ECONOMIC OVERVIEW Global Economy
The global economy experienced a slowdown in 2022-23 due to high
inflation rate, tightening financial conditions, increasing interest rates, rising
geopolitical tensions, ongoing Russia and Ukraine war and some ongoing effects of
Covid-19, as a result of these the global economy could only grow by 3.2% in 2022. With
most of these challenges continuing in 2023, the global economy is projected by IMF to
grow at 2.8% in 2023 which will be one of weakest growth rates since 2001.
Concern over slowdowns in major economies remain, with recent troubles
in banking sector aggravating worries that runaway inflation and tight monetary policy
would hamper growth and financial investments. As per IMF close to 90% advanced economies
will experience slowing growth this year.
Indian Economy
The Indian economy demonstrated resilience despite challenges in the
global environment on the back of strong demand, support from Government policies and
strong banking system. As per World Bank report of April 2023, India was one of the
fastest growing economies in the world in 2022-23 at 7% growth. Outlook for lndian economy
remains positive for 2023-24 with projected growth at 6.3%. IMFs bi-annual World Economic
Outlook projects lndias retail inflation to ease in 2023-24 to 4.9% from 6.7% in FY
2022-23 which will help improve demand and the discretionary expenditure.
lndias direct and indirect tax collections were robust in 2022-23.
Direct tax collections increased by 17.63% and indirect tax collections increased by 22%
over the previous year. Merchandise and service exports estimated at US$ 765 billion
jumped by 16% during the year 2022-23.
IMDs prediction of normal rains during the current year at 96% of
long period average will be good for agricultural sector and rural economy of lndia.
lncreased focus on infrastructure development by the Government of lndia and affordable
data pricing has helped the rural and semi urban areas not only in terms of improved
employment opportunities and income source but has also brought them closer to urban
centres and thereby increasing aspirations for better life style. Rural consumption of
FMCG products grew by 8.9% during 2022-23 which indicates increased preference towards
quality products.
Changes in the weather pattern with increased unseasonal spells of
heavy rains and larger periods of heatwaves during the summer months may however, have a
negative impact on some sectors of the economy. With signs of resurgence of Covid-19
pandemic virus, the same needs to be closely monitored with increased preventive steps to
control the spread so as not to adversely affect the economic growth in 2023-24.
REVIEW OF OPERATIONS
Company earned a net profit after tax of R 498.14 crores during the
year 2022-23 as against R 663.26 crores in the previous year. Companys margins came down
since the global deltas between raw material and finished product prices reduced to
pre-Covid levels in second half of the year which in the previous year were very healthy
due to high ocean freights and disruptions in supply chain.
Companys total sales volumes of its manufactured products increased
during the year by 4.87% to 2,85,895 MT. Company lost some volume sale to imports on
account of domestic supply constraints during the peak sale months with delays in startup
of the Companys expansion projects for PS and EPS due to late receipt of statutory
approvals. Companys expanded capacities of PS and EPS are now fully stabilised and
operational. Companys effective capacity after expansion of PS is 3,00,000 MT and of EPS
is 1,10,000 MT.
Styrene Monomer (SM)
SM prices remained volatile in the 1st half of the year which moderated
in the 2nd half. There were no major disruptions during the year on supply side of SM.
Many world scale SM plants, both standalone as well as integrated types were commissioned
during the year in China which made it self sufficient in respect of SM requirements. From
being a major importer of SM, China became a net exporter. China is expected to add about
10 million Tons of SM capacity between 2020-2026. This is changing the global trade flow
of SM. Producers in Middle East, Singapore, USA, Korea etc. the traditional exporter of SM
to China, have to find other markets to place their SM. This is a favourable situation for
supply to India and the Company. Liquid bulk freight rates continue to remain high which
is a cause of concern.
Polystyrene (PS)
Indian PS consumption grew by 20% during the year 2022-23 mainly on the
back of growth in appliance industry, stationery, writing instruments and sheets and
growth in demand for air conditioners etc. Demand in 2022-23 is surpassing the pre- Covid
demand by over 19% despite ban on supply of articles of Single Use Plastic (SUPs). Ban on
manufacture and sale of SUPs was fully implemented in the year under review. Polystyrene
market to the extent of about 16,000 MT was lost but it was more than compensated by
growth of OEM and Non-OEM segments.
