surana telecom and power ltd share price Management discussions


Surana Telecom and Power Limited was incorporated as a Private Limited Company on 14.08.1989 as Surana Petro Products Private Limited and was engaged in the business of manufacturing of Petro Products such as Petroleum Jelly and Telecom products such as Jointing Kits. Thereafter, the Company was converted into a Public Limited Company on 09.07.1993. In 1994, the Company ventured into the Telecom sector with the production of Optic Fibre Cables and consequently, name of the Company was changed to Surana Telecom Limited on 05.08.1994. In 2007 the Company diversified into the power sector with the manufacturing of low tension and high tension power cables and setting up of 1.25 MW wind power generation facility. In order to reflect the diversity, the name of the Company was again changed to "Surana Telecom and Power Limited" on 11.10.2007. In 2008, taking cue from the increasing recognition for nonconventional energy and anticipating demand primarily in the field of Solar Photovoltaic cells, the company ventured into manufacturing of Solar Modules and other Solar photovoltaic products.

During the year 2009-2010, a Scheme of arrangement was entered by the Company with M/s Surana Ventures Limited which was sanctioned by Honble High Court of Andhra Pradesh on 28.06.2010 and became effective from 28.07.2010, pursuant to which the "Solar Undertaking" was merged with M/s Surana Ventures Limited (the name has been changed to Surana Solar Ltd). The Company is into the business of generation of solar energy. In the year 201112, the Company had set up 5 MW Solar Power Project in Gujarat, with this it has successfully ventured into Solar Power Generation. Currently, the total installed capacity is 20 MW owned by the Company and its subsidiaries in the states of Gujarat, Uttar Pradesh and Telangana.

A) INDUSTRY STRUCTURE AND DEVELOPMENTS:

SOLAR ENERGY:

India has made tremendous progress in renewable energy adoption over the past few years, particularly in solar energy sector. Indias Solar energy capacity has grown from 6.76 GW in 2016 to an impressive 70 GW as on June 2023. This significant growth demonstrates Indias commitment to clean energy. The impressive solar energy growth can be attributed to several factors including Government policies and incentives, decreasing cost of Solar Power technology and increased public awareness. The Government has set up an ambitious target of having 280 GW of Solar Power by 2030.

B) OPPORTUNITIES AND THREATS:

India has tremendous potential in renewable energy. As part of Paris Climate Agreement, India has committed to achieve forty percent of its installed electricity capacity from non-fossil fuels by 2030. For achieving this goal, India has set an ambitious target of 175 GW of installed renewable energy (RE) capacity, including 100 GW of solar power, by 2023. India has also set a target of 450 GW installed RE capacity by 2030. As per the Central Electricity Authoritys Optimum Energy Mix report, the electricity requirement of the country by 2029-30 will be 817 GW, including the 450 GW from renewable energy sources, out of which 280 GW would come from solar energy. To achieve the target of 280 GW, around 25 GW of solar energy capacity is needed to be installed every year, till 2030.

The Government is committed to increased use of clean energy sources and is already undertaking various large- scale sustainable power projects and promoting green energy heavily with a target to reduce the emissions intensity of GDP by 33% - 35% below the 2005 levels and increase share of non-fossil fuel in total capacity to 40% by 2030. The governments goal of installing 175 GW of renewable energy, 100 GW of which is solar capacity, by 2023 looks achievable with the right policies and participation of the industry.

Indias solar sector is heavily reliant on imports of solar equipment. Certain countries dumping solar cells and modules to kill the nascent domestic industry, because of which Government had to impose Safeguard Duties. Considering Indias huge solar targets and that electricity is a strategic sector of the economy, India needs to develop domestic solar manufacturing capacities and reduce its dependence on imports to avoid disruption in future, Government has announced to impose 40% Basic Customs Duty (BCD) on Solar Modules and 25% BCD on Solar Cells from 1st April, 2023. The customs duty will replace a 15% safeguard duty currently imposed on imports from China and Malaysia. Further, the Government has announced Production- Linked Incentive (PLI) Scheme for Highly Efficiency Solar PV Modules for Enhancing Indias Manufacturing Capabilities and Enhancing Exports over a five-year period.

