kiri industries ltd Management discussions

MANAGEMENT DISCUSSION & ANALYSIS REPORT

AN ECONOMIC OVERVIEW:

Global Economy: The global economy remains in a precarious state amid the prolonged effects of the pandemic, the Russian Federations invasion of Ukraine, and the sharp tightening of monetary policy to contain high inflation. More than three years after the corona virus provoked the deepest global recession since World War II, the world economy continues to remain unstable, hence it will be necessary to make substantial progress on global ambitions to eliminate extreme poverty, counter climate change, and replenish human capital. Emerging Market and Developing Economies (EMDEs) today are struggling just to manage the wherewithal to create jobs and deliver essential services to their most vulnerable citizens.

After growing 3.1% last year, the global economy is set to slow substantially in 2023, to 2.1%, amid continued monetary policy tightening to prevent high inflation, before a tepid recovery in 2024, to 2.4%. Tight global financial conditions and depressed external demand are expected to weigh on growth across EMDEs.

Inflation has been persistent but is projected to decline gradually as demand weakens and commodity prices moderate, provided longer- term inflation expectations remain anchored. Median headline global inflation stood at 7.2 % year-on-year in April, down from a peak of 9.4 % in July 2022. With supply chain pressures easing and energy prices declining, excess demand appears to be a key driver of continuing high inflation in advanced economies.

Further, Global financial conditions are also tightened as a result of policy rate hikes and recent periods of financial instability. Many banks experienced substantial unrealised losses due to the sharp rise in policy interest rates. To boost market confidence and limit contagion to the broader financial system, authorities have responded with emergency liquidity facilities. The U.S. authorities also introduced an expanded deposit guarantee for the banks that failed in March. Central banks have nonetheless reaffirmed intentions to maintain, or increase, the tightness of monetary policy until inflation shows a clear trend toward targets.

Unexpected persistence in core inflation or further commodity price shocks could result in greater-than- expected monetary tightening and hence increase the risk of a repeat financial stress. In the longer term, the slowdown in the fundamental drivers of growth may be further worsened by trade destruction and aggravated climate change.

The global economy is increasingly vulnerable to shocks arising from climate change. Extreme weather events that inflict significant economic damage including droughts, floods, wildfires, and windstorms are becoming more frequent. In the near term, increased prevalence and severity of climate-related disasters would inflict substantial human costs, through failed harvests, damaged infrastructure, generalised disruptions to activity, and worsened government fiscal positions. Changes in climate may further increase food insecurity in regions with large numbers of subsistence farmers, who lack the resources to easily adjust production.

Further, another major factor in the negative trend of long-term growth is the rising number of restrictions on international trade which suggests that long-term growth could also be weakened by growing geopolitical and economic fragmentation. Further increases in geopolitical tensions could result in finance, trade, labor, and commodity markets being increasingly segmented into regional blocks. Reducing technological diffusion and the efficiency of capital and resource allocation, would result in lower productivity, raise prices, and make export-led development more challenging to achieve. It could also make the financial sector more volatile by reducing the scope for risk diversification.

Hence, the global economy is in rough shape and the extraordinary series of severe economic shocks and serious policy misjudgments are both the reason for the same.

(Source: A World Bank Group Flagship Report)

Indian Economy: In a world ravaged by multifaceted uncertainties,

India emerged as a beacon of hope registering a strong GDP growth of 7.2%. While India has not been completely immune to global volatility, strong private consumption and increased capital creation sustained the economic momentum.

While the Central Banks brought down spiralling inflation through gradual monetary tightening, it cast a shadow on industrial activity which dropped considerably. The drop was well cushioned as the agriculture and service sectors reported strong growth in FY23.

Indias overall exports (including merchandise and services) defied the global turmoil by registering a handsome growth of 13.84% to a record of US$ 770.18 billion in 2022-23. Imports on the other hand also scaled by 17.38% to US$ 892.18 billion.

