Kingfa Science & Technology (India) Ltd Management Discussions.


This report addresses the Management views and perceptions of the business considering the current scenario based on the market environment and possible growth opportunities with the visible and imminent headwinds and challenges while analyzing the performance for the year under review. The report also presents the summary of control and counter measures being initiated and also the Development of Human resources. The report should be read in conjunction with the Directors report to the shareholders, the Financial reports and other notes provided as a part of the annual report.


This years economic situation was governed more by International trade relations between business powers than any other specific issue. During the year the fluctuation in oil prices and the exchange rate adversely affected the performance of most of the companies. This was more acute for companies who were dependent on imports. In a nutshell we can say the economic situation was little unpredictable.

In spite of this scenario, India continues to remain a market with abundant opportunities for growth. With the continued focus on Fiscal Consolidation and Inflation control the macro scenario seems to be stable after the double impact of GST implementation and Demonetization in the previous years. The growth of the economy remains one of the robust globally which is commendable in-spite of headwinds like GST switch over, raising Oil prices and exchange rate. Being close to the elections, lot of caution is seen in major economic expansion activities.

With major initiatives and changes behind us and focus on ease of doing business, digitization and consolidation, we feel that the growth engine would keep chugging on with speed irrespective of how the Global economic scenario/tensions unfold. India has clearly emerged as the fastest growing major economy in the world and is expected to be one of the top three economic powers of the world over the next 10-15 years, backed by its strong democracy and partnerships.


During the year under review, the normal festival boost for automotive and appliances was not the same as that in previous years. The industry was feeling the pressure on the cost front everywhere and also built up inventory and bringing down the manufacturing though PMI peaked at 54.3 during Feb19. The multiple initiatives of the government on Skilling India and Manufacturing for growth is reflected in the automotive industry as well as bigger home appliances. Even more reflective of the growth and robustness is the growth in sales of Commercial vehicles by more than 24% during the year. With this kind of growth sustaining we were also able to record continuous growth in volumes year on year and more than doubled the volume in 3 years. This was the result of increased focus on all key OEMs across the country. Our focus on Appliances and other product lines in the recent years also started yielding tangible results with our business in Non-automotive sector continuing to double year on year.


Category 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Passenger Vehicles 3,087,973 3,221,419 3,465,045 3,801,670 4,020,267 4,026,047
Commercial Vehicles 699,035 698,298 786,692 810,253 895,448 1,112,176
Three Wheelers 830,108 949,019 934,104 783,721 1,022,181 1,268,723
Two Wheelers 16,883,049 18,489,311 18,830,227 19,933,739 23,154,838 24,503,086
Quadricycle 531 1,584 1,713 5,388
Grand Total 21,500,165 23,358,047 24,016,599 25,330,967 29,094,447 30,915,420



As indicated above with the automotive industry especially the commercial vehicles recording an impressive growth for the year, your company sustained impressive growth year-on-year and more than doubled the volume of sales in 3 years. Resourcing the front end & development teams and enhancing production capacity enabled us to increase our scope of engagement with existing OEMs and also new projects with vigor. The company continued its aggressive approach for market share with share of business with all OEMs in both Auto and Non-Auto sectors going up during the year and this is reflected in our growth which is significantly much more than our peers and the industry.

1) Operations

More than doubling the volume in 3 years is consistent with our efforts to build capacity ahead of the growth curve so that we have the capacity to fully capture the growth opportunity that presents itself. With the current name plate capacity of over 1,10,000 MTPA and new addition in our existing facility we are well prepared to deliver another year of exceptional growth opportunity that is unfolding.

Raw material prices remained volatile for better part of the year, however the rise in oil prices started cascading down to our RM in the beginning of the year though this didnt continue in the later part. We are taking support of our principals in creating multiple and alternate options to have a greater control on key RM prices. With the volumes significantly increasing and the number of grade/Color combinations going up Inventory management both at RM and FG continue to remain as a big challenge demanding our focus. We have established a robust Supply chain team and process to manage the entire order to delivery process which is a key to managing larger capacities and multiple production lines in the coming years.

2) Marketing Initiatives

Styling, Fuel economy, environment friendly materials, Safety, Comfort, Convenience and feeling of luxury are some of the key demands from the automotive industry along with demands of quality systems, supply chain robustness, service and cost. Any material option which addresses these significantly is always on OEMs radar. We have on a continuous basis increased multiple material options that addresses these key needs to varying extent. All the OEMs have shown significant interest in taking advantage of our material offering in the design and manufacture of their passenger cars. This is also evident from the new designs and styling seen in recent passenger cars. Our company has become the pioneers in offering paint free solutions to the automotive industry.

