MANAGEMENT DISCUSSION AND ANALYSIS REPORT
ECONOMIC OVERVIEW
Global Economic Landscape
The global economy, despite numerous challenges, exhibited remarkable resilience and
has been steadily recuperating since the start of 2022. Some of these challenges include
the Covid-19 pandemic, geopolitical tensions in Europe, escalating fuel and input prices,
and global efforts to raise interest rates in response to inflationary pressures. Rising
fuel and input costs led to higher production expenses, resulting in increased prices for
goods and services. All this further led to global inflation peaking at 8.7% in 2022,
according to the International Monetary Fund (IMF) World Economic Outlook, published in
April 2023.
The persistent high inflation rate in the US prompted the Federal Reserve to consider
raising interest rates to control it, with a predicted peak rate of 5.75%. The Bank of
England and the European Central Bank had already increased interest rates, leading to
tighter financial conditions and reduced demand in some sectors. This further exacerbated
the challenges faced by the global economy, leading to a decrease in demand and slower
economic growth.
Despite these macroeconomic challenges, the global economy grew by 3.4% in 2022, with
the European Union growing at 3.6%, the US at 2.1%, and India at 7%. Moreover, the global
economy is projected to experience a slight decline with a estimated growth rate of 2.8%
in 2023 and further expected to increase to 3.0% in 2024. This is an outcome of the
advanced economies raising interest rates to combat inflation, particularly in the US. The
ongoing conflict between Russia and Ukraine is also expected to impact global growth in
2023.
While the growth of advanced economies stood at 2.7% in 2022, it is anticipated to
decline by 1.3% in 2023 before improving to 1.4% in 2024. Emerging and developing markets
are expected to grow at a similar rate of 4.0% in 2022, with an anticipated decline of
3.9% in growth rate in 2023. These markets is anticipated to further grow by 4.2% during
2024.
The recent bank crises serve as a reminder of the fragility of the worlds economic
outlook, with the downside risks looming large. Despite the resilience displayed by labour
markets in developed nations, wage-price spirals are possible, making it difficult for
central banks to adopt a more flexible approach. In these challenging times, there is an
urgent need for caution and prudence.
Outlook
The world today is highly volatile and uncertain, characterized by ongoing conflicts
and trade disputes. This highly unpredictable scenario presents both challenges and
opportunities for global economies. There is immense risk to economic growth, particularly
in financial institutions, housing markets, and low-income nations. Inflation remains a
concern despite showing a decrease and could impact the economy if it persists. However,
there are some positive aspects to consider as well. Efforts are being made to reduce
inflation through strong monetary policies, although this could lead to emerging market
debt distress. The key priorities currently are to restore price stability and address
cost-of-living pressures. The need of the hour is a multilateral approach which will be
crucial in expediting the economic recovery. Encouragingly, Chinas reopening following
the COVID-19 pandemic has led to a faster-than-expected rebound, countering the previous
growth slowdown in 2022.
Indian Economic Landscape
As per the International Monetary Fund (IMF), the Asia- Pacific region is projected to
be the most vibrant among the worlds major regions in 2023. This growth is likely to be
propelled by the promising prospects shown by two of the largest emerging economies in the
region, namely India and China. According to the IMF, India alone is expected to make a
substantial contribution to the global economy, accounting for approximately 15% of the
global growth, making it a relative bright spot. Additionally, the combined growth of
India and China is expected to contribute to around half of the global economic growth in
2023, with another 20% coming from the remaining countries in the region
The Central Bank has implemented multiple interest rate hikes in 2022 to curb
inflation. This is expected to remain above the upper tolerance band for the first three
quarters of 2022-23. However, despite global challenges, the RBI paused its rate hikes in
April 2023, setting the benchmark policy rate at 6.50%.
The Indian economy is poised to be the worlds fastest- growing in 2023, with an
expected growth rate of 7%, primarily driven by private consumption. To fortify the
countrys infrastructure, the government is adopting a comprehensive approach that
involves a substantial increase in spending on critical sectors such as road transport,
highways, railways, and defence. This strategy entails allocating Rs. 10 lakh Crores
towards capital expenditure for 2023-24, a significant increase from Rs. 7.28 lakh Crores
from the previous year, as per the Union Budget. In addition, the government is
introducing various measures to foster financial inclusion, such as the implementation of
Postal Life Insurance (PLI). It is also launching the National Monetization Pipeline
(NMP), which seeks to unleash the potential value of public sector assets that are
currently underutilized or unutilized. Another significant initiative is the PM Gati
Shakti, which aims to enhance the countrys logistics and transportation infrastructure.
