ester industries ltd share price Management discussions

Overview

Over the last two years, the world witnessed unprecedented disruption to human life & economic activity across the globe. Vaccination drives, supportive macroeconomic policies & favorable business environment all over the globe prove to be a catalyst for global economy returning to normalcy. As per IMF estimates, global growth in 2021 stood at 6.1% versus a decline of 3.1% in 2020. Emerging markets & developing economies continued to record a faster pace of growth at 6.8% versus 2% decline in 2020. The recovery momentum was, however, weakened in due course of the year by new strains of the virus and an unprecedented spike in commodity prices due to global supply chain disruptions. In February 2022, Russia-Ukraine conflict led to sharp escalation in agriculture, fuel and crude linked commodity prices resulting in increased in ationary pressures on global economy. As per IMF, global in ation in 2022 is projected at 7.4% which is the highest in over two decades. According to the latest IMF estimates, aggregate global economic growth is estimated at 3.6% in 2022 wherein advance economies are projected to grow at 3.3% and emerging economies are estimated to grow by 3.8% impacted by muted growth in China & sharp decline in Russia. Amidst such a challenging backdrop, the Indian economy rebounded during the year by 8.9%. The recovery was however, uneven with different sectors of the economy and income classes experiencing varying degrees of impact. India recorded all time high GST collection of INR 1.68 Lac Crores in April 2022 indicating strong economic activity supported by country?s merchandise exports recording a high of USD 418 Billion in the FY 2021-22. While IMF projected a drop in India?s growth at 6.9% in FY 2023, Indian economy continues to remain one of the most dynamic economies of the world promising immense growth opportunity. Despite the challenging macro environment, your company has been able to perform well in FY 2021-22. Company?s revenue stood at INR 1,406 Crores as against INR 992 Crores last year recording a growth of 42%. EBIDTA of the year stood at INR 252 Crores as against INR 244 Crores last year. All businesses contributed in delivering top line growth & pro tability. Specialty Polymer Business delivered its best ever top line & bottom line numbers.

Operational Performance

Business Segment: Polyester Films Business

Flexible packaging is the most economical and environment friendly method to package, preserve and distribute food, beverages, consumables, pharmaceuticals and other products that need extended shelf life. PET is a clear, strong and lightweight plastic that is widely used to produce a wide variety of packaging materials for food products, personal and home care, pharmaceuticals as well as other consumables and industrial goods. PET is a popular choice due to its high tensile strength, chemical & dimensional stability, transparency, reflectivity as well as gas and aroma barrier properties. These properties enable longer shelf life, making PET the preferred product to protect F&B products and pharmaceuticals. Its ability to enhance shelf life of food products enables PET to contribute towards keeping food price in ation in check. Health and safety boards from across the globe have approved PET as a safe material to be used in the food and beverage industry. Historically the market of the PET lm industry comprises of both thin (below 50 microns) and thick lms (above 50 microns)

Industry Overview Global Market: Demand

Over the last ve years, regional demand growth rates have been varied greatly. Asian countries account for 77% of global demand for BOPET lm and this dominant position is expected to remain broadly consistent over the next ve years. China and India continue to be the driving forces of global BOPET lm market. Even during peak pandemic period, BOPET lm markets proved resilient and continued to grow comfortably above global average. Global BOPET lm market demand has grown by 5% p.a. during 2016-21, despite the impact of the pandemic. In 2016-21, the BOPET lm market saw 1.75 MT of new capacity additions.

Global BOPET lm demand by lm type

Film Type	2016 (KT)	2021 (KT)CAGR	(2016-21)
Thick 50 micron+	993	1,086	1.8%
Thin < 50 micron	3,435	4,573	5.9%
Global Demand	4,428	5,659	5.0%

Global BOPET lm demand by end use

End use application	2016 (KT)	2021 (KT)	CAGR
			(2016-21)
Electrical / electronic	668	782	3.2%
Imaging & graphics	208	190	-1.8%
Other industrials	964	1155	3.7%
Packaging	2588	3531	6.4%
Global Demand	4428	5659	5.0%

In 2021, the global market consumed 4.6 MT of thin lms. By far the largest end use was exible packaging, which accounted for 74% of the total volume of thin lms used. Over the last ve years, the global thin lm market has grown by an average of 5.9% p.a. despite weakened demand in mature markets su ering from sluggish economic growth pre-pandemic. Asia continues to dominate as a key BOPET lm exporter to the world. The pandemic brought new challenges to global supply chains and severely disrupted trade flows across the globe. On the contrary, despite trade disruptions, India remained in a stronger position to fulfill global BOPET supplies. This trend is expected to gain further momentum as high energy prices in the West will put strain on producers in the west to remain competitive.

