SPL - OVERVIEW :
Srikalahasthi Pipes Limited – SPL is one of the leading manufacturers of Ductile
Iron Pipes (DI Pipes) having the manufacturing facility in Rachagunneri village on
Tirupati – Srikalahasthi Road, Srikalahasthi Mandal, Chittoor Dist. Andhra Pradesh.
The integrated facility comprises of Backward and Forward integration units in a
centralized complex spread over 350 acres. The Company’s D.I. pipes are supplied to
various Water Boards, Municipal Corporations, Irrigation Departments, Railways and Turnkey
Contractors across the country for their Water Infrastructure Projects which are the
thrust area of the Annexure II to Directors’ Report Government of India. The
Company also manufactures Low Ash Metallurgical Coke, Pig Iron, Ferro Silicon and Cement
and all these products are used for captive consumption and surplus is sold in the market.
The Company operates predominantly in a single reportable segment viz., Ductile Iron
Pipes.
By virtue of core business of manufacture and supply of DI Pipes for the Water
Infrastructure Projects across the country, the Company is categorized as Public
Utility Services Industry engaged in Water Infrastructure Development in the Country.
Operational Performance:
| Product |
Production (MT) |
|
Sales (MT) |
|
2020-21 |
2019-20 |
2020-21 |
2019-20 |
| Molten Metal/Pig Iron @ |
2,58,978 |
2,99,477 |
2,59,925 |
2,98,326 |
| D.I.Pipes |
2,37,156 |
2,93,491 |
2,46,973 |
2,85,848 |
| Lam Coke # |
1,68,499 |
1,67,240 |
1,78,375 |
1,75,101 |
| Cement $ |
81,788 |
60,654 |
82,554 |
60,719 |
| Power (Lakh Units)^ |
817 |
902 |
817 |
902 |
@ Sales include 2,37,181 MT (Previous year 2,89,705 MT) used for captive consumption.
# Sales include 1,25,933 MT (Previous year 1,43,456 MT) used for captive consumption.
$ Sales include 29,713 MT (Previous year 35,802 MT) used for captive consumption.
^ Captive Consumption.
Details of Sales Mix: Rs. In Crores.
| Revenue from sale of product |
2020-21 |
2019-20 |
| Ductile Iron Pipes |
1127.15 |
1395.60 |
| Pig Iron |
56.00 |
20.60 |
| Cement |
18.51 |
8.31 |
| Ferro Silicon |
43.70 |
4.35 |
| Coke |
120.98 |
75.97 |
| Other products |
136.23 |
158.06 |
Details of Key Financial Ratios: from 19.47% in the FY 2019-20 to 15.78% in the FY
2020--21 and Net Profit Operating Profit Margin decreased from 11.28% in the FY 2019-20 to
6.89% in the FY 2020-21.
Net Worth: Rs. In Crores
|
FY 2020-21 |
FY 2019-20 |
| Share Capital |
46.70 |
46.70 |
| Other Equity |
1440.29 |
1369.45 |
| Net worth |
1486.99 |
1416.15 |
Total Debts: Rs. In Crores
| Debt outstanding as at |
31.03.2021 |
31.03.2020 |
| Term Loans |
122.48 |
118.11 |
| Current Maturities of Long Term Debts |
41.40 |
46.34 |
| Working Capital Loans |
89.61 |
245.49 |
| Total Debts |
253.49 |
409.94 |
Debt Equity Ratio:
|
31.03.2021 |
31.03.2020 |
| Debt (Rs. Cr) |
163.88 |
164.45 |
| Equity (Rs. Cr) |
1486.99 |
1416.15 |
| Debt: Equity |
0.11:1.0 |
0.12:1.0 |
Global Economy
Leaving behind the unprecedented health and economic crisis caused by Covid-19
Pandemic, the global economy is beginning to show a subdued recovery. The economy is
expected to accelerate in 2021, though with significant variation around the world. The
world will benefit from vaccinations, both directly in fewer illnesses and indirectly as
lockdowns and fears subside. Prospects have improved over recent months with signs of a
rebound in goods trade and industrial production. Global GDP growth is projected to be
5.2-5.6% this year. World output is expected to reach pre-pandemic levels by end-2021.
Indian Economy
India as a country, so far did better than many other countries, to effectively handle
the Covid-19 pandemic. India’s economy, estimated to contract by 6.9 per cent in 2020
due to the pandemic, is forecast to record a "stronger recovery" in 2021 and
achieve considerable growth in current fiscal year as the budget points to a shift towards
demand-side stimulus, with an uptick in public investment.