With delays in the startup of Companys PS expansion scheme, imports of
Polystyrene surged during the year to meet the increased requirement particularly in peak
demand months. Companys domestic PS business therefore could grow only by 5.7%. With the
Companys expanded capacity now fully operational and Company being fully geared up to
meet growing demand of Polystyrene in the country it is expected that the surge in imports
will taper off.
China has emerged as a major player in PS by becoming self-sufficient
in 2022. Asian producers who are traditional suppliers of PS to China are looking for
alternate markets or are rationalizing capacities by converting the plants to produce
other clear polymers like MS Resin. Chinas efforts to develop the hither-to
under-developed Northern & Western parts of China is creating new markets for
manufactured goods like appliances etc. which is expected to continue to increase demand
for PS at an annual average rate of 5.3% per year through 2027 in China. This will help in
growth of PS market and also absorb surplus PS capacity in China.
Outlook
PS demand is expected to grow at 5% CARG on the back of incentives like
PLI scheme etc. initiated by Government of lndia. Implementation of new capacities by air
conditioner producers who got approval under PLI scheme is in full swing. Some customers
have already started taking trials of Companys material to establish their production.
The full impact of the PLI schemes would be felt in this year onwards. Expansion of
capacities by refrigerator makers is largely completed & the effect of the new
capacities will be felt this year onwards. Export of stationery items from lndia to USA
& Europe is picking momentum which augurs well for the growth of PS business.
PS capacity expansions by Company will increase operational flexibility
to make available all grades including specialty grades on time to its customers. Company
is also augmenting & rationalizing regional warehousing capacities to make justin time
deliveries to its customers and make their operations efficient. New grades are being
developed in line with the changing requirements of the customers who are all aspiring to
be global suppliers of their products. With these developments Company targets a growth of
about 8% in the current year.
Expandable Polystyrene (EPS)
EPS market grew by 8.5% in India, mainly supported by growth in
appliance industry, Companys domestic sales volume grew by 12.8% despite competition from
three other producers. This could be possible due to excellent product quality, prompt
supplies made possible by facilities at two locations and customer service including
technical assistance.
Efforts were made by some users to replace the sturdy EPS moulded
protection components with honeycomb structures made out of paper & pulp. While
apparently paper looks environmentally friendly, full life cycle analysis carried out by
reputed agencies put them far inferior to EPS in environmental parameters like water
consumption, chemicals discharge, CO2 emissions etc. ln addition, cost-performance of EPS
is far superior particularly in respect of moisture ingress etc. To allay the environment
concerns, Company is working with all major appliance makers as well as non-profit
organisations like lndian Center for Plastics in Environment (ICPE) etc. to create
awareness about collection and responsible recycling of postconsumer EPS waste to make the
environment safe & secure. With the ban on supply of SUPs Company took the decision to
discontinue production of Cup-Grade EPS and converted the facilities to make standard
grades of EPS and completely integrated both the facilities.
Outlook
Company expects EPS market to grow by about 6% in 2023-24 in line with
countrys projected GDP growth for 2023-24. lncreased use of EPS in construction and
growth in External lnsulation Finishing System (EIFS) is also expected to aid in growth of
EPS business.
Availability of additional quantities from expanded capacity at Amdoshi
and Manali plants will enable Company to meet the growing requirements of its customers.
Realising the benefits of yearly contracts in PS especially in times of shortages, more
and more appliance customers are opting for contractual arrangements with the Company
which enables proper planning of production of various grades for on-time supplies.
Company targets a growth of about 7% in F. Y 2023-24.
Speciality Polymers & Compounds (SPC)
SPC business grew by 11.3% mainly driven by compounds of polymers.
Masterbatch business remained flat in view of planned withdrawal from filler Masterbatch
market. ABS Compounds business suffered due to low prices of locally produced ABS thus
making compounds from imported ABS unviable. Prices of domestic and imported ABS have
aligned since then.
Grade approvals from appliance customers for Speciality High Gloss
Compounds is expected to continue with new players starting production in the year
2023-24. With ABS prices normalising, pick up in ABS compounds business is expected.
Company expects a sales volume growth of about 20% in 2023-24.
