shaily engineering plastics ltd Management discussions

MANAGEMENT DISCUSSION & ANALYSIS

Global Economy

Global recovery continues, but the momentum has weakened, and uncertainty has increased.

The global economic recovery is continuing, even as the pandemic resurges. The fault lines opened up by COVID-19 are looking more persistent — near-term divergences are expected to leave lasting imprints on medium-term performance. Vaccine access and early policy support are the principal drivers of the gaps. Policy choices have become more difficult, confronting multidimensional challenges — subdued employment growth, rising inflation, food insecurity, the setback to human capital accumulation, and climate change — with limited room to maneuver.

Outlook:

The war in Ukraine has triggered a costly humanitarian crisis that demands a peaceful resolution. Economic damage from the conflict will contribute to a significant slowdown in global growth in 2022. A severe double-digit drop in GDP for Ukraine and a large contraction in Russia are more than likely, along with worldwide spillovers through commodity markets, trade, and financial channels. Even as the war reduces growth, it will add to inflation. Fuel and food prices have increased rapidly, with vulnerable populations — particularly in low-income countries — most affected. Elevated inflation would further complicate the trade-offs central banks face between containing price pressures and safeguarding growth. Interest rates are expected to rise as central banks tighten policy, exerting pressure on emerging market and developing economies. Moreover, many countries have limited fiscal policy space to cushion the impact of the war on their economies. The invasion has contributed to economic fragmentation as a significant number of countries sever commercial ties with Russia and risks derailing the post-pandemic recovery. It also threatens the rules-based frameworks that have facilitated greater global economic integration and helped uplift millions out of poverty. In addition, the conflict adds to the economic strains wrought by the pandemic.

Global growth is projected to slowdown from an estimated 6.1% in 2021 to 3.6% in 2022 and 2023. Beyond 2023, global growth is forecast to decline to about 3.3% over the medium-term.

Scarring effects are expected to be much larger in emerging market and developing economies than in advanced economies — reflecting more limited policy support and generally slower vaccination — with output expected to remain below the pre-pandemic trend throughout the forecast horizon.

Source: https://www.imf.org/en/Publications/WEO/Issues/2021/10/12/world-economic-outlook-october-2021 https://www.imf.org/en/Pub1ications/WEO/1ssues/2022/04/19/wor1d-economic-out1ook-apri1-2022

Indian Economy

The World Bank has retained Indias economic growth forecast for 2020-21 at 8.3% as the recovery is yet to become broad-based.

As per the first advanced estimates of the national income released by the National Statistical Office (NSO) last week, the economy is projected to grow at 9.2% in 2021-22, surpassing pre-COVID level in actual terms, mainly on account of improved performance, especially in farm, mining and manufacturing sectors.

The economy poised to benefit from the resumption of contact-intensive services, and ongoing but narrowing monetary and fiscal policy support.

On the export side, the pause in operations due to COVID-19 pandemic had led to a decrease in the number of shipping vessels. The lack of availability of containers and the faster than expected revival in international trade has raised freight rates significantly to the range of 300-350%. Further, the strong demand for containers in the United States and China has also led to a surge in container rates. India had experienced significant delays in their shipments and consequent liquidity concerns owing to the container shortage. Following, the Indian Government urged officials to dispose of the unclaimed, uncleared, and confiscated goods that are holding up containers for ease in availability of containers for exporters.

Outlook

As the Ukraine conflict impacts the global GDP, India is projected to grow by 6.4% in 2022, slower than last year but still the fastest- growing major economy, with higher inflationary pressures and uneven recovery of the labour market curbing private consumption and investment. The growth outlook will also be supported by ongoing structural reforms, a better than-expected financial sector recovery, and measures to resolve financial sector challenges despite ongoing risks. For the fiscal year 2023, Indias growth is forecast to be 6%.

The war in Ukraine has upended the fragile economic recovery from the pandemic, triggering a devastating humanitarian crisis in Europe, increasing food and commodity prices and globally exacerbating inflationary pressures.

Source: https://economictimes.indiatimes.com/news/economy/indicators/world-bank-retains-indias-economic-growth-forecast-at-8-3- for-2021-22/articleshow/88854379.cms

https://www.ndtv.com/india-news/indias-projected-gdp-down-to-6-4-yet-fastest-growing-major-economy-un-2989322

https://www.indiatoday.in/business/story/global-container-shortage-impact-on-india-export-trade-volume-1847120-2021-08-30

Inflation & interest Rates

India inflation rate highest since 2014

The annual inflation rate in India increased to 7.79% in April of 2022, the highest since May of 2014, and previous market forecasts of 7.50%. Food inflation accelerated for the 7^th straight month to 8.38%, a new high since November of 2020, with cost of oils and fats (17.28%), vegetables (15.41%) and spices (10.56%) recording the biggest rises. Additional upward pressure came from costs of transportation & communication (10.91%), health (7.21%), footwear (12.12%) and clothing (9.51%).

