MCON Rasayan India Ltd Management Discussions

1. This section shall include discussion on the following matters within the limits set by the listed entitys competitive position:

a. Industry structure and developments:

• The construction industry in India for the years 2022-23 is characterized by its embrace of technology, commitment to sustainability, and adaptability in the face of challenges. The sectors alignment with government policies, investment inflows, and a focus on skill development will continue to shape its growth trajectory. As India progresses towards its development goals, the construction industry stands as a crucial partner, building the foundations for a prosperous and sustainable future.

• The construction industry in India has embraced technological innovations, revolutionizing the way projects are planned, executed, and managed. Building Information Modeling (BIM) has gained traction as a powerful tool that facilitates better collaboration, reduces errors, and enhances efficiency in project delivery. The adoption of drones for site surveying, monitoring, and progress assessment has increased, leading to faster data collection and improved decision-making. The construction industry has seen some important developments in the recent times, right from the way concreting is happening through aluminium formwork or tunnel formwork to the types of finishing material used like gypsum plaster or tiles of different kinds. These changing technological advancements have created requirement for new type of Speciality building materials to suffice the requirement of the new structures.

• Mcon Rasayan India Ltd. Is in the business of manufacturing, marketing and selling of modern building materials and construction chemicals with a suite of more than 80 products which includes a range of construction materials and construction chemicals in both powder and liquid forms. The products are marketed and sold under the "MCON" brand. It is a leading waterproofing brand of Western India, with a comprehensive range of systems solutions for waterproofing to different locations of a building, catering to the needs of new construction as well as repairs and maintenance.

b. Opportunities and Threats.

Opportunities to Mcon Rasayan India Ltd.

Mcon Rasayan India Ltd. has a tremendous scope in the geography that its operating and also the product segment of Construction Chemicals and Modern building materials:

• The Construction Chemicals market in Western Zone of India presents several promising opportunities due to various factors such as urbanization, infrastructure development, real estate growth, and changing consumer preferences.

• Infrastructure Development: India has been investing heavily in infrastructure projects, such as roads, bridges, airports, metro systems, and smart cities. Construction chemicals are essential for ensuring the longevity and quality of these projects.

• Urbanization and Real Estate: The increasing urbanization and growth of the real estate sector create a demand for high-quality construction materials and technologies, including construction chemicals.

• Waterproofing Solutions: Indias diverse climate, including heavy monsoons, makes waterproofing solutions a critical aspect of construction. Effective waterproofing chemicals are in high demand to protect structures from water damage.

• Repair and Rehabilitation: As existing infrastructure ages, there is a need for repair, retrofitting, and rehabilitation. Construction chemicals can provide solutions for strengthening and prolonging the life of aging structures.

THREATS:

• Regulatory and Compliance Risks: Indias regulatory environment can be complex and subject to changes. The construction chemicals industry is affected by regulations related to product standards, labeling, safety, and environmental impact. Changes in these regulations can impact product formulations, market access, and operational practices, requiring companies to invest in compliance management and product adaptation.

• Quality and Performance Risks: Construction chemicals play a crucial role in ensuring the durability and structural integrity of buildings and infrastructure. Any compromise in product quality can lead to construction failures, safety concerns, and financial losses for all stakeholders involved. Maintaining consistent quality and performance standards across a diverse range of construction chemicals can be challenging, particularly in a market with varying levels of technological expertise.

• Economic and Market Fluctuations: The construction industry in India is influenced by economic cycles, interest rates, and government spending on infrastructure projects. Economic downturns or fluctuations can lead to reduced construction activities and consequently, a decrease in demand for construction chemicals. This vulnerability can affect revenues and profitability for manufacturers and suppliers in the industry.

• Technological Changes: The construction chemicals sector is experiencing technological advancements aimed at creating more efficient, eco-friendly, and sustainable solutions. Companies that fail to adapt to these technological changes risk losing market share to competitors offering innovative products. Staying updated with the latest research and development trends is crucial to remaining competitive in the long term.

• Supply Chain Disruptions: The construction chemicals market heavily relies on a complex supply chain involving raw materials, manufacturing processes, distribution networks, and transportation. Disruptions in any part of this chain, such as shortages of raw materials, logistic challenges, or geopolitical issues affecting imports, can lead to production delays and increased costs.

• Competition and Pricing Pressures: The construction chemicals market in India is becoming increasingly competitive as more players enter the field. Intense competition can lead to price wars and margin erosion. Companies need to find a balance between offering competitive pricing and maintaining profitability, while also providing value- added products and services.

c. Segment-wise or product-wise performance.

The financial year gone by has been a balanced year of performance. Many of our champion products did really well during this period. We have learned the tough way during the Covid situation that our Network and our Distributors are our strength and come what may we have to be aligned with them. So we kept on doing what we have been doing for so many years, that is supporting our Distributors to build business. And the results were really encouraging. In the year we did value g rowth of 63% and volume growth of 30%.

