Usha Martin Annual report - "Unified, Unwavering & Upward"
A turnaround story in play
Usha Martin Limited (the 'Company') is a public limited company incorporated and domiciled in India and is incorporated under the provisions of the Companies Act applicable in India.
The equity shares of the Company are listed on two recognised stock exchanges in India and its GDRs are listed on stock exchange in Luxembourg. The registered office of the Company is located at 2A, Shakespeare Sarani, Kolkata - 700071.
Outlook and business
While speculation of global economic slowdown, liquidity crunch due to interest rate hike to contain inflation by major economies, supply chain disruptions due to geo-political tensions is expected to continue, spending by Government of India in infrastructural and social welfare projects such as roads, railways, water and sanitation along with expected revival in auto sector will give an impetus to the demand of specialty products of the Company.
Company's commitment to quality is reflected in their in-house software and process optimisation, which ensures their products meet global standards.
With a strong global presence in >70 countries and international sales contributing to over half of company turnover, they have established themselves as a leading manufacturer of steel wire ropes worldwide.
"The decision to sell off the steel business has not only deleveraged our balance sheet but has enabled us to transform from a commoditized business to a value added high ROCE business focused on specialty wire ropes" - Rajeev Jhawar
Presence - A globally-local organization
Local Network
Glocal network - International Business
Usha Martin International Limited [UMIL]: UMIL is a wholly owned subsidiary of the Company located in United Kingdom which enjoys presence in Europe through its following wholly owned step-down subsidiaries with a production facility situated at Nottinghamshire, United Kingdom: a) Usha Martin UK Limited b) De Ruiter Staalkabel B.V. Netherlands c) Usha Martin Italia d) Usha Martin Europe B.V The consolidated performance of UMIL during the year under review is provided herein under:
Brunton Wire Ropes FZCo [BWR]: BWR, located in United Arab Emirates is a wholly owned subsidiary of the Company wherein the Company holds 75% of the paid-up capital of BWR and balance 25% of paid-up capital is held Usha Martin Americas Inc (a wholly owned subsidiary of the Company). The production facility is located at Jebel Ali Free Zone in Dubai. The performance of BWR during the year under review is provided herein under:
Usha Martin Singapore Pte Limited [UMSPL]: UMSPL located at Singapore is a wholly owned subsidiary of the Company which is in business of warehousing and distribution of wire ropes in Asia Pacific region by itself and through its following step-down wholly owned subsidiaries – a) Usha Martin Australia Pty Limited b) Usha Martin Vietnam Company Ltd c) PT Usha Martin Indonesia d) Usha Martin China Company Limited The performance of UMSPL during the year under review is provided hereinunder:-
Usha Siam Steel Industries Public Company Limited [USSIL]: USSIL is a subsidiary of the Company situated in Thailand in which the Company along with Usha Martin Singapore Pte Ltd. holds 97.98% of the equity of USSIL. The production facility is situated at Bangkok, Thailand. The performance of USSIL during the year under review is provided herein under:
Usha Martin Americas Inc [UMAI]: UMAI is a wholly owned subsidiary of the Company situated at Houston, United States of America. The performance of UMAI during the year under review is provided herein under:
Domestic business
U M Cables Limited [UMCL]: UMCL is a wholly owned Indian subsidiary of the Company, engaged in business of telecommunication cables. Its manufacturing facility is located at Silvassa, India. The performance of UMCL during the year under review is provided herein under:
Management Discussion and Analysis
Turnaround - The divestment of the steel business
reshaped our balance sheet — from
a net debt to equity of 4.3x in FY19 to
0.4x in FY20. Moreover, it enabled us
to transform from a commoditized
business to a value-added high ROE
business of specialty wire ropes.
Consolidation - Strengthened international teams
and organizational structure, improving synergies through closer integration
of the overseas subsidiaries with
the India business. Set up cross functional groups for key growth
segments e.g., ports, mining,
elevator, oil and offshore, to increase
focus on high-value products and
improve our margins. Focused on services business internationally
to add further value to our products
and increase market share.
Sustainable growth - During FY22, embarked on a
capacity expansion plan with a capital
expenditure of Rs. 310 crores that is
expected to come on stream within
FY24. Created a Global Growth
Centre in Europe to increase geographical spread and grow its share in strategic markets in which they have limited presence. Heavily
investing in digitalization and
automation of its operations to
increase efficiencies across the board.
