indo rama synthetics india ltd share price Management discussions

Pursuant to Schedule V to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 Covering business performance and outlook.

Industries Structure and Development

The man-made fibre (MMF) industry in India is expanding rapidly, ranking second in cellulose fibre/yarn production and second in synthetic fibre production globally. Further, the MMF market in India is mainly dominated by polyester and viscose, which constitute almost 94% of total production. Polyester holds the majority share, contributing to around 77.5%, while viscose accounts for 16.5%.

Cotton production is stable or on reducing trend.

The MMF sector is responsible for 17% of Indias textile exports, making it the worlds sixth-largest exporter of MMF textiles. Weavers and spinners in India are increasingly favouring man-made fibres, which are extensively utilised to produce non-cotton and blended fabrics. These fibres account for nearly 100% of such fabrics. The man-made fibre industry is well positioned to drive substantial growth in Indias textile sector in FY 2022-23 and beyond. Being self-sufficient and covering the entire value chain, from raw materials to finished garments, this industry is expected to grow at a rate of 6% annually.

Outlook

Demand for man-made fibres in India is expected to rise due to increasing use in nonwovens and technical textiles, changing consumer trends focused on fitness and hygiene, rising brand consciousness, evolving fashion trends, and increasing womens participation in the workforce.

The Indian market is expected to have a promising future with the governments strong policy support. The allowance of 100%

FDI (automatic route) in the textile and apparel sector has led to a significant increase in FDI, with approximately 298.67 USD million in 2021.

The MMF segment is expected to be highly lucrative in the future, as India has eliminated anti-dumping duty on important raw materials like Purified Terephthalic Acid, Spandex, and Viscose staple fibres. Furthermore, rationalising GST on the value chain of man-made fibres will help in stimulating the growth of the manmade fibre industry. The government has also launched the National Technical

Textiles Mission with a budget of $194 million for implementation over four years, starting from the fiscal year 2020-21 to 2023-24.

The PLI Scheme for textiles will give a boost to the high-value MMF segment, creating new employment and trade opportunities. The rising prices of cotton are also contributing to the growth of the MMF textile sector. The Indian government has introduced initiatives like PM Mitra Park, RoDTEP, RoSCTL, and QCOs on certain textile products to support the textile industry.

Opportunities and Threats

Indias man-made fibre (MMF) market is slowly but steadily becoming an emerging sub-section within the textile sector. With the rise in demand for technical and medical textiles, India has seen a surge in demand for MMFs. The government has put crucial measures in place for the sector to thrive, including the Production Linked Incentive (PLI) scheme for Man-made Textiles and the Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme. FTA with different countries will boost export. With the mandatory use of recycled bottles in food and beverage will increase the EBITA margins in polyester. However, there are various issues plaguing the value chain, such as limited supply of raw materials, outdated technology and high Customs Duty. Nonetheless, MMFs are not here to replace natural fibres but to complement them with newer alternatives such as blended fibres. Import of fabric and certain filament yarns, 100% polyester yarns from China reduce the inhouse capacity and lower margin.

About Indo Rama

Indo Rama has been a prominent player in Indias rapidly expanding polyester industry for the last three decades. The company has established itself as the largest dedicated polyester manufacturer in India, known for its exceptional product quality. Their extensive range of polyester products includes Polyester Staple Fibre (PSF), Partially Oriented Yarn (POY), Draw Texturised Yarn (DTY), Fully Drawn Yarn (FDY), and Polyester Chips. The company has formed technical collaborations with leaders in technology from Japan, Germany, and the USA. Indo Rama has a customer-centric approach, and it values high quality standards and innovative business practices.

Financial performance with respect to operational performance Corporate Strengths

• Legacy: Indo Rama has expertise of more than 3 decades to handle a complex business environment and owns an integrated production facility with an annual capacity of 610,050 tonnes in Butibori, Nagpur, Maharashtra. Its diverse product offerings include Polyester Stable Fibre, Polyester Filament Yarn, Draw Texturised Yarn, Fully Drawn Yarn, and Polyester Chips and also expanding PET Resin from June, 2023 quarter.