The Monetary Policy Committee, in an off-cycle move, had hiked rates by 40 bps for the first time since August 2018. The MPC expects inflation to rule at elevated levels, warranting resolute and calibrated steps to anchor inflation expectations and contain second-round effects.

With global turmoil continuing and commodity prices remaining high, there will continue to be upward pressure on inflation in the coming months. With concerns on second round effect of inflation and wage price spiral caused by high household inflationary expectations, the RBI will be on tenterhooks.

The Indian Government is considering spending an additional Rs.2 lacs crore (US$26 billion) in the 2022-23 fiscal year to cushion consumers from rising prices and fight multi-year high inflation. The new measures will be double the Rs.1 lacs crore hit Government revenues could take from tax cuts on petrol and diesel, the Finance Minister announced.

Source: https://tradingeconomics.com/india/inflation-cpi

https://economictimes.indiatimes.com/news/economy/indicators/retait-inflation-in-india-surges-to-7-79-in-aprii/artideshow/91518110.cms

https://economictimes.indiatimes.com/news/economy/flnance/india-considering-spending-additionat-26-bitlion-to-flght-inflation-sources/ articteshow/91724915.cms

Crude Oil

World oil demand growth is forecasted to slow to 1.9 mb/d in Q2 2021-22 from 4.4 mb/d in Q1 2021-22 and is now projected to ease to 490 kb/d on average in the second half of the year on a more tempered economic expansion and higher prices. As summer driving escalates and jet fuel continues to recover, world oil demand is set to rise by 3.6 mb/d from April to August. For 2022, demand is expected to increase by 1.8 mb/d on average to 99.4 mb/d.

Russias isolation following its invasion of Ukraine is deepening as the EU and G7 contemplate tougher sanctions that include a full phase out of oil imports from the country. If agreed, the new embargoes would accelerate the reorientation of trade flows that is already underway and will force Russian oil companies to shut in more wells. Even so, steadily rising output elsewhere, coupled with slower demand growth, especially in China, is expected to fend off an acute supply deficit in the near term.

Soaring pump prices and slowing economic growth are expected to significantly curb the demand recovery through the remainder of the year and into 2023. Moreover, extended lockdowns across China where the Government struggles to contain the spread of COVID-19 are driving a significant slowdown in the worlds second largest oil consumer.

Sustained rise in crude oil prices will have an adverse impact on the overall growth of the economy. Prolonged elevated prices above US$110 per barrel will trigger further inflation forcing the Central Bank to increase interest rates. Current account deficit and fiscal deficit would also widen due to higher inflation. Governments cost of borrowing will also rise which will have a cascading effect on the interest rates.

Source: https://www.iea.org/reports/oil-market-report-may-2022

https://www.newindianexpress.com/business/2022/apr/07/crude-oit-prices-may-iead-to-higher-inflation-govt-2438992.htmt

Global Plastics industry

The protracted disruption of the supply chain because of natural calamities, ensuing force majeure events, energy shortages, container shortages, and freight challenges, continued to drive upward pressure on resin prices in 2021. While overall consumption registered a recovery of 4.5% in 2021 (in terms of volume), the unprecedented rise in resin prices resulted in revenue registering a robust growth of 16.1% in 2021.

Sustainability and circular economy are the most important issues in the plastic industry. Though the pandemic and the ensuing disruption served as short-term impediments to the shift away from single-use plastics, 2022 is expected to witness a resurgence in downward pressure as legislations, restrictions, taxes, and bans are introduced across geographies.

Chemical recycling will be a mainstream, effective means of achieving circularity. Higher customer demand and the ever-growing investment in supply will augur well for commercialisation and scaling up of biobased, greener plastics.

The global plastic lead market volume using plastic waste should grow from 7,188.1 thousand tons in 2021 to 11,715.6 thousand tons by 2026 with a compound annual growth rate (CAGR) of 10.3% for the period of 2021-2026.

The role of plastics is extremely crucial in modern industries. Characterised by excellent properties, these materials have gained high prominence across an array of sectors, including automotive, electricals and electronics, manufacturing, medical and others.

The overall market demand is expected to further experience lucrative growth on account of rising demand for bioplastics and recycled plastics.

