Rohit Ferro Tech Ltd Management Discussions.
Global growth of economy was remained steady at 3.6 % in 2018 and growth is expected to remain steady for the coming years.
The Indias GDP growth for Financial year 2019-20 is expected to be 6%, boosted by conducive policy reforms and a credit rebound. The naon is currently experiencing a favourable phase of growth based on strong macro fundamentals of the economy, making growth prospects sustainable. Growth is expected to pick up in the second half of 2019. India also has an opportunity to strengthen its recent economic gains by iniang more integraon in the global value chain. Factors such as a young working populaon, improving business climate and renewed focus on export expansion would support this opportunity.
Ferro Alloys Industry
Ferro chrome is an alloy of chrome and iron which is primarily used in manufacturing stainless steel.
Ferro-alloys are crical addives in the producon of Iron & Steel and the fortune of Ferro Alloys Industry is directly linked with the growth of Iron & Steel Industry. The Company produces Ferro chrome and Manganese based alloys.
Indian Ferro Chrome Industry
The Indian Ferro chrome producon is gradually on increasing track in the Year 2019 as compared to the growth of the Year 2018. The countrys exports of annual Ferro chrome is also showing a gradual and significant value .
The demand for Ferro Chrome is expected to remain on increasing trend in the near future. Due to slowly revival of world economy high demand of infrastructure projects are expected to raise demand for Stainless Steel and Ferro Chrome.
The industry is expected to see substanal consolidaons which will drive market discipline and cut down inefficiencies in the producon capacity. India holds a lot of promise with government iniaves easing mining operaons for consolidated Ferro Alloys producers
The growth in the Indian steel sector has been driven by domesc availability of raw materials such as iron ore and cost-effecve labour.
Government of Indias focus on infrastructure and undertaking road projects is aiding the boost in demand for steel.
Stainless Steel Industry
Indias per capita consumpon for stainless steel products is connue to be below the world average which may cause a massive unrealised potenal for steel demand growth. There is an ongoing thrust for infrastructure development which will further boost the demand for stainless steel in the country. The growth in the Indian steel sector has been driven by domesc availability of raw materials such as iron ore and cost-effecve labour. Moreover, growing urbanisaon and disposable income will also enhance demand of stainless steel. Consequently, the steel sector has been a major contributor to Indias manufacturing output.
The steel sector has been a major contributor to Indias manufacturing output which in turn depends on increase in automove producon and the development of construcon sector.
The proporon of use of Ferro chrome depends upon the grade of stainless steel being produced which can be upto 30% of the total input of producon. The demand for Ferro chrome is expected to increase gradually in future. Rising investment in the infrastructure and real estate sectors and increase in number of construcon acvies are promising a slow but gradually demand for stainless steel products.
Rohit Ferro is the one of the significant manufactures Ferro chrome in Eastern India. The Company currently operates two manufacturing complexes at Jajpur in Oddisa and Bishnupur palnt in west Bengal and has an integrated management system that encompasses quality, environment and occupaonal health and safety cerficaon.
Details of Significant change in Key Financial Rao:
The significant changes in the financial raos of the Company, which are more than 25% as Compared to the previous year are summarised below:
|Rao||F.Y.2018-19||F.Y. 2017-18||Change (%)||Reason for change|
|Operang Profit Margin (%)||(15.54)||(39.66)||60.83||Beer sales realisaon and cost control|
|Net Profit Margin (%)||(31.19)||(46.33)||32.69||Beer sales realisaon and cost control|
|Current Rao (X)||0.31||0.41||(25.37)||Decrease in trade receivables, Loans and Advances and increase in current borrowings|
|Interest Coverage Rao (X)||(2.70)||(5.37)||49.69||Increase in sales realisaon and cost control|
|Debtors Turnover Rao (X)||1.91||1.29||48.57||Provisioning of debtors, Increase in realisaon and turnover|
|Inventory Turnover Rao (X)||8.34||3.00||177.78||Lower stock level maintained and Just-In-Time approach|
Risk, Opportunies and Threats
The Company manufactures ferro alloys as well as stainless steel. In Financial Year 2018-19 the overall growth of stainless steel business was sasfactory with slower increase in demand. Though increase of demand in year under review was sasfactory, the business was severely impacted by the increase in cost of raw material and oversupply by China. The domesc consumpon of steel is likely to increase 2019-20 due to Government iniaves like make in India, building Smart Cies, focus on sanitaon facilies, and development in areas of roads and railways etc.
