MANAGEMENT DISCUSSION AND ANALYSIS REPORT
A. Water Soluble Film (Watersol?):
Arrow Greentech Ltd (AGTL) is one of the worlds leading manufacturers of cast water-soluble films. Water soluble film, the flagship product of AGTL, is marketed under the brand Watersol?. Including optimum capacity utilisation at the Ankleshwar, Gujarat factory, company is focusing on new business development through innovative applications across segments. This shall expand, and strengthen, our growth pyramid for the future. Watersol? films have versatile yet specialised applications across industries, including Agrochemical, Construction chemicals, Dyes & Pigments, Embroidery, Health & Hygiene, Industrial engineering, Water transfer printing, home care and many more.
The agrochemical and home care segments consume around 60-70% of the water-soluble film market in the world, where AGTL is working closely with most key prospects and customers. AGTL is also preparing for expansion by targeting specific segments and establishing its footprint in various international regions. AGTL is constantly investing in research and development and collaborating with various organisations and institutions to work on path-breaking solutions in sustainability, precision engineering, and other sectors.
The global polyvinyl alcohol (PVA) films market size was valued at $403.69 million in 2022 and is projected to grow at a compound annual growth rate (CAGR) of 5.4% from 2023 to 2030. Increasing demand for eco-friendly packaging materials in developed regions like North America and Europe is expected to drive market growth. Growing environmental concerns in the Asia Pacific region due to the hazards caused by the disposal of general and electronic waste are also expected to drive market growth.
The water-soluble film is a versatile product used for various applications, including disinfectant laundry bags, fly-repellent sheets or pouches, hand-cleaning soap strips, capsule packs, battery separators, and backing sheets for sanitary pads. These products are helping to improve hygiene and safety in public healthcare facilities, especially in the wake of the COVID-19 pandemic.
AGTLs PVA films are water-soluble, biodegradable, and customisable, making them ideal for various new product development applications. These properties enable the films to be used for innovative packaging for water treatment chemicals, swimming pool chemicals, concrete fibre, construction chemicals, and various inhibitors and repellents for industry and consumer use.
AGTL plans to expand its capacity and product base by adding significant capital expenditure (CAPEX) in the coming times. This will activate other new business opportunities across geographies and business segments.
With our robust research and innovation activities, we are on a mission to become one of the most sought-after global suppliers of PVA film and related value-added products soon.
B. Bio-Compostable Products (Bioplast?):
The movement to ban single-use plastic (SUP) products are running for a few years now. However, this is yet to be seen as effective. Although the Government has evaluated alternatives and is running guidelines for the use of bio-compostable products as a replacement to them, there is a requirement to create awareness of the appropriate implementation of the same. The AGTL- Bioplast team is part of the industry in creating awareness among people and various industries and also contributing ideas through industry associations to support this initiative.
The bio-compostable film is an eco-friendly alternative to replace single-use plastic for our future generations. With increasing concern over the use of plastic, sustainable alternatives to plastic are in demand. Plastic made from petrochemicals is not a product of nature and cannot be broken down by the natural degradation process. AGTLs initiative into bio-compostable business is likely to be a game-changer in terms of alternatives to conventional single-use plastic packaging. Moreover, the machines being used to produce conventional plastic films can also produce Bioplast (eco-friendly bio compostable) films by making small changes in it. This ensures no operational disturbances to plastic manufacturing companys set up, assets, and skills.
AGTL has a technology for manufacturing the Bioplast film from Biotec, Germany that is compliant with the European standards - EN 13432 and ISO 17088. The final product is 100% bio-compostable, made from renewable plant resources (potato starch, polylactic acid, etc.), and has a diverse range of applications such as garbage bags, garment bags, industrial and commercial packaging, disposable dishes, straws, and food containers, etc.
C. Security Products:
AGTL has an impressive patent portfolio of security products and brand protection. These patents are having an impact on various products—like Anti-counterfeit Threads, Passport Security, Brand Protection, Paper etc.
AGTL investments are focused on high security elements related to Currency sector, with the viable option of adapting the technology for high value brand protection. Counterfeiting of high value products, including pharmaceuticals packaging will go a long way in promoting this segment of our company.
AGTL has filed several patents and secured National and International grants to rights of claims, for atleast 5 patents, while few are in examination phase. Our IP cell is very positive that we will get grants to these patents, going forward.
Our vision is to focus on Indian Security market, and once proven, we intend to take on the world market, where there are only a few credible players. We are also working on strategic alliances with some of the old players in the market, where we will take advantage of our low-cost base and absorbing their technology, while creating an eco-system to share the opportunities in fair and ethical manner.
