galaxy surfactants ltd share price Management discussions

"There are decades where nothing happens; and there are weeks where decades happen." - Vladimir Lenin


Since Galaxys inception in 1980, the beginning of every decade has been marked by extreme macro led volatility. Be it the Energy crisis in 1980s which led to a sudden surge in Inflation and resulted in an economic recession or the Collapse of the erstwhile Soviet Union and Gulf War in early 90s which yet again saw Crude spiking and halting economic growth. The turn of the century saw the Dot Com Bubble Burst followed by the Collapse of the Twin Towers in September 2001. As the world was recovering from the 2008 subprime crisis, the spike in Crude prices yet again in 2011, halted economic revival briefly.

The current decade has been no different. Starting with the pandemic in 2020 and 2021 to the invasion of Ukraine by Russia in February 2022, the world has been on tenterhooks since the start of this decade.

While major spike in Oil Prices either on account of War or supply cuts by OPEC has been a common cause; what sets this decade apart is the combination of a global pandemic, war and sustained inflation which have plagued economies and human lives simultaneously. Such has been the intensity that within 12 months the narrative has changed from ‘global recovery to ‘global recession.

But the world has always emerged stronger and ended all decades on a high driven by strong economic measures, growth and technological evolutions.

Starting from the 1980s wherein post the energy crisis, multiple steps were taken to open up economies, implement growth-oriented programmes and strengthen economic policies to the IT boom in the 90s. The turn of the century saw the emergence of China and India and as global trade picked up, China and India further consolidated and built on their global presence in the last decade. The last decade has seen multiple innovations and advancements in the fields of Technology, Digitisation, Retail and Sustainability. Going by historical precedents, the current decade will be no different. While the Global Outlook may seem weak today, like previous decades, we will end this decade as well on a positive note.

Reflecting on FY 2022-23, the onset of Russia-Ukraine War did result in yet another Crude Spike (like the previous decades). While supply led inflation on account of unavailability of feedstocks, higher lead times and freight costs had adversely impacted businesses in FY 2021-22; sustained inflation combined with Crude spike in Q-1 FY 2022-23 halted the buoyant demand led growth seen in FY 2021-22. Businesses therefore had to be geared up for managing the twin challenges emerging on account of:

1. Highly Volatile Supply Side (continuation of FY 2021-22)

2. Slowing Demand Side (Consumption)

The business performance reported this year therefore reflects the macro scenario and the strong risk management practices applied to mitigate the supply as well as demand driven challenges.


Global growth slowed in 2022 to 3.2%, more than 1 percentage point weaker than expected at the end of 2021, mainly weighed down by Russias war of aggression in Ukraine and the associated cost-of-living crisis in many countries. Growth is projected to remain at below-trend rates in 2023 and 2024.

Inflation, consumer prices (annual %) : Data (

Inflation which began on account of supply side constraints, further gained momentum on account of the Russia-Ukraine War. Crude Prices which had touched a peak of 85 USD/Barrel in October 2021 rallied to 125 USD/Barrel till June 2022. While the prices did correct post June, it remained above the Pre-Pandemic levels (Brent Crude ended 2019 at 68.6 USD/Barrel).

Sustained inflation resulted in tightening of global liquidity and invited actions from all Central banks via interest rate hikes. The US Federal Funds Rate started 2022 at 0.08% but closed the year at 4.33%; annual change of 5,412.5%. Unprecedented rate hikes by the US Federal Reserve saw the USD Index strengthening from 95.00 at the start of 2022 to 113.31 by October 2022. While the USD Index did weaken to 102.50 by March 2023, rising USD along with Interest rates is a precursor to economic turmoil in the developing world. The same played out in 2022 with multiple countries requiring a bailout from IMF.

The rapid rise in interest rates in the United States poses a significant challenge to Emerging and Developing Markets. As the Federal Reserve has pivoted towards a more hawkish stance to rein in inflation, a substantial part of the sharp increases in U.S. interest rates since early 2022 has been driven by shocks that capture changes in perceptions of the Feds reaction function. These reaction shocks are associated with adverse financial market effects in Emerging and Developing Markets, including a higher likelihood of experiencing a financial crisis. Their effects also appear to be more pronounced in developing markets with greater economic vulnerabilities. These findings of the World Bank suggest that major central banks can alleviate adverse spillovers through proper communication that clarifies their reaction functions. They also highlight that Emerging Markets need to adjust macroeconomic and financial policies to mitigate the negative impact of rising global and U.S. interest rates.

