Members and Investors are cautioned that the discussion in this section of the Annual Report may contain statements that involve risks and uncertainties. Forward-looking statements mentioned may involve risks and uncertainties that could cause results to differ materially from those projected. Consequently, actual results, performance or achievements could thus differ materially from those projected in any such forward looking statements. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Company assumes no obligations, assumptions and expectations of future events and trends that are subject to risks and uncertainties. Actual future results and trends may differ materially from historical results or those reflected in any such forward looking statements depending on a variety of factors.
The Company is the flagship listed Company of 3M Company, USA in India. 3M Company, USA is a diversified technology and science company with a global presence in the following businesses: Safety and Industrial; Transportation & Electronics; Health Care; and Consumer and is among the leading manufacturers of products for many of the markets it serves. Most of its products involve expertise in technology, product development, manufacturing, and marketing, and are subject to competition from products manufactured and sold by other technologically oriented companies.
The Company has manufacturing facilities in India at Ahmedabad, Bengaluru, Pune and its Corporate Office and Customer Innovation Center (R&D Center) is located at Bengaluru. As on March 31, 2022, the Company had an employee strength of 1,132 personnel. As on March 31, 2022, your Company was ranked 202 (PY: 111) based on Market Capitalization @ Rs. 22,18,915 Lakhs (PY: Rs. 34,28,710 Lakhs) and is now among the top 500 (PY: top 200) Companies based on Market Capitalization (Source: NSE). The Company managed its operations in four (4) operating business segments: Safety and Industrial; Transportation & Electronics; Health Care; and Consumer. The Company?s four business segments bring together common or related 3M technologies, enhancing the development of innovative products and services and providing for efficient sharing of business resources.
3M products are sold through numerous distribution channels, including directly to users and through numerous e-commerce and traditional wholesalers, retailers, jobbers, distributors, and dealers in a wide variety of trades in many countries around the world. Management believes that the confidence of wholesalers, retailers, jobbers, distributors and dealers of 3M and its products — a confidence developed through long association with skilled marketing and sales representatives — has contributed significantly to 3M?s position in the marketplace and to its growth.
The Company is committed to creating long-term value to shareholders. Accordingly, the Company is dedicated to achieving high levels of operating performance, cost competitiveness, enhancing the productive asset and resource base and striving for excellence in all areas of operation. The Company firmly believes that its success in the marketplace and good reputation are among the primary determinants of shareholder value. Its close relationship with customers and a deep understanding of their challenges and expectations drive the development of new products and services. With many decades of expertise and know-how, the Company offers its customers solutions that enhance their projects and builds trust. Anticipating customer requirements early and being able to address them effectively requires a strong commercial backbone. The Company continues to develop this strength by institutionalizing sound commercial processes and building world-class commercial capabilities across its marketing and sales teams. The Company uses different innovative approaches in the development of its products and services, as well as execution of growth opportunities. Your Company is also committed to creating value for all its stakeholders by ensuring that its corporate actions positively impact all the dimensions viz., economic, social and environment.
GLOBAL ECONOMIC OVERVIEW
The far-reaching impact of the pandemic continued well into 2021 affecting all areas of development. As economies adjusted to the new reality of living with multiple variants, there was uneven recovery between high income and low and middle income economies. The year also saw global supply chain disruptions due to extreme weather conditions like the US winterstorm and unpredictable occurrences like the Suez Canal obstruction, which led to trade disruptions, rising raw material costs and inflation. Trade picked up towards the latter half of 2021 with economies seeing robust recovery aided by accelerated national vaccinations programs. Following the strong rebound in 2021, the global economy entered 2022 amid fresh threats from the contagious Omicron and other newer variants of COVID-19 and the escalation of geopolitical tensions between Russia and Ukraine. Inflation rates already elevated from the trade disruptions of 2021 continue to rise with the war induced commodity price increases.
