J D Orgochem Ltd Management Discussions.

Special Note on Corona virus pandemic

The Corona virus disease (COVID-19) was declared a global pandemic by the World Health Organisation in March 2020. Following which, the Government of India then announced a nation-wide lockdown for six weeks and thereafter, a partial lock down in certain parts of the country, based on their risk profile.

The initial lockdown meant a complete slowdown of the economy and very limited demand for the Companys products and services. The Company has made committed efforts to support its business stakeholders, employees and service providers. It has geared itself to serve markets in different locations as the country re-opens, as per central and local government advisories. The Company is also working on various options to ensure that it effectively navigates through the crisis and emerges stronger.

Industry Structure and Developments

The global economy growth decline to 2.9% in 2019 as compared to 3.6% in 2018, as the result of an increase in global trade disputes and slowdown of the manufacturing sector, coupled with a global financial crisis. The Indian Dyestuff Industry has transformed from being import dependent to an export driven industry. Today, India exports dyes and dyes intermediates to the very same countries, on which it was dependant for imports till a decade ago. Dyes and Dyes-Intermediates group constitute one of the major components of chemical industry having vital role in the growing Indian economy. Dyes products predominantly find application in textiles with almost 80% of its production being used by textile sector. The other end application involves paper, adhesives, ceramics, cosmetics, glass, paints, plastics, soap, etc. The textile industry is witnessing growth due to several factors such as growing population, increasing disposable income, and changing consumer trends.

The market for Dyes & Pigments is anticipated to register a CAGR of over 5% during the forecast period. Major factors driving the market studied are increasing architectural paints and coatings production, and increasing demand from the textile industry. On the flip side, the negative impact of COVID-19 outbreak on the market and increasing demand for digital printing in textiles can hinder the growth of the market.

Opportunities and performance

Indias chemical industry is a global out performer. The Indian chemical market size accounts for only 3% of the global chemical industry of USD 5 trillion. India is expected to become the fourth largest chemical producer in the world by 2029. The growing demand for textile dyes for various fiber types, such as cotton, polyester, and viscose, can lead to growth of the textile dyes market. The industry is likely to see new dyeing technologies coming into the market with the help of good technical expertise and R&D achievements. The textile industry is expected to provide a positive growth trajectory and product demand in future due to several factors such as growing population, increasing disposable income, and changing consumer trends. The textile dyes market size is projected to grow from USD 8.2 billion in 2019 to USD 10.9 billion by 2024, at a CAGR of 5.9%, during the forecast period. The market is witnessing a high growth due to the growing use of textile dyes. Low-cost of manufacturing in APAC countries and high demand for textile dyes in the region are driving the global textile dyes market.

During Financial Year 2019-20 the Company achieved sales revenue of Rs 150.15 lakhs as compared to Rs 178.80 lakhs in Financial Year 2018-19. During the year the sales of Dyes was 90 MT as compared to 100 MT in previous year. Loss before other income, interest, depreciation and tax, for the year was Rs 47.19 lakhs as compared to Rs 44.82 lakhs during the previous year. At present the Company is not able to achieve significant growth in revenues and operating profits due to its inability to restart manufacturing activity.

Outlook and Strategy

The long-term growth prospects of the Indian economy being positive, the textile 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. With the consistent shift in the manufacturing base for Dyes and Dye-intermediates from the western countries to the Asian countries, there will be more opportunities for Dyes manufacturers. However, the Company may not be able to undertake manufacturing operations in immediate future due to financial constraints and ongoing litigation and disputes in labour matters.

Risks, Concerns and Threats

Stringent environmental regulations may hamper the growth of the dyes & pigment industry. Most of the advanced countries are imposing new and more stringent ecological norms which can restricts the exporters capability to grow, as complying with ecological norms is too expensive. Also the regulations are having an adverse effect on the availability of raw material and intermediate input products for the industry. The current slowdown in Indian economy may persist for longer period affecting the overall growth. Exchange- rate fluctuations, increase in prices of Crude Oil and down-stream petrochemicals, trade war between US and China, etc are all areas of concern which your company may face from time to time.

Internal Control Systems and their adequacy

The Company has a proper and adequate internal control systems ensure there is efficient use and protection of resources and compliance with policies, procedures and statutory requirements. There are well-documented guidelines, procedures and processes, integral to the overall governance, laws and regulations. An independent firm of chartered accountants carries out the internal audit across the organization. The internal auditors review the adequacy, integrity and reliability of control systems and suggest improvements. The internal auditor conducts extensive reviews and process improvements identified during the reviews, are communicated to the management on an on-going basis. Significant observations made by the internal auditors and the follow up actions thereon are reported periodically to the Audit Committee of the Board of Directors. The Audit Committee monitors the implementation of the audit recommendations.

Discussion on Financial Performance with respect to Operational Performance

particulars FY 2019-20 FY 2018-19
Net Sales 15,015,000 17,880,000
Earnings before Other Income, Interest, Depreciation and Tax (Operating Net Profit) (47,18,900) (4,482,494)
Earnings before Interest, Depreciation and Tax (25,16,961) 24,277,906
Profit/(Loss) before Tax (10,706,036) 17,203,754
Profit/(Loss) after Tax (11,400,160) 17,202,146
Other Comprehensive Income/(Loss) 39,480 (216,514)
Total Comprehensive Income/(Loss) (11,360,680) 16,985,632
Key Ratios
Debtors Turnover (Days) 22.48 33.12
Current Ratio 0.30 0.46
Operating Profit Margin (%) (31.43) (25.07)

Material Developments in Human Resources/ Industrial Relations front

The Company believes that growth of the Company largely depends on the contribution and efforts of the employees and understands the importance of the workforce. It always lays an emphasis on creating an environment which is favorable for the employees. But as on date the Company is facing ongoing litigation with workers of erstwhile Turbhe unit and Patalganga unit at various Judiciary authorities and details of same are provided in Boards Report. Company has only four of employees on the pay roll as on 31st March, 2020, which was the same as at the end of previous financial year.

Cautionary Statement:

Certain statements made in this Report relating to the Companys outlook, estimates, predictions etc. may constitute "forward looking statements" within the meaning of applicable laws and regulations. Actual results may differ from such estimates, whether express or implied. Several factors that could make a difference to Companys operations include climatic conditions and economic conditions affecting demand and supply, changes in Government regulation tax regimes, natural calamities, etc. over which the Company does not have any direct control.

For and on behalf of the Board
parag Sharadchandra Kothari
Date: 14th July, 2020 Chairman
place: Mumbai DIN:00184852