uflex ltd Management discussions


ANNEXURE-"D"

Forward-Looking Statement

Forward-looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Companys actual results, performance or achievements could thus di3er materially from those projected in any such forward-looking statements. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events.

Macroeconomic Overview

A series of severe and mutually reinforcing shocks hit the world economy in 2022, as it approached the midpoint for achieving the Sustainable Development Goals (SDGs) by 2030. While the impacts of the COVID-19 pandemic continue to reverberate worldwide, the war in Ukraine unleashed a new crisis, disrupting food and energy markets and exacerbating food insecurity and malnutrition in many developing countries. High inflation is eroding real incomes, triggering a global cost-of-living crisis that has pushed millions into poverty and economic hardship. Simultaneously, the climate crisis is taking a heavy toll on many countries, with heat waves, wildfires, floods, and hurricanes inflicting massive humanitarian and economic damage (Source: https:// www.undp.org/).

These shocks will weigh heavily on the world economy in 2023. Persistently high inflation – which averaged over 9 per cent in 2022 – has prompted aggressive monetary tightening in many developed and developing countries. Rapid interest rate hikes by the Federal Reserve of the United States have triggered capital outflows and currency depreciations in developing countries, increasing balance-of-payment pressures and intensifying debt sustainability risks. Financing conditions have tightened sharply amid high levels of private and public debt, pushing up debt servicing costs, constraining fiscal space, and increasing sovereign credit risks. Rising interest rates and diminishing purchasing power have weakened consumer confidence and investor sentiment, further clouding near-term growth prospects of the world economy. Global trade has soff ened due to tapering demand for consumer goods, the protracted war in Ukraine, and continued supply chain challenges. However, at the outset of 2023, the global economy has seen some positive signs as inflation and energy prices ease from their peak levels. Chinas ending of its zero-COVIDpolicyalsoprovidessomegrowthimpulses,though its full impact has not yet been unfolded. The world has entered a new era of rapid global change driven by major shi3 s in demographics, wealth, technology, and climate. But economic growth has been uneven, has come at the expense of the environment, and already has slowed due to climate damages. Global challenges — including fiscal strains on governments exacerbated by the COVID-19 pandemic, conflicts, environmental degradation, resource depletion, and record levels of displacement — are threatening recent gains. These challenges are compounded by intensifying systemic risks, including trade tensions, rising debt levels, reduced effectiveness of monetary policy as a crisis instrument, and increasing inequality — among and within countries. Global economic activity is decelerating sharply as a result of synchronized monetary policy tightening to contain very high inflation, less favorable financial conditions, and disruptions from the Russia-Ukraine conflict. The unexpected failures of two specialized regional banks in the United States in mid-March 2023 and the collapse of confidence in Credit Suisse—a globally significant bank—have roiled financial markets, with bank depositors and investors re-evaluating the safety of their holdings and shi3 ing away from institutions and investments perceived as vulnerable. This banking crisis hits world economy already disrupted by pandemic, war, sanctions, geopolitical tensions, and climate shocks. Nevertheless, the global macroeconomic environment remains challenging for economies, business and consumers in the year ahead.

1. Global Economy

For the global economy, 2022 brought forth several unforeseen challenges even as the world hoped to recover after two years of pandemic. Global economic recovery was well on track until the Russia-Ukraine conflict broke out in February 2022 that hit the economy hard. From triggering food and fuel shortage to creating an environment of uncertainty, the conflict - which even raised concerns of a nuclear threat - has kept the world on edge ever since it started on February 24, 2022. The conflict has now continued for more than a year, disrupting the restoration of the supply chains disrupted earlier by lockdowns and limited trade tra3 ic. During the year, the world economy has faced almost as many disruptions as caused by the pandemic in two years. The conflict caused the prices of critical commodities such as crude oil, natural gas, fertilisers, and wheat to soar. This strengthened the inflationary pressures that the global economic recovery had triggered, backed by massive fiscal stimuli and ultra-accommodative monetary policies undertaken to limit the output contraction in 2020. Inflation in Advanced Economies (AEs), which accounted for most of the global fiscal expansion and monetary easing, breached historical highs. Rising commodity prices also led to higher inflation in the Emerging Market Economies (EMEs), which otherwise were in the lower inflation zone by virtue of their governments undertaking a calibrated fiscal stimulus to address output contraction in 2020. Central banks, which were slow to react to price pressures building up during the nascent recovery from the pandemic, regarded them as transient only to realise, belatedly, the necessity and the inevitability of a strong monetary policy response. Led by the US Federal Reserve, central banks have been hiking policy rates and rolling back liquidity to rein in inflation synchronously. The pace of this tightening cycle has been rapid – the Federal Reserves pace of rate hikes is the quickest since the inflationary episode of the 1970s, with the central bank having raised interest rates by 475 basis points since March 2022. As the impact of monetary policy actions is felt with a lag, inflation rates remained stubbornly high during the early phase of the rate hike cycle but have begun to decline lately. At the same time, synchronised rate hikes by the central banks have not tightened financial conditions su3 iciently enough for central banks to end their tightening campaign. The frailties of the Chinese economy further contributed to weakening the growth forecasts. Dwindling global growth apart from monetary tightening may also lead to a financial contagion emanating from the advanced economies where the debt of the non-financial sector has risen the most since the global financial crisis. With inflation persisting in the advanced economies and the central banks hinting at further rate hikes, downside risks to the global economic outlook appear elevated.

Global growth is expected to decelerate sharply to 1.7 per cent in 2023—the third weakest pace of growth in nearly three decades, overshadowed only by the global recessions caused by the pandemic and the global financial crisis (Source: https://www.worldbank. org/). This is 1.3 percentage points below previous forecasts, reflecting synchronous policy tightening aimed at containing very high inflation, worsening financial conditions, and continued disruptions from the Russia-Ukraine conflict. The United States, the Euro area, and China are all undergoing a period of pronounced weakness, and the resulting spillovers are exacerbating other headwinds faced by Emerging Market and Developing Economies (EMDEs). The combination of slow growth, tightening financial conditions, and heavy indebtedness is likely to weaken investment and trigger corporate defaults. Further negative shocks—such as higher inflation, even tighter policy, financial stress, deeper weakness in major economies, or rising geopolitical tensions—could push the global economy into recession. In the near term, urgent global e3 orts are needed to mitigate the risks of global recession and debt distress in EMDEs. Given limited policy space, it is critical that national policy makers ensure that any fiscal support is focused on vulnerable groups, that inflation expectations remain well anchored, and that financial systems continue to be resilient. Policies are also needed to support a major increase in EMDE investment, which can help reverse the slowdown in long-term growth exacerbated by the overlapping shocks of the pandemic, the Russia-Ukraine conflict, and the rapid tightening of global monetary policy. This will require new financing from the international community and from the repurposing of existing spending, such as ine3 icient agricultural and fuel subsidies. Investment growth in emerging market and developing economies (EMDEs) is expected to remain below its average rate of the past two decades. Further adverse shocks could push the global economy into yet another recession. Small states are especially vulnerable to such shocks because of their reliance on external trade and financing, limited economic diversification, elevated debt, and susceptibility to natural disasters. Global growth has slowed to the extent that the global economy is perilously close to falling into recession—defined as a contraction in annual global per capita income—only three years after emerging from the pandemic-induced recession of 2020. Very high inflation has triggered unexpectedly rapid and synchronous monetary policy tightening around the world to contain it, including across major advanced economies. Although this tightening has been necessary for price stability, it has contributed to a significant worsening of global financial conditions, which is exerting a substantial drag on activity. This drag is set to deepen given the lags between changes in monetary policy and its economic impacts, and the fact that real rates are expected to continue to increase. Global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades. The cost-of-living crisis, tightening financial conditions in most regions, Russia-Ukraine conflict, and the lingering COVID-19 pandemic all weigh heavily on the outlook. Global growth is forecast to slow from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023 (Source: https:// www.imf.org/). This is the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the COVID-19 pandemic. Global growth is projected to remain at a below-trend rate in 2023-24, with inflation moderating gradually as the quick and synchronised monetary policy tightening over the past year takes full effect. Demand is likely to be cushioned by further easing of household saving rates in many countries, with households yet to fully use the additional savings accumulated during the pandemic. The impact of tighter financial conditions is otherwise likely to be felt throughout the economy over time, particularly on private investment. The disruption from the war in Ukraine is also likely to continue to weigh on global output both directly and indirectly through the impact on uncertainty, continuing risks to food and energy security, and the significant changes taking place in commodity markets as price caps and Western embargos on Russian energy outputs take full effect.

