Bhatia Colour Chem Ltd Management Discussions

FY 2023-24

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

This Report contains forward-looking statements that involve risks and uncertainties. When used in this Report, the words anticipate, believe, estimate, expect, intend, will and other similar expressions as they relate to the Company and/or its Businesses are intended to identify such forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of their dates. This report should be read in conjunction with the financial statements included and the notes.

INDUSTRY STRUCTURE AND DEVELOPMENT 1. GLOBAL SCENARIO • Global Economic Scenario

Covering more than 80,000 commercial products, Indias chemical industry is extremely diversified and can be broadly classified into bulk chemicals, specialty chemicals, agrochemicals, petrochemicals, polymers, and fertilisers. India is the 6th largest producer of chemicals in the world and 3rd in Asia, contributing 7% to Indias GDP. Indias chemical sector, which was estimated to be worth US$ 220 billion in 2022, is anticipated to grow to US$ 300 billion by 2025 and US$ 1 trillion by 2040.

Globally, India is the fourth-largest producer of agrochemicals after the United States, Japan and China. India accounts for 16-18% of the worlds production of dyestuffs and dye intermediates. Indias agrochemicals export was estimated to be at US$ 3.12 billion from April 2023 to December 2023. Indian colorants industry has emerged as a key player with a global market share of ~15%. The countrys chemicals industry is de-licensed, except for a few hazardous chemicals. India has traditionally been a world leader in generics and biosimilars and a major Indian vaccine manufacturer, contributing more than 50% of the global vaccine supply. India holds a strong position in exports and imports of chemicals at a global level and

ranks 14th in exports and 8th in imports at the global level (excluding pharmaceuticals). From April 2023 to December 2023, Indias dye exports (Dyes and Dye Intermediates) totalled US$ 1.69 billion.

Indias proximity to the Middle East, the worlds source of petrochemicals feedstock, enables it to benefit on economies of scale.

• The market for Indian textiles and apparel is projected to grow at a 10% CAGR to reach US$ 350 billion by 2030. Moreover, India is the worlds 3rd largest exporter of Textiles and Apparel. India ranks among the top five global exporters in several textile categories, with exports expected to reach US$ 100 billion.

• The textiles and apparel industry contributes 2.3% to the countrys GDP, 13% to industrial production and 12% to exports. The textile industry in India is predicted to double its contribution to the GDP, rising from 2.3% to approximately 5% by the end of this decade.

• The Manufacturing of Textiles Index for the month of December 2023 is 112.4.

• Global apparel market is expected to grow at a CAGR of around 8% to reach US$ 2.37 trillion by 2030 and the Global Textile & Apparel trade is expected to grow at a CAGR of 4% to reach US$ 1.2 trillion by 2030.

• The Indian Technical Textile market has a huge potential of a 10% growth rate, increased penetration level of 9-10% and is the 5th largest technical textiles market in the world.

• The Indian Medical Textiles market for drapes and gowns is around US$ 9.71 million in 2022 and is expected to grow at 15% to reach US$ 22.45 million by 2027.

• The Indian composites market is expected to reach an estimated value of US$ 1.9 billion by 2026 with a CAGR of 16.3% from 2021 to 2026 and the Indian consumption of composite materials will touch 7,68,200 tonnes in 2027.

• India is the worlds largest producer of cotton. In the first advances, the agriculture ministry projected cotton output for 2023-24 at 31.6 million bales. According to the Cotton

Association of India (CAI), the total availability of cotton in the 2023-24 season has been pegged at 34.6 million bales, against 31.1 million bales of domestic demand, including 28 million bales for mills, 1.5 million for small-scale industries, and 1.6 million bales for nonmills. Cotton production in India is projected to reach 7.2 million tonnes (~43 million bales of 170 kg each) by 2030, driven by increasing demand from consumers. It is expected to surpass US$ 30 billion by 2027, with an estimated 4.6-4.9% share globally.

• In 2022-23, the production of fibre in India stood at 2.15 million tonnes. While for yarn, the production stood at 5,185 million kgs during the same period. Natural fibres are regarded as the backbone of the Indian textile industry, which is expected to grow from US$ 138 billion to US$ 195 billion by 2025.

