mayur uniquoters ltd share price Management discussions

Management Discussion and Analysis Report popularly known as MDAR is the communication straight from the management to their valued shareholders giving them insights into the present business conditions of the company and its future potential. It gives a birds eye view about the Companys objective, predictions and forward looking statements. This report is an integral part of the Boards Report. Aspects on industry structure and developments, opportunities and threats, outlook, risks, internal control systems and their adequacy, material developments in human resources and industrial relations have been covered in this Report.

Companys financial statements are prepared in accordance with the Indian Accounting Standards (Ind AS) under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values are as per the provisions of the Companies Act, 2013 ("the Act") and guidelines issued by the Securities and Exchange Board of India (SEBI). The Ind AS are prescribed under Section 133 of the Act, read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015, and relevant amendments Rules issued thereafter.

Our Vision is to be preferred supplier to the leading OEMs in the World. Our values and guiding principle have been woven around seven major aspects which are evidently visible in all the activities performed by the Company i.e. Customer Satisfaction, Innovation, Quality Product and Service, Employee Growth, Culture, Being Sensitive towards Society and Environment Protection. This guiding principle is now the culture of the organization and ensures that both internal and external customers are satisfied.

ECONOMIC OVERVIEW GLOBAL

Global economy has experienced three major events since 2020:

• Pandemic leading to contraction of global output

• Geo-political development in Eastern Europe resulting in a worldwide surge of inflation

• Action by Central banks across economies to curb inflation through interest rate hikes All these have impacted the global economy in the last three years and will continue in the near future as well. In its January 2023 report, IMF forecasted that against an estimated global growth of 3.4% for 2022, growth will fall to 2.9% in 2023 followed by 3.1% in 2024 - three consecutive years of growth lower than the historical average of 3.8%.

Signs are apparent that monetary policy tightening is starting to cool demand and inflation, but the full impact is unlikely to be realised before 2024. Global headline inflation appears to have peaked in the third quarter of 2022. Prices of fuel and non-fuel commodities have declined, lowering headline inflation. As the central banks are hinting at future rate hikes to further stabilise inflation, the downside risks to the global economic outlook appear elevated. Global forex exchanges were in a highly volatile environment in 2022.

Domestic Economy - India will continue as the fastest growing major economy

The Indian economy, however, appears to have moved on after its encounter with the pandemic, staging recovery in FY 2022-23 ahead of many nations. RBI in its Monetary Policy announcement during February 2023 projected 7% GDP growth for FY 2022-23. These optimistic growth forecasts stem in part from the resilience of the Indian economy seen in the rebound of private consumption seamlessly replacing the export stimuli as the leading driver of growth. The uptick in private consumption has also given a boost to production activity resulting in an increase in capacity utilization across sectors. The rebound in consumption was facilitated by the near-universal vaccination coverage overseen by the government that brought people back to the streets. The growth rate reflects the strong fundamentals of our economy as it has emerged as the fastest-growing major economy in spite of the fact that India has also faced the challenge of reining in inflation as the Central Bank has taken measures on the policy fronts to manage the inflationary pressure. The RBI also projected the economic growth slow down to 6.4% in FY 2023-24, citing risks from geo-political tension and tightening global financial conditions.

INDUSTRIAL STRUCTURE AND DEVELOPMENTS

The Synthetic Leather Market is witnessing significant growth owing to the rising demand for animal-free and eco-friendly products across various end-use industries. Synthetic leather, also known as faux leather, is a man-made material that looks and feels like real leather but is made from plastic or other synthetic materials. It offers several advantages over traditional leather, such as cost-effectiveness, durability, and easy maintenance. The synthetic leather market is driven by the increasing demand for furniture, footwear, automotive interiors, and fashion accessories made from synthetic leather. Moreover, the growing awareness among consumers about animal welfare and environmental sustainability is also propelling the growth of the market. The market for synthetic leather is highly competitive, with several global and regional players operating in the market. The Company is focusing on product innovation and development to cater to the changing demands of the consumers. The Company is investing in research and development activities to introduce new and advanced materials that offer better quality and durability. In the present era the demand of synthetic leather in the automotive industry sector is increasing day by day. Therefore the growth in the market of the Company will also be increase accordingly in future. To achieve the desirable growth in the market and to meet out the increased demand of the customers in the prevailing scenario of the market, the management has to keep eagle eye on the fluctuating prices of raw materials. The Global Synthetic Leather Market size was valued at US$ 36.17 Bn in 2022, and is Projected to reach US$ 59.42 Bn by 2030, with growing healthy CAGR of 6.4% over the Forecast Period 2023-2030. Healthy growth of the footwear industry across the globe and increasing demand in synthetic leather in the fast growing automotive industry are driving the market growth.

The Indian leather, leather products and footwear Industry holds a prominent place in the Indian economy. This sector is known for its consistency in high export earnings and it is among the top ten foreign exchange earners for the Country. At present, synthetic leather is increasingly being used in a range of applications, which include footwear, interior designing, furnishing, automotive interiors, garments, and luxury goods.

