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Adhunik Metaliks Ltd.

BSE: 532727 | NSE: ADHUNIK | Series: BZ | ISIN: INE400H01019 | SECTOR: Steel - Sponge Iron

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BSE Live

Nov 29, 16:00
0.49 -0.02 (-3.92%)
Volume
AVERAGE VOLUME
5-Day
3,426
10-Day
5,067
30-Day
4,257
11,261
  • Prev. Close

    0.51

  • Open Price

    0.51

  • Bid Price (Qty.)

    0.00 (0)

  • Offer Price (Qty.)

    0.00 (0)

NSE Live

Nov 29, 15:32
0.50 0.00 (0.00%)
Volume
AVERAGE VOLUME
5-Day
26,194
10-Day
19,802
30-Day
13,803
33,015
  • Prev. Close

    0.50

  • Open Price

    0.50

  • Bid Price (Qty.)

    0.00 (0)

  • Offer Price (Qty.)

    0.00 (0)

Annual Report

For Year :
2014 2012 2011 2010 2008 2007

Chairman's Speech

Dear Shareholder''s The year 2011-12 (15 months) was one of the most challenging ever for our Company. Never in our existence have a number of challenges combined concurrently in the space of a single year as they did during the year under review: The alloy steel industry is resource intensive; during the year under review, there was a decline in resource availability following regulatory action that stopped mining in Karnataka and Goa leading to a concurrent increase in costs. The increase in the cost of finished goods was not adequate to cover the increase in raw material costs, impacting our margins. The resources and steel businesses are capital-intensive; during the year under review, India suffered high interest rates, which directly affected our margins on account of our borrowings and indirectly impacted the demand for downstream products (automotive and infrastructure). This dual impact increased our interest outflow on the one hand and reduced our ability to cover this with enhanced revenues. The resources business is regulation- driven; during the year under review, the government made regulatory approvals based on environmental considerations more stringent. This staggered the approvals process by six months during the year under review and operations commenced nearly six months behind our projected schedule. Besides, the government also initiated the verification process of various approvals of all the mines in the region. During this period, mining operations were stalled which hampered despatches from our existing operational mines. This is the cumulative impact: even as revenues grew 10% over 2010-11, there was a 21% decline in our EBIDTA and a 91% decline in our profit after tax. Counter-challenges At Adhunik, we recognised that the most effective way to counter the impact of the industry''s severe downturn was through a superior management of factors within the Company''s control. One, even as we suffered high e- auction costs of raw materials, we commenced our captive iron ore mining in June 2012, raised monthly production to 10,000 tons during the year and engaged in enhancing throughput to 35,000 tons per month in two years which will meet around 50-60% of our iron ore requirement. Two, we strengthened our core focus following the divestment of our power transmission and forging business during the year under review, which helped us mobilise around Rs. 35 crore. (entire sales proceeds were used for debt repayment) that will help us reduce Rs. 5 crore in annual interest outflow. Besides, we swapped high- cost debt with low-cost alternatives. Three, we enhanced yields without compromising product quality, which helped us generate higher throughput for the same costs that we incurred. Culture of urgency Adhunik, a company in the formative years of its sectoral presence, will always be engaged in the process of expansion and integration. Consequently, there is always a premium for the ability to commission projects on or ahead of schedule, which can translate into a control on our capital expenditure or a reduction vis--vis projected cost. In our view, timely project commissioning gets us into income mode with speed; when such projects are commissioned ahead of schedule, we benefit in two ways: quicker revenue inflow on the one hand and lower project cost, strengthening our overall viability. During the year under review, even as the external environment appeared bleak, we had the following positive developments to report: We commenced operations and ramp-up of our captive iron ore mine in June 2012. We commissioned our pellet plant four months ahead of schedule; we achieved 80% asset utilisation within four months of launch. We commenced mining operations at our Sulaipat iron ore mine. We expect to commission the first phase of our 270 MW power plant by October 2012 and second phase by January 2013 supported by a captive coal mine and linkages. Enhancing value At Adhunik, we recognise that winners are companies that ride out of sectoral slowdowns faster than the others. Our multi-level blueprint comprises initiatives in the area of value-addition, integration and throughput maximisation. First, Adhunik will focus on its core businesses of steel, merchant mining and power. This will ensure that all our available cash flows are bought back into strengthening our competitive advantage in chosen areas. Second, in its alloy steel business, Adhunik will focus on niche, value- added and customised products with the objective to escape competitive pricing on the one hand and enter into extended customer relationships on the other. In the mining business, Adhunik will enhance throughput Third, we will focus on rightsizing our Balance Sheet through the following measures: swap high-cost loans with low-cost alternatives, evaluate alternative funding routes (like ECB) to fund our upcoming pellet plant and mobilise an additional Rs.1,000 crore though a public offer of our mining business coupled with an equity dilution of our steel and power business. Four, we are tying up with Orissa Mineral Corporation for the supply of iron ore fines that enable us to enhance value from waste material, Five, we plan to set up a second pellet plant (1.6 mn TPA) utilising low grade iron ore fines for conversion. Six, we are focusing on the manufacture of niche auto grade steel, enjoying approvals from leading OEMs, which will translate into a first- mover''s advantage when the market rebounds. Optimism What bolsters me with optimism is despite the steel sector problems and resources availability still down, our various projects and investments are nearing fruition. When commissioned, they will generate attractive cash flows that progressively reduce our gearing. Once this trend begins, we expect to accelerate our turnaround and enhance value for our shareholders in a secure and sustainable way. Manoj Agarwal Managing Director