Mangalam Organics Ltd Management Discussions.


The slowdown in global economy, some country specific factors and the outbreak of corona virus pandemic (Covid-19) during the fourth quarter of the financial year brought the Indian economy down to its lowest growth in FY 2019-20. The stress in financial sector, lower GST collections and strain on fiscal deficit had negative impact on consumption, investment and trade. Both National Statistical June World Economic Outlook calculated Indias Gross Domestic Product growth at 4.2% in FY 2019-20 compared to 6.1% in the previous year.

The Government took certain measures in the year under review, towards giving monetary and fiscal support to the economy. Actions were taken towards scaling up of logistics infrastructure to increase export competitiveness of the country. The country also strengthened its external position by jumping to 63rd position in World Banks 2020 ranking of ‘Ease of Doing Business. This supported growing inflows of foreign direct investment (FDI) into the country. Additionally, the announcement of the National Infrastructure Pipeline (NIP) with a budget of Rs. 102 lakh crore and the Union Budget 2020 21 were targeted towards sustainable economic growth. New manufacturing companies also got the boost with the base corporate tax rate cut to 15%. However, the unprecedented spread of the corona virus pandemic, the lockdown, and activities posed complete halt to all economic fresh challenges to the economy.


With a focus on surviving this crisis, ramping up the healthcare system and supporting the economy, the Government has announced a Rs. 20 lakh crore Corona virus Relief Package called "Aatmanirbhar Bharat" with an aim to boost localisation and building a self-reliant economy. The package announced policy and liquidity support to cottage industries and MSMEs, NBFCs, labourers, farmers, middle class, and urban and rural poor. RBI contributed to the packagebycuttingthe repo rate to 4% and reverse repo rate to 3.75%, in order to make loans easily available to banks and discourage parking of cash with RBI. Further, to inject liquidity in the economy, it allowed loan repayment moratorium for six months. Besides that, tax breaks and collateral free loans for businesses and MSMEs and incentives for domestic manufacturing are likely to support the economy further.

To ease the economy from the negative impact of lockdown, Government decided on a phased reopening of the economy since June with strict SOPs. However, despite all the support, the quick intensification of the pandemic in India in Q1 FY 2020-21 is sealing all hopes of a rebound in the current fiscal year. IMF revised its forecast for India in its June WEO, and projected a negative growth of 4.5% for FY 2020-21. It however, projects the Indian economy to grow by 6% in FY 2021-22 supported by Governments growth strategies.

Source: India Economic Survey Volume II for inflation rate ( echap05_vol2.pdf ), PWC Indian Budget Analysis(file:///C:/Users/hp/Downloads/pwc-union-budget-analysis%20(1).pdf, a note%20for%20FAE%202019-20.pdf,


Pine Chemicals

The viability of the pine chemical industry lies in the principles of sustainability. The industry has been a pioneer in developing sustainable value added products from a renewable resource, even before the term became popular globally. Pine chemicals are recovered from the pine tree (genus Pinus) through three different methods of craft pulping, tree tapping and wood stumps. The biomass is extracted in the form of crude sulphate turpentine, gum turpentine and wood turpentine. They are processed in a bio refinery into a spectrum of marketable products used in a wide array of applications such as paints, inks, adhesives, perfumes, edible flavours, fragrances, food additives, vitamins, automobile tires etc. Because of its multiple uses and organic properties, pine chemical market is on a high growth trajectory.

According to a report ‘Global Impact of the modern pine chemical industry from Pine Chemicals Association International (PCA), revenues from global pine chemical industry are currently valued in excess of USD10 billion with a positive directly employs over 14,000 people globally and contributes significantly to the export revenue of both industrialised and developing countries.

Source: resource /resmgr/Studies/PCA-_Global_Impact_of_the_Mo.pdf


Terpenes are aromatic compounds found in many plants, especially conifers. The term ‘terpenes originates from turpentine, which is a pine chemical and it contains resin acid and hydrocarbons. is Because of its strong odour and high resistance capabilities widely used in various applications like essential oil, fragrance, flavouring agent in industrial uses. Demand for terpenes is being driven by its growing use in industries such as cosmetics, food als.pharmaceutic & beverages, paints & coatings, rubber, and However, fluctuation in supply of terpenes and high cost extraction process are creating market challenges. Despite the challenges, with growing market applications and increasing investment, more players are expected to enter the terpenes industry.

The global market for Terpenes is expected to grow at a CAGR of roughly 6.3% over the next five years to reach USD 730 million in 2024, from USD 510 million in 2019, according to a New Research study by 360 Research Reports.

