital expenditure during previous financial years and enhanced new business in investment castings. This would cater demand raised in future.
The higher inflation rate resulting in higher interest rate and hike in commodity prices may adversely affect your Companys financial performance. The Company does not foresee any other threat, as Company is working with modern technology and continues on development of quality products as per the need of market to adverse the risk of slow down.
Outlook
Indias growth story was, till recently, quite attractive in comparison with many other developed and developing economies. However, the nations adverse fiscal deficit and negative current account balance call for some bold rectification measures from the Government. The Government would be focusing on consolidation of the economic recovery through expeditious clearance of existing projects, selective disinvestment and accelerated foreign direct investment through policy reforms. Also, Governments emphasis on infrastructure projects would raise demand from Construction & Mining Equipment Industry in the domestic market. Reforms in global economy indicate positive signal for overseas market. Overall, the market seems to be going on the sluggish pace for the next few months and would have positive note thereafter.
Risk and Concerns
The factors like slowdown in the infrastructure investment can lead to lower order intake. The other factor like power shortages and its cost; increase in labour cost and transportation cost due to petrol/diesel price increase etc. could contribute to inflation. The Company considers good corporate governance as a prerequisite for meeting the needs and aspiration of its shareholders. The main risk to the Company which may arise is mainly due to Government policies and decisions, Fluctuations in prices of Raw materials, Exchange rate fluctuations, Industry demand etc
Segment or Product wise Performance
The Company is operating in one segment known as Alloys Steel Castings in the range of static and centrifugal. The product wise comparison is not possible as every product is specific as per order and to the size, shape and alloy mix. Therefore, performance of the Company has to be seen in overall manner and the Company has done reasonably well in the present scenario.
Internal control System and their Adequacy
The Company has developed adequate internal control system commensurate to its size and business. The Company has appointed Internal Auditors, an outside independent agency to conduct the internal audit to ensure adequacy of internal control system, compliance of rules and regulations of the country and adherence to the management policies.
Financial Performance with respect to Operational Performance
During the year under review, your Company has registered revenue of Rs. 13,418.26 Lakhs as against Rs. 9866.30 Lakhs in the previous year. The Profit before taxes in the current year is Rs. 851.31 Lakhs as against Rs. 652.36 Lakhs in the previous year and profit after taxes are Rs. 489.17 Lakhs as against Rs. 516.00 Lakhs in the previous year.
Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor, including
Sr Particulars No. | As at 31st March 2023 | As at 31st March 2022 | Deviation | Reason for deviation (more then 25%) |
1 Debt equity ratio (in times) | 0.16 | 0.07 | 135.21% | Due to increase in Borrowings taken from Banks. |
2 Debt service coverage ratio (in times) | 1.67 | 3.30 | -49.28% | Due to increase in Borrowings taken from Banks. |
3 Net profit ratio (in %) | 3.67% | 5.35% | -31.40% | Due to increase in consumption of raw material and administrative expenses during the year. |
4 Return on capital employed ratio (in %) | 22.93% | 18.33% | 25.14% | Due to increase in EBIT during the year. |
5 Return on investment ratio (in %) | 1.47% | 7.85% | -81.24% | Ind-AS effect during the year on investment is lower than the previous year. |
Compliance with Indian Accounting Standards (Ind-As)
In the preparation of the financial statements, the Company has followed the Indian Accounting Standards (Ind-AS) notified by Ministry of Corporate Affairs from time to time. The significant accounting policies which are consistently applied have been set out in the Notes to the Financial Statements.
Environment Protection And Pollution Control
The Company has always been socially conscious corporate, and has always carried forward all its operations and procedures following environment friendly norms with all necessary clearances. Your Company has taken the following steps towards environment and Ecological balance in manufacturing of Castings.
• Continuous plantation activities in and around the Factory as usual has helped in keeping the environment pollution free.
Goal
The main goal of the company to set and achieve highest standard in performance and quality. The goal is to align all sections of the organization internally to generate even better customer value propositions and returns for shareholders. The goal is also to set and maintain high safety and environment norms for the company.
Human Resources
Human resources are integral and important part for the Company. It has put in place sound policies for the growth and progress of its employees. During the year, Company maintained harmonious and cordial industrial relations. No man days were lost due to strike, lock out etc.
Disclosure by the Senior Management Personnel i.e. one level below the Board including all HODs
None of the Senior Management Personnel has financial and commercial transaction with the Company, where they have personal interest that would have a potential conflict with the interest of the Company at large.
Cautionary statement
The statements in this management discussion and analysis describing the outlook may be "forward looking statement" within the meaning of applicable laws and regulations. Actual result might differ substantially or materially from those expected due to the developments that could affect the companys operations. The factors like significant change in political and economic environment, tax laws, litigation, technology, fluctuations in material cost etc. may deviate the outlook and result.
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www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.
Copyright © IIFL Securities Ltd. All rights Reserved.
Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213, IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
This certificate demonstrates that IIFL as an organization has defined and put in place best-practice information security processes.