GLOBAL ECONOMIC OVERVIEW
2021-22 (FY2022) continued to be dominated by Covid. In India, the
second wave proved far more deadly than the first. After a late start, the roll-out of
vaccines began in earnest. The nation-wide vaccination programme has been a great success.
In fact, the vaccination drive played no mean a role in minimising the effects of the
third wave. The economy, too, was not locked down as in the first wave. Consequently, the
negative impact on GDP was less than anticipated.
Russias invasion of Ukraine and its effects on commodity markets,
supply chains, inflation, and financial conditions have steepened the slowdown in global
growth. One key risk to the outlook is the possibility of high global inflation
accompanied by tepid growth, reminiscent of the stagflation of the 1970s. This could
eventually result in a sharp tightening of monetary policy in advanced economies, which
could lead to financial stress in some emerging market and developing economies. A
forceful and wide-ranging policy response is required to boost growth, bolster
macroeconomic frameworks, reduce financial vulnerabilities, and support vulnerable groups.
Spillovers from Russias invasion of Ukraine are hastening the
deceleration of global economic activity, which is now expected to slow to 2.9 percent in
2022. The war is leading to high commodity prices, adding to supply disruptions,
exacerbating inflation, contributing to tighter financial conditions, magnifying financial
vulnerability, and heightening policy uncertainty. The Russian Federations invasion
of Ukraine has disrupted global energy markets and damaged the global economy.
Global GDP Growth
INDIAN ECONOMY OVERVIEW
The Indian economy has fully recovered to the pre-pandemic real GDP
level of 2019-20, according to the provisional estimates of GDP released on May 31, 2022.
Real GDP growth in FY 2021-22 stands at 8.7%, which is 1.5% higher than the real GDP in FY
2019-20. These figures are associated with stronger growth momentum, indicating increased
economic demand. The investment rate in the fourth quarter increased to its highest level
in the previous nine quarters. Moreover, capacity utilisation in the manufacturing sector
rose in the fourth quarter, as against the third quarter, implying a build-up in demand,
which is consistent with the growth objectives of the Indian economy.
Future capital spending of the government in the Indian economy is
expected to be supported by factors such as tax buoyancy, streamlined tax system, thorough
assessment and rationalisation of the tariff structure and digitisation of tax filing. In
the medium term, an increase in capital spending on infrastructure and asset-building
projects is set to increase growth multipliers. Furthermore, revival in monsoon and Kharif
sowing helped the agriculture sector gain momentum. As of July 11, 2022, the South-West
monsoon has covered the entire country, resulting in 7% higher rainfall than the normal
level.
India has emerged as the fastest-growing major economy in the world,
and is expected to be one of the top three economic powers globally over the next 10-15
years, backed by its robust democracy and strong partnerships.
Indian Economy: Overview, Market Size, Growth, Development,
Statistics...IBEF
Indian GDP Growth
GLOBAL COPPER INDUSTRY OUTLOOK
Global copper mining production is forecast to increase by 7.8 per cent
this year due to a slew of new projects coming online and low base effects due to Covid
pandemic lockdowns resulting in lower output last year, according to Fitch Solutions
Country Risk and Industry Research (FSCRIR). In a commentary on "Global Copper Mining
Outlook", FSCRIR said the new projects that go on stream this year would keep
production strong the next few years, supported by rising copper prices and demand. Copper
prices have gained over 21 per cent this year, though they are off from the record highs
seen in May. On the London Metal Exchange, coppers three-month contract ended at $9,405 a
tonne on Wednesday, with the metals cash price being $9,385. On May 6, copper three-
month contracts surged to a record $10,724.5 a tonne before paring gains on slowing profit
growth in Chinese industrial firms. Costlier raw materials have squeezed profits for these
companies.
FSCRIR said that Australia and Canada would see most new projects being
launched, followed by the US, Peru and Chile. In addition, Chile will see most of the
expansion in the copper projects.
