DIC India Ltd Management Discussions

Economic Environment

The Indian economy showcased resilience in 2024, although a slowdown marked the latter half of the year.

Initial growth moderated due to persistent inflationary pressures and weaker global economic conditions. Inflation remained elevated for most of the year, driven by high commodity prices and geopolitical uncertainties. This impacted consumer purchasing power and industrial costs, resulting in a relatively subdued festival period.

The FMCG sector, a barometer of consumer demand, experienced significant challenges in the second half of 2024 as inflationary pressures and cautious consumer spending weighed on growth.

There was a strong focus on inventory rebalancing in latter half of the year. Focus on sustainability continued to reshape the sector, driving demand for innovative, eco-friendly solutions, and cost effective in packaging and manufacturing.

The Indian market presents a distinctive challenge by emphasizing the adoption of sustainable solutions while maintaining a strong focus on cost efficiency. Companies must calibrate their innovation pipelines to deliver value-driven, eco-friendly offerings that align with this unique Indian consumer mindset, balancing affordability with sustainability.

Financial markets, initially stable in the early part of the year, encountered headwinds as economic growth decelerated. The Rupee experienced fluctuations with heightened sensitivity against the benchmark dollar rate, reflecting global economic uncertainties and volatile capital flows. Nevertheless, the Indian economys robust fundamentals and supportive policy measures contributed to preserving overall stability. The packaging industry also saw consolidation , with an increased buyout/investment by private equity/ large converters.

Sustainability continued to gain traction across industries, including the packaging inks sector. Companies increasingly aligned with global environmental goals, focusing on reducing carbon emissions and innovating with sustainable products.

Industry Structure & Developments

The Indian printing ink industry is a significant contributor to the countrys manufacturing sector. The market size was estimated at INR 17 billion in 2022 and is expected to grow at a compound annual growth rate (CAGR) of 6.5% during the following five years, reaching INR 27 billion by 2027 (Source: Research and Markets).

Key characteristics of the industry include:

• Fragmented Market: The industry is characterized by a mix of large multinational players and a large number of small and medium-sized enterprises (SMEs).

• Growing Demand: Driven by economic growth, urbanization, and a rising consumer class, the demand for high-quality printing inks across various sectors is steadily increasing.

• Focus on Sustainability: Environmental concerns are driving a shift towards eco-friendly inks, such as water-based, solvent-free, and bio-based formulations.

• Technological Advancements: The adoption of advanced printing technologies, like digital and flexographic printing, is driving the need for specialized inks with unique properties.

Key Trends:

• Strong demand for flexible packaging inks, driven by the growth of the food and beverage industry and the e-commerce sector.

• Increasing focus on sustainability, with a strong emphasis on developing inks with low VOCs, reduced environmental impact, and improved recyclability.

• Advancements in UV-curable and water-based inks to meet the demands of high-speed printing and reduce environmental impact.

• Growing demand for inks suitable for printing on a variety of substrates, including plastics, paper, and metal.

Opportunities & Threats Opportunities

In a challenging economic environment, DIC India leveraged its strategic focus on innovation, sustainability, and operational efficiency:

• Sustainability Initiatives: Building on the foundation set in previous years, DIC India expanded its use of renewable energy. This transition significantly reduced carbon emissions and operational costs, underscoring the companys commitment to environmental stewardship.

• Cost Productivity: DIC India placed a strong emphasis on cost productivity, optimizing supply chain operations, and enhancing asset utilization. These measures ensured the company remained competitive while meeting customer expectations.

• Product Innovation: The regional research center spearheaded the development of advanced packaging solutions, including eco-friendly and toluene-free inks, catering to evolving market demands and regulatory requirements.

• Digital Transformation: Continued investments in digital tools and processes improved customer engagement, operational efficiency, and market responsiveness.

Threats

The economic challenges of 2024 underscored several risks for the packaging inks sector:

• FMCG Demand Slowdown: Reduced consumer spending, particularly in the second half of the year has impacted demand for packaging solutions.