Astral Ltd Management Discussions.

GLOBAL ECONOMY OVERVIEW

The Calendar Year 2020 was a great disruption unleashed by a viral pandemic that hit the world economy very hard. The pandemic spread like a forest fire, reaching every corner the world, infecting more than 144 million and killing close to 2.8 million people worldwide (as of March 2021). For several months, uncertainties and panic paralysed most economic activities in both developed and developing economies. The pandemic has exposed the systemic vulnerability of the world economy. Building economic, social and environmental resilience must guide the recovery from the crisis.

World gross product fell by an estimated 4.3% in 2020, the sharpest contraction of global output since the Great Depression. The pandemic hit the developed economies the hardest, given the strict lockdown measures that many countries in Europe and several states of the United States of America imposed early on during the outbreak. The developing countries experienced a relatively less severe contraction, with output shrinking by 2.5% in 2020. Their economies are projected to grow by 5.7% in 2021.

Activity is expected to strengthen in the second half of this year and firm further next management aided by ongoing vaccination allows for an easing of pandemic control measures. Global economic output is expected to expand 4% in 2021 but still remain more than 5% below pre-pandemic projections. Global growth is projected to moderate to 3.8% in 2022, weighed down by the pandemic’s lasting damage to potential growth. The global recovery, which has been dampened in the near term by a resurgence of COVID-19 cases, is expected to strengthen over the forecast horizon as confidence, consumption, and trade gradually improve, supported by ongoing vaccination.

INDIAN ECONOMY OVERVIEW

The Financial Year 2020-21 started with a Nation-wide lockdown in India although India emerged as the fastest-growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships. The Economic Survey has projected that the economy will grow at 11%, up from an estimated historic decline of 7.7% in 2020-21, on account of the COVID-19 pandemic. Also, the vaccination drive is expected to provide an impetus for the restoration of contact-intensive sectors and a leading edge to the Indian ent types of polymers.pharma industry Piping the global market.

The Government of India, under its Make in India initiative, is trying to boost the contribution made by the manufacturing sector with an aim to take it to 25% of the GDP from the current 17%.

The government has the ambition of making India a USD 5 trillion economy by 2024 for which various initiatives have been undertaken in the last few years to improve ease of doing business, encourage Make in India, invite foreign companies to India with schemes like PLI (production-linked incentive) and tweak the legacy labour laws, Agri policies, etc. With the shift in sentiment to reduce dependence on a single country i.e. China, we are seeing increasing interest from international companies wanting to invest in India. Interest is largely from Asia led by Japan, Korea and Thailand although we are also seeing interest from Europe. Some of these enquiries are in sectors such as agrochemicals, building products, logistics, packaging, and new-age technology including electronics, sectors where we have not seen significant interest in the past.

GLOBAL PIPING INDUSTRY

The global plastic piping market is valued at USD 55,960 Mn and is expected to grow at a CAGR of 2.8% from the year 2021 to 2025 to reach at USD 62,410 Mn by 2025. In terms of volume, the global PVC pipes market has reached 24.51 year, as improved COVID-19 million tons in 2020 and is expected to reach a volume of 30.25 million tons by 2025.

PVC pipes have gained popularity across the globe owing to their favourable properties such as light-weight, cost-effectiveness, easy installation and durability. Apart from this, their excellent heat and electrical insulation properties have led to their usage in electrical fittings. Moreover, they do not rot, wear or rust over time and can withstand rigorous shaking and extreme movement in earthquake-prone zones. The primary drivers of piping and fitting industry is the rapid urbanization taking place in the infrastructure worldwide. The market is currently being driven by growing urbanisation, demanding larger and cost-effective sewage lines, rising construction activities, infrastructure developments along with growing demand in the chemical, oil & natural gas industry. Other than that many other industries such as mining and chemical industry, automotive and oil and gas industry are also likely to boost demand for plastic pipes.