Outlook
Despite the anticipated deceleration of global economic growth, there is a silver
lining in the form of easing global prices, which will bring crucial relief to key sectors
impacted by soaring commodity prices. The decline in commodity prices is expected to
positively impact various sectors such as consumers, metals, cement, and automobiles in
the coming quarters. This development is particularly beneficial for small-scale
manufacturers who have faced challenges during the pandemic and struggled to maintain
their market share amidst skyrocketing prices. The falling production costs are likely to
enable these manufacturers to regain their competitive edge. Further, buoyed by a strong
demand outlook and surge in infrastructure projects, the manufacturing industries are
expected to experience a much-needed recovery.
In May 2023, inflation stood at 4.25%, which is 45 basis point lower than the April
2023 figure of 4.70%. It is expected to gradually decline further in future. The growth of
the Indian economy has been revised to 7.2% in 202223, enabling it to maintain the
position of the fastest- growing nation.
INDUSTRY STRUCTURE AND DEVELOPMENT
Global Cold Chain Industry
In 2022, the global cold chain market was valued at USD 279.94 Billion. It is projected
to expand at a CAGR of 18.6% from 2023 to 2030 to reach USD 1,071.13 Billion by 2030. This
growth can be attributed to rapid technological advancements, increased demand for
temperature- sensitive products, and organized retail and international trade expansion.
It is further fuelled by implementing automation and connected devices in refrigerated
warehouses and government subsidies to boost the cold chain industry.
In addition, the shift to protein-rich foods in developing economies and the rise in
disposable incomes have led to a surge in demand for refrigerated transportation vehicles.
The significant growth of the e-commerce industry enabling the delivery of perishable
products has also contributed to the growth of the cold chain market.
The North American cold chain market is poised for substantial growth due to various
factors such as refrigeration and warehouse technology advancements, specialized retail
stores, and innovative technologies. Additionally, the changing dietary habits of
consumers in the region are also expected to contribute to the expansion of the market.
Further, the demand for cold chain logistics infrastructure in North America received a
boost from the sales of temperature-sensitive healthcare products and increased
consumption of perishable food items, particularly meat and seafood.
Similarly, the cold chain logistics market witnessed significant growth in the
Asia-Pacific region. This growth can be attributed to increased funding from governments
for building infrastructure and high demand for processed food goods, frozen dairy, and
meat products. Countries such as Japan, South Korea, China, and India have shown
remarkable growth in this sector, with a high market share expected in these regions. The
growth of the cold chain logistics market in the region over the forecast period is
further expected to be fuelled by the rising number of pharmaceutical companies and
foreign direct investment.
Indian Cold Chain Industry
In terms of revenue, the cold chain market in India was valued at Rs. 1.86 Trillion in
2022 and is projected to reach Rs. 4.26 Trillion by 2027, expanding at a CAGR of ~14.27%
during the 2023-27 period. This growth prospects is propelled by multiple factors. One of
the key growth drivers is the rising need for cold storage and distribution services,
especially for perishable items like fruits, vegetables, dairy products, seafood, meat,
and poultry. India is the worlds largest producer of milk and the second-largest producer
of fruits and vegetables. This has led to a considerable expansion in the countrys cold
chain infrastructure to cater to these products storage and transportation requirements.
Further, there is a notable surge in consumer demand in Indias processed food
industry. This is supported by the governments plans to establish numerous mega food
parks, which bodes well for the progress of the cold chain sector. Due to the increased
risks and investments associated with grain crops, farmers are increasingly shifting
towards cultivating fruits and vegetables, which necessitate refrigeration, thereby
promoting the development of cold storage facilities.
Additionally, the healthcare sector is driving an increase in cold chain facilities.
This is because various healthcare products such as vaccines, biopharmaceuticals, and
clinical trial materials are sensitive to temperature and require storage within the range
of 2?C to 8?C. With Indias vaccine and clinical trials market expected to grow at a
double-digit rate, there is likely to be greater demand for efficient cold chain
facilities in the coming years.