Regarding the rise in production, Perus mine output is forecast
to increase by 20 per cent this year due to the new projects and last years low base
effect. Last year, its production declined 12.5 per cent compared with the 2.5 million
tonnes (mt) output in 2019. The Fitch Solutions research body said that multinational
miners will continue investing in Peru, which has 10 per cent of the known reserves, due
to ample mine reserves, lower costs, and a favourable regulatory environment. "We
believe there is still room for growth through further exploration... Based on Perus
geography, we believe that there is further upside left in Peru for years to come,"
FSCRIR said.
China will continue to play "an increasingly important role"
in the Peru copper sector. Chinese firms will make up 17.2 per cent of the total
investment in that country over the next decade. However, copper mines ran the risk of
"elevated levels of unrest" resulting from the political risk that might have an
indirect impact on mining, it said.
Congo will be another country that will attract significant Chinese
investment, particularly after joining Beijings belt and road initiative in December
last year. China would also look at investing in Zambian mines, the research body said.
FSCRIR said that Chile has attracted a considerable amount of investments in copper mining
in recent years and will begin to pay off in the next few years.
However, the South American nation faces a long-term risk of decline in
average ore grades, which would necessitate mining a higher amount of ores. Though Chile
faced unrest due to protests, it added that stability was expected to return to the nation
in the long-term.
(Source:https://www.thehindubusinessline.com/markets/commodities/global-copper-mining-output-likely-to-increaseby78/article35072526.ece#:~:text=Global%20copper%20mining%20production%20is,and%20
Industry% 20Research%20(FSCRIR).)
INDIAN COPPER INDUSTRY OUTLOOK
Indian Industrial Production was restricted by one of the worlds
strictest COVID-19 lockdowns in Q1 FY 2020-21 and improved gradually thereafter. On a
yearly basis, domestic demand reduced by 24% to 566 KT in FY 2020-21 from 750KT in FY
2019-20.
On the raw material side, copper mines production was almost flat, with
only 01.% growth in copper concentrate production globally in CY 2020 compared to the
previous year. This was on account of multiple issue faced by the mining industry
including COVID-19 disruptions, local community issues in some South American countries,
drop -in copper grade in some large global mines.
Copper finds widespread use in a wide range of application in all major
sectors namely, construction, electric & electronic products, industrial machinery
& equipment, transportation equipment & consumer and general products.
At present, the demand for copper minerals in the country for primary
copper production is met through two sources i.e. copper ore mined from indigenous mines
and imported concentrates. The indigenous mining activity among the primary copper
producers is limited to only Hindustan Copper Limited (HCL). The other primary copper
producers in the private sector import the required mineral in the form of concentrate.
Currently, three major players dominate the Indian Copper Industry.
Hindustan Copper Limited (HCL) in Public Sector, M/s Hindalco Industries and M/s Sterlite
Industries in Private Sector. HCL is the only vertically integrated copper producer in the
country, while M/s Hindalco Industries at Dahej in Gujarat and M/s Sterlite Industries in
Tuticorin in Tamil Nadu (closure order issued to Vedanta Smelter/ refinery plant by Tamil
Nadu government in May2018) have set up port-based smelting and refining plants.
Current year production of copper are as under:
| Company |
Existing capacity |
Cumulative
Production (up to March, 2022) |
Cum. Actual
Production up to March, 2021 |
| Target |
Actual |
| NALCO |
4.60 |
4.60 |
4.60 |
4.18 |
| BALCO |
5.70 |
5.80 |
5.80 |
5.68 |
| HINDALCO* |
13.46 |
12.84 |
12.94 |
12.28 |
| VEDANTA LTD |
17.50 |
16.81 |
16.78 |
13.72 |
| Total |
41.26 |
40.05 |
40.12 |
35.86 |
* From Monthly Summary Reports on Non-Ferrous Minerals & Metals
from Ministry of Mines website
GLOBAL ALUMINIUM INDUSTRY OUTLOOK
It would not be an exaggeration to call copper the new oil.