Global Outlook [Source World Bank Report]

After growing 3.1% last year, the global economy is set to slow substantially in 2023, to 2.1%, amid continued monetary policy tightening to rein in high inflation, before a tepid recovery in 2024, to 2.4%. Tight global financial conditions and subdued external demand are expected to weigh on growth across emerging and developing economies. Projections for many countries have been revised down over the forecast horizon, with upgrades primarily due to stronger-than-expected data at the beginning of 2023 more than offset by downgrades thereafter. Inflation has been persistent but is projected to decline gradually as demand weakens and commodity prices moderate, provided longer-term inflation expectations remain anchored. Global growth could be weaker than anticipated in the event of more widespread banking sector stress, or if more persistent inflation pressures prompt tighter-than-expected monetary policy. Weak growth prospects and heightened risks in the near term compound a long-term slowdown in potential growth, which has been exacerbated by the overlapping shocks of the pandemic, the Russian Federations invasion of Ukraine, and the sharp tightening of global financial conditions. This difficult context highlights a multitude of policy challenges. Recent bank failures call for a renewed focus on global financial regulatory reform. Global cooperation is also necessary to accelerate the clean energy transition, mitigate climate change, and provide debt relief for the rising number of countries experiencing debt distress. At the national level, it is imperative to implement credible policies to contain inflation and ensure macroeconomic and financial stability, as well as undertake reforms to set the foundations for a robust, sustainable, and inclusive development path.

FIGURE 1.1 Global prospects

The global economy is projected to slow substantially this year, with a pronounced deceleration in advanced economies. The first half of the 2020s is expected to be one of the weakest half-decades of the past 30 years for emerging and developing market economies [EMDEs], as a result of both cyclical dynamics and slowing potential growth. EMDEs with lower credit ratings are set to experience a particularly sharp slowdown this year. Inflation remains elevated in many countries and is envisaged to remain above pre-pandemic levels beyond 2024. Excluding China, EMDEs are expected to make next to no progress at closing the gap in per capita incomes with advanced economies over the forecast horizon.


The sections below provide a Regional as well as Segmental Business Performance Update and Outlook for FY 2023-24.


India continued its outperformance this year. We strongly believe a structurally strong economy driven by consumption, moderate inflation and macroeconomic stability are critical requirements for sustained growth. Various supply side measures in the form of enhanced infrastructural investments and food availability not only moderated inflation but also enabled consumer spending. Ease of credit, conducive business environment for startups and businesses alike further accelerated growth. All these macro-economic measures have played a critical role in home and personal care consumption. We strongly believe as per capita incomes rise, spending will shift from mass to masstige and prestige products. This will bode well for us. The premiumisation trend seen in 2022-23 is at the cusp of a multi-decade growth. The Union Budget also hiked the capital expenditure by 33% for infrastructure development for 2023-24. This will not only aid rural spending but if supported by good monsoons can trigger sustained double digit volume growth for home and personal care companies, ensuring continuation of FY 2022-23 momentum for your Company.

Table: India Y-O-Y Volumes Growth (% indicates growth over Previous Financial Year)

FY19 FY20 FY21 FY22 FY23 CAGR 2018-23*
+12.1% +0.5% +11.2% +9.4% +9.4% +7.5%

*Post pandemic CAGR stands at 10% (FY20 – FY23) driven by the structural uptick seen in Home Care consumption.


Barring for any supply side shocks (below average monsoons, crude spikes, lower than budgeted infrastructural spending), we see the demand momentum sustaining for FY 2023-24.

Growth Tailwinds for coming Decade

• Premiumisation – Higher spending on premium beauty and personal care products or home care products (Liquid detergents/Liquid dishwashes/Premium detergent powders) bodes well for us. Enhanced expenditure on Home and Personal Care Products and Consumer Durables (Washing Machines and Dish Washers) along with greater awareness about sustainability, mildness and quality will further aid growth.

