Caprihans India Ltd Management Discussions.

INDUSTRY STRUCTURE AND DEVELOPMENTS

Caprihans is one of the largest manufacturers of PVC Films, consisting of both Flexible and Rigid. The Company is one of the leading players in pharma/non pharma packaging industry in India, producing high quality products. The Company operates from its two plants located at Thane and Nasik, Maharashtra. The Company also has sales offices across India. The Company is engaged in the processing of plastic polymers and manufactures PVC films by calendering process. It also produces PVDC coated Rigid PVC film and certain other plastic products through extrusion processes. Rigid PVC film is largely used for packaging in the Pharmaceutical, Food and FMCG industries. Flexible PVC film and plastic extruded products are used for a variety of industrial and consumer applications. Overall growth rate of the market size is estimated to be around 10% annually.

The image of the Company, built through decades of quality products and efficient customer service is the major strength of the Company. The Company has a significant share of the Rigid PVC film market and is also the quality leader in the Flexible PVC film market.

OPPORTUNITIES, THREATS AND OUTLOOK

The Company foresees opportunities of growth in the coming years. With the growing trend of mass consumerism and better living standards, demand for Companys products are expected to grow. Opportunities can also be explored to convert certain non-PVC packaging applications into PVC-based films. Though the Company is a major player for over decades, it faces competition in domestic market, as similar products being made available by many local players belonging mostly to the unorganised sector. However, Company always remained as a preferred vendor in the respective segments being a quality supplier. The industry is seeing lot of capacity additions though there is already excess capacity available. Due to enhanced competition and price sensitiveness, many customers have downgraded their specifications norms, leading to some new-comers supplying lower priced products. Consistent quality, superior customer service, timely delivery and appropriate pricing we believe, will help us to mitigate some portion of the potential risks.

SEGMENT PERFORMANCE

Companys business is covered under single business segment.

RISKS AND CONCERNS

PVC resin, used as key raw material has many industrial competing applications. Resin is a by-product of Petroleum. Given the volatility in Global crude oil price and demand for polymers for competing applications, the pressure on the input costs can be expected to fluctuate. Demand for PVC resin in the country has been increasingevery year. Domestic supply is not adequate to meet the rising demand. Henceimports are made to fulfil resin requirements as and when required, which is subjected to fluctuating prices, forex risks, logistics issues, import-duty and anti dumping regulations.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Company has proper and adequate internal control systems to ensure that its assets are safeguarded and that transactions are properly authorised, reported and recorded. The Company has also a system of internal audit and management reviews to ensure compliance with the prescribed procedures and authority levels.

FINANCIAL PERFORMANCE

The Companys turnover for the year amounted to Rs. 269 crores as compared to Rs. 255 crores in the previous year. The Company earned a profit before tax of Rs. 4.6 crores as compared to Rs. 5. due to raw material price increase resulted in lower profits. However, on the positive front, there has been some softening of raw material prices during the later part of the financial year. The Company continues to face pressure on margins due to volatility in raw material prices, enhanced market competition, surplus capacity in the industry and entry level pricing startegy by new entrants etc.

Companys Financial position for ten (10) years is appended seperately in the Annual Report.

HUMAN RESOURCES

The Company appreciates continued efforts of its dedicated team of employees. Industrial relations by and large remained cordial during the year. The number of employees on the roll as on 31st March, 2019 was 369 across all locations. The Company accords very high priority to safety in all aspects of its operations. The employees are trained in various aspects of safety.

KEY CHANGE IN FINANCIAL RATIOS AND RETURN ON NET WORTH

As the change in key financial ratios in the current financial year is less than 25% as compared to previous financial year, the same is not commented upon.

Due to reduction in profits, the Return on Net Worth in the current financial year is marginally lower at 2.8% as compared to 3.3% in the previous financial year.

CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis describing Companys objectives, estimates and expectations may be forward looking statement within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied. Important developments that could affect Companys operations include significant change in political and economic environment in India or key markets abroad, tax laws, environmental laws, litigations, labour relations, exchange rate fluctuation, interest and other costs.