The Management of Oricon Enterprises Limited ("the Company"),
presents the analysis of Company for the year ended on March 31, 2023 and its outlook for
the future. This outlook is based on assessment of current business environment. It may
vary due to future economic and other developments both in India and Abroad.
This Management Discussion and Analysis (MD&A) of Oricon
Enterprises Limited for the year ended on March 31, 2023 contains financial highlights but
does not contain the complete financial statements of the Company. It should be read in
conjunction with the Companys Audited Financial Statements for the year ended on
March 31, 2023.
GLOBAL ECONOMY:
The global economy experienced a slowdown in 2022-23 due to high
inflation rate, tightening financial conditions, increasing interest rates, rising
geopolitical tensions, ongoing Russia and Ukraine war and some ongoing effects of
Covid-19, as a result of these the global economy could only grow by 3.2% in 2022.
With most of these challenges continuing in 2023, the global economy is
projected by IMF to grow at 2.8% in 2023 which will be one of weakest growth rates since
2001. Concern over slowdowns in major economies remain, with recent troubles in banking
sector aggravating worries that runaway inflation and tight monetary policy would hamper
growth and financial investments. As per IMF close to 90% advanced economies will
experience slowing growth this year.
INDIAN ECONOMY:
The Indian economy, however, appears to have moved on after its
encounter with the pandemic, staging a full recovery in FY22 ahead of many nations and
positioning itself to ascend to the pre-pandemic growth path in FY23. Yet in the current
year, India has also faced the challenge of reining in inflation that the European strife
accentuated. Measures taken by the Government and RBI, along with the easing of global
commodity prices, have finally managed to bring retail inflation below the RBI upper
tolerance target in November 2022. However, the challenge of the depreciating rupee,
although better performing than most other currencies, persists with the likelihood of
further increases in policy rates by the US Fed. The widening of the CAD may also continue
as global commodity prices remain elevated and the growth momentum of the Indian economy
remains strong. The loss of export stimulus is further possible as the slowing world
growth and trade shrinks the global market size in the second half of the current year.
Despite these, agencies worldwide continue to project India as the
fastest-growing major economy at 6.5-7.0 per cent in FY23. These optimistic growth
forecasts stem in part from the resilience of the Indian economy seen in the rebound of
private consumption seamlessly replacing the export stimuli as the leading driver of
growth. The uptick in private consumption has also given a boost to production activity
resulting in an increase in capacity utilization across sectors. The rebound in
consumption was engineered by the near-universal vaccination coverage overseen by the
government that brought people back to the streets to spend on contact-based services,
such as restaurants, hotels, shopping malls, and cinemas, among others.
INDUSTRY STRUCTURE AND DEVELOPMENTS:
The demand for packaging is growing due to the rising population,
increasing income levels, changing lifestyles and growing economy. Food & Beverages
are one of the growing key segments and will drive the demand for plastic packaging, as it
ensures food safety, quality and long shelf life.
The increasing awareness regarding the environmental effect of
single-use plastic and unsustainable business practices have empowered consumers to demand
a higher standard of products with less environmental impact. The focus is shifting more
towards recyclable/reusable plastic packaging products.
COMPANY OVERVIEW & PRODUCTS:
The Company is engaged in the business of manufacturing plastic and
metal closures, PET, Preforms, collapsible tubes and Pilfer Proof Caps in the packaging
segment and petrochemical products. Since after lockdown due to COVID-19, the demand for
plastic closures have shown significant improvement in demand.
Your Company maintains a positive outlook for growth of its business
and is investing in strengthening its infrastructure and enhancement of capacities.
1. Plastic caps and closures: The global plastic caps and
closures market grew from $47.63 billion in 2022 to $55.68 billion in 2023 at a compound
annual growth rate (CAGR) of 16.9%. The continued 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. Considering the projected growth
your Company is also expanding its capacities to meet future demand of the industry.
2. Preforms: The rising demand from Beverage industry lead
to increase in demand of Pre-forms. The Company has its plant for Manufacturing Pre-forms
at Khurda having capacity of 22000 MT. We are further adding fresh capacity of 7000 MT
during 2023-24.
3. Metal - Crown and Pilfer Proof Caps: The demand for crown
caps is driven majorly by beer & soft drink industry but over a period the market has
shifted mainly to Pet Bottle. The beverage industry due to environmental problems is now
pushing to return to glass bottle where our crown caps are used which will help us in
enhancing capacity utilization. P.P. Caps demand continue to be stagnant and all efforts
are made to maintain the production level.
4. Petrochemicals: The Company is engaged in manufacturing
of different grades Pentane. At present, the Company has installed Capacity of processing
9,000 MT of raw Pentane. (Petrochemical) Being a non-core business, the Board has decided
to exit from Petrochemical business and efforts are being made to identify prospective
buyer.
