Ramkrishna Forg. Management Discussions


MANAGEMENT DISCUSSION AND ANALYSIS REPORT

AN ECONOMIC OVERVIEW

After a phenomenal uptick in economic progress in 2021 (owing to the pent-up demand after lockdowns), global economic growth returned to normal levels. World GDP stood at 3.4% in 2022 against 6.1% in 2021.

Global economic growth in 2022 was outstanding, considering that it transpired in the face of strong headwinds such as natural calamities, disasters owing to climate change, an energy crisis (mainly in Europe), stubborn inflation and supply chain disruption owing to the Russia-Ukraine war. Almost all Central Banks upped interest rates to curb inflation.

On the positive, consumer demand remained robust, labour markets rebounded, business investment increased and there was a better-than-expected adaptation to the energy prices.

Global trade is estimated to touch US$32 trillion in 2022, and trade in goods and services saw good growth, despite the global headwinds. Trade in goods grew 10% over the previous year to US$25 trillion, while trade in services grew 15% to US$7 trillion.

2023 may remain challenging due to the persistent challenges plaguing the previous year. The IMF estimated global growth to be at 2.9% in 2023. There could be a scale-down in global inflation from 8.8% in 2022 to 6.6% in 2023.

WORLD ECONOMIC OUTLOOK

India was the shining star in the globe registering a 7.2% GDP growth in FY23 according to the second estimate by the Ministry of Statistics & Programme Implementation (MoSPI).

PMI manufacturing remained in the expansion zone, where IIP showed a healthy output throughout the year. Robust growth in private consumption and an increase in investment of public and private capex helped scale IIP growth in FY23.

Total gross GST collection for 2022-23 stands at 18.10 lakh crore while the average gross monthly collection for the full year remains Rs.1.51 lakh crore. The gross collection for the fiscal was 22% higher than the previous year which reflects resilience of the Indian economy.

Strong and stubborn inflationary headwinds owing to the Russia-Ukraine war thwarted Indias economic progress. It forced the Central Bank to raise interest rates multiple times during the year.

In FY24, Indias GDP could dip marginally to 6% (NSO estimates) in keeping with a slowdown worldwide. Moreover, a probable El Nino warming event and global uncertainty may play their part. But with a good rabi harvest and inflation moderating in FY24, Indias medium to long-term growth outlook appears healthier. According to the World Bank, Indias GDP growth will be around 6.3% in FY24 owing to a subdued recovery in the pace of private capex and expectations of a moderation in urban consumption.

International Monetary Funds Managing Director Kristalina Georgieva said that the Indian economy would alone contribute 15% of the global growth this year (2023) as the country continues to remain a relative "bright spot" in the world economy.

Forging Industry is one of the essential pillars of the manufacturing industry. The Indian forging industry is known as a global metal forging production hub. The EEPC (Engineering Export Promotion Council) considers the forging industry a critical driver for export growth. The industry has an installed capacity of about 40 lakh MT and an array of capabilities - to forge various metals like alloy steel, carbon steel, stainless steel, super alloy, titanium, aluminum and many more.

Over the years, the Indian forging industry has evolved from a labor-intensive industry to a capital-intensive manufacturing sector. Now it is well recognized globally for its technical capabilities. With increasing capacity and rising opportunities, many global OEMs and Tier- 1 players are setting up shops in India to manufacture and procure high-quality products. The primary users for the forged products are sectors like automobile, heavy machinery, power, construction & mining equipment, railways and engineering. The automotive industry is its largest customer by far.

The last few years have not been very good for the domestic forging industry. In FY23, when the fortunes of the automotive sector improved, other factors such as high cost for material inputs for industries where it is not a pass -through and rising interest rates were to some extent hurting the forging industry

In the future, the fortunes of the forging industry hinge on its capability to diversify its presence away from the automotive sector. Its key customer may witness a seminal transformation from ICE vehicles to EVs in keeping with Indias net-zero carbon commitment. EVs require a considerably lesser number of moving parts than ICE vehicles. Hence, adopting electric vehicles on a large scale may increase unutilised forging capacity. However the major impact of the EV is presently seen in the four wheeler segment and the impact of the EV in the Commercial segment is still to be felt.

