COUNTRYS GENERAL ECONOMIC SCENARIO
The world economy grew by 2.9% in calendar year 2019, at its slowest
pace since the global financial crises in 2008-09 and much below 3.6% expansion in
calendar year 2018.
Just as Calendar Year 2020 started on a good note, the world was hit
hard by the COVID-19 pandemic. The virus spread rapidly across the world, compelling
governments to impose national lockdowns to break the chain of transmission, which brought
economic activities to a near halt which severely impacted the prospective economic growth
in last quarter of financial year 2019-20
Indias economic growth moderated in FY 2019-20 to 4.2% from 6.1%
a year earlier due to weak domestic consumption, sluggish manufacturing, subdued
investments, and extended monsoon, among others. The Union Budget 2020-21 also announced
certain key policy measures for different sectors and stakeholder groups to create
large-scale impact over the long term growth. However, while formulating these policy
actions, the government was mindful not to indulge in fiscal indiscipline.
Notwithstanding the ensuing risks to the economy, India has the
capacity and scale to expand its share in the global supply chain, which has been
disrupted by COVID-19. Industry leaders see significant opportunities for Indian
manufacturers to corner a fair share in the world trade, as global corporations look for
alternative sourcing destinations to lower their dependence on China.
INDUSTRY STRUCTURE & DEVELOPMENT
The pipeline Industry basically caters to three different segments
namely water, oil and gas. Various steps have been initiated by Government of India to
boost the production of the pipeline industry for all these three segments.
From an organisational standpoint, the Company views FY 201920 as an
eventful and somewhat challenging year. On one hand, the COVID-19 situation added on to
the prevailing roadblocks in the form of liquidity crunch, extended monsoons and overall
conservatism. On the other, the re-emergence of the countrys incumbent leadership,
post the general elections, ensures policy continuity and concerted action for the
nations development. The rollout of multiple interventions through the year by the
government to infuse liquidity and support the economy has been commendable.
As an organisation your Company is looking forward to the
implementation of the National Infrastructure Pipeline, which will go a long way in
spurring demand. In the Companys view, frontloading of infrastructure projects will
give a much-needed boost to the economy and will ensure adequate employment.
OPPORTUNITIES & THREATS
Opportunities:
While the world is foreseeing significant de-growth in most economies,
India is expected to be relatively resilient, even as the pandemic makes its impact on the
countrys economy. Timely
interventions by the central and state governments, together with the
efforts of medical and other professionals, have helped slow down the spread of the
pandemic, when viewed in relation with Indias population size. On the economic
front, the 20 lakh crore package announced by the central government will go a long way
in shoring up and sustaining domestic demand. India continues to reap the benefits of
favourable demographics and vibrant demand driven by aspirations of a growing population.
The steep fall in oil prices is a big advantage to the Indian Government to source its
energy requirements at relatively lower prices and simultaneously augment tax revenues
with additional taxes on petro fuels. However to sustain growth momentum, India must
modernise and expand its infrastructure in a meaningful way, as industrialisation,
urbanisation and access to technology remain the key pillars of economic growth.
Threats:
While on the face of it the Union Budget 2020-21 announced by the
Central Government, adequate optimistic thinking in the minds of various pipeline industry
players on the basis of past experience in all probability the practical situation works
out to be much different as unwanted delays are generally experienced in implementation of
the Government projects due to slow decision making at bureaucratic level coupled with the
Covid pandemic lockdown. A glaring example is the non-implementation of National Grid
Policy announced by Government of India few years back which has flattered all optimistic
plans made by pipe manufactures in last few years.
OUTLOOK
The peculiarity of Indian economy when compared with the economies of
rest of the world clearly paints a bright picture for the manufacturing sector
particularly for the one related to infrastructure development. Since pipeline industry is
also an integral part of infrastructure development of the country, the organisations in
pipeline industry were bound to get benefitted in the current financial year inspite of
the threats stated above. However, the Covid induced near half in economic activities has
affected the overall growth as expected. Moreover, stable Governments both at centre and
in different states are expected to play a useful role in providing the required
continuity for implementation of large projects which generally spread to few years after
their commencement. Hence keeping in view the various external as well as internal
factors, the overall outlook for the pipeline industry appears to be optimistic and in the
absence of any major adverse scenario arising, the industry is likely to grow at an
appreciable rate.
RISK AND CONCERNS
In the case of an Industry pertaining to a typical consumer product,
the growth can be very easily predicted as a result of which the systematic planning for
reaping the benefits of such growth can be put in practice. However, in an industry like
pipeline which is solely dependent on infrastructure development of the Country the risks
are too high because the said infrastructure development is always dependent on whims and
fancies of Government in power.
