Ram Ratna Wires Ltd Management Discussions.

1. Industry Scenario

(A) Industry Structure

As you are well aware, your company, M/s. Ram Ratna Wires Ltd (herein after referred as "The Company"/"RRWL") manufacturers winding wires and strips covering its full product range and almost all types in both copper and aluminum. In other words, the company provides total winding solutions to industry, especially to OEM (Original equipment manufacturers) for both rotating and static electrical equipments.

B) Development, Modernization & Expansion

In line with the tradition and philosophy of the company, innovation, development, modernization and expansion is a continuous process at the Company. The main product of your company are Enameled copper winding wires which constitutes around seventy five percent of the total production, in tonnage.

With continuous technology advancement and R&D, The company has been diversifying its insulated products viz: Enameled aluminum winding wires, Paper covered wires, Submersible winding wires in different combinations of insulation, Litz wires, Bunched or braided wires, Enameled copper strips, Enameled aluminum strips, Paper covered copper strips, Fiber glass covered copper and aluminum strips, Enameled and fiber glass covered copper strips, etc. which together accounts almost 25% of companys total production. Amongst these, few of the products are more like good value added products which will give boost to the bottom line of the company in the times to come.

Production of submersible winding wires and insulated strips has been increasing steeply during the FY 2018-2019. Likewise, demand for fine and super fine enameled wires has a quantum jump during last few years.

With the commissioning of ultra modern factory of RRWL unit III, at Sayli road, Karad Village, Silvassa, during the FY 2018 -2019, ample facilities have been given for the growth of insulated products like, Submersible winding wires, Insulated copper & aluminum strips and fine & super fine wires. Your company manufactures ultrafine wires of size 18 micron, much thinner than the size of human hair.

The company has also developed products like corona resistant wires (Triple coated wires) especially for inverter driven motors (IDM). Production for this special product is also on the rise.

Your company continues to import sophisticated Machinery and plant for production of Winding wires, strips and related products in both Copper and Aluminum, for the purpose of modernization and expansion

C) Outlook

C.1 Demand for winding wires & strips

Winding wires & strips are input to both electrical industry and a variety of electronic products. The year 2018 witnessed impressive growth of this sector and the trend will continue with greater momentum in the coming years, especially because of the continuity of the various programs undertaken by the same Government for the second term.

Demand for winding wire and strips is linked to the growth of power sector. Government of India has added around 1,07,000 MW of generation capacity since April, 2014 to October, 2018. India has set ambitious future plans for power generation. By 2022, renewal generation capacity itself is expected to reach around 1,75,000 MW. (Source of data- IEEMA Journal) Governments focus on "Power to All", coupled with purchasing power of growing middle class population, will increase the demand for domestic and house hold equipments like fans, mixer grinder, air conditioners & refrigerators, entertaining equipments, etc which in turn will boost the demand for winding wires.

Massive infrastructural spending, housing for all, growing number of middle class families, "Make in India" initiatives etc. attribute directly or indirectly for the demand of your companys products.

Electric vehicles are replacing the petroleum fuel run automobiles, especially in India, as most of Indian cities are highly polluted. Though the momentum is slow presently, the Company is sure that the present government policies will bring a rapid and strong growth for Electric Vehicles. This conversion is also a compulsion to nations all over the world as climate change due to global warming caused by the release of green house gases like carbon dioxide to atmosphere, threaten the very existence of life on this planet, mother earth.

C.2 RR Shramik Wire, a trusted brand

Your company is credited with a number of International certifications such as, ISO 9001:2015, ISO 14001:2015, BS OHSAS 18001:2007 which speaks of its quality and reliability as a trusted brand.

Many large private sector Indian & multinational companies like, M/s. Schneider, M/s. Siemens, M/s. Crompton etc and public sector undertakings like, Railways, BHEL, etc. include among esteemed customers of your company.

All these, domestic and international factors contribute to the huge demand for winding wires and strips including other products which we have recently included in our product basket; And therefore, the outlook for this industry is very bright.

