Nupur Recyclers Ltd Management Discussions

Global Economy Outlook

Global economic growth in 2024 remains fragile, as the aftershocks of high inflation synchronized monetary tightening continue to impact economies worldwide. Following a year where global growth dipped to 1.7% in 2023, the outlook for 2024 shows only a improvement, with growth projected to be subdued due to persistent inflationary pressures and ongoing geopolitical tensions, particularly in energy and commodities markets.

The United States, the euro area, and China the major drivers of global growth continue to experience significant challenges, including sluggish demand, elevated inflation, and geopolitical tensions. For Emerging Market and Developing Economies (EMDEs), tighter financial conditions, reduced external demand, and high inflation have exacerbated existing vulnerabilities, leading to continued economic pressures.

Global inflation, although expected to gradually moderate, remains a significant concern, with risks of persistence in underlying inflation pressures. Central banks across the globe are expected to maintain a tightening stance to curb inflation, contributing to subdued global demand and potential financial stress, particularly for economies with weaker credit profiles.

Commodity prices have somewhat stabilized after the sharp fluctuations of the previous year but remain elevated compared to historical standards, continuing to pose challenges, especially in the context of energy and food security. Crude oil prices have seen fluctuations, with natural gas prices in Europe stabilizing after peaking in 2023. Despite the moderation, food price inflation remains a concern in many EMDEs.

Indian Economy

High Real Growth, Resilient Amidst Global Uncertainty

Despite global economic challenges, Indias economy has shown resilience, with a projected real growth rate of 6-6.5% for FY24. This positions India as one of the fastest-growing economies globally, driven by strong domestic consumption, robust infrastructure investments, and a stable macroeconomic environment. While this growth rate is slightly lower than the previous years 7%, it reflects the impact of global headwinds, including the ongoing geopolitical tensions and the measures taken to control inflation.

Domestic Consumption as a Growth Driver

Indias economic resilience is further supported by its strong domestic consumption base. With foreign exports constituting only a fifth of the countrys GDP, India is relatively insulated from the global economic slowdown. The diversified nature of Indias exports, both geographically and across sectors, adds to its economic stability.

Favourable Import Positioning

Indias large and youthful population continues to drive robust demand for goods and services. Additionally, the moderation in global commodity prices, particularly crude oil, has provided relief to Indias import bill, helping to manage inflationary pressures. The continued import of discounted crude oil from Russia has also contributed to the relative stability of the Indian economy amidst global turmoil.

Resilient Indian Banking System

Indian banks have demonstrated resilience, benefiting from strict regulatory oversight, healthy asset quality, and strong capital bases. This positions them well to withstand economic downturns, in contrast to some of their global counterparts, particularly in the US, which have faced significant stress due to elevated inflation and rapid monetary tightening.

Inflation and Growth

The Reserve Bank of India (RBI) has projected a real GDP growth of 6.5% for FY24, with robust rural demand, government capital expenditure, and moderated commodity prices as key growth drivers. However, risks remain from protracted geopolitical tensions and global financial market volatility.

Industry Structure and developments

Metals Industry

The global metals industry continues to navigate through challenges posed by weaker demand, particularly from China, and monetary tightening in major economies. International prices of base metals have remained under pressure, with significant contractions observed in FY 2024 compared to the highs of FY 2023. However, domestic demand for non-ferrous metals in India remains robust, supported by government infrastructure projects and an uptick in the real estate sector.

Zinc

The outlook for zinc remains positive in India, driven by the governments infrastructure push and the growing demand from the automotive sector. Indian zinc consumption is expected to grow by 3-5% in the medium term, outpacing global growth rates.

Steel

Indias steel production and consumption continue to grow, supported by government initiatives like the National Infrastructure Pipeline (NIP) and the focus on improving the logistics ecosystem. The steel industry is expected to see steady growth, with production likely to increase by 3-5% and consumption by 10-12% in FY24.

Aluminium

Aluminium demand in India is expected to grow strongly, driven by infrastructure development and the transition to electric vehicles. The long-term fundamentals for aluminium remain robust, with an expected growth rate of 6-7% in the near term.

Threats

Fluctuating Metal Prices: The global metals market is h ighly v o latile, influenced macroeconomic factors, geopolitical tensions, and supply-demand dynamics. Fluctuations in metal prices, especially in the non-ferrous segment, can impact profit margins and business stability.

Regulatory Changes: The industry is subject to stringent environmental regulations. Any changes in government policies, particularly regarding import restrictions, waste management laws, or environmental compliance, could adversely affect operations and increase compliance costs.

Supply Chain Disruptions: The reliance on imported ferrous and non-ferrous metal scrap exposes the company to risks related to supply chain disruptions, such as delays in shipments, increased transportation costs, or geopolitical trade restrictions, which could impact the availability and cost of raw materials.

Competition: The metal recycling industry is becoming increasingly competitive, with new entrants and existing players expanding their capacities. This could lead to pricing pressures and a potential loss of market share.

Technological Changes: Rapid advancements in recycling technologies could require significant investments in new equipment or processes. Failure to adopt these technologies could result in a loss of competitive edge.

Economic Slowdown: A slowdown in the global or domestic economy could lead to reduced demand for recycled metals, particularly from key sectors like construction, automotive, and infrastructure, thereby impacting sales and profitability.

