Madhav Copper Ltd Management Discussions

Copper, one of the base metals has gained significant importance in the recent years both globally and in the domestic context. Countrys demand of copper metal is met largely through imported concentrates. The last five years witnessed wide fluctuations in the prices of copper metal. Copper being a versatile metal finds uses in many sectors right from households, infrastructure to telecommunication. Hence, from the raw material security point of view it was considered necessary to take up a Market Survey on Copper to analyse its domestic availability / demand, import dependence, the global scenario and the future outlook.

Copper is one of the most commonly used of the base metals, and when in high demand, copper is a reliable indicator of our economic health. But its importance isnt confined to electrical wires and thermal conductors. Copper also plays a vital role in the rise of renewable energies and the production of electric vehicles, helping us transition to a low-carbon economy.

Our team of experts provides global and local data-driven insights, prices, forecasts and market news to help you make sense of the forces influencing the copper market.

A) INDUSTRY STRUCTURE AND DEVELOPMENTS:

Industry Structure:

The copper industry is a vital component of the global economy, with its widespread applications in infrastructure, electronics, and transportation sectors. Despite our best efforts, the company faced significant headwinds during the year, leading to financial losses. In this report, we aim to provide an in-depth analysis of the factors contributing to the losses and our strategy to address these challenges going forward.

Industry Overview:

The copper industry is a fundamental component of the global economy, finding applications in various sectors such as construction, electronics, and transportation. The industry is influenced by macroeconomic factors, commodity price fluctuations, and geopolitical events. During the previous fiscal year, the copper industry experienced a volatile market, marked by a decline in demand from certain sectors and disruptions in the supply chain.

Company Performance:

During the F.Y. 2022-23 Madhav Copper Limited faced several challenges that resulted in financial losses:

1. Cost Pressures: We encountered cost pressures during the year, driven by rising input costs, particularly in energy and labor. These factors negatively impacted our margins and overall profitability.

2. Market Volatility: The copper industry experienced significant price volatility, with copper prices fluctuating widely throughout the year. The unpredictability of market conditions affected our ability to plan and respond effectively.

Strategic Initiatives:

To address the challenges and financial losses faced during the previous year 2022-23 Madhav Copper Limited, undertook the following strategic initiatives:

1. Cost Optimization: We initiated a comprehensive cost optimization program to identify inefficiencies

in our operations and streamline our expenses. This involved renegotiating contracts, improving procurement processes, and implementing efficiency measures in our production facilities.

2. Diversification: Recognizing the need to reduce reliance on traditional markets, we explored opportunities to diversify our customer base and expand into new geographic regions. This included targeting emerging economies with strong growth potential.

3. Innovation and R&D: We increased our focus on research and development to explore new applications for copper and develop innovative products that meet evolving customer demands.

4. Sustainability Efforts: We intensified our commitment to sustainability and responsible mining practices. By embracing eco-friendly processes and enhancing our environmental initiatives, we aimed to strengthen our reputation and attract socially conscious investors and customers.

Outlook and Future Strategy:

While the previous year presented considerable challenges, we remain optimistic about the future and are taking the following steps to position Madhav Copper Limited for growth and resilience:

1. Market Analysis: We will closely monitor market trends and customer demands to identify potential growth opportunities and areas for improvement.

2. Risk Mitigation: Our risk management strategy will be strengthened to anticipate and address potential threats, including market volatility and supply chain disruptions.

3. Innovation: By investing in research and development, we will continue to explore innovative applications for copper and differentiate ourselves in the market.

4. Financial Prudence: Our financial management practices will prioritize maintaining a strong balance sheet and adequate liquidity to weather unforeseen challenges.

With the government pushing for smart cities, there will be a greater demand for solutions to make homes, commercial complexes, industries and cities smarter. Initiatives by the government like “Make in India” and “Digital India”, amongst others, will further boost interest in India as it gives a fillip to the manufacturing sector.

