Shri Balaji Valve Components Ltd Management Discussions

1. INTRODUCTION:

Our Company was originally incorporated on November 17, 2011 as "Shri Balaji Valve Components Private Limited" vides Registration No. 141370 under the provisions of the Companies Act, 2013 with the Registrar of Companies, Pune Maharashtra. The name of our Company was changed from "Shri Balaji Valve Components Private Limited" to "Shri Balaji Valve Components Limited" vide Fresh Certificate of Incorporation dated July 10, 2023, Consequent upon Change of Name pursuant to Shareholders Resolution passed at the Extra Ordinary General Meeting held on June 26, 2023 and New Corporate Identification Number U29220PN2011PLC141370. Further our Company has issued share pursuant to Initial Public Offer (IPO) and listed on SME platform of BSE LTD on 03rd January 2024.

2. OVERVIEW OF BUSINESS

Incorporated in the year 2011, we are engaged in the business of engaged in the business of manufacturing ready-to-assemble valve components catering to the manufacturing of the valves. We manufacture and supply various types of valve components which are used in the manufacturing of ball valves, butterfly valves and other valves including forging products. Further, our manufacturing system has been certified for the establishment and application of the Quality management system for the manufacturer of materials according to directives 2014/68/EU by PED & the products manufactured by closed die forging have been certified to comply with the requirements specified by NORSOK.

3. IMPACT OF COVID-19 ON OUR BUSINESS

The global industrial valves market size was valued at USD 48.1 billion in 2020 and is projected to reach USD 85.7 billion by 2025. It is expected to grow at a Compound Annual Growth Rate (CAGR) of 12.3% during the forecast period. Increasing demand for valves from the pharmaceuticals industry due to the outbreak of the COVID-19 pandemic, growing focus on the development of smart cities globally, rising need for connected networks to maintain and monitor industrial equipment, and surging requirement for establishing new nuclear power plants and revamping existing ones are the key driving factors for the industrial valves market.

4. INDUSTRY REVIEW

Global Valve Industry

The global valve industry is a part of many sectors that use valves to control the flow and pressure of fluids. The industry is expected to grow at a rate of 5% to 7% from 2022 to 2028, driven by the demand from power and chemical industries, the need for desalination activities, and the adoption of advanced technologies. The industry faces some challenges such as the stagnant growth in developed countries, the high cost of installation and maintenance, and the diverse regional policies and certifications.

The industry can be segmented by type, material, component, function, application, and geography. The most popular types of valves are ball valves and check valves. The most common material for valves is steel. The main components of valves are actuator, positioner, and valve body. The main functions of valves are isolation, regulation, safety relief valve, special purpose, and non-return. The largest application segments for valves are oil & gas, energy & power, and water & wastewater treatment. The dominant geographical region for valves is Asia-Pacific.

The global valve market can also be segmented by geography into North America, Europe, Asia-Pacific, Latin America, and Middle East & Africa. Asia-Pacific is expected to dominate the global valve market during the forecast period due to the rapid industrialization and urbanization in countries such as China, India, Japan, and South Korea. North America and Europe are also expected to have significant shares in the global valve market due to their established industries and advanced technologies. The industry is highly competitive and fragmented with many players operating at regional and global levels.

Indian Valve Industry

The valve industry in India is a vital part of the engineering sector, as valves are used to control the flow of fluids and gases in various industrial applications. Valves are essential components in sectors such as oil and gas, power generation, petrochemicals, fertilizers, water and wastewater management, and others. According to a various report, the Indian valve market size is projected to reach $3 billion by 2023, growing at a compound annual growth rate of over 9% from 2017 to 2023. The report attributes this growth to the increasing demand for flow control equipment, the expansion of pipeline infrastructure for natural gas distribution, and the government initiatives to boost the manufacturing sector under the Make in India campaign.

The Indian valve industry is also becoming more competitive in the global market, as it offers cost-effective and quality products to meet the diverse needs of customers. According to a various report, India is the second-largest exporter of valves in Asia-Pacific, after China, and accounts for about 5% of the global valve exports. The reports states that the Indian valve industry has a complete portfolio of products, ranging from conventional valves to smart valves, which are integrated with sensors and actuators to provide real-time feedback and control. The reports also identify some of the key challenges faced by the Indian valve industry, such as lack of standardization, skilled manpower shortage, and environmental regulations.

The Indian valve industry is expected to witness further growth opportunities in the coming years, as the country plans to invest heavily in sectors such as renewable energy, urban development, smart cities, and industrial corridors. The Indian Valve and Actuator Manufacturers Association (IVAMA) is an industry body that aims to promote the ecosystem of the valve industry and bring global business to India. The association provides various services to its members, such as training, technical expertise, networking opportunities, and market intelligence. The association also organizes technology meets and exhibitions to showcase the latest developments and innovations in the valve sector.

To conclude, the valve industry in India is an important and growing segment of the engineering sector, which contributes significantly to the Indian economy. The industry has a strong potential to become a global leader in valve manufacturing and exports, by leveraging its strengths and overcoming its challenges. The industry also plays a key role in supporting other sectors that require efficient and reliable flow control solutions.