Strategic gains

The strategic pillars of growth were led by upgradation strategies and deeper penetration into new cities, setting up mechanisms to reach alternate channels and increasing the depth in the distribution through targeted openings. These strategies were strongly complemented by leveraging the brand strength and looking at product innovation to grow the premium and high margin product mix.

Our efforts to continue innovating and providing newer offerings to consumers paid rich dividends. We got inroads by giving some innovative epoxy coatings to the industry and thus penetrated into the infrastructure projects related to water supply chain. The two component epoxy food grade paint has found excellent response from the specifiers, the government officials and also the contractors and it also helped us in bettering our bottom lines.

In the exterior product segment, we introduced the Deco floor range of premium exterior decorative floor finishes that are much sought after by architects and structural consultants. Also our external textures gained popularity as it combined with the new Maarvel range of external waterproof paints thus elevating the experience of the customers. In the decorative segment we were also able to make inroads through our cost effective Distemper and 2 in 1 primer while the Wall putty as usual keep the ball rolling.

The waterproofing and adhesives product categories, two of our ongoing category saw major expansions, as we continued to grow significantly ahead of the overall portfolio growth. Our emphasis on product innovation and solution- focused approach to meet varied customer requirements through an evolving product plus service combination, has allowed us to make significant inroads in these large categories.

The major contributor in terms of volume and value was again the Ready mix mortar segment as our Readyplaster and Block adhesives were appreciated and sought after in spite of the tough price war going on in this category. We did a total tonnage of 20,786 the readymix mortar segment which contributed to total of 62% of our total tonnage sold in the year.

d. Outlook

The global construction industry has been experiencing significant growth and transformation in recent years, and the year 2022 - 23 is no exception. One of the key segments driving this evolution is the construction chemicals and paints sector.

These essential components play a crucial role in enhancing the durability, aesthetics, and functionality of buildings and infrastructure. The construction industrys increasing focus on sustainability and environmental consciousness is expected to greatly influence the construction chemicals and paints sector.

Consumers, developers, and regulatory bodies are placing a higher emphasis on eco-friendly and low-VOC (volatile organic compound) products. As a result, manufacturers like us are investing in research and development to formulate products that align with these demands, thereby catering to a more environmentally conscious customer base. Our product innovation of, Food Grade epoxy paints, self curing readyplaster and corrosion inhibiting admixture, is the testament that Mcon Rasayan is listening and adapting to the market expectations.

Consumer preferences for aesthetics and design are constantly evolving. We can see a shift towards more versatile and customizable paint, flooring and coating options. This involves the use of special effects, textures, and colors that allow architects and designers to create distinctive visual experiences. Personalization and customization are likely to become key selling points for manufacturers in the competitive construction chemicals and paints market. Thus our introduction of range of textures for the external walls and decorative flooring on concrete through our Deco floor systems is the need of hour and path of future. With a growing awareness of environmental issues, the waterproofing industry in India is shifting towards more sustainable practices. Water-based and solvent-free waterproofing products are gaining traction due to their reduced environmental impact and improved indoor air quality. Advanced polymers are being developed to withstand extreme climatic conditions and offer superior flexibility, ensuring longlasting waterproofing solutions for Indias diverse regions. Mcon Rasayan has introduced the polyurethane based liquid membranes with elongation ranging from 400% to 900% to ensure that we can service all kinds of waterproofing challenges. Indias diverse climatic zones present a unique challenge for waterproofing solutions. The future will see a greater focus on tailoring waterproofing systems to specific climate conditions. In regions with heavy monsoons, for instance, waterproofing solutions will need to be particularly robust and capable of withstanding prolonged exposure to heavy rainfall.

The successful implementation of future waterproofing technologies and practices hinges on skilled professionals who can design, install, and maintain these systems. As the industry evolves, investing in skill development and training programs will be crucial. Mcon has already taken initiative in this regard by conducting training programs for the applicators and then certifying them as the Authorised Applicators so that we can ensure that the product is applied in a proper manner and the consumer gets the utmost benefits from the same.

e. Risks and concerns.

Innovation and Development

The growth of the construction chemical manufacturing company is largely dependent on the research and development activities of the company. There is a constant need for innovation in the product spectrum. On the other hand, strong R&D set up ensures quality management and cost reductions. Since the company has its own R&D centre, the above concern is well addressed.

Raw material availability

Our business relies on a stable supply of raw materials, such as cement, aggregates(sand), and additives. Any disruptions in the supply chain, such as shortages or price fluctuations, can impact your production capacity and cost structure. We have done our bit to mitigate these risks by having a huge sand storage area at our Ambethi plant with a sand processing plant to ensure that we get an uninterrupted supply of good quality river sand for all our powder products. Also we have strong tie up with multiple vendors who can supply us high volume consistent material as per our fixed rates to ensure that the costing of the product will not fluctuate.

