shree ghantakarna rolling mills pvt ltd Management discussions

You should read the following discussion and analysis of financial condition and results of operations together with our financial statements included in this Draft Prospectus. The following discussion relates to our Company and is based on our restated financial statements. Our financial statements have been prepared in accordance with Indian GAAP, the accounting standards and other applicable provisions of the Companies Act.

Note: Statement in the Management Discussion and Analysis Report describing our objectives, outlook, estimates, expectations or prediction may be "Forward looking statement" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to our operations include, among others, economic conditions affecting demand/supply and price conditions in domestic and overseas market in which we operate, changes in Government Regulations, Tax Laws and other Statutes and incidental factors.

BUSINESS OVERVIEW

Our Company was incorporated as Shivani Rolling Mills Private Limited on June 26, 1984 under the Companies Act, 1956 with the Registrar of Companies, Gujarat bearing Registration number 7041. Further name of our Company was changed from Shivani Rolling Mills Private Limited to Shree Ghantakarna Rolling Mills Private Limited vide Special resolution dated December 27, 1996. Further name of our Company was changed from Shree Ghantakarna Rolling Mills Private Limited to Rhetan Rolling Mills Private Limited vide Special resolution dated August 29, 2018. Further name of our company was changed from Rhetan Rolling Mills Private Limited to Rhetan TMT Private Limited vide Special resolution dated December 31, 2021. The status of the Company was changed to public limited and the name of our Company was changed to Rhetan TMT Limited vide Special Resolution dated January 10, 2022.

Our Company owns a Rolling Mill which was non-operational from year 2001 to 2017 due to internal financial constraints as well as market conditions. In the year 2018 we had begun the process of revamping as well as expanding its production facilities. And we began the production in 2018 with an aggregate installed capacity of 30,000 tons per annum

We are an IS 1786: 2008 certified company. Our company strives to provide diversified products of steel, manufactured at our plant located at Survey No. 325, Karannagar, Kadi-Kalol Road, Taluka Kadi, Dist. Mehsana, Gujarat - 382715 spread over 15000 sq. yards. The plant is fully geared with latest technologies to provide competitive edge in the industry and is also compliant with the laws and licenses applicable on it. We are operating a Rolling Mill Section with installed capacity of 30,000 MTPA to produce TMT Bars and Round Bars in our plant. We have successfully established our brand in TMT Bars manufacturing.

Our total income as restated were M 6,703.45 lakhs, M 5,213.01 lakhs and M 2,008.26 lakhs for the period ended for the fiscals 2022, 2021 and 2020 respectively. Further, Our Profit after Tax had been recorded at M 234.57 lakhs, M 13.44 lakhs and M(58.04) lakhs for the period ended for the fiscals 2022, 2021 and 2020.

Our Strengths

Well educated and experienced management

Our senior management team is well educated and experienced in the trading and manufacturing industry of steel products. Our Promoter Director – Mr. Shalin Shah has completed his Civil Engineering from L.D. Engineering College, Ahmedabad and he has over three decades of experience in various businesses. We believe that our management teams experience and their understanding of the relevant business cycles will enable us take advantage of both current and future market opportunities. It is also expected to help us on addressing and mitigating various risks inherent in our business, including significant competition, reliance on independent agents, and fluctuations in prices.

Group Synergies

Our Company is part of Gujarat based diversified business group currently promoted by Mr. Shalin Ashok Shah and family. Our group has business interests in various sectors including Oil and Gas, Steel, Infrastructure, Electronic Equipments and Chemical Products. We believe that our interests and networks amongst the real estate and infrastructure space would help us identify sustainable business opportunities in our structural steel business.

Location of the Manufacturing Unit

Our manufacturing unit is located at around 45 kms from Ahmedabad at Industrial area of Kadi near Ahmedabad-Mehsana highway. Both Ahmedabad and Mehsana are big steel markets and thus the location is strategically advantageous. There are many steel industries nearby from where raw materials are easily made available. The location of the project is surrounded by states like Maharashtra, Rajasthan and Madhya Pradesh, which are producing sample quantity of iron and steel raw material. So, the basic raw materials for our products are all indigenously available at short notice and in required quantity and quality. The location of our plant is important for the smooth and economical operation of the industrial unit.

