Your Directors have pleasure in presenting this Management Discussion and Analysis
Report for the year ended on March 31, 2023.
INDUSTRY STRUCTURE AND DEVELOPMENTS:
Overall packaging industry in India is projected to be Rs. 2,150 - 2,200 billion for
fiscal 2023 The polymer packaging industry contributes substantially to the GDP growth in
India and at the same time support the consumer-led industries such as FMCG and pharma,
key sectors for growth in India, with reliable of packaging solutions.
Packaging industry to grow moderately in medium term:
CRISIL projects the Indian packaging industrys market size at Rs 2,150-2,200 billion
in fiscal 2023, growing at CAGR ~7% from fiscal 2017-22. Polymer packaging, which form
nearly 60-65% of the industry by revenue, grew ~6% during the period FY17-22. The paper
packaging segment also witnessed a strong ~12% CAGR revenue growth. On the other hand,
metal and glass packaging witnessed a ~3% and ~8% growth, respectively during fiscal
2017-2022. Demand for packaging segments comes from food packaging and pharma segments
Growth in consumer segments to drive packaging industry:
Over fiscals 2022-2027 we expect the industry to log 7-8% CAGR on the back of healthy
volume growth driven by polymer, paper and metals packaging segments. The pharmaceutical,
industry chemical, food product, and personal care sectors are expected to be the key
growth drivers. Fast-moving consumer goods (FMCG) companies increasing focus on
innovative packaging solutions that offer scope for enhanced aesthetic value and extended
shelf life will also propel demand. Polymers form more than half of packaging material:
Polymers have emerged as the most preferred packaging material with 60-65% share in
overall packaging. The segment has clocked ~6% CAGR between fiscal 2017-2022, following
paper packaging, which saw higher ~12% CAGR. Metal packaging witnessed ~8% CAGR during the
period and glass ~3% CAGR. In terms of end-user industries, the pharma and food product
segments witnessed a strong ~12% and ~7% CAGR during the period of fiscal 2017-2022,
driving demand for packaging. The personal care (~3% CAGR) and industry chemical segments
~4% CAGR also supported the overall industry demand. Traditionally, robust growth in
demand for FMCG products has been the key driver for the packaging sector. FMCG companies
focus on rural markets has boosted demand for polymer packaging, especially for pouches
and sachets.
SRMTLS PERFORMANCE AS INDUSTRY:
SRMTL is an ISO 9001:2015, 1SO 15378:2017 and DMF-type Ill certified Company engaged in
providing primary packaging solution. We currently manufacture a wide and diverse range of
packaging products such as laminated tubes (“Lami Tubes”), tube laminates and
flexible laminates. Our products are primarily used for oral care, pharmaceuticals,
cosmetics and fast-moving consumer goods (FMCG) sectors. Our products are available in
different sizes, diameters and circular shape as per the specifications of our customers.
Your companys major product is laminated tubes and laminates, which is used for
packing products in paste or gel form. Production related to Tubes was increased by 1.57 %
as compared to last year. The key growth driver for the year was tube laminate with 15.87
% growth in production as compared to last year. The numbers of key customers have been
tapped for this segment which can give impressive growth in the coming year. SEGMENT
-WISE/ PRODUCT WISE PERFORMANCE: The Company closed the year at higher level in laminated
tubes. This is because of robust orders of Laminates from domestic and export market.