Liability and Warranty Issues

Our products are used in construction projects and if defects or failures occur, we could face legal claims for damages. Offering warranties and ensuring our product meets industry standards can help mitigate this risk. Also we have our own set of Authorised applicators for the critical application of the products so that we can ensure that it serves the warranties offered. Also we have our own team of Technical experts in application who visit the ongoing sites at regular intervals to educate the site people and check on the correct use of our products.

f. Internal control systems and their adequacy.

The internal financial controls with reference to the financial statements are commensurate with the nature of the companys business and the size and complexity of its operations. The company has adopted policies and procedures for ensuring the orderly and efficient conduct of business including adherence to companys policies, safeguarding of its assets, prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information.

Adequacy and effectiveness of internal controls are routinely tested by the internal auditors of the company. Based on the internal audit report, the process owners undertake corrective actions in their respective areas, thereby further strengthening the controls. The conclusions of internal audit reports and effectiveness of internal control measures are reviewed by top management and audit committee of the company The company believes in conducting business in a fair, ethical and compliant manner.

g. Discussion on financial performance with respect to operational performance.

Effective financial performance is an essential aspect of any businesss success. However, financial outcomes are intrinsically linked to the underlying operational performance of an organization.

Cost Management: Efficient operations lead to reduced waste, lower production costs, and optimal resource utilization. This, in turn, positively impacts a companys financial bottom line. Our manufacturing plants the biggest cost to the company has been operating at 150% efficiency thus ensuring that we can bring down the cost of production and become profitable.

Productivity and Output: An organizations ability to produce more output with the same or fewer resources indicates higher operational efficiency. This can lead to increased revenue generation and improved financial performance. Our current team of professionals in the Logistics, manufacturing and operations boasts of doing 3X volume of work with 200% efficiency thus ensuring that we save on the human resource cost as well as the space needed to occupy the human resource. Like every growing company, creating such a team of passionate and relentless working professionals is a task.

Quality Control: Effective operational processes often result in higher-quality products or services, leading to customer satisfaction, repeat business, and positive brand reputation - all of which can enhance financial performance. Our quality control department is equipped with the latest instruments to test the product and right from the raw material stage to the finished goods leaving the factory , everything is thoroughly tested to ensure that we dont face any quality issues at site.

h. Material developments in Human Resources / Industrial Relations front, including number of people employed.

The company considers its employees as its main assets. The management believes in the philosophy of development of the company with the development of employees. Proper environment of work, all necessities and their safety is looked after. The well being of its employees is always a priority to the company. The employees are given proper guidance and training to execute their tasks. Hence, high degree of work satisfaction is enjoyed by the employees of the company.

i. Product segments and the story around the same.

We are operating in multiple Product segments and each Product segment is unique in its own way. A Company which can serve the customer with a Product Range from Foundation to Finishing with their fully automatic Manufacturing plant in Gujarat.

- Our Product Range can be defined in a unique way to ensure the utility of the products in various construction activities.

- We Care for the Concrete so we offer - Admixtures & Waterproofing Systems

- We Repair Rehabilitate the Concrete by giving - Concrete Repairs & Anti Corrosive Systems

- We Decorate the Concrete - Deco Floor System and Wall Finish Putties

- We Preserve & Protect the Concrete by offering our - Protective Coatings & Decorative Elastomeric Paints

- We Cover, seal and build the Buildings by our - Ready mix Mortars and Sealants

- We help in Tiling and Grouting the Surface and Walls with - Tile Adhesives and Tile Grouts

- We Increase the Wear & Tear of Concrete - Floor Hardeners & Engineering Grouts

- We have been predominantly a powder based product manufacturing company.

In the last one year we have done almost 61% of business from Powder based products like Readymix plasters, block adhesives, Tile adhesives and tile grouts. This has ensured that we could reach to every building that was being constructed in our Zone and we have helped more than 500 residential projects in completing their finishing work. We have also helped the Repair and rehabilitation of the buildings and more than 350 buildings in Mumbai alone have been repaired using Mcon products. The protection of building is not only about repairs but also about waterproofing the buildings. This was done with help of our strong product range of Concrete repair products and waterproofing systems. We have more than 19% contribution from these two product groups to our over all turnover.

We are a new entrant in the Decorative paint business and in a short span developed well. Also we have given some good quality protective coatings epoxy based as well as PU based to the infrastructure industry. The category of paint and protective coatings has given us more than 10% top line contribution in total turnover. Also this has ensured that our bottomlines have improved as well. We are sure that the way we have started this business in the first year, the coming years will see better volumes in this segment and give us better profits.

Mcon Rasayan has a strong portfolio of Concrete floor hardeners and we have done some fantastic and reputed projects with these. The famous Rani Baugh in Mumbai has been adorned a new look concrete flooring with help of Mcon flooring range.

Mcon rasayan has its own R&D centre and we are developing some high end products which are helping us in creating a niche market and also ensuring that we can retain our customers and also attract new customers.