Global BOPET thin lm market by region 2021 (KTs)

Region	Capacity Production Demand
China	3152	2237	2074
Asia (excluding China)	1938	1456	1439
North America	330	271	472
Latin America and the Caribbean	133	98	68
Middle East	175	88	39
Africa	79	53	56
Europe	432	327	369
Russia and the Caspian	47	43	53
Global BOPET thin lm market	6287	4573	4573

Global BOPET thin lm Market: Capacity

The global thin lm market is about 6.2 MT. There are several capacity expansions announced in the next 2-4 years and this is required to meet the expected demand growth. Bulk of the new capacity is coming up in India and China which is in line with global capacity share. However, exports from China are insignificant due to high tari barriers & limited product range. Given high energy prices in western world, older/ine cient lines will not be able to compete with the new wider and high productivity lines.

Global BOPET lm capacity

BOPET lm	2016 (KT)	2021 (KT)	2026 (KT)
Capacity
: Thick	1517	1928	2607
: Thin	4947	6287	9310
Production
: Thick	993	1086	1368
: Thin	3435	4573	5858

Indian Market

Domestic demand continued its growth momentum with the help of strong demographic factors such as

(1) increasing disposable income levels,

(2) rising consumer awareness and demand for processed food,

(3) the multinational giants taking rapid strides in the food, beverages, cosmetics & toiletries

(4) pharmaceuticals space

(5) Increasing exports of exible packaging laminates from India. Like all business exible packaging business also face some headwinds in terms of rising commodity prices leading higher working capital requirement throughout the value chain. Many FMCG companies amended their packaging sizes to weather the impact of cost increases. Despite all the challenges domestic demand continued its growth trajectory by recording a growth of 11-12% CAGR over the last ve years as against global growth of 5-6% CAGR during the same period. One new BOPET started operations during FY 22, with this new line the total production capacity of thin BOPET lm in India reached at 780 KT per annum. There are few lines which will come on stream during the course on FY23 which are likely to amend demand supply dynamics in the short to medium term.

Performance Overview (FY 2021-22)

FY 2021-22 has been a good year for the BOPET lm business. All plants maximized their production, created new benchmarks and improved product mix. We recorded highest ever production and sales of BOPET lms despite significant maintenance shut downs. The sales volume of the BOPET lm business in FY21-22 was 58,151 MT as compared to 56,366 MT over last year. Total sales turnover grew by 20.9%. The margin came under pressure (1) due to commissioning of new capacities in India and abroad (2) higher fuel costs and (3) higher freight expenses. However, the impact on margin was partly o set by cost rationalization initiatives, production and process e ciencies. In order to expanding proportion of value added and specialty products, we launched several new products and grew proportion of value added and specialty products. Ester is committed to increase the proportion of value added & specialty products in overall product mix driven by innovation and R&D efforts. There has been a significant improvement in product mix with higher share of value-added products. During the last financial year, the company commissioned Holography capacity and approved another capital expenditure for putting up new o ine coating capacity. Ester is continuously focusing on its sustainability efforts and is proud to announce that we now offer full range of BOPET Films made from Post-consumer recycled material with recycled content going up to 100 percent.