• Plant location accessible to all: Indo Ramas manufacturing plant has a strategic Central India location that enables it to promptly cater to demand throughout India.

• Most cost-effective producer: Indo Ramas integrated facility allows it to maintain its cost and market competitiveness.

• Best-in-class quality and process: Indo Ramas robust quality and process management systems ensure consistent and efficient delivery of high-quality goods.

• Technology at the core: The Companys investment in state-of-the-art equipment enables streamlined and cost-competitive operations.

• Global presence: With a presence in key global markets including Turkey, MENA, Brazil, Nepal and more, Indo Rama is a major player in the industry.

• Long-term client relationships - Indo Ramas long-standing client partnerships provide stability and credibility.

• Reliable and strong shareholder support: Being controlled by Indorama Ventures Public Company Limited (IVL), a leading player in the fibre industry, Indo Rama benefits from shared synergies in technology, finance, and operations.

Production Performance

Particulars	FY 2022-23	FY 2021-22
Polyester Staple Fibre (TPA)	207176	195707
Polyester Filament Fibre (TPA)	138799	167687
Draw Texturised Yarn (TPA)	95618	110683
Polyester Chips (TPA)	13543	9824

Note:

01) POY Qty Includes Captive Qty transferred to DTY 02) Excluding Trial run Chips Cp1 production qty 1470 Mt

Financial Performance ( in crores)

Particular	FY 2022-23	FY 2021-22
Total Income	3,930.79	3,907.42
EBITDA	73.00	308.69
PBT	(19.27)	218.11
PAT	(19.27)	268.19
Book Value per share (In )	22.09	22.95
Earnings per share (In )	(0.74)	10.27

Key Financial Ratios

Sr. No. Particulars	FY 2022-23	FY 2021-22	Explanation for Significant Change
1 Debtors Turnover Ratio (times)	21.75	26.01	-
2 Inventory Turnover Ratio (times)	6.41	8.26	-
3 Interest Coverage Ratio (times)	1.44	4.52	Subdued product margins resulted in reduced interest coverage ratio
4 Current Ratio (times)	0.85	0.81	-
5 Debt Equity Ratio (times)	1.15	0.49 Incremental borrowings for expansion projects have resulted in higher debt equity ratio
6 Operating Profit Margin (%)	1.85	8.19 Significantly adverse market conditions emerging out of geo-political unrest have resulted in lower operating margins
7 Net Profit Margin (%)	-0.49	7.12 Lower profit margin
8 Return on Net Worth (%)	-3.34	46.34 Net loss for the year

Risks and Concerns

In todays volatile, uncertain, complex, and ambiguous (VUCA) world, a reliable risk management system is crucial for any company. Indo Rama has made significant efforts to establish a robust risk management system that can help the company achieve its business objectives and ensure sustainable growth. To manage risks effectively at the transactional level, the company has implemented a decentralised risk management approach. By managing risks, we can identify, evaluate, and control potential threats to our companys capital and earnings, including financial uncertainties, legal liabilities, technical challenges, strategic management failures, and accidents. To address the full spectrum of risks, we rely on a comprehensive risk management methodology and framework.