The PU synthetic leather segment led the market and accounted for more than 55% share of the global revenue in 2022. It has been witnessing promising growth, in terms of product quality, variety, and yield. Polyurethane is waterproof, softer and lighter than real leather, and can be dry cleaned and torn easily than real hides. It also remains unaffected by sunlight. In addition, it is an eco-friendly substitute for vinyl-based products as it does not emit dioxins. All these factors are expected to augment its demand further.

The footwear segment led the market and accounted for more than 30% of the global revenue in 2022. Its application is getting nearer to genuine leather, which is increasingly replacing the applications in handbags, briefcases, car furnishings, and clothing. Rising income levels and economic growth, especially in emerging nations, have fuelled the demand for footwear. In addition, the segment is led by variations occurring in climatic conditions of different regions, which need different types of footwear.

The automotive industry is growing at a significant rate during the past few years coupled with the growth of the e-vehicles in recent years. Automotive market has a significant growth rate in the Asia-pacific region and across the globe. Synthetic leather is used to provide dashboard linings for the cars, gear boot, roof linings, door panels, trim panels head and arm rest, seats and other parts, due to its high wear resistant and durability are used across heavy vehicles and carriers, passengers vehicles, bike and other locomotive. Additionally, the growth of autonomous or e-vehicles is further expected to boost the synthetic leather market. Thus, increasing demand for synthetic leather is the fast growing automotive industry is likely to drive the growth of the artificial leather market revenue.

BUSINESS OUTLOOK

The Asia Pacific dominated the market and accounted for over 40% share of the global revenue in 2022. China, India and South Korea are expected to be the major growth-driving economies in APAC. Rising disposable income, coupled with the increasing population, will provide numerous opportunities for the market. The synthetic leather market grows at a significant rate and offers opportunities for various manufacturers. This region has a share of approximately 61% of the worlds population, and the manufacturing and processing vertical are growing at a faster pace in the region and it is the leading synthetic leather market with being the major market, which has a positive growth outlook.

Mayur, has the largest capacity for manufacturing of synthetic leather in domestic organized segment with capacity of annual production of 48.60 Million linear meters of PVC coated fabric and 5.00 Million Linear meter of PU coated fabric. MUL manufactures more than 400 variants of artificial leather from PVC polymer which finds application in footwear (shoes/sandals insole and uppers), automotive (seat upholstery and inner linings), furniture & fashion items (apparel) and leather goods.

Mayur, has a diversified clientele across various industries and caters to the synthetic leather requirements of reputed players like BMW, Mercedes Benz, Chrysler, Ford, Hyundai, MG, KIA, Maruti Suzuki, Tata, Toyota, Mahindra & Mahindra, ISUZU, Suzuki, Honda, Renualt, Skoda/Volkswagoan, Stellantis, Hero, Bajaj, Royal Enfield, TVS, Piaggio, Sonalika Tractor, Lear, TS Tech Sun, Bharat Seat, Krishna Maruti, Sharda Motors, S.I. Interpact Group, Swaraj Auto, Polor Auto etc. among automotives and Bata, Paragon, Lancer, Action, Relaxo, VKC Group etc. among footwear segment. Mayur is also exporting to automotive OEM i.e. Mercedes Benz and BMW in the European Market. Mayur has a subsidiary company named Mayur Uniquoters SA (Pty) Ltd in South Africa, which will develop logistics to facilitate exports to Mercedes Benz and BMW.

We have also entered into the retail furnishing business under the brand name "TEXTURE AND HUES" to serve our retail customer through our wholly owned subsidiary company ‘Mayur TecFab Private Limited, which will yield good profit to the Company in future. Approximately 40% of synthetic leather market are in furnishing business and we are making 1000 dealers across India to capturing this market out of which 350 dealers were already made in the FY 2022-23 and we are getting good response in the retail business from our dealers. The company see the bright future for the company in the furnishing sector.

OPPORTUNITIESAND THREATS OPPORTUNITIES

• Growing Demand from the Footwear and Automotive Industry

• Development of new types of high quality PU coated fabric

• Strong and eco-sustainable product

• Export opportunities to neighboring countries

• Modernized manufacturing units

• Product Diversification

• Optimizing production cost

• Trained / skilled manpower at competitive wage level

• Being a Cheaper alternative to natural leather with good aesthetic quality, demand to continue to remain strong

• Presence in global market

THREATS

• Lack of poor policies for the specific development of the sector

• Unfavorable foreign exchange rate fluctuations

• Non-biodegradability of synthetic leather

• Increase in competition

• Some raw material not available locally; it increases cost and lead tuff competitiveness

• Irregular supply of raw material

• Increase in logistic cost

SEGMENT-WISE PERFORMANCE

The Company deals only in one segment i.e. manufacturing and sale of PU/PVC Synthetic Leather, accordingly there is only single reportable segment.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The overview of financial performance with respect to operational performance of the Company can be obtained from the various following ratio analysis.