Outlook

As mentioned, the demand for BOPET lm in India continues to grow at approximately 11-12 percent with global demand for Thin PET lms is expected to grow at a CAGR of about 5-6% per annum over the next few years. In recent times, several new lm line expansions have been announced in India and globally. These new capacity expansions will keep a pressure on the utilization levels for the industry keeping pressure on margins. This coupled with the high energy cost in the western world is likely to prompt closure of older / ine cient lines. Ester remains committed to focus on its strategy towards

• Higher scale and cost-e cient operations

• Expanding value added and specialty products

• Diversifying into sustainable solutions

• Incorporating industry best practices for continuous improvement and better pro tability In line with our strategy of higher scale and cost-e cient operations, Ester is on track to commission its new high output line at Telangana in the month of Oct-2022. We have enhanced our manufacturing capability for producing Metalized paper, Holography lms. These capabilities will help us expand our share of value added and specialty products. Ester remains committed to its sustainability agenda by promoting the use of recycled content in exible packaging.

Ester is continuing its journey by offering the widest range of BOPET lms with recycled content going up to 100%.

Business Segment: Engineering Plastics Business The Product

Engineering Plastics (such as Polybutylene Terephthalate, Polyamides and Polycarbonate) possess enhanced mechanical and/or thermal properties and dimensional stability as compared to commodity plastics (such as Polystyrene, Polypropylene and Polyethylene). Engineering Plastics usually exhibit a combination of improved properties that make them suitable for applications in various industries such as automotive, electrical & electronics, construction, medical, consumer durables and telecommunication.

Ester manufactures and sells its products compounds of PBT, PET, PA6, PA66, PC, ABS, POM and their respective blends under the brand name "Estoplast".

Industry Overview

The global engineering plastics market, estimated at USD 99 Bn in 2021 (based on various industry reports), is slated to grow at a CAGR of ~3-4% over the next 5 years. COVID-19 variants and waves in various countries are expected to have lesser effect on the global economy but the rising in ation, higher interest rates resulting in tight money supply is expected to impact the global economy in 2022. In the year 2021-22 two COVID waves, supply chain disruptions, Ukraine war and super commodity cycle have resulted in the unprecedented price increase in almost all the polymers. FY 2022-23, we expect the commodities super cycle will reverse and the price of all the polymers will start falling due to expected poor demand from the end user segment.

The automotive segment the largest end-use segment saw a weak demand for two wheelers and a small recovery for four wheelers in 2021-22 due to lower H1 numbers (impact of Covid-19 in Q1 of 2021-22) and shortage of auto electronic components. The domestic automotive segment witnessed a small recovery in 4W segment v/s 2020-21, however 2W segment production in 2021-22 was lowest in last ve years. Over all auto segment numbers are much lower than FY 2018-19 i.e. pre-Covid numbers. There is a big shift expected in the Auto Industry based on GOI initiative of Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME India). This requires Application development capabilities for the Engineering Plastics Industry. As Indian manufacturer we are lagging far behind the big MNC?s on application development, which needs huge capital expenses in equipment and specialist manpower. The electrical industry comprising of the electrical equipment and lighting industries contributes towards the second largest customer segment for engineering plastics after Auto. Within the electrical equipment industry, the switchgear and energy meters industries account for the major EP demand.

Domestic switch gear industries performance in general in 2021-22 was ~8% less as compared to 2020-21.

According to various market research reports on switchgear market size is projected to grow at a CAGR of 6.7% during 2020-2026. Increasing foreign direct investment in power sector and booming infrastructure development especially in energy sector are the key factors driving the market of switchgear in India. Moreover, increasing infrastructure advancement including smart cities and rising number of solar power plants would bode well for the demand for switchgears during the forecast period. Low voltage switchgear acquired the largest revenue share in the overall India switchgear market Indian OFC market demand was lower by about 35% in 2021-22 as compared to 2020-21 due to fewer tenders from BSNL and the major requirement of Work from home (need for better connectivity) was catered in FY 2020-21. As per the various researches the OFC market demand in India is expected to grow by about 20% in next 4 to 5 years.

Key drivers for Industry Growth

• Large order book for four wheeler manufacturers, certain models are available with more than 1 year waiting period.

• Upward trend in the demand for Electric Vehicles, many countries have pushed various incentives for the same.

• Regulatory pressure driving demand for recycled/recyclable materials in developed countries.

• Electri cation programs such as "24x7 Power for All" expected to fuel growth in the India switchgear market.

• Enhanced usage of high performance plastics with increasing application in the Medical industry

• 5G network deployment to support increased data tra c and emerging technologies such as 5G, IoT, Smart City & AI expected to drive OFC demand. While overall demand in the next few months of the current year may get impacted by lower demand from the end user segment but in the long run market is poised for a growth.

