ECONOMIC AND BUSINESS OVERVIEW ACROSS THE GLOBE
In general, global economic shocks in the past were severe but spaced
out in time. At least three shocks have hit the global economy since 2020. It all started
with the pandemic-induced contraction of the global output, followed by the Russia-Ukraine
conflict leading to a worldwide surge in inflation. Then, the central banks across
economies led by the Federal Reserve responded with synchronised policy rate hikes to curb
inflation. The rate hike by the US Fed caused the US Dollar to appreciate against most
currencies. This led to the widening of the Current Account Deficits (CAD) and increased
inflationary pressures in net importing economies. The rate hike and persistent inflation
also led to a lowering of the global growth forecasts. Many developing countries,
particularly in the South Asian region, faced severe economic stress due to weakening
currencies, higher import prices, the rising cost of living and a stronger dollar, made
debt servicing more expensive.
ECONOMIC AND BUSINESS OVERVIEW IN INDIA
For India, 2022 was special as it marked the 75th year of
Indias Independence. India became the worlds fifth largest economy, measured
in current dollars. The rise in consumer prices has slowed considerably. The annual rate
of inflation is below 6 percent. Although the high oil price this year inflated
Indias import bill and caused the merchandise trade deficit to balloon, concerns
over the current account deficit and its financing have ebbed as the year rolled on.
Foreign exchange reserve levels are comfortable and external debt is low. India had a good
monsoon, and reservoir levels are higher than last year and the 10-year average. The
fundamentals of the Indian economy are sound as it enters its Amrit Kaal, the 25-year
journey towards its centenary as a modern, independent nation. The Indian economy,
however, appears to have moved on after its encounter with the pandemic, staging a full
recovery in FY22 ahead of many nations and positioning itself to ascend to the
pre-pandemic growth path in FY23. Yet in the current year, India has also faced the
challenge of reining in inflation that the European strife accentuated. Measures taken by
the government and RBI, along with the easing of global commodity prices, have finally
managed to bring retail inflation below the RBI upper tolerance target in November 2022.
However, the challenge of the depreciating rupee, although better performing than most
other currencies, persists with the likelihood of further increases in policy rates by the
US Fed. The International Monetary Fund expects India to grow by 5.9% in FY 2023-24 and by
an average rate of 6.1% over the next five years. The overall outlook of the Indian
economy remains positive. It is expected that investments will see a turnaround and India
will likely grow at a moderate pace. Growth in the next year is likely pick up as
investments will kickstart the virtuous circle of job creation, income, productivity,
demand and exports supported by favourable demographics.
During the current financial year 2023-24, growth in India is expected
to be constrained by slower consumption growth and challenging external conditions. Rising
borrowing costs and slower income growth will weigh on private consumption growth, and
government consumption is projected to grow at a slower pace due to the withdrawal of
pandemic-related fiscal support measures. In order to attain sustainable growth, India
will need a strong rebound in investments. Despite global uncertainties, India is poised
to grow by 6.5% in the medium term.
INDUSTRY STRUCTURE AND DEVELOPMENT
The plastic industry in India is closely intertwined with the
petrochemical industry. It starts with the raw materials, such as natural gas, oil or
plants and is refined into ethane and propane. These compounds are converted into monomers
which, on combining with catalysts, become polymers. These polymers are then converted
into plastics.
The industry comprises both upstream and downstream activities (conversion
of polymers). The downstream manufacturers cater to multiple industries across the
country with industries like, automotive, construction, electronics, healthcare, textiles,
and FMCG.
Indias overall production infrastructure for petrochemicals is
mainly driven by a limited number of oil refineries and standalone petrochemical
companies.
According to the polymer landscape study, West India accounts for the
maximum share (61%) of upstream plastic manufacturing, followed by Northern India with an
18% share, East India accounting for 15% and Southern India having the least capacity with
only 6% share. The downstream plastic processing sector in India is primarily dominated by
Indian companies.
The below mentioned table gives the present composition of business of
your Company.
