Prakash Steelage Ltd Management Discussions.

The Management of Prakash Steelage Limited, presents its analysis report covering performance and outlook of the Company. The core business of the Company is manufacturing and exporting stainless steel tubes and pipes. It has its registered office located in Mumbai, Maharashtra and plant located at Silvassa (UT – Dadra & Nagar Haveli). The Management accepts responsibility for integrity and objectivity of the Financial Statements of the Company.

Industry Structure and Developments:

Worldwide production of steel pipe is expecting the year 2019-2020 onwards an upward trend. According to estimates of the German Steel Tube Association, the outlook for the steel pipe industry has improved since 2016. It predicts that investment activities in the energy sector, which had practically reached a complete standstill after the crude oil price collapse in 2015, are starting to return to normal. In addition to the resulting backlog, the cyclical upswing in raw material and steel prices should benefit the sector just as much as the continued robust economic activity in the industrialized world. Playing important roles are the relatively favorable energy prices, expansive fiscal policies, and the favorable euro-to-dollar exchange rate. On top of this, the association expects North Americas anticipated expansive economic policies, and an energy policy that puts a stronger focus on fossil fuels, to have a positive effect on the steel pipe industry. Global Stainless Steel Pipes and Tubes market is projected to display a sustainable growth represented by a CAGR of over 3.55% during 2017 - 2022, primarily driven by rising energy demand and production of vehicles. The Stainless Steel Pipe and Tube is expected to lead the market in the forecast period. Among the regions, Asia Pacific accounts for the largest regional share in the Global Stainless Steel Pipe and Tube Market in 2016. However, Asia Pacific is also projected to progress at the highest rate, mainly driven by construction of major infrastructural projects and power projects and increasing demand of oil and gas. Additionally, the investment in Water supply and desalination projects foster the demand of stainless steel pipe and tube.

Opportunities, Threats, Risks and Concerns:

As is normal and prevalent for any business, the Company is likely to face competition from large scale imports. There can be risks inherent in meeting unforeseen situation, not uncommon in the industry. Company is fully aware of these challenges and is geared to meet them. Company also recognizes the risks associated with business and would take adequate measures to address the associated risks and concerns. Some of these factors include competition from multinational Companies, duty free imports by customers against export obligations, our pricing strategy being mainly dependent on import affairs and dependence on imported raw material.

Segment – wise or Product wise performance:

Pursuant to the Joint Venture Agreement executed between Tubacex S.A. Spain and the Company dated 13th February, 2015, in order to reduce its bank debts. However, the Company retains 32.47% shareholding in Tubacex Prakash India Private Limited post transfer of such seamless division. The Company continues to manufacture the welded tubes and pipes and also trade in S.S. products.

Outlook:

Steel Industry in India seems to be positive despite continuing global economic slowdown. This optimism stems from many factors. The Indian steel industry is in some ways insulated from the events affecting steel industry on a global scale as it does not rely on export to the developed markets. Despite high interest rates and marginal slowdown in economic activity, the basic economic fundamentals will ensure stable performance of the economy in coming year. Indian Steel production is set to meet the target of 200 million tonnes by 2020. This will result in India reaching second place in world steel production. The Summit on Steel was organized by Confederation of Indian Industry (CII). Public and private players discussed their intention to expand their existing capacities of steel. Industry value Added (IVA), or the industrys contribution to the overall economy, is expected to grow at an annualized increase by 0.7% to nearly 1.627 billion tonne in 2019 with India poised to overtake the US and grab the No. 2 slot in terms of global steel demand. Industrys growth in relation to that of the overall economy indicates that it is mature.

Internal Control systems and their adequacy:

The Company has in place adequate Internal Financial Controls with reference to financial statements and such internal financial controls are operating effectively. Your company has adopted policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Companys policies, the safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records and timely preparation of reliable financial statements.

Discussion on financial performance with respect to operational performance:

On the operational front, the Company on standalone basis has recorded net revenue of Rs. 4,299.36 Lakhs as compared to Rs. 4,663.35 Lakhs in the previous year. The net profit before tax is Rs. 1,379.67 Lakhs as compared to previous years net loss before tax of Rs. 24,826.70 Lakhs. The Company has earned net profit after tax of Rs. 1,374.28 Lakhs as compared to previous years net loss after tax of Rs. 24,076.33 Lakhs.

Significant changes in key financial ratios as compared to the previous year.

1. Operating profit margin ratio has improved to 0.81% as compared to (3.79) % in the previous year.

2. Net profit / (loss) margin ratio has also improved at 21.05% as against (488.35)% for the previous year.

3. Interest service coverage ratio: The account of the company has turned to NPA and in view of uncertainty the company has not provided interest on the borrowings and hence comment of Interest service coverage ratios are not applicable.

4. Inventory turnover ratio has improved at 3.46 as against 1.72 for the previous year.

5. Current ratio for the year under report is 0.11 as against 0.13 for the previous year.

6. Debt equity ratio stood at (1.17) as compared to (1.21) in the previous year.

7. Debtors Turnover ratio has improved at 2.34 as against 0.58 for the previous year.

8. Return on Net Worth stood at (5.13)%.

Material developments in Human Resources / Industrial Relations front, including number of people employed:

The Company continued to cultivate a learning mindset among employees with the help of its experienced talent pool to ensure they are ready for the challenges ahead and be well positioned for the future. The company has maintained an unbroken record of trouble free operations and good relations with its internal workmen union.

Cautionary Statement:

Statements in this Management Discussion and Analysis Report describing the Companys objectives, projections, estimates and expectations may be termed as "forward looking statements" within the meaning of applicable Laws and Regulations. Actual results may differ materially from those either expressed or implied. The readers of this report are, therefore, advised to read the same with this caution. The Company assumes no responsibility to publicly modify or revise any forward looking statements on the basis of any future events or new information.

For and on Behalf of the Board of Directors
Prakash Steelage Limited
Sd/-
Prakash C. Kanugo
Date : 13th August, 2019 Chairman & Managing Director
Place : Mumbai DIN: 00286366