Management Discussion and Analysis report
A. Global Economy
The global economy has shown strong resilience to the geopolitical shocks of the last year driven by strong macroeconomic fundamentals in most of the developed and emerging market economies. The United States successfully navigated recessionary pressures, while Europe exhibited economic resilience surpassing earlier projections. China faced significant challenges in regaining its economic momentum.
Although inflation remains above target in many countries, it continues to soften in all the major economies. Asia presents a more nuanced picture, with inflation not rising as steeply as in the west and receding more rapidly. As a result, interest rates have not risen as much. Global Inflation is expected to decrease faster than anticipated, reaching 5.8% in 2024 and 4.4% in 2025, led by easing supply-side issues and stringent monetdry policies.1
The recovery in global economic growth is facing challenges due to multiple crises, including high debt levels, energy crisis and geopolitical tensions. The Red Sea crisis has disrupted global trade routes, leading to increased transit times, shipping costs, insurance premiums, etc.2
As per the International Monetary Fund (IMF), global economy is projected to grow ot 3.1% and 3.2% for 2024 and 2025 respectively. This uptick in growth is attributed to the resilience of the United States and certdin emerging mdrkets, along with expected fiscdl support in Chino. Flowever, this growth remoins below the historicol overage, primorily due to elevoted central bank policy rates combating inflation, reduced fiscal support, and sluggish productivity growth.1
B. Indian Economy
The Indian economy has demonstrated remarkable resilience despite uncertainties stemming from adverse geopolitical developments and the implementdtion of expansionary fiscal measures during the COVID-19 pandemic.
Robust domestic demand, propelled by both private consumption and public investment, coupled with the governments sustained emphasis on infrastructure spending, has emerged as the primary engine of growth in FY24. India maintains its position as the worlds fastest-growing major economy and is poised to ascend to the rank of the third-largest economy by 2027 in terms of USD valuation. Projections indicate that Indias contribution to global economic expansion will increase by 200 basis points over the next five years.
The IMF forecasts Indias GDP to grow at 6.8% in 2024 and 6.5% in 2025, driven by robust domestic demand and government spending. Economic fundamentals are improving, with receding inflation, expanding financial ecosystem, prudent fiscal management, and increasing foreign reserves.
Capital expenditure in the past 4 years has gone up by 3x which has resulted in a huge multiplier effect on economic growth and employment generation. Make in India programme supported by government policies and initiatives has boosted growth in manufacturing sector while the services sector is adopting new technologies and techniques for global competitiveness.
Government and RBIs timely interventions aided Indias quick recovery from recent global shocks. Reforms in taxation, banking, and ease of doing business, along with infrastructure investments will boost long-term economic growth potential.
C. Industry Development
1. Pharmaceuticals Industry
According to findings by Crisil reseorch, the global pharmaceutical market experienced a 5-year compound annual growth rate (CAGR) of 5%, reaching a value of $145 trillion in 2022. Projections suggest that this growth pattern will persist, with an estimated CAGR of 4.5%-5.0% over the next five years, aiming for a market size of $18 trillion by 2027.6
Healthcare spending in regions around the world are growing following diverging trends, with some more, volume driven while others from adoption of innovation.
Countries in North America, Eastern and Western Europe, Latin America, and Africa & Middle East are expected to increase spending growth by more than 30%, indicating both population-driven volume growth and a shift in the mix of products to more expensive products.7
China, the worlds second largest country by pharmaceutical spending, will increase volume by 20% in aggregate over five years, while spending will increase 21%, a more modest rate than in the prior years.7
Indian Market:
For years, the Indian pharmaceutical industry has been hailed as the pharmacy of the world.1 Acknowledged for its prominence in the global generics sector, the industry accounts for more than 20% of the global generics supply by volume and meets about 60% of the global demand for vaccines.
Indias key strengths i.e manufacturing prowess, low costs, and skilled workforce - have enabled India to become the pharmacy of the world. According to reports published recently, the Indian pharma industry has the potential and bold ambition of achieving the target of $130 billion by 2030 and $450 billion by 2047.8
According to a CRISIL report, Indian pharmaceutical industry is poised to achieve revenue growth of 8-10% in FY24 driven by strong domestic demand and increased exports to regulated markets in the west.
Key Growth Drivers:
PLI Scheme: In FY21, the government announced a 5,000 crore PLI scheme to promote the Atmanirbhar narrative in the pharma sector. In September 2023, the government approved Rs.4,000 crore PLI scheme for the pharma sector, and Rs.25,813 crore has been invested by various companies under this scheme till date.9
Generic Pharmaceuticals:
Most India-based pharma companies have traditionally focused on research and development (R&D) in generics.
