MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations, and our assessment of the factors that may affect our prospects and performance in future periods, together with our Restated Consolidated Financial Information for the Fiscals 2023, 2022 and 2021 including the notes thereto and reports thereon, each included in this Draft Red Herring Prospectus.
Our Restated Consolidated Financial Information have been prepared under Indian Accounting Standards ("Ind AS") notified under the Companies (Indian Accounting Standards) Rules, 2015 read with Section 133 of the Companies Act, 2013 to the extent applicable. Our Restated Consolidated Financial Information has been compiled by the Company from the audited consolidated financial statements of the Company for the respective years. For further information, please see the "Financial Information - Restated Consolidated Financial Information" which on page 221.
Ind AS differs in certain material respects from Indian GAAP, IFRS and U.S. GAAP. Accordingly, the degree to which our financial statements will provide meaningful information to a prospective investor in countries other than India is entirely dependent on the readers level of familiarity with Ind AS.
This discussion and analysis contains forward-looking statements that reflect our current views with respect to future events and our financial performance, which are subject to numerous risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements. As such, you should also read "Forward-Looking Statements" and "Risk Factors" and beginning on pages 18 and 28, respectively, which discuss a number of factors and contingencies that could affect our financial condition and results of operations. Our fiscal year ends on March 31 of each year.
Our Companys order book as of a particular date is calculated based on the aggregate contract value of our on- going projects as of such date reduced by the value of work executed by us until such date, subject to certain adjustments including foreign exchange fluctuations and other contractual terms ("Order Book").
Our Company caters to the companies which own and operate oil and gas refineries, petrochemical complexes, fertilizer plants or other chemical plants i.e., asset owners / manufacturers ("End Customers"). Our Company also caters to the companies contracted with such asset owners / manufacturers for engineering, procurement and construction of either full or part of their oil and gas refineries, petrochemical complex, fertilizer plants or other chemical plants ("Contracting Customers", and together with End Customers, the "Customers"). Unless otherwise indicated, any reference made in this section to Customers includes both End Customers and Contracting Customers.
Unless otherwise indicated, industry and market data used in this section has been derived from the report titled "Opportunities In Heating Equipment, Waste Gas Handling/Emission, Control Systems, And Renewable Energy Systems" dated August 14, 2023, (the "F&S Report"), prepared and issued by Frost & Sullivan (India) Private Limited ("Frost and Sullivan"), which was exclusively commissioned and paid for by our Company for the Offer, and was prepared and released by Frost and Sullivan, who were appointed by us pursuant to the proposal dated February 28, 2023 and the engagement letter dated March 2, 2023. The data included herein includes excerpts from the F&S Report which may have been re-arranged by us for the purposes of presentation. The F&S Report forms part of the material contracts for inspection and is accessible on the website of our Company at www.jnkindia.com/industry-report.html. The F&S Report does not omit any material facts, information, or relevant details that may have an adverse impact on the investors. Frost and Sullivan are an independent service provider and are not related to our Company or its Directors, Promoters, Subsidiaries, Key Managerial Personnel or Senior Management, whether directly or indirectly in any manner. For details, see "Certain Conventions, Presentation of Financial Information, Industry and Market Data – Industry and Market Data" beginning on page 16.
In this section, unless the context otherwise indicates, references to "we", "us", "our" and similar terms are to our Company together with its Subsidiaries. For further information relating to various defined terms in the section, please see "Definitions and Abbreviations" on page 1.
Overview
We are one of the leading Heating Equipment companies in India in terms of new order booking between Fiscal 2021 to Fiscal 2023 and have capabilities in thermal designing, engineering, manufacturing, supplying, installing and commissioning process fired heaters, reformers and cracking furnaces. (Source: F&S Report) We are one of the well-recognized process fired heater companies in India, having a market share of approximately 27% in the Indian Heating Equipment market, in terms of new order booking in Fiscal 2023. (Source: F&S Report)
A process fired heater is a type of industrial heater used to heat fluids or gases directly by burning a fuel source such as natural gas or propane. Reformers are devices used to convert hydrocarbons, such as natural gas or naphtha, into synthesis gas or syngas, which is a mixture of hydrogen and carbon monoxide. Further, cracking furnaces are used to break down large hydrocarbon molecules into smaller ones, which can then be used to produce a variety of products, including fuels, chemicals, and plastics. The process of breaking down hydrocarbons is known as cracking, and it typically involves heating the hydrocarbon feedstock in the presence of a catalyst. (Source: F&S Report) The process fired heaters, reformers and cracking furnaces (together, the "Heating Equipment") are required in process industries such as oil and gas refineries, petrochemicals, fertilizers, hydrogen and methanol plants etc.
In India, we have completed projects in, amongst others, Andhra Pradesh, Assam, Bihar, Karnataka, Kerala, Maharashtra, Tamil Nadu, West Bengal and globally have completed projects in Nigeria and Mexico. Further, we have ongoing projects in Gujarat, Odisha, Haryana, Rajasthan in India and globally in Oman, Algeria, and Lithuania. Further, we have successfully completed projects which were based in far-reaching locations, which included our projects in India at Numaligarh, Assam; Kochi, Kerala; Barauni, Bihar; and overseas at Lagos, Nigeria. In recognition of our efforts, we have been accorded incentives by our Customers for early completion of projects in India and overseas. Further, in March 2022, we were recognised for our safety compliance by one of the private refinery companies of a multinational industrial conglomerate from Nigeria and were awarded a certificate of appreciation towards ‘Safety Compliance and Campaign Performance. Also, in November 2022, we were awarded a certificate of appreciation by the same refinery company, for providing four million safe manhours without a lost time incident and recognising our effective contribution towards installation of process fired heaters.
Our business model involves collaboration with our Customers, from the initial consultation, specification and design stage to the final installation of the Heating Equipment. We believe, that due to our long standing relationship with our Customers and our capability to provide customized solutions with a proven track record in product development and execution catering to the diverse needs of our Customers, we have a competitive advantage, since there are very few competitors with similar capabilities (Source: F&S Report). As of March 31, 2023, we have served 17 Customers in India and seven Customers overseas. Further, seven out of the 12 oil refining companies in India, are our Customers and we have supplied or are in the process of supplying Heating Equipment to 11 of the 24 operating oil refineries across India. (Source: F&S Report) Some of our domestic Customers include Indian Oil Corporation Limited, Tata Projects Limited, Rashtriya Chemicals & Fertilizers Limited and Numaligarh Refinery Limited. Further we have catered to overseas Customers such as a leading EPC company in Europe, a leading oil & gas exploration & production company in Oman and a middle east arm of European EPC company in oil and gas. Also we have enjoyed repeat orders from certain large domestic Customers such as Rashtriya Chemical & Fertilizers Limited, Tata Projects Limited, Numaligarh Refinery Limited and Indian Oil Corporation Limited. Likewise, we have executed 17 projects for JNK Heaters catering to their Customers in the overseas markets. JNK Heaters has also installed process fired heaters for its customer in Lagos, Nigeria, where one of the biggest refineries in the world (Dangote Refinery) is operated, having a capacity of 32.7 million metric tonnes per annum. (Source: F&S Report)
Since our inception, we have been working closely with JNK Heaters a KOSDAQ listed company. The relationship between our Company and JNK Heaters is both independent and collaborative in nature. While for certain projects our Company is able to participate independently and acquire projects in Heating Equipment, for certain projects we partner as a global joint engineering and implementing partner for JNK Heaters. JNK Heaters is also one of the Corporate Promoters of our Company with a shareholding of 25.79% as of the date of this Draft Red Herring Prospectus. Further, to strengthen our commercial understanding, we have entered into a Co- operation Agreement with JNK Heaters, which governs our relationship in relation to, amongst others, marketing and geography of operations. For further details, please see "History and Certain Corporate Matters – Summary of key agreements and shareholders agreements – Key terms of other subsisting material agreements" on page 193.
Heating equipment such as process fired heaters and reformers are used in a typical refinery and are also an effective and efficient heating solution for a wide range of industrial applications, but proper design, installation, and operation are critical to ensure safe and reliable performance. (Source: F&S Report) Process fired heaters are the critical equipment in a refinery. Around 10 – 20 process fired heaters are used in any typical refinery. Of all the process fired heaters, four applications such as the CDU, VDU, delayed coker unit and catalytic reforming units are the most critical and the capex for these heaters is also high when compared with the other heater application areas in the refinery. Other applications for process fired heaters are hydrotreaters, hydrocrackers,
FCC, etc. (Source: F&S Report). Key processes where process fired heaters are used in a refinery are CDU, VDU, FCCU, hydrocracker unit, visbreaker unit, delayed coker unit, catalytic reforming unit, hydrotreating unit and bitumen blowing unit. (Source: F&S Report) Further, various Heating Equipment such as process fired heaters, reformers and cracking furnaces are used in a petrochemical plant as well. Reformers and cracking furnaces are the most critical equipment in a petrochemical plant (Source: F&S Report) Process fired heaters and reformers are also used primarily in the ammonia plant of an integrated urea plant. Reformers are the most critical equipment in an ammonia plant. Reformers are used in ammonia production, which is later converted into urea. (Source: F&S Report)
Considering that we are manufacturing process fired heaters for oil and gas refineries and petrochemical industries already, in order to cater to the increased demand for flares and incinerators systems both in domestic as well as overseas market due to emission control norms getting stricter, we have diversified into flares and incinerators systems as well. Flare systems are important safety devices used in refinery and petrochemical facilities to burn excess hydrocarbon gases which cannot be removed or recycled. Flare system is a gas combustion device used in industrial plants such as petroleum refineries, chemical plants, natural gas processing plants, at oil or gas production sites with oil wells, gas wells, offshore oil and gas rigs, and landfills. Flare systems provide for the safe disposal of gaseous wastes. Flaring of gasses is intermittent in nature and is required whenever there is excess pressure in the system. (Source: F&S Report) Further, all SRUs have thermal incinerators to treat the tail gas effluent from the SRUs prior to emitting the waste gas to the atmosphere. (Source: F&S Report) While flaring systems are used across refinery, petrochemical and fertilizer plants, incinerators are primarily used in the refinery in the SRU for tail gas incineration. (Source: F&S Report).
Further, in pursuit of our inorganic initiatives we keep evaluating opportunities in acquiring technology and know- how with an aim to enhance our presence in newer product categories and deepen our penetration in the target markets. We intend to expand our Customer network in some of the overseas markets including Europe for us to capitalise on the untapped opportunities. We propose to continue to pursue inorganic growth opportunities in relatively larger markets such as Italy, Middle East and Africa. Further, our Company is also evaluating tie-ups / arrangements with players having technology know-how in areas such as flares and incinerators systems and electrolyser technology for hydrogen generation.
We are also working on building capabilities in renewable sector with green hydrogen. We are building capabilities in renewable sector with onsite hydrogen production, hydrogen fuel stations and Solar PV-EPC which forms part of green hydrogen value chain.
All of our products are fabricated as per the Customers requirements in accordance with applicable standards. Fabrication is undertaken in our in-house fabrication facilities and/or through third party fabricators. One of our premises is situated at multi-product special economic zone at Mundra, Gujarat, where fabrication is undertaken for export purposes only. It spreads over approximately 20,243 square meters with an installed capacity of 5,000 metric tonnes of fabrication and modularization per annum. Further, on situational basis and based on the requirement of our projects, we take certain facilities on lease basis and once the project is completed the facility is shut down and all the equipment and machinery is shifted to other facilities for other projects. This ensures project optimisation while providing us with logistical efficiency. One such facility is situated at Jajpur, Odisha, where fabrication is undertaken for one of our Customers refinery. It is spread, over approximately 16,187 square meters with a capacity of 1,000 metric tonnes of fabrication and modularization per annum.
We are an ISO 9001:2015, 14001:2015, 45001:2018 certified Company led by a qualified and experienced management team. Our Promoters and Directors, Arvind Kamath, Goutam Rampelli, Dipak Kacharulal Bharuka and our Director Bang Hee Kim have an extensive experience in the Heating Equipment industry and have been instrumental in the evolution of our business. Our Promoters are supported by an experienced management team comprising Deepak Sake (Vice President – Engineering), Mohsin Shaikh (Assistant Vice President, Projects) and Vallathur Ravikumar Mudali (General Manager, Procurement Department) with a cumulative experience of over 38 years in the development and execution of projects in Heating Equipment industry.
