Today's Top Gainer
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Simplex Castings Limited (SCL) is premier manufacturing organisation in India with global business presence. SCL possess well equipped manufacturing facilities such as Foundry Division, and Fabrication Division. Each plant is associated with modern machining facilities and a central machine shop with several machine tools including large number of CNCs, EPC Division to take up TurnKey Projects, Design wing with modern computer setup and aided tools. SCL is complete one stop shop for all engineering components manufacturing needs, castings, forging, fabrication, machining, assembly, equipment building, in-house testing, EPC division and Designing facility. SCL Units are situated in Bhilai, & Rajnandgaon, state of Chhattisgarh, the central part of India, most mineral rich & densely industrialized province in India. SCL is catering to various industrial sectors like Steel, Railways, Power, Mining , Cement, Sugar, Chemicals, Earthmovers, Machines Tools, Ship Building , Oil & Gas and Defense. Your Company believes in developing new products in line with changing technology and requirement of customer.
Simplex has been pioneer in its filed activities:
Pioneer to Export steel plant equipments to Russia.
Pioneer to Enter into tech tie-up with Tyazhprom
Export Russia for Turnkey Projects in India.
Pioneer to bring advance Japanese Technology for Sinter Plant in India for SAIL - Bhilai Steel Plant for complete Sinter Plant -III, executed on Turnkey basis in consortium with Mitsui / Kawasaki & Hitachi Zosen of Japan.
Pioneer to install on turnkey basis, Mini Blast Furnace of 350 Cubs. Mt for Southern Iron Steel Company at Salem (India) with Chinese Technology.
Pioneer to Design, engineering and supply of equipment for hot rolling stackle mill, executed for Salem Steel Plant as per SMS / Germanys design.
Pioneer in manufacturing undercarriage (bogie) for Railway Locomotives.
Pioneer in manufacturing Sucker rod pumping units for
Oil & Gas, for ONGC, India
ECONOMY OVERVIEW GLOBAL ECONOMY
Following an upswing in the last two years, global growth declined to 3.6% in 2018, owing to various factors such as increase in trade tensions and tariff hikes between the
United States and China, decline in business confidence, tightening of financial conditions, and higher policy uncertainty across many economies. While the first of 2018 witnessed strong growth at 3.8%, the second half saw a deceleration in global economic activity, in light of the various factors affecting major economies. Growth in China was at 6.6%, its slowest pace since 1990, due to necessary domestic regulatory tightening, slower domestic investment, and tariff hikes and trade tensions with the United States. The United States witnessed a growth of 2.9%, the highest since 2015, with major contribution coming from personal spending, fixed investment, public expenditure and inventories. Growth in the Euro area economy slowed to 1.8% in 2018, owing to weakening consumer and business sentiments, disruptions in car production in Germany due to delay in introduction of new fuel emission standards, fiscal policy uncertainty, elevated sovereign spreads, and declining investment in Italy, and drop in external demand, especially from emerging Asia. Growing concerns about a no-deal Brexit also probably weighed on investment spending within the euro area. Activity in Japan weakened mainly due to natural disasters.
WORLD ECONOMIC GROWTH IN CY 2018
Factors such as continued domestic consumption and investment trends have positioned India as the sixth largestfor several landmark economy and one of the fastest growing countries in the world. The growth in the domestic consumption demand is catalysed and strengthened by factors such as harmonised of Goods and Services Tax (GST) and recapitalised bank. Indian economy grew by 6.8% in 2018-19 as compared to that of 6.7% in 2017-18. Agriculture and manufacturing are the two key industry sectors that are expected to contribute to this growth graph. Few factors shaping the nations economic growth are:
Increased ease of doing business through changed processes such as a uniform Goods and Services Tax across India since mid-2017 and relaxed norms of opening, obtaining licences and investing in new businesses.
Domestic consumption driven economy: Nearly 60% of Indias GDP is driven by domestic private consumption as compared to that of 40% in China. Hence, the economy is protected to a great extent from external shocks and cycles of low or high public investment.
Policy reforms such as increased FDI limits in most sectors, including retail, manufacturing and telecom are driving increased participation of foreign investors and improved investment norms for non-resident Indians.
Large-scale infrastructure development projects such as smart cities, industrial corridors, road, rail and shipping hubs, and power projects.
During the year, the financial services industry went through a turbulent phase. NBFCs in particular, experienced a liquidity crisis owing to asset liability issues, the fallout of which was evident in pessimistic investor sentiment and an overall constrained access to capital.