Extruded Polystyrene Boards (XPS)
The year under review saw a growth of 26% mainly due to completion of
major infrastructure projects including construction of all weather tunnel in Kashmir,
pickup in building construction activities and export of reefer trucks. XPS boards were
also supplied through Companys distribution channels to prestigious projects like Central
Vista Project, Aerocity Project, Pragati Maidan upgradation etc. Several new companies
have started making sandwich panels using XPS Boards, which hitherto was the preserve of
PUF material. This is a welcome change which will help in growing XPS business.
Company has in pipeline orders for many new projects under construction
llT, AllMS, llM , Star Hotels & Power plants all of which have planned fully insulated
buildings. The sales force is being increased & new distributors added in
unrepresented areas. With all above actions, Company expects the sales volumes to grow by
20% in F.Y. 2023-24.
Acrylonitrile Butadiene Styrene (ABS)
As a prelude to our entry in ABS market, Company imports and supplies
ABS to its customers and have developed several compounded grades of ABS. ABS Compounds
are well received by customers in several segments in the lndian Market. Discussions are
ongoing with M/s. Versalis, Italy, technical collaborators for Companys ABS project, for
supply of Mass ABS for seed marketing to acclimatize the lndian customers.
EXPORTS
Export activity was in hibernation during the year under review due to
robust domestic demand and non-availability of product for exports on account of delays in
completion of expansion schemes of the Company due to late receipt of statutory approvals.
Companys export volume of all products put together reduced by 19.6% during the year.
With the successful capacity expansion of PS and expansion of EPS, Company is targeting to
increase PS exports to pre-Covid levels. Apart from reviving the old customers, efforts
are being made to get new approvals for speciality grades of PS and EPS. Company shall
also be focussing on EPS exports from this year which till now was minimal.
SUSTAINABILITY INITIATIVES
Your Company considers Environmental Sustainability as one of its core
values and includes it in all areas of its operations. Company believes that environment
sustainability is essential to create long term value for its stakeholders. Companys
focus on promoting wellbeing of its employees, neighbourhood and ensuring safe environment
continues. Company undertakes either directly or through other foundations/ NGOs welfare
activities in the areas of health, hygiene and education as part of its CSR activities.
Company continues to undertake various measures for improved energy and
water efficiency at both its manufacturing locations as part of its initiative towards
environment sustainability. Company has installed Zero Liquid Discharge system (ZLD) at
both its manufacturing locations in Maharashtra and Tamil Nadu. This not only has reduced
water intake for its processes but also significantly lowered effluent discharge.
Considering importance of climate change as a business risk, Company
partly uses renewable energy. During 2022-23 Company used 72% of its energy requirements
from renewable sources at its Manali plant, Tamil Nadu and about 10% at its Amdoshi plant,
Maharashtra.
Company is collaborating with ICPE to help create awareness about
collection and responsible recycling of post consumer waste. To encourage organised
collection of post consumer EPS packaging waste and recycling thereof, Company tied up
with NGOs. Suitable machine was developed and deployed for melting EPS waste in a safe and
scientific manner to avoid polluting the atmosphere. Company also participated in
developing a mobile compactor as a pilot project to be deployed in cities for efficient
collection of bulky EPS waste. So far most of the recyclers of EPS waste are in the
unorganised informal sector. Company is currently working with recyclers in Mumbai
Metropolitan Region (MMR) and National Capital Region (NCR) to bring them into formal
sector and providing required assistance for registering on CPCB portal. Company will
start focussing on some of the other metros during 2023-24.
Company is complying with all directions of CPCB including Extended
Producer Responsibility (EPR). As directed by CPCB Company stopped supply of its product
for manufacture of banned SUPs. Company shall be meeting the requirement of use of
reprocessed material as may be calculated by EPR portal in respect of all plastic
packaging used by the Company for its operations.
Company is now using all big sized (30 kl - 40 kl) tank lorries for
movement of liquid Styrene Monomer from port to its plant at village Amdoshi, Mahrashtra
and all outward supplies beyond a distance of 350 kms from Companys plant are transported
using large trucks carrying load of 25 MT to 35 MT per trip so as to reduce carbon
emissions.
The Securities and Exchange Board of India has put together a
comprehensive framework for Business Responsibility and Sustainability Report (BRSR) which
requires measurable quantitative details to facilitate better bench marking. BRSR is
attached with this report forming its integral part.
