Kokuyo Camlin Ltd Management Discussions.


A strong domestic demand growth in advanced economies coupled with a rebound of the Chinese economy and an improved performance in other large emerging market economies, the global economy continued to gather steam in 2017 taking que from 2016. Recording its best performance in the past six years, the global economy clocked a growth rate of 3.7% in 2017, well above 2016s 2.5% and is expected to sustain the solid growth in 2018.

Among advanced economies, domestic demand and output grew faster in the first half of 2017 than in the second half of 2016. In the United States, weakness in consumption in the first quarter turned out to be temporary, while business investment continued to strengthen, partly reflecting a recovery in the energy sector. In Europe and Japan, stronger private consumption, investment, and external demand bolstered overall growth momentum in the first half of the year. Growth in most of the other advanced economies, with the notable exception of the UK, picked up in the first half of 2017 from its pace in the second half of 2016, with both domestic and external demand contributing. Among emerging market and developing economies, higher domestic demand in China and continued recovery in key emerging market economies supported growth in the first half of 2017.

The emerging Asia region continued to deliver strong growth, in the face of widespread concerns about growing protectionism, a rapidly ageing society, and slow productivity growth. Emerging Asia witnessed a GDP growth of 6.4% in 2017 following a rebound in trade and domestic consumption volumes.


The outlook for advanced economies has improved, notably for the Europe, but in many countries inflation remains weak, indicating that slack has yet to be eliminated, and prospects for growth in GDP per capita are held back by weak productivity growth and rising old-age dependency ratios. Prospects for many emerging market and developing economies in sub-Saharan Africa, the Middle East, and Latin America are lackluster, with several experiencing stagnant per capita incomes. Fuel exporters are particularly hard hit by the protracted adjustment to lower commodity revenues. Global growth forecasts for 2018 and 2019 have been revised upward by 20 bps to 3.9%, reflecting improved momentum and impact of tax policy changes in the US.


India regained its status as the worlds fastest-growing major economy in the October-December quarter, surpassing Chinas growth after a gap of one year, boosted by higher government spending and a pick-up in manufacturing and services. The GDP growth rate for the third quarter (October-December) of the current fiscal (2017-18) stood at 7.2%. Favourable economic factors like low inflation rate, growing consumption, improved current account balance and a reduction in the fiscal deficit-to-GDP ratio helped the economy clock this growth.

In addition to the introduction of GST, the year also witnessed significant steps being undertaken towards resolution of problems associated with NPA among others. Export growth strengthened in 2017-18 and foreign exchange reserves grew to reach US$ 414 billion, as on 12th January 2018. Despite all the positives, the dark cloud of rising oil prices had some negative impact on the economy, as the average crude oil prices rose by 14% (mid-January 2018) vis--vis 2016-17. However, with global growth likely to witness a moderate improvement in 2018, expectations of a greater stability in GST, likely recovery in investment levels, and ongoing structural reforms, among others, should support higher growth.

The number of indirect taxpayers in the country witnessed a growth to reach 9.8 million unique GST registrants, as of December 2017.


The newly-introduced GST is expected to boost efficiency, growth, and Indias tax take. Disruptions caused by demonetisation may have dampened GDP growth in the short-term, but it could also prove to have long-term benefits. It increased the number of digital transactions being conducted within Indias economy, which are easier to track and to tax. Broadening its tax base should enable India to make much-needed progress in increasing the inclusivity of its economic growth. India has shown improvements in terms of internet bandwidth per user, mobile phone and broadband subscriptions and internet access in schools. India is also making a conscious effort to translate its growing economic clout into ‘soft power on the world stage.


Bank recapitalisation scheme: The Central Government announced capital infusion of Rs. 2.1 lakhs crore in public sector banks. The measure entailed a budgetary allocation of Rs. 76,000 crore by the Central Government, while the remaining amount is to be raised by the sale of recapitalisation bonds.

Expanding road network: To boost road infrastructure in the country and foster job creation, the Government of India announced a Rs. 6.9 lakhs crore investment outlay to construct 83,677 kilometers of road network, over a period of five years.