Significant Developments after March 31, 2022 that may affect our Future Results of Operations

The Directors confirm that there have been no events or circumstances since the date of the last financial statements as disclosed in the Draft Prospectus which materially or adversely affect or is likely to affect the profitability of our Company, or the value of our assets, or our ability to pay liabilities within next twelve months.

RECENT DEVELOPMENT

Impact of COVID-19

The pandemic outbreak has caused an economic downturn on a global scale, including closures of many businesses and reduced consumer spending, as well as significant market disruption and volatility. The demand for our products is dependent on and directly affected by factors affecting industries where our products are supplied. Our manufacturing operations were shut down from March 23, 2020 to May 18, 2020. After that, we were allowed to resume operations subject to certain adjustments in working patterns and limited workforce. Despite the impact of the COVID-19 pandemic, our revenue from operations for the Fiscal 2021 and for Fiscals 2022 was Rs. 5,213.01 lakhs and Rs. 6,703.45 lakhs respectively. We continue to closely monitor the impact that COVID-19 may have on our business and results of operations. It is difficult for us to predict the impact that COVID-19 will have on us, our customers or suppliers in the future.

FACTORS AFFECTING OUR RESULT OF OPERATIONS Economic conditions in the markets in which we operate

Our results of operations are dependent on the overall economic conditions in the markets in which we operate, including India. Any change in macro-economic conditions in these markets, including changes in interest rates, government policies or taxation and political, economic or other developments could affect our business and results of operations. The iron and steel market in India may perform differently and be subject to market and regulatory developments that are dissimilar to the markets in other parts of the world. While stronger macro-economic conditions tend to result into higher demand for our products, weaker macro-economic conditions tend to result into lower demand. Change in demand in the market segments we currently supply or improvement/deterioration in the market or a change in regulations, customs, taxes or other trade barriers or restrictions could affect our operations and financial condition.

Relationship with key customers

We have historically derived, and may continue to derive, a significant portion of our income from our top 10 customers. In Fiscals 2022, our top 10 customers represented 81.82%, of our total revenues from operations in such periods. Any reduction in orders from our top ten customers would adversely affect our income. The demand from our key customers, in particular our top 10 customers, determines our revenue levels and results of operations, and our sales are directly affected by the production and inventory levels of our customers. Our customers in turn are dependent on demand from their customers as well as general trends in the global iron & steel industry and construction and infrastructure industry. Over the years, we have developed strong relationships with a number of domestic corporations through which we have been able to expand our product offerings and also our geographic reach. Our business depends on the continuity of our arrangements with these customers. Our sales to such customers are typically conducted on the basis of purchase orders that they place with us from time to time.

Government approvals, licenses, regulations and policies

We require certain approvals, licenses, registrations and permissions for our operations. For further details, please refer to section titled "Government and Other Approvals" beginning on page 177 of this Draft Prospectus. While, we believe we will be able to obtain, maintain and renew such approvals or permits as required, there can be no assurance that we can do so in the timeframes anticipated by us, or at all. If we fail to obtain, maintain or renew any of these approvals or permits in a timely manner or at all, our operations and expansion plans may be interrupted, which could adversely affect our growth strategy, business and results of operations. Furthermore, our approvals and permits are subject to numerous conditions, some of which are onerous and require us to make substantial expenditures. If we fail to comply or a regulator alleges that we have not complied with these conditions, our business and results of operations could be adversely affected.

Competition

Steel being a vast and global industry, we face competition from various domestic and international players. Though being dominated by the large conglomerates, the industry is also unorganized and fragmented with many small and medium sized companies and entities. Competition in our business is based on pricing, relationships with customers, product quality, customization and innovation. We face pricing pressures from companies that are able to produce the products at competitive costs and consequently, supply their products at cheaper prices. Certain of our competitors may have greater financial resources, technology, research and development capability, greater market penetration and operations in diversified geographies and product portfolios, which may allow our competitors to better respond to market trends. Accordingly, we may not be able to compete effectively with our competitors across our product portfolio, which may have an adverse impact on our business, financial condition, results of operations and future prospects. We intend to continue competing vigorously to capture more market share and adding more management personnel to manage our growth in an optimal way.