Synthetic Resins and has similar physical Synthetic resinisan properties like natural resins, but is different chemically. Synthetic resins are not clearly differentiated from plastics. Different types plastics are therefore named after the name of the synthetic it is made from. They are produced in viscous liquids form, which is capable of hardening permanently. Natural resins have been almost entirely replaced by synthetic resins in modern industrial application.

According to a report from Procurement IQ, the global synthetic resins market is expected to witness category spend growth of more than USD 153 billion during 2018-2023, with a CAGR of 5.03%. Due to its properties like light weight, and the ability to act as an excellent barrier, synthetic resins are used as a flexible packaging material.

The growth of e-commerce sector is creating a substantial demand for flexible packaging and synthetic resins. Asia Pacific region dominating the global synthetic resins market and is expected to contribute significantly in the global spend.

Aroma Chemicals

Aroma chemicals are cyclic compounds that find application in additives and fragrances. They can be either synthetic aroma chemicals, or natural aroma chemicals. Key factor driving demand for aroma chemicals is its increasing application in Favour & Fragrance (F&F) and nutraceutical sector.

Being a leading producer of natural base ingredients like spices and herbs, India plays a dominant role in natural aroma chemical market because of the availability of natural raw materials. India is an important global supplier, with 70%+ of the Indian production being exported to global markets. Demand for these products is increasing globally, with natural ingredients getting preference across the F&B, FMCG and nutraceutical space.

The global base ingredient market for both Flavour & Fragrance and nutraceutical ingredients is calculated to being excess of USD 16 billion in 2019. This is poised to grow at a CAGR of ~6% till 2021. The Indian base ingredients market is currently sized at about USD 3.4 billion, growing at a CAGR of 11% till 2021.

Source: Report - ‘Flavours, Fragrances & Nutraceutical Ingredients in India" by Avendus Capital

Opportunities and Threats

Opportunities Threats
1. Demand for Pine chemicals is growing because of its organic and environment friendly properties benefits numerous 1. Volatility in foreign exchange rate
2. India has abundance of natural of ingredients like spice and herb used for making aroma chemicals 2. Cheaper imports from China
3. The growth of population in India will lead to more demand and consumption of camphor for religious purposes. 3. Competition from unorganised players 4. Geopolitical
4. Apart from religious use, camphor is also being used by the young generation freshener for its numerous benefits durability, rigidity, related to air purification tensions impacting export
5. Demand for synthetic fast due to its applications packaging and automotive sector is 5. Lack of adequate research and development in the sector.
6. Growth of Flavour & Fragrance (F&F) and nutraceutical sector is driving demand for aroma chemicals significantly


The key operational segment of the Company is Chemical manufacturing.


Mangalam Organics Limited (henceforth referred to as MOL or the Company) is a leading pine chemicals manufacturer in India. The Company produces Terpenes from Pine chemicals, from which a number of sub products like Camphor, Dipentene and Sodium Acetate are manufactured. It also produces Synthetics Resins under the single segment of chemicals. It is engaged in the manufacturing and selling of Camphor and by-products and various Synthetic Resins in India and abroad. The strength of its pine chemical products lies in the fact that they are extracted from natural resources and are devoid of the side effects of synthetic chemicals. The market performance of these products is not dependent on crude oil and the volatility of its prices.

Applications and uses

The Companys products have applications in a number of sectors such as religion and worship, pharmaceuticals, flavour and fragrance, rubber & tyre chemicals, paints and varnishes, among others. The Company caters to both domestic and the international market. In addition to having a wide reach and strong the domestic market, it is expanding its global operations. products have a variety of industrial applications, it has established a strong B2B presence, despite facing competition from domestic and international players.

Geographical presence

The Company has created a niche for itself in the pine chemicals industry as one of the major players with its customers spanning across Europe, Africa, USA and Middle East. With its decades of domain experience and backed by an experienced management team, MOL is creating its base in the Indian retail market with its branded offerings in Camphor. The Company is tying up with a number of retail brands and e-commerce platforms to augment its B2C business.

Products and Applications

Products Applications
B2B - Camphor Camphor: Religious
Terpene Dipentene use, healthcare
Sodium Acetate products, hygiene
Dipentene: Paints, cleaning and degreasing agents
B2B - Terpene Phenolic Resin Sodium Acetate: Textile and dyes industry, Leather tanning Adhesives, Tyres,
Synthetic Alkyl Phenolic Resin Rubbers, Chewing
Resin Rosin Esters Gum, Printing Ink
B2C - Retail CamPure - Homecare and personal care products based on Camphor
Operations Mangalam - Camphor tablets for Pious uses
Private Labelling

Manufacturing Capabilities

The Company has a state-of-the-art manufacturing facility spread of cleaning across about 25 acres (101,200 Sq. Meters) at Kumbhivali village in the Raigad district of Maharashtra. The manufacturing site also has a logistic advantage as it is situated on the Mumbai-Pune expressway for Pan-India road connectivity. Container terminal Jawaharlal Nehru Port (JNPT) is situated about 60 kms away from the plant.