Performance Overview

FY 2021-22 was a very good year for Ester?s Engineering Plastics SBU. In the domestic market, the overall automotive numbers were similar to FY21, the Electrical industry and Optical Fiber Cable industry declined by 8% and 35% respectively. Ester?s Engineering Plastics SBU registered growth of 44%. The growth in value terms was on account of 68% improvement in unit selling price (compared to the previous year) While overall volumes into the domestic market registered de-growth of ~22% mainly on account of OFC grades, Exports volumes grew by ~36%.

Ester?s EP business has registered a growth, with the 5-year CAGR (FY 17 to FY 22) at 15.4% and 1.2% in value and volumetric terms respectively.

Key Initiatives for Sustainable Long-term Business

• Build on relationship with OEMs & Tier-1/2 customers and secure approvals

• Work towards enhanced pro tability o Productivity/e ciency improvement o Variable cost reduction initiatives o Enhanced customer / product mix

• Continued focus on expanding global footprint

• Shift Manufacturing base to Halol (Gujarat) by Q3 of 2022-23 for enhanced supply chain efficiency.

• Continue to focus on new product/application development projects. Expertise of Radici Group in New Product Development/ Application development eld would be a boon to this initiative.

Decision to Divest:

On 6th May, 2022, the Company has entered into Business Transfer Agreement (BTA) for slump sale of its Engineering Plastics Business as a ‘Going Concern? for a consideration of Rs. 289.33 Crores (subject to adjustments specified in the BTA and other agreements). Date of completion of sales (closing) is subject to certain conditions precedent which are required to be completed on or before 15th October 2022. Engineering Plastics business is non core business for the Company. The divestment of Engineering Plastics business will further strengthen the Balance Sheet / Financial Position and allow faster growth & focus on its core competencies in Polyester Film and Specialty Polymers businesses.

Business Segment: Specialty Polymer Business Overview

Specialty Business is a unique business model catering to the needs of high-performance material used in wide spectrum of applications such as carpets, textiles, food & beverages, consumer electronics, automobiles, industrial etc. which cannot be met by commodity grades.

Ester has created a unique position for itself by developing the technology of all the products in-house and protected by global patents. The journey for Specialty Polymer business began almost a decade ago and we learnt the hard way that the gestation period of technology business is much longer than expected. The upside however is that, once the product and technology is accepted by the customers/ end users, the results are extremely pro table and long lasting. Over a period of time, Ester have led more than 20 patent applications out of which 14 patents have been granted and many others are under prosecution.

The business performed exceptionally well during FY 2021-22. Most of the products recorded their best ever sales numbers. On our new product pipeline, our technology team continued with its determination for finding solution for various latent needs of multiple application segments. </p>

Performance Overview (FY 2021-22)

The business performed exceptionally well on the back of strong demand for most of our products. Volume grew by 55% and Sale turnover recorded a growth of nearly 200%. EBIT margins recorded a growth of over 300%.

Our key product MB-03, which nd application in commercial carpets segment, recorded its best ever sales. Innovative PBT volumes continued with its growth momentum by recording its best ever sales number in this year. Our product MB07, which helps to make polyester dyeable with deeper and darker colors, had an impressive start with sizeable commercial volumes. During the course of the year, we commissioned our rPET extruder and starting our market development process. Ester?s board has approved a capital expenditure for enhancing manufacturing capability of Specialty polymers business with an investment of Rs 80 Crores. This capacity expansion will help us in offering wide range of product portfolio and will add to the flexibility in our manufacturing operations.

Outlook

Despite varying economic recovery across the globe, higher in ation, higher crude linked commodity prices & supply chain bottlenecks, we anticipate continued growth momentum in all the product segments of specialty polymers. With sustainability as a core development theme, the business will continue in its endeavor to deliver enhanced value to its growing customer base and application segments.

1. MB07 deep-dyeable master batch: Commercial volumes has already started moving and we expect the product to contribute sustainable volumes in times to come.

