asahi songwon colors ltd share price Management discussions

<dhhead>Management discussion and analysis</dhhead>



According to the World Economic Outlook, the global economy is poised for gradual recovery, with projections forecasting growth to fall to 2.8% in 2023, before rising modestly to 3% in 2024. Driven by accumulated consumer demand, persistent supply interruptions, and significant increases in commodity prices, inflation reached its highest levels in many economies last year. As a result, central banks took decisive measures to counteract this trend by implementing strong measures to align it with their goals and ensure that inflation expectations remain stable. It is expected to reduce from 8.7% in 2022 to 7.0% this year and 4.9% in 2024. The disruptions in supply chains are gradually resolving, and the effects of the war on energy and food markets are fading. China’s economy rebounded strongly, paving the way for a faster-than-expected recovery. Emerging markets and developing economies are making significant progress, as evidenced by their growth rates (comparing fourth quarters) surging from 2.8% in 2022 to 4.5% this year. Conversely, the deceleration is primarily seen in advanced economies, notably in the euro area and the United Kingdom.

The downside risks continue to outweigh the positives, with adverse factors, such as severe health outcomes in China, Russia’s war in Ukraine, and tighter global financing costs, all posing significant challenges. The rise in commodity prices has added to the risk of an economic hard landing. This at the back of inflation, which is likely to hit in the first half of 2023 further exacerbates the economic uncertainty. However, on the upside, pent-up demand in numerous economies, a faster fall in inflation, and greater multilateral cooperation could mitigate the adverse effects. To this end, it is necessary to deploy macroprudential tools and further strengthen debt restructuring frameworks, while fiscal support should be targeted at those most affected by elevated food and energy prices.

Bolstering multilateral cooperation can safeguard the fruits of a hard-won, rules-based global economic system and address the urgent challenge of climate change by curtailing emissions, and strengthening investments in green technologies. Such efforts will not only foster a more sustainable future for the planet but also enhance the resilience of the global economy against future shocks.




The Indian economy maintained a comparatively steady stance amid the global disruptions arising from the Russia-Ukraine conflict. According to the National Statistical Office (NSO), the economy recorded a growth rate of 7.2% in FY2023, which marked a decline from the 9.1% growth observed in FY2022. This impressive performance can be attributed to various growth factors, such as surge in exports, which accelerated the production process. Private consumption witnessed a strong surge, fuelling production across sectors.

The impressive upswing in economic growth can also be attributed to the government’s burgeoning capital expenditure, which surged by an astounding 63.4% during the first eight months of FY2023.

Furthermore, the MSME sector, a crucial cornerstone of the Indian economy, witnessed an extraordinary uptick in credit growth, with an average of 30.5% recorded between January and November 2022.

Rising global commodity prices had a ripple effect on India, causing retail inflation to reach a high of 7.79% in April 2022. This exceeded the Reserve Bank of India’s medium-term target range of 2-6%. Responding decisively, the RBI implemented rigorous measures to address the escalating prices, raising the repo rate six times during FY2023. The repo rate climbed from 4% at the start of May 2022 to 6.5% by the end of the financial year.

The combination of better global supply chains, decreasing commodity prices, and a decrease in domestic demand is expected to lead to a decrease in inflation.

With a workforce that’s expanding, a significant domestic market, investments in infrastructure and the rise of digital technology, India is strongly positioned to become the world’s fastest-growing major economy. The International Monetary Fund anticipates India’s GDP to achieve a growth rate of 5.9% in FY2024.

Robust credit disbursal, and capital investment cycles, further bolstered by the expansion of public digital platforms, and ground-breaking initiatives, such as PM GatiShakti, the National Logistics Policy, and the Production-Linked Incentives schemes to accelerate manufacturing output are expected to augur well in the country’s favour



The Indian chemical sector is one of the most integral components of India’s GDP, contributing a staggering 7% to it. With India ranking 6th in the world in terms of chemical production, and 3rd in Asia, the industry is poised to capitalise on forthcoming opportunities.

