Chromatic India Ltd Management Discussions.

Chemicals dyes Industry

In view of the slow- down on the economic front over the world and its corresponding impact on chemical dyes Industry across the globe, the chemicals dyes business experienced very challenging conditions during the year. With high natural / synthetic prices and the slowing down in end-product demand, customers undertook production cuts at periodic intervals. This did impact the demand for chemicals dyes adversely. The resultant mismatch in supply and demand of certain key chemicals impacted their selling prices, resulting in pressure on margins. Cost increases on account of various inputs, aggravated the situation further. Despite this, our Company managed to retain its volumes at the previous year’s levels.

Industry Structure and Development

Chemical industry is capital as well as knowledge intensive industry. This industry plays a significant role in the Global economic and social development. It is also human resource intensive industry and hence generates employment. The diversification within the chemical industry is huge and covers more than thousands of commercial used in a wide variety of products and processes. They are major contributors to national and world economies, their sound management throughout their lifecycle is essential in order to avoid significant and increasingly complex risks to human health and ecosystems and substantial costs to national economies. There is immense potential for increasing consumption within the country as also for India to become a reliable supplier of such quality chemicals to the world.

Chemicals play a major role in improving the quality of life by enabling the manufacture of the goods and materials that need whilst mitigating adverse environmental impact. By developing new usages of chemicals, processes and sustainable routes to produce novel environmental friendly materials, it can achieve low carbon processes that can make high value products of the Company for humans and solve energy and sustainability challenges.

Our Company is a manufacturer and supplier of Chemical Dyes, Dye Intermediates and Basic Chemicals. It currently focuses on manufacturing basic chemicals to feed dye intermediates and dyes manufacturing through a successful strategy of backward integration. The product range caters mainly to textiles industries. The Company has its manufacturing facility at Khed, District Ratnagiri. The setting up of additional production facilities will enable your Company to capture a higher market share out of additional production volumes.

Total income generated for the financial year ended March 31, 2019 is Rs. 8.12 crores as against Rs. 43.35 crores for the financial year ended March 31, 2018. The Loss before tax is Rs. 37.05 lacs for the year ended 2018-19 compared to Rs. 10.96 lacs for the year ended 2017-18. The Net profit after tax is Rs. 40.96 lacs for the financial year 2018-19 as against Rs 26.53 lacs for the financial year 2017-18.

Business Outlook: Opportunities and threats

Over the last fifteen years, the Indian chemicals industry has graduated from manufacturing principle chemicals in a highly regulated market to being a mature industry in a liberalized economy. Until 1991, India had a closed economy, with the domestic chemical industry enjoying protection in the form of differential import duties on raw materials and finished chemical products. Chemical manufacturing was largely controlled by licensing regulations. This industry is among the fastest growing industries in India. The bulk of chemicals produced in India comprise either upstream products or intermediates, which go into a variety of manufacturing applications.

Indian chemical companies with well-built systems and structured operations are likely to be benefited. It has been contributing to India’s growing economy in a phenomenal way. Today, India has achieved considerable progress in production of basic organic and inorganic chemicals, dyestuffs and intermediates. Those companies chemicals and who are compliant of industrial quality standards can make their mark not just in India but even in the overseas markets as well.

The sales efforts are also well supported by a team of technical experts who play a pivotal role in providing pre / post sales technical services, training to customer’s employee, on-site back-up, recipe and process customization, product development etc.

Our Company’s R&D activities broadly comprise various processes for developing new products, standardizing analytical methods and identifying substitutes for key raw materials. Through the R&D centre, the Company continuously interacts with consumers to obtain feedback on its existing as well as new products to complement its new product development activities.

Threats, Risks and Concerns:

The Company is a manufacturer and suppliers of Dyes, Intermediates and Basic chemicals. However, the following major issues may hamper business operation as well as growth of the Company:

(a) Volatility in prices of raw material especially crude oil and transportation cost can adversely affect the business operations and can thin out the profitability of the Company.

(b) The Company is doing business with various countries, therefore, our business operations and growth is dependent upon the political, climatic, economic, regulatory and social environment of such countries.

(c) The Company is a exporter therefore; the volatility in foreign exchange rates may affect the business operation as well as growth of the Company.

The Company is continuously working towards achieving further improvements in the quality of its products as well as in technological and operational efficiencies of its manufacturing processes. It also strives to develop new products to improve its participation in the market and enlarge its product range. The company is also, through its strong research initiatives, engage in developing new products which would meet the emerging needs of its customers and the environmental challenges of the future. The pricing scenario of chemicals dyes, accordingly, is likely to undergo a positive change with the reduction in the global supply position.

Periodic assessment across the Company is undertaken to identify and thereafter prioritize significant risks. Owners are identified for all such risks and are assigned the responsibility to develop and deploy mitigation strategies. These are subjected to a review by the Board.