Crude oil and gas and food prices have increased rapidly, impacting vulnerable populations in low-income countries. Global growth is also projected to slowdown from an estimated 6.1 percent in 2021 to 3.6 percent in 2022 and 2023. Multilateral global efforts to resolve the conflict through peaceful means, prevent further economic decline, curb inflation, manage debt increases, maintain global liquidity while prioritising the health and safety of its populations are essential for recovery.
INDIA ECONOMIC OVERVIEW
In a climate of uncertainty and a challenging second wave, India witnessed strong economic recovery and grew at 8.7 percent GDP as compared to a contraction of 6.6 percent in 2020-21. The government and the Reserve Bank of India took several monetary and fiscal policy measures to support and cushion the impact of the crisis on the economy. The growth is supported by widespread vaccination coverage, gains from supply side reforms, robust export growth, easing of regulations and availability of fiscal space to ramp up capital spending. Indicators show that the economic impact of the second wave of COVID was much smaller than that experienced during the COVID induced lockdown of the first wave, even though the health impact was unprecedented.
IIP (Index of Industrial Production) went through a sharp rebound from a contraction of 8.4 per cent in financial year 2020-21 to an expansion of 11.3 per cent in financial year 21-22.
Total consumption is estimated to have grown by 7.0 per cent in 2021-22 with government consumption remaining the biggest contributor as in the previous year. Private consumption is also estimated to have improved significantly to recover 97 per cent of corresponding pre-pandemic output level and it is poised to see stronger recovery with rapid coverage in vaccination and faster normalization of economic activity.
The impact of global trade disruptions which continued through most of financial year 21-22 was felt in the rise in inflation, input prices, raw material and freight costs. Heightened geopolitical uncertainties in Europe due to the conflict in Ukraine have impacted commodity, food and crude oil prices.
India?s economy has remained resilient through various global economic conditions and widespread pandemic, with a positive outlook for continued recovery.
STANDALONE RESULTS OF THE OPERATIONS OF THE COMPANY
On a standalone basis your Company?s revenue from operations increased by 27.18% at Rs. 307,830.08 Lakhs for the financial year ended March 31,2022 compared to Rs. 242,036.39 Lakhs in the previous financial year. The Profit before Interest and Depreciation is Rs. 41,660.78 Lakhs compared to Rs. 26,454.84 Lakhs for the previous financial year. Profit before Tax is Rs. 35,969.60 Lakhs compared to Rs. 20,244.08 Lakhs for the previous financial year. The operating margin for the current year is 13.38% compared to 10.81% for the previous financial year. Total Comprehensive Income is Rs. 26,727.38 Lakhs compared to Rs. 14,674.69 Lakhs for the previous financial year. Export Sales is Rs. 2,385.65 Lakhs for the financial year ended March 31, 2022 compared to Rs. 2,497.17 Lakhs in the previous financial year, a decrease of 4.47%, due to less demand in the global market.
The other income is Rs. 3,471.84 Lakhs for the financial year 2021-22 compared to Rs. 2,686.77 Lakhs for the previous financial year 2020-21.
Cost of Goods sold:
The % of cost of raw material consumed as against sales for the financial year 2021-22 is higher by 0.43% at 61.49% as against 61.07% for the previous financial year 2020-21, due to product mix and increase in foreign currency exchange rate.
Employee Benefits Expense:
Employee cost as a % of sales for the financial year 2021-22 stood at 11.22% (previous financial year was 13.76%) at Rs. 34,940.51 Lakhs (previous financial year: Rs. 33,677.10 Lakhs). Sales per employee has increased by 28.78% to Rs. 275.00 Lakhs (no. of employee?s 1,132) in the current financial year 2021-22 from Rs. 213.55 Lakhs (no. of employees 1,146) for the previous financial year 2020-21.
The interest cost for the financial year 2021-22 is Rs. 363.56 Lakhs compared to Rs. 243.22 Lakhs in the previous financial year 2020-21. The interest cost is on account of lease rentals of vehicles and office equipment.
