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Ratnamani Metals & Tubes Ltd.

BSE: 520111 Sector: Metals & Mining
NSE: RATNAMANI ISIN Code: INE703B01027
BSE 00:00 | 27 Jan 1893.25 -5.75
(-0.30%)
OPEN

1898.10

HIGH

1908.75

LOW

1890.45

NSE 00:00 | 27 Jan 1900.55 -1.55
(-0.08%)
OPEN

1910.00

HIGH

1920.00

LOW

1885.05

OPEN 1898.10
PREVIOUS CLOSE 1899.00
VOLUME 222
52-Week high 2300.00
52-Week low 1455.00
P/E 30.37
Mkt Cap.(Rs cr) 8,851
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 1898.10
CLOSE 1899.00
VOLUME 222
52-Week high 2300.00
52-Week low 1455.00
P/E 30.37
Mkt Cap.(Rs cr) 8,851
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Ratnamani Metals & Tubes Ltd. (RATNAMANI) - Director Report

Company director report

RATNAMANI METALS AND TUBES LIMITED ANNUAL REPORT 2011-2012 DIRECTOR'S REPORT The Board of Directors is pleased to present the 28th Annual Report with audited accounts of the Company for the year ended 31st March, 2012. 1. Financial Results: (Rs. in Lacs) 1. Financial Results 2011-2012 2010-2011 Revenue from operations (Net) 1,22,174.02 81,367.28 Profit before depreciation and tax 18,165.26 15,268.97 Less : Depreciation 4,249.15 3,999.46 Profit before tax 13,916.11 11,269.51 Less: Provision for taxation 4,484.79 3,058.16 (including Deferred Tax Credit) Profit After Tax and before prior period items 9,431.32 8,211.35 Add: Prior period items 1,712.87 106.00 Net Profit 11,144.19 8,317.35 Add: Balance brought forward from previous year 7,187.35 5,217.46 Amount available for appropriations 18,331.54 13,534.81 Appropriations General reserve 5,000.00 5,000.00 Proposed dividend with dividend tax 1,618.36 1,347.46 Balance carried to balance sheet 11,713.18 7,187.35 Total 18,331.54 13,534.81 2. Dividend: Your Directors are pleased to recommend a dividend of Rs.3 (150%) per equity share having face value of Rs. 2 each. 3. Review of Operations: A. General: The financial year 2011-12 has been challenging for the Indian economy. It witnessed a slowdown due to weak industrial activity coupled with a contraction in investments. Factors such as persistent and high inflation, monetary tightening, expansion of trade deficits, weakening of the rupee, negative global developments and domestic political uncertainty have also contributed to it. There has been slowdown in the advanced economies as well. Despite of the challenges, your company has outperformed during the year under review and posted encouraging results. The performance had established a new milestone for the Company. The Company's efforts for all round improvement helped in increasing the profitability. B. Financial Performance: The Company could achieve revenue from operations of Rs.1,221.74 crores with a PBT of Rs.139.16 crores and PAT before prior period item of Rs.94.31 crores during the year under review as compared to revenue from operations of Rs. 813.67 crores with a PBT of Rs.112.70 crores and PAT before prior period item of Rs. 82.11 crores during the previous financial year. The Net Profit post addition of prior period item is Rs. 111.44 crores for the year under review as compared to Rs. 83.17 crores during the previous financial year. C. Operations: The Company's products enjoy applications in various industries including oil and gas explorations, refineries and petrochemicals, power industries i.e. thermal, nuclear and solar power plants, chemical, fertiliser, desalination, aerospace and atomic energy, water and sewerage, paper and pulp industries, etc. During the year under review, there has been good demand for both stainless steel tubes and pipes as well as carbon steel pipes from various sectors resulted into optimum utilisation of capacities and robust performance during the year under review. 4. Management Discussion And Analysis: A management discussion and analysis report is annexed and forms an integral part of the annual report. 5. Directors: In accordance with the requirement of the Companies Act, 1956 and Article 170 of the Articles of Association of the Company, Shri D.C. Anjaria and Dr. V.M. Agrawal are liable to retire by rotation and being eligible, offers themselves for reappointment at the ensuing Annual General Meeting. Shri D.C. Anjaria and Dr. V.M. Agrawal are not related to any Director of the Company. 6. Credit Rating: CRISIL has reaffirmed AA-(AA minus) rating for the Company's long-term borrowings and A1+ (A1 plus) for short-term borrowings. 7. Deposits: Your company has not invited or accepted any deposits from the shareholders and public during the year within the meaning of Section 58(A) of the Companies Act, 1956. 8. Particulars of Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo: The information pertaining to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required under Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is given as per Annexure 'A' forming part of this Report. The Company has commissioned windmills at various places for 'Green Energy Generation'. Thus contributing in every way possible towards a greener and cleaner earth. 