National Plastic Industries Ltd Management Discussions

OVERVIEW:

Despite challenges posed by adverse weather conditions and a weakening international outlook, the Indian economy demonstrated resilience, maintaining healthy macroeconomic fundamentals. Real GDP growth, although slower at 6.3% in FY 2023-24 and projected at 6.1% in FY 2024-25, remains robust. The surge in services exports and sustained public investment continue to be key drivers of economic activity. Additionally, inflation is on a declining trajectory, enhancing purchasing power and contributing to economic stability. Looking ahead, productivity gains from policy reforms, along with improved global conditions, are expected to strengthen economic activity, with a projected real GDP growth of 6.5% in FY 2025-26. The governments commitment to fiscal consolidation remains steadfast, with efforts to reduce the fiscal deficit below 4.5% by 2025-26. Notably, an 11.1% increase in capital expenditure outlay for the next fiscal year, amounting to Rs. 11,11,111 crores, underscores the emphasis on driving economic growth and employment creation. Furthermore, initiatives such as interest-free loans to states aimed at boosting capital expenditures highlight the governments proactive approach to stimulate economic momentum. Macroeconomic stability, evidenced by significant moderation in the current account deficit and a comfortable foreign exchange reserves buffer, has contributed to stability in the Indian rupee. Moreover, proactive supply-side initiatives by the government have helped alleviate inflationary pressures. Fiscal prudence remains a priority, with efforts to reduce the fiscal deficit to 5.1% of GDP in FY 2024-25, laying the groundwork for achieving fiscal consolidation targets in the coming years.

(Source: OECD.org, pib.gov.in)

INDIAN PLASTICS INDUSTRY STRUCTURE AND DEVELOPMENTS:

India, the worlds fifth largest economy is witnessing a remarkable transformation in its job landscape fuelled by a burgeoning manufacturing sector. Indias plastic trade (imports + exports) itself has witnessed a huge growth in the past ten years, rising from USD 19 billion in 2013-14 to USD 37 billion in FY 2022-23. Indias plastics exports have contributed to this growth witnessing a CAGR of 4.8%. In FY 2022-23, Indias plastics stood at USD 12 billion with potential to reach USD 25 billion by 2027. With import substitution pegged at Rs 37,500 crores and vast emerging opportunities, this implies not only immense potential for employment generation, but greater entrepreneurship opportunities. The Indian plastics industry presently comprises over 50,000 processors employing over five million people, and its estimated worth exceeds USD 40 billion. From 2023 to 2029, the industry is anticipated to grow at a CAGR of 6.6%, resulting in job opportunities. Added to this are a growing number of ancillary industries including machinery, technology, exporters, importers, recyclers and more who make up for an integral part of the entire value chain. For the youth of India, this growing and dynamic sector opens up millions of job opportunities across various professional domains, ranging from manufacturing and engineering to sales and marketing. Opportunities abound for diverse skill sets and educational backgrounds, offering a wide spectrum of career advancement options, ranging from entry-level positions to leadership roles. In December 2023, Indias plastic exports reached a noteworthy USD 1,115 million, marking a robust 12.7% increase compared to the previous year. This momentum continued into January 2024, with exports totalling USD 916 million, reflecting a commendable 5.0% growth year-on-year. These figures underscore Indias growing significance as a key player in the global plastics market.

COMPANY OVERVIEW:

“National” a brand deals in various ranges of products that can suit all applications and different kinds of budgets. Consumers prefer National Moulded Furniture for its quality, colour, finishing and latest/ modular designs. “National Plastics Industries Ltd.” with its constant Endeavour for innovation will continue to introduce many new and innovative products both for domestic as well as International markets and thereby will fulfil its commitment to the society as a whole by offering premium quality products at the most affordable prices.

FINANCIAL REVIEW:

The gross turnover of the Company has decreased to Rs. 98.38 Crore from Rs. 112 Crore in last year marking a reduction of approximately 12.16%. This decline in gross turnover is primarily attributable to a more than 50% decrease in our cooler business and a 24% reduction in export sales. Your company has reported a lower profit before tax of Rs. 5.61 crore, down from Rs. 6.23 crore in the previous year. Additionally, the net profit after tax has decreased to Rs. 1.62 crore, compared to Rs. 4.34 crore in the previous year.

