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.
THE GLOBAL ECONOMYOVERVIEW
Global growth is projected to fall from an estimated 3.4 percent in
2022 to 2.9 percent in 2023, then rise to 3.1 percent in 2024. The forecast for 2023 is
0.2 percentage point higher than predicted in the October, 2022 World Economic Outlook
(WEO) but below the historical (2000-19) average of 3.8 percent. The rise in central bank
rates to fight inflation and Russias war in Ukraine continue to weigh on economic
activity. The rapid spread of COVID-19 in China dampened growth in 2022, but the recent
reopening has paved the way for a faster-than-expected recovery. Global inflation is
expected to fall from 8.8 percent in 2022 to 6.6 percent in 2023 and 4.3 percent in 2024,
still above pre-pandemic (2017- 19)levelsofabout3.5 percent.
The balance of risks remains tilted to the downside, but adverse risks
have moderated since the October 2022 WEO. On the upside, a stronger boost from pent-up
demand in numerous economies orafasterfall in inflation are plausible. On the downside,
severe health outcomes in China could hold back the recovery, Russias war in Ukraine
could escalate, and tighter global financing conditions could worsen debt distress.
Financial markets could also suddenly re-price in response to adverse inflation news,
while further geopolitical fragmentation could hamper economic progress.
In most economies, amid the cost-of-living crisis, the priority remains
achieving sustained disinflation. With tighter monetary conditions and lower growth
potentially affecting financial and debt stability, it is necessary to deploy macro
prudential tools and strengthen debt restructuring frameworks. Accelerating COVID-19
vaccinations in China would safeguard the recovery, with positive cross-border spill
overs. Fiscal support should be better targeted at those most affected by elevated food
and energy prices, and broad-based fiscal relief measures should be withdrawn. Stronger
multilateral cooperation is essential to preserve the gains from the rules-based
multilateral system and to mitigate climate change by limiting emissions and raising green
investment.
(Source: IMF, World Economic Outlook, January 2023).
THE INDIAN ECONOMYOVERVIEW:
Strong economic growth in the first quarter of FY 2022-23 helped India
overcome the UK to become the fifth-largest economy after it recovered from repeated waves
of COVID-19 pandemic shock. Real GDP in the first quarter of 2022-23 is currently about 4%
higher than its corresponding 2019-20, indicating a strong start for Indias recovery from
the pandemic. Given the release of pent-up demand and the widespread vaccination coverage,
the contact-intensive services sector will probably be the main driver of development in
2022-2023. Rising employment and substantially increasing private consumption, supported
by rising consumer sentiment, will support GDP growth in the coming months.
Future capital spending of the government in the economy is expected to
be supported by factors such as tax buoyancy, the streamlined tax system with low rates, a
thorough assessment and rationalisation of the tariff structure, and the digitization of
tax filing. In the medium run, increased capital spending on infrastructure and
asset-building projects is set to increase growth multipliers, and with the revival in
monsoon and the Kharif sowing, agriculture is also picking up momentum. The contact-based
services sector has largely demonstrated promise to boost growth by unleashing the pent-up
demand over the period of April-September 2022. The sectors success is being captured by
a number of HFIs (High-Frequency Indicators) that are performing well, indicating the
beginnings of a comeback.
India has emerged as the fastest-growing major economy in the world and
is expected to be one of the top three economic powers in the world over the next 10-15
years, backed by its robust democracy and strong partnerships.
MARKET SIZE
Indias nominal gross domestic product (GDP) at current prices is
estimated to be at Rs. 232.15 trillion (US$ 3.12 trillion) in
FY22. With more than 100 unicorns valued at US$ 332.7 billion, India
has the third-largest unicorn base in the world. The government is also focusing on
renewable sources to generate energy and is planning to achieve 40% of its energy from
non-fossil sources by 2030.
According to the McKinsey Global Institute, India needs to boost its
rate of employment growth and create 90 million nonfarm jobs between 2023 and 2030 in
order to increase productivity and economic growth. The net employment rate needs to grow
by 1.5% per annum from 2023 to 2030 to achieve 8-8.5% GDP growth between 2023 and 2030.