The Government revenue continued to scale new heights underpinned by strong GST revenue. Gross tax collections grew 10.4% in 2022-23, but this was lower than the nominal GDP growth of 16.1%, resulting in the gross tax-to-GDP ratio falling marginally to 11.3% from 11.5% in the previous year. This was mainly on account of lower excise duty collections following the cuts on fuel prices last year.

The Budget 2023 is characterised as growth-oriented, progressive, and prudent, with a specific focus on stability and sustainable development. The Budget introduces various policy measures aimed at generating demand for a variety of chemicals, including construction chemicals, emission control catalysts, thermoplastic polyurethane materials TPUs, bio-pesticides, and more.

Additionally, changes in the Basic Customs Duty (BCD) rates for goods such as crude glycerin, denatured ethyl alcohol, acid-grade fluorspar, and specified chemicals for the manufacture of pre-calcined Ferrite Powder are expected to provide impetus to increase domestic manufacturing of these products, aligning with the "Make in India initiative."

As Indias domestic demand remained steady amidst a global slowdown, import growth in FY23 was estimated at 16.5% to US$ 714 billion as against US$ 613 billion in FY22. Indias merchandise exports were up 6% to US$ 447 billion in FY23. Indias total exports (merchandise and services) in FY23 grew 14% to a record of US$ 775 billion in FY23 and is expected to touch US$ 900 billion in FY24. Till Q3 FY23, Indias current account deficit, a crucial indicator of the countrys balance of payments position, decreased to US$ 18.2 billion, or 2.2% of GDP.

(Source: Ministry Of Trade & Commerce)

The Reserve Bank of India started tightening its policy stance during the spring of 2022 to limit the damage caused by foreign capital outflows, a weakening currency, and inflation risks. Higher financing costs slightly dented buoyant economic activity, while over-leveraging in the corporate sector may become a factor of financial instability.

Low labour productivity is affecting the competitiveness of "Made in India" goods and their participation in global value chains. Employment and wage estimates suggest improving labour market conditions in rural areas, while export-oriented service firms report increasing difficulties in filling vacancies. Creating good jobs is the most promising pathway to reduce poverty, which is particularly high in the female population. Increasing investment in education and vocational training, and updating labour laws, would help to achieve this objective.

There are green shoots of economic revival, marked by an increase in rural growth during the last quarter, and an appreciable decline in consumer price index inflation to less than 5% in April 2023. India is expected to grow around 6-6.5% (as per various sources) in FY24, catalysed in no small measure by the governments 35% capital expenditure growth.

The growth could also be driven by broad-based credit expansion, better capacity utilisation, and improving trade deficit.

(Source: IMF Data)

Hence, broad-based credit growth, improving capacity utilisation, governments thrust on capital spending and infrastructure should bolster investment activity. Accordingly, manufacturing, services, and infrastructure sector firms are optimistic about their business outlook. The downside risks are protracted geopolitical tensions, tightening global financial conditions, and slowing external demand.

Global Chemical Industry:

The global chemicals market grew from US$4,700.13 billion in 2022 to US$5,079.29 billion in 2023 at a Compound Annual Growth Rate (CAGR) of 8.1%. The Russia-Ukraine war disrupted the chances of global economic recovery from 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 chemicals market is expected to grow to US$6,851.59 billion in 2027 at a CAGR of 7.8%.

(Source: Chemicals Global Market Report 2023)

The industry is focusing on meeting the growing global demand and enhancing sustainability through carbon reduction projects and advanced recycling and recovery.

The biggest risk to the outlook is persistent inflation and continued increase in interest rates that could prolong and deepen the downturn, but other risks may include escalation of wars, financial instability, and supply chain disruptions. Chinas chemical industry is expected to recover after the lifting of COVID-19 restrictions. Sectors such as pharmaceuticals and agricultural chemicals are expected to lead the growth.

(Source: Chemical Processing, American Chemistry Council, C&En)

Regional dynamics will impose structural challenges

Across the globe, we are witnessing pressure on chemical value chains - with Europe facing supply-driven inflation, and North America dealing with a demand-driven downturn due to consumer sentiment and a decrease in willingness to pay.