While the automotive sector provide the support for the forging industry, opportunities from other user sectors could abound owing to the Governments unwavering focus on scaling the manufacturing sectors contribution to the nations economic progress and policies such as the Atmanirbhar Bharat and Make in India and PLI schemes for diverse sectors, that have and will continue to usher in new investments into India in the manufacturing sector.

Diversifying into other sectors, such as engineering, railways, defence, healthcare, and infrastructure, appears logical as these sectors are large consumers of forgings. Moreover, the Government is investing heavily in these sectors.

In the Union Budget 2023-24, the Government has allocated 10 lakh crore for capital expenditure on infrastructure investment (3.3% of GDP), an increase of 33% over the previous years allocation. The Government has also increased the allocation for the Railways to Rs.2.40 lakh crore for 2023-24, one lakh higher than the allocation in the previous year. These realities promise to boost the economy and create new opportunities significantly.

The trucking industry serves the American economy by transporting large quantities of raw materials, works in process, and finished goods over land - typically from manufacturing plants to retail distribution centers.

Based on weight, commercial vehicles are categorised into several classes in the US. For instance, light-duty trucks fall in classes 1 & 2, medium-duty trucks are in classes 3-6, while classes 7 & 8 cover heavy-duty trucks.

In 2022, US truck & bus manufacturing picked up as semiconductors availability improved. Amid robust construction and transportation activities, marked by high freight volumes, demand for trucks witnessed a healthy uptick.

Also, expansion in retail and e-commerce continued to play out. This reality was also one of the important reasons why all major truck manufacturers saw positive growth in sales in 2022.

The North American Class 6-8 Truck market has been cruising steadily amid strong transport & construction activity marked by high freight volumes as well as rates and robust fleet utilisation levels across operators, while the demand for trucks and order backlogs have been surging across the industry OEMs. Continuing business activity improved, supply-chain and high pent-up demand were some of the key reasons behind the surge in demand.

In 2023, experts believe, despite all the existing global headwinds, the industry will continue to make steady progress. State of freight volumes, carrier profitability and potential for further supply-chain disruptions will determine the future truck order. But, with inflation numbers moderating, strong demand for original equipment is expected to sustain.

Meanwhile, the long-term de-carbonisation of the transportation sector will remain the highlight in the near term. At the same time, the sector will work toward sustainability efforts in services through an innovative business model configured on connectivity and autonomy.

(Source: European Automobile Manufacturers Association)

Total New Commercial Vehicle in the EU

In 2022, the overall commercial vehicle registration in the European Union contracted by 14.6% on a y-o-y basis to 1.6 million units. This drop was owing to the ongoing supply chain issue and the economic weakness as a fallout of the Russia-Ukraine war.

New heavy commercial vehicles (HCV): A total of 256,020 heavy trucks were registered in the EU, increasing by 6.5% yearly. In this segment, all the high-volume markets showed improvement except Germany. Spain, Poland, Italy and France registered a healthy upside of 13.6%, 6.6%, 5.1% and 2.3%, respectively.

New medium and heavy commercial vehicles (MHCV):

New registrations improved by 3.5%. This uptick was primarily owing to the substantial gains between August and November. However, markets in Western Europe, Germany and France declined compared to last year.

New medium and heavy buses & coaches (MHBC):

Registrations of new buses and coaches contracted by 5.1%, although March, May and October saw an upside. The regions key markets (Germany, France & Italy) witnessed a fall in registrations, down by 24.6%, 14.2% & 6.2%, respectively.

New light commercial vehicles (LCV):

New registrations dropped 18.1% lower than in 2021 to 1.3 million new LCV units. Except for Cyprus (which moved up 1.2%), all regional markets reported a decline.

Opportunities & challenges:

An uptick in construction and logistics activities could increase the demand for commercial vehicle sales in Europe. Additionally, the rapidly developing e-commerce sector and transition towards electric vehicles promise to brighten the demand landscape for the commercial vehicle sector in the coming years.

It was a dream run for the domestic commercial vehicle (CV) sector. Despite prevailing inflationary headwinds, elevated fuel costs and rising interest rates, the CV sector registered a 34.3% growth in sales volumes in FY23.