INDIAN PIPING INDUSTRY

The Indian plastic pipes and fittings industry is expected to reach 500-550 billion by the year 2025 growing at a CAGR of 10% from the current levels of 290-300 billion. Plastic pipes are made of is considered to be the high performance instrument as it acts as a transporting media for very high parameter constraints like high pressure, high temperature, heavy flow and hazardous materials. Pipes and fittings have variety of domestic, commercial and industrial applications and have a wide scale of applications as it has been used in every aspects from household to industrial appliances. At the domestic level pipes and fittings can be used in sewages, drainage systems, plumbing etc. For industrial sectors pipes and fittings can be used for carrying hazardous wastes or chemicals, liquefied natural gas, industrial affluent etc. Plastic pipes and fitting market is segmented into UPVC, CPVC, HDPE, LDPE, PPE and others. Of these, UPVC has accounted for the highest revenue share, following by HDPE pipes and fittings. PVC includes both UPVC (Un plasticized polyvinyl chloride) and CPVC (chlorinated polyvinyl chloride) pipes and fittings. UPVC pipes and fittings have major demand in the market due to its fair pricing and wider range of applications into sector like irrigation, sewerage, water supply, plumbing and bore-well system. CPVC pipes are used for hot and cold water distribution systems and are significant addition to the bathroom fittings. PE (poly ethylene) includes HDPE and LDPE pipes and fittings. The application areas for these pipes are mainly in municipal and environmental applications and agriculture.

UPVC plumbing system is an easy & economical product for distribution of water in residential, commercial & Industrial buildings with many advantages over the conventional piping system. This plumbing system offers a maintenance free solution for a longer service life. UPVC is beneficial over other materials, owing to its high chemical corrosion resistance, strong and light weight and good insulator. The manufacturers claim UPVC pipes and fittings a non-toxic plastic compound and is absolutely free from lead which makes it environmental friendly or completely safer. These plumbing systems have a shelf life of 50 years and more and are devised in a way that they are resistant to any kind of bacterial growth.

DIFFERENCE BETWEEN PVC & CPVC PIPES

Polyvinyl chloride (PVC) is a man-made plastic with added stabilizers that prevent oxidation and degradation. PVC’s chemical composition is made of two carbon atoms linked together with a perimeter of three hydrogen atoms and one chlorine atom, all attached by single bonds. This individual molecule unit (a monomer) is then further linked together with other molecules of the exact same structure to form chains (a polymer) that are extruded as PVC to form PVC products like pipe. PVC resins are key raw materials for the manufacture of plastic pipes. Polyvinyl chloride (PVC) resins are manufactured by the polymerisation of vinyl chloride monomer (VCM), produced by the thermal cracking of ethylene dichloride (EDC). Ethylene used in the manufacture of ethylene dichloride is produced by steam cracking of naphtha, gasoil and condensates while chlorine is derived from common salt by electrolysis.

Chlorinated Polyvinyl Chloride (CPVC) shares most of the features and properties of its close relative, PVC. It is also readily workable, including machining, welding, and forming. Because of its excellent corrosion resistance at elevated temperatures, CPVC is ideally suited for self-supporting constructions where temperatures up to 200F (93C) are present. The ability to bend, shape, and weld CPVC enables its use in a wide variety of process applications including tanks, scrubbers, and ventilation systems. It exhibits excellent fire resistance, chemical resistance, and is readily available in sheets, rods.

OPPORTUNITIES

Low per-capita consumption of plastic

Globally the average per-capita consumption of plastic is around 30 kg while that of India is only about 11kg which is very low. Traditional materials dominate the applications of plastic. However, over the past three to four Fiscal years, low crude oil prices and superior properties of plastic have increased the usage of plastic in India. Hence, it is expected that the per-capita consumption will move up towards to the global average. CRISIL Research expects demand for polymers to grow at a healthy 7-9% CAGR from the year 2019-2024.

Substitution and replacement demand

Plastic pipes have many advantages over the metal pipes. The raw materials used in manufacturing plastic pipes are derivatives of crude oil. Hence, prices of plastic pipes are correlated to crude oil prices. Superior real estate properties and low prices have led to the substitution of metal pipes by plastic pipes. The increase in the availability of raw materials (PVC, PE and PPR), followed by the commissioning of new petrochemical facilities in India will further support the plastic-pipes industry. Also replacement of older pipes with plastic pipes will help in driving the demand.

Irrigation sector

The irrigation sector is the key end-user for plastic pipes, accounting for a 45-50% share of the industry. India has 142 million hectares of cultivated land but only around 50% of the land is irrigated. Hence in Fiscal 2016, the central government converged irrigation schemes under the Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) to expand the area under cultivation by 2.85 million hectares in Fiscal 2017 and by 8 million hectares by 2020, outlining a spending target of 500 billion until 2020. The key schemes converged are Accelerated Irrigation Benefits Programme (AIBP), Integrated Watershed Management Programme, On Farm Water Management, and Per Drop More Crop. Investment in the sector is expected to rise in the next five years owing to the push from state governments to increase irrigation penetration in states.