D) Opportunities, threats and risks and concerns

As IEEMA journal October, 2018 edition reported, "last year Indian Electrical Industry saw a record growth of 12.8% which is the highest in the last 7 years." This trend will likely to continue, because of various growth oriented programs undertaken by both Government and Industry.

Being Capital intensive industry, there is minimal chance of new entrants. Metal being an integral part of product pricing, profitability of your company may have its effect on either side due to fluctuation in metal prices. Knowing this fact, your company has built-in systems that can manage the huge variations to some extent, as the phenomenon is very short term. Since your company has a portion of sales as export, foreign exchange variation will have its effect. However, to ensure minimum impact of exchange fluctuation, your company ensures to hedge the export at all the times.

Apart from above, your company does understand that the growth of company will takes its shape basis the overall economic and industrial growth of the country.

E) Performance Review

During the financial year 2018-19, revenue from operations including other income on standalone basis is र 1,25,355 Lakhs as against र 1,05,571 Lakhs in the previous year therefore growth of 18.74% over previous year. Profit After tax for the current year is र 1,596 Lakhs as against र 2,651 Lakhs in the previous year.

Net worth of the Company has increased from र 16,598 Lakhs to र 18,253 Lakhs in the year 2018-19 on account of increase in Reserves and surplus keeping the Equity Share Capital unchanged as the Company has not raised any Equity capital during the year.

Key Financial Ratios

Ratios Standalone
FY 2018-19 FY 2017-18
Debtors Turnover Ratio 6.24 6.12
Inventory Turnover Ratio 19.06 25.32
Interest Coverage Ratio 2.00 3.98
Current Ratio 1.16 1.12
Debt Equity Ratio 0.28 0.28
Operating Profit Margin% 3.91% 5.30%
Net Profit Margin% 1.28% 2.58%
Return on Net Worth (RONW) 8.75% 15.97%

There has been significant change in certain ratios (i.e. change of 25% or more as compared to immediately previous year) such as Interest coverage Ratio, Net Profit Margin%, Operating Profit Margin% and return on net worth. Increase in interest cost is majorly due to increased term loan and increase in working capital due to incremental business volume, thereby having impact on profitability and RONW. Additional burden was imposed on profitability is due to increased depreciation as a result of major CAPEX done by your company. There has been significant change in Inventory Turnover ratio due to purchase and sales in transit.

F) Internal Control Systems and their Adequacy

The Company has in place adequate and well established internal control systems and mechanisms which facilitates efficiency, reliability, ensures compliance with all laws and regulations and safeguard the Companys assets and interest of its Stakeholders.

The Company regularly checks its internal controls through audits conducted by its Internal auditors M/s DMKH & Co., Chartered Accountants covering areas such as Operational and financial checks. The suggestions, recommendations and implementation of the same are placed before the Management and the Audit Committee of the Board of Directors periodically. The adequacy of the internal control systems is also reviewed by the Audit Committee, on a periodic basis.

G) Human Resources Development

Training

The company views human resource as its biggest asset. Towards that end, it always strives to groom and develop its employees at all levels. Regular training and competence building is done in a structured manner. The congenial work environment promotes a culture based on meritocracy. The infrastructure provides for safe working conditions for all the employees.

Industrial Relations

The Company is committed to maintain good industrial relations through active participation of workers, regular meetings and discussions on all legitimate and legally tenable issues. The Company employed 940 number of permanent employees on its Roll as on 31 March, 2019

H) Disclaimer Clause

Statements in this Report describing the Companys objectives, projections, estimates, expectations may be "forward-looking statements" within the meaning of applicable securities 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 global and domestic economic conditions affecting demand/supply, price conditions, changes in the Government regulations, tax laws and other statutes and incidental factors.

For and on behalf of the Board
Place: Mumbai Mahendrakumar Kabra Hemant Kabra
Date: 30 May, 2019 Managing Director Executive Director & CFO
DIN 00473310 DIN 01812586