The liquidity tightness promoted the RBI to cut the repo rate by 25 bps to 6%, the second cut in three months, making India the only economy in Asia to have had implemented two consecutive policy rate cuts. The combined 50 bps cut also reflected the RBIs intent of infusing liquidity to kickstart the economy which is experiencing a soft patch.
Indias forex reserves remained buoyant, at $411 billion during the last week of March 2019. Merchandise exports grew by 8.75% y-o-y to $331.06 billion and services exports raising 17% y-o-y to $204.7 billion (Source: Ministry of Commerce and DGFT).
India GDP Growth (%)
Source: Central Statistics Office (CSO)
According to the International Monetary Fund (IMF), global economic growth is expected to further decline to 3.3% in 2019 but return to 3.6% in 2020. While the slow paced growth in the second half of 2018 is likely to continue in the first half of 2019, growth in the second half of 2019 is expected to gain momentum, owing to an ongoing build-up of policy stimulus in China, improvements in global financial market sentiment, waning of some temporary drags on growth in the euro area, and a gradual stabilisation of conditions in stressed emerging market economies. Improved momentum for emerging market and developing economies is projected to continue into 2020, primarily reflecting developments in economies currently experiencing macroeconomic distress.
Growth in advanced economies is expected to slow down from 2.2% in 2018 to 1.8% in 2019 to 1.7% in 2020. The United States is expected to grow at a slower pace of 2.3% in 2019, down to a further 1.9% in 2020 as the impact of the fiscal stimulus fades. Growth in the Euro area is expected to decline to 1.3% in 2019 as the effect of the weakness in 2018 is likely to carry forward to the first half of 2019.
Chinas economic growth is expected to be at 6.3% in 2019 due to lingering impact of trade tensions with the US.
REGION-WISE GROWTH OUTLOOK ESTIMATES(%)
Source: International Monetary fund(IMF)
The Indian economy is expected to grow at about 7.3% in 2019 and further by 7.5% in 2020, supported by the continued recovery of investment and robust consumption amid a more expansionary stance of monetary policy and some expected impetus from fiscal policy. Resolution of
Non-Performing Assets (NPA) and other recoveries over the past year have been efficacious. Large NPA accounts should continue to see resolution in 2019. The projected increase in growth rate can also be attributed to sustained rise in consumption, gradual revival in investments, and greater focus on infrastructure development.
Indias Expected growth rate in CY 2020
INDUSTRY STRUCTURE & DEVELOPMENT
India was the worlds second largest steel producer, as of 2018. The country is slated to surpass USA to become the worlds second largest steel consumer in 2019.
In FY19, India produced 131.72 million tonnes (MT) and 106.56 MT of gross finished steel and crude steel, respectively.Indias steel production is expected to increase from 106.56 MT in FY19 to 128.6 MT by 2021.
The Government has taken various steps to boost the sector including the introduction of National Steel Policy 2017 and allowing 100 per cent Foreign Direct Investment (FDI) in the steel sector under the automatic route. Between April 2000 and December 2018, inflow of US$ 11.18 billion has been witnessed in the metallurgical industries as Foreign Direct Investment (FDI).
Indias per capita consumption of steel grew to 68.9 kgs, during 2017-18. National Steel Policy 2017 aims to increase the per capita steel consumption to 160 kgs by 2030-31. (Source: www.ibef.org)
Steel Performance FY 2018-19
Crude Steel production (Million Tonnes)
Steel Consumption in India (MT)
Source : Joint Plant Committee
Performance Highlights- Indian Steel Industry
(Source: Joint Plant Committee Report, March 2019)
Steel demand growth at 7.5% y-o-y (to 97.5 MnT) outpaced production growth at 3.3% y-o-y(to 106.6 MnT) in FY 2018-19.
Total finished steel imports rose 4.6% to 8.8 MnT, displacing 15% of flat steel demand, 9% of total Indian steel demand.
Indian exports plummeted 26% to 8.5 MnT in FY 2018-
19 due to increased protectionism across the world.
Per capita steel consumption rose from 69 kg to 73 kg; demand for flat products grew 4.2% while that for long products grew 10.4%. The share of flat and long products remained unchanged at 46% and 54%.
Top 10 steel-producing countries:
POLICY SUPPORT AIDING GROWTH IN THE STEEL SECTOR
New National Steel Policy
New National Steel Policy has been formulated by the Ministry of Steel in 2016, which will retain the objectives included in National Steel Policy (NSP) 2005. It aims at covering broader aspects of steel sector across the country including environment and facilitation of new steel projects, growth of steel demand in India and raw materials.