• The global market volume for plastic compounding should grow from 475.9 billion pounds in 2021 to 540.4 billion pounds by 2026 with a compound annual growth rate (CAGR) of 2.6% for the period of 2021-2026.

• The global bioplastics market volume should reach 3.3 million metric tons by 2026 from 2.2 million metric tons in 2021 at a compound annual growth rate (CAGR) of 8.3% for the forecast period of 2021 to 2026.

Source: https://www.globenewswire.com/news-release/2022/04/25/2428040/0/en/Global-Plastics-and-Composites-Market-Outlook-Report- 2022-Sustainability-and-Circularity-Oriented-Innovations-to-Drive-Transformational-Growth.html

https://www.globenewswire.com/news-release/2022/04/25/2428040/0/en/Global-Plastics-and-Composites-Market-0utlook-Report-2022-

Sustainability-and-Circularity-0riented-Innovations-to-Drive-Transformational-Growth.html

Indian Plastics industry

The Indian plastics industry has been developing fast with market growth and diversification in recent years. The industry is likely to see increasing demands in the post-pandemic era. According to the Directorate General of Commercial Intelligence and Statistics (DGCIS) of India, the Indian plastics industry hosts more than 2,000 exporters.

In FY 2019-20, the plastics export in India stood at US$ 7.045 billion with the highest contribution from plastic raw materials at US$ 2.91 billion, followed by plastic sheets, films and plates at US$ 1.22 billion, and packaging materials at US$ 722.47 million.

Demand for plastics expected to increase

The Indian plastics industry produces a wide array of plastics, including polypropylene (PP), polyethene terephthalate (PET), polyvinyl chloride (PVC) and more. PP is the most produced polyolefin across India.

The PP demand in India grew at a CAGR of around 8.51% during 2015-2019 and is expected to achieve a healthy growth rate in 2022-2030.

The Government is taking steps to make the plastic business a rupees ten-lacs crore industry in the next five years.

India is a growing market of plastic industry and by the end of 2030 its use in the country will be 30 million tonnes. 95% plastic producing units in the country are in the MSME sector and the Government is providing assistance to them through different initiatives.

There are 3,500 modernised plastic recycling units in the country along with 4,000 unorganised recycling plants. The plastic industry is playing a significant role in the Make in India initiative.

Source: https://newsonair.com/2022/03/04/plastic-business-to-grow-into-a-ten-lakh-crore-industry-in-next-5-years-says-centre/

https://www.aninews.in/news/business/business/7th-ptastasia-2022-presenting-the-future-piastics20220331174630/#:~:text=New%20

Delhi%20%5BIndia%5D%2C%20March,from%2020%20%2D%2023%20April%202022.

Home Furnishing Business

This sectors growth has been driven by the socio-economic changes and rapid urbanisation in India. We are a country with a large base of young population who have a high disposable income and are also willing to spend for better lifestyle. Over the last few years, the real estate boom has allowed the young population to own a house of their own with easy loan schemes given by the banks and Government. The new homes for the small families have been a major driving factor as they are spending a considerable amount of setting it up. This has opened up a major market for home decor and furnishing brands.

The online home decor market in India is expected to increase by US$ 3.75 billion from 2021 to 2026, and the markets growth momentum will accelerate at a CAGR of 10.24%. The online home decor market share growth in India by the home furniture segment will be significant for revenue generation.

Tier-I and tier-II cities are the main target markets for home furniture manufacturers because these cities provide vendors with access to all their requirements to operate their online distribution channels successfully, including logistics and e-retailers.

This has prompted manufacturers to ensure that all products sold offline are available online also. Thus, the growing e-commerce sector will boost the demand for online home furniture in the region during the forecast period.

Factors propelling growth of home Decor and Furnishing sector

- People have started taking their home as the reflection of themselves and so, a lot of people are now spending more on both furniture and fixtures and also on home decor

- Working women are spending a lot on home fashion

- Disposable income, better education and also the growing trend of individuals opting for professional services to do their interiors have together led to a rise in this category

- Indians are now and have an exposure to lifestyles in other countries, this inspires them to have a similar lifestyle for themselves too

Our Home Furnishings Business started long back in 2004. Over the years we grew our business and today we are a trusted global supplier to our clients. To serve the clients, we have a dedicated EOU facility with more than 48 machines and a dedicated plastics facility at the Companys Halol Complex, which is operational from September 2021. With the Home Furnishing Majors entry into the Indian market and also opening of its online shopping website for selected cities in India, we see huge prospects of growth with regards to our clientele in the times to come.