2. Indian Economy

The impact of the pandemic on India was seen in a significant GDP contraction in FY21. The following year, FY22, the Indian economy started to recover despite the Omicron wave of January 2022. This third wave did not affect economic activity in India as much as the previous waves of the pandemic did since its outbreak in January 2020. Mobility enabled by localised lockdowns, rapid vaccination coverage, mild symptoms and quick recovery from the virus contributed to minimising the loss of economic output in the January-March quarter of 2022. Consequently, output in FY22 went past its pre-pandemic level in FY20, with the Indian economy staging a full recovery ahead of many nations. The experience with the Omicron variant engendered a cautious optimism that it was possible to stay physically mobile and engage in economic activities despite the pandemic. FY23 thus opened with a firm belief that the pandemic was rapidly on the wane and that India was poised to grow at a fast pace and quickly ascend to the pre-pandemic growth path. Strong economic growth in the first quarter of FY 2022-23 helped India overcome UK to become the fi3 h-largest economy after it recovered from repeated waves of COVID-19 pandemic shock. However, the effects of the slowdown in global economic growth resulting from high inflation and the continuing war between Russia and Ukraine are also seen to be affecting Indias economic performance. The country recorded muted growth of 4.4% in Q4 2022, compared to 6.3% in Q3 2022, with sluggish private consumption and exports being the major reasons behind that. The countrys real GDP growth in the fiscal year 2022-23 is estimated at 7.0% in comparison to 9.1% in the previous year. However, some demand indicators such as record sales of 3.8 million in the passenger vehicles segment in 2022 strong growth in tractor sales, and a rise in domestic air travel, continue to support economic growth. However, the challenge of the depreciating rupee, although better performing than most other currencies, persists with the likelihood of further increases in policy rates by the US Federals. The widening of the current account deficit (CAD) may also continue as global commodity prices remain elevated and the growth momentum of the Indian economy remains strong. The loss of export stimulus is further possible as the slowing world growth and trade shrinks the global market size in the second half of the current year(Source: https://www.indiabudget.gov.in/). In the second half of 2022, there was a respite for governments and households. Commodity prices peaked and then declined. In the near term, the acute pressure was relieved, although prices of some commodities (e.g., crude oil) remain well above their pre-pandemic levels. Commodity prices decline, and US interest rates peak, as does the US dollar. Capital and current account imbalances abate.

The enormous fiscal stimulus in advance economies earlier injected by their governments supported a strong demand revival. Growth in world trade subsequently followed, of which India was also a beneficiary. Indias exports surged in FY22, and the momentum lasted up to the first half of FY23. Export growth was strong enough to increase Indias share in the world market of merchandise exports. However, due to aggressive and synchronised monetary tightening, global economic growth has started to slow up, and so has world trade. As per United Nations Conference on Trade and Development (UNCTAD) latest global trade update, global trade growth turned negative during the H2:2022, and geopolitical frictions, persisting inflationary pressures, and subdued demand are expected to suppress global trade further in 2023. This is likely to affect many countries, including India, with the prospects of sluggish exports continuing into FY24, compared to the promise shown at the beginning of the current year (Source: https://www.indiabudget.gov.in/). The year 2022 has been challenging for India from various economic perspectives. However, even as the Indian economy faces multi-dimensional challenges in the short term, it remains one of the most dynamic major economies in the world with immense headroom for growth. A favourable demographic profile, rapid urbanisation and increasing a3 luence represent some of the key structural drivers of growth of the Indian economy. Indias recovery from the pandemic was relatively quick, and growth in the upcoming year will be supported by solid domestic demand and a pickup in capital investment. Even as Indias outlook remains bright, global economic prospects for the next year have been weighed down by the combination of a unique set of challenges expected to impart a few downside risks. Multi-decadal high inflation numbers have compelled central banks across the globe to tighten financial conditions. The impact of monetary tightening is beginning to show in slowing economic activity, especially in Advanced Economies. Besides this, adverse spillovers from the prolonged strains in supply chains and heightened uncertainty due to geo-political conflict have further deteriorated the global outlook. Hence, global growth is forecasted to slow from 3.2 per cent in 2022 to 2.7 per cent in 2023 as per IMFs World Economic Outlook, October 2022. A slower growth in economic output coupled with increased uncertainty will dampen trade growth. This is seen in the lower forecast for growth in global trade by the World Trade Organisation, from 3.5 per cent in 2022 to 1.0 per cent in 2023.

3. Industry Structure & Developments

As per the Economic Survey 2022-23, India is the third-largest economy in the world in PPP terms and the fi3 h largest in market exchange rates. The sheer size of economy has opened up new business opportunities to the world in all walks of business in general and packaging industry in particular. The flexible packaging market is amongst the most dynamic packaging markets presenting various types of materials and packaging used across several regions in the world and the sector in India has emerged as the sea of opportunities for entrepreneurs on the back of its rising popularity. The Indian packaging sector is among the industrial sectors witnessing highest growth potential, due to the presence of packaging in almost every industrial segment, and also due to globalisation of trade in goods and services and emergence of new trade models, such as E-commerce and organised retailing. The industry is broadly divided into two categories viz, rigid packaging and flexible packaging. Recent years have seen a significant rise in demand for flexible packaging material driven by demands in food and beverages industries, personal care and hygiene, and pharmaceuticals. The industry has evolved significantly in the past two years of the pandemic. Through the different phases of the pandemic, new trends have emerged and adopted by various companies in packaging industry. From smart packaging to sustainable and safe packaging with innovation and artistic touch, the packaging trends have gained a lot of prominence in the food, pharmaceutical, beverage, cosmetic and other FMCG industries. The large FMCG players globally have announced moving to sustainable packaging in a phased manner. The global flexible packaging market size was valued at USD 261.04 billion in 2022 and is expected to expand at a compound annual growth rate (CAGR) of 4.7% from 2023 to 2030 (https://www.grandviewresearch.com/). The growth is primarily driven by the growing demand for packaged food coupled with the convenience of use and cost-effectiveness of the product. Flexible packagingprofiters the benefits of plastic, paper, and aluminum foil without sacrificing printability, durability, barrier protection, freshness, or simplicity of use of the product. The food and beverages industry is shi3 ing preferences in favor of using flexible pouches for products, such as soups and juices, which have high liquid content. Flexible packaging is also used for products, such as snacks, frozen foods, ready-to-eat, and ready-to-cook food items. These are the major factors for the growth of the Indian flexible packaging market. Moreover, due to an increase in per capita income, India is witnessing a rise in the consumption of packaged foods, which, as a result, is expected to fuel the demand for flexible packaging in the upcoming years.

The Flexible Packaging market is primarily driven by a few key factors, such as increasing product appeal among consumers, successful marketing strategy in opportunities, and simultaneous financial investment in product development.

Flexible Packaging Market in India: Key Drivers, Trends & Challenges

Key Drivers:

The growing retail industry in India is notably driving the market growth.

The retail industry in India is one of the fastest-growing in the world. The retail industry is developing in tier-1 and tier-2 cities, in addition to major cities and metros in the country. Factors such as transforming demographic profiles, rising disposable incomes, growing urbanization, and changing consumer tastes and preferences are driving the growth of the organized retail market in India. The primary factor boosting the growth of the market is the shi3 of consumers, especially millennials, from traditional retail to online channels.

In addition, increasing consumer awareness about FMCG products and the regular launch of new products by manufacturers is the major factor expected to drive the growth of the FMCG market. Furthermore, the increasing trend of online shopping and expansion of the FMCG network in rural areas of developing countries are expected growth opportunities for the FMCG market. Therefore, the growing retail sector in India will increase the demand for flexible packaging, thereby, driving the growth of the India flexible packaging market.

