financial review
Consolidated Financials
Consolidated Net Sales grew by
3.1%
"EBITDA” (earnings before Interest, Taxes, Depreciation,
Exceptional items and foreign exchange differences) before non-operating income, increased
by
14.8%
Profit Before Tax (PBT) grew by
9.5%
PBT - excluding exceptional items* grew by
12.2%
Profit After Tax (PAT) grew by
20.8%
PAT - excluding exceptional items* grew by
24.4%
* Exceptional item represents impairment loss on plant and machinery at
Dahej Elastomer Project amounting to Rs 55 crores in current period and impairment in
value of investments amounting to Rs 18 crores in previous period.
On a constant currency basis, the overseas subsidiaries reported sales
growth of
9.6%
EBITDA grew by
107.9%
due to higher sales and better gross margin due to softer input cost.
Domestic subsidiaries sales declined by
8.2%
EBITDA de-grew by
8.3%
on account of lower sales and hence higher absorption of fixed cost.
financial review
Standalone Financials
As a result of the nation-wide lockdown declared in March 2020, the
standalone net sales in the last ten days of the quarter, and of the year, were lower than
the same period last year by around Rs 150 crores. This is equivalent to around 11 % of Q4
net sales last year.
Lower sales in the last ten days of the quarter and the year resulted
in last quarters standalone net sales growth reducing from around 9.6% as on 21st
March 2020 to (4.3%)* as on quarter end.
The years standalone net sales growth reduced from around 7.1% as on
21st March 2020 to 4.0%* as on year end.
The consequent impact on standalone EBITDA growth is estimated at a
reduction of 29.0% for last quarter and 6.0% for the year.
* Audited numbers, all other numbers are not reviewed/ audited by
auditors.
For the year, sales volume and mix grew by
1.7%
and EBITDA, excluding non-operating income improved by Profit Before
Tax (PBT) and exceptional items grew by
8.7%
Excluding exceptional items+ in current year and income from
inter-company transfer of intangible assets and dividend income from subsidiaries, in last
year, PBT grew by
Profit After Tax (PAT) grew by
12.5%
Excluding exceptional items+ in current year and income from
inter-company transfer of intangible assets and dividend income from subsidiaries and
effect of tax thereon, in last year, PAT grew by
23.3%
+ Exceptional item represents impairment loss on plant and machinery at
Dahej Elastomer Project amounting to Rs 55 crores and impairment in value of investments
of a subsidiary amounting to Rs 4 crores.
performance by industry segment (standalone)
The Company operates under two major business segments i.e. Branded
Consumer & Bazaar and Business to Business.
Products, such as Adhesives, Sealants, Art & Craft Materials and
Others, Construction and Paint Chemicals are covered under Branded Consumer & Bazaar
segment. These products are widely used by carpenters, painters, plumbers, mechanics,
households, students, offices etc.
Business to Business segment covers products, such as Industrial
Adhesives, Industrial Resins, Construction Chemicals (Projects), Organic Pigments, Pigment
Preparations, etc. and caters to various industries like packaging, joineries, textiles,
paints, printing inks, paper, leather, etc.
In both the above business segments, there are a few medium to large
companies with national presence and a large number of small companies which are active
regionally. Multinational companies are also present in many of the product categories in
which the Company operates.
consumer & bazaar
Branded Consumer & Bazaar segment contributed
79.9%
of the sales of the Company and grew by
5.4%
with volume and mix growing by
1.9%
Adhesives & Sealants category includes adhesives, sealants and
tapes. This category contributed
52.6%
of the sales of the Company and grew by
4.1%
Construction and Paint Chemicals contributed
19.2%
of the sales of the Company and grew by
12.1%
Art & Craft Materials etc. contributed
8.1%
of the sales of the Company and declined by
1.%
business to business
Business to Business segment contributed
18.7%
of the sales of the Company and grew by
4.9%
with volume and mix growing by
3.9%
Industrial Adhesives includes adhesives used in packaging, footwear,
cigarette, automotive industry and joinery. This category contributed
6.1%
of sales of the Company and grew by
0.5%
Industrial Resins, Construction Chemicals (Projects) etc. contributed
6.4%
of the sales of the Company and grew by
0.2%
Pigments and Preparations contributed
6.2%
of the sales of the Company and grew by
15.6%
others
The Others segment largely comprises of manufacture and sale of
Speciality Acetates, raw materials etc.
human resources
The year under review witnessed significant progress in people
practices, policies and processes, enabling the Company on its journey of Growing to
Greatness.