Environmental and Social Risks: Increasing scrutiny from environmental and social governance (ESG) perspectives can pose risks if the company is perceived as not adhering to sustainability practices. Failure to meet stakeholder expectations in these areas could lead to reputational damage and impact investor confidence.

Currency Fluctuations: The companys operations involve significant imports, making it vulnerable to fluctuations in currency exchange rates. Adverse movements in foreign exchange rates could increase costs and impact profitability.

Segment-wise Performance

The Company primarily operates in the business of importing ferrous and non-ferrous metal scrap and processing/trading the same across India. As such, there are no separate reportable segments as per Accounting Standard 17 on "Segment Reporting."

Outlook

Indias ambitious commitments to reducing carbon emissions and achieving net-zero by 2070 provide significant opportunities for the recycling industry. The extraction of materials from scrap will play a critical role in meeting these environmental goals, particularly in the metals sector, where recycling can significantly reduce carbon emissions and resource consumption.

Risks and Concerns

Regulatory Risks: Inconsistent implementation of waste collection and recycling regulations remains a challenge.

Market Adoption: The lack of standardization in recycled products may hinder broader market adoption.

Geopolitical and Market Volatility: The ongoing geopolitical turbulence and market volatility could result in elevated and fluctuating metal prices, impacting profitability.

Internal Control and Risk Management

The Company maintains a robust internal control environment to ensure operational efficiency, asset security, fraud prevention, accurate accounting, and compliance with laws and regulations. The Audit Committee regularly reviews the internal control systems, suggesting improvements in line with changing business dynamics.

Financial Performance & Analysis

Income

During the year, the revenue from operations increased to 18,081.81 lakhs from 9,884.76 lakhs in FY 2022-23. Total Income increased from 10,541.00 lakhs in FY 2022-23 to 18,684.04 lakhs in FY 2023-24.

Profitability

The company delivered EBITDA (including other income) of 1,008.22 lakhs in FY 2023-24 as against 1,365.81 lakhs in FY 2022-23. PBT stood at 1,444.84 lakhs in FY 2023-24 compared to 1,329.45 lakhs in FY 2022-23. PAT increased to 1,055.04 lakhs in FY 2023-24 from 934.45 lakhs in FY 2022-23.

Balance Sheet

Net Worth:

The net worth of the company for FY 2023-2024 stands at 8,565.90 Lakhs, compared to 7,002.63 Lakhs in FY 2022-23.

Cash & Cash Equivalents:

Cash & cash equivalents decreased to 129.60 Lakhs in FY 2023-2024 from 247.16 Lakhs in FY 2022-23.

Inventory:

Inventory was 931.93 Lakhs for FY 2023-2024, down from 1,752.26 Lakhs in FY 2022-23.

Trade Payables:

Trade payables were 40.30 Lakhs in FY 2023-2024, a decrease from 93.91 Lakhs in FY 2022-23.

Trade Receivables:

Trade receivables amounted to 988.21 Lakhs in FY 2023-2024, compared to 1,161.95 Lakhs in FY 2022-23.

Long-term Borrowings:

Long-term borrowings were 129.66 Lakhs in FY 2023-2024, an increase from 115.48 Lakhs in FY 2022-23.

Material developments in Human Resources / Industrial Relations

At Nupur Recyclers Limited (NRL), we recognize that human capital is a vital component of our success. As of March 31, 2024, the Company employed 18 permanent employees.

Throughout the fiscal year, NRL has actively invested in the development of its workforce by organizing numerous training programs. These initiatives are designed to nurture and enhance the skills and talents of our employees, aligning with our commitment to fostering a supportive and growth-oriented work environment.

Accounting Policies

The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year. The financial statements have been prepared under the historical cost convention on an accrual basis. The management accepts responsibility for the integrity and objectivity of the financial statements, as well as for the various estimates and judgment used therein.

Disclosure of Accounting Treatment in Preparation of Financial Statement

The Company has followed all relevant Accounting Standards laid down by the Institute of Chartered Accountants of India (ICAI) while preparing Financial Statements.

Details of significant changes (i.e., Change of 25% or more as compared to the immediately previous financial year) in Key Financial Ratios Accounting Policies

Following are important ratios showing better performance in FY 2024:

Particulars	FY 2023-24	FY 2022-23	Changes
Net Profit Ratio	5.65	8.86	(36.30%)
Trade Receivable Turnover Ratio	16.82	11.60	45.01%
Current Ratio	5.38	20.16	(73.30%)
Inventory Turnover Ratio	12.94	6.72	92.60%
Debt-Equity Ratio	0.11	0.05	112.72%
Interest Coverage Ratio	34.26	43.18	(20.65%)
Operating Profit Margin %	5.39	13.45	(59.93%)
Return on Net Worth	12.32	13.34	(7.70%)

Cautionary Statement

Statements in the Management discussion and analysis describing the Companys objectives, projections, estimates and expectations may be “forward looking statements” within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the companys operations include economic conditions affecting demand/supply and prices, conditions in the domestic and overseas markets in which the company operates/ going to operate, changes in government regulations, tax laws and other statutes and other incidental factors.

By order of the Board of Directors For Nupur Recyclers Limited

RAJESH GUPTA	DEVENDER KUMAR POTER
Managing Director	Director & CFO
DIN: 01941985	DIN: 08679602