Nilkamal Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENT OPPORTUNITIES, THREATS, RISKS, CONCERNS AND OUTLOOK: -

India remained resilient & the fastest growing major economy in the world in 2023-24. its real GDP growth is pegged at a high rate of 7.6 per cent. The growth is bolstered by steady domestic demand, an uptick in the manufacturing and service sectors and the government and private sector focus on infrastructure spending.

Going forward, Indias economic outlook remains cautiously optimistic with RBI estimating it to be 7 per cent for 202425. Experts believe this growth will be based on sustained government capex push, healthy corporate performance, softness in global commodity prices, the prospect of new private capex and rising domestic demand.

China +1 (Read India) has been the buzzword among multinationals. The large population, favourable demographics, healthy foreign exchange reserves, large government spending on infrastructure, controlled inflation, strong GST collection and stable political scenario is a perfect recipe for robust economic growth for decades.

• Overview

The Company achieved 3,134 Crores revenue in the year under review. The Material Handling & Furniture Division grew by 2 % & 8 % respectively. The Company processed & sold more than 1,25,000 MT in last financial year.

Nilkamal is extremely well positioned in its B2B Material Handling Business & B2C Furniture Business. With the large push to Make in India & growing private capex, Nilkamal shall reap growth in its Material Handling Solutions Business from the all-round growth in the manufacturing industry at large. The Division is in a sweet spot with the largest market share, largest range of solutions and strong presence across India. In Q3, the Company shall commence production and enter the fast-growing Rigid Packaging sector from existing Factories at Pondicherry, Barjora & Silvassa in Phase 1. The Material Handling Division already has working relationship with most prospective customers. Additional Injection Moulding Machines shall be installed in the current year to address the growing requirement of Crates & Pallets.

We all agree that "Home isnt a place, its a feeling."

Nilkamal Furniture Division is in process of re-grouping into Nilkamal Moulded, Nilkamal Homes (Nilkamal Furniture Ideas & @home), Nilkamal EDGE (B2B Furniture for Education, Healthcare & Offices), Nilkamal ECOM and Nilkamal Sleep (Mattress & Foam). These changes shall provide focus for growth for each of these verticals.

The Brand Nilkamal is well positioned as an affordable premium & value for money, brand. The Furniture Business of Nilkamal expects to harvest this position by making deeper inroads with large number of Nilkamal Homes FOFO Stores selling Nilkamal Ready Furniture (Beds, Wardrobe, Sofas etc.), value added Moulded Furniture and Nilkamal Sleep Solutions like Mattress, Pillows etc. The Moulded Furniture vertical shall focus on introduction & proper placement of value-added Moulded Furniture. Nilkamal EDGE shall focus on Education Institute chains for their requirement of Furniture from Nursery to Post Graduation. Corporates for their Office Furniture needs across India & Hospital Chains for entire range of Hospital Furniture from ICU Beds, Trolleys, Stretchers, Wheel Chairs, Storage, Waiting Area, Executive Chairs etc.

For the next few years, we shall be investing in branding Nilkamal for the next generation and emphasizing, Nilkamal is not just Plastics.

To power this future growth, Nilkamal has acquired 83 Acres of land near Hosur. The Company shall complete the first phase of construction at this greenfield site by Q3 of FY 2024-25.

The trial production of state-of-the-art continuous slab stock Polyurethane Foam line shall take place in FY 2024-25. The Foam shall be your Companys backward integration into mattresses & Sofas. We shall foray into manufacture technical foam for use in automotive, acoustics, footwear, leatherette backing and filter applications.

At the same site, highly automated Panel processing line with the capacity of 700K boards will be installed in current financial year.

Sustainability:

We consumed over 13.5 million Units of Electricity from Renewable energy of Wind Power & Solar Power.

The Company received Greenco Award from CII, acknowledging the Companys environmental friendliness in their operations covering a wide spectrum of parameters such as Resource conservation, Promoting Renewable resources, Green building etc. in entire Product Life Cycle.

We have crossed the target of 10 trees per day by planting over 4,000 trees within and around our Factories. Educative & Fun Picnics were organised around the Tree Plantation Drive, for the family & children of the employees. Involving the children & teaching the importance of sustainability was very well appreciated by the families. This year we have target to cross planting over 5,000 trees.

To reduce packaging scrap Sales, we are recycling and consuming scrap generated from our Raw Material bags. This year we have target to cross 100 Tonnes of recycling.

Carton boxes & Air bubble film consumption were optimized reducing waste.

Plastic Division

For the Financial Year 2023-24 the Plastic Business exhibited a volume & value growth of 3 %. It has achieved total turnover of 2,941 Cr. as compared to 2,852 Cr. in the previous year.

E-commerce,

Nilkamal through its robust Direct-to-Consumer (D2C) website and strategic presence across various online marketplaces is fostering unparalleled customer experiences while cementing trust in its name.

During fiscal year 23-24, Nilkamal Online achieved sale of 144.18 Cr., 22% increase in sales compared to the previous year. A key driver of this success is our expanding delivery and installation service provider network, now covering 16,000 PINCODES across India.

Nilkamal Online started personalizing customer journeys by implementing automated personalization engines on its websites. Nilkamal Online uses artificial intelligence (AI) to improve marketing RoAS, content generation, and multiple use cases to deliver superior value. The company is laying the groundwork for a genuinely sustainable digital business model.

Retail

In the coming year, the Company plans to restructure and rebrand retail vertical by merging stores of the Lifestyle Furniture division @Home and Nilkamal Furniture Ideas into one identity encompassing over 100 locations.