Improving business ecosystem: The country was ranked at the 100th position, registering an improvement of 30 places, in the World Banks Ease of Doing Business 2017 report. The significant jump was a result of the Central Governments pro-reform agenda, comprising measures such as passing of Insolvency and Bankruptcy Code, simplifying tax computation and merging applications for PAN and TAN. In addition, Aadhaar based identification approach could further help streamline challenges pertaining to the regulatory regime.

Goods and Services Tax: The Government of India carried out a significant overhaul of the indirect tax regime and launched the GST in July 2017, with the vision of creating a unified market. Post-GST implementation, Indias tax net expanded, as a 50% increase was recorded in unique indirect taxpayers.


Strong private consumption and services are expected to continue to support economic activity. Private investment is expected to revive as the corporate sector adjusts to the GST. Over the medium-term, the GST is expected to benefit economic activity and fiscal sustainability by reducing the cost of complying with multiple state tax systems, drawing informal activity into the formal sector, and expanding the tax base. The recent recapitalisation package for public sector banks announced by the Government of India is expected to help resolve banking sector balance sheets, support credit to the private sector, and spur investment. The global trade recovery is expected to increase exports.


The Indian stationery industry is expected to hold great growth potential as the school and college going population of the nation is on a rise. Nearly 22-24 crore students studying in schools and colleges, require notebooks and other stationery materials. Further, the office going population is also one of the biggest contributor to the sector. With the rise in the economic prosperity of the nation, more and more jobs are expected to be created in the days ahead, thus in turn would increase the demand of the office stationery and would contribute significantly in the growth of the sector.

Although the current Indian stationery market is highly unorganised, recent moves on the part of the government like the demonetization policy and the introduction of GST in 2017, has brought a number of unorganised players under the organised ambit and this is expected to benefit the industry and consumers over the coming years.

Pen and paper are the two most important components of the industry followed by products like pencils, scales, writing pads, erasers along with paper stationery comprising exercise books, notebooks, glues and diaries, writing pads among others which play an active role and are relevant items useful for commercial and office use.

Increasing number of schools and offices, improved standard of living as well as shift in focus from inexpensive to premium quality products on account of rapidly growing economy are some of the crucial factors which would drive the demand for stationery products in India over the next few years. Impetus on the part of government in terms of favourable policies like ‘Sarva Shiksha Abhiyan and other different measures is really expected to help the industry sustain the growth momentum in the days ahead.

With a number of factors working in the favour of the industry, its expected to grow its revenue at a CAGR of around 10% during 2018-24. The education application segment, one of the major contributors in its total revenue mix, would also continue to hold its dominant position of the next few years as the governments focus on the education sector is on a high.


Kokuyo Camlin Limited is one of the oldest and reputed players of the stationery market in India. The Company traces its origin to pre-independence when it started its operations in 1931 by manufacturing and marketing of inks under the brand CAMEL and CAMLIN. Over the years, both these brands have become synonymous with generation for art, scholastic, school stationery and general stationery products in India. The Company has been organising Camel Art Contest (earlier known as All India Camel Colour Contest) since 1998. It became the worlds largest Art Competition in 2011-12 and was recognised by the Guinness Book of World Records. The Company was acquired by Kokuyo Co., Ltd. – a leading Japanese stationery manufacturer in 2011 and was renamed Kokuyo Camlin Limited.

The Company embarked on an ambitious integration strategy in 2013 when it started work on building its integrated manufacturing plant at Patalganga, MIDC, with an investment of approximately Rs. 100 crores. Spread over 14 acres, the Patalganga plant is one of the biggest stationery plant in the Kokuyo Group and is a completely ‘Green plant. The plant was inaugurated by the Honble Chief Minister of Maharashtra in April 2017 and is now operational in full swing, manufacturing over 200 SKUs. The Prime Minister of India has also sent his wishes for the Patalganga plant as a shining example of the Make in India initiative.


