Nitta Gelatin India Ltd Management Discussions.

COVID-19 has shaken the global economy and has badly affected the Indian economy. Fortunately, amid all the COVID-19 induced gloom, Indias pharma exports have clocked an impressive growth of over 18% for financial year ended March 31, 2021. Exports have crossed the $24 billion mark for the first time to touch $24.44 billion. The growth came at a time when the global pharma market was reeling from negative growth of around 1-2 % in 2020 (source: Pharmexcil). In financial year 2019-20, pharma exports stood at $20.6 billion, a growth of nearly 8% over the previous fiscal. This is the second highest growth to be recorded in pharma exports post 2012-13.

At present, India is the largest provider of generic drugs globally. Indian pharma companies cater to over half of the global demand for various vaccines along with 40 percent of generic drugs demand in the US. Gelatin being a pharmaceutical excipient for making capsules, tablet binding etc., the growth in the pharmaceutical market is a boost to the gelatin demand.

Based on Grandview Researchs market assessment, the global gelatin market demand is projected to expand at a volume-based CAGR of 5.9% from 2020 to 2027. Increasing demand for convenience and functional food and beverage products, coupled with its augmented use in the pharmaceutical application, is anticipated to drive the market demand over the forecast period. The global demand for gelatin for food and pharma is continuing in its growth phase. The capsule and confectionery market is growing worldwide and gelatin is an inevitable ingredient in pharma and many foods. The market for Gelatin is projected to exceed 480,000 metric tons by 2022, driven by widening applications in food, pharma and nutritional products.

Gelatin is the popular excipient in empty capsules and softgel capsules. Capsules are the second most preferred delivery format. Capsules contributes 13% of dosage forms of the new drugs approved by FDA in 2020. The empty capsule market size is projected to grow at a CAGR of 7.4% and reach USD 2.79 billion by 2023, while, the global softgel capsules market is expected to reach $316.6 billion by 2025 at a CAGR of 5.4%. Softgels make up 25 percent of the total market for nutritional supplements and are the second most-prevalent dosage form behind tablets. They can be used to deliver oils and oil-soluble materials, such as omega-3s, vitamin E and carotenoids; and offer advantages in tolerability, ease of swallowing, assimilation and potency. Although animal gelatin-based shells are most common, vegetarian alternatives are on the rise. Great strides have been made with challenges such as oxidation, shelf stability and cost-effectiveness in the quality of gelatin.

The major factors driving the growth of this market include the growing adoption of capsule formulations, growth of the pharmaceutical market along with the increasing R&D activities and clinical trials, and advancements in capsule delivery technologies. Gelatin capsules hold major market share in empty capsule markets. Gelatin provides rapid drug release and excellent oxygen barrier and hence are preferred for manufacturing capsule shells. Based on release profile need for molecules, capsules are designed as immediate-release, sustained-release and delayed- release capsules. Immediate-release capsules are the most commonly prescribed capsules to treat a wide range of diseases and disorders. Other than pharma industry, capsules are being used by the Nutraceutical industry, Cosmetic industry, and research laboratories. The growth in pharmaceutical industry is driving the gelatin business. Europe and North America are expected to gain significant market share in revenue terms for softgel capsules market by 2026 end. Moreover, the softgel capsules market in Asian countries is projected to exhibit lucrative growth during the forecast period.

As per Grandview Market Research, the global Collagen Peptide market demand is estimated to grow at a CAGR of 5.9% from 2020 to 2027. Globally, it is estimated that currently around 65000MT Collagen Peptide being manufactured annually.

Collagen Peptide finds extensive application in the healthcare industry. The food and beverage industry is expected to be a major contributor to the rising demand for gelatin and hydrolyzed collagen. The product is an essential protein for the human body and has multiple nutritional, skin, and health benefits.

Demand for the product is expected to surge due to growing end-use applications, changing consumer preferences and lifestyles, increasing disposable income, and rising awareness regarding health and personal care in developing economies of Asia Pacific, including China, India, and South East Asia.