The Indian chemicals industry stood at $178 billion in 2019 and is expected to reach $304 billion by 2025 registering a CAGR of 9.3%. The demand for chemicals is expected to expand by 9% per annum by 2025. The chemical industry is expected to contribute $383 billion to India’s GDP by 2030. Growing demand, policy support and increasing investment are expected to augur well for the industry. Rise in demand from end-user industries such as food processing, personal care and home care is driving the development of different segments in India’s specialty chemicals market. With global companies seeking to de-risk their supply chains, which are dependent on China, the chemical sector in India has the opportunity for significant growth. Under the Union Budget 2023-24 the government allocated 173.45 crore to the Department of Chemicals and Petrochemicals. The government is also planning to introduce a production-linked incentive (PLI) scheme to promote domestic manufacturing of agrochemicals.

As the pandemic recedes and with the rise in disposable income, industries, such as cosmetics and fashion, and other FMCG are set to flourish. This bodes well for segments, such as perfumery cosmetics, essential oils, and sensory-linked products, which are a few of the many strong points for the country. It also spells accelerated growth for chemicals linked to product packaging.

On a worldwide scale, India holds the position of the fourth-largest agrochemical producer, trailing only the United States, Japan, and China. The nation contributes to approximately 16-18% of the total global output of dyestu_s and dye intermediates, solidifying its significance in the colorants industry with an approximate market share of 15%. Notably, India’s chemicals sector operates in a de-licensed manner, with the exception of a limited number of hazardous chemicals. Demonstrating its robust standing, India plays a significant role in both the international export and import of chemicals, securing the 14th rank in exports and the 8th rank in imports globally (excluding pharmaceuticals).


Organic pigments have emerged as a game-changer in various industries. With non-toxic properties, cost-e_ectiveness and high colour power, these pigments have become an irresistible choice for numerous applications. From the visual arts to high-tech industries, such as photo reproduction, optoelectronic display, and optical data storage, the demand for organic pigments has skyrocketed owing to their availability in a wide range of hues.

Additionally, they are extensively used in paint, ink, and the production of polymer and rubber. These pigments also serve as fillers and reinforcing agents for a wide range of applications, including colouring agents for plastics and synthetic fibres. The global market for organic pigments is predicted to grow from $15.09 billion in 2022 to $16.17 billion in 2023, marking a noteworthy Compound Annual Growth Rate (CAGR) of 7.1%. Asia-Pacific led the organic pigments market in 2022 due to its swift economic advancement and burgeoning population. This region is expected to maintain its rapid growth, becoming the fastest-growing sector during the projected period, with a substantial market share of around 46.5% between 2021 and 2031.

This growth is driven by the rising demand for organic pigments across diverse sectors like automotive, construction, and packaging. The Asia-Pacific region is a major player in both production and consumption, fueled by factors such as robust expansion in construction and automotive industries, increased demand for consumer goods, and urbanization. These dynamics have resulted in a significant demand for organic pigments used in products like paints, coatings, plastics, and related items.

The global demand for organic pigments is on the rise due to strict regulations governing the use of printing inks in food packaging. These regulations aim for more environmentally friendly pigments as concerns grow about the safety of food packaging and potential colour transfer into consumables. This has led to a surge in demand for high-quality organic pigments that offer colour stability, viscosity control, and versatility in printing on various materials. Additionally, the strong colouring capabilities of organic pigments allow for a wide range of customized colours, enhancing the visual appeal of products.

Simultaneously, the growth in construction and infrastructure projects in India and China has boosted furniture consumption. Initiatives like "Make in India" and investments in electric vehicles have also expanded the use of organic pigments in paints and coatings for the Indian automotive sector. These pigments find application in the plastics industry as well, with the Asia-Pacific region contributing to 52% of the world’s plastic production. Alongside the region’s cost-e_ective labour and abundant raw materials, this positions it as a hub for organic pigment manufacturing, driving significant market growth.

Source: ‘Organic Pigments Global Market Report 2023’ by The Business Research Company, Mordor Intelligence

The global market for active pharmaceutical ingredients (APIs) stood at a staggering $204.08 billion in 2023 and is poised to reach $285.29 billion by 2027, growing at a CAGR of 6.93%.