India contributes to approximately 20% of the global generics supply by volume and continues to dominate with around 48% of all ANDA approvals, establishing itself as the de-facto leader in the generics space.10
Geographical Footprint:
Indian pharmaceutical firms are extending their reach and expertise beyond generics, leveraging a robust talent pool and cost advantages. This has positioned Indias pharmaceutical sector as one of the rapidly expanding segments in export markets. Notably, India boasts the largest number of US-FDA compliant facilities outside the United States, enhancing its global footprint and presence.10
2. Specialty Chemicals
Industry
Between 2024 and 2026, the global chemical market is expected to witness a growth rate of 2.9%. During this period, Asia (excluding China) is forecasted to grow at a CAGR of 3.4%, while China is expected to achieve a growth rate of 4.1%. In comparison, the USA is projected to experience o growth rate of 12%, and the European region is anticipated to witness a modest growth rote of 10%.12
Indian Market: Accounting for 2.5% of global chemical sales, India is one of the largest global markets for Specialty Chemicals which was valued at $641 billion in 2023 and is anticipated to grow at a CAGR of 5.2% over the forecast period, reaching $851 billion by 2030.11
In FY25, the Indian chemical market is projected to reach $304 billion, with specialty chemicals accounting for $64 billion. By 2040, the Indian chemical market is expected to grow to $1 trillion, marking more than threefold increase from FY25.13
Key Growth Drivers:
Rising Endorsements from Global Majors:
Indian chemical industry continued to secure multi-year orders from global companies in 2023. We have seen clear evidence of supply chain shifting away from China, especially from Europe, reflected in ~$1 billion3 of new order wins for Indian companies this year. More importantly, these orders come from well-established global incumbents (such as Mitsubishi Chemicals, UBE Corporation and Givaudan etc), which we dlso think reflects Indias standing as an emerging and reliable supply partner.14
Expected Export Growth in FY25: This year, exports slowed down for many companies after dominating the industrys revenue for six yeors. Looking aheod, India is likely to keep gaining market share in Europe, especially as Europe faces higher costs and capacity closures. This shift favours India, especially with China exporting less due to domestic economic issues.14
Green Chemical Growth:
Asia Pacific has enjoyed the largest revenue share of 35% in green chemicals market, driven by increasing awareness for environmental sustainability and government initiatives to promote cleaner alternatives. Key trends include a rising emphasis on bio-based, renewable feedstock which aligns with the regions commitment to reduce carbon emissions. Additionally, the middle- class population is showing a preference for eco- friendly products, further propelling the demand for green chemicols in various industries, from manufocturing to agriculture.15
3. Agrochemicals Industry
Industry estimates indicate that the global agrochemicals market, valued at around $234 billion in 2023, is projected to grow at a CAGR of 3.1% from 2024 to 2030. This growth will primarily be fuelled by the increasing demand for fertilizers and crop protection solutions across the global agricultural sector. The rise in fertilizer adoption by farmers, aimed at enhancing crop yield by providing essential nutrients, continues to drive the demand for agrochemical products worldwide.16
In the upcoming quarters, agrochemical companies are anticipated to encounter challenges such as subdued pricing, rising inventories, and the ongoing influx of generic products from China, which is expected to exert pressure on the market for a significant portion of 2024.
Indian Market: In 2024, the Indian agrochemicals sector is valued at approximately $8.2 billion, projected to expand to $13.1 billion by 2029, boasting a CAGR of 4%.17
The industry stands at a pivotal moment, grappling with a worldwide economic downturn, increased competition from China, erratic monsoon patterns impacting crop growth, and worries about El Ninos effect on agriculture. Stakeholders are pushing for innovation, stressing the importance of creating new solutions and strategies to address changing needs in a sustainable manner. The spectre of Chinese dumping poses a significant threat, potentially causing disruptions in local markets. However, despite these obstacles, the industry is positioned for expansion, fuelled by factors like population growth, governmental backing, and advancements in production and storage technologies.18
4. Refineries Industry
The global oil refinery market is on the brink of substantial growth, with forecasts indicating a surge from $1.65 trillion in 2022 to $3.75 trillion by 2030. This significant expansion underscores the industrys resilience and its crucial role in meeting the increasing demand for refined petroleum products on a global scale. The driving force behind this growth is the ongoing expansion of downstream infrastructure worldwide, propelled by the rising demand for refined petroleum products.