2. Innovative Polybutylene Terephthalate (PBT): Catering largely to the consumer electronics industry, it has witnessed significant sales growth in last few years and we expect the volumes to continue to increase year after year.

3. Low Melt Polymer: It continued to go through various stages of technical approval and we are happy to inform that significant headway has been made in this product as well. This product was speci cally designed to achieve the sustainability goals of our customers by making their products fully recyclable. This is in line with your company?s goal of contributing towards circular economy. The product demand outlook from the customers looks very strong and we are sure that significant volumes of this product will contribute to the top line and the bottom line of the business in next 2-3 years.

4. Cationic dyeable master batch: Substantial progress has been made in this product and we expect regular commercial volumes to commence in the current year with significant volumes in the coming years.

5. Recycled Polyester, Various grades of products are under various stage of testing across a wide range of applications such as bottles, Filaments, Film, Fiber etc.

With the commission of new investments undertaken last year, the business will continue for broadening its customer base, enhancing sales velocity and developing new innovating offerings to maintain a healthy product pipeline. Overall with our continued focus on product development and commissioning of new investments, the business is well placed to create value for our shareholders.

BUSINESS & FINANCIAL PERFORMANCE

	Quantity Produced	Quantity Produced	Growth
	(MT)	(MT)
Polyester Chips	(During FY 2021-22) 68353	(During FY 2020-21) 55170	23.90%
Specialty Polymers	4683	2259	107.30%
PET Film Non	58341	57039	2.22%
Metallized
PET Film Metallized	11212	10549	6.61%
Engineering Plastics	12188	13658	(10.76%)

	Quantity Sold (MT)	Quantity Sold (MT)	Growth
	(During FY 2021-22)	(During FY 2020-21)
Polyester Chips	11648	746	1461.39%
Specialty Polymers	3601	2316	55.48%
PET Film Non	46865	45788	2.35%
Metallized
PET Film Metallized	11286	10549	6.99%
Sub Total – PET Film	58151	56337	3.22%
Engineering Plastics	11530	13419	(14.08%)

	Net Sales Value	Net Sales Value	Growth
	(Rs. in Lacs) (During FY 2021-22)	(Rs. in Lacs) (During FY 2020-21)
Polyester Chips	9534.82	423.05	2153.83%
Specialty Polymers	17637.73	5999.37	193.99%
PET Film Non	66756.83	55356.01	20.60%
Metallized
PET Film Metallized	19430.86	15910.84	22.12%
Sub Total - PET Film	86187.69	71266.85	20.94%
Engineering Plastics	29611.78	20512.26	44.36%
Others	546.25	1582.39	(65.48%)
Total	143518.27	99783.92	43.83%
Rebates & Discounts	4292.90	1298.39	230.63%
Total Net Sales	139225.37	98485.53	41.37%

	(Rs. in Lacs)	(Rs. in Lacs)	Growth
	(During FY 2021-22)	(During FY 2020-21)
EBITDA	25177.44	24375.24	3.29%
PBT	18835.08	18997.85	(0.86%)
PAT	13886.13	14207.77	(2.26%)
Other	(10.97)	(24.96)	-
Comprehensive Income
Total Comprehensive Income	13875.16	14182.81	(2.17%)

Main factors contributing towards sustained performance of the company are improvement in the performance of Specialty Polymer and Engineering Plastics business. with both SBUs compensating for lower performance of Film business Net sales value during the year under review stood at Rs. 1392.25 crores as compared to Rs. 984.86 crores during FY 2020-21, an increase of 41.37% on account increase in per unit selling price in products of all businesses and increase in volume of sales of Specialty Polymers and Polyester Film. Another factor for increased sales value was resumption of sales of Polyester Chips post restoration of Primary Heater #5 that caught re in March 20.

EBIT for the Film business reduced from Rs. 218.71 crores to Rs. 152.59 crores despite marginally higher volume of sales. Specialty Polymer business witnessed major revival during FY 2021-22. The business registered healthy growth in both revenues and pro tability. Revenue from operations increased by 190.9% from Rs. 59.34 crores to Rs. 172.64 crores while sales in volumetric terms increased by 55.5%. EBIT margin for the business improved from 23.2% to 32.2% on account of better product mix.