The Companys Happy and Healthy (HAH) movement saw unique
participation levels of 65%, a rise of more than 20% over the last year. New categories
were introduced to engage employees more inclined towards mental or indoor activities like
carrom, quiz and badminton.
To further strengthen the Learning and Development programmes, PACE,
the signature programme for R&D managers was added to the existing bouquet of
signature programmes for Sales and Marketing. Capstone, our programme for middle
management saw its second batch successfully complete the course.
To strengthen the assessment process, the Company introduced a
multi-rater stakeholder feedback process with the intention to bring in greater
transparency and accountability in our managers.
The Human Resource Management System Workline has been strengthened
with the implementation of multiple paperless processes across employee, self service
areas of communication and relocation reimbursements, manage personal compensation and tax
and personal profile updates. Additionally, to help digitise our hiring process, the
integration of the Application Tracking System (ATS) has been a key step in garnering pre-
and post-hiring intelligence.
Safety of our employees is of paramount importance and this was
reflected both during the onset and living through the COVID-19 pandemic.
The Company has reset the ways of working keeping a long-term view in
mind and is moving swiftly to a digitally enabled workforce which has learning, safety and
agility as the cornerstones of recasting the way we work.
The total number of employees as on 31st March 2020 is
6,064.
outlook
Current Year Outlook
During the first half of FY 2020-21, economic activity may remain
subdued due to a number of factors, such as social distancing, subdued demand and labour
shortage. Recovery in economic activity is expected to begin in second half of FY 2020-21
depending on how effectively the country is able to contain the virus. Overall there
remains significant uncertainty about the duration of the pandemic and the consequent
downside risks to domestic growth.
Continued slowdown in the construction industry and economic growth can
negatively impact sales growth for current year.
While major subsidiaries in India are taking initiatives to improve
margins and achieve consistent sales growth in their respective businesses, the impact of
the economic growth environment does pose a risk to these plans.
The Companys major international subsidiaries are in Bangladesh, Sri
Lanka, USA, Brazil, Thailand, Egypt and Dubai. Various initiatives are being taken to
increase sales and market share in Bangladesh and Sri Lanka.
The US subsidiary plans to maintain its focus on Retail and E-Commerce.
The Brazil subsidiary is taking initiatives for continued growth in sales and margins. The
business environment in these countries remain subdued as they all face the ongoing impact
of the pandemic and consequent lockdown.
Outlook on Opportunities, Threats, Risks and Concerns
The Indian economy provides a large opportunity to the Company to
market its differentiated products.
Slower growth of the Indian economy and stress in sectors, such as
construction could impact the performance of the Company.
Overseas subsidiaries, by virtue of their relatively smaller size,
remain vulnerable to the political and economic uncertainties of their respective
countries.
COVID-19 related slowdown may impact the performance of the Company and
its subsidiaries.
miscellaneous
The Companys Net Worth (Equity capital + Reserves) has grown from Rs
2,650 crores as on 31st March 2016 to Rs 4,465 crores as on 31st
March 2020, giving a Compounded Annual Growth Rate (CAGR) of 13.93%.
The market capitalisation of the Company on 31st March 2020
was Rs 68,935 crores and has grown at a CAGR of 30.36 % since the IPO in 1993.
other matters
The following matters are elaborated in the Directors Report
• Risks and concerns
• Internal control systems and their adequacy
cautionary statement
Statements in this Management Discussion and Analysis Report describing
the Companys objectives, projections, estimates and expectations may be forward looking
statements within the meaning of applicable laws and regulations. Actual results might
differ.
