Bhageria Industries Ltd Management Discussions

GLOBAL OVERVIEW

The global economy has been surprisingly resilient, despite significant central bank interest rate hikes to restore price stability. Global growth is projected to stay at 3.1 percent in 2024 and rise to 3.2 percent in 2025. Elevated central bank rates to fight inflation and a withdrawal of fiscal support amid high debt weigh on economic activity. Inflation is falling faster than expected in most regions, amid unwinding supply-side issues and restrictive monetary policy. Global headline inflation is expected to fall to 5.8 percent in 2024 and 4.4 percent in 2025, with the 2025 forecast having been revised down.

INDIAN OVERVIEW

The World Bank forecasts the Indian economy is projected to grow at 7 percent in 2024, driven by resilient activity in services and industry. The World Bank has revising its earlier projections for the same period by 1.2 percent.

Indias economic activity in 2024, Q4 exceeded expectations, with an 8.4 percent growth compared to the previous year, supported by increased investment and government consumption.

Indias composite purchasing managers index (PMI) stood at 60.6 in February, well above the global average of 52.1, indicating expansion. Inflation has remained within the Reserve Bank of Indias (RBI) target range, and financial conditions have remained accommodative.

Domestic credit issuance to the commercial sector grew by 14 percent year-on-year (YoY) in December 2023, with financial soundness indicators showing improvement. Foreign reserves increased by 8 percent in the year to January 2024.

In India economic outlook, the focus is on the emerging consumer spending patterns in India, highlighting the rise of the middle-income class. Not only has growth in consumer spending post pandemic been fluctuating, but there is also a shift in consumption patterns, with demand for luxury and high- end products and services growing faster than demand for basic goods. As we expect the number of middle- to high-income households with increasing disposable income to rise, this trend will likely get further amplified, driving overall private consumer expenditure growth.

But the challenge of rising household debt and falling savings could weigh on long-term growth sustainability. Controlling household debt to prevent it from crossing unsustainable levels will be essential to mitigate risks of debt overhang, maintain economic stability, and protect households against financial vulnerability.

INDUSTRY OVERVIEW

GLOBAL DYES AND DYES INTERMEDIATES INDUSTRY

Dye Intermediate is the main ingredient used for the manufacturing of Dyestuff. The manufacturing Chain of dye can be traced back to petroleum-based products.

The global dyes and pigments market size was valued at USD 42.64 billion in 2023 and is projected to grow from USD 44.68 billion in 2024 to USD 56.91 billion by 2032, exhibiting a CAGR of 5.1% during the forecast period. Increasing demand from various application industries such as textiles, paints & coatings, construction, and plastics is expected to drive the market growth. Major producers are actively venturing into enhancing their products by utilizing advanced technologies for the efficient removal of hazardous pollutants during the manufacturing process. Manufacturers are likely to experience varied production costs due to volatility in the prices of raw materials.

Factors, such as water pollution during the manufacturing processes, high metal content in pigments, and high water consumption in the textile industry to rinse dyes, are the major environmental threats. Stringent regulations have been imposed in regions, such as Europe, North America, and China, which may challenge market growth.

However, increasing environmental concerns are resulting in policy changes across the globe, which is anticipated to restrain the market growth over the forecast period.

PRODUCT INSIGHTS (REACTIVE DYES)

In a reactive dye, a chromophore (an atom or group whose presence is responsible for the colour of a compound) contains a substituent that reacts with the substrate. Reactive dyes have good fastness properties owing to the bonding that occurs during dyeing. Reactive dyes are most commonly used in dyeing of cellulose like cotton or flax, but also wool is dyeable with reactive dyes. This report studies the Reactive Dyes market.

According to our latest study, the global Reactive Dyes market size was valued at USD 4714.3 million in 2022 and is forecast to a readjusted size of USD 5599.4 million by 2029 with a CAGR of 2.5(Percent) during review period. The influence of COVID-19 and the Russia-Ukraine War were considered while estimating market sizes.

The production regions of Reactive Dyes are mainly located in China and India. China was the leader production regions, which achieved about 46(Percent) volume market share.