Hon. Primeminsters initiative ofAtma Nirbhar India, has give a new Urja in our company, and we intend to take it to higher levels, by fulfilling his dreams to capture markets in India and abroad, so as to make the world know about zero defect Indian Products, made in India with Pride.
AGTL has invested in a high technology plant to manufacture Anti Counterfeit Thread and security films. It entails multiple facets of metalizing, demattalising, holography, nano printing, nano security element, functional, coatings, including embedding of machine readable taggants and lamination. Products are being designed to be fully embedded or windowed embedded in Security Papers, Tax Stamps and brand protection of high value perfumes, cosmetics, and pharma-vaccines etc., including track and trace management. AGTL is expecting to augment its revenues from all the opportunities offered in this area.
D. Patents and IPR:
Arrow has always upheld the belief in securing our markets through strategic filing of Patents in India and abroad via the PCT route. We maintain dedicated Intellectual Property Cells in Arrow India and in our various subsidiaries for this purpose. In todays technology and innovation driven world, we recognise that the success of our company depends significantly on safeguarding our Intellectual Property while simultaneously respecting the rights of other Intellectual Property Right holders.
Our growth and long-term success are heavily reliant on developing inventive and commercial products and the successful commercialisation of such products. This in turn necessitates safeguarding our proprietary processes, know-how, tools, techniques, and other intellectual property. We collaborate closely with inventors, scientific communities, and universities, both in India and abroad, to build value in our selected fields and create revolutionary intellectual property that benefits the company and all its stakeholders.
Over time, we have successfully filed and obtained, trademarks and patents nationally and internationally, enabling us to enforce our intellectual property rights effectively. Patents serve as a means to a shield against infringement and can lead to substantial gains when we successfully commercialise or litigate them as the case may be. As reported earlier, AGTL has claimed injunctions and is in litigation with Nu-Therapeutics and Shilpa Pharmaceuticals. Delays on awards have been due to the Pandemic. Our attorneys are confidents of succeeding in these litigations.
In order to bolster our research and development efforts, we have established a dedicated centre for producing "POCs" (proof of concept) and pilot projects. Once proven, these projects can be out-licensed or produced by our company.
We actively participate in the "Select Committee on IP" organized by CII and DIPPIT (GOI) and supports the Atmanirbhar Bharat Policy of our Hon. Prime Minister and Hon. Finance Minister. We strive to expedite legal judgments and rulings in the IP arena, aspiring to place India in the Top 25 in GII (Global Innovative Index) as envisioned by our Hon. Prime Minister.
We are elated to inform you that our commitment to Innovation and excellence and our contribution to our countrys GII advance, has culminated in recognition by CII and DPIIT (Ministry of Commerce, Govt of India). Arrow has received the National IP Award, every year since 2019 barring year of Covid—2020 (i.e. received the National IP Award in 2019, 2021 and 2022 from CII.)
The intellectual property of our company is a vital asset, and we remain steadfast in our efforts to create, protect, and maintain it diligently.
E. Arrow UK Activities:
Arrow UK has been focusing on various avenues to generate income. It is a wholly owned subsidiary, of AGTL, India. The Board members and team of Arrow UK are aggressively working for Patent & technology commercialization. We plan to increasingly work on this subsidiarys logistical advantage on an ongoing basis in a very friendly environment offered in western world. Along with monetization of our patents and trading in WSF films, we are also working on trade in high-tech products. Post Brexit, as the UK is out of European Union (EU), Arrow UK has incorporated a wholly owned subsidiary company in the Netherlands and expected to contribute to topline and bottomline from next financial year.
F. Water soluble edible film - Mouth Dissolving Strips (MDS):
AGTL has invested in its wholly owned Subsidiary Company namely, Avery Pharmaceuticals Private Limited ("Avery Pharma") for manufacturing of Mouth dissolving strips (MDS). Avery Pharma is a specialty pharmaceutical company bearing prestigious approval of WHO-GMP and other accreditations with GLP, FSSAI, ISO 9001:2015, and ISO-22000 Certifications. The manufacturing facility has a state-of-the-art manufacturing facility & German-designed machines to undertake dedicated manufacturing of patented Mouth dissolving strips technology.
MDS are fast-dissolving films that release API quicker than the other formulations like tablets, capsules, oral disintegrating tablets, chewable tablets, and liquid dosage forms. These films are formulated to self-dissolve upon contact with saliva, omitting the requirement of additional fluids for consumption. MDS are quick in action by releasing drug instantly. The strips ensure quick absorption and instant bioavailability of drugs. MDS is highly suitable for geriatric, pediatric, mentally challenged, bedridden, mucositis, Dysphagia, veterinary. MDS offers irrefutable benefits like self-administration ease, without-water usability, Quick onset of action, non-invasive dosing methodology & patient convenience.