• Indias textile and apparel exports stood at US$ 28.72 billion in FY24 (April-January). Exports of textiles (RMG of all textiles, cotton yarns/fabs/made-ups/handloom products, man-made yarns/fabs/made-ups, handicrafts excl. handmade carpets, carpets and jute mfg. including floor coverings) stood at US$ 23.79 billion in FY24 (April-December).

• Exports for 247 technical textile items stood at Rs. 5,946 crore (US$ 715.48 million) between April-June (2023-24).

• Indias textiles industry has around 4.5 crore employed workers including 35.22 lakh handloom workers across the country.

The technical textiles market for automotive textiles is projected to increase to US$ 3.7 billion by 2027, from US$ 2.4 billion in 2020. Similarly, the industrial textiles market is likely to increase at an 8% CAGR from US$ 2 billion in 2020 to US$ 3.3 billion in 2027. The overall Indian textiles market is expected to be worth more than US$ 209 billion by 2029.

2. INDIAN ECONOMIC SCENARIO • Chemicals market in India

• Chemicals industry in India covers >80,000 commercial products.

• India accounts for 2.5% of the worlds global chemical sales, exporting to more than 175 countries.

• India is the 6th largest producer of chemicals in the world and 3rd in Asia, contributing 7% to Indias GDP.

• The industry is expected to reach US$ 304 billion by 2025 at a CAGR of 9.3%, driven by rising demand in the end-user segments for specialty chemicals and petrochemicals segment.

• Chemicals and petrochemicals demand in India is expected to nearly triple and reach US$ 1 trillion by 2040.

• During April-December 2023, Indias dye exports (Dyes and Dye Intermediates) totaled US$ 1.69 billion.

• Specialty chemical companies are seeking import substitutions while exploring export opportunities to accelerate their business.

• India is the third largest polymer consumer in the world and is expected to consume 60 million tonnes by 2040.

• Gross bank credit for Chemicals and Chemical products grew by 4.2% in December 2023 as compared to the previous month.

• The agrochemicals market in India is expected to register an 8.6% CAGR to reach US$ 7.4 billion between 2021 and 2026.

• Specialty chemicals account for 20% of the global chemicals industrys US$ 4 trillion, with Indias market expected to increase at a CAGR of 12% to US$ 64 billion by 2025. This gain would be driven by a healthy demand growth (CAGR of 10-20%) in the export/end-user industries.

Chemicals market is split into five key segments

Chemicals Market

Bulk chemicals

? These are groups of chemicals, which are manufactured on a large scale and further divided into organic, inorganic and alkali chemicals

Petrochemicals & polymers

? These chemicals are derivative of several chemical compounds such as hydrocarbons, which are derived from crude oil or natural gas

Fertilisers

? These provide nutrients for plant growth: are divided into organic/inorganic and natural/synthetic. Further, these can be broadly classified into phosphate, potassium and nitrogenous

Specialty

chemicals

? These are derivatives of basic chemicals that are manufactured for specific end-use solutions. The characteristics of these chemicals include high- value, high R&D and low volume

Agrochemicals

? These chemicals are used to protect crops against insects and pests and include fungicides, herbicides, and insecticides, among others. These chemicals can be applied in water irrigation, seeds, soils and crops

Chemical Clusters

• Gujarat

• Maharashtra

• Odisha

• Tamil Nadu

• Andhra Pradesh

• Uttar Pradesh

Indias chemical sector, which was estimated to be worth US$ 220 billion in 2022, is anticipated to grow to US$ 300 billion by 2025 and US$ 1 trillion by 2040. The demand for chemicals is expected to expand by 9% per annum by 2025. The chemical industry is expected to contribute US$ 383 billion to Indias GDP by 2030.

India has traditionally been a world leader in generics and bio similars and major Indian vaccine manufacturers, contributing more than 50% of the global vaccine supply. Chemicals and petrochemicals demand in India is expected to nearly triple and reach US$ 1 trillion by 2040.

An investment of Rs. 8 lakh crore (US$ 107.38 billion) is estimated in the Indian chemicals and petrochemicals sector by 2025. Specialty chemicals account for 20% of the global chemicals industrys US$ 4 trillion, with Indias market expected to increase at a CAGR of 12% to US$ 64 billion by 2025. This gain would be driven by a healthy demand growth (CAGR of 10-20%) in the export/end-user industries.

The Department of Chemicals & Petrochemicals intends to bring PLI in the chemical & petrochemical sector and will redraft the Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR) guidelines.

