Ador Welding Ltd Management Discussions

MANAGEMENT DISCUSSION & ANALYSIS REPORT

OVERVIEW:

For over 70 (seventy) years, we have been serving clients in India and around the world with end-to-end welding & cutting products and solutions. What makes us unique, is our willingness to make that extra effort for "Creating the best welding experience" to our customers.

Our goal is to form a sustainable Organization that meets the needs of the welding community, while providing jobs for our citizens and generating wealth for our stakeholders. Achieving these goals is not simple and we face many obstacles. We have addressed some of these challenges in this reports "Risk Factors" section.

INDUSTRY STRUCTURE AND DEVELOPMENTS:

The Welding Industry forms the backbone of the manufacturing sector, which is expected @ 17% of GDP Welding is critical for many manufacturing processes and the quality of welding has a direct impact on the quality of the final product.

The last financial year 2023-24 (FY24) commenced with strong expectations of economic growth.

In 2023, amidst a challenging global scenario, India emerged as a significant economic and geopolitical power. India assumed the presidency of G20, emphasizing a rule-based international order, advocating for collaboration to solve common issues. Indias role positioned it as a stabilizing force in an increasingly complex global geopolitical landscape. The global economy faced volatility and unpredictability due to geopolitical tensions, economic fragmentation, and financial turbulence. India was partly affected due to this and it continued to focus on infrastructural development, amongst other things. While macroeconomic stability remains anchored by moderating inflation, ongoing fiscal consolidation, and a modest current account deficit, global headwinds pose risks. These include high global interest rates, geopolitical strife, and sluggish global demand. Indias growth trajectory remains resilient, but challenges persist.

The Company continued to focus on product mix and cost reduction control measures to sustain growth and profitability.

The Capital goods segment witnessed some revival in activity over the previous year. New product launches continued to show encouraging results. The Company witnessed reasonably stable market conditions, despite the volatilities, to achieve growth in sales and profits.

Significant growth in the manufacturing industries is boosting the markets outlook. In line with this, rising demand for welding consumables in the energy sector is fuelling market expansion. Other factors, such as, extensive growth in the automotive industry and various technological advancements, such as the use of dissimilar metal welding via fibre lasers in the production of electric cars, are expected to drive the market further in the country. Furthermore, the Indian welding equipment and consumables market is expected to benefit from the growth of the railway industry, mining industry and defence. With large outlays in Defence sector, in the coming years, shipbuilding, airports, roads & tunnels, maintenance of vehicles & equipment, new technologies in Drones etc. will be the sectors to look forward to.

We have a sizable market share in both, the consumable and equipment markets (organised), and we are market pioneers in a variety of goods & geographies. We wish to cater to all the customer needs, with our solutions and products under one roof, through our Welding & Cutting Automation (WCA) division.

According to CEICdata.com, Indias gross fixed capital formation (GFCF) in the year 2024 is INR 94,341.903 billion and in the year 2025 GFCF is expected to be INR 105,249.815 billion. The Reserve Bank of India (RBI) expects GFCF to grow by 8.1% in FY 2024-25, and real private final consumption expenditure (PFCE) to grow by 6.1%. The RBI has also revised the real gross value added (GVA) growth projection for FY 2024-25 to 6.3%. All this augurs well for the welding industry, which can be expected to grow @ CAGR of around 8-9%, over the period.

OPPORTUNITIES AND THREATS:

The Indian Welding Equipment & Consumables market is expected to grow at more than 6.1% CAGR from the year 2023 to 2028. India has a large population, which has led to an increase in demand for housing, healthcare, and transportation. This has led to an increase in demand for welding equipment and consumables in various industries. Furthermore, with the increasing competition in the market, end-users are now focusing on the quality of welding equipment and consumables. This has led to an increase in demand for high quality welding equipment & consumables, that can meet the stringent quality standards.

Moreover, with the increasing number of welding equipment & consumables, being used in various industries, the demand for repair and maintenance services is also increasing. This has led to an increase in the demand for welding equipment and consumables that are easy to repair and maintain. In addition, India has a large pool of skilled and unskilled workers, which has led to an increase in the availability of trained welders and welding technicians.

The mandatory requirement of BIS marking for products, used in Government Industries, has opened up the opportunities for "Made-in-India" products and manufacturers like ADOR, can obtain the BIS certification without any additional investment or efforts, since its products are already designed and manufactured in India with specifications, surpassing requirements of the standards.

OUTLOOK, RISKS AND CONCERNS:

OUTLOOK:

The Indian manufacturing sector currently contributes around 17% to the GDF, supported by robust physical and digital infrastructure. However, this share is expected to grow to 21% in the next 6-7 years. India aims to triple its manufacturing gross value added (GVA) to reach a remarkable $1 Trillion by FY 2025-26. This ambitious goal implies a compounded annual growth rate (CAGR) of about 12%, a significant leap from the current growth rate of 7-8%.

Developing globally competitive manufacturing hubs, represent one of the biggest opportunities for India to spur economic growth and job creation in this decade.

McKinsey identifies 11 manufacturing value chains with strong potential:

• Pharmaceuticals and Medical Devices

• Electronics and Semiconductors

• Automobiles and Auto Components

• Textiles and Apparel

• Chemicals and Petrochemicals

• Food Processing and Agribusiness

• Machinery and Equipment

• Metals and Mining

• Renewable Energy and Storage

• Construction Materials and Infrastructure

• Consumer Goods and Appliances

These value chains can capitalize on Indias advantages in raw materials, manufacturing skills, and entrepreneurship. They can tap into market opportunities such as export growth, import localization, domestic demand, and contract manufacturing.

