J D Orgochem Ltd Management Discussions

Industry Structure and Developments

The Indian economy is projected to grow at 6.7% in FY 2025-26 as per RBI estimates. Key growth drivers for optimistic outlook are improved consumer confidence and corporate wage growth, resurgence in rural demand supported by rebound in agricultural production easing food inflation and a stable macroeconomic environment. The Indian dyestu_ and pigments industry is a vital segment of the countrys chemical sector and plays a key role in supporting Indias export economy. However, there can be significant challenges including geopolitical and trade uncertainties as well as potential commodity price shocks.

During the year the Company commenced an additional line of business operations with trading activities in large format Inkjet Printers and Spares for Inkjet printers. The Company started offering Digital Printing Solution comprising the said products with its manufactured Ink products and related technical support services. Sale of these printers serve as a vehicle for sales of digital ink products.

After commencement of Inkjet Printer business, the Company now operates into two segments. The other segment being Colourants & chemicals, comprising products from dyestu_s, pigments, pigments dispersion, inks and textile chemicals group. Ink products generally derive their colour value from dyes or pigments contained in them. Dyestu_ and pigment industry constitute one of the major components of chemical sector having vital role in the growing Indian economy. The Companys products are colouring materials having its major customer base from Textile sector. The Company also caters to customers from other several sectors such as, Paints, Coatings, Plastic, Paper etc. The industry is characterized by major global manufacturers and numerous regional players. Global dyes and pigment market size is expected to grow at CAGR of more than 5% for next 5 to 7 years. The Indian colourants sector is major player in global market which is estimated to grow at 8% to 10%.

Opportunities and Performance

Anchored by the textile industry, which remains the largest consumer, the sector is experiencing steady growth driven by rising demand from end-use industries such as textiles, leather, plastics, printing inks, and paper. With expected growth trajectory for the textile industry in particular and other end-use industries as well, the dyestu_ industry is also likely to generate perform well. Despite challenges such as global competition, export margin pressures, and volatile raw material prices, the industry continues to evolve, driven by innovation, R&D, and a growing emphasis on sustainable and ecocompliant practices.

The Ink products manufactured by the Company are mainly used by textile sector for digital printing. With commencement of large format Inkjet Printer business by the Company and increase in its install base, there can be significant growth in the sales volumes of Ink products. Digital printing has various advantages such as design flexibility, small runs, fast changes, personalisation, minimum wastages, with less water & e_uent treatment requirement, as compared to conventional printing. In view of these advantages major shift from conventional printing to digital printing is expected in textile sector. This will not only boost demand for Inkjet printers but also lead to growth in demand for Ink products. Also, India and China being major_producers of dyes are likely to provide positive scope for printing inks_application across the Asia Pacific.

The company also launched digital pigment inks for digital printing. The process is eco friendly and requires zero water consumption. The company has also applied for a patent for its jettable pre treatment ink for digital pigment printing. While sales have only just been initiated, the company is making concerted efforts to emerge as a cost and performance leader in this fast growing space.

The pigment and pigment dispersion industry has opportunities for growth and improved performance in view of eco-friendly solutions and advancements in technology. The Company mainly deals in phthalocyanine pigments for which market size is expected to increase owing to increasing utility in the plastic, construction, marine, and industrial equipment sectors. Region wise asia paci_c is anticipated to record substantial demand for phthalocyanine pigments on account of higher industrial application scope in the region. There is also a growing trend towards eco-friendly pigment dispersions that offer improved stability and reduced environmental impact.

Standalone revenue from operations for the year stands at Rs. 22,964 Lakhs as against Rs 20,574 Lakhs in FY 24, registering an increase of 12% compared to the previous year. Total export revenue for the year is Rs. 8,494 Lakhs, against Rs. 7,582 Lakhs in FY 24, registering an increase of 12%. The profit before tax for the year is Rs. 2,164 Lakhs, with an increase of 23%. Consolidated revenue from operations for the year stands at Rs. 22,632 Lakhs, registering an increase of 8% compared to the previous year. The consolidated profit before tax for the year is Rs. 2,136 Lakhs, with an increase of 24%.

Financial Performance on standalone basis:

Outlook and Strategy

The Indian economy being poised for long term growth, the end user industries comprising textile, paint, plastic, etc are also expected to grow. Increasing global population and rising disposable income of consumers in developed and developing countries is also expected to fuel the demand for high quality clothing, ultimately boosting demand for colorants. Constantly growing paint and coatings and plastics industry will be main drivers for growth pigment products market. It is expected that growing digital printing sector will boost the demand for Ink products. Market for Inks used for digital printing will also have exponential growth with significant growth expected in textile sector. Constantly changing fashion trend is also expected to drive textiles industry, thereby propelling the market growth._Other than Phthalocyanine pigments, the Company has added more product range in pigments dispersions for customers in existing and new markets. In case of Ink products for digital printing, the Company will make efforts to enter into long term arrangements with printer manufacturers to adopt the companys products. The business strategy is largely dependent on the economic environment of the Country.

Risks, Concerns and Threats

The company has implemented a structured approach to identify both current and emerging risks in making strategic decisions and in developing detailed mitigation plans. Implementation of stringent environmental regulations can hamper the growth of the dyes & pigment industry. Most of the advanced countries are imposing new and more stringent ecological norms which can restrict the exporters capability to grow, as complying with such ecological norms is highly expensive. Also, the recessionary conditions in the European Union, the demand outlook may be subdued for FY 2025-26. The company also faces strong international competition for its digital inks business from Chinese producers of digital inks. Due to the present geopolitical situation, the global economic outlook has many uncertainties leading to recessionary conditions. Further, any slowdown of economic growth or volatility in financial markets, exchange-rate fluctuations, increase in prices of crude oil and down-stream petrochemicals, etc are all areas of concern which the company may face from time to time.

Internal Control Systems and their adequacy

The Company has a proper and adequate system of Internal Control commensurate with the size and nature of its operations to ensure that all assets are safeguarded against unauthorized use or disposal, ensuring true and fair reporting and compliance with all applicable regulatory laws and company policies. Internal Audit Reports are reviewed by the Audit Committee of the Board.

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

Material Developments in Human Resources/ Industrial Relations Front

Industrial Relations remain cordial during the financial year 2024-25. The Company acknowledges the importance of the workforce with believe that growth of the Company largely depends on the contribution made by the employees. It always lays an emphasis on creating an environment which is favourable for the employees and motivates performance, customer focus and innovation Companys strategies are based, inter alia, on processes of continuous learning and improvement.

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.

Important factors that may affect the Companys operations and financial results include global and Indian demand & supply dynamics, fluctuations in finished goods with, raw material prices, cyclical market demand, changes in government regulations, environmental and tax laws, broader economic conditions in India and worldwide, as well as other variables such as pending litigation and industrial relations. These factors could significantly impact actual results compared to those implied by forward-looking statements. The Company does not undertake any obligation to publicly update these forward-looking statements to reflect new information or future events, except as required by law.