Rolcon Engineering Company Ltd Management Discussions.

Pursuant to Schedule V to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a Management Discussion and Analysis Report covering business performance and outlook (within limits set by Companys competitive position) is given below:

A. INDUSTRY STRUCTURE AND DEVELOPMENT

Global Economy

The global economy has been under turmoil ever since the first wave of the Covid-19 pandemic at the start of the calendar year 2020. From lockdowns disrupting supply chains to movement- limiting restrictions affecting all businesses, it was a year that tested resilience and persistence. Economic activity has normalised faster than anticipated, however, the global economy continues to reel under the pandemic.

The IMF expects the world gross domestic product (GDP) to drop 4.7% in 2020. S&P Global has kept its global GDP forecast for 2020 relatively unchanged at -4.1%, while raising forecasts for the US and euro zone on the back of a stronger than expected rebound in the third quarter, and for China (where the rebound took place in the second quarter). These improvements have been offset by a lower forecast for India as well as for the United Kingdom (UK) and Japan.

Indian Economy

The phased-out lockdowns, imposed to contain the spread of COVID-19, cratered employment, business, trade, manufacturing, and service activities across sectors. Reserve Bank of India (RBI) promptly responded and implemented adequate measures like slashing interest rates, announcing fiscal stimulus package and allowing loan moratorium facilities, among others, for the economys revival.

Consumption and investment are the major drivers of any economy. In recent years, India has grown primarily on the engine of consumption. The other engine of investment has been decelerating. On the supply side, the sharpest contraction was experienced in construction followed by trade, manufacturing, hotels, and transport and communication services. CPI inflation remained high at 6.9% in November 2020. The unemployment rate, as calculated by the CMIE, rose to 23.5% during the period April- May 2020, before further reducing to 9.1% in December 2020. GDP contraction on record of 23.9% and 7.5 % year-on-year in the first and second quarter respectively.

Meanwhile, the Index of Industrial Production (IIP) contracted sharply by 1.9% in November 2020 as against a growth of 3.6% in October 2020. With the reduction in daily COVID infection rate and commencement of vaccination, the economy is recovering at a much faster rate than anticipated. GST collection for January 2021 touched an all-time high of 1.19 lakh crore. While exports witnessed a growth of 5.37% in January 2021. Further it is expected that due to several announcement by Government of India to support the overseas investment would boost the Economic growth.

Industrial & Engineering Market

Indias engineering sector has witnessed a remarkable growth over the last few years driven by increased investment in infrastructure and industrial production. The engineering sector, being closely associated with the manufacturing and infrastructure sectors, is of strategic importance to Indias economy. India, on its quest to become a global superpower, has made significant stride towards developing its engineering sector. The engineering sector in India attracts immense interest from foreign players as it enjoys a comparative advantage in terms of manufacturing cost, technology, and innovation. The above, coupled with favourable regulatory policies and growth in the manufacturing sector, has enabled several foreign players to invest in India. The Indian engineering sector is of strategic importance to the economy owing to its intense integration with other industry segments. The sector has been delicensed and enjoys 100% FDI. With the aim to boost the manufacturing sector, the Government has relaxed the excise duties on factory gate tax, capital goods, consumer durables and vehicles.

B. Opportunities and Threats

Opportunities

• Industrial Drive Roller Chain and sprocket Market 2021 is estimated to clock a modest CAGR of 1.4% during forecast period 2021-2026.

• Cement, Sugar and Fertilizer Industries is expected to boom in where Conveyor Chain is mainly used.

• Indias Steel Demand is expected to rebound by 19.8% as per World Steel Association (WSA) which good sign for being Engineering Companies.

• Engineering Manufacturing Companys Demand for spare would increase slowly in respond to the re opening of Covid lockdown and

Industrial activities and as such business of industrial chain sprocket is expected to rise.

Threats

• Economic uncertainty: Based on the current and future market environment estimates, the base cost of material is expected to continue to be volatile. GDP witnessed contraction pushing the economy in a recession.

• Covid-19 pandemic: With the threat of the pandemic continuing globally, several countries still in lockdown, the resultant economic slowdown. Also, Experts expects third wave and new variant "Delta-Plus" of Covid-19.

• Availability of Steel and its Price Volatility is very high

C. Outlook

FY 2020-21 was a challenging business year for all industries in many ways and Rolcon is no exception. A relentless focus on cost management, value engineering and customer partnering has enabled the Company to sustain in such in a challenging year.

The Company is confident that it can utilise future opportunities and face future challenges with agility in order to meet the shareholders expectation of sustainable growth and profitability. The key focus areas are:

• Adoption of New Technology and Machinery

• Increasing Assets

• Diversification New Products/ Services from Existing Customer

• Increasing the Value Addition per product

• To Sustain the EBITDA levels

• Retaining the existing Customer base and wallet share

• To explore Export sales

D.Discussion on financial performance with respect to operational performance

The Highlights of the Companys performance is provided below:

• Turnover reduced by 29.53 % and stands at 25.56 Crs due to Covid-19 lockdown situation in the country (YoY).

