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Kanchi Karpooram Ltd Management Discussions

466
(0.20%)
Jul 12, 2024|03:40:00 PM

Kanchi Karpooram Ltd Share Price Management Discussions

We, the Board of Directors, present its analysis covering performance of the Company for the year 2022 - 2023 and the business outlook for the future. The business outlook performance is based on the current business environment and do not include any economic variation.

Industry structure and developments

The Camphor industry is sustaining its growth and is expected to continue in the same pattern. The positive outlook is the increase in demand for Camphor. Your Companys geographical location is a positive factor in the Camphor market. In todays competitive operation, the focus must be on cost reduction. Camphor has various uses, including medicinal, religious, and industrial applications. It is synthesized from turpentine oil.

With advancements in technology, the camphor manufacturing process has become more efficient and standardized. Modern manufacturing techniques have contributed to higher production yields and improved quality control.

Opportunities and Threats

The growth of population in India will lead to more demand and consumption of Camphor for religious purposes. Apart from religious use, Camphor is also being used by the young generation as car and room freshener for its numerous benefits related to air purification. Camphor is commonly used as an antibacterial, antifungal, and anti-inflammatory agent to treat skin conditions, improve respiratory function, and relieve pain. The Company is one of the pioneers in manufacturing synthetic camphor and among largest manufacturers of camphor in India.

Since the main raw materials required are imported, the price factor and the exchange variation may have adverse effect. However, the Company prices its products with due consideration of both the factors. The camphor industry, like many others, is subject to regulatory and environmental considerations. Regulations on the sourcing of raw materials, production processes, and waste disposal have impacted the industrys operations.

Product -wise Performance

The main product, namely Camphor is having progressive sales year after year so as other by-products. The demand for Dipentene which is a by product of Camphor is also increasing year on year. Besides Camphor and its derivatives, Companys products such as Gum rosin and Rosin Derivatives, also enjoy an enviable share in the market.

Outlook

Your Company has a substantial growth potential in terms of marketing of its products which has been so far progressive in the past and the Company looks forward for the same in the years to come.

Risks and Concerns

General risks:

The Foreign Exchange fluctuations may have adverse effects due as your Company imports huge raw materials. Operational risks:

Price of the main raw material may have an adverse effect if the demand and supply gap is widen.

Financial risks:

Your Company needs to import raw materials at appropriate time, which warrants sizable works capital with a conscious approach to the degree of risk in terms of procurement of raw material keeping in view of the finance available.

Regulatory and Legal risks:

The Company is exposed to environmental regulations. The Company has adequate system and controls to mitigate various risks.

Risk management:

The Companys risk management is based on various risks and proper risks assessment and strategic measures by continuous monitoring the procedural establishment for this purpose which are in line with normal industrial practice.

Internal Control Systems and their adequacy

Your Company has well defined and adequate internal controls and procedures, commensurate with its size and nature of its operations. This is further strengthened by the Internal Audit done concurrently.

Besides, the Company has an Audit Committee, comprising Non-Executive Directors, to monitor its financial systems, controls, management and operations.

Discussion on financial performance with respect to operational performance

Your Company has observed a decrease in the volume in sales. Your Company exercises stringent cost control factors and quality control measures so as to sustain consistent in performance. The Companys turnover was Rs. 20,856.89 Lakh as compared to Rs. 25,351.88 Lakh and has profit after tax Rs. 1,414.65 Lakh as compared to Rs.3,068.01 Lakh profit in the previous year.

Managerial Developments in Human Resources and Industrial Relation

There are no material changes in Human resources front during the year under review.

Number of people Employed: 124

Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefore, including:

PARTICULARS 2022-2023 2021-2022
A. Profitability Ratios
Operating Profit Margin 10.77% 18.24%
Net Profit Margin 6.89% 12.22%
Return on Equity 7.39% 17.99%
B. Ratio for Assessing Financial Health
Capital Turnover Ratio 1.52 2.59
Fixed Assets Turnover Ratio 3.87 5.57
Inventory Turnover Ratio 2.58 3.61
Debtors Turnover Ratio 10.01 14.36
Current Ratio 31.11 14.00
C. Earnings and dividend ratio
Dividend percentage 10% 25%
Earnings per Share 32.57 70.63
P/E Ratio 11.71 9.70
Book Value Per share 455.96 425.89

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018, the Company is required to give details of significant changes (change of 25% and more as compared to the immediately previous financial year) in key financial ratios.

Ratios where there has been significant change from Financial Year 2021-2022 to Financial Year 2022-2023 Decrease in Profitability Ratio:

Decrease in Profitability ratios can be attributed to the decline in camphor prices during the year. The fall in prices were the result of increased supply in the camphor industry arising out of capacity expansion of certain competitors without commensurate increase in demand.

Decrease in Fixed Asset Turnover Ratio and Capital Turnover Ratio:

The fall in the price of outputs have adversely affected the revenue from sales resulting in reduced Fixed Asset Turnover Ratio and Capital Turnover Ratio.

Current Ratio and Inventory Turnover Ratio:

During the year, the company had converted the investment made in Immovable property into inventory to start real estate business on that property. Therefore, the inventory includes the cost of inventory in land which would be used for real estate development in future, resulting in an increase in the Current ratio and decrease in Inventory Turnover Ratio.

Debtors Turnover Ratio:

The fall in the Debtors Turnover Ratio is attributable to the decrease in the sale price and the consequent reduction in the revenue.

Cautionary Statement

The Management Discussion and Analysis Report contains forwarding looking statements based upon the data available with the Company, assumptions with regard to global economic conditions, the Government policies etc. The Company cannot guarantee the accuracy of assumptions and perceived performance of the Company in future. Therefore, it is cautioned that the actual results may materially differ from those expressed or implied in the report.

For and on behalf of the Board of Directors
KANCHI KARPOORAM LIMITED
Dipesh S Jain Suresh V Shah
Place: Chennai (DIN: 01659930) (DIN: 01659809)
Date: 11.08.2023 Joint Managing Director Managing Director

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