To ensure future competitiveness, chemical players are taking a closer look at their geographic footprints. Over the last few years, the industry has seen a shift in the preferred site of production - Asia, and especially China, is increasingly becoming the go-to region due to cheaper labor and energy costs combined with high demand growth from customer industries in the region.

Moving into 2023 and beyond, energy-intensive industries, such as the chemical sector, will concentrate their investments in regions with reliable and competitive energy supply more than ever before. While this might not work in Europes favour in the short term, the increasing supply of renewable energy and advancements in green technologies could strengthen European players competitiveness in the long term as low renewable energy costs spark activity and ESG regulations regarding emissions or human rights move up the agenda. Likewise, North America could be a strong contender for business investment in the future.

Indian Chemical Industry: The Indian chemical industry remained robust despite significant challenges, emerging as a notable economic sector on the global stage. It contributed immensely to the success of several government initiatives such as "Make in India" and the "Atmanirbhar Bharat Abhiyaan"

Indias chemical industry covers more than 80,000 commercial products such as bulk chemicals, specialty chemicals, agrochemicals, petrochemicals, polymers, and fertilisers. Globally, India is the fourth largest producer of agrochemicals after the United States, Japan and China. India accounts for 16-18% of the worlds production of dyestuffs and dye intermediates.

Indian colorants industry has emerged as a key player with a global market share of 15%. The countrys chemicals industry is de-licensed, except for a few hazardous chemicals. India holds a strong position in exports and imports of chemicals at a global level and ranks 14th in exports and 8th in imports at the global level (excluding pharmaceuticals).

Moreover, according to the CRISIL report, the specialty chemicals market in India would grow faster than China, increasing its market share to 6% by 2026 from 3-4% in fiscal 2021. A shift in the global supply chain brought on by the China+1 strategy and a resurgence in domestic end-user demand will fuel significant revenue growth of 18-20% in 2022 and14-15% in 2023.

(Source: Report By IBEF- India Brand Equity Foundation)

Union Budget 2023-24

A 2024 vision for the chemicals and petrochemicals sector has been set up by the government to explore opportunities to improve domestic production, reduce imports, and attract investments in the sector.

The government plans to implement a production-link incentive system with 10-20% output incentives for the agrochemical sector so as to create an end-to-end manufacturing ecosystem through the growth of clusters.

Under the Union Budget 2023-24, the government allocated Rs.173.45 Crore (US$ 20.93 million) to the Department of Chemicals and Petrochemicals.

The Union Budget 2023-24 proposed to exempt Basic Customs Duty (BCD) on denatured ethyl alcohol to support the Ethanol Blending Programme and facilitate the governments endeavour for transition to greener energy. The Budget also exempts customs duty on several chemicals, which will prompt Indian chemical companies to enhance their production capacities. This exemption in the duty of raw materials will promote exports of specialty chemicals in the global market.

The Budgets emphasis on green growth supports the long-term commitment to accomplishing the transition to eco-friendly and affordable energy alternatives. The enhanced budgetary allocation of Rs.160 billion under the reform- oriented, result-oriented capital expenditure (Capex) programme is projected to allow the state to improve its infrastructure as well as operational efficiencies.

THE DYES INDUSTRY OVERVIEW

Global Dyes Industry: The Global Dyes and Pigments Market is estimated to register a CAGR of over 5% during the forecast period. Due to the COVID-19 outbreak, nationwide lockdowns around the globe, disruption in manufacturing activities and supply chains, production halts, and labour unavailability have negatively impacted the dyes and pigment market. However, the conditions started recovering in 2021, which is expected to restore the markets growth trajectory.

Growing demand from Asia-Pacifics paints and coatings industry and increasing demand from the textile

Indian Dyes Industry: Dyestuff sector is one of the core chemical industries in India. It is also the second-highest export segment in the chemical industry. The Indian dyestuff industry is made up of about 1,000 small- scale units and 50 large organised units which produce around 1,30,000 tonnes of dyestuff. Maharashtra and Gujarat account for 90% of dyestuff industry are the major driving factors augmenting the growth of the Dyes market. It is expected to witness the highest CAGR in the next three to five years for the Asia-Pacifics dyes and pigments market. The dominance of the Asia-Pacific is attributed to the high demand for dyes and pigments in China, India, and other Asian countries. The growing demand for reliable commercial products, like 3D printing material, will likely create lucrative growth opportunities for the market soon.