Our Patalganga plant is now operational. Over 200 SKUs are now being manufactured at this single-manufacturing unit. This integrated manufacturing has resulted in definite synergies and advantages with economies of scale and size. R&D and innovation efforts are also now centralized at the plant. New technology from Kokuyo Co., Ltd., Japan is also now being brought to the Patalganga plant. The plant will eventually provide direct and indirect employment to around 900 people. During the year, a key initiative taken by the Company was to sharpen its focus on priority products with a view to unlock more potential for growth and expansion. This sharper focus on priority products will become the key driver for future growth and expansion. The focus will also ensure optimal allocation and use of the Companys resources, assets and infrastructure. GST was implemented from 1st July 2017. This has been one of the boldest structural reforms in recent times and promises tremendous opportunities as India finally becomes a single-market. However, GST also had its share of challenges, particularly in the initial months of introduction. Every aspect of the Companys business was impacted – from manufacturing to logistics to marketing and sales. At Kokuyo Camlin Ltd., the GST challenge was successfully overcome with in-house effort. From IT to Accounts and from Finance to Sales, every department worked seamlessly and cohesively to revamp and reshape systems and processes in line with the new GST requirement. It was an exemplary effort and resulted from perfect teamwork at the Company.

During the year, the Company continued to launch new products in all categories. What makes Kokuyo Camlin product launches stand apart are its innovative products like the brush pen – which was launched for the first time in India. Such innovative products are in line with the Companys larger purpose of developing and launching products that address key needs of customers and are just right for their requirements. Brush pens, for example, do away with the mess and clutter associated with water colours, palettes, water bowls and cleaning cloth. Another example of such innovative product launch is the Heavy Body Acrylic colours.

The Company also introduced products in categories like Pens and Notebooks to strengthen its market presence.


The stationery market in India continues to be a mix of both challenges and opportunities. With a young population and the governments focus on education, especially primary education, there is a massive opportunity for the short and long-term. However, challenges in the form of increasing competition, especially from China, continues to have a strong impact for the stationery market. Quality is fast emerging as a key attribute and critical success factor in the market place not only for product but for service, relationship and brand strength as well.


The year 2017-18 continued to have its share of challenges. The disruption caused by the implementation of GST did impact the Company especially in the first quarter. To compound the GST disruption, competition both from small and unorganised players as well as from China continued to remain intense. Prices came under pressure again due to competitive forces as well as post GST wherein Companys selling prices got reduced by average around 7.5%. Post GST, the Company renegotiated with the suppliers and reduced the purchase price of several input materials. The Company also maintained a strict control over operating expenses. The trade discounts increased from 3.81% in 2016-17 to 9.30% in 2017-18. This was over and above the selling price reduction the Company took post GST.

In such operating context, the Net Revenue of the Company was Rs. 63850.03 lacs compared to Rs. 66315.46 lakhs. It is important to note here that the decline of 3.72% in net revenue was due to the price decrease and discounts. There was a healthy volume growth post GST.


Your company continued to focus on optimum levels of inventory, operating efficiencies and cost saving across the organisation.

The analysis of major items of the financial statements is shown below.

Revenue from operations:

(Rs. In Lakhs)
FY 2018 FY 2017 Change %
Revenue from operations 63850.03 66315.46 -3.72
Foreign exchange earned 798.57 1559.05 -48.78

Other Income:

(Rs. In Lakhs)
FY 2018 FY 2017 Change %
Other Income 288.22 306.82 -6.06

Cost of Material:

(Rs. In Lakhs)
FY 2018 FY 2017 Change %
Cost of Material 23676.41 24929.21 -5%

Employee benefit expenses:

(Rs. In Lakhs)
FY 2018 FY 2017 Change %
Employee benefit expenses 8019.13 6806.32 17.82

Increase in employee cost is mainly due to increments and new recruitments in Patalganga.

Finance cost:

(Rs. In Lakhs)
FY 2018 FY 2017 Change %
Finance cost 960.57 1174.61 -18.22

Decrease in finance cost was mainly due to decrease in interest rate and repayment of loans.