• Debtor Turnover Ratio is 3.93 times

• Inventory Turnover Ratio is 2.62 times

• Interest Coverage Ratio is 60.88 times

• Current Ratio is 6.07 times

• Debt to Equity Ratio is 0.03 times

• Operating Profit Margin Ratio is 20.91 percentage

• Net Profit Margin Ratio is 17.71 percentage

RISKS AND CONCERNS

We believe that great things never come from comfort zones and so, we are constantly working on way to do things better every single moment. The Company is impacted by the change in the business environment both within the Country and globally and this necessitates continuous evaluation. In the current scenario of competitive business environment and open economy across the world, no Company can imagine risk free business environment. Your Company is proactively taking steps to identify and monitor the risk and make efforts to mitigate significant risks that may affected.

The Board of Directors and Senior Management is continuously and carefully monitoring the risks and concerns related to the business for example: macroeconomic factors, foreign exchange fluctuation, geographical concentration, change in the Government policies and legislation, increase in the raw material prices etc. The Company has also taken several insurance policies to mitigate other risks and concerns of the Company.

RESEARCH AND DEVELOPMENT (R&D)

Research and Development activities have played a pivotal role in differentiating the overall attributes of synthetic leather from traditional leather. In this direction, your Company has increased its R&D efforts in scope and scale for comprehensive and integrated research works in the identified thrust areas.

Our R&D work towards the development of synthetic leather with various new textures, colors, patterns, and functionalities to develop synthetic leather with superior properties. We continuously strive towards in-house product development /innovation and sustainable synthetic leather in tune with evolving industry trends.

With experienced and qualified human resources our R&D capabilities are the driving forces of our current momentum and future growth of the organization. With innovation instilled into culture of the company at various levels, R&D is a crucial attribute in fostering our vision to become a global leader in the leather Industry.

The Company is providing new products time to time which helps in expanding the business to new dimensions. Customer from OEMs, automobile, footwear, furniture and upholstery, leather goods, sports equipment and fashion industry have varied requirements which are all successfully fulfilled in our prototype laboratories. To mention their achievements, the R&D wing delivers good number of samples on every working day.

Strategically, Mayur is well placed to create PVC/PU leather products to every part of interior trim applications meeting worldwide standards. We are augmenting our research capabilities and expanding our product portfolio to address the prospective demand across global markets Further to meet out the requirements of the customers in the new era as per the international standards and advance technology, we are setting up a new world-class R&D Centre which will focus on developing, demonstrating, innovative and environment friendly, customer centric products and process technologies for developing new and critical product in the artificial synthetic leather industry.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

To ensure effective internal controls across business processes and systems, the Company has established a robust framework that is designed to provide reliable and quality assurance related to the Companys financial and operational information so that it can comply with applicable laws and safeguard its assets. The framework comprises both entity-level controls and business process controls. The adequacy and efficacy of these controls are evaluated on a regular basis: To facilitate the same, following measures have been initiated:

• The internal control systems are evaluated with respect to their compliance with the operating systems and policies of the Company across all locations.

• The Company has put in place robust data security management.

• The Company is employing data analytics in the internal audit.

• All operations are executed through Standard Operating Procedures (SOPs) in all functional activities, and these are updated and validated periodically as per the business need.

Commensurate with the size and nature of operations, the Company has adequate systems of internal control comprising authorization levels, supervision, checks and balances and procedures through documented guidelines which provide that all transactions are authorized, recorded and reported correctly and compliance with policies and statutes are ensured.

The Company has an independent internal audit system to monitor the entire operations and services. The top management and Audit Committee of the Board review the findings of the Internal Auditor and takes remedial actions accordingly.

The division also assesses opportunities for improvement in business processes, systems & controls and it provides the recommendations for design to add value to the organization and it also follows up on the implementation of corrective actions and improvements in business processes after review by the audit committee and senior management.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATION

The Company always believes that its growth is closely linked with the growth and overall development of its employees. The Company is committed to upgrade the skill of its employees and to create an environment where excellence is recognized and rewarded. The target is to place right people at right position and to enhance the efficiency, working speed, competency and time management skill of its employees. The Companys endeavour is to create an environment where people can use all of their capabilities in promoting the business of the Company. Number of people employed, as at March 31, 2023 are 497.

CAUTIONARY STATEMENT

Statement in the Management Discussion and Analysis and Directors Report describing the Companies strengths, objectives, strategies, projection and estimate are forward looking and progressive within the meaning of all applicable laws and regulation. Actual results may vary depending upon the various aspects of the economic such as government policies, rules and regulations, economic conditions and other incidental factors.

Important factors that could make a difference to our Companys operations include raw material availability and prices, cyclical demand and pricing in our principal markets, changes in government regulations, tax regimes, economic developments within India and outside the countries in which we conduct business and other incidental factors. Management will not be in any way responsible for the actions taken based on such statements.