A. Global Economy
The baseline forecast is for growth to fall from 3.4 percent in 2022 to 2.8 percent in
2023, before settling at 3.0 percent in 2024 (Source-IMF, April 2023 World Economic
Outlook). Advanced economies are expected to see an especially pronounced growth slowdown,
from 2.7 percent in 2022 to 1.3 percent in 2023 whereas emerging market and developing
economies would see marginal fall in growth from 4 percent in 2022 to 3.9 percent in 2023.
Fast & furious rise in interest rates and softening of food and energy prices have
helped moderate the global headline inflation rate to 7 percent in 2023 from 8.7 percent
in 2022. Flowever, the side effects from fast rise in policy rates are becoming apparent,
as banking sector vulnerabilities have come into focus and fear of contagion have risen
across the broader financial sector. It is expected that the prolonged geopolitical
conflict in Europe could continue to impact the supply chain dynamics and keep commodity
prices volatile for a longer period.
B. Indian Economy
India reported a growth of 7.2 percent in Real Gross Domestic Product (GDP) at constant
prices (2011-12) in the year 2022-23 compared to 9.1 percent in 2021-22 as per the
provisional estimates released by the National Statistical Office, Ministry of Statistics
and Programme Implementation, Government of India. The overall growth remained robust
during the first two quarters of the fiscal year 2022-23. There were some signs of
moderation in the second half of FY 20222-23. Growth was underpinned by strong investment
activity bolstered by Governments capex push and buoyant private consumption,
particularly among higher income earners. Inflation remained high, averaging around 6.7
percent in FY 2022-23 but the current account deficit narrowed in Q3 on the back of strong
growth in service exports and easing global commodity prices. Comparatively, India has had
better success in taming inflation with relatively lesser policy tightening. Sustained
efforts taken by The Reserve Bank of India to rein in inflation by increasing the repo
rate by 250 basis points (bps) over the past year has been reasonably been reasonably
successful.
The fourth quarter data points to further building on the positive momentum in the
economic data. The GDP growth at 6.1 percent in January- March23 was higher than expected
with recovery in manufacturing, after two quarterly consecutive contractions, with boost
from construction and increase in farm output. As per the World Economic Outlook Update,
July 2023 by International Monetary Fund growth in India is projected at 6.1 percent in
2023, a 0.2 percent upward revision compared with April projection, reflecting momentum
from stronger than expected growth in the fourth quarter of FY 2022-23 as a result of
stronger domestic investment. The Governments push through larger infrastructure spend
continues in FY 2023-24. The private capex continues to provide tailwinds to the growth
momentum. Buoyancy in tax collections during the current fiscal year supports the capex-
led growth aspirations. A healthy balance sheet of private players, improving consumer
confidence and investment activity, as well as growing demand conditions, will provide
support to economic growth in the near term.
Despite the recent positive growth surprises there exist downward risks. Tight labour
markets and pass through from past exchange rate depreciation could push up inflation in a
number of economies. The war in Ukraine could intensify, further raising food, fuel and
fertilizer prices. Further policy rates tightening by central banks could put stress on
banks and nonbank financial institutions whose balance sheet remain vulnerable to interest
rate risk.
C. Rishi Laser Limited - The Year 2022-23 in Brief
Your Company recorded superlative performance on all key parameters during the year
under review. Topline for the year 2022-23 at Rs.134.07 crores reported a jump of 14.79
percent over the previous year. The Three major verticals namely Construction & Mining
Equipment, Power Distribution and Rail Transportation contributed Rs.96.10 crores to the
topline of the Company accounting for 71.68% of the turnover compared to Rs.81.70 crores
(69.95 percent)in the previous year. Operational performance showed significant
improvement compared to previous year with operating profit (excluding other income) of
Rs. 8.78 crores compared to Rs. 4.89 crores in the previous year recording a jump of 79.55
percent. Operating profit (excluding Other Income) as a percentage of sales was at 6.55
percent for the year under review compared to 4.19 percent in the previous year marking a
significant increase of 236 basis points (bps). Performance during FY 2022-23 makes it
noteworthy as the same was achieved despite high volatility in input (steel) cost
throughout the year putting pressure on cost and a reasonable time lag to pass on the same
to customers. We consolidated our position with most of our major customers by quickly
developing newer parts for newer models and by adding few newer components into our
product list. Special impetus was given in strengthening new product development team in
couple of manufacturing facilities with a view to produce first article quickly and with a
first time right approach.
i) Construction Equipment
With sales of Rs. 79.64 crores, this sector accounted for 59.41 percent of total net
revenue for FY 2022-23 compared to Rs.74.29 crores (63.62 percent) in the previous year.
