hindprakash industries ltd share price Management discussions


COMPANY OVERVIEW:

The Company was originally incorporated as Hindprakash Lonsen Industries Private Limited under the provisions of Companies Act, 1956. The name of the Company was changed to Hindprakash Industries Private Limited on February 16, 2018. The company was subsequently converted into public company and consequently name was changed to Hindprakash Industries Limited. The CIN of the company is L24100GJ2008PLC055401. The Company is engaged in the manufacturing and trading of Dyes, Auxiliaries, Intermediates and Chemicals. Company started manufacturing unit in the year 2008 to produce Disperse Dyes, Reactive Dyes and Textile auxiliaries for catering the needs of domestic textile industry. The Company has achieved a steady growth in productivity and has expanded its range of products from dyes to auxiliaries to speciality chemicals. We believe that Companys expertise in chemical manufacturing has enabled to expeditiously increase the production capacity and expand into new value added products. With wide range of products, Company cater to various industries viz. Dyestuff and Dye intermediates, Textiles, Construction Chemicals, Speciality Chemicals etc. The Company is located at Vatva i.e. in the heart of Gujarat Industrial Development Corporation, an Industrial Estate for manufacturing, blending and formulation of dyes, auxiliaries & intermediaries. The Estate has common effluent treatment plant of which most of the units in the estate are members apart from having their own environmental treatment facilities. The Company is promoted by Mr. Om Prakash Mangal, Mr. Sanjay Prakash Mangal and Mr. Santosh Narayan Nambiar. With decades of experience in this industry, Companys Promoters along with the team of management are actively involved in the day to day affairs of the companys operations adding valuable knowledge and experience required for sustainable growth.

FINANCIAL YEAR 2022-23 AND OUTLOOK:

During the year ended 31st March 2023, the company achieved a total net sale of Rs. 10,078.54 Lakhs and achieved net profit after tax of Rs. 245.77 Lakhs.

ECONOMIC / INDUSTRY OVERVIEW: ? Global Scenario:

The global chemicals market grew from $4700.13 (approximately) billion in 2022 to $5079.29 (approximately) billion in 2023 at a compound annual growth rate (CAGR) of 8.1%. The chemicals market is expected to grow to $6851.59 billion in 2027 at a CAGR of 7.8%. The Chemicals industry is one of the fastest growing sectors of the manufacturing industry. The industry growth exceeds that of the manufacturing sector, despite the challenges of escalating crude oil prices and demanding international environmental protection standards which are now adopted globally. The US chemical industry has shown strong financial performance, reaching a level last seen more than two decades ago. Further, chemical producers can play a crucial role in effectively tackling climate change. Chemicals and materials are ubiquitous in a modern-day lifestyle, and for chemical producers to operate in an evolving global geopolitical landscape, there will be a strong need for fundamental changes to be made, either proactively or reactively. The global chemicals industry is being shaped by following trends that are impacting business models, processes and product segments of multinational players.

The key segments of the chemical industry are Commodity chemicals, Specialty chemicals, Pharmaceuticals, Agrochemicals and Consumer Products.

As the US chemical industry transforms itself by adjusting portfolios, retooling supply chains, and advancing material innovation, 2023 will set the stage for a reset in terms of materials transformation. The significance of this reset lies in and is driven by changing customer requirements, which include products sold and extends as far back as pathways and feedstock choices.

? Indian Scenario:

The Chemical industry is a knowledge intensive as well as capital intensive industry. It is an integral constituent of the growing Indian industry. This Industry occupies a pivotal position in meeting basic needs and improving quality of life. The Chemical industry in India provides several building blocks and raw materials for many industries, including textiles, paper, paints, soap and detergents, pharmaceuticals and agrochemicals.

Indias specialty chemicals companies are expanding their capacities to cater to rising demand from domestic and overseas.

The chemical industry is expected to contribute US$ 383 billion to Indias GDP by 2030.

India is the 6th largest producer of chemicals in the world and 3rd in Asia contributing 7% to Indias GDP.

FDI inflows in the chemicals sector (other than fertilizers) reached US$ 20.96 billion between April 2000- December 2022. The government has targeted to increase the ethanol blending to 20 per cent by 2025 which is presently 10%. Indian chemicals and petrochemicals industry is growing to new heights, looking forward to an investment of INR 8 lakh cr by 2025.

