shish industries ltd Management discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

INDUSTRY STRUCTURE AND DEVELOPMENTS & OUTLOOK

Introduction

Countries around the world are facing multiple overlapping challenges, which are hindering—even reversing—progress toward their development goals. Many countries are still grappling with the health, economic, and social impacts of the COVID-19 pandemic; and vaccination rates remain low in the poorest countries. Already high inflation has been exacerbated by the Russian invasion of Ukraine, making food, energy, and other necessities more expensive, with much of the burden falling on the poorest and most vulnerable people. Climate change continues to pose long-term risks, as natural disasters and extreme weather affect everything from agriculture to infrastructure. And growing fragility and conflict around the world are deepening food insecurity, forcing millions of people to flee their homes, and compounding the downturn in growth prospects from two years of the pandemic. Real median income has declined further in many countries, and the tragic reversals in development during the pandemic have worsened. The world urgently needs to increase the supply of energy and massively expand reliable access to electricity in poorer countries. This will require major new investments in cleaner energy, energy efficiency, and electricity grids and transmission.

Indian economic review

Recovering from pandemic-induced contraction, Russian-Ukraine conflict and inflation, Indian economy had staged a broad-based recovery across sectors, positioning to ascend to the pre-pandemic growth path in FY22. Indias GDP growth is expected to remain robust in FY24. GDP forecast for FY24 to be in the range of 6-6.8 %. The Capital Expenditure of Central Government and crowding in the private Capex led by strengthening of the balance sheets of the Corporates is one of the growth drivers of the Indian economy in the current year. The credit growth to the MSME sector was over 30.6 per cent on average during Jan-Nov 2022. Indian Rupee performed well compared to other Emerging Market Economies in Apr-Dec 2022. Direct Tax collections for the period April-November 2022 remain buoyant. Enhanced Employment generation seen in the declining urban unemployment rate and in the faster net registration in Employee Provident Fund. Economic growth to be boosted from the expansion of public digital platforms and measures to boost manufacturing output.

Plastics Export Promotion Council

The PLEXCONCIL was established by the Ministry of Commerce and Industry in 1955. The main objective of this non-profitable organization is to showcase India as a reliable supplier of high-quality products. PLEXCONCIL is the apex body of the plastics industry in the country and represents more than 2,500 exporters who manufacture and trade plastics products ranging from plastic raw materials to semi-finished and finished items.

Plastic Export trend

Overall, the total plastics exports between April-September 2022 stood at US$ 6.38 billion. During this time period, the exports of plastic raw materials, medical items, and pipes and fittings increased by 32.3%, 24.8% and 17.9% over the same time last year, respectively.

In May 2022, the exports of plastics and linoleum from India were valued at US$ 1,073 million. During the same period, medical items of plastics; plastic films & sheets; plastic pipes & fittings; FRP & composites; packaging items; cordage fishnets & monofilaments; and miscellaneous products recorded strong growth. The cumulative exports for April and May 2022 grew 2.6% YoY to US$ 2,173 million.

Export Destinations

India exports plastic to more than 200 countries in the world. The top 5 consumer and houseware product importing countries are the USA, Germany Japan, the UK and France. India largely exports plastic and related products to the USA, China, UAE, Germany, Italy, the UK, Bangladesh, Nepal, Turkey, France, Viet Nam, Indonesia, etc.

The Minister for Commerce and Industry, Mr. Piyush Goyal, recently urged the industry to adopt international standards to help it expand its global footprint. India has recently signed a free-trade agreement with UAE and Australia, which will give the plastics industry new opportunities.

Government Initiatives

The Union Ministry of Commerce and Industry of India targets to increase the plastic exports of the country to US$ 25 billion by 2025. There are multiple plastic parks are being set up in the country in a phased manner that will help improve the plastic manufacturing outputs of the country. Under the plastic park schemes, funds of up to 50% of the project costs or a ceiling cost of INR 40 crore (US$ 5 million) per project.

Government initiatives like "Digital India", "Make in India", and "Skill India" will also boost Indias Plastic industry. For instance, under the "Digital India" program, the government aims to reduce the import dependence of products from other countries, which will lift the local plastic part manufacturers.

The government also launched a program for building Centres of Excellence (CoEs) to develop the existing petrochemical technology and promote the research environment pertaining to the sector in the country. This will aid in promoting and developing new applications of polymers and plastics in the country. Additionally, about 23 Central Institute of Plastics Engineering & Technology (CIPET) have been approved to accelerate financial and technological collaboration for promoting skills in chemicals and petrochemicals sector.