(Rs. In Lakhs)
FY 2018 FY 2017 Change %
Depreciation 1650.51 1207.66 36.67

Increase in depreciation is due to addition in fixed assets worth Rs. 74.48 crs in FY 17-18

Other expenses:

(Rs. In Lakhs)
FY 2018 FY 2017 Change %
Other expenses 13112.35 13927.18 -5.85


With the majority of the market moving from the unbranded to the branded segment coupled with the governments demonetisation and GST regime, the outlook for the stationery industry in India continues to remain positive and the total market share of the organised players are expected to rise substantially in the years ahead.

Factors that are expected to catalyse the consumption of stationery products in India:

Favourable demographics: India, with 1.28 billion people, is the second most populous country in the world and it accounts for nearly 17% per cent of the world population. More than 50 per cent of Indias current population is below the age of 25 years and over 65% below the age of 35. It is estimated that by 2020, India will consist of 25% of the global workforce. The potential market for companies providing educational services is thus immense, compared with other nations. Since the Indian stationery market is closely related to literacy in general and the education sector in particular, these factors will lead to an increase in the demand for stationery products and act as a major catalyst for the growth of the writing instruments industry.

Increased spending on the education sector on the part of the government: India has come a long way in terms of its education expenditure. Alongside Russia, Brazil and China, it falls into the category of countries spending 2-4% of its GDP on education. Education spending in India has been lower than the world average. Globally, around 4.9% of the GDP was spent on education while India spends only 3.4%. Indias vast youth population requires the support of a significant increase in expenditure to turn it into a resource-driven force. The government in its Union Budget 2017-18, increased the allocation in the education sector by nearly 9.9%. With the government planning to further increase its education expenditure from the current 3% to 5% of GDP further growth of the stationery industry is expected

Rising literacy rate: With the rise in the number of students, stationery companies will see more consumers for its products. The last five decades have seen the number of students enrolling for higher education recording a 6.5% CAGR and the literacy rate has gone up six-fold since 1947, from 12% to around 75%, according to the Census of India, and is on its path to increase further with the help of government and private initiatives.


Sarva Shiksha Abhiyan (SSA): Launched in 2001, Sarva Shiksha Abhiyan (SSA) is the Government of Indias flagship elementary education programme. The program was initiated with an aim to provide universal education to children between the ages of 6 to 14 years. In Financial year (FY) 2018-19, the Government of India allocated Rs. 26,129 crore for SSA, a 11% increase over the previous year.

While there are significant challenges on the horizon, so are the opportunities. Your Company is prepared and poised to both face the challenges as well as leverage on the opportunities. With the integrated plant now at Patalganga, the Company believes it enjoys definite competitive and comparative advantages. The marketing division of the Company is deploying both traditional media as well as digital media to further reach and engagement of the Company. The Companys various brands continue to enjoy strong preference and connect with customers. The Company is confident of continuing with track-record of steady and strong performance.


Business cyclicality risk: The Companys primary business segment includes products which have a higher acceptance in schools and colleges. Thus a major chunk of the revenue generated is exposed to the cyclicality risk as demand for the products peak during the beginning of a new school season while demand remains fiat for the rest of the year. Thus any set back on the part of the Company during the peak period could seriously dent the companys profit.

Mitigation: The Company diligently tracks the school session timings across various parts of the country and accordingly launches new products, plans production and re-stocks the distribution channel and the retailers. Thus the company not only ensures adequate supply of its product during the peak period but also ensures that its product are within the hands reach. Further the Company has also enhanced its presence in the office stationery segment over the years, which have a round the year steady demand, thus reducing its dependence on only one segment.

Product portfolio risk: Though the company has large number of SKUs across various customer segments, an aggressive market environment may erode the competitiveness of the Company.

Mitigation: The Company is one of the largest manufacturer and seller of stationery products in India. With a rich industry experience of over 80 years, the Company has successfully positioned itself as a one-stop shop for ones all office and school stationery related needs by adding a number of products under its name.

