Global economy
Overview
The global economic growth was estimated at a slower 3.2% in 2022, compared to 6% in
2021 (which was on a smaller base of 2020 on account of the pandemic effect). The
relatively slow global growth of 2022 was
marked by the Russian invasion of Ukraine, unprecedented inflation, pandemic-induced
slowdown in China, higher interest rates, global liquidity squeeze and quantitative
tightening by the US Federal Reserve.
The challenges of 2022 translated into moderated spending, disrupted trade and
increased energy costs. Global inflation
was 8.7% in 2022, among the highest in decades. US consumer prices decreased about 6.5%
in 2022, the highest in four decades. The Federal Reserve raised its benchmark interest
rate to its highest in 15 years. The result
is that the world ended in 2022 concerned that the following year would be slower.
Gross FDI inflows – equity, reinvested earnings and other capital – declined
8.4% to USD
55.3 billion in April-December. The decline was even sharper in the case of FDI inflows
as equity: these fell 15% to USD 36.75 billion between April and December 2022. Global
trade expanded by 2.7% in 2022 (expected to slow to 1.7% in 2023).
The S&P GSCI TR (Global benchmark for commodity performance) fell from a peak of
4,319.55 in June 2022 to 3,495.76
in December 2022. There was a decline in crude oil, natural gas, coal, lithium, lumber,
cobalt, nickel and urea realisations. Brent crude oil dropped from a peak of around USD
120 per barrel in June 2022 to USD 80 per barrel at the end of the calendar year following
the enhanced availability of low- cost Russian oil.
Performance of major economies
United States: Reported GDP growth of 2.1% compared to 5.9%
in 2021
China: GDP growth was 3% in 2022 compared to 8.1% in 2021
United Kingdom: GDP grew by 4.1% in 2022 compared to 7.6%
Japan: GDP grew 1.7% in 2022
compared to 1.6% in 2021
Germany: GDP grew 1.8% compared to 2.6% in 2021
[Source: PWC report, EY report, IMF data, OECD data]
Outlook
The global economy is expected to grow 2.8% in 2023, influenced by the ongoing
Russia-Ukraine conflict. Concurrently, global inflation is projected to fall marginally to
7%. Despite these challenges, there are positive elements within the global economic
landscape. The largest economies like China, the US, the European Union, India, Japan, the
UK and South Korea are not in a recession. Approximately 70% of the global economy
demonstrates resilience, with no major financial distress observed
in large emerging economies. The Global inflation is likely to be still relatively high
at 4.9% in 2024.
Interestingly, even as the global economy is projected to grow less than 3% for the
next five years, India and China are projected to account for half the global growth
(Source: IMF).
|
Indian economy |
in 2021 |
|
| Overview |
sluggish equity market. Indias |
fifth-largest global economy. India
|
| Even as the global conflict |
economic growth is at 7.2% in |
surpassed China to become the
|
| remained geographically distant |
FY 2022-23. India emerged as |
worlds most populous nation
|
| from India, ripples comprised increased oil
import bills, inflation, cautious government and a |
the second fastest-growing G20 economy in FY
2022-23. India overtook UK to become the |
(Source: IMF, World Bank)
|
| Growth of the Indian economy |
|
|
|
FY 20 FY 21 |
FY 22 FY23
|
| Real GDP growth (%) |
3.7 -6.6% |
8.7 7.2
|
(Source: Budget FY24; Economy Projections, RBI projections)
According to the India Meteorological Department, the year 2022 delivered 8% higher
rainfall over the long-period average. Due to unseasonal rains, Indias wheat harvest
was expected to fall to around 102 million metric tonnes (MMT) in 2022-23 from 107 MMT in
the preceding year. Rice production at 132 million metric tonnes (MMT) was almost at par
with the previous year. Pulses acreage grew to 31 million hectares from 28 million
hectares. Due to a renewed focus, oilseeds area
increased 7.31% from 102.36 Lakh
hectares in 2021-22 to 109.84 Lakh hectares in 2022-23.
Indias auto industry grew 21% in FY23; passenger vehicle (UVs, cars and vans)
retail sales touched a record 3.9 million units in FY23, crossing 3.2 million units in
FY19. The commercial vehicles segment grew 33%. Two-wheeler sales fell to a seven-year
low; the three- wheeler category grew 84%.
As Indias domestic demand remained steady amidst a global slowdown, import growth
in FY23 was estimated at 16.5%
to USD714 billion as against USD613 billion in FY22. Indias merchandise exports
were up 6% to USD447 billion in FY23. Indias total exports (merchandise and
services) in FY23 grew 14% to a record of USD775 billion in FY23 and is expected to touch
USD900 billion in FY24. Indias fiscal deficit was estimated in nominal terms at ~
H17.55 Lakh Crore and 6.4% of GDP for the year ending 31st March, 2023. (Source: Ministry
of Trade & Commerce)
Indias headline foreign direct investment (FDI) numbers rose from USD74.01
billion in 2021 to a
record USD84.8 billion in 2021-22, a 14% Y-o-Y increase, till Q3FY23. India recorded a
robust USD36.75 billion of FDI. In 2022-23, the government was estimated
to have addressed 77% of its disinvestment target (H50,000 Crore against a target of
H65,000 Crore).