Indias current account deficit (CAD), primarily driven by an increase in the trade
deficit, stood at 2.1% of GDP in the first quarter of FY 2022-23.
Exports fared remarkably well during the pandemic and aided recovery
when all other growth engines were losing steam in terms of their contribution to GDP.
Going forward, the contribution of merchandise exports may waver as several of Indias
trade partners witness an economic slowdown. According to Mr.PiyushGoyal, Minister of
Commerce and Industry, ConsumerAffairs, Food and Public Distribution and Textiles, Indian
exports are expected to reach US$ 1 trillion by 2030.
RECENT DEVELOPMENTS
India is primarily a domestic demand-driven economy, with consumption
and investments contributing to 70% of the economic activity. With an improvement in the
economic scenario and the Indian economy recovering from the Covid-19 pandemic shock,
several investments and developments have been made across various sectors of the economy.
According to World Bank, India must continue to prioritise lowering inequality while also
putting growth-oriented policies into place to boost the economy. In view of this, there
have been some developments that have taken place in the recent past. Some of them are
mentioned below.
• As of September 21, 2022, Indias foreign exchange reserves
stood at US$ 524,520 million. The private equity- venture capital (PE-VC) sector
investments stood at US$2 billion in September2022.
• Merchandise exports in September 2022 stood at US$ 32.62
billion.
• PMI Services remained comfortably in the expansionary zone at
56.7 during April-September 2022
• In September 2022, the gross Goods and Services Tax (GST)
revenue collection stood at Rs. 147,686 crore (US$ 17.92 billion).
• Between April 2000-June 2022, cumulative FDI equity inflows to
India stood at US$ 604,996 million.
• In August 2022, the overall IIP (Index of Industrial Production)
stood at 131.3. The Indices of Industrial Production for the mining, manufacturing and
electricity sectors stood at 99.6,131.0 and 191.3, respectively, in August 2022.
• According to data released by the Ministry of Statistics &
Programme Implementation (MoSPI), Indias Consumer Price Index(CPI) based retail inflation
reached 7.41% in September2022.
• In FY2022-23, (until October 28, 2022), Foreign Portfolio
Investment (FPI) outflows stood at Rs. 58,762 crore (US$ 7.13 billion).
• The wheat procurement in Rabi 2021-22 and the anticipated paddy
purchase in Kharif 2021-22 would include 1208 lakh (120.8 million) metric tonnes of wheat
and paddy from 163 lakh (16.7 million) farmers, as well as a direct payment of MSP value
of Rs. 2.37 lakh crore (US$ 31.74 billion) to their accounts.
(Source: https://www.ibef.org/economy/indian-economy-overview)
INDUSTRIAL STEEL INDUSTRY OVERVIEW:
One of the primary forces behind industrialization has been the use of
metals. Steel has traditionally occupied a top spot among metals. Steel production and
consumption are frequently seen as measures of a countrys economic development because it
is both a raw material and an intermediary product. Therefore, it would not be an
exaggeration to argue that the steel sector has always been at the forefront of industrial
progress and that it is the foundation of any economy. The Indian steel industry is
classified into three categories - major producers, main producers and secondary
producers.
As of December 2022, India was the worlds second-largest producer of
crude steel. In FY22, the production of crude steel and finished steel stood at 133.596 MT
and 120.01 MT, respectively. In April-November 2022, the production of crude steel and
finished steel stood at 81.96 MT and 78.09 MT respectively. The growth in the Indian steel
sector has been driven by the domestic availability of raw materials such as iron ore and
cost-effective labour. Consequently, the steel sectorhas been a majorcontributor to
Indias manufacturing output.
The Indian steel industry is modern, with state-of-the-art steel mills.
It has always strived for continuous modernisation of older plants and up-gradation to
higher energy efficiency levels.
MARKET SIZE
In the past 10-12 years, Indias steel sector has expanded
significantly. Production has increased by 75% since 2008, while domestic steel demand has
increased by almost 80%. The capacity for producing steel has grown concurrently, and the
rise has been largely organic.
