hindustan organic chemicals ltd Management discussions

The Management of Hindustan Organic Chemicals ltd (HOCL) presents its Analysis Report covering the Performance and Outlook of the Company. The Report contains business prospects and perspectives based on the current environment and strategic options to steer the Company through unforeseen and uncontrollable external factors.

HOCL Kochi Unit is having Integrated Management System Certification comprising ISO 9001-2015 (Quality Management system), ISO 14001-2018 (Environment Management System), ISO 45001-2018 (Occupational Health and Saftey Management system). The certification is valid upto 19/11/2023. HOCL is in the process of implementing ISO 50001. All the products of HOCL are certified by BIS.

1. INDUSTRY STRUCTURE AND DEVELOPMENTS

The Government of India is focused on improving Chemicals Industry competitiveness and manufacturing share in the overall economy. Its FY 2033-34 vision for chemicals and petrochemicals sector emphasises on ways to enhance domestic output, reduce import dependency and promote investment.

Going forward, the potential for strong growth in Indian economy with GDP likely to double to US$ 5 trillion over next decade, creates a large opportunity for Indian chemical companies. End use sectors such as agriculture, consumer and retail, infrastructure, auto and electronics and healthcare sectors could drive ~ 50% of incremental demand in chemicals.

Overall the future outlook for the industry looks optimistic and your company commits to create value for the members overtime with greater efficiency in Companys operations.

2. KEY OPPORTUNITIES

Capacity utilization of main products (Phenol and Acetone) of Kochi Unit has improved substantially after restructuring. This was mainly due to improved working capital position. The operating loss has been reduced due to improved working capital position and reduced interest expenditure, after the initiation of the restructuring process.

3. KEY THREATS INCLUDE

HOCL has only one unit at Ambalamugal, in the District Ernakulam in the state of Kerala, which is functioning at present. Kochi unit is engaged in manufacturing of Phenol, Acetone, and Hydrogen Peroxide. The market for main products at Kochi had high degree of volatility and was largely determined by international prices. Due to severe working capital the Unit often worked below its capacity. There is severe competition in the horizon with private sector players set to establish capacities up to 2 lakh MT of Phenol against 40000 MT that the Unit had. Without anti-dumping duties, HOL Kochi unit will be unable to compete against imports. Kochi unit has its own inherent deficiencies such as outdated technology leading to productivity loss, high levels of fixed cost which is not being absorbed due to lower scale of operations, constraints in capacity expansion, absence of product diversification, lack of market competitiveness, etc.

Companys products such as Phenol,AcetoneandHydrogenPeroxidewhichsatisfiesthe requirements of key customers who procure multiple products. Your Companys products cater to wide range of end- use sectors such as dyes & pigments, agrochemicals, pharmaceuticals companies. This assists the organization in obtaining new clients and addressing huge spectrum of their demands.

3. SEGMENTWISE PERFORMANCE

The Company is primarily in the business of manufacture and sale of chemicals.

	Year ended 31/03/2023			Year ended 31/03/2022 in the ever
Product Segment	Target MT	Actual MT	Percentage Achieved	Target MT	Actual MT	Percentage Achieved
Chemicals	69308	70979	102.41	60070	48866	81.35%

4. PRODUCT WISE PERFORMANCE (Production of Main Products)

Sr. No. Name of Product	F.Y. 2022-23 Installed Capacity	Actual	F.Y. 2021-22 Actual
1 Phenol	40000	37350	24745
2 Acetone	24640	23306	15560
3 H2O2	10450	10323	8561
TOTAL	75090	70979	48866

5. OUTLOOK FOR THE NEXT YEAR

</b>Expedition of the land sale process so as to reduce the financial liabilities and thus bring down the finance costs.

Your Company has received necessary approvals from regulatory authorities for shifting its registered office from state of Maharashtra to the state of Kerala where its only is located. It is anticipated to reduce operational cost of your Company and increase its performance due to direct supervision of Top Management over your Companys affairs and business operations.

Upgrade to the latest technology so as to improve productivity;

Explore the diversification into value added products to maximum extent possible so as to gain some level of protection against swings in the market prices.

Your Company will continue to be vigilant and will capitalize on the opportunities that arise as a result of swift transformation in the industry landscape.

6. SOME RISKS & CONCERNS.

Lack of product diversification or downstream value addition

Competition from cheaper Imports of main product Phenol and Acetone.

Volatility in raw material feed stock prices based on fluctuations in crude prices. Inability to pass on the increase in raw material cost to the consumers due to availability of imported finished product at cheaper prices.

