RTS Power Corpn. Management Discussions


ANNEXURE - B TO DIRECTORS REPORT

Industry Structure and Developments, Opportunities and threats

Your Company is a manufacturer of Power & Distribution Transformers, Cables and Conductors of various capacities which are electrical equipment used in the generation, transmission and distribution of electricity. The product portfolio has been further increased with the introduction of Galvanized Steel Wires and Strips by our Wholly-owned Subsidiary, Reengus Wires Private Limited.

Your Company is uniquely positioned as a Multi-Locational and Multi-Product Company in the Electrical Equipment Sector. It enjoys the advantage of low-cost sourcing at its North India operations and provides last mile support to its customers on a Pan-North and East India basis via its strategically located plants in East and North of the country. It is in both a National as well as a regional player in its segment.

The company is one of the largest exporters of Distribution and Power Transformers in Eastern India today. The company exports Transformers from its Kolkata Unit. This unit of the company has been accorded Star Export House Status by the Government of India.

Segment-wise or Product-wise Performance

Particulars

SALES (GROSS)

Year ended 31.03.2023 (Rs. in lakhs )

Year ended 31.03.2022 (Rs. in lakhs )

Electrical Equipment- Transformers, Cables, Conductors

6,814.13

3,217.40

Wind Energy

82.09

81.67

The company derives bulk of its sales from the sale of Electrical Equipment. Wind Energy sales are a very small fraction of the overall sales of the company. Within Electrical Equipment, the company is primarily focused on Transformers of various types. The sales of cables and conductors have been reduced as the company does not find the prices in this segment to be very lucrative.

Financial Performance (Rs. in Lakhs)

PARTICULARS

Year Ended 31.03.2023 Year Ended 31.03.2022
Total Income 7,350 4,158
EBITDA 1,802 1,049
Profit Before Tax (PBT) 1,416 600
Profit After Tax (PAT) 983 453

Operational Performance

Net Revenue from Operations for the year was Rs. 68.62 crores as compared to Rs. 32.99 crores in the previous year. Profit before Tax has increased by 136 % to Rs. 14.16 crores, the Highest Ever in the Companys history, as against Rs. 6 crores in the previous financial year. The EBIDTA of the company has seen a healthy improvement from Rs. 10.49 crores to Rs. 18.02 crores. An increase of 71%.

Your Companys decision to diversify from its core business has borne fruit. The Companys wholly owned subsidiary Reengus Wires Private Limited has managed to stabilize its operations and substantially increased its revenue from Rs. 59.40 crores to Rs. 76.10 crores.

The management feels it important to point out a few key highlights about the company and its performance.

Even though the Revenue of the company has increased by over 100%, it remains well below Pre-Covid years. The company is confident that with improving market conditions, it will be able to utilize its capacity better. As on today the Transformer Manufacturing capacity of the company remains significantly underutilized. Given this situation the company is well positioned operationally and financially to take advantage of any opportunities in the market.

The Operating Profit Margin of 19.15 % is the highest ever in the history of the company. This is due to the focus of the company on selected order bookings in better margin and more profitable segments. As a well thought out and conscious strategy to remain under-leveraged and de-risked from stress in the Distribution sector, the Company has reduced its direct business with Government Utilities. Direct business with Utilities continues to remain less than 10% of the companys turnover. While this has been one of the primary reasons for reduced turnover, it has resulted in the company redirecting its focus on other segments.

MANAGEMENT DISCUSSION AND ANALYSIS ANNEXURE - B TO DIRECTORS REPORT

As a result of this strategy, the companys Debtor Days have come down to an All Time Low of 111.3 days. Many old debtors have been realized and new debtors with long outstandings are not being created. Your Company continues to remain very careful in selecting its customers and is targeting only profitable segments with payment certainty.

A key highlight from this years numbers have been the export performance of the company. While the company has been actively exporting for over a decade, its performance this year has been the best so far in its history. The company will actively look at growing this segment further and has strengthened its export sales team.

The companys Creditor Days have been coming down from 274 days in FY 14 to 83.71 days in this FY. The company has managed to increase its profit margins due to better payment terms with its vendors by reducing the creditor days and availing cash discounts in many cases. By the companys estimate, better payment terms have resulted in the company adding 3-3.5 % additional margin to its bottom line.