• The ‘Aware and Informed Consumer – The median age of Indias population is 28.2 years. Today, at least 50% of Indias population has access to the Internet. These macro factors are important as todays young Indian consumer has the 3As – o Greater Accessibility to Home and Personal Care Products o Greater Awareness about Quality and Sustainability of these Products o Greater Affordability given the increase in number of products consumed per household when compared to the previous decade

• Home and Personal Care Industry Composition – Entry of a New player, Private labels and D2C Brands gaining traction will be beneficial for both our segments. Improving penetration of niche categories will aid specialty growth and migration of consumers from mass to masstige and prestige categories through improved distribution channels will add further momentum.

We strongly believe the next decade will belong to India and we at Galaxy are completely ready in terms of products, capacities, capabilities, customer relationships and innovations to serve as well as benefit from these emerging opportunities.


Economic growth in early 2022-23 remained solid for oil exporting countries, benefiting from high oil prices, but weak in oil importers, undermined by high inflation. Among countries with floating exchange rates, the currencies of Morocco and Tunisia have depreciated slightly against the U.S. dollar since mid-2022, but the Egyptian pound has depreciated significantly. Consumer price inflation has remained high in several economies. In the Arab Republic of Egypt, limited access to foreign currency and shift to a more flexible exchange rate saw the pound lose about 2/3rds of its value against the U.S. dollar. Rising costs, difficulties securing imported inputs, and slowing global demand weighed on activity, with industrial production (excluding oil) contracting by 6% on a year ago in January 2023. Urban consumer price. inflation was 30.6% (year-on-year), reflecting the depreciation of the pound. In response to rising inflation, dwindling reserves, and declining net foreign assets, the central bank more than doubled policy rates since the start of 2022.

Rising inflation and depreciating currency saw cost of imports surging significantly in Egypt which resulted in price hikes and downtrading by consumers. There has been a strong shift to cheaper local brands with private label detergents gaining share. The upward pressure on unit prices also forced consumers to prioritise their purchasing decisions thus leading to demand cutbacks and slower than usual consumption of essential home and personal care products.

While food inflation too played a key role in cutback of expenditure on other non-food items (including home and personal care products); the impact was felt differently across the region. While the GGC economies largely managed to keep their inflation below global averages, Oil importing countries such as Egypt, Turkey, Morocco and Tunisia experienced higher levels of food and energy linked inflation.

While food and energy linked inflation did ease by Q-4 FY 2022-23, AMET Volumes continued to decline vis-?-vis the previous year.

Table: AMET Y-O-Y Volumes Growth (% indicates growth over Previous Financial Year)

FY19 FY20 FY21 FY22 FY23 CAGR 2018-23
-4.7% +9.4% +8.2% -15.1% -11.9% -3.0%


Macro-economic stability along with sustained economic growth are the pre-requisites for sustainable growth in volumes. Both these factors have been missing especially in the non-oil exporting countries of Africa Middle East and Turkey for the past couple of years. But, with food and energy inflation easing; while it will be too premature to talk about growth, we do believe barring for any further accelerated depreciation of the currencies; decline in volumes at Egypt as well as Rest of AMET (excluding Egypt) seems to be done. Your Company is taking all possible steps to restore and revive the growth momentum.

ROW – Rest of the World (Americas + Europe + Asia Pacific – excl. India)

Persistent Inflation along with accelerated rate hikes acted as sudden breaks for the advanced economies. While demand was robust in FY 2021-22; the shocks on account of the War (especially on Europe), slower than expected recovery post the pandemic (in China) and excess inventory built up (in USA) adversely impacted premium consumption for FY 2022-23.

Trends that impacted home and personal care consumption in FY 2022-23 were:

• Real Consumer Spending in the USA was in a declining trend with real spending falling for the first time in more than 2 years in March 2023. This decline was driven by all sets of consumers ranging from Low Income to High Income groups.