Huge investments required for revamp/replacement/modernization of the old plants. Sale of balance unencumbered land at Rasayani / Panvel after receipt of NOC from Government of Maharashtra.

Availability of working capital from Banks for continuous operation of the Plants at Kochi.

7. INTERNAL CONTROL SYSTEMS & THE ADEQUACY

Internal controls are supported by Internal Audit and Management Reviews. Company ensures existence of adequate internal control through documented policy and procedures to be followed by the executives at various levels. The Management is keen on these issues and initiated various measures such as upgrading IT infrastructure, evaluating & implementing Tally ERP software, web-based application and establishing connectivity amongst manufacturing units and branch offices for effective & proactive services andbusiness benefits.

With the objective of improving the systems and removing bottlenecks, systems review is carried out and policies and procedure manuals are amended. HOCL Kochi unit is having ISO

9001:2015 (Quality Management System) and ISO 14001:2015 (Environmental Management System) certification.Theexistingcertificatefor ISO 9001 has been extended up to 1st September 2020 and ISO 14001:2015 is valid up to 07th March 2022 audit for further extension is in progress.

Your Company has Corporate Governance structure that govern its operations and the management team follows sound financial policies as well as processes and systems. deficiency,

8. REVIEW OF FINANCIAL PERFORMANCE:

As per accounts of FY 2022-23, your Company has incurred a net loss of Rs.2.32 Crore during the 4th quarter and incurred net loss of Rs.50.22 Crore (before tax) for the year 2022-23 as against net loss incurred during the previous year FY 2021-22 was Rs. 26.19 Crore. EBIT (Earnings before Interest and Tax) for the current year FY 2022-23 stands at Rs.16.67 Crore. Capacity utilization of Phenol plant during the year 2022-23 is 93% as against 62% during the previous 2021-22. Hydrogen Peroxide plant operated at 99% capacity during the year 2022-23 as against 82% during the previous year 2021-22.

9. INFORMATION TECHNOLOGY

Company has effective information systems for core business areas. However, company has envisaged a plan to meet changing demands keeping in view the technological changes and the way information & communication technology offering innovative services suiting to every business need. The core business functions are performed using Tally Prime ERP system. The integration of different modules of the ERP system resulted in better functioning, timely and smooth completion of our business process and transactions.

-changing technological environment, for Managementensurescontinualeffort improving and meeting with requirement like data security, information availability, transparency and accuracy. The IT infrastructure of the company is audited by CERT-In empanelled audit authority to ensure the compliance with IT policies & standards. Company is using open tendering / e-Tendering solution being provided by National Informatics Centre (NIC). Company has also registered with GEM Government platforms for procurement and TREDs for payment to MSMEs. Company is also following various guidelines of procurement through MSMEs.

10. CAUTIONARY STATEMENT

Statement in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be ‘forward looking statements within the meaning of applicablelawsandregulations.Actualresultsmightdiffersubstantially or materially from those expressedorimplied.Importantdevelopmentsthatcouldaffectthe Companys operations include a downtrend in the chemical industry - global or domestic or both, significant changes in political and economic environment in India or key markets abroad, tax laws, litigation, manpower cost, exchange rate fluctuations, interest and other costs

ATTENTION INVESTORS

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Risk Disclosure on Derivatives

9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses.
On an average, loss makers registered net trading loss close to Rs. 50,000.
Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs.
Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost.

Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213, IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248

We are ISO 27001:2013 Certified.

This certificate demonstrates that IIFL as an organization has defined and put in place best-practice information security processes.

ATTENTION INVESTORS

Prevent Unauthorized Transactions in your demat / trading account Update your Mobile Number/ email Id with your stock broker / Depository Participant. Receive information of your transactions directly from Exchanges on your mobile / email at the end of day and alerts on your registered mobile for all debits and other important transactions in your demat account directly from NSDL/ CDSL on the same day." - Issued in the interest of investors.
KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.
No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account."

Risk Disclosure on Derivatives

9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses.
On an average, loss makers registered net trading loss close to Rs. 50,000.
Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs.
Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost.

Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213, IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248

We are ISO 27001:2013 Certified.

This certificate demonstrates that IIFL as an organization has defined and put in place best-practice information security processes.

hindustan organic chemicals ltd Management discussions

ATTENTION INVESTORS

Risk Disclosure on Derivatives

We are ISO 27001:2013 Certified.

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ATTENTION INVESTORS

Risk Disclosure on Derivatives

We are ISO 27001:2013 Certified.