Key Performance Indicators
For Fiscals 2021 to 2023, our revenue from operations, EBITDA and profit after tax had grown at a CAGR of 71.97%, 68.09% and 67.75%, respectively, demonstrating growth in our financial performance in recent years. The following table sets forth certain of our financial and revenue related metrics as of and for the years/periods indicated:
|
Serial No |
Particulars |
Fiscal |
||
|
2023 |
2022 |
2021 |
||
|
Financial related KPIs |
||||
| 1 | Revenue from operations (in ? million) | 4,073.02 |
2,963.96 |
1,377.21 |
| 2 | EBITDA (in ? million) | 735.05 |
545.77 |
260.15 |
| 3 | PAT (in ? million) | 463.62 |
359.83 |
164.76 |
| 4 | EBITDA Margin (in %) | 18.05% |
18.41% |
18.89% |
| 5 | PAT Margin (in %) | 11.38% |
12.14% |
11.96% |
| 6 | RoCE (in %) | 57.17% |
83.25% |
71.90% |
| 7 | RoE (%) | 47.71% |
66.03% |
56.96% |
|
Revenue related KPIs |
||||
| 1 | Total Order Book (in ? million) | 8,682.70 |
5,434.57 |
1,435.76 |
FACTORS AFFECTING RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Our results of operations and financial condition are affected by a number of important factors, including:
Demand for Heating Equipment
We are one of the leading Heating Equipment companies in India in terms of new order booking between Fiscal 2021 to Fiscal 2023 and have capabilities in thermal designing, engineering, manufacturing, supplying, installing and commissioning process fired heaters, reformers and cracking furnaces. (Source: F&S Report). We are one of the well-recognized process fired heater companies in India, having a market share of approximately 27% in the Indian Heating Equipment market, in terms of new order booking in Fiscal 2023. (Source: F&S Report) We commenced operations in 2010 and have a successful project competition track record of over 10 years.
India is the third largest oil consumer in the world and the oil demand is expected to reach 11 million barrels per day by calendar year 2045. (Source: F&S Report) India is expected to be one of the largest contributors to non- OECD petroleum consumption globally (Source: F&S Report). Consumption of petrol products from April 2022 to October 2022 is 126.12 million metric tonnes. There are 18 refinery projects expected to be commissioned by Fiscal 2031 with a cumulative capacity of 124.0 MMTPA (Source: F&S Report).
Petrochemicals are key elements in the Indian industrial segment and a major driver for economic growth (Source: F&S Report). In calendar year 2020, the per capita consumption of polymers in India was around 12 kilograms, while the global average was 37 kilograms (Source: F&S Report). Driven by increased domestic consumption and global demand, the Indian petrochemical sector has invested in capacity additions to benefit from the market opportunities. The acceptance of petrochemicals in diverse industries such as healthcare, construction, agriculture, textiles, automotive, etc. is expected to accelerate the demand for petrochemical production in India. (Source: F&S Report)
India is an agricultural economy and about 80% of the people depend on agriculture. India surpassed China to become the most populous country in calendar year 2023. With the growing population, there is a need to increase agricultural production and diversify agricultural base (Source: F&S Report). The government is focussing on irrigation, adoption of new agricultural technologies, credit facilities to farmers and the use of various agriculture input like better quality seeds, efficient and balanced use of fertilizers and insecticides to improve the yield. Fertiliser is one of the main agriculture inputs for increasing food grain production. It strengthens the soil and enhances its fertility (Source: F&S Report). Chemical fertilizers are the most used fertilizers in India and Urea is the major fertilizer used in India and accounts for about 60% of the total fertilizer consumption in India (Source: F&S Report). Local production of urea is not able to meet the domestic demand and about 30% of the demand is met through imports. India is planning capacity additions in this segment to reduce its import dependency and has a target to become self-reliant by calendar year 2025. There are about four urea projects expected to be commissioned by Fiscal 2026 (Source: F&S Report).
We obtain majority portion of our revenues from sales of Heating Equipment. The table below shows our revenue from sale of Heating Equipment for Fiscals 2023, 2022 and 2021, respectively.
|
Product category |
Fiscal 2023 |
Fiscal 2022 |
Fiscal 2021 |
|||
Revenue from operations (in ? million) |
% of revenue from operations |
Revenue from operations (in ? million) | % of revenue from operations |
Revenue from operations (in ? million) | % of revenue from operations | |
| Heating Equipment |
3,359.68 |
82.49 |
2,612.00 |
88.13 |
1,215.93 |
88.29 |
As of March 31, 2023, we have served 17 Customers in India and seven Customers overseas. Further, seven out of the 12 oil refining companies in India, are our Customers and we have supplied or are in the process of supplying Heating Equipment to 11 of the 24 operating oil refineries across India. (Source: F&S Report). In India, we have completed projects in, amongst others, Andhra Pradesh, Assam, Bihar, Karnataka, Kerala, Maharashtra, Tamil Nadu, West Bengal and globally have completed projects in Nigeria and Mexico. Further, we have ongoing projects in Gujarat, Odisha, Haryana, Rajasthan in India and globally in Oman, Algeria, and Lithuania. Further, we have successfully completed projects which were based in far-reaching locations, which included our projects in India at Numaligarh, Assam; Kochi, Kerala; Barauni, Bihar; and overseas at Lagos, Nigeria. Any slowdown in the Indian or the global Heating Equipment markets due to any reasons including recession, pandemic or any other geo-political reasons may adversely impact our growth prospects and the results of operations.
Sale of our Heating Equipment may decline because of several factors including but not limited to, loss of our market share, increase in competition, change in technology, pricing pressures and a decline or slowdown in oil and gas refineries, petrochemical and fertilizers industries Any or all these factors may have an adverse effect on our business prospects, and sales of our products could decline substantially. Further, our business is heavily dependent on the capital expenditure of oil and gas refineries, petrochemical and fertilizers industries as they are the end Customers for Heating Equipment. Any fluctuations in the oil and gas prices, whether in India or overseas, would create an impact on the capital expenditure plans of oil and gas refineries, petrochemical and fertilizers industries. Such fluctuations may lead our Customers in oil and gas refineries, petrochemical and fertilizers industries to cancel, downsize or defer their capital expenditure plans thus impacting demand for Heating Equipment There can be no assurance that such lack of demand for our high revenue generating products, i.e., our process fired heaters and reformers furnaces could potentially be offset by sales of our other products.
Imposition of liquidated damages and invocation of performance bank guarantees/indemnity bonds by our Customers
Our ability to meet specific Customer demands depends on our ability to design, engineer, manufacture, supply, install and commission Heating Equipment, within short timeframes. Any failure to adhere to a contractually agreed schedule, for reasons other than the agreed force majeure events could result in imposition of liquidated damages on us. Payment of liquidated damages on account of delay in supply of products or failure to submit the required performance bank guarantees or failure to install the equipment or commission the product, as required under the contract, is a standard clause forming part of most of our contracts and the maximum amount payable for such liquidated damages varies from contract-to-contract basis. There have been instances in the past where we were not able to meet the scheduled timelines on account of revision in the timelines by the Customers and delay in the supply chain and accordingly our milestones of payments were impacted and consequently, we had to pay liquidated damages. The table below shows the liquidated damages paid by us for Fiscals 2023, 2022 and 2021, respectively:
|
Particulars |
Fiscal 2023 |
Fiscal 2022 |
Fiscal 2021 |
| Liquidated damages (in ? million) | Nil | Nil | 0.56 |
| As a % of total expenses | Nil | Nil | 0.05 |
We cannot guarantee that in future we will not default any of the existing terms of our contracts resulting in the payment of liquidated damages. While there have been no instances in past where our contracts were terminated on account of delay in supply, there can be no guarantee that our Customers would not terminate contracts on account of delay in supply along with payment of liquidated damages. The incurring of such liabilities pursuant to the imposition of liquidated damages as well as invocation of such performance bank guarantees in relation to our contracts could have an adverse effect on our business, operations, revenues and earnings.
Terms of our contracts with our Customers
We are in the business of designing, engineering, manufacturing, supplying, installing and commissioning Heating Equipment. We obtain most of our business through a competitive bidding process in which we compete for contracts based on, among other factors, pricing, technical capabilities, inclusion of our name in the vendor list of
the Customer, reputation for quality, financing capabilities and past track record. Most of our on-going projects are from Contracting Customers while some are from End Customer from some private players and public sector undertakings. Such contracts involve certain specifications, including, design plans, timelines, material quality, end finishing of the structure, etc to be followed strictly as provided by the Customer. Though we are generally empowered to make practical operating decisions for development of the project, we may be required to make certain decisions in consultation with our Customers. These arrangements may limit our flexibility to make certain decisions in relation to the projects. In the event of any delay in the completion of the project within the envisaged time frame, we may be required to indemnify and compensate the Customer with whom we have entered into an agreement with. Any disputes that may arise between us and the parties involved in the agreement may cause delay in completion, suspension or complete abandonment of the projects we undertake. This may have a material adverse effect on our business operations, financial condition and reputation.
Our bidding and execution capabilities
We are in the business of designing, engineering, manufacturing, supplying, installing and commissioning Heating Equipment. We obtain most of our business through a competitive bidding process in which we compete for contracts based on, among other factors, pricing, technical capabilities, inclusion of our name in the vendor list of the Customer, reputation for quality, financing capabilities and past track record. This process therefore involves pre-qualifying for bids based on our technical and financial strengths, and an evaluation of the nature and value of contracts executed in the past to determine a companys eligibility to bid for new projects. A contract is awarded based on our ability to meet the qualification criteria and on the quote of the work order submitted. We are required to continuously improve on our operational and technical efficiency which includes amongst others, efficient equipment and material sourcing and efficient project planning. Our ability to qualify for bidding larger projects, efficient project planning and timely execution would enable growth of our business and would determine our overall performance, which is likely to impact our profitability. For further information, please see "Risk Factors
- Bidding for a tender involves cost estimations for the bidding process. Inability to accurately estimate the cost or match the prices quoted by our competitors, may lead to loss of tender creating an adverse impact on our business, results of operations, financial condition and cash flows" on page 38.
Dependence on our in-house engineering and technical teams for project execution
We have a team of experienced engineers and technicians who work closely with our Customers to understand their specific needs and provide solutions that meet or exceed their expectations. As of March 31, 2023, we have 69 employees in the engineering department with capabilities of detailed engineering in process, mechanical, structural, electrical, instrumentation, piping and civil engineering. Further, as of March 31, 2023, our business development, sales and marketing team consist of seven personnel who are responsible for sales of our products. Our ability to effectively execute and manage projects is crucial to our continued success. The designing and engineering of projects in this segment is technically complex, time consuming and resource intensive because of unique project requirements. We are therefore required to constantly upgrade our technical abilities to offer our Customers the full range of services at a competitive cost and without compromising on quality. If we are unable to recruit, train and retain a sufficient number of technically qualified employees, then our ability to maintain our competitiveness and grow our business could be negatively affected. We may be unable to bid for projects for lack of technical qualification and our competitors may get an advantage due to our incapability in bidding for projects requiring technical capabilities which we are not capable of providing. Further, as we expect to continue to expand our operations and develop new products, we will need to continue to attract and retain experienced management personnel. Also, loss of skilled employees from our engineering and technician teams may affect our ability and capability to execute projects and may also affect our growth prospects. For further information, please see "Risk Factors - We are dependent on our Promoters, Directors, Key Managerial Personnel and Senior Management, including other employees with technical expertise. Any loss of or our inability to attract or retain such persons could adversely affect our business, results of operations and financial condition" on page 34.
Ability to effectively execute and expand our Order Book
Our Companys Order Book as of a particular date is calculated based on the aggregate contract value of our on- going projects as of such date reduced by the value of work executed by us until such date, subject to certain adjustments including foreign exchange fluctuations and other contractual terms. The manner in which we calculate and present our Companys Order Book information may vary from the manner in which such information is calculated and presented by other companies, including our competitors. The Order Book information included in this Draft Red Herring Prospectus is not audited and does not necessarily indicate our future earnings. For risk related to Order Book, please see "Risk Factors – The number of orders we have
received in the past, our current Order Book and our growth rate may not be indicative of the number of orders we will receive in future. The order wins and any delays in execution of our orders expose us to time and cost overruns and variability in revenue, materially and adversely impacting our revenue from operations, cash flows and financial conditions" on page 29.
