indian acrylics ltd share price Management discussions

Management Discussion and Analysis Report for the year under review was stipulated under Regulation 34(2)(e) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, is presented as under.

a) Acrylic Fibre Industry Global and Indian Perspective

The year 2022-23 is quite full of challenges like high energy prices post Ukraine Russia War, low consumer sentiments across European region and High Inflation challenges in world major economies. We saw interest rate rising continuously pushing financing cost and Indian Rupee fast depreciation against US Dollar in a short span of time from Rs.74 to nearly Rs.83. The challenge remained to control the cost of energy, raw materials and freight due to these factors. The large production facility of Mitsubishi Rayon Japan announced closure of their acrylic fibre plant during the year.

As per market estimates, the demand of Acrylic fibre has increased in the current year in the domestic market from 0.86 lakh MT to nearly 1 Lakh MT. Lower availability and high prices of Cotton after Ukraine Russia War and Acrylic fibre competitive position remained key in the above demand growth.

China is the largest acrylic fibre producing country in the world and control nearly 40% of total Acrylic Fibre being produced globally and their production in the year April-March 2023 also increased from 4.91 Lakh MT to 5.58 Lakh MT. Capacity utilization of plants in China was nearly 65% this year. Global demand of Acrylic fibre has also increased from 12.62 lakh MT in 2021 to 13.19 Lakh MT in 2022.

The focus of the company on seeding of acrylic yarn in the new export markets and development of new varieties as per customer & market needs at the affordable prices helped in the growth of yarn business and in mitigating the effect of higher cost by increasing production and sales volumes. The export of Acrylic fibre by the company remained consistent thruout the year. The export of acrylic fibre increased from 1504 MT in the previous year to 5625 MT in this year. The volume of export of acrylic yarn has also increased from 1188 MT in previous year to 3634 MT in this year. Industry in India facing problem of dumped imports of Acrylic Fibre by several countries. The recommendations of Ministry of Commerce, Directorate of Anti-dumping duties following final findings of investigations released in August Sept 2020 against dumping of acrylic fibre being done by several countries like Thailand, Belorussia, Peru, EU etc are still pending implementation by the Ministry of Finance, Govt of India. Forum of Acrylic Fibre has taken up the matter with the Government as well as in the Courts for early levy of anti dumping duties against dumped imports in India. The Court has ordered during the year for provisional assessment by custom of the imported consignments. This order is pending implementation by the Govt and Forum of Acrylic Fibre is taking up the matter further.

Business Outlook

Acrylic Fibre and Yarn production in India enjoys a comparative advantageous position in terms of cost of production and availability of skilled manpower. Man made textile Industry is growing with increasing consumer demand in the domestic market and robust income growth going in the hands of rural masses.

The supply situation of raw materials is stable and likely to remain next year as well with the increasing new capacities in the Asian Region. The initiative and policy actions by the Government of India such as establishing new 75 textile hubs / parks in India, allowing 100% FDI (automatic route) attracting more foreign direct investment, production linked incentive (PLI) scheme worth Rs.10,683 Crore ( USD 1.44 billion) for manmade fabrics and technical textile over a period of 5 years, Uniform GST rate 12% on manmade fabrics, MMF yarns and apparels from 1st January 2022, increasing investment by amended Technology Upgradation Fund (ATUFS) in Union Budget of 2023-24 and resumption of export demand after successful covid vaccination programs across major western economies are all quite positive for Indian textile exporters. The uncertainty in demand caused by recession fears in later half of 2023-24 in US economy, continued Ukraine war and major central banks fighting against high inflation are few challenges going ahead. Company has well diversified product mix of acrylic fibre and yarns with strong customer base across various markets in Africa, Europe, South America and Asian Regions and well placed to grow its production and sales and overcome these challenges.

Internal Control Systems and Their Adequacy:

Your Company has a well-designed Internal Audit programme and dedicated team for independent review of all systems, procedures and financial controls of the Company to bring in the best industry practices, compliance with internal systems & procedures and statuary laws. The Companys overall internal control system is adequate given size and nature of operations. All important issues are regularly presented to the Audit committee of the Company. Senior management of your Company places emphasis on taking proper actions on the significant issues, findings and recommendations of internal audit, and systems are strengthened appropriately. Internal Financial Controls: The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weaknesses in the design or operation were observed. a) Management Perception of Risk & Concerns: Risk Management

The Risk Management Committee ensures compliance of all the fiscal, industrial, labour and environments laws by using adequate internal control measures and through regular monitoring by the respective departmental heads in the company.

The following table gives the key risks faced by the Company, and the steps taken to mitigate the same:

Key Risks	Impact on IAL	Mitigation
Global Economic Scenario	Spending on clothing have shown strong correlations with GDP Growth. Uncertain economic outlook in China can impact the consumer spending on clothing and thereby constrain the demand growth of acrylic fibre.	- Well diversified customer base across different geographical locations and across different end uses of fibre
		- Target newer markets which might provide counter-cyclical support
Adverse change in Govt Policy	Any sudden action by the Government to allow duty free imports of acrylic bre in India under free trade agreements without corresponding reduction in the duties on raw materials can impact the company as there are no local producers and company is dependent on imports for its main raw materials	- Increasing exports share in the turnover of the company by investing in newer markets development
Currency Volatility	Volatility in currency exchange movements resulting in sudden transaction and translation exposure.	- Currency hedging policy and practices in place.
		- Hedging strategy monitored by risk management committee through regular reviews
Crude Oil volatility	Volatility in crude oil prices resulting in sudden spurt or plunge of raw materials prices	- Increasing value added products in the product mix.
		- Inventory exposure monitored by risk management committee through regular reviews
Dumping of fibre	Large scale dumping by certain countries in India can impact the domestic sales	- Investing in the energy saving, alternate fuels and new products by in-house R & D.
		- Increasing exports sales by developing the new export markets

As such, the Company is monitoring and taking steps to mitigate the risks, if any, which may threaten the existence of the Company.

Cautionary Statement:

Statements in this report on Management Discussion and Analysis describing the Companys Objectives, projections, estimates, expectations or predictions may be "forward looking" within the meaning of applicable Securities laws and regulations. Actual results could differ materially from those expressed or implied.

	On Behalf of the Board of Directors
Place : Chandigarh	ALOK GOYAL	R.K. GARG
Date : 15.05.2023	EXECUTIVE DIRECTOR	MANAGING DIRECTOR
	DIN-08049515	DIN-00034827