As for the region consumption, the China remained the largest market for Reactive Dyes in the world, with 41(Percent) market share consumption. Other major consuming regions include India and Europe, which account for 15(Percent) and 19(Percent) respectively. For the various types of Reactive Dyes, Halogen Reactive Dyes are growing in the past, which was hold 27(Percent) market share approximately.

Reactive Dyes are used in a wide range of applications such as Polyester, Nylon and Polyurethane Fibers. Reactive Dyes are also used in Cotton Textiles, Wool and Silk. Apparel Cotton Textiles was the largest filed, which was esteemed to hold 37(Percent) market share.

INDIAN DYESTUFF INDUSTRY

At present, India contributes about 6% of the share in the global market with a CAGR of more than 15% in the last decade. The dye market are mostly dominated by reactive and disperse dyes. The demand for reactive and disperse dyes is expected to grow in future as these two dyes are dominant in all the regions.

Dyestuff sector is one of the core chemical industries in India. It is also the second highest export segment in chemical industry. The Indian dyestuff industry is made up of about 1,000 small scale units and 50 large organized units, who produce around 1,30,000 tonnes of dyestuff. Maharashtra and Gujarat account for 90% of dyestuff production in India due to the availability of raw materials and dominance of textile industry in these regions. The major users of dyes in India are textiles, paper, plastics, printing ink and foodstuffs. The textiles sector consumes around 80% of the total production due to high demand for polyester and cotton, globally. Globally the dyestuffs industry has seen an impressive growth. Initially the industrys production bases were mostly in the west, but in the last few years, they have been shifting to the East. Dyestuff can be used for Printing inks, plastics, textiles, paper and foodstuff. The world consumption for dyestuff accounts for printing inks at 40%, paints 30%, plastics 20% and others from segments like textiles.

Indias position as one of the leading global suppliers of D&P is evident through its major exports to countries like Bangladesh (11% of total D&P exports during FY23), followed by China (6%), Turkey (6%), USA (6%), and Indonesia (3%). However, during FY23-24, the industry encountered various challenges, including a significant decline in exports and a moderation in profitability. These challenges were primarily caused by a rise in inflation and an uncertain geopolitical landscape resulting from the Russia-Ukraine war. The war led to economic sanctions imposed on several countries, sharp volatility in commodity prices (including crude oil), and supply chain disruptions. Consequently, major global economies, particularly the USA and Europe, experienced recessionary trends that affected the demand for D&P from the textile industry, which accounts for over 70% of the overall consumption. Furthermore, the industry faced competition from low-cost Chinese products, as Chinas consumption declined due to Covid-19-induced restrictions. This intensified the competitive pressure on Indian exporters in the global market. As a result, the industry witnessed a moderation in profitability and haWd to navigate through a challenging business environment during FY23-24.

The growth of dye sector in the future continues to depend on the performance of end user industries like paints, textiles, printing inks, paper, plastics and foodstuffs. The changing customer preferences, boom and expansion of infrastructure in certain parts of the world creates new market opportunities for the dye industry. To achieve global standards the industry needs to put efforts in critical areas so as to adopt aggressive growth and focus on exports, R&D, marketing alliances, up- gradation of manufacturing facility, contract manufacturing with companies having established markets, identification of areas of core competence, consolidation, collaboration by cluster development, outsourcing, environmental consciousness, cost reduction etc. The industry is likely to see many new dyeing technologies coming into the market with the help of good technical expertise and R&D achievements. Globally the high usage of cotton, polyester and the banned vat and azo dyes in some of the countries has paved the way for reactive and disperse dyes. It is expected that in future these two dyes would lead the market. The Industry feels unless the labour laws, power supply and infrastructure are improved, it would be very difficult to compete globally with rapidly declining duty differentials and appreciation in the value of rupee.

OUTLOOK

Indian Chemicals and Petrochemicals (CPC) industry is one of the most critical and indispensable industries and a consistent GDP contributor. The ship of growth has started his journey from ashore toward a sea of unrealized potential on the backdrop of amenable government policies and initiative and ever rising demand and strong market.