Healthy growth in government investments towards Water Supply & Sanitation (WSS)

WSS and plumbing are the second largest segments for plastic pipes, accounting for 35-40% share of the plastic pipes market. In the past five Fiscal years (i.e., from April 1, 2014, to March 31, 2019), government expenditure on the sector rose at 22% CAGR to about 624 billion in Fiscal 2019. This was led by several Central government schemes, coupled with rising emphasis by municipal authorities, such as Mumbai Metropolitan Region Development Authority, Mumbai and Pune municipal corporations. The Government has also proposed “Nal se Jal” scheme, a component of the Jal Jivan Mission, which promises to provide piped drinking water to every household in the country by the year 2024.

Real estate

Real estate is a key end-user sector for plastic pipes and fittings in India. Over the last few years, end-user demand for real estate has been sluggish. Developers had delayed the possession of projects in many instances due to various reasons, including approval delays and financial issues. However, with the implementation of Real Estate Regulatory Authority (RERA), the confidence of end-users will improve Housing for All 2022 National Mission for Urban Housing will also provide a boost to the industry. The Government of India has increased the allocation for the Pradhan Mantri Awas Yojana (PMAY) to 260 billion for FY21 from 80 billion announced to boost the housing sector and have also relaxed an I-T provision enabling the developers to reduce property rates by up to 20% compared to existing circle rates. The Indian Government will infuse 60 billion as an equity in National Investment & Infrastructure Fund’s debt platform, as India readies for a massive 111 trillion infrastructure pipeline.

Sectoral Consolidation

In recent times, several smaller players in PVC pipes sector have been impacted by volatility in PVC prices, liquidity crisis and working capital constraints, have been significantly impacted which led them to close their operations. It has been observed that the market share of top players has increased due to shutdown of operations by the smaller unorganized players. This creates an opportunity for sectoral consolidation

Water Tank Business

Water tanks are containers used to store liquid like potable water, rain water, water for irrigation, water for construction, water for livestock, water for indoor house use, and others.

Water tanks used at home or at institutional use are generally made of polyethylene, steel, or fiber glass. They come in various shapes and sizes ranging from 200 liters up to more than 10,000 liters. The plastic or the polyethylene water tank is the most widely used water tank all around the world owing to easy availability and installation process.

Now-a-days PVC pipes companies are entering the water tank business as there is an opportunity of about ~ 50 billion and growing at a CAGR of 10%. The water tank business is dominated by the unorganized players (70% market share), which provides attractive opportunity for the organized players to build their stronghold. We expect the water tank segment to clock ~12% CAGR in the next five years compared to 10% CAGR in PVC pipe segment.

The future of the plastic water storage tank market looks promising with opportunities in all the sectors: residential, commercial, industrial, and municipal. The major drivers for this market are growing construction activities, increasing concerns about water conservation, surge in population, increase in government regulation of wastewater and aging water infrastructure.

Opportunities for Plastic Water Storage Tank by Various Application, Polymers, Size, Plastic, Type and End Use

Application Polymers Size Plastic Type End Use
Potable Water Polyethylene Less than 1,000 litres Fresh Above-ground Municipal
Water Conservation PVC and others 1,001-5,000 litres Recycled Under-ground Industrial
Wastewater Above 5,000 litres Commercial
Industrial Wastewater Residential
Fire Production
Plumbing and Engineering
Solution

An emerging trend, which has a direct impact on the Plastic water storage tank opportunities have evolved dynamics of the plastic water storage tank market, includes through number of stages as presented in figure below: increasing demand for four layered water storage tanks for protection from bacteria and fungus.

On the basis of comprehensive research, Lucintel forecasts that polyethylene will remain the largest segment and it is also expected to witness the highest growth because it is exceptionally durable, light weight, and cost effective.

Astral is having advantage of multi location presence, which able to can not only give logistic benefit remain close to the market.

Within the plastic water storage tank market, residential will remain the largest end use industry due to increasing housing starts and growing population.

Asia Pacific will remain the largest region. It is also expected to witness the highest growth over the forecast period due to growing population and construction activities in this region.