Source: https://www.indiaretailing.com/2017/05/01/retail/india-home-furnishing-market-prospects-and-opportunities/

https://www.prnewswire.com/news-releases/online-home-decor-market-in-india-set-to-grow-by-usd-3-75-billion-from-2021-to-2026--home-furniture-segment-to-be-signiftcant-for-revenue-generation--17000-technavio-reports-301495912.html

Toys Business

The global toys market size was US$ 129.45 billion in 2020. The global COVID-19 impact has been unprecedented and staggering, with the product witnessing a positive demand shock across all regions amid the pandemic. The global market exhibited a stellar growth of 22.30% in 2020. The market is projected to grow from US$ 141.08 billion in 2021 to US$ 230.64 billion by 2028 at a CAGR of 7.30% in the 2021-2028 period. The sudden fall in CAGR is attributable to this markets demand and growth, returning to pre-pandemic levels once the pandemic is over.

Toys play a major role in developing childrens minds by improving their thought process and decision-making ability. They consist of different categories such as brain training, physical activity, promotional merchandise, and collectibles. Festival occasions are the major means of selling different kinds of play items to the kids for the associated companies. Therefore, the manufacturers are introducing different types of dolls that suit childrens festivals, which, in turn, boosts their overall revenues.

The emergence of gaming items made up of eco-friendly materials such as bamboo, clay, cork, and others are likely to ease the demand for sustainably made dolls. Moreover, companies are increasingly focusing on developing games from recycled plastic material to meet such a demand, this in turn will tend to increase the market growth.

Driving Factors

• Rising social media influence of toy companies to propel market growth

• Recent toy technology events to support market growth

• The growing number of websites offering a wide range of toys and games has increased the demand for these products, especially among working parents who seek easy accessibility and convenience

• Rising income levels in the emerging markets

• Baby toys becoming smarter designed specifically for learning purposes

In 2021-22, we have ramped up this business and are expecting it to grow further in coming years. We had entered this industry by establishing relationship with one of the major players in the Toy market and we are proud to announce that we have positioned ourselves stronger in the industry by entering into relationship with other global toy giants. We foresee huge growth potential in this business going ahead as many global toy companies are now planning to diversify their sourcing and are looking at India as a potential manufacturing destination.

Source: https://www.fortunebusinessinsights.com/toys-market-104699

Global Pharma Devices Market

The global medical device market held a market value of US$ 434.2 billion in 2021 and is estimated to reach US$ 625.3 billion by the year 2027. The market is anticipated to register a CAGR of 6.3% during the forecast period of 2022 to 2027. The market volume for medical devices in 2021 is subjected to be 66,499,150.5 thousand units.

The increase in chronic diseases, such as, arthritis, liver inflammation, cancer, renal diseases, diabetes chronic pain, sciatica, and other nervous disorders boost the demand for medical devices. For instance, according to the Indian Council of Medical Research (ICMR), the Institute for Health Metrics and Evaluation, and the Public Health Foundation of India in 2019, 72 million Indians suffer from Type-2 diabetes, and this statistic is projected to be nearly double to 134 million by 2025, provided the current unhealthy dietary trends continue. In addition to that, the International Diabetes Federation states that the number of diabetic populations worldwide was 463 million in 2019.Such high statistics will aid in the market growth of the medical devices.

The rising elderly population across different countries indirectly rises the usage of medical devices for different vital functions. For instance, in India, geriatric population is predicted to be 193.8 million in 2031 including 92.9 million elderly males and 100.9 million elderly females. Such high statistics point towards the high usage of medical devices in high population countries, such as, India, China among others.

Source: https://www.researchandmarkets.com/reports/5511315/global-medical-device-market-by-product-by Rs.utm_source=GNOM&utm_medium=PressRelease&utm_code=3x3zzb&utm_campaign=1657629+-+Global+Medical+Device+Market+to+2027+-

+by+Product%2c+Application%2c+End-user+and+Region&utm_exec=jamu273prd

Global Pharma Drug Delivery Market

The drug delivery devices market was valued at US$ 258.81 billion in 2021, and it is expected to reach US$ 394.03 billion by 2027, registering a CAGR of 7.40% during the forecast period of 2022-2027.

The injectable drug delivery devices segment is estimated to witness a healthy growth over the forecast period. The injectable drug delivery devices are considered to administer drugs either intravenously, intramuscularly, or subcutaneously. The injectable method is the frequently used method for drugs with poor oral bioavailability, targeted drug delivery system, and delivery of drugs at the site of action. Injectable drug delivery is used in conditions, such as hormonal imbalance, diabetes, cystic fibrosis, autoimmune diseases, pain, Wilsons disease, hemophilia, hepatitis C, and ribose-5-phosphate isomerase deficiency.