Our Order Book and the new projects that we bid for win and will continue to bid for in the future will have an effect on the revenues we will earn in the future. For instance, our revenue from operations for Fiscals 2021 to 2023, had grown at a CAGR of 71.97%. In Fiscals 2023, 2022 and 2021, our revenue from operations was ? 4,073.02 million, ? 2,963.96 million and ? 1,377.21 million respectively. This growth in our revenue from operations is in conjunction with the growth in our Order Book. Our Order Book increased from ? 1,435.76 million as on March 31, 2021 to ? 8,682.70 million as on March 31, 2023 on account of strong order wins of ? 6,284.95 million during Fiscal 2022 and ? 7,712.74 million during Fiscal 2023. This has led to our Order Book to Sales ratio doubling from 1.04 times for Fiscal 2021 to 2.13 times for Fiscal 2023. Further, during Fiscal 2021, we won orders from one of the private refinery companies of a multinational industrial conglomerate from Nigeria and a government owned refinery project in Rajasthan. During Fiscal 2022, through JNK Heaters, we won orders for Heating Equipment from a refinery company in Mexico and we also received orders for Heating Equipment from Indian Oil Corporation Limited. In Fiscal 2023, we managed to secure order from Numaligarh Refinery Limited (Assam), Indian Oil Corporation Limited and few overseas orders from Customers in Oman and Lithuania. For further details, please see "Our Business – Order Book" on page 164. In addition, our project implementation schedule may vary due to various factors that may be beyond our control, including availability of raw materials, approval of designs from the clients and timely commencement of work. These depend on various factors such as the value of these projects, the timeline for completion and payments to be made as per the agreed timelines. Accordingly, the realization of our Order Book and the effect on our results of operations may vary significantly from reporting period to reporting period depending on factors such as the nature of such contracts, actual performance of such contracts, as well as the stage of completion of such contracts as of the relevant reporting date. The value of the orders we receive and our ability to execute them in a timely manner therefore impacts our future performance. As our Order Book expands, the modified terms of payments for new projects may necessitate higher working capital requirements and therefore impact our financial performance. Any cancellation of orders or termination/ deferment of ongoing projects by our Customers may result in a reduction of our future revenue. Any delay in payments that are due and payable to us will affect our operations and have an impact on our cash flows. This may result in an increase in our working capital borrowings thereby affecting our business and results of operations.
Revenue from JNK Heaters
Since our inception, we have been working closely with JNK Heaters. The relationship between our Company and JNK Heaters is both independent and collaborative in nature. While for certain projects our Company is able to participate independently and acquire projects in Heating Equipment, for certain projects we partner as a global joint engineering and implementing partner for JNK Heaters. Further, to strengthen our commercial understanding, we have entered into a Co-operation Agreement with JNK Heaters, which governs our relationship in relation to, amongst others, marketing and geography of operations. For further details, please see "History and Certain Corporate Matters - Summary of key agreements and shareholders agreements - Key terms of other subsisting material agreements" on page 193.
We derive a significant portion of our revenue from operations from orders from Contracting Customers. We have received projects through Contracting Customers such as Tata Projects Limited and JNK Heaters. However, we derive a significant portion of our revenue from orders from JNK Heaters. In Fiscal 2023, Fiscal 2022 and Fiscal 2021, our revenue from JNK Heaters was ? 2,215.23 million, ? 2,188.96 million and ? 751.00 million respectively, which constituted 54.39%, 73.85% and 54.53% of our revenue from operations for the respective periods. Further, our Order Book value in relation to orders with JNK Heaters as a Contracting Customer, as of March 31, 2023 was ? 1,522.93 million, constituting 17.54% of the total Order Book value as of March 31, 2023, as of March 31, 2022 was ? 4,196.05 million, constituting 77.21% of the total Order Book value as of March 31, 2022 and as of March 31, 2021 was ? 1,050.39 million, constituting 73.16% of the total Order Book value as of March 31, 2021. There can be no assurance that we will be able to procure new contracts or retain the existing contracts from JNK Heaters. Further, inability of JNK Heaters to obtain new contracts due to reasons beyond our control would also impact our prospects of getting further business, adversely affecting our operations, cash flows and financial conditions. Also, there cannot be any guarantee that the relation between our Company and JNK Heaters would remain cordial and in case of any conflict between JNK Heaters and our Company, we may not receive contracts from JNK Heaters which may create an adverse impact on our business, revenue from operations and financial conditions.
We are eligible to bid and secure majority of the large contracts for process heaters and reformers independently in India and benefit from our relationship with JNK Heaters to secure global contracts. However, we are gradually reducing our dependence on JNK Heaters, which is evident from the fact that our Order Book value in relation to JNK Heaters has reduced from ?4,196.05 million as of March 31, 2022, which was 77.21% of our total Order Book value to ?1,522.93 million as of March 31, 2023, which was 17.54% of our total Order Book value.
Availability of financing on favorable terms
As of June 30, 2023, we had total outstanding borrowings of ? 1,204.90 million. Our projects are working capital intensive, we need to finance the purchase of materials and equipment and the performance of engineering, designing installation and other work on projects before payments are received from Customers and any increase in interest expense may have an adverse effect on our results of operations and financial condition. We are also required to deposit performance bank guarantee for our projects. Our finance costs are dependent on various external factors, including Indian and global credit markets and, in particular, interest rate movements and adequate liquidity. We believe that we have been able to maintain relatively stable finance costs. Our ability to avail financial facilities or to maintain our finance costs at optimum levels will continue to have a direct impact on our profitability, results of operations and financial condition.
Raw materials cost and availability
The primary raw materials required for manufacturing of our products are structural steel, tubes, pipes, fittings, burners. We procure our raw materials domestically as well as internationally from a wide and diverse network of suppliers, based on our requirements on an on-going basis. Pricing of our raw materials can be volatile due to several factors beyond our control, including global demand and supply, general economic and political conditions, transportation and labour costs, labour unrest, natural disasters, competition, import duties, tariffs and currency exchange rates, and there are uncertainties inherent in estimating such variables, regardless of the methodologies and assumptions that we may use. Volatility in commodity prices in particular, the cost of steel can significantly affect our cost of raw materials. Steel prices fluctuate based on a number of factors, such as, the availability and cost of raw material inputs, fluctuations in domestic and international demand and supply of steel and steel products, international production and capacity, fluctuation in the volume of steel imports, transportation costs, protective trade measures and various social and political factors, in the economies in which the steel producers sell their products and are sensitive to the trends of particular industries, such as, the construction and machinery industries. Further, volatility in fuel prices can also affect commodity prices worldwide which may increase our raw material costs.
The table below indicates the cost of raw materials consumed in Fiscals 2023, 2022 and 2021 respectively:
|
Particulars |
Fiscal 2023 |
Fiscal 2022 |
Fiscal 2021 |
| Cost of goods used (in ? million) | 1,405.58 | 930.37 | 254.60 |
| As % of our revenue from operations | 34.51 | 31.39 | 18.49 |
| As % of our total expenses | 40.29 | 37.32 | 22.01 |
Suppliers of our raw materials are predetermined by our Customers and most of the times we have to opt for the suppliers from a preferred list of suppliers provided by our Customers, thus if we experience significant increase in demand, or need to replace an existing supplier, we cannot assure you that we will be able to meet such demand or find suitable substitutes, in a timely manner and at a reasonable cost, or at all.
We also import certain of our components such as burners, pressure parts, pipes and tubes required in the manufacturing process. We generally import these components from China and certain parts of Europe such as Spain, Italy, Netherlands and Luxembourg. We do not have any long-term contracts or a fixed price with our foreign suppliers, and any fluctuation in the price of the components would create an adverse impact on our expenditure on imports. Further, loss of any of our foreign suppliers due to lack of any long-term contractual obligations, may adversely affect our flow of operations. Further, most of our procurement contracts with suppliers are at a fixed price with certain of our contracts having an exchange rate variation clause. On account of this, our ability to pass on increased raw material costs is limited. Furthermore, any increase in the cost of raw materials which results in an increase in prices of our products, may reduce demand for our products and thereby affect our margins and profitability. For further information, please see "Risk Factors - Availability and cost of raw materials may adversely affect our business, results of operations, financial condition and cash flows" on page 45.
Pace of research and development and technological advancements driven by industry standards
The products and services need of our Customers, change from time to time, and may render our products and technologies obsolete. Our ability to anticipate changes in technology and regulatory standards, understand industry trends and requirements, changes in Customer preferences and to successfully develop and introduce new and enhanced products to create new or address unidentified needs among our current and potential Customers in a timely manner, is a significant factor in our ability to remain competitive. This depends on a variety of factors, including execution of internal and external performance plans; availability of supplier and internally produced parts and materials; performance of suppliers; hiring and training of qualified personnel; achieving cost and production efficiencies; identification of emerging regulatory and technological trends in our target end markets; validation and performance of innovative technologies; the level of Customer interest in new technologies and products; and the costs and Customer acceptance of the new or improved products. We do not have any R&D facility and may have to rely on one of our Corporate Promoters, JNK Heaters for any new technological development. While we continue to focus on developing newer technology to upgrade our existing products further, there can be no assurance that our in-house R&D efforts will result in new technologies and capabilities being developed on a timely basis or meet the demands of our Customers as effectively and competitively. Any failure on our part to successfully introduce new technologies and upgrades may have an adverse effect on our business, results of operations and financial condition. We may also be required to make significant investments in R&D, which may strain our resources and may not provide results that can be monetized.
Competition
The Indian heating equipment market is closely competed among seven companies with our Company and Thermax Limited being the most prominent and comparable players. Bharat Heavy Electricals Limited is also a participant however, its revenue from heating equipment is comparatively lower compared to its other flagship businesses. Other participants in the Indian heating equipment market are, Esteem Projects Private Limited, Heurtey Petrochem Solutions, TR Engineering, and ITT Engineering India. (Source: F&S Report) While the Heating Equipment market has high barriers to entry as the engineering of industrial process fired heaters requires a complex understanding of various oil products, our competitors may win market share from us by providing lower cost solutions to our Customers, or by offering technologically advanced products. However, our capabilities in thermal designing, engineering, manufacturing, supplying, installing and commissioning Heating Equipment to companies forming part of some highly regulated industries, acts as a significant entry barrier to new entrants (Source: F&S Report). For further information on our competition, see "Our Business – Competition" on page 176.
Our success depends on our ability to develop and deliver advanced products, utilizing our R&D technologies, to help our Customers operate more effectively and efficiently. We may incur significant expenses in preparing to meet anticipated Customer requirements that we may not be able to recover or pass on to our Customers. Even if our offerings address industry and Customer needs, our competitors may be more responsive to these needs and more successful at selling their products.
Further, as we intend to selectively pursue strategic investment and acquisition opportunities that complement our growth strategy or strengthen or establish our presence in our targeted domestic and overseas markets, we may face significant competition in these regions.
SIGNIFICANT ACCOUNTING POLICIES
The restated consolidated financial information incorporate the financial information of the Company and its subsidiaries. For this purpose, an entity which is controlled by the Company is treated as subsidiary.
The Company together with its subsidiaries constitute the Group. Control exists when the Company, directly or indirectly, has power over the investee, is exposed to variable returns from its involvement with the investee and has the ability to use its power to affect its returns.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Income and expenses of a subsidiary acquired are included in the restated consolidated Statement of Profit and Loss from the date the Company. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:
In current case the restated consolidated financial information are prepared for the group where JNK India Private Limited is a Parent Company and JNK India Pvt FZE and JNK Renewable Energy Pvt Ltd are its subsidiaries.
All intra-group assets, liabilities, income, expenses and unrealised profits / losses on intra-group transactions are eliminated on consolidation.
The Restated Consolidated Financial Information is prepared using uniform accounting policies for like transactions and events in similar circumstances and necessary adjustments required for deviations, if any, to the extent possible unless otherwise stated, are made in the Restated Consolidated Financial Information.
The list of subsidiary companies which are included in the consolidation are as under:
| Name of the Subsidiary Company |
Ownership in % |
Country of Incorporation |
||
| As at March 31, , 2023 |
As at March 31, 2022 | As at March 31, 2021 | ||
| JNK India Private FZE | 100 |
100 |
100 |
Nigeria |
| JNK Renewable Energy Pvt Ltd* | 100 | - | - | India |
* The company is incorporated on June 17, 2022.
Cash flow statement is prepared segregating the cash flows from operating, investing and financing activities. Cash flow from operating activities is reported using indirect method as set out in Indian Accounting Standard (IND AS) -7 "Statement of Cash Flows".
Under the indirect method, the net profit is adjusted for the effects of:
Cash and cash equivalents comprise cash at bank and in hand and demand deposits with banks and are reflected as such in the cash flow statement. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
Property, plant and equipment, other than freehold land, are stated at cost less accumulated depreciation and impairment, if any. Costs directly attributable to acquisition are capitalized until the property, plant equipment are ready for use, as intended by the management. Freehold land is carried at cost and is not depreciated.