C) SEGMENT-WISE OR PRODUCT WISE PERFORMANCE:

During the year under review, the Company has recorded revenue of Rs. 1710.93 Lakhs and made a net profit of Rs. 736.79 Lakhs against revenue of Rs. 1770.04 Lakhs and net profit of Rs. 487.41 Lakhs in the previous financial year 2021-22.

The following segment wise turnover in percentage wise during the financial year ended 31.03.2023:

Renewable Energy (Solar & Wind) - 79.69%
Trading & Others - 20.31%

D) BUSINESS OUTLOOK:

Solar power in India at current levels is cheaper than electricity generated through coal, natural gas or other fossil fuel options. Support from various central

and states government for solar power industry is continuously increasing. The Government of India has set an ambitious target of achieving 500 GW of renewable energy capacity by 2030 which includes 280 GW of solar power. With this the market players in India now have enough incentive to move to clean sources of energy. In view of the huge demand for solar power and company having considerable resources in this line of activity, the Company expects to get benefits from the proposed huge installation of solar power capacity.

E) RISKS AND CONCERNS:

Your company being in the business of generation of solar energy have risks with land acquisition, tariff bidding, government policies etc. The Company has sufficient risk management policies in place that act as an effective tool in minimising the various risks that the businesses are exposed to during the course of their day-to-day operations as well as in their strategic actions.

F) INTERNAL CONTROL SYSTEM AND ITS ADEQUACY:

The Company has adequate Internal Control Systems and Procedures with regard to purchase of Stores, Raw Materials including Components, Plant and Machinery, equipment, sale of goods and other assets. The company has clearly defined roles and responsibilities for all managerial positions and all operating parameters are monitored and controlled. The Company designs and maintains accounting and internal control systems to provide reasonable assurance at reasonable cost that assets are safeguarded against loss from unauthorized use or disposition, and that the financial records are reliable for preparing financial statements and maintaining accountability for assets.

The company has an Internal Audit System commensurate with its size and nature of business. M/s Sekhar & Co., a firm of Chartered Accountants, are acting as Internal Auditors of the Company. Periodic reports of Internal Auditors are reviewed in the meeting of the Audit Committee of the Board. Compliance with laws and regulations is also ensured and confirmed by the Internal Auditors of the company. Standard operating procedures and guidelines are issued from time to time to support best practices for internal control.

G) FINANCIAL PERFORMANCE & OPERATIONAL PERFORMANCE:

A. FINANCIAL PERFORMANCE:

Capital Structure:

The Equity Share Capital of the Company as on 31st March 2023 is Rs. 1357.59 lacs comprising of 13,57,59,963 Equity Shares of Re. 1 each fully paid.

Other Equity:

The Other Equity of the Company for the current year is Rs. 10708.98 lacs and in the previous year was Rs. 9831.70 lacs

Property, Plant and Equipment:

During the year, the Company has added Property, Plant and Equipment amounting to Rs. 346.53 lacs as against Rs. 122.35 lacs in the previous year. The total net block of assets as on 31.03.2023 is Rs. 39627.20 lacs

Inventories:

Inventories, as on 31st March, 2023, amounted to Rs. 115.96 lacs as against Rs. 111.31 lacs in previous year.

Trade Receivables:

Trade Receivables amounting to Rs. 262.38 lacs as on 31st March, 2023 and Rs. 254.39 lacs in the previous year.

Cash and Cash Equivalents

Cash and Cash Equivalents with Scheduled Banks, as on 31st March, 2023, amounting to Rs. 76.94 lacs as against Rs. 0.08 lacs

Bank balances other than cash

Bank balances with Scheduled Banks, as on 31st March, 2023, amounting to Rs. 60.80 lacs as against Rs. 62.26 lacs.

