Axel Polymers Ltd Management Discussions

The Management Discussion and Analysis Report has been prepared in accordance with the provisions of Regulation 34(2)(e) of Listing Regulations, with a view to provide an analysis of the business and Financial Statements of the Company for FY 2023-24 and should be read in conjunction with the respective Financial Statements and notes thereon.

A. ECONOMIC OVERVIEW:

GLOBAL ECONOMY:

Global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades. The cost-of-living crisis, tightening financial conditions in most regions, Global Uncertainty. Global growth is forecasted to be slower in the current scenario. Inflation could continue to prove more persistent than anticipated, with further disruptions to energy and food markets still possible. A sharper slowdown in China would drag on growth around the world even further. Public debt remains elevated in many count

With inflation persisting in the advanced economies and the central banks hinting at further rate hikes, downside risks to the global economic outlook appears elevated.

OUTLOOK:

The recent conflict in the Middle East, after Russia-Ukraine conflict, has heightened geopolitical risks. Conflict escalation could lead to surging energy prices, with broader implications for global activity and inflation. Other risks include financial stress related to elevated real interest rates, persistent inflation, weaker-than-expected growth in China, further trade fragmentation, and climate change-related disasters.

Against this backdrop, policy makers face enormous challenges and difficult trade-offs. International cooperation needs to be strengthened to provide debt relief, especially for the poorest countries; tackle climate change and foster the energy transition; facilitate trade flows; and alleviate food insecurity.

INDIAN ECONOMY AND OUTLOOK ECONOMY

India turned its story around in one decade - one that saw populism breakthrough in the West in 2016, demonetization in 2017, the shadow banking crisis of 2018, a once-in-a-lifetime pandemic in 2020, the highest inflation in 40 years in the West (which still continues), and two wars since early 2022. Despite uncertainties, India managed to sail ahead while building its ship. India took determined and focused actions to convert know-how and capabilities into unique products and solutions. Indias emphasis on using technology to accumulate and diffuse tacit knowledge, building high-end manufacturing capacity, and improving competitiveness through exports formed the three necessary catalysts that boosted its growth trajectory and improved its economic fundamentals over the years.

OUTLOOK

The global economy is expected to witness a synchronous rebound in 2025 as major election uncertainties get sorted out and the central banks of the West may announce a couple of rate cuts later in 2024. Analysing changed market conditions, Deloitte has revised Indias annual economic growth prediction from 7.6% to 7.8% and estimated the countrys GDP growth to be around 6.6% in FY 2024-25 and 6.75% in the current fiscal as markets learn to factor in geopolitical uncertainties in their investment and consumption decisions. Strong growth numbers over the past two years have helped the economy to catch up with the pre-COVID trends. Investment, backed by strong government spending on infrastructure, has helped India maintain a steady recovery momentum. The difference between actual GDP from the pre-COVID GDP levels is progressively narrowing as growth picks up pace. (Deloitte).

However, there were concerns about inflation and geopolitical uncertainties feeding into higher food and fuel prices. At the same time, the prediction of above normal monsoon would likely provide some respite by positively impacting agriculture output and easing pressure on food prices. Inflation is expected to remain above the Reserve Bank of Indias target level of 4% over the forecast period due to strong economic activity.

B. INDUSTRY STRUCTURE AND DEVELOPMENT

Axel is a leading Manufacturer of Compounds Blends & Alloys of Engineering Polymers in India.

Changing economic and business conditions, technological innovation and technology adoption are making the markets more competitive. The customer focus has shifted to cost saving and alternate solution. Axel always provides the optimum solution to its customer.

The Company serves various industries, focusing especially on automotive, home appliances, electrical and electronics, construction, packaging and the healthcare industry. Changing economic and business conditions, evolving consumer preferences, rapid technological innovation and adoption and globalisation are creating an increasingly competitive market environment. In this environment, our customers are strongly focusing on cost-saving and innovative solutions. The Company is determined to support the success of its customers in their markets to give them a competitive edge. The Company strives to always provide its customers with the best product solutions to support their growth.