Collagen peptide being a nutritional supplement is used as a functional food ingredient for promoting bone and joint health, beauty from within, sports performance and healthy aging. Over the last few years, consumer awareness about healthy food products has been fueling the collagen peptide market for nutritive food products. Consumers are increasingly focusing on healthy aging, not only to increase their life expectancy but also to prevent and postpone the onset of diet and bone-related diseases.

It is blended in various drinks, shakes, smoothies, and ice creams to give an anti-inflammatory protein boost, as the ingredient has the tendency to dissolve in the cold liquid medium easily. Collagen Peptide has good organoleptic properties, taste, and is odor-free, while at the same time enabling the food product to maintain its organoleptic characteristics. It is used in various formulations due to its property to mix and blend with other food forms.


Gelatin demand in India has shown growth for pharmaceutical applications. The gelatin demand for both hard gelatin capsules and soft gelatin capsules is growing due to growth in pharmaceutical industry. Company was able to operate its gelatin plant at its full capacity during the year 2020-21. Lockdown due to COVID-19 affected sales during March-April20, due to lockdown control measures although Company was given permission to operate, being a supplier to essential products. Even as COVID-19 hits industries across the spectrum, Company has witnessed a robust demand for its Gelatin with the onset of the pandemic. The uptick was a result of the rising demand for immunity and wellness products, in which Gelatin and Collagen Peptide are key ingredients in the domestic as well as overseas markets

As the Indian gelatin industry caters to the pharmaceutical and nutraceutical sectors, there is a strong demand for Gelatin. Drop in production in some countries impacted by COVID-19 also supported demand growth. The increase in demand for many immunity-building products like nutritional supplements is one of the growth drivers for the surging demand.

During lockdown period, the sales of Collagen Peptide was affected due to drop in prescription sales, closure of fitness centers etc.


Export of Ossein to Japan during the year 2020-21 was restricted due to shortage in raw material. Export volume dropped by almost 18% while revenue drop was 2% compared to previous year due to better prices. In the case of Gelatin, exports for the year stood 43% higher than the previous fiscal. The demand was stable. Collagen Peptide export revenue was 130% higher than the previous year due to demand from Korean beauty market after launch of Health claim product, higher price realization and favorable exchange rate. Raw material scarcity was a major issue in 2019 and 2020. The average USD/INR exchange rate for the year 2020-21 was 73.75 as against 70.36 for the previous financial year.

Domestic Market

The domestic demand for Gelatin is showing a steady growth trend as India is strengthening its identity as a pharma manufacturing hub. The competition from imports was higher especially from Chinese based cheaper gelatin. We were able to maintain the sales. Domestic sale of Collagen Peptide dropped significantly due to slowdown in demand by the customers as COVID-19 lockdown and restrictions significantly impacted sales through prescription channel and fitness centers. The non-availability of competitive raw material for Fish Collagen Peptide is continuing and poses a challenge for market expansion. To ensure quality product, Company depends on imported raw materials for manufacturing Fish Collagen Peptide. The poultry industry saw slow down due to various reasons like flood, feed price increase, fake news on spread of corona virus through chicken, COVID-19 related lockdown and restriction etc. It affected the demand for DiCalcium Phosphate (DCP) in the first half of 2020-21. Recovery in the second half of 2020-21 helped the Company to catch up on revenue with a marginal deficit of 2% compared to 2019-20. However, threat from imports of MCP is still looming.


Growing Pharma Market in India

India is on its way to become the worlds pharma hub. The COVID-19 pandemic might have pushed several economies and business to the brink, but what stood strong at such a crucial period was Indias pharmaceutical industry.

As the Pharma sector grows, Gelatin demand is likely to continue hand in hand. Gelatin is the preferred excipient for Pharma industry. Gelatin capsule industry consumes roughly 90-95% of all bovine bone gelatin production in India and as per the latest estimates about 750 billion gelatin capsules, both soft and hard, were produced.