Talking of global trends, global inflation is weighing heavily on the end market textile, paper, pharma, plastic, agrochem, water treatment, etc. Consumption of end users industries has been sluggish due to overall slowdown in the global market. Uncertainty about the European market has further decelerated the demand scenario of the chemical industry. The industry is further expected to grow at a CAGR of 1.5% between 2024 and 2028 to reach a value of almost 311 million metric tons by 2026. The major drivers of the industry such as the rising population, increase in fertilisers and chemical industry, the rising demand for the developing regions, and the increase in the demand from major consuming industries like agriculture are expected to aid the market growth.

INDIAN SOLAR POWER MARKET - A SCENARIO

The Indian solar market is one of the fastest-growing in the world, driven by the countrys ambitious renewable energy goals and favourable government policies. Here are some key points about the Indian solar market:

MARKET SEGMENTS

1. Utility-Scale Solar: Large-scale solar parks and plants dominate the market, with many projects being developed across states like Rajasthan, Gujarat, and Tamil Nadu.

2. Rooftop Solar: This segment is growing steadily, with increasing adoption in residential, commercial, and industrial sectors due to favourable net metering policies and financial incentives. In line with the announcement in the interim budget, PM Surya Ghar Muft Bijli Yojana has been launched to install rooftop solar plants to enable 1 crore households obtain free electricity up to 300 units every month. The scheme has generated remarkable response with more than 1.28 crore registrations and 14 lakh applications, and we will further encourage it.

3. Off-Grid Solar: There is substantial potential in off-grid solar solutions, especially in remote and rural areas where conventional grid access is limited.

CHALLENGES

1. Grid Integration: Integrating large amounts of solar energy into the national grid poses technical challenges related to grid stability and storage.

2. Financing and Costs: While the cost of solar PV panels has decreased significantly, financing remains a challenge for small and medium-scale projects.

3. Land Acquisition: Acquiring land for large solar projects can be a hurdle due to regulatory and social issues.

FUTURE OUTLOOK

1. Technological Advancements: Innovations in solar technology, including more efficient PV panels and advanced storage solutions, are expected to drive further growth.

2. Policy Support: Continued government support through favourable policies and incentives will be crucial for the sustained growth of the solar market.

3. Sustainability Goals: Indias commitment to international climate agreements and its own sustainability targets will ensure that solar energy remains a key focus area.

The Indian solar market presents a dynamic and rapidly evolving landscape with significant opportunities for growth and development.

This year was a very progressive year for whole industry. We also entered in the segment of international EPC. We get awarded rooftop solar EPC project of 11.40 MWp from APM Terminal, Bahrain. Apart from this we also received two more work orders of solar EPC in Maharashtra for the capacity of 4.50 MW and 1 MW respectively.

GLOBAL PHARMACEUTICAL INDUSTRY

The pharmaceutical industry has exhibited remarkable agility in responding to the COVID-19 pandemic by developing highly effective vaccines and treatments at unprecedented speed. Over the next five years, the US market is expected to grow at -1 to 2% CAGR on a net price basis due to the Inflation Reduction Acts conservative outlook, while Europe is expected to focus on generics and biosimilars, leading to increased pressure on the pricing of novel medicines. The Asia-Pacific region is predicted to experience steady growth following the pandemic, but Chinas growth will likely slow down due to pricing pressures.

According to IQVIA, the pharmerging markets are expected to grow 5-8% in spending through 2027. On the other hand, lower- income countries are expected to experience a CAGR of 4.57.5% in spending growth, with projected spending of US$2933 billion by 2027, up from US$23.2 billion in 2022, the same report said.

INDIAN PHARMA OVERVIEW

The Indian pharmaceutical industry has become a thriving sector, producing a range of medications and vaccines at affordable prices. Known for its expertise in generic drugs, biosimilars, and biologics, the industry has grown at a CAGR of 9.43% over the past nine years, making it the third-largest pharmaceutical producer by volume.

India has a significant presence in the global API market, with 500 Indian API producers accounting for around 8% of the market. India is also a major player in the global exports of generic drugs, meeting around 20% of the demand. The country has the largest number of pharmaceutical manufacturing facilities that comply with USFDA standards outside the US. The Indian pharmaceutical market is predicted to reach US$65 billion by 2024 and US$130 billion by 2030, with Indian pharma companies having a significant share in the US and EU prescription market.

OUTLOOK

Bhageria Industries Limited (BIL), is committed to advancing its API business, With a strong resence, aims to further expand its reach and impact in the pharmaceutical industry.

