Management Discussion and Analysis Report Overview The global economy faced different challenges during the last financial year. While the US economy seems to be recovering and emerged out of its crisis and it was the turn of emerging markets, hitherto the prime drivers of economic growth, to face growth barriers. Given the slow growth in China and consumption slowed down in many emerging markets, In India, the challenges were even tougher due to slow down in manufacturing sector, and power sector impacted demand, while the cost brssure continued, primarily driven by high energy prices. Against the backdrop of such challenging macro-economic environment, your Company went through a transformational phase. FY15 was the year of new expansions and challenges for your Company. An additional capital investment of over Rs. 571.56 Lacs was made during the year in existing projects and procurement & establishment of new projects viz. Cored Wire Mill, Conductor, Cables and Alloy Plant. Courageously these odds, your Company registered a remarkable performance. Profit Before Debrciation, Interest and Tax increased by 101.3% over the brvious year. Business Highlights Your Company has delivered strong operational performance during FY15 through registering a strong top line and bottom line growth. New project, Cored Wire Mill commenced operations during the year and is currently ramping up. This project in its fullness would redefine your Company's cost competitiveness on the domestic compass and significantly enhance the sustainability of its operations. This would not only enhance the product portfolio but would also redefine Indian Cored Wire market. Significant steps have been made to strengthen the recycling capabilities that will help aluminium recycling business to improve its cost structure and enhance competitiveness and profitability. Highlights for the financial year 2014-15 were: • Volume growth of 34.32% year on year basis. • Highest ever Gross Sales of Rs. 29,123 Lacs during the year. • Strong operating performance by business delivering highest ever EBIDTA of Rs. 1,265 Lacs. • Cored Wire Mill and Alloy Plant achieved significant progress on all its strategic expansion. • 25% increase in existing production capacity through expansion and additional capital expenditure in existing plants. Despite of few adverse external factors in the economy like political challenges, volatility in forex market, increased competition etc. the Company has recorded a notable growth during the year under report and improved the overall productivity and efficiency. The better management of the resources as well as use of production facilities has resulted into improved efficiency and better customer satisfaction. Commissioning of new plants and products shall let the Company to be at the highest peak in the upcoming years. Export of the Company has increased 1845% in compare to the brvious year Financial and Capital Market The Indian stock market turned out to be among the world's best performers in 2014 with the Bombay Stock Exchange (BSE) Sensex rising 25% from 22,455 on April 01, 2014 to 28,070 on March 31, 2015. Most market players believe that this stellar run will continue during 2015-16 on the back of reforms, strong foreign fund inflows, revival of manufacturing, improvement in the macro-economic situation and rise in corporate earnings growth. Industry Review Aluminium plays a key role in the progress of industrial development in India because it serves as a basic input for a number of industries apart from its use as a strategic metal. Aluminium holds good promise for exports and industrial developments of the country in view of its varied applications and use in strategic and vital sectors. This metal is needed today practically by every sector of engineering and rural developments. For the Company, overall, the year 2014-15 has been noteworthy and ended with growth, posting a positive guidance for the upcoming years. Strengths •Low cost and efficient labour force •Strong managerial capabilities emerging •Strongly globalised industries and global competitiveness •Modern new plants & modernized old plants Weaknesses • Higher duties and taxes •Strict labour laws •Dependence on import of raw materials Opportunities • Rapid urbanization • Increasing demand for consumer durables • Untapped rural demand • Increasinginterest of foreign Aluminium producers in India • Globalization Threats • Market fluctuations and China's export possibilities • Global economic slowdown • Competition • Governance issues • Environmental concerns Segment wise Reporting The Company is engaged only in one business of manufacturing and trading of non ferrous metal and does not have any other segment or activity. Hence segment wise reporting is not required to be given. Product wise Performance Aluminium Wire Rods The Company has recorded 39% increase in sales volume of Aluminium Wire Rods over the last year. The sales volume during the year under report is 8,000 metric tons (approx) in compare of 5,700 metric tons (approx) for the brvious financial year 2013-14. Aluminium Deox The Company has recorded 47% increase in sales volume of Aluminium Deox Products over the last financial year. The sales volume during the year under report is 6,600 metric tons (approx) in compare of 4,500 metric tons (approx) for the brvious financial year 2013-14. The Company expects Aluminium Deox product sales volume to increase by around 20% during FY16. Aluminium Auto Products, Cored Wire Mill, Alloy Plant, Conductor and Cables The Company has recently launched and commenced production of Cored Wire Products and is in process to set up & commence production of Alloy, Conductor and Cables from these plants. Thus, information on performance of these products / plants shall be provided by the Company in its next publications. Further, Introduction of these businesses shall enhance future profitability and value creation for the Company. The increase in quantities for production of the aforesaid products is a result of best quality of the products, innovation in the methods, techniques of manufacturing, satisfaction and trust which our customers and other stakeholders have put into us. Outlook The year 2014-15 has proved to be encouraging for Indian Aluminium Sector as a result of improved demand and prices. We have an adequate and efficient strategic planning process at Arfin through which we evaluate annually the business objectives and strategic themes of the Company. The performance of the Company is examined at regular intervals. During the year under report, the Company has taken adequate steps to ensure that there has been sufficient increase in supply and distribution of products, technology enhancement and customer engagements etc. The management strongly believes that the external economic environment and consumer demand will be more favorable to the Company in the forthcoming financial years. Risks & Concerns As it is normal and brvalent for any business, the Company also is likely to face competition from existing