LCV (Light Commercial Vehicles) sales volume increased around 26%, while MHCV (Medium & Heavy Commercial Vehicles) sales volume grew around 49% respectively over the previous year on the back of improved infrastructure and industrial activities.

Other factors responsible for the traction are an overall economic improvement, increased public and private capex in infrastructure, better fleet utilisation levels, a flourishing e-commerce sector and a rebound in replacement demand.

Demand for replacement vehicles also increased as very low replacement happened in the past three years due to the ongoing pandemic and economic slowdown. Owing to the ever-increasing fuel prices, CV owners replaced their aging vehicles for better fuel efficiency.

Remove FY23(P) bar from this bar chart below

Production

Domestic Sales

Exports

FY22 FY23 FY22 FY23 FY22 FY23
M&HCV
Passenger Carrier 15,510 43,807 11,804 38,410 6,499 10,543
Goods Carrier 2,56,657 3,35,452 2,28,773 3,20,593 25,682 11,524
Total M&HCV 2,72,167 3,79,259 2,40,577 3,59,003 32,181 22,067
LCV
Passenger Carrier 21,984 45,011 19,957 44,315 1,785 1,799
Goods Carrier 5,11,376 6,11,356 4,56,032 5,59,150 58,331 54,779
Total LCV 5,33,360 6,56,367 4,75,989 6,03,465 60,116 56,578
Total Commercial Vehicles 8,05,527 10,35,626 7,16,566 9,62,468 92,297 78,645

Source: SIAM

Outlook

End-user industries like food & beverage, construction, automotive and healthcare have a high requirement for commercial vehicles to transport raw materials and distribute finished products to the sales channel.

With India transitioning towards an industrialised economy in the coming years, the Indian CV market could experience a healthy uptick over the medium term. Also, with Indians returning to work as before and schools functioning normally, the demand for buses will accelerate. Further, penetration of electric and hydrogen buses in this segment will drive growth in this market.

According to ICRA, CV sales volume will increase 7-10% in FY24 from a much higher base, primarily owing to massive government spending on infrastructure, back-to-school & office, replacement demand and e-commerce expansion. CRISL mentions that domestic Commercial Vehicles sales volumes is expected to grow 9-11%in FY24 driven by medium and heavy commercial vehicles.

Fitch Ratings mentions that the sales of commercial vehicles will reach the previous peak of close to 1 million units a year by FY24 aided by a rapid recovery in Indias economic activity levels and a resurgence in replacement demand after multiple muted years. The ratings agency expects CV sales to grow at a rate of 14-19% over the coming few years.

Budgetary support

The Union Budget 2024 has announced a record allocation for infrastructure development at Rs.18.6 trillion, a total 28% increase over the budgetary allocation for FY23.

Gross budgetary support for the MoRTH (Ministry of Road Transport and Highways) is increased by 25% to Rs.2.59 trillion for FY24. Also, the allocation to NHAI (National Highway Authority of India) has increased by 15% to Rs.1.62 trillion for the next fiscal year.

Additionally, the Government has allocated Rs.75,000 crore for taking up 100 critical transport infrastructure projects on priority for last and first-mile connectivity for ports, coal, steel, fertilizer, and food grain sectors.

These allocations reflect the Governments ambition of improving the nations core infrastructure and promise to open up significant opportunities for the CV sector, particularly the M&HVC segment.

Scrapping policy

The Vehicle Scrapping Policy aims to create a method to phase out unfit and polluting vehicles. This policy proposes de-registration of CVs after 15 years if it fails to get a fitness certificate.

Prospects of the Small Commercial Vehicle Market

The reasons for the popularity of small commercial vehicles are their ability to reach narrow roads and facilitate first and last-mile connectivity. Small CVs primarily cater to secondary logistics, which is the mainstay for modern-day e-commerce and retail operations.

Secondary logistics services include delivery not only to warehouses and big distribution centers (DCs) but also to smaller DCs and direct to customers too.

Before the pandemic, secondary logistics was a docile marketplace. But with the spread of the disease and restrictions on the movement of regular people and the explosion of e-commerce, it started proliferating. The Indian e-commerce logistics market is expected to grow at 8% CAGR from 2022-2027.