Raw material risk: Non-timely availability of raw materials may impact the production and which in turn may have an impact on the sales and profitability of the Company. At the same time high cost of raw materials may also impact the bottom-line.

Mitigation: We have started the process of multiple vendor development to avoid non timely availability of raw material. Further we have also started to look for alternate/substitute material to overcome high cost of raw material.

Brand risk: In a highly crowded and competitive marketplace, Camlins brand might lose recall, resulting in sluggish offtake, lower realisations and reduced profitability.

Mitigation: With an industry presence of more than 80 years, the Company has been highly successful in creating a strong brand image for itself and today the name "Camlin" is synonymous with office and school stationery product. The Company growing market share over the years is an apt example of its growing brand image.

Network risk: A weak marketing team and a fragile distribution network could seriously impact the Companys profitability. Untimely delivery of orders because of a weak distribution system can hamper the brand name of the Company.

Mitigation: The Company has in place a wide spread network through its association with more than 1,500 active dealers and distributors who in turn supplies Camlins product to more than 300,000 retailers across the country. The deep-rooted distribution network of the Company covers all the states of India and Union territories.

Production risk: The stationery industry is predominantly a mass market business marked by high production volumes and low margins. The Companys inability to produce sufficiently to meets its demand in the market might lead to not just loss in profitability but also a reputational damage.

Mitigation: The Company over the years has also made a strong manufacturing presence within the industry and is one of the largest producers of the stationery products in India. With four state-of-the-art manufacturing facilities in India the Company has a production capacity to mitigate such risk .The recently added Patalganga plant of the Company has further enhanced its production capacity thus placing it in a leadership position in terms of production.


The Company has in place structured and well-defined internal control systems commensurate with the size and nature of business it operates in. These systems, policies, procedures and guidelines cover various operational aspects. Your Company stringently follows all procedures, ensures accuracy of financial information and compliance at all levels, and adheres to the laws, rules and statutes of the land. It periodically undertakes internal audit, which is under the review of its Audit Committee. Your Companys well-defined MIS system further ensures that all expenses are within the budgetary allocations and immediately flags off any mismatch for attention and corrective measures.


Digitization was one of the major steps undertaken by HR to enhance the efficiency of their HR processes. We implemented a HRMS platform, "iHR" with an objective to bring in HR processes & data closer to employees. The platform has an "Employee Self Service" Module, on which employees can access their data easily with a few clicks. This platform bridged the gap between HR and our field employees, who can now have easy & quick access to all HR related data. On completion of the implementation, employees Pan-India were orientated on using the iHR platform.

The importance of quality, be it in product or service, cannot be over-emphasized. The company believes in this adage and has over the years taken many initiatives towards enhancing quality of our products as well as processes. We have successfully implemented 5S at our Tarapur & Taloja factories and witnessed great benefits in improving the workplace efficiency. We have planned to replicate our success with 5S at our Samba & Gangyal manufacturing units this year. The project kicked off in July 2017 and since then all the employees, including contract workers have been oriented on the 5S framework. Employees were enthusiastic about the same & have come forth in sharing various initiatives for 5S. The results of these initiatives will be visible to us in the coming year.

The company has also been taking initiatives towards enhancing the skills of our employees. We also organised Workshops on Selling Skills for our field employees, pan-India.

Our new factory at Patalganga was inaugurated on 28th April 2017 by our honourable Chief Minister, Mr. Devendra Fadnavis. Patalganga Plant is one of the biggest state-of-art manufacturing unit for Kokuyo Camlin & Kokuyo stationery group. The factory is now fully operational & will manufacture more than 200 different product SKUs.

As on 31st March, 2018, your Company had total strength of 1217 employees.


Statements in the Management Discussion and Analysis Report describing the Companys projections, estimates and expectations may be interpreted as "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions affecting demand/ supply, price conditions in the domestic and international markets in which the Company operates, changes in government regulations, tax laws and other statutes. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements on the basis of any subsequent development, information or events.