The Group depreciates property, plant and equipment, other than leasehold improvements, over their estimated useful lives using the written down value method. Leasehold improvements are depreciated over the tenure of Lease Term. The useful lives of material assets are estimated as follows:-
| Particulars |
Years |
| Plant and Equipment |
10 |
| Furniture and Fixtures |
10 |
| Office Equipment |
5 |
| Others | |
| Temporary Office |
5 |
| Temporary Construction |
5 |
| Assets at Project site |
Project period |
| Computer software |
3 |
| Computers |
3 |
If significant parts of an item of Property, Plant and Equipment have different useful lives then they are accounted for as separate items (major components) of Property, plant and Equipment.
Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates.
Advances paid towards the acquisition of property, plant and equipment outstanding at each Balance Sheet date are classified as capital advances under other non-current assets and the costs of assets not put to use before such date are disclosed under ‘Capital work-in-progress. Subsequent expenditures relating to property, plant and equipment are capitalized only when it is probable that future economic benefits associated with these will flow to the Group and the cost of the item can be measured reliably.
Repairs and maintenance costs are recognized while computing net profit, in the Statement of Profit and Loss, when incurred. The cost and its corresponding accumulated depreciation are eliminated from the financial information upon sale or retirement of the asset and the resultant gains or losses are recognized in the Statement of Profit and Loss. Assets to be disposed off are reported at the lower of the carrying value or the fair value less cost to sell.
Gains or losses arising from de-recognition of tangible assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
Intangible assets are stated at cost less accumulated amortization and impairment. Intangible assets having finite lives are amortized over their respective individual estimated useful lives, from the date that they are available for use. The estimated useful life of an identifiable intangible asset is based on a number of factors including the effects of obsolescence, demand, competition, and other economic factors (such as the stability of the industry and known technological advances) and the level of maintenance expenditure required to obtain the expected future cash flows from the asset. Amortization methods and useful lives are reviewed periodically including at each financial year end.
Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the profit and loss when the asset is derecognized.
The carrying amounts of Property, Plant and Equipment, Intangible Assets and investments in subsidiary companies are reviewed for impairment at the end of each financial year and also whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An assets recoverable amount is the higher of an assets or Cash Generating Units (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount.
Ind AS requires that an entity shall present current and non-current assets, and current and non- current liabilities, as separate classifications in its balance sheet.
Any asset or liability is classified as current if it satisfies any of the following conditions:
All other assets and liabilities are classified as non-current.
Financial assets include investments in equity and debt securities, cash and cash equivalents, trade receivables, employee and other advances and eligible current and non-current assets.
All financial assets, except Trade Receivables are recognized initially at fair value. Subsequent to initial recognition, financial assets are measured as described below:
Debt instruments that meet the following criteria are measured at amortized cost (except for debt instruments that are designated at fair value through Profit or Loss (FVTPL) on initial recognition):
Debt instruments that meet the following criteria are measured at fair value through other comprehensive income (FVTOCI) (except for debt instruments that are designated at fair value through Profit or Loss (FVTPL) on initial recognition)
Instruments that do not meet the amortised cost or FVTOCI criteria are measured at FVTPL. Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on re-measurement recognized in statement of profit and loss. The gain or loss on disposal is recognized in statement of profit and loss. Interest income is recognized in statement of profit and loss for FVTPL debt instruments. Dividend on financial assets at FVTPL is recognized when the Groups right to receive dividend is established.
Trade receivables that do not contain a significant financing component are initially recognized at transaction price. They are subsequently measured at amortised cost less any impairment losses. Due to their short term maturity, the carrying amount approximate fair value. Expected credit losses are estimated by adopting the simplified approach using a provision matrix reflecting current condition and forecast of future economic condition.
Other financial assets, cash and cash equivalents and other assets. They are presented as current assets, except for those maturing later than 12 months after the reporting date which are presented as non-current assets. These are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method, less any impairment losses. For most of these assets the carrying amounts approximate fair value due to their short term maturity.
Impairment of Financial Assets:
In accordance with Ind AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss and credit risk exposure on the financial assets that are debt instruments measured at amortized costs e.g. loans, deposits, trade receivables, contractual receivables and bank balances. The Company follows ‘simplified approach for recognition of impairment allowance. For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognizing impairment allowance based on 12-month. The Company considers current and anticipated future economic conditions relating to industries of the customer and the countries where it operates. ECL impairment allowance (or reversal) recognized during the period is recognized as income/expense in the Statement of profit and loss under the head ‘other expenses. ECL is presented as an allowance, i.e. as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets write- off criteria, the Company does not reduce impairment allowance from the gross carrying amount.
Derecognition
The Group derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expires or it transfers the financial asset and the transfer qualifies for de- recognition. If the Group retains substantially all the risks and rewards of a transferred financial asset, the Company continues to recognise the financial asset and also recognizes a borrowing
for the proceeds received.
Financial liabilities include long and short-term loans and borrowings, bank overdrafts, trade payables, eligible current and non-current liabilities.
All financial liabilities are recognized initially at fair value.
Subsequent to initial recognition financial liabilities are measured as described below:
Trade and Other Payables
Trade and other payables, which consist of Trade Creditors and Borrowings are subsequently carried at amortized cost using the effective interest method. For Trade and other payables, the carrying amounts approximate fair value due to the short-term maturity of these instruments.
A financial liability (or a part of a financial liability) is derecognized from the Groups balance sheet when the obligation specified in the contract is discharged or cancelled or expires.
Cash and cash equivalents comprise of cash on hand, cash at banks, short-term deposits and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Inventories are assets held for sale in the ordinary course of business or in the form of materials or supplies to be consumed in the production process or in the rendering of services.
Inventories held as on the reporting date are valued at the lower of cost and estimated net realizable value. In some cases, manufacturing work-in-progress is valued at lower of specifically identifiable cost and proportionate overheads or net realisable value. The cost of inventories comprises of all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The cost of inventories is assigned by using the first-in, first-out (FIFO) formula. When inventories are sold or consumed in rendering services, the carrying amount of those inventories is recognized as an expense in the period in which the related revenue is recognized.
Borrowing costs include Interest and other incidental costs.
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
In case of general borrowings, the borrowing costs are capitalised as per the Indian Accounting Standard 23.
Capitalisation of borrowing costs is suspended during extended periods in which active development is interrupted and is ceased when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete.
Borrowing costs which are not directly attributable to the acquisition, construction production or development of a qualifying asset are recognised as an expense in the period in which they are incurred.
Government grants are assistance by government in the form of transfers of resources to an entity in return for past or future compliance with certain conditions relating to the operating activities of the entity. They exclude those forms of government assistance which cannot reasonably have a value placed upon them and transactions with government which cannot be distinguished from the normal trading transactions of the entity.
Government grants shall be recognised in profit or loss on a systematic basis over the periods in which the entity recognises as expenses the related costs for which the grants are intended to compensate.
A government grant may take the form of a transfer of a non-monetary asset, such as land or other resources, for the use of the entity. In these circumstances the fair value of the non-monetary asset is assessed and both grant and asset are accounted for at that fair value.
All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits and they are recognized in the period in which the employee renders the related service.
Eligible employees receive benefits of a state run provident fund and insurance scheme. These are defined contribution plans. Both the eligible employee and the Group make monthly contributions to provident fund plan and the insurance scheme equal to a specified percentage of the covered employees salary. There are no other obligations other than the contribution payable to the relevant fund/ scheme.
The Group provides for gratuity, a defined benefit retirement plan covering eligible employees. The Gratuity plan provides a lump sum payment to the vested employees at retirement, death, incapacitation or termination of employment of an amount based on the respective employees salary and tenure with the Group. Liabilities with regard to Gratuity are determined in accordance with the actuarial valuation.
The Group has opted for a scheme and a fund run by LIC for gratuity.
Equity share-based payment (ESOP) are governed by ESOP scheme of the company. The fair value of ESOP granted to employees is recognised as an employee expense, with a corresponding increase in equity.
The Group recognizes revenue in accordance with Accounting Standard Ind AS 115, as per which revenue should be recognized when the performance obligation is satisfied.
Performance obligation is a promise in a contract with customer to transfer to customer either:
The Group needs to identify the transaction price. Transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods and services to a customer, excluding amounts collected on behalf of third parties.
Such a transaction price needs to be allocated to performance obligations in a contract. An entity transfers control of a good or service over time and therefore satisfies a performance obligation and recognizes revenue over time if any of the following criteria is met:
In any other case, revenue is recognized at a point of time.
Revenue is recognized when it has approval and commitment from both parties, the rights of the parties and payment terms are identified, the contract has commercial substance and collectability of consideration is probable. The Group recognizes revenue from contracts with Customers when it satisfies performance obligation by transferring promised goods or services to a customer. The revenue is recognized to the extent of the transaction price allocated to the performance obligation satisfied.
Engineering, Procurement and Construction (EPC) contracts are contracts specifically negotiated for the construction of plants and systems, involving design, engineering, fabrication, supply, erection and commissioning thereof.
The Group recognizes revenue over time as it performs because EPC contracts involve continuous transfer of control to the customer.
The Group identifies performance obligations regarding distinct goods or services, if any, within the context of EPC contracts most of which involve products or services that do not have an alternative use and the customer controls the work in process. The contracts contain clauses such as customers ownership over goods and drawings, customers right to termination of contract and in that event, the rights of the Group to payment towards performance obligations within the overall EPC Contract already fulfilled, including some profit corresponding thereto.
The Group uses cost-based measure of progress (or input method) for indivisible works contracts containing a single performance obligation, wherein the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues, including estimated profits, are recorded proportionally as costs are incurred.
Revenue from sale of goods is recognized when the control of the same is transferred to the customer and it is probable that the Group will collect the consideration to which it is entitled for the exchanged goods.
Revenue from rendering of services is recognized over time as the customer receives the benefit of the
Groups performance and the Company has an enforceable right to payment for services transferred.
Unbilled revenue represents value of services performed in accordance with the contract terms but not billed.
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration and are transferred to Trade receivables on completion of milestones and its related invoicing. Contract assets are recorded in balance sheet as unbilled revenue and Retention Money Receivable from Customers.
A receivable represents the Groups right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due).
A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration from the customer. If a customer pays consideration before the Group transfers goods or services to the customer, a contract liability is recognised when the payment is made. Contract liabilities are recognised as revenue when the Group satisfies the performance obligation. Contract liabilities are recorded in balance sheet as Advance from Customers and Retention Money Payable to Vendors.
Expenses are accounted on accrual basis.
Tax expense for the year comprises current tax and deferred tax.
Current Tax is determined as the amount of tax payable in respect of the taxable income for the period in accordance with Income Tax Act, 1961.
Income tax expense is recognized in net profit in the Statement of Profit and Loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in other comprehensive income.
Current income tax for current and prior periods is recognized at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Current tax assets and current tax liabilities are offset only if there is a legally enforceable right to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
The Group offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Deferred income tax assets and liabilities are recognized for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the restated consolidated financial information. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date and are expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect of changes in tax rates on deferred income tax assets and liabilities is recognized as income or expense in the period that includes the enactment or the substantive enactment date. A deferred income tax asset is recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilized.
Provision involving substantial degree of reliable estimation in measurement is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that is reasonably estimable, and it is probable that an outflow of economic benefits will be required to settle the obligation.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made.
Since functional currency of the Company is Indian Rupee (INR) which is also the presentation currency, restated consolidated financial information are prepared in INR.
Transactions denominated in foreign currencies entered into by the Company are initially recorded at the exchange rates prevailing on the date of the transaction. Monetary items denominated in foreign currencies at the year-end are restated at the closing rates. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction.
On consolidation, the assets and liabilities of foreign operations are translated into INR at the rate of exchange prevailing at the reporting date and their statements of profit or loss are translated at exchange rates prevailing at the dates of the transactions. For practical reasons, the group uses an average rate to translate income and expense items, if the average rate approximates the exchange rates at the dates of the transactions. The exchange differences arising on translation for consolidation are recognized in OCI. On disposal of a foreign operation, the component of OCI relating to that particular foreign operation is recognized in profit or loss.
Basic earnings per equity share are computed by dividing the net profit or loss (excluding other comprehensive income) for the year attributable to the equity holders of the Group by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares is adjusted for events such as bonus issue, bonus element in a right issue, share split and reserve share splits (consolidation of shares) that have changed the number of equity shares.
Diluted earnings per equity share are computed by dividing the net profit or loss (excluding other comprehensive income) for the year attributable to the equity holders of the Group by the weighted average number of equity shares outstanding during the year adjusted for the effects of all dilutive potential equity shares.
Derivative financial instruments are those which create rights and obligations that have the effect of transferring between the parties to the instrument one or more of the financial risks inherent in an underlying primary financial instrument.