Trends

Consumer trends for effective packaging solutions have drastically changed over time. One packaging trend that has always been a key preference for industries such as food and beverages, retail and electronics, is flexible packaging.

The increasing use of stand-up pouches is an emerging trend in the market growth.3 Vendors are coming up with new and innovative packaging solutions to withstand the high competition in the market in India. Innovative packaging includes stand-up pouches that have gained popularity primarily in the food industry. A stand-up pouch weighs less compared to glass bottle, enhances the functionality of portability and serves as a replacement to cans for storing process food.

Stand-up pouches are easier to open than metal food cans. The stand-up pouches have zips that can be closed if the content in them has to be reused. In addition, metal cans cannot be given any differentiating designs to help consumers in using unique designs for their products and brands, whereas stand-up pouches can be designed in different shapes and prints with high-quality graphics. Therefore, the growing use of stand-up pouches is expected to drive the growth of the Indian flexible packaging market.

Challenges

The volatility in raw material prices is a major challenge impeding market growth.

The different types of packaging materials used for the packaging of food include plastic, glass, metals, and paper. For example, the cartons used in food packaging are produced either from recycled fiber or virgin fiber. The prices of both recycled fiber and virgin fiber fluctuate constantly, which is a major concern for end-users such as carton producers. The instability in the price of raw materials will result in increased production cost and reduced profit margins. The prices of packaging raw materials such as paper and paper products that are used to manufacture corrugated packaging solutions are also expected to fluctuate. In addition, aluminum, a key raw material used in manufacturing food cans, is also exhibiting continuous price fluctuations. Hence, the above-mentioned factors are expected to hinder the growth of the India flexible packaging market in focus.

However, despite the challengesprofiten presented by flexible packaging in terms of consistent recycling channels, the format remains a preferred choice for brands, retailers and consumers.

4. Business Review

(i) Packaging Films Business

The main products of this business are BOPP films, CPP films, Polyester (BOPET) films, Metalized, AlOx Coated, Specialty films, and green films such as AsclepiusTM PCR (Post-consumer Recycled) PET films, and Recyclable Mono-material films.

The Companys OPP (Orientated Polypropylene) films comprising of BOPP (Bi-axially Oriented Polypropylene) and CPP (Cast Polypropylene) films are highly cost-e3 ective, functionally e3 icient, and therefore have rapidly penetrated high barrier sensitive packaging segments across the world. These films are primarily used for applications like packaging and conversion; industrial coatings; printing and lamination; encapsulation; overwraps, confectionery packaging; anti-fog (for food products), and textile bags; amongst others. The Company manufactures BOPP films at its India, Egypt, and Hungary manufacturing facilities with a cumulative capacity of 149,000 TPA. The Company manufactures CPP film at its India plant in Noida and overseas at its Egypt plant. The cumulative capacities of its two CPP film lines stand at 11,000 TPA. In FY23, the Company set up a CPP film line at its existing facility in the UAE and a greenfield project in Dharwad, Karnataka, India, with a capacity of 18,000 TPA each. BOPET (Bi-axially Oriented Polyethylene Terephthalate) film is a polyester film using high-quality resins and exhibits superior mechanical properties, improved resistance to chemicals, good barrier to oxygen, excellent receptivity to surface treatment and coatings, and high resistance to abrasion. Manufactured at the companys world-class film manufacturing plants in India, the UAE, Egypt, Poland, Mexico, USA, Russia, and Nigeria, the companys cumulative BOPET film production capacity globally stands at 350,000 TPA.

The Company has set up a BOPET film line in Dharwad, Karnataka, India, with a capacity of 45,000 TPA to serve a large base of its clients located in South India, and once commissioned, will make UFlex the largest producer of thin BOPET films in the world (ex-China). Metalized films are manufactured at all film manufacturing plants of the Company with a cumulative capacity of 2,12,700 TPA. The Company also manufactures high-barrier metalized films that are used for packaging a wide array of products requiring extended shelf life apart from a host of applications in various industries. AlOx-coated transparent ultra-high barrier films, manufactured by the Company, find extensive use in stand-up pouches that provide see-through features to consumers at the point-of-sale (POS).

Future projects:

Steps are continuously being taken towards innovation and renovation of products including new product development and enhancement of product quality/ profile, toprofiter better products to customers including high seal strength in polyester films and other sustainable solutions.

New Products and Innovation:

Metallized High Barrier Easy Tear Polyester (F-ETB-M) Film: This film addresses barrier requirements of various pouches and packaging applications while enabling easy-to-tear package properties from both directions. The superior oxygen barrier of this metalized, easy-tear BOPET film makes it the best choice for packaging items like mouth fresheners, tea sachets, confectionary items, biscuits, and multiple pharma and medical products.

Transparent High Barrier Easy Tear Polyester (F-ETB) Film: This film is a next-level packaging solution for items like dry food as these products require an excellent oxygen barrier for maintaining freshness and easy-to-tear packages for enhanced customer experience.

F-TFE Thermoformable BOPET Film: ‘F-TFE Mono or co-extruded transparent Biaxially-Oriented Polyethylene Terephthalate or BOPET film is specially designed for thermoforming applications for depth formation and its outstanding properties include high tensile strength, chemical stability, dimensional integrity, and transparency.

‘F-POX Excellent Oxygen and Moisture Barrier Transparent BOPET Film: This film enables see-through packaging while functioning as a high aroma retention barrier.

High-barrier BOPET film F-AFR-M: F-AFR-M allows easy handling and machinability.

PET-based Silica Masterbatch Solution for BOPET Film: With the development of this value-enriched Silica Masterbatch solution, the business has not only achieved higher anti-blocking properties but has also brought about a significant reduction in production cost.

Metalized High Barrier Easy Tear Polyester Film:

This film provides excellent easy tear properties in both directions.

Transparent High Barrier Easy Tear Polyester Film:

This film is suitable for high barrier and easy tear application for Dry Food packaging.

(ii) Flexible Packaging Business

The Flexible Packaging business at UFlexprofiters an extensive product range in flexible packaging and laminated roll stocks. Some of the products in the portfolio include a wide variety of pouches: 3D & 4D pouches with re-closable options, wicketed bags for baby and hygiene markets with handles, pet food pinch bottom bags, cement block bottom bags, Flexi-tubes, lids, confectionery foils, embossed foils, hygiene films, innolock pouches, pocket PTC zipper, spot embossing, electron beam curing, Cast ‘n Cure technologies, and more. Owing to full backward integration into films (BOPET, BOPP, CPP, Metalized Films), chemicals (inks, coatings, adhesives), engineering (converting and packing machines), holography (packaging films and labels) and cylinders (electronic, laser, gravure, and flexographic plates), UFlex has an exclusive advantage to deliver customized solutions.

The companyprofiters flexible packaging solutions for the entire spectrum of product types which includes solids, semi-solids, powders, granular materials, viscous fluids, pastes, and gels. UFlex continues to be a forerunner in sustainable innovation and commitment toward a "circular economy" by focusing on the three pillars: source substitution, source reduction, and biodegradability. A few notable investments in recycling projects include USD 7 million in Poland, USD 20 million in Mexico, and USD 3 million at a new site (Malanpur) in India. Another notable achievement in the calendar year 2022 is the reduction in the average carbon footprint per ton of packaging from 4.16 to 4.14.

New Products and Innovation:

Teen Ikka 25 Kg WPP Top and Bottom Pinch Bag with Foil Stamping: To help the brand solve the problem of counterfeiting, UFlex developed a WPP Pinch bottom bag with foil stamping as an anti-counterfeit feature to prevent it from getting re-filled or falling prey to counterfeiting.

3D Pouch for Dormulin 5kg Vegetative Fertilizer:

UFlex developed and converted the WPP bag of Dormulin fertilizer into a 3D pouch for a 5 kg product quantity in Q4, FY23. This enhances the products packaging aesthetics and the packaging design for better display and appeal.

Enhancing consumer engagement via variable data incorporation in packaging: The flexible packaging business developed a solution for a leading FMCG brand where each chocolate pack has a different code that can be used to connect with consumers.

