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Overview

Financial Year 2022-23 was another year of significant challenges with escalating geopolitical tensions, rising energy prices, aggressive monetary & fiscal policies to control the mounting inflation rates and of course, the lingering COVID-19s impacts; the economic uncertainty was faced across the globe.

As per IMF estimates, global growth has slowed from +6.1% in 2021 to +3.2% in 2022. Emerging markets & developing economies continued to record a faster pace of growth at +4% versus Global +3.2%.

Major forces that shaped the economy in 2022 seems to continue at changed intensities in 2023. Commodity prices that rose sharply due to invasion of a country by another may get moderated, supply chain disruptions caused by CoVID-19 appear to be recovering and the continued intervention by policy makers may help the economy to recover but at a slower pace. According to the latest IMF estimates, aggregate global economic growth is estimated to fall further to +2.8% in 2023 wherein advance economies are projected to grow at +1.3% and emerging economies are estimated to grow by +3.9% impacted by sharp decline in growth of Russia & India. As per IMF, global inflation is expected to decrease slower than expected i.e. from 8.7% in 2022 to 7% in 2023 further reducing to 4.9% in 2024.

In such a challenging backdrop, the Indian economy also suffered during the year, growing by +6.8% but showed growing economic activities in terms of an all-time highest GST collection of Rs 18 Lac crores in FY22-23 (+22% YoY) and highest ever merchandise exports of USD 447 Billion in FY22-23 (+6% YoY). The World Bank has projected a drop in Indias growth at 6.3% in FY24, the growth is expected to be constrained by slower consumption growth due to rising interest rate, slower income growth and withdrawal of pandemic-related fiscal support measures.

Due to external challenges in FY 2022-23, Companys revenue including revenue from discontinued operations stood at ?1,213 crores as against ?1,406 crores last year recording a decline oRs 14%. EBIDTA for the year stood at f136 crores as against f252 crores last year however due to Capital Gain before Tax of f145.56 crores arising from divestment of Engineering Plastics business to Radici India Plastics Private Limited ensured that PBT and PAT were both higher than last year. The commercial production at new BOPET film plant in Telangana started on 20th January, 2023.

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 inflation 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 film industry comprises of both thin (below 50 microns) and thick films (above 50 microns)

Industry Overview Global Market: Demand

Over the last five years, regional demand growth rates have been varied greatly. Asian countries account for 77% of global demand for BOPET film and this dominant position is expected to remain broadly consistent over the next five years. China and India continue to be the driving forces of global BoPET film market. Global BOPET film market demand has grown by 5% p.a. during 2016-22.

Global BOPET film demand by film type

Film Type	2016 (KT)	2022 (KT)	CAGR (2016-22)
Thick 50 micron+	993	1,128	2.1%
Thin < 50 micron	3,435	4,793	5.7%
Global Demand	4,428	5,921	5.0%

Global BOPET film demand by end use

End use application	2016 (KT)	2022 (KT)	CAGR (2016-22)
Electrical/Electronic	668	796	3.0%
Imaging & graphics	208	188	-1.6%
Other Industrials	964	1218	4.0%
Packaging	2588	3719	6.2%
Global Demand	4428	5921	5.0%

In 2022, the global market consumed 4.8 Mn Tons of thin films. By far the largest end use was flexible packaging, which accounted for more than ~70% of the total volume of thin films used. Over the last six years, the global thin film market has grown with a CAGR of 5.7% despite weakened demand in mature markets suffering from sluggish economic growth. Asia continues to dominate as a key BOPET film exporter to the world. Tension filled geopolitical situation and lingering Pandemic impact 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 fulfil 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 film market by region - 2022 (KTs)

Region	Capacity	Production	Demand
China	3491	2355	2165
Asia (excluding China)	2232	1521	1543
North America	330	264	487
Latin America and the Caribbean	177	116	70
Middle East	175	103	40
Africa	79	63	59
Europe	426	316	373
Russia and the Caspian	80	55	56
Global BOPET thin film market	6990	4793	4793

Global BOPET thin film Market: Capacity

The global thin film capacity is about 7 Mn Tons. Capacity expansions have been announced that will come on stream during 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 tariff barriers & limited product range. Given high energy prices in western world, older/inefficient lines in this region will not be able to compete with the new wider and high productivity lines.

Global BOPET film capacity based on thickness

BOPET Film	2016 (KT)	2022 (KT)	2026 (KT)
Capacity
: Thick	1517	2112	2607
: Thin	4947	6990	9310
Production
: Thick	993	1128	1368
: Thin	3435	4793	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; and (5) Increasing exports of flexible packaging laminates from India. Like all business, flexible packaging business also faces some headwinds in terms of rising commodity prices leading to 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 ~10% CAGR over the last six years as against global growth of ~6% CAGR during the same period.