(Source: mordorintelligence.com - Industry Report On Dyes & Pigment Market)

Increasing demand from various application industries, such as textiles, paints, coatings, construction, and plastics, is expected to drive market growth. Major producers are actively venturing into enhancing their products by utilising advanced production in India due to the availability of raw materials and the dominance of the textile industry in these regions. The major users of dyes in India are textiles, paper, plastics, printing ink, and foodstuffs.

The dye markets are mostly dominated by reactive and disperse dyes. The demand for reactive and disperse dyes is expected to grow in the future as these two dyes are dominant in all regions, especially in those where disperse vat and other dyes are stagnant.

The dyestuff industry has recently been moving towards consolidation poising organised players as potential leaders in the global market. Small units (around 1,000) that exist today are still competing in the segments technologies for the efficient removal of hazardous pollutants during the manufacturing process. Manufacturers are likely to experience varied production costs due to volatility in the prices of raw materials, such as benzene.

Globally the dyestuffs industry has seen impressive growth. Initially, the industrys production bases were mostly in the West, but in the last few years, they have been shifting to the East. Dyestuff can be used for Printing inks, plastics, textiles, paper, and foodstuff. The world consumption for dyestuff accounts for printing inks at 40%, paints at 30%, plastics at 20%, and others from segments like textiles. where price realisation is lower and the competition is severe. Large and organised players (around 50) are gearing up for global competitiveness by leveraging technology, product innovation, and brand building.

These units are mainly present in Gujarat and Maharashtra, with the former accounting for almost 80% of capacity.

India accounts for 12% of the global colorant industry, out of which nearly 2/3rd is exported. India has largely been an exporting country and has emerged as a global supplier of reactive, acid, vat, and direct dyes accounting for 10% of world trade. Also, these dyestuffs are exported to Europe, South East Asia, and Taiwan to cater to the textile industries in these countries.

Today, India exports dyes and dye intermediates to countries on which it was once dependent for imports. All types of dyes, reactive, acid, inkjet, disperse, and leather dyes are produced in India and are exported globally. The major export countries include the USA, Turkey, Bangladesh, China & Germany.

The dyes industry in India is expected to witness steady growth in the coming years due to environmental crackdowns in China, resulting in a shutdown of several domestic dye companies. India is better place due to the availability of the ecosystem, feedstock, technology, and compliance required for the industry.

Thus, there is a strong possibility that the consumer base of China will shift to India due to these reasons in the coming years.

(Source: Expert Market Research.com - Report On Indian Dyes And Pigment Market)

INDIAN SPECIALTY CHEMICAL INDUSTRY OVERVIEW

Commodity Chemicals make up 80% of the global chemical industry, with the balance 20% being constituted by Specialty Chemicals. Specialty chemicals are different from commodity chemicals in terms of the extensive product R&D, and innovation involved. Though these type of chemicals are used in low quantities, they have a higher value which often get translated into better margins, profitability, and lesser capex intensity. Almost 80% of the specialty chemicals exports are expected to come from four segments - agrochemicals, dyes and pigments, cosmetics and personal care, and food ingredient chemicals.

Indias specialty chemicals industry, which is currently seeing an expansion drive by major players, expects to see robust growth in the next few years. Indias specialty chemicals industry is projected to grow at a CAGR of more than 12% from the year 2020 to 2025.The specialty chemicals market represents 22% of Indias overall chemicals and petrochemicals market and is valued at US$32 billion.

In terms of trade, specialty chemicals account for a significant portion of more than 50% of all chemical exports. By 2040, its net exports are expected to rise by around ten times, from about US$2 billion in 2021 to US$ 21 billion.

