MANAGEMENT DISCUSSION AND ANALYSIS REPORT
GLOBAL ECONOMY
The global economy continues to be on course of a sharp slowdown, with a worsening
outlook 2023 and below-trend growth forecast for 2024. The looming energy crisis in
Europe, the rise in the cost of living, the sharp tightening of global financial
conditions, and the slowdown in China are major factors clouding the dimmed growth outlook
for the world. Much of the global slowdown over the forecast horizon is accounted for by
major economies, which will also weigh on demand in emerging and developing economies
(EMDEs). After recovering to an estimated 5.5% in 2021, the global economic outlook for
2023 is among the weakest in decades, with global real GDP growth forecast to increase by
2.3% in 2023, further down from 3.3% recorded in 2022. due to the ongoing COVID -19
flare-up, weakening fiscal support, and persistent supply bottlenecks result
Russia-Ukraine invasion.
Slowdown of the economy in 2023 will come with a widening divergence in growth rates
between advanced and emerging markets, led by Chinas post-pandemic economic rebound.
Pent-up demand is expected to boost consumption in China resulting in substantial regional
growth effects, with tourism and commodities benefiting in particular. Chinas growth will
further support momentum in Asia Pacific, a region that includes the fastest growing
emerging economies globally in 2023, including India, Indonesia, the Philippines and
Vietnam. Although the slowdown in advanced economies will weigh on commodities and
manufacturing exporters in the region, these countries are expected to maintain
significant growth momentum, nonetheless.
Economies, businesses and consumers are facing a new economic reality as the world is
entering a period of slowing growth, high inflation, higher interest rates, and with
uncertainties around commodities and labour supply, as well as shifts in the nature of
globalisation. While the global outlook remains uncertain, understanding key economic
issues that are likely to decide business outcomes become more important than ever for
global companies.
INDIAN ECONOMY
After a long period of balance sheet repair in the financial and corporate sector, the
financial cycle in India is poised to turn upward, staging a full recovery in FY22 ahead
of many nations and positioning itself to ascend to the pre-pandemic growth path in FY23.
As the health and economic shocks of the pandemic and the spike in commodity prices in
2022 wear off, the Indian economy is well placed to grow in the coming decade, similar to
the growth experience of the economy after 2003. With monetary tightening, the US dollar
has appreciated against several currencies, including the rupee. However, the rupee has
been one of the better-performing currencies worldwide, but the modest depreciation it
underwent may have added to the domestic inflationary pressures besides widening the CAD.
For FY23, India has sufficient forex reserves to finance the CAD and intervene in the
forex market to manage volatility in the Indian rupee.
Agencies worldwide continue to project India as the fastest-growing major economy at
6.5-7.0 per cent principally led by private consumption and capital formation in FY23. The
uptick in private consumption has also given a boost to production activity resulting in
an increase in capacity utilisation across sectors. Measures taken by the government and
RBI, along with the easing of global commodity prices, have finally managed to bring
retail inflation below the RBI upper tolerance target in November 2022. Recent estimates
of Indias GDP growth for FY24 by several multilateral agencies continue to subscribe to
the view that, despite the global challenges, India will show a robust growth which is
close to 6%.
The World Bank, in its India Development Update 2, has projected Indias real GDP
growth at 6.3% in FY24. In its assessment, Indias economy has been relatively resilient
to uncertain external conditions. Domestic demand is expected to remain robust despite an
expected moderation in consumption growth due to rising borrowing costs, slower income
growth and continued fiscal consolidation. Investment is expected to be supported by the
governments sustained Capex push and improved corporate and banking sector balance sheets
due to healthy corporate profits and a reduction in non-performing assets (NPAs)
respectively.
The Capital Expenditure (Capex) of the central government, which increased by 63.4 per
cent in the first eight months of FY23, was another growth driver of the Indian economy in
the current year, crowding in the private Capex since the January- March quarter of 2022.
Consequently, the credit growth to the Micro, Small, and Medium Enterprises (MSME) sector
has been remarkably high, over 30.6 per cent, on average during Jan-Nov 2022, supported by
the extended Emergency Credit Linked Guarantee Scheme (ECLGS) of the Union government.