economic value added (EVA)
computation of eva
| EVA |
= Net Operating Profit After Tax (NOPAT) -
Weighted average cost of capital employed. |
| NOPAT |
= Net profit after tax + post tax interest
cost at actual. |
| Weighted average cost of capital employed |
= (Cost of equity x average shareholder funds)
+ (cost of debt x average debt). |
| Cost of equity |
= Risk-free return equivalent to yield on long
term Government of India (GOI) securities (taken @ 7.54%) + market risk premium (assumed @
6.01%) x beta variant for the Company (taken at 0.75), where the beta is a relative
measure of risk associated with the Companys shares as against the stock market as a
whole. |
| Cost of debt |
= Effective interest applicable to Pidilite
based on an appropriate mix of short, medium and long term debt, net of taxes. |
| Item |
2015-16 |
2016-17 |
2017-18 |
2018-19 |
2019-20 |
| 1. Risk Free Return on Long Term GOI
Securities |
75% |
6.5% |
7.2% |
7.3% |
7.5% |
| 2. Cost of Equity |
12.9% |
9.2% |
11.4% |
13.1% |
12.0% |
| 3. Cost of Debt (Post Tax) |
0.0% |
0.0% |
0.0% |
0.0% |
0.0% |
| 4. Effective Weighted Average Cost of Capital |
12.8% |
9.2% |
11.4% |
13.1% |
12.0% |
| Economic Value Added (Rs in crores) |
|
|
|
|
|
| 5. Average Debt |
3 |
1 |
0 |
0 |
0 |
| 6. Average Equity (Shareholder Funds) |
2,500 |
3,025 |
3,482 |
3,875 |
4,326 |
| 7. Average Capital Employed (Debt + Equity) |
2,503 |
3,026 |
3,482 |
3,875 |
4,326 |
| 8. Profit After Tax (as per P&L account) |
774 #$ |
868 #$ |
955 $ |
979 $ |
1161 #$ |
| 9. Interest (as per P&L account, net of
Income Tax) |
4 |
4 |
4 |
5 |
10 |
| 10. Net Operating Profit After Tax (NOPAT) |
778 |
872 |
959 |
984 |
1171 |
| 11. Weighted Average Cost of Capital (4x7) |
322 |
278 |
397 |
509 |
521 |
| 12. Economic Value Added (10-11) |
456 |
594 |
563 |
475 |
650 |
| 13. EVA as a % of Average Capital Employed (12
e 7) |
18.2% |
19.6% |
16.2% |
12.3% |
15.0% |
# Profit After Tax excludes exceptional items.
$ Profit is after tax but before Other Comprehensive Income.
10 years5 financial performance
|
I GAAP |
IND AS |
|
| Highlights |
2010-11 |
2011-12 |
2012-13 |
2013-14 |
2014-15 |
2015-16 |
2016-17 |
2017-18 |
2018-19 |
2019-20 |
CAGR % |
| Operating Results |
|
|
|
|
|
|
|
|
|
|
|
| Sales and Other Income |
2,530 |
3,017 |
3,615 |
4,169 |
4,724 |
5,134 |
5,409 |
5,627 |
6,285*** |
6,484 |
11.0% |
| Manufacturing & Other Expenses |
2,036 |
2,483 |
2,939 |
3,448 |
3,918 |
3,942 |
4,070 |
4,197 |
4,796 |
4,847 |
10.1% |
| Operating Profit |
494 |
534 |
676 |
721 |
806 |
1,192 |
1,339 |
1,430 |
1,490 |
1,637 |
14.2% |
| Interest (Net) |
27 |
21 |
8 |
10 |
10 |
6 |
6 |
6 |
7 |
13 |
(7.4%) |
| Depreciation |
44 |
48 |
53 |
69 |
108 |
88 |
90 |
91 |
100 |
126 |
12.3% |
| Profit from Ordinary Activities |
423 |
465 |
615 |
642 |
688 |
1,098 |
1,243 |
1,333 |
1,383 |
1,498 |
15.1% |
| Exceptional Item |
25 |
13 |
(6) |
6 |
18 |
27 |
94 |
- |
- |
59 |
10.1% |
| Foreign Exchange Difference - Expense/(Income) |
1 |
8 |
1 |
5 |
2 |
1 |
4 |
2 |
6 |
2 |
9.3% |
| Profit-Before Tax |
397 |
444 |
620 |
631 |
668 |
1,070 |
1,145 |
1,331 |
1,376 |
1,437 |
15.4% |
| Current Tax |
94 |
105 |
156 |
160 |
156 |
299 |
363 |
403 |
438 |
369 |
16.4% |
| Deferred Tax |
(1) |
4 |
3 |
2 |
11 |
24 |
8 |
19 |
11 |
(33) |
57.2% |
| Profit-After Tax for the year |
304 |
335 |
461 |
469 |
501 |
747 |
774 |
909 |
927 |
1102 |
15.4% |
| Add: Prior Years Tax Provision written back |
- |
- |
- |
- |
- |
- |
- |
46 |
53 |
- |
- |
| Profit-After Tax |
304 |
335 |
461 |
469 |
501 |
747$ |
774 $ |
955$ |
979$ |
1,102$ |
15.4% |
| Dividend on Equity Shares |
103 * |
112 * |
156 * |
162 * |
179 * |
404 *** |
31 *** |
293**** |
364**** |
827**** |
26.1% |
| Retained Earning |
201 |
223 |
305 |
307 |
322 |
343 |
743 |
662 |
615 |
275 |
3.5% |
| Financial Position |
|
|
|
|
|
|
|
|
|
|
|
| Capital-Equity |
51 |
51 |
51 |
51 |
51 |
51 |
51 |
51 |
51 |
51 |
0.0% |
| Reserve (Less Revaluation Reserve & Misc.