9. Particulars of Employees: The particulars of employees under the Companies (Particulars of Employees) Rules, 1975 as amended up to date, which is required to be included in the Directors' Report pursuant to Section 217 (2A) of the Companies Act, 1956 is attached herewith as Annexure 'B' forming part of this Report. 10. Auditors: M/s. Mehta Lodha & Co. and M/s. S.R. Batliboi & Associates, Chartered Accountants, joint statutory auditors of the Company, hold office until the conclusion of the ensuing Annual General Meeting and are eligible for reappointment. Your Directors recommend their reappointment as statutory auditors of the Company until the conclusion of the next Annual General Meeting of the Company on such remuneration as may be fixed by the members. The Company has received letters from both of them to the effect that their reappointment, if made, would be within the prescribed limits under Section 224(1B) of the Companies Act, 1956 and that they are not disqualified for reappointment within the meaning of Section 226 of the said Act. The Notes on annual accounts referred to in the Auditors' Report are self- explanatory and do not call for any further comments. 11. Cost Auditors: In pursuance of Section 233B of the Companies Act, 1956 and an order no. F.No.52/26/CAB-2010 dated 03.05.2011 issued by Cost Audit Branch, Ministry of Corporate Affairs; your Directors have appointed N.D. Birla & Co., Cost Accountants, Ahmedabad as a cost auditor to conduct the cost audit of 'Steel Tubes & Pipes Products' for the financial year 2011-12. The said appointment has been approved by the Central Government. The Board of Directors has reappointed M/s. N.D. Birla & Co, Cost Accountants, the cost auditors for conducting the cost audit for the business as stated above for the financial year 2012-13 subject to approval of the Central Government. 12. Directors' Responsibility Statement Pursuant to Section 217 (2AA) of the Companies Act, 1956: The Board of Directors hereby state and confirm: a. That in the preparation of the annual accounts, the applicable Accounting Standards have been followed, along with proper explanation relating to material departures; b. That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profits of the Company for that period; c. That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d. That the Directors have prepared the Annual Accounts on a 'going concern' basis. 13. Corporate Governance Report: Your company has been practising principles of good Corporate Governance over the years. The Board of Directors supports the broad principles of Corporate Governance. In addition to the basic governance issues, the Board lays strong emphasis on transparency, accountability and integrity. The Board has formed Code of Conduct for all Board members and Senior Management of the Company and they have affirmed compliance during the year under review. The Board has received CEO/CFO Certification under sub-clause V of the Clause 49 of the Listing Agreement. The Company has formulated Code of Conduct for prevention of Insider Trading as required by SEBI (Prohibition of Insider Trading) Regulations 1992 as amended from time to time. The code ensures prevention of dealing in the Company's shares by persons having access to unpublished price sensitive information. A separate report on Corporate Governance is enclosed as part of this Annual Report and marked as Annexure 'C'. Requisite certificate from M/s M. C. Gupta & Co., practising Company Secretaries regarding compliance of Corporate Governance as stipulated under the Clause 49 of the Listing Agreement is annexed to the report of Corporate Governance. 14. Employees Stock Option Scheme (ESOS-2006): As required by SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999, detailed disclosure is enclosed as per Annexure 'D' and forms part of this report. During the year under review, the Company has allotted 40,650 Equity Shares to the employees under the Employees Stock Option Scheme 2006. 15. Listing: Equity shares of your company continue to be listed on Bombay Stock Exchange Ltd. and National Stock Exchange of India Ltd and Listing Fees for the year 2012-13 have been paid to them. 16. Green Initiative: Your Directors would like to bring it to your notice that the Ministry of Corporate Affairs (MCA) has taken a 'Green Initiative in Corporate Governance' allowing paperless compliance by Companies through electronic mode and the Companies are now permitted to send various notices/documents (including annual report) to its shareholders through electronic mode at the registered e-mail address of shareholders. To support this green initiative, we hereby once again appeal to all members who have not registered their e-mail addresses so far are requested to register their e-mail addresses, in respect of electronic holdings with their concerned Depository Participant and in respect of shares held in physical form with Registrar and Share Transfer Agent of the Company. 