An increase in the adoption of injectable drugs is currently driving the growth of the market. Additionally, companies operating in the prefilled syringes industry are getting regulatory approvals for various drugs used in syringes to increase their market share. For instance, in June 2019, IPSEN Biopharmaceuticals received UD FDA approval for its new prefilled syringe for Somatuline Depot (lanreotide).

One of the advantages of prefilled syringes over traditional packaging in vials includes ease of use. Prefilled syringes essentially eliminate the processes required before the use of the drug in a vial. Additionally, it helps eliminate dosing errors. Thus, due to the factors mentioned above, the injectable drug delivery devices segment is expected to register significant growth over the forecast period.

Source: https://www.mordorintelligence.com/industry-reports/drug-delivery-devices-market

Pharma Packaging Business

The global pharmaceutical packaging market size was US$ 90.23 billion in 2019 and is projected to reach US$ 153.93 billion by 2027, exhibiting a CAGR of 6.4% during the forecast period.

The pharmaceutical industry is growing at an unprecedent rate. The need for packaging in the medical industry is mainly dependent on the prevalence of communicable and non- communicable diseases.

These packaging solutions are used to secure, store and protect drugs during transportation and storage.

These solutions are highly regulated to ensure the protection of the medicines from physical damage and external influences that might lead to contamination until the consumption of medicines. Pharmaceutical packaging also helps to maintain the stability of the product through its shelf life, and is also used for product promotions. Further, it also helps manufacturers to differentiate their products from competitors. The rising demand for these products, in turn, will aid the development of novel drug packaging systems.

Plastic & polymers are the major raw material type used for pharmaceutical packaging. Cost-effectiveness, and excellent shatter resistance makes plastic an effective raw material for pharma packaging. Plastic can be easily converted into the required shapes such as vials, bottles, applicators, etc.

Source: https://www.fortunebusinessinsights.com/pharmaceutical-packaging-market-102860

We are one of the Indias leading injection moulding companies in the pharma devices and packaging field. We are not just converters, we believe in providing total solutions to our clients, right from manufacturing to also assisting them in obtaining regulatory approvals. Shaily Engineering Plastics Limited has carved a niche for itself in the Pharma Devices and Packaging market. We have been able to build a strong pipeline in this segment which gives us confidence that it will become a major growth driver for the Company in the near future. We are expected to complete exhibit supplies of major medical devices in the years to come, creating strong pipeline for years to come for their commercial supplies.

In the last few years we have spent considerable time in developing our own intellectual properties for drug delivery devices, which is now reflecting in our performance. Healthcare business earns better margins for us and is poised to grow at a faster pace.

In Pens we have a strong product portfolio which is rare for any company to have globally. We have acquired 3 new customers for pen in the current fiscal year, 1 in insulin pen and 2 for GLP. During the year we have, added 12 drug delivery devices in commercial production. We aim to grow considerably in this segment over the years to come.

Carbon Steel Furniture Business

The global carbon steel market size was valued at US$ 887.7 billion in 2019 and is anticipated to attain a CAGR of 3.4% from 2020 to 2027. Increasing focus on infrastructure development particularly in Asia-Pacific countries is projected to drive the consumption of carbon steel products over the coming years. The Asia-Pacific is likely to attract nearly 50% of infrastructure investment over the coming years. Countries such as India, China, and Southeast Asian countries are spending higher portion of their budget on infrastructure development to boost the overall economic growth.

Source: https://www.grandviewresearch.com/industry-analysis/carbon-steel-market

We have done an Investment of Rs.63 crore where Phase 1 plant is built in 70,000 sq. ft. area (total land of the facility is 8L sq. ft.). 600 tons of RM steel processed/annum and we started commercial production in Q3 2020-21. We have received orders for 6 new products which has scope to grow in future.

Automotive Segment

We continue to develop products and address the new age requirements of auto companies in their bid to enhance their performance. We continue to maintain steady state of business with our customers in this segment. Our product offerings are highly niche to this segment. We are expecting some launch of products happening from Shaily in this segment in the coming year.

FMCG Segment

In the FMCG segment, we provide end-to-end solutions that include Vacuum Metalizing, High Speed Pad Printing, Hot Stamping & Hot Foiling, Ultrasonic Welding and Painting. We have an injection moulding facility & secondary operation facility with high level of engineering skills.

In the appliances and lighting segment, we supply critical components for the needs of various kinds of knob assemblies for different appliances.