The objective is to optimize the entire retail synergy to improve operational efficiency through a single brand identity and propel focused growth. The new brand will continue to expand through large format stores of 8,000 to 10,000 sqft furniture showrooms in all major cities through the capex-light franchisee route.

The new brand will offer a complete range of thoughtfully designed home furniture, mattresses, home office, and home decor merchandise. The stores are positioned to be a single-stop destination, showcasing the entire Nilkamal range of products, which will help the brand position as a complete furniture solution brand.

Mattress

Throughout the fiscal year, mattress category has seen significant progress. Weve onboarded 400 new channel partners, and expanded team by hiring over 150 industry professionals. Our rebranding to "Nilkamal Sleep" and celebrity endorsement reflects commitment to innovation and growth. Weve revamped our product assortment to cater to diverse consumer needs, introducing innovations like Bounce Foam.

We are happy to announce investment in PU foam plant which has been especially designed and developed by leading European company. This will empower in providing a wide and customized range of flexible PU foam solutions to customers and for captive consumption in mattress and furniture.

Our Strategically located manufacturing plants in Hosur, Bhiwandi, Gurgaon, and Barjora ensure easy servicing to four different zones of the country, while 30 depots and 4 regional warehouses guarantee timely reach to our consumers.

BubbleGUARD

Nilkamal BubbleGUARD continued its performance by reporting annual growth greater than 30% for the 3^rd year in a row. Driven by continuing demand for sustainable and cost-saving packaging, the category is poised to grow further in FY 25.

This year, our investment in higher production capacity will lead to improved flexibility and reduced lead time for customers. The crowded competitive landscape creates pricing challenges but we continue to differentiate by being the only fully vertically integrated solutions provider which is a key differentiator.

Material Handling Business

Financial Year 2023-2024 for Material Handling (excluding Racking) business closed on a strong note of growth, with volume & value growth of 16% & 7% respectively.

Nilkamal Limiteds Material Handling Division specializes in providing comprehensive solutions for factories and warehouses. Our solutions help in ensuring the efficient movement, storage, and protection of goods. Our wide range of products includes bins, crates, pallets, material handling equipments, shelving & racking, insulated boxes and waste management products positioning us as a "One Stop Shop for material handling solutions."

In the past financial year, the company witnessed a substantial surge in demand for plastics range of material handling products, resulting in a remarkable 16% rise in volume. However, despite these achievements, the steep reduction in prices of plastic raw material impacted revenue growth

Food & beverages, logistics & retail, automobiles, industrial, construction, electronics & engineering, pharmaceutical, chemicals, hospitality and waste management end-user industries were the major contributors to our revenue.

The steel racking business of the company saw a volume reduction of 22%. Further, sharp reduction of steel raw material prices, led to decline in revenue. Also, many e-commerce as well as logistics companies deferred their purchase, impacting overall volumes in racking.

Our hospitality solutions venture Cambro Nilkamal Private Ltd. grew by 22% in revenue. We are in process of widening our portfolio, to establish ourselves as a one stop shop solutions for the commercial food service industry.

Our efficient and capable professionals remain dedicated to serving our ever-expanding customer base. In the current year alone, the company processed more than 100,000 unique orders by serving 28,000+ customers out of which 33% customers were new.

Rigid Plastic packaging

Our material handling products such as bins, pallets, crates are considered as a secondary reusable packaging for industrial customers to store and move their raw material as well as finished goods.

With the introduction of rigid packaging, we are positioned strongly as a complete solution provider in material handling and packaging space.

This new business has synergy with our existing business in terms of materials, manufacturing processes, and customer base. This entry will help us to enter into a large and growing market for packaging. With the use of PCR resins in our product offerings and solutions, we would help the customers/ brand to comply with their EPR regulations. This will support the customers to have more sustainable and environmentally friendly packaging.

Future prospects:

We believe our material handling business (both plastics and metal) will grow substantially this year owing to the last years buoyant volume growth and positive tailwinds from the manufacturing and logistics industries.

Financial Review

There is no significant change i.e. change of 25%or more to the immediately previous financial year in key financial Ratio.

RISK MANAGMENT

The Company recognizes that risk is an integral part of business and is committed to managing the risks in a proactive and efficient manner. The Company periodically assesses risks in the internal and external environment, along with the cost of treating risks and incorporates risk treatment plans in its strategy, business and operational plans across all its location. Risk evaluation is driven by Financial Objective, Overall Strategy, Companies Operations, Statutory Compliance and Reporting Objectives. This ensures business continuity and value creation on sustainable basis.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company have placed internal financial controls in the form of procedures and policies. The Companys internal control systems are commensurate with the nature of its business and the size and complexity of its operations. To ensure that all assets are safeguarded and protected against loss from unauthorized use or disposal and that transactions are authorized, recorded, and reported correctly, the placed internal controls are evaluated by the internal audit department, external professional agencies as per the approved audit plan and periodical review by the management. The system is designed to ensure that financial and other records are reliable for preparing financial information and other data and for maintaining accountability of assets. Based on the reports of internal audit department and external professional agencies, process owners undertake requisite corrective action in their respective areas. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board.

Human Resources and Industrial Relations

Your Companys industrial relations continued to be harmonious during the year under review. The employee strength of your Company is currently 3,636.

Cautionary Statement

The Management Discussions and Analysis Statement made above are on the basis of available data as well as certain assumptions as to the economic conditions, various factors affecting raw material prices, selling prices, trend and consumer demand and preference, governing and applicable laws and other economic 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 and implied therein.