chemiesynth vapi ltd Management discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The key areas of Management Discussion and Analysis are given below:

The company is into manufacturing of chemical dyes and specialty intermediates for leading agro chemical and pharmaceutical companies in India.

Industry Overview

The Indian agrochemicals market is projected to register a CAGR of 8.5% during the forecast period (2022-2027).

COVID-19 has affected the production and supply of the agrochemicals market. The global pandemic has impacted the proper functioning of various industries across the country, and it affected the functioning of the agrochemicals market. Further, geo political crisis caused by Russia-Ukraine faceoff and inflationary conditions in Western world has disrupted the supply chain considerably.

The rising population across the world, accompanied by rising affluence, is seeing a shift in consumption patterns. There is a need to not just increase production to meet demand but also to ensure that the nutritional needs of an increasingly affluent population are met. Shrinking arable land and loss of crops due to pest attacks lead to wastage, posing a critical challenge to ensuring food and nutritional security. The agrochemical market is an important agriculture support industry, which boosts the agriculture output. These factors support the growth of the market.

Pesticides usage was high among the other chemicals. Price premiums and innovative eco-friendly production methods are emerging steadily in the agrochemical market. There is an increasing need to balance the judicious use of the best chemicals and minimize the impact of that use.

Speciality chemicals are high value, low-volume chemicals produced by a complex, interlinked industry ecosystem. These are classified based on end-user industries. Some specialty chemicals are used in multiple industries. Demand for speciality chemicals is owing to its performance enhancing applications instead of composition. Businesses operating in this sector require deep knowledge and the ability to bring about consistent innovations. The speciality chemicals industry is a mature sector with proven benefits accruing to a wide range of end-use customers. It comprises about 17% of the global chemicals market and is expected to grow at an average of 5.3% between 2019 and 2024, picking up pace on the back of emerging usage applications in a variety of industrial sectors.

The last two decades have seen a significant shift in the global specialty chemicals industry with developed countries losing their production supremacy (particularly the US) to emerging market nations in Asia. Key facilitators for this shift include stricter environmental norms in western countries and cost advantages enjoyed by emerging markets in in terms of logistics and labour. Further, companies wanted to shift closer to demand centres and optimizing their supply chains

Key strengths

• Designing capabilities that create and sustain market differentiation

• State-of-the-art and integrated manufacturing capabilities

• Consistent quality focus to deliver safe, convenient and secure consumer packaging

• An engaged and experienced team

Outlook

The chemicals industry supports Indias agricultural and industrial development. It provides raw materials, intermediates and process chemicals for agro chemicals, detergents and soaps, textiles, paper, paints, pharmaceuticals, varnish, etc. Specialty chemicals segment clocked over 9% CAGR from fiscals 2015 to 2020, driven by an increase in domestic consumption from various end-user industries and rising exports.

However, in fiscal 2021, the specialty chemicals segment declined by 5-6% on-year due to a slowdown in economic activity and consequent fall in demand in end-user industries. It is expected that this segment to clock 10-12% CAGR during fiscals 2021 to 2026 driven by rising domestic consumption and exports.

Opportunities and Threats

Consolidation of vendor ecosystems is an emerging theme across global chemicals supply chains, with many products being sourced from countries with robust ecosystems. These trends stem from cutting the need to cut costs, drive volumes and adhere with global environmental regulations. India is well-positioned with a scalable, compliant ecosystem for manufacturing chemicals. This is being accentuated by realignment of geopolitical equations, in turn driving foreign trade and creating favourable diversification in global manufacturing from China to countries like India.

With the US-China political equations impacting trade over the last few years, tariffs on Chinese exports to the United States are rising significantly. Thus, manufacturing imports from China to the US are declining and buyers are actively looking for new supply sources across the world. Implementation of stricter environmental protection guidelines impacted Chinese manufactured exports due to clamp downs and disruptions. Rising labour costs and a strong currency have disrupted established supply chain equations for Chinese exports

Risks & Concerns

Regulatory Risks:

The Company operates in several markets and is exposed to the risk of changing regulations

The Company remained cognisant of the importance of adopting Safety, Health and Environment (SH&E) norms. It also judiciously follows reduce-reuse-recover principles across sites.

Innovation Risk

Risk of redundancy and losing out to competition on account of poor R&D is a major overhang.

The Company has been focused on strengthening its technical skill-set around niche application and has always emphasised product innovation, bagging many awards for innovation in chemical engineering.

Raw Material Risk

The Company runs the risk of ready availability of raw materials and fluctuation in raw material prices.

The Company has fostered long-standing relationships with its suppliers to ensure steady availability of raw materials at competitive prices. The Company follows a RM-plus pricing mechanism for its various speciality chemicals. This reduces margin/ topline pressures in the event of rising input costs.

Internal Control System and Adequacy

The Company has suitable and adequate internal control system and adequacy system for safeguarding the assets. Board of Directors is reviewing the system from time to time for benefits of the company. Reviews are conducted on an on-going basis, based on a comprehensive risk based audit plan, which is approved by the Audit Committee at the beginning of each year. The Audit Committee meets on a quarterly basis to review and discuss the various Internal Audit reports and follow up action plans of past significant audit issues and compliance to the audit plan.

Human Resources

The company is providing sufficient motivation for better performance of human resources. Companys main emphasis is on developing skill and expertise in employees. Steps are taken for reskilling and upskilling Companys talent pool with future-ready and future-engaged competencies. This includes functional capability, behavioural or managerial capability and leadership capability.

Financial Performance

The financial Performance of the Company for the year under review is discussed in detail in the Directors Report.

	For and on behalf of the Board of Director
Place: Vapi
Date: 14/08/2023	Mr. Sandip S. Zaveri	Mr. Satish B. Zaveri
	Managing Director	Director
	DIN:00158876	DIN: 00158861