Many refineries worldwide are aging and in need of upgrades to enhance operational efficiency and ensure compliance with evolving environmental standards. This presents a noteworthy opportunity for market participants to seize. Additionally, the Asia- Pacific region, supported by upcoming major refinery projects in countries like China and India, is positioned to retain its significance in the global oil refining market, further highlighting the industrys potential for growth and innovation.19
India Market:
In India, the refining industry currently has a capacity of 254 MMTPA and is striving to enhance its refining capabilities, with aspirations to expand its capacity to 450 MMTPA by 2030. This strategic initiative underscores the nations dedication to meeting the rising demand for petroleum products domestically and potentially establishing itself as a major player in the global refining arena. To accomplish these ambitious goals, continuous investments in infrastructure, technology upgrades, and regulatory frameworks are essential to support this growth trajectory while adapting to changing environmental and market conditions.20
5. Metals, Minerals & Mining Industry
Mining holds a significant historical legacy as one of the worlds oldest industries.21 It is poised to play a crucial role in facilitating the global transition to clean energy, as minerals serve as vital components for renewable energy technologies.
Indian Market: India is anticipated to move towards sustainability with the implementation of aggressive policy reforms aimed at improving the ease of doing business for domestic players. These reforms will also contribute to the countrys ambition to achieve self-reliance, thereby reducing import dependency for raw materials and metals essential for the green energy transition.22 Estimates suggest that India aims to achieve annual sales of one crore electric vehicles (EV) by 2030.23
The minerals and metals industry in India is anticipated to undergo significant expansion in the coming years, primarily to cater to the robust domestic demand driven by infrastructure investment and a surge in the real estate sector, while also aiming to decrease reliance on imports.22
India has established ambitious objectives, aiming to achieve a total crude steel capacity of 300 million metric tons per annum (MTPA) and total crude steel production of 255 MTPA by the fiscal year 2030-31 Anticipated infrastructure development projects, including the construction of roads, railways, airports, and other initiatives, are expected to drive a surge in steel demand, estimated to rise by approximately 10%24.
India holds significant positions in various mineral sectors worldwide, ranking as the second-largest producer of aluminium, third- largest producer of lime, and fourth-largest producer of iron ore. The robust growth in iron ore and limestone production mirrors the strong demand conditions in key user industries such as steel and cement. Furthermore, the substantial increase in aluminium production indicates vibrant economic activity across sectors such as energy, infrastructure, construction, automotive, and machinery.25
6. Other Industry Segments
Some of the other industries that the company caters to are paints and fertilizers.
Paints Industry: The global paints and coatings market was estimated at $177.4 billion in 2023 and is projected grow at a CAGR of 4.7% to reach $269 billion by 2032.
The growth will be driven by rising global urbanization and industrialization, particularly in emerging economies, growth traction in the construction and automotive industries, growth in the global furniture market, and diversification of oil and other industries in the Middle East.28
Asia-Pacific dominated the market across the world, with China, India and Japan being the largest consuming countries.27
Fertilizer Industry:
The Indian market for fertilizers reached a value of $41.2 billion in 2023 and is projected to grow at a CAGR of 6.1% to reach $70.2 billion by 203228. India holds the third position globally in overall fertilizer production, ranking second in nitrogen fertilizers and third in phosphate fertilizers29. In the upcoming financial year, the Finance Ministry has allocated Rs.1.64 lakh crore for fertilizer subsidy, marking a 13% decrease from the revised estimate for FY24.
This reduction is attributed to declining international prices, government initiatives promoting the use of bio and organic fertilizers, and the increasing adoption of nano urea.30. Fertilizer subsidies constitute approximately one- ninth of Indias total budget expenditure.31
D. Company Overview
GMM Pfaudler is the leading technologies, systems and services provider for the chemical and pharmaceutical industries, as well as many others.
We design, manufacture, install and service corrosion- resistant equipment and complete chemical process systems, according to the requirements of our customers.
With the integration of the Groups technologies into complete process solutions for a myriad of applications - such as reaction, evaporation, acid recovery, distillation, filtration and drying, amongst many others - the global team of process engineers and project managers provide turnkey designed and built systems.
The exceptional portfolio of systems and technologies requires global support for installation, maintenance and optimization. To better serve the Groups clients, we provide extensive worldwide services with the largest field service organization in the industry.
GMM Pfaudler is driven by 2000+ individuals across 4 continents and 20 global manufacturing facilities around the world.
With the growing shift towards conducting business responsibly, GMM Pfaudler has integrated an ESG-led approach to generate holistic value for all its stakeholders The Company has taken concerted efforts in the areas of environment conservation, social well-being, and ensuring sound corporate governance in the organization.
To this end, GMM Pfaudler has undertaken various mindful initiatives during the reporting year, the details of which have been covered in the ESG section.