Eco-friendly Chotu Pack: With brand owners continuously looking at reducing the environmental impact on account of non-recyclable packaging, UFlex launched a fully recyclable spout pouch using BOPP (Biaxially Oriented Polypropylene)/PE films for a leading brand.

3.2 Litre re-closable stand-up pouch for a leading FMCG brand: UFlex developed an eco-friendly flexible packaging solution for storing liquids where the re-closable pouch can store up to 3.2 liters of liquid laundry - making it hugely popular with environmentally-conscious consumers.

Henna paste pack for a startup in the beauty and wellness space: UFlex developed a special high-barrier packaging format for a natural, preservative-free henna pack that prevents degradation and preserves the natural properties of the product.

MPP and WPP large packaging bags: The flexible packaging business of UFlex has pioneered the art of developing WPP bags. In FY2023, UFlex developed a packaging solution with added security features for a water-soluble fertilizer brand.

3D Pouch with Registered Window Metallization for a premium brown sugar brand: UFlex developed a three-layered 3D pouch with registered metallization for a premium brown sugar brand that allows consumers to see the packed content.

Profile Spout Pouch with Re-closable Option and Easy Pour Experience for a cooking oil brand:

This structure has emerged as a viable solution for packaging edible oils, and successfully replaces the need for rigid containers.

3D Pouch with Paper-based Barrier Laminate for a coffee brand: UFlex developed a unique pack with a stand able pack structure thatprofiters good barrier properties to keep the packed coff ee in the desired state and prevents moisture, air, and more from affecting the quality of the packed content.

(iii) Aseptic Liquid Packaging Business

AseptoTM, the Aseptic Liquid Packaging Business brand from the house of UFlex, provides innovative solutions (filling machines and packaging material) catering to multipleindustrieslikebeverages,dairy,andalcohol.With a strong focus on innovation, customized solutions, and backward integration business solutions, the businessprofiters unique packaging formats, including world-class aesthetics, brand enhancement, anti-counterfeit, and captivating effects like foil stamping, holography, and 3D lens under the categories AseptoTM Spark, Premium, and Eye. Leading brands have partnered with AseptoTM for their packaging strategies to differentiate their brands and packs on retail shelves and attract new-age and new segments of consumers.

AseptoTM caters to more than 200 customers and exports to more than 35 countries worldwide. Backed by a strong order book, AseptoTM has become the worlds fastest-growing brand in the segment with a year-on-year growth of more than 100% in the last five years.

To deliver on the sustainability agenda of the Indian government and to meet the sustainability goals of consumers across the world, AseptoTM commissioned Indias first and the worlds fastest line for U-shaped paper straws in 2022 complying with world-class standards.

(iv) Chemicals Business

The Business manufactures liquid inks (solvent and water-based); laminating adhesives (water-based, solvent, and solvent-less); ink binders, polyols, and specialty coatings (UV/UV-LED/EB) for flexible packaging, mono-cartons, graphic arts, labels, and paper board segments of the packaging industry. In FY2022-23, UFlex Chemicals acquired an India patent for a ‘solvent-free pigmented adhesive and a process for its preparation (Patent number 406417) – an environment-friendly, cost-e3 ective, and versatile adhesive. This is a noteworthy addition to the businesss portfolio of innovative and sustainable products and solutions. This patent has been awarded to UFlex by the Government of India in accordance with the provisions of the Patents Act, 1970 for a period of 20 years. The present disclosure relates to a two-component adhesive composition and the process for its preparation. The adhesive composition of the present disclosure is solvent-free and works well on existing solvent-less lamination machines. It helps reduce the use of white ink, thus significantly reducing costs. The process for the preparation of the adhesive composition is simple, e3 icient, solvent-free, and environment-friendly. The presence of high content of volatile organic solvents in solvent-based conventional adhesives is detrimental to the environment and is energy-intensive, thereby increasing overall costs.

Product Launches and Innovation

Epoxy Acrylate: Epoxy Acrylate Oligomer is yet anotherenvironment-friendlyproductdemonstrating the companys continued focus on sustainability. The Epoxy Acrylate Oligomer is an essential feedstock for radiation-curable coatings and printing inks manufactured by UFlex. The production process of this polymer is designed in a way that it generates no VOCs and e3 luents.

Polyester Acrylate: This halogen-free product adds to the companys e3 orts at promoting sustainability through research-led environment-friendly printing and coating solutions. The Polyester Acrylate oligomer is a significant feedstock for UV and EB curable coatings and printing inks. This product is recommended for use in applications such as flexography, dryprofitset, screen printing, and wet lithographic inks for paper, plastics, and metals. It can also provide adhesion for metal, plastics, and paper coatings.

Flexgreen Sprayable top-coat gloss coating: With diverse applications in the construction industry, this considerably flexible coatingprofiters excellent curing capability on high-speed machines and leads to energy savings of about 30-70%.

Flexcure Super Matt: Its been designed as a free radical UV coating for absorbent and non-absorbent underlayers like paper, polythene, and polypropylene.

Flexcure Sheetfed "Bio" Series for O3 set Application (with >40% BRC): The Flexcure Sheetfed "Bio" series is an advanced, innovative, and environment-friendly solution that represents a new generation of UV inks forprofitset printing especially designed using high bio-renewable content ingredients.

Flexcure Low Migration "Nutri Series" for aseptic packaging: Flexcure Nutri series represents a new generation radical mechanism designed especially for food packaging and hygiene applications demanding low migration and no odor.

Flexcote MH 785: UFlex developed a solvent-based adhesive with high solids and low viscosity for medium to high performance in flexible packaging applications in FY23. It is a cost-e3 ective solutionprofitering excellent bond and seal strength.

Retort grade 2K PU Adhesive FLEXCOTE HP 875/ FLEXCOTE HP 75: The chemicals business developed a two-pack solvent-based PU adhesive in FY23 that is specially designed for high-end retort pouch applications, most suitable for food and pharma packaging applications.3

FLEXBOND SF WET LM 35 Water-based Adhesive for Wet Lamination Application: UFlex developed FLEXBOND SF WET LM 35, a water-based synthetic adhesive designed mainly for wet lamination of clear BOPP & PVC films to paper or duplex board applications with manual or semi-automatic machines in Q1, 2022.

Flexseal Ecocoat: In FY23, UFlex chemicals business division developed Flexseal Ecocoat, an eco-friendly aqueous dispersion application coating specially designed for the inner side of paper cups as a replacement for PE coating. Besidesprofitering added convenience to consumers, it ensures sustainability by enabling easy recycling of paper products, post-consumption.

Flexseal HSL 1025 (G) and Flexseal HSL 1024 (F):

Adding to the long list of green solutionsprofitered by the chemical business, UFlex developed water-based heat sealable coatings in Q3, 2022. It is a highly advanced product for sealing a formidable bond between coatings of flexible packaging materials.

Epoxy Acrylate: UFlex Chemical has developed the Epoxy acrylate oligomer which is a major feedstock for radiation-curable coatings, and printing inks produced by us. This is an environmentally friendly product promoting sustainability.

Polyester Acrylate: UFlex Chemical has developed this Oligomer which is a major feedstock for UV and EB curable coatings and printing inks. This halogen-free product promotes sustainability.

(v) Holography Business

The Business has always been ahead of the curve when it comes toprofitering advanced anti-counterfeit and brand enhancement solutions to its customers. Its clients include leading brands and companies in the pharmaceutical, automotive, FMCG, consumer electronics, F&B, and textiles industries, amongst others. The innovativeprofiterings from the business help global and Indian brands government departments, and educational institutions by way of providing superior brand enhancement & protection solutions. UFlex is also a certified printer by the Indian Banks Association (IBA) for the printing of MICR instruments for leading banks.

The business demonstrated consistent growth in the financial year 2022-23, winning business from many existing and new customers and entering new market segments both in India and overseas markets.

Product Development and Innovation

Holography Beeds Designs for HM & Sequins Film: With a moving dot effect, the Holography Beeds Designprofiters a unique and visually appealing option for Hot-Melt Film and Sequins film used in various textile applications. The new designprofiters a unique differentiation to the products and can help attract customers looking for something fresh and innovative and will enable textile businesses to tap into a growing market segment of customers seeking a change from the standard holography designs.

Checkered Pattern Hot Stamping Foil: The newly developed Checkered Pattern Hot Stamping Foil by the UFlex Holography Business enables an enhanced style and improved elegance of textile products. Hot stamping foil is a popular decorative technique for improving visual appeal and adding vibrancy to textiles. Checkered Pattern Hot Stamping Foil has applications across market segments such as fashion, home textiles, accessories, and upholstery.

3D Optics as a superior security feature for product authentication: UFlex developed a 3D Flipogram material in FY23 to authenticate genuine products from counterfeits, protecting consumers from spurious products.

Floating lens film with customized brand logo:

Another great innovation in the quarter ended December 31, 2022, was developing a new and advanced brand protection packaging product consisting of customized emboss film designed for laminates, paper board, and UVprofitset printing on mono cartons.

Sustainability in textile products: As brands consciously embrace sustainability, many companies actively seek to develop products that have minimum impact on the environment. In FY23, UFlex catered to a requirement for BPA (Bisphenol A) free sequins material from a large global retailer and fashion brand, meeting the stringent international test requirements.

High-end security solutions in pharma packaging:

UFlexs Holography division has developed a High Refractive Index Film with an extremely high metallic sheen for the surface of the packed cartons, to address this vital anti-counterfeit requirement of its pharma customers.

Multi-colored Holographic Textile Foil with New Pattern for Enhanced Aesthetics: Catering to increasing demand for aesthetic-rich developments in the textile space, the Company has developed an array of appealing textile foil options that can make brands stand out.

Fresnel Lens Self-Adhesive Holographic Labelling Solution to Prevent Counterfeiting & Enhance Aesthetics: UFlex integrated Registered Fresnel Lens Technology in labeling solution to give a premium look by placing two lenses at the middle and bottom of the label. The combination of a Fresnel lens that is reflective from various angles along with vibrant printing produces an effect that is both aesthetically striking and instantly recognizable for scrutiny. This application is used across several industry verticals such as FMCG, automobile, lubricants, apparel, liquor, agrochemicals, personal care, and electronics.

Plastic-grade Hot Stamping Foil for Premium Aesthetics on Stationery Products: UFlex developed a Plastic-grade Hot Stamping Foil solution in FY23 that is used for a very wide range of applications such as writing instruments, picture frames, wall clocks, etc.

BEEDS Design for HM and Sequins Film: The Holography BEEDS design with moving dots effectsprofiters a unique and visually appealing option for Hot-Melt Film and Sequins film used in textile applications.

Checkered Pattern Hot Stamping Foil: In the world of textiles, adding unique and eye-catching designs to fabrics is crucial to stand out in a competitive market and one such method from UFlex that has gained popularity is hot stamping foil, a versatile decorative technique that imparts brilliance, vibrancy, and sophistication to textiles.

(vi) Printing Cylinders Business

The Business traverses the complete printing life cycle from design to print andprofiters infallible printing consistency and eco-friendly products to its customers in the converting industry. The Business has a wide range of productprofiterings including Electromechanical Engraved Printing Rotogravure Cylinders, Robotic Laser Engraved Rotogravure Cylinders, Embossing Rotogravure Cylinders, Specialized Rotogravure Cylinders (High & Low GSM Coating and Anilox Rollers), Flexographic Printing Plates (Esko CDI Crystal Imager & Kodak Flexcel NX System) and Flexo Elastomer Plates and Sleeves. The Business has manufacturing facilities in Noida and Jammu and assures the highest standards of quality and time-bound deliveries. Its Noida manufacturing facility is equipped with a fully automatic Robotic Laser Engraving line for manufacturing Rotogravure Cylinders. Carving effect through laser embossing on PVC: Carving Effect through laser embossing on PVC is an exciting new product from UFlexs Printing Cylinders business that has many attractive applications for home decoration. It can enhance the attractiveness and aesthetics of home interiors like modular kitchens, table covers, door mats, floor mats, and even in-car floor mats. It is durable, easy to maintain, cost-e3 ective, and can be installed in a short time. Laser embossing on the shoe soles: When it comes to shoes, one of the most significant issues faced by users is that their soles areprofiten slippery. This causes various problems for consumers, especially during the rainy season or when walking on slippery surfaces as there is not enough friction. The laser embossing on shoe soles developed by UFlex Printing Cylinders business helps make shoe soles skid-free and safe for use, providing a much-needed solution to users. This product is suitable for different geographical and weather conditions. Aesthetic effect on shoe foxing through laser embossing: The aesthetic effect of shoe foxing (the upper layer of shoe sides) makes footwear more attractive and appealing to customers. This innovation from UFlexs Printing Cylinders Business can help shoe manufacturers rapidly multiply their revenues. In addition, this embossing on shoe foxing creates a higher demand for such footwear in the market.

The anti-skidding pattern on foot mats through laser embossing: This is another innovative solution from UFlexs Printing Cylinders Business that creates a 3D anti-skidding effect on PVC sheets through laser embossing. Such skid-free embossing can be used in the manufacturing of foot mats. Moreover, different anti-skidding patterns created by this innovation are in high demand.

Embossing Effect on Fabrics: While embossing has found broad applicability in advertising and marketing industries, it has remained a challenge for the Indian textile businesses. Addressing this challenge creatively for the first time in India, UFlex has developed embossed cylinders to produce an embossing effect on fabrics.

Attal Promotional Bags: The product packs some unique features like two layers metallic effect in hal3 one without using metalized films with special security features like micro text, dot security, and line security.

Carving Effect through laser embossing on hard PVC, used for home d?cor: This product finds its use in home d?cor like decorating modular kitchens, table covers, door mats, floor mats, car floor mats, etc. The product is durable, cost-e3 ective, and provides an enhanced aesthetic appeal.

Laser embossing on shoe soles to make shoes skid-free: With laser embossing, UFlex provides various patterns on footwear to make it suitable for different geographical and weather conditions.

Aesthetic effects on shoe foxing (upper layer of shoe sides) through laser embossing: Aesthetic effects on Shoe foxing make shoes more attractive, appealing, and differentiated.

Anti-skidding patterns on foot mat (made of PVC) through laser embossing: With this innovation, a 3d effect (anti-skidding) is created on a PVC sheet through Laser embossing.

(vii) Engineering Business

The business manufactures high-end machines for the Converting and Packaging Industries. CI Flexo printing, Rotogravure printing, Laminators (solvent-less, solvent-base, Combi, and Extrusion Coating), Slitters, Pouch Making have been serving the Converting Industry whereas a complete range of Form-Fill-Seal, Wrapping, and special purpose machines cater to all kinds of packaging needs. In addition, the business alsoprofiters wide web slitter and special-purpose coating machines for targeted applications. The machines are well-established in domestic as well as international markets. To address the challenge of recycling multi-layer mixed plastic waste, the business designed the ReLAM 250, an advanced multi-layer recycling machine, in line with European standards, which turns mixed plastic waste into a granulated product called pellet, without the need for separation of layers, thus dispelling the myth that multi-layer plastic cannot be recycled.3 Pellets formed out of this machine can be used to make various useful molded products like dustbins, outdoor benches, paver tiles, other household, andprofitice articles, and more. The business stands committed to research-led innovation, market-leading product development, and delivering on customer and market expectations. Accu Slit-3300: After the successful performance of Accu Slit-2500 and Accu Eco Slit-3000, the UFlex Engineering Business design team has developed Accu Slit-3300, the new slitter of width 3300, for slitting Metalized BOPP and other substrates in Q4, FY23.

LPFS-4U: UFlex launched a machine in Q3, 2022, called LPFS-4U or 4 UP Linear, Pick, Fill, and Seal that guarantees speed, performance, safety, and hygiene and caters to environment-conscious brands.

Quick changeover in Rotogravure Printing:

Rotogravure printing involves a rotary press with cylinders typically rotating at high speeds used for printing various substrates for packaging applications. UFlex made some innovations to make it even more e3 icient by enabling auto changeover, where with a press of button, trolleys at multiple stations are changed, saving significant time.