Industry overview and business overview
- During the year under review the steel industry was negatively affected due to disruption of supply-chain, increase of key input materials, global liquidity crunch due to increase in rates of interest by central banks of major economies including that of India.
- Development in sectors like oil & gas, port and mining have resulted in demand for the Company’s specialised products such as large diameter ropes, port crane ropes and mining ropes.
Financials
Strategic priorities company will look going forward:
- Strategic capital expenditure - one of company's main focus areas would be to produce high value products.
To support this, company has planned a capex
of Rs. 310 crores during FY22 and
Rs. 167 crores proposed during FY24. The objectives include expanding capacities, modernizing its existing
production facilities to improve
productivity and reduce the cost
to serve, enhancing R&D and
testing facilities, improving its plant
infrastructure, and digitalizing operations. The increased capacities
would primarily focus on value-added
products such as mining ropes, nonrotating ropes, compacted ropes and
plasticated ropes, etc.
Company plan to fund most of the capex
through internal accruals, with about
20-25% through debt, and their focus
is on achieving asset turns of 2-3x
over the next two years at optimal utilization levels.
- Expanding market segments and geographies - Successfully expanded their business by diversifying into various geographies and sectors. This has helped them reduce their dependence on a single product or market and enabled them to sustain growth and profitability. International business have recorded a substantial growth in revenue, and made up 55% of FY 2022-23 revenue.
Growth is supported by both
macro-economic and internal factors.
Macro-economic factors, such as
growth in the oil & gas and renewable
energy sectors, specifically offshore
wind, will continue to strengthen company's performance. They have also been able
to take advantage of supply chain
disruptions and higher cost structures
faced by global competitors.
- Leading through innovation - Upgraded its manufacturing facilities with technology to improve operational efficiency, reduce production costs, and enhance product quality.
Company feels moving forward, the degree of digital transformation will differentiate them from their competitors. Digital
marketing will be a key tool for future
growth, enabling them to aggressively
increase customer engagement,
develop interest and awareness among
B2B decision-makers, generate online
leads, build an online reputation, and
ultimately increase brand value. To
achieve these goals, they're establishing
highly interactive digital marketing
channels and employing innovative
tools and techniques.
Company is making its digital infrastructure more robust with the implementation of SAP HANA with future roadmaps in IT infra as shown below:
Business outlook guidance
Volume growth
During FY 2022-23, the Company achieved gross production of Wire Ropes and Conveyor Cord of 67,557 MT against 62,145 MT in FY 2021 - 22.
The gross production of Strand, Wire & LRPC was 91,853 MT in FY 2022- 23 against 93,450 MT in FY 2021-22. Production of the total value added products was higher by about 2.5% in FY 2022-23 compared to that in the previous financial year.
Health & Safety
MANUFACTURING FACILITY AT RANCHI IS CERTIFIED WITH ISO 45001:2018 A GLOBALLY RECOGNISED STANDARD FOR OCCUPATIONAL HEALTH AND SAFETY MANAGEMENT SYSTEM
Governance
Usha Martin has appointed four
independent directors to ensure that the
company operates with transparency,
accountability, and impartiality
while prioritizing the welfare of
all stakeholders.
57%
INDEPENDENT DIRECTORS ON BOARD
Policies - Anti-bribery and anticorruption policy, Vigil mechanism and
whistleblower policy, Related party
transactions policy, Supply chain
management policy are in place
Quality
- Certification of conformation with respect to Quality Management System under ISO 9001:2015 and Environmental Management System under ISO 14001:2015 continues to be maintained.
- Certificate of Product Design Assessment (“PDA”) issued by ABS, Ship/Offshore Engineering Department, Singapore is in place.
- Further the Company continues to have Approval of Manufacturing (“AOM”) from DNV-GL, ABS & Lloyd.
- The organization has a Certificate of Authority to use the official API Monogram issued by American Petroleum Institute, USA.
- The Company continues to have a number of product certifications such as BIS from Bureau of Indian Standards, Inmetro of Brazil, SONCAP of Nigeria, China Classification Society of China, NKK of Japan, Certificate of Recognition for BV Mode II scheme by Bureau Veritas, SIRIM QAS of Malaysia, SNI of Indonesia.
- The Mooring Line Base Design Certification conforming with Mooring Equipment Guidelines is in place.
- LRPC product continues to be certified by Australasian Certification Authority for Reinforcing and Structural Steels Ltd and the Company is an approved manufacturer and supplier of wire ropes to mines recognized by Directorate General of Mines Safety, Dhanbad, India.