Category |
Percentage Share in Total Turnover |
Consumer durable (white goods)
injection moulded plastic components |
95% |
Brite branded products
(material handling crates and beauty products) |
5% |
OVERALL FINANCIAL PERFORMANCE:
The financial performance of the Company (Standalone) has been
summarized in the table below followed by explanatory remarks for significant changes in
2022-23 compared to the previous year.
(Rsin lakhs)
Particulars |
FY 2022-23 |
FY 2021-22 |
Change |
% Change |
Remarks |
| Total operational income (net) |
20673.60 |
23,025.35 |
(2,351.75) |
(10.21) |
1 |
| Total expenses |
3,647.95 |
3,437.08 |
210.87 |
6.14 |
|
| Earnings before depreciation and |
|
|
|
|
|
| finance cost |
123.69 |
1,306.66 |
(1,182.97) |
(90.53) |
2 |
| Other income |
182.46 |
3,638.90 |
(3,456.44) |
(94.99) |
|
| Depreciation and amortization expenses |
580.64 |
621.23 |
(40.59) |
(6.53) |
|
| Finance costs |
378.82 |
471.37 |
(92.55) |
(19.63) |
|
| Profit/ (loss) before tax |
(653.31) |
3,852.96 |
(4,506.27) |
(116.96) |
|
| Tax expenses |
(311.10) |
657.00 |
(968.10) |
(147.35) |
|
| Profit/ (loss) after tax |
(342.21) |
3,195.96 |
(3,538.17) |
(110.71) |
|
| Property, Plant and Equipment |
|
|
|
|
|
| (incl. CWIP) |
5,474.18 |
4156.52 |
1,317.67 |
31.70 |
3 |
1. There has been decrease in sales due to decrease in market share and
demand of OEMs products in the consumer durable segment.
2. EBDITA for the year 2022-23 is Rs 123.69 lakhs as compared to Rs
1,306.66 lakhs in the previous year.
3. During the year, Company has invested Rs 1903.42 Lakhs in Property,
Plant and Equipment (incl. CWIP).
(Rs in lakhs)
Cash Flow details (Standalone) |
2022-23 |
2021-22 |
| Net cash flow from/ (used in) operating
activities |
42.32 |
667.11 |
| Net cash flow from/ (used in) investing
activities |
266.64 |
589.17 |
| Net cash from/ (used in) financing activities |
(343.83) |
(1,589.84) |
REVIEW OF OPERATION:
During the year under review, the increasing costs of raw materials,
rising operational cost and year on year cost down initiatives of the customer, coupled
with fresh investment in new projects for which the turnover has yet not started have
impacted profit margins of the Company.
The decline in demand for one of companys major customer along
with steep competition which has impacted their market share had a direct impact on
production and sales turnover.
The tooth brush sales remained steady during the year under review. The
growth trajectory of DIVO brand is in a positive trend.
GROWTH DRIVER
The new investment made in 2 fresh locations of Hosur and Haridwar for
our consumer durable customers will add to the turnover and profitability of the Company.
These units have been set up to be logistically closer to the customers manufacturing
units.
In addition to the injection moulding process and in a drive for
diversification, the Company has invested in new manufacturing technologies such as Hand
Lay Up (HLU), LRTM (Light Resin Transfer Moulding) and Vacuum Bag Infusion Process (VIP).
These technologies have been installed in the new unit located at Pune. This unit will
scale up its production by Q4 of FY 2023-24.
Further, the manufacturing unit set up by Companys WOS in USA
will allow the Company to cater to international customers and thereby mark its footprint
in the global market allowing us to consolidate orders which will be manufactured and
exported from the Pune unit.
OPPORTUNITIES
Post the pandemic period, the drive for indigenisation and de-risking
from China, has pushed companies to invest in and set up production facilities in India.
This coupled with the incentives provided by Government of India (GOI), will give boost to
domestic production and manufacturing requirements. In the last budget, the GOI has given
a thrust on infrastructure and railways which are direct industries where your
companys new composite division is targeting to supply.
