Jaysynth Dyestuff (India) Ltd Management Discussions.

Industry Structure and Developments

The global economy is expected to grow by 2.8% in 2019 as compared to 3.2% in 2018. Global chemical production is forecasted to grow by 2.7% in 2019. Slowing external demand, rising borrowing costs, and persistent policy uncertainties have impacted the emerging market and developing economies. International trade and manufacturing activity have softened, trade tensions remain elevated and some large emerging markets have experienced substantial financial market pressures.

Dyes and Pigment group constitute one of the major components of chemical industry having vital role in the growing Indian economy. The Company operates into single segment with products comprising from Dyes, Pigments and Inks group, which 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

Dyes predominately find 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 Textile Dyes market is projected to grow from USD 7.8 billion in 2018 to USD 9.82 billion by 2022, with CAGR of 6.00%. 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. The consumption growth is projected to increase in regions such as Asia Pacific and Central & South America. During FY 2018-19 the Company achieved sales volume of Dyes aggregating to 337 MT as compared to 390 MT in previous year.

Pigment products are used in paints & coatings, automotive finishes, printing inks, polyester textiles and plastics like PVC, rubber and synthetic polymers and nylons, paper. The main user industries, namely, Paint and Coatings and Textile, will continue to grow because of increase in discretionary spending. The global Pigments market is expected to grow at CAGR of 4.1%. As the future of the Pigments industry depends on the end-user industry, the constantly growing paint and coatings and plastics industry have been the main drivers of its growth. The major product groups of Organic Pigments are Azo Pigments, Phthalocyanine Pigments and Quinacridone Pigments. The Company mainly deals into Phthalocyanine pigment products. The Pigments industry is facing challenges on changing environmental regulations, increase cost of raw materials. Tightened environmental regulation, particularly in Asia Pacific Region, which accounts for 40% of the total business, led to consolidations throughout the supply chain. During FY 2018-19 the Company achieved sales volume of Pigment products aggregating to 1718 MT as compared to 1936 MT in previous year.

Growing digital printing sector will fuel the demand for Ink products. However, due to adverse effects of the rollout of GST which impacted the textile sector most, the Ink products volume was impacted. Countries such as India and China being major producers of dyes are likely to provide positive scope for printing inks application across the Asia Pacific. Textiles are expected to witness a significant growth owing to rapid growth in the emerging economies. During FY 2018-19 the Company achieved sales volume of Ink products aggregating to 179 MT as compared to 139 MT in previous year, but with lower price realisation.

During FY 2018-19 the Company achieved sales revenue of Rs. 11587 Lakhs as compared to Rs. 11522 Lakhs in FY 2017-18 with marginal increase of 0.56%. EBITDA for the year was Rs. 522.49 Lakhs as compared to Rs. 426.94 Lakhs during the previous year, up by 22.38%. The Company is not able to achieve significant growth in operating profits due to stagnancy of sales and reduction of margins Ink products.

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. 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 is intending to add more product range of pigments to customers in existing and new markets. In case of Ink products for digital printing, the Company will make efforts to enter into arrangement with printer manufacturers.

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. 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 of the Company. 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. High cost of spares for digital printers and limitation in printing results are restricting the expected growth of Digital Textile 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.

Discussion on Financial Performance with respect to Operational Performance

(Amt In Rs.)

Particulars FY 2018-19 FY 2017-18
Net Sales 1,15,87,40,176 1,15,22,54,290
Earnings before Other Income, Interest, Tax, Depreciation and Amortisation 5,22,49,331 4,26,94,479
Profit before Tax (including Other Comprehensive Income) 4,47,22,706 2,69,83,995
Profit after Tax (Comprehensive Income) 3,37,91,224 1,83,73,441
Key Ratios
Debtors Turnover (Days) 103 95
Inventory Turnover (Days) 64 69
Current Ratio 3.40 2.63
Operating Net Profit Margin (%) 4.51 3.71
Net Profit Margin (%) 2.92 1.59
ROCE(%) 4.61 2.62

Material Developments in Human Resources/ Industrial Relations Front

Industrial Relations remain cordial during the financial year 2018-19. 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 115 employees as on 31st March, 2019 as against 123 employees as on 31st March, 2018.

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 of Directors
Parag Sharadchandra Kothari
Place: Mumbai Chairman and Managing Director
Date: 29th May, 2019 DIN: 00184852