Indias foreign exchange reserves, which had witnessed three consecutive years of
growth, experienced a decline of approximately USD70 billion in 2022, primarily influenced
by rising inflation and interest rates. Starting from USD606.47
billion on 1st April, 2022, reserves decreased to USD578.44 billion by 31st March,
2023. The Indian currency also weakened during this period, with the exchange rate
weakening from H75.91 to a US dollar to H82.34 by 31st March, 2023, driven by a stronger
dollar and increasing current account deficit. Despite these factors, India continued to
attract investable capital.
The countrys retail inflation, measured by the consumer price index (CPI), eased
to 5.66% in March 2023. Inflation data on
the Wholesale Price Index, WPI (calculates the overall price of goods before retail)
eased to 1.3% during the period. In 2022, CPI hit its highest of 7.79% in April; WPI
reached its highest of 15.88% in May 2022. By the close of the year under review,
inflation had begun trending down and in April 2023 declined below 5%, its lowest in
months.
Indias total industrial output for FY23, as measured by the Index of Industrial
Production or IIP, grew 5.1% year-on-year as against a growth of 11.4% in 2021-22.
India moved up in the Ease of Doing Business (EoDB) rankings from 100th in 2017 to 63rd
in 2022. As of March 2023, Indias unemployment rate was 7.8%.
In 2022-23, total receipts (other than borrowings) were estimated at 6.5% higher than
the Budget estimates. Tax-GDP ratio was estimated to have improved by 11.1% Y-o-Y in RE
2022-23.
The total gross collection for FY23 was H18.10 Lakh Crore, an average of H1.51 Lakh a
month and up 22% from FY22, Indias monthly goods and services tax (GST) collections
hit the second highest ever in March 2023 to H1.6 Lakh Crore. For 2022–23, the
government collected H16.61 Lakh Crore in direct taxes, according to data from the Finance
Ministry. This amount was 17.6% more than what was collected in the previous fiscal.
Per capita income almost doubled in nine years to H1,72,000 during the year under
review, a rise of 15.8% over the previous year. Indias GDP per capita was 2,320 USD
(March 2023), close
to the magic figure of USD2500 when consumption spikes across countries. Despite
headline inflation, private consumption
in India witnessed continued momentum and was estimated to have grown 7.3% in 2022-23.
Outlook
There are green shoots of economic revival, marked by an increase in rural growth
during the last quarter and appreciable decline in consumer price index inflation to less
than 5% in April 2023. India is expected to grow around 6-6.5% (as per various sources) in
FY2024, catalysed in no small measure
by the governments 35% capital expenditure growth by the government. The growth
could also be driven by broad-based credit expansion, better capacity utilisation and
improving trade deficit. Headline and core inflation could trend down. Private sector
investments could revive. What provides optimism is that even
as the global structural shifts are creating a wider berth for Indias exports,
the country is making its largest infrastructure investment. This unprecedented investment
is expected to translate into a robust building block that, going ahead, moderates
logistics costs, facilitates a quicker transfer of products and empowers the country to
become increasingly competitive. This can benefit Indias exports in general,
benefiting several sectors. The
construction of national highways in 2022-23 was 10,993 kilometres;
the Ministry of Road Transport and Highways awarded highway contracts of 12,375 km in
the last financial year (Source: IMF).
The global landscape favours India: Europe is moving towards a probable recession, the
US economy is slowing, Chinas GDP growth forecast of 4.4% is less than Indias
GDP estimate of 6.8% and America and Europe are experiencing its highest inflation in 40
years.
Indias production-linked incentive appears to catalyse the downstream sectors.
Inflation
is steady. India is at the cusp of making significant investments in renewable energy
and other sectors and emerging as a suitable industrial supplement to China. India is
poised to outpace Germany and Japan and emerge as the third-largest economy
by the end of the decade. The
outlook for private business investment remains positive despite an increase in
interest rates. India is less exposed to Chinese economic weakness, with much less direct
trade with China than many Asian peers.
Broad-based credit growth, improving capacity utilisation, governments thrust on
capital spending and infrastructure should bolster investment activity. According to our
surveys, manufacturing, services and infrastructure sector firms are optimistic about the
business outlook. The downside risks are protracted geopolitical tensions, tightening
global financial conditions and slowing external demand.
Indian tableware market overview
For the past few years, the concept of a dining room has transformed from being just a
place for having a meal. Tableware has made dining graceful and elegant.
In India, the requirement for tableware has witnessed a striking change. This segment
can be used as serve ware as well as
a lifestyle product, marked by
the transforming attitudes of customers and changing lifestyles.
Looking ahead, the demand for branded tableware is growing on account of aesthetic
appeal, affordability and microwave- friendly characteristics.
Despite being fragmented, the opalware market is growing steadily. It is considered
superior to alternative products. With an
increase in the cultural diversity and varied lifestyles in India, this market has
become one of the most vibrant in India.
