MANAGEMENT DISCUSSION AND ANALYSIS REPORT
GLOBAL ECONOMY
The World economic activity has proven more resilient than expected, considering
Russias war of aggression against Ukraine and the resurgence of COVID-19 in China. Even
though these factors weighed on economic growth, the global economy battled these
headwinds with a GDP of 3.4%.
The real GDP print was subdued in all the advanced economies, including the United
States and the Euro area, except major Asian emerging markets. Households spent more to
satisfy pent- up demand, particularly on services, despite heightened inflation, partly by
drawing down their stock of savings as economies reopened.
On the supply side, easing bottlenecks and declining transportation costs reduced
pressures on input prices and allowed a rebound in previously constrained sectors. Energy
markets have adjusted faster than expected to the shock from Russias invasion of Ukraine.
Despite ongoing supply chain issues and volatile commodity prices, the global
manufacturing sector output grew by a healthy 3.8% in 2022. Regionally, growth in Europe
has been slow throughout the year, while it was stronger in APAC.
Global trade hit a record high of US$ 32 trillion in 2022, with trade in goods reaching
US$ 25 trillion, with a growth of 10% over the previous year.
Outlook: Moving forward, global growth is projected to fall to 2.8% in 2023,
considering the rise in central bank rates to fight inflation, especially in advanced
economies and because of the war in Ukraine. But it is likely to go up again in 2024 to
3%. Advanced economies will continue to witness economic downturns, while global headline
inflation is set to fall from 8.7% in 2022 to 7% in 2023 on the back of lower commodity
prices.
(Source: IMF, World Economic Outlook, April 2023)
(Source: https://unctad.org/news/global- trade-set-hit-record-32-trillion-2022-outlook-
increasingly-gloomy-2023)
INDIAN ECONOMY
Indias overall growth remains robust despite the risks that the global economic
turmoil has brought to the economy. Indias GDP grew by 7.2% in FY23 owing to a
broad-based improvement in domestic drivers such as private consumption, public
consumption, and a surge in business investments.
The Government emphasised capital expenditure to push economic growth, and it worked.
It remained a significant driver for investment as it increased by 63.4% in the first
eight months of FY23.
Inflation surged in FY23 as a result of the global geo-political crisis and supply
chain issues. With higher food prices, the annual average inflation touched 6.7%. But
because of prompt action by the RBI, inflation showed signs of moderation by the end of
the last fiscal.
Despite inflation, private consumption expenditure, which comprises 61% of the GDP,
grew by an estimated 7.5% higher than the pre-pandemic 5-year average of 6.9%.
In FY23, Industrial Production in India (IIP) recorded a growth of 5.1% for the entire
year. The eight-core sector, which comprises little more than 40% of IIP, stood at 7.6% in
the same period. Electricity generation surged 8.9% in FY23 over the corresponding
previous year.
Indias exports (including merchandise and services) are expected to have increased by
13.84% to a record USD 770.18 billion in 2022-23. In the meantime, the Indian rupee was
seen steadily depreciating from 74.50 to 83.25, a fall of more than 11% on a y-o-y basis.
Outlook: In FY24, inflation is expected to moderate to 5.1% but will likely stay
above RBIs tolerance limit. Like last financial year, the Government of Indias
increasing capex for infrastructure is anticipated to drive investment growth in this
fiscal year as well.
Further, moderation in commodity prices and robust credit growth are expected to
support overall growth, which is why Indias GDP is projected to be around 6% which is
among the fastest in the world.
However, weak global demand, high- interest rates and their impact on household
budgets, global recessionary environment, contraction in exports and their impact on
employment, and the potential effects of El Nino on crops can negatively impact economic
growth.
https://www.livemint.com/news/india/factory-
output-rises-i-i0-in-march-grows-by-5-i-in- fy23-ii68389438/650.html
https://thewire.in/economy/eight-core-sector- industries-post-3-6-growth-in-march-slowest-
in-five-months#:~:text=The%20growth%20 rate%20of%20eight,%25%20recorded%20 in%20202i%2D22.
https://pib.gov.in/PressReleasePage. aspx?PRiD=i894932t:~:text=The%20
Capital%20Expenditure%20(Capex)%20 of,January%2DMarch%20quarter%20of%20 2022.
https://pib.gov.in/PressReleasePage.
aspx?PRiD=i9i6220#:~:text=worth%20of%20 exports.-,Merchandise%20exports%20have%20
registered%20highest%20ever%20annual%20 exports%20of%20USD,exports%20of%20
USD%20422.00%20billion.