5. Real Estate: During the year under review the Company has
sold 4 flats, admeasuring about 8500 Square feet, at Indiabulls BLU Worli Mumbai and 9
flats are still unsold. The flats will be sold as and when the Company gets good price.
OPPORTUNITIES AND THREATS
Opportunities:
Increase in Demand of packaged food & beverages.
Change in lifestyle of consumers.
Threats:
Biodegradable and Organic Packaging Options
Environmental concerns.
Volatility in Commodity Price.
Increased competition.
SEGMENT WISE PERFORMANCE:
Your Company has identified segments reporting in terms of IND - AS 108
issued by Institute of Chartered Accountants of India (ICAI). The following are the
abridged results of these segments:
Standalone Results:
|
Segment Revenue (Rupees in Lakhs) |
Segment Results Profit / (Loss) from
each segment before interest and tax (Rupees In Lakhs) |
| Packaging |
47,917.54 |
4,227.27 |
| Real Estate |
1,778.00 |
951.48 |
| Petrochemicals |
7,355.47 |
469.57 |
| Others |
5.15 |
0.05 |
| Total |
57,056.16 |
5,648.38 |
Consolidated Results:
|
Segment Revenue (Rs. in Lakhs) |
Profit/(Loss) from each segment before
interest and tax (Rs. In Lakhs) |
| Logistics |
3,200.63 |
(1,585.17)* |
| Packaging |
47,917.54 |
4,135.40 |
| Real Estate |
1,778.00 |
951.48 |
| Petrochemicals |
7,355.47 |
469.57 |
| Others |
5.15 |
0.05 |
| Discontinued Operations |
240.27 |
(8.33) |
| Total |
60,497.06 |
2,014.81 |
*Includes Rs.178.57 Lakhs as a exceptional item on account of sale of
subsidiary companies namely shakti clearing agency Pvt Ltd & USL Lanka logistics Pvt
Ltd.
DETAILS OF SIGNIFICANT CHANGES (25% OR MORE AS COMPARED TO PREVIOUS
YEAR) IN KEY FINANCIAL RATIOS:
| Key Ratio |
2022-23 |
2021-22 |
Variance |
Reason |
| Debt-Equity Ratio |
0.18 |
0.13 |
45.59% |
Due to increase in Debt |
| Net Profit Margin |
3.2% |
29.9% |
-89.33% |
Due to decrease in profit |
| Interest Coverage Ratio |
3.23 |
14.78 |
-78.15% |
Due to decrease in profit |
RISKS AND CONCERNS:
To sustain and grow in global market brings in uncertainties. Greater
the uncertainties, higher the risk.
The Company has a risk identification and management frame work
appropriate to it and to the business environment under which it operates. Risks are being
identified at regular intervals by the Board.
The Company has a Risk Management Policy, which provides overall
framework of Risk Management in the Company. The Board of Directors is responsible for the
assessment, formulation and implementation of guidelines, managing key risks, risk
minimization procedures and periodicals review.
INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:
Your Company has a system of internal controls to safeguard the
Companys assets against loss from unauthorized use and ensure proper authorization
of financial transactions. The Company also has budgetary control system to monitor all
expenditures against approved budgets on an ongoing basis. The Company maintains a system
of internal controls designed to provide assurance regarding the effectiveness and
efficiency of operations, the reliability of financial controls and compliance with
applicable laws and regulations as applicable in the various jurisdictions in which the
Company operates. The Company has in place adequate internal control systems and
procedures covering all the operational, financial, legal, and compliance functions. The
structured internal audit process charged with the task of ensuring reliability and
accuracy of the accounting and of the other operational data.
The Company has a system of monthly review of businesses as a key
operational control wherein the performance of units is reviewed against budgets and
corrective actions are taken.
FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:
This has been dealt in Director Report.
HUMAN RESOURCES / INDUSTRIAL RELATIONS:
The Company has been very proactive to support its entire work force at
all the levels in best possible manner. The Company has also developed its infrastructure
and facilities by which many employees are able to work from home. This has helped the
Company to continue to provide efficient services to all its stakeholders.. Human resource
is considered as key to the future growth strategy of the Company and looks upon to focus
its efforts to further align human resource policies, processes and initiatives to meet
its business needs.
Industrial relations at all the units and locations are harmonious
during the year under review.
CAUTIONARY STATEMENT:
Statements in the Management Discussion and Analysis describing the
Companys objectives, expectations or predictions may be forward looking within the
meaning of applicable securities, laws and regulations. Actual results may differ
materially from those expressed in the statement. Important factors that would influence
the Companys operations include cost of raw materials, tax laws, interest and power
cost, economic developments and such other factors within the country and the
international economic and financial developments.
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