The API industry has emerged as a dominant force in the healthcare and pharmaceutical domain, buoyed by a multifarious range of drivers. Conducive government policies, a remarkable stride in the API manufacturing space, coupled with the escalating incidence of chronic illnesses, such as cancer, and cardiovascular diseases have given a boost to the sector.

Further, due to changes in geopolitical situations, countries such as India are preferred over China for the export of APIs, as governments strive to reduce dependence on China for API products.

It is worth noting that the pandemic has, paradoxically, provided an impetus to the growth of the global API market. As the world grappled with the pandemic, the pharmaceutical industry took centre stage in treating its numerous symptoms. This heightened popularity of the pharma industry during the pandemic has, in turn, propelled the API market to new heights. Moreover, the development of precision medicine, primarily for oncology, and the growth in biosimilars market owing to the rise of various diseases is further boosting demand for APIs.

At present, the API market is under the substantial influence of North America, and this dominance is anticipated to persist for the foreseeable future. The region’s grip on the market is projected to strengthen further due to a surge in disease prevalence and a progressively aging population. Notably, the United States holds a significant portion of the market within the North American territory.

Source: Mordor Intelligence

The API segment’s growth is expected to remain robust in the upcoming years, driven by substantial investments from major players to set up advanced manufacturing facilities. The said players are also focused on leveraging their production capabilities in Asian countries to cater to the API demands of other drugmakers. Moreover, the Indian government’s announcement of a 9.4 billion stimulus package for the bulk drug industry is expected to further bolster domestic production and boost exports. The outsourcing segment of the API industry has witnessed substantial growth, largely owing to the significant contributions of top biopharmaceutical players. By outsourcing API manufacturing to developing countries, such as India, the industry has effectively capitalised on the cost advantages that these countries offer, thereby boosting profit margins and accelerating the segment’s growth trajectory. Meanwhile, the generic drug market is poised to achieve exceptional growth rates, particularly in regions, such as Brazil and India, owing to its high unmet clinical needs and acceptance of over-the-counter drugs.

Source: MarketsandMarkets


Asahi Songwon Colors Limited (Asahi), a leading manufacturer and exporter of colour pigments, has diversified its business portfolio with a recent foray Into the pharmaceutical industry. In 2019, the Company expanded its product line to include yellow and red (Azo) pigments, in addition to its core offering of Phthalocyanine pigments used in printing inks, paints, plastic, textiles and paper industries. Through the acquisition of Atlas Life Sciences Private Limited, a renowned manufacturer of anti-convulsant anti-psychotic and anti-diabetic APIs, Asahi is now home to a third manufacturing facility located in Odhav. The Company is aggressively striving to expand its manufacturing footprint, with a fourth unit in Chhatral, which will be commissioned by October 2023. This strategic move has allowed the Company to cater to the growing demand for high-quality APIs backed by Atlas Life Sciences’ expertise in the field.

The Company’s manufacturing facilities, situated in Padra and Dahej have an installed capacity of 16,800 MT and cater to over 40 international and domestic customers. With a strong team of 580+ employees, the Company has garnered more than 60% of its revenue from exports to MNCs in 20+ countries, a testament to its global presence and commitment to delivering incremental value to its customers. To further strengthen its position in the market, Asahi has invested in a phase 2 brownfield capex, which will double the capacity of yellow pigments at the Dahej site. Asahi is guided by a competent and diverse Board of Directors, comprising professionals with a wealth of experience in various fields. With their expertise, the Company ensures the highest standards of corporate governance, striving to maintain transparency and accountability in all aspects of the business.


According to Business Research Insights, the Phthalocyanine pigments market is anticipated to grow at a rate of $2215.8 million with CAGR of 4.8% during 2022-2028. The market size is likely to reach a valuation of $2215.8 million by 2028, up from an estimated value of $1672.5 million in 2022. This market’s growth is driven by factors such as evolving industrial and consumer demand patterns, rapid urbanisation and higher standards of living. Further, there is a surge in interest to incorporate architectural aesthetics in buildings, which is contributing to high the demand for superior-quality paints and coatings.