Following are the Key Strategic and Financial Highlights for FY24:
1. Key Strategic Highlights
Acquisition completed for MixPro, Canada in December 2023. This strategic move strengthens our industrial Mixing business and reinforces our commitment to delivering superior products and services that will help our customers improve process efficiencies.
DBAG Fund VI has completed the sale of its stake in the company, concluding an 8-year partnership. Chrys Capital has acquired 9.9% stake, while the Patel family has purchased 1%
Profitability improvement in the International business driven by strong execution, pricing improvements and lower costs (raw material and energy).
Partnered with Altilium to integrate their sustainable DNi method for mining cobalt and nickel with our advanced corrosion- resistant equipment.
New Edlon site opened in Coatesville, Pennsylvania to perfect the development and production of ultra- high purity equipment.
Ratings outlook upgraded by CRISIL to Positive.
Credit Rating is now AA-/ Al+/Positive.
GMM Pfaudler India received the Rising Star and Best Company in Engineering award at Fortune Indias Next 500 event, securing an impressive rank of twenty- six.
2. Financial Performance
GMM Pfaudler maintained its growth momentum during FY24 despite the global geopolitical uncertainties and slowdown in the Pharma & Chemical sector.
The Company continued to remain committed to enhancing shareholder value, reflected in its increasing market capitalisation of over 16 times in the last six years. GMM Pfaudler is one of the top 1000 listed companies in terms of market capitalisation (its rank on The BSE Limited (BSE) was 624 while on the National Stock Exchange of India Limited (NSE) was 619). In FY24, GMM Pfaudler recorded standalone revenues of 11,031 crore, down 4% from the previous years 11,075 crore and consolidated revenues of 13,446 crore, up 8% from the previous years 13,178 crore. Standalone Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) is down at 1139 crore as compared to 1171 crore in FY23 and consolidated EBITDA increased 11% to 1477 crore as compared to 1429 crore (before exceptional item).
Profit Before Tax (PBT) reduced by 47% to 170 crore as compared to 1131 crore in FY23 on a standalone basis and reduced by 6% to 1255 crore compared to 1271 crore (before exceptional item) in FY23 on a consolidated basis.
The Company continued to strengthen its internal systems and processes to improve efficiencies and minimise costs. In the current year, the Company has been able to reap the benefits from these efforts and will continue to do so in the coming years as well.
The year FY25 started with a strong order book and with the resurgence in the Pharma & Chemical sectors, the Management remains confident that GMM Pfaudler will continue to dominate the corrosion-resistant technologies, systems, and services space.
E. Key Financial Ratios
Details of change of 25% or more in the key financial ratios in comparison to the previous financial year along with explanation thereof are as under.:
Sr. No. Particulars | Consolidated | ||
FY24 | FY23* | % Change | |
1 Debtors Days | 46 | 45 | 2% |
2. Inventory Days | 74 | 83 | -11% |
3. Interest Coverage Ratio | 5.0 | 6.4 | -22% |
4. Current Ratio | 161 | 1.49 | 8% |
5. Debt Equity Ratio | 0.93 | 1.20 | -23% |
6. Operating Profit Margin (%) | 13.83% | 13.51% | 2% |
7. Net Profit Margin (%) | 5.05% | 6.62% | -24% |
8. Return on average net worth (%) | 19.49% | 28.42% | 31% |
9. EPS (in Rs.) | 39.8 | 36.8 | 8% |
*FY23 numbers have been restated for final fair values of purchase price allocation for Mixel France SAS and Hydro Air Research Italia S.r.l. For further details kindly refer Note 45: Business Combination
Notes:
Return on average net worth
(%): Return on average net worth decreased primarily due to lower profit after tax and increase in total net worth in FY24 as compared to FY23.
Definitions:
1) Debtor Turnover: Average of trade receivables (current year and previous year) by revenue from operations for the year.
2) Inventor Turnover: Average inventory (current year and previous yeor) by revenue from operations for the year.
3) Interest Coverage Ratio:
Total EBITDA before exceptional item by finance cost for the year.
4) Current Ratio: Current assets by current liabilities including working capital borrowings.
5) Debt Equity Ratio: Total debt including working capital borrowings and lease liabilities by total equity at the end of the year.
6) Operating Profit Margin:
EBITDA before exceptional item by operating revenue for the year.
7) Net Profit Margin: Profit after tax for the year by revenue from operation for the year.
8) Return on average net worth:
Profit after tax for the year by average net worth for the year.
9) Earnings Per Share (EPS):
Profit for the year by number of equity shares.
The calculation of above ratios (including restatement of prior year ratios, wherever necessary) is in accordance with formula prescribed by Guidance note on Schedule ill issued by the Institute of Chartered Accountants of India.