Currently, India has 7,129 cold storage facilities with a capacity of around 32 million
metric tonnes and about 10,000 actively refrigerated vehicles. However, this can still
grow sharply to cater to the 40.7 Million metric tonnes of total perishables in 2023,
representing an 8.2% increase from 2020.
ICE MAKE AT A GLANCE
Ice Make Refrigeration Limited (‘Ice Make or ‘The Company), has over three
decades of experience in providing high-quality cooling solutions to a diverse range of
customers across various industries. The Company operates under five key business
verticals: Cold Room, Commercial Refrigeration, Ammonia Refrigeration, Industrial
Refrigeration, and Transport Refrigeration. It has established state-of-the-art
manufacturing facilities in Ahmedabad (Dantali, Gujarat), Vamaj (Kadi, Gujarat) and
Chennai (TamilNadu) which allow it to provide customized cooling solutions to its clients.
Ice Make has always been at the forefront of serving its customers. The Company continues
to strengthen its business verticals while ensuring consistent growth across all sectors.
During the financial year 2022-23, the Company secured big orders, developed and
supplied cold storage solutions to leading food processing companies, and completed
capacity expansion projects. Ice Make also leveraged the power of synergy and incorporated
Ice Best Private Limited, enabling the Company to tap into future opportunities and
explore new avenues of growth. Furthermore, the Company expanded into new geographies in
the East and may expand in the countrys other region as and when necessary. The Company
has the planned capex for the Greenfield project of continuous penal and it will be fully
functional by April 2024. Going forward, Ice Make aims to create long-term value by
providing premium-quality products to its customers.
During the financial year 2022-23, the Company secured big orders, developed and
supplied cold storage solutions to leading food processing companies, and completed
capacity expansion projects.
Product Portfolio
Ice Makes products are broadly classified into five categories:
Average Ticket Size of Products
| Cold Room |
Rs. 3,00,000 to 6,50,000 |
| Commercial Refrigeration |
Rs. 50,000 to 75,000 |
| Transport Refrigeration |
Rs. 3,00,000 to 5,50,000 |
| Industrial Refrigeration |
Rs. 3,50,000 to 5,50,000 |
FINANCIAL PERFORMANCE ( In lakhs)
| Consolidated Financials |
2022-23 |
2021-22 |
| Total Revenue |
31,332.58 |
20,680.29 |
| EBITDA |
3,323.47 |
1,518.61 |
| EBITDA Margin (%) |
10.61 |
7.34 |
| PAT |
2,080.12 |
732.03 |
| PAT Margin (%) |
6.64 |
3.54 |
| Net Worth |
8,112.58 |
6,168.10 |
| Long-Term Debt |
253.94 |
320.69 |
| Cash and Cash Equivalent |
128.29 |
49.03 |
Key Financial Ratios (Consolidated)
| Ratio |
As at March 31, 2023 |
As at March 31, 2022 |
Variance |
Explanation in case of variance is more than 25% |
| Current Ratio |
1.70 |
1.56 |
9% |
|
| Debt-Equity Ratio |
0.93 |
0.99 |
(6%) |
|
| Debt Service Coverage Ratio |
12.66 |
4.95 |
156% |
Increase in profitability along with lower current maturities of long term debt |
| Return on Equity Ratio |
29.13% |
12.41% |
17% |
|
| Inventory turnover Ratio |
4.66 |
3.56 |
31% |
Improvement is due to better utilisation of operating cycle |
| Trade Receivables Turnover Ratio |
8.46 |
8.36 |
1% |
|
| Trade Payables Turnover Ratio |
6.46 |
6.42 |
1% |
|
| Net Capital Turnover Ratio |
6.11 |
6.34 |
(4%) |
|
| Net Profit Ratio |
6.66% |
3.55% |
3% |
|
| Return on Capital Employed |
35.05% |
17.80% |
17% |
|
| Return on Investment |
17.66% |
7.85% |
10% |
|
RISK MANAGEMENT
Ice Make is confronted with various risks that can be efficiently handled by
implementing appropriate mitigation strategies through careful planning. It is possible
for the Company to effectively reduce the impact of these risks and sustain its
competitive advantage within the refrigeration equipment market through a proactive risk
management approach.
| Risk |
Impact |
Mitigation |
| Supply Chain Disruption |
The Company relies on its suppliers for necessary raw materials, components and parts
to manufacture its products. Any disruption to the supply chain can significantly impact
the Companys ability to produce and deliver products on time, resulting in lost revenue
and customer dissatisfaction. |
The Company has diversified its supplier base and cultivating strong relationships
with suppliers to ensure timely delivery of materials. It will also maintain an inventory
of critical components and parts to mitigate supply chain disruptions. |
| Economic Downturn |
Changes in the social, geopolitical, legal or competitive global business environment
could hamper the Companys regular business operations and may adversely impact the
financial conditions |
The Company keeps a close eye on developments in the relevant business environment.