Over the past 15 years, the competitive dynamics within the Phthalocyanine pigments sector have undergone a notable transformation. During this period, India has emerged as a formidable contender in the market, progressively capturing market share from China. Previously, China held a dominant position, contributing over 70% of the Phthalocyanine pigment market share. Presently, India has ascended to a position of prominence, catering to over 70% of the global demand for Phthalocyanine pigments. Asahi, a leading manufacturer of Phthalocyanine pigments, caters to the diverse needs of various industries such as printing ink, packaging ink, paint, plastic and textile. Asahi is one of the largest manufacturers of CPC blue crude globally. Leveraging its expertise and knowledge, Asahi has signed long-term contracts with its clients and is committed to providing them with superior-quality pigments, thus contributing to the growth of the industry.


The global market for Azo pigments is a highly competitive area where multinational corporations offer attractive discounts to maintain their market share. Azo pigments are witnessing a quick acceptance as an eco-friendly alternative to dyes, which is driving their demand in high-grade plastics and coating applications. According to Persistence Market Research, the global market for Azo pigments is expected to stand at $1,618.6 million in 2023. Leading Azo pigment manufacturers are prioritising strong partnerships with key distributors and long-term contracts with clients to maintain dominance. Meanwhile, India’s pigment sector is emerging as a formidable competitor to China, owing to its growing environmental compliance and wage costs. Asahi has partnered with Tennants Textiles Colours Limited (TTC), one of the leading colour manufacturers in the UK, to produce a range of red, yellow and orange pigments. The successful completion of the planned capex has enabled the Company to leverage the growing demand for Azo pigments in various end-user industries. With its proven delivery across the world, combined with its scale, Asahi is a highly attractive partner for large-scale manufacturers and companies seeking high-quality pigments at affordable prices.


Pregabalin, an anti-convulsant medication, has emerged as a promising treatment for various medical conditions, such as epilepsy, neuropathic pain, fibromyalgia, and general anxiety disorders. Owing to its ability to reduce pain from injured nerves throughout the body, pregabalin is experiencing a steady demand across the world. The global consumption of pregabalin is 1,430 tonnes growing at 10% CAGR. The market is dominated by North America, with Asia-Pacific emerging as a key growth region, owing to the surging prevalence of convulsions and anxiety disorders, growing healthcare infrastructure and rising geriatric population in the region. Furthermore, a large number of initiatives by public and private organisations to spread awareness, at the back of rising healthcare expenditure, will expand the market.

As the global consumption of pregabalin continues to grow at a robust pace, Indian manufacturers are driving process efficiency and competitiveness to meet the rising demand. With a well-equipped manufacturing base and more 15 key producers, the country is contributing significantly to the global market share. In addition, India accounts for a 28% share of global consumption, almost 395 tonnes out of 1,430 tonnes.

Asahi has opened up exciting new avenues for growth with its recent acquisition of Atlas Life Sciences, a prominent player in the pregabalin market. This strategic move not only strengthens Asahi’s foothold in the industry but also enables the Company to tap into emerging opportunities, diversify its portfolio and thus stay ahead of the competition.

$2,215.8 mn


$1,618.6 mn



The expanding textile industry has paved the way for the increased use of colourants in modern textile solutions, making colour a critical component in product marketing. This trend is expected to continue as pigment consumption rises and the textile industry continues to grow rapidly. Additionally, the growth of the paints and coatings sector can be attributed to the rise in residential and commercial building construction. This sector is likely to propelled by factors, such as government and private sector investments in infrastructure development, increased consumer spending, higher per-capital earnings, and improved quality of life.

1,430 tonnes


Moreover, the packaging ink sector is one of the fastest-growing end-use industries with screen printing and digital printing applications contributing to its growth. This rise in production and sales of organic pigments is also due to the increased demand for various printing inks. The sector’s growth is further driven by the emergence of digital printing ink in the sports and leisure, packaging and textile sectors. The pharmaceutical industry on the other hand has been experiencing remarkable growth in recent years, driven by several key factors. One of the most significant regulations aimed at ensuring patient safety and improving healthcare outcomes. These regulations have led to a greater demand for innovative medicines, as well as increased R&D activities within the industry.

