Ecoboard Industries Ltd Management Discussions.

About the company

Ecoboard deals in laminated EcoBoard boards made from agri-residues mainly baggasse and anaerobic waste water treatment plants for distilleries.

The baggasse boards are 100% wood free and a versatile all purpose board meant to be a alternative to conventional wood based MDF, EcoBoard boards, plywood and other panel products.

With technical assistance from Sulzer Chemtech Ltd., Switzerland the company manufacturers waste water treatment plants which handle toxic residues spent wash and effluent of obnoxious nature from distilleries and transform bio gas, by product of the treatment process into fuel, i.e turning waste water to wealth.

Manufacturing process of baggasse boards :

A lot goes into the process of manufacturing baggasse boards. Bales of baggasse, received from sugar factories are elaborately processed, blended, resin with fibers, machine pressed, screened, layered into sheets, checked and graded to reconfirm quality. This is followed by a secondary process of decorative covering with textured melamine gas treated design using short cycle laminating process. The end product, manufactured from agro residue such as sugarcane baggasse, stalk of cotton, bajra, tur, corn etc. is cent-percent wood free, sturdy, durable, easy to maintain, abrasion resistant, eco friendly , moisture resistant, dimensionally stable, termite resistant, fire retardant, and also cost effective.

Manufacturing facilities:

The company had initially set up two manufacturing facilities situated at Velapur near Solapur district and at Jambhulwadi in Sangli district respectively keeping in mind the assured raw material supply. However due to unavailability of baggasse for reasons recorded elsewhere, the Plant at Jambhulwadi had been closed down since April 2010.

The Velapur plant is spread over 90 acres of land and has a production capacity of 36 lacs m2 per annum. Furthermore it has sophisticated and automated plant and machinery imported from Germany and UK. Your Company has taken up the work of setting a new production line at its Velapur unit for production of 8x4 size EcoBoard boards from agro-waste and of improving material preparation section of existing line of 13.5x6 size EcoBoard boards production line.

The case for Ecoboard

Philosophy and Environmental outlook

Ecoboards are made from any form of agricultural waste and converted into good quality  EcoBoard/fibre board for application to the doors, office furniture, home furniture, school furniture, wall paneling, commercial buildings, floors etc. as against the wood based boards use of which has caused enormous depletion of forest cover thus damaging the environment and contributing to adverse climate change.

Risks baggasse as a raw material

The main risk is of availability of raw material in required quantity and at economic price, baggase is being used captively by the sugar factories for steam generation and for generation of electricity. With a power shortage in Maharashtra State the pressure on sugar factories to generate electricity would be high and to that extent availability of baggasse and its price would be a constant concern.

Today agro-waste in Maharashtra is available for EcoBoard board industry at over Rs. 3300/T excluding landing cost plus GST which is industry irrelevant. It is ironical to note that the by product itself is now available at a higher price than sugar cane where once the disposal of baggasse itself was a problem. Plywood which is conventionally used is still encouraged and continued by the public at the cost of depleting forest cover and tree resources due to lack of Govt. clear direction despite ban on expansion of plywood industry by the Honble Supreme Court.

Industry synopsis

Over the period globally plywood industry is losing its base and alternative materials are getting used over wood products due to development of a conscious public mind to conserve forest wealth. Industry aims to reduce 50% plywood use in this decade while substituting particle board industry to reach 50% requirement.

Agro residue boards Industry if allowed to survive and sustain, shall help the country encourage to set up at least 1000 units in rural India wherein use of non conventional renewable agri-residues shall replaced wood/tree resources in next 20 years. In addition to serve the environmental cause, the industry supports and encourages rural employment and rural development and brings sizeable revenue to the poor farmers through sale of agro-residue which is otherwise burnt in the field causing enormous carbon emissions.

Risk aversion initiatives

In view of High Agro-waste price your Company has taken up the works of for improving material preparation section of EcoBoard boards of 13.5x6 size production line. Work on setting up of new production line has been completed.

Management is hope full that the decision of Modification of existing line of 13.5x6 boards will result in:-

a) Reduction in our cost of Production on account of reduction in power consumption by at least 25%.

b) Reduction in ratio of Raw material consumption and inputs. c) Reduction in manpower on account of automation.

Efforts are made through the all India agro board association which has asked the government to allot / ensure adequate supply of baggasse for EcoBoard board industries.

Optimal capacity utilization, logistics, connectivity of distribution system by setting up nodal service centers at strategic locations across India and a swift delivery module by maintaining stock of finished goods at centers these are the key elements in our road map for achieving growth targets. The GST implication in near future will further help the Companies growth prospects by easy logistics points in other states.

Trends technological challenges, new developments

The developed countries like Japan USA, had imposed formaldehyde free norms/directions for living environments due to the importance of lowering CO2 emissions and reducing toxicity. Other countries are following with the support of local/national governments.

The production process will have to be in conformity with the ISO 2001 certification norms in future. New techniques are being invented to produce boards which are both fire and water resistance.

