Gopala Polyplast Ltd Management Discussions.
a. Industry Structure and Developments:
Gopala Polyplast Limited has been in the HDPE/ PP woven sacks industry right from its inception. The Company offers the complete range of HDPE/ PP woven bags/ sacks with liner, HDPE/PP woven laminated bags, BOP P coated bags, AD Star bags, Sand Bags which are manufactured in our state of the art manufacturing unit. Today the Company is one of the largest manufacturers of PP Woven Sacks for Cement Industry in the Country. The Company has also diversified its activities by setting up facilities for manufacture of textile woven labels.
Despite being hampered by the Jute Packaging Materials (Compulsory Use in Packing Commodities) Act, 1987 (JPMA) by which the Government of India mandates the use of only Hessian (Jute) bags for many high-volume applications like packaging of food-grains and sugar HDPE/ PP bags are becoming increasingly popular in India and have caught the eye of many end users for their requirement of packing materials. They have become popular on account of their inertness towards chemical, moisture and excellent resistance towards rotting & fungus attack. They are non toxic conventional bags. PP/ HDPE woven sacks laminated with LDPE/ PP liner have wider applications. HDPE woven sacks are much stronger & can withstand much higher impact loads because of HDPE strips elongation at break is about 15-25% as compared to 30% of Jute. These sacks are much cleaner & resist fungal attack. Jute prices are very unstable in the market since Jute is an agriculture product. These sacks have many advantages over other conventional sacks materials & are quite competitive in price. A typical 50/- kg. Hessian bag costs about 50/- per bag whereas a PP woven sack costs around 10/- to 25/- per bag to the consumer.
Woven polyethylene/ polypropylene bags or simply woven HDPE/ PP bags are versatile packing materials and are, being used as an innovative and cost-effective packaging concept with light weight and the toughest packaging bags, in mainly cement industries, agricultural, sugar, fodder, chemicals, fertilizers, sand, metals and concretes etc. polypropylene bags have special linings that result in better resistant to humid conditions, in turn, leading to prolonged shelf life of the packed products. The HDPE/ PP fabrics have high strength along with increased tear resistance. Hence, these bags can withstand rough handling during the process of transportation. HDPE (high density polyethylene) used in order to take advantage of its excellent protective barrier properties. Its chemical resistance properties also make it well suited for items such as containers for household chemicals and detergents.
PP (polypropylene) has high tensile strength, making it ideal for use as tough handling material. Because of its high melting point, polypropylene can be hot-filled with products. PP Woven bags are the traditional bags in packaging industry due to their wide variety of usage, flexibility and strength. PP Woven bags are made according to customers preferred specifications as to mesh, denier, square meter, color, and width that varies from 35cm. to 80 cm. Polypropylene bags or sacks are used for packing a wide range of pulverous and free-flowing goods such as flour, corn, grain, animal feed, sugar, salt, fertilizer, carbon, caustic soda, Cement, calcium carbonate, gypsum, lime, sand etc.
HDPE bags are used mainly by the fertilizer industry and PP bags are mainly used for the packaging of cement. Of course, this number has been boosted by the periodic shortage of Hessian bags in recent years as a result of which the Government has permitted dilution of the JPMA from time to time until the shortage was overcome.
So far as Textile Label is considered the growth of organized retailing through huge malls and increase in the demand of ready to wear garments because of changing fashion trends have lead to growth in demand of labels. The Company has made inroads in the domestic garments sector.
b. Opportunities and Threats:
1. Growing industrialization in India, leading to more demand of sophisticated packaging by end customer. The Company is main supplier to cement industry and all major players in cement industries are doing their expansion on regular basis so demand of bags is increasing.
2. With the beginning of organized retailing of agro & food products, the packaging requirement with value added PP bags has emerged creating a new market for the companys product.
3. Poor showing of jute industry. Hence food grain sector shows ample scope in future as government is relaxing the jute packaging orders.
4. Export, retail packing of sugar and food grain shifting to PP sacks segment.
5. Ready to wear garment in domestic market is increasing due to changing fashion trend which is creating a new demand for label product for the company.
1. The threats of competition out of new capacities.
2. The company is engaged in the manufacture of HDPE/ PP bags and price of its raw material i.e. plastic granules is affected by fluctuations in crude oil prices and dollar. Domestic market is more price sensitive than quality sensitive
3. The process of making bags from fabric is labour oriented and labour is now in short supply.
4. Products are not bio degradable. Hence, criticism from certain sector of society as being dangerous to environment may force government to put some type of restrictions which may adversely affect future growth. However, plastics can be reused and recycled.
c. Segment wise Performance:
The Company is operating mainly in Woven Sacks Division. The Company is also in manufacturing of Labels.
d. Recent Trend and Future Outlook:
According to a report prepared by FICCI and Tata Strategic Management Group (TSMG) on plastic industry titled Plastic packaging is one of the fastest growing industries and stands at USD 700 billion globally. It has grown higher than GDP in most of the countries. In developing country like India, it grew at a CAGR of 16% in the last five years and touched ~USD 32 Bn. in FY 15. The Indian packaging industry constitutes ~4% of the global packaging industry. The per capita packaging consumption in India is low at 4.3 kg., compared to developed countries like Germany and Taiwan where it is 42 kg. and 19 kg. respectively. However, in the coming years Indian packaging industry is expected to grow at 18% p.a. wherein, the flexible packaging, which among other includes woven sacks, is expected to grow at 25% p.a. and rigid packaging to grow at 15% p.a.