CAPITAL EXPENDITURE
Company incurred a total expenditure of R 206 crores during the year
under review for projects related to PS, EPS, Mass ABS and hardware replacement at Amdoshi
and Manali plant locations. PS expansion at Amdoshi and EPS expansion at both Amdoshi and
Manali plants are successfully commissioned.
First phase of Mass ABS with 70,000 TPA capacity project is progressing
as per schedule. Detail engineering and procurement activities are progressing well.
Proprietary equipment are ordered. Long lead items are in the ordering stage. Discussion
on technology licence of second train with Licensor is yet to be concluded. Looking at the
current worldwide recessionary trends and excess ABS capacity creation in China, Company
will optimise the construction of the second line.
Capital Expenditure proposed to be incurred in the current financial
year towards Mass ABS project, EPS second phase expansion, SPC, XPS expansion projects at
Amdoshi and hardware replacement at both locations is estimated at about R 430 crores.
FINANCE
Company remains debt free. Available surplus funds are deployed in
short term debt schemes of reputed mutual funds and bank fixed deposits so as to optimise
returns with minimum risk to the principal amounts invested.
Capital expenditure of R 206 crores incurred during the year was met
from internal accruals. All capital expenditure planned as on date is proposed to be
funded from Companys own funds.
During the year Company split its shares from a face value of R 4/- per
share to R 2/- per share thus increasing the number of shares to 188041342. This splitting
of shares has not changed the paid up equity share capital of the Company in any manner
viz. keeping it intact at R 37,60,82,684/-.
CRISIL Ratings Ltd. has reaffirmed long term rating at CRISIL AA -/
Stable and short term rating at CRISIL A1 + for Companys working capital facilities from
banks.
lndia Ratings and Research (lnd-Ra) reaffirmed Companys long term
rating with revised outlook to INDAA-/ Positive/ IND A1+ and short term rating to INDAA-/
Positive/ INDAI +
Chanqes in Key Financial Ratios :
Pursuant to the provisions of Regulation 34(3) of SEBI (LODR)
Regulations 2015 read with Schedule V part B(1) details of changes in
Key Financial Ratios are given as hereunder :
| Sr. Ratio No. |
|
Year Ended |
|
|
31/3/2023 |
31/3/2022 |
| 1 Debtors Turnover Ratio |
Times |
13.66 |
12.63 |
| 2 Inventory Turnover |
Times |
9.14 |
12.52 |
| 3 Interest Coverage Ratio |
Times |
200.81 |
196.31 |
| 4 Current Ratio |
Times |
2.41 |
2.48 |
| 5 Debt Equity Ratio * |
Times |
0.01 |
0.03 |
| 6 Operating Profit Margin |
% |
13.41 |
18.46 |
| 7 Net Profit Margin |
% |
9.32 |
13.10 |
| 8 Return on Average Net Worth |
% |
29.66 |
51.41 |
| 9 Return on average capital employed |
% |
39.10 |
67.35 |
* The Company is Debt free. For purpose of calculation of this ratio,
amortised value of right to use assets taken on lease is considered as debt.
With reduction in global delta between raw material and finished
product prices, Companys margins reduced in turn affecting its profitability ratios and
return on net worth and capital employed. Bunching of shipment arrivals in March 23
increased the raw material inventory towards the year end thus adversely affecting the
inventory turnover ratio.
RISK MANAGEMENT
Company continuously monitors the risks associated with its business
and operations including timely identification of new risks, if any, and plans to mitigate
risks so as to avoid any adverse impact on the Companys operations. Company has in place
a risk management policy which is reviewed under the guidance of Risk Management Committee
and Board. Committee met twice during the year to review the risk to the business of the
Company and mitigation plan thereof.
International pricing and demand / supply risk are inherent in the
import of Styrene Monomer, the main raw material. Company enters into annual procurement
contracts for imports of Styrene Monomer. A part of SM requirement is also sourced on spot
basis. On the sale side, some part of Companys sale is on annual contracts basis tied
into monthly SM pricing which allows for equitable sharing of the volatility in SM
pricing. Department of Chemicals and Petrochemicals has mandated BIS standards
particularly on all imports of Styrene Monomer from 24/04/2024. This could be a cause of
concern particularly for supplies from manufacturer suppliers in U.S.A., China, Europe and
supplies through trading houses.