OPPORTUNITIES, THREATS AND RISK PERCEPTION:
Laminated tubes are estimated to clock 10-11% CAGR over fiscals 2022-2027, led by
volume growth in personal care categories pharma, cosmetics and new food segment
The industry is expected to grow faster going ahead driven by rapid growth in
consumption of personal care products pharma, cosmetics and new food segment. Laminated
tubes are expected to clock a CAGR of 10-11% over fiscals 2022-2027, driven by increase in
volume sales of personal care categories and higher penetration in the India metro and
non-metro markets, increase in value addition and design aspects of tubes for attractive
marketing, and moderate increase in raw material prices. The change in mix towards high
value tube offerings in personal care and beauty category will drive value growth for the
industry. Over the next five years, extruded mono-layer and aluminium tubes are also
likely to be substituted by laminate tubes, especially in the skin care and
pharma/healthcare segments. The key growth trends expected to drive sales and realisations
of tube manufacturers are as follows:
e Continued shift to ABL tubes in the pharma segment for OTC ointments/ gels and
prescription cream-based skin application medicine
e Growth in end-user segments and rise in share of personal care categories in tubes,
driven by sales of lip care, eye care, hand creams, face care and OTC ointments/ gels and
prescription cream- based skin application medicine
e Growing concerns over package sustainability and costs are also likely to facilitate
substitution of bottles by tubes in personal care products
e Increase in exports potential and consumption in the European, Middle East and Africa
markets. Middle east and African markets have low penetration of production facilities
which creates potential for exports
e Shift from conventional oral care to beauty and pharmaceutical products, demanding
high packaging protection and value addition
e Increase in demand for sophisticated and attractive designs and prints on tubes
leading to rise in realisations
Challenges and risks in laminated tubes packaging
Acute competition: Competition is considerable for domestic medium and small-scale
players in the flexible packaging space. Large and established players enjoy superior
positioning owing to innovative products and better service offerings, in terms of design.
Rising cost pressures because of several tube manufacturers in the space and standard
low-cost offerings will ensure acute competition in the industry. Also, there is
competition from unorganised manufacturers owing to the low entry barriers. However,
manufacturers can reduce competitive intensity by focusing of research and development of
innovative products and introducing better design features.
Furthermore, the ability to provide new products in line with customers changing
requirement will provide an edge over competitors. In fact, the industry is undergoing
rapid changes, in terms of product innovation and offerings. But this lower lifecycle of
product design has further increased competition, and, hence, the need is for constant
innovation and improvement of the production facilities to manufacture new structure or
laminates effectively. Traditional rigid packaging users are also shifting to flexible
packaging mainly because flexible packages are aesthetically attractive, cost-effective
and sturdy
e Volatility in raw material prices: Polymer and aluminium foils are the key raw
materials. As raw material accounts of 60-65% of the product value, it plays a critical
role in determining profitability. Given that polymer is a crude oil-derivate, it is
subject to high volatility in prices. With current high crude prices, going forward crude
oil prices will is expected to see downward correction. The risk of loss or decline in
realisations from decline in prices is a key monitor able for the company.
e Backward integration by customers: Currently, laminated tubes are primarily directly
delivered to end-use customers. But, any backward integration by customers and the
development of in-house tube-making facilities will lower realisation for the laminated
tube industry. eo Lack of access to advanced technology: Consumer goods companies are on a
constant lookout for ways to cater to consumers evolving needs and make use of attractive
packaging to sale product in a highly competitive market. They tend to rely on flexible
packaging companies to innovate and attract more customers. At times, the flexible
packaging industry may find it difficult to keep pace with these fast-changing demands.
Furthermore, flexible packaging companies have to make constant technology upgrades from
product quality and printing capabilities to meet these demands, which would require huge
capital investments.
Due to increasing focus on maximising output and capacity utilisation, there is minimal
focus on research and development by small and mid-sized players. Most of the technical
components in domestic machinery are imported from Japan, the US and Europe, which leads
to a much higher capex to set up a plant. e? Increased demand for sustainable packaging:
Clients, especially established brands look for sustainable solutions for packaging with
minimum impact on environment. Players are innovating to include paper board based tubes,
sugar care paper tubes, post-consumer recycled (PCR) tubes made with recycled plastic
offering same barrier properties. Separation of laminates for recycling poses challenge
and substantial efforts for recycling. Thus demand for sustainable packaging, drives
players to constantly innovate and offer better packaging solution to clients without
impact the feel, look and protection offered by the tubes. oe Large capital expenditure
(capex): The packaging industry requires significant capital to enable investments in
plant and machinery, technology and research to enable innovation of new products.
eo Working capital cycle: Poor bargaining power increases their debtor and inventory
cycles, which drives up working capital requirements, thus hampering companies credit
profile.
e Impact on tourism: Travel-tubes sales were impacted on account of slowdown in travel
and tourism industry and macro-economic impact from covid pandemic.