? Indian Government Initiatives:

The Indian government recognises chemical industry as a key growth element and forecast to increase share of the chemical sector to 25% of the GDP in the manufacturing sector by 2025. Under the Union Budget 2023-24 the government allocated Rs. 173.45 crore (approximately) (US$ 20.93 million) (approximately) to the Department of Chemicals and Petrochemicals. A 2034 vision for the chemicals and petrochemicals sector has been set up by the government to explore opportunities to improve domestic production, reduce imports and attract investments in the sector. The government plans to implement production-link incentive system with 10-20% output incentives for the agrochemical sector; to create an end-to-end manufacturing ecosystem through the growth of clusters. The government has established four petroleum, chemicals and petrochemical investment regions (PCPIRs) as investment regions for petroleum, chemicals and petrochemicals, along with associated services. 100% FDI is allowed under the automatic route in the chemicals sector with few exceptions that include hazardous chemicals. The government has proposed several incentives for setting up a sourcing or manufacturing platform within an Indian SEZ: Effective April 1, 2020, 100% Income Tax exemption on export income for SEZ units for the first five years, 50% for the next five years thereafter and 50% of the ploughed back export profit for next five years. Single window clearance for central and state-level approvals. Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units.

ROAD AHEAD:

The Indian chemical industry has numerous opportunities considering the supply chain disruption in China and trade conflict among the US, Europe and China. Anti-pollution measures in China will also create opportunities for the Indian chemical industry in specific segments. Additional support, in terms of fiscal incentives, such as tax breaks and special incentives through PCPIRs or SEZs to encourage downstream units will enhance production and development of the industry. The dedicated integrated manufacturing hubs under Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIR) policy to attract an investment of Rs. 20 lakh crore (US$ 276.46 billion) by 2035. The Indian Dyestuff Industry is an important sub-sector of the Chemicals industry. It has forward and backward linkages with various sectors such as paper, textiles, plastics, printing inks, leather and foodstuffs. The sub-sector has immense potential and serves as a profitable opportunity for investors.

OPPORTUNITIES:

Growing demand for chemicals: The demand for chemicals will continue to rise as the global population grows and urbanizes. Chemicals are used in almost every aspect of modern life, from construction to transportation to healthcare, making this industry an essential part of the global economy. Technological advancements: The chemical industry is constantly evolving, and new technologies are being developed to increase efficiency, reduce waste, and improve safety. Innovations such as green chemistry, process intensification, and 3D printing are changing how chemicals are produced and consumed.

Sustainable practices: With increasing pressure to reduce the environmental impact of industrial processes, there is a growing focus on sustainable practices in the chemical industry. This presents an opportunity for companies to invest in developing chemical eco-friendly products and strategies and implement more efficient waste management and recycling practices.

CHALLENGES:

Environmental concerns: Chemical production can have a significant impact on the environment, with the potential for air and water pollution, soil contamination, and the release of greenhouse gases. As a result, chemical companies are under increasing pressure to develop sustainable practices and reduce their carbon footprint.

Regulatory compliance: The chemical industry is subject to a wide range of regulations and safety standards, which can be complex and costly. Ensuring compliance while maintaining profitability can be a significant challenge for companies. Volatility in raw material prices: Chemical production requires various raw materials, including oil, natural gas, and minerals. The prices of these materials can be volatile, making it difficult for companies to predict costs and manage supply chain risks.

BUSINESS MODEL OF THE COMPANY: LOCATIONS:

Registered Office 301, Hindprakash House, Plot No.10/6, Phase-I, GIDC, Vatva, Ahmedabad-382445, Gujarat, India
Factory Plot No. A2-114 &115, GIDC, Industrial Estate, Phase-II, Vatva, Ahmedabad
Leasehold Land/Plot Plot No. T-10 to T-12, Saykha Industrial Estate, GIDC, Ta. Vagra, Dist. Bharuch, Ahmedabad

BUSINESS STRATEGY:

Going forward to our business strategy will rest on below mentioned pillars, the idea is to put in place a proper framework to give us the best chance to grow in the face of challenges from the competition and external events over which we may have no control. Each of tenets of our strategy is explained below:

MANUFACTURING PROCESS:

The Manufacturing of dyes, auxiliaries & chemicals require various processes to obtain final product. The major steps include:

KEY RISK AND CONCERNS:

The company is exposed to business risk which may be internal as well as external and the growth of our industries is linked to the overall economic growth. Primary risk to the business will be on account of adverse changes to the economy, another is Company faces tough competition in terms of pricing and customer base.