The overall borrowings of the Company continue to remain low. The present Debt-Equity Ratio of the Company on a Standalone basis stands at 0.08. The Company has borrowed a total amount of Rs. 8.58 crores from its Bankers on account of working capital loans including export packing credit. There are no term loans taken from banks on account of its operations. The only marginal term loan facilities are on account of vehicle loan taken. The company feels it has sufficient headroom to Finance future growth projects both from internal resources and Banks.

Risks and concerns

Due to unprecedented rise in the price of commodities witnessed in the current year, the Company faces margin pressure. Competition from unorganized and semi-organized sector continues to depress prices.

However, the Management is fully aware of the risks and threats and actively works towards mitigating the same.

Outlook

With the introduction of the RDSS Scheme by the Government of India and the companys own focus on exports, the company feels the demand outlook in the medium term should remain robust. With its deleveraged Balance Sheet and low-capacity utilization, the company is in a very good position to make use of any opportunity that the market presents to it. The company will look at both domestic as well as export markets to grow its business in the future.

Internal Control Systems and their adequacy

The philosophy being followed with regard to Internal Control Systems and their adequacy has been formulation of effective systems, commensurate with the Companys size and nature of its operations and their strict implementation to ensure that assets and interests of the Company are safeguarded and checks and balances are in place to determine the accuracy and reliability of the accounting data.

The Company has a well-established and comprehensive Internal Control structure to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition, that transactions are properly authorized recorded and reported correctly and that operations are conducted in an efficient and cost effective manner and that all applicable laws and regulations are complied with.

Your Company has proper and adequate system of Internal Control in all areas of its operations. This Internal Control System is regularly reviewed and monitored. The Audit Committee of the Board of Directors supervises the functioning and effectiveness of Internal Controls.

Material developments in Human Resources / Industrial Relations front

Employee Relations scenario of your Company continues to be excellent.

Your Company would like to record its appreciation of the whole hearted support and dedication from employees at all levels numbering 47 as on March 31, 2023 in sustaining its operations and functioning during the period under review.

For and on behalf of the Board of Directors

Registered Office:

Directors

56, Netaji Subhas Road

2nd Floor, S.S. JAIN

Kolkata – 700001. CHAIRMAN

Dated: 14.08.2023 DIN 00013732

Policy for Selection of Directors and determining Directors independence Introduction:

The Board of Directors of the Company (the Board) consists of a balanced profile of Members specializing in different fields that enables it to address the various business needs of the Company, while placing very strong emphasis on corporate governance.

The Company recognizes the importance of Independent Directors in achieving the effectiveness of the Board. The Company has at present an optimum combination of Executive, Non-Executive and Independent Directors which too complies with the Companies Act, Rules made thereunder and the SEBI (LODR) Regulations.

This Policy sets out the Guidelines for the Nomination and Remuneration Committee (the NRC) and the Board for identifying persons who are qualified to become Directors or are suitable for appointment as Director of the Company and to determine the independence of Directors for Independent Directors of the Company.

Policy:

  1. Qualifications Criteria
    1. Before appointment of a person as a Director, NRC and the Board shall ensure that the person concerned has appropriate skill, knowledge and experience required to be a Member of the Board. The objective is to have a Board with diverse background and experience that are relevant for the Companys operations.
    2. In evaluating the suitability of an individual to be a Board Member, NRC and the Board shall take into consideration the following factors :
      1. Educational and professional background
      2. Relevant expertise and experience
      3. Personal and professional ethics, integrity and values;
      4. Readiness to devote sufficient time and energy in carrying out his duties and responsibilities.
    3. The proposed Director shall :
      1. not be disqualified under the Companies Act, 2013 and gives a declaration to that effect;
      2. give his written consent to act as a Director of the Company
      3. possess a Director Identification Number;
      4. abide by the Code of Conduct established by the Company for Directors , Independent Directors and Senior Management Personnel;
      5. disclose his concern or interest in any company or companies or bodies corporate, firms, or other association of individuals or other entity, including his shareholding at the first Meeting of the Board in every Financial Year and thereafter whenever there is a change during the Financial Year in the disclosures already made;
      6. Comply with such other requirements as may be prescribed, from time to time in future, under the Companies Act, 2013, Rules made thereunder, SEBI (Listing Obligation and Disclosure Requirement) Regulations, 2015 and other laws as applicable.
  2. Independence Criteria
    1. NRC shall assess the independence of Directors at the time of appointment / re-appointment and the Board shall assess the same annually. The Board shall also assess continuity/ maintenance of independence whenever any new interests or relationships are disclosed by a Director.
    2. The Companies Act, 2013 and SEBI (Listing Obligation and Disclosure Requirement) Regulations, 2015 sets out the following criteria of independence for a person to be an Independent Director :
    3. An Independent Director in relation to a Company, means a Director other than a Managing Director or a Whole-time Director or a Nominee Director —