Loans (Noncurrent):

Loans and Advances amounting to Rs. 4262.10 lacs as on 31st March, 2023, as against Rs. 4719.88 lacs in the previous year.

Other Current Assets:

Short Term Loans and Advances amounting to Rs. 33.69 lacs as on 31st March, 2023, as against Rs. 46.54 lacs in the previous year.

Current Liabilities:

Current Liabilities amounting to Rs. 945.13 lacs as on 31st March, 2023, as against Rs. 769.62 lacs in the previous year.

B. OPERATIONAL PERFORMANCE:

Turnover:

During the year 2022-23, the Net turnover of the Company was Rs. 1710.93 lacs and Rs. 1770.04 lacs in the previous year.

Other Income as on 31st March, 2023 is Rs. 983.35 lacs as against Rs. 291.15 in the previous year.

Depreciation and Amortization:

The Company has incurred a sum of Rs. 465.90 lacs towards depreciation and amortization for the year and Rs. 482.66 lacs in the previous year.

Net Profit:

The Net Profit of the Company after tax is Rs. 736.79 lacs and Rs 487.41 lacs in the previous year.

Earnings per Share:

Basic Earnings per Share for the year ended 31.03.2023 is Rs. 0.54 for Face Value of Rs. 1 and Rs. 0.36 per share for the year ended 31.03.2022.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS:

Ratios 2023 2022 Change (in %)
Current Ratio 1.31 0.63 108.02
Debt Equity Ratio 0.10 0.17 (39.19)
Debt Service Coverage Ratio 1.79 1.32 34.78
Return on Equity Ratio 6.11 4.36 40.17
Inventory Turnover (no. of days) 24 23 7.78
Debtors Turnover (no. of days) 55 51 6.99
Creditors Turnover (no. of days) 130 274 (52.71)
Net Capital Turnover Ratio 1.56 4.39 (64.43)
Net Profit Ratio 43.06 27.54 56.39
Return on Capital Employed 11.95 11.06 8.10
Operating Profit Margin 86.54 77.12 12.22

Notes:

1. Current Ratio: Change in the Current ratio is due to increase in the current Assets on account of investment in Mutual Funds.

2. Debt Equity Ratio: Change in Debt Equity ratio is due to Prepayments of Long Term borrowings.

3. Debt Service Coverage Ratio: Change in the Debt Service Coverage Ratio is due decrease in long term liability and Net profit.

4. Return on Equity Ratio: Change in the Return on Equity Ratio is on account of Increase in Net Profit.

5. Creditor Turnover: Change in Trade Payables ratio is due to increase in purchases.

6. Net Capital Turnover Ratio: Change in Net Capital Turnover Ratio is due to increase in Certain Assets.

7. Net Profit Ratio: Change in the Net Profit ratio is due to Increase in other income and decrease in Finance cost.

HUMAN RESOURCE DEVELOPMENT AND INDUSTRIAL RELATIONS:

The Company believes that the quality of its employees is the key to its success in the long run and is committed to provide necessary human resource development and training opportunities to equip them with skills, which would enable them to adapt to contemporary technological advancements.

Industrial Relations during the year continues to be cordial and the Company is committed to maintain good industrial relations through negotiations, meetings etc.

CAUTIONARY STATEMENT:

Statements in the Management Discussion and Analysis describing the Companys Objectives and Expectations may be "Forward-Looking Statements" 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 the Companys Operations include economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, technological obsolescence, changes in the Government Regulations and Policies, Tax Laws and other Statutes and incidental factors.

For and on behalf of the Board of Directors
NARENDER SURANA DEVENDRA SURANA
MANAGING DIRECTOR DIRECTOR
DIN: 00075086 DIN: 00077296
Place: Secunderabad
Date: 10.08.2023