CHEMICALS BUSINESS
The Company has two divisions viz the Chemicals Division and the
Environment and Biotech Division. The total revenue from operations of the Company for the
year 2022-23 was Rs. 1089.82 crores as against Rs. 1,178.02 crores for 2021-22. The
revenue from operations of the Chemicals Division for the year 2022-23 was Rs. 1,067.10
crores ( Rs. 1,152.54 crores for FY 2021-22) and that of the Environment and Biotech
Division was Rs. 22.72 crores ( Rs. 25.48 crores for FY 2021-22). The Chemicals Business
is engaged in the manufacture of speciality chemicals, intermediates and actives catering
to various end user segments like Agrochemicals, Water Treatment, Soaps & Detergents,
Lube Oil Additives, Mining Chemicals, Polymer Additives and Pharmaceuticals.
Industry Structure and Developments:
• The Company is a leading manufacturer of speciality and
performance chemicals.
• Speciality and Performance chemicals are knowledge chemicals
which require specialized skills and knowledge in terms of chemistry and engineering
capabilities, Environment, Health and Safety (EHS) management, material handling and
effluent treatment.
• Speciality chemicals are required in a number of end use
applications ranging from the Life Sciences (Agrochemicals and Pharmaceuticals) to Fast
Moving Consumer Goods (FMCG). Production of speciality chemicals requires good knowledge
of the requirements of the end user applications to whose needs they are meant to cater.
• All speciality chemicals are subject to varying degrees of
regulatory requirements and the demand for these chemicals can be impacted by changes in
regulations.
• The Size of the Indian chemicals industry is estimated at US $
220 billion. (Source: www.investindia.gov.in.) Even though there are varying estimates,
the share of the speciality chemicals can be considered to be at 25% of the total
chemicals industry.
• Given the specialized knowledge component involved, there are
limited number of producers in India for the range of products manufactured by the
Company. However, there is a stiff competition from China given the huge capacities of
Chinese producers and their access to locally available feedstock.
• Some major key basic raw materials (feedstock) required for the
products manufactured by the Company are imported because the domestic availability is
either non-existent / limited.
Performance of the year (2022-23) and Outlook for (2023-24)
The year 2022-23 saw the normalisation of supply chains which had been
disrupted post Covid 19. Anticipating continued supply chain problems, almost all the
players had over ordered materials across the chemicals value chain. The easing of supply
chain meant a sudden flow of material ordered over a period of time. This, coupled with
the demand downturn due to recession in key markets like Europe meant accumulation of
excess high priced inventory across the value chain. Another key factor which played out
in 2022-23 was the Chinese demand. China eased on its zero Covid policy. It was widely
expected that there would be a strong consumption demand in China once the lockdown
restrictions were lifted. However, contrary to these expectations, the recovery of the
Chinese economy was very sluggish which led to low domestic demand. This resulted in a
high exportable surplus from China. Above factors led to a severe pressure on both the top
lines and bottomlines of Indian chemical companies. Agrochemical companies, in particular
were severely impacted. This had an adverse bearing on the performance of the company for
the year 2022-23. The company responded quickly to this new situation. A prudent policy of
managing cash and working capital was put in place. The global economy continues to be
challenging with very high uncertainity. The Company continues to be agile and resilient
to face ever changing market situations.
• Due to the above factors, the Company expects the business
environment in the current financial year 2023-24 to be very challenging.
• The Company will continue to keep a close watch on the situation
and emerging trends and respond appropriately.
Opportunities:
Even though the immediate outlook is not encouraging on account of the
factors mentioned above, the long term prospects of the speciality chemicals sector is
encouraging. Over the years, the company has established itself as a reliable supplier for
its customers. This will stand the company in good stead when the demand revives.
Opportunities in Agrochemicals and Pharmaceutical sectors are also seen with products
expected to go off patent during the coming years. Efforts to work on product development
which aligns with the current product chain is also being explored
• The Company is actively working on developing a line of new
products to take advantage of the opportunities. The new product development strategy is
focussed around integration and seamless supply chain making the Company self-reliant.
