MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Chemical industry plays a crucial role in modern globalized world economy, converting raw materials like crude, natural gas, air, water and diverse minerals into ready to use products which are essential to meet the daily necessities. Apart from producing wide range of finished goods like paints, plastics, polymers, resins, synthetic fibers, it has also extensive usage in agrochemicals, urea, fertilizer, pesticides, water chemistry that benefits to upgrade the living standards of consumers across globe. The chemicals are an important part of global value chain having widespread application ranging from energy generation & transportation to constructions - supporting agriculture - providing clear drinking water Chemistry helps to meet the affordable and clean energy goal through the development of new materials for renewable energy, by being energy efficient in the chemical processing industries, and by advancing cleaner fuel technologies. The chemical industry is quite heterogeneous in characters which ranges from commodity chemicals to research driven products and can broadly be classified as basic chemicals, specialty chemicals and knowledge-based chemicals. Chemical play an important role in achieving clean, green and sustainable growth to the global economies.
The global chemical industry plays an important role in terms of its size and features which involve significant capital investment, high knowledge content and qualified human resources. The revenue of global chemical industry has crossed more than US$ 5 trillion. It is important to note that EU & US which were traditionally key chemical producers, have been replaced by China as major force post the global financial crisis in 2008. The share of developing countries like China, South Korea, India, Taiwan, Japan etc. in chemical revenue had started picking up post 2008. The industry has witnessed global shift in chemical manufacturing base from western countries to Asia which is being evolved as global chemical manufacturing hub. Asian countries such as China, India, Japan & Korea together constitute 56% of global chemical sales and the major driving force for this being low labour cost, relatively relaxed environment norms, government subsidies etc. This has resulted in China & India expand their respective share in the global revenue from chemicals.
The research done by Oxford Economics in 2017 revealed that every US$ 1 of gross value added by the chemical industry, has generated support and addition of US$ 4.2 contribution elsewhere in the global economy. Interestingly, the chemical industry supported 7.5% of global GDP through direct & indirect impacts.
Indian Chemical Industry has evolved from being a basic chemical producer to becoming an innovative industry. The Chemical and chemical products sector constitute 9.6% of total manufacturing output in 2021. With increasing investment in R&D, the chemical industry is expected to register significant growth in fine and specialty chemicals, however, India continues to be net importer which indicates that growth in exports is not commensurate with rising import of chemicals.
To achieve selfreliance and reduce the dependency on imports, the industry needs to focus on boosting domestic manufacturing and exports by adopting a market and product specific approach. To boost the domestic production of chemicals and petrochemicals and cut down imports and make India a manufacturing hub for the sector, the "Vision document 2024" of Department of Chemicals & Petrochemicals has been prepared to meet the growing domestic demand of chemicals and petrochemicals.
As India progresses towards becoming a US$ 5 trillion economy by 2025-26, the share of the petrochemicals and its derivatives sector is expected to become even more prominent considering that it is the backbone of agriculture, infrastructure, manufacturing and service.
India has ranked as sixth largest player in the global petrochemical business with a market size of around US$ 190 bn in 2022. Indias strong economic progress, supported by robust macro fundamentals, and population growth are major enablers for the petrochemical manufacturing hub.
The flagship programmes such as Make in India and the Aatma Nirbhar Bharat provide direction to this sector and create a facilitative environment to attract further investments. The Indian petroleum industrys forward integration into petrochemicals and subsequent polymer derivatives is a potential gamechanger. The security of feedstock availability and intermediate products for downstream polymer industries will result in value maximization across the entire chain of polymer molecules.
Indian Petrochemical Industry
Although India is self-reliant in basic petrochemical products with its export numbers promising, however scarcity of petrochemical intermediates or derivatives, results in import dependency of over 50%. It is an opportune time for Indian downstream companies to invest in developing the polymer intermediate industry by capacity expansions or forging Joint Ventures within or outside the country. The lack of growth in the Indian petrochemical intermediate compels Indian companies to become import dependent resulting in a cumulative loss of US$ 180-200 bn due to high import bill. On the other hand, the downstream petrochemical industry i.e. specialty chemicals accounted for over 50% of chemical exports in 2022, dominated by agrochemicals, dyes and pigments etc. due to the emerging markets like India and China. We have witnessed significant shift in product supremacy from developing market to emerging markets.