Under the policy, the central government stated that all the government tenders will give preference to domestically manufactured steel and iron products. Moreover, Indian steel makers importing intermediate products or raw materials can claim benefits of domestic procurement provision by adding minimum of 15 per cent value to the product.
The New steel policy, 2017 aspires to achieve 300MT of steel making capacity by 2030. This would translate into additional investment of Rs 10 lakh Crore (US$ 156.08 billion) by 2030-31.
New Steel Policy seeks to increase per capita steel consumption to the level of 160 kgs by 2030 from existing level of around 60 kg.
R & D and Innovation
The scheme for the promotion of R&D in the iron and steel sector has been continued under the 14th Finance Commission (2019-20). Under the scheme, 26 projects have been approved with financial assistance of Rs 161 crore (US$ 24.98 million) from Ministry of Steel.
The Ministry of Steel is also actively participating in the Impacting Research Innovation & Technology (IMPRINT) & Uchchatar Avishkar Yojana (UAY) Schemes launched by Ministry of Human Resource Development. IMPRINT scheme aims to solve major engineering and technology challenges and UAY is promoting industry sponsored, outcome-oriented research projects.
Ministry of Steel is setting up an industry driven institutional mechanism - Steel Research & Technology Mission of India (SRTMI) with an initial corpus of US$ 30.89 million. The institute will facilitate joint collaborative research projects in the sector.
Foreign Direct Investment
100 per cent FDI through the automatic route is allowed in the Indian steel sector
OPPORTUNITIES & THREATS
The automotive industry is forecasted to grow in size by US$ 74 billion in 2015 to US$ 260-300 billion by 2026.With increasing capacity addition in the automotive industry, demand for steel from the sector is expected to be robust.
The capital goods sector accounts for 11 per cent of steel consumption and expected to increase 14/15 per cent by 2025-26 and has the potential to increase in tonnage and market share . Corporate Indias capex is expected to grow and generate greater demand for steel.
The infrastructure sector accounts for 9 per cent of steel consumption and expected to increase 11 per cent by 2025-26. Due to such a huge investment in infrastructure the demand for long steel products would increase in the years ahead.
More and more modern and private airports are expected to be set up .In FY19, passenger traffic at Indian airports stood at 280.25 million and number of operational airports stood at 103 in February 2018.Development of Tier-II city airports would sustain consumption growth and estimated steel consumption in airport building is likely to grow more than 20 per cent over next few years.
The Dedicated Rail Freight Corridor (DRFC) network expansion would be enhanced in future .Gauge conversion, setting up of new lines and electrification demand .
Oil and Gas
Indias primary energy consumption of oil and gas is expected to increase to 10 mbpd and 14 bcfd, respectively, by 2040.This would lead to an increase in demand of steel tubes and pipes, providing a lucrative opportunity to the steel industry.
CORPORATE SOCIAL RESPONSIBILITY
During FY 2018-19, your Company contributed Rs 9.37 Lacs towards Corporate Social Responsibility (CSR).
OPERATIONAL AND FINANCIAL PERFORMANCE
During the year ended 31 March, 2019, the Company had registered a revenue from operations of Rs 18297.82 Lacs as against Rs 22442.04 Lacs during the year 2017-18.
The Profit Before Tax (PBT) and Profit After Tax for the year 2018-19 were Rs (2494.16) Lacs and Rs (1582.18) Lacs respectively, as against Rs 327.97 Lacs and Rs 335.47 respectively during the previous year ended 31 March, 2018.
a) Revenue from operations (Rs in Lakhs)
|Particulars||FY 2018-19||FY 2017-18|
|Sale of Products||15784.58||14780.37|
|Sale of Traded Goods||2388.58||7483.14|
|Job Contract Receipts||98.05||89.24|
|Work Contract Receipts||-||43.04|
|Other Operating Revenue||26.62||46.25|
|Total Revenue from||18297.82||22442.04|
During the year Revenue from operations have decreased by 18.47 % amounting to Rs. 4144.22 Lacs, despite the increase in the Sale of products amounting to Rs. 1004.21 Lacs.
(b) Consumption of Raw Material & Components:
During the year consumption of Raw Material is Rs 9384.13 Lacs as compared to Rs 7767.50 Lacs in previous year.
In the year 2018-19 the volatility in the prices of major raw material and inputs was historical. The rising trend of the Raw material and components prices has pushed up the value of consumption by 20%. The estimated profits in the Orders have ended up with negative.
