apcotex industries ltd share price Management discussions


The global economy is experiencing a number of turbulent challenges. Inflation higher than seen in several decades, tightening financial conditions in most regions, and Russias invasion of Ukraine all weigh heavily on the outlook. Normalization of monetary and fiscal policies that delivered unprecedented support during the pandemic is cooling demand as policymakers aim to lower inflation back to target. The global economys future health rests critically on the successful calibration of monetary policy, the course of the war in Ukraine and consumption increase in China.

Global growth is forecasted to slow from 6.0% in 2021 to 3.2% in 2022 and 2.7% in 2023. This is despite a surprisingly resilient labour market and consumer spending in most advance economies, and upliftment from Chinas reopening. Global inflation is forecast to rise from 4.7% in 2021 to 8.8% in 2022 but to decline to 6.5% in 2023 and to 4.1% by 2024.

Strong and coordinated monetary and fiscal policy actions over the past years prevented a much worse outcome. But with rising geopolitical tensions and still-high inflation, a robust recovery remains elusive. This harms the prospects for the entire world, especially for the most vulnerable people and countries.

Trends such as global warming, green energy, sustainability and digital adoption will continue to affect countries and industries. Some will be positively impacted by these changes while others will find it challenging. Overall, while there are several short to medium term concerns, we believe there are several opportunities as well that can be exploited by companies for the longer term.


Our overall outlook for the Indian economy remains positive. We expect investments to see a turnaround and this will in turn thrust the economy into sustainable growth. India will likely grow at a moderate pace of 6.0%-6.5% in FY 2023-24, as the global economy continues to struggle. Undoubtedly, the Reserve Bank of India (RBI) has shouldered a major responsibility of cushioning the economy from rising prices and maintaining liquidity. Yet, navigating inflation and preserving financial stability, while boosting growth drivers, has been a tightrope walk for policymakers. Growth in the next year will likely pick up as investments kickstart the virtuous circle of job creation, income, productivity, demand, and exports supported by favorable demographics.


The global synthetic rubber market is expected to grow at a CAGR of over 4% over the next 5 years. The synthetic rubber market is mainly driven by the tyre segment, the largest end-use segment of synthetic rubber, followed by automotive. Some synthetic rubbers with significant strength are replacing metal parts in vehicles. This reduces the weight of the vehicle and increases fuel efficiency without compromising performance.

The trend of reducing greenhouse gas emissions in vehicles has also increased synthetic rubber demand in the automotive industry. In terms of volume and value, the Asia Pacific region is anticipated to experience the highest rise in synthetic rubber use. Indian consumption of synthetic rubber is expected to increase at a CAGR of 6% over the next five years and hence India needs additional capacity in the future. In addition, synthetic rubber demand comes from the manufacturing of footwear, sports goods, and other components.

Similarly, synthetic latexes like Styrene-Butadiene latex, Styrene Acrylic, Pure Acrylic, Vinyl Acetate, Nitrile Latex, etc. are also expected to grow globally at an average CAGR of 4-5%. The major applications are paper & paper board coating, carpet backing, construction, gloves, textiles, paints and adhesives, etc. In India, growth in demand is expected to be extremely strong at 8-10% due to population growth, consumer trends, and an increase in per capita GDP. Apcotex has one of the broadest ranges of specialty synthetic emulsion polymers and adds new grades and products every year.

Your Company, with its specialty grades of rubbers, latexes, powders and polyblends, is well-positioned to cater to the growing demand in India and the region. Nitrile latex for gloves is a new emulsion polymer that your company has developed through internal R&D. It was successfully scaled up in FY 2020-21 and is currently only manufactured by your Company in India. During the year, your Company has commissioned a 50,000 MTPA facility at Valia Plant for manufacturing Nitrile Latex which is easily scalable to 80,000 MTPA. The Covid-19 pandemic has accelerated the growth of the gloves industry globally and thus the requirement of Nitrile Latex during the financial year. Even though, there is a post-pandemic downturn in the glove industry, it is likely to grow at a fast pace for the next few years.

Asia Pacific leads production of the global synthetic rubber industry with the automobile sector leading the growth. With the rise in population, large manufacturing base of the automobile industry and the availability of competitive labour, India offers excellent opportunities for synthetic rubber product manufacturers. With increasing R&D investments backed by strong infrastructure, your Company is a leader in specialty rubber products (i.e. Nitrile Butadiene Rubber and High Styrene Rubber).