These are challenging times across the world. Almost every business every individual is being impacted in these times and your Company is no exception to it. We have worked harder and smarter, delight our customers now more than ever. The true spirit is founded on our enthusiasm, our constant will to renew, our willingness to assume responsibility and to ensure that we succeed.

PRODUCTS

The Product portfolio of your Company is broadly classified into the following sectors:

• Water Management

• Engineering Industry

• Electrical & Electronics

• Automotive

• Household Appliances

With best-in-class production technology, advanced R&D skills, your Company is perfectly equipped to ensure the highest level of quality, efficiency, and innovation.

Your Company continues to focus on innovative solutions to create more value for its customers.

Segment wise / Product wise performance

Class of Goods	Unit	Sales Qty. (MT)	Value Rs (lacs)
Compounds of Engineering Polymers	MT	4537.592	12269.44
Toll Compounds of Engineering Polymers	MT	NIL	NIL
Trading of Engineering Polymers and Compatibilizers	MT	154.700	522.17

OPPORTUNITIES

Polymer Industries in India holds significant opportunities for growth and development. One of the primary opportunities lies in the rising domestic demand for polymers across various industries, including automotive, packaging, construction, and electronics.

Due to the launch of several infrastructure development initiatives such as "Make in India" and "Smart Cities Mission", which require a wide range of polymer-based products for construction, transportation, Water Management, and other sectors, which has created additional market for Polymer Industry.

Indias polymer manufacturing industry stands to benefit significantly from "India" strategic position on the global stage, bolstered by favorable foreign relations and numerous free trade agreements (FTAs). These agreements facilitate easier access to international markets, enhancing export competitiveness. Collaborations and technology transfer agreements with global partners allow Indian manufacturers to adopt advanced technologies and improve product quality. Additionally, Indias strategic geographical location offers proximity to key markets in Asia, the Middle East, Africa, and Europe, enabling efficient export logistics. Leveraging these opportunities, Indias polymer industry is well-positioned to expand its global footprint and boost exports.

By 2025, Indias Consumer Electronics and Appliances Industry is predicted to be the fifth-largest in the world. The Indian Appliances and Consumer Electronics (ACE) market is predicted to nearly double in the next 3 years, reaching approximately US$ 17.93 billion ( 1.48 lakh crore) by 2025.

Despite the single use plastic ban, the packaging industry in India is witnessing robust growth due to increasing urbanization, changing lifestyles, and the rise of e-commerce. One can capitalize on this trend by providing innovative and sustainable packaging solutions. Automotive Industry in India, is expected to grow at a much faster pace; mainly the EVs.

THREATS

Polymer manufacturing heavily relies on the availability and prices of raw materials and other additives. Fluctuations in raw material prices can significantly impact the costs and margins.

Since India imports a significant amount of polymer resins to meet its increasing domestic demand, it creates pressure on domestic manufacturers which may result in lower prices and margins. Polymer manufacturing in India faces several significant threats. The industry heavily relies on imports for crucial raw materials, making it vulnerable to global supply chain disruptions and changes in international trade policies.

Additionally, stringent environmental regulations aimed at curbing plastic pollution are leading to increased compliance costs for manufacturers. Rapid technological advancements globally pose another challenge, as Indian manufacturers must invest in new technologies and research to remain competitive. Furthermore, competition from countries like China, which have more advanced manufacturing capabilities and lower production costs, intensifies the pressure on Indian manufacturers.

With the growing global concern about plastic waste and its impact on the environment, Governments and consumers are increasingly pushing for sustainable alternatives to traditional plastics and also resulting in stringent environmental regulations and adapting to eco-friendly manufacturing processes.

The Indian government has implemented various regulations and policies to control plastic waste, including bans on single-use plastics. Rapid advancements in technology may disrupt the traditional manufacturing processes and therefore companies need to invest in research and development to stay competitive and adapt to emerging technologies such as biodegradable polymers, recycling technologies, and additive manufacturing techniques.

It is therefore important for the companies to stay proactive, invest in research and development, explore sustainable alternatives, and maintain a strong understanding of market dynamics to leverage opportunities and mitigate threats.