Though, 2nd wave of Covid-19, sweeping India since mid-March, 2021, is a cause of
concern, the long-term growth perspective of the Indian economy remains positive due to
its young population and corresponding low dependency ratio, healthy savings, and
investment rates, increasing globalization in India and integration into the global
economy.
According to Economists, the next 10 years could be the most important period in
India’s economic development, because if everything goes as per estimates, India will
be able to reap the fruits of its favorable demography in 2030s and 2040s.
Demand for Potable Water Supply
Water, the basic essential need of life, is likely to pose the greatest challenge on
account of an increased demand with population rise and economic development, and
shrinking supplies due to over-exploitation and pollution.
The ever growing demand for safe water supply and disposal is fueling an increasing
demand for pipes. Government of India is doing everything in their capacity to bridge the
gap between the supply and demand for water. Rapidly increasing urbanization across
emerging regions has been responsible for the hike in the demand for Water infrastructure.
India is set for a major expansion in water supply and distribution infrastructure with
the government planning to spend Rs 3.6 lakh crore in a span of 5 years to provide tap
water connections to every household by 2024. With the government’s key focus
targeted around improving the water infrastructure, water conservation/storage and
providing clean drinking water under constructive initiatives like Jal Jeevan Mission,
AMRUT, Smart Cities and Har Ghar Jal, India now has realized the criticality of water
usage and conservation of available water.
Sewerage Schemes
With increasing urbanization, draining out used water and keeping the cities clean is a
matter of increasing concern. Sewerage disposal in many cities and town are not up to the
mark and a number of new sewerage schemes are being taken up in many of the towns and
cities. Instead of only disposal, there is more emphasis now on treatment and reuse. This
is a very healthy trend to conserve the scarce resource.
Demand for Water for Industries
Rapid pace of Industrialization, the backbone of the economic development in India, is
bringing in more industries and with more industrialization the demand for Industrial
water supply is also growing. Growth is again witnessed in the real estate and service
industries which in turn further adding to water demand. A massive push to development of
industrial corridors all over India is being given through National Industrial Corridor
Development Corporation (NCDC). The few major industrial corridors being taken up in South
are Chennai – Bengaluru Industrial Corridor, Vizag – Chennai Industrial
Corridor, Hyderabad – Bengaluru Industrial Corridor.
Demand for Water in Irrigation
India has a seasonal pattern of rainfall with 50% of precipitation falling in just 15
days and over 90% of the rivers flow for just four months. With a very limited storage
capacity, farming activity in India is mainly sustained by irrigation.
There is fast growing demand from Irrigation sector. This demand is being met with
several government initiatives in the form of policies as well as regulations.
Traditionally irrigation in India has been mainly canal based However, to minimize the
transmission loss due to percolation and evaporation and to avoid the complication of land
acquisition, now there is a growing acceptance of piped irrigation systems in the country.
In many states a number of Piped Irrigation Systems are coming up and other states are
trying with model schemes, before going in big way. This has created good scope for use of
pipes in the irrigation sector in the last few years and the same is expected to grow, as
more and more states tastes the benefits of Piped Irrigation System.
Demand for other Developing Sectors
Various River Linking Projects (RLP) being taken up by Government is opening a new area
for use of pipes. Under the National Perspective Plan for water resources development,
through inter basin transfer of water (River Linking), prepared by the Jal Shakti
Ministry, National water development Agency (NWDA), after making Pre-Feasibility Reports
has identified 30 links for Feasibility Reports. There are two RLPs taken up for
execution- Cauvery-Gundar River Link and Ken Betwa River Link.
River Cleaning Projects being taken up on PAN India basis is also presenting an
opportunity for using the pipes. National River Conservation Directorate (NRCD) is
responsible for cleansing of identified rivers in India, just like "National Mission
for Clean Ganga" is responsible for cleansing Ganga River. There are a total of 351
rivers under NRCD. Few major rivers in South under the scope of NRCD are Godavari,
Krishna, Cauvery and Bhavani.
OPPORTUNITIES :
The focus of Governments on Water Supply Schemes, Sewerage Schemes, Industrial
Corridors and Irrigation Schemes and new sectors of River Linking and River Cleaning
Projects, as described above is creating unprecedented opportunities for pipes market.