F. Business Segments & Operational Highlights
1. Business Overview
GMM Pfaudler is present across Americas, Europe, and Asia through its offerings in technologies, systems, and services. Through its product portfolio, the company has sustained its business relations with a marquee customer base and continues to strengthen its position as the market leader. GMM Pfaudler is at the forefront of innovation, focused on developing new technologies that will become a benchmark for tomorrow.
Technologies:
Since the very beginning, GMM Pfaudler has continually revolutionised the industry to meet its clients highly specific, ever-changing chemical processing needs. Year after year, with proven reliability, we have designed and manufactured the technologies required to create chemicals that are sought after worldwide.
Our Group boasts over a century-long expertise in the use of many types of corrosion-resistant materials, like glass-lined, borosilicate glass 3.3, fluoropolymers, high nickel alloys, zirconium, and tantalum, just to name a few.
By leveraging our vast portfolio and truly global operational footprint, GMM Pfaudler can serve its clients with single source solutions for all their most complex needs.
The Technologies business accounted for a revenue of Rs.2,057 crore with an order intake of Rs.1,762 crore in FY24.
Glass-Lined Technologies
Pfaudler has been at the forefront of developing new technologies to meet the highly specialized chemical processing needs of its clients for more than a century.
One of the primary reasons why Pfaudlers glass-lined equipment is trusted by over 90% of the worlds top chemical companies is due to its exceptional reliability in reaction technologies and the comprehensiveness of its glass-lined accessories. These advanced technologies are crucial for the safe containment of corrosive contents, maintaining vessel pressure, and ensuring the final batch quality.
Business Highlights:
Operational excellence projects completed in Waghausel, Germany and Li Yang, China plants leading to throughput improvement.
Market share gained in Spain, Italy, Slovenia & Eastern Europe through our sourcing program from India.
Quality improvement programme implemented in India.
Spend analysis and optimization by developing alternate vendors, achieved price consistency across plants in India.
Non Glass-Lined Technologies:
GMM Pfaudlers non glass- lined technologies that include Mavag (Filtration & Drying), Mixion, Mixel and Mixpro (Mixing Technology), Interseol (Seoling Technology), Equilloy (Alloy Process Equipment), Edlon (Fluoropolymers) and Normag (Lab & Process Glass) showcase our strength as a group, our capabilities, and our constant pursuit of innovation. The objective has always been to diversify from our core business by entering adjacent industries to sustain growth and cdpture customer wallet share through portfolio expansion. With our non glass-lined technologies, we leverage the full breadth of our capabilities to provide our customers an end to end solution.
The focus remains on strengthening the non-glass- lined portfolio to create a basket of brands that are complementary in nature and cdn increase customer spend in the core industries that we serve.
Business Highlights:
Mixion orders on track, expanding to new application areas such as PET recycling, gold processing and gas fermentation.
Equilloy funnel remains strong; breakthrough order in biorefinery application (SS and exotic vessels).
Two new products developed in India: Vertical Conical Filter Dryer (VCFD) and Continuous Pressure Filter (CPF).
Cross-selling of multiple products to customers in US, Europe and Asia resulting in increased customer spend.
Systems:
GMM Pfaudlers capabilities are not limited to the individual technologies themselves. Utilizing vast chemical processing expertise, our skilled engineers combine technologies and services into complete, fully integrated, and efficiently operating process systems.
GMM Pfaudler supplies turnkey systems from lab through full industrial scale plants, for all chemical processes. Our expertise allows us to design process systems with Pfaudler technologies meeting the complex requirements of reaction, evaporation, distillation, acid recovery, absorption, filtration, and drying processes. A complete system includes the design of all the unit operations surrounding and supporting the core technology. Systems are designed specifically for each clients process. Each system layout is custom designed to ensure proper system functionality and to ensure all equipment, instruments and valves are arranged for ease of operation and maintenance. Our technicians assist with field installation and our engineers work with our clients team to commission the system.
As a single-source provider, we ensure that the design of every component is perfectly integrated into the system for optimum performance. Our skilled engineering and manufacturing ensure high quality while our project management expertise provides for fast-track schedules and reduced costs. Our focus is to provide our customers with innovative solutions and comprehensive service offerings across the world.
The Systems business accounted for a revenue of Rs.418 crore with an order intake of Rs.379 crore in FY24.
Business Highlights:
Large order win for an acid recovery plant in Korea, the biggest of its kind globally.
Agreement with Bhabha Atomic Research Centre (BARC) for technology transfer of desalination technology.