      1. who, in the opinion of the Board, is a person of integrity and possesses relevant expertise and experience;
      2. (a) who is or was not a promoter of the company or its holding, subsidiary or associate company;
    1. who is not related to promoters or directors in the company, its holding, Subsidiary or associate company;
      1. Who, apart from receiving Directors remuneration, has or had no material pecuniary relationship with the company, its holding, subsidiary or associate company, or their promoters ,or directors, during the two immediately preceding financial years or during the current financial year;
      2. none of whose relatives has or had pecuniary relationship or transaction with the company, its holding, subsidiary or associate company, or their promoters, or directors, amounting to two percent or more of its gross turnover or total income or fifty lakh rupees or such higher amount as may be prescribed, whichever is lower, during the two immediately preceding financial years or during the current financial year;
      3. who, neither himself nor any of his relatives—
        1. holds or has held the position of a key managerial personnel or is or has been employee of the company or its holding, subsidiary or associate company in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed;
        2. is or has been an employee or proprietor or a partner, in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed, of—
          1. a firm of auditors or company secretaries in practice or cost auditors of the company or its holding, subsidiary or associate company; or
          2. any legal or a consulting firm that has or had any transaction with the company, its holding, subsidiary or associate company amounting to ten per cent or more of the gross turnover of such firm;
        3. holds together with his relatives two per cent or more of the total voting power of the company; or
        4. is a Chief Executive or director, by whatever name called, of any nonprofit organization that receives twenty-five per cent or more of its receipts or corpus from the company, any of its promoters, directors or its holding, subsidiary or associate company or that holds two percent or more of the total voting power of the company; or
        5. is a material supplier, service provider or customer or a lessor or lessee of the company.
      4. who shall possess appropriate skills, experience and knowledge in one or more fields of finance, law, management, sales, marketing, administration, research, corporate governance, technical operations, corporate social responsibility or other disciplines related to the Companys business.
      5. who shall possess such other qualifications as may be prescribed, from time to time, under the Companies Act, 2013 and the SEBI (Listing Obligation and Disclosure Requirement) Regulations, 2015.
      6. who is not less than 21 years of age.
    1. The Independent Directors shall abide by the "Code for Independent Directors" as specified in Schedule IV to the Companies Act, 2013.
  1. Every Independent Director shall at the first Meeting of the Board in which he participates as a Director and thereafter at the first Meeting of the Board in every Financial Year or whenever there is any change in the circumstances which may affect his status as an Independent Director, gives a declaration that he meets the criteria of independence as mentioned above.
  1. Criteria for making effective contribution
  2. Before making its recommendation to the Board for appointment of an individual as a Director of the Company, NRC shall take into consideration his Directorships/ Committee Memberships in other companies because Directors are expected to give sufficient time and energy to the Company for his effective contribution as a Board Member.

    The Companies Act 2013, and the SEBI (Listing Obligation and Disclosure Requirement) Regulations, 2015 already stipulates the following restrictions in this regard:

    • A Director shall not serve as Director, including as alternate Director, in more than 20 companies of which not more than 10 shall be Public Limited Companies.
    • A Director shall not serve as an Independent Director in more than 7 Listed Companies, and in more than 3 Listed Companies in case he is serving as a Whole-time Director in any Listed Company.
    • A Director shall not be a Member in more than 10 Committees or act as Chairperson of more than 5 Committees across all the companies in which he holds directorships.

    For the purpose of considering the limit of the Committee Chairpersonship and Membership, Chairpersonship and Membership of Audit Committee and Stakeholders Relationship Committee of all Public Limited Companies only, whether listed or not, shall be included and all other companies including Private Limited Companies, Foreign Companies and Companies under Section 8 of the Companies Act, 2013 shall be excluded.