The Company earned Rs. 2,726.19 Lakhs on the surplus during the financial year 2021-22 when compared to Rs. 1,976.53 Lakhs during the financial year 2020-21 by keeping the funds in deposits with the Banks.
Earnings per Share (EPS):
The EPS (Basic and Diluted) of the Company for the financial year 2021-22 was Rs. 236.28 per Share as compared to Rs. 132.53 per Share in the previous financial year, a increase of 78.28%.
The Authorized/Issued/Subscribed and Paid-up Capital as at March 31, 2022 is Rs. 11,26,50,700 (divided into 1,12,65,070 Equity Shares of Rs. 10/- each). During the year under review, the Company has not issued Shares with differential voting rights nor granted Stock Options nor Sweat Equity.
Reserves & Surplus:
Entire profit of Rs. 26,727.38 Lakhs is retained in profit and loss account for the year ended March 31, 2022. The Reserves & Surplus is Rs. 247,751.61 Lakhs including the current financial year retained profit.
The total shareholder funds increased to Rs. 248,878.12 Lakhs as at March 31,2022 from Rs. 222,150.74 Lakhs as of the previous financial year 2020-21, representing a growth of 12.03% mainly because of retained profits of the current financial year.
The depreciation charge for the current financial year is lower at Rs. 5,327.62 Lakhs when compared to Rs. 5,967.54 Lakhs of previous financial year 2020-21.
Fixed Assets-Capital Expenditure:
The gross Fixed Assets as at March 31,2022 was Rs. 49,563.21 Lakhs as compared to Rs. 43,432.28 Lakhs of previous financial year 2020-21. Capital Investments during the financial year 2021-22 were at Rs. 6,999.06 Lakhs (Net of capital work-in-progress and capital advances) (2020-21: Rs. 4,041.72 Lakhs) an increase of 73.17% year on year.
Inventory as at March 31, 2022 amounted to Rs. 45,347.77 Lakhs as compared to Rs. 43,027.05 Lakhs of previous financial year 2020-21. The inventory ratio has decreased to 84 days as at March 31,2022 from 103 days of previous financial year 2020-21.
Trade Receivables as at March 31,2022 amounted to Rs. 48,857.75 Lakhs as against Rs. 46,050.86 Lakhs of previous financial year 2020-21. The debtor?s turnover ratio is 58 days (previous financial year: 69 days).
Cash and Bank balances:
The total balance of cash and bank balances as at March 31, 2022 was Rs. 120,653.96 Lakhs as compared to Rs. 93,715.39 Lakhs as at March 31,2021.
Current Ratio: 3.12 (2021-22); 3.0 (2020-21)
Debt Equity Ratio: 0.98 (2021-22); 1.03 (2020-21)
Interest Coverage Ratio: 99.94 (2021-22); 84.23 (2020-21)
Overall analysis of the Profit and Loss (Standalone):
|Particulars||Year Ended March 31,2022||Year Ended March 31, 2021|
|Rs. in Lakhs||%||Rs. in Lakhs||%|
|Revenue from operations||307,830.08||98.88||242,036.39||98.90|
|Other income, net||3,471.84||1.12||2,686.77||1.10|
|Cost of Materials consumed||130,084.69||41.79||93,820.92||38.34|
|Purchases of stock-in-trade||62,193.44||19.98||53,534.70||21.88|
|Changes in inventories of finished goods, work-in-progress and stock-in -trade||(853.23)||(0.27)||2,086.59||0.85|
|Employee benefits expense||34,940.51||11.22||33,677.10||13.76|
|Profit before Finance costs and Depreciation||41,660.78||13.38||26,454.84||10.81|
|Depreciation and amortization expense||5,327.62||1.71||5,967.54||2.44|
|Profit before Tax||35,969.60||11.55||20,244.08||8.27|
|Profit for the year||26,617.51||8.55||14,930.09||6.10|
|Items that will not be reclassified subsequently to profit or loss||109.87||0.04||(255.40)||(0.10)|
|Total comprehensive income for the year||26,727.38||8.59||14,674.69||6.00|
Overall analysis of the Profit and Loss (Consolidated):
|Particulars||Year Ended March 31,2022||Year Ended March 31, 2021|