Indian specialty chemicals industry is characterised by a large unorganised market, which in some sub-segments such as base ingredients, is estimated to be larger than the organised market. Gujarat and Maharashtra have emerged as the most preferred manufacturing destinations for leading chemical manufacturers, with 15 out of the top 25 specialty chemical companies in India having their manufacturing units in these states.

Some of the factors that have contributed to the emergence of the chemical sector in these states include (a) excellent international connectivity by way of ports, which facilitates better movement of raw materials and finished goods, (b) abundant availability of skilled manpower (c) business-friendly policies and (d) presence of adequate infrastructure facilities.

Agrochemicals is the largest subsegment of the Indian specialty chemicals market.

At US$ 9.2 billion, it is the fourth largest agrochemical production market globally. Agrochemicals in India are currently a US$ 5.5billion market. By 2040, it could account for almost 40% of Indias overall chemicals exports and nearly 13% of the global agrochemical market. Dyes and Pigments is the second largest sub-segment of the Indian specialty chemicals industry. Given the large volume of demand from end-user markets such as textiles, this segment is expected to continue to grow at 10% CAGR over the next 5 years.

(Source: Report By FICCI And Avendus Capital Private Limited)

The Indian specialty chemicals sector will see revenue growth of 6-7% in fiscal 2024, with higher domestic demand (60% of total revenue) driving up volume growth amid macroeconomic headwinds in the US and Europe subduing exports.

(Source: CRICIL Report)

KJ

Global Textile Industry: The Global textile market grew from US$573.22 billion in 2022 to US$610.91 billion in 2023 at a CAGR of 6.6%. The Russia- Ukraine war disrupted the chance of global economic recovery from 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 textile market is expected to grow to US$755.38 billion in 2027 at a CAGR of 5.5%.

(Source: Textile Global Market Report 2023 By The Business Research Company)

Asia-Pacific was the largest region in the textile market in 2022. Western Europe was the second-largest region in the textile market. The top 5 textiles and apparel exporting nations are China, India, Italy, Germany, and Turkey. China, the largest exporter, has a share of 39% while India is a distant second with a 5% share. In the global textile and clothing business, the United States is the major importer, followed by Germany, Japan, the United Kingdom, and China. Per capita apparel consumption in developing countries like India and China is expected to increase by more than 2 times in the next 10 years (CAGR of 9-11%) and will make developing countries the drivers of incremental growth.

According to the report by the International Textile Manufacturers Federation (ITMF), the global textile industry is facing a perfect storm scenario as production costs continue to climb and demand declines. "Weakening demand" has indeed been rated the major concern in the global textile value chain since July 2022. Inflation remains the second major concern worldwide.

The expected improvements for the second half of 2023 are supported by a relatively low level of order cancellations and stabilising inventory levels.

In Feb 2021, the Indian Government announced the setting up of seven mega textile parks in the next three years. The government has also decided to rationalise the duties on raw material inputs to man-made textiles by reducing the customs duty rate on caprolactam, nylon chips, nylon fiber, and yarn to 5%.

Natural fibers accounted for the maximum revenue share of more than 44.5% in 2021. This trend was attributed to the wide usage of natural fibers in diverse applications of the fashion and apparel industry.

This segment will grow further at a steady CAGR from 2022 to 2030 due to increasing environmental awareness and consumer preference for sustainable products.

The nylon segment is estimated to register the fastest CAGR, in terms of revenue, as it is widely used in apparel and home-furnishing applications owing to high resilience, elasticity, and moisture absorption.

The polyester segment is also expected to experience a steady growth rate from 2022 to 2030, due to the rising demand thanks to properties like high strength, chemical & wrinkle resistance, and quick drying.

(Source: Textile Industry Analysis By OEM News)

The growing popularity of online shopping probably drives the textile manufacturing industry. The ability of manufacturers to sell their goods in a larger market than in the past will expand their geographic customer base and fuel the growth of the textile manufacturing industry. E-commerce platforms have increased the sales of traditional clothing in countries like India by increasing the geographic exposure of producers.

The global fashion e-commerce market is forecast to reach US$ 1.2 trillion by 2027.