The manufacturing operations are a robust operation system that efficiently integrates the functions related to quality control, stores, packing, dispatch, maintenance and R&D. The Company regularly reviews the plant systems, procedures and practices to activities the products confirm to safety. The manufacturing statutory pollution control standards.

Product Portfolio


MOL manufactures a wide range of high demand products under this sub-segment. This is the key raw ingredient for producing camphor and related products. The Company is focusing on production efficiency and quality control so that it can produce international quality intermediate products and their derivatives for the fragrance and flavour industry. The company has been exploring new product development from terpenes and is further exploring the retail opportunity to expand its market reach through diversification.


Camphor is the primary product of the Company which contributes 80% of total sales in Terpenes. Due to its ability to impart a sense of complete purity to the religious devotees, it finds the widest application in religious use in the domestic market. This is a naturally derived product that completely burns off with no residue. Camphor was earlier sold as a commodity. However, as it presents a large retail opportunity, it enables the Company to forward integrate and diversify into the FMCG space by retailing the products through Modern Trade, General Trade and E-Commerce. The Company continues to leverage the growing retail opportunity and is confident of continuing growth in the years ahead. It continues to grow grades offered from the same unit to capture a larger market share in the domestic and export markets. MOL has the following registered brands.

Retail Portfolio

Mangalam Camphor tablets for religious purposes
CamPure Home care products based on camphor such as Camphor Cone, Sticks, Camphor Air Camphor Purifiers, Camphor Hand Wash, Camphor Soap Bar


Dipentene is a by-product in camphor manufacturing and is used as a solvent in the paints industry. The Company offers various grades of this material. Dipentene is a ready substitute in and degreasing agents, as Limonene faces formulations supply shortages. It is also witnessing demand growth in the export market as a substitute for Limonene.

Sodium Acetate

Sodium Acetate is used as a dye intermediate by textile and dye manufacturers. It also finds application in leather tanning industry and is exported to Europe. highly automated and run by


MOL manufactures three broad types of synthetic resins, with each of them having a large domestic and export market. The Company enhance productivity, efficiency is confident of all the categories in this segment and is continuing and its efforts to enhance margins and build higher volumes in each of them.

Terpene Phenolic Resin

Terpene Phenolic Resin finds application in the adhesive, tyre and rubber industries as a in volumes, revenue and profitability over the years ahead.

Alkyl Phenolic Resin

Alkyl Phenolic Resin finds application in Neoprene and rubber-based adhesives. The Company is working with consultants to improve its quality of products as per global standards and leverage the growing export opportunities.

Rosin Esters

Rosin Esters finds application in pressure sensitive adhesives. Company is working with consultants to improve its quality of products as per global standards and leverage the growing export opportunities.

Covid-19 Impact

The outbreak of Covid 19 pandemic slowed down economic various operations and sales with the pandemic induced lockdown. Manufacturing operations and offices had to be shut down during the lockdown period. This had partially March 2020 and the first quarter of FY 2020-21. The restart of operations was not at its normal capacity due to various reasons such as by societies on its members, a large number of areas being under red zone, etc. The Companys near normal operations has been started from mid-June, 2020. The Company followed all the health and safety, and hygiene protocols during the lockdown period and after the unlocking of economic activities in June.


During the year under review, Revenues from operations for FY 2019-20 stood at Rs. 374.52 crore, a decline by of 11.80% as compared to Rs. 424.62 crore in FY 2018-19. Decrease in revenue was due to global reduction in the price of the finished manufactured by your Company.

Further, the Company registered a Net Profit of Rs. 47.56 crore for FY 2019-20, a decline of 34.30% as compared to Rs. 72.39 crore for the FY 2018-19, this was due to the inventories procured at high prevailing price earlier which is usually required by manufacturing industries to run the operations smoothly. The Companys EBIT stood at Rs. 87.36 crore for FY 2019-20, as compared to Rs. 110.44 crore in FY 2018-19.

Details of Significant Changes in Key Financial Ratios

In FY 2019-20, there are no significant changes in key Financial Ratios, except the following:

1. Interest Coverage Ratio

FY 2019-20 FY 2018-19
Company foresees an increase 15.02x 28.89x

Decrease in Interest Coverage Ratio was due to decrease in profitability on account of low realisation from finished products of the Company as compared to FY 2018-19.