Further, the electrical energy is one of the major inputs in producon of ferro alloys and high power tariff is a great threat for the Ferro alloys industry. High power cost has already impacted us severely and that led to suspension of our plant at Haldia since 1st July, 2015.
The Company has a Risk Management framework in place which is designed to idenfy, assess and monitor various risks related to key business and strategic objecves. All idenfied risks are categorised based on a matrix of likelihood of occurrence and impact thereof and a migaon plan is worked out to extent possible
The government has already iniated so many steps for the beerment of Indian economy and has also undertaken two large inia ves viz. pung more money into the rural economy especially aer demonesaon and pung a renewed focus on infrastructure development and this would certainly enable the ferro alloys and steel producers to survive and grow in the markets.
During the year under review the Company has produced 63749 MT of Ferro Alloys against 57150 MT of Ferro Alloys in previous year registering an increase of 11.55% over previous year.
Iron & Steel
During the year under review, the Company has produced 57818 MT of Stainless Steel against 48205 MT in previous year registering an increase of 19.94% over previous year.
The secondary segment details idenfied as the geographical segment based on the locaon of customers within India and outside India is given in notes no. 37 to the Annual Accounts.
Health, Safety and Environment
The Company is commied to conducng its acvies in a manner that promotes the health and safety of its employees, assets and the public, as well as protecon of the environment. The Companys Integrated Management System comprises of quality, environment and occupaonal health and safety cerficaon. New employees are being given intensive safety inducon training and are being issued with "Safety Passports" related to their work area. All the statutory requirements related to safety, health and environment are being complied with.
Requirements of environmental acts and regulaons are complied with. Monitoring and analysis of water, stack emissions and ambient air quality etc., are undertaken periodically to verify whether the level of environmental parameters are maintained and are well within the specified limits.
Internal Controls Systems and their adequacy
Your Company maintains adequate Internal Control Systems in all areas of operaon. Services of Internal and External Auditors are ulized from me to me, as also in-house experse and resources. The Company connuously upgrade these systems in line with the best available pracces. An independent Audit Commiee of the Board reviews the adequacy of Internal Control. Some significant features of Internal Control Systems are :
Adequate documentaon of policies, guidelines, authories and approval procedures covering all important funcons.
Deployment of an ERP system which covers most operaons and is supported by a defined on-line authorisaon protocol.
Ensuring complete compliance with laws, regulaons, standards, and internal procedures and systems.
Ensuring the integrity of the accounng system; the properly authorised recording and reporng of all transacons.
Ensuring a reliability of all financial and operaonal informaon.
The Company has an Audit Commiee with majority of independent directors as members. The commiee periodically reviews significant audit findings, adequacy of internal control and compliance with Accounng Standards, amongst others. The Internal Audit Reports are placed before the Audit Commiee for consideraon. The management duly considers and takes appropriate acon on the recommendaons made by the Statutory Auditors, Internal Auditors and the independent Audit Commiee of the Board of Directors. The Company also takes quarterly compliance cerficate in respect of various applicable laws from the concerned departmental heads and place the same before the board.
Industrial relaons and Human Resources
Human Resource management is not only important but also a crical asset for a Companys growth. The Companys human capital comprises a prudent mix of youth and experience. The Company employs contract labour in its manufacturing facilies. The Company partners with its employees to ensure a highly engaged and movated workforce dedicated to achieving the Companys goals. We ensure a safe work environment for all our women employees. We also promote gender equality. Abiding by the Sexual Harassment Policy, we have a Complaint Commiee which addresses any complaint from women employees in this relaon and take necessary acon. The Policy is being reframed as per the provision of Sexual Harassment of Women at the Work Place (Prevenon, Prohibion & Redressal) Act, 2013. During the year the Company has not received any complaints of sexual harassment. As on date of this report, the Company has 339 employees on its payroll.
Certain statements in the Management Discussion and Analysis Report describing the Companys objecve and predicons may be "forward-looking statements" within the meaning of applicable laws and regulaons. Actual results may vary significantly from the forward looking statements contained in this document due to various risks and uncertaines. These risks and uncertaines include the effect of economic and polical condions in India, volality in interest rates new regulaons and government policies that may impact the Companys business as well as its ability to implement the strategy. The Company doesnt undertake to update the statements.