Ram Ratna Wires Ltd Management Discussions.

INDUSTRY STRUCTURE AND DEVELOPMENTS

The Companys main business activities are, manufacturing and sales of all types of Winding Wires to industry and trade segment. The Company is a leading Indian manufacturer and supplier of Winding Wires in organized market. The Company is known for its unique product range with its portfolio of all gauges backed by a widespread distribution network. The Company has strong brand equity and a robust business model that has continuously steered its growth over the years. It is one of the most trusted brands providing winding wire solutions to both retail and industrial customers spread across the country. In general, there is no material change in the industry structure.

ECONOMIC REVIEW Global Economy

In 2017, the cyclical upswing since mid-2016 continued to strengthen, and the global economy witnessed pickup in growth. According to the International Monetary Fund (IMF), the year reported the broadest synchronized global growth upsurge since 2010. The US economy remained in robust shape, with growth in GDP, industrial production, and investments holding up well. The US growth forecast has been raised from 2.3% to 2.7% in 2018 and from 1.9% to 2.5% in 2019. In 2017, the eurozone turned in its fastest pace of growth over the last decade. Emerging markets contributed to the uptick last year, and many are on track to turn in an even better growth performance in 2018. Chinas growth remained robust and well-balanced across sectors and across categories of domestic demand.

Indian Economy

Indias economy temporarily decoupled in H1FY18, on the back of demonetisation, teething difficulties in the new GST regime, the twin balance sheet challenge, and rural distress. In H2FY18, the economy witnessed robust signs of revival. Economic growth improved as the shocks began to fade, corrective actions were taken, and the synchronous global economic recovery boosted exports. Consequently, the GDP growth for FY18 is estimated at 6.7 percent YoY, down from 7.1 percent YoY in FY17 (Source: Government of India Economic Survey). The USD-INR appreciated to an average of 64.5 in FY18 from 67 in FY17, recovering from the disruptions of demonetisation, and owing to steady foreign investment inflows.

The investment sentiment stayed largely positive in FY18 as Moodys revised Indias sovereign rating to Baa2, higher from Baa3, changing the outlook to stable. In addition, India jumped up 30 notches into the top 100 in the World Banks ‘Ease of Doing Business index.

It is estimated that FY19 will begin on a solid foundation with three broad based themes:

1. Revival of rural economy

2. Robust infrastructure spending

3. Sustained global recovery

FY19 GDP is expected to achieve robust growth at 7.4 percent YoY (Source: IMF, World Economic Outlook, April 2018). However, there are three macro risks to the outlook:

1. Rise in global crude oil prices leading to higher inflation, wider current account deficit and weaker rupee

2. Excessive global liquidity tightening, which could affect flows into emerging markets

3. T rade protectionist measures, which might affect exports adversely

India may witness sentiment-driven movement in economic parameters, in the run up to the 2019 General Elections, causing temporary volatility in markets. Overall, the economic activity will continue to get support from strong private consumption and services. Private investment is expected to revive as the corporate sector adjusts to the GST. The reform cycle is likely to shift from rollout to execution. Recapitalisation of banks, infrastructure development and rural sector support will be on the priority list for the Government.

Outlook

The overall economic situation of the country is healthy with improving growth forecasts and favourable macro economic indicators. Going forward, this should reflect well in growth numbers for major sectors. While the inflation has been within bounds, recent strengthening of US Dollar can exert some pressure on our commodity input costs and interest rates.

The outlook for our industry remains robust. There has been a renewed focus on infrastructure spending, reflecting in corresponding overall industry growth. However, real estate sector continues to lag in growth, remaining as a peg for growth in future.

Development, Modernization & Expansion

Modernization and expansion into more value added products and Technological development has been the tradition of your Company. Your Company continues to import sophisticated processing machines, especially for production of more valued added items. The production of enamelled copper wire, copper strip and enameled copper strip, submersible winding wires witnessed higher growth. Other value added items like fiberglass insulated wires & strips and paper covered wires & strips have also shown substantial increase in production, compared to that of previous years.

OPERATIONS

The Company is manufacturing winding wires, mainly enamelled copper wires. Based on market demand Companys products have been diversified into enamelled copper strips, enamelled aluminum wires, submersible winding wires, Dual Coated MH Classic Submersible Winding Wires, litz wires, bunched wires, miniature circuit breakers, copper rods, paper covered round wires and strips, fiber glass covered strips and enamelled fiberglass covered and varnished strips.

Dual Coated MH Classic Submersible Winding Wires

The Company has started manufacturing a new type of submersible winding wires. This new wire is extruded PP covered with two layers of BOPP films. Overall insulation dimension remains same on finished wire resulting into increase in the insulation leakage current when high voltage is applied. Advantages of this type of wires is enhanced softness due to exclusion of Polyester films and superior insulation properties than conventional wires.

LITZ Wire (Bunched Enameled Wire)

The Company has started manufacturing Litz Wire. Litz wire is a type of cable used in electronics to carry alternating current. The wire is designed to reduce the skin effect and proximity effect losses in conductors used at frequencies up to about 1 MHz. It consists of many thin wire strands, individually insulated and twisted/bunched, groped or braided/ woven together, as per the specific design and application. The application of Litz wire is in High-frequency inductors and transformers, Motors, Relays, Ultrasonic Equipments and Invertors etc.