The total production capacity of thin BOPET film in India reached to 1095 KT per annum in 2022. There are few lines which will come on stream during the course of FY24 which are likely to amend demand supply dynamics in the short to medium term.

Performance Overview (FY 2022-23)

FY 2022-23 has been a challenging year for the BOPET film business. The sales volume of the BOPET film business achieved by the Company in FY22-23 was 57,172 MT as compared to

58,151 MT over last year due to loss of production on account of shutdown of Film Plant #3 consequent to breakdown in CP Plant for a period of 28 days. Total sales volume decreased by 1.6% and the sales turnover went down by 6.2% due to lower price realization and compression in margins.

The margin came under pressure (1) due to loss of production / sales from Film Plant #3 due to a breakdown; (2) due to enhanced competition post new plant commissioning; and (3) higher conversion costs. In order to expand proportion of value added and specialty products, we launched several new products and grew proportion of value added and specialty products.

During last financial year, the company added new BOPET Film capacity in Telangana through its Wholly owned Subsidiary, Ester Filmtech Limited to cater to new demands & customers and also divested its engineering Plastic business to better focus on its core business.

our new Film Plant in Hyderabad started its commercial operations during the quarter ended March 23. To quantify, the unit has achieved sales of 4,757 MT translating into revenues of f 49 crores. The plant is expected to generate revenues worth approximately f 500 to 550 crores upon achieving optimal utilization. We have plans in place to export part of the output from this plant 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.

Ester continues to focus 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%. ester also added all Mono Pet based solutions and PCR PET film solutions to add towards the sustainability goals of the company.

our Company is also focusing on streamlining its growing business through digital innovation initiatives like Business Process Re-engineering, Digital Transformation and Data Analytics. The aim of the company is to make it future ready for new challenges and opportunities.

Outlook

As mentioned, the demand for BOPET film in India continues to grow at approximately 11-12 percent per annum while global demand for Thin PET films is expected to grow at a CAGR of about 5-6 percent per annum over the next few years. In recent times, several new film line expansions have been announced in India and globally. These new capacity expansions will exert some 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 / inefficient lines in this region.

While near to medium term outlook is expected to be challenging due to excess supply and benign realizations & margins, we are working towards improving our product mix by increasing proportion of Value Added & Specialty portfolio, ramping up the utilization levels of the new plant and cost rationalization to help us offset the headwinds and improve margins & profitability.

To achieve higher proportion of VAS portfolio, we have invested in an off-line coater that is expected to be commissioned soon. Build-up of volume from new coater will be achieved gradually and continuously. We are also working on new products that will enable us to improve profitability despite adverse market scenario. The company is targeting about 28% to 30% value- added film in Ester Industries, and the margin profile should be in that range.

Ester focuses on sustainability and green initiatives by using bio-waste or rice husk as fuel, bio-based raw materials, reducing usage of packing material, and offering products made out of polyester to replace PVC films. Ester also remains committed to its sustainability agenda by promoting the use of recycled content in flexible packaging. Ester is continuing to add new products to its portfolio offering the widest range of BOPET films with recycled content going up to 100%.

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, most of which are 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 profitable and long lasting. Over a period of time, Ester have filed more than 35 patent applications out of which 16 patents have been granted and many others are under examination.

Though the business performance in FY 2022-23 was better than in FY 2021-22 due to significantly better performance during first half of FY 2022-23, second half of the FY 2022-23 got impacted by the economic uncertainty. Though our turnover went up by ~14% and profitability in absolute terms remained almost in line with FY22, the EBIT margin got down due to higher raw material and conversion cost. However, the prospects of the business remain robust basis innovative products already commercialized and expected to be introduced in near future. The persistent efforts of R&D team to improve innovation pipeline and process enables us to build a healthy product pipeline.

Performance Overview (FY 2022-23)

The business performed well in terms of sales turnover seeing an increase by ~14% and the sales volume went up marginally. On an annual basis, the profitability in absolute terms was largely steady despite external challenges.

The performance of our key products MB-03, which find application in commercial carpets segment, and Innovative PBT, which finds application in consumer electronics, textile, fiber & automotive, largely remained steady despite external challenges. We commissioned our rPET extruder last year and have started market development process which got good response from the industry.

The business will continue broadening its customer base, enhancing sales velocity and developing new innovating offerings to maintain a healthy product pipeline.

Outlook

Specialty Polymer as you may be aware is largely export oriented business and any uncertainties & headwinds in the global economy are likely to have an impact on its financial performance and growth momentum. The performance of the Specialty Polymers SBU is likely to remain impacted during next 2 - 3 quarters until economic revival in US. We expect rapid expansion in both volume and value of sales post economic revival in US. We expect business to deliver steady growth over long term given its innate nature i.e. limited competition/ IP protected business.

our R&D team as well continues to work towards building an exciting and innovative product pipeline which further reassures us of the robustness and long-term growth prospects of the business. We dont foresee any major risk to the business barring global uncertainties which may impact its growth momentum in short term. We are also seeing global freight rates moderate which should help us serve our customers better.