This vertical continues to be the highest contributor to revenue of the Company.
Contribution from this sector continues to strengthen over time on the back of increase in
localization content by some of our major customers and addition of some new
components.Indias construction equipment industry turned in its best ever performance
with 26 percent year-on-year growth in FY 2022-23 as sales crossed the one lac unit mark
driving on road construction and railway demand. Growth in FY 2022-23 was driven by all
four subsegment of construction equipment industry, except road construction equipment,
which recorded slight de-growth of 3 percent. Earthmoving equipment, backhoe loaders and
crawler excavators and concrete equipment sales grew by more than 20 percent in FY 23 over
the previous year. However, material handling equipment segment stood-out with 47 percent
jump over previous year. Growth in this industry was on the back of enhanced pace of
construction and mining activity during the year which resulted in a significant increase
in demand for all types of construction equipment. The current and future pipeline is
expected to enable this industry achieve 1520 percent growth year-on-year in FY 202324
before declining sharply to flat growth or even negative to the tune of 10 percent in FY
2024-25, following the general elections in the country.
ii) Power (Distribution)
Poweris among the most critical components of infrastructure, crucial for the economic
growth and welfare of nations. The existence and development of adequate power
infrastructure is essential for sustained growth of the Indian economy. Sources of power
generation in India range from conventional sources such as coal, lignite, natural gas,
oil, hydro and nuclear power, to viable non-conventional sources such as wind, solar,
agricultural & domestic waste. Government of India has identified the power sector as
a key sector is promoting it through various initiatives like higher budgetary allocation
and increased funding under PLI scheme besides schemes like Deen Dayal Upadhyay Gram Jyoti
Yojana (DDUGJY) and Integrated Power development Scheme (IDPS). The capacity addition in
power sector is expected to be driven by the renewable energy segment, given the policy
focus and the Governments intent to increase the share of renewable generation in the
energy mix.
We were mainly present in power transmission and distribution leg of this segment.
However, with recent acquisition of a new customer from renewable power generation sector,
we have forayed into power generation segment as well. This new addition helped us
increase revenue from this sector to Rs.15.54 crores in FY 2022-23 from Rs. 5.77 crores in
FY 202122 resulting in robust growth of 169.47 percent. In percentage terms this sector
accounted for 11.59 percent of overall revenue of the Company in FY 2022-23 compared to
4.94 percent in the previous year.
iii) Rail Transportation
Revenue from this segment for the year under review was Rs .92 crores as against
Rs.1.64 crores in the previous year. In absolute terms revenue from this vertical during
the year decreased by 43.90 percent over the previous year and in percentage terms it
dipped by 73 basis points from 1.41 percent in last year to 0.68 percent of total revenue
in current year.
Customers in this segment use tender routes to award business to participants. Most of
the tenders are fixed price having long supply period. High volatility in raw material
prices during the year under review dissuaded us from participating in such fixed price
tenders with long supply period.
D. Outlook
Indian economic growth is expected to be brisk in FY24 as a vigorous credit disbursal,
and capital investment cycle is expected to unfold in India with the strengthening of the
balance sheets of the corporate and banking sectors. Further support to economic growth
will come from the expansion of public digital platforms and path-breaking measures such
as PM GatiShakti, the National Logistics Policy, and the Production-Linked Incentive
schemes to boost manufacturing output. The pace of economic activity is expected to remain
strong on the back of various structural reforms undertaken by the Government.