RISK AND CONCERNS:
Challenges and risks in flexible packaging
Environmental issues: As it is widely known and already highlighted in this report,
plastic poses environmental concerns. The Indian packaging industry uses more than 50% of
the plastic produced in the country. This has resulted in increased legislation and
regulations to minimise the environmental impact of packaging materials. Companies,
especially in the flexible and rigid plastic space, are being targeted by regulators, as
these are seen to have maximum impact on the environment. For example, in February 2011,
the Supreme Court of India banned the usage of flexible plastics for tobacco products.
Government of India also notified the Plastic Waste Management Amendment Rules, 2021,
prohibiting identified single use plastic items by 2022. Thickness of plastic carry bags
increased from 50 to 75 microns from 30 September, 2021 and to 120 microns with effect
from the 315! December, 2022. High input costs: Raw materials account for 70-80% of the
total cost for a packaging player. The ability of players to pass on the rise in input
prices is limited as the industry is highly fragmented. At the same time, a decline in
input price has to be passed on to the customers. In many cases, raw materials are
imported, which exposes packaging players to volatility in exchange rates.
Large capital expenditure (capex): The packaging industry requires significant capital
to enable investments in plant and machinery, technology and research to enable innovation
of new products.
Lack of technology: Due to increasing focus on maximising output and capacity
utilisation, there is minimal focus on research and development by small and mid-sized
players. Most of the technical components in domestic machinery are imported from Japan,
the US and Europe, which leads to a much higher capex to set up a plant.
Rapid technological changes: Consumer packaged goods (CPG) companies are on a constant
lookout for ways to cater to consumers evolving needs. They tend to rely on flexible
packaging companies to innovate and attract more customers. At times, the flexible
packaging industry may find it difficult to keep pace with these fast-changing demands.
Furthermore, flexible packaging companies have to make constant technology upgrades to
meet these demands, which would require huge capital investments.
Working capital cycle : Poor bargaining power increases their debtor and inventory
cycles, which drives up working capital requirements, thus hampering companies credit
profile.
Regulatory constraints: Due to stringent government regulations, changing consumer
preferences, and environmental pressures, manufacturers are steering their strategies
toward circularity and leveraged new plastic technologies to develop recyclable and
sustainable solutions that include specific properties such as oxygen, moisture, light,
puncture, and chemical resistance, and easy-tear propagation. Key focus areas for
manufacturers include the development of alternative bioplastics solutions such as
polybutylene succinate and biopolyproplyene, along with the price and disposal of
bioplastics. BUSINESS OUTLOOK: Growth drivers in flexible packaging e Growth in organised
retail: India is emerging as the most favoured destination in the world for organised
retail. Also, e-commerce has been expanding rapidly, leading to a revolution in the retail
industry. Retailers are now leveraging digital retail channels, thereby enabling wider
reach to customers with less amount of money spent on real estate. Therefore, organised
retail and boom in e-commerce offer huge potential for growth of retailing in India,
which, in turn, is pushing growth of the flexible packaging sector.
e Increase in packaged branded food products: Packaged branded food products have been
increasing rapidly, for which flexible packaging is preferred. The ready-to-eat food
product industry is expected to witness 20-22% growth going ahead. e Increasing use of
small packets: With a view to attract smaller consumers, FMCG companies market their
products (largely food and personal care) in small packets. As a result, ready-to-eat
foods, biscuits, shampoo, and other FMCG categories have witnessed increase in consumption
in rural areas and smaller cities, which has further lifted demand for packaging
materials.
oe Shift in consumer preferences: Rising consumer demand for lightweight, convenient,
durable, tamperproof, and aesthetic packaging has also been a big boost for flexible
packaging. Further, improved barrier property parameters and superior functionality give
flexible packaging an edge over other packaging materials.
eo Innovation led by high competition and demanding consumers: The industry is
increasingly becoming technologically advanced and creating new-age products to cater to
different requirements of customers. These innovated and value-added products help players
differentiate themselves amid high competition in the industry. Players are offerings and
innovating new designs, sustainable and recyclable packaging solutions to the market as
per customer demand driving growth for the industry. e Sustainability: Shifting
demographics and consumer preferences are driving the demand for more sustainable
solutions in flexible packaging. Huge sustainable benefits are responsible for shifting
demand from rigid to flexible packaging. Focus is also on more cost-effective and
technologically feasible recyclable packaging solutions.