In FY22, the production of crude steel and finished steel stood at
133.596 MT and 120.01 MT, respectively. The consumption of finished steel stood at 105.751
MT in FY22. Between April-December 2022, Indias finished steel consumption stood at 75.34
MT. In April-July 2022, the production of crude steel and finished steel stood at 40.95 MT
and 38.55 MT respectively.
In FY23 (until January 2023), the exports of finished steel stood at
5.33 MT, while the imports stood at 5 MT. In FY22, exports and imports offinished steel
stood at 13.49 MT and 4.67 MT, respectively. In FY22, Indias export rose by 25.1% YoY,
compared with 2021. In FY21, India exported 9.49 MT of finished steel. In December 2022
exports offinished steel stood at4.42 lakh tonnes.
The annual production of steel is anticipated to exceed 300 million
tonnes by 2030-2031. By 2030-31, crude steel production is projected to reach 255 million
tonnes at 85% capacity utilisation achieving 230 million tonnes of finished steel
production, assuming a 10% yield loss or a 90% conversion ratio for the conversion of raw
steel to finished steel. With net exports of 24 million tonnes, consumption is expected to
reach 206 million tonnes by the years 2030- 1931 .As a result, it is anticipated that
per-person steel consumption will grow to 160 kg.
OPPORTUNITIES AND THREATS:
OPPORTUNITIES
a) HIGH DEMAND AND EXPORT
The steel industry and the construction industry are complementing each
other. High investment in the construction industry is increasing the demand for steel.
The steel manufacturers should take advantage of the growing demand in the market, and
increase their profitability and revenue by producing more. The recovery in demand for
steel products will enable the Company to expand its activities. Indias finished steel
consumption is anticipated to increase to 230 MT by 2030-31 from 119.17 MT in Financial
Year 2023. India is the worlds second-largest producer of crude steel, with an output of
125.32 MT of crude steel and finished steel production of 121.29 MT in Financial Year2023.
b) COMPETITIVEADVANTAGE
Indias steel production is estimated to grow 4-7% to 123-127 MT in
Financial Year 2024. Easy availability of low-cost manpowerand presence of abundant iron
ore reserves make India competitive in the global set up. India is home to fifth-highest
reserves of iron ore in the world.
THREATS
i. TECHNOLOGY DEVELOPMENT
High technological development is focusing on finding new ways to build
houses and infrastructures that dont involve a lot of steel. It is decreasing the demand
for steel in the customer market, and it is not good news for manufacturers and owners
because they have invested a lot of resources in the steel industry.
ii. LOGISTICS
For most Indian steel makers, managing logistics requirements is
arduous, challenging and costly. The primary raw material for steel making is iron ore,
besides coal or coking coal. Both are bulk minerals, and steel is also a bulk commodity.
So, whether it is physical transportation of raw materials for steelmaking to the steel
mills or physical transportation of finished steel to demand centres, transportation of
bulk materials is always arduous.
Moreover, most Indian steel plants are located inland, unlike in China,
Japan or Korea, where they are located close to the sea. This increases the challenge of
managing logistics requirements for most steel plants in India.
Railways are naturally the preferred mode of transportation for steel
makers. More than 80% of the total logistics requirements of the steel industry are met
through the railway network, as the sea route can be partially leveraged for only three
steel plants. Moreover, transportation through roadways for bulk materials is economically
unviable.
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 RESPECTTO OPERATIONAL
PERFORMANCE
On the operational front, the Company on standalone basis has recorded
net revenue of Rs. 9657.20 Lakhs compared to Rs. 8,573.75 Lakh of previous year. The
Company has incurred a profit before tax and exceptional item Rs. 308.60 Lakhs as compared
to previous years Profit before tax and exceptional item of Rs. 16,302.55 Lakhs. The
Company has gained net profit after tax Rs. 414.61 Lakhs as compared to previous years
net profit after tax of Rs. 16,350.41 Lakhs. The Earning Per Share (EPS) stood at Rs.