|Rs. in Lakhs||%||Rs. in Lakhs||%|
|Revenue from operations||333,584.17||98.90||260,483.14||99.06|
|Other income, net||3,711.51||1.10||2,473.73||0.94|
|Cost of Materials consumed||140,774.54||41.74||99,441.00||37.82|
|Purchases of stock-in-trade||69,977.05||20.75||58,365.23||22.20|
|Changes in inventories of finished goods, work-in-progress and stock-in -trade||(1,683.02)||(0.50)||2,101.44||0.80|
|Employee benefits expense||38,819.21||11.51||36,990.48||14.07|
|Profit before Finance costs and Depreciation||42,635.57||12.64||28,422.16||10.81|
|Depreciation and amortization expense||5,511.72||1.63||6,184.59||2.35|
|Profit before Tax from continuing operations||36,751.81||10.90||21,992.16||8.36|
|Profit for the year||27,197.11||8.06||16,237.65||6.18|
|Items that will not be reclassified subsequently to profit or loss||127.26||0.04||(292.01)||(0.11)|
|Total comprehensive income for the year||27,324.37||8.10||15,945.64||6.06|
On a standalone basis, the Safety and Industrial business increased by 16.48%; Transportation business increased by 32.30%; Health Care business increased by 49.39%; and Consumer business increased by 23.85%.
(A) Safety and Industrial Business:
This segment includes businesses that serve the core industrial, electrical, vehicle maintenance and safety markets. This business segment consists of personal safety, industrial adhesives and tapes, abrasives, electrical and products for the automotive aftermarket.
(Rs. in Lakhs)
|March 31, 2022||March 31, 2021|
|Financial Highlights||Segment Revenue||105,118.82||90,245.49|
|Profit Before Interest & Tax||8,658.98||9,569.74|
|Highlights of Safety and Industrial Business||• Robust growth in the safety and industrial business with strong revival as several end markets opened up.|
|• Expansion into emerging markets especially for industrial tapes, adhesives and personal safety segments.|
|• Responded to long term trends such as robotics and automation with new Robotic & Automated Sanding and Finishing solutions for the industrial segment. ‘New to market? 3M™ Performance Paint Spray Gun with disposable nozzle heads and the 3M™ Ceramic Coating were new solutions launched for the auto market.|
(B) Healthcare Business:
This segment provides products and services such as medical and surgical supplies, oral care solutions (dental and orthodontic products) and food safety products.
(Rs. in Lakhs)
|March 31, 2022||March 31, 2021|
|Financial Highlights||Segment Revenue||45,280.51||30,309.56|
|Profit Before Interest & Tax||6,162.86||1,933.85|
|Highlights of Healthcare Business||• Ensured timely supply of products in the face of supply chain and raw material constraints as healthcare facilities and dental clinics opened up.|
|• Drove efforts in the development of guidelines and protocols for infection prevention practices in healthcare facilities and created awareness about international best practices. Strong partnerships as a knowledge partner with professional medical organizations such as INS India, AORN India, and CAHO that are driving the upgradation of clinical practices and upskilling of paramedical staff.|
|• Scaled up online education through 3M™ Healthcare Academy delivering both local and global content for hospitals, dentists and orthodontists by supporting continuous education and skill upgradation.|
(C) Transportation and Electronics Business:
This segment includes businesses that serve global transportation and electronic original equipment manufacturer (OEM) customers. This business segment consists of automotive and aerospace, commercial solutions, advanced materials, and transportation safety.
