The Management Discussion and Analysis Report has been prepared in
accordance with the provisions of Regulation 34(2)(e) of Listing Regulations, read with
Schedule V(B) thereto, with a view to provide an analysis of the business and Financial
Statements of the Company for FY 2022-23 and should be read in conjunction with the
respective Financial Statements and notes thereon.
Styrenix Performance Materials Limited (formerly known as INEOS
Styrolution India Limited) is the number one producer of Absolac (ABS) and Absolan (SAN)
in India. With 45 years of pioneering experience, Styrenix Performance Materials Limited
has been the most preferred supplier to its customers and helps them succeed by offering
innovative and sustainable best-in-class solutions, designed to give them a competitive
edge in their markets.
Industry Structure and Developments
The Company serves various industries, focusing especially on
automotive, home appliances, electrical and electronics, construction, packaging and the
healthcare industry. Changing economic and business conditions, evolving consumer
preferences, rapid technological innovation and adoption and globalisation are creating an
increasingly competitive market environment. In this environment, our customers are
strongly focusing on cost-saving and innovative solutions. The Company is determined to
support the success of its customers in their markets to give them a competitive edge. The
Company strives to always provide its customers with the best product solutions to support
their growth.
Opportunities
With a rapidly growing population and an expanding middle class, which
is driving the demand for various consumer products and packaging materials, there are
significant opportunities for the industry to cater to the increasing demand.
Due to the launch of several infrastructure development initiatives
such as "Make in India" and "Smart Cities Mission", which require a
wide range of polymer-based products for construction, transportation, and other sectors,
it has created a market for polymer manufacturers.
Despite the single use plastic ban, the packaging industry in India is
witnessing robust growth due to increasing urbanization, changing lifestyles, and the rise
of e-commerce. Polystyrene manufacturers can capitalize on this trend by providing
innovative and sustainable packaging solutions.
Indias automotive industry is one of the largest in the world and is
expected to grow further. The styrenics industry can benefit from this growth by supplying
components and materials used in automotive sector. A huge spurt in demand for household
appliances like air conditioners and refrigerators is expected and this would offer an
interesting opportunity for participation by the Company.
Threats
Polymer manufacturing heavily relies on the availability and prices of
raw materials such as crude oil and natural gas. Fluctuations in raw material prices can
significantly impact the costs and margins. Since India imports a significant amount of
polymer resins to meet its increasing domestic demand, it creates pressure on domestic
manufacturers which may result in lower prices and margins.
With the growing global concern about plastic waste and its impact on
the environment, Governments and consumers are increasingly pushing for sustainable
alternatives to traditional plastics and also resulting in stringent environmental
regulations and adapting to eco-friendly manufacturing processes. The Indian government
has implemented various regulations and policies to control plastic waste, including bans
on single-use plastics.
Rapid advancements in technology may disrupt the traditional
manufacturing processes and therefore companies need to invest in research and development
to stay competitive and adapt to emerging technologies such as biodegradable polymers,
recycling technologies, and additive manufacturing techniques.
It is therefore important for the companies to stay proactive, invest
in research and development, explore sustainable alternatives, and maintain a strong
understanding of market dynamics to leverage opportunities and mitigate threats.
Outlook
Post-Covid, the overall demand situation has not seen a strong revival
globally, especially in China and the weak demand scenario is likely to continue for a few
more quarters. Your Company continues to monitor changes in general economic situation and
is prepared to take measures to safeguard its business operations.
Our close association with key OEMs in automotive and household
segments has enabled us to drive pro table growth and we expect it to continue in the
coming year. Our organizational focus on key industry segments ensures a deep
understanding of their needs and will enable new product introductions for the specific
industry. Your Company utilizes its R&D capabilities to develop new products for the
automotive, household and healthcare segments and maintains a strong intellectual property
position.
We expect the automotive business, both for two-wheelers and four
wheelers, to remain strong for the coming year. Consumer spending on household goods like
air conditioners, refrigerators, washing machines, water/air puri ers, packaged goods and
healthcare are expected to increase and our product portfolio is well positioned to cater
to these applications.
With the ongoing war between Russia and Ukraine, which is unlikely to
see an immediate resolution, we would expect the crude, other key raw material prices and
exchange rates to continue to remain volatile. Further, risks are constantly monitored and
corrective measures, mitigating steps are planned out wherever necessary. An active
focused approach helps us in ensuring minimal impact to the Company, if any.
Products
The Company provides styrenic applications for many everyday products
across a broad range of industries, apart from automotive, electronics, household,
construction and healthcare and includes packaging and toys, sports & leisure. With
best-in-class production technology, advanced R&D skills, your Company is perfectly
equipped to ensure the highest level of quality, efficiency, and innovation.
Your Companys product portfolio includes ABSOLAC, ABSOLAN, General
Purpose Poly Styrene and High Impact Poly Styrene, which continue to have a preferred
market status amongst user industries such as automotive, construction, healthcare,
household and electronics. Research and Development towards new product and grade
development and processes is yielding good results and has helped the Company to add
differentiated and value added products in its portfolio. The Company has also been
augmenting its capacities by debottlenecking the process in all its plants and expects to
yield results in near future.
Your Company continues to focus on innovative solutions to create more
value for its customers.
Economic Outlook
Indian economy estimated GDP growth is expected to be in the range of 6
6.5 % as forecasted by RBI, World bank and other rating agencies.