Our focus on larger OEMs continued and we have made significant progress with respect to approvals and new specifications. We should see these efforts reflecting in sizeable business as we go along in the immediate future and coming years.

Sustained engagement with the OEMs, both auto and non-auto, is of prime importance and we have increased our scope of engagement with all OEMs across all levels with frequent Technology Shows, Focused Interactions across various departments at OEMs as well as inviting our customers to our facilities to make them acquainted with the test facilities that we have. This has helped us in evolving a number of leads and opportunities which is the corner stone for future business and volume growth.

It is always important to have multiple options for growth and managing risks associated with any one industry. With the growth in economy and also available disposable income industries like white goods, Small appliances, water treatment and handling, mass transportation are seeing newer market segments and growth. The construction industry is looking at dismantlable structures for faster work completion. All these industries are looking for newer material options to cater to these needs. We are now seeing traditional items like ceiling fans and coolers giving new designs and multiple performance options. The safety standards of the equipment are being revised upwards and your companys material options offer solutions to meet the new norms and regulations.

Water treatment, Washing machines, Air Conditioners, Power Storage equipments have all have shown significant growth and are on high growth curve and we continue to engage with them for mutual benefit.

3) Human Resources & Industrial Relations

The demands from the market in terms of performance expectations are going up continuously and as a company we attach real importance to the skill set of our people to be ready and primed to take on the fresh challenges and opportunities the markets would throw up. We have already integrated our front end team with our Global team to make them current with the technological advancements in the automotive and allied industry. We have embarked on a program to relocate our front-end team at overseas locations to give them exposure to overseas markets. The experience that the team gains in getting new business abroad is immense for the future of the company. This has also assisted us in seamlessly engaging with transnationals who are setting up manufacturing in India. Your company will benefit from this greatly when they commence operations in India.

Training has been the focus in order to gear up the manpower to meet the enhanced requirements thrown up by the industry. While the plant personnel were trained in analyzing and getting to the root causes for problem solving, the front end sales team got exposed to newer selling skills in order to clinch the new business with speed. The technical team continued to get the training at our HQ on the latest advancements. Incentives and rewards in line with the companys goals and being worked out on a continuous basis. The team felt charged with the opportunity given to them. The permanent employees on the rolls of the company stood at 195 as of 31st March 2019.

4) Business Opportunity

The Companys key focus and objective continues to be growth much above the market trend by aggressively pursuing all opportunities while continuously investing in people, technology and capacity ahead of the demand curve. We are supremely confident that this objective would put us in the right place to fully capitalize and upswing in manufacturing growth in India.

Our construction of Global Scale Manufacturing and Contemporary Design and Development Center at Chakan, Pune is going as per plan and is in the final stages of completion. This facility would enable us to develop material and formulations for future applications that evolve continuously.

As mentioned earlier, We have embarked on a program to relocate our front-end team at overseas locations to give them exposure to overseas markets. The potential for business in overseas market is essential to utilize the enhanced capacity that we are building.

New automobile brands have entered India now and have offered a big opportunity for the company to benefit from their new requirement. Similarly, we also see new brands from abroad entering into Indian space in the appliances segment. As consolidation happens in the industry, we also see the leaders in their respective businesses growing stronger with additional portfolios added giving us more opportunity to grow with them.

Our focus is now moving towards offering more and more engineering plastics. The experience gained in the modification of PP & TPE compounds will be at hand for the team to move fast on the engineering plastics products as well.


The exposure of the Company to various types of risks is detailed below along with the strategy employed to manage / mitigate the same.

Business risks

Business Risks are permanent and cyclical with lot of factors contributing to the same and also the ability of the customers to expand and spend. We are sensitive to the same and are focussing our efforts across Industry segments and also expanding our product basket. By continuously engaging with wide spectrum of Industry we feel that we will be able to significantly mitigate if any one segment runs into rough patch.

Financial Risks

Financial risks are real and permanent and usual part of business and the company always views the same seriously and continuously. Inventory and receivables are continuously reviewed and working capital is managed tightly and ensure optimal cash flow. We apply the lean principle in both while being adaptive to the market swings to get the best benefit out of the customers demand swing. With the implementation of SAP this year we are able to review these real time and make effective business decisions.

As our key inputs are derivatives of Petroleum price variations and volatility are normal and secondly not in our control. Multiple options and sources and robust planning and analysis helps us mitigate the over all risk.

We have effectively used resources from our HQ to mitigate interest cost risk. However we continue our focus on receivables and creditors management to reduce risk.