Further, rapid growth in the retail sector also helped secondary logistics. Indian retail market is expected to grow 10% CAGR to $1.6 trillion by 2026.

These encouraging numbers are further complemented by the Governments push for first and last-mile connectivity and expansion of public and private capex on it. Additionally, rapidly growing roads, highway infrastructure and penetration of e-commerce pan-India will help to grow the small CV sector in the coming years.

In the small CV segment, however, Government is more inclined towards green vehicles because of low emission levels and noise-free operations. The PLI scheme by the Government for building a vibrant EV ecosystem, focus on energy security, a booming MSME sector and transition to alternate fuel will further drive growth in this sector.

Indian Railways is one of the largest employers globally and operates one of the largest railway networks in the world. It carries 23 million passengers daily in over 13,000+ passenger trains. Maintaining such massive operations requires a vibrant revenue stream. The freight service is the main contributor to the overall revenue. Passenger service remains a close second.

During 2022-23, freight revenue has climbed to Rs.1.62 lakh crore, a growth of nearly 15% from the previous year. Indian Railways passenger revenues have registered an all-time high growth of 61% to reach Rs.63,300 crore.

The Railways has floated a tender to procure 80,000 forged wheels in India under Make in India initiative.

This plan has been drawn to reduce the import dependence of Indian Railway. These wheels have to be of export quality and will be used in semi-high speed (Vande Bharat) and high speed (Bullet) trains. These wheels maybe sourced from government organisations and the private sector.

Outlook: For FY24, the total capital outlay for Indian Railway has gone up to Rs.2.40 lakh crore in the annual budget, which is a record.

As part of the railways annual rolling stock programme for 2023-24, the railways will acquire new rolling stock worth more than Rs.3.14 trillion. Among these orders are 300 Vande Bharat metro trains, 1,000 eight-coach Vande Bharat trains, 35 hydrogen trains and locomotives for freight augmentation in FY24. The railways will spend Rs.65,000 crore on 1,000 coaches of Vande Bharat trains. Further, Railways wants to purchase 10,000 Link Hoffman Busch (LHB) coaches for Rs.27,500 crore.

Link Hofmann Busch: To ensure zero casualties in case of derailment or head-on collisions between two trains on the same tracks, the railway has started working on a mission mode to replace all the existing rakes of old conventional coaches from the passenger trains with LHB (Link Hofmann Busch) coaches. The LHB coaches are now being manufactured with German technology and design to secure maximum safety and comfort for the passengers. As per a conservative figure, the railway will replace more than 50,000 conventional coaches by 2025-30 with LHB coaches.

Ramkrishna Forgings occupies a dominant position in Indias forging sector. It is the largest in Eastern India and one of the largest in India providing forged products to discerning customers across India and across the world.

Based out of Kolkata, the Company has its major operating facility at Jamshepdur, that houses contemporary equipment-manufacturing and quality control-allowing it to seamlessly cater to demanding global OEMs operating in India. Continuous investment in capacity and capability building has allowed the company to grow from strength-to-strength despite adversities and volatility in the sectoral ecosystem.

Its ability to develop customised products has created a huge product basket - widening its opportunity canvass. This has enabled it to forge strong relations with Tier-1 customers in the US and with OEMSs and Tier -1 in the Europe Markets. The Company is also increasing its footprints in the Latin American Markets.

Headquartered in Kolkata, Ramkrishna Forgings is managed by a team of experienced and enthusiastic professionals. Its equity is listed on the BSE and the National Stock Exchange of India Limited.

• Regular investments in business to align with dynamic sectoral realities and customer requirements.

• Best in class integrated facility that houses requisite equipments, resulting in a wide product portfolio to meet customer needs.

• Better understanding on developing products suitable for building customer relations.

• Graduated from manufacturing components to subassemblies.

• Proximity to raw material sources.

• High-quality standards endorsed by global certifications.

• Foray into Non-Automotive industries.

• Increasing need to transport products between.

• Production centers and consuming markets.

• Increase in the cost of the production in the European regions.

• Positioning India as a global manufacturing hub through the governments Make in India mission should fuel demand for more vehicles.