17. Acknowledgements: Your company has outperformed in a challenging year and continues to build shareholder value. Your Directors are hopeful of a good performance going forward. Your Directors would like to express their sincere gratitude for the unstinted support from all stakeholders, Banks, Central and State Governments. The Directors would also like to place on record their heartiest appreciation for the outstanding contribution by the employees in achieving remarkable performance during the year under review. For and on behalf of the Board of Directors Place: Village: Indrad, Taluka Kadi Prakash M. Sanghvi Date : 29th May, 2012. Chairman ANNEXURE: A ADDITIONAL INFORMATION AS REQUIRED UNDER SECTION 217(1)(e) OF THE COMPANIES ACT, 1956: (A) Conservation of Energy: The Company is constantly striving towards high degree of optimisation, conservation of energy and absorption of technology. Some of the initiatives taken by the Company during the financial year 2011-2012 are listed below: (a) Energy Conservation measures taken; 1) Changed 150 watt lamp instead of 250 watt resulted into saving of 11 KWH/day. 2) Installation of A.C. VF drives for smooth operation resulted in to saving of 2.96 KWH/day. 3) Replacement of old low efficient L.T. Motor by Energy Efficient Induction Motor resulted in to saving of 3.4 KWH/day. 4) Maintained unity power factor during the whole year so the maximum demand has decreased. 5) Installed Translucent Sheets to ensure availability of natural light in plant, it saves electricity. 6) Installed Air turbo Ventilator-decreased inside plant temperature so working efficiency increased. 7) Roofing of the plant changed. Old A.C sheet roof changed with new pre- coated and FRP Transparent Sheet. 8) Replacement of high power consuming halogen lamps by energy efficient metal halide lamps. 9) Automatic power factor cum harmonic filter system installed for efficient use of electrical energy by reduction of heating loss in distribution system and reduction of immature failure of electrical equipment. 10) ERW and Spiral Plants Hydro Tester-ACVF drive has been put in operation to control heavy current kicks at the time of starting which in directly control of maximum demand from grid power. 11) All Heat treatment furnaces has been switched over from LPG to CNG from July 2011, which has resulted in to a substantial savings to the Company. 12) Though there has been 15% (approx) increase in the per unit electricity cost during the year 2011-12, the unit consumption for despatched finished goods has been brought down by 3.5%. This reduction is without taking into account the multi-process products, which were manufactured in higher quantities, which if accounted for, will result in higher savings. 13) Installed a Fully Automatic Billet Heating system with a very narrow range of temperature control, for billets heated by induction heating for the Hot Extrusion Press. This resulted in a drastic decrease of the billet drops on the furnace thereby increasing the quality of the hot extruded pipes and saving of electricity for reheating the dropped billets. 14) Replaced the Mono-block pump with submersible pump and installed auto with control, through water temperature in cooling bath at Bright Annealing Furnace No: 01 resulted in to saving of 66 KWH per day. 15) Renovation of the Furnace with changing new brick lining and high- temperature resistant ceramic tiles in Heat Treatment Furnace No: 01 resulted in to saving of 6 SCM per hours resulted in to saving of 144 KWH per day. 16) Replacement of heater in Degreasing water tank at Instrumentation Pilger mill by common tank in place of individual. 17) Power consumption is brought down by monitoring and controlling of compressors resulted into saving of 78 KWH per Day. (b) Additional investment and proposals, if any, being implemented for reduction of consumption of energy; No separate accounts are maintained. (c) Impact of measures (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods; Substantial energy saving, reduction of energy consumption, saving of LNG consumption. Savings/rebate on cost. (d) Total energy consumption and energy consumption per unit of production as per form 'A': Not Applicable. (B) Technology Absorption: (e) Efforts made in technology absorption as per Form B: Form B enclosed. (C) Foreign Exchange Earnings and Outgo: (f) Activities relating to exports: The Company has exported tubes and pipes to the U.K., the U.S., the U.A.E, Spain, South Korea, Saudi Arabia, Qatar, Oman, Mexico, Malaysia, Kuwait, Kenya, Japan, Italy, Iran, Indonesia, Germany, France, Bahrain, Australia, Peru, Brazil, Bangladesh. (g) Total foreign exchange earnings used and earned: Foreign exchange earnings (FOB) Rs. 28,858.70 Lacs (P.Y. Rs. 5000.79 Lacs) Foreign exchange outgo Rs. 2,610.50 Lacs (P.Y. Rs. 845.40 Lacs). FORM-B FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO ABSORPTION, RESEARCH AND DEVELOPMENT: Research and Development (R & D): 1) Specific areas in which R & D is carried out by the Company: Installation and commissioning of new RTR Machine. 