RESULTS OF OUR OPERATIONS

	For the year ended March 31,
Particulars	2022	% of Total Income	2021	% of Total Income	2020	% of Total Income
INCOME:
Revenue from Operations	6,702.87	99.99%	5,208.90	99.92%	2,000.84	99.63%
Other Income	0.58	0.01%	4.12	0.08%	7.42	0.37%
Total Income (A)	6,703.45	100.00%	5,213.01	100.00%	2,008.26	100.00%
EXPENSES:
Cost of Materials Consumed	7,021.75	104.75%	5,289.02	101.46%	2,226.21	110.85%
Changes in inventories	(918.26)	-13.70%	(406.63)	-7.80%	(366.13)	-18.23%
Employee benefit expenses	104.78	1.56%	115.07	2.21%	54.26	2.70%
Finance costs	126.96	1.89%	97.72	1.87%	29.85	1.49%
Depreciation	45.35	0.68%	47.08	0.90%	24.23	1.21%
Other Expenses	35.51	0.53%	52.73	1.01%	29.30	1.46%
Total Expenses (B)	6,416.09	95.71%	5,194.99	99.65%	1,997.72	99.48%
Net Profit / (Loss) before tax	287.36	4.29%	18.03	0.35%	10.54	0.52%
Less: Tax expense
(i) Current tax	49.80	0.74%	-	0.00%	-	0.00%
(iii) Deferred tax	2.99	0.04%	4.59	0.09%	3.62	0.18%
(b) Deferred Tax for earlier periods	-	0.00%	-	0.00%	64.97	3.23%
Total Tax Expense	52.79	0.79%	4.59	0.09%	68.59	3.42%
Net Profit / ( Loss ) after tax	234.57	3.50%	13.44	0.26%	(58.04)	-2.89%

Main Components of our Profit and Loss Account

Income

Our total income comprises of revenue from Sale of Products and other income.

Revenue from Operations

Our revenue from operations as a percentage of total income was 99.99%, 99.92%, and 99.63%, for the fiscals 2022, 2021 and 2020 respectively.

Other Income

Our other income comprises of interest income and excess provision written off. Other income, as a percentage of total income was 0.01%, 0.08% and 0.37%, for the fiscals 2022, 2021 and 2020 respectively.

Expenditure

Our total expenditure primarily consists of raw material consumed, Change in Inventories of WIP & Finished Goods, employee benefit expenses, finance cost, depreciation expenses and other expenses.

Cost of Raw Material Consumed

It consists of cost of raw materials consumed and other direct expenses.

Changes in Inventories

Consists of changes in work-in-progress, finished goods & scrap, if any.

Employee Benefit Expenses

Employee benefit expenses comprises of salaries, employee welfare expenses, contribution to PF & Gratuity.

Depreciation and Amortization Cost

Depreciation and Amortization Expenses consist of depreciation on the Tangible assets of our company i.e. Furniture & Fixtures, Plant & Machinery, Computer, Other Equipments, Electric Installation, Buildings and Vehicle.

Finance costs

Finance cost includes Interest on Borrowings and processing expenses.

Other Expenses

Other expenses include Legal & professional expenses, MCA Filing fees, Security expense, Repair of plant & machinery, Annual custody fees, Insurance expense, Deferred revenue expenditure written off, Rent, Rates & Taxes, Stamp duty, valuation charges and Miscellaneous expenses.

Provision for Tax

The provision for current tax is computed in accordance with relevant tax regulation. Deferred tax is recognized on timing differences between the accounting and the taxable income for the year and quantified using the tax rates and laws enacted or subsequently enacted as on balance sheet date. Deferred tax assets are recognized and carried forward to the extent that there is a virtual certainly that sufficient future taxable income will be available against which such deferred tax assets can be realized in future.

Fiscal 2022 compared with fiscal 2021

Income

In fiscal 2022, our total income increased by 1,490.44 lakhs or 28.59%, from 5,213.01 lakhs in fiscal 2021 to 6,703.45 lakhs in fiscal 2022. The increase in the year 2022 was due to increase in the sale of finished goods as compared to last year.

Other income decreased by 3.54 lakhs or 85.94%, from 4.12 lakhs in fiscal 2021 to 0.58 lakhs in fiscal 2022.