• While overall the intent to splurge declined, selective indulgence was seen on Travel, Food and Apparel. Thus, one trend that was clearly visible was the intent to cut back or trade down on certain categories whereas splurge selectively on others.

• Cutting back on non-essential purchases along with delayed consumption of essential home and personal care products due to energy crisis adversely impacted demand in Europe. The spurt in Oil and Gas prices not only diverted a significant portion of consumer spending on securing Food and Electricity but also reduced the spending frequency on essential as well as non-essential purchases.

• Global Home and Personal Care majors while reported growth; this was driven entirely by price hikes. Given the decline in consumption and persistent inflation, volume-wise all major players reported a decline for their core beauty and personal care categories.

• Migration towards sustainable products continued but willingness to pay a premium for these products declined given the inflationary pressures.

Table: ROW Y-O-Y Volumes Growth (% indicates growth over Previous Financial Year)

FY19 FY20 FY21 FY22 FY23 CAGR 2018-23
+29.2% +2.8% -6.8% +7.8% -4.6% -0.4%


Minimisation of supply led volatility along with cooling off inflation may ensure a soft landing for economies. While recession looks likely for US and Europe; rate cuts and fiscal support may provide the required fillip for consumption. With most of the Home and Personal Care channels being low on inventory, any positive trigger may not only give a boost to the consumption sentiment but may also trigger a strong pickup in non-essential premium consumption. This will bode well for our Specialty Care Products.

With sustainability being one of the topmost priorities; the future looks extremely bright for our new-age Mild Surfactants, Non-Toxic Preservative Blends and other high end specialty products. Barring for any new adverse macro-development, we do see consumption picking up by H2 FY 2023-24.

Segment-Based Analysis: Performance Snapshot, Outlook and Long-Term Trends Performance Surfactants

These are the basic ingredients of any Home and Personal Care formulation which perform the functions of cleansing and foaming. Applications such as Shampoos, Body washes, Face washes, Liquid and Powder detergents, Toothpastes, Dishwashes, Toilet Cleaners primarily contain these performance surfactants as their base building ingredients. Given the applications, scale and operations play a critical role in ensuring sustainable growth for this segment. Your Company has plants in India as well as Egypt which manufacture these Performance Surfactants. Given the nature of the segment, closeness to customers plays a key role in ensuring demand visibility as well as growth. India and AMET therefore are the key regional drivers for this segment.

Table: Performance Surfactant Volumes in MT

FY 2021-22 FY 2022-23 Y-O-Y Change in %
149,195 153,126 +2.6%

149,195 153,126 +2.6%

While momentum in India drove volumes for this segment, slowdown in Egypt and Turkey adversely impacted the same. Overall, your Company logged in a growth of 2.6% over previous year despite the slowdown seen globally. Going ahead, with inflation cooling off and Home and Personal Care companies focussing on volumes to revive growth, FY 2023-24 may see strong revival in volumes. The key here would be sustenance of momentum in India and revival of demand in AMET.

The Future – Trends that will ensure sustainable long-term growth for Performance Surfactants [Long-Term Outlook]

• Migration - Petro Oil Based Surfactants to Natural Oleo Chemical Based Surfactants for manufacturing Home Care Products.

• Premiumisation – Migration from Mass Powder detergents to Washing Machine based Powder and Liquid Detergents. Migration from Bars to Dishwashing Liquids.

• Sustained Rise in Consumption – Greater consumption per Household of Home and Personal Care products by members of different age groups.

Specialty Care Products

Specialty Care Products are products which perform a special function in any Home or Personal Care product. Unlike performance surfactants, these cater primarily to the masstige and prestige categories and volumes can range from Hundred (00) to Thousand (000) MT. Your Company manufactures various types of specialty products – Mild Surfactants, Preservatives, Non-Toxic Preservative Blends, Surfactant Blends, Proteins, Syndet and Transparent Bathing Bars, Amine Oxides, Conditioning Agents, Betaines and Quats. As these products cater to the masstige and prestige segments. Affordability and consciousness play a key role in ensuring sustainable growth for this segment. Given the nature, developed markets [Rest of the World] are majorly responsible for driving growth.

