N K Industries Ltd Management Discussions

INDUSTRY OVERVIEW

The global castor oil market demonstrated steady growth in FY 2024-25, reaching an estimated volume of approximately 933.74 Kilo Metric Tons (KMT) in 2024. Projections indicate a continued upward trajectory, with expectations to attain 1,304.46 KMT by 2034, reflecting a Compound Annual Growth Rate (CAGR) of 3.4%.

India maintained its position as the leading producer and exporter of castor oil globally. In the fiscal year 2024-25, India exported approximately 629,846 metric tonnes of castor oil, valued at around USD 1.009 billion (approximately 8,400 crore). Gujarat continued to dominate domestic production, contributing over 75% of Indias total castor seed output, followed by Rajasthan and Andhra Pradesh.

Indias castor oil industry experienced robust performance in FY 2024-25. During the period from January to September 2024, castor oil exports totaled 549,428 metric tonnes, with a corresponding value of 6,688.78 crore. The average price of castor seed in Gujarats Mehsana district ranged between 5,535 to 5,865 per quintal in July 2024.

The rising utilization of castor oil in numerous industries, such as personal care, chemicals, pharmaceuticals, lubricants, etc., owing to its unique properties and versatility, are primarily driving the market.

India has a large production share of castor and castor oil in the world with almost 85 % share and Gujarat is still the leader in contributing more than 75 % in production of castor and castor oil followed by Rajasthan and Andhra Pradesh in the race. The castor plant appears to have originated in eastern Africa, around Ethiopia. Hot and humid tropical climate is more suitable for Castor growth though it grows in different climatic conditions as well. The major castor-growing countries like India, China and Brazil are sharing about 80 per cent of its total area in the world. Castor is grown in thirty different nations, and between 15 and 20 lakh tonnes of castor seed are produced in a year. Castor oil is used in the making of washing soaps, lubricating grease, laxative, surfactants, rubber chemicals, nylons, hydraulic brake fluids, paints and polymers, perfumery products, biodiesel, etc. Castor cake is also used in agriculture as organic manure. Considering the increased and wider use, the price of castor seed has gone up to 6175 per quintal in July 2024. It is to be noted that India is exporting castor-seed oil of about 7000 to 8000 Crores per year.

Looking forward, the global castor oil market is expected to experience moderate growth during the forecast period (20262031) Castor oil is becoming an essential bio-based raw material which makes it ideal for various industrial applications. As a result, its demand is rising as a potential alternative to petroleum-based chemicals. On account of its distinctive chemical structure, castor oil acts as a major raw material which is used in the production of various end products such as biodiesel, polyurethane adhesives, machining oils, refrigeration lubricants, etc. This versatile nature of castor oil has been contributing towards the propelling growth of the market. As compared to other vegetable oils, castor oil is a healthier and less expensive alternative. Owing to this, food grade castor oil has gained a momentum in the food industry in the form of flavourings, mould inhibitor, food additives and packaging. The global castor oil market is being hindered by the unstable prices of castor beans which is the result of their fluctuating supply. This supply highly depends upon the weather conditions of the region and a long harvesting process of castor beans.

GLOBAL CASTOR OIL MARKET DRIVERS/CONSTRAINTS:

The global castor oil market size the global castor oil derivatives market size was USD 1,035.4 million in 2019 and is projected to reach USD 1,429.7 million by 2027 exhibiting a CAGR of 4.3% during the forecast period. Castor oil and its derivatives are multi-featured chemicals and widely used in the manufacturing of paints, lubricants, coatings, cosmetics, pharmaceuticals, and other products. Owing to their excellent chemical properties, these derivatives are gaining popularity. Leading ingredient manufacturing companies are launching castor oil-based ingredients to tap opportunities in the green chemicals market. For instance, in August 2020, BASF SE launched a Lamesoft Balance, a hydrogenated castor oil-based product to stabilize ingredients in hair and skin cleansing formulations. It helps in providing homogeneous rheology in cleansing formulations, which is often challenging to obtain. Such activities are fueling the castor oil derivatives market growth.

Some of the major restraints for the castor oil derivatives market are poor extraction techniques, lack of innovation, and higher demand for chemical-based cosmetics, and alternatives.

RISK AND CONCERNS

The Company is exposed due to disparity resulting into pressure on margin. Moreover non-availability of funds due to sickness of the unit and poor market conditions affects the quick turnaround. However, the Management is aware of the said problems & therefore has designed the system to address the same.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has an adequate system of internal control across all functions such as purchase, sale and acquisitions of fixed assets, cash & bank. Job work is carried out within the time schedule. The Company has set up an Audit Committee comprising of Non-Executive Independent Directors. The Company has also appointed the firm of Chartered Accountants to carry out Internal Audit, where one of their function is to review the Internal Control system regularly, with a view to further strengthen the same.

FINANCIAL HIGHLIHTS AND PERFORMANCE

The Financial highlights of the Company are as under ( In lacs)

Rs

HUMAN RESOURCE

Throughout the year under review, the Company continues to make strides towards improving HR Processes and Practices to create an organisation for long-term sustainability. The Company emphasises on fostering personal growth and development within an environment that promotes professionalism and excellent performance. The Company has focused on developing staff capabilities as this will enable the company to achieve higher operational standards. The Company sponsors a variety of seminars to help employees grow. Additionally, the Company also organises various training programmes to improve employees abilities.

MANPOWER:

The Management is continuously trying to see that the unit runs on job work basis as well as direct sales. Once the funds are available, it will help to enhance the utilization of its capacity and thereby create further employment.

CAUTIONARY STATEMENT

This "Management Discussion and Analysis" may contain "forward-looking statements" within the meaning of applicable securities laws and regulations if it refers to the Companys goals, plans, estimates, expectations, or predictions. Results might significantly vary from those stated or inferred. The Companys operations can have an impact due to factors like global and Indian demand and supply conditions, finished goods prices, input material availability and prices, cyclical demand and pricing in the Companys key markets, changes to governmental regulations and taxation systems, and economic developments in India and the nations where the Company conducts business, as well as other factors like litigation and labour negotiations. The Company disclaims any obligation to publicly edit, modify, or revise forward-looking statements in light of unforeseen circumstances, new information, or other factors.