Cost of Material Consumed

Cost of material consumed increased by 1,732.73 lakhs or 32.76%, from 5,289.02 lakhs in Fiscal 2021 to 7,021.75 lakhs in Fiscal 2022.

Change in Inventory

Changes in Inventories shows a variance of 125.82% from negative M 406.63 lakhs in Fiscal 2021 to negative M 918.26 lakhs in Fiscal 2022.

Employee Benefit Expenses

Employee Benefit Expenses decreased by 10.29 lakhs or 8.94%, from 115.07 lakhs in fiscal 2021 to 104.78 lakhs in fiscal 2022. This decrease was mainly due to decrease in salaries, bonus and staff welfare expenses, contribution to Gratuity & PF as compared to last fiscal.

Depreciation Expenses

Depreciation expenses was 45.35 lakhs in fiscal 2022 as compared to 47.08 Lakhs in fiscal 2021.

Other Expenses

Other expenses decreased by 17.22 lakhs or 32.65% from 52.73 lakhs in fiscal 2021 to 35.351 lakhs in Fiscal 2022. The decrease was majorly due to decrease in certain expense like deferred expenditure Write off, rent rates & taxes, Repair and maintenance building, directors remuneration.

Profit/ (Loss) before Tax

The increase in revenue from operations has led to increase in our Profit before tax by 269.33 lakhs or 1494.19 % from 18.03 lakhs in fiscal 2021 to 287.36 lakhs in fiscal 2022.

Tax Expenses

The Companys tax expenses had increased by 48.20 lakhs or 1050.28 % from 4.59 lakhs in the Fiscal 2021 to 52.79 lakhs in Fiscal 2022 due to increase in profits.

Profit/ (Loss) after Tax

After accounting for taxes at applicable rates, our Profit after Tax increased by 221.13 lakhs or 1645.82 %, from 13.44 lakhs in fiscal 2021 to 234.57 lakhs in fiscal 2022.

Fiscal 2021 compared with fiscal 2020

Income

In fiscal 2021, our total income increased by 3,204.76 lakhs or 159.58%, from 2,008.26 lakhs in fiscal 2020 to 5,213.01 lakhs in fiscal 2021. The increase in the year 2021 was due to increase in the sale of finished goods as compared to last year.

Other income decreased by 3.30 lakhs or 44.50%, from 7.42 lakhs in fiscal 2020 to 4.12 lakhs in fiscal 2021.

Cost of Material Consumed

Cost of material consumed increased by 3,062.81 lakhs or 137.58%, from 2,226.21 lakhs in Fiscal 2020 to 5,289.02 lakhs in Fiscal 2021.

Change in Inventory

Changes in Inventories shows a variance of 40.49% from negative M 366.13 lakhs in Fiscal 2020 to negative M 406.63 lakhs in Fiscal 2021.

Employee Benefit Expenses

Employee Benefit Expenses increased by 60.81 lakhs or 112.06%, from 54.26 lakhs in fiscal 2020 to 115.07 lakhs in fiscal 2021. This increase was mainly due to increase in salaries wages and bonus and staff welfare expenses as compared to last fiscal.

Depreciation Expenses

Depreciation expenses were 47.08 lakhs in fiscal 2021 as compared to 24.23 lakhs in fiscal 2022.

Other Expenses

Other expenses increased by 23.43 lakhs or 79.97 % from 29.30 lakhs in fiscal 2020 to 52.73 lakhs in Fiscal 2021. The increase was majorly due to increase in certain expense like legal & professional expense, security expense, deferred expenditure written off, rent rates & taxes and stamp duty & valuation charges.

Profit/ (Loss) before Tax

The increase in revenue from operations has led to increase in our Profit before tax by 7.48 lakhs or 71.01 % from 10.54 lakhs in fiscal 2020 to 18.03 lakhs in fiscal 2021.

Tax Expenses

The Companys current tax expenses had decreased by 64.00 lakhs or 93.31 % from 68.59 lakhs in the Fiscal 2020 to 4.59 lakhs in Fiscal 2021 due to an deferred tax for earlier periods.

Profit/ (Loss) after Tax

After accounting for taxes at applicable rates, our Profit after Tax increased by 71.48 lakhs or 123.15 %, from negative 58.04 lakhs in fiscal 2020 to 13.44 lakhs in fiscal 2021.

