Delton Cables Ltd Management Discussions

The global economy has demonstrated remarkable resilience, with growth holding steady and advanced and emerging economies countries returning to their target inflation levels after staying elevated for the past few years. The global commodity market has experienced significant price volatility, driven by geopolitical tensions in the Middle East and shifts in supply and demand dynamics. Commodity prices are expected to soften slightly in 2024 and 2025 but will remain above prepandemic levels. Metal commodities have also seen notable price movements. The IMFs base metals price index rose by 4.7% from August 2023 to February 2024, driven by record steel production in China.

Copper prices increased by 3% in the first quarter of CY 2024, reaching a two-year high due to stronger demand from China and supply constraints in South America. Although there is an increase in 2024 percent-wise, the y-o-y (year-on-year) average monthly Copper LME prices were USD 8,836/MT in March 2023, compared to USD 8,676/MT in March 2024, showing a 1.81% drop in the prices. Nonetheless, the ongoing energy transition to clean and green energy continues to drive copper demand, particularly for electric vehicles (EVs) and renewable energy infrastructure. Copper prices are projected to rise 5% in 2024 and remain steady in 2025 as new production capacities come online.

Towards the latter part of the year, the GDP growth of 7.5% in FY24, India continues to be among the fastest-growing countries globally. Amidst global economic uncertainties, India showcased resilience and continued its growth trajectory. The growth was buoyed by policy initiatives aimed at strengthening the financial sector alongside focus on development of physical and digital infrastructure. Embracing the vision of ‘Atmanirbhar Bharat, India emphasised indigenous manufacturing, supported by schemes like the Production Linked Incentive (PLI). With governments enhanced focus on infrastructure and manufacturing, the electricals industry also witnessed strong demand for categories like industrial switchgears, professional lighting and power cables.

INDUSTRY STRUCTURE AND DEVELOPMENTS

The W&C industry experienced substantial growth, reaching approximately INR 84,500 Crores in 2023-24, compared to INR 74,800 Crores in 2022-23. This growth, driven by sectors like power, railways, and real estate, is expected to continue at a CAGR of approximately 13% from 2023-24 till 2026-27 to reach a market value of INR 1,20,000 Crores. The fastmoving electrical goods industry reached approximately INR 1,02,600 Crores in 2023-24 and is expected to regsiter a CAGR of 8% from 2023-24 till 2027-28.

The wires and cables can be subcategorized into Housing Wires, Power Cables, Control and Instrumentation Cables, Communication Cables and Flexibility, Speciality Cables and others.

OPPORTUNITIES AND THREATS:

Opportunities:

• Rising demand for the EHV cables with growing EPC infrastructure projects, where The Company faces less competition.

• Governments focus on Infrastructure developments such as roads, railways, ports, housing is increasing and is expected to create demand for electrical goods.

• With formalisation of economy and rising base of aspiring customers, the demand for branded goods and organised companies is increasing.

• Reviving demand from sectors such as metro rail, fertilizers, steel, cement, IT and pharmaceuticals.

• Increasing urbanization is expected to drive the demand for housing sector, thereby, driving the demand of wires.

• Structural demand for more and efficient T&D infrastructure

• Increasing renewable energy generation causing demand to rise for T&D for power evacuation

Threats:

• The global economic slowdown and disruptions in trade and sectors

• Volatility in exchange rates and prices of key raw materials

• Increasing competition in the wires and cables industry

• Fast-changing technology and constant need for upgradation SEGMET WISE PERFORMANCE

The company operates in single segment of Wires and Cables. The turnover of the company has increased significantly to Rs.40,086 lakhs as compared to Rs. 27,214.70 lakhs last year.

OUT LOOK

The Company is positive about the growth prospects of the Wires & Cables (W&C) industry in the near to mid-term. With the governments push towards manufacturing and infrastructure, the real estate being in its upcycle, and the economic climate favourable, the W&C industry is poised for accelerated growth in the near term. the Company is in a strong position to reap the benefit of the expected growth. The demand for W&C industry is expected to be driven by factors such as expansion and modernisation of power transmission and distribution infrastructure, upgradation and expansion of the railway network, increased investments in metro railroads, smart grid initiatives, and development of smart cities. In addition to catering to the demand from these opportunities, Delton will look to drive growth by focusing on the twin opportunities of import substitution and that from rural geographies. The Governments emphasis on ‘Atmanirbhar Bharat has led to an increase in investment in sunrise sectors such as Renewables, Defence, and Electric Vehicles. These sectors have traditionally depended on imported cables for their requirements.