Indian Textile Industry: India is ranked second in the textile industry, which contributes to the countrys economic stability. The textile sector contributes 35% to Indias economy, accounting for at least one-third of the total contribution from all other sectors, implying that Indias textile sector serves as the countrys backbone. India currently have more than 1400 large textile companies and around 1.5 million small and medium enterprises (SMEs) operating in the sector. Indias textiles industry has around 4.5 Crore employed workers including 35.22 lakh handloom workers across the country.

The Indian textile and apparel industry is expected to grow at a 10% CAGR from FY 2019-20 to reach US$ 190 billion by FY 2025-26. Indias textile and apparel exports (including handicrafts) stood at US$ 44.4 billion in FY22, a 41% increase YoY. During April-October in FY23, the total exports of textiles stood at US$ 21.15 billion.

India is the largest producer of cotton in the world, accounting for 22% of the total cotton production in the world, and one of the leading producers of jute, silk, and wool. More than 11.7 million hectares of cotton in India are grown, compared to 31.2 million hectares worldwide, taking up 37% of the total world area under cotton cultivation.

Nearly two-thirds of Indias cotton production comes from the states of Maharashtra, Gujarat, Andhra Pradesh, and Telangana, which are collectively referred to as the "Cotton Basket of India." Cotton production in India is projected to reach 7.2 million tonnes by 2030, driven by increasing demand from consumers. In FY23, exports of ready-made garments (RMG) cotton including accessories stood at US$ 7.68 billion till January 2023. It is expected to surpass US$ 30 billion by 2027, with an estimated 4.6-4.9% share globally.

Government Initiatives

In February 2023, according to the Union Budget 2023-24, the total allocation for the textile sector was Rs.4,389.24 Crore (US$ 536.4 million). Out of this, Rs.900 Crore (US$ 109.99 million) is for Amended Technology Upgradation Fund Scheme (ATUFS), Rs.450 Crore (US$ 54.99 million) for National Technical Textiles Mission, and Rs.60 Crore (US$ 7.33 million) for Integrated Processing Development Scheme. The union government approved 1,000 acres land for setting up a textile park in Lucknow.

In December 2022, a total of 44 R&D projects were started, and 23 of them were successfully completed. 9777 people were trained in a variety of activities relating to the silk industry.

A total of US$ 75.74 million (H621.41 Crore) in subsidies was distributed in 3,159 cases under the Amended Technology Upgradation Fund Scheme, with special campaigns held in significant clusters to settle backlog cases. A total of 73,919 people have received training, out of which 38,823 have received placement under SAMARTH.

The establishment of 7 PM Mega Integrated Textile Region and Apparel (PM MITRA) Parks with a total investment of US$ 541.82 million (H4,445 Crore) for the years up to 2027-28 was approved by the government. Under the National Technical Textile Mission (NTTM), 74 research projects for specialty fibre and technical textiles valued at US$ 28.27 million (H232 crore) were approved. 31 new HSN codes have been developed in this space.

(Source: Textile Industry Report By IBEF)

financial performance of the company

A. STANDALONE FINANCIAL PERFORMANCE

Total Revenue: During the Financial Year 2022-23, the total revenue of the Company is reduced by 45.12% from Rs.1138.67 Crore to Rs.624.88 Crore as compared to the previous Financial Year 2021-22. The revenue has decreased mainly on account of a decrease in average price realisation and average dispatch volume due to lower demand for dyes and dyes intermediates worldwide. Expenditure: During the year, total expenditure has decreased by 34.05% from Rs.1153.62 Crore in FY 2021-22 to Rs.760.80 Crore in current FY 2022-23.

A major decrease in expenditure is due to a decrease in especially raw material cost, outward freight & transportation charges, and export expenses on account of subdued demand for products.

Employee benefits expenses: During the year under review, the Employee benefits expenses decreased by 18.33% from Rs.52.54 Crore to Rs.42.91 Crore as compared to the previous Financial Year.

Finance Cost: The finance cost is increased by 32.32 % from Rs.4.61 Crore to Rs.6.10 Crore as compared to the previous FY 2021-22 mainly related to interest cost on account of availing new term loan facility.