2) Benefits derived as a result of the above R & D: Better control of weld process as testing result is accurate. 3) Future plan of action: The Company would continue research and development work in manufacturing of smaller diameter and higher thickness pipes. 4) Estimated expenditure on R & D: No separate record of expenditure is maintained. Technology absorption, adaptation and innovation. 1) Efforts, in brief made towards technology absorption, adaptation and innovation: a. Developed Alloy Steel SAW Welded Pipes. b. Surface Grinding Machine-New machine was purchased and developed in- house facility for sample preparation. c. Notch Broaching Machine-New machine was purchased for preparing notches on samples. 2) Benefits derived as a result of the above efforts: (a) Saving of time (b) Better quality of samples. (D) Information on Pollution Control Measures Forming Part of Directors' Report Installed Online Bright Annealing Induction Heating equipments to avoid pickling of tubes after the annealing process thus resulting into no usage of acids and saving of water. Installed New Air Scrubber system at Pickling Area, which reduces the pollution arising due to acid and chemical fumes. The Company monitors and maintains environment and pollution control parameters at its plant site. The Company is maintaining proper effluent treatment plants and the treated water gets used for plantation of trees. ANNEXURE: D DISCLOSURES REGARDING STOCK OPTIONS: During the year 2006-07, the Company had introduced Employee Stock Option Scheme (ESOS 2006) for the benefit of employees of the Company. Pursuant to the applicable requirements of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ('the SEBI Guidelines'), following disclosures are made in connection with Employees Stock Option Scheme (ESOS 2006). The details of options granted under Employee Stock Option Scheme 2006 are given in the table. Particulars ESOS 2006 a. Total options authorised 22,50,000 by the plan b. The pricing formula Rs.59.40/- (plus applicable taxes) which is 75% of the average of daily closing price of equity shares of the Company during 30 days preceding the date of grant of options as quoted on the Stock Exchange, Mumbai c. Options vested 22,50,000 d. Options exercised 14,15,609 e. Total number of shares 14,1 5,609 arising as a result of exercise of options f. Options lapsed NIL g. Variation of terms Exercise Period extended from 5 years to of options 8 years at 27th AGM held on 18.08.2011 h. Money realised by Rs. 28,31,218/- share capital exercise of options Rs.8,12,55,957/- share premium i. Total number of options 8,34,391 in force j. Employee-wise details Name Options granted of options granted to (a) Senior Management Shri D.C. Anjaria 25000 Personnel: Dr. V.M. Agrawal 25000 Shri P.M. Mehta 25000 Shri A.J. Vora 25000 Shri D.N. Patel 25000 Shri R.S. Patel 25000 Shri P.H. Bhat 25000 Shri Vimal Katta 25000 Shri B. Ranganath 17500 Shri M.S. Randhawa 25000 Shri T. Venugopal 25000 Shri V.C. Bhagat (Since Retired) 20000 (b) Any other employee who No employee has received grant of options receives a grant in any amounting to 5% or more. one year of option amounting to 5% or more of options granted during that year. (c) Identified employees There is no employee who has been granted who were granted options, during 1 year equal to or exceeding 1% of during one year, equal to the issued capital or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant. k. Diluted Earning Per Rs. 23.90 Share (EPS) pursuant to issue of shares on exercise of Option calculated in accordance with Accounting Standard (AS) 20 'Earnings per Share' The Company has used 'intrinsic value' method as defined in SEBI Guidelines. The disclosure under clause (l), (m) and (n) are not required to be made as the fair value of the options is less than intrinsic value. Note: The number of options granted and vested, and the price per option are adjusted on account of sub-division of Equity Share having face value of Rs. 10/- each into five equity shares of face value Rs. 2/- each. MANAGEMENT DISCUSSION AND ANALYSIS Global economy: The global economy contracted in 2009 and recovered in 2010 even as there was financial uncertainty in the Euro zone, slower recovery in advanced economies, high unemployment, tightening credit and rising risk premia. While most businesses in mature markets focused on cost savings, investment sentiment remained better in