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.


The year 2021-22 started with hopes for the entire World after being ravaged by the effects of Covid-19 and its aftermath. The World witnessed widespread lockdown in almost all the countries in the previous year. Although the incidence of Covid-19 was being felt all across the nations through the year 2021-22, it is also a year in which the resilience of our society to battle out the Pandemic was much more evident. The experience and the knowledge gained from suffering in the previous year helped all the Nations to device strategies to combat the infection and at the same time keep moving with all the economic activities. The successful roll out of the Vaccine for Co-vid19 brought cheers to one and all and rejuvenated the entire Globe. The second wave of Co-vid 19 in the form of ‘Delta variant posed further challenges to the health sector that resulted in vigorous vaccination drive across all the countries.

The industrial revival was evident right from the beginning of the year with the exception of May21 when the effects of ‘Delta variant forced another series of lock down albeit on a medium scale. The recovery was non-stop since Jun21.

The economic activities revived with vigor and at the same time the after-effects of opening up, the gap in demand-supply situation, the volatile situation in key raw materials and host of attendant issues presented further challenges to the industry. Towards the year end, the war between Russia and Ukraine brought in volatility in the global scenario.

The exchange rate which dropped to Rs.72.89 (average) in Q4 of FY 2020-21 went up in FY 2021-22 every quarter. This was a stress to the importers with increasing cost of imports that too in a year where all the prices of raw material, be it metals or Plastics, went up non-stop.

The exchange rate, during FY 2021-22 was on the increasing trend, Quarter-on-Quarter, as against the reducing trend witnessed in the previous year. You can see the comparison of exchange rate trend as per data from RBI in the chart below for the year in discussion and the previous year.

The crude prices were on the increasing trend through 2021-22 except for a brief period in Dec21. The conflict between Russia and Ukrain resulted in steep increase of Oil prices in Q4 of 2021-22 touching a high of US$130/barrel before averaging to US$117 in Mar22.

As a result of this prices of petrochemical based output, especially the polymers, both commodity as well as specialty polymers,had to face hardening input prices and as a result erosion in their margins.

The Indian economy had a massive jump in the first quarter of 2021-22 compared on a weak previous years quarter which was hit by Covid. The government has projected 8.9% growth in 2021-22, which is lower than the January estimates. Indias Gross Domestic Product grew by 5.4% in the October-December quarter and expansion at 8.9% in 2021-22 financial year is expected to be the nal gure.

In the Union Budget 2021-22, presented on 1st February 2021, the Finance Minister announced an outlay of INR 1.97 Lakh Crores for the Production-Linked Incentive (PLI) Schemes for 13 key sectors, to create national manufacturing champions and generate employment opportunities for the countrys youth. This was a booster for the industries to get into specific sectors and the benefits of the same will be seen in the coming years. Governments focus on EV segment and alternate fuel / energy was also evident in the budget announcements.

In July 2021, the Indian government announced inclusion of retail and wholesale trades as MSMEs to strengthen the sector and boost economic growth.Budget allocation for MSMEs in FY22 more than doubled to Rs. 15,700 crore (US$ 2.14 billion) vis-a-vis Rs. 7,572 crore (US$ 1.03 billion) in FY21. The Indian government launched the Special Credit Linked Capital

Subsidy Scheme (SCLCSS) for the services sector. This scheme will help enterprises in the services sector meet various technology requirements.


During the year under review, the industries were seen recouping themselves after a year of Covid induced intermittent lockdowns. The manufacturing sector was affected in the first quarter with the second wave of Co-vid. Fortunately, the third wave in Q4 did not affect the manufacturing by and large.

The manufacturing PMI came down to 48.1 in Jun21 when the Delta variant of covid-19 swept through India as second wave. The manufacturing activities revived in subsequent months and the PMI hit a peak of 57.6 in Nov21 riding on festive demand. The PMI in Q4 of 2021-22 was steady in spite of global turmoil after the Russian-Ukraine con ict.

The automobile as well as appliances segments continued to feel the shortage of Chips and had to face cut down in production.

After two consecutive years of reduced growth in excess of 14%, the India overall automobile production went up by 1.2% in the year 2021-22. The shortfall in the availability of chips was the major reason for the low level of change year-on-year. However, the passenger vehicle segments could register a 19.2% growth and commercial vehicles segment 28.9%growth basically due to the lower volumes in the previous two years.


Category 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22
Passenger Vehicles 3,801,670 4,020,267 4,028,471 3,424,564 3,062,221 3,650,698
Commercial Vehicles 810,253 895,448 1,112,405 756,725 624,939 805,527
Three Wheelers 783,721 1,022,181 1,268,833 1,132,982 611,171 758,088
Two Wheelers 19,933,739 23,154,838 24,499,777 21,032,927 18,349,941 17,714,856
Quadricycle 1,584 1,713 5,388 6,095 3,836 4061
Grand Total 25,330,967 29,094,447 30,914,874 26,353,293 22,652,108 22,933,230


The auto sector is cyclical. The cyclicality varies from segment to segment. The commercial vehicle sales are linked to overall economic growth while that of tractors are linked the monsoon. Compared to these segments the passenger vehicles and two wheelers are less cyclical. A mix of factors such as rise in the cost of vehicles due to changes in emission and regulatory norms, higher lending rates and available disposable incomes decide the sale growth of PV and 2W. Covid hurt the economy and made people conservative on spending over replacement vehicles. Hopefully, the reviving economy will result in a robust growth in the coming year for Indian auto industry.


