Hitech Corporation Ltd Management Discussions

Global Economy

During the reported year, the global economy endured various macroeconomic challenges. Despite headwinds such as persistent geopolitical conflicts, energy and food price volatility and rising inflation,1 the global economy demonstrated resilience and global growth achieved a 3.2% growth rate2. While the Ukraine-Russia war resulted in supply chain interruptions, a global shortage of energy and food and a notable inflationary spike exacerbated the condition, central banks resorting to calibrated interest rate hikes were effective to rein in inflation.

The polymer prices are affected by the prices of crude oil world-wide. During the year there was a fall in crude oil prices due to increased oil production capacity of Russia and several non-OPEC countries. Crude oil production outpaced consumption thus leading to an increase in oil inventory levels during the year which resulted in a fall in prices.

Looking forward, with the decline in global inflation, the global economy is anticipated to grow steadily. The manufacturing sector experienced robust growth, expanding at doubledigit rates, driven by sustained corporate profitability and declining input costs. Central banks are also aiming to ease monetary policies, reflecting a cautious optimism. Global trade volume (goods and services) is projected to grow modestly by 3% in Calender Year 2024 and 3.3% in Calender Year 2025, respectively.

Global companies are focusing their efforts on introducing sustainable practices into their operations which reduces their environmental impact and appeals to a more environmentally conscious customer base.

It is expected that collective policy responses of governments and the resilience of economies worldwide will be instrumental in shaping a sustainable and inclusive growth trajectory in the months ahead.

Indian Economy

During FY 2023-24, India achieved an impressive growth rate of 8.2%3, the highest among major global economies. This robust performance was driven by strong fiscal management, including a significant rise in capital expenditure from H10.5 lakh crore in FY23 to H12.7 lakh crore in FY24. Despite the global headwinds, Indias economic resilience is indeed notable.

Certain factors such as government capital expenditure, rising capacity utilisation, robust corporate balance sheets, double-digit credit growth, healthy financial sector and steady decline in inflation are powering the growth of the Indian economy. Effective government policies are also expected to bolster consumers purchasing power. Additionally, a gradual increase in private sector capital expenditure is expected to foster a more widespread investment growth.4

What has helped the growth of Indias economy is the strength of its domestic demand. The domestic demand has recovered since the pandemic and has moved from strength to strength in FY23. The agriculture sector registered a twelve-quarter record high growth rate. The industrial sector rebounded in Q4, driven by manufacturing.

However, factors that can constrain the pace of growth include escalation of geopolitical stress, enhanced volatility in global financial systems, sharp price correction in global stock markets, a high magnitude of El-Nino impact and modest trade activity and FDI inflows owing to frail global demand. Should these developments deepen and dampen growth in the subsequent quarters, the external sector may challenge Indias growth outlook for the next year.

Industry Overview Rigid Plastic Industry5

Rigid plastic, including products and packaging made from plastic resins, is predominantly used for molded items such as food containers, tubes, pails, bottles, drums, caps and closures. The primary materials used in rigid plastics are PET (Polyethylene terephthalate), PP (Polypropylene) and HDE (High-Density Polyethylene).

As rigid plastic packaging is the best alternatives for recyclability and reusability, this type of packaging material is rapidly replacing traditional packaging materials. It is expected that the market will register a CAGR of 9.36% between 2024 and 2029,6 driven by lower-cost packaging, technological innovation, increasing demand of packaged products, especially by middle-class consumers and modern retail formats and a growing desire for higher-quality products.

Some of the key market drivers driving the market are the growing customer desire for product safety and extended shelf life, the growing need for sustainable packaging solutions, and various breakthroughs in manufacturing technology.

Source: https://www.marketresearchfuture.com/reports/india-rigid-plastic- packaging-market-20707

Allied Industries

Paint Industry7

The Indian paint market, a dynamic and competitive industry, is projected to achieve a CAGR of 9.38% from 2023 to 2028. This growth is attributed to factors such as increasing urbanisation, rising disposable incomes and a growing demand for both aesthetic and protective coatings. The total market share can be distinguished between decorative paints and industrial paints, each holding 75% and 25% of the market share respectively.

With the Indian paints industry being fiercely competitive, it is essential for key players to focus on strategies such as innovation, product differentiation, low cost packaging and market expansion to stay ahead of the curve. Further, the companies are increasingly exploring new markets to sustain their positions.

