Filtra Consultants & Engineers Ltd Management Discussions

A. INDUSTRY STRUCTURE AND DEVELOPMENT

Global Economy:

The Economy since 2019 has been eventful, starting with COVID-19 pandemic impacting supply-chain disruptions, then war between Russia-Ukraine followed by war between Israel and Palestine and growing tension between Chaina and Taiwan, change in weather conditions, all of which has impacted the global economy and triggered global energy and food crisis which in turn increased the inflation and trend of recession in many part of the worlds.

The baseline forecast is for the world economy to continue growing at 3.2 percent during 2024 and 2025, at the same pace as in 2023. A slight acceleration for advanced economies where growth is expected to rise from 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8 percent in 2025 will be offset by a modest slowdown in emerging market and developing economies from 4.3 percent in 2023 to 4.2 percent in both 2024 and 2025. The forecast for global growth five years from now at 3.1 percent is at its lowest in decades. Global inflation is forecast to decline steadily, from 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025, with advanced economies returning to their inflation targets sooner than emerging market and developing economies. Core inflation is generally projected to decline more gradually.

Indian Economy:

Over the course of the last decade, India has showcased a robust and resilient growth story driven by perseverance, ingenuity and vision. In the face of unprecedented challenges such as the Covid pandemic and geopolitical conflicts, the Indian economy has demonstrated a remarkable ability to bounce back and convert challenges into opportunities while striving to achieve strong, sustainable, balanced, and inclusive growth.

The Indian economy is set to achieve nearly 7% growth in the financial year 2024-25, according to a report released by the Ministry of Finance. The report attributes this positive outlook to the robust domestic demand that has propelled the country to a growth rate exceeding 7% over the past three years. The financial year 2023-24 witnessed a growth rate of 7.3%, securing Indias position as the fastest-growing major economy.

As per IMF Report, growth in India is projected to remain strong at 6.8 per cent in 2024 (FY25) and 6.5 per cent in 2025 (FY26), with the robustness reflecting continuing strength in domestic demand and a rising working-age population.

Global Water treatment industry:

Water and waste water treatment is necessary to meet the growing demand for clean water resources, serving municipal, agricultural and critical industrial processes. Currently, over 40% of the global population resides in regions experiencing acute water stress. With only about 1% of the Earths water being fresh water, countries grappling with severe water scarcity are compelled to carry out treatment to convert sea water into freshwater via the desalination process.

Wastewater treatment is the removal of impurities from wastewater or sewage before it reaches bodies of water such as rivers, lakes, oceans, or aquifers. Water pollution is generally occasioned by human activities. Discharge of contaminated water into surface water or groundwater is one of the activities. The burgeoning population is a major menace to the environment and ecology. As a result, water and wastewater treatment companies have to be more responsible.

One major element driving the market expansion of wastewater treatment chemicals is the growing worry about the depletion of freshwater resources and health concern due to contaminated water. In order to prevent and resolve such issues and improve the reusability of wastewater in the process, governments of many nations throughout the world are putting tight laws and regulations into place. A number of governments are also actively interested in enhancing municipal water infrastructure in both urban and rural locations. The demand for water & wastewater treatment chemicals is anticipated to increase as a result of such advancements in industrial and domestic/municipal water treatment. Rapid industrialization is also contributing to rising groundwater pollution, particularly in developing nations. Because of this, governments in many nations are launching programs to use wastewater effectively, which are predicted to increase demand for chemicals used in wastewater treatment.

Advanced exploration technologies give a boost to water and wastewater treatment companies. Many governments have introduced stringent regulations regarding water pollution. This is done to create awareness among people of its harmful consequences. Consciousness-raising initiatives have been taken to acquaint people. Biodiversity conservation and ecotourism is a sine qua non. Therefore, water and wastewater treatment companies prove to be a boon for the planet.

The global water and wastewater treatment market size was estimated at USD 328.74 billion in 2023 and is expected to hit around USD 576.43 billion by 2032, growing at a CAGR of 6.4% during the forecast period from 2024 to 2032.

Indian Water treatment Industry:

With large size of population in India is not having access to safe drinking water, cases of people falling severely ill or losing their lives to waterborne diseases have been hitting the news daily. In India, these diseases are estimated to add an economic burden of $600 million annually.