Derivative financial instruments are recognized and measured at fair value. Attributable transaction costs
are recognized in the statement of profit and loss as cost.
Subsequent to initial recognition, derivative financial instruments are measured as described below:
Changes in the fair value of the derivative hedging instruments designated as a cash flow hedge are recognized in other comprehensive income and held in cash flow hedging reserve, net of taxes, a component of equity, to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are recognized in the statement of profit and loss and reported within foreign exchange gains / (losses), net within results from operating activities. If the hedging instrument no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively. If the hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument recognized in cash flow hedging reserve till the period the hedge was effective remains in cash flow hedging reserve until the forecasted transaction occurs. The cumulative gain or loss previously recognized in the cash flow hedging reserve is transferred to the statement of profit and loss upon the occurrence of the related forecasted transaction. If the forecasted transaction is no longer expected to occur, such cumulative balance is recognized in the statement of profit and loss.
Changes in fair value of foreign currency derivative instruments not designated as cash flow hedges are recognized in the statement of profit and loss and reported within foreign exchange gains, net within results from operating activities.
Changes in fair value and gains / (losses) on settlement of foreign currency derivative instruments relating to borrowings, which have not been designated as hedges are recorded in finance expense.
The Group assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether:
At the date of commencement of the lease, the Group recognizes a right-of-use (ROU) asset and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of 12 months or less (short-term leases) and low value leases. For these short-term and low-value leases, the Group recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
Equity Settled Transactions (ESOP)
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model. That cost is recognised, together with a corresponding increase in ESOP reserves in equity, over the period in which the performance and/or service conditions are fulfilled in employee benefits expense. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Groups best estimate of the number of equity instruments that will ultimately vest. The statement of profit and loss expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense. The dilutive
effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
Investments in subsidiaries are carried at cost less accumulated impairment losses in the Groups balance sheet. On disposal of such investments, the difference bet disposal proceed and the carrying amounts of the investments are recognised in the statement of profit and loss.
Dividend to equity shareholders is recognized as a liability in the period in which the dividends are approved by the equity shareholders. Interim dividends that are declared by the Board of Directors without the need for equity shareholders approvals are recognized as a liability and deducted from shareholders equity in the year in which the dividends are declared by the Board of directors.
The Group considers exceptional items to be those which derive from events or transactions which are significant for separate disclosure by virtue of their size or incidence in order for the user to obtain a proper understanding of the Groups financial performance. These items include, but are not limited to, acquisition costs, impairment charges, restructuring costs and profits and losses on disposal of subsidiaries, contingent consideration and other one-off items which meet this definition. To provide a better understanding of the underlying results of the period, exceptional items are reported separately in the Statement of Profit and Loss.
Estimates and Judgements
The preparation of the restated consolidated financial information in conformity with Ind AS requires the management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the restated consolidated financial information and reported amounts of revenues and expenses during the period. Accounting estimates could change from period to period and actual results could differ from those estimates. Appropriate changes in estimates are made as the management becomes aware of the changes in circumstances surrounding the estimates. Changes in estimates are reflected in the restated consolidated financial information in the period in which changes are made and, if material, their effects are separately disclosed in the notes to the financial statements.
In particular, information about major areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the restated consolidated financial information is given in the following notes:
EPC Contracting is a complex business involving many activities and is a team effort the success of which depends of effectiveness many sub-vendors and service providers. Assessing the stage of completion for the purpose of revenue recognition, valuation of work in progress and inventory; is subject to substantial judgement and subjective opinions which vary considerably. Since EPC contracts are high value contracts, slight difference in opinion and judgement leads to considerable difference in financial results.
The business of the Group requires giving performance guaranties and maintenance during warranty period. The circumstances which may involve expenditure on this account are completely unpredictable
and considerable degree of estimation is involved in ascertaining the same. This impacts the provision for warrantees.
The major tax jurisdiction for the Group is India. Significant judgments are involved in determining the tax liabilities including judgment on whether tax positions adopted by the Group are probable of being sustained in tax assessments. A tax assessment can involve complex issues, which can only be resolved over extended time periods through a lengthy litigation process, at the end of which even if the Group wins, huge expenditure gets incurred in litigation which has an impact on the financial results.
Testing for impairment, of assets in general and intangible assets in particular is a very difficult task because there is no objective way of doing the same. It involves use of significant estimates and assumptions regarding economic conditions, growth rates and market conditions. Slight error or inaccuracy in such estimates or assumptions can have a material impact on the financial results of the Group.
The Group evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification of a lease requires significant judgment. The Group uses significant judgement in assessing the lease term (including anticipated renewals) and the applicable discount rate.
The Group determines the lease term as the non-cancellable period of a lease, together with both periods covered by an option to extend the lease if the Group is reasonably certain to exercise that option; and periods covered by an option to terminate the lease if the Group is reasonably certain not to exercise that option. The Group revises the lease term if there is a change in the non-cancellable period of a lease.
PRINCIPAL COMPONENTS OF INCOME AND EXPENDITURE
Income
The following table sets forth our income in Rupees in million and as a percentage of our revenue from operations for the periods indicated.
(in ? million, except percentages)
| Particulars | Fiscal 2023 |
Fiscal 2022 |
Fiscal 2021 |
| Sale of products | |||
| Domestic goods | 952.11 | 484.87 | 421.73 |
| Percentage of revenue from operations (% of A) | 23.38% |
16.36% |
30.62% |
| Export | 1,305.50 | 1,143.29 | 116.35 |
| Percentage of revenue from operations (% of A) | 32.05% |
38.57% |
8.45% |
| Sale of services | |||
| Domestic supply | 312.94 | 245.04 | 77.45 |
| Percentage of revenue from operations (% of A) | 7.68% |
8.27% |
5.62% |
| Export | 1,494.96 | 1,014.81 | 590.28 |
| Percentage of revenue from operations (% of A) | 36.70% |
34.24% |
42.86% |
| Geography-wise revenue information | |||
| Domestic | 1,265.05 | 729.91 | 499.18 |
| Percentage of revenue from operations (% of A) | 31.06% |
24.63% |
36.25% |
| Export | 2,800.46 | 2,158.10 | 868.81 |
| Percentage of revenue from operations (% of A) | 68.76% |
72.81% |
63.08% |
| Particulars | Fiscal 2023 |
Fiscal 2022 |
Fiscal 2021 |
| Product-wise revenue information | |||
| Heating Equipment | 3,359.68 | 2,612.00 | 1,215.93 |
| Percentage of revenue from operations (% of A) | 82.49% |
88.13% |
88.29% |
| Flares, incinerators and others | 705.83 | 276.01 | 152.06 |
| Percentage of revenue from operations (% of A) | 17.33% |
9.31% |
11.04% |
| Other operating revenues | 7.51 | 75.95 | 9.22 |
| Percentage of revenue from operations (% of A) | 0.18% |
2.56% |
0.67% |
| A. Revenue from operations | 4,073.02 | 2,963.96 | 1,377.21 |
| Interest income | 7.82 | 6.12 | 4.89 |
| Percentage of revenue from operations (% of A) | 0.19% |
0.21% |
0.36% |
| Other non-operating income | 34.61 | 1.28 | 2.43 |
| Percentage of revenue from operations (% of A) | 0.85% |
0.04% |
0.18% |
| B. Other income | 42.43 | 7.40 | 7.32 |
| Percentage of revenue from operations (% of A) | 1.04% |
0.25% |
0.53% |
| Total income (A+B) | 4,115.45 | 2,971.36 | 1,384.53 |
Revenue from Operations
Our revenue from operations was ? 4,073.02 million, ? 2,963.96 million and ? 1,377.21 million in Fiscals 2023, 2022 and 2021, respectively. Our revenue from operations can be classified in two ways: a) geography-wise revenue; and b) product-wise revenue.
Geography-wise revenue
Our revenue from operations is primarily generated from a) sale of product and services in the domestic market and b) through export of products and services in the overseas markets.
Our income from domestic sale of products and services primarily relate to our revenue from sale of Heating Equipment and sale of flares, incinerators and others in India. Our, income from sale of products and services in India was ? 1,265.05 million, ? 729.91 million and ? 499.18 million for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively, which accounted for 31.06%, 24.63% and 36.25% of our revenue from operations for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively.
Our income from export of products and services primarily relate to our revenue from sale of Heating Equipment and sale of flares, incinerators and others in the overseas markets such as Nigeria and Mexico. Our income from sale of products and services in the overseas market was ? 2,800.46 million, ? 2,158.10 million and ? 868.81 million for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively, which accounted for 68.76%, 72.81% and 63.08% of our revenue from operations for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively.
Product wise revenue
Our revenue from operations is primarily generated from a) sale of Heating Equipment and b) sale of flares, incinerators and others.
Our income from sale of Heating Equipment was ? 3,359.68 million, ? 2,612.00 million and ? 1,215.93 million for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively, which accounted for 82.49%, 88.13% and 88.29% of our revenue from operations for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively.
Further, our income from sale of flares, incinerators and others was ? 705.83 million, ? 276.01 million and ?
152.06 million for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively, which accounted for 17.33%, 9.31% and 11.04% of our revenue from operations for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively.
Other operating revenues
Our other operating revenues accounted for 0.18%, 2.56% and 0.67% of our revenue from operations for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively. Our other operating revenues primarily relate to duty drawback received, duty credit scrip sold and other income.
Other Income
Our other income was ? 42.43 million, ? 7.40 million and ? 7.32 million which accounted for 1.04%, 0.25% and 0.53% of our revenue from operations for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively. Our other income primarily relates to interest income on fixed deposits, interest income on loans given, and other non-operating income which includes bad debts recovered, profit on mutual fund redemption, sale of scrap, gain on foreign exchange fluctuation etc.
Expenses
Our expenses were ? 3,488.34 million, ? 2,493.10 million and ? 1,156.49 million in Fiscals 2023, 2022 and 2021, respectively. Our expenses comprise of (i) purchase of stock-in-trade; (ii) changes in inventories of finished goods, stock-in-trade and work-in-progress; (iii) project expenses; (iv) employee benefit expenses; (v) finance costs; (vi) depreciation and amortization expenses; and (vii) other expenses.
The following table sets forth our expenditure and as a percentage of our revenue from operations for the periods indicated:
(in ? million, except percentages)
| Particulars | Fiscal 2023 |
Fiscal 2022 |
Fiscal 2021 |
| Purchase of stock-in-trade | 1,601.74 | 1,502.98 | 302.68 |
| Percentage of revenue from operations | 39.33% |
50.71% |
21.98% |
| Changes in inventories of finished goods, stock-in- trade and work-in-progress | (196.16) | (572.61) | (48.08) |
| Percentage of revenue from operations | (4.82%) |
(19.32%) |
(3.49%) |
| Project expenses | 1,097.26 | 704.49 | 279.36 |
| Percentage of revenue from operations | 26.94% |
23.77% |
20.28% |
| Employee benefit expenses | 532.38 | 414.48 | 326.26 |
| Percentage of revenue from operations | 13.07% |
13.98% |
23.69% |
| Finance costs | 42.12 | 37.65 | 13.47 |
| Percentage of revenue from operations | 1.03% |
1.27% |
0.98% |
| Depreciation and amortization expenses | 65.82 | 29.86 | 18.59 |
| Percentage of revenue from operations | 1.62% |
1.01% |
1.35% |
| Other expenses | 345.18 | 376.25 | 264.21 |
| Percentage of revenue from operations | 8.47% |
12.69% |
19.18% |
| Total expenses | 3,488.34 | 2,493.10 | 1,156.49 |
Purchase of stock-in-trade
Purchase of stock-in-trade comprises of purchase fabricated items and bought out items which are primarily involved in the manufacture of our products and include semi-furnished and near finished materials prepared by third-party fabricators, fans, compressors, valves and blowers. Purchase of stock-in-trade accounted for 45.92%, 60.29% and 26.17% of our total expenses for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively.
Further, purchase of stock-in-trade also comprises of cost of goods used during the manufacture of our products, which include structural steel, tubes, pipes, fittings, burners. Our cost of goods used was ? 1,405.58 million, ?
930.37 million and ? 254.60 million for Fiscals 2023, 2022 and 2021. It accounted for 40.29%, 37.32%, 22.01% of our total expenses for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively.
Changes in inventories of finished goods, stock-in-trade and work-in-progress consist of costs attributable to an increase or decrease in inventory levels during the relevant financial period in raw materials and work-in progress. Changes in inventories of raw materials and work-in-progress accounted for (5.62%), (22.97%) and (4.16%) of our total expenses for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively.