However, the growth momentum will not be smooth and free from challenges. On the
external front, risks to the current account balance stem from multiple sources. While
commodity prices have retreated from record highs, they are still above pre-conflict
levels. Strong domestic demand amidst high commodity prices will raise Indias total
import bill and contribute to unfavourable developments in the current account balance.
These may be exacerbated by plateauing export growth on account of slackening global
demand. Should the current account deficit widen further, the currency may come under
depreciation pressure.
E. Opportunities & Threats
Being associated with major constituents of overall infrastructure sector, we see huge
opportunity going forward from high budgeted capital expenditure proposal of Government of
India. Once implemented it will have a huge multiplier effect in creating employment and
will further boost a virtuous cycle of growth.
However, global economic slowdown will suppress merchandise trade, which could be a
drag on Indias growth prospects. Uncertainties in global business ecosystem will send
crippling headwinds towards India. The danger of persistent and prolonged inflation and
supply chain disruptions will remain entrenched for some time. Rising commodity prices,
concerns about recession in US & the EU could pose threats to economic recovery.
F. Risks & Concerns Input Costs
We are operating in a raw material intensive industry. The main inputs used by the
company are various types and grades of steel which constitute a substantial percentage of
its overall cost. Unexpected rise and volatility in the steel prices can adversely affect
profit margin or have a negative impact on the demand.
Exchange rates
High Volatility in the exchange rates could have adverse impact on import of steel,
machines and spares.
Government Regulations
Government policies relating to import of steel, capital goods, stringent emission
norms or other similar policies could have adverse impact on Companys business.
Competition
We operate in a very high competitive business environment which has increased
significantly over a period of time. Cut throat competition poses a high risk to the share
of business also the pricing power.
Geopolitical risk
War, trade barriers, sanctions and geopolitical conflicts could impact world economy
directly or indirectly.
G. Internal Control system & its adequacy
The Company has adequate systems of internal control and procedures covering all
financial and operating functions commensurate with the size and nature of operations. The
Company believes that a strong internal control framework is one of the important pillars
of Corporate Governance. Continuous efforts are being made to see that the controls are
designed to provide a reasonable assurance with regard to maintaining of accounting
controls and protecting assets from unauthorized use or losses. The audit committee looks
into all aspects of internal control and advices corrective actions as and when required.
H. Discussion on financial performance with respect to operational performance
(On standalone basis):
Your Companys net revenue increased by 14.79% i.e., from Rs. 116.80 crores in
FY2021-22 to Rs. 134.07 crores in FY 2022-23 as the all major business verticals recorded
growth during the year under review.
The Companys major revenues continued from three major verticals namely Construction
equipment, Rail Transportation and Power (Transmission & Distribution). The three
major verticals mentioned above cumulatively accounted for 71.68 percent (Rs.96.10 crores)
and 69.95 percent (Rs. 81.7 crores) of net revenues in FY 2022-23 and FY 2021-22
respectively.
Construction equipment vertical with contribution of Rs.79.64 crores in FY 2022-23
(Rs.74.29 Crores in FY 2021-22) was the highest contributor to net revenue of the company.
Power vertical contributed Rs.15.54 crores in FY 2022-23 compared to Rs.5.77 crores in
FY 202122. Revenue from this vertical recorded growth of 169.32 percent compared to last
year.
Revenue from Rail Transportation vertical decreased to Rs.0.92 crores for the year
under review as against Rs. 1.64 crores in the previous year posting a sharp decline of
43.90 percent.
Businesses from rest of the verticals were clubbed under "others" category
contributing Rs.37.97 crores for the year under review as against Rs.35.09 crores in the
previous year.
Revenue from job-work during the year under review amounted to Rs.1.94 crores compared
to Rs.2.58 crores in FY 2021-22. Job work receipts as a percentage of net sales decreased
by 76 bps from 2.21 percent in FY22 to 1.45 percent in FY 23.
Expenditure:
Raw material consumption for the current year was Rs.78.57 crores compared to
Rs.70.26 crores in the previous year. Raw material consumption as a percentage of with
material sales for the year under review decreased by 206 bps to 59.46 percent from 61.52
percent in the previous year.
