Duroply Industries Ltd Management Discussions.

OVERVIEW

Duroply Industries Limited (DIL) is one of the oldest plywood manufacturers in India. The Company owns a plywood and allied products unit at Rajkot, Gujarat. The Company is utilizing the best available raw materials for its products. Companys DURO range of products are increasingly gaining acceptance in the market and the company continues with its efforts of further growing the market. DURO brand in India is well recognized for its deep-dive innovation, unmatched craftsmanship & unparalleled customer service.

Indian economic review

The Indian government announced a complete lockdown in public movement and economic activity from the fourth week of March 2020. The lockdown staggered an already slowing economy as 1.38 billion Indians stayed indoors - one of the most stringent lockdowns anywhere.

The outbreak of the novel coronavirus impacted the Indian economy during the first quarter of the financial year under review. The Indian economy de-grew 23.9 per cent in the first quarter of 2020-21, the sharpest de-growth experienced by the country since the index was prepared.

The Indian and state governments selectively lifted controls on movement, public gatherings and events from June 2020 onwards, each stage of lockdown relaxation in linked to corresponding economic recovery. The result is that Indias relief consumption, following the lifting of social distancing controls, translated into a full-blown economic recovery.

Indias GDP contracted initially and then recovered in 2020-21. This recovery one of the most decisive among major economies validated Indias long-term consumption potential. The resurgence of COVID-19 cases in the Country could be the only downside risk to Indias GDP growth.

However, the only dampener is the surge in Covid-19 in the first quarter of the current financial year that could affect public consumption of products and services.

Plywood Sector Overview

Over the years, the demand for plywood has increased significantly due to its structural strength and flexibility, resistance to chemicals and fire as well as insulation against sound and excessive heat. The result is that it has emerged the preferred choice for doors, stairs, external cladding, flooring, framing, interior rails, balustrades, internal panels and timber joinery products.

SEGMENTWISE PERFORMANCE

Plywood

During the year 2020-21, segment revenue decreased from Rs184.98 Crores to Rs 162.41 Crores i.e. a decrease of 12.20%.

During the year under review, the outbreak of the deadly Covid-19 pandemic, followed by the lockdown in the country has adversely affected the business operations of the Company.

Tea

Segment revenue during the year was Rs 18.91 Crores as against Rs 21.56 Crores in the preceding financial year representing a decrease of 12.29%.

During the year under review, the Company has sold Companys Tea Processing Business as a going concern on slump sale basis to Teloijan Techno Agro Limited by way of Business Transfer Agreement on September 24, 2020.

INTERNAL FINANCIAL CONTROL SYSTEM AND THEIR ADEQUACY

The Companys internal audit system has been continuously monitored and updated to ensure that assets are safeguarded, established regulations are complied with and pending issues are addressed promptly. The audit committee reviews reports presented by the internal auditors on a routine basis. The committee makes note of the audit observations and takes corrective actions wherever necessary. It maintains constant dialogue with statutory and internal auditors to ensure that internal control systems are operating effectively. Based on its evaluation (as provided under Section177 of the Companies Act, 2013 and Regulation 18 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015), the Audit Committee has concluded that as of March 31, 2021, the Internal Financial Controls were adequate and operating effectively.

M/s. S K Agrawal and Co Chartered Accountants LLP, the Statutory Auditors of the Company audited the financial statements included in this Annual Report and issued a report on the internal controls over financial reporting (as defined in Section 143 of the Companies Act, 2013).

OUTLOOK

The Company expects financial year 2021-22 to be a challenging year in view of the second wave of Covid-19 which has caused a slowdown in some sectors during the first quarter of the financial year. The Company aims to enhance the capacity utilization of the existing installed capacity across various product lines.

With the Companys continuous endeavour to introduce new products and improve efficiencies and performance, your Directors view the prospects for the financial year 2021-22 with cautious optimism.

OPPORTUNITIES & THREATS

Opportunities:

Some of the key opportunities based on the recent scenario of the economy are as follows:

One of the fastest-growing economies in the world

Consistent cost optimization initiatives

Decades-long experience

Deep distribution network

Your company is well positioned to take advantage of the opportunities in the market in the upcoming years.

Threats

Non availability of raw materials

Price volatilities of raw materials

Competition from the unorganised sector

Cheaper substitutes

DETAILS OF SIGNIFICANT CHANGES IN THE KEY FINANCIAL RATIOS

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended, details of significant changes (change of 25% or more as compared to the immediately previous financial year) in key Financial Ratios and any changes in Return on Net worth of the Company including explanations therefor are given below:

Ratio March-21 March-20 % Changes Explanation
Debtors Turnover Ratio (days) 36.50 37.07 -2 -
Inventory Turnover Ratio (days) 57.00 67.11 -15 -
Interest Coverage Ratio (times) 0.52 0.69 -25 Increased interest cost on account of increase in borrowings
Current Ratio(times) 0.83 0.84 -1 -
Debt Equity Ratio(times) 1.97 1.95 1 -
Operating Profit Margin (%) 4.67 4.00 17 -
Net Profit Margin (%) -1.35 -1.97 -31
}Substantial improvement in margins is owing to gain on sale
Return on Net Worth (%) -3.80 -6.12 -38 of tea processing business

BUSINESS RISK MANAGEMENT

Risks are integral part for a business to grow. However, an effective risk management framework helps the organisation in mitigating the risks effectively and ensures business sustainability. Effective risk management comprises reducing the element of surprise, improve services, ensure proactive change management, source resources efficiently, optimize utilisation levels, prevent leakages and reduce wastages. Duroply has an efficient risk management process in place and the same is periodically reviewed by the Board for measuring their effectiveness. The process evaluates each risk associated with various business transactions and undertakes effective mitigation strategies to minimise impact.

FINANCIAL PERFORMANCE

During the year under review, the gross turnover of the Company has decreased from Rs 206.54 Crores to Rs 181.32 Crores i.e, a decrease of 12.21%. The Company has incurred a net loss of Rs 2.66 Crores as against a net loss of Rs 4.46 Crores in the preceding financial year. In view of losses incurred by the Company during the year, the Board of Directors did not recommend any dividend.

HUMAN RESOURCES MANAGEMENT

The Company believes that the quality of employees is the key to its success. In view of this, it is committed to equip them with skills, enabling them to evolve with technological advancements.

During the year, the Company organised training programmes in technical skills, behavioral skills, business excellence, general management, advanced management, leadership skills, customer orientation, safety, values and code of conduct. Considering the health and safety of employees and advisories, orders and directions issued by State and Central Governments to restrict the novel corona virus, the Company implemented a work from home policy to ensure employee safety.

The HR department of the Company was continuously in touch with employees to guide and solve problems. It created awareness regarding COVID-19 and educated employees about precautions. The Company conducted interviews through telephone and video calls in reference to the need for social distancing. The Company prepared a systematic operating plan to address COVID-19 after the lockdown is lifted. The Companys permanent employee strength stood at 525 as on March 31, 2021.

CAUTIONARY STATEMENT

Certain statements in this Management Discussion and Analysis, describing the Companys objectives, outlook and expectations, may constitute “forward-looking statements” within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied. Several factors make a significant difference to the Companys operations, including climatic conditions, economic scenario affecting demand and supply, Government regulations, taxation, natural calamity and such other factors over which the Company does not have any direct control.

Registered Office : For and on behalf of the Board
9, Parsee Church Street
Kolkata 700 001
SUDEEP CHITLANGIA SUJIT CHAKRAVORTI
Managing Director Director
Date : June 24, 2021 (DIN : 00093908) (DIN : 00066344)