Project expenses
Project expenses relate to expenses directly related to our projects. These consist of freight charges, fabrication charges, transportation charges, labour charges, manpower cost at the project site, technical services charges and other project expenses. Project expenses accounted for 31.46%, 28.26% and 24.16% of our total expenses for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively.
Employee benefit expenses
Employee benefits expense includes (i) salaries and wages; (ii) contribution to provident fund and other funds;
Finance costs
Finance costs includes incudes (a) interest paid on cash credit/overdraft, leases, car loans and inter corporate deposits; (b) other borrowing costs such as bank guarantee charges, stamp duty charges, loan processing fees etc. Finance costs accounted for 1.21%, 1.51% and 1.16% of our total expenses for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively.
Depreciation and amortization expenses
Depreciation represents depreciation on our fixed assets including buildings, plant and machinery, furniture and fittings, office appliances, computers and vehicles. Amortization represents amortization on our intangible assets which includes our computer software and on leases. Depreciation and amortization expenses accounted for 1.89%, 1.20% and 1.61% of our total expenses for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively.
Other expenses
Other expenses include legal, professional and consultancy charges, traveling and conveyance, rent, rates and taxes, petrol and fuel, warranty expenses, commission charges, repairs and maintenance, corporate social responsibility expenses, business promotion expenses, assets written off, provision for bad debts, handling charges, statutory audit fees, insurance premiums and other expenses. Other expenses accounted for 9.90%, 15.09% and 22.85% of our total expenses for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively.
RESULTS OF OPERATIONS
Fiscal 2023 compared with Fiscal 2022
Total Income
Our total income increased by ? 1,144.09 million or 38.50% from ? 2,971.36 million in Fiscal 2022 to ? 4,115.45 million in Fiscal 2023.
Revenue from operations
Our revenue from operations increased by ? 1,109.06 million or 37.42% from ? 2,963.96 million in Fiscal 2022 to ? 4,073.02 million in Fiscal 2023. This increase was a primarily on account of increase in the revenue generated geography-wise and product wise.
Our income from sale of products and services in India increased by ? 535.14 million or 73.32% from ? 729.91 million in Fiscal 2022 to ? 1,265.05 million in Fiscal 2023, primarily due to successful order wins in the domestic market worth ? 1,015.53 million, ? 2,918.64 million and ? 5,860.35 million in Fiscal 2021, Fiscal 2022 and Fiscal 2023 respectively. We won a large domestic order aggregating to ? 2,528.89 million for a Paraxylene (PX) plant for Indian Oil Corporation Limited at Paradip Refinery, Odisha, in Fiscal 2022, for which we raised an invoice aggregating to ?634.12 million in Fiscal 2023. Further, we also partially executed our first hydrogen refuelling station for Indian Oil Corporation Limited worth ? 341.19 million and executed a project in EPC of Solar PV aggregating to ? 19.60 million in Fiscal 2023. The increase in the revenue from sale of products and services in India is also due to our increasing focus on the domestic market. This is evident from the fact that our Order Book value in relation to sale of products and services in India has increased by ? 4,708.82 million or 155.94% from ? 3,019.57 million as of March 31, 2022 to ? 7,728.39 million as of March 31, 2023. And there is an increase in our order win in relation to sale of products and services in India by ? 2,941.71 million or 100.79% from ? 2,918.64 million in Fiscal 2022 to ? 5,860.35 million in Fiscal 2023.
Our income from sale of products and services through exports increased by ? 642.36 million or 29.77% from ? 2,158.10 million in Fiscal 2022 to ? 2,800.46 million in Fiscal 2023, primarily due to successful order wins in the overseas market worth ? 1,098.99 million, ? 3,366.30 million and ? 1,852.39 million in Fiscal 2021, Fiscal 2022 and Fiscal 2023 respectively. We executed a project for a refinery company from Mexico and for one of the private refinery companies of a multinational industrial conglomerate from Nigeria between Fiscal 2022 and Fiscal 2023. For the said projects, we realised a partial revenue (including incentive) of ? 2,063.51 million from a refinery company at Mexico and a partial revenue of ? 728.76 million from our Customer at Nigeria (our End Customer as well as through Contracting Customer), in Fiscal 2023. Further, our Company also executed the project for the refinery company at Mexico, efficiently on time, due to which we received an additional incentive of ?171.31 million in Fiscal 2023, leading to a further increase in revenue through exports of products and services.
Product wise revenue
Our income from sale of Heating Equipment increased by ? 747.68 million or 28.62% from ? 2,612.00 million in Fiscal 2022 to ? 3,359.68 million in Fiscal 2023, primarily due to execution of large export orders for refinery companies at Mexico and Nigeria. Further, the increase in the income from sale of Heating Equipment is also due to setting up of a new fabrication facility in April 2021 at multi-product special economic zone at Mundra, Gujarat. This new facility increased our export capabilities and helped us in timely execution of export orders in Fiscal 2023, due to this our Company executed a project for a refinery company at Mexico, efficiently on time, due to which we received an additional incentive of ?171.31 million in Fiscal 2023, leading to a further increase in revenue. We also won a large domestic order aggregating to ? 2,528.89 million for a Paraxylene (PX) plant for Indian Oil Corporation Limited at Paradip Refinery, Odisha in Fiscal 2022, for which we raised an invoice aggregating to ? 634.12 million in Fiscal 2023. Our growth in our revenue from sale of Heating Equipment is in conjunction with the growth in our Order Book. Our Order Book value for Heating Equipment had increased by
? 3,492.35 million or 70.46% from ? 4,956.21 million as on March 31, 2022 to ? 8,448.56 million as on March 31, 2023 on account of strong order wins of ? 7,085.99 million during Fiscal 2023. Our order wins for Heating Equipment increased by ? 1,588.25 million or 28.89% from ? 5,497.74 million in Fiscal 2022 to ? 7,085.99 million in Fiscal 2023.
Our income from sale of flares, incinerators and others increased by ? 429.82 million or 155.73% from ? 276.01 million in Fiscal 2022 to ? 705.83 million in Fiscal 2023, primarily due to successful order win for flares and incinerators worth ? 334.84 million, ? 441.71 million and ? 607.15 million in Fiscal 2021, Fiscal 2022 and Fiscal 2023, respectively. We received an order for flares system from one of the private refinery companies of a multinational industrial conglomerate from Nigeria in Fiscal 2021 and the execution of the project was done over Fiscals 2021, 2022 and 2023. We invoiced aggregating ?253.44 million for the said project in Fiscal 2023. We also received an order for an incinerator system project from the same Customer at Nigeria in Fiscal 2023. We
had partially executed the project in Fiscal 2023 and raised an invoice aggregating to ?152.31 million for the same in Fiscal 2023 itself. We also executed a project for our first hydrogen refuelling station for Indian Oil Corporation Limited worth ? 341.19 million and executed a project in EPC of Solar PV project aggregating to ? 19.60 million in Fiscal 2023. Our growth in our revenue from flares, incinerators and others is in consonance with our strategy to build up our diversified product offering, which is evident from the fact that the total revenue contribution from sale of flares, incinerators and others has increased to 17.33% in Fiscal 2023 from 9.31% in Fiscal 2022. Further, our order wins for flares and incinerators increased by ? 165.44 million or 37.45% from ? 441.71 million in Fiscal 2022 to ? 607.15 million in Fiscal 2023.
Other operating revenues
Our other operating revenues decreased by ? 68.44 million or 90.11% from ? 75.95 million in Fiscal 2022 to ?
7.51 million in Fiscal 2023, primarily since the crane hire charges provisions which were made in Fiscal 2021 for our Subsidiary JNK India Private FZE were reversed in Fiscal 2022 and recognised as other operating revenue. There were no similar provisions being created for Fiscal 2023.
Other income
Other income increased by ? 35.03 million or 473.38% from ? 7.40 million in Fiscal 2022 to ? 42.43 million in Fiscal 2023, primarily due to recovery of bad debts amounting to ? 29.43 million which were earlier written off.
Total Expenses
Our total expenses increased by ? 995.24 million or 39.92% from ? 2,493.10 million in Fiscal 2022 to ? 3,488.34 million in Fiscal 2023. This increase was a primarily on account of increase in (i) purchase of stock-in-trade; (ii) project expenses; (iii) employee benefit expenses; (iv) finance costs; and (v) depreciation and amortization expenses.
Purchase of stock-in-trade
Purchase of stock-in-trade increased by ? 98.76 million or 6.57% from ? 1,502.98 million in Fiscal 2022 to ? 1,601.74 million in Fiscal 2023 on account of purchase of stock-in-trade towards execution of large export orders for refinery companies in Mexico and Nigeria. Further, purchase of stock-in-trade also comprises of cost of materials consumed during the manufacture of our products, which include structural steel, tubes, pipes, fittings, burners. There was an increase in purchase of stock-in-trade also due to an increase in cost of goods used by ?
475.21 million or 51.08% from ? 930.37 million in Fiscal 2022 to ? 1,405.58 million in Fiscal 2023, the increase in cost of goods used was due to surge in steel prices in Fiscal 2023.
Changes in inventories of finished goods, stock-in-trade and work-in-progress
Changes in inventories of finished goods, stock-in-trade and work-in-progress decreased by ? 376.45 million or 65.74% from (? 572.61 million) in Fiscal 2022 to (? 196.16 million) in Fiscal 2023 on account of higher inventory build-up of raw material in Fiscal 2022 of worth ? 624.37 million due to execution of a large export order for a refinery company at Mexico.
Project expenses
Project expenses increased by ? 392.77 million or 55.75% from ? 704.49 million in Fiscal 2022 to ? 1,097.26 million in Fiscal 2023 on account of increase in freight charges due to disruptions in supply chain caused by Russia- Ukraine conflict. Freight charges paid in Fiscal 2023 was ? 510.20 million which was ? 198.33 million or 63.59% higher than the freight charges paid in Fiscal 2022, which were ? 311.87 million. Further, growth in project expenses is in line with the growth in our revenue from operations, our total income increased by ? 1,144.09 million or 38.50% from ? 2,971.36 million in Fiscal 2022 to ? 4,115.45 million in Fiscal 2023.
Employee benefit expenses
Employee benefit expenses increased by ? 117.90 million or 28.45% from ? 414.48 million in Fiscal 2022 to ?
532.38 million in Fiscal 2023 primarily due to increase in (i) salaries and wages, (ii) contribution to provident fund and other funds, (iii) ESOP 2022 and (iii) staff welfare expenses, which was due to increase in the number of employees from 150 as of March 31, 2022 to 192 as of March 31, 2023. Further, due to institution of the ESOP
2022, a onetime expense of ? 50.72 million in relation to ESOP 2022 was also incurred in Fiscal 2023.
Finance costs
Finance costs increased by ? 4.47 million or 11.87% from ? 37.65 million in Fiscal 2022 to ? 42.12 million in Fiscal 2023. The increase in finance costs was primarily on account of increase in bank guarantee charges by ? 18.34 million or 305.16%, from ? 6.01 million in Fiscal 2022 to ? 24.35 million in Fiscal 2023. We are required to furnish various bank guarantees, such as security deposits (or contract performance guarantee), performance bank guarantee and advance bank guarantee. We are required to provide security deposit in the form of bank guarantees to our Customers immediately upon receipt of the purchase order, which can generally range up to 10% of project value, and which is valid until completion of the project. The increase in bank guarantee charges is in line with the growth in our revenue from operations, our total income increased by ? 1,144.09 million or 38.50% from ? 2,971.36 million in Fiscal 2022 to ? 4,115.45 million in Fiscal 2023. Further, our total order win increased by ? 1,427.79 million or 22.72% from ? 6,284.95 million in Fiscal 2022 to ? 7,712.74 million in Fiscal 2023.
Depreciation and amortisation expense
Depreciation and amortisation expenses increased by ? 35.96 million or 120.43% from ? 29.86 million in Fiscal 2022 to ? 65.82 million in Fiscal 2023. The increase in depreciation and amortisation expenses was primarily on account of increase in assets due to setting up of a new fabrication facility in February 2022 at Jajpur, Odisha.
Other expenses
Other expenses decreased by ? 31.07 million or 8.26% from ? 376.25 million in Fiscal 2022 to ? 345.18 million in Fiscal 2023. The decrease in other expenses was primarily a result of :
? 8.39 million for Fiscal 2023; and
? 2.22 million for Fiscal 2023;
The above reductions were partially offset by:
Profit before tax
As a result of the foregoing, our profit before tax increased by ? 148.85 million or 31.12% from ? 478.26 million in Fiscal 2022 to ? 627.11 million in Fiscal 2023.
