gkb ophthalmics ltd Management discussions


Certain statements made in this Management Discussion and Analysis Report describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable laws and regulations. Actual results may differ from such expectation whether express or implied. Several factors that could make significant impact on the companys operations include global and domestic demand and supply conditions, input availability and prices, changes in Government regulations, tax laws, economic developments within the country and other factors.

i) Industry Structure and Developments:

Glass lenses have been used for different purposes so far. However, there is no demand for Glass Lenses as they are brittle and heavy to wear, therefore have now been replaced by plastic lenses. They are organic lenses made by polymerisation of chemical mixtures consisting mainly of monomer mixed with an initiator. Plastic Lenses have greater durability, good ultraviolet light resistance and are safe to use during any physical activity as there are less chances of breakage. Plastic lenses can be easily coated with various coatings such as the anti - reflective coatings depending upon the end user requirements. Plastic Lenses are low weight as compared to glass lenses which makes them user friendly. They can be tinted with colours that boosts their cost and in turn makes them very attractive. Now, new variants have been introduced by the industry being High Refractive Index lenses, which are thinner and lighter in nature.

Eyesight is a vital aspect of everyones life. Sedentary lifestyle, increasing literacy rate in India and developing countries, rising usage of mobile phones, laptops, television and pollution has resulted in significant rise in the number of people developing several visual ailments and eyesight-related problems, such as myopia, hypermetropia, and presbyopia which is contributing to the increase in demand for lenses as an appropriate measure to prevent further damage. Various Government and Non Government Organisations are taking initiatives to spread awareness about the treatment for various vision related ailments. With the increase in awareness, education and medical services, there is a big scope for increase in demand of lenses. There is an urgent need to promote investment in eye care industry.

ii) Opportunities and Threats:

The good service life of plastic lenses is one of the key reasons for their high demand in the global market. Apart from aiding in improving visual acuity, Plastic Lenses are also being used in the eye safety equipment of firefighters and military personnel as they are shatter resistant. Rising usage in medical devices, consumer electronics and eye safety equipments is boosting the market growth.

The uncertainties associated with the Covid -19 pandemic, the mandatory lockdowns imposed by the government of numerous countries, the resultant restrictions and the sluggish economic conditions all over the world has lowered the demand for lenses. The availability of contact lenses is also expected to slow down the growth of the plastic lens market. However, lenses being a necessity, the company is expecting that the demand for its lenses shall pick up very soon. Relief measures by the Government are also expected to boost the economy affected because of the Pandemic.

India with its large population is one of the prominent markets for the sales of plastic lenses. However, the Companys business has been facing a stiff competition from China as Chinese are dumping lenses in India at a very lower price. The Company has made a representation to the Central Government to impose an Anti- Dumping Duty on the import of the plastic lenses into India. The said application with the Central Government is under review.

iii) Segment wise or Product wise Performance:

The Company is engaged in the business of manufacturing semi-finished plastic lenses.

iv) Outlook :

The Plastic Lens industry witnessed a massive slowdown in its progress as a result of the spread of Covid-19 pandemic across the globe. However, with the onset of recovery, the demand for lenses started increasing, the operations of the Company reached back to normalcy during the year.

As the Company sells its products to the end customers who finish these lenses for the end consumers, the closure of optical shops in containment areas affected the demand for its products during lockdowns.

Presently, the company on an average manufactures 18,000 pieces per day of plastic lenses which it is expecting to increase to 24,000 pieces by the end of financial year 2022-23. The management has chalked out plans to achieve targeted sale of Rs. 40 .00 Crores during the current financial year.

The JV Project, GSV Ophthalmics Private Limited, is being re-evaluated because a lot of raw material costs (monomer from multinational companies, etc.,) has increased significantly during the pandemic. However, selling prices from our own competitors remain unchanged. The management of the Company and SOMO are in continuous discussion about how to overcome this new challenging scenario.

v) Risks and Concerns:

We do not foresee any risks, except for foreign exchange fluctuations. Since the Company also depends on exports, the economic situation in exporting countries is likely to affect the performance of the Company.

vi) Internal Control Systems and their Adequacy:

The Company has developed adequate Internal Control Systems, commensurate to its size and business, which are aimed at achieving efficiency in operations, effective monitoring and optimum utilisation of resources. The Internal Audit is carried out by a firm of Independent Chartered Accountants, along with CFO of the Company. The reports of the Internal Auditors are periodically reviewed by the Audit Committee.

vii) Discussion on Financial Performance with respect to Operational Performance:

During the year under review, the turnover from operations of the Company increased to Rs. 2704.82 lakhs compared to Rs. 2134.31 lakhs in the previous financial year. However, the Company reported a net loss from operations of Rs. 236.69 lakhs only during the current financial year compared to a net loss of Rs. 247.92 lakhs incurred during the previous financial year.

The significant change in key financial ratios in percentage along with the explanation therefore, are as under:

Ratios F.Y. 2021-22 F.Y. 2020-21
Debtor Turnover Ratio 4.02 2.40
Inventory Turnover Ratio 2.23 1.70
Return on Networth 5.727 6.185

The Debtors turnover ratio indicates the effectiveness in collecting accounts receivable. The Company is having a favorable ratio indicating efficiency in processing credit. A high Inventory Turnover ratio indicates the ability to sell the goods quickly and that there is considerable demand for products. The change in return on networth is due to the loss reported for financial year 2021-22.

viii) Material Developments in Human Resources/Industrial Relations front, including number of people employed :

The Ophthalmic lens industry is a labour intensive. Labour relations have been cordial with no interruption of manufacturing activities. The total number of permanent employees of the company as on March 31, 2022, was 179, out of which 160 employees are working for more than 10 years.