Government’s capex on infrastructure

The Indian Government and large private sector companies have planned capex over the next three to five years with meaningful spending on applications such as Plumbing, Insulation, Sewage drainage, Fire sprinklers and Urban infrastructure. Plastic pipes accounts for ~5-10% of the total project capex and implies sustainable demand for PVC pipes going forward. Given the country’s ambition to modernise infrastructure, advance its cities with smart development, and boost employment, India is expected to become the third largest construction market in the world by 2025.

KEY CONCERNS Anti-Dumping Duty

In 2019, the Indian government had imposed anti-dumping duty on CPVC resins originating from China and South Korea, who were major suppliers to India. This hit the players who depend on their raw material sourcing from the said countries.

Volatility in Raw material prices

The primary raw materials comprise of UPVC, CPVC, PPR and HDPE resins, which are derived from crude oil byproducts. Crude oil prices are volatile and any fluctuations in the prices of crude oil would lead to fluctuations in the prices of the raw materials required to manufacture its products. India is a net importer of PVC and PE as demand growth has outpaced capacity addition. Although capacity expansion plans are in action by major domestic manufacturers but the growth in domestic output won’t be seen in the near term. Thus, we are vulnerable to exchange rate, and demand-supply mismatch are the key risks faced by players in the pipes and fittings industry.

Agri pipe demand softens

The first quarter of the financial year 2022, which is a busy season for agriculture pipes has been affected by both the higher PVC prices and the second wave of the pandemic. However, this segment is expected to do well in terms of volumes in H2FY22 as the prices have started on downward journey.

Slow-down in the construction industry

With increased COVID cases, there has been a temporary inactivity at construction and development regions. This has slacked the volumes of the pipe industry players. However, this segment is less likely to be impacted compared to Agri. Astral’s presence is more on plumbing side of piping segment, so we will be comparatively less affected than the companies who are more dependent on Agri Business

ADHESIVES INDUSTRY

The Indian adhesives and sealants market is projected to reach USD 1,703.68 million by 2026, growing at an estimated CAGR of 8.07% over the forecast period (2021-2026). The industry is fairly consolidated with a few companies. India is one of the fastest growing markets for adhesives, led by growth in auto, packaging, and housing industries.

OPPORTUNITIES Packaging Industry

The demand for adhesives in the packaging industry is increasing with a higher number of end-user applications. The packaging applications that use adhesives and sealants include flexible packaging, specialty packaging, composite containers, and frozen food packaging.

Construction Sector

The construction sector is one of the largest sectors in the country, and it is growing at a healthy rate, owing to the rising population, increase in middle-class income and urbanization.

Government Initiatives

Government initiatives such as Make in India and Smart Cities projects will help the adhesive market grow significantly.

KEY CONCERNS

Slowdown in Automobile Industry

The slowdown of the automotive industry and the detrimental impact of COVID-19 are hindering the growth of the market.

Concentrated Market

India adhesives and sealants market is highly concentrated in terms of revenue. The top few players make the market highly competitive.

OUTLOOK

The Indian Plastic Piping industry is expected to grow based upon various Initiatives led down by the Indian Government such as Jal Jeevan Mission on urban and rural water supply along with higher capex for infrastructure growth, particularly for the organised players.

Whilst the second wave of COVID-19 along with resultant lockdowns/restrictions in a many states from end of March 2021, it is expected to impact the PVC pipe sector in the near-term. We believe that the faster-than-expected strong recovery will compensate once the restrictions are withdrawn in similar lines of the previous year. It is likely that going forward market consolidation, steadiness in higher

PVC prices; opportunities in infra pipe segment, which is expected to pick-up with the government’s strong emphasis on infrastructure in the budget and strong growth potential of adhesives business with resumption of construction and development activities.

COMPANY OVERVIEW

Astral Ltd. (formerly known as Astral Poly Technik Limited) is one of India’s leading manufacturers of Chlorinated Poly Vinyl Chloride (CPVC) and Poly Vinyl Chloride (PVC) plumbing systems, for residential, commercial and industrial applications. The operations with a strong vision of being a pioneering and trend setter in the Indian plastic plumbing industry. Currently, along with being a forerunner in the Piping segment, it has also diversified into the adhesives and sealants segment, infrastructure products and water tank. At present, the company has seven piping and water tank manufacturing facilities and one more upcoming (in Cuttack, Odisha) in India and five adhesives and sealants manufacturing facilities across the globe with three within India and one each in the USA and UK.

