Elgi Rubber Company Ltd Management Discussions

Industry Structure and Developments

The global economic landscape in 2023-24 was characterized by recovery from the pandemics aftermath, geopolitical tensions, and fluctuating raw material prices. While inflationary pressures impacted consumer spending and industrial activities, the rubber industry saw a mixed impact with varied demand across different sectors. The Company strategically navigated these challenges through prudent financial management and operational efficiencies made performance well in the USA and Brazil.

The Company continued to strengthen its position in the rubber industry during the financial year 2023-24. Despite global economic challenges, the company demonstrated resilience and adaptability, ensuring steady growth and maintaining its commitment to innovation, sustainability, and customer satisfaction.

The rubber industry in 2023-24 experienced a dynamic environment marked by technological advancements, sustainability initiatives, and fluctuating raw material prices. The automotive sectors transition towards electric vehicles (EVs) and hybrid models significantly influenced the demand for specialized rubber components. Additionally, increased infrastructure spending worldwide boosted the industrial rubber segment. The Company positioned itself effectively within this evolving landscape, leveraging its extensive product portfolio and commitment to innovation.

Opportunities and Threats

The demand trajectory is improving due to the growth in the industrial and construction activities along with various government initiatives. Infrastructure, real estate, transportation, and logistics, as well as rising radialization, formalization of value chains, and significant demand for new tyre replacement, are anticipated to promote this business. Increasing Radialization, Higher Capacity Trucks & Regulatory action against overloading have contributed to faster movement of goods. Additionally, Focus by Government of India and state governments on infrastructure outlay has led to an improved road network in terms of Quality and Quantity. These are positive developments for the logistics, tyre & retreading industry.

Increase in commodity prices of raw materials stressing the profit margins for retreading material manufacturers, new tyre companies & retreaders. Additionally, on a conservative margin a radial tyre gives at least 50% more mileage than a bias tyre and thus contracting the total demand in tyre replacement market proportionally

Segment-wise or Product-wise Performance

The company has only one business segment, that is, manufacture of Reclaimed rubber and allied activities, hence segment wise reporting is not required.

Outlook

Looking ahead, the company is optimistic about its growth prospects for 2024-25. The company plans to capitalize on the rising demand for reclaimed rubber products, expand its footprint in emerging markets, and continue its focus on sustainable product development. Investment in R&D and digital transformation will be pivotal in driving innovation and operational efficiency.

Risks and Concerns

The Companys comprehensive risk management framework enabled the company to mitigate potential threats effectively. Key risks identified include fluctuations in raw material prices, supply chain disruptions, and regulatory changes. The company implemented strategic sourcing and supplier diversification to ensure stability and continuity.

Internal Control Systems and Their Adequacy

The Company has implemented comprehensive internal control systems to ensure operational efficiency, accuracy in financial reporting, and compliance with regulatory requirements. These systems are regularly reviewed and updated to address emerging risks and ensure adequacy. The internal audit team conducts periodic assessments to identify areas for improvement and enhance control mechanisms.

Discussion on Financial Performance with Respect to Operational Performance

The financial performance of the company during the financial year 2023-24 has been discussed in the Directors Report and the audited financial statements, which has been prepared in accordance with the requirement of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, 2015, discloses a true and fair view of the performance of the company during the said period.

Material Developments in Human Resources / Industrial Relations Front, Including Number of People Employed

The Company places significant emphasis on human capital development, recognizing it as a critical driver of growth. During the year, the company implemented several training and development programs to enhance employee skills and competencies. As of March 31, 2024, The Company employed approximately 448 individuals. Industrial relations remained harmonious, with ongoing dialogue and engagement between management and the workforce to address concerns and foster a collaborative environment.

Key Financial Ratios

Sl. No. Description	31.03.2024	31.03.2023	% of change
1 Debtors Turnover	4.11	4.18	(1.67%)
2 Inventory Turnover	4.53	4.86	(6.79%)
3 Current ratio	1.13	1.18	(4.24%)
4 Debt Equity ratio	0.53	0.48	10.42%
5 Interest coverage ratio	2.28	2.08	9.62%
6 Operating profit margin *	21.63%	19.34%	11.84%
7 Net profit margin *	8.46%	6.64%	27.41%
8 Return on Net worth *	5.88%	5.12%	14.84%

* Improvement of profitability ratio was primarily due to increase in profit driven by better export realization.

Cautionary Statement

Management Discussion and Analysis forming part of the Directors Report is prepared in compliance with Schedule V(B) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and such statements may be "forward looking" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could influence the companys business operations includes economic conditions affecting demand/supply and price conditions prevailing in the domestic and overseas markets in which the company operates, changes in the Government regulations, policies, fiscal laws and other statutes and other incidental factors.

	For and on behalf of the Board
	For Elgi Rubber Company Limited
	Sudarsan Varadaraj
Place : Coimbatore	Chairman & Managing Director
Date : May 30, 2024	DIN: 00133533