• The Company has enough capacities of key products to meet sudden
revival of market demand and capitalise on dynamic situations.
Risks and concerns
China continues to be a major competitor globally and enjoys advantage
of better input prices due to its feedstock resources. Chinese producers continuously
engage in intense competition leveraging the relatively low inputs costs leading to dent
in market share. Focus on process improvements and better engagement with customers to
offer a product basket and some forward integrated value added products are some of the
areas where the Company is working to mitigate the risk to best possible extent. The
Company is into the Agrochemical and Pharmaceutical space, actively engaged in supplying
intermediate chemicals. Any change in law or regulatory reviews of technical or
formulations will affect the prospects of product demand. There could be abrupt stoppage
and can have an adverse impact on the business and growth of the Company. The Company is
monitoring the developments on real time basis to adapt dynamic situations.
ENVIRONMENT & BIOTECH DIVISION Industry Structure & Development
The Indian Waste Management Market size* is expected to reach $ 32.09
billion in 2023 and grow at a CAGR of 2.25% to reach $ 35.87 billion by 2028.
Recycling & resource recovery, technological advancements & circular economy are
the major focus areas. Construction & Demolition (C&D) waste management is a
leading focus area. Being among major source of city air pollution, it has found prominent
focus both in Swachh Bharat Mission (SBM) 2.0 & National Clean Air Plan (NCAP).
Scientific treatment of C&D waste is still in nascent stage. It is going to remain in
Governments key focus area for next decade owing to Governments commitment of
improving air quality across all cities.
The Government withdrew Market Development Assistance (MDA) scheme for
City Compost during 2021. There is now a new scheme viz. PM Programme for Restoration,
Awareness Generation, Nourishment and Amelioration of Mother–Earth (PMPRANAM) for
Organic fertilizers, which is yet to see impact on the ground. Plastic waste management
continued to remain a key growth area and has seen visible progress & improvement in
terms of systematic & regulatory changes through Extended Producer Responsibility (
EPR) regulations. It will help in bringing transparency, visibility & control in
malpractices.
Despite multiple Regulations in place, lag in its implementation/
enforcement remained a key challenge for the industry. NGTs (National Green Tribunal)
penal orders on most of the cities, states for poor waste management creates a strong push
for sector growth. Excel collaborated with CII ( Confederation of Indian Industry ) to
advocate policy related industry issues including but not limited to reinstatement of
discontinued MDA, decriminalization of Fertiliser (Control) Order (FCO) offences,
consultations with the Office of the Principal Scientific Advisor etc.
* -
https://www.mordorintelligence.com/industry-reports/india-waste-management-market/market-size#:~:text=India%20
Waste%20Management%20Market%20Analysis,period%20(2023%2D2028).
Segment Performance & Outlook
Our Company being the pioneers in creating new waste management
products & service solutions, owing to its strong in-house R&D capability &
unique innovative service delivery approach has shifted focus towards integrated
solution-oriented approach in waste management. Apart from Decentralized Waste Management,
Division focused on Biogas segment, C&D waste, Material Recycling Facility (MRF) &
Plastic Waste Management. Continuous engagement with Clients helped Division recover &
achieve 200% growth in Decentralized Waste Management during the year. Excel developed
market for its two new in vessel Automatic & Non Heating Composting Solutions -
Bioturn & Biorapid. Excel provided B2G, Zonal Level Wet Waste Composting solutions in
hard to reach interior hilly regions of North India. Excel executed its first
Decentralized 5 TPD (Tons per day) Biogas Project in Maharashtra and augmented its
capability & pre-qualification to achieve future Biogas business.
Excel is progressing in the 50 TPD C&D Project with Rajkot
Municipal Corporation. The plant‘s erection and commissioning will get completed
during the year. Excel bagged its first 50 TPD, 10 years Public Private Partnership (PPP)
Project for Material Recycling Facility (MRF) project from Pune Municipal Corporation.
