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Shivalik Bimetal Controls Ltd Management Discussions

675.5
(0.93%)
Jul 18, 2024|03:32:02 PM

Shivalik Bimetal Controls Ltd Share Price Management Discussions

ECONOMIC REVIEW

Global Review

The World has witnessed an exceptional uncertainty due to the outbreak and spread of the global pandemic . As per the World Economic Outlook by the International Monetary Fund (IMF) "the global economy is projected to grow 5.5 percent in the year 2021 and 4.2 percent in the year 2022 . The forecast in the year 2021 may improve based on expectations of a vaccine-powered strengthening activities later in the year 2021 and additional policy support in a few large economies . "

The projected growth recovery in the year 2021 follows a severe collapse in the year 2020 that has had acute adverse impacts on women, youth, poor, informally employed people, and those who work in contact-intensive sectors . The global growth contraction for the year 2020 is estimated at -3.5 % . The strength of the recovery is projected to vary significantly across countries, depending on access to medical interventions and effectiveness of policy support

Indian Economy

The Indian economy contracted by 7.3% in FY21, as compared to 4.2% growth recorded in the previous fiscal year. The first half of the fiscal year witnessed overall economic slowdown, due to COVID-19 onset resulting in stringent lockdowns severely impacting economic activity, bringing manufacturing and trading activities to a halt As the economy emerged out of the pandemic-induced recession in the second half, it registered a positive GDP growth of 0.4% in Q3 and 1. 6% in Q4 on the back of a tailored fiscal stimulus of Rs . 20 trillion under ‘Self-Reliant India movement, robust financial market and structural reforms initiated by the government, along with revival of consumer confidence The growth reflected through uptick in manufacturing activity and GST revenues crossing Rs 1 trillion mark for a stretch of six months since October 2020 and hitting a record figure of Rs 1 23 trillion in March 2021

The resurgence of COVID-19 cases since March 2021 is posing a serious risk to economic recovery and weighing down Indias GDP growth projections for FY22 . Considering the impact on economically important states, Q1FY22 could witness lower economic activity and demand than anticipated due to stringent lockdowns and restrictions Multiple states have been enforcing lockdowns of varying severity, leading to reduced mobility and unemployment, leading to economic distress

However, the government has taken and taking several initiatives with the objective of revitalizing the economy. Proactive measures taken by the Government is expected to offer a sustained long-term recovery of the economy Favorable fiscal and monetary reforms, ease in credit policies and concentrated stimulus packages for distressed sectors and vaccination roll-out are expected to enable revival in economic growth

 

(Source:https://www.financialexpress.com/budget/unionbudget-2021-fm-sitharaman-proposes-steps-to- increasefunding- for-national-infrastructure-pipeline/2184391/).

INDUSTRY OVERVIEW

SHIVALIK caters to a broad spectrum of applications which include Switchgears, Energy Meters, Industrial, Electrical applications, Automotive & Electronic Devices . Our growth is directly connected with the Electrical, Electronics and Automotive Industries

Electrical Industry: The Electronics System Design & Manufacturing (ESDM) marketing India is anticipated to increase at a CAGR of 16.1% between 2019 and 2025, owing to strong demand, supportive government policies and increased digitalization The Government of India attributes high priority to electronics hardware manufacturing as it is an important pillar of Make in India, Digital India and Start-up India programmes

The Electrical Consumer Durables (ECD) segment in India is likely to grow owing to a demographic profile with higher disposable income, access to easy finance options, increasing electrification of rural areas, rapid urbanization and growth of nuclear families, and emerging consumer trends of ‘Home Proud and ‘Health & Wellness etc . Continuous focus on innovation to drive differentiation and creating value has provided a growth impetus to this sector

