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The Anup Engineering Ltd Management Discussions

3,412.8
(0.58%)
Apr 2, 2025|12:39:45 PM

The Anup Engineering Ltd Share Price Management Discussions

Management Discussion and Analysis

(a) Industry structure and developments:

The Company caters to wide range of process industries including Oil & Gas, Petrochemicals, LNG, Fertilizers, Chemicals, Power, Water and Paper & Pulp with its extensive product range of Heat Exchangers, Reactors, Pressure Vessels, Columns & Towers, Industrial Centrifuges & Formed Components. We have witnessed a strong Capex cycle in the Capital goods, both domestic and international, and continues to see good traction which works well for manufacturers in this space. India is surely playing a very dominant role in the manufacture and supply of critical process equipment globally through its improved capacities, capabilities and a strong reputation on quality. Hydrogen as an energy source is also witnessing a strong push on the energy transition road map. Many projects are under execution globally and many more being announced which presents multiple opportunities for manufacturers like us. Focus on Green ammonia, which would be a route for green fertilizer and green hydrogen also presents sizable opportunities in the future. Petrochemicals, Fertilizer, Gas, Hydrogen (Blue for now) and Specialty Chemicals are showing good macro level indicators on growth.

(b) Opportunities and Threats:

Opportunities: The drive towards cleaner energy mix for decarbonization is presenting opportunities added to the demand for conventional energy mix which fuels the higher demand and also GDP growth aspirations of the developing countries. We are seeing good traction especially on Petrochemicals, Gas, Hydrogen, Fertilizer and specialty chemicals segment. Capex cycle across the Capital goods segment presents ample opportunities in this space. This is manifesting into good number of orders being bagged by Indian manufacturers like us in this space, providing a good opportunity to improve share of exports. The growth in the specialty chemical segment also means higher possibilities in the exotic/ finer grade material segment which means higher realization over the same capacity. The commissioning of our PHASE-1 expansion of our new state of the art facility at Kheda - Gujarat, provides us that added opportunity to improve our share. The acquisition of Mabel Engineers Private Limited a manufacturing plant in Tamil Nadu, which adds products like Silos, Storage Tanks and Vessels provide a wider bandwidth to address our customer requirements. This also helps us spread geographically down south of India to address our customer requirements in SEFE market.

Threats: The current concerns and the developments on geopolitics globally, is something that every manufacturer with substantial export/ import contribution will need to monitor closely. Moreover, being into custom built equipment business where every product is designed and made to order, labor skills play an important role especially skilled operators. The availability of skilled workforce to fuel the growth aspirations is always going to be a challenge. Hence high focus on Automation & Productivity improvements, both on the shop floor and office, is the key.

(c) Segment-wise or product-wise performance:

Historically, we have been dominant in the Shell & Tube heat exchangers which formed almost 70% of our annual revenue. Now with our new manufacturing plant at Kheda with close proximity to the National highway provides us that opportunity to address larger sized equipment. Therefore, our product range would improve more on Reactors, Vessels, Columns and other larger sized equipment in future. But Heat exchanger will still continue to be the dominant product. We expect the Heat exchanger to be between 60-65% of our revenue for this year.

Our impeccable record on ONTIME DELIVERY performance in line with the benchmark, sets us apart as a Reliable & Trusted supplier, globally. Other noteworthy developments last year have been, the Acquisition of Mabel Engineers Private Limited a manufacturing company in Tamil Nadu helping us spread geographically south of India and also adds products like Silos, Tanks and Vessels to our existing product lines. The newly established design office at Vadodara helps us to be in the vicinity of our esteemed Customers. The commissioning of our state-of-the-art manufacturing facility at Kheda- Gujarat, provides us with that added capacity for growth and also the capability to manufacture & deliver larger sized equipment being on the National highway providing easy access to the ports.

(d) Outlook:

We continue to see traction on capex into capital goods especially focused on Petrochemicals, Gas, Fertilizer, Hydrogen and Specialty chemicals. The focus on self-sufficiency, post the pandemic and the current geo-political uncertainties, have led to countries announcing new greenfield & brownfield projects to expand capacities. The goal in India to double the refining capacity by 2030 and also be a leader in petrochemicals, will manifest into good projects hitting the ground. The climate change is a serious concern globally, and the shift to low carbon emitting energy mix will be the way forward. Hydrogen forms a very important part of this new energy mix, and it offers a big opportunity for manufacturers like us, both for Blue hydrogen to start with and Green hydrogen in the near future. Announcement of new coal/ lignite gasification plants also provides new opportunities in this segment. Moreover, GDP growth aspirations announced by developing countries meant Oil & Gas and Petroleum products will continue to be an important part of their energy mix driving the growth, in addition to the focus on cleaner energy mix.

Good macro indicators on the sectors we work with, provides a reasonable confidence to continue our growth momentum, providing opportunities, both in domestic and exports.

(e) Risks and concerns:

The Company has in place a mechanism to identify, assess, monitor, and mitigate various risks to key business objectives. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis.

The Companys internal control encompasses various managements systems, structures of organization, standard and code of conduct which all put together help in managing the risks associated with the Company. With a view to ensure the internal controls systems are meeting the required standards, the same are reviewed at periodical intervals. If any weaknesses are identified in the process of review, the same are addressed to strengthen the internal controls which are also in turn reviewed at frequent intervals.