High frequency indicators signal the ongoing recovery in the Indian economy. Manufacturing
PMI remained above the threshold of 50 for the 21st consecutive month in March 2023, with
its level at a three-month high of 56.4 as compared to 55.3 in February 2023.
Significant initiatives have been introduced under Aatmanirbhar Bharat and Make in
India programmes to enhance Indias manufacturing capabilities and exports across the
industries. Sector specific Production Linked incentives (PLI) have been introduced in the
aftermath of the pandemic to incentivise domestic and foreign investments which will
significantly boost production, exports and employment in the medium term; however, its
impact will be visible only with time.
Indias gross FDI has increased from an average of 2.2 per cent of GDP during FY05-FY14
to 2.6 per cent in FY15-FY22. The highest-ever annual gross FDI inflow of USD 84.8 billion
was recorded in FY22. These trends are an endorsement of Indias status as a preferred
investment destination amongst global investors.
ALUMINIUM INDUSTRY
Aluminiums low density and ability to withstand corrosion through the passivation
phenomenon makes this metal and its alloys critically important to the aerospace,
transportation, and construction industries. The major drivers of the Aluminium market are
rising environmental concerns, increased applications of the product in making aluminium
sheets, consumption of aluminium in the manufacturing of aircraft, growing use of the
material in electrical engineering as well as machinery and equipment industries,
technological advancement, upward swing in the construction industry, and rising
population.
Aluminium is highly preferred by automotive engineers and designers in the production
of lightweight as well as electronic vehicles for Its properties of reducing emissions and
increasing fuel economy. Al can be recycled into various products such as car bodies and
tractor-trailers. Additionally, recycling secondary Al does not reduce the metal quality,
thereby allowing it to be recycled indefinitely. The production of recycled metal requires
only about 5% of the energy required to produce new Al metal. In addition, any scraps left
during the production process can be melted down and reused repeatedly. As a result,
approximately 75% of all Al metal produced is still in use today. For instance, recycling
aluminium cans saves natural resources and energy and reduces the pressure on landfill
sites. Making new cans from recycled metal saves almost 95% of the energy used to make
cans from the bauxite ore. Moreover, the rising emphasis on consuming sustainably sourced
products is expected to further drive metal recycling operations and is likely to boost
the market growth.
The global aluminium market is expected to grow at a CAGR of 3.63% in the period of
2023-2028, supported by the rising demand from end-uses such as transport, machinery and
equipment, and construction. The Asia Pacific and the Americas are two regions with mature
markets, with the Asia Pacific likely to dominate future growth rates. Aluminium is widely
produced in Asia Pacific countries such as China, India, Russia, Canada, and the UAE.
China is a major producer of aluminium, accounting for more than half of the global
output. Capacity expansions in aluminium manufacturing facilities are expected in several
Asia Pacific, Middle Eastern, and African countries.
Indias ongoing progress is evident in the expansion of transportation, construction,
and power industries, aimed at bolstering infrastructure to accommodate the increasing
population driven by rapid migration to urban centres. This development is expected to
present favourable growth prospects for the aluminium market in the foreseeable future.
Indias hunt for extracting aluminium from its ore started in 1808 and took more than four
decades to bring it to production. India is considered to be the fifth largest producer of
aluminium in the world with a tremendous bauxite reserve of about 3 billion tonnes. While
major consumption of aluminium in India is done by the electrical (31%) and B&C
sectors (13%), Aluminium is the second most used metal in the world after steel with an
annual consumption of 88 Million Tonnes (including scrap). Aluminium consumption in India
at 2.5 kg per capita is much below the global average of 11kg per capita. Indias
significant bauxite reserves, accounting for approximately 10% of the global total,
coupled with a thriving aluminium sector, augurs well for the country. This advantageous
position allows India to leverage its reserves to meet the growing demand for aluminium.
In domestic demand for aluminium is projected to witness a notable increase of 8-10%.
