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. I N D U S T RY S T R U C T U R E A N D

DEVELOPMENT

Global Economy

As per IMF World economic Outlook (Apr-2024), a slight acceleration for advanced economies—where growth is expected to rise from 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8 percent in 2025—will be offset by a modest slowdown in emerging market and developing economies from 4.3 percent in 2023 to 4.2 percent in both 2024 and 2025. Global inflation is forecast to decline steadily, from 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025, with advanced economies returning to their inflation targets sooner than emerging market and developing economies. Core inflation is generally projected to decline more gradually.

The global economy has been surprisingly resilient, despite significant central bank interest rate hikes to restore price stability, the recent financial sector turmoil is increasingly elusive. The recent tightening in global financial conditions is also hampering the recovery. As a result, many economies are likely to experience slower growth in incomes in 2023, amid rising joblessness. Moreover, even with central banks having driven up interest rates to reduce inflation, the road back to price stability could be long. Over the medium term, the prospects for growth now seem slow.

According to the World Bank, global growth is expected to slow 2.4% in 2024, third consecutive year of deceleration, while in Asia and pacific it projected to slow 4.5% in 2024 and 4.4% in 2025. Growth in china is expected to be slow. While same is expected in Europe and Central Asia at moderate rate 2.4% in 2024 and slight progress in 2025.

Indian Economy

According to the World Bank, growth in south Asia is expected to edge marginally lower from an estimated 5.7% in last year to 5.6% in 2024 and then 5.9% in 2025. Indias economic growth rate is projected to remain strong largely driven by robust investment and services. While, The International Monetary Fund (IMF) has raised Indias growth forecast for 2024-25 to 6.8% from 6.5% on the back of strong domestic demand and a rising working-age population. The Reserve Bank of India, the countrys central bank, estimates the economy to grow at 7%. The IMF estimates Asias third largest economys gross domestic product to grow at 6.5%. The finance ministry in its last monthly economic report (February) said that strong growth accompanied by stable inflation and external account, and progressive employment outlook would help the Indian economy close FY24 on a positive note. "There are headwinds like indications of hardening crude oil prices and global supply chain bottlenecks to trade. Nonetheless, India, on the whole, looks forward to a bright outlook for FY25."

Industrial & Engineering Market

According to the survey, new orders came from both domestic and export markets. New export orders, which increased at the fastest pace since May 2022, reflected better sales to Africa, Asia, Europe and the US, the survey said.

Indias push for manufacturing growth is expected in sunrise sectors such as semiconductors, electronics manufacturing, electric vehicles ecosystem, renewable energy and defence, according to a recent report by Boston Consulting Group and Matrix Partners.

To this extent, the Centre has stepped up its capex budget in recent years to try and improve the countrys creaking infrastructure, create jobs, and push manufacturing to accelerate economic growth. The government has also announced production linked incentive (PLI) schemes across 14 key sectors in 2020 with an outlay of ?1.97 trillion (over $26 billion) for a period of five years starting 2021-22 to enhance manufacturing capabilities. The Centres capital expenditure on infrastructure projects was raised to ?11.11 trillion for the financial year starting 1 April 2024.

As per Deccan herald survey, Electronics and electricals, along with machine tools, are two manufacturing sectors that are expected to have a strong. The other sectors included in the survey, namely automotive and auto components, capital goods and construction equipment, chemicals, fertilisers and pharmaceuticals, FMCG, metal and metal products, paper and paper products, textiles, apparels and technical textiles, and miscellaneous, are expected to see moderate growth, which is pegged at 5-10 per cent. While, CII identified a list of manufacturing sectors that contribute to the majority of manufacturing GDP which include Aerospace and Defense, Auto and Auto Components, Cement, Chemicals, Engineering, ESDM, Pharmaceuticals, Steel and Textiles.

The long-term outlook for the Indian economy is supported by a number of key growth drivers. An important positive factor for India is its large and fast-growing middle class, which is helping to drive consumer spending. The rapidly growing Indian domestic consumer market as well as its large industrial sector have made India an increasingly important investment destination for a wide range of multinationals in many sectors, including manufacturing, infrastructure and services.

Indias engineering exports edged up to USD 109 billion in 2023-24 despite a slowdown in some of the major global markets amid geo-political tensions, EEPC said on Monday. Indias engineering exports are competitive globally and expected to gain further market share in the coming years, with the country entering into more FTAs. Notably, the engineering sector is the largest contributor to Indias overall exports, with a share of 24 per cent, and also contributes approximately 40 per cent of the countrys total manufacturing exports."The engineering goods exports in FY24 surpassed the previous years numbers despite a slowdown in some of the key global markets, geo-political tensions, Red Sea crisis and high freight rates. Engineering exports in FY24 rose to USD 109.31 billion from USD 107.04 billion in the previous financial year, thus registering a growth of 2.13 per cent, the Commerce Ministry data released Free trade agreements (FTAs) with the UAE and Australia have allowed the exporting community to deepen their foothold in key markets. India and the four-nation European bloc EFTA recently signed a free trade pact, The European Free Trade Association (EFTA) members are Iceland, Liechtenstein, Norway, and Switzerland.