The Indian chemical industry is expected to further grow with a CAGR of 11-12% by 2027, increasing Indias share in the global specialty chemicals market to 4% from 3%.

A shift in the global supply chain brought on by the China+1 strategy and a resurgence in domestic end-user demand was expected to fuel significant revenue growth of 18-20% in 2022 and 14-15% in 2023.

Evolution of the Indian chemical sector

1939-1945

? Foreign drug supplies were decreased, and several Indian pharmaceutical companies were established.

? Companies included Unichem, Chemo Pharmaceuticals, Zandu Pharmaceutical Works, Chemical Industrial and Pharmaceutical Laboratories (CIPLA) and East India Pharmaceutical Works.

1950S-1960S

IN

? Indian government established five public- sector companies.

? Established Hindustan Antibiotics Ltd. (HAL) in 1954 and Indian Drugs and Pharmaceuticals Ltd. (IDPL) in 1961.

1980S-1990S

? Expansion of the petrochemical industry.

? Development of integrated naphtha and gas crackers, along with related downstream plants for polymers, synthetic fibers, aromatics and other chemicals.

1990S-2000S

Bly <y

? Indian players and MNCs collaborated for key investments.

? Lower tariff barriers exposed the domestic industry to competitors (from imports).

2000s to date

> r r •

? The chemical industry is expected to contribute USS 383 billion to Indias GDP by 2030.

? Indian chemical companies spend -1% of their revenue on R&D.

? Chemicals contribute 3% to the total FDI equity inflow and ~8% to the countrys exports.

? PLI schemes were introduced to promote Bulk Drug Parks, with a budget of Rs. 1,629 crone (USS 213.81 million).

? Major chemical production reached 899.84 million metric tonnes (MMT) in October 2023, while petrochemical production reached 1,702.13 MMT.

? In October 2023, production levels of various chemicals were as follows:

? Soda Ash: 226.87 MMT

? Caustic Soda: 285.46 MMT

? Liquid Chlorine: 207.88 MMT

? Formaldehyde: 20.66 MMT

? Pesticides and Insecticides: 21.14 MMT

Chemical sector import and export statistics

? From April 2023 to December 2023, exports of organic chemicals stood at US$ 5.49 billion & inorganic stood at US$ 1.50 billion.

? Imports of organic chemicals were US$ 11.21 billion and inorganic chemicals US$ 5.01 billion from April 2023 to December 2023.

? From April 2023 to December 2023, exports of castor oil, essential oil, and cosmetics and toiletries stood at US$ 2.92 billion.

? Imports of castor oil, essential oil, and cosmetics and toiletries are US$ 1.98 billion during April-December for FY2023-24.

? From April-December 2023, the export of agrochemicals was US$ 3.12 billion, dyes were US$ 1.56 billion and the other dye intermediates were US$ 125.53 million.

? The import of agrochemicals was US$ 1.11 billion, dyes were US$ 226.33 million and the other dye intermediates were US$ 969.07 million during April- December 2023.

? India exported to more than 175 countries in 2022-23. The major export destinations were the USA, China and new destinations viz. Turkey, Russia and North-East Asian Countries (Hongkong, Japan, Korea RP, Taiwan, Macao, Mongolia).

? Around 50% of the agro-chemicals are exported from India to the world. India is the top producer and exporter of castor oil, with 85-90 % of total global exports in the world.

? India holds a strong position in international trading of chemicals and ranks 9th in exports and 6th in imports at a global level (excluding pharmaceuticals).

• India Textile Chemicals Market Report

India textile chemicals market stood at $ 1.5 billion in 2017 and is projected to grow at a CAGR of around 10% to reach $ 2.6 billion by 2023, on the back of growing demand for high-quality finished textile products.

Stringent environmental regulations imposed in China against pollution have forced several Chinese textile dye manufacturers to discontinue their operations, thereby resulting in opportunities for Indian players to further penetrate the international market.

India is the second largest textile exporter in the world and the state government of Maharashtra is taking initiatives to establish around nine textile parks, which is expected to encourage domestic textile manufacturing, which in turn is anticipated to spur the demand for textile chemicals in India in coming years.