TOROSLIT-1650, a high-speed Turret Slitter for Wide Web Widths: To meet the demand for high-quality slitters, UFlex developed a high-speed turret slitter with a web width of up to 2200mm. Owing to its advantages, TOROSLIT range is fast emerging as the preferred slitter for packaging film manufacturers worldwide.

Accu Slit-3300: After the successful performance of Accu Slit-2500 and Accu Eco Slit-3000, the Business developed a New Slitter of width 3300, christened Accuslit-3300 for slitting Metalised BOPP and other substrates.

HALL OF FAME

In FY23, UFlex was conferred with leading industry awards and recognition such as:

‘Outstanding Work in Circularity Award in Large Enterprises at the Indian Circular Economy Forum ACE Award 2022 for its sustainability-driven initiatives that help create a circular economy.

Best Employer Brand Award in the Global Best Employer Brands 2023 segment at the World HRD Congress 2023, presented by Times Ascent.

‘Best Organization in HR Practices at the National Management Summit 2022 organized by Top Rankers Management Club.

Silver Award for Technical Innovation at the Flexible Packaging Achievement Awards 2023, organized by the FPA, for our F-UHB-M Ultra High Barrier & High Metal Bond Metallized Polyester Film for aluminum foil replacement.

The IIPs National IndiaStar and PacMachine 2022

Awards for Excellence in Packaging

I. B-TGM Multi Layered Mono-material BOPP Film with Superior Oxygen & Good Moisture Barrier for Pouch Packaging

II. Fully Recyclable 10 Kg Peacock Rice Pack in Mono PE format3

III. Registered Lens Technology with Holography Solution to Prevent Counterfeiting and Enhance Aesthetics

IV. Transparent UV HRI Customised Holographic Film for Lamination

V. Water-Based Printing Inks

• SIES SOP Star Awards 2022 for Packaging Innovation and Creativity.

I. ‘F-ISB Special Polyester Film for Cold forming for Alu-Alu Blister Packaging Application for Packaging Materials & Components Category

II. Flexbeam O3 set EB Inks for Comexi ‘Ci8 Machine for Packaging Materials & Components

III. Flexfoil Universal Heat Seal OP Ink for Foil based Food & Pharma Blister Packaging Application for Packaging Materials & Components Category

IV. Stitching & Twining effect on different substrates like Leatherette (PU/PVC) with Laser Embossed Cylinder for Labelling & Decoration Category

V. Holographic Lens Label with Re-Registered Ripple Lens Effect for Premium Whisky for Labelling and Decoration Category

VI. Registered Lens Technology with Holography Solution to Prevent Counterfeiting and Enhance Aesthetics for Fortune Drinking Water Application for Labelling and Decoration Category

VII. Anti-Counterfeit Holographic Lidding Foil for Pharma Blister Pack for Pharmaceutical & Medical Category

VIII. CTCH Collar-type Packaging Machine for Snack Packaging for Packaging Machineries/ Systems Category

IX. Unique Shape Spout Pouch with Good Standability for MBS Beverage Packaging ‘Pop Pack for Beverages Packaging Category

• IFCA Star Awards 2022 for global recognition for excellence in Innovations and Creativity.

I. F-ISB PET Film for Cold Blister Packaging Applications for Innovations & Creativity Category

II. B-TGM Outstanding Oxygen Barrier Transparent BOPP Film for Food Packaging Application for Innovations & Creativity Category

III. FLEXCOAT AQUABAN - Water Repellent Coating for Kra3 Paper used as Inner Liner in Corrugation Box for Innovations & Creativity Category

IV. Artificial Leather Effect on PVC/PU/Paper through Laser Embossed Cylinder for Decorative Textile Industry for Innovations & Creativity Category

V. 3D Flower Design through Laser Embossed Cylinder on Artificial Leather (PVC/PU/Paper) for Innovations & Creativity Category

VI. Plastic Decorative through Laser Embossed Cylinder for Fashion and Textile Decorative Industry for Innovations Structural & Graphic Design Category

VII. Holographic Lens Effect with a Floating Image to Prevent Counterfeiting for Innovations & Creativity Category

VIII. Holographic Lidding Foil for Pharma Packaging Application for Innovation – R&D Category

IX. Supreme Security Master Fresnel & Sterling Stamping Foil for Anti-Counterfeiting Applications and Premium Aesthetics for Innovation – R&D Category

X. Combi Laminator for Packaging Lamination Applications for Innovations & Creativity

XI. High-barrier Transparent Recyclable Laminate for Namaste India Gold Standard Milk Powder Packaging for Innovations and Creativity Category

XII. Customized Profile Pouch with V Notch and D-shape Handle for MTR Idli Batter3 for Innovations & Creativity Category

XIII. Fully Recyclable Transparent Barrier Laminate for Snacks Pack in PP Mono Polymer for Innovations & Creativity Category

XIV. 3 Layer Met PE-based Recyclable Laminate with Excellent Bond strength for P&G Head & Shoulders Shampoo Sachet for Best Branding Category

XV. High Barrier PE-based Flexible Packaging Structure with Easy Tear-ability for P&G Vicks Action 500 for Innovation – R&D Category

XVI. PE/PE Based Mono-material Laminate Packaging Structure for P&G Gillette Guard for Innovation – R&D Category

XVII. FLEXITUBES with High-end Graphics and Matte Finish for Denver for Best Branding

XVIII. Aspetic Liquid Packaging Structure for Nutricharge Refresher with Holographic Effect for Best Branding Category The UFlex Chemicals Business division has won

a FICCI Chemicals & Petrochemicals Award for Efficiency in Water Use.

Patents and Certifications:

1. The UFlex Packaging Films Business has been granted a patent for its innovative research methodology to develop Thermoplastic Films Having Asymmetric Properties (Patent No.: 425294).

2. The only packaging manufacturer to be featured amongst the top 200 Business World Indias Most Sustainable Companies 2021.

3. The UFlex chemicals business division has been conferred a ‘Certificate of Appreciation award by the National Safety Council of India Safety Awards. This has been awarded in recognition of appreciable achievement in Occupational Safety & Health.

4. The UFlex Chemicals Business has been awarded a patent for its innovative research methodology to develop Solvent free pigmented adhesive and a process for its preparation (Patent No 406417)

5. The UFlex Packaging films business has been awarded IMS Certification (ISO 9001:2015, ISO 14001:2015, ISO 45001:2018) and Energy Management Certification (ISO 50001: 2018).

6. The Chemicals business was acknowledged with a ‘Certificate of Special Recognition by CII at for its Environment Health & Safety Practices at the Northern Region EHS Competition.

6. Financial & Operational Performance - Overview

(Rs. in Crores)

2022-23 2021-22
Consolidated Standalone Consolidated Standalone
Total Income 14784.48 6817.01 13236.79 5720.59
Profit before Finance, Cost, Depreciation & Tax 1878.50 761.75 2279.98 679.66
Profit before Tax 806.04 317.12 1420.40 271.42
Profit for the Year 480.69 243.72 1098.26 222.33

7. Opportunities, Key Trends & Threats

Flexible packaging rescued the Indian E-commerce business during the covid-19 pandemic, and the demand for flexible packaging has skyrocketed post-pandemic.

This shi3 has widened business opportunities and growth in the printing and packaging Industry. Further, the industry is driven by key factors like rising population, increase in income levels and changing lifestyles. Growth prospects of end-user segments are contributing to rise in the demand of the flexible packaging industry. Demand from rural sector for packaged products is being fuelled by the increasing media penetration through the means of internet and television. India is emerging as the most favoured destination for organized retail destination in the world. Furthermore, presence of E-commerce is expanding rapidly and is bringing around a revolution in the retail industry. Retailers are now leveraging digital retail channels thereby enabling wider outreach to customers with less amount of money spent on real estate. Therefore, organized retail and boom in e-commerceprofiters huge potential for future growth of retailing in India which in turn is pushing the growth of packaging sector.