In 2021-22, the Ministry of Jal Shakti received an allocation of Rs 69,053 crore which
is a 64% annual increase over the actual expenditure in 2019-20. The focus of the
increased expenditure is on drinking water, which is in line with the government’s
agenda to provide functional tap water connections to all households by 2024.
Further, the Economic Survey (2020-21) noted that a strong emphasis on sanitation and
drinking water is required to prevent communicable diseases.
Major policy proposal of the Central Government in force are –
(a) The Jal Jeevan Mission (Urban) to enable universal water supply and liquid waste
management in urban areas.
(b) The Urban Swachh Bharat Mission 2.0. It will focus on sludge and waste water
management.
Due to its merit – high pressure bearing ability, excellent structural strength,
easy installation along with long service life, ductile iron pipes remain to be one of the
preferred pipe material and are expected to benefit from the impressive demand across
sectors in the coming years. With D I Pipes manufacturers in India engaged in propagating
use of DIPs for irrigation projects and sewerage schemes by offering improved
linings/coating and developing features for special applications, use of DIPs is poised
for additional growth.
In view of the above, SPL is enhancing the production capacity of DI pipes which will
help the company to grow in all respects, in near future.
THE THREAT PERCEPTION
Though the ‘Jal Jeevan Mission’ can bring about considerable growth in the
water and waste water sector, consistent funding and persistent monitoring is required to
achieve the goal of ‘Har ghar Nal se Jal’. Timely allocation of resources,
efficient planning and proper project implementation are to be ensured to maintain
sustainability of pipe demand.
Another concern is the increasing cost of raw materials as the market price is not
escalating at the same pace putting stress over the profitability. Increasingly higher
input and overhead cost, expensive pipe transportation/shipping logistics is creating
pressure on margins. On the other side, new DI pipe manufacturers are planning for
entering into fray in near future, making the DI pipe market more competitive.
However, with more focus on backward integration, cost reduction, exploring alternative
markets, overcoming logistic constraints and long term planning for raw materials, the
Company is confident of maintaining sustained growth.
Estimated spend towards drinking water and sanitation, Rural and Urban Development
Projects & Schemes :
Raw materials Management:
The Company strongly believes that effective and efficient functioning of the material
management has direct bearing on the total performance of the organization. The
Company’s Material Management function is operated on an integrated basis and is
focused on material forecasting, planning, and inventory control. At SPL, efforts to
secure raw materials of the right quality at the most competitive price, vendor
development, material substitution have been a regular activity of the Procurement
function to secure the materials needed for the operations and minimize disruptions to
production. Optimal utilization of sinter plant capacity, maintaining economic ratio of
lump ore and fines, judicious procurement of bulk raw materials like iron ore / coal at
competitive prices have been the focus areas of the Company.
Quality Management System (QMS):
The Company renews its commitment to ensure reliable quality and in turn earns customer
satisfaction, through continuous perseverance of its Quality Assurance Policy. In order to
accomplish this, the company strives to detect and prevent any non-conformance during
production and implement the means to prevent its recurrence. The Company emphasizes on
upgrading technology and improving techniques, systems, procedures and to carry out
continuous innovation to meet changing customer needs, besides continuously focusing on
creating most congenial and healthy working environment for attainment of quality goals
with excellence. The plant has well equipped laboratories with latest quality control and
testing equipments. The Company has well documented Standard Operating Procedures (SOPs)
and process controls for every stage of operation and the Quality Assurance Team ensures
strict adherence to the SOPs to ensure achieving industrial quality benchmarks.
It has been the endeavour of the Company to remain focused on strict adherence to
international quality standards and as a mark of quality assurance and our commitment to
total customer satisfaction, we are accredited with ISO 9001:2000 certification and the
Ductile Iron Pipes manufactured by the Company are Kite Mark licensed as approved by BSI,
UK.
Safety, Health & Environment (SHE) :
The Health, Safety and Environment Committee has been constituted, inter alia, to
monitor and ensure maintaining the highest standards of environmental, health and safety
norms and compliance with applicable pollution and environmental laws at all plants across
the Complex and to recommend measures, if any, for improvement in this regard.
The Committee reviews the Health, Safety and Environment Policy of the Company,
performance on health, safety and environment matters and the procedures and controls
being followed across the plant and compliance with the relevant statutory provisions.
The company has well-established in-house infrastructure, manpower pool, documented
standard operating procedure and other administrative machineries to implement the given
policies in the area of safe and sustainable production of goods & services of the
company. The Safety Department of the Company along with apex management acts as the nodal
department to execute and oversee policies pertaining to safe, healthy and environment
friendly operations and compliance with sustainability parameters as mandated and desired.