Big order win for cardanol extraction skid systems in India
Focus on specialty chemicals for WFEs starting to pay dividends
- strong opportunities with multiple customers.
Final commissioning of first acid recovery project in India.
Services:
Not only do the worlds top chemicol companies trust on GMM Pfaudlers Technologies and Systems to manufacture their products, but they also rely on our engineering, technical services, and aftermarket parts to keep their plants operating efficiently.
We provide pdrts dnd maintenance services for our technologies to our global network of customers throughout their plants, as well as the same services for those of others.
However, our services also extend far beyond that of standard maintenance. Every project is unique, and our highly experienced team of engineers and technicians will work together with you to deliver the most effective ond complete process solution, from conception to design and instdlldtion.
The Services business accounted for a revenue of Rs.971 crore with an order intake of Rs.873 crore in FY24.
Business Highlights:
New service centers opened in Taubat6, Brazil and Venice, Itoly.
Large fermentation agitators installed for 3 major customers in India.
Strengthening of services team through key personnel hires which would help expand presence in India.
2. Operational Highlights
New welding qualification and training centre opened at our manufacturing facility in Vatva, India, designed to enhance the skills of our welders.
Operational excellence projects in Switzerland and Karamsad continue.
Operational excellence projects and cost reduction measures continue across geographies.
G. Innovation and Technology
GMM Pfaudlers high efficiency gas induction impeller, HEGI has been granted a patent by the Government of Indias patent office, recognizing its ability to significantly improve gas hold up and mass transfer as compared to commercially available impellers.
Developed and launched new Drying technology for Chemical Industry which significantly reduces drying time and costs.
Hydro Air built a mobile "pilot-in-a-container" unit to enhance latex process production, supporting INEOS Inovyns sustainable E-PVC production for high-end applications in automotive and energy sectors.
H. Opportunities and Threats
Opportunities:
The governments focused thrust on positioning India as a global sourcing hub, a reliable alternative to China, on becoming self- reliant, coupled with its efforts in moving up the Global Ease of Business ranking is expected to attract investments into India. These efforts should open interesting growth opportunities for GMM Pfaudler.
The company remains focused on innovation to drive growth. The primary growth engine for the chemical and pharmaceutical sectors over the next ten years will be the shift in production from China,
Europe, and the USA to India. Russia-Ukraine war, higher labour costs in China and the developed world, stricter pollution norms in China, and the Indian governments support to chemicals and pharmaceutical industries through the PLI scheme and Pharma city are the key facilitators of this trend.
The companys recent acquisitions have expanded our reach into the Non-Glass Lined business, offering a range of new industries and applications, especially for our mixing systems business. These acquisitions, combined with our existing capabilities, position us for global growth.
The allocation of the Production Linked Incentive (PLI) scheme continues, with notable increases in active pharmaceutical ingredients (APIs) and semiconductor and display manufacturing ecosystem.
GMM Pfaudler is currently working on green and ESG-friendly glass lined equipment materials.
Some of the heavy metals which were part of the old formula are now being replaced with greener materials. The company also has technologies to cater to bioplastic, bio proteins and mock meat industries. The rapidly growing EV space is also an area of growth opportunity that the company is exploring.
Threats:
GMM Pfaudlers business is dependent on the performance of their end user industries like pharmaceuticals and chemicals. Poor business outlook in these end industries end a consequent cut in capex may impact business prospects. However, the company is de-risking itself from the traditional pharma and chemical industries and foraying into newer industries with the strategy for non-GLE and systems business to grow via crossselling opportunities and exploring new applicotion areas.
Any significant uptick in the prices of commodities can potentially impact margins. Raw material inflation in end user industries, as witnessed post Covid or during the Russia-Ukraine war, can adversely impact the business of clients leading to o deferment of capex, which in turn impacts the companys order book. To mitigate the impact, the company is undertaking cost reduction meosures and passing on the price increase to end customers.
Threat from geopolitical risks may impact the delivery approvals from the government. GMM Pfaudler was not able to ship out a vessel from UK to China, to a European player operating in China owing to government regulations.
I. Risks and Concerns
In todays environment, all businesses encounter risks from strategic, regulatory, alliance, operational, and financial perspectives.
GMM Pfaudlers Risk Management policy ensures the organizations sustainable growth by encouraging a proactive approach to evaluating, mitigating, and reporting these risks.
This policy establishes a structured and disciplined framework for making decisions related to business risk issues.
Risk Management Framework
The Companys risk management framework has been developed with an objective to enhance value of the Company and to the stakeholders (internal and external) by ensuring Companys business and growth objectives are protected. This framework facilitates decision making, planning and prioritization threats to business activities, fluctuations and balancing risks and opportunities.