Despite varying economic recovery across the globe, higher inflation, higher crude linked commodity prices & supply chain bottlenecks, Specialty Polymer business as such faces no threat of competition and therefore should continue its growth momentum over the coming years. Furthermore, given that this business is IP protected, margins as well will sustain going forward.

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. Margin profile should remain in the range that is seen now.

overall with our continued focus on product development and innovation, the business is well placed to create value for our shareholders.

BUSINESS & FINANCIAL PERFORMANCE

(Rs in Lacs)

	(FY 2022-23)	(FY 2021-22)	Growth
EBITDA (including discontinuing operations)	13,568.91	25,177.44	(46.11%)
PBT (including discontinued operations)	6,575.69	18,835.08	(65.09%)
Capital Gain before Tax from divestment of Engineering Plastics business	14,555.95
PAT (including discontinuing operations)	16,104.42	13,886.13	15.97%
	(FY 2022-23)	(FY 2021-22)	Growth
other Comprehensive Income	27.07	(10.97)	--
Total Comprehensive Income	16,131.49	13,875.16	16.26%

* During the year under review, the Engineering Plastics Business of the Company was divested with effect from 15th September, 2022. Performance of engineering Plastics business was therefore available only from 1st April, 2022 to 14th September, 2022 before its divestment.

Net sales revenue during the year under review on standalone basis decreased by 14.10% from f1,392.25 crores to f1,195.95 crores, mainly on account of lower sales of Polyester Chips that decreased from 11648 MT to 2925 MT (in value terms from f95.35 crores to f27.11 crores).

Reduction in production of Polyester Chips mainly due to breakdown of Continuous Polymerization plant for 28 days & reduction in TPD due to certain technical issue.

Reduction in production of engineering Plastics on account of divestment of business on 15th September, 2022.

Sustained performance of the Specialty Polymer coupled with capital gain from divestment of engineering Plastics business enabled company to post higher PAT during the year under review.

Due to repayment of term borrowings strictly as per repayment schedule, the financial leveraging indicated by Total Outside Liabilities: Total Equity ratio stand at 0.61 as at 31st March, 2023. The book value per equity share stood at f 92.78.

Key Financial Ratios

Note: All the ratios mentioned below have been calculated based on both continuing & discounted operations

Particulars	2022-23	2021-22	Change %	Remarks
Current Ratio	1.90	1.89	0.53%	Marginal variation
Debt Equity Ratio	0.50	0.51	(1.96%)	Marginal variation
Debt Service Coverage Ratio	1.50	2.49	(39.76%)	Due to smaller numerator on account of lower profit from continuing operations
Return on Equity	7%	24.25%	(71.13%)	Net Profit after Tax (NPAT) from continuing operations is lower but average equity is higher on account of profit after tax arising from discontinued operations of engineering Plastics business including capital gain after tax arising from divestment of engineering Plastics business.
Inventory Turnover	4.65	5.19	(11.61%)	Consumption of material consumed has reduced due to divestment of engineering Plastics business but average inventory is almost the same.
Trade Receivables Turnover Ratio	7.24	8.08	(11.60%)	Turnover has reduced due to divestment of engineering Plastics business and low margins but average debtors are almost the same.
Trade Payables Turnover Ratio	19.99	22.04	10.26%	Trade payables did not reduce proportionate to reduction in consumption of material.
Net Capital Turnover Ratio	4.92	6.18	(20.39%)	Due to divestment proceeds invested in liquid investment and kept in escrow account, the net current assets increased while sale of products reduced on account of divestment of engineering Plastics business.
Net Profit Ratio	4.10%	9.97%	(58.88%)	NPAT in absolute terms reduced due to compression of margins in Polyester Film business and operating performance of engineering Plastics business being available only for about 6 months, Net Profit ratio reduced by 58.88%
Return on Capital employed	8.06%	21.79%	(63.01%)	NPAT in absolute terms reduced due to compression of margins in Polyester Film business and operating performance of engineering Plastics business being available only for about 6 months 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 63.01%.

Detailed explanation of ratios

(i) Current Ratio

The Current Ratio is a liquidity ratio that measures a Companys 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 Companys 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 shareholders 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 profitability 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 Companys 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 Companys 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 Profit Ratio (%)

The Net Profit 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 profitability 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, 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. Considering the current volatile and dynamic environment, 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 efficiencies 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 focus 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 center 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-defined for teams and individuals from time to time keeping in view the very dynamic external environment. The roles are re-defined for improving Companys 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.