• Chemical Finishing in Textile

Chemical finishing in textile plays an important role but the recent trend to "High Tech" product adds a great popularity to it. With the increase of high performance textiles, the popularity of chemical finishing has also increased. The chemicals and auxiliaries that are utilized in a year is about one-tenth of the worlds fiber producation. About 6 million tons of chemicals are consumed for 60 million tons of fiber The consumption of chemicals in finishing covers 40% of total textile auxiliaries. Within the textile finishing group, the product breakdown, based on TEGEWA, is given as a survey in the following table. In terms of value, the repellent group is the leader with the highest ratio of cost per amount. This reflects the relatively high cost of the fluorochemical subgroup of repellents.

The Company is in trading & manufacturing of Chemicals, Dyes and Auxiliary products. Company produce finished Textile Auxiliaries & Chemicals by mixing basic Textile Auxiliaries & Chemicals with our standardised formulation of chemicals with the help of stirrers. The Company produce Foil Binders, Printing Inks and Zari Binders in our Company with the variety of ranges and specialisation as per the demand of the client.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE:

OUR PRODUCT

Textile Auxiliaries

The Textile Auxiliaries are specially used for washing and dying of yarns and fabrics. These auxiliaries are formulated for textile products in the forms of cationic, non-ionic, surfactants and amphoteric. These auxiliaries find usage in textile industries for dyeing, finishing, printing and sizing fabric applications. Textile auxiliary chemicals, commonly called as the dyeing auxiliaries are formulated chemical compounds which are used in various operational processes in a textile.

It is formulated chemicals used for, dyeing, printing, and effectively completing the manufacturing process to get the desired effect.

It is an essential product which is essential for a textile industry because it helps in the preparation of the substrate, which is used for colouration. It is also used for stabilization of the medium of application, plays a major role in increasing the fastness property of dyeing and modification of the substrates.

We are manufacturing the Foil Binders of different specifications as per the requirements of the processing houses. The product manufactured by us are innovative and compete with the market on the price range. The quality of our product is accepted by the processing houses and they got desired results by using our product satisfactorily, on account of that, we have developed cordial relation with the customers and got repetitive orders.

Value Added Printing Products

By looking at the revolution in the textile industries, in our Company, we manufacture the Value Added Printing

Products by way of dyes and chemical for the textile industry.

The Value Added Printing Products involves below mentioned products:

• Value Added Printing

• Glitter Powder

During, the period of 01.04.2023 to 31.03.2024, companys Revenue from Textile Chemicals & Auxiliaries is Rs. 11447.83 Lakhs.

Sale: Textile, Chemicals

& Auxiliaries

Rs. 11373.33 Lakhs

Sale: Plastic Scrap

Rs. 24.16 Lakhs

Sale: Plastic Granules Rs. 50.35 Lakhs

Total Sales

Rs. 11447.83 Lakhs

OUTLOOK

The company was incorporated on 10^th December, 2021 with an object to take over the undergoing business of M/S Ravi Chem which is engaged trading activity of Dyes and Intermediates. Further company got listed on BSE SME Stock Exchange and utilized the Net Proceeds to acquired M/S Polychem Export, Partnership Firm which is engaged in trading of Textile Dyes, Intermediaries, solvents, Resin, Chemicals and Auxiliaries. In the period of 3 Months, company has earned Net profit of Rs 51.73 lakhs in FY 21-22. And in FY 22-23 company has earned Net profit of Rs 273.89 lakhs After that FY 23-24 company has earned Net profit of Rs 345.12 lakhs.

The roadmap of the company for is as follows:

• Our growth will depend upon the improvement of the operational efficiencies. The improvement of operational efficiency will enhance the profitability of the Company. We intend on implementing various measures to improve our operational efficiencies, including undertaking measures to reduce our consumption of disposable items and avoid wastage. We intend to maximize our operational efficiency by achieving greater integration and by implementing a stronger supply chain management.

• The Company is planning to expand its business activities in not only Gujarat but also in other states of India.

RISK AND CONCERNS

• Constant advancements are required to stay combative in the market, especially in terms of technology for improving product quality.

• Disruption in supply of materials from the major suppliers would adversely affect operations.

• Our business involves handling and storage of hazardous chemicals, which are a potential risk to the environment.