Tax expense
Current tax expenses increased by ? 52.03 million or 40.52% from ? 128.41 million in Fiscal 2022 to ? 180.44 million in Fiscal 2023. Deferred tax expenses decreased by ? 6.97 million or 69.81% from ? (9.98) million in Fiscal 2022 to ? (16.95) million in Fiscal 2023.
Profit for the year
For the various reasons discussed above, and following adjustments for tax expense, we recorded an increase in profit after tax by ? 103.79 million or 28.84% from ? 359.83 million in Fiscal 2022 to ? 463.62 million in Fiscal 2023.
Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA")
Our EBITDA increased by 34.68% or ? 189.28 million from ? 545.77 million in in Fiscal 2022 to ? 735.05 million in Fiscal 2023, this was due to increase in our revenue from operations by ? 1,109.06 million or 37.42% from ? 2,963.96 million in Fiscal 2022 to ? 4,073.02 million in Fiscal 2023. However, our EBITDA Margin decreased marginally from 18.41% in Fiscal 2022 to 18.05% in Fiscal 2023. We provide price quotes on estimations of raw material prices at the time of submission of bids. In the event there is an increase in prices of the raw materials, we are not able to pass on the additional cost to our Customers, which led to marginal decrease in our EBITDA Margin.
Fiscal 2022 compared with Fiscal 2021
Total Income
Our total income increased by ? 1,586.83 million or 114.61% from ? 1,384.53 million in Fiscal 2021 to ? 2,971.36 million in Fiscal 2022.
Revenue from operations
Our revenue from operations increased by ? 1,586.75 million or 115.21% from ? 1,377.21 million in Fiscal 2021 to
? 2,963.96 million in Fiscal 2022. This increase was a primarily on account of increase in the revenue generated geography-wise and product wise.
Geography-wise revenue
Our income from sale of products and services in the domestic market increased by ? 230.73 million or 46.22% from ? 499.18 million in Fiscal 2021 to ? 729.91 million in Fiscal 2022, primarily due to successful order win aggregating to ? 703.77 million for a greenfield refinery project in Rajasthan. Out of this order win, revenue for an amount aggregating to ? 219.24 million was booked in Fiscal 2021 and an amount aggregating to ? 463.54 million was booked in Fiscal 2022. Further, we received an order from Tata Projects Limited which was executed in Fiscal 2021, however the revenue of ? 167.70 million was realized in Fiscal 2022.
Our income from sale of products and services through exports increased by ? 1,289.29 million or 148.40% from
? 868.81 million in Fiscal 2021 to ? 2,158.10 million in Fiscal 2022, primarily due to successful order wins in the overseas market worth ? 1,098.99 million and ? 3,366.30 million in Fiscal 2021 and Fiscal 2022 respectively. We executed large export orders for refinery companies at Mexico and Nigeria. We executed a project for a refinery company from Mexico and for one of the private refinery companies of a multinational industrial conglomerate from Nigeria between Fiscal 2022 and Fiscal 2023. For the said projects, we realised a partial revenue of ? 1,621.65 million from a refinery company at Mexico and a partial revenue of ? 531.42 million from our Customer at Nigeria (our End Customer as well as through Contracting Customer), in Fiscal 2022.
Product wise revenue
a) Heating Equipment
Our income from sale of Heating Equipment increased by ? 1,396.07 million or 114.81% from ? 1,215.93 million in Fiscal 2021 to ? 2,612.00 million in Fiscal 2022, primarily due to successful order win aggregating to ? 703.77 million for a greenfield refinery project in Rajasthan. Out of this order win, revenue for amount aggregating to ?
219.24 million was booked in Fiscal 2021 and ? 463.54 million was booked in Fiscal 2022. Further, we received an order from Tata Projects Limited which was executed in Fiscal 2021, however the revenue of ? 167.70 million was realized in Fiscal 2022. Further, our order wins for Heating Equipment increased by ? 3,718.07 million or 208.92% from ? 1,779.67 million in Fiscal 2021 to ? 5,497.74 million in Fiscal 2022. Our growth in our revenue from sale of Heating Equipment is in conjunction with the growth in our Order Book. Our Order Book value for Heating Equipment had increased by ? 3,641.65 million or 277.02% from ? 1,314.56 million as on March 31, 2021 to ? 4,956.21 million as on March 31, 2022 on account of strong order wins of ? 5,497.74 million during
Fiscal 2022. Our order wins for Heating Equipment increased by ? 3,718.07 million or 208.92% from ? 1,779.67 million in Fiscal 2012 to ? 5,497.74 million in Fiscal 2022. Such an increase in the order wins in Fiscal 2022 and Fiscal 2023 have resulted in growth of revenue of our Company.
b) Flares, incinerators and others
Our income from sale of flares, incinerators and others increased by ? 123.95 million or 81.51% from ? 152.06 million in Fiscal 2021 to ? 276.01 million in Fiscal 2022. This was primarily due to successful order win for flares and incinerators worth ? 334.84 million, ? 441.71 million and ? 607.15 million in Fiscal 2021, Fiscal 2022 and Fiscal 2023, respectively. Further, we received an order for flares system from one of the private refinery companies of a multinational industrial conglomerate from Nigeria in Fiscal 2021, the execution of the project was done over Fiscals 2021, 2022 and 2023. We invoiced aggregating ?268.54 million for the said project in Fiscal 2022. Our order wins for flares and incinerators increased by ? 106.87 million or 31.92% from ? 334.84 million in Fiscal 2021 to ? 441.71 million in Fiscal 2022.
Other operating revenues
Our other operating revenues increased by ? 66.73 million or 723.75% from ? 9.22 million in Fiscal 2021 to ?
75.95 million in Fiscal 2022, primarily since the crane hire charges provisions which were made in Fiscal 2021 for our Subsidiary JNK India Private FZE were reversed in Fiscal 2022 and recognised as other operating revenue.
Other income
Other income increased by ? 0.08 million or 1.09% from ? 7.32 million in Fiscal 2021 to ? 7.40 million in Fiscal 2022, primarily due to increase on interest accrued on fixed deposits.
Total Expenses
Our total expenses increased by ? 1,336.61 million or 115.57% from ? 1,156.49 million in Fiscal 2021 to ? 2,493.10 million in Fiscal 2022. This increase was a primarily on account of increase in (i) purchase of stock-in-trade; (ii) project expenses; (iii) employee benefit expenses; (iv) finance costs; (v) depreciation and amortization expenses; and vi) other expenses.
Purchase of stock-in-trade
Purchase of stock-in-trade increased by ? 1,200.30 million or 396.56% from ? 302.68 million in Fiscal 2021 to ? 1,502.98 million in Fiscal 2022 on account of purchase of stock-in-trade towards execution of large export orders for refinery companies in Mexico and Nigeria. Further, purchase of stock-in-trade also comprises of cost of materials consumed during the manufacture of our products, which include structural steel, tubes, pipes, fittings, burners. There was an increase in purchase of stock-in-trade also due to an increase in cost of goods used by ?
675.77 million or 265.42% from ? 254.60 million in Fiscal 2021 to ? 930.37 million in Fiscal 2022, the increase in cost of goods used was due to surge in steel prices in Fiscal 2022 and increase in cost of material imported. We partially import certain components such as burners, pressure parts and pipes for our manufacturing process from China and from certain parts of Europe. The increase in purchase of stock-in-trade is also due to an increase in the import of the raw materials by ? 301.03 million or 2,535.80% from ? 11.87 million in Fiscal 20221 to ? 312.90 million in Fiscal 2022.
Changes in inventories of finished goods, stock-in-trade and work-in-progress
Changes in inventories of finished goods, stock-in-trade and work-in-progress decreased by ? 524.53 million or 1,090.95% from ? 48.08 million in Fiscal 2021 to ? 572.61 million in Fiscal 2022 on account of higher inventory build-up of raw material in Fiscal 2022 of worth ? 624.37 million due to execution of a large export order for a refinery company at Mexico.
Project expenses
Project expenses increased by ? 425.13 million or 152.18% from ? 279.36 million in Fiscal 2021 to ? 704.49 million in Fiscal 2022 on account of execution of a large project for a refinery company at Mexico, for which our company incurred a freight charge of ? 311.87 million in Fiscal 2022. Further, growth in project expenses is in line with the growth in our revenue from operations, our total income increased by ? 1,586.83 million or 114.61% from ?
1,384.53 million in Fiscal 2021 to ? 2,971.36 million in Fiscal 2022.
Employee benefit expenses
Employee benefit expenses increased by ? 88.22 million or 27.04% from ? 326.26 million in Fiscal 2021 to ? 414.48 million in Fiscal 2022 primarily due to increase in (i) salaries and wages, (ii) contribution to provident fund and other funds; and (iii) staff welfare expenses, which was due to increase in the number of employees from 101 as of March 31, 2021 to 150 as of March 31, 2022.
Finance costs
Finance costs increased by ? 24.18 million or 179.51% from ? 13.47 million in Fiscal 2021 to ? 37.65 million in Fiscal 2022. The increase in finance costs was primarily on account of increase in bank guarantee charges by ?
5.39 million or 869.35%, from ? 0.62 million in Fiscal 2021 to ? 6.01 million in Fiscal 2022. We are required to furnish various bank guarantees, such as security deposits (or contract performance guarantee), performance bank guarantee and advance bank guarantee. We are required to provide security deposit in the form of bank guarantees to our Customers immediately upon receipt of the purchase order, which can generally range up to 10% of project value, and which is valid until completion of the project. The increase in bank guarantee charges is in line with the growth in our revenue from operations, our total income increased by ? 1,586.83 million or 114.61% from ? 1,384.53 million in Fiscal 2021 to ? 2,971.36 million in Fiscal 2022. Further, our total order win increased by ? 4,170.43 million or 197.23% from ? 2,114.52 million in Fiscal 2021 to ? 6,284.95 million in Fiscal 2022.
Depreciation and amortisation expense
Depreciation and amortisation expenses increased by ? 11.27 million or 60.62% from ? 18.59 million in Fiscal 2021 to ? 29.86 million in Fiscal 2022. The increase in depreciation and amortisation expenses was primarily on account of increase in assets due to setting up of a new fabrication facility in February 2022 at Jajpur, Odisha.
Other expenses
Other expenses increased by ? 112.04 million or 42.41%% from ? 264.21 million in Fiscal 2021 to ? 376.25 million in Fiscal 2022. The increase in other expenses was primarily a result of .
116.69 million for Fiscal 2022; and
16.32 million for Fiscal 2022
The above increases were partially offset by:
? an decrease in legal, professional and consultancy charges by ? (18.78) million or (13.40)% from ? 140.17 million for Fiscal 2021 to ? 121.39 million for Fiscal 2022;
? an decrease in other expenses by ? 18.85 million or 41.73% from ? 45.17 million for Fiscal 2021 to ? 26.32 million for Fiscal 2022; and
Profit before tax
As a result of the foregoing, our profit before tax increased by ? 250.22 million or 109.73% from ? 228.04 million in Fiscal 2021 to ? 478.26 million in Fiscal 2022.
Tax expense
Current tax expenses increased by ? 69.00 million or 116.14% from ? 59.41 million in Fiscal 2021 to ? 128.41 million in Fiscal 2022. Deferred tax expenses decreased by ?(13.90) million or (354.59)% from ? 3.92 million in Fiscal 2021 to ? (9.98) million in Fiscal 2022.
Profit for the year
For the various reasons discussed above, and following adjustments for tax expense, we recorded an increase in profit after tax by ? 195.07 million or 118.40% from ? 164.76 million in Fiscal 2021 to ? 359.83 million in Fiscal 2022.
Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA")
Our EBITDA increased by 109.83% or ? 285.67 million from ? 260.10 million in Fiscal 2021 to ? 545.77 million in Fiscal 2022, this was due to increase in our revenue from operations by ? 1,586.75 million or 115.21% from ? 1,377.21 million in Fiscal 2021 to ? 2,963.96 million in Fiscal 2022. However, our EBITDA Margin marginally decreased from 18.89% in Fiscal 2021 to 18.41% in Fiscal 2022. We provide price quotes on estimations of raw material prices at the time of submission of bids. In the event there is an increase in prices of the raw materials, we are not able to pass on the additional cost to our Customers, which led to marginal decrease in our EBITDA Margin.
