emmbi industries ltd share price Management discussions


Forward Looking Statements

The report contains forward-looking statements, identified by words like plans, expects, will, anticipates, believes, intends, projects, estimates and so on. All statements that address expectations or projections about the future, but not limited to the Companys strategy for growth, product development, market position, expenditures and financial results, are forward-looking statements. Since these are based on certain assumptions and expectations of future events, the Company cannot guarantee that these are accurate or will be realised. The Companys actual results, performance or achievements could thus differ from those projected in any forward-looking statements. The Company assumes no responsibility to publicly amend, modify or revise any such statements on the basis of subsequent developments, information or events.

Economy and Outlook

The recent WEO update (World Economic Outlook report by IMF, April 2023) suggests that global growth is expected to slow-down to 2.90%, (3.20%) for the calendar, and expected to improve to 3.10% in 2024. The Asian economies would be the major drivers, with India expected to grow at upwards of 6%, and China at 5%. Regional Banks in the US, high inflation could impact the US economy adversely; in most economies, especially Europe addressing cost-of-living, and dis-inflation seem the talking points, amongst policy-setters. Higher interest rates, and Russia-Ukraine tensions continue to weigh down the global economy, though inflation is expected to fall to 6% levels, before settling down to pre-covid levels of 3.50%.

India faced tough headwinds since the Russia-Ukraine conflict, elevated crude-oil prices, supply disruptions - on account of both the lack of shipping containers, and supply-chain issues, and tightening financial conditions. Government measures in terms of Capital Expenditures partly offset the slowdown in private consumption and led to India overtaking UK as the fifth largest economy in the world. India is less exposed to international trade flows and is reliant more towards domestic consumption. Indias current account remains in a comfortable, and foreign exchange reserves, more than adequate. The geopolitical situation also favours India in benefitting as a global supply-chain destination. The digitisation reforms and creation of platforms have led to financial inclusion across Indias diaspora, would be a major driver in the medium term. The diverse economy, positive governmental policies and reforms, improving socio-economic scenario, increased urbanisation, higher disposable incomes, a stable government has made it an attractive investment destination.

Sector Performance

The world is witnessing an exponential growth in the usage and consumption of polymers. Production that used to range at 340 million tons p.a. in 2010, crossed 550 tons the turn of the decade (a CAGR of 10%). The completely man-made nature of polymers makes innovation and creation of new materials and applications limitless. The Packaging sector in India is estimated at over $415 billion, and this is expected to exhibit around 6% growth in the next five years. While the size of the Global Polymer industry is expected to reach around 800 billion by 2027 with CAGR of 5.5%.

Despite being one of the worlds largest economies, India lags in per capita the consumption of polymers which is just under lOkgs vis-a-vis 100 kg in developed countries and World Average 30kgs.

We are proud to state that we have over 30 dividual products that cater to a client base of over 200, spread across 60 + countries. The best part is though the products are used by different countries and multiple industries, the mother of all products remain in "Technical Textile" . This unique ability to remain present in many industries while maintaining the economies of scale.

Business Segments and Geographies

B2B Businesses

International Business

Revenues from Exports stood at Rs. 2459.25 million, notably across 60+ countries. The new wave of Sustainable packaging is giving good lift to Emmbis Reclaim30 range of products, countries like US, Spain and Italy have already implemented hard regulations for the usage of polymer based packaging and usage of recycled material based packaging is incentivised by favourable duty structures. Emmbis investment in reclaim range of products will definitely yield much better results in year to come.

Domestic Business

Domestic business stood at Rs. 1894.00 million for fiscal 23. We have been prudent in growing this segment, despite it providing a predictable stream of revenues, for we firmly believe that resources should be allocated to business lines or products, that helps in maximising ROCE. Moreover, this is a highly competitive segment, where the buyers are highly price elastic. This coupled with the fact that Emmbis manufacturing facilities are fungible, and we saw a margin driven growth in the export business, led us to focus on the International Segment.