To overcome risks of cost and pricing due to foreign exchange
volatility, Company hedges part of open foreign exchange exposure. Company also has a
natural hedge to the extent of its exports and pricing its products locally on import
parity basis. Foreign currency exchange rates being dynamic, Company constantly monitors
FX movements to decide on proper response measure.
Company has adequately insured its assets against all risks and on
reinstatement basis with adequate loss of profit insurance policy. Company has also
insured itself against cyber and other crimes. The management periodically reviews the
adequacy of the insurance cover.
Security of data and uptime of system is essential for our business.
Company has instituted the best practices adopted across the industry to achieve the same.
Company has co-located all its servers (Primary and Data Recovery) in the best-in-class
Tier lV Data Centres located at different seismic Zones. Tools like antivirus,
antispyware, antimalware, Endpoint Detection & Response (EDR) are installed and are
regularly updated on all the endpoints for protection against any security threats.
Firewall is in place to provide protection to the endpoints as well as to all the
application servers, against threats through internet traffic, LAN or WAN. Company ensures
the usage of licensed software products only on the Company provided devices. Apart from
this, Company gets lT Security infrastructure audited by the 3rd party service providers
periodically by using ethical hacking tools. lssues found in the audit are reviewed and
mitigated as per the recommendation, followed by re-audit for effective mitigation.
HUMAN RESOURCES / INDUSTRIAL RELATIONS
Human Resources are one of the most important ingredients to fuel
future growth and progress of the organization. The Company therefore strives to align
human resource policy and initiatives to meet business plans. Companys focus on promoting
well being of its employees, providing safe and congenial work environment continues.
Training of employees to maintain high level of motivation is an ongoing process. Career
development opportunities are provided at all levels and across all functions. lndustrial
relations at all the units remained cordial during the year.
INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY
The internal control systems for safeguarding and protecting assets of
the Company against loss from unauthorized use or disposition are in place.
Regular internal audits, review by management and documented policies,
guidelines and procedures supplement the internal controls which are designed to ensure
that financial and other records are reliable for preparing financial information and
other data and for maintaining accountability of assets.
Audit of lnternal Financial Controls (lFC) was carried out by a third
party apart from audit by the statutory auditors. Recommendations of third party audit
have been duly implemented.
HSE MANAGEMENT, AWARDS & RECOGNITION Health Safety and Environment:
Considering the significance of Health Safety and Environment to any
petrochemical operations, the Company has established a robust HSE system at both of its
plants situated at Amdoshi, Maharashtra and Manali, Chennai.
Both the Environmental Management System and Occupational Health and
Safety Management System continued to be maintained by the Company as per the ISO
14001:2015 Standard and ISO 45001 :201 8 Standard, respectively.
Company continues to implement the HSE Management Systems under the
Guiding Principles of declared lntegrated Management System policy (Occupational Health
and Safety Policy and Environmental Policy). HSE Performance lndex for the period under
review stood to be in "Excellent" Range. Companys plant completed 8202
accident-free days as on March 31, 2023 i.e. 21.45 million man-hours of accident-free
operations.
Awards and Recognition
Company has achieved the following recognitions and awards in the field
of HSE during the period under review :
Amdoshi Plant, Maharashtra :
• National Safety Council Maharashtra Chapter - Maharashtra Safety
Awards 2021 for Achieving Zero Accident Frequency Rate consequently for 3 years 2018,2019
& 2020 in the manufacturing sector. •
• National Safety Council - Suraksha Puraskar (bronze trophy) -
2022.
• 22nd Annual Greentech Environment Award 2022- for Outstanding
Achievement in Environment protection.
• Greentech lnternational EHS Award 2023 under the Best Practices
Category.
• Greentech lnternational EHS Award 2023 under the Health &
Safety Category.
Manali Plant, Tamil Nadu :
• Certificate of Appreciation at national level for 2022 from
National Safety Council.
• 22nd Annual Greentech Environment Award 2022 for outstanding
achievement in Environment Protection.
CAUTIONARY STATEMENT
Statements in the Management Discussion and Analysis describing
Companys objectives, estimates, expectations, or projections may constitute "forward
looking statements", within the meaning of applicable laws and regulations. Actual
results may differ materially from those either expressed or implied in the statements.
Important factors that could make a difference to 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.
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