FMCG8

The Indian FMCG industry experienced a noteworthy 6% growth in value during Q4 FY2024, primarily attributed to a 6.4% increase in volume. This surge in volume indicates positive consumption patterns and robust demand for FMCG nationwide.

Further, the FMCG industry is expected to garner a value growth of 4.5% to 6.5% in 2024. On the backdrop of a robust economy, coupled with increased consumer spending and advent of technological advancement, the Indian FMCG industry is poised for further expansion. The consumption gap between urban and rural markets are steadily narrowing down with rural areas witnessing 5.8% growth, closely approaching the 6.8% growth rate of urban areas.

Growth Trends

• Rising popularity of e-commerce platforms: Technological advancement has played a crucial role in impacting both the rural and urban areas. Additionally, with better accessibility of e-commerce platforms, the industry has observed a paradigm shift. E-commerce platforms have made it easier for consumers to purchase products according to their convenience.

• Evolving market dynamics: The FMCG sector is emphasising upon innovation and adaption to meet evolving consumer demands. The companies are taking into account the varied consumer preferences to tailor their product portfolio.

Agrochemicals9

The Indian agrochemicals sector is witnessing a resurgence after experiencing a subdued growth during pandemic. As of 2024, the domestic agrochemicals market stands at an estimated $8.22 billion and is poised to reach $13.08 billion by 2029, demonstrating a CAGR of 4% between 2024 and 2029.

As reported by the Federation ofIndian Chambers of Commerce and Industry (FICCI), the Indian government recognises the pivotal role of the agrochemical industry, identifying it as one of the top 12 sectors to attain global leadership, with a projected growth rate of 8-10% through 2025.

India currently holds the position of being the worlds fourth largest producer of agrochemicals and the 12th largest exporter of chemicals.

Growth Trends

• Increased Population: According to the World Bank, Indias population is 1.44 billion as of 2024 and is expected to reach 1.66 billion by 2050. About 50% of the Indian population is still dependent on agriculture for their livelihood. Further, the increasing population creates a huge demand for food products.

• Government Initiatives for Agriculture: Various governmental initiatives such as Pradhan Mantri Kisan Samman Nidhi (PM-KISAN), Pradhan Mantri MaanDhan Yojana (PM-KMY), Pradhan Mantri Fasal Bima Yojana (PMFBY), among others, have empowered the farmers to address the multifaceted challenges faced by the farmers and ensure their development. These schemes have consequently contributed to the surge in sales of agrochemicals.

Lubricants

The Indian Lubricants Market Size is estimated at 2.87 billion litres in 2024 and is expected to reach 3.15 billion litres by 2026, growing at a CAGR of 4.76% between 2024 and 2026.

Industrial lubricants form a protective film between moving parts, reducing friction and wear. It facilitates smooth and efficient movement and reduces the frequency of repairs and maintenance. Industrial lubricants play a vital role in various end use industries, finding application in engines, transmissions, differentials and various other components.

Growth Trends

• Rapid development in the automotive industry: As engine and gear oil used in motor vehicles compared to any other industrial application, development in the automotive industry is expected to drive the growth of the lubricants industry.

• Developing manufacturing sector: Industrial

lubricants play a major role in the manufacturing sector by streamlining operations, enhancing productivity, minimising downtime and reducing operation costs. With the government aiming to develop India as a manufacture hub, it is expected to surge the sale of lubricants.

Food and Beverages Industry 10

India food and beverage industry, segregated into several segments and sub-segments, is one of the largest and fastest- growing sectors in the country. The sub-segments of the industry include dairy products, confectionary, frozen foods, convenience foods, processed fruits and vegetables, alcoholic and non-alcoholic beverages, among others. The sector accounts for 27% of the share in the D2C (direct-to-consumer) space. While the industry generates 3% of the GDP, it accounts for around two-thirds of Indias overall retail market.

It has been observed that the industry revitalised upon the entry of startups offering innovative product ranges. The industry supports the livelihood of more than 7.3 Mn people, making it the single-largest employment space in India. It also functions as a growth engine for various other segments of the economy such as retail, transportation, agriculture and hospitality services. Looking forward, the industry is anticipated to reach almost USD 504.92 billion by 2027.

On the other hand, the domestic food processing segment is expected to grow from USD 263 Bn to USD 470 Bn by FY 2025, driven by evolving lifestyles, rising incomes, rapid urbanisation and favourable government policies.