B2C (Avana)

Consumer Durables

The growth in agriculture sector seems muted, however Emmbis business to the agricultural sectors stands at Rs. 722.35 million. We are now well entrenched in Maharashtra, Rajasthan, Madhya Pradesh, Karnataka and made decent forays into Uttar Pradesh, Haryana, Andhra Pradesh, and Telangana. The business which started with making reservoirs for the agriculture & farming sector is now also very popular choice for the Commercial Fishing Ponds for Fish & Aquaculture ponds for Shrimp farming New application of Industrial wastewater treatment & storage tanks is becoming more and more popular with governments initiative of increased care from water pollution

Consumer Goods

Revenues for fiscal 23, despite the uncertain situation in Eastern Europe, and High Commodity Prices, seem sustainable on account of the following,

1. Introduction and Spread of Reclaim 30? range of products

2. Consistent Growth in International demand of products under Advance Composites & Speciality Packaging.

3. Improved capacity utilisation across all the manufacturing units.

4. Emmbis innovation, track record, and distribution network makes it a first-choice provider for existing clients and serves as a referral base.

5. Avana that has made a mark in few states, is expanding across Indian and introducing newer products, that have found tremen dous acceptance.

6. The Governments initiatives for improving farmers incomes, and a greater thrust across rural India on Pond manufacturing.

7. The Honourable PMs impetus on creating 50,000 ponds across India over the next few years, is very positive for Emmbi.

We are today the Worlds largest pond lining company, and given our quality, and track record we are confident of winning substantial share of this business.

8. Consumption Shift in B2C, the increased e-commerce (Avanamart) has resulted a new revenue stream for the company

Emmbis Manufacturing Operations: Plant Capacity and Utilisation

Plant capacity remained at 27,440 MT/ Annum, and Capex spend, was on routine maintenance.

Industry 4.0 standards (IoT), and Robotic Process Automation (RPA) have increased operational efficiencies, improved product technicalities, and reduced wastage to a near zero levels. A Special AI based manufacturing tools have greatly helped to control the manufacturing "Lot Sizes" thereby reducing the non salable surplus material. This helped us to control the material consumption to great extent.

Inventories Management

Emmbis strategy of managing business in a non-speculative nature, translates down to its inventory management policies. We always make it a point to match the order pipeline to the inventory levels. Procurements of raw material is simultaneous to order booking, and that way neither the fluctuations in the prices of crude oil, ocean fright or currency variation thereby its derivatives impact the income statement or capital in an adverse manner.

More-over the relationship between crude oil prices, and polymer prices is not entirely direct. Finally, it is the many stages derivative Polypropylene that goes into our products, and the actual impact of crude price constitutes only under 15% of the total product component.

Despite this linkage, we as a policy continue to apply effective hedge mechanisms.


Our revenues stands at Rs 4353.25 million which was translated into an EPS of Rs. 4.67.

Quality and Adherence

We adhere to the latest international standards and believe in adapting the best practices in the industry, be it people, processes, quality of our products or internal systems. We are in the process of "Integrated Management System" (IMS) a customised combination of ISO 9001:2015, 14001:2015 and 45001:2018. We have also reduced waste by 50%, and we plan to become a zero waste company over the next eight quarters. Company also runs a Certified AA Grade "Clean Manufacturing Facility" for food & Pharmaceutical grade materials. We are having multiple units certified by ISO 22000 for the "Industrial Clean" grade products. We are also "Koshar" & "Halal" certified. The best practices with the employees also helped us to get "Sedex" registration.

People and Processes

We continue in investing and developing existing talent, and source human resources when needed. We continue to conduct workshops on both technical, and soft skills, with the help of internally created teams, and external experts. We have in place a Whistle Blower policy keeping in check with the best practices (Detailed in the Corporate Governance Section).

Information Technology

All our plants across the locations are integrated, and they in-turn communicate to the head offices, through various systems. We are one of the first to adopt Industry 4.0 standards that has led to process and operational improvements and getting translated into financial savings. Entire data of the company is securely stored and is accessible to all the authorised personal from remote locations.