In summary, the outlook for the Aluminium market remains optimistic, with sustained
growth expected in the coming years. Increasing consumer demand, advancements in
technology, and investments from key industry players are poised to drive growth and
advance innovation within the market.
INDUSTRY AND SECTOR WISE PERFORMANCE
Aluminium Powder
Aluminium powder is an odourless, fine, granular, silvery-white to grey powder made
from aluminium metal. It is a reactive and flammable material that is produced by stamping
and ball-milling foils in the presence of fatty lubricants such as stearic acid, edible
vegetable oil, and food-grade fatty acids Generally, it is manufactured in four forms-
atomised aluminium powder, aluminium flake powder, aluminium paste, and aluminium pigment
powder. Some of the major industries where it is widely used include metallurgy,
chemicals, paints and pigments, and construction, among others. The powder is denser than
water and is widely used in the production of with a wide range of organic and inorganic
chemicals. Aluminium powder is utilized in the construction industry as it forms an
essential component in the production of lightweight concrete. When aluminium powder is
oxidised, it undergoes exothermic reactions. In combination with oxygen, it is used in the
aerospace and defence sector for launching rockets. It has high corrosion resistance and
is effective in increasing the lifespan of the product. This has led to an increasing
demand for aluminium powder in the electronics industry and as the main ingredient in the
production of solar cells. Moreover, environmental concerns have encouraged manufacturers
to adopt green manufacturing practices to minimize operating costs and reduce energy and
utility bills which is acting as a major trend in the market.
The global aluminium powder market size reached 646,600 Tons in 2022. Research &
Markets Group expects the market to reach 732,500 Tons by 2028, exhibiting a growth rate
(CAGR) of 2.1% during 2022-2028 driven by the rapid urbanisation, growth of commercial
mining explosions in the countries, growing paints and coatings sector, and rapid
technological advancements. The leading regions in the market are North America, Latin
America, the Asia Pacific, Europe and the Middle East and Africa, with the Asia Pacific
region expected to account for a significant share of the global market for aluminium
powder due to government investments in infrastructure development activities and rising
population in India and China. Demand of aluminium powder for residential and commercial
infrastructure is bolstering as it is used to impart lustre and finishing to paint and
coatings. Meanwhile, North America is also expected to witness a growth due to increased
demand for aluminium powder in the aerospace industry.
The Indian aluminium powder market reached a volume of nearly 36034.7 tons in 2020. The
industry is further expected to grow at a CAGR of 6% over the period of 2023-2028 to
attain a volume of 50254.6 tons by 2026. The key market trend guiding the growth of the
aluminium powder market include the growing expenditure by the key players in research and
development of the product. The major players in the industry are The Metal Powder Company
Limited, MMP Industries Ltd, and The Arasan Aluminium Industries (P) Ltd., among
others.
Construction and Housing
Despite near-term challenges in certain construction sectors and surge in construction
costs, medium to long term growth story in India remains intact on the back of robust
government spends on infrastructure projects through 2022, a trend that is projected to
further continue in 2023. Construction industry in India is expected to grow by 12.0% to
reach INR 45,907 billion in 2023. The growth momentum is expected to continue over the
forecast period, recording a CAGR of 9.9% during 20232027. The construction output in the
country is expected to reach INR 66,954.8 billion by 2027.
The growth of the construction industry in 2023 will be supported by government
investment to complete major infrastructure projects ahead of the 2024 elections.
Additionally, investment in transport, electricity, and housing projects will also help
the growth of the market over the rest of the period 2023-2027. The key sectors in the
Indian construction market include commercial construction, industrial construction,
infrastructure construction, energy and utilities construction, institutional
construction, and residential construction.
The residential construction sector was the largest in Indias construction market in
2022, followed by energy and utilities construction, infrastructure construction, and
others. Despite the interest rate hikes by Reserve Bank of India the growing residential
sales volume has led to a recovery in the real estate market. Although the initial rate
hikes have had minimal effect on the demand for residential units in India, it is
anticipated that subsequent increases will start impacting the sales of housing units in
2023. This will directly impact the monthly instalments paid by homebuyers, potentially
leading to a significant decline in consumer affordability.