K t intuit i-mu

Products and Services

Group	Products
Industrial Packing	PP Corrugated Sheet - Twin Wall/3 Ply and Multi Wall/5 Ply; PP Bubble/Roll Sheet; Stout-Composite strap; Stuffex Dunnage Bags; FIBC Bags; Pallet Cover; Contractor Bag
Thermal Insulation Products	Premium Bubble insulation; Super Bubble Insulation; Strip 1.0 Carmika Vent; ECO Raddiant Barrier
PE/PP Woven fabrics	PP/PE Woven Fabric; House Wrap; Shishkin Gio Liner; Lumber Wrap; Poultry Curtain, Tarpaulin; Landscap Woven Fabric; Roof Underlayment; VCI Woven Fabrics
Packaging Depot	Plastic pallet Crates; BOPP Tapes; Stretch film; Foldable Plywood box; Wooden pallet, (Pine wood/Plywood); Wooden Box (Pine wood/Plywood); Corner/Edge guard; Pp strap; Pet strap; Cord strap

Research and Development (R & D)

We at Shish have taken a pledge to go green and have taken following measures to implement the same;

• Implemented a recycling program

• Conserve energy within the office

• Promote a paperless office

• Support green vendors

• Reduce by reusing

• Invest in office plants

• Conserve human energy

• Encourage sustainable transportation

• Get outside and volunteer

• Make green thinking a key part of your company culture

Packaging Business

The India Packaging Market was valued at USD 50.5 billion in 2019, and it is expected to reach USD 204.81 billion by 2025, registering a CAGR of 26.7% during the period of 2020-2025. Packaging is among the high growth industries in India and developing @ 22-25% per annum and becoming a preferred hub for the packaging industry.

By end use or application, industrial packaging market cater to various industries such as agriculture & horticulture, building & construction, automotive, chemicals & pharmaceuticals, food & beverage, engineering, metal products, plastic & rubber, electronics, and furniture.

Increased international trade demands for product safety and robust packaging options to overcome damage occurred by environmental factors and transportation will drive the global industrial packaging market. This enables the manufacturers to provide easier distribution and reduce transportation losses caused by the damage through the right packaging.

However, the non-availability of the right packaging product hinders industry growth. Low penetration of the industrial packaging product & services in developing countries hinders the manufacturing industries growth.

OPPORTUNITIES

• Growing demand for Food and Beverages, Agriculture, Healthcare, Others around the world has had a direct impact on the growth of the Plastic Corrugated Packaging

• Availability of products in a variety of sizes and strengths

• Comprehensive range of accessories to guarantee the best solution for every application

• Environment Friendly products

• Strong export network i.e. exporting to more than 45+ countries

• Approach to diversify and to reach out for new developments

• In depth research to provide solutions

• Modernized manufacturing units

• A surging demand for fresh agricultural products, processed food, life sciences and other products has led to a recurring need for a temperature-controlled supply chain and we offer a wide range of products to cater such needs

THREATS

• High Tax Structure

• Legislatives fiats like compulsory use of jute bags for packing food grains and sugar have stifled demand for plastics

• high cost structure

• Non-bio degradability of plastic and its components

• Low duty protection

• Harmful environmental effects of the processing of plastic and is a major restraint for the market

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE & DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The company is primarily engaged in the business of Corrugated Plastic Sheets, which constitute a single reportable segment in accordance with Ind AS 108 - "Segment Reporting".

FINANCIAL HIGHLIGHTS

			INR In Lakh
	Standalone		Consolidated
	F.Y. 2022-23	F.Y. 2021-22	F.Y. 2022-23	F.Y. 2021-22
Revenue from Operations	7,022.97	5,002.14	6,853.79	5,002.14
Other Income	175.15	99.91	178.77	97.06
Total Income	7,198.12	5,102.05	7,032.55	5,099.21
Less: Total Expenses before Depreciation, Finance Cost and Tax	6,296.24	4,641.97	5,955.60	4,602.18
Profit before Depreciation, Finance Cost and Tax	901.88	460.08	1,076.95	497.03
Less: Depreciation	99.62	100.63	127.92	109.96
Less: Finance Cost	33.73	33.97	51.23	39.88
Profit Before Tax	768.52	325.48	897.81	347.18
Less: Current Tax	193.42	81.92	219.28	85.64
Less: Short provision for earlier year	6.34	-	6.34	-
Less: Deferred tax Liability (Asset)	(4.43)	(3.81)	(5.68)	(3.41)
Profit after Tax	573.19	247.37	677.87	264.95

FINANCIAL PERFORMANCE On Standalone Basis

During the year under review, the revenue from operation of the Company was stood at INR 7,022.97 Lakh as against that of INR 5,002.14 Lakh for previous year. Revenue from operation of the Company was increased by 40.40% over previous year.

Profit before Tax for the financial year 2022-23 stood at INR 768.52 Lakh as against that of INR 325.48 Lakh making the net profit of INR 573.19 Lakhs for the financial year 2022-23 as against the net profit of INR 247.37 Lakhs for the financial year 2021-22. The increase in profit after tax was achieved due to effective purchase policy of the Company and thereby reducing the cost of raw materials.

During the year under review, export sales of the Company was increased by 4.84% than that of previous year, due to which the revenue of the Company was increased. On the other side, the Company also performed well in Domestic Market. The domestic sales of the Company was increased by 139.85% than that of previous year.