Research & Development

Emmbi runs full-fledged R&D centre called "Emmbi Innovation Lab" for about past decade, accredited by the Department of Science and Technology, the Government of India. Our R&D department is staffed with a 30 member team. As a policy we allocate ~1.50% of revenues towards, research and product development. This not only helps us getting tangible benefits like tax breaks, VAT benefits, preferred bidder for Government projects, etc.

We also get invaluable intangible benefits such as visibility in the international arena, through government initiatives.

Emmbi Innovation Lab has been extremely successful in developing various Products & Processes which gave us an edge over our competition. We have filled 13 Product & 5 Processes Patents in the past decade. 2 Patents have been already awarded and balance are in the processes of getting vetted by the department.

Cautionary Statement

The estimation and expectation made in this report may differ from actual performance due to extraneous factors such as economic conditions, governmental policies, regulations, and other factors.

For & On Behalf of the Board of Directors

Makrand M. Appalwar Chairman & Managing Director DIN:00171950

Place: Mumbai Date: 30th May, 2023.

Statement of Income

Revenue from Operations

The Company recorded revenue of Rs. 4,353 million (Rs. 5104 million). The fungibility, and flexibility of the factory, and the production lines, helped to achieve this revenue despite of major slowdown in global market especially in Europe due to Russia-Ukraine War.

Cost of Operations

Cost of Material consumed stood at Rs. 2,421 million (Rs. 2,819 million) and Employee Costs at Rs. 169 million (Rs. 197 million). Increased usage of "Reclaim" material, Reduction in operating wastage. Constant engaging with and improving upon production techniques including- Robotic Process Automation (RPA), Industry 4.0, and Kaizen (Project Manthan) also helped in ensuring that there were no catastrophic setbacks either financially or operationally during the period of slowdown.

Cost of Finance

Finance costs stood at Rs. 157 million (Rs. 147 million). Increase in finance cost is caused by increase in Repo rate by Reserve Bank of India 6 times in FY 2022-23 from 4.00% on 08.04.2022 to 6.50% on 08.02.2023.

Profits and Distribution

Emmbi industries reported after-tax profit of Rs. 83 million (Rs. 190 million). The Companys liquidity, and financial position continued to remain strong, with substantial buffer in the sanctioned lines of credit lines of credit. The company declared a dividend of Re. 0.30 per share.

Balance Sheet Items

It has managed its debt at a very conservative Debt-Equity level of 0.91x. Assets and Deployment

Assets for the year stood at Rs. 3,663 million (Rs. 3,546 million), the growth on account of core assets, required for business operations. Fixed assets addition pertained more towards routine maintenance and marginal capacity expansion (de-bottleneck capacity), which stood at 27,440 MT per annum.

Current Assets

Inventories stood at the year-end stood at Rs. 1040 million (Rs. 977 million); the increase on account of price fluctuations and volumes to match the demand.

Receivables stood at Rs. 690 million (Rs. 759 million). The companys exports are backed by ECGC guarantees and to-date it has not resorted to seeking a repayment from the same, as the quality of receivables are at 100% collection.

The Asset conversion cycle stood at 108 days (96 days).

Fixed Assets

The company invested very marginally in the creation of fixed assets, as the expansion plans were completed last year, and with the de-bottleneck the current capacity stands at 27,440 mtpa.

Capital and Borrowings

The growth was financed through a mix of internal accruals, additional term borrowings, and working capital. Debt-Equity was conservative at 0.91x, and the current ratio at a healthy 1.48x. The company still had un-drawn lines of credit with banks. This indicated that liquidity, and the solvency parameters are strong, and the ability to absorb unforeseen shocks was tested, and proved resilient.

Total net worth increased to Rs. 1,607 million (Rs. 1,534 million), whilst overall bank borrowings stood at Rs. 1,468 million (Rs. 1,441 million). In the course of the year the company repaid its obligations.