The advent of EVs and new-age batteries means the need for far more
copper. According to a Copper Development Association report, hybrid electrical vehicles
(which run on batteries and gasoline engines) will require 85 pounds of copper.
In comparison, plug-in-hybrid vehicles will need 132 pounds and battery
electric vehicles, which run only on batteries, 183 pounds of copper compared to 18-49
pounds for a petrol engine car.
The India Energy Storage Alliance (IESA) projects that the Indian EV
market growing at a CAGR of 36 per cent till 2026 and the EV battery market at 30 per cent
CAGR during the same period.
Yet, India will need to import more copper, resulting in higher outgo
of precious foreign exchange. According to the Commerce Ministry, India earned a net
foreign exchange of $1.1 billion on the export of copper in 2017-18. However, after the
shutdown of Sterlite Coppers smelter plant in May 2018, India has been seeing a net
foreign exchange outflow of $1.2 billion on rising imports. Additionally, there will be a
higher demand for copper in the EV ecosystem, especially in the charging stations. While
the charger itself does not have much copper in it, the wires used to connect the charger
to the electrical panel and the charging cables use copper.
The electrical conductivity, easy solderability and mechanical
toughness make copper wire an ideal choice for solar panels and solar technology. On
average, solar energy systems use up to 5.5 tonnes of copper per MW because these wires
can be used for all wiring, cabling and heat exchanger requirements.
Indias ambitious target of generating 450 GW of renewable power
— solar and wind — will require a lot of copper.
Globally wind turbines are fast emerging as one of the most
environment-friendly renewable energy applications. Investments in large-scale wind power
projects are rising as a result. Indias total wind power generation capacity is
expected to reach 170 GW by the end of 2022.
The suitability of copper with its requisite flexibility, strength and
durability for wind turbines to withstand such harsh conditions without any degradation of
functionality is a well-established fact today.
Additionally, smart grids, with built-in electronic hardware and
automated software, are the future - as far as efficient energy storage is concerned. Not
surprisingly, global investments in intelligent grids are growing at an impressive pace,
with modular switchgear being produced on a scale.
The global copper market, valued at $2,30,050 million in 2020, is
expected to touch $3,25,860 million by the end of 2027, growing at a CAGR of 5.1 per cent,
according to the Global Copper Market Research report.
Hence, long-term prospects for copper remain bullish. Moreover, JP
Morgan says that efforts to decarbonise the economy will account for more than 40 per cent
of overall demand growth next year in the 25-million-tonne market.
Similarly, copper prices are expected to stay firm, with Bank of
America predicting an average $9,813 per tonne in 2022 and $8,375 a tonne in 2023. Goldman
Sachs predicts that copper prices could average $11,875 per tonne in 2022, $12,000 in
2023, $14,000 in 2024 and $15,000 in 2025.
The ‘futuristic copper - The Hindu BusinessLine
Growing Demand for Electrical and Electronics Segment
• Copper is being used for many applications due to its
properties. Electronic applications of copper are wires and cables, dynamos, transformers,
motors, electromagnets, switches, communication cables, residential electrical circuits,
etc.
• Recently, the growth of electric vehicles increased the demand
for copper. Foils, stators, rotors, shaft heads, hollow wires, and motors are used in
electrical vehicles consisting of heavy copper.
• According to JEITA ( Japan Electronics and Information
Technology Industries Association), the total global production by the electronics and IT
industries was expected to rise by 11% Y- o-Y in 2021 to reach USD 3,360.2 billion. Thus,
this factor is excepted to increase the demand for copper materials used in the
electronics segment.