Strategic Objectives:

1. Expansion of API Portfolio:

a. New Product Development: Focus on developing innovative APIs targeting neglected and orphan diseases. BIL aims to introduce at least 5-10 new APIs over the next five years, leveraging its strong R&D capabilities.

b. Customization and Specialization: Develop customized APIs to meet specific client requirements, enhancing value proposition and differentiation in the market.

2. Enhancing R&D Capabilities:

a. Investment in R&D Infrastructure: Upgrade existing R&D centers and establish new facilities equipped with state-of-the-art technology to support advanced research and development.

b. Collaboration with Academic Institutions: Strengthen collaborations with leading universities and research institutions to foster innovation and stay at the forefront of scientific advancements.

3. Regulatory Compliance and Quality Assurance

a. Global Regulatory Approvals: Achieve additional global FDA accreditations and regulatory approvals to expand market access and ensure compliance with international standards.

b. Quality Management Systems: Continuously improve quality management systems to maintain high standards of product quality and safety.

4. Market Expansion:

a. Entering New Geographies: Expand into emerging markets with high growth potential, focusing on regions with unmet medical needs.

b. Strategic Partnerships: Form strategic alliances and partnerships with global pharmaceutical companies to enhance market penetration and distribution capabilities.

5. Sustainability and Environmental Responsibility:

a. Green Chemistry Initiatives: Implement green chemistry practices in API manufacturing to minimize environmental impact and promote sustainability.

b. Energy Efficiency Projects: Invest in energy-efficient technologies and processes to reduce the carbon footprint of API production.

6. Human Resource Development:

a. Skill Enhancement Programs: Invest in training and development programs to enhance the skills and knowledge of the workforce, ensuring they are equipped to handle advanced technologies and processes.

b. Talent Acquisition: Attract and retain top talent in the industry by offering competitive compensation packages and fostering a culture of innovation and excellence.

Bhageria Industries Limited is poised to strengthen its position in the global API market through a comprehensive strategy focused on innovation, quality, and sustainability. By expanding its product portfolio, enhancing R&D capabilities, and entering new markets, aims to address unmet medical needs and contribute to the advancement of global healthcare.

Accelerating Growth Despite Challenges:

While similar-sized companies or the industry as a whole typically take five years to streamline operations, BIL has demonstrated remarkable agility and commitment to excellence by achieving a "WHO-GMP"Certification as well as CEP (Certification of Suitability)to the monographs of the European Pharmacopoeia, filing within just 12 months of starting operations. This significant milestone underscores Bhageria Industries Limited capability to navigate complex regulatory landscapes and deliver results swiftly. The following strategies have been instrumental in this achievement:

1. Focused Project Management

2. Leveraging Expertise

3. Robust Infrastructure

4. Streamlined Regulatory Processes

5. Strategic Partnerships

This roadmap outlines the strategic initiatives that company plans to undertake to ensure sustained growth and success in the API business.

Future Expansion Plans Post-Profitability:

By implementing these strategies, Bhageria Industries Limited aims to surpass industry benchmarks in the API business, ensuring superior quality, innovation, and customer satisfaction. Post-profitability, the companys investments in R&D for Vitamin B12 and Vitamin D will drive further growth and solidify BIL position as a global leader in the pharmaceutical industry.

COMPANY OVERVIEW

Bhageria Industries Limited is a leading player in the chemical industry, renowned for its commitment to innovation, sustainability, and quality. Established in 1989, the company has steadily evolved into a powerhouse, catering to diverse industrial needs with its comprehensive range of chemical dyes and dye intermediates products. With a strong emphasis on research and development, coupled with a customer-centric approach, Bhageria Industries Limited has earned the trust of clients worldwide.

The Company Constantly striving to pioneer new technologies and solutions to meet evolving market demands, Committed to maintaining the highest standards in manufacturing processes and product quality with Integrating eco-friendly practices into operations to minimize environmental impact, Upholding ethical business practices and fostering transparent relationships with stakeholders and anticipating and fulfilling the diverse needs of customers through tailored solutions and exceptional service

Bhageria Industries Limited has established a strong foothold in both domestic and international markets. Through strategic partnerships and alliances, the company continues to expand its global reach, catering to clients across continents

Bhageria Industries is also engaged in solar power generation and EPC contracts, having constructed a solar facility in Ahmednagar and securing a power purchase agreement with SECI.