Financial Performance of the Company for 2021-22

• The Company reported a Consolidated Revenue of Rs.57,653.42 lacs. Standalone revenue stood at Rs.57,467.90 lacs in 2021-22 vis-a-vis 36,317.71 lacs in 2020-21.

• The Company reported Consolidated EBITDA of Rs.9001.61 lacs in 2021-22. Standalone EBITDA stood at Rs.8,984.67 lacs in 2021-22 as compared to Rs.6213.77 lacs in 2020-21 i.e. a growth of 44.59% Y-o-Y. EBITDA margins reduced by 148 bps and reached to 15.63% in 2021-22.

• Consolidated Profit Before Tax (PBT) is Rs.4,653.38 lacs in 2021-22. Standalone Profit Before Tax stood at Rs.4,640.76 lacs as compared to Rs.2,988.35 lacs in 2020-21 i.e. a growth of 55.29%.

• The company reported Consolidated Profit after Tax of Rs.3,526.63 lacs in 2021-22. Standalone Net Profit i.e. Profit after Tax stood at Rs.3,514.01 lacs in 2021-22 as compared to 2,202.08 lacs in 2020-21 i.e. a growth of 59.58% Y-o-Y.

• The revenue mix for exports to domestic sales stands at 75:25. The revenue mix continue to skew towards exports.

• Our Debt to Equity ratio stands at 2.11 times

• Total Capex spend (including work in progress) during 2021-22 is Rs.12,656.79 lacs. The major capex has been towards the new plastics facility, Healthcare and Toys business

• Looking at the expansion projects on hand, the Company wishes to conserve cash for internal accrual purpose and hence do not propose any dividend.

Significant changes in Key Financial Ratios during 2021-22

The key financial ratios on Standalone basis are as below:

Key Financial Ratios	As at 31 March 2022	As at 31 March 2021	Variance (%)
Debtors Turnover Ratio	6.65	5.40	23.14%
Inventory Turnover Ratio	4.25	3.90	8.92%
Interest Coverage Ratio	5.91	5.37	10.03%
Current Ratio	1.56	1.24	25.95%
Debt Equity Ratio	0.47	1.10	-57.75%
Operating Profit Margin (%)	15.63%	17.11%	-8.62%
Return on Net Worth (%)	12.80%	12.91%	-0.78%

Note: Debtors and Inventory Turnover ratio is considered in number of times.

KEY DEVELOPMENTS DURING THE YEAR Shaily (UK) Limited :

Ramp up of operations in the UK. Started design center operations.

Note: Shaily (UK) Limited is a Wholly Owned Subsidiary of the Company and headquartered in the UK. Shaily UK will be the design and research & development centre for various drug delivery devices. It has been establised for the sole purpose of creating leading technologies across the Pharma business segment that is in-license through our customers either directly or through product manufacture and supply. The Company is looking forward to expand our brand with this subsidiary.

consumer Business :

toys : Started supplies to a global toys company.

new Plastics Facility at halol : Trial Production started at New Plastics Plant in Q1 2021-22. New Plastics facility started commercial operations in September 2021.

home furnishing : Expanding brush manufacturing capacity. New capacity to be operational by Q1 2022-23

Automotive & Engineering business :

Confirmation received for three actuator rods.

healthcare business :

- Two (2) new pen development contracts signed

- Acquired two (2) additional patents for pen devices in Shaily (UK) Limited

- Confirmation for two (2) Injector Pens received. Development would be done from Shaily (UK) Limited

- IP acquired for Pen Injector

- Contract for Pen Injector finalised with leading Indian Pharma Company

- Added 12 drug delivery devices in commercial production

Others :

Listing on the National Stock Exchange of India Limited (NSE) : Equity shares of the Company got listed on the NSE effective from 04 April 2022.

PREFERENTIAL ALLOTMENT OF SHARES

During the Financial Year 2021-22, the Company through preferential allotment by way of private placement issued 8,55,072 Equity Shares of face value Rs.10/- each fully paid up at a price of Rs.1,755/- per Equity Share (inclusive of premium of Rs.1,745/- per Equity Share), for an aggregate consideration of Rs.150,06,51,360/- (Rupees One Hundred Fifty Crores Six lacs Fifty One Thousand Three Hundred and Sixty only) to funds managed by marquee Investor groups - Lighthouse Funds and White Oak Funds.

This fund raise is being deployed for towards capacity expansion and for the long-term growth of the Company. The investment will be in the Healthcare, Toys and Home Furnishing business. This investment will allow us to leapfrog in the next phase of growth and strengthen our relationship as a strong supplier to global brands.

