Voltamp Transformers Ltd Management Discussions

ECONOMY / INDUSTRY OVERVIEW:

Post pandemic, India has emerged as one of the fastest-growing economies in the world, and it now offers a growing and thriving environment for investments, both domestic and foreign. With the largest youth population in the world, it provides prospective investors with a highly skilled workforce and a strong work ethic.

The present Government has achieved significant milestones in economic reform and development, the journey towards sustained economic growth is ongoing. Therefore, the continuity of this policy is crucial. Maintaining the momentum in key focus areas such as infrastructure development will be key determinants of Indias economic trajectory in the coming years. Indian economy seems to be in a sweet spot with healthy growth, moderating inflation, strong FII inflows and healthy Corporate and Banks balance sheets. The China plus one strategy and policies like Production Link Incentive Schemes and push for energy transition will drive the next generation of manufacturing facilities to India. Given the growing emphasis on ESG investments, sustainable industries in India are expected to rise. The transition to green fuels and electrification is expected to usher in a new era of sustainability.

Recent speedy infrastructure investments, the inclusion of more sectors under the PLI scheme, an increase in public investments and increasing PE/VC activity have led to plenty of investments in the Indian market. A stabilizing economic backdrop and financial oversight have provided investors with a perfect opportunity to invest in the country and have made India a rising economic powerhouse. India is entering 2024 on a confident note with high growth and moderating inflation. Geo political concerns are likely to continue in 2024 and any escalation of geo-political rifts will pose risks for commodity prices. There are uncertainties and lingering concerns around the volatile global environment, the impact of war on global commodity and fuel prices, as well as on freight cost. But overall the mood is optimistic.

OUTLOOK FOR THE COMPANY:

Over the years, the Indian government has introduced many initiatives to strengthen the nations economy. The Indian government has been effective in developing policies and programs that are not only beneficial for citizens to improve their financial stability but also for the overall growth of the economy. Over recent decades, Indias rapid economic growth has led to a substantial increase in its demand for exports. Besides this, a number of the governments flagship programes, including Make in India, Start-up India, Digital India, the Smart City Mission, and the Atal Mission for Rejuvenation and Urban Transformation, is aimed at creating immense opportunities in India. In the near to medium term, the outlook for the power sector in India is promising and transformative. The ongoing shift towards renewables should continue, with a focus on capacity addition and manufacturing. The Indian Power sector is slated for sustainable growth and will be one of the key sectors enabling the countrys future development.

The current economic environment across the world is marked by significant uncertainty. From the rising interest rates to geopolitical conflicts including the Russia-Ukraine war, crises in the red sea region, and ongoing tensions between Israel -Palestine may have impacts on the supply chain, logistic cost increase and lead time.

Despite all this, India has shown exceptional resilience with a growth rate of 7.6% in financial year 2024 according to second advance estimate. This is evidenced by several high frequency indicators, including strong GST collections, E-way bill transactions, robust bank credit growth, and a positive purchasing managers index (PMI).

The Government has continued its focus on capex as harbinger of growth. But pick up in private investment will be a critical factor for sustained growth momentum. There has been increased investment by private sector in segment like steel, cement, petrochemicals, automobile, metals, renewable energy. The order books of capital goods companies have increased sharply in the last fiscal year.

Overall, Indian economy is comfortably placed with GDP growth likely to be around 7.2% in financial year 2025. Structural developments like digitization and increased formalization appears to have pushed Indias potential growth to higher level. This is an apt time for the government to focus on quality of growth, while remaining vigilant of the luring risks.

FINANCIAL PERFORMANCE OF THE COMPANY DURING THE LAST FIVE YEARS:

Profit Before Tax (PBT), Profit After Tax (PAT), and Sales and Services Income of the last five years.

The Company has achieved net sales and service revenue of 1616.22 Crores as compared to 1385.10 crores in the previous year and the PBT increased to 397.88 crores as compared to 260.37 crores in the previous year and PAT increased to 307.08 crores as compared to 200.49 crores in the previous year.

FACTORS AFFECTING OUR FUTURE RESULTS OF OPERATIONS:

The major factors affecting future results of operations of your Company are the currency fluctuation, competitive pressures from local as well as recently entered International competitors, Govt. policies on power and infrastructure sectors and project implementation, aggressive pricing, continuing and highly volatile raw material prices and timely availability of imported raw materials at budgeted cost.

HUMAN RESOURCES/ INDUSTRIAL RELATIONS:

The Company continue its focus on development of human resources. The Company is a firm believer that its employee are its strength and the Company therefore respects individual rights and dignity of all its employees. The relations of the management with employees during the year continued to be cordial. Learning and development has been strengthened to bring value addition in the employee and to enhance team building leading towards success. The Company focuses on providing the employees, employee - friendly environment and culture and career growth opportunities.

INTERNAL CONTROL SYSTEMS:

The Company has in place, commensurate with the size and complexity of Companys business operation, effective internal control systems and policiesfor compliance of lawsand to safeguard the interest of the Company. The Company maintains a system of internal controls designed to provide reasonable assurance regarding the efficiency and reliability of operations and for safeguarding the assets of the Company and for ensuring appropriate recording and reporting of financial information for ensuring reliability of financial controls and for ensuring compliance of applicable laws and regulations.

The internal financial controls are adequate and are operating effectively and there are proper systems in place to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.

The internal audit covers a wide variety of operational matters and ensures compliance with specific standards with regard to reliability and suitability of policies and procedures.

The internal auditors report to the top management through CFO and continuously monitor adherence to laid down systems and policies. Services of internal auditors are being outsourced through established audit firm. The systems are regularly reviewed and modified for changes in operating and regulatory requirements.

The Audit Committee reviews the adequacy and effectiveness of internal control systems and suggests improvement for strengthening the same from time to time.

RISKS & CONCERNS:

Currently the geo-political situation, supply chain issues, volatile commodity prices be crucial parameter to watch while forecasting upcoming businesses opportunities. Volatility in major material prices is also an area of concern adversely impacting fixed price orders for transformers. The wide fluctuation of rupee against US Dollars also affects margin since the key raw materials, viz. copper, transformer oil, special steels for lamination, etc., are of import origin.

STRENGTH:

The Company is debt free since many years and having a good amount of investments of its surplus funds in diversified portfolios, viz. debt and equity mutual funds, bonds, debentures, tax-free bonds, etc. and the Company has efficient working capital management. The Company has a diverse industrial client base and not dependent on any particular industry segment or region to book orders. Continuity of senior level management staff in service with long duration allows the Company to handle larger volume of business with comparatively less risk.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS:

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018, the company is required to give details of significant changes (change of 25% or more as compared to the immediately previous financial year) in key sector specific financial ratios.

KEY FINANCIAL RATIOS:

LAST 10 YEARS FINANCIAL HIGHLIGHTS

CAUTIONARY STATEMENT:

Statements in this report on Management Discussion and Analysis relating to the Companys objectives, projections, estimates, expectations or prediction may be forward looking within the meaning of applicable securities laws and regulations. These statements are based on certain assumptions and expectations of future events. By their nature, forward-looking statements require the company to make assumptions and are subject to change based on risks and uncertainties. Actual results might differ materially from those expressed or implied depending upon factors such as climatic conditions, global and domestic demand-supply conditions, finished goods prices, raw materials cost and availability, foreign exchange market movements, changes in Government regulations and tax structure, economic and political developments within India and the countries with which the Company has business and other factors such as litigation and industrial relations. The Company assumes no responsibility in respect of forward looking statements herein which may undergo changes in future on the basis of subsequent developments, information or events.