Bhageria Industries Limited actively engages in CSR initiatives aimed at uplifting communities and promoting social welfare. Through educational programs, healthcare initiatives, and environmental conservation efforts, the company endeavors to make a positive impact on society.

Driven by a vision of continuous growth and innovation, Bhageria Industries Limited aims to further consolidate its position as a global leader in the chemical industry. With a focus on sustainability and customer satisfaction, the company is poised to explore new opportunities and expand its horizons in the years to come.

ANALYSIS OF FINANCIAL PERFORMANCE

Standalone performance for the year ended March 31, 2024:

The Companys revenues in FY 2023-24 is 511.82 Crore. EBIDTA stood at Rs. 60.54 Crore compared to Rs. 58.14 Crore in the previous year. The Company reported profit after tax of Rs. 19.62 Crore during FY 2023-24 compared to profit after tax of Rs. 15.05 Crore in the previous year. The Company proposed a Final Dividend of Rs. 1 per equity shares on the Face Value of Rs. 5 each.

(Rs. in Crores)

PARTICULARS	FY 2023-24	FY 2022-23
Total Income*	511.82	505.10
EBITDA	60.54	58.14
EBITDA Margin (%)	11.83	11.51
PAT	19.62	15.05
PAT Margin (%)	3.83	2.98

* It comprises revenue from operations and other income.

Financial Ratios

PARTICULARS	FY 2023-24	FY 2022-23
Inventory Turnover Ratio (in times)	9.15	7.43
Interest Coverage Ratio (in times)*	19.68	7.93
Current Ratio (in times)	2.73	2.79
Debt Equity Ratio (in times)	0.07	0.07
EBITDA Margin (%)*	11.83	11.51
Return on Equity (%)*	3.83	2.98
Net Profit Margin (%)*	3.83	2.98
Earnings per share (in )*	4.50	3.45

Details of significant Changes (Change of 25% or more as Compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefore, including:

* The improvement in profitability this year is due to effective cost management, optimized operational efficiency and reduced depreciation expenses. This factor led to significant cost savings and enhanced resource allocation. As a result, profitability has increased compared to previous year, reflecting our commitment to growth and shareholder value.

Consolidated performance for the year ended March 31, 2024:

The Companys revenues in FY 2023-24 is 511.21 Crore. EBIDTA stood at Rs. 59.83 Crore compared to Rs. 58.33 Crore in the previous year. The Company reported profit after tax of Rs. 18.53 Crore during FY 2023-24 compared to profit after tax of Rs. 14.71 Crore in the previous year.

(Rs. in Crores)

PARTICULARS	FY 2023-24	FY 2022-23
Total Income*	511.21	505.33
EBITDA	59.83	58.33
EBITDA Margin (%)	11.70	11.54
PAT	18.53	14.71
PAT Margin (%)	3.62	2.91

* It comprises revenue from operations and other income.

Financial Ratios

PARTICULARS	FY 2023-24	FY 2022-23
Inventory Turnover Ratio (in times)	9.15	7.43
Interest Coverage Ratio (in times)*	15.17	6.78
Current Ratio (in times)	2.74	2.83
Debt Equity Ratio (in times)	0.09	0.08
EBITDA Margin (%)*	11.70	11.54
Return on Equity (%)*	3.60	2.90
Net Profit Margin (%)*	3.62	2.91
Earnings per share (in )*	4.37	3.38

Details of significant Changes (Change of 25% or more as Compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefore, including:

* The improvement in profitability this year is due to effective cost management, optimized operational efficiency and reduced depreciation expenses. This factor led to significant cost savings and enhanced resource allocation. As a result, profitability has increased compared to previous year, reflecting our commitment to growth and shareholder value.

