DIC India Management Discussions

Economic Environment

The Indian economy, in 2022, continued to emerge out of Covid-19 impacted decline, the year started with the Omicron wave, which affected the early months, followed by the Ukraine war, which halted the stabilisation of raw material prices, and in many cases, the prices reversed and took an upward trend to global headwinds.

Most of the lead indicators remain strong but stubborn in ation, a waning high-base effect, a slowing global economy (and world trade), and financial market uncertainties have dragged down growth in H2. The H2 GDP data also point to a plateauing of economic activity.

As the major central banks continue tightening monetary policy, the India-US interest-rate differential may shrink further, triggering fresh capital out flows or at the least, creating volatility. The interest rate increase in the US will impact financial and currency markets, putting renewed pressure on the rupee, which has clawed back some ground from record lows earlier this quarter. In addition, a depreciating rupee would exacerbate Indias in ation-interest rate dynamics, further eroding growth.

Global crude prices continue to move up. As a country, we managed the situation much better. However, a sizeable part of the raw material base is directly (through the raw material manufacturing route) or indirectly (using gas and crude as energy sources) associated with crude and its derivatives. Moreover, the association with crude and raw materials impacted by it has resulted in challenges in the supply chain and in ationary pressures.

With supply constraints, European suppliers continued to push for price increases throughout the year. In the latter half of the year, the surge in Covid-19 in China also had its supply-side challenge.

On the demand side, the FMCG sector, in a rare phenomenon, bucked the trend of consumption growth aligned to GDP and had a quarter-on-quarter decline in volume. For the packaging inks industry, the FMCG sector is the largest customer, and the volume pressures coupled with price increases, which the companies found dif cult to pass on to consumers, resulted in intensi ed industry competition and many cases, packaging inks downgrade to manage cost.

Indias neighbourhood in South Asia has seen a financial crisis in many countries. India, however, has remained resilient in its forex reserves. However, as Indian exports to neighbours have been challenging in the second half of the year due to depleting forex reserves in these countries, this has also impacted the packaging Inks industry, as most companies supply products from India.

As brand owners accelerated adoption, the industry has seen increased adoption of toluene-free inks for food packaging. In July, the single-use plastic ban also opened opportunities for alternate packaging technologies, seldom in demand earlier in India.

Chinas reopening from a zero covid policy to the rest of the world and, more importantly, to itself after three closed years promises to constitute among the most significant global event of 2023. However, an increase in demand within China and a recession in Europe will constrain the easy availability of raw materials.

The downside risks will weigh on growth and the markets in the coming months. Headline in ation remains downtrend, with consumer (CPI) and wholesale (WPI) in ation dropping.

Opportunities & Threats


DIC India has continued to invest in making its manufacturing footprint more efficient. For example, the new green eld project in Gujarat allows the Company to access the Western market more efficiently with a reduced cost to serve.

The Company continues to invest in technologies to make it more sustainable and aligned with DIC groups Vision 2030. It has reported improvement in all environmental parameters: CO emissions, waste and water management. Its biggest plant in Noida has shifted to Solar energy which will further help reduce CO emissions. The continued commitment to governance, investing in social capital with CSR initiatives to support communities around its new plants, and investment in learning and development for its people will ensure continued alignment to ESG commitment.

As a responsible corporate and a leading player in its industry, DIC developed new technologies for food packaging at its regional research centre. It plans to drive a market shift to safer and more effective technologies.


Packaging and Publication are vital drivers for the printing inks industry. The drop in FMCG volume growth, the rural distress and decline in consumption post covid and the tightening of the money supply to counter in ation will continue to ensure that the business environment for packaging inks remains challenging in the short term. The expansion of digital adoption will impact the historically strong publication Inks business.

DIC India continues to focus on expanding its product range, with DIC Corporations support and building a more premium and sustainable portfolio. However, the supply chain stress and volume pressures will continue to impact volume growth and capacity utilisation in the near term.

The Company continues to review asset productivity and will focus on the structural alignment of its supply to ensure it remains nimble and efficient.

Segment-wise performance and Industry Outlook

The packaging Ink business has seen a volume decline in 2022. Further, due to in ationary pressures, there is also a step down in the quality of inks demanded by customers as they try to balance legislation, performance and cost with a more t-for-purpose product range.

The adhesive segment has cooled down in pricing actions in the industry, but margin challenges still need to be addressed.

The Company has expanded its premium portfolio sales in exible packaging sales, with a combination of aggressive share gain with its new series introduced in 2022 and long-term contracts with select large converters.