Growth Trends11

Health-Conscious Consumers: With growing health consciousness, individuals are seeking alternatives that provide the goodness of nutrients without compromising upon the taste.

This has resulted in a rise of

• Functional foods and beverages: Products with added ingredients for specific health benefits, such as probiotics for gut health or mindboosting supplements in snacks.

• Plant-based options: Vegan and vegetarian meals are becoming mainstream, with innovative and delicious meat alternatives.

• Clean labels: Consumers are prioritising natural foods over processed ones. The clean label trend reflects the consumers growing preference for naturalness in the foods and increasing scrutiny.

Convenience: As an increasing number of individuals lead hectic lives nowadays, the demand for food and beverages that fit right into the schedule has surged.

• Direct-to-consumer (DTC) food: With the increase in subscription services and online retailers, it has become easier to receive restaurant-quality meals and groceries at your doorsteps.

• Rise of online grocery: As more people are becoming reliant on online groceries, the market is expected to reach $1 87.7 billion in the US alone for 2024.

Sustainability based menu: As consumers are becoming more aware of the environmental impact of their food choices, there has been an increase in popularity in plant-based meals.

Personal Care12

The current Indian beauty and personal care (BPC) market is under-penetrated. On a per capita basis, the spend on beauty and personal care stands at $14 in the country, compared to $313 in the US and $38 in China. However, it is projected that the market will reach $30 Bn by 2027, accounting approximately 5% of the global market, facilitated by online commerce.

Pure-play beauty companies have disrupted the market by targeting specific use-cases, leading to higher growth rates, gross margins and profitability compared to FMCG-led BPC players. The new brands have given stiff competition to the established brands, resulting in key players adopting innovative strategies to increase market share. This has further propelled market growth, attracting national and international brands to meet the needs of the evolving landscape.

As consumers have better access to BPC brands due to e-commerce platforms, market players are making substantial investments to diversify their product portfolio, expand footprint, increase research and development initiatives and develop better strategies to drive sales.

Growth Trends

1. Rise of Natural and Organic Products

As consumers are becoming more aware of the potential harm caused by chemicals, the demand for natural and organic product has surged. To meet this growing demand, numerous market players are introducing vegan, paraben-free, fragrance-free, halal and organic products in the market.

2. Growing Online Shopping Landscape

With a plethora of benefits such as better convenience, competitive pricing and the availability of a wide range of products, the popularity of online shopping has escalated over the years. Both local and international players are capitalising on the trend, offering diverse options for beauty and personal care products.

3. Emphasis on Sustainability and Ethical Practices

The beauty and personal care industry is witnessing a paradigm shift towards sustainable and ethical practices. With growing environmental awareness, consumers are increasingly opting for eco-friendly products and manufacturing brands that promote ethical processes.

4. Integration of Technology in Beauty Solutions

With the rise of smart beauty devices and personalised skincare solutions, market players are introducing innovative products that leverage technology to provide better solutions and enhance consumer convenience.

Chemical Industry13

Globally, the chemical industry is a colossal market, valued at approximately USD 4.73 trillion, within which Asia holds a dominant position, particularly India.

The Indian chemical industry is highly diversified, incorporating production of nearly 80,000 commercial products. Broadly classified into bulk chemicals, specialty chemicals, agrochemicals, petrochemicals, polymers and fertilizers, the Indian industry stands at a market size of USD 178 Bn. It ranks 11th in the World Exports of Chemicals and 6th in the world Imports of Chemicals, excluding pharmaceutical products.

The industry provides employment to more than 2 million. In terms of size, the Indian Chemical Industry ranks at 6th in the world and 4th in Asia. The industry also observes 100% FDI through the automatic route, except in the case of hazardous chemicals.

As India aims to become the third largest economy by 2030, the chemicals sector will play a crucial role in facilitating the growth of the country.

Growth Trends

The Indian chemical industry is experiencing rapid transformations, with a strong growth trajectory and some exciting sub-sectors leading the charge.

• Rapid Growth: The industry is projected to reach a value of $290-310 billion by 2027, reflecting a Compound Annual Growth Rate (CAGR) of 11-12%. This is significantly higher than the historical growth rate of around 4.61% (2017-2022).

• Specialty Chemicals: The specialty chemicals segment is expected to reach $50 billion by 2025, growing at a CAGR exceeding 12%. This is driven by increasing demand from various sectors such as pharmaceuticals, automobiles and food processing.