• Unable to retain or acquire competent and experienced employees may hamper the Companys ability to pursue its growth strategies effectively.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has in place an adequate system of internal control commensurate with its size and nature of its business. These have been designed to provide reasonable assurance that all assets are safeguarded and protected against loss from unauthorized use or disposition and that all transactions are authorized, recorded and reported correctly and the business operations are conducted as per the described policies and procedures of the Company. The Audit Committee and the Management have reviewed the adequacy of the internal control systems and suitable steps are taken to improve the same.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

Revenue from operations for the period ended on 31^st March, 2024 is Rs. 11447.83 lakhs. EBIT came in at around Rs. 646.49 lakhs and Profit after Tax was Rs. 345.12 lakhs. The company expects to be in a good wicket in FY25.

To conserve resources for the Companys future growth plans, no dividend is being recommended by the Directors for the year ended 31st March, 2024.

Company has recorded a total Sales of Rs 11447.83/ - lakhs in current financial year 2023-24 as compared to Rs 11021.65/- in previous financial year 2022-23.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES

The company firmly believes that its human resources are the key enablers for the growth of the company and are an important asset. Hence, the success of the company is closely aligned to the goals of the human resources of the company. The company has over 156 employees, skilled and unskilled combined who are proficient and carry rich experience. They form a perfect team, and are the true reason behind the improvement of the performance of the Company. Taking this into account, the Company would continue to invest in developing its human capital and establishing its brand on the market to attract and retain the best talent.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIO

Ratio analysis compares line-item data from a companys financial statements to reveal insights regarding profitability, liquidity, operational efficiency, and solvency. Ratio analysis can mark how a company is performing over time, while comparing a company to another within the same industry or sector.

• Interest Coverage Ratio

The interest coverage ratio measures the ability of a company to pay the interest on its outstanding debt. This measurement is used by creditors, lenders, and investors to determine the risk of lending funds to a company.

The companys Interest Coverage ratio is 3.68% in FY 2023-24 and 2.20% in FY 2022-23.

• Current Ratio

The company is maintaining its Current Ratio at 4.98% in FY 2023-24 compared to 3.26% in FY 2022-23, which is intended to make sure it has enough resources to meet its short-term obligations.

• Debtors Turnover Ratio

Debtors Turnover Ratio measures how many times a business can turn its accounts receivable into cash during a period. The company is maintaining its Debtors Turnover Ratio at 1.42%, indicating good liquidity in financial year 23-24 which was 1.23% in previous year 22-23.

• Inventory Turnover Ratio

The inventory turnover ratio is an important tool which measures how well a company generates sales from its inventory. The company in FY 2024 has maintain a healthy Inventory turnover ratio at 5.76% which was 4.45 % in previous FY 2023, which suggests that the company is able to sell goods quickly and there is existence of demand for the products and services provided by the company.

• Operating Profit Margin (%)

The operating margin measures how much profit a company makes on an amount of sales after paying for variable costs of production, such as wages and raw materials, but before paying interest or tax. It is calculated by dividing a companys operating income by its net sales. The Company aims to maintain a stable Operating Margin Ratio; however, in FY2024 Operating Profit Margin was 5.00%.

• Debt to Equity

The debt-to-equity (D/E) ratio is used to evaluate a companys financial leverage and is calculated by dividing a companys total liabilities by its shareholder equity. The FY24 Debt- to Equity ratio of the company is 0.32% which in FY23 was 0.33%.

• Net Profit Margin (%)

The Net profit margin is intended to be a measure overall success of a business. Net Profit of company for the financial year 2023-24 is Rs. 345.12 lakhs which was Rs. 273.89 lakhs in financial year 2022-23 . However, the company is expecting to be on more profitable terms in the upcoming financial year. In FY 2024, Net Profit Margin of the company was 3.01% and in FY 2023 is 2.49%.

RETURN ON NET WORTH

The Company witnessed a significant Return on Equity at 5.67% in FY 2023-24 which was 4.74% in FY 2022-23. The company expects to be on a good wicket in the coming Fiscal Years.

Financial Year	2023-24	2022-23
Net Profit after tax	345.12	273.89
Average Shareholders Equity	6,088.87	5,779.36
Return on Equity	5.67%	4.74%

 

Place: Surat	For and on behalf of the Board of Directors
Date: 27/07/2024	Bhatia Colour Chem Limited

 

Sd/-	Sd/-
Rameshchand Chanduram Bhatia	Bharat Brijlal Bhatia
Whole-Time Director	Chairman/Managing Director
DIN:09431185	DIN:09095082