The increase in interest rates by the central bank to counter in ation
has resulted in a fall in demand for various market segments resulting in a slightly
unenthusiastic sentiment. We believe that the interest rates would peak in 2023 and the
normalcy in demand and market sentiments would be restored in 2024.
The growth of industries such as automotive, electronics, and packaging
will contribute to the increase in demand for ABS and Polystyrene. Government initiatives
promoting manufacturing and infrastructure development can boost the demand for these
materials. The governments policy to improve logistics infrastructure, incentives to
facilitate industrial production and measures to improve farmers income will support the
countrys efforts to grow at a faster pace.
Indias ABS and Polystyrene markets continue to be influenced by global
market trends and trade dynamics. Changes in international prices, demand from other
countries, and geopolitical factors can have indirect effects on the Indian market.
The government is expected to continue its focus on infrastructure
development and attract foreign investment under the "Ease of doing business"
program. There is a push towards local manufacturing and being self-reliant as a country.
Risk Management Report
Your Directors wish to state that risk management and control practices
have been deployed across all the functions and functional evaluation of rating
probability and impact is being constantly monitored under the guidance of the Risk
Management Committee, the Chairman and the Managing Director. The critical / high ranking
risks and mitigating steps and measures applied or to be applied, are discussed internally
with functional leaders and then discussed by the Risk Management Committee before being
presented to the Board.
Your Company has integrated its risk monitoring procedures in
accordance with prudent business practices. The objectives of the Companys risk
management framework comprise the following:
To identify, assess, prioritize and manage existing as well as new
risks in a planned and coordinated manner;
To increase the effectiveness of internal and external reporting
structure; and
To develop a risk culture that encourages employees to identify risks
and associated opportunities and respond to them with appropriate actions.
The Chairman and the Managing Director carry out the risk assessment on
an ongoing basis and take measures and effective steps to mitigate / reduce impact and
control the same from time to time. They provide overall directions in controlling /
mitigating risks generally and are in complete know of the organizational risks potential.
The Company has a proper system to ensure compliance of legal / regulatory requirements
that are applicable to the Company.
Internal Control Systems and their adequacy
Your Companys internal control systems are adequate and commensurate
with the size of operations. These controls ensure that transactions are authorized,
recorded and reported on time. They ensure that assets are safeguarded and protected
against loss or unauthorized disposal.
The internal auditors of the Company M/s. Ernst & Young (till
December 2022) and M/s. Sharp & Tannan (from January 2023) carried out audits in
different areas of your Companys operations. Post-audit reviews were carried out to
ensure that audit recommendations were implemented. The audit committee reviews the
adequacy and effectiveness of the internal control systems, significant audit observations
and monitors the sustainability of remedial measures.
Financial performance with respect to operational performance
Financial performance and review of operations form part of the Boards
report which details the Companys financial and operational performance.
Material developments in Human Resources / Industrial Relations front,
including number of people employed
Our employees are our most important assets. As of March 31, 2023, the
Company employed 392 permanent employees, 59 employees on xed term contracts and 556
employees on contractual basis, through contractors. Our culture and reputation as a
global leader in the styrenics industry enables us to recruit and retain some of the best
available talent in India. Our human resource (HR) division acts both as a service
provider and as a governance unit in the various employee-related elds of work. The scope
of activity include attraction, selection and talent development and rewarding of
employees, while also overseeing organizational leadership and culture and ensuring
compliance with employment and various applicable labour laws. Companys HR fosters a
trusting and open culture by promoting mutual respect and fairness throughout the entire
organization.
The management has a strong belief that the industrial relations will
remain cordial and harmonious and continues to be so in the year ahead. The directors
believe that continuous HR interaction has and would lead to a healthy environment and a
strong relationship of mutual trust.
KEY FINANCIAL RATIOS
| Sr. No. Particulars |
March 31, 2023 |
March 31, 2022 |
Explanation for Significant Change (Above
25%) |
| i Debtors Turnover Ratio Inventory Turnover
Ratio |
8.95 |
8.40 |
- |
| ii (Excluding GIT) |
8.99 |
9.70 |
Marginally impacted to support future demand. |
| iii Current Ratio |
2.30 |
2.96 |
Increase in inventory reduced this ratio marginally. |
| iv Long Term Debt Equity Ratio |
0.01 |
0.01 |
- |
| v Interest Coverage Ratio |
50.71 |
61.02 |
|
| vi Return on Net worth % |
23.3% |
37.0% |
Market volatality and market dynamics has adverse impact on
margins and related ratios. |
| vii Operating Profit (EBITDA) % |
12.2% |
22.4% |
|
| viii Net Profit Margin |
7.71% |
14.80% |
|
Accounting Treatment
The financial statements of the Company for the financial year ended
March 31, 2023 were prepared in accordance with IND-AS, which are the prescribed
Accounting Standards.
Safety, Health & Environment (SHE)
The Company is deeply committed to combining economic success with
environmental and social responsibility. Guided by corporate value of
"Responsibility" and Companys SHE policy, Company is continually working to
meet the highest standards of corporate citizenship by protecting the health and safety of
individuals, by safeguarding the environment, and by creating positive impact on the
community it does business with.
|
For and on behalf of the Board |
|
Mr. Rakesh S. Agrawal |
| May 26, 2023 |
Chairman |
| Vadodara |
DIN: 00057955 |
+91-9892691696