• Growing demand for mass transportation vehicles due to expansion of city perimeters into suburban areas.

• Forgings Sector being fragmented and Unorganized.

• Major dependence on CV Industry.

• Increase in the cost of financing.

• Volatility in raw material prices.

• Business environment of the fleet owners.

Financial Highlights

• Net Sales increased by 31.31 percent to Rs.3,00,099.86 Lakhs in 2022-23 from Rs.2,28,536.55 Lakhs in 2021-22.

• Export Sales increased by 25.72 percent to Rs.1,24,512.96 Lakhs in 2022-23 from Rs.99,038.13 Lakhs in 2021-22.

• EBITDA increased by 27.13 percent to Rs.67,195.82 Lakhs in 2022-23 from Rs.52,857.84 Lakhs in 2021-22.

• PAT increased by 14.09 percent to Rs.23,559.21 Lakhs in 2022-23 from Rs.20,650.18 Lakhs in 2021-22.

Operational Highlights

Production volumes increased to 1,63,382 Tons in 2022-23 to 1,44,439 Tons in 2021-22. The Production of commercial vehicle (CV) sales in India increased by 28.57% to 10,35,626 units last financial year, as against 8,05,527 units in 2021-22.

The M & HCV segment production volumes increased by 39.35 % from 2,72,167 vehicles in 2021-22 to 3,79,259 vehicles on 2022-23. The sales of M&HCV increased by 49.23 % from 2,40,577 vehicles in 2021-22 to 3,59,003 vehicles in 2022-23. The exports of the M&HCV vehicles decreased by 31.43 % from 32181 vehicles in 2021-22 to 22,067 vehicles in 2022-23.

The Company production has increased by 11.60 % during the year on account of increase in the production volumes of the M&HCV segment, thrust of the Company to widen its customer base across various geographies along-with the initiatives to increase the product basket with the existing customers. In addition, the team has been working continuously on cost reduction measures and process improvements which helped in increasing cost efficiencies and improve product quality.

The team comprising metallurgist experts under the R & D continuously endeavour to make continuous yield improvement through design and process modification which helps to improve the raw material yield. In addition, the team also facilitated process changes for improving asset utilisation.

Revenue from operations:

The net revenues for the FY22-23 was Rs.3,00,099.86 Lakhs as compared to Rs.2,28,536.55 Lakhs, showing an increase of 31.31%.

Revenue from exports increased to Rs.1,24,512.96 Lakhs in 2022-23 from Rs.99,038.13 Lakhs in 2021-22 showing an increase of 25.72%.

The revenues in export segment increased as the company has been able to increase its exposure in the European Market by expanding its reach to new customers and adding new product profile with the existing customers. The export demand from North American market has also been robust from the existing products and the Company has also added new products with the existing clients. The company has increased its business in the UAE markets.

The revenue in the domestic segment has increased to Rs.1,75,586.90 Lakhs in 2022-23 from Rs.1,29,498.42 Lakhs in 2021-22 on account of improvement in the production volumes of the M&HCV and the initiatives to increase the product basket with the existing customers.

Operating expenses:

Operating expenses (total expenses less interest and depreciation and stock variation) increased by 32.67% to Rs.2,33,280.77 Lakhs in 2022-23 from Rs.1,75,839.64 Lakhs in 2021-22. Operating expenses as a percentage of net sales stood at 77.73 % in 2022-23 against 76.94 % in 2021-22.

Cost of material consumed:

Material costs increased by 32.07% to Rs.1,60,367.99 Lakhs in 2022-23 from Rs.1,21,422.59 Lakhs in 2021-22. This increase was owing to an increase in production volumes to 163382 tons in 2022-23 to 144,440 tons in 2021-22 coupled with increase in the prices of Raw Materials.

Employee expenses: It is increased by 19.98% to Rs.14,431.17 Lakhs in 2022-23 from Rs.12,028.45 Lakhs in 2021-22.

Finance cost: The Finance cost increased by 23.15%, to Rs.11,495.91 Lakhs in FY22-23 from Rs.9,334.69 Lakhs in FY21-22 due in increase in interest cost. The interest cover stood at 5.85x in 2022-23 against 5.66x in 2021-22.