5. SWOT ANALYSIS

Strengths

Integrated Manufacturing Setup: SBVCL boasts a complete in-house manufacturing setup, giving us greater control over quality and production timelines.

Product Diversification: We offer a wide range of valve components and precision machined components, catering to diverse customer needs and reducing dependence on any single product category.

Vertical Diversification: We have our supply spread across varied sectors such as Oil & Gas, Petrochemical, Food & Beverage, Power Generation, Pharmaceutical, Defence & Construction Equipment Manufacturing.

Strong, Diverse & Growing Customer Base: We have established longstanding partnerships with both customers and suppliers, ensuring a reliable supply chain and consistent demand.

Quality Focus: Our commitment to quality assurance and adherence to industry standards strengthens their brand reputation and customer trust.

Experienced Management: The company is led by a team with extensive experience in the valve components industry, providing strategic direction and industry knowledge.

Weaknesses

Supplier Dependence: They rely on a limited number of suppliers for critical raw materials. Disruptions from these suppliers could impact production.

Opportunities

Industry Growth: The valve components market is anticipated to grow in the coming years, driven by factors like increasing industrial activity and infrastructure development. SBVCL can leverage this growth to expand its market share.

Global Presence: Their existing presence in countries like the US, Germany, and Dubai offers a platform for further international expansion.

IPO Funds: The recent IPO can provide SBVCL with the capital to invest in new technologies, product development, and capacity expansion to strengthen their competitive edge.

Threats

Competition: The valve components industry is likely to face increasing competition from domestic and international players. SBVCL needs to stay innovative and cost-effective to maintain its market position.

Raw Material Price Fluctuations: Volatility in raw material prices can squeeze profit margins if SBVCL is unable to effectively manage costs or pass them on to customers.

Economic Downturn: An economic slowdown could reduce demand for industrial products, impacting SBVCLs sales and profitability.

6. MITIGATION OF RISK /RISK MANAGEMENT

The Board assesses and classifies risks across various domains such as operations, finance, marketing, regulatory compliance, and corporate affairs. The Internal Auditor, Statutory Auditor, and Company Secretary provide their insights on risk levels while auditing specific areas, reporting to the Audit Committee. The company is proactively implementing immediate and future-oriented measures to minimize any potential risks that might emerge.

7. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has an effective and reliable internal control system commensurate with the size of its operations. At the same time, it adheres to local statutory requirements for orderly and efficient conduct of business, safeguarding of assets, the detection and prevention of frauds and errors, adequacy and completeness of accounting records and timely preparation of reliable financial information. The efficacy of the internal checks and control systems is validated by self-audits and internal as well as statutory auditors.

8. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

Share Capital:

During the year under review, the Company has increased Paid-up Share capital of Company as per details mentioned below:

	Date of Allotment	Nature of allotment	No. of Equity Shares allotted
1	17th June, 2023	Bonus Issue	59,90,000

Reserves and Surplus:

The Reserve and Surplus of Company is Rs. 2967.81 lacs as on period ended on 31st March, 2024.

Total Income:

The Company has earned total Income Rs. 4564.87 lacs as on period ended on 31st March, 2024.

9. CORPORATE GOVERNANCE

In addition to the applicable provisions of the Companies Act, 2013 with respect to Corporate Governance, provisions of the SEBI (LODR) Regulation, 2015 will also have complied with the extent applicable to our Company immediately upon the listing of the Equity Shares on the Stock Exchange. Our Company stands committed to good Corporate Governance practices based on principles such as accountability, transparency in dealings with our stakeholders, emphasis on communication and transparent reporting. We have complied with the requirements of the applicable regulations, in respect of corporate governance including the constitution of the Board and Committees thereof. The Corporate governance framework is based on an effective Independent Board, the Boards Supervisory role from the executive management team and the constitution of the Board Committees as required under law. The Board functions either as a full board or through the various committees constituted to oversee specific operational areas. As of the date, there are Five Directors on our Board out of which one-third are Independent Directors.

Our Company complies with the corporate governance norms prescribed under the Companies Act, 2013, particularly, in relation to the appointment of Independent Directors to our Board and the constitution of Board-level committees. Our Company undertakes to take all necessary steps to continue to comply with all the requirements of the SEBI (LODR) Regulation, 2015 and the Companies Act, 2013.

10. MATERIAL DEVELOPMENTS IN THE HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING THE NUMBER OF PEOPLE EMPLOYED:

The total employees strength of the Company was 178 as on 31st March, 2023., who are the backbone of success and growth of the Company. The company has fostered a culture of mutual respect, teamwork, and innovation among its workforce, and has provided them with adequate training, development, and welfare opportunities. The company has also maintained cordial and harmonious industrial relations with its employees and their representatives and has ensured compliance with all the applicable labour laws and regulations. The company values its human capital as its most precious asset and strives to create a conducive and rewarding work environment for them.

11. CAUTIONARY STATEMENT:

This report contains forward-looking statements based on the perceptions of the Company and the data and information available to the company. The company does not and cannot guarantee the accuracy of various assumptions underlying such statements and they reflect the Companys current views of future events and are subject to risks and uncertainties. Many factors like changes in general economic conditions, amongst others, could cause actual results to be materially different.