As mentioned above with the second and third wave of Covid affecting the manufacturing and services, industry had a mixed performance during the year.

Your company is no exception to the trend witnessed in the manufacturing sector.

1) Operations

Our company has always been ahead of the growth curve that keeps us at the frontline. Our new green eld manufacturing facility at Chakan near Pune which was commissioned in the previous year, continued to be strengthened with addition of capacity with new compounding lines added. More and more Engineering plastics compounds were localized reducing the lead time for the customers.

The PPE division added new lines for 3 Ply, foldable masks and facilities for different variants. The product portfolio was enhanced with new products for industries, g in numbers mining and other specialty requirements. The PPE division continued to get relevant product certifications as per the needs of the end users.

Raw material prices continued to rise during the year and the volatility witnessed during the year was unprecedented. The Poly Propylene prices hit historical highs during Mar22 after the Ukraine-Russia conflict intensied into a full-scale war.

No new capacity additions were seen during the year in polymer resins. The demand supply gap and the tightness in the logistics, especially the availability of containers and the unpredictable voyage of vessels made the imports of raw material unpredictable.

We continue to take support of our principals in creating multiple and alternate options to have a greater control on key RM prices and availability. Inventory management both at RM and FG level continue to remain a big challenge in view of the unpredictability seen in the imports. This was managed well with specific in-house projects for improving the efficiency in inventory control.

2) Marketing Initiatives

As you are aware, your company has a sales and marketing team which is ever mobile and ready to grab any opportunities that come up.

During the year separate sales teams were formed to handle Polymer and PPE businesses.

Your company organized webinars through industry associations like Indian Plastics Institute to keep in touch with existing and potential customers as in the past to keep the engagements alive.

New customers in newer segments were added for Engineering plastics compounds. Today we can con dently say that your company is also one of the leading manufacturers of engineering plastics in India having gained significant foot hold in PA, PBT, ABS, HIPS, SAN and blends & alloys.

One significant foray is that of Electric Vehicles. Your company successfully commercialized Flame retardant compound for 2W segments in EV. Work is going on with OEMs for the PV as well.

3) Human Resources & Industrial Relations

Your company is proud to state that the morale of all the employees were kept high during the year under review. The technical and marketing teams were strengthened with the addition of a mix of new and experienced hands. The addition of PhDs to the technical team is bound to result in higher confidence level of our customers as a total solution provider. The laboratory facilities saw commissioning of new test Equipments and the technical team members are getting the necessary training to handle the same effectively.

Lat year we have successfully relocated our front-end team at overseas locations to give them exposure to overseas markets. During the year, the teams at overseas locations continued their development work in spite of the adverse changing scenarios due to the pandemic.

To reiterate, the experience that the team gains in getting new business abroad is immense for the future of the company. This helps 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 in the near future.

The permanent employees on the rolls of the company stood at 221 as of 31st March 2022.

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 con dent that this objective would put us in the right place to fully capitalize and upswing in manufacturing growth in India.

Relocation of our marketing personnel at South Africa and Thailand has started yielding results with exports commencing during the year. The teams abroad are now busy closing new deals for the future.

During the year, your company continued to successfully deploy the approvals that Kingfa has in China for Engineering Plastics to India OEMs that helped in utilizing the new capacity created at our Chakan plant. With the curbs on Covid relaxing, many of the MNCs with business in India started auditing your companys new plant at Chakan, Pune for formal product and facility approvals.


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 ow. 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 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 ongoing manufacture of and therefore require a continuous supply of polypropylene and other engineering plastics resins. 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 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 have started exports to Thailand and South Africa. We should soon be exporting to Europe & other continents as well. 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 con dent 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 rm 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.



Sales revenue of the company grew by 67.04% over the previous year. 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 continue to get customer approval for Auto and non Auto sectors.

Input costs

There was an overall decrease in the input costs during the year. A combination of sourcing action, Formulation rationalization and Optimization coupled with price softness helped us achieve this. Production process improvement and planning was utilized to reduce our manufacturing costs significantly.

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 offtake of vehicles is sustained will the volume of tonnage increase 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/other resins and other crude oil based inputs.

b) New commercial vehicles call for increased usage of PP compounds with enhanced performance and lesser weight to Volume ratio 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 ef ciency, should also contribute to the reduction of working capital requirement leading to a reduction in interest costs.

d) Dependence on one segment of the industry is always a risk and your company understands the same. Your companys strategy is to broadbase its product offerings into other segments of manufacturing, viz, Electrical, Powertools, Appliances, Batteries and other Non-auto segments through aggressive marketing and also offer products higher in the value chain like Engineering Plastics.

The overall outlook looks promising with the country coming out of the Covid blues and withering the storm in the global economic turmoil.


As per 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 therefor, are given below:

Particulars 2021-22 2020-21
(i) Debtors Turnover : 4.24 3.07
(ii) Inventory Turnover : 4.27 4.12
(iii) Interest Coverage Ratio : 9.52 4.75
(iv) Current Ratio: 1.30 1.47
(v) Debt Equity Ratio (%): 11.98% 7%
(vi) Operating Profit Margin (%) : 4.45% 2.39%
(vii) Net Profit Margin (%) : 2.92% 0.85%

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 con rm that the Company has adopted a code of conduct for the members of its Board and Senior Management Personnel. We con rm that the Company has, in respect of the Financial year ended 31st March, 2022, 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 : Pune
Date : 25th May 2022