CASH FLOWS
The following table sets forth certain information relating to our cash flows under Ind AS in Fiscals 2023, 2022 and 2021:
(in ? million)
| Fiscal 2023 |
Fiscal 2022 |
Fiscal 2021 |
|
| Net cash generated from operating activities | 200.05 | 335.12 | 199.64 |
| Net cash (used in) investing activities | (250.19) | (249.30) | (167.38) |
| Net cash generated from/ (used in) the financing activities | (21.07) | 59.27 | (3.03) |
| Net increase/(decrease) in cash and cash equivalents | (71.21) | 145.09 | 29.23 |
| Cash and cash equivalents at the beginning of the year | 225.19 | 80.10 | 50.87 |
| Cash and cash equivalents at the end of the year | 153.93 | 225.19 | 80.10 |
Operating Activities
Fiscal 2023
In Fiscal 2023, net cash flows generated from operating activities was ? 200.05 million. Our profit before tax was
? 627.11 million, which was adjusted for certain non-cash and non-operating items in a net amount of ? 131.52 million resulting in an operating profit before working capital changes of ? 758.58 million.
The following key adjustments were made to operating profit before working capital changes to arrive at cash flow from operating activities:
? an increase in the inventories of ? 196.16 million was due to an increase in cost of goods used by ? 475.21 million or 51.08% from ? 930.37 million in Fiscal 2022 to ? 1,405.58 million in Fiscal 2023, the increase in cost of goods used was due to surge in steel prices in Fiscal 2023;
? an increase in the non-current assets and current assets of ? 319.86 million was primarily on account of increase in advance paid to the vendors by 43.98% or ? 77.59 million from ? 176.42 million in Fiscal 2023 to ? 254.01 million in Fiscal 2023. This increase was due to our Order Book value increasing by ? 3,998.81 million or 278.52% from ? 1,435.76 million as on March 31, 2021 to ? 5,434.57 million as on March 31, 2022. Further, there was an increase in other assets by 316.61% or ? 163.78 million from ? 51.73 million in Fiscal 2022 to ? 215.51 million in Fiscal 2023;
? an increase in the borrowings of ? 272.27 million was primarily due to an increase in working capital limits by 860.82% or ? 270.04 million from ? 31.37 million in Fiscal 2022 to ? 301.41 million in Fiscal 2023. This increase was due to increase in the working capital requirement of our Company by 446.96% or ? 1,091.89 million from ? 244.29 million in Fiscal 2022 to ? 1,336.18 million in Fiscal 2023; and
? a decrease in the other current liabilities of ? 114.85 million was primarily due to a decrease in the advanced received from the Customers by (49.28)% or ?(490.43) million from ? 995.17 million in Fiscal 2022 to ?
504.74 million in Fiscal 2023
We paid a direct tax of ? 150.20 million. The cash generated from our operations decreased from ? 453.63 million in Fiscal 2022 to ? 350.25 million in Fiscal 2023.
Fiscal 2022
In Fiscal 2022, net cash flows generated from operating activities was ? 335.12 million. Our profit before tax was
? 478.26 million, which was adjusted for certain non-cash and non-operating items in a net amount of ? 78.61 million resulting in an operating profit before working capital changes of ? 556.87 million.
The following key adjustments were made to operating profit before working capital changes to arrive at cash flow from operating activities:
? 1,437.96 million from ? 751.00 million in Fiscal 2021 to ? 2,188.96 million in Fiscal 2022. Further, there was an increase in our Order Book value for JNK Heaters by 299.48% or ? 3,145.66 million from ? 1,050.39 million as of March 31, 2021 to ? 4,196.05 million as of March 31, 2022;
995.17 million in Fiscal 2022
We paid a direct tax of ? 118.51 million. The cash generated from our operations increased from ? 249.29 million in Fiscal 2021 to ? 453.63 million in Fiscal 2022.
Fiscal 2021
In Fiscal 2021, net cash flows generated from operating activities was ? 199.64 million. Our profit before tax was
? 228.09 million, which was adjusted for certain non-cash and non-operating items in a net amount of ? 63.73 million resulting in an operating profit before working capital changes of ? 291.82 million.
The following key adjustments were made to operating profit before working capital changes to arrive at cash flow from operating activities:
the Customers for ? 164.92 million and statutory dues for ? 114.57 million.
We paid a direct tax of ? 49.65 million. The cash generated from our operations in Fiscal 2021 was ? 249.29 million.
Investing Activities
Fiscal 2023
Net cash used in investing activities was ? 250.19 million in Fiscal 2023, which primarily consisted of ? 72.04 million on purchase of property, plant and equipment, since our fabrication plant at Jajpur became operational in Fiscal 2023. Further, the investing activities consisted of ? 2.68 million for purchase of intangible assets and ?
293.87 million used for investment in fixed deposits. This amount was partly offset by ? 7.81 million received pursuant to interest on deposits and ? 110.59 million received from sale of investments.
Fiscal 2022
Net cash used in investing activities was ? 249.30 million in Fiscal 2022, which primarily consisted of ? 190.95 million on purchase of property, plant and equipment, ? 5.28 million for purchase of intangible assets and ? 110.59 million for investments in mutual funds. This amount was partly offset by ? 6.12 million received pursuant to interest on deposits and ? 51.40 million received from maturity of fixed deposits.
Fiscal 2021
Net cash used in investing activities was ? 167.38 million in Fiscal 2021, which primarily consisted of ? 40.07 million on purchase of property, plant and equipment, which was primarily for setting up of a new fabrication facility in April 2021 at multi-product special economic zone at Mundra, Gujarat, ? 0.06 million for purchase of intangible assets and ? 132.07 million used for investment in fixed deposits. This amount was partly offset by ?
4.82 million received pursuant to interest on deposits.
Financing Activities
Fiscal 2023
Net cash used in financing activities in Fiscal 2023 was ? (21.07) million. This primarily resulted from addition of long term borrowings of ? 5.47 million, increase in lease liabilities of ? 13.24 million, payment of finance charges of ? 25.38 million and payment of dividend of ? 14.40 million.
Fiscal 2022
Net cash used in financing activities in Fiscal 2023 was ? 59.27 million. This primarily resulted from addition of long term borrowings of ? 24.39 million, increase in lease liabilities of ? 57.35 million, payment of finance charges of ? 16.47 million and payment of dividend of ? 6.00 million.
Fiscal 2021
Net cash used in financing activities in Fiscal 2021 was ? (3.03) million. This primarily resulted from repayment of long term borrowings of ? 1.35 million, payment of finance charges of ? 13.48 million, payment of dividend of ? 6.00 million and increase in lease liabilities of ?17.80 million.
LIQUIDITY AND CAPITAL RESOURCES
We fund our operations primarily with cash flow from operating activities. Our main uses of funds from operating activities have been to pay for our working capital requirements and capital expenditure. We evaluate our funding requirements regularly in light of our cash flow from our operating activities and market conditions. To the extent we do not generate sufficient cash flow from operating activities, we may rely on other debt or equity financing activities, subject to market conditions.
Our Company had cash and cash equivalents of ? 153.93 million as of March 31, 2023, ? 225.19 million as of March 31, 2022 and ? 80.10 million as of March 31, 2021. As of March 31, 2023, we had total non-current
borrowings of ? 32.39 million.
CONTINGENT LIABILITIES AND COMMITMENTS
Contingent liabilities
As of March 31, 2023, our contingent liabilities that had not been provided for were as follows:
(in ? million)
| Particulars |
As of March 31, 2023 |
|
(in ? million) |
|
| Contingent liabilities | |
| Income tax (assessment year 2020 -2021) | 0.28 |
| Income tax (assessment year 2013-2014) | 2.00 |
| Total | 2.28 |
Commitments
The following table presents the details of our commitments (net of advanced) as of March 31, 2023:
| Particulars |
As of March 31, 2023 |
|
(in ? million) |
|
| Provision for tax payable (net of advance tax, TDS and TCS) | 62.17 |
| Total | 62.17 |
For further information on our contingent liabilities and commitments, see "Financial Statements" on page 221.
Capital expenditures
Our historical capital expenditures were, and we expect our future capital expenditures to be, primarily for investments in freehold land, plant and equipment for our fabrication facilities and other intangible assets.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements that have or which we believe reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, operating results, liquidity, capital expenditure or capital resources.
RELATED PARTY TRANSACTIONS
We enter into various transactions with related parties in the ordinary course of business and in accordance with applicable laws, including rent expenses, managerial remuneration and professional fee expenses. For further information relating to our related party transactions, see "Restated Consolidated Financial Information – Note 33 – B – Related Party Transaction" on page 266.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss related to adverse changes in market prices, including interest rates and foreign exchange rates, of financial instruments. In the normal course of business, we are exposed to certain market risks including credit risk, liquidity risk and foreign exchange risk.
Credit risk
Credit risk is the risk of financial loss to our Company if a Customer or counter party to a financial instrument fails to meet its contractual obligations. Our Company is exposed to credit risk from its operating activities (primarily trade receivables), deposits with banks and other financial instruments. Credit risk arises from the
possibility that counter party may not be able to settle their obligations as agreed upon.
Liquidity risk
For our Company, liquidity risk arises from obligations on account of financial liabilities – borrowings, trade payables and other financial liabilities. Our Companys approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring losses or risking damage to our Companys reputation. Our Company manages liquidity risk by maintaining adequate reserves, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of the financial assets and liabilities. It maintains adequate sources of financing including loans, debt and other borrowings.
Foreign exchange rate risk
Changes in currency exchange rates influence our results of operations. Our Company has entered into contracts wherein the revenue is receivable in foreign currency. These are not hedged.
CHANGES IN ACCOUNTING POLICIES
There have been no changes in our accounting policies during Fiscals 2023, 2022 and 2021.
SIGNIFICANT ECONOMIC CHANGES
Other than as described in this section and in "Risk Factors", "Industry Overview" and "Our Business" on pages 28, 111 and 151, respectively, there are no other significant economic changes that materially affect or are likely to affect income from continuing operations.
UNUSUAL OR INFREQUENT EVENTS OR TRANSACTIONS
Except as described in this Draft Red Herring Prospectus, there have been no other events or transactions that, to our knowledge, may be described as "unusual" or "infrequent".
KNOWN TRENDS OR UNCERTAINTIES
Other than as described in this Draft Red Herring Prospectus, particularly in the sections "Risk Factors" and "Managements Discussion and Analysis of Financial Condition and Results of Operations" on pages 28 and 285, respectively, to our knowledge, there are no known trends or uncertainties that have had or are expected to have a material adverse impact on our sales, revenues or income from continuing operations.
FUTURE RELATIONSHIP BETWEEN COST AND REVENUE
Other than as described in "Risk Factors", "Our Business" and "Managements Discussion and Analysis of Financial Condition and Results of Operations" on pages 28, 151 and 285, respectively, to our knowledge there are no known factors that may adversely affect our business prospects, results of operations and financial condition.
TOTAL TURNOVER OF EACH MAJOR INDUSTRY SEGMENT
We operate in only a single reportable segment "fired heaters and related products" and there are no other reportable segments. For further information, see ‘Financial Information on page 221.
NEW PRODUCTS OR BUSINESS SEGMENTS
Other than as disclosed in this chapter and in "Our Business" on page 151, there are no new products or business segments that have or are expected to have a material impact on our business prospects, results of operations or financial condition.
COMPETITIVE CONDITIONS
We operate in a competitive environment. See "Our Business – Competition" on page 176, "Industry Overview"
on page 111 and "Risk Factors" on page 28 for further details on competitive conditions that we face across our various business categories.
SEASONALITY OF BUSINESS
Our products and solutions around it are custom built and involve detailed engineering and therefore have a long lead time (up to 24 months). Typically, in our contracts there are milestone payments linked to certain specific performance (such as dispatch of material) and our revenue is accounted only upon completion of such milestones. Further, the variability in revenues is also a result of the number and timing of order wins during the year and the timing of execution of the existing orders. Hence, although there is no such seasonality in our business, we typically see variability in our revenues across the quarters in a particular fiscal.
SIGNIFICANT DEPENDENCE ON CUSTOMERS AND SUPPLIERS
Our business is not dependent on third party suppliers. However, we derive a significant portion of our revenue from operations from Contracting Customers. For further information on our dependence on Contracting Customers, see "Risk Factors – We derive a significant portion of our revenue from orders which are contracted to us by Contracting Customers, any failure to obtain new contracts may impact our revenue from operations, cash flows and financial conditions materially and adversely" on page 29.
MATERIAL DEVELOPMENTS SUBSEQUENT TO MARCH 31, 2023
Except as stated above and elsewhere in this Draft Red Herring Prospectus, no developments have come to our attention since the date of the Restated Consolidated Financial Information as disclosed in this Draft Red Herring Prospectus which materially and adversely affect or are likely to materially and adversely affect our operations or trading or profitability, or the value of our assets or our ability to pay our liabilities within the next twelve months.
IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000
IIFL Securities Support WhatsApp Number
+91 9892691696
Download The App Now
Follow us on
2024, IIFL Securities Ltd. All Rights Reserved
www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.
Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.