RISK MANAGEMENT

Risk Category	RISK	MITIGATION STRATEGY
Technology Risk	Bhageria faces the challenge of keeping up with rapid technological advancements to maintain competitiveness and enhance product quality.	To address this, Bhageria prioritizes innovation and continuous technological updates, ensuring it meets client quality expectations and drives growth.
	The market is increasingly competitive, with numerous global players striving to expand their market share.	Bhageria counters this by focusing on product innovation, technological integration, and strong brand development. Leveraging its technical expertise and market skills, the company aims to broaden its global reach and improve customer engagement.
Liquidity Risk	Variations in commodity prices, currency exchange rates, and supply-demand imbalances can lead to financial losses.	Bhageria mitigates these risks through risk hedging, diversification, financial risk management, market intelligence, strategic partnerships, and contingency planning.
Regulatory Risk	Changes in laws and regulations require ongoing updates to protect the companys assets.	Bhageria ensures compliance by maintaining robust internal processes and quality monitoring systems, adapting to regulatory changes effectively.
Human Risk	Success relies on the ability to attract and retain qualified employees; challenges in this area could impact business development.	Bhageria addresses this by fostering a positive work environment and offering comprehensive training programs to keep employees skills current and attract new talent.
Environment Risk	Increased operational costs may arise due to stringent environmental regulations and heightened customer awareness.	Bhageria tackles this risk by developing sustainable technologies and adhering to environmental regulations, demonstrating a commitment to environmental responsibility.

STRATEGY

Our long-term strategy is anchored in key principles designed to ensure the sustainability and growth of our business.

Firstly, we are committed to maintaining our market share in key regions both within India and internationally. This involves vigilant monitoring and adaptive responses to market dynamics to sustain our competitive edge.

Secondly, we actively seek to capitalize on emerging opportunities in the chemical, pharmaceutical, and solar sectors. By leveraging our diversified product portfolio, we continuously explore and pursue new growth avenues, aligning with market trends and customer needs.

Thirdly, we emphasize backward integration to achieve economies of scale. By integrating various stages of our supply chain, we enhance operational efficiency, boost profitability, and strengthen our reserves, supporting sustainable business expansion.

Fourthly, we are dedicated to upholding Environmental, Social, and Governance (ESG) principles. Our focus includes increasing the use of solar energy, reducing our carbon footprint, and optimizing costs. These initiatives not only support sustainable practices but also advance our commitment to environmental stewardship.

Finally, our rigorous Environment, Health, and Safety (EHS) protocols ensure a safe and healthy work environment across all our sites. By prioritizing employee well-being and maintaining high safety standards, we ensure business continuity and uphold our commitment to responsible and sustainable operations.

By adhering to these core principles, we aim to build a solid foundation for long-term success, fostering business growth while positively impacting our stakeholders and the environment.

HUMAN RESOURCE

At Bhageria, our human resources are considered a pivotal asset in driving progress and achieving organizational success. We deeply value the skills, dedication, and enthusiasm of our employees, recognizing them as essential to meeting our strategic goals and objectives.

To support and develop our workforce, Bhageria has implemented comprehensive People Development Processes aimed at enhancing skills and delivering exceptional value. These processes are designed to focus on key areas essential for achieving the Companys vision and objectives. Through a variety of programs and initiatives, we offer our employees numerous opportunities to expand their knowledge, develop their skills, and cultivate their talents, fostering continuous professional growth and advancement.

As of March 31, 2024, Bhageria employed 384 individuals. During fiscal year 2024, we welcomed 73 new employees to replace those who left. Our HR strategy covers crucial aspects such as recruitment, training, development, and compensation. By addressing these areas, we ensure a holistic and effective approach to managing our human resources, supporting the long-term success of our workforce.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

Our internal audit system is diligently monitored and frequently updated to protect assets, ensure adherence to regulations, and promptly resolve any outstanding issues. The audit committee reviews report from internal auditors on a routine basis, carefully noting their observations and implementing corrective actions as needed. The committee maintains an ongoing dialogue with both statutory and internal auditors to confirm that our internal control systems are functioning effectively.

CAUTIONARY STATEMENT

Statements in the management discussion and analysis describing the Companys objectives, projections, estimates, expectations or predictions may be ‘forward-looking statements within the meaning of applicable securities, laws and regulations. Actual results could differ materially from those expressed or implied. The important factors that could make a difference to the Companys operations include global and Indian demand and supply conditions, finished goods prices, raw material availability and prices, cyclical demand, changes in government regulations, environmental laws, tax regimes, economic developments within India and the world, as well as other factors such as litigation and industrial relations