daikaffil chemicals india ltd share price Management discussions

Annexure B

INDUSTRY STRUCTURE & DEVELOPMENT

The Chemical Industry is essential for the economic development of any country, providing products and enabling technical solutions in virtually all sectors of the economy. The Chemical Industry in India is a key constituent of Indian economic contributory factor in the GDP. In terms of volume, Chemical industry in India is the third largest producer in Asia and sixth largest in the world.

Considering this fact, the Government is taking various initiatives for the growth and development of the sector. 100 per cent FDI is permissible in the Indian chemicals sector while manufacturing of most chemical products is de-licensed. It is expected that new initiatives are likely to attract large investments, both domestic and foreign, with requisite improvements in infrastructure and competition. The government has also been encouraging Research and Development (R&D) in the sector. Moreover, the government is continuously reducing the list of reserved chemical items for production in the small-scale sector, thereby facilitating greater investment in technology up-gradation and modernisation.

FINANCIAL AND OPERATIONAL PERFORMANCE

Members are hereby informed that due to manufacturing orders drying up, the costs had become higher than the revenue, thereby incurring losses. To restrict any further erosion of capital due to the losses the management undertook certain cost saving measures. The management decided to undertake a planned shutdown in FY 2021-22 of the factory for sometime so that the fixed cost of plant is saved. Certain workers/labourer were retrenched and base workers were retained for the plant upkeep so that as and when the plant restarts, the condition of the plant should be good for manufacturing.

The Members are further informed that, the Company is into the business of Chemical manufacturing since 1992 and trading of the same, it has necessary expertise and appropriate network of vendors in India and abroad and hence, in the interim, the Trading activities are being carried out of Dyes and Dyes intermediates including optical brightener and related group products so that the margins from that can help in sustaining the other costs. As and when sales orders start flowing, the plant will be operational again and the capacity will be restored gradually.

The Members are further informed that, the Company has issued the retrenchment letters ONLY to workmen at the plant and all benefits due to them including retrenchment compensation under applicable labour laws have already been paid and the same is duly reflected in the books of the Company and in Managements view no additional provision is required in the books towards retrenchment of workmen at the plant.

The following table exhibits, in summary, the financial performance of the Company for the year in relation to previous year.

	F.Y. 2022-23	F.Y. 2021-22
Sales Growth [ % ]	(-)92.19%	(-)27.63%
Domestic Sales Growth [%]	(-)64.07%	(-)48.42%
Export Sales Growth [%]	(-)100.00%	(-)18.50%

PRODUCT WISE PERFORMANCE AND ITS OUTLOOK

In accordance with the Accounting Standard 17 notified by Companies (Accounting Standards) Rules, 2006 and based on characteristics of products, production processes and the class of customers, the Company is in one range of product i.e. Organic Dyes and Intermediaries:

Optical brighteners

Optical brighteners, or fluorescent whitening agents, are used to make plastics, fibers, coatings, inks, and detergents appear whiter and brighter. These products function by absorbing invisible ultraviolet light and re-emitting it as visible light in the blue range of the spectrum. These products are particularly useful to mask the yellowish cast sometimes observed in plastics and fibers after high temperature processing operations. They are also used in substrates containing pigments or dyes to make colours appear more brilliant. Optical brighteners are also used in the production of uncoated fine paper, particularly in uncoated fine paper grades containing high-yield pulp (HYP). Increasing level of whiteness and the HYP substitution in fine papers have increased the importance of optical brighteners globally in the recent years.

Naphthol

Naphthol is an organic compound used to manufacture organic Pigments/Master batch. Pigments are used for colouring paint, ink, plastic, fabric, cosmetics, foods and other materials. Most pigments used in manufacturing and the visual arts are dry colorants, usually ground into a fine powder. The Company is very optimistic about Naphthol grounders because of its Japanese quality. The entire range of Naphthol grounders are being consumed by MNCs. and its printing Ink manufacturers in Japan. The demand of the product has been rising rapidly in Europe & Japan. Looking at the product portfolio and demand in international market the company foresee a wide scope of the business in near future and may increase capacity subject to approval from Maharashtra Pollution Control Board.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has adequate system of internal controls commensurate with its size and nature of its business and ensure proper safeguarding of assets, maintaining proper accounting records and providing reliable financial statements. These systems enable integrity of financial reporting and adherence to guidelines defined for the Company. Internal controls are regularly reviewed by both internal and external agencies for its efficiency and effectiveness. Corporate policies, management information and reporting system for key operational areas form part of overall control mechanism.

The Internal Audit plan and management actions are presented to the Audit Committee on quarterly basis. The Audit committee reviews adequacy of Internal Control System and the Internal Audit Reports and compliance thereof. The members of audit committee held discussions with the Internal and Statutory Auditors during the meetings of the Committee and all the quarterly and yearly financial statements of the Company were reviewed and recommended by Audit Committee for consideration and approval of the Board of directors.

RISKS AND CONCERNS

The Company foreign currency revenue earnings are significant and any appreciation or depreciation in the rupee can have a significant impact on revenue and profitability. We evaluate exchange rate exposure arising from these transactions and enter into foreign exchange instruments to mitigate risks arising out of movements in the rupee (INR). The Company have an appropriate internal control for monitoring the Forwards and future contracts.

Your Company has also shown its concern towards the environment safety. It is becoming more and more conscious about environmental norms, discharge of effluents and better safety for employees, quality standards and has also shown considerable improvement in the recent past. OPPORTUNITIES AND THREATS

Your Company range of products are under Japanese technology and therefore we stand a better chance of facing competition from China and Indian manufacturers even though the prices are lower compared to ours. The Consumers are ready to pay the extra price for superior quality. The Company may consider expansion once it turns profitable.

HUMAN RESOURCES DEVEPLOPMENT AND INDUSTRIAL RELATION

Your company emphasizes on the safety of people working in its premises, Structures safety meeting were held and safety programmes were organised for them throughout the year.

The total numbers of person employed in your company as on March 31,2023 were 16

	For and On Behalf of the Board of Director
	DAIKAFFIL CHEMICALS INDIA LIMITED
	Sd/-	Sd/-
	ADITYA PATEL	AMIT PATEL
Date: May 22, 2023	Managing Director	Director
	(DIN: 00005276)	(DIN: 00005232)