Managed care and insurers have also been playing a critical role in driving growth within the pharmaceutical sector. The rising focus on cost containment and quality of care has resulted in a greater emphasis on preventive care and early detection of diseases, leading to a rise in the use of pharmaceutical products. Additionally, the growing trend towards personalised medicine and the use of biologics has created new opportunities for pharmaceutical companies to develop specialised treatments for a range of medical conditions.


Asahi’s Azo business is already gaining steady momentum and the demand for Phthalocyanine pigments is gradually improving. The Company continues to cultivate enduring client relationships owing to its exceptional product quality. The establishment of the new Dahej plant positions Asahi among a cluster of distinguished chemical enterprises. This strategic move a_ords the Company the advantage of accessing a proficient workforce, robust shared infrastructure and convenient proximity to raw materials, culminating in substantial savings on logistical expenditures. The greenfield investment in Chhatral is poised to elevate operational efficiency and bolster overall profitability while cementing our position as the market leader in the production of APIs and raw materials for pregabalin. Plans are underway to ramp up the capacity of the intermediates for pregabalin and supply them to the Odhav facility instead of buying them from external sources. Anticipated industry consolidation within the global pigment sector will also propel the Company onto a trajectory of renewed growth.

With customers diversifying supply chains away from China, India, and by extension, Asahi, emerges as a promising contender. This outlook is further augmented by India’s favourable access to indigenous raw materials, cost-e_ective labour and vertically integrated operations.


Regional disease outbreaks can harm chemical supply networks. Global economic uncertainty may reduce demand. Despite higher immunisation rates, new Covid-19 variants still affect people, especially employees, amid government movement restrictions. Variable raw material prices, reliance on key imports and high global crude oil costs pressure product margins. Fluctuations in Rupee and Yuan versus the Dollar significantly affect pricing, as Indian manufacturers compete with Chinese peers in the organic pigment industry. The concentrated pigments market faces ESG concerns. Businesses might grapple with compliance costs and complex regulations.

Asahi is well-prepared and equipped to effectively manage these risks. With a robust strategy, dedicated team and proactive measures in place, the Company can effectively navigate challenges and continue delivering value


As Asahi navigates through diverse challenges and opportunities, the contributions of each team member remain under constant recognition. The collective skills of the team propels the organisation forward, driving the accomplishment of its objectives. The team’s adaptability, resilience and collaborative efforts serve as a continual source of inspiration. It is essential to bear in mind that the employees constitute the core of the organisation, with their well-being being of utmost importance. The Company is committed to cultivating a nurturing environment that facilitates their personal and professional growth. As on March 31, 2023, the Company had a workforce of 580+ employees.


WORKFORCE AS ON MARCH 31, 2023 analysis (Continued)


The Company upholds an unwavering commitment to the implementation of internal financial control systems that are proportionate to the size and complexity of its operations. The primary objective of these systems is to provide reasonable assurance by ensuring the accuracy and reliability of financial and operational information, complying with relevant accounting standards and statutory requirements, protecting assets from unauthorised use, and ensuring proper authorisation of transactions.

To ensure the adequacy and effectiveness of the internal controls, the Company has appointed independent auditors who conduct periodic audits and make recommendations for improvements. The Audit Committee, led by a non-executive Independent Director, regularly reviews the internal control systems for their effectiveness and translates the recommended changes into the system. Furthermore, the Company’s internal audit reports are subjected to thorough review and scrutiny by the Board’s Audit Committee, thus providing a robust system of checks and balances.



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Statements in the Management Discussion and Analysis and other parts of the report describing the Company’s objectives, projections, estimates and expectations may be forward-looking statements. Actual results may differ materially from those expressed or implied due to various risks and uncertainties. Important factors that could make a difference to the Company’s operations include economic and political conditions in India and other countries, in which the Company may operate. Other factors that may impact the Company’s operations include volatility in interest rates, changes in government regulations and policies, tax laws, statutes, and other incidental factors. The Company does not intend to update these statements.