Notwithstanding what is stated above generally in pipeline industry,
your Company is presently suffering from additional disadvantage vis-a-vis the industry in
general. This is so because as a consequential effect of few external and some internal
factors the Company suffered a severe financial crunch in 2013 forcing your management to
go through CDR process in accordance with RBI guidelines on the subject. As some of the
stringent conditions imposed by CDR cell while approving a restructuring scheme of the
Company in September, 2013 could not be completely complied with by the promoters group of
the Company, the Company had to exist from the CDR mechanism. Since as a result of the
severe financial crunch spread across few years and near stoppage of Companys
production as a direct consequence thereof the networth of the Company got eroded due to
which a reference had to be made to Board for Industrial and Financial Reconstruction
(‘BIFR). However, since Sick Industrial Companies Act, 1985 (‘SICA)
was subsequently repealed, the Company has now approached National Company Law Tribunal
(‘NCLT) with a view to have a resolution plan in place. The Company is
presently in vulnerable position since in the absence a Resolution Plan coming in way
during the insolvency and Resolution process of the company, the NCLT has finally ordered
the Liquidation of the company. In view of this development the Company is unable to
venture into bidding process of large sized business projects arising in the market.
INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:
The Company has designed and implemented a process driven framework for
internal financial controls in accordance with the Companies Act, 2013. These controls
have been established at the entity and process levels to comply with internal control
requirements. The process adopted by your Company is best in class and commensurate with
its size and scale of operations. These are strengthened as per the business need from
time to time. The system of internal controls ensures timely and accurate financial
reporting in accordance with the applicable accounting standards and compliance with
applicable laws, regulations, listing agreements and management policies. The Company has
also adopted risk based framework which is intended at proper mitigation, with increased
transparency and accountability.
FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
As discussed earlier due to acute financial crunch faced by the Company
in early 2013, the Companys business especially in this tight liquidity environment,
suffered major setback and the Company had to request its lenders to restructure the
financial package as per the prescribed RBI Guidelines in this regard. However, as some of
the stringent conditions of the CDR Scheme approved for the Company in September, 2013
could not be complied with, the Company was exited from CDR process on 28th December,
2016. In order to ensure that at least some of the plants of the company are in running
condition thereby avoiding the risks of them becoming unserviceable the company had
entered into an Operation Maintenance and Management Agreement with Jindal Tabular
Limited, to enable them to operate the said plant and to meet the cost of companys
manpower employed in the said plant. Unfortunately due to sluggish economic conditions and
few other reasons the said arrangement did not continue. The company however continued
to be engaged in keeping is plants busy by executing smaller projects
procured by the company from its trusted customers for conversion of steel provided by
them into pipes. Such limited operations were enabling the company to meet its fixed
operating costs, although the company is not in a position to pay back to its lenders.
Despite companys efforts to run the company as a going concern, the liquidity crunch
forced the company to apply NCLT, Ahmedabad bench under Section 10 of Insolvency and
Bankruptcy Code, 2016 for initiating CIRP Consequently the CIRP was initiated w.e.f. 15th
February, 2019 but as the Resolution Professional did not receive any Resolution plan
within the prescribed extended time the COC recommended liquidation of Company which was
thereafter approved by NCLT on 10th September, 2020.
In view of the above stated reduced operations companys
standalone income was recorded at Rs.7765 Crores
HUMAN RESOURCE DEVELOPMENT
The importance of Human Resource has increased with each passing year.
We continuously emphasis on strengthening employee - employer relationship by formulating
effective strategies and improvising functional processes vital to achieve the
organizational goals. We believe in Human Resource Development wherein pools of
competencies are identified that are required for delivering an output along with
development of required skill through Training and Development.
As a responsible employer, the women safety parameters are also kept at
a high statute. A committee for the Prevention of Sexual Harassment of Women at workplace
has been constituted wherein all the women falling within the purview of the organization
have been provided a forum for redressal of their grievances, if any on this account. All
the females enjoy a safe and secure working atmosphere with all the requisite facilities.
Our organization has a talent pool of different capabilities and can
boast to be a cosmopolitan workforce since we are believer of equal opportunities to all.
We practice processes like job rotation, multi-skilling, lateral hiring, training programs
etc. to attract, develop and retain talents in the organization.
As a direct result of heavy losses faced by the company in the last 3
to 4 years after it is suffered severe financial crunch, the company had to unwillingly
reduce its manpower burden so as to limit the pay-roll expenses. It is, however, a matter
of pride for the company that no mass scale retrenchment of the workers was resorted to
and those who ceased to be in the employment of the company before the initiation of CIRP
by NCLT were paid all their dues so as to avoid any undue hardship to them.
CAUTIONARY STATEMENT
Some of the statements in this Management and Discussion and Analysis,
describing the Companys objectives, projections, estimates, expectations and
predictions may be "forwardlooking statements" within the meaning of applicable
laws and regulations. However, actual results could differ materially from those expressed
or implied. Since the Company has now been order to be liquidated initially as an ongoing
concern failing which under the provision of Insolvency and Bankruptcy Code, 2016.
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