Indian pharma companies are focusing on regulated markets and such markets demand capsules with excellent quality and dissolution properties. Hence gelatin manufacturers are focusing on providing superior quality gelatin. The endeavor to make special grade of gelatin has given birth to products like Gelatin with reduced cross linking for long shelf life capsules, gelatin for capsules with faster and delayed disintegration properties, Gelatin for enteric capsules etc. Manufacturers are continuing their efforts to add value to Gelatin and try to be more relevant in line with the changing industry norms.

Expanding Indian Nutraceutical Industry

Global nutraceutical companies are keen to invest in India as pandemic opens up avenues to boost immunity in varied delivery forms. This comes after the Union government approved 100 per cent foreign direct investment (FDI) in nutraceutical manufacturing sector via the automatic route. It allows entities to market through wholesale, retail, or e-commerce platform. Further, the pandemic phase has found considerable relevance to immunity boosters and naturally derived foods. In addition, India holds promise for exploring delivery of nutraceutical formulations in varied forms of liquids, capsules, tablets, chewable gummies etc.

International companies want to access the Indian market swiftly and responsible evidence-based nutrition is at the center of all these conversations. International Trade Administration, Department of Commerce, United States Report estimates Indian Nutraceutical market to grow from the current $4 billion to $18 billion by 2025. Currently, India imports US$ 2.7 billion worth of Nutraceuticals.

Growth and establishment of Nutraceutical industry in India is likely to support growth of Collagen Peptide business. Collagen Peptide is the trending ingredient for new product developments for Healthy Ageing, Beauty From within, Womens Health, Fitness nutrition etc. The need for ingredient which has multiple health benefits and sufficient clinical evidence cannot be avoided by the industry. This opens up ample opportunities for Companys Wellnex range of products. A greater focus on health consciousness is leading to an increase in consumer spend on nutritional supplements to boost immunity and support their overall health.

Collagen protein is a blockbuster ingredient in the Nutraceutical industry. Once considered as a cheap protein, it is now gaining popularity due to its functional benefits in skincare, bone and joint health and sport nutrition. Collagen derived peptides are one of the key ingredients in the Nutraceutical formulations in these segments. Several studies are going on to explore other potential benefits of Collagen derived bioactive peptides. Considering the immense potential of Collagen Peptide several manufacturers have already scaled up their manufacturing facilities.

Raw Material Sourcing Challenges intensified after COVID-19

Although the market outlook is encouraging, the challenges in the supply chain are a major concern. Company has been hit by the shortage of bovine bones, a major raw material, due to lockdown related restrictions. The availability has declined by 30 percent, which in turn resulted in more than 30% increase in its cost. But the Company ensured that the Gelatin plant is operated to its full capacity, even at the cost of compromising on the sales of some of the other product lines so that the availability of medicines in the form of capsules to end consumers is not adversely affected.

Post lockdown, the tourism and hotel industry were badly affected which reduced domestic meat consumption and slaughtering. Meat export also dropped due to lockdown, shortage of manpower and transportation bottlenecks during the lock down. These factors affect the raw material availability.

Company is exploring other possible ways, like import of bones, alternate raw materials like Hide etc., to ensure raw material availability and sustained operation. As Hide demand for leather fashion and car seat industry is dwindling, suppliers are keen to divert them for usage in gelatin industry. Since this is a cost effective raw material compared to bones, its development is of high priority for the Company.


The activities towards Carbon foot print reduction done during year 2020-21 are as under :

1. Ossein Division-

a. Installed conventional biogas generation system reducing furnace oil consumption.

b. Specific Power reduced by 50 units/MT of CB form 2019-20 through improved motor efficiencies, installing LED lights etc.

2. Gelatin Division-

a. Specific power consumption reduced by 100 units/ MT of Gelatin from 2019-20 through installation of high efficiency motors, improved consumption efficiency, installation of LED lights etc.

3. Online meetings - Inter division travels by employees for meetings avoided by usage of digital media for conducting online meetings.

Even though COVID-19 lock downs has impacted the availability of carbon neutral fuels in the initial periods of 2020-21, Company could reduce 2149 MT of CO2 generation compared to 2017-18 levels from Fossil Fuel reduction.

