AND ANALYSIS #
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.
Earnings
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.
+91-9892691696