emerging economies. The global economy is forecast to expand by around 4% in 2012, growth being driven by emerging markets. Indian economy: The manufacturing sector remained volatile with seven out of the 22 industry groups responding negative growth during April-February 2011-12. The services sector increased its GDP share from 58% in 2010-11 to 59% in 2011-12. Global steel tubes and pipes: The performance of the steel pipes and tubes industry are intertwined with the performance of the construction, oil and gas and infrastructure sectors. The increasing energy security investments of global governments are likely to catalyse the demand for steel pipes. Driven by increased activity in the oil and gas and construction sectors and the rise in infrastructure development projects, the global demand for steel tubes and pipes is forecast to reach 151 million tonnes by 2017 (Source: Global Strategic Business Report). Indian steel tubes and pipes: Stainless steel: In 2010, the Indian stainless steel melt production reached 2.9 million tonnes and finished products touched 2.6 million tonnes. The volume of production was 162 times higher than in 1978, 13 times higher than in 1990 and almost three times higher than in 2000. India is at the fourth position in stainless steel production behind China, the European Union and Japan; it is the third largest stainless steel consumer after China and the European Union. Demand and production are expected to grow at 10% annually in the five years till 2016; production capacity is expected to grow to around 6.8 million tonnes by 2016. Most of this additional capacity will go on stream between 2011 and 2013 (Source: Steel Market Intelligence Report, GmbH). Carbon steel: In India, the carbon steel pipes market (large diameter) is around one million tonnes per annum; globally this market is estimated at between 12-15 million tonnes per annum. The supply of the product in India is around six million tonnes per annum, resulting in an oversupply. The market is growing by 10% per year. Sector optimism: Oil and gas: India's gas demand is projected to rise from 290 million standard cubic meters a day (mmscmd) in 2012-2013 to 470 mmscmd in 2016-17. Against this, domestic supply is estimated to increase from 124 mmscmd to 220-230 mmscmd only (Source: Indian Infrastructure, February 2012) The demand for petroleum products is projected to cross 300 million tonnes of oil equivalent (mtoe) by 2017, up from the present 175 mtoe. (Source: Indian Infrastructure, March 2012) Gas pipeline infrastructure: Currently, India has a gas pipeline network of 11,900 km with a gas transmitting capacity of 304 mmscmd. Various pipeline projects currently under implementation will add another 14,500 km of pipeline by the end of FY16, designed to carry around 426 mmscmd of gas (Source: Ambit Research). Refineries: India's refining capacity of 194 million tonnes per annum is set to increase to 238 million tonnes by 2013-a 22% rise. India has a surplus oil refining capacity with fuel demand pegged at 141.785 million tonnes in 2010-11. Fuel demand is projected to rise by four to five per cent per annum in the Twelfth Five Year Plan (2012-2017). With India being the fourth-largest oil importer, oil and gas constitute 45% of country's primary energy basket, leaving tremendous scope for domestic growth (Source: Financial Express, December 25, 2011). Pharmaceuticals: The Indian pharmaceutical market has grown at a CAGR of 15% over the past five years and is expected to reach USD 20 billion by 2015. The Indian pharma industry has grown at an average of 15-18% for the last couple of years, while MNCs have grown only at about 8-12%. With strong growth in domestic and US formulation segments, the sector is expected to witness healthy growth (Source: Karvy Research). Power: India has 439 nuclear reactors in operation, providing almost 16% of the world's electricity. The country is expected to reach 20,000 MW nuclear capacity by 2020 and 63,000 MW by 2032. With increased foreign technology, India aims to supply 25% of electricity through nuclear power by 2050. The Twelfth Plan estimated an additional capacity addition requirement of 1,00,000 MW during 2012-17; of this, around 70% is expected to be thermal. Fertiliser: After a 7.6% contraction in 2008-09, global fertiliser consumption started to recover (+5.4%) in 2009/10, reaching 163.9 Mt. Global fertiliser demand is expected to reach 191 million tonnes by 2015-16, growing at an average annual growth rate of 2.6% . Regional demand growth in South Asia is seen as remaining strong, driven by India, where demand is expected to increase by 3.4% owing to a fast-expanding regional population (Source: 79th International Fertiliser Industry Conference, Montreal). Sugar: India is the world's largest consumers of sugar, accounting for 15% of the world's consumption and second-largest producer