Through this framework, Company plans to inculcate a risk aware culture which will ensure that risk management is consistently practiced across the Company and highlight areas of focus for Management to make informed decisions to reduce the threats to the Companys business and growth objectives.
The Company has adopted a comprehensive Enterprise Risk Management approach to identify and manage risks at an enterprise level. The risk methodology adopted is in line with leading Risk Management standard laid down by the Committee of Sponsoring Organizations (COSO).
Risk Management Process
Risk Management Organization Structure
The Risk Management
Committee (RMC) of the Board facilitates implementation of Risk Management Policy and Framework. RMC also apprises the Board about the evolving changes in the risk universe (landscape) and recommends actions to be taken.
The Executive Risk Management Council (ERMC) consistently monitors and records changes in the business environment, threats and factors impacting the risk profile of the Company. The ERMC tracks and reports the implementation of the risk mitigation plans to the RMC who in turn reports to the Board of Directors. The ERMC consists of the Managing Director, Chief Executive Officer, Chief Financial Officer, Chief Risk Officer Business (CRO), Enabling Function Heads (HR, IT, other function heads). The CRO works closely with the ERMC and Risk Owners to identify risks and facilitate development of risk mitigation plans.
Risk Identification and Mitigation
Effective risk management begins with comprehensive risk identification and mitigation strategies. By systematically identifying potential risks across various categories such as strategic, operational, financial, and regulatory, organizations can anticipate challenges that may impact their objectives. Once identified, these risks are assessed and prioritized based on their potential impact and likelihood. Mitigation strategies are then developed and implemented to reduce the risks to an acceptable level. This proactive approach ensures that organizations are better prepared to handle uncertainties, thereby safeguarding their assets and promoting long-term stability and growth.
In line with the same, some of the major risks identified by the company, and its mitigation plans, are given below:
Risk Item | Mitigation measures |
The Company has acquired complete stake in Pfaudler International which has various plants across the globe. The Company has further acquired Hydro Air Research Italia S.r.l., GMM Pfaudler JDS LLC, Mixel and MixPro to enhance the Companys product portfolio and strengthen its process know-how & simulation/ testing capabilities. | |
Acquisition synergies | Committed to maintaining its position as a leading provider of corrosion-resistant technologies, systems, and services, the Company is making significant strides in value sourcing, operational excellence, portfolio expansion and branding & communication. Additionally, the Company has established a global Mixing technology platform that caters to diverse industry segments. |
Geopolitical Risk | The financial and operational stability of the Company can be threatened by increased volatility and uncertainties resulting from war and political upheavals. To mitigate these risks, the management team regularly reviews geopolitical risks and devises plans to minimize their impact on the business. |
The Company recognizes that effective human capital management is crucial for achieving its strategic and operational goals. Key elements of human capital include attracting, retaining, and engaging talent, as well as maintaining strong employee relations, all of which are crucial for business success. | |
QQQ | With a view to align and retain employees, the Company has an Employee Stock Option Plan (ESOP) in place which serves as a longterm incentive for its global workforce. |
oy Human capital | The "NEEV" training calendar, featuring specialized training on business products from subject matter experts, has added significant value. A blend of functional and behavioural training programs, aligned with the Companys "DNA for Success," has been successfully implemented. Leadership development also remains a key focus, with coaching sessions provided for critical employees. |
With the introduction of an enhanced reward and recognition system, a culture of prompt acknowledgment and collective celebration has become a welcome practice within the organization. | |
The Company has also implemented a systematic succession planning process to build and strengthen its talent pipeline. | |
Risk Item | Mitigation measures |
Digitalization and Innovation | Digitization has become an essential aspect of any business organization. The company has created a comprehensive digitization roadmap encompassing both operations and support functions. By leveraging technology, the company aims to generate insights for faster and more effective decision-making, as well as to develop technology-driven products and value-added services. One notable initiative is the in-house development of a one-touch QR Code mobile application, which provides customers with quick and easy access to essential documents related to Glass-Lined products. |
Intellectual property | Loss of proprietary designs/infringement of intellectual property may lead to loss of revenue, market share and will adversely impact demand of GMM products. The Company has strengthened its documentation and created an operational framework to respond to cases of potential infringements. |
IT Security | The company has well-institutionalised information security management system based on internationally recognised standards and best practices and is continually improving its cybersecurity posture to safeguard from the emerging cyber threats to its business. Regular updating of online infrastructures is being undertaken. Adequate firewalls and disaster recovery systems has been set. Further, Company is further implementing Security information event management for entire IT Ecosystem |
Supply Chain n | Significant process changes and digital initiatives were adopted in the supply chain front to reduce process time and to improve price discovery. Detailed vendor analysis is being conducted to identify high- risk vendors. Company plans to further de-risk by onboarding alternate vendors for all critical items. |
Regulatory Risks | The Company monitors proposed regulatory changes and maintains a well-structured and documented compliance framework, which enables management to monitor and report on compliance risks and exposures to the Board. The Board conducts periodic reviews of compliance reports covering all applicable laws. |
3. Human Resources
Keeping up with the organizations rapid pace of growth, HR continues to evolve itself as a strategic business partner. Keeping future in mind, we have prioritized the tdlent imperatives that supplement our growth journey. In the last year, we saw our talent and ledrning strategies focusing on continuous learning and personalized development. These initiatives have kept our organization aligned to our mission and help us navigate through the VUCA world.