• Export Boom: As global companies are diversifying its supply chains, India is emerging as a competitive exporter, attracting foreign investments due to its cost- effective manufacturing processes and the countrys unwavering focus on quality.

• Government Support: The introduction of favourable policies and initiatives such as Make in India, is propelling domestic production and exports.

Company Overview

Established in 1991, the Hitech Group has emerged as a leading conglomerate in India, specialising in a diverse product portfolio catering to various industries. The Company manufactures rigid plastic containers for lubricants, paints, coatings, construction chemicals, agrochemicals, food & beverages and personal care markets. Hitech serves over 2000 customers with the support of 1000+ professionals.

The Company has 13 state-of-the-art manufacturing facilities and has invested in a new DSIR-approved Design and Development centre this year. During the current year, the polymer prices have dropped substantially resulting in a low selling price of products. Inspite of this setback faced by the company, we have yet grown in overall tonnage by 12% during the year.

We have newly established a manufacturing facility at Dahej which caters to the chemical industry. In this facility we are manufacturing drums from 50 Litres to upwards of 200 Litres capacity. The company has embarked on a major machine modernization project across plants to bring the best manufacturing facility to our customers and to ensure operation efficiencies.

On the sustainability front, the company has embarked on various initiatives in the current year. It has commissioned solar projects in Rohtak, Vizag and Mysore. In the next year, the company will commission solar projects in all other plants. Usage of recycle polymers and improvement in operational KPIs are successfully done to reduce our carbon footprint.

Placing the customer at the heart of our business has always been our guiding principle which strengthens our relationship with them and fuels our growth and success in the competitive market. With that in mind we have launched new products across markets with new enhanced designs.

Capital expenditure and expansion plans

During the year, the company has emphasized on the introduction of the latest technology at all manufacturing facilities. This includes the following:

1. We have achieved great improvement in our plant KPIs by installing All electric machines at our plants to increase efficiency in operations, strictly monitoring and reducing our internal rejections and obtaining Green Channel Certification across all our manufacturing facilities.

2. Our shift to renewable energy sources i.e. Solar has been completed at Mysore, Rohtak and Vizag. We are in the process of introducing usage of Solar energy across all other manufacturing facilities. Sustainability is our key focus for the company and we have multiple projects such as light-weighting, recycling, interactive/smart packaging, sandwich technologies in the pipeline.

3. Our new plant at Dahej has commenced operations during the year and caters to the requirements of the vast chemical industry in the vicinity. This facility has state-of- the-art manufacturing technology spread over 1 Lakh sq. feet having cutting edge production lines, warehousing and research facilities. This manufacturing facility delivers large barrels ranging from 50 Litres to 250 Litres.

4. The company is well positioned to expand its footprint to growth segments of the Indian industry which includes food & beverage and personal care. During the year the company has invested in a new technology centre at Kuruli, Pune. In depth packaging research is carried out to understand the needs of our customers. From concept sketching to mood boards, product renderings to 3D prototyping and design stimulation is carried out by our experts. Careful material selection and mould designing at our in-house mould development centre is done to meet the requirements of the customers.

Opportunities, risks and threats

With the paradigm shift towards sustainability, the Company recognises a significant opportunity in spearheading the adoption of sustainable packaging practices. The Company has collaborated with industry and academic experts to provide customers with the most cost-effective alternatives.

As the Company leverages the transformative potential of Industry 4.0, it has modernised machinery fleet and enhanced operational efficiency. Hitech remains dedicated to delivering innovative solutions tailored to meet the varied needs of consumers. The Company relentlessly undertakes initiatives to fortify its position as the preferred partner for marquee clients.

While there are several opportunities driving the growth of the Company, however, the Companys revenue gets impacted by the changes in the polymer prices . The Companys business also gets affected by the Indian economic activity on account of private consumption expenditure which had declined by 3% compared to the robust growth in the overall GDP by 7-8%. For this the company needs to develop effective strategies to mitigate the challenges arising due to general economic downturns impacting customer segments and fluctuations in polymer prices.

Human resources

Hitech acknowledges the value of its workforce in driving the Company towards new heights of success. The Company has cultivated a working environment that prioritises each employees wellbeing and provides them with opportunities to enable them to enhance their knowledge and improve their skills. The Company has several on-going training programmes at their manufacturing facilities to not only enhance learning but also create an inclusive environment that values different perspectives, experiences and backgrounds.