INTERNAL CONTROL SYSTEMS AND ITS ADEQUACY
The Company has adequate and effective internal controls to provide reasonable
assurance on achievement of its operational, compliance and reporting objectives. The
Company has deployed controls through its policies and procedures. These policies and
procedures are periodically revised to ensure that they remain updated to changes in the
environment. There is a well laid out process for making amendments to processes in the
Company and implications of changes are well thought through and all stakeholders are
consulted so that implementation is smooth.
Internal Audit as part of their audits, review the key processes from an adequacy of
controls point of view. Suggestions to further strengthen the processes or to make them
more effective are shared with the process owners and changes are made suitably.
The Company believes in conducting business in a fair, ethical and compliant manner. In
this regard, periodic meetings to make the employees aware of the code of conduct are
held. The Company has designed its software tool which helps track key compliances as
close as possible to the actual due date. Any deviations are highlighted for prompt
corrective action. Functional heads take responsibility for putting in preventive steps.
The internal financial control system is also included in the board report.
DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
During the financial year 2022-23, the Company has achieved total revenue from
operation of Rs 19626.04 lakhs thereby registered growth in revenue by 30.57 % as compared
to the previous years figure of Rs. 15031.47 lakhs. The EBIDTA of the Company during the
year stood at Rs. 1463.96 Lakhs. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/ INDUSTRIAL
RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED
The Company attaches importance to the dignity of employee irrespective of position and
highly values the cultural diversities of employees. As on March 31, 2023, the total
number of permanent employees on the roll of the company is 350. The company is committed
to nurturing, enhancing and retaining its top talent through superior learning and
organizational development. This is a part of our Corporate HR function and is a critical
pillar to support the organizations growth and its sustainability in the long run.
DETAILS OF SIGNIFICANT CHANGES (i.e. CHANGE OF 25% OR MORE AS COMPARED TO FY - 2021-22) IN
KEY FINANCIAL RATIOS
| Sr. Ratio |
Year |
| No. |
2022-23 |
2021-22 |
| 1 Debtors Turnover |
5.94 times |
5.83 times |
| 2 Inventory Tumover |
577times |
554 times |
| 3 InterestCoverageRatio* ~~ |
594times |
(650)times |
| 4 CumentRato |
" 7 23 |
215 |
| 5 DebtEquityRatio |
277 |
822 |
| 6 Operating Profit Margin (%)? |
438% |
286% |
| 7 NetProfit Margin (%)? |
259% |
330% |
| 8 Returnon Net WorthR |
16.96% |
(19.99)% |
Change in Interest Coverage Ratio due to profit incurred as compared to previous year.
A Operating profit ratio and Net profit ratio have been increased due to profit
incurred in current financial year due to price of raw material remains stable and average
sales realization is high as compared to previous financial year. Return on Net Worth
ratio has been increased due to profit incurred in current financial year as compared to
loss in previous year.
Cautionary Statement: Estimates and expectations stated in this Management Discussion
and Analysis may be “forward-looking statement” within the meaning of applicable
laws and regulations. Actual results could differ materially from those expressed or
implied. Important factors that could make a difference to your Companys operations
include economic conditions affecting demand / supply and price conditions in the domestic
and international markets, changes in the Government regulations, tax laws, other statutes
and other incidental factors. *Source: CRISIL Industry Report
For, Shree Rama Multi-Tech Limited
| Place: Moti-Bhoyan |
Mittal K. Patel |
| Date: May 29, 2023 |
Chairman |
|
(DIN: 03619139) |
+91-9892691696