after Brazil. In the last decade, sugar consumption in India increased at a CAGR of 3.5%. Going ahead, India's sugar consumption is expected to double in 20 years and by 2030, India will account for 18% of the world's consumption (Source: SKP Securities). Aerospace: Massive investments in airport infrastructure have led to world class airports, the symbol of India's growth story. In addition, the Ministry of Civil Aviation released Vision-2020 document, an assessment of the overall outlook of the aviation sector in 2020. It highlights that the aviation sector has a growth potential to absorb upto USD 120 billion of investment. Furthermore, the fleet size of commercial airlines sector is expected to grow to approximately 1,000: domestic passenger numbers could reach 150-180 million, helicopter fleet is expected to be 500, while the air cargo movement is expected to reach nine million metric tonnes (MMT). Atomic energy: With the prospect of conventional energy sources diminishing drastically in the next two decades, nuclear energy is gaining ground as a viable energy source. India is the sixth largest producer of nuclear energy in the world with installed capacity of 4,780 MW of electric power. With six new nuclear reactors to come up in five years, the total capacity will increase to 9,580 MW. At present, India obtains 2.6% of its total energy requirements from nuclear energy. The government is planning to increase this share to 10% by 2020 and 25% by 2050. This translates into a substantial rise in installed nuclear power generation capacity from the current level to 20,000 MW by 2020. To meet these targets, the government has announced investments of USD 77 billion in new nuclear power plants between 2010 and 2020. The Company is equipped to convert sectoral optimism into opportunities. INTERNAL CONTROL SYSTEMS: The Company has adequate Internal Control Systems to ensure that all assets are safeguarded and transactions are authorised, recorded and reported properly. The Internal Controls are periodically reviewed to enhance efficiency and to ensure statutory compliances. The Internal Audit plan is designed in consultation with the Statutory Auditors and Audit Committee. Regular operational and transactional audits are conducted by professionally qualified and technical persons and the results are used for effective control and improvements. INDUSTRIAL RELATIONS AND HUMAN RESOURCES: As the Company continues to grow, the focus has been on enhancing morale and capabilities of employees. An exercise was initiated to take a fresh look at the organisational structure to make it more functionally aligned with business requirements. We continue to provide orientation and training for the development of soft and hard skills. Our industrial relations remained cordial at all organisational levels and work places. CAUTIONARY STATEMENT: The statement given in this report, describing the Company's objectives, estimates, and expectations and future plans may be construed as forward looking statements within the meaning of applicable laws and/or regulations. Actual performance may differ materially from those either expressed or implied. Important factors that could affect the working of the Company include economic conditions, domestic as well as international, affecting demand and price conditions; raw material prices, interest costs, changes in the government policies affecting investments, changes in the government regulations tax laws, and other statutes, high prices of petro products affecting energy and transportation cost among others. The information and opinion expressed are forward looking statements, which the management believes are true to the best of its knowledge at the time of its preparation. The management will not be liable for any loss, which may arise, as a result of any action taken on the basis of the information contained herein. The information contained herein may not be disclosed, reproduced or used in whole or in part for any purpose or furnished to any other persons without the express written permission of the Company. BUSINESS SEGMENTS: BUSINESS DIVISION 1: STAINLESS STEEL TUBES AND PIPES: Overview: The Company's SS division comprises two main products-seamless and welded tubes and pipes. The Company is one of the largest SS tube and pipe manufacturers in India with a market share of around 55% for tubes and pipes used in critical applications. The Company's SS production is carried out in Indrad and Kutch. Over the years, the Company invested in high-end equipment, widening the product range and addressed segments. Highlights, 2011-12: The Company emerged as the only Indian company approved by Nuclear Power Corporation of India Limited for the manufacture of the critical heat exchanger and instrumentation tubes used in nuclear reactors. Product strengths + High tensile strength + High corrosion resistance + Light weight + Wide range of sizes + Quality surface (inside and outside) Facilities: Process facilities: Ratnamani invested in the best imported equipment and testing facilities. The Company is among few global manufacturers with a hot extrusion facility, empowering the Company to manufacture tubes and pipes of higher outer diameter and harder tube finish. Critical applications: Power generation: The Company possesses the competence to manufacture low-pressure feed water tubes, high pressure feed water tubes and condenser tubes in welded and seamless construction. It can manufacture tubes upto 36 metres single length in a bright annealed condition across grades. Desalination plants: The Company specialises in the manufacture of ferratic grade tubes. Oil and gas: The Company's instrumentation tubes in bright annealed condition are used in the oil and gas and nuclear sectors. Road ahead: + Focus on value-added products of higher grades, catering to niche and critical applications. + Lay the foundation for cold finishing line expansion in Indrad and Kutch. + Ensure higher value engineering. + Replace manual tube loading with automation leading to increased productivity. + Increase share in the markets of presence. + Increase product range in high-end application requirements. BUSINESS DIVISION 2: CARBON STEEL PIPES: Overview: This division specialises in the manufacture of carbon steel pipes. The division makes submerged arc welded (SAW) and high-frequency electric- resistant welded (ERW) pipes. The division also manufactures API 5L up to X 80 grade pipes or their equivalent. Over the years, the Company strengthened its value proposition through superior quality, the ability to cater to wide sectoral requirements and the graduation from line piping to projects piping. The Company strengthened its performance through a higher order booking and a corresponding increase in capacity utilisation. Highlights, 2011-12: + Manufactured alloy steel pipes of ASTM-A6 91 quality for the first ever time. + Executed a 200 km pipeline order for a client. + Increased ERW pipe yield by modifying the welder and coil feeding unit. + Added clients for 64'x19.1' SAW pipe of X-70 grade. Product strengths: + Applicable across a number of downstream sectors. + High tolerance level. + Mechanically and technically tested. Road ahead. + Generate additional revenues through the manufacture of ERW pipes (18' diameter) + Increase productivity. + Expand the domestic and global presence. Application areas: Industry Application Oil and gas pipelines * Cross country oil and gas pipeline * Spur lines * City gas distribution * Refinery and petrochemical Power plants * Cooling water line and auxiliary cooling water line * Ash handling line Water and sewerage * Distribution and transmission lines for irrigation systems * Pipes for potable water * Drainage pipes Structural * Piling and casing pipes * Structural columns Other industrial * Pipes for fertiliser plant * Mining pipes * Dredging pipes * Air duct piping * High mass pipes for wind mill towers BUSINESS DRIVER 1: INTELLECTUAL CAPITAL Overview In a business where the competitive edge is derived from the ability to make a superior product, the strength of the Company lies in the quality of its people. The Company's employee base comprises people with the desired competence. Key initiatives: At Ratnamani, we inculcate a sense of teamwork and belonging among our employees through the initiatives: + The Company organised various events at multiple locations to facilitate employee engagement. + The Company established a system with streamlined talent requisition, sourcing methodologies with a clear focus on the talent needs vis-a-vis business. + The Company reintroduced Employees Performance Management System facilitating an alignment of functions towards meeting the Company's goals. + The Company strengthened training and induction around business and functional orientation through specialised faculty. + The Company implemented steps to enhance the welfare and motivation of team members, including helping survivors of the deceased. Outlook: The Company is on the verge of an integration of the HR function through an online system. BUSINESS DRIVER 2: INFORMATION TECHNOLOGY: Overview: In a business where success is derived from informed decision-making, the strength of the Company lies in its ability to draw information from various sources and provide it on tap for onward planning, reconciliation, visibility and strategic accuracy. The Company kept itself abreast with prevailing business requirements and accordingly aligned its IT environment. BUSINESS DRIVER 3: RAW MATERIAL MANAGEMENT: Overview: In a business where a commoditised raw material needs to be adequately available and comprehensively enriched to manufacture a specialised end product, success is derived from the ability to manage this input