The Indian petrochemical intermediates market is driven by the growth of downstream industries such as plastics, synthetic fibers, and rubber, as well as the increasing demand for high-performance materials in various end-use applications such as automotive, construction, and textiles. It is expected to grow at a steady pace in the coming years, to fill the gap between basic petrochemical and speciality chemical industry. Companies operating here need to expand their production capacities, investing in research and development, and forming strategic partnerships and acquisitions to strengthen their market position.
The availability of skilled labour, favourable government policies, and a growing manufacturing sector are expected to provide further impetus to the growth of the petrochemical intermediates market in India. India has joined the movement of banning single use plastics along with more than 150 countries, including a nationwide ban on certain items and initiatives to promote alternatives and recycling. Studies show these plastics contain harmful chemicals which endangers the ecosystem. The Indian governments efforts have helped to raise awareness about the issue and encourage positive changes in behaviour among individuals and businesses.
Indias petrochemical sector is on the cusp of significant growth. This is evidenced by various factors, such as the impressive return on investment in financial markets, Indias demographics, increasing affluence, and its global stature. This presents a lucrative opportunity for petrochemical companies to cater to the domestic market, which could lead to import substitution and savings in foreign exchange.
The PLI schemes with an outlay of Rs. 1.97 lakh crore to promote vital end-use sectors, including pharmaceuticals, telecommunications, automobiles, electronics, mobiles, medical devices, and textiles. This is expected to further boost the countrys demand for chemicals and petrochemicals.
Strategic global partnerships and collaborative programs with the government will also be critical in driving the industrys growth. The chemicals and petrochemicals industry shall be responsible for contributing towards nearly 10 out of 17 UN Sustainable Development Goals by 2030. Moreover, the petrochemical industry needs to play a vital role in promoting a circular economy through effective design, reuse, and recycling of materials, as well as innovation and technology.
The Indian petrochemical industry can facilitate the transition to a circular economy and explore opportunities in green chemicals to play a pivotal role in this transformation. Overall, with the right policy support and investment, the petrochemical industry can contribute significantly to the goal of making India a US$ 5 trillion economy by 2025-26.
Phthalic Anhydride (PAN)
Phthalic Anhydride is an organic substance that is an anhydride of phthalic. It was the principal commercial form of phthalic acid, the first anhydride of a dicarboxylic acid to be commercially available. Indian PAN market is anticipated to increase at an impressive rate in view of wider uses across industries. PAN is a white crystalline chemical used to make plasticizers, pigments, dyes and resins.
The consumption of PAN & its derivatives is growing rapidly over the last few years. Phthalic Anhydride finds application across various end user industries as it is used for the production of a large number of chemicals. The growth in demand of PAN is expected from the increasing demand from the Construction and Paints & Coating Sectors. Phthalic Anhydride is frequently used in paints, plasticizers, CPC pigments industry and for producing unsaturated polyester resins, which are used in growing sectors like construction and automotive for the production of their components. PAN is now also used in the production of speciality chemicals, agrochemicals, specialized polymers, electric & electronic products, insect repellents and urethane polyester polyols. It is also being innovatively used for making plastic currency, paper boards, leisure boats and sail of windmills etc. This industry is primarily served by very few players not only in India but also globally.
Polyvinyl Chloride (PVC) is one of the significant compounds used in construction sites owing to its flexible and fireproof characteristics. PAN provide flexibility and softness to the PVC without which it would be hard and brittle and may not serve the intended purpose. According to FICCI, India consumes almost 73% of its PVC material in pipes & fittings industries. The Real Estate Industry (where PVCs finds its extensive application) in India is anticipated to grow upto US$ 1 Tn by 2030 and is expected to comprise upto 13% of Indian GDP by 2025. Therefore, an increase in the construction sector market led to rising demand for the PAN market in the country.
Phthalic Anhydride is a well-recognized industrial chemical used in the production of certain dyes. As per the report, the Indian paint industry is predicted to be US$ 8.64 billion. There are about 3,000 paint producers in India, and all the major players of the world are actively working in the regional market. These trends led to an increase in the demand for PAN market in the projected period with the upsurge in the demand for paint and dyes. Apart from government schemes, innovative projects like smart city projects are also helping in propelling the demand of the PAN market.