Operational & other Expenses:

The operational & other expenses decreased by 35.72% from Rs.1105.38 Crore to Rs.710.57 Crore as compared to the previous FY 2021-22 mainly on account of a decrease in raw material cost, outward freight, and transportation charges due to lower demand of dyes and dyes intermediates worldwide.

Net Profit/Loss: Due to a reduction in revenue, an increase in Finance cost, and high legal and professional fees with respect to Singapore Case, the Company has incurred a Net Loss of Rs.133.71 Crore as compared to a Net Loss of Rs.9.60 Crore in the previous FY 2021-22.

Non-Current Liabilities: The noncurrent liabilities have increased by 48.78% from Rs.33.72 Crore to Rs.50.17 Crore as compared to the previous FY 2021-22 as the Company has availed new term loan facility. Current Liabilities: The current liabilities have increased from Rs.397.90 Crore to Rs.424.90 Crore as compared to the previous FY 2021-22. Non-Current Assets: The non-current assets have reduced by 4.81% from Rs.811.70 Crore to Rs.772.62 Crore as compared to the previous FY 2021-22 on account of a reduction in capital advances.

Current Assets: The current assets have been reduced by 20.89% from Rs.244.93 Crore to Rs.193.76 Crore as compared to the previous FY 2021-22.

B. CONSOLIDATED FINANCIAL PERFORMANCE

Total Revenue: The total revenue has decreased by 36.73% from H 1498.90 Crore to Rs.948.40 Crore as compared to the previous FY 2021-22 on account of lower demand for the products.

Total Expense: The total expenses have been decreased by 27.46% from H 1430.57 Crore to Rs.1037.74 Crore as compared to the previous FY 2021-22 on account of a reduction in material consumption due to lower demand. Net profit: In the current Financial Year, Company has recorded a net profit (before OCI) of Rs.106.64 Crore as compared to Rs.388.77 Crore of the preceding financial year 2021-22 which is a decrease of 72.57% due to lower demand of Dyes and Dyes intermediates worldwide. Non-Current Liabilities: The noncurrent liabilities have increased by 43.83% from Rs.35.11 Crore to Rs.50.50 Crore as compared to the preceding FY 2021-22.

Current Liabilities: The current liabilities have increased by 1.04% from Rs.466.46 Crore to Rs.471.32 Crore as compared to the preceding FY 2021-22.

Non-Current Assets: The non-current assets have been increased by 6.49% from Rs.2494.87 Crore to Rs.2668.12 Crore as compared to the preceding FY 2021-22.

Current Assets: During the year, total current assets have reduced by 8.70% from Rs.579.35 Crore to Rs.532.96 Crore as compared to the preceding FY 2021-22.

Details of Key Financial Ratios

In compliance with the requirement of the listing regulations, the key financial ratios were examined and the ratios with significant changes of 25% or more as compared to the immediately previous financial year have been provided hereunder along with the explanation for the changes, if any.

Key Financial Ratios	FY 2022-23	FY 2021-22	Reason for Significant Change, if any
Inventory Turnover Ratio (times)	4.39	7.27	Though there is a reduction in the inventory value; the Inventory turnover ratio has decreased mainly on account of the reduction in the quantum of sales during the year
Interest Coverage Ratio (times)	-21.19	-9.89	In the current financial year losses are widened and interest cost is increased due to additional loans, therefore there are changes in Interest Coverage Ratio
Current Ratio (times)	0.46	0.62	Current ratio coverage decreases mainly on account of a reduction in trade receivables and inventory on one side and other side increase in trade payables
Debt Equity Ratio (times)	0.09	0.15	Debt equity ratio improves mainly on account of the repayment of debt during the year
Operating Profit Margin	-25.40%	-1.10%	In the current financial year operating profit margin negative due to lower demand, lower capacity utilisation, increase in raw material prices, high energy cost, and higher legal cost for Singapore cases. Hence, there are significant changes in the Operating Profit Margin ratio
Net Profit Margin	-22.23%	-0.84%	Due to the loss incurred during the year, the net profit percentage is negative
Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof	-27.21%	-1.52%	In the current financial year, losses are widened as compared to the preceding year. Therefore, there are significant changes in the return of net worth ratio

INTERNAL CONTROL SYSTEMS

The Companys internal control systems are effective and robust, ensuring that there is efficient use and protection of resources and compliance with policies, procedures, financial reporting, and statutory requirements. They are commensurate with the size of the Company and the nature of its business activities. There are also in place proper systems to safeguard the interests of the Company by review of audit controls and by making changes in the scope of the audit committee when necessary.