• In North America, especially in the United States, the
electronics industry is expected to grow moderately. An increase in the demand for new
technological products is expected to help market expansion in the future.
https://www.alcircle. com/specialreport/3 23
/global-aluminium-industry-outlook-2021
INDIAN ALUMINIUM INDUSTRY OUTLOOK
The year 2021 experienced demand recovery for aluminium in most major
markets across the world, with usage increased from 86.9 million tonnes in 2020 to 93.5
million tonnes. But now with the onset of 2022, time to look forward to what is in store
this year, which is why the AlCircle team has come up with a new report on "Global
Aluminium Industry Outlook 2022."
The team has projected in the report that aluminium demand will
progress in 2022 but at a slower rate from last year. In contrast to 7.6% growth rate in
2021, aluminium demand is estimated to increase by about 3.3 per cent to reach 96.6
million tonnes by the year-end. On the other hand, as supply is concerned, it is likely to
remain tight throughout 2022, with limited capacity additions in China and elsewhere in
the world.
In the upstream sector, global bauxite output is expected to grow by
about 1.6% to come in at 383 million tonnes in 2022, supported by new projects and
expansion plans in leading producing countries like Australia, Guinea, and Indonesia.
Demand for alumina and alumina prices is expected to be positively influenced by the
growing demand for primary aluminium in 2022.
In 2022, primary aluminium demand is likely to be driven by the
transport sector at 9.8 per cent, followed by the packaging sector at 7.2%, as mentioned
in the report. (Global Aluminium Industry Outlook 2022 (alcircle.com))
Needless to say that the Covid-19 pandemic and the ensuing lockdowns
resulted in a major setback for the aluminium industry across the world in the last fiscal
year. India was no exception but to witness slow business and industry activities, both in
Q1 and Q2 of FY2020-21. According to the market data, domestic aluminium consumption
declined by about 15%, with downstream products import shrank by almost 19 per cent
throughout the year. Amid this impeding market condition, it is of an utmost importance to
analyse the future trend of the industry in order to plan for growth, expansion and
investment accordingly.
With such an objective, AlCircle has brought to you a new report on "Outlook
for the Indian Aluminium Industry - In-depth industry analysis & forecast to
2026-27".
AlCircle research has estimated that aluminium usage in India is likely
to grow at a CAGR of 6.7% over the next five years to reach 4.84 million tonnes by
2026-27. Electrical and electronics is expected to dominate the market by consuming around
1.69 million tonnes of the metal by the said year. The usage of aluminium by the
transportation sector is set to grow at about 7.2% per annum to reach 1.37 million tonnes
by 2026-27.
This new report of AlCircle has not only cumulated the broad overview
of the potential market trend in the next five years but has also evaluated the in-depth
course of the industry vertical wise. The reported has offered strategic information to
planners and decision makers enabling them to explore investment opportunities in the
country.
https://www.alcircle.com/specialreport/325/outlook-for-the-indian-aluminium-industry
ABOUT RCI Industries & Technologies
Head quartered in Delhi, it is among the leading manufacturers of
copper products in India. The Company is into the trade and manufacturing of flat and
round products in copper, brass, stainless steel and special alloys. With one plant in
Himachal Pradesh at Baddi, RCI offers a wide range of customized products. The Company has
a global customer network with a strong presence in Middle East and African countries. It
caters to a diverse customer portfolio of traders and manufacturers.
CONSOLIDATED FINANCIAL AND BUSINESS OVERVIEW
The Company is in the business of manufacturing, trading and exporting
Ferrous and Non-Ferrous Metal products. The Company achieved a turnover of Rs. 5968.13
lakhs in FY 2021-22.
The consolidated performance of the Company for the financial year
ended March 31, 2022, is as follows:
Total revenue from operations at Rs. 5968.13/-lakhs for the year ended
March 31, 2022, as against Rs. 6880.22/- Lakhs for the corresponding previous period, on
account of decrease revenues from operational due to COVID pandemic.
The Profit/(loss) after tax were Rs. (7189.89) /- lakhs for the year
ended March 31, 2022, as against loss after tax Rs. (9043.41)/- Lakhs for the
corresponding previous period.