In January 2023, the Indian government has entered into a loan agreement with the Asia
Development Bank worth US$1.2 billion for funding infrastructure development in India.
This includes the upgrade of 300 kilometres of state highways and district roads in Assam,
US$300 million to improve the connectivity of the metro rail system in Chennai, and US$350
million to improve connectivity with key economic areas in Maharashtra. The loan agreement
is expected to cover the development activities of highways in the North-eastern state of
Assam and Tripura.
• As part of the Sagarmala Program, more than 610 projects with a total cost of
USD 10.5 million will be carried out between 2015 and 2035.
• Bharatmala Pariyojana is a new highway umbrella program that focuses on
improving the efficiency of freight and passenger movement across the country by bridging
critical infrastructure gaps.
• In 2022-2023, the PM Gati Shakti Master Plan for Expressways is implemented,
allowing for faster transit. The National Highway network would be expanded by 25,000
kilometers in 2022-2023, at a cost of INR 20,000 crore (USD 2417670).
• The government approved the development of 21 greenfield airports in the country
in January 2022. In the next four to five years, the Airports Authority of India (AAI)
plans to create new airports as well as expand and upgrade many existing airports at a
cost of USD 338 million.
As the national government continues to prioritize infrastructure development, it is
likely to enter into more such agreements over the next three to four years. This will
keep driving investment in the sector, thereby supporting the growth of the construction
industry in India.
Explosives for Mining & Infrastructure
Industrial explosives are highly hazardous blasting agents made from hydrogen, carbon,
oxygen, and nitrogen. When efficiently ignited, they transform into gases at high pressure
and temperature, through a process called blasting, that causes rocks to break apart to
withstand construction and mining activities. Industrial explosives aid in eliminating
toxic gas production and reducing the labour costs and time required for safe and
efficient mining, thereby optimizing commercial operations. Consequently, industrial
explosives are extensively used in the mining, quarrying, and construction industry after
their assessment based on various parameters, including density, storage life, the
velocity of detonation (VOD), and water resistance. At present, they are commercially
available in ammonium nitrate fuel oil (ANFO), slurries, emulsions, and water gel
explosive types.
The global mining explosive market was worth US$ 10.2 billion in 2022 and is expected
to grow significantly to US$ 30.2 billion by 2030 as per DataM intelligence report. During
the period (2023-2030), the market is expected to grow at a CAGR of 5.9%. The growth of
the mining explosive market is being fueled by the rising demand for explosives in the
global metal mining industry. The level of mining activity worldwide directly influences
the need for mining explosives. As the global demand for metals, minerals, and other
resources continues to rise, there is a corresponding increase in the demand for mining
explosives used in the extraction and processing of these resources. The global industrial
explosives market, categorized by end-use industry, includes mining, construction, and
other sectors. Currently, mining holds the largest market share.
India recently announced the discovery of substantial lithium reserves, an
essential rare element in the production of electric vehicles. The Salal-Haimana area of
Reasi district in Jammu and Kashmir has been identified by the Geological Survey of India
as containing approximately 5.9 million tonnes of lithium. However, India currently lacks
the necessary technology for extracting and processing lithium. With a significant number
of metal-producing mines and a robust demand for industrial explosives in the metal mining
sector, India anticipates a substantial surge in the requirement for ammonium nitrate
explosives as the mining industry expands in the region.
Aluminium Foil
Aluminium foil is a thin film made of an aluminium alloy with 92% to 99% aluminium
content with thickness typically between 6 m and 0.2 mm. It is made from aluminium
obtained through the Bayer refining process, which is melted and then rolled into thin
foil films and formed to hundreds of specifications for applications such as thermal
insulation, fin stock, capacitors, and packaging products. Aluminium foils popularity
stems from several factors, including its easy availability of raw materials, long
durability, and non-toxic nature. Furthermore, aluminium foil is resistant to chemical
attack and offers excellent electrical and magnetic shielding.