Key Risk and their Mitigation Processes

Risks	Mitigation Process
Cost Risk: The cost of raw materials for producing polyester is subject to fluctuations due to the crude oil price sensitivity, thereby posing a risk to the overall cost of production.	• Wherever feasible, we strive to source maximum of our primary raw material, such as PTA, from local suppliers to minimise price volatility and transit time.
	• To reduce the cost of raw materials, we engage in vendor renegotiation and explore alternative procurement options.
	• Our pricing policy is aligned with public raw material price indexes.
Quality Risk: The Companys reputation could be negatively impacted by any decrease in product quality.	The implementation of robust quality control measures and reliable technological support plays a vital role in maintaining the quality of output.
	• Our quality standards comply with ISO 9001:2008 certification.
	• We have a well-equipped quality control laboratory that leverages state-of-the-art technology and software to ensure consistent delivery of high-quality products
Employee Risk: The Companys growth may be hindered by the inability to attract and retain talented employees.	• We follow a standardised and merit-based recruitment process that relies on a well-organised and accurate selection approach to ensure fairness and impartiality.
	• Our employee retention strategy centres around objective evaluation methods and performance appraisals that eliminate bias.
	• We offer incentives such as awards and recognition to motivate and retain talented employees.
	• Our aim is to foster a positive work environment that promotes staff engagement and overall job satisfaction.
Technological Risk: Technological obsolescence can negatively affect operational performance	• We have established numerous technological collaborations with prominent technology firms across the globe.
	• Our focus on re-engineering and continuous improvement is essential to maintaining our competitive edge.
	• We place a high value on ongoing investment in technological advancements.
	• We monitor operations closely to ensure that everything runs smoothly.
Competition Risk: High business risk from the peers in the market.	• Building customer trust, expanding our customer base, and catering to unique demands are key priorities.
	• We aim to offer a wider range of value-added products to a larger customer base.
Forex Risk: Fluctuations in currency values across the globe.	• To mitigate the risk of currency volatility, we purchase forward contracts based on needs and assessments.

Power Generation and Sourcing

Starting from June 2020, the Company has ceased generating power at its captive co-generation facility and instead sources all required power from the state DISCOM. Nevertheless, the DG power set is maintained in standby mode as a backup power source to fulfil critical power requirements in the event of an outage from the state DISCOM. Indo Rama is constantly monitoring its power consumption, both internally and externally, in order to identify ways to reduce costs.

Internal Controls Systems and their Adequacy

Indo Rama has put in place a strong Internal Control System that aims to ensure the effectiveness of its systems, processes, and controls. An Independent Agency and an Internal Enterprise Risk Management team conduct Internal Audit, covering all major areas and processes as per the managements review plan. The compliance of Standard Operating Procedures and management-approved policies is reviewed, and any areas needing improvement are identified. The Internal Audit process checks if all systems and processes are appropriate for the size and structure of the business. Adequate Internal Control Systems are in place to protect the companys assets by promptly identifying and mitigating risks. The

Internal Audit Report is reviewed with the management and Audit Committee members to monitor the current systems and take corrective measures to strengthen the control measures.

Statutory Compliance

The Company Secretary and Compliance Officer confirm with all units of the company and issue a declaration at every Board Meeting about the companys adherence to relevant statutes, including SEBI regulations, the Companies Act 2013, and other applicable laws.

They ensure compliance with these regulations.

Human Resources and Industrial Relations

Indo Ramas achievements are attributed to the skills, quality, and experience of its employees. The Company has a structured performance management program in place to keep its workforce engaged and retain the best talent in the industry. The organisation also offers its employees opportunities for growth and advancement within the company, fosters a collaborative and pleasant work environment, and maintains transparency.

Safety, Health and Environment

Indo Rama recognises that a companys sustainability depends on its ability to manage safety, health, and environmental concerns effectively. We strive to demonstrate environmental and social responsibility in all our operations while aiming to benefit our communities, including employees, the public, and the environment. Our safety, health, and environmental goals include complying with all industry-related laws, and we believe in sharing responsibility for adhering to these regulations throughout the organisations

. hierarchy. Indo Rama holds the ISO 45001:2018 certification for

Occupational Health and Safety (OH&S) Management and has established an OH&S system and policy that meet the standards.

Fire and Safety

We adhere to all the legal compliance requirements outlined in the Factories Act 1948, Maharashtra Factories Rules 1963, and

Maharashtra Fire Prevention and Life Safety Measures Rules. Indo Ramas management makes a continuous effort to educate and create awareness about fire and safety among employees, their family members, and contractor workers.