The EPS (Earning Per Share) for the financial year ended March 31, 2022
was Rs. (45.99) for a face value of Rs 10 per share, as against Rs. (57.76) for the
corresponding previous period.
RISKS AND CONCERNS
The Company faces the following Risks and Concerns:
Economic Risk
A part of business is substantially dependent on the prevailing global
economic conditions. Factors that may adversely affect the global economy and in turn
Indias economic growth, that could affect the demand for copper and other non
ferrous and ferrous metal products include slowdown in the rate of infrastructure
development, inflation, changes in tax, trade, fiscal and monetary policies, scarcity of
credit etc. However, given that our key drivers for demand are fast growing segments like
Electrical, Transport, General Engineering and Consumer Durables combined with growth in
global EXIM traffic and current prevailing trend of falling copper prices, we do not
expect this risk to affect our business.
Competition Risk
This risk arises from more players wanting a share in the same pie.
Like in most other industries, opportunity brings with itself competition. We face
different levels of competition in each product segment, from domestic as well as
multinational companies. However, RCI has established strong brand goodwill in the market
and a strong foothold in a wide spectrum of non ferrous and ferrous products. We are one
of leading copper product manufacturers and traders in India. Our wide network across the
globe helps us generate higher volumes and negotiate competitive pricing. We have built a
strong relationship with key industry suppliers and traders and as a result are able to
obtain competitive commercial terms and operational advantages. We also counter this risk
with the quality of our products, our customer-centric approach and our ability to
innovate customer specific solutions, focusing on pricing and aggressive marketing
strategy, disciplined and time bound order executions, coupled with prudent financial and
human resources management and better control over costs. Thus, we do not expect to be
significantly affected by this risk.
Trade Risk
Our business can be affected by the rise and fall in the levels of
price and import of copper in the country. As per a Bloomberg report, in 2017 alone,
62,000 fewer tones of copper will come to market than previously expected. Global copper
demand may continue to grow at a moderate pace as China, which accounted for 45% of global
demand in 2015, transitions toward an economy driven by domestic consumer spending rather
than government infrastructure investment. Given the projected growth in the Indian
economy and expected recovery in global trade, rising spending in the infrastructure and
manufacturing space and increasing per capita and disposable income, it is estimated that
demand for goods will continue to rise steadily. The Company is further reducing its
dependence on global EXIM trade by shifting focus from trading to manufacturing. Thus, we
believe we have adequate mitigation in place for trade risk.
Regulatory Risk
If we are unable to obtain required approvals and licenses in a timely
manner, our business and operations may be adversely affected. We require certain
approvals, licenses, registrations and permissions for operating and expanding capacities
at our plants. Also, some of the new value-added product segments that the Company plans
to enter require Government approval. We may encounter delays in obtaining these requisite
approvals, or may not be able to obtain such approvals at all, which may have an adverse
effect on our revenues. However, the Government has come up with a number of initiatives
to boost the sector. The estimated copper usage growth is expected to increase as the
Government has put in process various initiatives such as Housing for All, Make in India
and smart cities to name few. As all industry predictions suggest that this will be the
trend in the future as well and given our own experience in obtaining such permissions, we
do not expect this risk to affect us materially in the coming years.
Liability Risk
This risk refers to our liability arising from any damage to products,
equipment, plant & machinery, life and third parties which may adversely affect our
business. The Company attempts to mitigate this risk through contractual obligations and
insurance policies.
Execution Risk
The Company has undertaken number of orders in the last year and
several more are in the pipeline. Order execution is largely dependent upon sourcing of
raw materials and timely manufacturing. Any delay in project implementation can impact
revenue and profit for that period. Our implementation schedules are in line with the
plans. Emergency and contingency plans are in place to prevent or minimize business
interruptions. Therefore, we do not expect this risk to affect us materially in the
future. Concerns like soaring copper and other metal prices, an unfavourable tax
structure, infrastructure bottle-necks, retaining talent and unprecedented natural and
man-made disasters and political/social turmoil which may affect our business, remain.