The new manufacturing facility at Cuttack (Bhubaneswar, Odisha) of 20,000 MTPA capacity will be operational from September, 2021. This will help the company tap the fast growing Eastern market and improve the margins.

Brownfield expansion is being done at Aurangabad and Sangli locations with an additional pipe manufacturing capacity of 5,000 MTPA and 8,856 MTPA respectively. The venture of manufacturing and supply of double wall corrugated pipes by acquiring Rex Polyextrusion Private Limited (“Rex”) in 2018, has not yet started giving significant benefit. But now it will give good growth as Govt. has announced many infrastructure projects which need Rex Products.

The Company has entered into framework agreement with M/s Shree Prabhu Petrochemicals Pvt Ltd. and other parties to acquire assets of its water tank business in November 2020 and has started manufacturing from Aurangabad plant in December 2020 under the brand name ‘SARITA’. The production from Ahmedabad facility of the plastic water storage tanks started from April 2021 under the brand name ‘ASTRAL’.

The Company is also planning to start the production of water tank at multi location for both the Economy and Premium Segment.

During the fourth quarter of this financial management has decided to close the loss making business of Joint Venture Company, Astral Pipes Limited (Kenya) and started process for selling of its Assets. Majority of loss company has already provided in the books of account in the current year.

The R&D facility at Resinova will be further expanded and the valve project of Astral will be completed by second quarter of the financial year 2021-22.

PRODUCT GROUPS:

The product groups of the Company have been categorised as under:

Group Products
Pipes & Fittings Pipes & fittings
Fire Sprinklers pipes & fittings
Plumbing pipes & fittings
Sewerage Drainage pipes & fittings
Surface Drainage System
Electrical Conduit Pipes & Fitting
Industrial Pipes & Fittings
Column (Borewel) Pipes
Adhesives & Sealants Admixtures
Acrylic Adhesives
Cyanoacrylate
Construction Chemicals
Epoxy Adhesives & Putty
Hand Sanitizer
Industrial Adhesives
Membrane & Coating
PVA
Silicon Sealants
Solvent Cements
Tapes
Tiling, Grouting & Repair Mortar
Rubber Adhesive
Polyester Putty
Infrastructure Products Double Wall Corrugated Pipes
Ancillary Products
Cable Protection
Industrial pipes & fittings
Insulation Tube
Urban Infrastructure
Storage Tanks Water Tanks

BUSINESS STRENGTH

Market leader in CPVC Pipes

At Astral, we have always focused on product innovation and value engineering. We started this company thinking that one day we will be a dominant player in this segment, and we believe we have successful created a brand around us. We were the first ones to introduce CPVC piping products with unique features, which helped us to have our niche clientele.

Innovative and Trendsetter in piping segment

Over the years we have introduced countless innovations in the pipes category and have been ahead of the technology curve. We strongly believe that our journey has just begun as we further diversify our product range by manufacturing tanks and infrastructure products. This was a challenging year for us, but what helped us survive is the name that we have made for ourselves over the two decades. Our ability to predict market requirements and identify consumer preferences has enabled us to launch products backed by intense research.

Wide Product range in piping and adhesives segment/ Diversified Product Portfolio

Being a customer-centric organisation, a range of blended pipes, adhesives and sealants and value added products like water tanks and infrastructure products with advanced features suitable for conditions are being promoted by Astral. Our products are finding We have 18+ different major types of Pipes, 38+ adhesives and two major variants in water tanks. Our diverse product bouquet ranges has several brands, a wide range of sizes, shapes, and strengths to suit usage requirements.

Strong Brand Equity

With our world-class quality and service, we have successfully built a relationship because of unbeatable consistent quality and product innovations. Over the years we have won several awards.

We have been awarded as The Most Trusted Pipe Brand by TRA Research for 2019 and 2020. In the Financial Year 2020-21 we won India’s most trusted Pipe Brand and Consumer Validated Superbrand for the third consecutive year.

Wide and deep distribution reach

Our well-balanced, nationwide footprint in India helps us serve our customers with speed and efficiency. We have Robust Network of Channel Partners: 12 depots in pipes. 9 depots in adhesives and sealants. 33,000+ dealers in pipes and 1.3L+ dealers in adhesives and sealants

Strategically located manufacturing facilities

We have undertaken capacity expansion through organic route to sustain and grow market share and capitalise on the growing consumption in the eastern and central regions

World class manufacturing capabilities and technical tech-ups. Six pipes manufacturing facilities and two units under construction. Three adhesives manufacturing facilities in India, one in UK and one in USA. Two water tanks manufacturing facilities and third one is under construction.