Internal Audit is carried out in accordance with auditing standards to review the design effectiveness of internal control systems & procedures to manage risks, operation of monitoring control, compliance with relevant policies & procedures, and recommend improvement in processes and procedures.

The Audit Committee regularly reviews the execution of the Audit Plan, and the adequacy & effectiveness of internal audit systems, and monitors the implementation of internal audit recommendations including those relating to strengthening of Companys risk management policies & systems. The systems are regularly updated and enhanced to face changing business requirements.

MATERIAL DEVELOPMENT IN HUMAN RESOURCES

The Companys approach to Human Resource Development is based on the fundamental principles of relevance, continuity, and fairness. The Company continues its endeavor of investing in Human Talent and Talent Management process by undertaking various initiatives and implementing policies which are drawn up to engage our employees, especially the younger generation, and ensure a healthy balance between business needs and individual aspirations.

Performance management links individual and team performance to the Companys overall strategic objectives. The HR department is committed to aligning its strategic interventions and procedures with a long-term vision to create and enhance value for the Company and its stakeholders. This remains one of the most important factors in boosting business performance. During the year, the Company maintained positive relations with its employees and focused on providing training and skill development opportunities to help them navigate the changing work environment.

MANAGEMENT OUTLOOK

The Company is well-positioned to benefit from the significant opportunities arising in the sector due to the "Make in India for the World" initiative, and the increasing adoption of the China+1 strategy. In order to achieve its objective of "Atmanirbhar for Key Raw Materials" and under the "Make in India" initiative, it has started to manufacture certain intermediate products to reduce dependency on the import of such products.

By virtue of large-scale facilities and fully integrated operations from the manufacturing of basic chemicals, dye intermediaries, and dyes, the Company derives benefits of economies of scale and high standards of quality control.

The Company is an accredited and certified Key Business Partner with the worlds top Dyestuff majors across Asia-Pacific, the EU, and America. It provides products and services across the whole value chain in numerous industrial sectors (apparel, hosiery, automotive, carpets, leather, paper, home upholstery, industrial fabrics, etc.).

In the 25 years of the Companys corporate journey, it has been focusing on providing products of high-quality standards, executing collaborations and strategic acquisitions, implementing environmentally aligned R&D, and finding innovative solution-centric and all-encompassing customer care. All initiatives taken by the Company; it has enabled it to set its footprints in over 50 countries across 7 continents.

RISK & CONCERNS

The Company has a comprehensive risk management system in place, which is tailored to the specific requirements of its diversified businesses, considering various factors, such as the size and nature of the inherent risks and the regulatory environment of the individual business segment or operating Company. Current global and domestic headwinds need to be closely monitored for their impact on business operations. The Company continues to keep a constant vigil for better risk management.

The Board undergoes diligent processes for risk management, supported by internal controls, to ensure that the Company meets strategic objectives and the organisation is protected from adverse events. The thoroughness of the process has improved corporate sustainability. Hence, Risk Management plays an important part in our corporate philosophy and how we execute our strategy. Under the framework, your Company has constituted a Risk Management Committee to continuously monitor report and mitigate various risks faced.

CAUTIONARY STATEMENT

Certain statements made in this report relating to the companys outlook, estimates, predictions, etc. May constitute "forward-looking statements" within the meaning of applicable laws and regulations. Actual results may differ from such estimates, whether express or implied. Several factors that could make a difference to companys operations include climatic conditions and economic conditions affecting demand and supply, changes in government regulation tax regimes, natural calamities, etc. Over which the company does not have any direct control.