Companies. There can be risks inherent in meeting unforeseen situations, not common in the industry. Your Company is fully aware of these challenges and is geared to meet them. Your Company also recognizes the risks associated with business and takes adequate measures to address the associated risks and concerns. Rising up to the new challenges will only be possible when we scale-up the value chain and put in efforts toward providing more and more satisfaction to the clients. Risk: The growth of the Company is correlated to high performing individuals and overall skill development of the employees. Mitigation: The Company focuses on enhancing the skills of its people through a standardized curriculum as well as on developing talent among its employees in marketing and technology through various leadership programs. Risk: Disruption in sources of funding could adversely affect the liquidity and financial position of the Company. Mitigation: The Company meets its funding requirements from diverse sources, including working capital loans, shareholder funding, secured and unsecured loans and other credit facilities. Risk: Exposure to interest rate risks might result in increased cost of lending to customers. Mitigation: The Company prudently assesses the fund mix to reduce dependency on any one source of funding. Risk: Regulatory implications might dent the smooth operational functioning of the Company. Mitigation: The Company has in place a robust Corporate Governance framework and ensures that all the regulatory checks are successfully complied with at all times. Risk: Difficulty in expanding operations across new markets or regions in the country. Mitigation: The Company leverages its deep industry experience during the course of its expansion strategies. It identifies and collaborates with local business partners and adopts strategies to successfully market its products, ensuring that it reaches to every customer. Keep the Risk one step behind The Company has laid down a well-defined risk management mechanism covering the risk mapping & trend analysis, risk exposure, potential impact and risk mitigation process. A detailed exercise is being carried out to identify, evaluate, manage and monitoring of both business and non-business risks. The management periodically reviews the risk and suggests steps to be taken to control and mitigate the same through a properly defined framework. In line with the new regulatory requirements, the Company has formally framed a Risk Management Policy to identify and assess the key risk areas, to monitor and report compliance and effectiveness of the policy and procedure. Internal Control Systems and its Adequacy The Company has put in place an adequate Internal Control System to safeguard all assets and to ensure operational excellence. The system also meticulously records all transaction details and ensures regulatory compliance. The Internal Audit Function is an independent function and is carried out by a team of external as well as in-house auditors at the plants, branches and head office. The Company has proper and adequate system of internal controls to provide reasonable assurance that transactions are authorized, recorded and reported correctly and to ensure compliance with policies and statutes. The internal control system provides for well documented policies, guidelines, authorizations and approval procedures. The Company has an Audit Committee that regularly reviews the reports submitted by the Internal Auditors. Easy Accounting System in Data Processing implementation has been done across board in all our branches as well as our plants. All the workings are now being done through ERP. Employees of the Company are now well-versed with ERP. The Internal Audit Department also assesses opportunities for improvement in business processes & systems and controls, provides recommendations & designs to add value to the organization and follows up on the implementation of corrective actions and improvements in business process after being reviewed by the Audit Committee. The main purposes of the Internal Control System are: • Assurance about the fact that the transactions are recorded in proper manner and under proper heads. • Automatic and independent checking of transactions so as to ensure their validity. • To check and assure the compliance of various enactments like corporate laws, tax laws etc. • To brvent and early detection of frauds and malpractices, if any. Human Resource At Arfin India Limited, we ensure to provide environment for continuous innovation and improvement by rewarding the employees for the dedicated efforts made by them in achieving Company's goal. We believe whatever we achieved from where we started our journey long back is the result of efforts of our team. So, we consistently aim to provide a sustainable environment for learning right from the stage of recruitment to retention. To accomplish the same, we have drawn up a long-term strategy to nurture human potential within organization by retaining and grooming them and by attracting requisite talent from outside to focus on filling gaps across all levels of the organization. We continuously strive to attract and retain the best talent from the local markets; clearly define their roles and responsibilities; include them into robust performance management systems; create an inspiring and rewarding work environment; engage them into an inclusive work place; impart training and create development opportunities for increasing employee knowledge and efficiency to make them future ready and to create career opportunities. To keep abreast with changing environment and new skills, the employees are being provided regular training in their respective fields of work. Your Company believes in investing in people development and process improvements, aligned with Company's visions and values. The industrial relations with employees of the Company during the period under report generally remained cordial at Corporate Office and at all the Branches & Plants. Further, your Company is an equal opportunity employer and is committed to ensure that the work environment at all its locations is conducive to fair, safe and harmonious. It strongly believes in maintaining the dignity of all its employees, irrespective of their gender or seniority. Discrimination and harassment of any type is strictly prohibited. Cautionary Statement Certain statements in the Management Discussion and Analysis Report describing the Company's objectives, brdictions may be "forward-looking statements" within the meaning of applicable laws and regulations. Actual results may vary significantly from the forward looking statements contained in this document due to various risks and uncertainties. These risks and uncertainties include the effect of economic and political conditions in India, volatility in interest rates, new regulations and Government policies that may impact the Company's business as well as its ability to implement the strategy. The Company does not undertake to update these statements. |