- The Company is also an approved manufacturer of elevator ropes recognized by TUVSUD.
- The Company has also received recognition as approved manufacturer of galvanized core wire from PGCIL, India.
- Further the Company continues to have Certificate of Accreditation in the field of testing as per ISO 17025: 2017 by National Accreditation Board for Testing & Calibration Laboratories (NABL).
The Company is in constant pursuit of achieving Business
Excellence. Concepts of Value Engineering, Kaizen
Management, Fuguai Management, 5S activities, Total
Productive Management (TPM), Lean Manufacturing are
embraced and integrated at our production facilities along
with cost reduction initiatives, process improvements and
digitization.
Litigations:
Significant and Material Orders Passed by Regulators or
Courts or Tribunals Impacting the Going Concern Status
and Company’s Operations in Future:
- The Central Bureau of Investigation (“CBI”) registered a regular case on 20th September 2016 (“FIR No. 1”) under the Indian Penal Code, 1860 (“IPC”) and the Prevention of Corruption Act, 1988 (“PC Act”) against certain individuals and the Company, wherein, inter-alia, various illegalities have been alleged qua the allocation of mine to the Company and abuse of official position by government servants. On October 2020, CBI registered another first information report (“FIR No. 2”) under the PC Act read with the IPC against the Company, few officials of the Company and others, alleging influencing of the investigation in FIR No. 1 for which proceedings are pending adjudication at CBI Court, New Delhi.
- The Directorate of Enforcement (“ED”), Patna passed a provisional order dated 9th August 2019 (“Provisional Order”) for provisional attachment of certain immovable properties of the Company valued at approximately Rs.190 Crore pertaining to the wire rope business of the Company, situated at Ranchi in the State of Jharkhand. This order was passed in connection with sale of iron-ore fines in earlier years from the erstwhile iron-ore mines of the Company situated at West Singhbhum in the State of Jharkhand. On 10th January 2020, the Adjudicating Authority under the Prevention of Money Laundering Act, 2002 (“PMLA”) issued an order confirming the Provisional Order, subsequent to which the Company filed applications for stay and appeal against the order of Adjudicating Authority, PMLA, with the Appellant Tribunal, PMLA, New Delhi. The Appellant Tribunal vide an order dated 31st January 2020 directed that status quo be maintained and presently the matter is pending adjudication before the Appellant Tribunal. ED filed a complaint followed by a supplementary complaint before the District and Sessions Judge cum Special Judge, Ranchi (“Ranchi Trial Court”) which is pending adjudication at Ranchi Trial Court. Further, in connection with FIR 2, ED filed a complaint before the Special Court, New Delhi (“Special Court”) under PMLA which is presently pending adjudication at Special Court.
Auditor
At the 35th Annual General
Meeting held on 11th August 2021, Messrs. S.R. Batliboi & Co.
LLP, Chartered Accountants (Firm Registration No. 301003E/
E300005) had been re-appointed as Statutory Auditors of the
Company to hold office from the conclusion of the 35th Annual
General Meeting till the conclusion of the 40th Annual General
Meeting of the Company.
The Board has
re-appointed M/s. Mani & Co., Cost Accountants as the Cost
Auditors of the Company for the Financial Year ending 31st
March 2024
Key financial Ratio:-
Management remuneration
Share holdings
Provision and contingencies
The Company has accrued liabilities of Rs. 1,580 lakhs
as shown in Note 15 and disclosed in Note 30C(iii)
contingent liabilities of Rs. 35,037 lakhs as at March 31,
2023.
Opportunities: −
- Growth in oil & gas and renewable energy sectors specifically offshore wind projects.
- Opportunities in Latin America mining sector is expected to augment exports. \
- Strong activity level in shipping and container terminals
- Supply chain disruptions and higher cost structures faced by global competitors
- Revival in automotive sector and government policies for development of infrastructure projects and thrust on “Make in India” will boost demand for the Company’s specialty products.
Threats, Risks & Concerns: −
- Slowdown of major economies might impact growth plans of the Company.
- Tightening of interest rate regimes by central banks of major economies may continue to be a deterrent factor.
- Inability to pass-off the effect of adverse movement of prices of key input materials and rising freight costs.
- Geo-political tension in Eastern Europe might adversely affect supply-chain and receivables.
- Re-emergence of Covid may dampen business and operations.
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