Profitability and margins: The EBITDA increased by 27.13% to Rs.67,195.82 Lakhs in 2022-23 from Rs.52,857.84 Lakhs in 2021-22. The EBITDA margin on net sales decreased by 74 bps, from 23.13% in 2021-22 to 22.39% in 2022-23. The Net profit after Tax stood at Rs.23,559.21 Lakhs in 2022-23 as compared to Rs.20,650.40 Lakhs in 2021-22. The net margin stood at 7.85% in 2022-23 as against 9.04% in 2021-22.

*The formula for Interest Coverage Ratio has been taken as Earnings before Interest, Depreciation & Tax (EBITDA)/Finance Cost.

Balance Sheet :

Capital employed (Total Assets less Current Liabilities excluding Current Maturities of Long Term Debt):

The Capital employed in the business increased by 9.97%, to Rs.2,42,328.63 Lakhs as on March 31, 2023 from Rs.2,20,368.02 Lakhs as on March 31,2022 .

Shareholders funds: The balance under this head increased by 21.10%, to Rs.1,32,492.43 Lakhs as on March 31, 2023 from Rs.1,09,408.03 Lakhs as on March 31, 2022.

External funds: The Companys Total Net Debt (after adjusting cash and cash equivalents, bank balances, current investment and Tata Motors recourse bill discounting) decreased by 18.16% to Rs.1,09,366.85 Lakhs as on March 31,2023 from Rs.1,33,631.84 Lakhs as on March 31,2022. The Net Debt-Equity ratio stood at 0.83x as on March 31,2023 against 1.22x as on March 31, 2022. The Net Debt/ EBITDA stood at 1.63x as on March 31, 2023 as against 2.53x as on March 31, 2022.

Gross block of Fixed Assets excluding capital work in progress including Right to Use Assets: The Gross Block of Fixed Assets increased by 19.46% to Rs.2,55,866.51 Lakhs as on March 31,2023 from Rs.2,14,181.83 Lakhs as on March 31, 2022.

* Face Value of Shares changed from Rs.10 to Rs.2

Key Financial Indicators (Rs. in Lakhs except ratios)

Particulars As at March 31, 2022 As at March 31, 2023 Percentage (%) Change
Net Revenue from Operations Rs./Lakhs 2,28,536.55 3,00,099.86 31.31
EBITDA Rs./Lakhs 52,857.84 67,195.82 27.13
EBITDA Margin on net sales Percentage 23.13 22.39 (0.74)
Net Profit after Tax Rs./Lakhs 20,650.18 23,559.21 14.08
Net Profit Margin on net sales Percentage 9.04 7.85 (1.19)
Net Worth Rs./Lakhs 1,09,408.03 1,32,492.43 21.10
Total Net Debt Rs./Lakhs 1,33,631.84 1,09,366.85 (18.16)
Total Net Debt/Equity Times 1.22 0.83 (31.97)
Return on Avg. Net worth Times 20.82 19.48 (6.44)
Current Ratio Times 1.29 1.27 (1.55)
Interest Coverage Ratio Times 5.66 5.85 3.23
Inventory Turnover Ratio Times 2.49 2.45 (1.61)
Receivable Turnover Ratio Times 3.14 3.68 17.20
Book Value per Share Rs. 68.43 82.86 21.10

Note:

The Inventory days and the Receivable days based on net sales.

The formula for Interest Coverage Ratio has been taken as Earnings before Interest, Depreciation & Tax (EBITDA)/Interest.

Risk management is critical to overall profitability, competitive market positioning and long-term financial viability, to meet the commitments to our clients and other stakeholders. We have put in place a strong risk-management structure that enables meticulous examination of business activities for identification, evaluation and mitigation of potential internal or external risks.

Our risk management framework encompasses strategy and operations and seeks to proactively identify, address and mitigate existing and emerging risks. The risk management framework goes far beyond traditional boundaries and seeks to involve all our key managers.

To ensure transparency and critical assessment, we have a Risk Management Committee that coordinates the risk management system. The risk management framework is reviewed by the Board.

Sectoral risk:

Demand slowdown and increasing competitive intensity could impact business fortunes.