(Rs. in Lakhs)
|March 31, 2022||March 31, 2021|
|Financial Highlights of Transportation Business||Segment Revenue||115,947.10||87,642.35|
|Profit Before Interest & Tax||9,196.44||1,487.69|
|Highlights of Transportation Business||• Higher Government spending on infrastructure projects, investments in multi-modal transportation initiatives like PM Gati Shakti and increased highway construction activities offered growth opportunities for 3M?s transportation safety solutions.|
|• Launched a new product for road safety, 3M™ Stamark™ tape, which offers all weather reflectivity and improved road visibility.|
|• Commercial solutions for hygiene and cleanliness saw increased uptake as back to work and hybrid models encouraged sales in quick service restaurants (QSR), offices, retail and commercial places.|
|• Fleet graphics solutions expanded with growing demand from railways, banking & finance, oil and gas and automotive OEM segments.|
|• Growth in the automotive segment through new content.|
(D) Consumer Business:
This business serves consumers with home care, office supply and stationery, home improvement and consumer healthcare products.
(Rs. in Lakhs)
|March 31, 2022||March 31,2021|
|Profit Before Interest & Tax||7,720.83||3,932.58|
|Financial Highlights||Capital Employed||3,991.57||6,335.29|
|Highlights of Consumer Business||• Increased availability and impactful noticeability of Scotch-Brite? range of products across existing and evolving channels to better serve consumers through the pandemic.|
|• Grew E-commerce business faster than other channels and ensured reach of our products to consumers across channels during the pandemic.|
|• Increased awareness and penetration for several household cleaning products of the Scotch-Brite? range beyond scrub pads to help consumers maintain clean and hygienic homes.|
|• Drove awareness of DIY mounting solutions of Command™ and 3M Double sided tapes to help consumers improve their home decor.|
|• Launched a new consumer respirator to provide protection to consumers with comfort for long hours of usage during the pandemic.|
OPPORTUNITIES AND THREATS
3M Company?s breath of technologies and product portfolio have enabled it to retain its leading market positions. Your Company strongly believes in the 3M?s brand equity and its ability to provide customers with innovative solutions. Global campaigns and brand building continue to benefit the Company?s business in India.
The Company is operating in a highly competitive market which may exert pressure both on the top line as well as the bottom line of the Company. The Company?s products involve expertise in product development, manufacturing and marketing and are subject to competition from products manufactured and sold by other technologically oriented companies both within India and outside India. In the addition, rupee depreciation, fluctuating oil & high commodity prices remain key challenges needing focused attention.
RISKS AND CONCERNS
Provided below are cautionary statements of what your Company believes to be the most important risk factors applicable to the Company.
• The Company?s results are affected by competitive conditions and customer preferences.
• Results are impacted by the effects of and changes in economic, political, regulatory, capital markets and risks related to public health crises such as the global pandemic associated with the coronavirus (COVID-19).
• Foreign currency exchange rates and fluctuations in those rates may affect the Company?s ability to realize projected growth rates in its sales and earnings.
• The Company?s growth objectives are largely dependent on the timing and market acceptance of its new product offerings, including its ability to continually renew its pipeline of new products and to bring those products to market.
• The Company?s future results are subject to fluctuations in the costs and availability of purchased components, compounds, raw materials and energy, including oil, natural gas and their derivatives, due to shortages, increased demand, supply interruptions, currency exchange risks, natural disasters and other factors like the global pandemic.
• Security breaches and other disruptions to the Company?s information technology infrastructure could interfere with the Company?s operations, compromise information belonging to the Company or its customers, suppliers, and employees, exposing the Company to liability which could adversely impact the Company?s business and reputation.
• The Company?s strategy for growth, future revenues, earnings, cash flow, uses of cash and other measures of financial performance, and market position.
• The Company?s future results may be affected by its operational execution, including scenarios where the Company generates fewer productivity improvements than estimated.
• Asset impairments.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
All key functions and divisions of the Company are independently responsible to monitor risks associated within their respective areas of operations such as production, supply chain, marketing, finance, accounting, treasury, legal and other areas like health, safety, and environment. The Company has identified various risks through an internal selfassessment compliance checklist and has laid out necessary procedures to mitigate the same.