Guided by its purpose of building a greener, stronger, smarter world, our company provides innovative solutions for a sustainable planet

Madhav Copper has taken several cost optimization initiatives across the Country to improve efficiency and reduce the overall cost of production at all its facilities.

In addition, our Company has set up copper Furnace and production through the same is already started. This has resulted into added capacity to our existing manufacturing capacity as well as introduction of new products i.e. Copper Bus Bars, Profile, Copper Stripes, Oxygen Free Copper Rod, Paper Insulated Copper Conductor, Fibber Glass Copper Conductor.

Global Business Scenario :

Copper is a versatile metal and has become a vital component of modern society. Copper has anti-bacterial qualities; hence it is perfect for use in medical applications. Additionally, it can be recycled and reused repetitively, making it a sustainable metal. Copper is crucial for the manufacture of electronic systems used across diverse sectors because of its adaptability and excellent electric and heat conductivity. Approximately three quarters of all copper used worldwide is in smart gadgets, computers, wiring or cables, telecommunications, and electronics.

In the changed post COVID-19 business landscape, the global market for Copper estimated at US$170.6 Billion in the year 2022, is projected to reach a revised size of US$298.4 Billion by 2030, growing at a CAGR of 7.2% over the period 2022-2030.

The global copper market size will grow from $160.7 billion in 2022 to $176.74 billion in 2023 at a compound annual growth rate (CAGR) of 10.0%. The Russia-Ukraine war disrupted the chances of global economic recovery form the COVID-19 pandemic, at least in the short term. The war between these two countries has led to economic sanctions on multiple countries, a surge in commodity prices, and supply chain disruptions, causing inflation across goods and services and affecting many markets across the globe. The copper market size is expected to grow from $254.33 billion in 2027 at a CAGR of 9.5%,

Asia-Pacific was the largest region in the Copper ore mining market in 2022. The Regions covered in this copper ore mining market report are Asia-Pacific, Western Europe, Eastern Europe, North America, South America, Middle East, and Africa.

B) OPPORTUNITIES

Urbanization in developing countries and infrastructure projects in both developed and developing nations create a substantial demand for copper in building construction, transportation networks, and power distribution. As environmental concerns become more significant, the recycling of copper products gains importance. The industry can benefit from promoting sustainable practices and participating in circular economy initiatives.

C) THREATS

Supply Chain Disruptions: The copper industry heavily relies on global supply chains for raw materials, equipment, and distribution. Any disruptions, such as geopolitical tensions, trade wars, or natural disasters, can impact the industrys operations and prices.

Energy and Labor Costs: The copper industry is energy-intensive, and fluctuations in energy prices can impact production costs. Additionally, labor costs and availability can influence mining and production operations.

Technological Shifts: While technological advancements can be an opportunity, they can also be a threat if the industry fails to keep up with innovations. New materials or technologies could replace copper in certain applications, affecting demand.

Economic Downturns: During economic downturns, demand for copper in various industries may decline, leading to reduced revenues and potential financial challenges for copper producers.

The copper industry is influenced by a complex interplay of factors, and it must adapt to changing market conditions, technology developments, and environmental concerns to remain competitive and sustainable in the long term.

D) SEGMENT WISE PERFORMANCE

The Company has only one segment. Performance of the same is given below in point H.

E) OUTLOOK

Copper demand is expected to grow at 7% -8% in India. The growing demand from the power sector in view of Government laying thrust on renewable energy and increasing demand from the households for consumer durables will increase demand for copper in India. Manufacturing of hybrid and electric vehicles (EVs) will also augment the consumption of copper as EVs use four times more copper than traditional internal combustion engines. Copper is essential to EV technology and its supporting infrastructure. The evolving EVs market will have a substantial impact on copper demand. Copper demand is expected to increase further in health sector due to its biocidal properties.