https://economictimes.indiatimes.com/news/
economy/indicators/rural-inflation-higher-in- fy23-heres-the-data/articleshow/99540354.cms
https://www.financialexpress.com/economy/ india-remains-fastest-growing-economy-
economists-hail-indias-resilient-growth-with- fy23-gdp-growth-at-/-2/3ii002//
https://economictimes.indiatimes.com/news/ economy/indicators/rural-inflation-higher-in-
fy23-heres-the-data/articleshow/99540354.cms
https://indianexpress.com/article/ business/economy/mpc-meet-rbi-gdp-
growth-projection-fy24-inflation-forecast- 865i882/#:~:text=The%20central%20bank%20
also%20lowered,the%20rest%20of%20the%20 year.
global furniture market
Among the significant factors favorably affecting the global furniture market are the
burgeoning worldwide population, increased urbanisation, and rising development of both
residential and commercial buildings.
Additionally, the demand for lightweight, adaptable, portable furniture with ample
storage is rising globally due to the growth of the travel and tourism industries, rising
income levels, changing lifestyles, and rising living standards. In addition, the rise in
nuclear families is fueling demand for foldable, compact furniture that is simple to set
up in confined spaces.
The Asia-Pacific region dominates the global furniture market with a 43% market share,
which is attributable to the large number of wood furniture producers in nations like
China and India. Other than the common factors, the regions furniture market is growing
due to a steady rise in consumer spending power. North America stood second with around
25% market share.
Growth drivers: The global furniture market is projected to increase due to the
major players in the industry launching their exclusive online platforms and forming
alliances with e-commerce platforms to expand their distribution networks.
The rivalry intensified with the arrival of a global furniture giant in the Indian
subcontinent, which aided the companies in bolstering their global position.
Additionally, the growing adoption of premium-quality home decor items among the
population in countries such as India and Australia further drive the furniture market
growth in the region.
GLOBAL MEDIUM-DENSITY FIBERBOARD
market
The global medium-density fiberboard market size was valued at USD 39.76 billion in
2022 and is expected to register a compound annual growth rate (CAGR) of 6.9% over the
forecast period of 2023-2030.
Regarding regions, the global medium- density fiberboard market can be bifurcated into
North America, Europe, Asia Pacific, Latin America, and the Middle East & Africa.
Asia Pacific accounted for a large market share in 2020 and is expected to dominate the
market due to the rising construction activities in countries such as India, South Korea,
China, and Japan. Among these countries, China is a large consumer of MDF panels due to
high product dispersion in the construction and furniture manufacturing industry.
Growth drivers: Cost-effective products and the availability of several varieties
of application-specific panels are some of the factors that are likely to compel
manufacturers to opt for these products in construction and furniture applications.
Further, the demand for MDF products is anticipated to increase due to their superior
qualities, including high strength and durability.
GLOBAL PLYWOOD MARKET
The global plywood market was estimated at US$ 105.9 billion in 2021 and is projected
to reach US$ 146.7 billion by 2030 at a compound annual growth rate (CAGR) of 6.1% during
the forecast period.
Manufacturers operating in the global plywood market focus on developing zero-emission
plywood to reduce the environmental impact and increase their market share. For instance,
in 2020, one of Indias largest interior infrastructure companies launched its
first-of-a-kind zero-emission plywood. In an environmentally conscious era, this type of
sustainable product creates new growth opportunities in the market.
Asia-Pacific dominates the plywood market due to rising production activities in the
region. It is also the fastest-growing market in the world, driven by high economic growth
and heavy investments in building & construction, industrial and housing development.
Growth drivers: Major plywood market companies are using biodegradable chemicals
for plywood preservation to enable long life by protecting the wood from rotting owing to
microbial agent attacks and insects. Companies use biodegradable chemicals instead of
chromate copper arsenate (CCA), one of the most widely used wood preservatives.
The presence of extensive forest cover in countries such as China, India, Indonesia and
other Southeast Asian countries supports the growth of the plywood market. Additionally,
the rise in partnerships and collaborations supports the market and is expected to raise
the demand for plywood.
The increased usage of plywood in numerous industrial markets because of its excessive
resistance to a wide variety of chemical compounds has provided a thrust to both the
global and regional marketplace. Further, it has outstanding fire resistance properties
and flexibility and structural strength.
It also offers sound and extreme heat insulation. These characteristics make it
worthwhile for various industries, including construction, aviation, and marine.
https://www.globenewswire.com/en/ news-release/2023/01/04/2582640/0/
en/Global-Plywood-Market-Is-Expected- To-Grow-To-More-Than-146-7-Bn-
By-2030-Registering-A-CAGR-of-6-1-
During-Forecasted-Time-Period.html
GLOBAL LAMINATES MARKET
As per the estimates of IMARC group, the global decorative laminates market size
reached US$ 43.6 Billion in 2022. IMARC Group expects the market to reach US$ 56.1 Billion
by 2028, exhibiting a growth rate (CAGR) of 3.9% from 2023-2028.