Bunched /Braided Wires

The Company has started manufacturing bunched/ braided wires. Braiding and bunching of copper conductors is used as an excellent solution for flexible electrical connections. The flexibility is essential in the moving parts, where there is no chance of making rigid/solid connections. Since these are fine sized copper wire strands bunched and braided, it can easily withstand tweaking, bends and vibrations. The application of such wire is in MCB, MCCB, switchgears etc.

Miniature Circuit Breakers (MCBS)

The Company has Introduced new products MCBs during the year. MCBs are electromechanical devices which protect an electrical circuit from an over current. MCBs is a better alternative to a fuse since it does not require replacement once an overload is detected. Unlike fuse, MCBs can be easily reset and thus offers improved operational safety and greater convenience without incurring additional cost.

Copper Rods

Copper rod is the feed stock for our Winding Wires. The Company has started manufacturing its own copper rods from the scrap generated by all plants and copper cathodes purchased from other local suppliers.

Your Company is credited with maximum Number of International certifications in the industry, such as ISO 9001: 2015 Quality Management System ; ISO 14001:2015 Environment Management System; ISO 50001: 2011 Energy Management System; OHSAS 18001: 2007 Occupational Health and Safety speaks of its quality, reliability and competitiveness which will definitely help increase in demand for your Companys products.

FINANCIAL REVIEW

(Rs In lakhs)

Description FY 2017-18 FY 2016-17
Total Revenue 1,05,571.25 89,183.90
Total Expenditure 99,004.30 83,918.34
Profit before Interest, Depreciation & Taxation (EBITDA) 6,566.95 5,265.56
Finance Costs 1,401.09 1,092.59
Depreciation 990.25 833.57
Profit before Tax 4,175.61 3,339.40
Net Profit after tax 2,651.07 2,188.70
Earnings Per Share (in Rs) 12.05 9.95
Receivables 19,588.45 14,759.63
Inventory 3,168.60 3,981.86
Fixed Assets 11,972.89 7,219.21

RISK MANAGEMENT

The Companys financial performance is significantly impacted by two main forces :

First Fluctuations in prices of Aluminium and Copper, exchange rates and interest rates. The Company takes a very structured approach to the identification and quantification of each such risk and has adopted a comprehensive risk management practice to mitigate such risks. Over past year, we witnessed continued rise in copper prices, putting sharp pressure on our costs. In line with our established framework, we managed this with a mix of strong focus on efficiency improvement, pricing decisions and portfolio enhancement to derive better value in market. This will be the strategy going forward that will help us conserve our margin and revenues in adverse cost scenario. As regards the risk of sharp raw material price movements, though the Company endeavors to pass on the price effect to the customers, there has always been a time lag between the price movement and the passing thereof. The Company negotiates price variation contracts with bulk buyers. The Company has been fair in dealing with its customers and accordingly enjoys customer confidence in pricing decisions.

Secondly Competition from a large unorganized sector which produces products of inferior quality but at cheap prices. The Company has been handling the risk of the competitive forces through its organized business approach, by the strength of its reach, superior quality products, safe products and maintaining high standards of service levels to its customers. The Company enjoys the advantages of economies of scale and backward integration.

ADEQUACY OF INTERNAL CONTROL

The Company has an all-inclusive internal control system, which safeguards the Companys assets and ensures that transactions are properly authorised. The internal control system assures integrated, objective and reliable financial information. The Internal Auditors, M/s DMKH & Co., Chartered Accountants, conducts audits at its various locations and covers all the major functions, with a focus on various operational areas and internal control systems. 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.

ENVIRONMENT, SAFETY AND HEALTH

As a responsible corporate citizen, Company is dedicated to human health & safety, conservation of natural resources & the environment. The Companys plants follow the environmental, health and safety management standard that integrates environment and safety responsibilities into everyday business. The focus of these efforts is to make the safest work place and to go for "zero harm" to its employees, community & environment. Hence, safety is considered as core value all across the Company and initiatives to help achieve this ambition and to be the benchmark within the industry are underway. In order to build a sustainable safe work place environment, a common health and safety management system across the company is being implemented. This includes implementation of world class safety standards, organisational safety competency and capability improvement, safety leadership development, a cross auditing activity to enhance sharing experiences and sharing best practices across the Company.

HUMAN RESOURCES DEVELOPMENT Training

The Company sees its relationship with its employees as critical to the future and believes that every employee needs to possess apart from competence, capacity and capabilities, sustainable values, current and contemporary which would make them useful, relevant and competitive in managing the change constructively for overall growth of the organisation. To this end, the Companys approach and efforts are directed towards creating a congenial work atmosphere for individual growth, creativity and greater dedicated participation in organisational development. In-house and external training and instructions are also provided to employees at all levels, which help in attaining professional and productive culture by a blend of technology and highly skilled manpower.

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 665 number of permanent employees on its Roll as on 31st March, 2018.

CAUTIONARY STATEMENT

Statements in this report describing the Companys objectives, expectations, predictions and assumptions may be ‘forward looking within the meaning of applicable Securities Laws and Regulations. Actual results may differ materially from those expressed herein. Important factors that could influence the Companys operations include global and domestic economic conditions affecting demand, supply, price conditions, natural calamities, change in Governments regulations, tax regimes, other statutes and factors such as litigation and industrial relations.

For and on behalf of the Board
Rameshwarlal Kabra
Place: Mumbai Chairman
Date: 14th August, 2018 DIN: 00150875