Packaging is an essential part of the food supply chain in this era given growing
consumer awareness leading to increase in demand for fresh and safe food. Aluminium foils
are light, easily recyclable, and flexible compared to other packaging materials. The
upsurge in demand for packaged food and beverages, coupled with the growing trend of
on-the-go eating habits is driving the demand for aluminium foil in the food and beverage
industry. Aluminium foil is also extensively used in the pharmaceutical industry for
packaging medicines, as it offers protection against moisture, light, and air, which can
degrade the medicines effectiveness. It is also used in the packaging of cosmetics and
personal care products to maintain their freshness and prevent contamination.
The global aluminium foil market size was valued at USD 25.79 billion in 2022 and is
expected to grow at a compound annual growth rate (CAGR) of 5.5% from 2023 to 2030. The
expansion of the global packaging industry is expected to drive market growth for
aluminium foil due to its extensive utilization in packaging various products, including
food, beverages, cosmetics, and pharmaceuticals. The increasing demand for electric
vehicles.
(EVs) and the growing requirement for air conditioning systems are expected to
further augur growth for aluminium foils.
The Asia Pacific region is the largest market for aluminium foil, accounting for a
significant share of global demand. The regions dominance is attributed to the growing
population, rapid urbanization, and increasing demand for packaged food and beverages,
pharmaceuticals, and personal care products. China and India are the leading consumers and
producers of aluminium foil in the region.
MMP Industries manufactures aluminium foil for pharmaceutical sectors, food packaging
sector and home foil / containers at Umred MIDC, near Nagpur. All customers, especially
the pharmaceutical companies prefer buying all their products from a single source under
one roof and our plant is well placed to serve this need.
Aluminium Conductors & Cables:-
The outlook for the aluminium wire and cable market in 2023 and the future is subject
to various factors that encompass global supply and demand dynamics, trade policies, the
evolution of industry standards, and advancements in technology. Since Aluminium has a
superior conductivity-to-mass ratio than copper, it is used to wire power grids, such as
overhead power transmission lines and local power distribution lines for aircraft power
wiring. It is lightweight, durable, and corrosion- resistant, making it an ideal material
for these industries. Given aluminium fasteners have become more prevalent, the need for
aluminium wires has increased over the past several years with several organizations
striving to develop these alloy wires. The manufacturers have been creating and innovating
to enhance conductivity, flexibility, bending ability, as well as mechanical strength,
which is something that improves the automobile.
The aluminium wire market attained $50.7 billion in 2021 and is projected to reach
$69.7 billion by 2031, growing at a CAGR of 3.3% from 2022 to 2031 as per research &
Markets. Technological advancements are also driving innovation in the aluminium wire and
cable market. One of the key drivers of pricing growth in the aluminium wire and cable
market is the rising demand for electricity across various industries, including
construction, automotive, and power generation.
Pesticides
India is primarily an agrarian country, with agriculture providing a living for more
than half of the population. However, agricultures contribution to the countrys economy
has been declining in recent years, the reason being lower crop yields in India compared
to North American and European regions, as well as in comparable countries such as China.
India is currently the fourth-largest producer of agrochemicals after the United States,
Japan, and China.
Farmers are focusing on increasing production through proper pest management and the
use of crop protection products, such as insecticides, fungicides, and nematicides.
Pesticides represent the last input in an agricultural operation and are applied for
preventing the spoilage of crops from pests such as insects, fungi, weeds, etc thereby
increasing the agricultural productivity. The significance of pesticides has been rising
over the last few decades catalysed by the requirement to enhance the overall agricultural
production and the need to safeguard adequate food availability for the continuously
growing population in the country. Government and private initiatives are increasing the
awareness of pesticides among farmers. In various parts of the country, farmers are being
educated on the proper use of pesticides, application methodology, and chemicals.
Pesticide penetration levels in India are significantly lower than in other major
countries, indicating that the pesticide market is still largely unexplored, with room for
future growth.
The global Agricultural Pesticides market was valued at US$ 103490 million in 2022 and
is projected to reach US$ 145850 million by 2029, at a CAGR of 5.0% during the period
2023-2028. The Indian pesticides market size reached INR 229.4 Billion in 2022. IMARC
Group expects the market to reach INR 342.3 Billion by 2028, exhibiting a growth rate
(CAGR) of 6.6% during 2023-2028. Aluminium powder made by the Company is used as a
fumigant in warehouses where grains are stored. With all government warehousing
overflowing with grains demand for this product is expected to double in 2-3 years
specially with the normal monsoon in the current year.
COMPANY OVERVIEW
MMP Industries Limited (‘MMP or ‘the Company) is engaged in
the manufacturing of aluminium products at locations in and around Nagpur in the state of
Maharashtra. The product range includes pyro and flake aluminium powders, atomised
aluminium powders, aluminium foils, aluminium pastes, aluminium conductors & cables.
Aluminium powders (pyro, flake and atomised) are used in several industrial sectors
like construction (AAC Blocks) and mining (aluminised slurry explosives), agriculture
(pesticides), defence (ammunition), firecrackers, railways (thermit portions) etc.
Aluminium foils are used in pharmaceutical, food packaging. Aluminium Conductors &
cables are consumed by the power sector for laying of overhead transmission lines.
ASSOCIATE COMPANIES / JOINT VENTURE COMPANIES
The Company has a joint venture with Toyo Aluminium K.K. of Japan, Toyal MMP India
Private Limited (TMI), for the manufacturing of special grades of aluminium paste. The
Company holds 26% equity in the new joint venture.
Star Circlips & Engineering Limited is an associate Company engaged in the
manufacture of circlips, retaining rings, washers, shims and formed components mainly used
in auto and auto component industries in which the Company holds 26.06% equity.
EXPORT
MMP primarily exports its products to three main regions in the world that include
Europe, Africa and the Middle East. The Companys products are now expected to be sold in
Japan through our JV company TMI.
OPPORTUNITIES
Demand for aluminium is expected to pick up as the scenario improves for user
industries like power, infrastructure, coal, mining and transportation.
The Company will also have access to various global Toyo marketing channels, which will
help both the Aluminium powder and paste business. Since the Company produces certain
powders not in the range of our JV partner Toyo Aluminium KK, this is an opportunity to
open potential business in Japan through TMI.
Negotiations are also currently on for sale of powders in Europe, but remunerative
pricing is still an unresolved issue. However, once aluminium price volatility stabilizes,
the Company expects its business to materialize.
With the installation of special machinery and process development assistance from our
JV partner, the Company will produce special fractions of powders for bulk usage in space
applications and specialized defence applications.
THREATS
Economic and industrial growth is going to be adversely impacted for the foreseeable
future due to the pandemic and other external challenges. The uncertainty of how long this
will persist cannot be ascertained.
The volatility in the prices of important raw materials such as Aluminium is another
challenge with the rapidly changing global economic scenario. This impacts business of all
aluminium user segments.
The manufacturing and handling of Aluminium Powder is inherently hazardous and there is
always a risk of accidents in the plant. MMP is OHSAS and EMS certified and gives prime
importance to the safety of its people. The Company conducts regular safety audits and
trainings to mitigate risks of an accident.
CAUTIONARY STATEMENT
The statements in the ‘Management Discussion and Analysis describing the
Companys objectives, projections, estimates and expectations may be ‘forward-looking
statements within the meaning applicable to securities laws and regulations. Actual
results could differ materially from those expressed or implied. Important factors that
could make a difference to the Companys operations include economic conditions affecting
demand or supply and price conditions in the domestic and overseas markets, changes in the
Government regulations, tax laws and other statutes and other incidental factors.
|
For and on behalf of the Board |
|
Sd/- |
Sd/- |
|
Arun Raghuvirraj Bhandari |
Lalit Bhandari |
| Place : Nagpur |
Managing Director |
Whole-time Director |
| Dated : 29th July 2023 |
DIN - 00008901 |
DIN - 00010934 |
+91-9892691696