Avery Pharma has entered long-term collaboration and started commercials production for leading MNC with a novel & unique patentable combination of product for the Brazil market and is working on to launch multiple products in other markets. Avery Pharma is also working on clientele-patented new product Development project under the Contract development and Manufacturing model (CDMO).
At present Avery Pharma has 40 + products are approved under FSSAI and 10 + products approved under Rx. Avery has applied test license for more than 20 Rx products and soon will be completing with development phase for these products. Avery Pharma has already filed a patent for two innovative products that are being commercialized in the market and few more innovative products are under the pipeline for patent filling. The research lab has also successfully developed a combination of API in MDS technology, loaded higher doses of drug above 100 mg surpassing the limitation of MDS technology. New developments are underway for sublingual and Buccal MDS technology.
Owing to ESG concerns, every company is focused on creating a strong environmental proposition to create more value for its stakeholders. Scientists and politicians today debate on the effects of global warming and dwindling natural resources, green industry practices income of a lower carbon footprint, but increased cost savings, supportive government policies, and ever- increasing profitability as well. Trends in consumption, specially preference towards refill and reuse, government policy, and costs all point towards even more green industry business opportunities in the years ahead.
Green industry methods are on the rise because theyre increasingly demanded by consumers, important for the citizens, and are required by governments. Sustainable business practices acknowledge the finite resources available and reduce costs through renewable and reusable inputs. Hence, they attract niche customers early and have enormous potential to grow into the mainstream.
The need for non-soluble Bio Compostable Plastics is gaining attention now. The threat of flooding has resulted in the realization that Bio-Compostable Films as the preferred material to save the cities from flooding. The need for Bio-Compostable film and BioDegradable film to save the environment is now present universally and environmentally conscious people of planet earth are looking at various ways to improve the quality of life.
Arrows Security division has a huge capacity, having invested in state-of-the-art manufacturing, and we plan to take our technology and products to the world market, starting with exports to the EU and EER region, while Arrows 100% owned subsidiary Avery Pharmaceuticals Pvt. Ltd. and Watersol divisions are also looking to expand in South American and African continents. Our inhouse R&D Labs facilitates unique development of new products that are new for markets.
Covid 19 gave us an opportunity to replace some parts of the supply chain being disrupted due to the closure of China and Chinese products. Its a good time for us to build on this new opportunity, to increase our markets in India and worldwide. We will be slowly, but surely inching towards the same.
Our business operation may fluctuate due to a variety of factors such as geopolitical development, technology obsolescence over a period, increase in input costs, delay in project execution, patent expiry and tender outcome etc. Threats also include the import of non-specified materials (like extruded films) from China, compelling us to keep our prices competitive. Major risks have been identified by the businesses and functions and the Company will adopt various measures at different points in time to counter these risks successfully on a continuing basis.
4. Internal control system and their adequacy:
The companys internal audit system is geared towards ensuring adequate internal controls commensurate with the size, complexity and needs of the business with the objective to ensure that all assets are safeguarded and protected against loss from misuse or disposition and that transaction are authorized, recorded, and reported correctly.
All operating parameters are well defined and monitored periodically. Audit Committee continuously reviews the adequacy and efficacy of the internal controls. The internal control is designed with the ultimate objective of improving efficiency in its operation, better financial management and compliance with regulation and applicable laws.
The company has appointed a firm of Chartered Accountants as internal auditor in compliance of Section 138 of the Companies Act, 2013 to conduct internal audit of functions and activities of the company. They report on quarterly basis to the company on their findings. Their report is reviewed by the Audit Committee Members and Statutory Auditors.
5. Material developments in human resources/industrial relations front, including number of people employed:
Industrial relations during the year was cordial and peaceful without any disruption of manufacturing activities. Programs aiming motivation and technical and soft skills were conducted during the year. The company has implemented various safety measures for safety of employees. The company has also implemented work from home for non-factory staff and provided the required technology support and tools to function smoothly. The company considers human capital as a critical asset and success factor for smooth organizational workflow and growth of the Company as all the products, patents and product application are Niche in themselves. Therefore, the quest for building a dedicated team is ongoing which will foster the growth of the Company. Manpower as on March 31,2023 was 98.
6. Cautionary statement:
This analytical report contains forward-looking statements. AGTL may also make forward-looking statements in our periodic reports to the Stock Exchanges as per prevalent rules and in its annual report to shareholders, in its proxy statements, in its offering circulars and prospectuses, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Arrow assumes no obligation to update the forward-looking statements in this release and elsewhere. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement.
|For and on behalf of the Board of Directors
|Shilpan P Patel
|Chairman & Managing Director
|Date: 27th May, 2023