In Engineering Plastics SBU, on account of higher selling prices, revenue from operations increased from Rs. 204.99 crores to Rs. 295.41 crores, an improvement of 44.1% though sales in volumetric terms reduced by 14.1% from 13419 MT to 11529 MT mainly due to reduction in volumetric sales of OFC grade engineering plastics. The higher increase in value terms was on account of ~68% increase in unit selling price (compared to the previous year) consequent to the steady rise in polymer prices and more than proportionate rise in margins. EBIT from the business improved from Rs. 40.65 crores to Rs. 68.22 crores - EBIT margin improving from 19.8% to 23.1%. EBIT margins that started to improve from September 20 quarter reached its peak during June 21 quarter and then started to gradually moderate with business witnessing almost normal margins during March 22 quarter. Due to repayment of term borrowings strictly as per repayment schedule, the financial leveraging indicated by Total Outside Liabilities : Total Equity ratio stand at 0.70 as at 31^st March 2022. The book value per equity share stood at Rs. 75.31

Key Financial Ratios

Particulars	2021- 22	2020- 21	Change %	Remarks
Current Ratio	1.89	1.93	(2.00%)	Marginal variation
Debt Equity Ratio	0.51	0.40	(26.55%)	Due to new term loans availed for capital expenditure & other applications, higher utilization of WC limits consequent to signi cant increase in gross current assets
Debt Service Coverage Ratio	2.49	4.82	(48.39%)	Due to larger denominator on account of higher interest and higher repayment obligation
Return on Equity	24.25%	30.73%	(21.07%)	Net Pro t after Tax (NPAT) in absolute terms was marginally lower than last year but due to increase in average shareholders? equity, the ROE reduced by 21.07%.
Inventory Turnover	5.19	4.13	25.5%	Due to increase in the prices of raw materials which are primarily petrochemical based products.
Trade Receivables Turnover Ratio	8.08	7.23	11.74%	Variation is on account of change in the proportion of sales of each SBU in the total sales of the company and also on account of change in customer mix & product mix
Trade Payables Turnover Ratio	22.04	17.77	(24.03%)	Trade payables did not increase in the same proportion as the purchases. This was so because of LCs were provided in the month of March 2022 for procurement of raw material.
Net Capital Turnover Ratio	6.18	5.82	6.24%	Marginal variation
Net Pro t Ratio	9.97%	14.43%	(30.86%)	NPAT in absolute terms is almost same as last year but due to higher sales value (on account of increase in per unit selling price consequent to increase in feedstock prices), Net Pro t ratio reduced by 30.86%
Return on Capital Employed	22%	28%	(21.11%)	NPAT in absolute terms is almost same as last year but due to higher TNW, new term loans availed for capital expenditure & other applications, higher utilization of WC limits consequent to significant increase in gross current assets, ROCE reduced by 21.11%.

Detailed explanation of ratios

(i) Current Ratio

The Current Ratio is a liquidity ratio that measures a Company?s ability to pay short term obligations or those due within one year. It is calculated by dividing the current assets by current liabilities

(ii) Debt Equity Ratio

The ratio is used to evaluate a Company?s financial leverage. It is a measure of the degree to which a Company is financing its operations through debt versus wholly owned funds. It is calculated by dividing sum total of total borrowings and total lease liabilities by its shareholder?s equity

(iii) Debt Service Coverage Ratio

The above ratio is used to evaluate debt service capability of the Company. Higher ratio indicates better debt service capability. It is measured by dividing the sum total of NPAT, Non-cash operating expenses like depreciation & other amortizations, interest on term loans & lease liabilities and other adjustments like loss on sale of fixed assets etc. by sum total of Interest & lease payments and Principal Repayments during the year.

(iv) Return on Equity (%)

Return on Equity (ROE) is a measure of pro tability of a Company expressed in percentage. It is calculated by dividing NPAT for the year by average shareholders? equity. Average shareholders? equity is calculated by dividing sum total of shareholders? equity at the beginning and at the end of the year by two.

