National Plastic Technologies Ltd Management Discussions

The Management Discussion and Analysis Report sets out developments in the business environment and the Companys performance. The analysis supplements the Boards Report, which forms part of this Annual Report.

Economy Overview

The Indian Economy has grown by 8.20% in fy 2023-24 and registered one of the best growth rates in recent years despite challenging external environment. India is enjoying very stable macro economic conditions which enables us to grow at very healthy rates over the next few years. Various sectors of the economy have also registered a healthy growth last year as a result of increased GDP growth.

Plastics Industry Scenario and Development

The plastics industry in India has become one of the prominent Industry in the nations economy, containing of over 30,000 companies & employing more than 4 Mn people. India is also one of the worlds best exporters of plastics products. The country produces & exports a range of raw materials, laminates, electronic equipment, medical ware & consumer goods.

Indian plastics industry also delivers plastic materials to many other industries such as automotive, consumer durables, packaging & electronics. Over the past few decades, the demand for Plastic has increased by over 8 percent yearly. A similar growth rate is anticipated to continue for the foreseeable future, as the per capita consumption of plastics will certainly increase due to the use of plastic in more & more segments, opening new markets & substituting traditional materials. Meanwhile, major investments are also estimated in the Indian plastics industry during the next few years, owing to its rapidly expanding market size. The plastic industry in India is one of the fastest rising segments which is estimated to rise further owing to increasing demand for inexpensive packaging.

India exports plastic to more than 200 countries in the world. The top five consumer and houseware product importing countries are the USA, Germany Japan, the UK, and France. India largely exports plastic and related products to the USA, China, the UAE, the UK, Germany, Italy, Bangladesh, etc. 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. 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 crore (US$ 5 million) per project.

The Indian Consumer Durable Industry

The consumer durable industry in India is one of the major growth industry. By 2025, India will be the fifth-largest consumer durables market. The demand for a wide range of consumer durable goods is growing as a result of the ongoing increase in disposable income and technological innovation in India. This in turn is fueling fierce competition among the various consumer durable brands that are available across the country. India is viewed by multinational organizations as one of the primary markets from which future growth is likely to originate. With robust growth, India aims to achieve electronics manufacturing worth US$ 300 billion and electronics exports of US$ 120 billion by Fy26.

The Indian appliances and consumer electronics industry stood at US$ 9.84 billion in 2021 and is expected to more than double to reach Rs. 1.48 lakh crore (US$ 21.18 billion) by 2025. The consumer durables industry in 2024 is poised to thrive by staying premium and sustainable. Industry leaders and experts emphasise that premium, feature-led products, incorporating cutting-edge technology and sustainability, will be the key growth drivers. Consumers are increasingly drawn to products that are manufactured locally, aligning with the Make in India initiative. Brands are responding to this demand in a competitive industry, working towards delivering products that not only meet but exceed customer expectations.

The Indian Auto Component Industry

The auto component industry is expected to grow to $ 200 billion by 2026. With a 20.1% contribution to the manufacturing GDP, the automotive sector is a top driver of macroeconomic growth and technological development in the country. India has become the fastest-growing economy in the world in recent years. This fast growth, coupled with rising incomes, a boost in infrastructure spending and increased manufacturing incentives, has accelerated the automobile industry. The two-wheeler segment dominated the automobile industry because of the Indian middle class, with automobile sales standing at 23.85 million units in FY24. Significant demand for automobiles also led to the emergence of more original equipment and auto components manufacturers. As a result, India developed expertise in automobiles and auto components, which helped boost international demand for Indian automobiles and auto components. The Indian automobile industry has a considerable impact on the auto component industry. Indias auto component industry is an important sector driving macroeconomic growth and employment. The industry comprises players of all sizes, from large corporations to micro entities, spread across clusters throughout the country. The auto components industry accounted for 2.3% of Indias GDP and provided direct employment to more than 1.5 million people. By 2026, the automobile component sector will contribute 5-7% of Indias GDP.

Company Overview & State of Affairs

During the year 2023-24, the Company has posted a very healthy revenue and profit growth despite several challenges like rising interest rates, competition, volatility in commodity prices, etc. The Company expects growth to continue over the next few years. Usage of plastic products in Automotive and Consumer Durable industries is rising due to its advantages in designing, cost reduction, and weight reduction. Further, the Industry itself is growing at a good pace thus creating opportunities for the Company. The Company is predominantly into manufacture of products for Automotive and Consumer Durable industries and is already a major supplier of plastic products to the above mentioned industries. Also, the rising adoption of EVs presents a great opportunity for the Company to increase its volume and provide value added products to the EV manufacturers especially, the two wheeler manufacturers. The Company has already started supplies for EVs to two wheeler manufacturers and expects to grow in this segment over the next few years. The Company is well positioned to capitalize on the opportunities over the next few years.

Opportunities and Threats

While increasing demand is an opportunity for the Industry, increased competition in the processing sector, volatility on commodity prices, increasing costs, change in Government regulations and fragmented nature of the plastic processing units are a threat to the Company. However, with multiple barriers to entry, the company, being an organized player, is well placed to outpace competition.

Business Outlook

Current low per capita consumption level of plastic products as compared to developed countries suggests that India offers a huge opportunity over long term. Company has ample opportunities to grow by producing more products to meet the demand and achieve growth.

Discussion on financial performance, Internal control systems and their adequacy, risks and concerns and developments in Human resources/ Industrial Relations are given elsewhere and forms part of the Directors Report.

Key Financial Ratios:

Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor :

Particulars of Ratio	F.Y. 2022-23	F.Y. 2023-24	Change in %	Reason (if more than 25% change)
Debtors Turnover Ratio	6.61 times	6.24 times	-6%	Not Applicable The improvement is due to effective utilization of inventory.
Inventory Turnover Ratio	5.32 times	6.87 times	29%
Interest Coverage Ratio	2.71 times	3.20 times	18%	Not Applicable
Current Ratio	1.05 times	0.99 times	-6%	Not Applicable
Debt Equity Ratio	1.44 times	1.35 times	-6%	Not Applicable
Operating Profit Margin %	8.37%	8.51%	2%	Not Applicable
Net Profit Margin %	2.93%	3.13%	7%	Not Applicable

Details of any change in Return on Net Worth as compared to the immediately previous financial year.

Particulars	F.Y. 2022-23	F.Y. 2023-24
Net Worth
Share Capital (A)	607.83	607.83
Reserve & Surplus (B)	2928.87	3700.57
Net Worth (A+B)	3536.70	4308.40
Profit after Tax	615.38	841.65
Return on Net Worth	17.40%	19.54%

Note: Due to higher sales and increased profitability, the Return on net worth has improved.

Cautionary Statement

Statement made herein describing the Companys expectations or projections are “Forward looking statements”. The actual results may differ materially from those expected or forecast depending on market conditions, input costs, economic development, Government policies and other external factors.