The Company has a Risk Management Committee of the Board of Directors and Risk Management Policy consistent with the provisions of the Act and the Listing Regulations. The Internal Audit Department facilitates the execution of Risk Management Practices in the Company, in the areas of risk identification, assessment, monitoring, mitigation and reporting. The Company has laid down procedures to inform the Audit Committee as well as the Board of Directors about risk assessment and related procedures & status.

The framework defines the process for identification of risks, its assessment, mitigation measures, monitoring and reporting. While the Company, through its employees and Executive Management, continuously assess the identified Risks, the Audit Committee reviews the identified Risks and its mitigation measures from time to time.

The Risk Management Policy which is available on the website of the Company at https://www.anupengg.com/policies/.

(f) Internal control systems and their adequacy:

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The Company has an Internal Audit department with adequate experience and expertise in internal controls, operating system and procedures.

The system is supported by documented policies, guidelines and procedures to monitor business and operational performance which are aimed at ensuring business integrity and promoting operational efficiency.

The Internal Audit Department reviews the adequacy of internal control system in the Company, its compliance with operating systems and laid down policies and procedures. Based on the report of internal audit function, process owners undertake corrective actions in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board of Directors from time to time.

(g) Discussion on financial performance with respect to operational performance:

This discussion covers the financial results and other developments during the Financial Year 2023-24 in respect of the Company. Published result is as prepared on Indian Accounting Standards (IND AS). Highlights below given only for comparison.

Financial highlights for operating performance of FY 2023-24:

(Rs. in Lakhs)
Particulars FY 2023-24 FY 2022-23
Revenue from Operation 55,038.45 41,133.81
EBITDA 12,675.06 8,270.49
EBITDA % 23.03 20.11
PAT 10,347.50 5,143.00

Overall revenues for the year grew 33.80% and stood at 55,038.45 Lakhs. Sales and Other income for the year ended 31st March 2024 were 55,944.82 Lakhs as compared to 41,258.02 Lakhs for the year ended 31st March 2023. The net profit stood at 10,347.50 Lakhs (previous year 5,143.00 Lakhs).

Strong order pipeline of 854.20 Crores as on 31st March 2024 to provide good execution visibility.

(h) Material developments in Human Resources / Industrial Relations front, including number of people employed:

At The Anup Engineering Limited, we firmly believe that our people are the cornerstone of our success. We prioritize talent acquisition, engagement, development, retention, and reward initiatives to drive organizational growth and prosperity.

An integral aspect of our HR strategy is our responsiveness to evolving trends shaping the future of work. By embracing agility and productivity enhancements, we continuously refine our HR systems and processes to elevate the employee experience.

Our concerted efforts are evident in our emphasis on effective recruitment practices and the cultivation of our employer brand. We actively promote internal mobility, align organizational structures with business imperatives, and institute robust rewards and recognition frameworks.

Central to our employee-centric approach is our commitment to facilitating growth opportunities. We prioritize internal mobility initiatives, enabling employees to explore diverse functional roles and ascend to higher positions within the company.

In the realm of learning and development, we are steadfast in our digitalization efforts. By offering a plethora of e-learning courses encompassing managerial and functional competencies, we equip our workforce with the requisite skills for success in an increasingly digital landscape.

At the heart of our HR philosophy lies a culture of open communication and support. Regular dialogues between managers and team members foster an environment where concerns can be voiced, improvements can be initiated, and individuals feel empowered to contribute their best.

Our performance management approach is multifaceted, combining accountability with continuous development opportunities. We champion a holistic view that nurtures talent, aligns with our compensation framework, and fuels career progression.

In our quest to groom future leaders, we provide a myriad of leadership development avenues. These initiatives aim to cultivate management skills, foster change management capabilities, and ensure alignment with our organizational strategy for sustained business success.

Through these concerted efforts, we endeavor to create a workplace where our employees thrive, excel, and contribute to the enduring success of the Company.

As on 31st March 2024, there were 243 permanent employees of Management Staff on role of the Company.

(i) Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations thereof, including:

Parameters Numerator Denominator 2023-24 2022-23
Debtors Turnover Ratio (times) Revenue from Operations Average Debtors 3-99 3.01
Inventory Turnover Ratio (times) Revenue from Operations Average Inventory 3-77 3.79
Interest Coverage Ratio (times) EBIT Finance Costs 54.43 50.70
Current Ratio (times) Current Assets Current Liabilities 1.86 2.05
Debt Equity Ratio (times) Total Debt Equity 0.04 0.08
Operating Profit Margin (%) EBIT Revenue from Operations 21.50 17.36
Net Profit Margin (%) Net Profit after Tax Revenue from Operations 18.80 12.50
Return on Net Worth (%) Net Profit after Tax Net worth 19.58 11.75

(j) Cautionary Statement:

Statements in this report on describing the Companys objectives, expectations or predictions may be forward looking statements within the meaning of applicable security laws or regulations. These statements are based on certain assumptions and expectations of future events. Actual results could however differ materially from those expressed or implied.

The Company assumes no responsibility in respect of the forward looking statements herein which may undergo changes in future on the basis of subsequent developments, information or events.

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