Personnel Cost in absolute terms for FY 202223 at Rs.19.98 crores was higher
compared to Rs. 17.31 crores in the previous year due to higher volume of business and
increase in minimum wages. Due to increase in minimum wages in FY 23 compared to FY 22,
personnel cost to net sales in percentage terms increased marginally by 8 bps to 14.90
percent in FY 2022-23 from 14.82 percent in the previous year.
Financial Expenses for the year under review amounted to Rs.3.15 crores in FY
2022-23 as against Rs.3.49 crores in FY 2021-22 translating to 2.35 percent and 2.99
percent of the total revenue respectively. Decrease in financial expenses is mainly
attributed to repayment of debts.
Depreciation & Amortization Expenses at Rs.
2.87 crores for the year under review was lower than Rs. 2.97 crores in the previous
year.
Earnings:
Earnings before Interest, Depreciation and Tax
(excluding other income) was Rs.8.78 crores in FY 2022-23 compared to profit of Rs.4.89
crores in FY 2021-22 signifying a jump of 79.55 percent. Operating profit margin
(excluding other income) showed significant jump of 236 bps to 6.55 percent in FY 2022-23
as against 4.19 percent in the previous year. Increase in EBIDTA was primarily due to
increase in revenue and reduction in raw material consumption in FY23 compared to FY22.
Profit before Tax (PBT) before exceptional items for FY 23 was Rs.4.59 crores
compared to Rs.0.28 crores in the previous year showing a sharp jump of 1517 percent.
Profit after Tax (PAT) of the Company for the year under review was Rs.4.91 crores
compared to Rs.0.20 crores in FY 2021-22. Higher operating profit for the year under
review was due to higher operating profit.
Return on Capital Employed for the current year was at 6.13 percent compared to
ROCE of 5.00 percent in the previous year. Increase in ROCE was due to higher EBIDTA.
Liquidity & Leverage:
Net Cash flow from operating activities decreased by Rs.3.12 crores to Rs 4.52
crores in FY 2021-22 from Rs.7.64 crores in FY 2021-22 mainly due to increase in inventory
and payment to creditors.
Gross Working Capital at Rs.27.28 crores in FY 2022-23 as against Rs. 34.98 crores
was due to sales of Non-current assets. Net customer receivables at the end of FY 2022-23
stood at Rs. 15.52 crores, representing 42 days of sales compared to 46 days in the
previous year. Receivables equivalent of number of days sales improved during the year due
to availment of invoice discounting s of some of our major customers.
Networking capital (including current maturities of long term debt) for FY 2020-21
was negative Rs.7.36 crores compared to negative Rs. 5.63 crores in the previous year.
Debt-equity ratio improved to 0.17 times in FY 2022-23 from 0.33 times in FY
2021-22. Debts reduced to Rs. 7.00 crores as at March 31, 2022 from Rs.13.26 crores as at
March 31,2022.The ratio has improved during the year due to repayment of debts .
Value Creation:
Total Equity of the company increased by Rs.4.63 crores to Rs.44.67 crores as at
March 31, 2023 from Rs.40.04 crores as at March 31, 2022 due to higher profit during the
year.
Book Value per Share increased to Rs.48.59 as at March 31, 2023 from Rs.43.55 as at
March 31, 2022 due to increase in profit during the year.
I. Human Resources
People are catalyst to the success and growth of any organization. We understand it and
have put continuous efforts for people development. We have put efforts in building good
work culture through various initiatives such as Organization restructuring, Talent
acquisition and retention, Management and employee development programs and operational
excellence programs. We treat people with respect and provide equal opportunity for
professional growth in the company. Many seniors working with us today had joined at
fairly junior position or had started their carrier with company. The Company endeavors to
keep its workplace Employee friendly and safe.
J . Cautionary Statement
Statements in the management discussion and analysis 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 among others, economic
conditions affecting demand/supply and price conditions in the domestic and overseas
markets in which the Company operates, changes in the Government Regulations, tax laws and
other statutes and incidental factors.
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