For 2021-22 major initiatives are further reduction in specific fuel & Power consumption by means of efficiency improvement, improved Boiler Steam generation efficiencies at GD, etc.


We have never seen before a near shut down of the modern global economy in the setting of an ongoing pandemic and restoring normalcy is going to be a massive challenge. As geographies experience continued COVID-19 case growth, it is likely that restrictions will be imposed on movement of men and materials, to attempt to stop or slow the progression of the disease. This will almost certainly drive a sharp reduction in demand for goods and services, which in turn will lower economic growth this year. Demand recovery will depend on a slowing of the spread of the disease. Demand may also return if the diseases fatality ratio becomes lower than what we are currently seeing. We may in our sector see delayed demand. In supplements industry, Collagen peptide customers may put off discretionary spending because of the pandemic but will purchase such items later or look for less expensive products, once the fear subsides and confidence returns. In addition to facing consumer-demand headwinds, Company will need to navigate supply-chain challenges, raw material availability and ensuring continuous operations.

The Board has reasonable expectation that the Company will be able to continue the operation and meets its liabilities as they fall due over the period of assessment.

The novel Coronavirus (COVID-19) has compromised many companies over their production activities due to lockdown. Gelatin being a pharmaceutical excipient comes under essential goods and hence operations were allowed by government. However, limited supporting factors like raw material availability, manpower, transportation and limited operations in the supply chain are expected to impact the business.

Although various cost control measures have yielded benefits, the same was neutralised by regular increase in raw material cost. During the course of the financial year, crushed bone cost increased significantly by 27%. At the same time quality of raw material is deteriorating adding to increase in processing cost. The Company is putting efforts to minimize the impact of raw material price escalation through various business excellence initiatives under "PRISM" and cost reduction initiatives. Such initiatives are helping the Company to stay competitive in the industry.

The demand for Gelatin, Collagen Peptide and Di Calcium Phosphate is likely to grow at an attractive rate. Companys focus is to ensure continuity in operation in the next financial year to meet the growing demand. Company is acting on sustainability of operations through various operational excellence initiatives. The Company is striving towards realizing its vision of emerging as among the worlds best gelatin manufacturing facilities through the implementation of a systematic operational excellence initiative. Cost reduction activities are being strengthened to become a cost competitive bone gelatin manufacturer in the future.

The Company is making efforts to commercialize value added and new products to pave the path for faster growth. Considering the demand for Gelatin & Collagen Peptide, the Company is also evaluating the scope of expanding its production capacities for Gelatin and Collagen Peptide.


The financial results of operations of your Company for the year under review are detailed under the caption performance forming part of the Directors Report. As per the same, the Companys operations have resulted in a pre-tax profit of Rs. 24.33 Crores for the current year as against pre-tax profit of Rs. 6.87 Crores for the previous financial year. The post-tax profit for the current year is Rs. 17.90 Crores as against post tax of Rs. 7.89 Crores for 2019-20. Other comprehensive income (net of tax) for the current year is Rs. 4.29 Crores as against other comprehensive loss of Rs. 5.88 Crores for the previous year. The increase in other comprehensive income during the year is attributable to the mark-to-market profits on account of forward foreign exchange contracts for export receivables in USD. Last year there was a loss on account of the sharp weakening of the Rupee against USD in the month of March 2020 following the COVID-19 pandemic.

During the year, the Company has continued its efforts to optimize financial costs through availing loans in foreign currency thereby resulting in substantial reduction of financial costs.

The basic and diluted earnings per share during the year was profit of Rs. 19.72.per share as against - Rs. 8.70 per share during the previous fiscal year.