Project is to promote Dry Waste Segregation, Recovery & Recycling. The Division worked
on capability building for Exports Business and completed timely execution of three
end-to-end solution projects in Philippines. Division successfully got letter of award
from Maldives Clean Environment Project (MCEP) tender for supply of Organic waste
solutions to four islands. Excel decided to close operations of its first Centralized MSW
Processing Plant at Pirana, Ahmedabad due to consistent financial losses since past few
years due to operational issues for which we could not find solution with AMC. This
decision will help to improve bottom line performance of Division in the coming year.
Division is successfully creating new revenue streams viz. MRF at Pune. The Company handed
back Varanasi MSW Processing Plant with full compliances to NTPC in November, 2022 after
successful completion of the contract.
Division acquired ISO 9001 Certification to Standardize Internal
Processes. Division is working on strengthening its internal business processes, build
relationships and partnerships, nurture talent and collaborate across industry value
chains.
Opportunities and Threats
Excel aspires to become single point waste management solution provider
in Municipal Solid Waste (MSW), C&D, Biogas, EPR and Process Waste Disposal (PWD).
Decentralized business is facing challenge of price driven market & low cost solutions
under regulatory compliance pressure with little focus on waste processing. Excel
continues to focus on innovation, digital marketing and customer education. Positive
customer experience is reflected in repeat sales and referrals.
Refused derived fuel (RDF), despite being a major problem area in MSW
management remained neglected from policy perspective. Cement companies have set
progressive industry standards for Thermal substitution rate (TSR). However, lack of
policy support, access to large volume of feedstock remained much-needed missing links.
For required focus & growth, Government should expedite Ministry of Environment,
Forests & Climate Change (MoEFCCs) proposal to give Waste Management Industry a
Priority sector lending status.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Your Company has put in place adequate internal financial controls with
reference to the financial statements, some of which are outlined below: Your Company has
adopted accounting policies which complies in all material aspects with the Indian
Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013
(the Act) [Companies (Indian Accounting Standards) (Ind AS) notified under Section 133 of
the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015]
and other relevant provisions of the Act. These are in accordance with generally accepted
accounting principles in India. During the year under review, there was no change in the
accounting policies followed by the Company.
The policies to ensure uniform accounting treatment are prescribed to
the subsidiaries of your Company. The accounts of the subsidiary companies are audited and
certified by their respective Auditors for consolidation.
The Company has proper and adequate system of internal audit and
control which ensures that all the assets are safeguarded against loss from unauthorized
use and that all transactions are authorized recorded and reported correctly.
The Company continuously improves upon the existing practices for each
of its major functional areas with a view to strengthen the internal control systems.
The Company has assigned internal audit function to an independent firm
of Chartered Accountants. Regular internal audit and checks are carried out to ensure that
the responsibilities are discharged effectively. All major findings and suggestions
arising out of internal audit are reported and reviewed by the Audit Committee. The
management ensures implementation of the suggestions made by the internal auditors and
reviews them periodically.
FINANCIAL PERFORMANCE AND ANALYSIS
During the year under review, the net revenue from operations slipped
by 7.49% from Rs. 1178.02 Crores in FY 2021-22 to Rs. 1089.82 Crores in FY 2022-23,
largely due to various international business constraints and reduction in sales prices.
Companys profit before tax declined by 51% from Rs. 212.10 Crores to Rs. 103.95
Crores, largely due to reduction in sales realization, sluggishness in exports volumes and
also due to temporary mismatch in the sales prices and input material cost. Consequently,
net profit after tax for the year decreased by 51% from Rs. 160.16 Crores to Rs. 78.45
Crores. The revenue from operations of the Chemicals Division for the year 2022-23 was Rs.
1067.10 crores ( Rs. 1152.54 crores for the FY 2021-22) and that of the Environment and
Biotech Division was Rs. 22.72 crores ( Rs. 25.48 crores for FY 2021-22).
The Reserves excluding revaluation reserves as on 31.03.2023 are at Rs.
985.43 Crores.
CRISIL Limited reviewed and revised its rating outlook on the long term
bank facilities of the Company to ‘Stable from ‘Positive while
reaffirming the rating on long term bank facilities at ‘CRISIL A+ and on
short-term bank facilities at ‘CRISIL A1.