Strong Cash Flows

There has been several short-term challenges due to the COVID-19, and a few created medium-term opportunities.

During the year, the core focus remained on maintaining balance between health and cash flow. With our continuous commitment, we were able to have a strong operational year during the rough times and continued to pave the way for business continuity and resilience.

The surge in PVC prices also resulted in growth in revenue from operations on the piping segment, the improved internal working structure and focus on technology especially in the adhesives segment and prudently optimisation of cash flows to conserve liquidity have resulted well.

The upcoming growth on the infrastructure business along with various government initiatives are encouraging in the coming quarters for the company. applications and local

The company has a cash balance of about 4,760 Mn and 4,094 Mn (net of borrowings) although during the year, a capex of 1,673 Mn was made, which includes the acquisition of tank business and capacity expansion of more than 19,000 MT.

BUSINESS STRATEGIES Capacity Expansion

Our objective is to service the growing demand across the nation and expanding our market reach, strengthen presence in the existing and also eastern region and adding new SKUs in the existing business segments and the newly added verticals to the overall business.

It is projected that the demand is going to rise significantly in India especially as the infrastructure development projects kick starts. This, in turn, will ensure that our ample capacity to cater to the rising demand scenario.

During the financial year 2021, the company expended

1,673 Mn on capex and estimates to do a capex of about

1,500 Mn in the coming financial year 2022 and of about

1,000 Mn the following year. aAstral will be adding capacities at three more locations during the financial year 2022 to manufacture the SWR, AGRI, CPVC & UPVC pipes at Sangli, Aurangabad & Cuttack (Bhubaneswar). This will strengthen company’s position further in respective geographies and will help to gain market share. The Eastern Markets are one of the fastest growing market for pipe industry.

NEW PRODUCT LAUNCHES Pipes:

A new technology advanced multi layered CPVC composite pipe for hot and cold water plumbing, Astral Multi Pro, has been introduced. The three-layer construction of pipe with a middle layer of aluminium provides strength to the pipe construction and reduces expansion and contraction. The middle aluminium layer which is joined with two CPVC layers with adhesive, provides extra strength and provides very good impact resistance and CPVC is such a material that resists corrosion. This works very well in case of high-rise buildings and has longer life span and does not need frequent cleaning and maintenance.

Water tanks:

We believe that this segment is a huge market opportunity as we hold just 0.08% share in this market 50 Bn. There is an immense growth prospects and untapped market reach. The water tank segment is an expanded domain of plumbing and water supply with a huge nationwide potential. A framework agreement has been enter with M/s Shree Prabhu Petrochemicals Pvt. Ltd. and other parties to acquire assets of their water tank business for a total consideration of approx. 510 Mn in November 2020.

There will be two variants which we will be providing, economy, which will be catering through the brand name ‘SARITA’, and the premium will be served under the brand name ‘ASTRAL’. ‘Sarita Water Tanks’ offer highly durable and robust triple-layered water tanks, with each layer providing its own set of benefits. These tanks also keep stored water clean and disinfected for a long time. ‘Astral Vito’ is an Anti-microbial Technology against bacteria, viruses, fungi, and algae developed by focusing on innovations on every curve. This is our first product in the Water Tank segment.

In this technology, active copper is impregnated within the polymer system so that the leeching of copper to the human body over threshold limits is prevented and at the same time, the Anti-viral / Anti-microbial copper shield remains active throughout its life cycle. The water storage tanks are available in varied capacity ranging from 500L to 5000L. The plastic water storage tanks with ‘SARITA’ brand was started from the Aurangabad plant in December 2020 and the brand name ‘ASTRAL’ from Santej from April 2021. The facility at Ghiloth, Rajasthan will also start manufacturing from July 2021. Shortly a water tank manufacturing machine will be added for the south market in Hosur facility and eventually in the eastside.

Adhesives: A varied range of adhesive and products have been added under the brand name of ‘SolvoBond’, ‘ResiWood’, ‘TruBuild’ and ‘Bond Set’. Over the years the company evolved as the leading manufacturer of adhesives & sealants, construction chemicals, self-adhesive tapes & industrial maintenance products. We offer a wide range of products which are comprised of different chemistries, such as - epoxy resins & hardeners, epoxy putty, cyanoacrylates, silicones & hybrid sealants, construction chemicals, solvent cement, anaerobic, etc.