Mitigation measures

Global geographic footprint to minimise concentration risk.

Enhancing product profile with existing customers.

Growing industrial activity in India to amplify growth opportunities in the domestic market.

Cost risk:

Persistent and elevated inflation could impact profitability.

Mitigation measures

Continuing efforts to reduce costs through small initiatives that make an appreciable difference.

Negotiating with customers for passing on any inordinate hike in costs.

Improved Capacity utilisation provides economies of scale which help to absorb fixed costs better.

Improving the product mix.

Quality risk :

Consistent good product quality is essential for sustaining healthy business relations.

Minimising risk

Ensures strict adherence to SOPs which are continually upgraded to meet customer requirements.

Frequent training on quality standards and manufacturing processes for minimising in-house quality rejects.

Focus on automating processes to minimise errors due to human intervention.

Intellectual Capital represents its most valuable asset at Ramkrishna Forgings Limited, from the executive level to the shop floor. In line with this, the Company has positioned employee engagement as a key priority. In order to motivate its employees the Company has implemented various initiatives which also creates a worker friendly organisation.

Training:

The Company in order to align the capability matrix with the dynamic business realities has many training programmes to improve the functional and behavioural soft skills of its employees. Training programmes are conducted round the year with the help or both internal as well as external trainers. It also facilitated in gaining insights into prevailing trends and emerging opportunities. The Company has undertaken many training programs relating to health & safety, ESG, HR - Diversity, equity & inclusion, POSH, Stress Management and Team Building.

The Company provides special focus on safety of its employees and have undertaken various trainings including as mentioned below:

• Safety training and Job specific training.

• Work Permit System.

• Safety Audit.

• Safety Committing Meeting.

• Hazard Identification and Risk Assessment & Aspect Impact assessment.

• Mock Drill.

• Near Miss Identification and compliance.

• 5 S Audit and its compliance maintain inside premises.

Training effectiveness:

The Company adopts a need based capability building training requirements whose effectiveness is measured by adopting the Kirk Patrick Model for measuring training effectiveness. Pre and post training tests are conducted as a tool for gauging effectiveness and effective communication of the same is given to the employees. The performance improvement of the employee is monitored regularly to gauge the training effectiveness. This has helped in strengthening the learning culture within the organisation.

Employee engagement:

Significant energy has been invested in creating a fun at work environment and creating an inclusive culture for our team. The engagement initiatives include its suggestion scheme, cross functional 5S zonal competition and birthday celebrations. The Company has introduced Umang initiative, a mass communication platform between the management and team members, which made considerable progress as extended discussions facilitated in growing operational and strategic awareness and cross pollination of ideas helped in improving business operations. The high engagement level within the Company helps stronger people understanding and fosters bonds beyond professional needs which interestingly works as a catalyst in growing the business. The Company also arranges inter plant tournaments to enhance the team spirit & cohesiveness among the employees.

Performance and rewards:

The Company continues to make regular appraisals wherein performers are periodically recognised. It also undertakes recognition programs like the Employee of the Month, Best Suggestion & Kaizen, and Maximum Attendance award. Besides, performance-linked incentive programs are introduced to nurture employee motivation.

Health protection: In order to protect the health of employees and to ensure healthy working environment, your Company has taken Group Health (Floater) Insurance policy and Group Personal Accident Insurance policy. To build its leadership pipeline, the Company undertakes a new talent management program for senior and middle management. This program aims to build leadership competencies of the selected members, enabling them to undertake a larger role in taking the organisation to the next level.

The Company has an ESOP scheme for the senior management - under which options has been vested to the senior management team - strengthening the bond between the Company and its decision makers.

The Company has in place adequate systems of internal controls and documented procedures covering all financial and operating functions. These have been designed to provide reasonable assurance with regard to maintaining proper accounting control, monitoring the economy and efficiency of the Company, protecting assets from unauthorised use or losses and ensuring the reliability of financial and operational information. The internal controls are designed to ensure that financial and other records are reliable for preparing financial statements, collating other data and for maintaining accountability of assets.

Statements in this Management Discussion and Analysis, describing the Companys objectives, projections, estimates, and expectations may be "forward-looking statements within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied.