OVERVIEW OF ECONOMY, INDUSTRY STRUCTURE AND DEVELOPMENTS:
Business Environment
a. Global Economic Outlook
In FY 2022-23, the global economy continued to grapple with several
macroeconomic pressures. The continued war between Russia and Ukraine, the impact of
supply chain disruptions and mounting inflationary pressures affected countries globally.
The sudden surge of COVID in China dampened growth prospects further, as global inflation
remained high at an escalated 8.7%.
The entire chemical industry in India had seen robust economic growth
over the last five years including excellent performance during the pandemic. However, the
world economic outlook for growth has fallen from 3.4% in 2022 to under 2.0% in 2023.
There are already indications that most countries in European economies are entering
recessionary conditions. Despite these projections of low growth rates, Indias growth is
expected to be resilient. After seeing a surge in market conditions and manufacturing
output, there have been signs of moderation in the second half of FY 2023.
The global economy demonstrated tentative signs of a soft landing in
early 2023. The recent financial sector turmoil and sticky inflation have posed a risk to
sustained growth. The slowdown is most pronounced in advanced economies, especially in the
Eurozone and the United Kingdom. Moreover, central banks monetary policies are expected
to bear fruit, contributing to a drop in global inflation. The Emerging Markets and
Developing Economies (EMDEs), including India, are powering ahead, with growth rates
anticipated to witness a significant upsurge this year.
In terms of the global economy, the baseline forecast is that growth
will decline from 3.4%in 2022 to 2.8% in 2023 before levelling off at 3.0% in 2024.
Conversely, a particularly sharp drop in growth, from 2.7% in 2022 to 1.3% in 2023, is
anticipated for advanced economies. Despite this, the baseline global headline inflation
rate is projected to drop from 8.7% in 2022 to 7.0% in 2023 as a result of reduced
commodity prices, however the rate of decline for underlying (core) inflation is
anticipated to be slower. Even if monetary policy has tightened, domestic demand in EMDEs
like India and China has so far remained healthy. The IMF projects that these regions will
contribute significantly to the global economy in FY 2024 as its anticipated expansion
accelerates to 4.2% from 3.9% in over the previous year FY 2023.
b. India Economic Outlook
India sustained its position as the worlds fastest-growing major
economy after remaining mostly insulated from the gloomy global outlook in FY 2022-23.
Throughout this year, the domestic economy demonstrated remarkable resistance to global
headwinds. The National Statistical Offices (NSO) second advance estimate reveals that
the Indian economy is in a sweet spot and expected to clock a growth rate of 7% in FY
2023-24. Amid global uncertainty, the Indian economy continues to be resilient.
Overall, Indias demand remains conducive to economic growth. India
remains bullish about the next fiscal year on the back of its underlying and overall
macroeconomic stability. However, it remains cautious about emerging geopolitical and
geoeconomic concerns.
OPPORTUNITIES AND CHALLENGES:
> High inflation in textile importing countries and higher inventory
levels across the textile value chain further impacted the demand of textile dyes and
chemicals. This in turn affected the selling prices and margins of dyes and chemicals.
> The size of the world Textile Dyestuff industry is estimated at
US$ 6.6 bn and is expected to grow at about 3% in the coming years. China continues to be
the largest manufacturer of dyes followed by India. The world market for high-performance
pigments is estimated at US$ 5.9 bn (constitutes both organic and inorganic pigments) and
is expected to grow at about 4% in the coming years.
> Fluctuations in foreign exchange, high inflation in export
markets, low demand and competition from China may impact sales realisations. Treatment
costs are expected to remain high because of stricter regulatory norms and increasing
demand for the implementation of green chemistry principles and ESG compliance.
> The world market for textiles is growing and, therefore, the
demand for dyes will continue to grow in future.
> Rising domestic demand in Textile Dyes and chemicals, Indias
attractiveness as a manufacturing destination and its improved ease of doing business are
some factors that suggest possibility of further growth in the chemical industry.
> The Indian Textile chemicals industry continues to be benefited
due to availability of technically skilled manpower and competitive labour costs.
> Pollution and effluent problems have become the single biggest
factor in restricting the growth of the textiles dyes industry in the developed nations.
Tighter rules and regulations, strict laws and high standard for treatment of the
effluents have forced these countries to look for better opportunities without sacrificing
their interest. If India has to capitalize on these opportunities, then there seems to be
no harm in encouraging this industry in the country provided proper measures are taken for
effluent treatment.
> The cost of compliance and complex regulatory process also impact
operations economically. The ability to scale up, offering differentiated products through
innovations, implementing effective sales and marketing strategy and maintaining high
levels of regulatory standards will clearly separate winners from the crowds in this
space.
OVERVIEW OF COMPANY : -
Indokem Limited is one of the leading manufacturing Company of Textiles
Dyes and Chemicals and Exporter of
related products. The manufacturing Index of the Company remained
broadly positive, the Company has kept pace
with the changes and there is tremendous growth in future.
> During the F. Y 2022-23, your Company achieved a turnover of Rs
111.66 Crores, which is decreased by 1.5% as compared to last year, which is mainly due to
higher price level of both inputs and finished goods.
> The Honble National Company Law Tribunal (NCLT), Mumbai Bench,
has by pronouncement made on 14th July, 2023, sanctioned the scheme of
amalgamation of Refnol Resins and Chemicals Limited (Transferor Company) with Indokem
Limited (Transferee Company) and their respective shareholders, under Sections 230 to 232
of the Companies Act, 2013, and other applicable provisions of the Companies Act, 2013,
and rules framed thereunder. The copy of the order of the NCLT sanctioning the scheme as
uploaded on its website on 14th July 2023, approves the scheme of amalgamation,
finding it fair, reasonable, and is not in violation of any provisions of law and is not
contrary to public policy. According to the order, upon implementation of the scheme,
Indokem Limited will issue fully paid-up equity shares to the equity shareholders of
Refnol Resins and Chemicals Limited in the proportion of 1,153 equity shares of Indokem
Limited for every 1,000 equity shares held in Refnol.
> Company has invested in new machineries to manufacture new
products range from Ambernath Units.
> Company has also invested in modernization of Effluent Treatment
Plants of all the Ambernath Units.
> Company is continuously investing in Quality Control machinery in
Laboratory and has qualified staff to meet global standards.
> IT system and infrastructure is being continuously monitored and
enhanced with any required upgrades.
> Our major product has received Global Organic Textile Standard
(GOTS) certification and successfully completed annual GOTS audit. GOTS is the worldwide
leading textile processing standard for organic fibers, including ecological and social
criteria, backed up by independent certification of the entire textile supply chain.
> Company has successfully registered maximum of its products under
Zero Discharge of Hazardous Chemicals (ZDHC) certification.
> Company is continued as ISO 45001:2008 certified Company.
> Customers have shown great trust in our Reactive Dyes range of
products and now we are focusing on Pigment Emulsions range for which there is less
competition.
> Company is regularly investing in new and attractive Packing
Material for the products which has shown better effects.
> Company is continuously investing in the registration and renewal
of Trademarks to safeguard Intellectual Property Rights.
> New Corporate clients have shown faith in our products since last
couple of years.
Discussion on Financial Performance with respect to Operational
Performance
( in Lakhs)
| Particulars |
FY 2022-23 |
FY 2021-22 |
| Net Sales |
11186 |
11356 |
| Earnings before Interest, Tax, Depreciation and Amortisation |
344 |
530 |
| Profit before Tax |
31 |
283 |
| Total Comprehensive Income for the year |
30 |
290 |
Significant Changes in Key Financial Ratios:
| Parameters |
FY2022-23 |
FY2021-22 |
% change |
| Debtors Turnover (number of times) |
3.69 |
4.43 |
-16.70% |
| Inventory Turnover (number of times) |
8.08 |
9.67 |
-16.44% |
| Interest Coverage Ratio |
1.17 |
2.67 |
-56.18% |
| Current Ratio |
1.69 |
1.66 |
1.81% |
| Debt Equity Ratio |
0.46 |
0.35 |
-31.42% |
| Operating Profit Margin (%) |
0.04% |
2.63% |
-98.47% |
| Net Profit Margin (%) |
0.27% |
2.49% |
-89.16% |
| Return on Net Worth |
0.90% |
8.29% |
-89.14% |
FUTURE OUTLOOK:
The long-term growth prospects of the Indian economy being positive,
the textile chemical industry is also expected to grow in view of growing population,
increasing disposable income, and changing consumer trends. The growing demand for textile
dyes for various fiber types, such as cotton, polyester, and viscose, is expected to fuel
the growth of the textile dyes market. Constantly changing fashion trend is also expected
to drive textiles industry, thereby propelling the market growth. The Company is intending
to add more product range for customers in existing and new markets. The Company is taking
all measures to strengthen itself against the volatility and inflation. We hope that our
commitment will continue to drive the Company, as we move forward.
RISKS AND CONCERNS:
> Chemicals industry is a highly regulated industry with stringent
environmental norms. Any change in policy by the Government may have an adverse impact on
the performance of the Industry. However, Indokem Limited follows best in class process
controls and systems, and hence we are always ready to adapt to any changes in the
Government Regulations.
> Huge fluctuation in the foreign exchange rates had an adverse
impact on the Companys import and export transactions which finally impacted financials
of the Company. Further rise in the crude oil prices has weakened Indian Rupee due to
increase in import costs.
> As part of the global policy, the relevant parameters for all
manufacturing sites are analyzed to minimize the risk associated with protection of
environment, safety of operations and health of people at work. These are then monitored
regularly with reference to statutory regulations prescribed by government authorities and
guidelines defined by Indokem. The Company fulfills its legal requirements concerning
emission, waste water and waste disposal. Improving work place safety continues to be top
priority at all manufacturing units.
> The Company continues its focus on compliance in all areas of its
business operations by rationalizing and strengthening controls. This is also an important
component of Companys Code of Conduct. The Company has set in place the requisite
mechanism for meeting with the compliance requirements and periodic monitoring to avoid
any deviation. Company aims to set exemplary and sustainable standards, not only through
products, services and performance, but also through integrity and behavior.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:
The Company has an Internal Control System, commensurate with the size,
scale and complexity of its operations. In order to supplement the internal control
process, the Company has appointed an Internal Auditor who is authorised by the Audit
Committee to assess the adequacy and compliance of internal control process and provide
their report covering observations and recommendations. Based on the report of internal
audit function, the Company undertakes corrective actions in their respective areas and
thereby strengthens the controls. Significant audit observations and recommendations along
with corrective actions thereon are presented to the Audit Committee of the Board.
Further, in compliance with the Companies Act, 2013, and SEBI (Listing
Obligations & Disclosure Requirements) Regulations, 2015, the Company has laid down a
system of internal financial controls over financial reporting and adequacy and operating
effectiveness of such controls. These controls are designed to provide a reasonable
assurance regarding:
• Adherence to the Companys policies and procedures;
• Safeguarding assets;
• Prevention and detection of fraud and error;
• Reliability, completeness and accuracy of accounts;
• Timely reporting of information (financial, non-financial,
internal and external).
QUALITY MANAGEMENT SYSTEM:
Your Company maintains its quality systems from lower level Management
to higher level Management by imparting ethical standards in its approach and behavior and
implementing the same in day to day business practices. The Company is complying with ISO,
GOTS and ZDHC certification for its manufacturing units.
HUMAN RESOURCE MANAGEMENT:
The biggest asset of the Company are its people; it is promoting a
culture that empowers its people to be the best version of themselves essential to foster
high engagement and consistent improvement in performance. It is creating a learning
organisation and building end-to end capabilities to be future-ready as its businesses
further evolve and expand - it is committed to pervade technology in all its HR processes.
People and culture are the cornerstones for building a company and for
it to face the test of time. The Company took further initiatives to enhance i) its HR
processes (particularly using technology) related to recruitment, performance management,
learning and development, manpower planning and employee care and ii) work environment
related to culture and code of conduct to manage a growing business.
Indokem is an equal opportunity employer and strives to create an
inclusive workplace and work culture. The Company is committed to treating all people with
respect, care, fairness, sensitivity, and dignity.
Industrial Relations remain cordial during the FY 2022-23. The Board
gives guidance to the Management ensuring that the implications of safety and
sustainability are addressed properly in all the strategic initiatives. Company considers
its committed and talented workforce as one of its most critical assets and key to driving
sustainable performance, growth and developing competitive advantage. The number of
employees increased from 117 as on 31st March, 2022 to 122 as on 31st
March, 20223.
CAUTIONARY STATEMENT:
Statements in the Management Discussion and Analysis describing the
Companys objectives, expectations or forecast may be forward looking within the meaning
of applicable laws and regulations. Actual results may differ materially from those
expressed in the statement. Important factors that could influence the Companys
operations include global and domestic supply and demand conditions affecting selling
prices of finished goods, input availability and prices, changes in Government
regulations, tax laws, economic developments with the country and other factors such as
litigations and industrial relations.
CONCLUSION:
Your Company has already turned around and expects future growth in its
performance in coming year on account of several initiatives taken by the Company in
improving plant efficiency, new product developments and focus on Research and
Development. We have come a long way from where we had begun and we continue to set new
benchmarks for ourselves in order to constantly improve our performance. To summarise,
your Company is optimistic about the growth in the medium term in revenues as well as
operating margins.
|
For and on behalf of the Board |
| Place: Mumbai Date: 25th July, 2023 |
Sd/- Mr. Mahendra K. Khatau Chairman & Managing Director
DIN:00062794 |
+91-9892691696