Infrastructure: With the acquisition of ‘Rex Poly’, a major player in the double-wall corrugated (DWC) plastic pipes, Astral has forayed into the infrastructure segment. The pipes are mainly used for sewage, rail, and road drainage, Ducts for Pre Stressing and Post Tensioning Tendons and, Underground Cable Ducting.

Branding and Communications/ Brand Building and Marketing Strategy

For better mass reach, Astral has sponsored three Indian Premier League teams: Kolkata Knight Riders, Mumbai Indians and Chennai Super Kings. Regular advertisement and brand promotional activities are carried through various means like TV and print ads, outdoor brand promotion, radio ads, trade exhibitions, dealer shop branding, in-filmproduct integration, on-ground cricket match branding, dealer meets, plumber meets, the consultant meets, and digital Marketing. We have on boarded Ranveer Singh as our brand ambassador of Astral Pipes in 2019 for three years. These activities have helped Astral to gain an exceptionally wide visibility and also gain market share.

Strengthening Dealer Network

Dealer and distribution network plays a very crucial role in our growth. The company regularly conducts dealer meets to update them with the new product introduction and strengthening brand value. Continuous additions were made even during the tough times of pandemic. Currently the company has more than 33,000 dealers in pipes and more than 1,30,000 dealers in adhesives and sealants segment. Astral launched one of the kind loyalty program for plumbers and dealers across the country. It was started in 2020 to strengthen the distributor connect. Currently more than 1,00,000 plumbers and more than 33,000 dealers have registered for the program. We offer them points based on their purchases of Astral Pipe products and redeem those points to get attractive rewards like appliances, bike, car, Paytm Vouchers, Gold Coin etc.

Focus on Cost Efficiencies and Margin Improvement

A healthy margins was witnessed during the year due to an increase in raw material prices which we were able to pass on to the end consumer. The lost market share by various regional players in this financial year and our strong brand values were able to command a better pricing for our products which can be reflected from our financials. Solar project has commissioned generation of power in the first quarter of the financial year 2022 at Ghiloth (Rajasthan) and Sangli (Maharashtra) plants. During previous financial year also we had completed solar projects at for our Santej (Astral Pipe Plant), Santej (Adhesive Plant of Resinova) and Dholka plant. This will not only going to save power cost to the company but aiding to our commitment towards the environment and clean energy.

Financial Highlights

Coming to the financials of the company for the financial year 2021, Revenue from Operations stood at 31,763 Mn, with EBITDA at 6,626 Mn and PAT at 4,082 Mn. We are growing at a rate which we have never grown before as the 5-year Revenue CAGR was at 14% and the bottom line 5 year CAGR at 30%.

The revenue from pipes is at 76%, and the revenue from the adhesives segment is at 24%. year, the Our pipe business recorded revenue of 24,863 Mn, with EBITDA at 5,552 Mn and PAT at 3,269 Mn. We are witnessing strong growth in this segment as the 5-year

Revenue CAGR is 14% and the 5-year bottom line CAGR is at 32%. Our EBITDA margins from the pipes segment are at their all-time high with 22.3%.

Our Adhesives business segment reported a revenue of 7,345 Mn, with EBITDA at 1,137 Mn. We are witnessing constant margin growth in this segment due to improved internal working structure and focus on technology.

We recorded an EBITDA margin of 15.5% for the financial year 2021.

We witnessed healthy margins in the year due to an increase in raw material prices which we were able to pass on to the end consumer, with our consolidated gross margin and EBITDA margin at 38% and 20.9% respectively. We are happy to announce that we are net debt-free and have a net cash balance of 4,094 Mn. regional players lost Webelievein thefinancial market share and the organized players were able to command better pricing for their products which can be reflected from our financials.