Expenditure) |
1,088 |
1,327 |
1,682 |
1,988 |
2,298 |
2,599 |
3,348 |
3,513 |
4,136 |
4,414 |
16.8% |
| Net Wor th |
1,139 |
1,378 |
1,733 |
2,039 |
2,349 |
2,650 |
3,399 |
3,564 |
4,187 |
4,465 |
16.4% |
| Borrowings |
287 |
264 |
60 |
8 |
6 |
1 |
- |
- |
- |
- |
- |
| Deferred Tax Liability (Net) |
41 |
45 |
48 |
51 |
55 |
75 |
84 |
103 |
113 |
76 |
7.1% |
| Funds Employed |
1,467 |
1,687 |
1,841 |
2,098 |
2,410 |
2,726 |
3,483 |
3,667 |
4,300 |
4,541 |
13.4% |
| Fixed Assets ** |
|
|
|
|
|
|
|
|
|
|
|
| Gross Block |
1,205 |
1,343 |
1,469 |
1,637 |
2,005 |
1,775 |
1,856 |
1,975 |
2,110 |
2,538 |
8.6% |
| Depreciation |
431 |
476 |
527 |
594 |
716 |
707 |
790 |
871 |
930 |
1041 |
10.3% |
| Net Block |
774 |
867 |
942 |
1,043 |
1,288 |
1,068 |
1,066 |
1,104 |
1,180 |
1,497 |
7.6% |
| Investments in - Overseas Subsidiaries |
233# |
239 # |
260 # |
315# |
341 # |
355 # |
270# |
303# |
330# |
327# |
3.9% |
| - Others |
167 |
94 |
287 |
259 |
360 *** |
748 |
1,523 |
1,483 |
1,860 |
1,496 |
27.6% |
| Net Current Assets |
293 |
487 |
352 |
481 |
421 *** |
555 |
624 |
777 |
930 |
1,220 |
17.2% |
| Total Assets |
1,467# |
1,687 |
1,841 |
2,098 |
2,410 |
2,726 |
3,483 |
3,667 |
4,300 |
4,541 |
13.4% |
| The Company transitioned into Ind AS from 1st
April 2015 |
~ Less than 1 crore |
| * Includes Tax on Dividend |
*** Previous years figures regrouped |
| ** Including Capital Work-In-Progress and excluding Revalued
Assets |
**** Paid dividend (including tax) as per IND AS |
| and Depreciation thereon |
$ Profit is after tax but before Other Comprehensive Income |
| # After deducting provision for diminution. |
|
|
I GAAP |
IND AS |
| Highlights |
2010-11 |
2011-12 |
2012-13 |
2013-14 |
2014-15 |
2015-16 |
2016-17 |
2017-18 |
2018-19 |
2019-20 |
| Funds Flow |
|
|
|
|
|
|
|
|
|
|
| Sources |
|
|
|
|
|
|
|
|
|
|
| Internal Generation |
373 |
400 < |
511 < |
546 |
638 |
886 |
967 |
1,066 |
1,091 |
1,259 |
| Increase in Capital & Reserve on
conversion of FCCB |
- |
15 |
50 |
- |
- |
- |
- |
- |
- |
- |
| Increase in Equity Share Capital |
- |
- |
- |
- |
- |
-~ |
-~ |
-~ |
-~ |
-~ |
| Increase in Loans |
- |
- |
- |
8 |
- |
- |
- |
- |
- |
- |
| Decrease in Investment-Others |
99 |
73 |
- |
35 |
- |
- |
- |
283 |
- |
102 |
| Decrease in Working Capital |
- |
- |
141 |
- |
23 *** |
329 |
- |
- |
- |
- |
| Total |
472 |
488 |
702 |
589 |
661 *** |
1,215 |
967 |
1,349 |
1,091 |
1,361 |
| Applications |
|
|
|
|
|
|
|
|
|
|
| Repayment of Loans |
135 |
23 |
204 |
60 |
2 |
5 |
1 |
