grauer weil india ltd Management discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

1. AN OVERVIEW OF BUSINESS PERFORMANCE

The business environment for the first half of the year was challenging with continued increase in the price of commodities including metals although the prices stabilised and to some extent, corrected during the second half of the year 2022-23.

Revenues for Surface Finishing crossed 800 crore during the year with good performance in the two major segments - General Metal Finishing and Industrial Paints and Coatings. The Engineering division also recorded a good performance with revenues crossing 100 crore.

The performance of Mall division, in the year 2022-23, was commendable as revenues exceeded the pre-COVID performance of 2019-20 after a gap of 2 years.

An overview of the performance of different business segments of the Company is as under:

a. Surface Finishing Segment: Surface Finishing Segment continues to be significant part of overall business operations of the company. The segment accounts for 84.73% of total segment revenues whilst contributing to nearly 77.55% to segment results.

Its product portfolio includes General Metal Finishing (such as anodising, decorative coatings, phosphating, plating on plastics, anticorrosion treatments, etc.), Paints & related Coatings (such as high-performance industrial coatings, marine coatings, aerospace and defence coatings, architectural coatings etc.) and Industrial Lubricants (such as Rust Preventives, Cutting oils, Deformation oils etc.).

Metal Finishing: Ybur Company continued to maintain its leadership position in metal finishing products and gross total revenue from this sub-segment crossed the 527 crore mark despite growing intensity of competition from domestic and international companies.

Paints coatings: Performance in this sub-segment continued to be encouraging with a value growth of 29.27% over previous year. Strong orders from marine and industrial plants segments supported this sub-segment. However, the volume growth had been only 9% in this subsegment.

Industrial Lubricants: The Industrial Lubricant sub-segment reported a flattish performance as competition strengthened in this subsegment and oil prices remained challenging during the early part of the financial year.

b. Engineering Segment: The Engineering business for the first time in its history crossed 100 crore in revenue in financial year 2022-23 backed by strong order book from newer areas driven by the Government of Indias PLI schemes.

c. Mall Segment: Footfalls continued to remain a challenge whereas consumer spends reached full normalcy in 2022-23. Food as a category had excellent performance as consumer behaviour has shifted towards increased out-of-home food consumption. Many other brands in this segment experienced excellent growths. Some segments such as Entertainment, however, continue to remain sluggish.

2. EXPORTS

Growth in exports had been relatively low during the year due to the shadow of global recession as well as the turmoil in Europe that continues to impair consumer sentiment. This was quite unexpected given that globally, organizations are de-risking their supply chain by reducing their dependence on China. However, such strategies have not yet been converted to additional Exports business for your Company as yet.

In Paint coatings, there had been no major opportunities for export this year. However, your Company will continue to explore the opportunities for export to Middle East & Russia where paint demand is enormous.

3. FINANCIAL PERFORMANCE

The highlights of financial performance of the Company for the year under review are as under :

a. The Net profit after tax for the year increased by 43.02% to 11,188.88 Lacs from 7,823.43 Lacs.

b. The Company spent 1,435.79 Lacs in capital expenditure during the year.

c. The Company has no long-term loans as at the end of the year. The only long-term liability on account of hire purchase declined from 9.65 Lacs to 5.29 Lacs.

d. The Working capital (Net current assets) increased by 5,475.30 Lacs i.e. from 36,030.90 Lacs to 41,506.20 Lacs.

e. Key Financial Ratios :

d ALIGN=RIGHT>2.89

	FY 2022-23	2021-22
Debtors turnover (days)	59	62
Inventory turnover (days)	88	99
Interest coverage Ratio (times)	85	43
Current Ratio (%)	2.91
Debt : Equity Ratio (%)	0.03	0.04
Operating profit margin (%) (before exceptional items)	17.88	16.68
Net profit margin (%)	11.56	10.31
Return on Net worth (%)	17.72	14.23

4. OPPORTUNITIES, THREATS, RISKS, CONCERNS AND OUTLOOK

Buoyed by strongly positive business sentiments, government initiatives for manufacturing (especially Atmanirbhar Bharat) and normalization of the business environment, your Company is well-poised to grow during the year. Ybur Company is building additional manufacturing capacities at Jammu, Barotiwala and Dadra to augment these growth opportunities.

As the threat of hyper-inflation and supply chain disruption abates and industries such as automotive and housing have rebound to normalcy, your Company has launched several products with focus on addressing the demands from these fast-growing segments.

In the area of Paint coatings, there are big opportunities in India due to huge investments in oil & gas, infrastructure and drinking water segment. Your Company already has strong presence in these markets and will continue to pursue strongly in these market segments.

Company continued to focus on Supply / Apply contracts which have grown due to payment security and higher than normal margin. However, competitors, too, have ventured in this business model and are establishing dedicated vertical for such contracts leading to tough market scenario in coming years. Companys vast experience in this business model and dedicated workforce is expected to supplement its efforts to keep pace with the changing business scenario.

The outlook for Engineering division is positive with a strong enquiry base generated through extensive digital marketing and lead generation initiatives.

The competition in the catchment area might result in some pressure on Mall segment current year onwards for a couple of years. Your company is taking adequate steps to bolster the brand image and renovation of some of our key structural elements to ward-off such possible threat from competition.

5. FUTURE PROSPECTS

The Company continued and refined its business strategy and continues to focus on Anodising, Plating over Plastics and Phosphating. Many new areas have been identified, both in Paints and Lubricants for horizontal expansion in 2023-24.

In Paint coatings, with change in strategy and addition of newer segments, your Company hopes to keep the pace of its growth and with a continued focus on its profitability. Ybur Company is focussing on new business opportunities in railways where it is having relatively low presence and which will help the Company to tap opportunities in infrastructure segment which is growing rapidly.

The blueprint for Growel Technical Centre is already finalised and statutory approvals are being sought to start construction in current financial year.

All segments continue to hold excellent prospects in the coming years ahead.

6. HUMAN RESOURCES

Your Companys emphasis on Human Resources continues unchanged. New systems and measures for training, development and enhancement of quality and skills have been deployed. A new fully-equipped training centre has been setup at the Head Office. The Performance Measurement Systems and Individual Development areas have been strengthened. The Company completed implementation of Success Factor, an important HR module of its SAP ERF.

There were no material developments on human resources and industrial relations fronts. The relationship with employees and workers continued to be cordial.

7. INTERNAL CONTROL SYSTEMS AND RISK MANAGEMENT FRAME WORK

The Company has appropriate internal control systems and risk management frame-work commensurate with the size and nature of the Companys business. The Company has a system of regular internal audit carried out by an independent firm of Chartered Accountants. The internal control systems / frameworks are reviewed by the Top Management and by the Audit Committee of the Board and proper follow up actions are ensured wherever required.

8. CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis describing the Companys objectives, expectations, estimates or predictions, may be forward looking within the meaning of applicable Securities Laws and Regulations. Actual results may differ materially from those expressed in the statement. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, events or information.