The Safety Observation tool launched by the Company has been un-compromisingly implemented
across all the units and it is working effectively in improving risk perception of
employees and bringing change in behaviour patterns and elimination of unsafe acts since
these have been found to be the root causes of majority of unsafe incidents.
It has been the constant endeavour of the Company to develop process that enable energy
conservation, solid waste utilization, water conservation and reduce overall harmful
impact on the environment. The Company has undertaken various measures to address
environmental issues across all the units of the plant. Online continuous emission
monitoring and ambient air quality monitoring stations have been installed for monitoring
and controlling stack emissions and ambient air quality.
Some of the notable initiatives undertaken during the year are:
• 20 KL Roof top rain water harvesting pit established at DIP gasket godown to
recharge rain water into the ground.
• One Online stack emission monitor installed at Ferro Alloy plant.
• 3000 Saplings planted within the plant premises, as part of green belt
development.
CORPORATE SOCIAL RESPONSIBILITY (CSR):
The Company is fully engaged in ensuring equitable and sustainable growth of society in
and around the area of its operations. The Company’s CSR initiatives are based on
social, environmental, and economic considerations. We recognize and embrace our
commitment to the communities in which we operate and we believe the private sector plays
a vital role in creating a level playing field,driving innovation and building an
environment that enhances education and entrepreneurship to foster economic growth. Our
social investment strategy is based on our vision to better society and improve
people’s lives.
INFORMATION TECHNOLOGY (IT):
We strongly believe that Information Technology (IT) is a vital and integral part of
our business and it is the best tool that improves the quality and efficiency of our work.
The strategic use of information technology can help organizations increase their
competitive advantage and make considerable improvements in operating performance.
Your Company continues to believe that with IT, real time information helps the Company
to identify the problems and take swift actions to resolve. Alongside the investment in
technology, your Company is also improving its service management processes to prevent any
defects in the IT environment and to enable faster resolution of any such incidents with
minimum business interruption.
During the FY 2020-21, the IT function of the Company has successfully undertaken the
following initiatives to further enhance overall organizational efficiency.
• Successful implementation of SAP disaster recovery system in Cloud environment.
• Development of E-Invoicing and TCS programs in SAP in line with changes in
statutory requirements.
• Implementation of online Performance Management System through SAP for staff and
executives across the Company.
• Development of programme for WBS element wise project cash flow through SAP.
HUMAN RESOURCES MANAGEMENT:
We believe that human resource management system of a company has a significant impact
on individual and organizational effectiveness and brings consistency in human resource
management practices and improves human relations in the company. With this object the
Company has set up an effective HRMS, which continuously focuses on a strategic objective
and works for improving employee knowledge, skills, motivation and opportunities for
improved contribution. Based on their overarching goal, human resource management systems
contribute to organizational effectiveness in multiple ways.
As part of Company’s learning and development initiatives, the exercise of
identifying skill sets of employees and career mapping is carried out on a regular basis
and job-specific/need based training programmes are conducted across all levels of
employees for skill upgradation and career development. The Company has also embarked on
developing a Performance Linked Incentive Scheme for all the employees directly involved
in the production. The Company also supported development of employees at managerial level
with a Key Result Area (KRA) based Performance Management System.
Greater emphasis is given for employee participation for productivity improvement and
operational efficiency involving all levels of employees through Kaizens and formation of
various Small Group Activities.
RISKS/CONCERNS & MITIGATION:
A prudent risk management framework has been developed and a cautious approach is
undertaken to identify and analyse internal and external risks and minimise their impact
on operations. The Company’s Risk Evaluation Process includes periodic identification
of risks that may likely to impact its business, rating of risks based on the intensity of
its impact, implementation of risk mitigation plans and regular monitoring of the same.
The major risks and suggested mitigation plans are explained as under.
Raw material Risk :
In view of un-predictability in the price and availability of major raw materials used
by the Company, it is open to the risk of volatility in raw material prices.
The rising prices of coal and iron ore may put pressure on the cost of production. The
Company continuously monitors the market trend and evaluates the sourcing strategy of coal
and iron ore to keep the procurement cost under control. Further, a number of cost control
measures are initiated on a continuous basis to reduce consumption through process
modifications to minimize the impact of increase in the prices of major raw materials.
Competition Risk:
Intense competition in the domestic DI Pipes industry may have an effect on the
profitability of the Company.