THREAT
Shifting consumer preferences in a projected economic downturn
scenario, amendments to industrial policies to align with growing environmental concerns,
huge fluctuations in raw material costs triggered by prevailing geo-political tensions,
and expected economic turbulences are noted as key challenges to be addressed by the
Plastics industry players during the short and medium term forecast.
The Continued pressure from unorganized players in the industry to
supply at low costs in order to capture the business have a direct impact on operating
profit margins.
OUTLOOK
The future outlook for the manufacturing industry is complex as the
industry faces challenges related to environmental sustainability, regulatory compliance,
and changing customer demands. As the global economy continues to recover from the
COVID-19 pandemic, demand for plastic products is expected to increase, particularly in
emerging markets. Overall, the plastic manufacturing industry is expected to see continued
growth and innovation, but will need to adapt to changing customer demands and
environmental concerns in order to remain competitive in the long term. With the Companies
new investment in facilities and capacity expansions along with the push for
diversification, it is poised to see good growth in its top line to help absorb the
increasing costs and remain sustainable in the years to come.
FINANCIAL RATIOS
The significant changes in the financial ratios of the Company, which
are more than 25% as compared to the previous year are summarized below:-
Ratio |
F.Y. 2022-23 |
F.Y. 2021-22 |
Change (%) |
| Interest Coverage Ratio |
(0.72) |
1.73 |
(141.78)% |
| Return on Net Worth |
(5.02) |
3.53 |
(242.20)% |
| Net Profit Margin |
(0.02) |
0.01 |
(245.05)% |
REASON FOR CHANGE IN RATIOS:
The reason for change in the aforesaid ratios is mainly due to
reduction in sales turnover of the Company and also the increase in expenditure incurred
by the Company during the period under review. While setting up the additional
manufacturing units, the Company has incurred capital as well as revenue expenditures,
however, the corresponding revenue generation did not begin during the period under
review. Hence, there has been a significant change in the aforesaid ratios. As the
manufacturing facilities at Hosur and Pune would begin in the current financial year, the
Company is confident that there will be a positive impact on the said ratios.
INTERNAL CONTROL SYSTEMS
The Company has adequate internal audit and control systems. Internal
auditors comprising of professional firms of Chartered Accountants have been entrusted the
job to conduct regular internal audits at all units and report the lapses, if any, to the
management. Both internal auditors and statutory auditors independently evaluate the
adequacy of internal control system. Based on the audit observations and suggestions,
follow up and remedial measures are being taken including review and increase in the scope
of coverage, wherever necessary. The Audit Committee of Directors in its periodical
meetings, review the adequacy of internal control systems and procedures and suggest areas
of improvements.
The Company has undertaken a detailed exercise to revisit its control
systems in technical and other non-financial areas to align them properly with Management
Information Systems (MIS) to make MIS more efficient and result oriented. Information
technology base created by the Company over the period is providing a very useful helping
hand in the process. Needless to mention that ensuring maintenance of proper accounting
records, safeguarding assets against loss and misappropriation, compliance of applicable
laws, rules and regulations and providing reasonable assurance against fraud and errors
will continue to remain the central point of the entire control system.
CAUTIONARY STATEMENT
Statements in this "Management Discussion and Analysis"
describing the Companys projections, expectations or predictions may be
"Forward looking statements" within the meaning of applicable Securities laws
and regulations. Actual results may differ materially from those expressed in the
statement. Important factors that could make a different to the Companys operation
include cyclic demand and pricing of raw materials, changes in Government regulations, tax
regimes, cost of power and interest cost and other factors such as litigation and labour
negotiations. The Company assumes no responsibility to publicly amend, modify or revise
any forward looking statements on the basis of any subsequent developments, information or
events or otherwise.
For and on behalf of the Board,
BRIGHT BROTHERS LIMITED
|
Suresh Bhojwani |
|
Chairman & Managing Director |
|
DIN: 00032966 |
Place: Mumbai |
|
Date : 24th May, 2023 |
|
+91-9892691696