AWARDS AND RECOGNITIONS RECEIVED DURING 2021-22

- Certificate of Excellence in BPC-PGP Glass All India Kaizen Competition 2021-22, organised by Baroda Productivity Council on 12 May 2022.

- Top Exporter of Engineering Plastics Components for the year 2019-20 and 2020-21 conferred by the Plastics Promotion Council, on 16 April 2022. This award marks the 18*^h consecutive year, the Company has been awarded this honour.

ANALYST & INVESTOR MEETS/CONFERENCE CALLS

The Company hosts Earnings Call to discuss the financial, operational and business performance with Investors/Analysts, every quarter, after declaration of the results. Result presentations and transcripts of the earnings call held till date is available on the website of the Company at https://shaily.com/investors/investor-presentation-updates. The Company also participated in various Institutional Investor/ Analyst meets during the year. The details of the participation(s) are available on the website of the Company at www.shaily.com

QUALITY CERTIFICATIONS

The Company continues to focus on quality and strives to exceed customer expectations at all times. SEPL is certified under various standards to meet client demands and enhance value delivery.

SEPL is accredited with the following certifications:

TUV Rheinland - iSO 9001:2015

Design, Development and Manufacturing of Plastic Molded Components and Assemblies.

Automotive - TUV Rheinland - IATF 16949:2016

Manufacture of Plastic Molded components for interiors, seating systems, lightning systems, radiator tanks and guide bush for the automotive industry without product design and development.

Primary Packaging - TUV SUD - ISO 15378:2015

Design, Development and Manufacturing of Plastic Moulded components and assemblies, used as primary packaging material for Medicinal Products.

Medical Devices - TUV Rheinland - iSO 13485:2016

Manufacturing of Plastic molded components and assemblies, used in medical devices.

MDSAP - Medical Devices Single Audit Programme

Contract Design, Contract and Manufacturing of re-usable and disposable pen injectors, rectal applicators, dry powder inhalers, vaginal tablet applicators, plastic bottle applicator with brush, underarm applicator and vaginal speculum with led illuminator for drug delivery and medical examination under ISO 13485:2016.

SOCIAL COMPLIANCE CERTIFICATION

The Company continues to be responsible for SEPLs social accountability policies. After due process of audit, SEPL has been accorded with Social Accountability certification as below:

SA 8000:2014 - Certification for organisations Social Accountability Management System.

Responsible Business Alliance (RBA)

Audit in respect of compliance under Electronic Industries Code of Conduct (EICC/RBA version 6.0) and compliance with state, regional, national and international laws.

SECURITY CERTIFICATIONS

Shailys business being a customer-driven business is audited periodically based on internationally accepted standards. The Company continues to be accorded with high satisfactory Global Audits certifications. Below are few global audits conducted across the Companys various facilities.

Intertek - Global Security Verification

Audit in respect of international supply chain security standards to secure trade, protection against terrorist acts and to combat illegal trafficking.

Authorised Economic Operator

Recognition & appreciation of companys commitment to secure the international supply chain and in compliance with the WOCs SAFE framework Authorised Economic Operator (AEO) programme under CBIC Circular Number 33/2016 dtd 22.07.2016.

RECOGNITIONS

The Company is recognised by the Government with the following recognitions :

Recognition of In-house R&D Unit

Government recognised R & D facility, recognised by Department of Scientific Research and Industrial Research Technology Bhavan, New Delhi established under Ministry of Science and Technology.

Two Star Export House

The Companys 100% EOU Plant has been accorded with the status of two-Star Export House under provisions of Foreign Trade Policy 2015-20 by the Directorate General of Foreign Trade (DGFT), Ministry of Commerce & Industry.

HUMAN RESOURCES :

With a total workforce of 2,000+ employees, which includes staff, permanent and contract workers, the prime objective of Human Resource function is employee development. To achieve success and profitability, the Company relies on its greatest assets - intellectual capital. SEPLs culture fosters continuous learning. In-house training programmes for employees at all levels are conducted on a regular basis. New employees are educated about the Company with Induction training. Under this programme, new recruits undergo an induction training by departmental heads, which offer a broad overview of the Companys varied functions, processes, strategy and growth objectives. This allows the new incumbent to fit seamlessly within the organisation structure, culture and environment.

Employee Engagement Initiatives

The Company periodically carries out various employee motivation and engagement activities which include various festival celebrations, birthday celebrations, sports and competition events.

Internal Control System

The Company has a system of Internal Controls over financial reporting ensuring the accuracy of the accounting system and related financial reporting. The Internal Control System adheres to local statutory requirements for orderly and efficient conduct of business. The efficacy of the internal checks and control systems are validated by Internal as well as Statutory Auditors.