(c) Employees Benefits Expenses (Rs in Lakhs)
|Employees benefits Expenses||1793.23||1727.35||3.81|
Handmade Castings is a state of art technology and Simplex is known for expertise in it. The industry requires a huge skilled and experienced work force for execution of such customized products. Due to the very nature of the industry, retention of such work force is compulsory, despite of low production the man power remains constant.
(d) Finance Costs (Rs in Lakhs)
|Particulars||FY 2018-19||FY 2017-18||Change %|
The company has experienced higher prices of inputs and slower and lower realisation from customers during the year which has leaded to full utilisation of credit facilities and impacted into increase in the finance cost by 17.95% .
KEY FINANCIAL RATIOS:
In accordance with the amended SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015, the Company is required to give details of significant (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations thereof:
The Company has identifiedfollowing ratios as key financial ratios:
|Particulars||2018-19||2017-18||Change in %|
|Debtors turnover ratio(No of Days)||176||99||77.77%|
|Inventory Turnover Ratio (No of Days)||152||143||6.29%|
|Interest Service coverage ratio||0.29||2.35||(87.66)%|
|Debt Equity Ratio||0.44||0.40||10.00%|
|EBIDTA to net sales (%)||2.17%||12.35%||(82.43)%|
|Net Profit Margin (%)||(8.65)%||1.52%||(669.08)%|
|Return on Net Worth||(21.11)%||3.78%||(658.47)%|
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial results of the Company included results from the operations of Subsidiary Companies i.e. Simplex Castings International Pte Ltd. The Company does not have any associate or joint venture company.
On a Consolidated basis, the total revenue from operations for the year 2018-19, was Rs 21313.00 Lacs . The PBT and PAT for the year 2018-19 were Rs (2503.34) Lacs and Rs (1591.36) Lacs.
Business risks exist for any enterprise having national and international exposure. Your Company also faces some such risks, the key ones being - a longer than anticipated delay in economic revival, unfavorable exchange rate fluctuations, emergence of inflationary conditions, Competition in
Indian and Global market and any unexpected changes in regulatory framework.
The Company is well aware of these risks and challenges and has put in place mechanisms to ensure that they are managed and mitigated with adequate timely actions.
LONG-TERM AND MEDIUM-TERM STRATEGY
The Company has strategies for business development to cop up with the dynamic situation evolving everyday globally. Your Company is subject to all the positive & negative effects of the change in the global scenario. Your Company works on long term and medium term strategies to deal with the challenges: a. Long-term Strategy: a) Widening of customer base b) Entry into audit findings covering operational, financial new industry segments c) Development of new casting products for existing customers b. Medium-term Strategy: a) Improvement in product quality b) Control & minimising rejections c) Cost reduction
INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY
The Company has adequate internal audit and control systems. Internal auditors comprising of professional firms of Chartered Accountants have been entrusted the job to conduct regular internal audits at all units/ locations and report to the management the lapses, if any. Both internal auditors and statutory auditors independently evaluate the adequacy of internal control system. Based on the audit observations and suggestions, follow up, remedial measures are being taken including review and increase in the scope of coverage, if necessary. The Audit Committee of Directors, in its periodical meetings, review the adequacy of internal control systems and procedures and suggest areas of improvements.
The internal control system ensures compliance with all applicable laws and regulations, facilitates in optimum utilisation of resources and protect the Companys assets and investors interests. The Company has a clearly defined organisational structure, decision rights, manuals and operating procedures for its business units to ensure orderly and efficient conduct of its business.
The Company has a whistle blower policy so that Directors and Senior personal can report their genuine concern. The Audit Committee of the Board on Quarterly basis reviews significant and other areas and provides guidance on further strengthening the internal controls framework.
HUMAN RESOURCES DEVELOPMENT AND INDUSTRIAL RELATIONS
Human resource is considered as key to the future growth strategy of the Company and looks upon to focus its efforts to further align human resource policies, processes and initiatives to meet its business needs. In order to focus on keeping employees abreast of technological and technical developments, the Company provides opportunity for training and learning. Industrial relations at all the units and locations are cordial. As on March 2019, the company had 846 employees on its rolls.
Statements in the Management Discussion and Analysis describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable securities, laws and regulations. Actual results may differ materially from those expressed in the statement.
Important factors that would influence the Companys operations include cost of raw materials, tax laws, interest and power cost and economic developments and such other factors within the country and the international economic and financial developments.