There is a rising demand for decorative laminates in hotels, hospitals, shopping malls,
airports, educational institutions, and other commercial infrastructures owing to the wide
availability of designs, colours, textures and many other factors.
The global laminate flooring market is experiencing steady growth due to growing
construction activities across the globe. Asia-pacific displays a clear dominance in the
global laminate market accounting for the largest share.
Growth drivers: Several refurbishments and re-modeling activities in residential
and commercial sectors of the developed regions have further propelled the demand for
decorative laminates. Also, the low installation cost and low maintenance cost, as well as
a greater preference for decorative laminates over wooden floorings, are boosting the
demand.
The rising demand for eco-friendly flooring options due to increasing environmental
concerns also provides an impetus to market growth. Further, product innovations in terms
of pattern, texture and finishes that imitate various natural materials like stone and
wood are also boosting the market.
INDIAN FURNITURE MARKET
Considering that India is anticipated to become the third-largest economy by 2030, the
Government of India has identified the furniture industry as a significant contributor to
the "Make in India" initiative.
The Indian furniture market is primarily fragmented with micro and small players or
unorganised segments.
They account for 80% of the market.
The unorganised segment dominates the Indian furniture market as it offers cheaper
products than those through the organised segment.
Product customisation availability in the unorganised sector is another factor for the
segments leading market position. However, as per industry experts, new players will
accelerate the shift from the unorganised to the organised sector in the next five years.
One of the main reasons for the shift from the unorganised to the organised sector is
that furniture shopping is now a virtually enabled buying experience from a purely
physical one.
The furniture sector in India is getting rapidly organised off late because the
Government of India has widened the scope of GST. While in the pre-GST era, the rates
fluctuated from region to region, the new GST regime has closed the disparity in pricing
and procurement of high-quality materials.
As per Businesswire, the Indian furniture market stood at US$ 17.77 billion in 2020 and
is expected to rise to US$ 37.72 billion by the end of 2026, growing at a double-digit
CAGR of 13.37% during 2020-2026.
Furniture Export
As per the estimates of Invest India, there has been a three-time increase in Indias
furniture exports in April-January 2022-23 compared to the same period in 2013-14.
The Convention on International Trade in Endangered Species of Wild Fauna and Flora
(CITES) has agreed to modify an existing rule on exporting products made out of Shisham.
This change may help improve Indias furniture export which has dipped since 2016
following the treatys introduction of such a provision.
India has recently concluded India- Australia Economic Cooperation and Trade Agreement
(ECTA) and India-UAE Comprehensive Economic Partnership Agreement (CEPA), providing
zero-duty market access opportunities for India- made furniture to these global markets.
INDIAN MEDIUM-DENSITY FIBERBOARD MARKET
In India MDF market size is expected to be 2.8 million CBM (3000 cores) in 2021 which
will grow at a CAGR of 15-20% to 6000 crores by 2026. As per industry experts, the MDF:
Plywood ratio in India is estimated to improve to 50:50 from the current 20:80 by 2030.
This presents a strong growth potential for the MDF industry in India.
MDF costs significantly lower than plywood while devoid of particle grain and knots in
its structure. Owing to these properties, this fiberboard is an excellent alternative to
plywood for application in areas wherein moisture and impact resistance are not the
primary requirements.
Indias furniture industry is changing considerably with the entry of domestic
organised and international players. These players are expected to initiate more
automation driving higher growth rates for the medium-density fiberboard sector since it
is a raw material produced in fully automated plants.
MDF is extensively used in furniture, sports equipment and shoe heels with lower
structural defects than plywood, which is produced in a labor-intensive environment. This
makes it an ideal replacement for wood.
INDIAN PLYWOOD MARKET
As per the estimates of Research and Markets, the Indian plywood market reached a value
of 243. 9 billion in 2021 and is expected to reach 344.2 billion by 2027 at a CAGR of
5.97% during 2022-2027.
The growing demand for plywood is increasing due to the growing number of distribution
networks and exclusive outlets of premium furniture manufacturers influencing the market
positively in India.
Also, the rising integration of technologically advanced production methods to
manufacture plywood with improved features, such as flexible plywood, is propelling the
markets growth.
In addition, the growing utilisation of plywood for making partitions and false
ceilings in houses and office spaces offers a favorable market outlook in the country.
Apart from this, the increasing employment of plywood in manufacturing various easy-to-
assemble and lightweight furniture contributes to the markets growth.
Moreover, the increasing number of government housing schemes and infrastructural
projects, coupled with rising urban settlements in the country, bolsters the markets
growth. One of the critical factors that will drive the growth of the plywood industry in
India is the Governments focus on affordable housing.