The Audit Committee reviews the adequacy and effectiveness of the internal control systems, significant audit observations and monitors the sustainability of remedial measures.

OUTLOOK ON OPPORTUNITIES AS WELL AS THREAT, RISKS AND CONCERNS.

Consumer Business :

• Home Furnishing:

- We take pride in being supplier of choice for one of the worlds most reputed & largest Swedish Home Furnishing Majors.

- With the Swedish Home Furnishing Major planning to expand its presence in the country, the Company stands to gain. Also, Home Furnishing majors commitment to procure more and more domestically augurs well for us. We plan to further leverage our long-standing relationship to drive incremental growth in our business with the client.

- We have set up a new plant at Halol for the Consumer business. We have built the requisite capabilities for new projects and remain confident of delivering as per the expected standards.

• Toys Business :

- We successfully executed an order for this business for one of the largest global Toys company.

- Shaily is manufacturing childrens products which comply with the highest international standards

- We foresee huge potential in this business and believe that it can become as large as our existing top customers in the years to come

• Healthcare Business :

- Expansion of the generic market, technological advancement & strict Government regulations for conventional packaging are major factors that are expected to drive growth in this business.

- Also, low competitive intensity due to higher compliance costs, longer gestation periods and zero tolerance towards any errors creates entry barriers for this business.

- The Company has built varied capabilities in this business ranging from applicators to drug delivery devices. Developed its own Intellectual property in Injector Pens.

- The Company has dedicated Healthcare facility, in-house research and development division.

• Steel Furniture Business :

- Our largest client, the Swedish Home Furnishings major entrusted us with a new line of product into the Carbon Steel business. This indicates the confidence laid by them on our execution capabilities. The Company has already commenced commercial supplies in the previous financial year and significant ramp up is expected in the years to come.

• Other Business :

- In the automotive business, the Company has been successful to garner incremental business from existing global clients.

As the Indian as well as world economy continue to struggle to come out of COVID-19 pandemic impact, it is important to consider threats associated with COVID-19 impact.

- Delay in execution due to external factors out of the Companys control as well as adverse changes in the International business environment may impact business as the Company derives large portion of Revenues from Export Sales.

- For expansion of business, a lot depends upon various external factors. We have heavy reliance on export markets and therefore how other countries are releasing and scaling up the economy will be a guiding factor for us.

- Container shortage faced around the globe, possesses a huge risk for delay in export supplies and rise in base prices.

- Client concentration risk is high as a large portion of the total revenue is derived from a single client. We have been working to penetrate into new clients and been successful in doing so, thereby gradually reducing risk of high reliance on single client. With growth in Toy and Pharma Business, we will have this risk to be reduced over a period of time.

- Since we are into rapid and multiple expansion for this year too, we run the risk of overrun of cost as well as delay in start up/ scaling up of the new plastic facility. The expansion is being taken at our existing Rania facility for Toys Business demand and so it is imperative that all expansions are controlled and focused for in time and within cost deliverables.

- The Company operates in contract manufacturing business as an OEM supplier, hence, business depends on customer requirements. Any fluctuation in the customers demand can affect the Companys performance. We are also exposed to project risks due to delay in project implementation/cost escalation, risks on account of fluctuation in FX rates.

RISK MANAGEMENT:

As we transform our business and expand our product portfolio, understanding and managing our principal risks becomes more important than ever. We set out below the risks that are most material to our business and performance at this time. We also explain some of the mitigating actions that we believe help us to manage these risks.

Risks	Mitigation Strategies
Revenue growth: We are a B2B player and are dependent on the success of our customers products in end-market. Thereby, our business is exposed to global market forces, fluctuations in national economies, geopolitical uncertainty and natural crises, among others	We have diversified our business model and presence across multiple business offering comprehensive range of product portfolio that enables us to cater evolving customer requirements.
Labour and manpower availability: Production schedules gets impacted owing to challenges in terms of manpower availability	We have increased the mix of permanent labour and manpower in all our facilities. Further, we have hired technical manpower from ITI. Also, we have expansions happening in multiple locations (Rania and Halol Facilities) reducing our reliance for labour in one locality.
Raw material price volatility: Volatility in prices of raw materials can impact margins	We have a raw material price-pass-through arrangements with all our customers. The price-pass-through mechanism is varied across customers. With reputed customers and a streamlined process, the pass-through process of price revision is transparent and easier to execute.

	For and on behalf of the Board of Directors
	Mahendra Sanghvi
Vadodara	Executive Chairman
May 30 2022	DIN :00084162