caprolactam chemicals ltd Management discussions

1) Industry structure & developments.

The earlier trend of smaller companies being marginalized has continued in the year under review. Our products being the intermediate for perfume industries, antioxidant and also in food colours and chemical intermediates.

2) Opportunities and threats.

Though the overall scenario for the smaller companies is extremely competitive, there are some niche areas where there are some opportunities for growth. The management is exploring these areas to consider entering these areas and develop expertise in such areas.

3) Outlook

The management is doing its best to form relations with other companies and take the Company forward. However, the outlook of the management is cautious in view of the competitive nature of the market.

4) Risk and concerns

Given below are some of the significant risks that could have an impact on the Company and the mitigation measures put in place by the Company.

. Quality Risk

The risk of quality of work not adhering to specifications as per contract, leading to short certifications of our invoice, payment delays and additional costs for rectification lowering the profitability and reputation loss.

Mitigation Measures

1. Constantly evaluating quality standards of our Vendor/Service Providers and having a pre- qualified panel for placing orders.

2. Monitoring of the quality of incoming materials and work execution through our in-house team.

. Risk of Timely Completion Mitigation Measures

1. Timely mobilization of site team and other resources, as per contract requirements.

2. Ensuring availability of material / labour / equipment as per execution plan through effective planning and tracking.

3. Ensuring availability of drawings/ clearances from client/ various authorities and any gap is communicated in advance and delays from the clients end are documented.

Cost Escalation Risk

Increase in costs beyond budget leading to margins getting affected.

Mitigation Measures

1. Project Cost estimates to be based on specific site conditions, seasonal cost variation and availability factors and anticipated cost push over the tenure of the project.

2. Escalation clauses based on base prices for key input materials to be included in the contracts.

3. Negotiating better rates from suppliers/ service providers, based on volumes.

4. Ensuring timely completion of the project.

. Compliance Risk

Contractual and Legal - noncompliance of specific contractual obligations and general obligations in practice and statutory noncompliance will result in penalty and loss of reputation.

Mitigation Measures

1. Monitoring industry specific statutory requirements including RERA regulations as applicable, and training of employees to ensure compliance.

2. Checklist to capture applicable contractual obligations from quotation stage and ensure onerous clauses are not accepted.

3. Maintaining documentation to record non-compliances on contractual obligations due to client issues.

. Human Resources Risk

Attracting and retaining right talent, impacting the performance and growth of the business

Mitigation Measures

1. Identifying good performers and ensuring opportunities for career growth through challenging roles and performance related compensation.

2. Attracting talent from industry with up-to-date technical skills through market related compensation.

. Liquidity Risk

Not generating adequate cash as per requirements, resulting in delayed payments affecting execution and higher borrowings, resulting in higher interest cost.

Mitigation Measures

1. Ensuring timely submission of bills, certification of the work done by the client to meet cash flow.

2. Monitoring collections as per contractual terms and put in escalation mechanism for close follow-up of overdue when delays occur.

3. Ensuring better credit terms from suppliers. The risk management matrix consisting of probable risks, their impact and the mitigation measures are reviewed periodically at the senior management level as well as by the Risk Management Committee

5) Internal control systems and adequacy

The Company is endeavouring to place all the controlling systems to have proper control and accountability on the operations at each level.

6) Discussion on financial performance with respect to operational performance. Income from operations:

During the year, the Company achieved revenue from Operations of Rs. 985.668 lakhs as against Rs. 247.440 lakhs in the previous year. EBIDTA was positive at Rs. 469.122 Lakhs as against Rs. (16.286) Lakhs in the previous year. Profit before tax was at Rs. 297.048 Lakhs as against losses of Rs. (147.401) Lakhs in the previous year.

Summary of Financial Results:

The revenue and breakup of expenditure for the year are as follows: Net Profit

	2022-23 (in Lacs)	2021-22 (in Lacs)
Total revenue	985.668	247.440
Profit before interest and tax (PBIT)	[353.855	(119.757)
Profit before tax (PBT)	297.048	(147.401)
PBT as % of revenue	30.13%	59.57%

Net Worth

The net worth of the Company as at March 31, 2023 was Rs. 534.166 Lacs as compared to Rs. 279.801 Lacs as at March 31, 2022.

Key Financial Ratios

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2018, the Company is required to give details of significant changes (change of 25% or more as compared to the immediately previous financial year) in key sector specific financial ratios The Company has identified the following ratios as Key Financial ratios: Ratios:

	2022-23	2021-22
Debtors turnover (Avg days)	27.78	86
Inventory turnover (times)	93.85	18.02
Current ratio (times)	0.34	0.21
Debt Equity ratio	1.06	2.68
Operating profit margin % -	0.26	(0.60)

Human Resources/Industrial relation

The Company believes and recognizes that its employees are a vital resource in its growth and to give competitive edge in the present business scenario. The Board of Directors wishes to place on record its appreciation for the hard work and dedication of its employees at all levels.