Opportunities
Supported by Governments affordable housing initiatives, the real estate sector in
India is expected to reach US$ 1 trillion in market size by 2030, up from US$ 200 billion
in 2021, and contribute 13% to the countrys GDP by 2025.
Retail, hospitality, and commercial real estate are proliferating, providing
much-needed infrastructural support for Indias growing needs.
With the popularity of online marketplaces and furniture-specific e-commerce platforms,
customers are becoming accustomed to purchasing furniture online. This eventually helps
companies grow their customer base while navigating the ever-changing consumer landscape.
According to experts, there will be a surge in the online home decor market in the near
future. According to a report, the global market for online home decor was estimated at
$98.4 billion in 2020 amid COVID-19 and is projected to a revised rise of $348.3 billion
by 2027. Many furniture players will be looking into a more extensive integration into the
home decor space to tap into the opportunity.
Challenges
High raw material cost: Despite having sufficient availability of tropical and hardwood
forests, raw material costs, on average, are more expensive than competing countries.
Further, the global supply chain problems and high crude prices are some of the reasons
for high input costs in the industry in recent years.
Lack of high-quality raw materials: Lack of quality raw materials is one of the
challenges faced by the Indian plywood industry. Therefore, the industry must develop an
efficient supply chain and procurement strategy.
Competition from unorganised players: The organised sector accounts for only 1/3rd of
the Indian plywood market. Low-quality non-innovative products typically characterise the
unorganised sector. But the formalisation of the economy by introducing GST may help
reduce the gap between unorganised and organised segments.
FINANCIAL PERFORMANCE
The Company reported a stellar performance as the real estate market remained buoyant
which accelerated sales volumes. The increased demand resulted in a strong uptick in
revenue from operations and was reflected in an appreciable increase in the Companys
bottomline.
INTERNAL CONTROL & ITS ADEQUACY
The guidelines are set by the Board of Directors who are responsible for the internal
control system. They verify its adequacy, effectiveness and application thereafter. The
Companys internal control system is designed to ensure management efficiency,
measurability and verifiability, reliability of accounting and management information,
compliance with all applicable laws and regulations, and the protection of the Companys
assets. This is to timely identify and manage the Companys operational,
compliance-related, economic and financial risks. The Companys internal control systems
play an important role and acts as a supplement to the external control systems. Your
company has appointed an internal auditor to streamline the system and has adequate
internal control systems to maintain accuracy in accounting and financial transactions and
comply with rules and regulations. The internal control systems of the Company are
monitored and evaluated by internal auditor and their finding & observations are
reviewed by the Audit Committee.
OUTLOOK
The outlook for the current year appears promising as economic resurgence, improving
trend in the real estate sector and growing renovation (consequent to increasing
disposable income) suggest healthy growth in business volumes.
HUMAN RESOURCE
Archidply values its intellectual capital as an essential growth driver for doing
business sustainably and profitably.
It invests both time and money to develop various programmes that help upgrade its
workforce both in terms of skill and capability to address current and future business
needs.
The Company is led by a 373 strong workforce as on March 31,2023 with an effective
blend of youthfulness and experience.
During the year under review, the Company organised numerous programmes to upgrade the
skillset of its team to align then with the dynamic business requirements. The HR team is
now focused on strengthening the leadership pipeline across various verticals.
RISK MANAGEMENT
At Archidply, our risk strategy is determined by a risk appetite defined for a series
of risk criteria. The criteria are based on sectoral circumstances, geo-political issues,
liquidity available and our earnings target within accepted volatility limits. These
criteria provide a reference for our operating divisions.
Our risk management framework encompasses strategy and operations and seeks to
proactively identify, address and mitigate existing and emerging risks. The risk
management framework goes far beyond traditional boundaries and seeks to involve all our
key managers.
The Company has a robust risk management framework to identify and mitigate risks
arising out of internal as well as external factors. There is a formal monitoring process
at unit and company level, wherein new risks are identified, categorised as per impact and
probability, mapped to key responsibilities of select managers and managed with
appropriate mitigation plan.
To ensure transparency and critical assessment, we have a Risk Management Committee
that coordinates the risk management system. The risk management framework is reviewed
annually by the Audit Committee on behalf of the Board.
Cautionary Statement
Important factors such as economic developments within the country, demand and supply
conditions of the industry, input prices, changes in Government regulations, tax laws and
other factors such as litigation and industrial relations, influence the Companys
operations. This may lead to the Companys projections and approximate estimates to
dispose them as "forward looking statements". Though, these qualitative aspects
are usually set in the framework meaning of applicable securities laws and regulations.
The actual results may sometimes materially differ from those expressed or implied.
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