B. OPPORTUNITIES AND THREATS

Opportunities

• Infrastructure, Road & Transport growth and continuous focus by the government will be rise robust demand for Cement, where Conveyor Chain is mainly used.

• Ethanol blending promotion by the government will boost the sugar production and OEM related business.

• Capital Goods and Food process industries are doing exceptionally well, which is expected to show same growth in ensuing year too.

• The Engineering Manufacturing Companys

Demand for spare would increase slowly in respond to the overall manufacturing growth in the Country and outside and as such business of industrial chain sprocket is expected to rise.

• If same Government elected again in ensuing General Election 2024, will give steady growth and same sector in focus where our company is already gaining advantage.

Threats

• Global geopolitical tension: the conflict among the Israel – Hamas and Iran has impacted in Oil production and its international price. Combat between Russia and Ukraine are still there which has restricted the growth in Europe, and same is still impulsive.

• Economic uncertainty: Based on the current and future market environment estimates, the base cost of material is expected to be volatile. The demand from China is worrisome, especially in steel sector.

• Inflation in USA and central banks interest rate cut is still unpredictable. Which, has impact on Consumer products, auto industry and financial market.

• The Major fear the market predicts is the result of ensuing General election-2024 in India, can cause change of focus of the sector development.

C. OUTLOOK

A relentless focus on cost management, fiscal prudence, value engineering and customer partnering has enabled the Company to record a creditable performance.

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:

• Increasing the Value Addition per product

• Atomisation of production process as much as possible

• To Sustain the EBITDA levels

• Retaining the existing Customer base and attract new OEMs

• More Focus on Marketing all over the globe along with domestic footprint

• To explore Export sales

• Growth oriented Investment

D. D I S C U SS I O N O N F I N A N C I A L

PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The Highlights of the Companys performance is provided below:

• Turnover increased by 8.31% and stood at 5149.88 Lakh due to fast recovery in economy and increases overall demand from all sectors in the country (YoY).

• PBT grown by 14.22% from 466.40 Lakh to 532.70 Lakh

• PAT Declined by 9.91% from 322.88 Lakh to 290.87 Lakh

• EBITDA has Increased by 14.52% from 583.09 Lakh to 667.77 Lakh

• Long term borrowing has down by 33.94 % from 17.80 Lakh to 11.76

• Operating cash flow (Consolidated) now stands at 193.79 Lakh as against 118.80 Lakh in LY

Segment: The Company has identified its business of Manufacturing ‘Engineering Goods which is only ‘operating Segment as primary reportable segment.

E. KEY FINANCIAL RATIOS

Ratios	Units	FY 2023-24	FY 2022-23	% Change
Current Ratio	Times	1.62	1.97	(0.36)
Debt Equity Ratio	Times	0.76	0.52	0.24
Return on Equity/Net worth	%	14.60	19.35	(2.45)
Inventory Turnover	Times	5.25	6.33	(1.08)
EBIDTA margin	%	12.97	12.26	0.70
Net Profit Ratio	%	6.65	6.79	(0.14)

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 all 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 and compliance practices are well formed with internal and independent professional consultancy practice from time to time review and on periodical requisites amendments as and when require as per the Companies act 2013, and SEBI regulations.

G. RISKS AND CONCERNS

The Management maintains an active oversight of the risk and the effectiveness of the risk mitigation strategies and plans put in place by the Company specially, define and implement strategies to address uncertain or contingent risk as one of the key business risks facing the Company. 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.

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 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

Human Resource development continues to be our top focused area which will ensure intentions are converted to realities. The emphasis was on reskilling and up skilling to enable the teams in navigating change and remaining compliant with evolving processes. Industrial Relations with employees remained cordial throughout the year under review. The Company extensively invests in training programs and learning modules. The Company consciously works and maintains harmonious industrial relations at its offices and plants. It believes and nurtures a culture of complete transparency through open communication channels with easy access. The Company further refines its policies in alignment with its organizational interest, benefitting everyone at the same time.

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 Board of Directors of

Rolcon Engineering Company Limited

Sd/-

Suresh H. Amin

Chairman & WTD

DIN: 00494016

Vallabh Vidyanagar

May 24, 2024.