KEY FINANCIAL RATIOS
In accordance with the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015, the Company is required to give details of significant
changes (i.e. change of 25% or more as compared to the immediately previous financial
year) in key financial ratios, along with detailed explanations thereof: The Company has
identified following ratios as key financial ratios:
| Sr. No. Particulars |
FY 2022-23 |
FY 2021-22 |
%Change |
| 1 Trade Receivable Turnover Ratio (in days) |
59.57 |
57.60 |
3.41 |
| 2 Inventory Turnover Ratio ( in days) |
49.68 |
36.28 |
36.93 |
| 3 Interest Coverage Ratio |
58.57 |
119.80 |
-51.11 |
| 4 Current ratio |
3.59 |
2.34 |
53.73 |
| 5 Debt Equity Ratio (%) |
0.27 |
0.79 |
-66.06 |
| 6 Operating Profit Margin (%) |
9.74 |
18.17 |
-46.40 |
| 7 Net Profit Margin (%) |
7.20 |
13.60 |
-47.05 |
| 8 Return on Equity (%) |
8.15 |
19.43 |
-58.04 |
Notes for those ratios where percentage change is in excess of 25%:
– Movement in inventory turnover ratio is due to increase in
average inventory and reduction in sales.
– Movement in interest coverage ratio is mainly due to reduction
in earnings.
– Movement in current ratio is mainly due to decrease in current
liabilities during the year.
– Movement in debt equity ratio is mainly due to decrease in debt
during the year.
– Movement in operating profit margin is mainly due to reduction
in earnings.
– Movement in net profit margin is due to lower profits earned
during the year.
– Movement in return on equity is due to lower profits earned
during the year.
HUMAN RESOURCE DEVELOPMENT/ INDUSTRIAL RELATIONS
Post Covid, the focus area for HR was on building capabilities within
the organization for the next growth phase. It was decided to build skills internally and
supplement knowledge and skills in certain identified technologies and areas. The Company
continued to focus on opportunities to grow and all round development in its people. As
part of the development process and succession planning, "Leaders of Tomorrow"
programme which was launched in May 2021 continued to invest in its future leaders by
coaching and mentoring to be future-ready. These future leaders have completed their
learning journey and will soon be leading some exciting projects.
We continued to attract talent from the industry. The new employees go
through process of induction. They are mentored and supported to align themselves with the
culture and values of the Company. Sustained excellence is possible only when employees
are greatly motivated to deliver strong performance and positive outcomes. To deliver
these, the internal performance management system is being continuously improved to
further enhance the quality and delivery orientation in the organization.
As a process, we continued to follow vertical approach and focussed on
deliverables for the year, as shared by top management. These deliverables were discussed
and agreed by each function / business / site. There was a sense of ownership of these
company level goals by respective business/ function owners. This helped in setting up
KRAs for the year. All the three sites operated in a smooth manner due to our employee
friendly policies and proactive industrial relationship approach. We also signed the Bonus
agreement for Lote and Mumbai.
Post Covid, the Company reinstated engagement with employees vigorously
and in-person. Many activities were conducted at sites and offices like the long service
award ceremony, the annual Pooja etc. Facilities of canteen resumed. Employee strength of
the Company as on 31st March, 2023 was 1020.
CAUTIONARY STATEMENT
Statements in this report on Management Discussion and Analysis
relating to the Companys objectives, projections, estimates, expectations or
prediction may be forward looking within the meaning of applicable securities laws and
regulations. These statements are based on certain assumptions and expectations of future
events. Actual results might differ materially from those expressed or implied depending
upon factors such as climatic conditions, global and domestic demand-supply conditions,
raw materials cost, availability and prices of finished goods, foreign exchange market
movements, changes in Government regulations, tax structure, economic and political
developments within India and the countries where the Company conducts its business and
other factors such as litigation and industrial relations. The Company assumes no
responsibility in respect of forward looking statements herein which may undergo changes
in future on the basis of subsequent developments, information or events.
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