Commodity Price Risks

The Company is affected by the price volatility of certain commodities. Its operating activities require the on-going manufacture of and therefore require a continuous supply of polypropylene. However, the company being indirect user of these commodities and based on past trend to pass on these volatility to customers, does not have direct impact on profitability over a period of time.

Foreign Exchange Risks

Adverse movement of Foreign exchange does present a risk and the same arises as we do import critical raw material components. We use the services of professional advisory with an structured and panned approach to manage and reduce the impact of any adverse movement.

i) To reduce the probability and potential cause of financial risks by making the Company as neutral as possible to currency and interest rate fluctuations.

ii) We have made significant progress in looking for export markets and should soon be exporting to Europe, Africa & East Asia.

This would help us hedge our US $ variation risk significantly.

iii) To create a stable planning environment by taking steps to reduce the impact of currency and interest rate fluctuations both in respect of short term and long term commitments.

Credit risk

Credit risk is the risk that counter party will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks, foreign exchange transactions and other financial instruments.

Asset protection

The Company has ensured that all of its assets are properly safeguarded against all insurable risks using appropriate and current valuation methods and the adequacy of the same is reviewed periodically with the assistance of professional independent agencies.

Our exposure to automotive Industry passenger car segment is still very significant and any risk of depression would adversely impact car production. This risk is factored adequately in our growth plans and we have increased our engagement with non Automotive markets to reduce our growth risks. We are confident that we would be able to ride through effectively any downside in the Auto Industry.



The objective of the internal control systems is to ensure optimal use of resources, safeguard the Companys assets, exercise control, and minimise system deficiencies and weaknesses. Internal Audit is carried out by an independent professional audit firm to review all aspects of the internal control system and adherence to policies and procedures. The Audit Committee of the Board of Directors reviews the internal audit reports and the implementation of corrective actions and also addresses all aspects of the Companys functioning from this perspective as required under SEBI and Company Law guidelines.


COMPANY Revenues

Sales revenue of the company grew by 16.60% over the previous year, whilst the volumes grew by 11.81%. As the key prices of RM like PP

trended lower during the year some of the selling prices had to be reduced in line with the pricing agreements in place.

Engineering Plastic compounds clocked a sale of approx. 4953 MT and constitutes approx. 12% of the company turnover.

Input costs

Input costs control is the continuous process and the input cost control is achieved through a combination of sourcing action, Formulation rationalization and Optimization. Production process improvement and planning was utilized to monitor our manufacturing costs.

Financial costs

Reduction in interest rates negotiated with the Bankers helped in savings in the interest cost.

Higher level of Working capital necessitated was managed through longer negotiated credit period from group companies.


a) Only if the trend in increasing off take of vehicles is sustained will the volume of tonnage increases materialise. Such increased volumes and management of supply chain and logistics should help in bettering margins during the current year subject of course to the price behaviour of Polypropylene and other crude oil based inputs.

b) New commercial vehicles call for increased usage of PP compounds on interior parts and your Company is already working with major companies in this segment to benefit from this approach.

c) Control of receivables and inventory and improved process efficiency, should also contribute to the reduction of working capital requirement leading to a reduction in interest costs.

d) Companys strategy is to broad base its product offerings into other segments of manufacturing, viz, Electrical, Power tools, Appliances through aggressive marketing and also offer products higher in the value chain ( viz. Engineering Plastics).

The overall outlook looks promising with the hope of stable Government at the Centre.


As per the amendment made under Listing Regulations, details (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with explanations there for, are given below :

Particulars 2018-19 2017-18
(i) Debtors Turnover : 3.59 3.98
(ii) Inventory Turnover : 5.46 5 41
(iii) Interest Coverage Ratio : 29.97 52.51
(iv) Current Ratio : 1.81 2.43
(v) Debt Equity Ratio (%) : 5% 5%
(vi) Operating Profit Margin (%) : 4.46% 6.5 8%
(vii) Net Profit Margin (%) : 2.72% 4.10%

Cautionary Statement

Statements in the Managements Discussion and Analysis Report describing the Companys projections, estimates, expectations or predictions may be forward-looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that would make a difference to the Companys operations include demand-supply conditions, raw material prices, changes in Government regulations, tax regimes, economic developments within the country and other factors such as litigation and labour negotiations.


This is to confirm that the Company has adopted a code of conduct for the members of its Board and Senior Management Personnel. I confirm that the Company has, in respect of the Financial year ended 31st March, 2019, received from the members of the Board and Senior Management Team of the Company, a declaration of compliance with the code of conduct as applicable to them.

Managing Director Executive Director
Place : Chennai
Date : 28 th May, 2019