F) RISKS AND CONCERNS

In the winding wire business, the global demand and supply of copper and its prices plays a vital role and could significantly affect your Companys turnover. Your company is fairly exposed to the domestic and global political and economic risks. The prices advanced on rapidly increasing demand for copper from China, India and the other emerging economies of Asia. Your company also continuously keeps working on getting approvals from new and renowned customers to increase its market share commensurate with its capacity.

Intense competition in the market could affect our cost advantages and result in decreased turnover. Failure to complete fixed price, fixed time frame deliveries could result in lower revenues of the company. The business of your company could suffer if we fail to anticipate and develop new products and enhance existing range to keep pace with the rapid changes in the winding wire industry. Currency fluctuations could affect the results of operations.

Your companys manufacturing facilities are based in India. Any changes in the legal, fiscal and other regulatory regimes of our country could affect our performance. In the event that the Government of India brings about any changes in import tariffs in India and reduction or curtailment of income tax benefits available to some of our operations in India can pose risks to your company. It also has a wide customer base and changes in the legal, fiscal or regulatory regimes can also affect the competitiveness of our product and affect your companys performance.

G) INTERNAL CONTROL SYSTEM

The Company has implemented internal control system at floor to shop level and we believe that Internal controls and systems implemented are adequate. These are also reviewed periodically by the Audit Committee and efforts are made to improve further, wherever possible. To ensure effective Financial Controls the Company has laid down following measures: All legal and regulatory compliance are ensured on quarterly basis. Any amendment is regularly updated by internal and external agencies. Approval of all transactions is ensured through pre-approved Delegation of Authority Schedule which is reviewed periodically.

H) DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

During a year production of the company was not-operative. The company has incurred a loss in current financial year as compared to substantial profit of previous financial year. The Companys revenue from operations for FY 2022-23 stood at zero as compared to 12,225.24 Lakhs in the previous year.

The Companys profit before tax was -527.39 Lakhs during the year as compared to . -188.86 Lakhs in the previous year. The Company has incurred a loss i.e. net profit after tax of -441.44 lakhs, as against a net profit after tax of -243.97 Lakhs in the previous year

I) HUMAN RESOURCE DEVELOPMENT

Training:

Training to employees at all levels is provided regularly to develop the knowledge and skills. The management is fully committed to the development of its human resources. Your company aims at providing in-class training to each employee. Every new recruit receives complete safety training and on the job training from his colleagues/supervisor. Functional and developmental training is provided from time-to-time to all employees to enhance their skills and productivity. There is an all-round support from the management to the development of human resources.

Knowledge Management:

Madhav Group has a practice of sharing experiences of one company with other group companies in various fields of production / finance / marketing. Knowledge Management is being developed by involving and sharing of information on key performance parameters at all levels which results in an overall improvement. This has been formalized by having a daily Business Meeting which is held at all locations of the group companies.

Industrial Relations:

Your company continues to maintain healthy and cordial industrial relations. The values and the culture of the group foster family feelings amongst all its employees.

Details of significant changes in key financial ratios:

Ratios	Current Financial Year	Previous Financial Year
	2022-2023	2021-2022
Debtors Turnover Ratio	0	3.36
Inventory Turnover Ratio	-0.04	0.08
Interest Coverage Ratio	-4.34	2.14
Operating Profit Margin % Ratio	-2654.30%	-2.21%
Net Profit Marin % or sector- specific equivalent ratio (as Applicable )	-2137.72%	-1.97%
Details of any change in return on Net worth as with immediately previous financial year.	-32.53%	-17.98%

Conclusion:

Despite facing financial losses during the previous year, Madhav Copper Limited remains committed to overcoming the challenges and positioning ourselves for long-term success. We acknowledge the difficulties in the copper industry but are confident in our ability to navigate the evolving landscape and emerge stronger. We extend our gratitude to our dedicated employees, customers, and shareholders for their unwavering support during these challenging times. Together, we will work towards creating a sustainable and profitable future for Madhav Copper Limited.