The Company expanded exports of its rigid packaging Inks, which helped in the top line growth revival. However, the muted demand in the domestic segment and the emergence of local competition have put margin under pressures on this segment. The Company is taking suitable measures to address these challenges.

In the adhesives segment the Company has expanded its business in the sustainable non-lamination adhesives segment. It also has pilot-tested products in sustainable adhesives range for lamination. The new range will provide an opportunity to grow its business going ahead.

The publication business, where the Company is the market leader, continues to expand its market share, with a strong focus on asset productivity and upstream product portfolio. The segment, however, will continue to see muted or declining growth due to plateauing demand.

Risk & Concerns

The year 2022 has seen muted /declining demand from its core user base. The demand decline has been coupled with price increase fatigue with its customers after two years of relentless price increases and pressure on competition to drive capacity utilisation with aggressive pricing.

The capital expenditure over the last four years in the industry and demand expansion has been off tandem over the previous 2-3 years due to Covid, and this has resulted in surplus capacity in the industry, both at the ink manufacturers level and printing inks converters end. As a result, the surplus capacity will continue to put pricing pressures on the industry.

The continued pressure on the supply chain amidst global uncertainty and erratic price movement of a few critical raw materials has put pressure on balancing the size and value of inventory.

The tightening money supply by RBI to counter in ation and low consumption in the industry has put pressure on converters and has the potential to expand market credit to maintain volumes and reliability of capital rotation in new cases.

The Toluene ban, though announced by the government, continues to see weaker adoption. As global brands seek to align their packaging with international sustainable packaging guidelines, they expect similar customer service and prices for imported technologies as they insist on domestic supplies. As a result, the supply chain alignment to match customer expectations from new technology platforms can cause pressure on pro tability and the need for new capital expenditure (when the cost of capital remains on the higher side).

Business Strategy

DIC India celebrated its 75 years in 2022. It continues to remain committed to build a business portfolio that contributes to sustainable prosperity for society in line with Vision 2030 of DIC Corporation and strongly focuses on I-ESG (Innovation- Environmental, Social, and Governance) to transform its business.

2022 has seen many innovations from DIC India, which will help refresh its portfolio. Its digital- first approach has ensured the automation of management approval processes. For example, an integrated CRM to provide improved customer management and a solid digital marketing drive has helped it manage the costs prudently during in ationary times and become more responsive.

The digital initiatives have ensured a strengthened internal governance framework for the Company.

The continued investment in improving yield and lowering CO2 emissions, water consumption and enhanced waste management has ensured continued progress on sustainability commitment.

DIC maintained a strong focus on safety and safe operations in 2022, with no reportable injury case.

DIC India has maintained its cost optimisation program with a structured Kaizen program. These programs have ensured the productivity of its manufactured capital.

The Company continued to focus on prudent cash management and was cash positive in 2022 through improved working capital management, supported by process improvements which built ef ciency in the supply chain.

DIC aims to leverage LEAP, its CRM and digital marketing based on a solid technology backbone to reach out to a more extensive customer base and effectively communicate DICs proposition to customers

DIC India has aligned its CSR objective to focus on SDG (Sustainable Development Goals) 3,4: Good Health & Well Being and Education respectively. These are the areas identified as per the guidelines in section 135 of the Companies Act.

Internal Control System and their adequacy

The Companys Internal Control System details and their adequacy have been furnished in the Boards Report forming a part of this Annual Report.

Even though not mandated by Law, the Company has constituted Risk Management Committee, with oversight by an independent director. Its risk register continues to measure the Companys ability to mitigate potential risks through structured risk mitigation programs with a line of sight to the board of directors.

Financial performance impacted by operational performance

The Company continued to maintain its pro tability despite volume shrinkage with end users, global in ationary pressures and supply constraints, negative impact on imports due to financial crisis in the neighbourhood and early recession in many other countries, along with price increase fatigue in the Indian market.

The Company has rapidly expanded its market share in the premium segment in both exible and rigid packaging by introducing a series of innovations designed and developed for the Indian market. In addition, the Company has expanded its market share in these segments with long-term contracts with many large customers, providing a sustainable and balanced revenue and income stream.

Human Resource

The Details about Human Resources have been furnished in the Boards Report forming a part of this Annual Report.

Disclosure of Accounting Treatment

The financial statements are prepared and presented under Indian Accounting Standards (IndAS) notified under the Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time as notified under Section 133 of the Companies Act 2013, the relevant provision of the Companies Act 2013 ("the Act").