2. Current Ratio

FY 2019-20 FY 2018-19
3.29x 2.25x

Company has repaid substantial working capital facility which resulted in improvement in Current ratios as compared to FY


3. Debt Equity Ratio

FY 2019-20 FY 2018-19
0.28x 0.57x

Decrease in Debt Equity Ratio as compared to FY 2018-19 was due to considerable reductionin short term and long term liability.impacted the operations in lack of labour, strict restriction

4. Operating Profit Margin

FY 2019-20 FY 2018-19
20.93% 24.73%

Decrease in Operating profit margin was due to reduction in realisation from the finished products of the Company as compared to FY 2018-19. goods

5. Net Profit Margin (%)

FY 2019-20 FY 2018-19
12.70% 17.05%

Decrease in Net profit margin was due to reduction in realisation from the finished compared to FY 2018-19.

6. Details of any change in Return on Net Worth, compared to the previous financial year

FY 2019-20 FY 2018-19
28.33% 59.66%

Profitability has been affected due to low realisation of finished products, which resulted in further low net worth as compared to previous year 2018-19.


Risks are a part of any organizational setup, the bigger the market, higher the risks. Operating in a highly competitive and changing economic and business environment brings its own share of risks. Some of the key risks specified

Competition risk: Any market share losses for the company to capacity, in their existing the global and domestic players will adversely impact the financial results of the company.

Macroeconomic risk: Any slowdown in economic growth of the country and resulted drop in consumption may lead to a slowdown in FMCG sector. Consequently, this would adversely affect Indian Chemical industry causing lower capacity utilizations for the company.

Raw material price risk: Fluctuation in the price of raw materials or shortage in the supply of raw materials used by the Company poses a threat to its revenue and competitive position.

Concentration of customers risk: Dependency on a few large clients also poses a risk to revenue as any fall in the order book number can impact the business negatively.

Regulatory Compliance risk: Regulatory Compliances covering various federal, state, local and foreign laws relating to various aspects of the business operations are complex and non- compliances can result in substantial fines,


Functional and Operational various operational processes.

Business Continuity risk: Business Continuity risks arising out of climate change related and other disruptions like natural disasters, IT outages, pandemic, terror and unrest, power, water and other resource disruptions etc. which may challenge or impact our customers business and availability of People and process, Technology and Infrastructure.

The Company monitors and analyses all relevant parameters relating to above risks for the manufacturing site to minimise risk of environment, safety of operations associated with protection and health of people at work with reference to statutory regulations and guidelines defined. The Company fulfils its legal requirements concerning emission, waste water and waste disposal. Improving work place safety continued to be top priority at the manufacturing sites.


For the year 2020-21, the Company will continue to look at sustainable growth by focusing on-

Increasing domestic and export market share

Increasing efficiency of the Companys present production capacity

Boosting the B2C business

Increased competition from global and domestic players is putting pressure on sales prices. Increase in prices of certain raw materials also puts pressure on contribution. chemicals focused more on Asia, it is expected that there will be further growth in the chemical industry.

During the year 2020-21, the Company expects its investments in various projects to add to the top and bottom-line.

The Company will continue efforts to improve the production further increasing efficiency while re-looking at business strategies and models, wherever necessary.

FY 2020-21 started with a depressing note because of the severe intensification of the Covid-19 pandemic. However, the Company expects to bounce activities are back as soon as economic normalised. With its continuous efforts on improving efficiencies and margins, barring unforeseen circumstances like the present outbreak of Covid-19, the Company expects to achieve steady results in FY 2020-21.


The Company has a well-established system of internal control and internal audit, commensurate with its size and complexity of the business, with regards to efficiency of operations, financial reporting, compliance with applicable laws and regulations. The Company continually upgrades internal control systems by adding better process control, various audit trails and use of external management assurance services, whenever required. The internal control system is supplemented by extensive internal audits, conducted internally by the finance and account department. The findings of Audit Team are discussed internally as well as

risk: risks arising out of in audit committee meetings. The Audit Committee of the Board of Directors reviews the adequacy and effectiveness of internal control systems and suggests improvement for strengthening them.


In the current age of dynamic, challenging and changing business environment, the Company believes that its ‘People i.e. ‘Human Capital are its important and vital assets. Skills acquired by the employees through training are assets for the Company. Thus, training and development strategy aims to build coherent workforce capabilities, skills or competencies required to ensure sustainable and successful organisation. The Company always strives on maintaining healthy and strong employee relations by devising strategies that ensure high productivity and employees satisfaction. A positive atmosphere of trust has been created. The headcount as on March 31, 2020 was 310 employees on the payrolls of the Company.


This document contains some statements about expected future events, financial and operating results of Mangalam Organics Limited, which are forward-looking. By their nature, forward-looking statements require the Company to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that the assumptions, predictions and other forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause assumptions, and events to differ materially from those expressed in the forward-looking statements. However, with global growth of