Your Company is one of the leading producers of emulsion polymer products in India, namely Synthetic Latexes (various grades of Carboxylated Styrene Butadiene Latex, Styrene Acrylic Latex, Vinyl Pyridine Latex and Nitrile Latex) and Synthetic Rubber (Nitrile Butadiene Rubber, Nitrile Polyblends, NBR Powder and High Styrene Rubber). The Company has one of the broadest ranges of emulsion polymer products in India and caters to a wide range of industries. Your Companys Synthetic Latex products are used for paper and paperboard coating, carpet backing, construction, non-wovens, textile finishing, tyre cord dipping, paints, gloves and a few other specialty applications. Various grades of Synthetic Rubber find application in products such as footwear, automotive components, rice rolls, moulded items, v-belts, conveyor belts, hoses, etc.

The Companys major raw materials are petrochemical products, and its business could be vulnerable to high volatility in the prices of crude oil as well as its downstream products.

OPERATIONS DURING THE FINANCIAL YEAR 2022-23 The Company has achieved total revenue of Rs. 1,08,722 Lakhs during the financial year 2022-23, compared to Rs. 96,478 Lakhs in the preceding financial year. The Company exported its products worth Rs. 22,013 Lakhs during the financial year, approximately 21% of the total revenue. The Company has registered a value and volume sales growth of about 13% and 9% respectively over the previous financial year.

Profit before tax is up by 12% to Rs. 14,551 Lakhs as compared to Rs. 13,036 Lakhs during the previous financial year, mainly on account of increase in volume sales, introduction of new products, optimization of product and customer mix, adding new geographics, de-bottlenecking and quality improvement projects undertaken over last couple of years.

During financial year 2022-23, Operating EBITDA went up by 13% to Rs. 15,852 Lakhs from Rs. 13,982 Lakhs during the previous financial year. Profit after tax is up by 9% to Rs. 10,794 Lakhs, as compared to Rs. 9,881 Lakhs during the previous financial year. The Balance Sheet of the Company is healthy with long-term debt of Rs. 12,476 Lakhs, reasonable working capital cycle and cash/ liquid investments valued at Rs. 8,796 Lakhs based on NAV as on 31st March, 2023.

During the year, your company has successfully commissioned a 50,000MT Nitrile Latex plant in Valia, Gujarat and a 35,000MT multi-purpose latex plant in Taloja, Maharashtra. The total investments for both plants were over Rs. 20,000 Lakhs. In addition, investments were made in a Zero-liquid discharge plant in Valia, Gujarat and a direct power line to the Valia plant for future requirements.

The Company has also completed a rebranding exercise in order to more effectively communicate what Apcotex stands for, both internally and externally. As we embark on this new chapter in our journey, we look forward to a time of growth, innovation, and collaboration.

Apcotex believes that moving towards environmentally friendly processes and products, focusing on high levels on governance and growing equitably, are all imperative in todays context. We have recently embarked on our ESG journey. The ESG framework is based on three pillars; Product Stewardship, Stakeholders Delight and Responsible Business. Together all three pillars support our core purpose of using science responsibly for our planet, society and stakeholders. Over the next 10 years, your Company has set short, medium, and long-term targets on several KPIs such as increasing green energy consumption, reducing waste, reducing energy consumption/MT, reducing water consumption/MT, planting trees at our plant sites, etc. We will also work with our vendors and customers to reduce GHG emissions across the supply chain.

During the year, your Company undertook a Digital transformation exercise with the help of a boutique consulting firm. Phase 1 is completed which included identifying business cases for digitizing certain processes and shortlisting relevant IT tools, thereby leading to increased revenue and contributions. We have implemented also SAP Success Factor for our performance appraisal process. Your Directors consider Companys performance as satisfactory.


The Company expects financial year 2023-24 to be a challenging year due to a few reasons. The Gloves industry is still going through a deep downturn due to large excess inventories created in the last 2 years due to the pandemic. This, coupled with more capacities of Nitrile Latex, has resulted in significantly lower margins than anticipated in the short term and will have an impact on margins till demand picks up again. In addition to this, against imported competition for our synthetic rubber products, the higher margins we enjoyed due to shortages and higher cost of ocean freight has returned to normalcy. Despite the short-term challenges, your company is optimistic about its prospects with all the steps taken over the last 2-3 years. Business volumes across most of its product groups has been very strong through the year and this is expected to continue in the new financial year. The company is also well-diversified in terms of end applications as well as geographies with more than 20% of our sales coming from Exports.

The Company has commissioned new latex capacities at Taloja and Valia during the financial year. The Company will continue to look for opportunities in new adjacent products as well as opportunities for inorganic growth.

There is a continuous thrust from the management to develop a strong R&D and technical service team to develop new products, explore new applications and understand better the changing customer needs.