- |
- |
- |
| Capital Expenditure (Net) > |
124 |
141 |
128 |
169 |
353 |
134 |
88 |
125 |
159 |
393 |
| Investments in - Overseas Subsidiaries |
13 |
19 |
26 |
55 |
26 |
14 |
10 |
34 |
26 |
19 |
| - Domestic Subsidiaries |
- |
- |
- |
7 |
|
68 |
80 |
117 |
35 |
127 |
| - Others |
- |
- |
188 |
- |
101 *** |
590 |
695 |
- |
255 |
- |
| Buyback of Equity Shares |
- |
- |
- |
- |
- |
- |
- |
500 |
- |
- |
| Dividend |
103 * |
112 * |
156 * |
162 * |
179 * |
404 **** |
31 **** |
293 **** |
364 **** |
827 **** |
| Increase in Working Capital |
97 |
193 |
- |
136 |
- |
- |
62 |
280 |
252 |
(5) |
| Total |
472 |
488 |
702 |
589 |
661 *** |
1,215 |
967 |
1,349 |
1,091 |
1,361 |
| Ratios |
|
|
|
|
|
|
|
|
|
|
| Return on Average Net Worth % (RONW) (PAT
divided by Average Net Worth) ## |
31.7 |
27.6 |
29.3 |
25.2 |
23.7 |
31.0 |
28.7 |
27.4 |
25.3 |
26.8 @ |
| Return on Average Capital Employed % (ROCE)
(PBIT divided by Average Funds Employed**)## |
32.3 |
31.2 |
36.2 |
33.7 |
31.6 |
44.0 |
41.1 |
37.4 |
34.7 |
34.2 |
| Long-term Debt/Cash Flow |
0.8 |
0.6 |
0.1 |
- |
- |
- |
- |
- |
- |
- |
| Gross Gearing % (Debt as a percentage of Debt
plus Equity) |
20.1 |
16.1 |
3.4 |
0.4 |
0.2 |
- |
- |
- |
- |
- |
| Current Ratio |
1.6 |
1.8 |
1.6 |
1.8 |
1.7 |
2.5 |
3.4 |
3.0 |
3.0 |
2.6 |
| Assets Turnover (times) (Gross Sales divided
by Total Assets) |
1.7 |
1.8 |
1.9 |
2.0 |
1.9 |
1.8 |
1.5 |
1.5 |
1.4 |
1.4 |
| Debtors Turnover (Gross Sales divided by
Debtors) |
9.5 |
9.7 |
10.2 |
10.0 |
9.6 |
9.5 |
9.1 |
8.4 |
8.3 |
8.0 |
| Inventory Turnover (Cost of Goods Sold divided
by Inventories) |
4.1 |
4.2 |
4.3 |
4.5 |
4.7 |
4.4 |
4.3 |
4.3 |
4.5 |
4.0 |
| Operating Profit Margin (%) ## |
19.9 |
19.2 |
20.5 |
18.7 |
18.4 |
25.3 |
27.7 |
26.9 |
24.6 |
26.0 |
| Net Profit Margin (%) ## |
16.9 |
16.3 |
18.5 |
16.5 |
15.7 |
23.3 |
25.6 |
25.1 |
22.8 |
23.8 |
| The Company transitioned into Ind AS from 1st
April 2015 |
~ Less than 1 crore |
| > Includes Cost of Brands, Patents Trademarks and
Businesses Acquired |
*** Previous years figures regrouped |
| * Includes Tax on Dividend. |
**** Paid dividend (including tax) as per IND AS |
| ** Excluding Deferred Tax Liability (Net) |
@ As compared to FY 2018-19, FY 2019-20 RONW is higher by |
| < Includes security premium received on FCCB conversion |
by 6.2% mainly due to 11.6% growth in average net worth |
| ## PAT, PBT and PBIT are excluding exceptional items |
against 18.5% growth in PAT |
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