Smart Meter: Global Smart Mstsrs Market is sxpsctsd to grow at ~7.3% CAGR during ths forecast period, 2021-2027. Global Smart Meters Market is expected to witness high growth due to the rise in demand for devices in every sector. Smart meters are rapidly replacing traditional meters due to their accuracy and their proving better information . Smart meters are electronic devices that accurately monitor energy consumption Smart meters offer a host of benefits such as reduction of meter reading cost, removing inefficiencies, disconnection and reconnection cost in billing, and re-connection costs to corporations and consumers . There are a number of factors influencing the growth of the market including fiscal incentives and appropriate policies of the government. Furthermost, the rise in investments from governments to support the smart meter installation in the end-user sectors such as industrial, residential, and commercial are increasing the growth of the global smart meter market

Automotive Industries: The global electric vehicle market size is projected to grow from 4,093 thousand units in 2021 to 34,756 thousand units by 2030, at a CAGR of 26.8% . Factors such as growing demand for low emission commuting and governments supporting long range, zero emission vehicles through subsidies & tax rebates have compelled the manufacturers to provide electric vehicles around the world This has led to a growing demand for electric vehicles in the market Countries around the world have set up targets for emission reductions according to their own capacity

EVs had a growing demand in the covid-19 period. This led to a growing demand for EV production around the world. In the first few months, however, the production of most companies was affected due to lockdowns and logistics problems . However, post lockdowns, demand for EVs surged as governments around the world increasingly encouraged changing to low emission fuel vehicles Many countries also increased their EV charging stations and hydrogen fueling stations across their states . Overall, there wasnt much of a loss for the electric vehicle market during the pandemic due to its increase in demand

The Indian auto industry is expected to record strong growth in 2021-22, post recovering from effects of COVID-19 pandemic . Electric vehicles, especially two wheelers, are likely to witness positive sales in 2021-22 . According to NITI Aayog and Rocky Mountain Institute (RMI) Indias EV finance industry is likely to reach Rs . 3.7 lakh crore (US$ 50 billion) in 2030. A report by India Energy Storage Alliance estimated that EV market in India is likely to increase at a CAGR of 36% until 2026

In addition, projection for EV battery market is forecast to expand at a CAGR of 30% during the same period. This is a huge opportunity for India to not just achieve its sustainability targets but also emerge as a global EV manufacturing hub The current trends are in favour of growth and the revised policies under the FAME-II scheme, which are already in place, are bound to increase traction in the segment

Switchgear Industry: The Global Switchgear Manufacturing Market is expected to exceed more than US$ 137.10 Billion by 2024 at a CAGR of 6 .3 % in the given forecast period .

The global switchgear market is enrolling solid growth because of expanding access to power in developing nations and growing investments in smart grid networks in developed economies The worldwide switchgear manufacturing market is growing because of expanded interest for cutting edge switchgear from power age and dissemination organizations and manufacturing companies These elements alongside innovative advances, for example, smart grids and IoT technologies is expected to drive the switchgear manufacturing sector globally

The Indian switchgear market is expected to see high demand due to exponential growth in residential, commercial, and industrial sectors that the country is witnessing. With the expansion of smart grids, the need for quality power is also increasing Therefore, for smart grids to function optimally the communication between the switchgears, other network equipment and operators also become progressively important

COMPANY OVERVIEW

"Shivalik" is engaged in the business of manufacturing & sales of Thermostatic Bimetal /Trimetal strips and Components, Current Sense Metal Strip Shunts/Resistors, SMD Current Sense Resistors and other electron beam welded products . The Company specializes in joining of metals by various methods such as diffusion bonding, electron beam welding, continuous brazing and resistance welding The Company offers precision manufactured components specific to the application requirements of our customers . The Company is a single vendor to many prestigious OEMs since 1986 and has successfully met the most stringent of demands set by multiple large global organizations The application of

"Shivalik"s Products are mainly in Switchgears, protective relays, metering, various Automotive Devices and Energy and Battery Management Devices and various other Electrical Electronic and Automotive Devices . The Companys products are exported to over 40 industrialized countries around the world .