With the Companys continuous endeavour to introduce new products and improve efficiencies and performance, your Directors view the prospects for the financial year 2023-24 with cautious optimism.


The Company has laid down a well-defined Risk Management Framework covering the risk, risk exposure, potential impact and risk mitigation process. Plant Risks are identified by all process owners which is discussed with the HOD and then taken to the Plant Risk Committee for their Consideration. After evaluation of the Risk by the Plant Risk Committee, same is placed before the Apex Risk Committee and thereafter before Risk Management Committee of Board. Major risks identified by the plants, functions and senior management are systematically addressed through a quantified risk assessment process and mitigating actions are discussed and reviewed twice a year. These are also discussed at the meetings of the Risk Management Apex Committee, Audit Committee, Risk Management Committee of Directors and the Board of Directors of the Company.

The Companys Apex Risk Management Committee, Plant Risk Committees, and Risk Management Committee of the Board, periodically review the risks in the organization, identify new risk areas, develop action plans and monitor and report the compliance and effectiveness of the policy and procedure to the Audit Committee and the Board.

The Audit Committee and the Board review the risks and suggest steps to be taken to control and mitigate the same through a properly defined framework.

The Companys Board of Directors perceives the following risks as current high risks areas:

1. New Plant Risk - Nitrile Latex:

Delays in approval of product manufactured from new plant may impact budgeted sales for this financial year.To mitigate this risk, focus will on obtaining customer approvals as quickly as possible for the products manufactured in the new plant and to ensure the new capacity is filled as soon as possible. The other risk is on margins which is largely market driven and at the current stage lower than pre-pandemic levels. This was not anticipated earlier and in the medium-term is expected to normalize.

2. Procurement Risk:

Major risks arise from a few key raw materials like Styrene, Acrylonitrile and Butadiene, amongst others, that are used in several of our products. Butadiene is used in all products. Butadiene is currently available from limited manufacturers in the country. If there is an issue with the supply of Butadiene on account of an unplanned shutdowns taken by a supplier, production of most of our products would be affected adversely.

To mitigate this risk, we have business relationships with multiple suppliers and keep an adequate inventory and pipeline of Butadiene. The Company has imported Butadiene for the first time in FY 2022-23 and are now confident of handling import of Butadiene, if required.

3. Competition Risk:

Excess Capacity and inventory of Nitrile Latex globally and Styrene Butadiane Latex excess capacity in domestic market may impact volume and margins in short term.

To mitigate risk, in case of Nitrile Latex, focus will be on filling capacity with positive contribution and ensuring new capacity is filled over 18-24 months. In case of Styerene Butadiane Latex, focus will be on filling capacity with healthy contribution, maintaining domestic market share and increasing footprint in export markets.


Internal checks and controls covering operations of the Company are in place and are constantly being improved upon. Adequate systems exist to safeguard Companys assets through insurance on reinstatement basis and maintenance of proper records. The company has well-defined procedures to execute financial transactions.

Internal audit is being conducted by an independent firm of Chartered Accountants. The internal auditor monitors and evaluates the efficiency and adequacy of internal control systems in the organisation, its compliance and its effectiveness with operating systems, accounting procedures and policies of the Company. Based on the observations of the internal auditor, the process owners undertake the corrective actions and improvements in their respective areas. Significant audit observations and corrective actions thereupon are presented to the Audit Committee.

The Partners of both, Statutory Auditor and Internal Auditor attend all the Audit Committee meetings.


Your Company believes that its employees are its core strength and accordingly development of people and providing a best-inclass work environment is a key priority for the organization to drive business objectives and goals. Robust HR processes and policies along with Digital HR tools are in place, which enables building a stronger performance culture and at the same time developing current and future leaders.

SIGNIFICANT CHANGE IN KEY FINANCIAL RATIOS There is significant change in the following key financial ratios during the financial year, as compared to that of previous financial year.

During the financial year under review, your Company had availed a term loan to part finance the capacity enhancement projects and other capital projects at Taloja and Valia, resulting in higher debt to equity ratio. The Net Profit increased in value on account of the increase in volume sales, introduction of new products, optimization of product and customer mix and commissioning of cost-saving projects, which has resulted in improved Interest Service Coverage Ratio. However, Return of Capital Employed has declined due to capitalization of new projects.


The return on net-worth for the financial year 2022-23 is 22.7% as compared to 24.9% for the preceding financial year. CAUTIONARY STATEMENT

Statement in this Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the companys operations include raw material availability and prices, cyclical demand, movements in companys principal markets, changes in Government regulations, tax regimes, economic developments within and outside India and other incidental factors.