RTS Power Corporation Ltd Management Discussions.

(Annexure "B" to Directors Report)

Industry Structure and Developments, Opportunities and threats

Your Company is a manufacturer of Power & Distribution Transformers, Cables and Conductors of various capacities which are electrical equipment used in the generation, transmission and distribution of electricity. The product portfolio has been further increased with the introduction of Galvanized Steel Wires and Strips by our Wholly-owned Subsidiary, Reengus Wires Pvt. Ltd. Ever since the onset of Covid-19 in the country, most Indian Utilities have been severely impacted. Due to poor recovery of Electricity and High T&D Losses, Utilities remain in a very poor financial condition. Many of them have postponed their capital expenditure due to shortage of funds. Most Central Government Funded schemes have come to an end and the country has achieved almost complete Household Electrification. The Central Govt has announced a new scheme for the Power Sector under the National Infrastructure Pipeline. The same is due to begin implementation in the current financial year. Once the projects are awarded, new orders will start flowing again. In the present scenario, order booking remains weak.

India’s transformer market has the presence of many companies in the unorganized sector. The impact of GST, Demonitization as well as Covid 19 has severally impacted most of them. Due to the low demand scenario, many companies are quoting very low prices to get orders. Your company shall continue to focus on reasonable margin orders and prefers not to execute orders which are very low margin or below cost. While in the short term the order situation remains low, your company is encouraged by the response its wholly owned subsidiary is receiving from the market. The new project of Galvanized Steel Wires and Strips has commenced commercially production and the operations of the same are stabilizing. Going forward your company expects this new line of business to provide growth to the company.

Segment-wise or Product-wise Performance

PARTICULARS

SALES (GROSS)

Year ended 31.03.2021 Year ended 31.03.2020
(Rs. in lakhs ) (Rs. in lakhs )
Electrical Equipment- Transformers, Cables, Conductors 6,009.53 11,140.90
Wind Energy 60.26 86.17

Financial Performance (Rs. in Lakhs)

PARTICULARS Year Ended 31.03.2021 Year Ended 31.03.2020
Total Income 6,778 11,429
EBITDA 973 862
Profit Before Tax (PBT) 534 327
Profit After Tax (PAT) 411 1,186

Operational Performance

Net Revenue from Operations for the year was _ 60 crores as compared to _ 112 crores in the previous year resulting in a decrease of 46.42%. However, Profit Before Tax has increased by 63.31 % to _ 5.34 crores as against _ 3.27 crores in the previous year. Given the fall in demand for Transformers and Cables, your Company has expanded its portfolio of products and services by setting up a Wholly –owned Subsidiary, Reengus Wires Private Limited was formed in year 2019 for manufacture of galvanized wires and strips. This plant has now commenced commercial production and is trying to establish itself in the market. The response so far has been encouraging. Due to the onset of Covid-19, Indian Utilities have been facing various headwinds. Their financial position is today very precarious. Most Utilities have postponed their purchase of Capital Equipment, severally affecting the Indian Electrical Equipment Industry. At this stage the outlook of our industry remains extremely subdued and challenging. Your company has adopted a very cautious approach towards only selected order booking from Utilities. Given low external borrowings and very low Total outside Liability, your company is in a better position than many of its competitors to weather the present storm. External Liabilities including Borrowings and trade payables continues to remain low. Your company has negligible long term liabilities and the company shall endeavor to keep the same within manageable limits. Trade Payables have further reduced from _19.02 crore to _7.79 Crore during the current financial year. Finance Cost has come down from 2.85 crores to 2.11 crores. The management remains committed to the growth of the Company without relying on excessive external borrowings. Your Company remains very careful in selecting its customers and is targeting only profitable segments with payment certainty. Demand for your Company’s products remain low in the short term.

Risks and concerns

Due to overcapacity in the industry, your Company is facing the problem of lower margins. Continuous increase in cost of raw materials, like CRGO steel, Copper, Transformer Oil, etc. can contribute for a further erosion in margins.

However, the Management is fully aware of the risks and threats and actively works towards mitigating the same.

Outlook

Under the current scenario, given the impact of COVID 19 on the economy remains unclear, it is very difficult to fully assess the impact on the business of your company. However, your company remains confident, given the strength of the business, wide range of products and strong Balance Sheet, once normalcy comes back to the economy, your company will be able to capitalize on growth opportunities and bounce back to higher growth.

Internal Control Systems and their adequacy

The philosophy being followed with regard to Internal Control Systems and their adequacy has been formulation of effective systems, commensurate with the Company’s size and nature of its operations and their strict implementation to ensure that assets and interests of the Company are safeguarded and checks and balances are in place to determine the accuracy and reliability of the accounting data.

The Company has a well-established and comprehensive Internal Control structure to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition, that transactions are properly authorized recorded and reported correctly and that operations are conducted in an efficient and cost effective manner and that all applicable laws and regulations are complied with.

Your Company has proper and adequate system of Internal Control in all areas of its operations. This Internal Control System are regularly reviewed and monitored. The Audit Committee of the Board of Directors supervises the functioning and effectiveness of Internal Controls.

Challenges during Lockdown due to COVID-19

Covid-19 pandemic has severely disrupted the Company’s business in many ways.

During the Covid-19 related lockdown period, the Company continued operations in a minimal way by:

Continuously realigning the manpower planning and business processes while complying with social distancing guidelines issued by Government Authorities from time to time.

Constantly updating consumers regarding the continuous changes in different processes dynamically, through various communication channels like SMS, Email.

Regularly interacting with different Government agencies and adapting to various Government directives, both at Central as well as State Level.

Doing fund planning proactively

Upgrading digital services to support working from home, online payment by consumers, teleconferencing /

Webinars etc.

Material developments in Human Resources / Industrial Relations front

Employee Relations scenario of your Company continues to be excellent.

Your Company would like to record its appreciation of the whole hearted support and dedication from employees at all levels numbering 58 as on March 31, 2021 in sustaining its operations and functioning during the period under review.

Registered Office: For and on behalf of the Board of Directors
56, Netaji Subhas Road
2nd Floor S. S. JAIN
Kolkata – 700001 Chairman
Dated : June 30, 2021 DIN 00013732