The boards are being made are fully (100%) recyclable or reusable to an equal product in order to fulfill the Cradle to Cradle (C2C) concept.

With the increasing globalization there is a need to standardize the product at par with the international standards. This would enhance the product life, meet the users need and benefit economically for the user.

Process improvement in par with ISO standards would bring environmental consciousness among the users groups and aid in Internationalization of R & D to in the industries.

Company has already started the process to increase in the revenue by overcoming raw material problems and by adopting new technology which helps to minimize production cost. Your Company is in process of Finalizing the Prospective Buyer to sale out Jambhulwadi plant and sale proceeds for the same shall be utilized to modernize facilities at Velapur plant and to reduce working capital loans.

Internal Control Systems

Adequate internal control systems are in place in all areas of operation to ensure safeguarding of assets against loss from unauthorized use or disposition and the same are being continually reviewed and strengthened wherever necessary. Such systems have also been developed to ensure adherence to polices and systems and mitigation of the operational risks covering each area under review. The organization is well structured and the policy guidelines are well documented with pre defined authorities. The company has also implemented suitable controls to ensure that all resources are utilized optimally, financial transactions are reported with the accuracy and there is a strict compliance with all applicable laws and regulations.

Corporate Social Responsibility

As a matter of fact there is no formulated written CSR Policy in place. The Board invariably has 1) Planted trees as part of Govt of Maharastras drive 2) Schools furniture for Government schools 3) Medical and Food camps for the annual event Wari attended by lakhs of pilgrims.

The Company developed a strategy to provide a roadmap for its CSR activities over the period and after passing of the Companies Act, 2013 in particular, which has become an integral part of our business strategy over a decade or so.

As a good corporate citizen, we recognize and perform the obligations towards our employees, investors, customers, suppliers, competitors and the community as a whole. We believe our reputation, together with the trust and confidence of those with whom we deal, to be one of our most valuable assets. We strongly believe that integrity in dealings with stakeholders is a prerequisite for a successful and sustained business relationship.

Environment

As the products of the Company are eco-friendly and fired by a passion of protecting the environment, the company believes that, by nature, our operations have a minimal impact on the environment. In the course of our operations we seek to identify opportunities to reduce/ keep it at minimum consumption of energy, water and other natural resources. We also strive to re-use and recycle where possible and dispose of non-recyclable items responsibly, thereby minimizing impact on the environment.

Human Resources / Industrial Relations

The Company has a fully functional human resource department taking care of human force in the Company. Company has taken effort for human resource development. Company has arranged various training programs during the year. Company has a proper team for recruitment of employees and keeps compensation structure in line with the market developments.

FINANCIAL PERFORMANCE

SHARE CAPITAL AND RESERVES AND SURPULS

During the year Authorized capital of the Company stands at Rs. 2500 Lacs and Reserves & Surplus of Rs. -3,339.14/- Lakhs it includes Depreciation on fixed assets whose residual useful life is nil is adjusted against retained earnings as per provisions of Schedule II to the companies Act, 2013. And paid up capital was 1783.20/- Lakhs.

FIXED ASSETS

During the year 2018-2019 Company has purchased Furnitures of Rs. .70/- Lakhs, whereas the value of Fixed Assets decreased from Rs.3653.80/- Lakhs to Rs 3,527.33/- Lakhs.

CURRENT ASSETS LOANS AND ADVANCES AND CURRENT LIABLITIES AND PROVISIONS

Loans and advances as at 31st March, 2019 was Rs. 105.4 Lakhs significant item of loans and advances includes advance towards Capital Expenditure. Company has Rs. 1,288.85 Lakhs of Inventories of Raw Material, Stores and packing Material, Finished goods etc.

Other Current Liabilities as at 31.03.2019 were Rs. 1320.99 Lakhs.

OPERATIONAL PERFORMANCE

Particulars Current Year Previous Year
2018-19 2017-18
Income:
2,038.20 883.21
Revenue from operations 38.08 18.53
Other Income
2,076.28 901.74
Total Income
Expenditure:
Cost of materials consumed 1,544.11 614.56
Changes in inventories of finished goods, work-in-progress 212.14 161.61
Employee benefits expense 159.35 198.53
Finance costs 498.14 636.27
Depreciation 106.95 122.68
Other expenses 474.88 555.41
2,995.57 2,289.06
Profit / (Loss) before exceptional items and tax (919.29) (1387.32)
Add/(Less): Exceptional items 199.05 0.00
Profit / (Loss) before tax (720.24) (1387.32)
Less: Tax expenses 0.00 0.00
Profit / (Loss) for the period (720.24) (1,387.32)

Cautionary Statements

Statements made in the Management discussion and analysis report describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed in the statement.

Important factors that could influence the Companys operations may include:

1) Supply and demand conditions affecting selling prices, input availability.

2) Companys ability to successfully implement Companys strategy, growth and expansion plans and technological initiatives.

3) Changes in government policies, changes in political conditions,

4) Changes in laws and regulations including tax laws.

5) General economic developments and business conditions in India and other countries.

Other factors such as litigation and industrial relations.