Maleic Anhydride Market
The global Maleic Anhydride Market was valued at US$ 2.8 billion in 2021 and is projected to reach US$ 3.4 billion by 2026, growing at a CAGR 4.2% from 2021 to 2026. Factors such as increasing demand for Unsaturated Polyester Resins (UPR) in the automotive industry, high growth in the construction and wind energy industries, and growing demand of 14-BDO in various end-use industries are major driving factors. Commercialization of bio-based maleic anhydride is the major growth opportunity for the market. Asia Pacific is the key market for maleic anhydride, globally, in terms of value. It is also the fastest-growing region in the market followed by Europe as the second-largest market and thereafter North America .
The Diethyl Phthalate market is expected to grow at a CAGR of 4.1% during the period 2023 to 2030 according to the analysis carried out by Data Bridge Market Research. The major factor driving the growth of the Diethyl Phthalate market is the increasing consumption of cosmetics and personal care products.
• Developing cosmetics and personal care products have expanded over the years and the future. In addition, technological advancements in personal products will drive the global Diethyl Phthalate market in the upcoming years.
• Accelerated industrialization, increase in income, changing lifestyle and increased application of polymer based products in day to day life have caused the upsurge of polymer industry. The polymer are used in healthcare, agriculture, clothing, housing, furniture, electronics and construction
• Diethyl Phthalate is used in agrochemicals to keep away insects and pests from crops. Due to increasing insects attack on crops, the insecticides demand are too rising.
About IGPL, its plant and vision
IGPL is the largest producer of PAN in India dominating with a market size of more than 50% and is the lowest cost producer. The Companys state-of-the-art manufacturing facilities along with proximity to the raw material and customers puts the Company in a sweet spot to generate higher yields. The Company expanded its PAN facilities in 2020 by 53,000 MTPA, thus taking the total production capacities to 2,22,110 MTPA and MAN facilities to 7,660 MTPA. With further investments to the tune of Rs. 350 crores, another 53,000 MTPA is being added through the brownfield route which will enhance the total capacity to 2,75,110 MTPA and MAN facilities by 1,500 MTPA to 9,160 MTPA by by FY 2024.
Operational performance overview and the significant changes in ratio
Strict receivable and working capital management by the Company
Efficient inventory management by the Company
Interest Coverage ratio
Due to existing debt reduction(excluding debt for PA-5 Capex)
Higher current liability resulted due to increase in creditors and short - term borrowing thereby marginally affecting the current ratio
Debt Equity Ratio
Due to increase in borrowings
Operating Profit Margin
Increase in cost of goods sold and competitive pressure resulted in decrease in operating margin
Net Profit Margin
Return on Net Worth
The Companys risk management framework outlines the approach to risk management, its perception and the mitigation measures. The risk management encompasses the identification, assessment, analysis and response to factors that pose risk to the business. The effective risk management process provides an opportunity to reduce the possibility of occurrence of risk and its potential impact.
The Board of Directors regularly reviews the outcome of the Risk Management Committee.
Corporate Social responsibility
At IGPL, corporate social responsibility originates from the Companys philosophy of giving long-term benefit to the communities in which it operates. We realise the necessity of contributing to the development of the underprivileged parts of society while serving the interests of our stakeholders, and we are dedicated to doing so responsibly. During the year, the Company contributed Rs. 436.99 lakhs towards the fulfilment of its CSR responsibility.
The key focus areas were Education, Skill Development and Women Empowerment.
The Company collaborated with Tata Community Initiatives Trust as implementation partner for setting up skill development centre aiming to upskill around 325 students and construction of school in association with Saraswati Shishu Mandir Trust. Also, the Company is working with 5 villages in and around Taloja for Women Empowerment and Self-help group based entrepreneurial programs to enhance the livelihood and empowerment of the women in the villages through NGO partner
We are a responsible corporate citizen.
In the face of an ever-changing and disruptive environment marked by concerns over climate change and events such as the Covid pandemic, Russia War, and the US Bank crisis, the future of human resources (HR) necessitates significant shifts in mindset, roles, and capabilities, facilitated by technology. At IGPL, we firmly believe that the achievement of our goals relies on the ability of our workforce to translate plans into actions. Over the past period, we have made focused and sustained efforts to enhance capabilities, enrich our culture, redesign our organization, improve employee engagement, and undergo business transformation, all with the aim of aligning people and processes with our overall business strategy.