FINANCIAL AND OPERATIONAL PERFORMANCE:

The key standalone and consolidated financial are as under: (Rs. in Lakhs)

PARTICULARS FOR THE YEAR ENDED Consolidated Standalone
March 31 , March 31 , March 31 , March 31 ,
2023 2022 2023 2022
Revenue from operations 10078.54 10361.25 10078.54 10361.25
Profit before Tax 333.82 367.75 333.08 367.75
Profit after Tax 246.51 273.06 245.77 273.06

SEGMENT-WISE OR PRODUCT WISE PERFORMANCE:

As the Company has identified manufacturing, dealing and trading of Dyes, Intermediates, Auxiliary, Chemicals and other merchandise etc. as its sole primary business segment, the disclosure requirements of segment wise reporting is not applicable.

KEY FINANCIAL RATIOS:

Sr. No.

Ratio

Unit Numerator Denominator 31- Mar- 23 31- Mar- 22 Variance in % Explanation for any change in the ration by > 25% as compared to preceding year
In Current Current

1

Current Ratio

Times In Assets Liabilities Shareholders 1.56 4.23 (63.17%) See Note (i)

2

Debt Equity Ratio

Times In Total Debt Earnings Equity 0.50 0.24 110.05% See Note (ii)

3

Debt Service Coverage Ratio

Times Available for Debt Service Net Profit after taxes available to Debt Service Average Share 1.81 2.97 (39.01%) See Note (iii)

4

Return on Equity Ratio

In % In Equity Share Holder Cost of Holder Equity Average 6.08% 7.38% (17.66%) NA

5

Inventory Turnover

Times In Good Sold Net Credit Inventory Average Trade 5.93 6.31 (6.11%) NA

6

Trade Receivable Turnover Ratio

Times In Sale Net Credit Receivable Average Trade 3.61 4.47 (19.14%) NA

7

Trade Payables Turnover Ratio

Times In Purchase Payable Average 10.44 29.22 (64.26%) See Note (iv)

8

Net Capital Turnover Ratio

Times Net Sales Net Profit Working Capital 3.94 3.47 13.33% NA

9

Net Profit Ratio

In % after taxes Earnings Before Net Sales Capital 2.44% 2.64% (7.47%) NA

10

Return on Capital Employed

In % Interest and Taxes Income Employed Cost of 8.29% 8.21% 1.02% NA

11

Return on Investment

In % from Investment Investment Nil Nil Nil NA

Reason for Variance:

(i) Decreased due to increase in average current liability, but well within acceptable norms. (ii) Increased due to utilization of CC limit, but well within acceptable norms. (iii) Decreased due to repayment of GECL WCTL started after moratorium period. (iv) Decreased due to increase in Trade Payable level.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has an adequate and efficient internal control system, which provide protection to all its assets against loss from unauthorised use and for correct reporting of transactions. The Company has put in place proper controls, which are reviewed at regular intervals to ensure that transactions are properly authorised and correctly reported and assets are safeguarded. The Audit Committee of the Board addresses issue raised by Auditor. The internal control system are implemented to safeguard the companys assets from loss and damages. To keep constant check on cost structure and to provide adequate financial and accounting controls and implement accounting standards. In addition to above, the Company has formulated a vigil Mechanism (Whistle Blower Policy) for its Directors and Employees of the Company for reporting genuine concern about unethical practices and suspected malpractices.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS:

The Company has in place adequate number of employees as required in its registered office and its factory. Professionals with required amount of experience and knowledge are hired on need to need basis by the Company. The Industrial relation of the Company with various suppliers, customers, financial lenders and employee is cordial. There are total 45 Employees on payroll of the Company.

Registered Office: For and on behalf of Board of Directors
301,"Hindprakash House", Hindprakash Industries Limited
Plot No.10/6, Phase-1, GIDC, Vatva, CIN: L24100GJ2008PLC055401
Ahmedabad - 382 445

 

Sanjay Prakash Mangal Santosh Narayan Nambiar
Date: August 14, 2023 Managing Director Wholetime Director
Place: Ahmedabad DIN: 02825484 DIN: 00144542