We have established Gurukuls at each of our manufacturing facilities which provide regular training sessions on all our critical processes. This involves end-to-end process mapping, defect identification, material and process knowledge, customers requirements and systems improvement.

Six Sigma practices are at the centre of everything we do at Hitech. Implementation of Six Sigma includes comprehensive training for our employees to enhance quality and efficiency of our processes. We align our Six Sigma projects with our strategic goals focusing on areas with the highest impact on customer satisfaction, operational efficiency and financial performance. Using the DMAIC methodology - Define, Measure, Analyse, Improve and Control we are systematically identifying and addressing root causes of inefficiencies. Regular monitoring and continuous improvement efforts ensure sustained improvement.

Environment, Health and Safety

At Hitech, prioritising health and safety remains paramount. Thereby, the Company upholds a comprehensive strategy aimed at safeguarding employees, assets and the environment. The Company has implemented robust policies and procedures, supplemented by thorough employee training initiatives, to foster safe working environments. The Company conducts regular fire and safety audits across all manufacturing facilities. Moreover, the Company maintains vigilant systems to continually monitor performance and identify and mitigate potential safety hazards.

Regular First Aid & Fire Safety training programmes are conducted to equip our employees with essential skills for handling medical emergencies and fire incidents. The First Aid training covers CPR and injury management. The Fire Safety focuses on fire prevention, proper use of fire extinguishers and evacuation procedures. Cancer awareness programmes are conducted for early signs of detection of cancer.

At Hitech, we organize a series of employee engagement activities such as rangoli competition, painting competition and dance events. These events provide a creative and fun outlet for our employees to showcase their talents and foster a sense of community & togetherness which contribute to a vibrant and inclusive workplace culture.

Research and Development

Situated in Sanaswadi, Maharashtra, Hitechs Design and Development Centre is accredited by the Department of Scientific and Industrial Research (DSIR) of the Government of India. While mould design and development have been the cornerstone of Hitechs technological advancement, the Company leveraged a diversified spectrum of innovations spanning from cost-effective automation to streamlining processes to enhance customer satisfaction.

Hitech has been at the forefront of innovation, facilitating the creation of superior materials, optimising material usage without compromising performance and exploring more sustainable alternatives.

Internal control systems

Hitech has established an internal control system that is appropriate for the nature, size, and complexity of its operations, in accordance with the Companies Act, 2013. The management has evaluated the effectiveness of the companys internal control over financial reporting, as mandated by section 143 of the Companies Act, 2013, and the Statutory Auditors have provided an attestation report. Additionally, a comprehensive internal audit plan is developed annually, encompassing all manufacturing facilities and various business areas such as accounting, finance, procurement, and IT processes. The company regularly assesses their risk management systems across different business processes to enhance profitability, efficiency, and operational performance.

Financial performance

The key highlights of the financial performance are given below.

Revenues and profitability

Particulars	FY 2024	FY 2023	Change	Remarks
Operating Revenue (H in Lakhs)	56,179	55,867	0.5%	Operating Revenue remained flat
EBITDA (H in lakhs)	7,399	7,593	(2.6)%	Owing to increase overhead
Net profit after tax (H in lakhs)	2,200	2,832	(22)%	The major drop is owing to exceptional item of H381 lakhs in FY 2023. The balance decrease is owing to increase in overheads.

Financial ratios

Ratios	FY 2024	FY 2023	Remarks
Debtors Turnover Ratio (in days)	26	26	No change
Inventory Turnover Ratio (on cost of goods sold and in days)	43	42	Marginal change
Interest coverage ratio	5.2	5.8	Owing to increase in borrowing and reduction in profits
Current ratio	1.1	1.2	Better working capital management
Debt Equity ratio	0.3	0.3	No change
Operating margin ratio	7.9%	9.2%	Reduced mainly because of lower profit as compared to previous year. The major drop in profit compared to previous year is owing to exceptional item (income) in FY 2023. The balance decrease is owing to increase in overheads.
Net profit margin	3.9%	5.0%
Return on Net worth (RONW)	8.7%	12.3%
Return on Capital Employed (ROCE)	13.8%	16.3%

The Management Discussion and Analysis contains forward-looking statements that are subject to the provisions of relevant securities laws and regulations. Actual outcomes may vary from those anticipated or implied. Key factors impacting the companys performance include economic conditions impacting market demand, supply, and pricing, as well as shifts in government regulations, tax legislation and other unforeseen elements.