During the challenging times of the third wave of the pandemic and its aftermath, we concentrated on engaging our employees through various initiatives to enhance the overall employee experience (EEX) within our organization. To foster employee engagement and cultivate a culture of appreciation, we relaunched our Rewards & Recognition program, which included Annual Employee of the Year awards, Spotlight awards, Take the Bull by the Horn awards, and introduced exclusive Safety awards throughout the year
Over the years, we have consistently created positive experiences for our employees through various structured initiatives aimed at fostering higher levels of engagement. Our focus has remained strong on enriching the work environment to embrace diversity, nurturing positive relationships, providing challenging assignments, and offering opportunities for growth and career development based on meritocracy.
We have recently established the People Development Committee (PDC) with a singular focus on introducing new People Development programs and initiatives to attract, retain, nurture, and develop talent within the organization. This year, several initiatives have been launched through the PDC.
In order to enhance our Talent Management efforts, we have relaunched our Performance Management system, including goal setting, mid-year and annual performance reviews, and Key Performance Indicators (KPIs). We have also organized various training programs and published guidebooks to ensure that all employees understand and adopt the Performance Management system, which is a critical tool for talent development.
Furthermore, we have implemented a new and improved Onboarding and Induction program with support from all departments. We have also introduced a Buddy program for new joiners, which provides them with guidance and support during their initial period at the Company.
In our endeavor to streamline HR processes and systems, we have transitioned several manual processes to digital platforms. We have also reviewed and updated talent review and succession plans to ensure the availability of critical resources.
Transparency and collaboration remain paramount, and we have fostered a free flow of information across all levels of management. Additionally, we have nurtured the 5S program, which has increased efficiencies and unlocked the potential of our workforce, as well as initiated the PSM (Performance, Safety, and Morale) program in its initial stages.
At IGPL, we are committed to fostering a culture of continuous learning and development for our employees. We firmly believe that investing in their professional and personal growth not only benefits them but also keeps us competitive in an ever-evolving market. To ensure employees have the relevant skill sets aligned with their learning needs, we have conducted a structured "need identification" process, followed by customized learning interventions. Recently, we conducted several training sessions, including Internal Committee Capability Building (under the PoSH Act), Goal Setting, Time Management, and Advanced MS-Excel Training.
Our proactive approach to employee engagement has resulted in an attrition rate that remains well below industry levels. This highlights the effectiveness of our employee engagement interventions and our focus on people development. Furthermore, our Company maintains a harmonious and peaceful industrial relations climate. The implementation of various HR and IT systems has contributed to increased process efficiencies and effectiveness, further enhancing employee performance.
As we enter the new financial year, the progress we have made thus far instills confidence in leveraging our HR initiatives to deliver business performance through a competent and engaged workforce.
The Internal Control process of the Company aims to provide a reasonable assurance of the effectiveness and efficiency of operations, reliability of financial reporting and adherence to the applicable laws and regulations. The audit plan is laid out for the year by the Internal Auditor on the guidelines as set out by the Audit Committee and the management.
The Internal Control activities are the specific policies and procedures which involves segregation of duties, proper authorization of transactions and activities, adequate documents and records, physical control over assets and records, and independent checks on performance. In order to establish effective internal controls, the Company continuously assess the risk, monitor control implementation, and modify controls as and when required.
The Internal Auditor participates in all meetings of and reports directly to the Audit Committee. The internal audit reports dwells on the detailed observations and its rating, the recommendation and corrective action proposed to be initiated.
The Companys internal financial control systems commensurate with its nature of business, size and operations.
This report contains statements that are "forward looking statements" including, but without limitation, statements relating to the implementation of strategic initiatives and other statements relating to Companys future business developments and economic performance. While these forward looking statements indicate our assessment and future expectations concerning the development of our business, several risks, uncertainties and other unknown factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to, general market, macroeconomic, governmental and regulatory trends, movements in currency exchange and interest rates, competitive pressures, technological developments, changes in the financial conditions of third parties dealing with us, legislative developments, and other key factors that could affect our business and financial performance. Company undertakes no obligation to publicly revise any forwardlooking statements to reflect future/likely events or circumstances.