Our vision for our business is "To earn our clients trust and maximize the value of their business by providing solutions using our knowledge and technology. " We seek to emphasize on our core values of being passionate about our clients success, treating each person with respect, being global and responsible and maintaining unyielding integrity in everything we do

The year was marked by profound disruption on account of COVID-19 pandemic and healthy rebound in the second half. First quarter was radically impacted by nationwide lockdowns . Our factories, warehouses, and offices were temporarily shut, in line with relevant guidelines from local and national authorities

The Company maintained tight operating controls and functioned with increased agility, resulting in an improved liquidity position which helped it comfortably sail through challenging business environment. Gradual unlocking from June showcased progressive signs of improvement as the restriction in movement eased . Infrastructure and economic activities started picking up and also started charting a broader recovery path from the second quarter onwards

It has been a challenging year with several macro headwinds encompassing several industries Slow economic activity and liquidity challenges impacted the overall demand scenario in the industry. However, your Companys cost saving measures, robust business continuity plan and strong brand proposition led to decent overall growth and a healthy balance sheet

The assessment of impact of COVID-19 is a continuous process given the uncertainties associated with its nature and duration The company will continue to monitor any material changes to future economic conditions

FINANCIAL REVIEW

Standalone financial performance is as under:

Equity Share Capital: The Equity Share Capital of the Company as on 31* March, 2021 stood at Rs . 768.06 Lakhs . There was no fresh issue of capital during the year

Turnover: The Companys sales and other income has increased from Rs . 19,162.97 Lakhs to Rs . 20,776.77 Lakhs, an increase of 8.42% over the previous year.

Net Profit: Net profit available for appropriation for the year 2020-21 stood at Rs . 2,406.68 Lakhs as compared to Rs . 1,256.34 Lakhs in the previous year.

Earnings per Share (EPS): The Companys Earnings per Share during the current year is Rs . 6 .27 as compared to Rs 3 27 in the previous year

Net Worth:

Particular FY 2020-21 FY 2019-20 CHANGE CHANGE %
Net Worth 13,823.46 11,531.99 2,291.47 19.87

Net Worth has increase by 19.87% from Rs . 11,531.99 Lakhs in FY 2019-20 to Rs . 13,823.46 Lakhs in FY 2020-21. The book value per share has increased to Rs. 36.00 in FY 2020-21 from Rs . 30.03 in FY 2019-20.

FUTURE OUTLOOK

Outlook for the SHIVALIKs business in the medium to long-term remains positive given the diverse usage of its products . It is a promising sign that the governments plans and policies are conducive towards the growth of the SMART Metering, EVs and Switchgear market. In fact, the major factor that drives the smart meter, EVs market growth is supportive government policies and financial incentives such as production-linked incentive (PLI) scheme in automobiles & auto components with an approved financial outlay over a five-year period of Rs .57,042 crore (US$8.1billion) to boost Indias manufacturing capabilities, exports and promote the ‘Atmanirbhar Bharat initiative, FAME II (Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles in India) scheme, Automotive Mission Plan 2016-26 and Liberalization in the FDI policies

Whils hsalthy growth in forssssn in all the ssctors catsrsd to by SHIVALIK, (switchgear, mstsring, power electronics and automotive) the most promising market for the Company will be the EVs sector. The Companys products find many applications not only in the Electric Vehicle itself, but also in the charging station(s). The charging stations will require both Switchgear as well as Current Sense Resistors .

As far as Global market in concerned, three million new electric cars were registered in 2020. This was 41% higher than those registered in 2019 . Further, the rise in electric car sales in 2020 came even as the worldwide automobile market contracted by 16% due to the Covid-19 pandemic. Apart from that, the number of electric cars, buses, vans and heavy trucks on roads is expected to hit 145 million by 2030 and several Government agencies are also providing numerous subsidies and financial aids for promoting the adoption of Electric Vehicles in the country, thereby catalyzing the demand for Electric Vehicle Batteries and their Management Systems .