Cash Flows			(Rs in lakhs)
	For the year ended March 31
Particulars	2022	2021	2020
Net Cash from Operating Activities	(1,447.98)	(701.72)	(1,191.65)
Net Cash from Investing Activities	(9.89)	(16.98)	(159.86)
Net Cash used in Financing Activities	1,450.95	722.91	1,356.56
Net Increase / (Decrease) in Cash and Cash equivalents	(6.92)	4.21	5.05

Cash Flows from Operating Activities

Net cash from operating activities for the fiscal 2022 was negative 1,447.98 lakhs as compared to the PBT of 287.36 lakhs for the same period. This difference is primarily on account of changes in trade and other receivables, change in inventories and other current assets.

Net cash from operating activities in fiscal 2021 was 701.72 lakhs as compared to the PBT of 18.03 lakhs for the same year. This difference is primarily on account of changes in trade and other receivables and change in inventories.

Net cash from operating activities in fiscal 2020 was negative 1,191.65 lakhs as compared to the PBT of 10.54 lakhs for the same year. This difference is primarily on account of changes in trade and other receivables and changes in inventories.

Cash Flows from Investment Activities

In fiscal 2022 the net cash invested in investing activities was negative 9.89 lakhs. This was majorly on account of purchases of Plant & machinery.

In fiscal 2021, the net cash used in investing activities was 16.98 lakhs. This was majorly on account of purchase of fixed assets.

In fiscal 2020, the net cash invested was 159.86 lakhs. This was majorly on account of purchase of fixed assets.

Cash Flows from Financing Activities

Net cash from financing activities in fiscal 2022 was 1,450.95 lakhs. This was on account of proceeds from proceeds from issue of share capital.

Net cash from financing activities in fiscal 2021 was 722.91 lakhs. This was on account of proceeds from issue of share capital.

Net cash from financing activities in fiscal 2020 was 1,356.56 lakhs. This was on account of proceeds from borrowings and proceeds from unsecured loans.

OTHER MATTERS

1. Unusual or infrequent events or transactions

Except as described in this Draft Prospectus, during the period/ years under review there have been no transactions or events, which in our best judgment, would be considered unusual or infrequent.

2. Significant economic changes that materially affected or are likely to affect income from continuing Operations

Other than as described in the Section titled "Financial Information" and chapter titled "Managements Discussion and Analysis of Financial Conditions and Results of Operations" on page 126 and 150 respectively of this Draft Prospectus respectively, to our knowledge there are no significant economic changes that materially affected or are likely to affect income from continuing Operations.

3. Known trends or uncertainties that have had or are expected to have a material adverse impact on revenue or income from continuing operations

Other than as described in the chapter titled "Risk Factors" and "Managements Discussion and Analysis of Financial Conditions and Result of Operations" on page 23 and 150 respectively of this Draft Prospectus respectively, best to our knowledge there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on revenues or income of our company from continuing operations.

4. Future relationship between Costs and Income

Other than as described in the chapter titled "Risk Factors" on page 23 of this Prospectus, best to our knowledge there are no factors, which will affect the future relationship between costs and income or which are expected to have a material adverse impact on our operations and finances.

5. The extent to which material increases in revenue or income from operations are due to increased volume, introduction of new services or increased prices

Increase in revenues are by and large linked to increase in volume of business activity thereby, serving more customers.

6. Status of any publicly announced new services or business segments

Please refer to the chapter titled "Our Business" on page 84 of this Draft Prospectus.

7. The extent to which the business is seasonal.

Our business is not seasonal in nature.

8. Any significant dependence on a single or few suppliers or customers

For fiscal 2022, the revenue from our top 5 and top 10 customers constituted approximately 64.45 % and 81.82% respectively of the revenue from operations. For further details, please refer chapter "Our Business" on page 84 of this Draft Prospectus.

9. Competition Conditions

We face competition from various domestic and other players in the market. Most of our competitors in the regional level are from the unorganized sector of the industry. We intend to continue competing rigorously to capture more market share and manage our growth in an optimal way. We expect that our commitment to quality, past record of timely execution and transparency will provide us with an edge over our competitors. Further we believe that our competition also depends on several factors which include changing business framework, competitive price, and established relationship with suppliers, brand recognition etc.