However, these are threats faced by the entire industry. With superior methodologies and
improved processes and systems, the Company is well positioned to lead a high growth path.
OPPORTUNITIES & THREATS
| COPPER |
|
|
|
| Strength |
Weakness |
Opportunities |
Threat |
| • A balanced portfolio of revenue streams to tide hrough
volatile market |
• Import dependence for Copper concentrate supplies |
• Immense headroom for growth due to lower consumption
vs global average |
• Mine disruptions Duties & FTAs - trade policies |
| • Secured concentrate supply via long term contracts
with miners • Increased focused on VAP |
|
|
|
INDIA ALUMINIUM
| Strength |
Weakness |
Opportunities |
Threat |
| • Integrated business model generating healthy cash
flows |
• Import dependence for Copper concentrate supplies |
• Immense headroom for growth due to lower consumption
vs global average |
• Mine disruptions Duties & FTAs - trade policies |
| • The dominant player in India across upstream and
downstream |
|
|
|
| • Utkal - among the worlds most economical and
efficient Alumina producers; capacity expansion of 500 Kt in progress and Utkal capacity
to reach 2.0 Mt |
|
|
|
| • Increased focused on |
|
|
|
| Value Added Products (VAP) to be further de-linked to the
global aluminium prices. |
|
|
|
INTERNAL CONTROL SYSTEMS AND ADEQUACY
The Companies Act, 2013 re-emphasizes the need for an effective
Internal Financial Control system in the Company. The system should be designed and
operated effectively. Rule 8(5)(viii) of Companies (Accounts) Rules, 2014 requires the
information regarding adequacy of Internal Financial Controls with reference to the
financial statements to be disclosed in the Boards report. To ensure effective Internal
Financial Controls the Company has laid down the following measures:
^ The Company has a comprehensive risk management framework
^ RCI Industries & Technologies Limited has in place a well-defined
Whistle Blower Policy/ Vigil Mechanism
^ RCI Industries and Technologies Limited has a system of Internal
Business Reviews
All departmental heads discuss their business issues and future plans
in monthly review meetings. They review their achievements in quarterly review meetings.
Specialized issues like investments, property, FOREX are discussed in their respective
Internal Committee meetings. The Company has a proper and adequate internal control system
to ensure that all assets are safeguarded and protected against loss from unauthorized use
or disposition and those transactions are authorized, recorded and reported correctly. The
internal control is exercised through documented policies, guidelines and procedures. It
is supplemented by an extensive program of internal audits conducted by in house trained
personnel.
The audit observations and corrective action taken thereon are
periodically reviewed by the audit committee to ensure effectiveness of the internal
control system. The internal control is designed to ensure that the financial and other
records are reliable for preparing financial statements and other data, and for
maintaining accountability of persons.
HUMAN RESOURCES
The Companys HR philosophy is to establish and build a high
performing organization, where each individual is motivated to perform to the fullest
capacity to contribute to developing and achieving individual excellence and departmental
objectives and continuously improve performance to realize the full potential of our
personnel.
As on March 31, 2022, the Company had a workforce of 119 people on
rolls.
OUTLOOK
The Company constantly endeavors to improve the quality of its products
to secure an increased number of orders at competitive rates. On account of bulk orders
and bargain power, the Company is able to quote better rates and maintain high quality of
products. However, copper industry needs great support from the government as it is going
through a difficult phase due to slow down in global market and increasing competition
from imports.
The financial statements have been prepared in compliance with the
requirements of the Companies Act, 2013 and Generally Accepted Accounting Principles in
India. Please refer Directors Report in this respect.
| By Order of the Board of Directors |
| For RCI Industries & Technologies Limited |
| Sd/- |
| Mr. Rajeev Gupta Chairman & Managing Director |
| DIN 00503196 |
| Date: 05.07.2022 |
+91-9892691696