A focused approach to the industrial policy, aimed at lifting productivity, securing know-how, and providing access to capital, could help these value chains more than double their GDF contribution to $500 billion in seven years, while creating extensive job opportunities.

RISKS AND CONCERNS:

• Infrastructure Challenges: Despite improvements, India still faces infrastructure gaps, including inadequate transportation networks, power supply, and logistics. These bottlenecks can hinder manufacturing growth.

• Labour Productivity: Enhancing labour productivity remains crucial. Skill development, vocational training, and upskilling programs are essential to create a skilled workforce.

• Regulatory Environment: Cumbersome regulations, bureaucratic hurdles, and compliance complexities can deter investment and hinder ease of doing business.

• Global Competition: India competes with other manufacturing giants like China, Vietnam, and Indonesia. Maintaining competitiveness is vital.

• Supply Chain Resilience: COVID-19 pandemic highlighted vulnerabilities in global supply chains. India must focus on building resilient supply networks.

• Environmental Sustainability: Balancing economic growth with environmental conservation is critical. Sustainable practices are essential for long-term viability.

In summary, Indias manufacturing sector has immense potential, but addressing challenges and seizing opportunities will be crucial for achieving its ambitious growth targets in the coming years.

INCOME STATEMENT ANYLISIS:

In FY24, overall revenue from operations reached INR 88,383 Lakhs from INR 77,676 Lakhs in FY23. This translates to about 13.78% increase from the previous year FY23. Revenue from consumables business was at INR 67,780 Lakhs, as compared to INR 61,449 Lakhs in FY23. Revenue from equipment & automation business was at INR 17,131 Lakhs, as compared to INR 11,504 Lakhs in FY23. Revenue from Flares & Process Equipment Division (erstwhile Project Engineering Business (PEB)) was at INR 3,472 Lakhs, as compared to INR 4,723 Lakhs in FY23. Other income of INR 1,307 Lakhs, mainly consisted of forex gains, interest income, rental income and export incentive, etc.

BALANCE SHEET ANALYSIS:

During FY24, overall working capital days have been controlled at 89 days, compared to 85 days in the previous year, even after significant increase in business and undertaking a large scale project with longer lead time. The borrowings are under control, with Debt to Equity ratio of 0.12.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company continues to strongly believe that effective internal controls are critical for good corporate governance and that the operational freedom in conducting business should be exercised within the framework of appropriate checks & restraints, subject to adherence of applicable laws of the land.

The Company has robust Internal Financial Control System (IFCS), which covers all the critical aspects of business processes and reporting.

The Company has a well-defined Internal Audit System. The scope of Internal Audit is reviewed & finalized at the beginning of every financial year, in consultation with the Statutory Auditors and approved by the Audit Committee. The audit plan is focused, primarily, on the operations & processes.

The Audit Committee reviews the Internal Audit Reports on a quarterly basis and offers necessary guidance with respect to its coverage, scope & corrective measures.

Our ERP & IT system makes Finance & Accounts Management robust, data tracking easier and decision making faster.

The Company has developed a software, which helps in centralizing its order processing, leading to better logistics/movement of goods. The Company has a very sound compliance track record with all the Legal and Statutory authorities in the Country, and there is a regular Management Audit mechanism to ensure that the Company, does not violate any known Legal or Statutory provisions, applicable to the Company.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES:

In FY24, we continued our focus on working towards achieving our Vision of "Creating the best Welding Experience" by imbibing three (03) core values viz. Enhancing Performance, Building Trust & Relationship and strive to give the best Customer Experience.

All key HR initiatives, such as Performance Management, Training & Development, Recruitment etc. aimed to increase employee productivity and retention. We emphasized on not just the physical wellbeing of our employees through insurance/health care policies, but also considered their mental/emotional wellbeing. In addition, recreational activities across all three factories and workshops on Stress Management and Work Life Balance were also a part of the wellbeing initiatives.

For skill enhancement and improving efficiency, various technical and Soft Skill programs were conducted throughout the year to meet the increasing performance demands of the Business. The Employee Feedback Survey, which is conducted annually, also gave insights into Company Culture and improvement areas for the coming year.

The hiring process was refreshed to ensure diversity and fairness in the selection of suitable candidates. Talented young engineers from various Campus/Institutes were recruited across locations in different functions to strengthen the teams. The employee turnover/attrition was lowest in the last 10 years except for the Pandemic Year (FY21).

As we continue to grow, we will strive to keep our employees motivated, trained and ready for any upcoming challenges on our journey towards achieving excellence.

The employee strength as of 31^st March, 2024 stood at 672.

Disclaimer:

The information and opinion expressed in this section of the Annual Report may contain certain forward looking statements, which the Management believes are true to the best of its knowledge, at the time of its preparation. The Company and the Management shall not be held liable for any loss, which may arise, as a result of any action taken on the basis of the information contained herein.

	For and on behalf of the Board
	Ninotchka Malkani Nagpal
Place: Mumbai	Executive Chairman
Date: 30th April, 2024	(DIN: 00031985)