multibase india ltd share price Management discussions

SEGMENT WISE SALES CONTRIBUTION

BACKGROUND & INDUSTRY OUTLOOK

Global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades. The cost-of-living crisis, tightening financial conditions in most regions, Russias invasion of Ukraine and its effects, climate change and the lingering COVID-19 pandemic all weigh heavily on the outlook. IMF forecasts global growth to slow from 3.4 percent in 2022 to 2.8 percent in 2023 before settling at 3.0 percent in 2024. Advanced economies are expected to see an especially pronounced growth slowdown, from 2.7 percent in 2022 to 1.3 percent in 2023*. However, with the recent relaxations of COVID-19 restrictions in China and the unleashing of the pent-up demand, there is an expectation of faster-than-expected recovery in the global economy in a gradual manner. Indias GDP is projected to grow around 6 percent this year**, though the ongoing Russia & Ukraine war, financial bank crisis in US, and the elevating fuel & food prices may also cast some clouds in 2023 for India. Indias GDP growth might fall short of 6 percent as higher interest rates and global economic slowdown weigh on investment and exports. *IMF April 2023. https://www.imf.org/en/Publications/WEO/ Issues/2023/04/11/world-economic-outlook-april-2023 ** RBI 6.5%; IMF 5.9%; WB 6.3%; ADB 6.7% and OECD 5.9% Recovery in a few sectors, especially agriculture, manufacturing, construction, and contact-intensive services sector, weighed on the overall growth. Increase in the sales of electric vehicles together with demand for passenger vehicles is expected to further boost the automotive industry in the country. While the growth outlook is optimistic, the resilience of the Indian economy would be tested against the global crisis during the course of 2023-24.

BUSINESS & FINANCIAL REVIEW

With the current business portfolio, the Company is largely operating in Automotive, Consumer & Industrial and Thermoplastic Additives. During the year under review, the Company reported gross revenue from operations of Rs. 7,221.58 Lacs as against

Rs. 6,248.39 Lacs during the FY 2022-23. The Company reported Profit before Tax of Rs. 1,316.50 Lacs and Profit after Tax of Rs.978.86 Lacs as against Rs. 862.78 Lacs and Rs. 633.93 Lacs respectively for the previous financial year. Revenue during the current financial year increased by 15.57% as against last year and is mainly on account of increase in trading segment portfolio sales and increase in selling price of certain products.

The Companys gross margins improved by 1% from 28.87% to 30.19% in the current year which is mainly on account of stable raw material prices and increase in traded products margin. Further the Company has earned interest income on fixed deposits of Rs. 353.75 Lacs owing to changes in monetary policies in India and due to better interest rate negotiated in the current year.

KEY FINANCIAL RATIOS AS ON 31ST MARCH 2023

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018, the Company is required to give details of significant changes (change of 25% or more as compared to the immediately previous financial year) in key sector-specific financial ratios.

The Company has identified the following ratios as key financial ratios:

Ratios	2022-23	2021-22
Inventory turnover	4.80	3.61
Debtors turnover	6.46	5.63
Assets turnover	0.54	0.53
Current ratio	13.75	11.09
Gross profit (%)	30.19%	28.87%
Net profit margin (%)	13.55%	10.15%

The reason for variation in key ratios are as under:

Inventory turnover ratio: Increase in inventory turnover ratio is on account of efficient utilization of inventory and managing the stock in hand efficiently as per the sales plan. Further due to COVID impact last year in 4^th quarter, inventory has accumulated to certain extent due to lesser liquidation. Net profit margin: Increase in on account of two reasons, firstly stable raw material prices and increase in selling price of certain category of products which enabled the Company to earn higher margin. Secondly due to change in monetary policies and better interest rate negotiation, Company could earn higher interest income for the deposits placed during the year.

OPPORTUNITIES AND THREATS

1. Threat of strong downward pressure on raw materials, higher than historical gap between various EMEA and AP raw prices a. This can be a threat since many Multibase raw materials are procured in EMEA

2. Risk of emboldened local competition benefiting from lower raw materials costs more than Multibase a. May lead to challenges to our business market, share loss, loss of growth platforms

3. Opportunity to transition to more AP raws (qualifications/ scouting ongoing) to improve variable cost and local supply access a. Risk as well since the process is not yet fully completed b. More diversified supply chain improves supply access and raises growth potential

4. Opportunity to localize production of certain finished products to Daman to reduce costs and improve competitiveness

5. Opportunity to grow with India market, capture growth platforms, expand silicone based products, expand sales outside of India from Daman, qualify new products at the site

RISKS AND CONCERNS

The biggest uncertainty at this point in time is the ability to pass on the inflationary, forex impacts in price to the customers, which seem challenging as we operate in a very competitive environment. Logistics for imported grades and raw materials has been a significant challenge with uncertain shipping times, shortage of vessels and increased costs. We have developed plans to counter the negative impacts, both mid-term and long-term. We are committed to make these work.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

The Industrial relations with workmen during the year were cordial. The Directors place on record their appreciation for the sincere and efficient services rendered by the executives, staff and workmen of the Company and are confident that they will continue to contribute to the Companys prosperity and growth.

INTERNAL CONTROL SYSTEMS

The Company has put in place an adequate system of internal control measures in all risk areas, implemented by the management towards achieving efficiency in operations, optimum utilization of resources and effective monitoring thereof and compliance with applicable laws.

The directors had laid down internal financial controls to be followed by the company and such internal financial controls are adequate and were operating effectively.

These measures are in the form of procedures/ processes set by the management covering all critical and important areas. These controls are periodically updated and are subject to review by internal auditors. Internal audit function has been outsourced to independent firm of Chartered Accountants who submit quarterly reports to the Board. The Audit Committee reviews the report of the Internal Auditors and recommends steps to be taken to improve internal controls if any.

CAUTIONARY STATEMENT

This section of the Annual Report has been included in adherence to the spirit enunciated in the Code of Corporate Governance approved by the Securities and Exchange Board of India. Shareholders and Readers are cautioned that in the case of data and information external to the Company, though the same are based on sources believed to be reliable, no representation is made on its accuracy or comprehensiveness. Further, utmost care has been taken to ensure that the opinion expressed therein contain its perceptions on most of the important trends having a material impact on the Companys operations.

The opinions expressed by the management may contain certain forward-looking statements in the current scenario, which is extremely dynamic and increasingly fraught with risks and uncertainties. The Company undertakes no obligation to publicly update or revise any of the opinions or forward-looking statements expressed in this report, consequent to new information, future events, or otherwise. Estimation and expectation made in the Report may differ from actual performance due to various economic conditions, government policies and other related factors.