C. PERFORMANCE ANALYSIS

During the year under review, your Company posted a total income of Rs. 12795.20 lacs as against Rs. 8292.58 lacs in the previous year. The Net profit for the year was Rs. 155.59 lacs as against Rs. 118.42 lacs in the previous year.

The Company has posted another good year of performance. The demand for Companys product has increased in spite of challenges being faced in the supply chain, substantial increase in raw material costs, adverse economic impact due to Russia- Ukraine war, foreign exchange volatility etc. Some measures were being undertaken to optimize rising input costs comprised of the use of product mix alternatives, cost-effective measures, increased operational scale, quality vendors and procuring from nearest places.

D. COMMITMENT TO QUALITY

The Company is committed to quality. It aims to develop, produce and deliver products which consistently conform to the customer requirements, and to pursue the goal of error-free performance through product, process and quality management. The Company continues to monitor and maintain its effective and well-crafted Quality Control (QC) measures. QC is aligned to the business objectives of the Company and ensures that the Company is focused on maintaining Quality Centric approach towards its customers/ clients. Over the years, the Company has evolved robust processes and strives to improve them continuously.

E. RISK MANAGEMENT

Polymer Industry has a certain specific set of risk characteristics, which needs to be carefully evaluated and mitigated. In order to effectively manage the same, the Company has evolved proactive Risk Management System, which is adhered to. The risk management covers the entire process from capital investment, competitors activities, new entrants etc.

Continual reforms and emphasis on technological developments shall reduce the exposure to risk. The Company recognizes that these risks need to be managed and mitigated to protect the interest of the shareholders and stakeholders, to achieve business objectives and enable sustainable growth.

F. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

There are adequate internal control systems operating in the Company, which are commensurate with the size and operations of the Company. The Audit Committee supervises the checks and controls exercised and reports any suggestions or deviations on a continuing basis. The authority and responsibility of every employee is defined, thus leaving no scope for any deviation.

Your Companys internal control systems are adequate and commensurate with the size of operations. These controls ensure that transactions are authorized, recorded and reported on time. They ensure that assets are safeguarded and protected against loss or unauthorized disposal.

M/s Chirag Bhatt & Associates, Chartered Accountant (Firm reg. no. 148286W), Vadodara, the internal auditors of the Company carried out audits in different areas of your Companys operations. Post-audit reviews were carried out to ensure that audit recommendations were implemented. The audit committee reviews the adequacy and effectiveness of the internal control systems, significant audit observations and monitors the sustainability of remedial measures.

G. FINANCIAL PERFORMANCE VIS-A-VIS OPERATIONAL PERFORMANCE

During the year under review, your Company posted a total income of Rs. 12795.20 lacs as against Rs. 8292.58 lacs in the previous year. The Net profit for the year was Rs. 155.59 lacs as against Rs. 118.42 lacs in the previous year.

The Company has posted another good year of performance. The demand for Companys product is increased in spite of challenges being faced in the supply chain, substantial increase in raw material costs, adverse economic impact due to Russia- Ukraine war, foreign exchange volatility etc. Some measures were being undertaken to optimize rising input costs comprised of the use of product mix alternatives, cost-effective measures, increased operational scale, quality vendors and procuring from nearest places.

The Company has met all the Financial Commitments to Bank within the stipulated period as per the Audit Report. The production costs in absolute terms, increased during the current year.

H. HUMAN RESOURCES

The focus is on the capability development, performance management and employee engagement. This is expected to improve the cost competitiveness through greater levels of employee participation, commitment and involvement.

I. ACCOUNTING TREATMENT

The financial statements of the Company for the financial year ended March 31, 2023 were prepared in accordance with IND-AS, which are the prescribed Accounting Standards.

CAUTIONARY STATEMENT

Statement in this management analysis detailing the Companys objectives, projections, estimates, expectations, or predictions may be "forward looking" statements within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that may influence your companys operations include Global and domestic supply and demand conditions affecting selling prices, input availability and prices, changes in Government policies, regulations, tax regimes, economic development within and outside the country and other allied factors. The Company assumes no responsibility to publicly amend, modify or revise the forward-looking statement on the basis of subsequent developments, information or events.