However, due to changing consumer preferences for opalware, no other segment in India
comprises established
branded products, which makes the market fragmented. (Source: Daedal
Research)
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Company overview
La Opala RG Limited remains the largest market participant in the Indian opalware
sector, accounting for a major portion of the industry. The opalware
category, being one of the fastest growing markets, is gaining consumer traction at a
growing speed, resulting in an increased
consumer offtake across categories.
The Company has two production plants in Madhupur (Jharkhand) and two in Sitarganj
(Uttarakhand).
La Opala established a distribution network and developed a brand
recall among customers. The Company has been recipient of Top Export Award & Trophy
from EPCH (Export Promotion Council for Handicrafts) and CAPEXIL (Chemical and Allied
Export Promotion Council).
Financial review
Analysis of the Profit & Loss statement
Revenues: Revenues from operations during 2022-23 stood at H452.32 Crore compared to
H322.69 Crore in 2021-22. Other Income of the Company in 2022- 23 was 21.78 Crore against
H19.15 Crore in 2021-22, which was a 4.82% share of the Companys revenues and
manifesting the Companys reliance on its core business operations.
Expenses: Total expense of the Company increased by 41.82% from H218.17 Crore in
2021-22 to H309.40 Crore in 2022-23
Analysis of the Balance Sheet Sources of funds
- The net worth of the Company
enhanced by 4.65% from H740.49 Crore as on 31st March, 2022 to H774.94 Crore as on 31st
March, 2023 due to a growth in Reserves and Surplus. During the year under review, the
Companys equity share capital stood at 11,10,00,000 equity shares of H2 each.
Working capital management Current assets of the Company enhanced by 25.63% from
H427.03 Crore as on 31st
March, 2022 to H536.46 Crore as on 31st March, 2023. The Current and Quick Ratios of
the
Company stood at 8.51 and 7.31, respectively in 2022-23 as against to
7.12 and 6.51, respectively in
2021-22.
Margins
The Company registered an EBIDTA margin of 38.27% during 2022-23 compared to 35.91% in
2021-22.
Disclosure under Regulation 34(3) read with Schedule V Clause B of SEBI LODR
Significant changes in key financial ratios
|
2022-23 |
2021-22 |
% Change |
Explanation wherever change is
more than 25% |
| Debtors Turnover Ratio |
13.10 |
9.12 |
43.68 |
Improved Realisation & Increase in Sales. |
| Inventory Turnover Ratio |
12.32 |
16.93 |
(27.23) |
Increase in Inventory due to Commencement of New
Plant. |
| Interest Coverage Ratio |
20.25 |
25.55 |
(20.72) |
- |
| Current Ratio |
8.51 |
7.12 |
19.51 |
- |
| Debt-Equity Ratio |
0.02 |
0.02 |
- |
- |
| Operating Profit Margin (%) |
33.43 |
31.67 |
5.55 |
- |
| Net Profit Margin (%) |
27.26 |
27.33 |
(0.26) |
- |
| Return on Net Worth (%) |
15.87 |
11.80 |
34.49 |
Due to Increase in Net Profit by 40.76% whereas
average capital employed increase by 7.76%. |
Risk management
Economy risk
The Companys performance may be affected by an economic slowdown.
Mitigation: The Indian economy rebounded to a growth of 7.2% in 2022-23. This
improved consumer sentiment, resulting in a PAT growth of 40.76% during the year under
review.
Geography risk
Global demand and exports may be impeded as a result of an economic slowdown.
Mitigation: The Companys products are showcased in 40 countries and it
aspires to
penetrate new international markets.
Liquidity risk
Operational smoothness might be hampered due to a shortage of cash.
Mitigation: The Company has adequate cash in its reserves, valued at H417.78 Crore
as on 31st March, 2023.
Safety risk
In the opalware industry, accidents, health risks and injuries are frequently
encountered
Mitigation: The Company implemented essential
safety standards across its manufacturing facilities and instituted a training needs
identification protocol at every level.
Competition risk
The increasing number of players in the industry may have an adverse impact on the
Companys profitability.
Mitigation: The Company possesses a competitive edge through its unique designs,
state- of-the-art technology, attractive pricing, strong relationships with distributors
and retailers and sector-specific expertise.
Human resources
La Opala focuses on enhancing the potential and overall wellbeing of its employees
– both in the corporate office and manufacturing facilities.
It focuses on building a dealer
distributor network embellished by fair business practices. The Company provides an
engaging workplace environment, attractive growth opportunities and fair compensation. The
Company
enjoys one of the highest employee retention rates in the industry; it creates leaders
within the organisation, strengthening prospects.
Internal control systems and their adequacy
The internal control system defines a set of rules, procedures and organisational
structures that identify, measure, manage and monitor the main risks,
allowing sound and fair operation
of the Company in line with pre-established objectives and all the short-term and long-
term operational goals of the
Company. As such this process is aimed at pursuing the values of
both procedural and substantial fairness, transparency and accountability, which are
key factors for managing La Opalas business.
Cautionary statement
Statements in the Managements Discussion and Analysis Report describing the
Companys projection, 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, change in governmental regulations, tax regimes, economic
developments within the country and other factors such as litigation and labour
negotiations
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