Jaysynth Dyestuff India Ltd Management Discussions

Industry Structure and Developments

Dyestu_ and pigment industry constitute one of the major components of chemical sector having vital role in the growing Indian economy. The industry is characterized by major global manufacturers and numerous regional players. The global dyes and pigment market size is valued at USD 39 billion and is expected to grow at CAGR of more than 5% for next 5 to 7 years. The industry has transformed from being import dependent to an export driven industry. There is also a growing trend towards eco-friendly pigment dispersions that o_er improved stability and reduced environmental impact. The Indian colourants sector is major player in global market with estimated share of 15%.

The Indian economy is in a stable position expected to expand at 7% in FY 2023-24. The emergence of several favourable government policies have resulted in significant strides in growth of the industry. High energy prices, labour cost and stringent environmental regulation are significant challenge for western countries in the rapidly changing global environment of the chemical sector. China was one of the benefactors of the transition until recently. In the aftermath of pandemic, the world is looking into other geographies, mainly India and Indian chemical sector is expected to have higher growth prospects. The Company operates into single segment with products comprising from Dyes, Pigments and Inks group. The Companys products are colouring materials having its customer base in several industries such as Textile, Paints, Coatings, Plastic, Paper etc. Ink products generally derive their colour value from dyes or pigments contained in them.

Opportunities and Performance

The pigment and pigment dispersion industry has opportunities for growth and improved performance through increased demand in emerging markets, eco-friendly solutions, advancements in technology. In pigment the Company mainly deals in phthalocyanine pigments for which market size is expected to increase during next _ve years owing to increasing utility in the plastic, construction, marine, and industrial equipment sectors. However due to recessionary conditions in European Union, USA economies, the demand outlook may be subdued for FY 2023-24. Phthalocyanine pigments are typically high-quality organic pigments incorporated in textiles, paints, inks, and dyes to impart colors. They offer good fastness to heat, optimum resistance to chemical attacks, combined with brightness and cleanliness of shade, making them an ideal choice in the coloring sector. These pigments are also marking a widespread presence in the automotive sector. For Instance, copper phthalocyanine blue is widely utilized as an organic nano pigment in automotive as well as high-performace paint formulations considering its excellent color strength. In the longer term of 3 to 5 years higher demand from the automotive, construction, and aerospace sector will infuse a positive prospect for the industry expansion. Regionwise Asia Pacific is anticipated to record substantial demand for phthalocyanine pigments on account of higher industrial application scope in the region. However, overall global economic outlook has many uncertainties due to recessionary conditions particularly in European Union countries.

The Digital printing sector is expected to grow significantly due to major shift from conventional printing to digital printing, which is likely to fuel the 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.

Dyes predominately _nd application in textiles with almost 80% of its production being used by textile sector. The other end applications involves paper, adhesives, art supplies, food and beverages, ceramics, construction, cosmetics, glass, paints, plastics and soap. 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 growing demand for textile dyes for various _bre types, such as cotton, polyester, and viscose, is expected to fuel the growth of the textile dyes market.

Outlook and Strategy

The long-term growth prospects of the Indian economy being positive, 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 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 e_orts to enter into arrangement with printer manufacturers. The business strategy is largely dependent on the economic environment of the Country.

The Board of Directors of the Company has approved the Composite Scheme of Arrangement amongst the three companies being the Company (Transferor Company 1), Jaysynth Impex Private Limited (Transferor Company 2) and JD Orgochem Limited (Transferee Company) and their respective shareholders and creditors, under Section 230 and 232 and other applicable provisions of the Act. The Scheme provides for absorption of Transferor Companies with and into Transferee Company (with effect from Appointed date 01^st April, 2023) and in consideration thereof, the Transferee Company shall issue equity shares and preference shares to the shareholders of Transferor Company 1 and Transferor Company 2 respectively. Upon sanction and implementation of the Scheme, the merged entity will be able to tap into new business opportunities thereby unlocking growth opportunities and achieve economies of scale for better operational e_ciency.

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 restrict the exporters capability to grow, as complying with ecological norms is too expensive. High cost of spares for digital printers and limitation in skilled work force in middle level are restricting the expected growth of Digital Textile Printing. Further, any slowdown of the economic growth or volatility in Financial market, exchange-rate fluctuations, increase in prices of crude oil and down-stream petrochemicals, etc are all areas of concern which company may face from time to time. The Pigments industry is facing challenges on changing environmental_regulations, increase cost of raw materials due to increase in Crude oil prices, tightened environmental regulation, particularly in Asia Paci_c Region. High capital cost of machinery for digital printing is discouraging the entrepreneurs in textile sector for major shift from conventional printing to digital printing.

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 e_cient 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 _rm 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

(Rs in Lakhs)

Particulars	FY 2022-23	FY 2021-22	Variance	Reason
Net Sales	13,817.15	15,929.21	(13.26%)
Earnings before Interest, Tax, Depreciation and Amortisation	938.12	1,225.04	(23.42%)	Due to lower sales and reduction in operating margin.
Profit before Tax	734.17	1,025.00	(28.37%)	Due to lower sales and reduction in operating margin.
Total Comprehensive Income for the year	542.45	754.92	(28.14%)
Key Ratios
Debtors Turnover (Days)	86	83	3.61%
Inventory Turnover (Days)	106	83	27.71%	Due to lower sales and high inventory levels due to supply chain issues.
Current Ratio	3.61	3.70	(2.43%)
Operating Profit Margin (%)	6.79	7.29	(6.86%)
Net Profit Margin (%)	4.09	4.54	(9.91%)
ROCE(%)	8.22	11.96	(31.27%)	Due to lower sales and reduction in operating margin.

Material Developments in Human Resources/ Industrial Relations Front

Industrial Relations remain cordial during the Financial year 2022-23. 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. The Company had 107 employees as on 31^st March, 2023 as against 114 employees as on 31^st March, 2022.

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 di_er from such estimates, whether express or implied. Several factors that could make a di_erence to Companys operations include climatic conditions and economic conditions a_ecting 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 of Directors

	Parag Sharadchandra Kothari
Place: Mumbai	Chairman and Managing Director
Date: 10th August, 2023	DIN: 00184852