CHANGES IN KEY FINANCIAL RATIOS:

Pursuant to provisions of Regulation 34(3) of SEBI (LODR) Regulations 2015 read with Schedule V Part B(i) details of the change in key financial ratios is given hereunder:

BUSINESS OUTLOOK

The company has kept its commitment to improve and increase the overall business growth and added varieties of new products to supply industry and government. The Company is also making hard effort to increase export business in near future. The Company is in the process to manufacturing new range of plastic furnitures with modern design and best quality in line with consumer preferences and useful utilities in reasonable price. Driven by a spirit of continuous innovation, National Plastics Industries Ltd. is committed to bringing the latest and most advanced plastic products to domestic and international markets. We believe in offering premium quality at the most competitive prices, fulfilling our commitment to serve society as a whole.

OPPORTUNITIES:

The Company is focussing to add new products for industrial sector and determined to emerge as a major player with its quality products and good corporate governance. The Plastic Export Promotion Council (PLEXCONCIL) has set a target to increase the plastic exports of the country to US$ 25 billion by 2027. There are multiple plastic parks that are being set up in the country in a phased manner that will help improve the plastic manufacturing outputs of the country creating opportunities for the company to develop Industrial plastic products. Under the plastic park schemes, the Government of India provides funds of up to 50% of the project costs or a ceiling cost of Rs. 40 crores (US$ 5 million) per project. The company is focusing to imbibe these factors in its business.

THREAT:

The company are subject to rising rules and regulations that govern the production, disposal, and clean-up of hazardous chemicals, as plastic products usage contributes to environmental pollution. In addition, Product lifecycle has decreased from years to months, affecting the entire supply chain of plastic goods. Any major upward movement in the Crude Prices could change the inflationary scenario impacting on input prices and the margin of the Company.

RISK AND CONCERNS:

The company is exposed to several potential risks like technological changes, political risks, product distribution both from internal and external sources but the same can be anticipated and curbed by addressing them in its early stages for a long-term corporate success. The Company is of the opinion that recycling & reuse of plastics are expected to increase in our Industry, thus effecting the development innovation and sustainability too.

The company maintains an inbuilt mechanism to track any suspicious events and frauds in the business. In addition, the Board and the Audit Committee of the Company periodically reviews the risk management procedures and takes various preventive measures to mitigate the risk factors.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Board has adopted policies and procedures for ensuring that all transactions are authorized, recorded and correctly reported, all assets are safeguarded and protected against loss from unauthorized use or disposition, reducing wastages and maintenance of proper accounting records for ensuring accuracy and reliability of its financial information. The Board has constituted an Audit Committee which meets periodically to review the financial performance and the accuracy of financial records and accordingly appropriate actions are taken by the management.

INDUSTRIAL RELATIONS AND HUMAN RESOURCE

Industrial relations continued to be harmonious both at manufacturing unit as well as in branches.

Our employees are our greatest asset and we are committed to attract, retain and recognize talent. We encourage fresh minds and new ideas. The Company constantly facilitates and encourages its employees at all levels to enhance their knowledge and skills and continuously seeks to inculcate within its employees, The Company inculcates a strong sense of business ethics and social responsibility.

The Company endeavors to create a challenging and favorable work environment that encourages entrepreneurial behavior, innovation and the drive towards business excellence.

POLLUTION AND ENVIRONMENT CONTROL:

Pollution control is an essential task and responsibility in the manufacturing industry. The management is assured that all the plants of the Company are under appropriate Waste Management Systems and operate in harmony with the surrounding ecosystem. Adequate pollution control amenities are established at all the plants as per guidelines of pollution control authority and as per set norms.

For safety, the work force is provided with appropriate safety equipment and necessary training from time to time.

CAUTIONARY STATEMENT:

The Management Discussion and Analysis Statements made above are on the basis of the available data as well as certain assumptions as to the economic conditions, various factors affecting raw material prices and selling prices, trend and consumer demand and preferences, governing and applicable laws and other economical and political factors. The management cannot guarantee the accuracy of the assumptions and projected performance of the Company in future. It is therefore, cautioned that the actual results may differ from those expressed or implied therein.