Demand for the Companys products depends on the growth in demand for the products of its user industries, such as Cement (about 60%), Fertilizer (about 15%), Chemicals (about 7%), Food Grains (about 6%), Sugar (about 1%),. The Indian woven sack industry is expected to continue to grow at the annual compounded growth rate of 11% to 12%.
In case of Labels demand depends on the growth of Apparel Industry, which is also expected to grow at the annual compounded growth rate of 11% to 12%.
e. Risks and Concerns:
1. Food grain products are restricted to use PP sacks as stipulated under Jute Packaging Materials (Compulsory Use in Packaging Commodities), Act, 1987, which affects the demand. Though the Company is not affected by the said restriction as its major sales is to Cement sector which consumes about 60% of production of the Company of PP sacks, it definitely impacts the growth plans.
2. Due to lower margins high production capacity utilization is required in order to earn profit.
3. The companys inventory holding level generally remains high due to the nature of its products. So if there is steep fall in prices then there will be substantial loss in the value of stock held by the company.
f. Internal Control Systems and their Adequacy:
The Company has adequate systems of Internal Controls commensurate with its size and operations to ensure orderly and efficient conduct of business. These controls ensure safeguarding of assets, reduction and detection of fraud and error, adequacy and completeness of the accounting records and timely preparation of reliable financial information.
g. Financial Performance with respect to Operational Performance:
The financial performance of the Company for the year 2017-18 will be described in the Directors Report.
h. Material Developments in Human Resources and Industrial Relations Front:
Your Company has undertaken certain employees development initiatives, which have very positive impact on the morale and team spirit of the employees. The Company has continued to give special attention to Human Resources/ Industrial Relations development. Industrial relations remained cordial throughout the year. We are also concentrating on building up of our Human Resource Capital especially in our Sales Team by under taking various T & D activities. We are also creating adequate support systems at our HO which will provide requisite knowledge and data to our sales team. These activities will lead to a more informed and motivated sales team.
i. Cautionary Statement:
Statement in this Management Discussion and Analysis Report, describing the Companys objectives, estimates and expectations may constitute Forward Looking Statements within the meaning of applicable laws or regulations. Actual results might differ materially from those either expressed or implied.
a. The Company has not entered into any transaction of material nature with the Promoters, the Directors or the Management that may have any potential conflict with the interest of the Company.
The Company has no subsidiary.
b. There has neither been any non compliance of any legal provision of applicable law, nor any penalty, stricture imposed by the Stock Exchange/s or SEBI or any other authorities, on any matters related to Capital Market during the last three years.
c. The Company has implemented Vigil Mechanism and Whistle Blower Policy and it is hereby affirmed that no personnel have been denied access to the Audit Committee. The Whistle Blower policy is available on the website of the Company viz. www.gopalapolyplast.com
d. The Company is in compliance with all mandatory requirements under Listing Regulations.
Adoption of non-mandatory requirements of Listing Regulations is being reviewed by the Board from time to time.
e. The policy on related party transactions is disclosed on the Companys website viz. www.gopalapolyplast.com
f. Disclosure of Accounting Treatment :
These Financial Statements are prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 and the Companies (Indian Accounting Standards) (Amendment) Rules, 2016 notified under Section 133 of the
Companies Act, 2013 (the Act) and other relevant provisions of the Act. The Financial Statements up to and for the year ended 31st March, 2017 were prepared to comply in all material aspects with the Accounting Standards specified under Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Act. The previous year figures have been regrouped/reclassified or restated as per Ind AS, so as to make the figures comparable with the figures of current year. As these are the first Financial Statements prepared in accordance with Indian Accounting Standards (Ind AS), Ind AS 101 First Time Adoption of Indian Accounting Standards has been applied.
1 3. DETAILS OF NON COMPLIANCE OF CORPORATE GOVERNANCE REQUIREMENT:
There was no non-compliance during the year and no penalties were imposed or strictures passed on the Company by the Stock Exchanges, SEBI or any other statutory authority.
14. NON-MANDATORY REQUIREMENTS OF REGULATION 27 (1) & PART E OF SCHEDULE II OF THE
LISTING REGULATIONS: i. The Company has an Executive Chairman.
ii. The quarterly / half yearly results are not sent to the shareholders. However, the same are published in the newspapers and also posted on the Companys website.
iii. The Companys financial statements for the financial year 201718 do not contain any audit qualification except for the remarks on gratuity and calculation on borrowings.
iv. The internal auditors report to the Audit Committee.
15 . The Company is in compliance with the corporate governance requirements specified in Regulation 17 to 27 and Clause (b) to (i) of sub-regulation (2) of Regulation 46 of SEBI Regulations.
For and on behalf of the Board,
Manoj M. Somani
Chairman & Managing Director
Place : Ahmedabad
Date : 20th July, 2018