To mitigate this risk while the Company seeks to compete on the basis of product
differentiation through quality, it manages its costs to ensure it has an edge in pricing
over its competitors. Besides, the Company has been regularly focusing on cost reduction
measures and optimization of available resources to reduce its cost of production and
thereby protect its margins.
Environmental Risk :
By virtue of its manufacturing process, the Company is exposed to the risk of
environment pollution.
The company has implemented environmental management systems that have been certified
the requirements of international standard ISO 14001:2015 and these systems provide us
with a framework for managing compliance and achieving continuous improvement. Further, it
has been the constant endeavour of the Company to emphasize regular focus on sustainable
improvement of its Environmental Management System, which reduces the implications of its
process on the environment.
Receivables Risk :
Company, by virtue of offering credit to its customers, as a Policy, is open to risk of
receivables.
The Company regularly reviews its debtors’ position and take appropriate actions
for the recovery of receivables. Besides, the strict evaluation process adopted by the
Company for assessing credit worthiness of its customers and the strategy of covering
majority of supplies through Letters of Credit and Bank Guarantee has minimized the risk
of default.
Foreign currency Risk:
By virtue of overseas sourcing of certain raw and essential materials, equipment, it
has exposure to US Dollar. The Company is thus vulnerable to risks on account of
fluctuations in foreign exchange rates.
To mitigate this risk, the Company’s Forex Management Committee frequently reviews
its foreign exchange exposure and adopts comprehensive risk management system and hedges
its foreign exchange exposure by implementing strategy of selective and systematic hedging
of instruments viz. forward contract, options etc,.
Human resources Risk:
The Company being manpower intensive is vulnerable to the threat of human exodus and it
is a challenging task to attract and retain skilled and talented pool of employees.
The Company has an effective Human Resource Management Systems in place and it always
stays focused on identifying key staff and critical organizational roles, a process that
is increasingly being addressed through assessment and recognition. Developing talent
management strategies for retaining key employees through effective day-to-day management,
employee development and mobility, and compensation management that rewards past
performance and incents future contributions is a continuous activity in the organization,
which ensures attraction and retention of talent pool.
INTERNAL CONTROLS AND THEIR ADEQUACY:
Your Company has dedicated Internal Audit (IA) Team, which carries out audits of key
areas in-house. At the same time, periodic audits are carried out by the Internal Auditors
of the Company appointed by the Audit Committee. The Internal Auditors carry out audit as
per the scope approved by the Committee. The Audit Committee of the Board oversees the
functioning of Internal Audit. The process of procurement, payment, sales and collections,
risk management, safe remittance, fraud prevention, internal controls.
All transactions in the company are carried out on SAP S/4 HANA, an ERP based business
Application. Proper and adequate system of internal control exists to ensure that all
aspects are safeguarded and protected against loss from unauthorized use or disposition
and that each transaction is authorized, recorded and reported. The System further ensures
that financial and other records are fact-based and reliable for preparing the financial
statements. The Company has developed a comprehensive Compliance Management System to
ensure timely compliances with different regulations and accounting standards.
The Company has an adequate system of internal controlsin place. It has documented
policies and procedures covering all financial and operating functions. These controls
have been designed to provide a reasonable assurance with regard to maintaining of proper
accounting controls for ensuring reliability of financial reporting, monitoring of
operations, and protecting assets from unauthorized use or losses and compliances with
regulations.
OUTLOOK:
The company is having comfortable order book for supply of Ductile Iron pipes. During
this Covid-19 situation, safe and hygienic water supply is most important for the
Government. Ductile Iron pipe is the safest and most suitable pipe for transportation of
water not only in urban cities but also in rural India. The company is hopeful that
Central and State Governments will continue to give priority and remain committed in
respect of ongoing and future water supply, sewerage and irrigation and other projects in
the country. With enhanced production capacity, the company should be able to serve more
customers and will command more market share.
CAUTIONARY STATEMENT:
Statements in the Management Discussion and Analysis and Directors Report describing
the Company’s strengths, strategies, projections and estimates are forward-looking
statements and progressive within the meaning of applicable laws and regulations. Actual
results may vary from those expressed or implied, depending upon economic conditions,
Government Policies and other incidental factors. Readers are cautioned not to place undue
reliance on the forward looking statements.
| For and on behalf of the Board of Directors |
|
R.K. Khanna |
|
Chairman |
| Date: 04.05.2021 |
(DIN:05180042) |
+91-9892691696
