samrat forgings ltd share price Management discussions

Your directors have pleasure in presenting the management discussion and analysis report for the year ended on March 31,2023.

INDUSTRY STRUCTURE AND DEVELOPMENT

The Indian Economy has been scripting a recovery after the bruising impact of COVID 19 pandemic. However, the global slowdown, geopolitical tensions, high inflation, rising interest rates have posed challenges to faster expansion. Despite these challenges, India has shown remarkable resilience to global headwinds in Financial Year 2022-23 and remains in a sweet spot owing to its strong microeconomic fundamentals. Government initiatives such as Make in India, production-linked incentive schemes are expected to boost manufacturing and accelerate economic growth.

The domestic tractor Industry, to which your Company has major supplies, posted a solid growth during FY 2022-23 which has favored the company to get better sale results from its customers into/ related to tractor manufacturing. However, the demand for commercial vehicles continued to be under pressure, with rising fuel prices and subdued manufacturing activity during the year particularly in the first half of FY 2022-23.

OPPORTUNITIES AND THREATS

The factors like hike in minimum support price (MSP) for major crops, good water reservoir levels, adequate availability of financing etc are likely to sustain the tractor demand momentum. Also, owing to the Governments thrust to enhance farmers income through various initiatives such as improved irrigation facilities, crop insurance, periodic revision in MSP, monetary support to marginal farmers etc, it is expected that the tractor industry will continue witnessing growth in medium to long term. In this backdrop, the business of the Company being connected to tractor industry to which the company has major supplies is likely to be improved.

With the installation of further machinery during last year, the Company has expanded its production capacity and is striving to increase its volume of supplies to other customers also and explore new business opportunities in niche segments with special focus on exports. Necessary initiatives and steps towards value engineering, cost reductions, products up gradation continue to be the main focus for the company this year too.

The volatility of prices of steel and supply chain related issues, availability of required manpower etc are the major concerns before the company. However, no threat is foreseen at present to be a stoppage of the company as going concern.

SEGMENT WISE OR PRODUCT WISE PERFORMANCE

The Company operates in single segment i.e. manufacturing of closed die steel forgings and machined components and all its operational performance reported in the financial statements and other reports forming part of the Annual Report are from this single segment only. The Company manufactures and supply wide range of components to its customers in automotive and nonautomotive industries; thus, the evaluation of product wide performance is much complicated and not feasible to be reported and the performance of the company can be recognized as a whole as there is no separate segment for reporting.

OUTLOOK

The Indian automotive industry is expected to sustain its growth momentum in 2023 despite the challenges such as escalating input costs, higher inflation etc. Tractor industry whereof your company has major supplies and new businesses coming from non-tractor segment, overseas customers like Railways and construction equipment manufacturers and focus on exports, it is expected that the company would be able to make its business grow in coming years.

The company has developed many new parts both for domestic as well as export markets and is very confident of growth. The Company has expanded its production capacity during the financial year 2022-23, which has resulted in increased sales and value addition. More machines are planned in forging as well as machining division to strengthen production capacities of the Company.

RISKS AND CONCERNS

Commodity risks, characterized by fluctuations in demand and supply, and price movements pose significant risk in manufacturing industries. In the Forging industry, Alloy steel, being the primary raw material for manufacturing is susceptible to risks arising from fluctuations in global steel price movement. The impact of such risks creates challenges in maintaining competitive advantage in price and strained working capital requirements of the company.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

All departments of the Company are adequately staffed with professionally qualified and experienced personnel. There are established internal control systems and procedures in place commensurate to the size and nature of business of the Company, which ensure efficient use and protection of business resources and compliance with the policies, procedures and statutes. The financial information is compiled periodically and reviewed by the management time to time. The reporting and monitoring system is elaborate and the same is reviewed by the management on regular basis. The internal control is supplemented by programs of internal audits, review by the management and documented policies, guidelines and procedures. The focus of these reviews is to identify the weaknesses and the areas of improvement, compliance with defined policies and processes, safeguarding the tangible and intangible assets and compliance with applicable statutes.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

After the adverse impact of COVID 19 pandemic during recent past, the Forgings Industry has picked up momentum during the financial year 2022-23. The overall scenario intermittently has posed different challenges like increase in price of raw material and other consumables, supply chain related issues more particularly procurement of raw material, availability of required manpower etc. However, the Company by effectively managing all related matters, continued to do well and yet again able to post its highest ever performance.

In the above backdrop, the Company has achieved its highest ever turnover during the financial year ended 31^st March, 2023. The net operating revenue for FY 2022-23 stood at Rs. 181.31 crore as against Rs. 139.49 crore of previous year. With continued focus on cost front, the Company has earned profit before tax of Rs. 6.99 crore against the previous years profit before tax of Rs. 5.18 crore; profit after tax (before other comprehensive income) of Rs. 4.89 crore (previous year: Rs. 3.56 crore) translated into Earning Per Share of Rs. 9.77 (previous year: Rs. 7.13). Total comprehensive income (net of tax) for the year stood at Rs. 5.04 crore as against Rs. 3.61 crore of previous year.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

The Company believes that its human assets are the most valuable assets, which convert planning into execution and generate results. Hence, the Company always endeavor and attentive on having qualified and talented employees in all divisions. The management always keeps its focus to evaluate the performance of all employees and necessary steps are taken to strengthen the areas that need improvements. More experienced technical manpower is being taken at the senior level to streamline the whole business process and adequate facilities and opportunities are also being provided to the technical and professional staff to update themselves with the latest technologies and different other activities. The company continued to maintain good relationship with workers and staff during the last year.

As on March 31, 2023 the company had 747 permanent employees.

KEY FINANCIAL RATIOS

Particulars	Financial Year 2022-23	Financial Year 2021-22	Change as compared to previous Financial Year
Debtors Turnover Ratio	8.67	7.06	22.88%
Inventory Turnover Ratio	3.30	2.58	27.91%
Interest Coverage Ratio	2.51	2.18	15.14%
Current Ratio	1.13	1.16	-2.59%
Debt Equity Ratio	2.09	1.98	5.55%
Operating Profit Margin%	10.98	11.01	-0.27%
Net Profit Margin%	2.69	2.55	5.49%
Return on Net Worth%	17.15	15.19	12.90%

Detail and reason of significant changes i.e. change of 25% or more:

• Inventory turnover ratio increased due to increase in sales in comparison of previous year.

CAUTIONARY STATEMENT

This report may contain statements particularly which relate to Management Discussion and Analysis describing Companys objectives, projections, estimates and expectations etc, which the Company believes are or may be considered to be "forward looking statements" within the meaning of applicable laws and regulations. The actual results might differ materially from those expressed or implied. The Company assumes no responsibility in respect of forward looking statements which may be amended or modified in the future on the basis of subsequent developments, information or events.

Regd. Office:	For and on behalf of the Board
Village & P.O. Ghollu Majra, Tehsil Derabassi, Distt. Mohali, Punjab - 140506
Email: info@samratforgings.com
CIN: L28910PB1981 PLC056444	Rakesh M Kumar	Ritu Joshi
Date: 12.08.2023	Managing Director	Director
Place: Derabassi	(DIN: 00066497)	(DIN: 01598873)