in a consistent manner for predictable results. At Ratnamani, our supply chain sources adequate raw material of the right quality at the lowest possible cost with the objective to keep its production lines running at all times. Highlights, 2011-12: + The Company sources raw material from some of the largest and most respected carbon steel and stainless steel manufacturers globally. + The Company is engaged in relevant value-engineering to strengthen the input-output ratio and reduce waste. + The Company eliminated non value-adding processes, reduced processes and material costs. + The Company's just-in-time sourcing reduced material accumulation. BUSINESS DRIVER 4: QUALITY AND TESTING: Overview: In a business where the end product is manufactured in large quantities, success is derived from the ability to ensure that a high quality is consistent from batch to batch in line with precise customer needs. At Ratnamani, a high quality consistency is derived from its comprehensive quality and testing discipline without interrupting production/sales flow. Over the years, the Company invested in stringent testing procedures benchmarked with international standards, progressively raised the bar and complied with a number of process certifications. Key initiatives, 2011-12: + The Company strengthened the nondestructive testing process to ascertain pipe cracks, pin holes, dents and laminations. + The Company manufactured alloy steel pipes adhering to the ASTM-AS-91 quality grade + The Company streamlined quality checks, reducing rework to less than one per cent. RISK MANAGEMENT AT RATNAMANI: RISKS AND ITS EFFECTS ARE POSSIBLE EVENTS OR POSSIBILITIES THAT COULD HAVE AN IMPACT ON THE COMPANY'S PERFORMANCE. RATNAMANI ANALYSES BUSINESS RISKS FOLLOWED BY A DETAILED MITIGATING APPROACH AS UNDER: The Company may not be able to capitalise on growing business opportunities: The Company enjoys enduring business relationships with large global and Indian customers with repeat engagements. The Company is present in growing business spaces (oil and gas, petrochemicals and refineries, power industries-Thermal, nuclear and solar power plants, fertiliser and chemical industries, paper and pulp, sugar industries, line pipes for LNG Terminals, desalination plants, aerospace, atomic energy, among others) with a comprehensive product range supported by three manufacturing facilities (Indrad, Chhatral and Kutch) and two mobile plants. The Company's manufacturing facilities are proximate to Kandla and Mundra ports, helping exports with speed. The business may cease to be attractive: The Company's products form an integral part of several sectors. The Company provides products to several sectors. Some of these sectors (oil and gas, nuclear and thermal power, engineering, water management and pharmaceutical sectors, among others) are expected to grow attractively. Volatile raw material could affect the bottomline: The Company enters into short and long-term contracts to reduce the impact of price volatility. Its proximity to raw materials (being close to ports) and multi-vendor support helped control costs. Quality aberrations could affect the order book and revenues: The Company is consistently committed to continuous quality control process monitoring. Its plants are certified across safety and environment certifications. It received quality approvals from demanding clients, leading to order inflows. Its stringent quality and testing resulted in long-term relationships with customers and introduction of new customers. The depreciation in the value of the Indian currency relative to foreign currency can affect earnings: The Company imports a substantial requirement of its mother hollows, flats and coil on one hand, while exports comprise a considerable part of the total revenue thereby providing a natural hedge. Efforts are on to increase exports. Obsolete technology could affect customer attrition: The Company invested in specialised imported equipment. It is one of the few, globally, into manufacture of titanium tubes used in nuclear reactors. Its SS plant of Kutch is a complete automated plant considered among the three leading manufacturing plants in the world. Its proposed cold finishing line in the SS division at Indrad will be the largest cold finishing line at a single location in India. Inadequate liquidity could affect growth: The Company is adequately supported by cash reserves comprising 11.59% of the total capital employed. The Company borrowed loans in 2008, following which it funded its working capital and capex requirement largely through accruals. The Company's average debt cost is less than 10%; its debt-equity ratio was 0.51 at the close of 2011-12. For and on behalf of the Board of Directors Place: Village: Indrad, Taluka Kadi Prakash M. Sanghvi Date : 29th May, 2012. Chairman
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