KEY FINANCIAL HIGHLIGHTS ( IN MN)

Particulars

Standalone

Consolidated
2020-21 2019-20 Y-o-Y Growth 2020-21 2019-20 Y-o-Y Growth
Revenue from Operations 24,863 20,428 21.71% 31,763 25,779 23.21%
EBITDA 5,552 3,806 45.87% 6,626 4,534 46.14%
Profit after Tax (PAT) 3,269 2,008 62.80% 4,082 2,496 63.54%
Basic and Diluted Earnings per share ( ) 16.27 10.00 62.70% 20.13 12.34 63.13%

STANDALONE KEY FINANCIAL RATIOS

Ratios 2020-21 2019-20 Variance (%)
Debtors turnover (in days) 26 25 4
Inventory turnover (in days) 53 75 (29.33)
Interest coverage Ratio* 58.78 15.97 268.07
Current Ratio 1.71 1.42 20.42
Long term Debt Equity Ratio 0.02 0.09 (77.78)
EBIDTA Margin 22.33% 18.63% 19.86
PAT Margin 13.15% 9.83% 33.77
Return on Net Worth 21.98% 16.17% 35.93

*Interest = Finance cost less Exchange di_erences regarded as an adjustments to borrowing costs.

CONSOLIDATED KEY FINACIAL RATIOS

Ratios 2020-21 2019-20 Variance (%)
Debtors turnover (in days) 32 32 -
Inventory turnover (in days) 54 77 (29.87)
Interest coverage Ratio* 46.95 15.51 202.71
Current Ratio 1.84 1.57 17.20
Long term Debt Equity Ratio 0.03 0.11 (72.73)
EBIDTA Margin 20.86% 17.59% 18.59
PAT Margin 12.85% 9.68% 32.75
Return on Net Worth 23.77% 17.77% 33.76

*Interest = Finance cost less Exchange di_erences regarded as an adjustments to borrowing costs.

HUMAN RESOURCES

The year presented unique challenges and tested our outlook towards employees and stakeholders. We are grateful to the Astral family – the employees and everyone in the extended value chain at our distributor points and depots, who made this happen.

Astral believes that the employees are at the core of its strategies to achieve all present and future organisational goals. During the year, the Company organised training programmes in technical skills, behavioural skills, business excellence, general management, advanced management, leadership skills, customer orientation, safety, values and code of conduct.

The wellbeing emerged as a key priority for our people and their families due to the novel corona virus. Through the year, we built a systemic approach on wellbeing with customised interventions for various employee segments and continue to encourage work from home wherever possible and reinforce safety standards in The HR department was continuously in touch with employees to create awareness, educate, guide and solve problems regarding COVID-19. A systematic operating plan is prepared to address COVID-19 after the lockdown is lifted. We are providing support to our staff members at the and at the factory employees and their families to accelerate the coverage of the national vaccination programme. Almost 90% employees at the office and around 50% at the factory are vaccinated through a vigorous vaccination drive at our plants and at the factory level.

The Company has declared financial help to the legal heirs of the deceased employee who lost his life in Covid 19 by giving 24 months last drawn salary and support in education fees by extending help of 50,000/- per child per year (for two children) till they complete their education upto 12th Std.. We have ensured that the staff members and their family also get the best treatment.

As on March 31, 2021, the Company had 1,853 permanent employees spread across different locations.

Overall harmonious industrial relations prevailed at all the units and locations of the company.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

Astral has in place an adequate system of internal control procedures for business processes, operations, financial reporting, fraud control and compliance with applicable laws and regulations, among others. They commensurate with the size of the company and the nature of the business and is in line with requirements of the regulations. We have laid down adequate procedures and policies to guide the operations of our business. The unit/functional heads are responsible for ensuring compliance with the policies and procedures laid down by the management. Our internal control systems are periodically tested by the Management, Statutory Auditors and Internal Auditors.

M/s. S R B C & Co. LLP, the Statutory Auditors of the Company audited the financial statements expressing an unmodified opinion on the adequacy and operating effectivenessof the Company’s internal financial controls over financial. The same has been included in this Annual Report and issued a report on the internal controls over financial reporting (as . defined in Section 143 of the Companies Act, 2013).

CAUTIONARY STATEMENT

Some of the statements in this Management Discussion and

Analysis, describing the company’s objectives, projections, estimates and expectations may be ‘forward looking statements’ within the meaning of applicable Laws and

Regulations. Actual results might those expressed or implied. Important developments that could affect the company’s operations include the cost of raw materials, changes in economic conditions affecting demand, supply and price movements in the domestic and overseas markets in which your company operates, changes in the Government regulations, Tax Laws and other

Statutes or other incidental factors particularly in the view of ongoing pandemic COVID 19 and such other factors within the country and the international economic and financial developments. The company assumes no responsibility in respect of forward-looking statements, which may be amended or modified in future.