The rapid rise of the organized sector and the governments focus on investment in infrastructure and development projects would promote large-scale growth across sectors, such as infrastructure, power, telecom, transmission and distribution, manufacture, real estate, engineering, and automotive. Growth in renewable power generation, expansion and revamping of Transmission & Distribution (T&D) infrastructure, increasing investments in metro railways and smart grid projects and growth in the data center sector will also contribute to a robust demand for wires and cables in India. Increasing urbanization and commercialization are expected to bolster investments in the real estate industry and drive the demand for wires and cables.

RISKS AND CONCERNS:

As in the case of any other industry segments, risks are always there and cable industry is also prone to various roadblocks from time to time, in terms of non-availability of cheaper finances, logistics issues, policy concerns, taxation perils, availability of skills. The concern about logistics related to bringing in the raw materials into the manufacturing locations and reaching out to the customers with the finished products still remain as a major bottleneck due to geopolitical disturbances in recent times coupled with increased cost of logistics.

Sharp increase in commodity prices could lead to increase in cost of finished goods impacting the affordability and consumer sentiment, Hyper competitiveness is normal, but it becomes a risk in case it leads to irrational behavior in the market in terms of pricing and other trade practices.

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 SYSTEM AND THEIR ADEQUACY

The Company has a well-framed internal control system commensurate with the size and nature of its business. These internal controls ensure safeguarding of assets from unauthorised use or disposition, proper recording and reporting of all transactions and compliance with applicable regulatory requirements. The internal control systems are reviewed and modified continually to keep up with the changes in business environment and statutory requirements.

The framework is monitored by the internal audit team of the Company. The Audit Committee of the Board is periodically apprised of the internal audit findings. The Audit Committee reviews the efficacy and effectiveness of the internal control system, takes corrective actions and suggests measures for strengthening it. The Company has a robust Management Information which forms an integral part of the control mechanism.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

During the year under review, the Company achieved Revenue from operations of Rs.40,086 lakhs as compared to Rs. 27,214.70 lakhs in the previous financial year. Further, the Company has earned profit after tax and exceptional items of Rs.1465.6 lakhs in the current financial year as against profit of Rs 57.75 lakhs in the previous financial year.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

Human capital is the most essential part of the Company. The Company keeps promoting a collaborative work environment where all the employees feel safe and a part of the Company. The Human Resources policies of the Company are aimed at attracting, nurturing and retaining talent in a constantly evolving business environment while ensuring trust, transparency and teamwork amongst its employees.

The Company recognizes the importance of human resources in realising its growth ambitions and believes in nurturing talent within the organization to take up leadership positions. During the year Company continued to maintain healthy and cordial relationship with its employees.

DETAILS OF SIGNIFICANT CHANGES (I.E. CHANGE OF 25% OR MORE AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR) IN KEY FINANCIAL RATIOS, ALONG WITH DETAILED EXPLANATIONS:

DISCLOSURE OF ACCOUNTING TREATMENT:

The Company prepared its Financial Statements to comply with the Accounting Standards specified under section 133 of the Act read with Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time. These Financial Statements includes Balance Sheet as at 31 March 2024, the Statement of Profit and Loss including Other Comprehensive Income, Cash Flow Statement and Statement of changes in equity for the year ended 31 March 2024, and a summary of significant accounting policies and other explanatory information (together hereinafter referred to as "Financial Statements").

CAUTIONARY STATEMENT

Statements in this report describing the Companys objectives, projections, estimates and expectations may constitute "forward looking statements" within the meaning of applicable laws and regulations that involve risks and uncertainties. Such statements represent the intention of the Management and the efforts being put into place by them to achieve certain goals. Actual results might differ materially from those either expressed or implied in the statement depending on the circumstances. Therefore, the investors are requested to make their own independent assessments and judgments by considering all relevant factors before making any investment decision.