The Company has in place adequate systems of internal control commensurate with its size and the nature of its operations. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorized use or losses, executing transactions with proper authorization and ensuring compliance of corporate policies. The Company, through its own Corporate Internal Audit Department, carries out periodic audits to cover all the offices, factories and key areas of business segments based on the plan approved by the Audit Committee and bring out any deviation to internal control procedures. The Internal Auditor functionally reports to the Audit Committee and administratively to the Managing Director. The observations arising out of audit are periodically reviewed and compliance ensured. The summary of the Internal Audit observations and status of the implementation is submitted to the Audit Committee of the Board of Directors. The status of implementation of the recommendations is reviewed by the Committee on a regular basis and concerns, if any, are reported to the Board.
DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS
Learning and Development:
Your Company continued to advance its goal of equipping employees with the skills required to adapt and thrive in a volatile and evolving environment. The learning culture adapted to the challenges of the pandemic with several virtual programmes based on themes of ‘Change Agility?, ‘Intercultural Collaboration?, ‘Growth Mindset? and ‘Emotional Intelligence? to name a few.
Supervisors gained the opportunity to strengthen their supervisory skills through dedicated Asia virtual workshops and social learning options with peers across 3M, globally. Inside-Out coaching and Franklin Covey supervisory programmes were some of the key development initiatives to enhance supervisory capability. Employees and leaders also had a chance to learn and contribute to the collective learning through the Asia Mentoring and Reverse Mentoring programmes.
‘Feel@Home?, 3M India?s new employee orientation programme involved volunteers from Employee Resource Networks (ERN) (Pride, Women?s Leadership Forum and New Employee Opportunity Network). This aided in fostering inclusion and offered a window of development for ERN volunteers.
Your Company provided employees with regional and global learning content through virtual platforms and new learning initiatives tailored to businesses and functional needs. Udemy was launched as a new learning partner for employees to take on self-learning courses.
HR Business Partnering (HRBP):
Your Company introduced several initiatives to support employee well-being. A Company led cross-functional effort provided COVID vaccinations to employees and their families through on-site camps and off-site partnerships with hospitals. Clinical expertise was also provided during the on-site camps by external healthcare partners.
Employee well-being and mental health were at the center of discussions between supervisors and employees. Managers were provided with resources and tools to support teams through challenging circumstances. A wellness calendar was rolled out for the year with multiple webinars, events and content that covered physical, mental and emotional wellness.
Mechanisms for engagement of employees remained primarily virtual. As customers gradually returned to workplaces, employees made continued efforts to engage, train & support them in the adoption of 3M?s solutions. Your Company continues to take steps to fully adopt a progressive ‘work from anywhere? concept while balancing resource requirements at plants, warehouses & other locations that need 24x7 support. Corporate guidance on "Work Your Way" - a flexible way of working to help our non-production employees work where they want, when they want and how they want was introduced.
The HR team continued its efforts to build a more diverse and inclusive organisation through the concerted efforts of Employee Resource Networks (ERNs). The WLF, PRIDE and NEON ERNs strived to encourage conversations, build awareness on allyship, and educate our employees on building a culture of inclusion.
Employee Relations (ER):
Your Company?s enduring focus has been on enhancing shop floor culture and strengthening our performance philosophy. 3M?s philosophy on employee relations has always been ‘direct engagement and communication with the organisation.
FY2021-22 continued to impact many engagement initiatives due to the rise of COVID cases in Wave 2 & 3. The plants leveraged the virtual platform for many engagement activities viz., Kaizen nights, EAP program, connect sessions with family members on COVID appropriate behaviors. The plants also continued to function through all waves of COVID to support customers. Some additional actions undertaken during the year included:
• Encouraged participation of plant employees in corporate CSR initiatives.
• Launch of the Manufacturing Women Leadership forum (M-WLF) to increase participation and leadership development of women within manufacturing plants.
|On behalf of the Board of Directors|
|Ramesh Ramadurai||Amit Laroya|
|Place: Bengaluru||Managing Director||Director|
|Date : May 27, 2022||DIN:07109252||DIN:00098933|