(v) Inventory Turnover

Inventory Turnover is the number of times a Company sells and replaces its inventory during a period. It is calculated by dividing cost of goods sold by average inventory

(vi) Trade Receivables Turnover Ratio

The above ratio is used to quantify a Company?s effectiveness in collecting its receivables or money owed by customers. The ratio shows how well a Company uses and manages the credit it extends to customers and how quickly that short term debt is collected or is paid. It is calculated by dividing net sales turnover by average trade receivables.

(vii) Trade Payables Turnover Ratio

The above ratio is used to quantify a Company?s effectiveness in being able to use trade payables or money owed to suppliers as source for financing working capital needs of the Company. It is calculated by dividing Net Purchases by Average Trade Payables. Net purchases are sum total of cost of material consumed, consumption of stores & spares, consumption of packing material, power & fuel and increase / decrease in raw material & stores & spares inventories.

(viii) Net Capital Turnover Ratio

It is calculated by dividing Net Sales by Working Capital.

(ix) Net Pro t Ratio (%)

The Net Pro t Ratio is equal to how much net income or profit is generated as a percentage of Net Sales. It is calculated by dividing NPAT for the year by Net Sales during the year

(x) Return on Capital Employed (ROCE) (%)

Return on Capital Employed (ROCE) is a measure of pro tability of a Company expressed in percentage. It is calculated by dividing NPAT for the year by capital employed. Capital employed is sum total of Tangible Net Worth, Total Debt and Deferred Tax Liability

Risk Management

In Ester, Risk Management Committee reviews and evaluates the identified risks, their probability of occurrence and impact. It is understood that risk is an integral part of any business. The aim of the Risk Management Committee is to detail the objectives and principles of risk management along with an overview of the risk management process and related roles and responsibilities. The framework covers inter alia process, governance and execution of the risk management plans. The risk management system has laid down following steps identi cation of risks that matter, assessment of impact of identified risks, prioritization of risks with high impact, developing & monitoring mitigation plan. Under the policy & process document, a monitoring process has been institutionalized to ensure periodic review of organization risk pro le, identify emerging risks, their classification into various categories viz: Strategic, Financial, Operational and Compliance, and assess the implementation status of mitigation plans. Considering the current volatile and dynamic environment, identified risks and the progress in the implementation of mitigation plans to manage the identified / inherent risks are reviewed and if required, the risks and the mitigation plans are modified to align with the changed scenario / environment. Upon detailed review of the identified risks & mitigation plan thereof, the Board is of the opinion that that there are no risks which may threaten very existence of the Company.

Intellectual Capital

The business environment has undergone a remarkable set of changes in the last decade and more particularly in last 3 4 years. Industry and businesses worldwide are striving to formulate strategies, sharpen operations, bring down costs, improve quality and differentiate products to increase their worth in the market. This is an era of continuous improvement in thoughts & processes, which is the only way to move towards competitiveness.

All these changes in the competitive environment demand that we transform ourselves to become the first choice of customers in terms of time, quality and price. Further, it is also important that we build our e ciencies in all the category of resources to enhance customer value creation and elimination of waste. We continue to focus on human capital development and continue with our various people initiatives. The learning and development framework focuses to enhance adherence to operating & business processes. Operating processes for entire business operations are constantly relooked at / reviewed for improvement keeping the customer delivery in mind. These processes are being kept at the centre for training the workforce. Having multi-skilled workforce is the first and most critical element to the success. Roles and performance parameters are being re-de ned for teams and individuals from time to time keeping in view the very dynamic external environment. The roles are re-de ned for improving Company?s performance as well as for career growth of individuals. Technology is being taken to the front line level far beyond the current boundaries to track and monitor performance on a regular basis.

Creating a customer centric organization by challenging the functional boundaries require a big cultural shift and mind-set change and therefore to keep the workforce aligned and engaged, the senior management has continuous communication & engagement with the employees at all levels including active participation in floor level activities.

Cautionary statement

Statements in this section relating to future status, events, circumstances, plans and objectives are forward looking statements based on estimates and anticipated effects of future events. Such statements are subject to risks and uncertainties and accordingly are not predictive of future results. Actual results may differ materially from those anticipated in the forward looking statements. The Company cannot be held responsible in any manner for such statements. The company undertakes no obligation to publicly update these forward looking statements to reflect subsequent events or circumstances.