Flexible Packaging Industry:

Key Trends

Increased Adoption of Flexible Packaging Over Rigid Packaging

Major influencing factors in the global flexible packaging market include the cost of raw materials, e3 icient cost of production, and lightweight nature. Further, the demand from buyers and end customers is compelling the shi3 to flexible packaging. The advent of smaller packs and single-serve packaging has resulted in more packages of lesser volume in 2020 and during COVID-19. The flexible packaging market alsoprofiters easy-to-use caps and closure functionalities that were previously one of the reasons for slower adoption by users. Flexible pouches have become the most sought-after product as they can package products belonging to food, pharma, beverages, FMCG, and others. Also, other flexible packaging products, such as aluminum foil and paper, have expanded their scope with many variations. Also, the newer packages with increased protection features from the external environment, combined with functionalities such as zips and spouts, are increasing the adoption of pouch packaging and, in turn, flexible packaging over rigid packaging. Hence, a greater number of products that were earlier packaged in rigid materials have now been replaced by flexible packaging.

Usage of High-Barrier Plastic Packaging Materials

The barrier properties of films used in plastic packaging are important as it ensures that the food is not spoilt and shelf life is increased. The advent of thinner packaging materials leads to a requirement for high-barrier properties. These barrier properties include the permeability of gases, water vapour, aroma compounds, and light. The polymers used in these plastic films are the essential differentiating factor for the e3 icacy of such barrier films in maintaining the quality of packaged or processed foods. The flexible plastic packaging market widely uses high-barrier films for premium food protection. The lightweight nature and flexibility of flexible packaging using these high-barrier films replace traditional packaging materials such as metal, rigid plastic, and glass. With the growing demand for high-barrier packaging, especially in the vacuum packaging market due to its cost-effectiveness and efficiency, recyclable high-barrier plastics such as stand-up pouches are preferred. Moreover, rising awareness of eco-friendly and convenient packaging in the food industry is also expected to increase the demand for high-barrier vacuum packaging in the flexible packaging market.

Restraints

Recycling Challenges With Flexible Packaging Products

Recycling flexible pouches and other products are cumbersome and not economically viable, as separating those materials involves many processes. Unlike rigid plastic products, recycled flexible packaging cannot be used for packaging food and pharmaceuticals as per FDA regulations. The recycled material can only be used for other applications. The recycling process involves the collection of waste, sorting, and recycling. In these processes, the materials undergo washing, shredding, categorization of plastic and extruding. Low-quality materials are disposed of or transferred to energy recovery centers, as end-users use only high-quality material output.

Further, presently, the supply of recycled plastics is not robust. Also, the quality of recycled plastics is not uniform across all regions and facilities. The volume of plastic required by converters is enormous, and the supply side is yet to match the huge demand. This is one of the factors why the adoption rates are currently low for recycled plastic and creates a recycling challenge in the global flexible packaging market. Any fluctuation in the quality or quantity has an immediate impact on the prices of the end products and hence is currently not economically viable.

Higher Operational Costs

Manufacturers of flexible packaging are getting increasingly concerned about inflation. Labor, energy and transportation costs have created a competitive industry with high operational expenses. Additional raw material price hikes are influenced by the crisis between Russia and Ukraine, Russian sanctions, and the realignment of western and eastern countries in the geopolitical arena.

Environmental Consciousness

With environmental awareness rising globally, there is a strong momentum towards sustainable solutions. Stakeholders across the value chain are voicing their concerns regarding the use of plastic packaging and organizations are realigning themselves in this direction.

8. Future Outlook

The global market for flexible packaging has displayed massive development in recent times. The main parameter supporting the markets development is the escalating demand for packaged food. Furthermore, the convenience of use & cost-effectiveness of flexible packaging are the crucial parameters supporting the expansion of the global market. Moreover, the rising consumer preference for convenience products will positively influence market performance over the review era. Consumer preferences are changing due to smaller households and busy lifestyles, needing simple products to open, carry, use, store, dispose of and serve their on-the-go lifestyles. Consequently, product packaging that complements modern lifestyles is becoming more popular. In addition, the growing consumer purchasing power is also likely to catalyze the performance of the market over the review era. The factors such as changing consumer lifestyles & consumption habits, adoption of flexible packaging in a variety of end user industries, high market penetration of ready-to-eat meals, a high number of working-class professionals, advancements in food processing techniques, and highlighting the benefits are also projected to boost-up the performance of the market over the coming years. The emergence of bio-based & biodegradable films and growing demand for packaging solutions across the food & beverage, healthcare & personal care industries that ensures enhanced protection & convenience handling are the major growth driver for the Flexible Packaging Market. Increase in demand for snack and convenience food in small or single size portions fuels the growth of the flexible packaging market. The packaging industry is moving toward flexible packaging, owing to its multifold energy and environmental advantages. Today, the demand is increasing rapidly for flexible packaging as it is used by the food and beverage, personal and home care industries, as well as pharmaceutical, to protect the countless life-enhancing and life-saving products every day. And demand is increasing rapidly. The worlds population is projected to reach 8.5 billion by 2030 and surpass 9.7 billion by 2050 (Source: https:// www.un.org/), necessitating a significant increase in food production. Global supply chains will need to adapt to this growth, and flexible packaging will play a critical role in delivery of safe and a3 ordable products to consumers, improving accessibility no matter where they are. Further, growing global initiatives to promote sustainable packaging due to increasing plastic wastage on landfill is primarily fueling growth of the sustainable packaging market. Thus, opportunities in the flexible packaging market are the growing demand for sustainable packaging and better substitute for traditional packaging materials because of increasing awareness about hygiene. Consumer demand for eco-friendly and sustainable product packaging has proven remarkably stable and robust throughout the societal changes that have occurred in the last several years. However, the high costs of raw materials which are required for making flexible packaging products, poor recycling infrastructure end use restrictions on recycled flexible packaging and rapid changes in technology are the major factors expected to hinder the growth of flexible packaging market.

The Asia Pacific (APAC) region is the home to the fastest-growing economies and most populous countries in the world. The region is expected to have the largest market share in the coming years. The region provides great amount of opportunities for the growth of the flexible packaging market due to the growing population. Further, the presence of organized retail sector, developing e-commerce sector, availability of low cost labour and the easily available raw materials as well as growing popularity of snacks and beverages in the developing nations of the Asia Pacific region will drive the market growth in the years to come.

9. Internal Control System, their Adequacy and Operative Effectiveness

UFLEX believes in continued reinforcement of the Financial and Operational Controls, intended to improve transparency, accountability and effectiveness of the Companys processes. The Company has in place a well-framed internal control system that authorizes, records, and reports transactions to safeguard assets and protect against loss from unauthorized use or disposition. The internal controls ensure the reliability of data and financial information to maintain accountability of assets. They are supplemented by extensive internal audits, management review, and documented policies, guidelines and procedures. The Company has a robust Internal Audit mechanism, conducted as per the pre-approved calendar. Based on the audit, Internal auditors periodically report on the design deficiency and operational inefficiency, if any, apart from recommending further improvement measures, to accomplish the Company objectives more e3 iciently. The observations and agreed action plans are presented quarterly to the Audit Committee that reviews the adequacy of the controls implemented by the Management.

Some significant features of the internal control of systems are:

The Audit Committee of the Board of Directors, comprising of independent directors regularly review the audit plans, significant audit findings, adequacy of internal controls, compliance with accounting standards as well as reasons for changes in accounting policies and practices, if any;

A well-established Internal Audit team operates in line with best governance practices. It reviews and reports to management and the Audit Committee about compliance with internal controls and the efficiency and effectiveness of operations as well as the key process risks. Both the Internal Financial Control and Legal Compliance framework are subject to review by the Management in respect of their adequacy and operational effectiveness. These systems in turn are also reviewed by the Internal Auditors, Statutory Auditors and the Audit Committee.