The second wave of COVID-19 that is impacting the nation along with the increasing commodity prices is expected to pose challenges for your Company. However, your Companys adequate liquidity position, surplus cash and operational efficiencies will enable it to protect its profitability and meet all statutory requirements and obligations Further, during this time, we prioritized safety of our employees and partners and by end of August 100% of our workforce will be fully vaccinated

Opportunities & Threats Opportunities

• Favourable Government Schemes and Programmes

• Introduction of new ELECTRIC vehicle models in the Global market.

• Rise in affordable housing projects of the Govt, such as "Housing for All" and the "Pradhan Mantri Awas Yojana" offers potential to generate demand for electrical products

• Governments plan to convert traditional meters into smart meters and replacement and retrofitting programmes . Threats

• Commodity inflation: Sharp increase in commodity prices could lead to increase in cost of finished goods impacting competitiveness and working capital cost;

• Supply chain Disruptions: Shortages of shipping container and covid impacted logistics

• Pandemic: Deterioration in demand due to ongoing pandemic .

Risks & Concerns

The Company adopts a comprehensive and integrated risk appraisal, mitigation and management process The risk appraisal and risk mitigation measures of the Company are periodically for reviewed

The Company has internal audit systems which assesses the effectiveness of internal controls, risk identification and mitigation processes prevailing in the Company Audit Committee of the Board of Directors also reviews the internal audit reports and takes appropriate actions w r t Deviations, if any

The various heads of operations have regular interactions and communications to keep themselves abreast with the developments in the market, products, competition and other relevant areas

Internal Control System and their Adequacy

SHIVALIK has an adequate system of internal controls in place which has been designed to provide a reasonable assurance with regard to maintenance of proper accounting controls, monitoring of operations, protecting assets from unauthorized use or losses, compliance with regulations and for ensuring reliability of financial reporting Company has documented procedures covering all financial and operating functions

Company has robust internal audit programme, where the Internal Auditors, an independent firm of chartered accountants, conduct a risk-based audit with a view to not only test adherence to laid down policies and procedures but also to suggest improvements in processes and systems Internal audit observations and recommendations are reported to the Audit Committee, which monitors the implementation of such recommendations

Occupational Health & Safety

SHIVALIK gives great importance to all the matters related to Health, Safety and Environment and ensures compliances of all statutory regulations . Training of employees on emergency response, firefighting, rescue and first aid are some of the regular features at manufacturing sites

Occupational Health & Safety is an area concerned with protecting the safety, health and welfare of employees engaged in the Company. The goals of occupational safety and health programs include fostering a safe and healthy work environment. Occupational Health & Safety has been recognized as an integral and key part of the Companys Business Process . The management believes that people working with the organization are of key resource for the success of the Organization . The sincere efforts put in by the employees have translated in to Quality improvements, Productivity improvements and Cost reduction etc . Management firmly believes in developing and nurturing its human resources and improving their talents which subsequently help in the growth of the Company. Proper care is taken for safety, health and welfare of the employees The Company ensured employee safety through investments in pollution mitigating equipment, the selection of safe processes, adequate safety training and provision of safety equipment Our aim is to remove unsafe situations and practices by any/all pre-emptive steps required . For the safe return of the employees to their homes all precautions are taken to avoid accidents

Human Resource and Industrial Relations

The organisation aims to achieve sustained growth through developing a skilled, motivated and committed workforce

Your Company is continuously striving to create appropriate environment, opportunities and systems to facilitate identification, development, and utilization of their full potential and inculcating a sense of belongingness . Your Companys industrial relations continued to be harmonious during the year under review

Cautionary Statement

Statements in the "Management Discussion and Analysis" describing the Companys objectives, projections, estimates and expectations or predictions may be ‘forward looking statement within the meaning of applicable securities laws and regulations . Actual results could differ substantially and materially from those expressed or implied . Important factors that could make a difference to the Companys operations include economic conditions effecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, currency (forex) fluctuations, changes in government regulations, tax laws, other statutes and other incidental factors

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