• PBT grown by 9.89 % from 84.03 Lakh to 92.34 Lakh

• PAT grown by 13.29% from 49.30 Lakh to 55.85 Lakh

• EBITDA has reduced by 12.58 % from 1.82 Crs to 1.59 Crs

• Long term borrowing has grown by 567.10 % from 9.02 Lakh to 60.14 Lakh (Overdraft from the bank against Fixed Deposit)

• Operating cash flow now stands at 1.58 Crs as against 0.95 Crs in LY

E. Key Financial Ratios:

Particular Units FY 2020-21 FY 2019-20

% Change

Remarks
Debtors Turnover Times 9.12 8.00 1.12 Close follow-up has improved the Debtor turnover
Inventory Turnover Times 6.62 10.81 -4.19 Reduction in sales caused the declined in Inventory Turnover
EBIDTA margin % 5.02 6.22 -1.20 Reduction in sales has affected the Earnings interest, taxes, depreciation, and amortization
Net Profit margin % 2.88 1.39 1.49 PAT Increased as Deferred Tax written back.
Return on net worth % 8.07 7.62 0.45 Increased due to Reduction of Expenses
Current Ratio Times 1.72 1.63 0.09 Increased in response to reduction in current liabilities
Debt Equity Ratio Times 1.72 1.86 -0.14 Increased due to secured borrowing.

Segment: The Company has identified its business of Manufacturing of Industrial chain and sprocket as its only primary reportable segment.

F. Internal control systems and their adequacy

The Company maintains adequate and effective internal control systems commensurate with its size and complexity. It also ensures that they are recorded in Al l material respects to permit preparation of financial statements in conformity with established accounting principles, along with the assets of the Company being adequately safeguarded against significant misuse or loss. In the opinion of the Management, the Company has adequate internal audit and control systems to ensure that all transactions are authorized, recorded and reported correctly. An independent internal audit function is an important element of the Companys internal control systems. This is supplemented through an extensive internal audit program and periodic review by the management and the Audit Committee. The Corporate Governance practices instituted by the Company are discussed in detail in the chapter on Corporate Governance which forms part of the Annual Report.

G. Risks and concerns

The Risk Management Committee maintains an active oversight of the risk and the effectiveness of the risk mitigation strategies and plans put in place by the Company. Covid-19 highlighted the need to proactively define and implement strategies to address pandemic risk as one of the key business risks facing the Company. The general slowdown of the economy due to disruptions caused by the pandemic as well as continued volatility in input costs and foreign exchange remains a risk. The Company has appropriate mitigation plans to protect margins while continuing to grow and transform the business. While the Companys focus on long term strategic drivers and brand building continues, during 2020 appropriate Strategic and pricing interventions as well as cost and efficiency management programs were undertaken keeping in mind input costs, competitive positioning and product brand strategy. The Company actively managed its cyber security risk including the impact of greater remote working required during the pandemic by promoting the right behaviors and using tools and processes to protect its information, systems, assets and people against current and emerging cyber security threats. The Company has a robust risk mitigation plan to minimize identified risks through continuous monitoring and mitigating actions as may be required.

H. HUMAN RESOURCE AND INDUSTRIAL RELATIONS

The Company recognizes that human capital is its cardinal asset. Prudent HR practices have helped nurture the skills and growth of its employees. The Company extensively invests in training programmes and learning modules. It reinforces engagement with employees across levels by providing an enriched workplace and transparent communication. With new ways of working during the pandemic, the Company is now geared to create a digitally-enabled workplace to the extent possible, with seamless virtual collaboration. The Company consciously works and maintains harmonious industrial relations at its offices and plants. It believes and nurtures a culture of complete t r a n s p a re n c y t h ro u g h o p e n communication channels with easy access. The Company further refines its policies in alignment with its organizational interest, benefitting everyone at the same time. As on December FY 2020, the Company had a total team of 248 employees adding value to the organization.

CAUTIONARY STATEMENT

The statement forming a part of this Report may contain certain forward-looking remarks with the meaning of applicable Securities Law and Regulations. Many factors could cause the actual results, performances, or achievements of the Company to be materially different from any future results, performances, or achievements. Significant factors that could make a difference to the Companys operations include domestic and international economic conditions, changes in government regulations, tax regime and other statutes.

For and on behalf of Boards Directors of
Rolcon Engineering Company Limited
Sd/-
Suresh H. Amin
Chairman & WTD
DIN: 00494016
Vallabh Vidyanagar
May 28, 2021.