Sree Rayalaseema Hi-Strength Hypo Ltd Management Discussions.

A) Industry Structure And Developments:

The Companys main activity is manufacturing of chemicals. Other activities are generation of power through wind, solar, thermal and also trading activities.

B) Opportunities And Threats:

(1) There is growing demand for Calcium Hypochlorite in the international market

(2) Most of the raw materials are easily available locally thus savings in the transportation costs

(3) The raw material prices are uncertain in the market. Any steep upward price rise would affect the profitability of the unit.

(4) The import of lime for the manufacture of Hi-strength Hypochlorite and Sodium Metal for Sodium Hydride may affect the profitability of the Company due to exchange fluctuations.

(5) The generation of power through wind mainly depends on high wind velocity which is seasonal in nature and thermal energy mainly depends on availability of coal both indigenous and imported .

C) Segment-Wise Or Product-Wise Performance:

The Company surpassed its previous year performance in case of Calcium Hypo chloride (HSH), Stable Bleaching Powder (SBP) , Sodium Methoxide , Sulphuric Acid , Chloro Sulphonic Acid (CSA) , bottling of Hydrogen Gas, Oleum and Power gen eration through Thermal energy . However, there was a slight decline in Sodium Hydride Mono Chloro Acetic Acid (MCA) , Hydrochloric acid (HCL), , Power generation through wind .

D) Outlook:

The Company is exploring possibilities in manufacturing of electrolite products.

E) Risks And Concerns:

(i) Raw material prices are market driven and any upward revision will affect the profitability of the Company.

(ii) Fluctuations in foreign exchange currencies in relation to exports, Imports and FCTL.

(iii) The investments in shares are market driven which are exposed to related risks.

F) Internal Control Systems and Their Adequacy:

The Company has a good system of internal controls in all spheres of its activities. All the staff of the Internal Audit Department are well trained in internal control procedures and well versed with computerized environment.

Further, in key areas like stores, finalization of purchase orders and fixation of material prices are under pre-audit. The Management regularly reviews the findings of the internal auditors and effective steps to implement the suggestions/observations of the Auditors are taken and monitored regularly. In the opinion of the Board, an effective internal control system adequate to the size of the Company are in place.

G) Discussion on Financial Performance With Respect To Operational Performance:

For the year 2019-20 net profit before Tax is Rs.4544.90 lakhs against Rs.4220.60 lakhs during the previous year. The Company provided Rs. (1258.16) lakhs towards deferred tax, Rs.2011.86 lakhs towards current tax and net profit after Tax is Rs.3791.20 lakhs.

H) Material Developments In Human Resources / Industrial Relations Front, Including Number Of People Employed:

During the year, the Company maintained harmonious and cordial industrial relations. The Company regularly conducting seminars and workshops to improve the safety and maintenance of the factory and for also timely dispatches of quality products. The Company is deputing employees for attending seminars for updating their skills and knowledge. The Company had around 430 employees on its rolls.

Details of Key Financial Ratios :

Ratios March 31, 2020 March 31, 2019 % of Change
Interest coverage ratio
(Profit before tax + interest + Depreciation) / Interest 63.92 12.75 (401.49)
Debtors turnover ratio
(Receivable + more than 90 days) / Gross Sales 0.12 0.13 4.91
Inventory Turnover ratio
(Inventory) / Cost of goods sold(note: cost of goods sold is excluding interest, selling and other overheads) 0.11 0.10 (7.96)
Current ratio
Current Assets / Current Liabilities (excluding AMTL) 2.15 1.65 (30.56)
Debt equity ratio
Long term Debt / Net worth 1:0.02 1:0.04 42.65
Operating profit margin (%)
PBIT / net sales 0.07 0.07 3.55
Net profit / negates * 0.06 0.03 (89.12)
Return on Net worth
Net Profit / Net worth 0.12 0.06 (93.80)