Table: Specialty Care Products Volumes in MT

FY 2021-22 FY 2022-23 Y-O-Y Change in %
85,023 77,659 -8.7%

For FY 2022-23, this segment logged in a decline of 8.7% primarily due to the slowdown seen in Europe and persistent inflation experienced globally. This in turn delayed new launches and adversely impacted premium personal care consumption. Going ahead, with inflation cooling off and Europe slowly getting back, we do see demand making a comeback by H2 FY 2023-24. As for the Americas, with retail channels being low on inventories, any uptick in consumer sentiment and spending can trigger a strong revival. Your Company is working closely with all its MNC as well private label customers to ensure we are ready to capitalise on this revival.

The Future – Trends that will ensure sustainable long-term growth for Specialty Care Products [Long-Term Outlook]

• Greater Affordability and Consumption – India and AMET: Today specialty consumption in India and AMET is low compared to the developed countries. Uptick in per capita consumption driven by sustained growth will ensure greater demand for masstige and prestige products thus driving demand for our specialty care products.

• Premiumisation and Greater Awareness – Globally the demand for sustainable, mild, non-toxic, high quality and functional attribute-based products is rising. Consumers are not only opting for these but are also willing to pay more for these products. Your Company has exclusively designed its specialty portfolio to cater to these needs.

• D2C Brands, Private Labels and E-Commerce Channels – The global emergence of Private labels, D2C Brands and E-Commerce players catering to niche categories will further drive penetration and demand for our specialty care products.

Raw Materials Scenario

Fatty Alcohol and Fatty Acids accounted for nearly 2/3rds of our Raw Material purchases. Crude-based Derivatives accounted for nearly 1/5th of our Raw Material purchases.

While FY 2021-22 was marked by unavailability, higher lead times and persistent uptick in feedstock prices, FY 2022-23 saw a complete reversal. Availability improved, lead times reduced and both Fatty Alcohol and Crude (barring for Q-1 FY 2022-23) were in a downward trajectory. Fatty Alcohol began the year around 2,653 USD/MT and ended the financial year around 1,422 USD/MT. Crude too, rallied to 120 USD/ Barrel in Q-1 FY 2022-23, but eventually corrected sharply to end the year around 80 USD/Barrel.

Astute risk management was critical to ensure availability as well as no adverse MTM impact.


Ratios 2022-23 2021-22 Y-o-Y Change
Volumes (MT) 230,785 234,218 -1.5%
EBITDA ( Crores)* 578 413 39.9%
EBITDA/MT (/MT)* 25,054 17,641 42.0%
Profit After Tax ( Crores)* 381 263 44.9%
Cashflow from Operation ( Crores) ^ 573 5 11,521.7%
Debtors Turnover 7.0 6.6 6.7%
Inventory Turnover 4.6 4.5 1.5%
Interest Coverage Ratio 22.8 26.6 -14.3%
Current Ratio 2.4 1.8 30.9%
Debt Equity Ratio# 0.1 0.2 -37.2%
Operating Profit Margin (%) 11.2% 9.4% 19.3%
Net Profit Margin (%) 8.6% 7.2% 20.0%
ROCE 23.9% 19.3% 23.9%
RONW 22.0% 18.3% 20.4%

* Better mix, efficiencies, recoveries and exchange

^ Higher due to higher profitability & lower working capital requirements

$ Higher due to repayment of current borrowings and higher cashflow due to higher profitability

# Lower due to repayment of borrowings and higher profitability


While the demand scenario barring for India remains hazy, our complete focus for FY 2023-24 will be to ensure sustainable volume led growth. The last 3 years have been flat in terms of volumes and while we have grown in terms of our profitability due to better mix, efficiencies, recoveries and exchange; volumes hold the key.

The targets as stated previously remain the same:

Volume Growth of 6-8%, EBITDA Growth being higher than Volume Growth and PAT Growth being higher than EBITDA Growth with ROCE in the 22% zone.

To conclude dear esteemed shareholders, it is said that "Success in Business is all about building – Building relationships, talent pipelines, great products and robust processes consistently and passionately." At Galaxy, we have done that for the past 4 decades and the ensuing decades will be no different.