Thereon, taking proactive measures in terms of changes in strategies to protect the
business interest |
| Currency Exchange Risk |
The Company operates internationally and is exposed to currency risk on account of its
receivables in foreign currency. The functional currency of the Company is Indian Rupee |
The Company has adopted hedging strategies such as forward contracts and currency
options to mitigate currency exchange risk. It has also explore opportunities to source
materials and components locally to reduce exposure to exchange rate fluctuations. |
| Quality Control Issues |
The Companys reputation and customer satisfaction rely heavily on the quality of its
products. Nonetheless, there is a potential risk that quality control problems may impact
the Companys standing by causing product defects and recalls. |
The Company has implemented strict quality control processes and procedures to ensure
that products meet customer expectations. |
| Risk |
Impact |
Mitigation |
| Cybersecurity Threats |
The Company stores critical information such as customer data, financial details, and
intellectual property on its computer systems. This implies that any cybersecurity risks,
such as data breaches or hacking attempts, can have a profound impact on the Companys
financial status. |
The Company has implemented robust cybersecurity measures such as firewalls, antivirus
software, and regular data backups to mitigate cybersecurity risks. |
| Competition |
The Company faces competitive challenges in the refrigeration equipment market from
both domestic and international players. This can impact the Companys operations and
market position. |
The Company has focused on innovation and product differentiation to stand out in the
market. Additionally, it has also invested in marketing and branding efforts to increase
its visibility and attract customers. |
| Technological Obsolescence |
The Company may face challenge in maintaining competitiveness in the market due to
constant technological evolution. Outdated technology can significantly impact the
Companys products, potentially making them less appealing to customers. |
The Company has invested in research and development to remain up-to- date with the
latest technological advancements. It will also engage in collaborations with technology
partners to integrate cutting-edge technology into its products. |
QUALITY CONTROL
Ice Make has a group of experts that oversees quality assurance and quality control
processes. The team is well- equipped with technical knowledge and skills to carry out
their responsibilities.
HUMAN RESOURCES
Ice Make has a workforce of skilled, semiskilled, and unskilled labour. The Company
believes in establishing connections with all employees at the grassroots level to enhance
their performance. Ice Make has made employee empowerment a priority as a part of its
efforts towards strengthening its position at the global level. To achieve this, the
Company has consistently upgraded its human resources by implementing various training
programs to improve skills and cultivate talent. As of March 31, 2023, Ice Make had 300
employees and 327 contract employees, many of whom demonstrate a strong commitment to the
Companys interests.
Further, Ice Makes wholly-owned subsidiary, Bharat Refrigerations Private Limited, had
24 Company employees and 24 contract employees as of March 31, 2023. Despite facing
several economic downturns in the past, the Companys experienced team promptly responded
to the challenges by deploying efficient strategies that helped it navigate the current
economic climate.
INTERNAL CONTROL SYSTEM
Ice Make has established an internal control system that is deemed to be sufficient,
effective, and efficient in reducing or eliminating fraudulent activities and other
irregularities in its daily operations. The Companys internal and statutory auditors
conduct periodic evaluations of the effectiveness of the internal controls, which the
Audit Committee regularly reviews. Based on the auditors findings, the Audit Committee
guides the Management on the necessary corrective actions and controls that align with the
Companys organizational needs.
CAUTIONARY STATEMENT
The Management Discussion and Analysis report may contain forward-looking statements,
which describe the Companys objectives, projections, estimates, and expectations, and are
subject to applicable securities laws and regulations. There is a possibility that the
actual results could differ significantly from the expressed and implied statements.
Various factors, including economic conditions that affect demand/supply and price
situations in both domestic and overseas markets where the Company operates, alterations
in government regulations, tax laws, and other statutes, and incidental elements, could
impact the Companys operations.
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