More people, especially in the post-pandemic era, are re-evaluating their lifestyle, becoming health conscious and aware of the water they are consuming. The increased awareness coupled with the modern lifestyle changes has led to most Indians wanting a water purifier in their homes leading to an increase in the water purifier market size. The trend can be compared to that of past trends in cities like Delhi where they witnessed a surge in the demand for air purifiers due to continuous air quality deterioration. Similarly, water purifiers are now no longer seen as a luxury. They have become a necessity.

The India Water And Wastewater Treatment Technology Market size is expected to reach USD 1.02 billion in 2024 and grow at a CAGR of 10.78% to reach USD 1.71 billion by 2029.

Water treatment include those chemicals that are used to remove waste particles such as solid waste, bacteria, fungi, and other contaminated minerals from wastewater for the purification of water. The chemicals used for the treatment of water is mainly used for treatments of equipment such as boiler water treatment, cooling water treatment, purification of water, and treatment of wastewater effluent in the industries. Water treatment improves the quality of water to make it appropriate for the specific end-use.

Wastewater treatment is necessary and used across India in different cities. The significant applications of treatment technologies include preliminary treatment, primary and secondary treatment, tertiary treatment, biological nutrient removal (BNR), resource recovery, and energy generation. Municipal wastewater treatment involves a lot of biomass. Therefore, biological treatment is a significant step used to treat bio-waste.

B. OPPORTUNITIES AND THREATS

Opportunities:

In most developing countries, water pollution is becoming worse every day as a result of industry and urbanization and sanitization issues are getting worse as well. In the manufacturing sector, where water demand has expanded, waste water production has increased as well. The waste water includes toxic chemicals and sludge which are separated through the water treatment and then discharge it in the water bodies by industries. Various chemicals are used by the industries for the treatment of the waste water which is generated during the manufacturing.

Various governmental initiatives, such as the Atal Mission for Rejuvenation and Urban Transformation, National Mission for Clean Ganga, Jal Jeevan Mission and Community Drinking Water Schemes, contribute to the growth of the Indian water and wastewater treatment market. In May 2019, the Indian government created the Jal Shakti Ministry, bringing all water-related agencies under one ministry to provide safe drinking water to the people of India.

This ambitious project, Jal Jeevan Mission, is creating opportunities for suppliers of water meters, water quality monitoring systems, water treatment products, Water purifiers, tertiary treatment technology and water-related Engineering, Procurement, and Construction companies

Investments or funding from companies or organizations offers potential growth opportunities for water & wastewater treatment companies. Pollution/contamination of freshwater resources and increasing demand from industries are the significant factors driving the growth of the water and wastewater treatment market. Funding/investments for infrastructure development and urban water sanitation & water supply are providing opportunities to the water and wastewater treatment market. The high cost of water treatment solutions and stringent regulations for the adoption of treatment solutions are hampering the overall market.

From global warming to the COVID-19 pandemic, the water treatment industry faces several long- and short-term challenges which are also creating opportunities. The long-term macro trends are positive. The population is growing, and there are concentrations of people in areas where water is becoming scarcer, especially as climate change affects supply in arid regions. Even if important and necessary conservation efforts are successful, demand for water and the need for water and wastewater investments will clearly increase. Seawater desalinization, which is very expensive and a last resort, will become a bigger part of the equation in the future in coastal areas because demand will be so great. And greater demand will come from fast-growing, less-developed economies as governments will become more able to afford investments in clean water and pollution control.

Threats:

The chance of intentional contamination of water by undesirable person is a strong possibility in present times. Water infrastructure can be targeted directly or water can be contaminated through the introduction of poison or disease causing agents. The damage is aimed at inflicting human casualties, rendering water unusable, or destroying purification and supply infrastructure. Although, massive casualties from attacking water systems are difficult to produce, yet the risk of societal disruptions, disarray and panic are high. Water contamination can disrupt the entire supply of purified water which can be of following types: ? Chemical contamination ? Biological contamination ? Radiological contamination ? Nuclear contamination Water purifiers require timely maintenance every 6 to 12 months for optimally filtering water. The replacement cost of filters is expensive. Although it varies from manufacturer to manufacturer, a common overall rate is pretty high for maintenance. It is a notable challenge for the India Water Purifier Market growth that might restrain the adoption of water purifiers across rural areas or among the low-income population in the country.

C. SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

The Company deals in only water treatment equipments. Therefore there are no different segments or products of the Company.

D. OUTLOOK

Global Outlook:

Water is the driving force of nature; however, sources are now running dry at an alarming rate. The global population continues to soar, but freshwater supplies have not increased similarly. Rapidly diminishing fresh water resources, increasing industrial activity, inefficient irrigation practices in agriculture, growing world population and stringent legislation on used waste discharge are driving the market for wastewater treatment technologies worldwide. Six billion people are expected to face a scarcity of clean water by 2050 due to the rising water demand, reducing water resources, and increasing water pollution, driven by the exponential growth in the world population and rapid industrialization.

Demographic pressures, the rate of economic development, urbanization, and pollution are creating unprecedented pressure on the worlds water resources. The water demand is growing rapidly mainly due to poor sanitation and water management.

Taking just the technology into account, dissolved solids removal hold the largest share of the water treatment technologies market, with municipal water treatment being the largest end-user industry In terms of growth, food & beverage industry, pharma Industry and pulp & paper industry would fuel the amount of growth in the demand for water treatment technologies in the region.

In North America, United States occupies the highest market share, in the value. Asian Countries like China and India, due to their large population, show exciting prospect for future market for wastewater treatment industry establishments, and is expected to lead the market.

Indian Outlook:

Indias GDP in FY 2022-23 was 7.2%, against 9.1% in the earlier fiscal year, outpacing major economies. Indias nominal gross domestic product will likely outstrip Japans in 2025 to become the worlds fourth-largest economy, according to an International Monetary Fund estimate, a year earlier than the previous projection.

The growth was driven by broad-based investment in domestic drivers such as private consumption, public consumption, investments and increased government expenditure. India remains the worlds fifth-largest economy, underpinned by strong investment activity bolstered by the governments capex push and buoyant private consumption. IMF has projected that India will be the fastest growing economy in the world, despite considerable challenges such as inflationary pressures, effects of the war in various parts of world, etc.

The rising prevalence of waterborne diseases in the country, along with the introduction of product variants that can remove inorganic compounds effectively, the implementation of favorable government initiatives promoting safe drinking water, and the emerging technological advancements in water purification technology are some of the major factors driving the India water purifier market.

Moreover, several advancements in water purification technology have made systems more affordable, efficient, and user-friendly representing another major growth-inducing factor. As these technologies become more accessible, consumers are inclined to invest in water purification solutions that cater to their specific requirements. Besides this, government initiatives and regulations promoting clean water access with campaigns such as the Swachh Bharat Abhiyan and efforts to improve rural water infrastructure resulted in the adoption of water purifiers, thus accelerating the market growth. Furthermore, rapid urbanization and industrialization led to increased pollution of water sources, further emphasizing the need for effective water purification systems, thus creating a positive market outlook.

RISKS AND CONCERNS

The last year started on an encouraging note only to run into more turbulence with the developments arising from the conflict in Europe. Supply chain disruptions, a weaker rupee, higher interest rates and extreme challenges of inflation globally are key concerns for the ongoing financial year.

Water and waste water management, which also includes wastewater treatment plants (WWTPs), are considered essential elements critical infrastructure. A disruption of their operation can result in the discharge of wastewater into the environment without having been adequately treated. This can cause health problems, contamination of soil, groundwater and surface water, etc.

Following are the major Risk and concerns:

? Changes in economic and relevant regulatory policies, lower GDP growth, scaling back of government initiatives and termination of government contracts with little or no prior notice, insufficiency of funds and the reluctance of government departments to make quick decisions may adversely impact opportunities from a specific country or region. ? Disruptive geopolitical scenario (includes political shifts, such as major policy changes, coups, revolutions and wars) and changes in governments or unstable political regimes in the geographies where the Company is present, can delay project execution. ? Rising competition from other global players and also un- organized sectors in the Industry may compel the Company to lower prices to win contracts and maintain market share. This may lead to substantial margin pressure. ? Poor credit worthiness of customers can cause multiple setbacks in the midst of an order execution and lead to project delays. ? Inconsistent commodity supply and price volatility of specific commodities/raw materials could affect project cost and gross margins. ? FILTRA depends on vendors for supply of key products. Therefore, it is exposed to uncertainty in the quality of their services, equipment and supply including timely delivery. This can cause operational delays and increased costs.

E. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Board and the Audit Committee are responsible for maintaining and reviewing the risk management framework and internal control processes and policies. The Board assesses and approves its overall risk appetite, monitors the risk exposure and sets limits, which are periodically reviewed. The Companys management systems, organizational structures, processes, standards, code of conduct and behaviors together form a system of internal control that governs how it conducts its businesses and manages associated risks.

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 and restraints, subject to adherence to applicable laws of the land.

The Company has a system of internal controls to ensure that all its assets are properly safeguarded and not exposed to risks arising out of unauthorized use or disposal. The Internal Control system is supplemented by programs of internal audit to ensure that the assets are properly accounted for and the business operations are conducted in adherence to the laid down policies and procedures. The internal control system also focuses on processes to ensure integrity of the Companys financial accounting and reporting processes.

The effectiveness of the internal control mechanism is reviewed by an independent professional Internal Auditor and by the Statutory Auditors. The Audit Committee of the Board periodically reviews the functioning of the internal audit and the implementation of the recommended measures to improve the internal control mechanism.

The Management were regularly exploring on new systems and processes to have better controls. In addition to the external auditors, the Companys Management also carries out Audits and analysis of its various functions and reporting to check working of internal control systems and their adequacy.

F. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL

PERFORMANCE

The year 2023-24 has shown reasonable increase in every aspect of the business. The sales of the Company increased from Rs. 90.66 Crores to Rs. 99.76 Crores, registering a growth of 10.04%. EBT has been increased by 3.49% in F.Y. 2023-24 and was at Rs. 4.69 Crores as against Rs. 4.53 Crores in previous year. Net profits after tax of the Company stood at Rs. 3.57 Crores in the F.Y. 2023-24 as against Rs. 3.44 Crores in the F.Y. 2023-24, recording an increase of 3.78%.

G. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS

FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

The Company promotes positive workplace environment through its policies and best practices for all its employees. The Company policy prohibits harassment of any kind, including harassment based on age, race, religion, caste, creed, color, sex, marital status or any other basis protected by law. During the year, the Companys Internal Complaints Committee did not receive any complaint. Total numbers of employees on pay roll as on March 31, 2024 were 73.

Health, Safety and Environment:

The Company takes timely measures to protect the health and safety of its employees and minimize pollution to preserve the internal as well as the surrounding environment. The Company also conducts safety induction trainings for its employees and workers to make them aware of the system, safety rules and the procedure to report any incident to their supervisors. The training programmes also give them an overview of the dos and donts during emergency situations.

H. 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 therefor:

Sr. No. Particulars	2022-23	2023-24	Changes (in %)
1 Debtors Turnover ratio	12.63	11.57	-1.06
2 Inventory Turnover ratio	5.32	5.9	0.58
3 Interest Coverage Ratio	755.07	170.29	-584.78
4 Current Ratio	2.36	2.49	0.13
5 Debt Equity Ratio	0.01	0	-0.01
6 Operating Profit Margin (%)	16.09	16.35	0.26
7 Net Profit Margin (%)	3.80	3.58	-5.74

? Interest Coverage Ratio: Interest Coverage Ratio has decreased from 755.07 in the year 2022-23 to 170.29 in the year 2023-24 due to increase in the interest amount from Rs. 0.60 Lakhs to Rs. 2.77 Lakhs.

I. Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof.

Sr. No. Particulars	2022-23	2023-24	Changes (in %)
1 Return on Net Worth	17.08	15.05	-2.03

? Return on Net Worth: The return on Net Worth decreased from 17.08 in Financial Year 2022-23 to 15.05 in Financial Year 2023-24. This decrease was due to increase in share-holders fund from Rs. 2015.66 Lakhs to Rs. 2372.80 Lakhs.

Cautionary Statement

Certain statements under ‘Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be ‘forward-looking statements within the meaning of applicable securities laws and regulations. Although the expectations are based on reasonable assumptions, the actual results could materially differ from those expressed or implied, since the Companys operations are influenced by many external and internal factors beyond the control of the Company. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements, on the basis of any subsequent developments, information or events