NEEV, our structured training calendar, features specialized sessions led by industry experts, masterclasses curated by internal subject- matter experts, playing a crucial role in enhancing our teams skills and knowledge in a tdrgeted manner. Additionally, we have focused on improving essential business skills through a series of functional programs aimed at strengthening our capabilities in various areas, including sales, finance, and product training. Talent League, our program for key talent, will adopt a blended learning approach, incorporating elements like coaching, action learning projects, and more with the aim of strengthening the succession management process while offering our key talent experiential learning opportunities.
Our competency framework, the DNA for success, continues to be the anchor that drives our behavioural initiatives. These behaviours, being central to our company culture, required us to sensitize them among all our employees. We have transitioned from traditional classroom led learning to a more application-based ledrning culture. This shift not only enables our employees to exhibit success behaviours, but also encourages them to recognize and reward these behaviours through (Appreciate, our employee recognition program.
The insights gained from our annual employee engagement survey, Parivartan, remain an essential tool for listening to our workforce. This crucial input influences the design and development of our HR initiatives in line with the business requirement.
This year, we have trodden on the path towards strengthening Diversity, Equity, and Inclusion (DEI) agenda.
Our inaugural DEI workshop marked an important step in our commitment to fostering an inclusive workplace culture. DEI is not just a business imperative but also a moral commitment.
Moreover, our harmonious relationship with the Union is a testament to our unwavering commitment to fair labour practices and colldborative engagement.
K. Internal Control Systems and their Adequacy
At GMM Pfaudler, Internal Controls are a key pillar of Corporate Governance. The Company has an internal control mechanism, which is commensurate with the nature, size, and complexity of the business, both at entity and process levels. The system assures integrated, objective, and reliable financial information.
The preparation of Companys Financial Statements is based on the Significant Accounting Policies selected by the Management and approved by the Audit Committee and the Board. These Accounting policies are reviewed and updated from time to time.
The Company uses LN ERP System as a business enabler and maintain its Books of Account. The transactional controls built into the LN ERP systems ensure appropriate segregation of duties, an appropriate level of approval mechanisms and maintenance of supporting records.
The Information Management Policy reinforces the control environment. The Company has a well institutionalised information security management system and uses robust IT tools for minimising errors and lapses, identifying exceptional trends through data analysis and tracking crucial compliances.
The Company has advanced solutions which automate threat detection and response against an evergrowing variety of threats, including ransomware. The Company has introduced XDR (extended detection and response) in place which collects and automatically correlates data across multiple security layers - email, endpoint, server, cloud workload and network.
The Company has done various assessments including Vulnerability & Red Team Assessment and Penetration Testing to further strengthen the IT infrastructure. As part of increasing the security posture and security architecture, a complete GAP assessment has been initiated on the Companys cyber security and data privacy practices to identify areas of high risk to the Companys business and determine interventions.
The Company has also implemented a Data Loss Prevention ("DLP") solution as part of its information security strategy, which has significantly improved the Companys ability to protect sensitive data and prevent data breaches.
Suggestions, recommendations, implementation status and significant internal audit observations are placed before the Management and the Audit Committee on a periodic basis. The Management undertakes a periodic review and ensures appropriate actions. The Audit Committee periodically reviews the adequacy of the internal control systems and provides direction and guidance, including external benchmarking of best practices for further action, if any. Internal auditors conduct a quarterly follow up for implementation/ remediation of all audit committee recommendations and the status report is presented to the audit committee regularly.
In accordance with the requirements of Section 143(3) (i) of the Companies Act, 2013, the Statutory Auditors have confirmed the adequacy and operating effectiveness of the internal financial control systems over financial reporting.
Invest wise with Expert advice
IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000
IIFL Capital Services Support WhatsApp Number
+91 9892691696
IIFL Securities Limited - Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.