On Consolidated Basis

The consolidated revenue from operation of the Company for financial year 2022-23 stood at INR 6,853.79 Lakh as against that of INR 5,002.14 Lakh for previous year. The consolidated net profit after tax for the financial year 2022-23 was stood at INR 677.87 Lakh as compared to INR 264.95 Lakh for the previous financial year 2021-22.

The Company has reported record growth of 155.67% in consolidated net profit after tax and 37.02% in revenue for the full financial year 2022-23 as compared to the previous financial year 2021-22. The increase in profit after tax was achieved due to effective purchase policy of the Company and thereby reducing the cost of raw materials.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS (STANDALONE BASIS)

Particulars	F.Y. 2022-23	F.Y. 2021-22	Reason
Debtors Turnover	4.67 times	9.22 times	Ratio decreased due to significant increase in Trade Receivables as compared to increase in Revenue.
Inventory Turnover	8.09 times	7.11 times	Ratio improved due to decrease in holding period of Inventory.
Interest Coverage Ratio	31.76 times	19.00 times	Decrease in borrowing cost viz a viz increase Profit Before Tax and Interest resulted into improvement in the ratio.
Current Ratio	2.48: 1.00	2.11: 1.00	Current Ratio has increased due to increase in Assets.
Debt Equity Ratio	0.22: 1.00	0.27: 1.00	Due to increase in Shareholders fund, ratio decreased.
Operating Profit Margin (%)	11.30%	6.87%	Operating Margin has been increased due to increase in sales during the financial year viz a viz decrease in raw material cost.
Net Profit Margin (%)	8.16%	4.95%	Net Profit Margin has been increased due to increase in Sales viz a viz reduction in cost of Raw Materials.
Return on Net Worth	22.53%	17.07%	Return on Net worth has been increased due to increase in earning.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS (CONSOLIDATED BASIS)

Particulars	F.Y. 2022-23	F.Y. 2021-22	Reason
Debtors Turnover	4.86 times	9.24 times	Ratio decreased due to significant increase in Trade Receivables as compared to increase in Revenue.
Inventory Turnover	7.35 times	7.11 times	Ratio improved due to decrease in holding period of Inventory.
Interest Coverage Ratio	25.36 times	15.48 times	Decrease in borrowing cost viz a viz increase Profit Before Tax and Interest resulted into improvement in the ratio.
Current Ratio	2.50: 1.00	2.13: 1.00	Current Ratio has slightly increased due to decrease in liabilities.
Debt Equity Ratio	0.27: 1.00	0.34: 1.00	Due to increase in Shareholders Fund, the ratio improved.
Operating Profit Margin (%)	13.64%	7.42%	Operating Margin has been increased due to increase in sales during the financial year viz a viz decrease in raw material cost.
Net Profit Margin (%)	9.89%	5.30%	Net Profit Margin has been increased due to increase in Sales viz a viz reduction in cost of raw materials.
Return on Net Worth	25.93%	18.18%	Return on Net worth has been increased due to increase in earning.

RISK AND CONCERNS

The Company is exposed to various risks and uncertainties which may adversely impact its performance. The Companys future growth prospects and cash flow generation could be materially impacted by any of these risks or opportunities. The major risks as identified by the Company are demand-risks due to any resurgence in the COVID 19 pandemic, currency risk associated with imports, unfair competition, etc. The Company follows the Enterprise Risk Management (ERM) framework to manage and mitigate such risks which is primarily based on the integrated framework for enterprise risk management and internal controls developed by the Company.

INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

Internal Control system and adequacy Internal Control measures and systems are established to ensure the correctness of the transactions and safe guarding of the assets. Thus, internal control is an integral component of risk management. The Internal control checks and internal audit programmes adopted by the Company plays an important role in the risk management feedback loop, in which the information generated in the internal control process is reported back to the Board and Management. The internal control systems are modified continuously to meet the dynamic change. Further the Audit Committee of the Board of Directors reviews the internal audit reports and the adequacy and effectiveness of internal controls.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

The Company believes in establishing and building a strong performance and competency driven culture amongst its employees with greater sense of accountability and responsibility. The Company has taken various steps for strengthening organizational competency through the involvement and development of employees as well as installing effective systems for improving their productivity and accountability at functional levels. The Company acknowledges that its principal asset is its employees. Ongoing in-house and external training is provided to the employees at all levels to update their knowledge and upgrade their skills and abilities. As on March 31, 2023, the Company had total 46 full time employees. The industrial relations have remained harmonious throughout the year.

CAUTIONARY NOTE

Statements in this Report, describing the Companys objectives, projections, estimates and expectations may constitute forward looking statements within the meaning of applicable laws and regulations. Forward looking statements are based on certain assumptions and expectations of future events. These statements are subject to certain risks and uncertainties. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The actual results may be different from those expressed or implied since the Companys operations are affected by many external and internal factors, which are beyond the control of the management. Hence the Company assumes no responsibility in respect of forward-looking statements that may be amended or modified in future on the basis of subsequent developments, information or events.