10. Risk Management

While the world and businesses are recovering from the impact of the COVID-19 pandemic, new external and internal risks continue to challenge businesses in every possible way amplifying existing risks. Not only are the nature of risks evolving, but the speed of risk is increasing with faster time to impact. Geo-political situations like the Russia-Ukraine war and collapse of Silicon Valley

Bank in USA have further forced global businesses to revisit their operations, delivery, supply chains and contractual aspects. Risk Management is becoming even more relevant as the risk landscape continues to evolve radically at a fast pace and thus Company continues to focus on a system-based approach to business risk management. The management of risk is embedded in the corporate strategies of developing a portfolio of world-class businesses that best match organisational capability with opportunities in domestic and international markets, developing capabilities and competencies for the future in order to enhance competitiveness and win in the markets of tomorrow. The Company recognizes that risk is an integral part of business and is committed to managing the risks in a proactive and e3 icient manner. The Companys governance structure has well-defined roles and responsibilities, which enable and empower the Management to identify, assess and leverage business opportunities and manage risks effectively. The Company periodically assesses risks in the internal and external environment, along with the cost of treating risks and incorporates risk treatment plans in its strategy, business and operational plans. The Company through its risk management process, strives to contain impact and likelihood of the risks. UFLEXs approach for risk management flourishes on the ability to demonstrate agility and proactive management of unforeseen risks. The Company is committed for creating sustainable position through an in-depth understanding and management of material risks, as well as maximizing value by unleashing new opportunities. UFLEX practices well-defined and established enterprise-level Risk Management Framework which is entrenched in the core business strategy and planning process of the organisation. This enhances its ability to manage risks and transform risks into opportunities as practically as possible. The Framework is governed by an overarching Risk Management Policy which clearly articulates the Companys approach for managing risks across the organization.

The Company has a Risk Management Committee which plays an important role in supporting the Board in the oversight and management of risk. The objective of risk management activities is to recognise, assess, and manage risks early on. It helps the timely implementation of appropriate measures to mitigate the identified risks and concerns. At UFLEX, risk management is a continuous process of analysing and managing all the business risks that arise owing to the dynamic industry that the Company operates within. The Risk Management Committee oversees the effectiveness of the risk management framework. The Company has formalized & documented a detailed Manual on Internal Financial Control covering each activity involving Financial and Operational transactions, the probable risk underlying those activities and the control tools to prevent such risks either through manual or automated process. All the Financial, Operational and Legal risks associated at transactions and operational levels are taken care through the above systems. In addition to these, there are other risks which arise during the course of decision making on strategic and corporate financial matters of the Company.

The Company has identified following nature of risks which may be associated with the decisions on Strategic and Corporate Financial matters of the Company.

• Political, Social and Economic Risks

• Market Risk

• Technology Selection Risk

• Capital Structuring Risk

• Exchange & Interest Rate Risk

• Credit Risk

• Liquidity Risk

• Foreign Currency Risk

• Commodity Price Risk

The Management of the Company evaluates the above risks before taking any decision on strategic and corporate financial matters. On the basis of the aforesaid Risk Management Process followed by the Company the Risk Management Committee and Audit Committee review & evaluate in detail the establishment and adherence of the Companys Enterprise Risk Management System and also review and evaluate the adequacy and e3 icacy of the same.

Further, the Board reviews the recommendation of the Audit Committee on the establishment, adherence, adequacy and e3 icacy of the Companys Enterprise Risk Management framework.

11. Companys Standalone and Consolidated Financial Performance & Analysis

Results of Operations

(Rs. in Crore)

Particulars Standalone Consolidated
Year ended 31-Mar-23 Year ended 31-Mar-22 Year ended 31-Mar-23 Year ended 31-Mar-22
INCOME
Revenue from Operations 6778.89 5673.78 14662.51 13127.13
Other Income 38.12 46.81 129.42 108.98
Share in Profit / (Loss) of Associate for the Year 0.00 -- -4.99 4.30
Share in (Loss) of Joint Venture for the Year 0.00 -- -2.46 -3.62
Total Income 6817.01 5720.59 14784.48 13236.79
EXPENDITURE
Cost of Materials consumed 4504.83 3756.76 9304.95 8022.15
Purchase of Stock-in-Trade 81.10 29.62 81.1 101.64
Changes in Inventories of finished goods, work-in- progress and Stock-in-Trade -22.82 -82.19 -165.31 -364.31
Employee benefits expense 560.60 506.79 1079.22 924.95
Other expenses 943.82 847.34 2630.27 2293.16
Expenses Allocated to Self Constructed Assets -12.27 -17.39 -24.25 -20.78
Total Operating Expenses 6055.26 5040.93 12905.98 10956.81
EBIDT 761.75 679.66 1878.50 2279.98

Segment-wise performance has been disclosed at Note No- 43 of the financial Statement.

12. Significant Changes in Financial Ratios

During the year, the significant changes in the financial ratios of the Company, which are more than 25% as compared to the previous year are summarized below:

Standalone Basis

Financial Ratio FY 2022-23 FY 2021-22 Change (%) Reason for change
Debt to Equity Ratio 0.85 0.65 30% The significant change in these ratios are due to the additional borrowings during the year coupled by increase in utilisation of working capital facilities due to increase in the operational volumes of the Company.

Details of other significant changes in key financial ratios, along with explanations thereof have been disclosed in Note no. 50 of the Notes on the Financial Statements (Standalone) for the financial year ended 31st March 2023.

13. Human Resource Development/ Industrial Relations

Human Resources are vital and most valuable assets for the Company. They play a significant role in the Companys growth strategy. The Company emphasizes on talent nurturing, retention and engaging in a cordial, amicable and constructive relationship with employees with a focus on productivity and efficiency and underlining safe working practices. UFLEX is a truly global organization that recognizes the capabilities, contributions, potential, and value of its human capital. The Board of Directors also value the professionalism and commitment of all employees of the Company and place on record their appreciation and acknowledgement of the e3 orts, dedication and contribution made by employees at all levels that has contributed to Companys success and remain in the forefront of flexible packaging business. Peoples safety and well-being are the utmost priority to the organization. Our objective is always to identify and adopt the best practices of every region in our work culture. The Human Resource function of UFLEX leads from the front and leaves no stone unturned to make a positive difference in the lives of its employees. Employee communication and engagement remain at the heart of Companys approach and are facilitated by technology. To foster a more connected organization, the company has been using various media to stay connected with the workforce, providing emotional support. The Company aims to help each employee reach their fullest potential, and thus employee development strategy is aimed at creating a dynamic talent pipeline, capable of supporting the organization to meet evolving business challenges in the long run. The Company educate its employees through regular training which helps them acquire new skills, increase their productivity, climb the corporate ladder and take up bigger responsibilities and above all keep them motivated and aligned to organizational goals.

The Company believes in providing Equal Growth Opportunities to all those who have the ability and willingness to perform. The Company is committed to the growth and development of its employees to strengthen their functional, managerial, and leadership capabilities. The Company has a focused approach with the objective of addressing all capability gaps and preparing its employees to adapt to the fast-changing external environment to meet the Companys strategic objective. The Company had 7194 permanent employees in Indian Operations as on 31st March, 2023. The Company maintains healthy, cordial and harmonious industrial relations at all level and in the Financial Year 2022-23, industrial relations across the Company were cordial & harmonious.

14. Environment, Occupational Health & Safety

Environment is one of the most important aspects of Companys business ethos and it believes in taking all the measures necessary to continuously improve its environmental performance over time. The Company is committed to ensuring environmentally sustainable and responsible operations to achieve highest standards of excellence. In terms of environmental performance, UFLEX aims to minimise impact and create a positive footprint wherever possible. The company also ensures a safe and healthy workplace for the wellbeing of its employees The Company being in the business of flexible packaging plays a very important role in the conservation of natural resources and reduction in carbon gas emission through recycling and reprocessing of the waste materials and saving the land fill areas. The Company actively promote, improve, develop and establish EHS policies, work practices, standards and norms for all activities across its manufacturing plants. As an environmentally conscientious organization, the Company is mindful of its responsibility towards sustainable ecosystem and biodiversity. UFlex global sustainability initiative ‘Project Plastic Fix, is designed to form measures that focuses on solutions to keep plastic in the economy and out of the environment. The Company aims to manage plastic waste stock and flow through its 4R approach to transform ‘Waste to Wealth- Reduce, Reuse, Recycle & Return. Further, for fulfilling the obligation of providing a safe and healthy work environment, the Company continually work towards identifying, assessing and managing environmental impacts and health & safety risks of all activities & products.