Fire Audits (Form B) were conducted in July-2022 and January-2023, as mandated by the Maharashtra Fire Protection and Life Safety Measures Act.

The company has a comprehensive on-site Emergency Management Plan to handle any emergency situation within and outside the plant premises, which is regularly updated.

Mock drills have been conducted to ensure the preparedness of employees in various emergency scenarios.

Topics Covered in Fire and Safety Training in 2022-23 are General Safety Awareness, Construction Safety, Accident Investigation, Work

- Permit System, Causes of Accident and its Prevention, Personal Protective Equipment, Fire Protection, Material Handling, Lifting tools and tackles, Work at height, HOT Work, Confined Space Entry,

. LOTO, Emergency Management Plan (EMP), Hazard Identification and Risk Assessment (HIRA) and Electrical Safety.

Initiatives taken to Improve Fire and Safety System in 2022-23 are as follows.

• New foam fire tender procured in April-2022.

• Installed High Velocity Water Spray (HVWS) System for bigger transformers.

• Installed Wireless Fire Detection system in 220 KV switchyard and POY/DTY Warehouse in Nov-2022.

• Increase height of over head HT lines in front of company gates for improved safety .

• Conducted various safety motivational events to improve safety awareness.

• Spare diesel operated fire main pump installed in CFHTM Fire pump house.

Health

Maintaining high standards of health and cleanliness has always been of utmost importance to Indo Rama as it is an integral part of the Companys operations. The Butibori plant of Indo Rama is equipped with a well-equipped health centre staffed by highly skilled doctors and nurses, as well as an ambulance and other medical facilities, providing medical assistance to employees, their families, contractors, and the public around the clock. The health centre also conducts regular employee health checks and provides advice on health, diet, and exercise. First aid boxes have been provided at all plant areas, and periodic medical examinations of all employees have been conducted, with health awareness lectures delivered from time to time.

Environment

Indo Ramas mission is to conserve the environment, with every operation guided by advanced protection measures. The company limits pollution at the source, during treatment and disposal, and emphasises efficient operation of facilities. Efforts are made to maintain environmental balance, with solid and hazardous waste laws enforced for limited effluent discharge and increased water recycling. The company seeks to minimise its environmental impact.

Information Technology

The company implemented several digital transformation initiatives, including rolling out the SuccessFactors and ADP systems for eligible staff, and adding up an additional subsidiary, Indorama Ventures Yarns Private Limited, to the existing SAP ECC setup.

The company also introduced the cloud-based O365 suite to enhance user collaboration and ease of use, and implemented MFA-based authentication for VPN access to enhance security. Furthermore, the company implemented an Asset Management system for software compliance and rolled out a cloud backup solution for critical application data. Group ITGC and Statutory Audits were effectively managed, with gaps addressed and closure within defined timelines. The infrastructure, including servers and networks, was hardened to improve security and align with STCP audits and group requirements.

The Company identified and is currently implementing a SIEM tool to enable integrate and assess security events from multiple systems and help corelate and identify anomalies leading to improved security posture. A Gap assessment for the OT network too has been performed and requisite measures to align with CSMS standards have been initiated. To enhance user knowledge around cyber security, a system is currently being implemented that shall help maintain user records, track performance as also assess user learnings from such trainings. Additional subsidiary units have been configured in SAP enabling SSP and PET project roll-outs. Several legacy business applications have been upgraded to currently supported platforms. ITGC audit has been satisfactorily closed.

Cautionary Statement

Indo Ramas management is responsible for the financial statements in this report, which follow Indias accounting principles. Statements in this Management Discussion and Analysis that describe the Companys objectives, plans, and expectations may be considered forward-looking statements. Management has attempted to identify such statements by using phrases like anticipate, estimate, expect, project, intend, plan, and believe. However, such statements are subject to known and unknown risks, and actual results may differ due to changes in the political and economic environment, tax laws, litigation, and other factors. Management cannot guarantee that these statements will be realised and has no commitment to update them publicly.