With the expectation of an improvement in the market conditions for the Chemical Industry during the year, the Company will endeavour to perform better than the last year.

Segment–wise or product-wise performance

The company has only one manufacturing plantand unifiedmarketing and administrative set-up due to which segment wise disclosures of Liabilities and Profitability cannot be determined.

The Company operates in one business segment, namely manufacturing & trading of S. O. Dyes & Chemicals and geographic segments i.e. the Domestic and the Overseas are summarised as follows. :

Particulars Domestic Overseas Total
Sales 99,08,707 548,91,436 648,00,143
(95,630,818) (334,620,304) (430,251,122)
Total Sales 99,08,707 548,91,436 648,00,143
(95,630,818) (334,620,304) (430,251,122)

Note: Figures in bracket represent previous year figures.

Financial and Operational Performance

The highlights of the Financial Operational Performance are given below :

(Rupees in Lakhs)
Sr. No Particulars 2018-19 2017-18
1. Sales/ Income from Operations 648,00,143 4302.51
2. Other Income 164,46,314 61.90
3. Sub – Total 812,46,457 4364.41
4. Total Expenditure (Before Interest) 828,17,827 2947.88
5. Profit Before Interest and Exceptional Items (15,71,370) (10.96)
6. Profit/Loss from Ordinary Activities Before Tax (37,05,060) (10.96)
7. Profit/Loss After Tax (40,95,875) (26.53)

Internal control systems and their Adequacy

Effective Internal Control Systems have been out in place by the Management to provide reasonable assurance for :

- Safeguarding Assets and their usage

- Maintenance of Proper Accounting Records and

- Adequacy and Reliability of the information used for carrying on Business Operations.

Key elements of the Internal Control Systems are as follows:

(i) Existence of well defined organisational structure and Authority

(ii) Existence of Corporate Policies for Financial Reporting and Accounting

(iii) Existence of Management Information System updated from time to time as and when required

(iv) Existence of Internal Audit System

(v) Review of Opportunities and Risk factors depending on the domestic scenario and to undertake measures as may be necessary.

The Company has appointed an Independent internal auditor to conduct internal audit and to ensure effective compliance and effectiveness of the Internal Control Systems in place.

The members of the Audit Committee are regularly reviewing the Internal Audit Reports for the audit carried out in all the significant areas of the operations. In addition to it, the Audit Committee approves all the audit plans and reports for significant issues raised by the Auditors. The Internal Audit Reports are circulated on a regular basis for the perusal of the Senior Management and appropriate action is taken as and when required.

Material developments in Human Resources / Industrial Relations front, including number of people employed

In view of the acute shortage of skilled and equipped human resources prevailing in the country, our focus during the year was to enhance the capabilities of our existing workforce. In order to ensure employee motivation and confidencelevel which would enable the Company to face the current challenges and seize future opportunities, various initiatives were taken for the same. Necessary steps are taken to strengthen the areas in which the employees of the Company need improvement. The Company complies with all the regulations pertaining to Safety. The Company continues to have an excellent track record in the area of Safety. The main objective of the company is to achieve zero accident/ incident and safe working environment. Regular programmes are therefore held on health and safety awareness, fire fighting and first aid, apart from other development programmes. Industrial relations remained cordial during the year.

The employee development is quite extensive as the Company believes in investing in the human capital at our own company first and foremost. At present there are in all 39 employees associated with the Company. The Company has invested its time and resources in training and developing its workforce to become indispensable resources for the Company later on.

The Company believes individuals in any organization is a vital resource and must be valued, nurtured and retained. Employees are the most valuable assets and truly the backbone of an organization. Every employee in his/her own way contributes towards the success or failure of an organization. Without employees in an organization, even the most powerful machinery with the latest technology would not function.

Details of significant changes in key financial ratios & Return on NetWorth

25% or more as compared to the financial year 2017-2018 in key Therearenosignificant financial ratios such as Debtors Turnover, InventoryTurnover,DebtEquityRatio,NetProfit . Margin, etc

Moreover there is no specific change Return on Net Worth as compared to the financial year 2017-2018

Cautionary statement

Statements in the Management Discussion & Analysis Report describing the Company’s objectives, projections, estimates, expectations or predictions are ‘forward looking statements’ within the meaning of applicable securities laws and regulations.

Actual results could differ from those expressed or availability and prices, cyclical demand and pricing in the Company’s principal markets, fluctuation in forex rates, changes in

Government regulations, tax regimes, economic developments within India and the countries in which business is conducted, and other incidental factors. The Readers are cautioned not to place undue reliance on the forward looking statements.

For and on behalf of the Board of Directors
Chromatic India Limited
Sd/-
Vinod Kumar Kaushik
Place: Mumbai Whole Time Director
Date: August 14, 2019 (DIN: 02586479)