0.24.
MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/ INDUSTRIAL RELATIONS FRONT,
INCLUDING NUMBER OF PEOPLE EMPLOYED
As on 31 st March 2023, the number of permanent employees in the
Company is 75 at various levels. Talent management has always been the crucial factorfor
the Company, as your Company believes that its continued success will depend on its
ability to attract and retain key personnel with relevant skills and experience. The
attrition rate among the Top Management of the Company has been negligible in last many
years. The Company has robust process of human resource development. The Company has a HR
Policy in place and encouraging working environment. The Company has continued to focus on
various aspects like employee training, welfare and safety thereby maintaining a
constructive relationship with employees. The Management had taken all required efforts
for implementation of terms and conditions laid down by Ministry of Home Affairs of
Central Government of India for prevention of outbreak at work places through detailed
Standard Operating Procedure and Human Resource Department had taken effort in its
implementation at all the sites. The necessary arrangement was made through site HR
officials for groceries, vegetables during lockdown phases and the required home isolation
facilities were allocated to the workers of subcontractors too during the entire period.
CAUTIONARY STATEMENT
Certain statements in the MDAsection concerning future prospects may be
forward-looking statements which involve a number of underlying identified/non identified
risks and uncertainties that could cause actual results to differ materially. In addition
to the foregoing changes in the macro environment, Russias war in Ukraine could escalate,
and tighter global financing conditions could worsen debt distress. The results of these
assumptions made, relying on available internal and external information, are the basis
for determining certain facts and figures stated in the report. Since the factors
underlying these assumptions are subject to change overtime, the estimates on which they
are based, are also subject to change accordingly. These forward looking statements
represent only the Companys current intentions, beliefs or expectations, and any
forward-looking statement speaks only as of the date on which it was made. The Company
assumes no obligation to revise or update any forward-looking statements, whether as a
result of new information, future events, or otherwise
DETAILS OF SIGNIFICANT CHANGES (i.e. CHANGE OF 25% OR MORE AS COMPARED
TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR) IN KEY FINANCIAL RATIOS.
The change in the key financial ratios as compared to previous year is
stated below:
| Ratios |
Financial year ended 31-03-2023 |
Financial Year ended 31-03-2022 |
Changes (%) |
Reason for change |
| Debtors Turnover Ratio |
13.34 |
9.32 |
43.02 |
Increased due to good recovery from debtors. |
| Inventory Turnover Ratio |
4.40 |
1.93 |
128.49 |
Increased due to good market conditions, as Company has done
higher production with minimum inventory holdings. |
| Interest Coverage Ratio |
35.75 |
52.55 |
(31.96) |
Decreased due to lower Earning before Interest and Tax and
lower Finance Cost as compared to Previous Year. |
| Current Ratio |
0.34 |
0.33 |
2.35 |
Increased due to repayment of liabilities. |
| Debt Equity Ratio |
(0.58) |
(0.63) |
(7.90) |
Decrease due to repayment of debts. |
| Operating Profit Margin (%) |
17.62 |
38.34 |
(54.04) |
Decrease due to increase in cost of materials and overheads. |
| Net Profit Margin (%) |
4.37 |
353.74 |
(98.77) |
Decrease due to no other income and exception income on
account of remission of banks liabilities in FY 22-23. |
DETAILS OF ANY CHANGE IN RETURN ON NET WORTH AS COMPARED TO THE
IMMEDIATELY PREVIOUS FINANCIAL YEAR
The Return on Net Worth for Financial Year 2022-23 was -8.27% as
against -301.25% for Previous Year. The Decrease in the same is on account of decreased on
Net Profit of current year. Previous years profit was inclusive of other income and
exceptional income on account of remission of banks liabilities.
|
Forand on Behalf of the Board of Directors |
|
Prakash Steelage Limited |
|
Sd/- |
|
Prakash C. Kanugo |
| Date: 25th August, 2023 |
Chairman & Managing Director |
| Place: Mumbai |
DIN:00286366 |
+91-9892691696
