Multibase India Ltd Management Discussions

SEGMENT WISE SALES CONTRIBUTION

BACKGROUND & INDUSTRY OUTLOOK

The global macro-economic scenario during the financial year 2023-24 was another period of subdued growth marked by geo-political tensions, concerns of recession, and supply chain constraints. In spite of these challenges and risks, the global economic growth expectations can be viewed with cautious optimism – with a growth rate of 2.7 percent in the financial year 2023-2024 as compared to 3 percent in the financial year 2022-2023.

In spite of global economic risks, emerging India is poised to be the fastest-growing economy for the next few years and a preferred market for investments. India has gained a strong presence in various global diplomatic and trade forums and made progress toward achieving its goal to be a global manufacturing hub. As global supply chains seek to diversify, India stands to gain as a stable destination for manufacturing and business. The Indian economy, bolstered by strong macro fundamentals, retained its growth momentum, which was primarily driven by government investments in infrastructure and an invitation to global and local players to boost local production and manufacturing in India. India has been a key global growth engine, contributing 16% to the global growth in 2023. The countrys growth rate of 7.2% during the financial year 2022-2023 was the highest among the G20 countries and almost twice the average for emerging market economies that year.

India showed a remarkable performance, closing 2023 with a GDP of US$ 3.73 trillion. With a projected GDP growth rate of 6.3 percent, India is geared to become a US$ 5 trillion economy by 2027*.

According to IMF estimates, both Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) inflows have increased in 2023, and are projected to be US$ 44.4 billion and US$ 33.9 billion respectively in 2024. The increase in foreign investment is a testament to the fact that India is perceived as an emerging power that has the potential to generate a steady return on investment with a negligible risk premium.

Another key focus of the Government has been on sustainability and green growth. All these measures had a cascading effect on capacity utilization, and with the strong corporate balance sheet, the private sector is at the threshold of a resurgent investment cycle.

BUSINESS & FINANCIAL REVIEW

The Company operates in Automotive, Consumer & Industrial, and Thermoplastic Additives with its customers largely present in India.

During the year under review, the Company reported gross revenue from operations of 6,473.67 Lacs as against 7,221.58 Lacs during the FY 2022-23. The Company reported Profit before Tax of 1,499.44 Lacs and Profit after Tax of 1,115.22 Lacs as against 1,316.50 Lacs and 978.86 Lacs respectively for the previous financial year. During the current financial year revenue from operations decreased by 10.36% as compared to last year and is mainly on account of stiff competition in the domestic market for thermoplastic elastomer products and shifting of customer base.

World Economic Forum January 2024 India could become the Worlds 3^rd largest economy in the next 5 years. Heres how : World Economic Forum (weforum.org)

The Companys gross margins is consistent with last year of 30% on account of stable raw material prices. Further, the Company has earned interest income on fixed deposits of 624.57 lakhs owing to changes in monetary policies in India and due to better interest rate negotiated in the current year.

KEY FINANCIAL RATIOS AS ON MARCH 31, 2024

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	2023-24	2022-23
Inventory Turnover ratio	4.47	4.8
Debtors Turnover ratio	6.34	6.46
Assets Turnover	0.46	0.54
Current Ratio>	17.24	13.75
Gross Profit(%)	30.05%	30.19%
Net Profit Margin(%)	17.23%	13.55%

The reason for variation in key ratios are as under:

Net profit margin & Current Ratio: Increase is mainly on account of increase in non-operating income by placing surplus cash accumulated during the year in time deposits and earning at an average interest rate of 6%.

OPPORTUNITIES AND THREATS

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

2. Threat of emboldened local competition benefiting from lower raw material costs more than Multibase may lead to challenges to our business, share loss, loss of growth platforms.

3. Opportunity to transition to more AP raw materials (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 as 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.