Kaka Industries Ltd Management Discussions

Annexure - VI

Industry and company performance Indian PVC furniture Industry

The Indian PVC furniture industry has been experiencing robust growth, driven by increasing urbanisation, government initiatives, and rising demand for durable and cost-e_ective furniture solutions. The shift from traditional wood furniture to PVC furniture, due to their water resistance, Termite proof, lightweight, and ease of installation, has further fuelled this growth. Key segments within the industry include Hollow UPVC Profile, WPC and Solid Profile, UPVC Windows profile, Door frame, UPVC roofing sheet and WPC frame and sections, each catering to different need of the consumers such as Doors, windows, wardrobe, Kitchen cabinets, wall partition, ceiling, wall cladding and roofing sheet.

Growth Drivers-

1. Urbanisation And Housing- Rapidurbanisation and the governments "Housing for All" initiative are driving the demand for economical furniture in residential construction. The need for cost effective furniture and decorative products in new housing projects is boosting the market.

2. Replacement Of Traditional Furniture - The replacement of ageing and deteriorating traditional furniture products with UPVC furniture products is contributing to market growth. UPVC furniture offer benefits of being water proof, termite proof, longer lifespan and lower maintenance costs. Similarly, the replacement of old furniture products with modern, new colour variants is driving the demand.

3. Make In India Initiative- The "Make in India" initiative is enhancing the competitiveness of the manufacturing sector, driving the growth of the UPVC furniture market. The initiative encourages domestic production and reduces dependency on imports.

4. Rising Disposable Incomes- Increasing disposable incomes are enabling consumers to spend more on home improvement and renovation projects. This trend is boosting the demand for premium and luxury UPVC furniture, which offer better quality and enhanced aesthetic appeal.

5. Growth of Nuclear Families - The shift from extended families to nuclear families has been a significant trend over the past few decades. This change is driven by various factors, including urbanization, economic development, and changing social norms. UPVC furniture has gained popularity due to its a_ordability, durability, and versatility. As nuclear families often live in smaller homes or apartments, they prefer furniture that is lightweight, easy to maintain, and cost-e_ective. PVC furniture fits these criteria perfectly.

Market Trends-

1. Technological Advancements- Innovations in UPVC profiles manufacturing, such as the development of new colours, New textures are driving market growth. These advancements enhance the functionality and appeal of UPVC furniture, making them a preferred choice among consumers. In the UPVC furniture industry, fluted panels, WPC panels and Charcoal panels are attracting consumers for their decorative appeals.

2. Sustainability- The increasing focus on sustainability is driving the demand for eco-friendly UPVC profiles and furniture. Manufacturers are developing products with lower environmental impact, UPVC products save trees and forest and bring same furniture feel of wood.

3. Rising Disposable Incomes- Rising disposable incomes are enabling consumers to invest in high-quality UPVC furniture products. This trend is driving the demand for premium UPVC furniture products, which offer better performance and durability.

4. Expansion Into Rural Markets- The cost-e_ective furniture products is very well accepted by Rural markets and acceptance of innovative furniture products will drive growth of UPVC furniture products. The focus on rural markets is expected to drive significant growth in the coming years.

5. Increasing Awareness Of Upvc Furniture Products- The consumers are becoming more concerned for furniture which are cost effectiveness, low maintenance and more durable.

Product-Wise Performance:

Internal Control Systems And Their Adequacy:

The Company has in all material respects, an adequate internal financial controls towards achieving orderly and efficient conduct of its business operations, adherence to companys policies, optimum utilization of resources, and effective monitoring thereof in order to prevent and detect frauds and errors in timely manner. The internal control mechanism ensures that, all transactions are authorized, recorded, and reported correctly in a timely manner and compliance with all laws and regulations and policies and procedures laid down by the management from time to time.

Financial performance with respect to operational performance: During the year, the Company has earned profit before tax of Rs. 1735.43 lakhs as compared to Rs. 1002.4 Lakhs in previous year. The financial performance has been improved during the year due our strategic initiatives and strong market positioning and highest ever revenue from operations also keeping production cost below. The details analysis and discussion on financial performance has been reflected in Directors Report, which has also been reviewed by Audit Committee from time to time.

Business, Operational And Financial Risks

The significant risks and concerns which may have an impact on the Companys business are as follows:

1. Indian Economy and International Economic trends

2. Interest rate fluctuations and high rates on inflation

3. Foreign Currency rate fluctuations

4. Unforeseen circumstances like natural calamities- pandemic, floods, earthquakes, closure due to violence 5. Government Policies & Regulations Opportunities And Threats The Governments initiatives in Housing for All, Affordable Housing and Smart City projects will give an excellent opportunity to increase the business of your company in the coming years. Replacement of Wood Furniture and traditional furniture with UPVC Furniture products is already taking place in India. Significant risks and threats to your company are related to Global economic situation, Volatile plastic raw material prices, War situations in Europe and Middle East. The situation of economic downturn, if it comes, may affect building and construction, industrial sectors; and these may affect the demand of your companys products.

Material Developments In Human Resources

The Company considers employees as its vital and most valuable assets. Your Company considers manpower as its assets and understands that people have been driving force for growth and expansion of the Company. Company has always remained an equal opportunity employer and has embedded these values in its employees. Manpower are being mentored to take on larger roles in the organisations. Through our learning and development initiatives, the Company continues to upskill our employees for their jobs. The Company is into process of continuous improvements based on feedback and inputs from multiple stakeholders, past experiences and industrys best practices for giving better employee experiences.

Key Financial Ratios:

Note 1

Companys Net Profit during the year has been increased by 63.16% as compared to Previous Year mainly due to highest turnover and maintaining cost of material consumed during the year below as compared to previous year which has led to a phenomenal increase in Net Profit Margins.

Note 2

During the year there is a substantial improvement in companys EBIT Interest Coverage Ratio on account of increase in Earnings Before Interest and Taxes and decrease in finance cost as company has fully repaid certain debts during the year.

Note 3

Debt Equity Ratio has been improved during the year mainly due to increase in Equity Capital and Securities premium received through Initial Public Offer by company as well as increase in current year net profit as compared to previous year.

Cautionary Statement

The Management Discussions and Analysis Statement made above are on the basis of available data as well as certain assumptions as to the economic conditions, various factors affecting raw material prices, selling prices, trend and consumer demand and preference, governing and applicable laws and other economic and political factors. The management cannot guarantee the accuracy of the assumptions and projected performance of the Company in future. It is therefore, cautioned that the actual results may differ from those expressed and implied therein.