The Company undertook the following HR initiatives during the financial year:-

1. Competency Development Programme: Further to the competency assessments that were conducted, the Company kick-started a few initiatives to bridge the gaps identified in the competencies of employees for handling higher responsibilities through

a. Online programmes: The Company engaged Loyola Institute of Business Administration to deliver online classroom training for its Managers. Twelve training modules that cater to the gaps identified in 15 competencies have been rolled out across all divisions, targeting 64 employees. The programme prescribes a blended learning approach involving self-learning, interactive classroom sessions, summative assessment tools such as quizzes and practical evaluation sessions in the form of assignments.

b. E-learning courses: The Company prescribed e-learning modules from Udemy to help employees utilise the time available during Work-from- Home created by lockdowns following COVID-19 pandemic and to enhance their learning through new methods. Courses prescribed include Process Capability Analysis, Lean Leadership, Lean Culture & Lean Management, Strategy Unplugged and Mind Mapping.

c. Presentation Skills Assessment & Training: The Company conducted an assessment of the Presentation Skills of the Senior Executives at Reva Division and kick-started a blended learning training programme for the employees using online courses and coaching.

2. Skill Assessment and Development for Workmen: The Company conducted skill assessment of workers belonging to all disciplines in the following categories: Job Knowledge Danger Identification Abnormality Identification and 5S Awareness.

In-house training modules have been developed and are being rolled out for those workmen who have gaps in the skills mentioned.

3. Kirkpatrick Evaluation Method: The Company has rolled out the Kirkpatrick Evaluation Methodology to assess the effectiveness of training programmes. The method assesses the impact that each programme has had on the employees at three phases and ensures conduct of due diligence prior to the conduct of each programme.

4. Mentorship Programme: The Company rolled out a programme to help future leaders connect with the senior executives through mentorship. Mentors and mentees meet informally to help the transfer knowledge across generations and to help professional development of the mentees through support and guidance provided by the mentors.

5. Health & Wellness Programme: The following programmes were conducted with the objective of helping employees to enhance their health, wellness and to promote better engagement among employees.

a. Yoga and Holistic Diet: Online Yoga classes were conducted to teach employees basic yoga postures and to guide them through better dietary habits by engaging Dr. Rethish Kumar, a renowned Yoga practitioner who is also specialized in lifestyle diseases and dietary habits. An average of 37 people participated in each session and the programme was extended to facilitate the participation of employees family members also.

b. Badminton Courts: The Company approved construction of badminton courts at both Gelatin and Ossein Divisions for employees to aid their fitness and recreation. Construction of the court at Ossein Division has been completed and is in progress at Gelatin Division.

c. COVID-19 Awareness Sessions: The Company conducted online sessions by engaging reputed experts to spread awareness among employees about COVID-19 pandemic and to help employees and families protect themselves better against the disease.

6. Vision-Mission-Values: The Company conducted programmes to help the employees imbibe the Vision, Mission and Values of the organisation.

a. Instructor-led Online Sessions: Online sessions were conducted for management staff using MS Teams to spread awareness about Vision, Mission and Values.

b. Competitions: Competitions are being conducted to help employees think more about the influence of each value in their personal and professional lives and to engage them better in the VMV programme.

7. Public Relations

a. Social Media Outreach: The Company has formed a Social Media Team that manages and spreads online content that promote a positive image of the organisation within both among the employees and the community outside. Channels have been created on YouTube, Facebook and Twitter and content that portray Company in a positive light, which celebrate the successes of its employees, their family members and well-wishers, are regularly shared on the same.

b. COVID-19 Awareness Sessions: Similar to the sessions conducted for the employees, the Company also conducted awareness sessions for the public and for local Panchayath leaders to help aid in the successful handling of this pandemic.

c. Yoga sessions: In order to promote a healthier lifestyle among the youth, school students from local schools and their parents as well as the general public were given yoga training by Dr. Rethish Kumar.

d. Organic Farming promotion: In order to promote organic farming practices in the locality, the Company has included over 50 farmers from around the Company premises in their subsidised bone- meal distribution program.

8. Coaching programme: The Company has engaged an organisation called We3Coaches to deliver coaching programme to one of its senior executives as a pilot session. If found successful, this programme shall be rolled out to more senior executives.

9. Talent Dialogue: The Company had conducted Talent Dialogue sessions for all management staff in the previous year. This has been extended to the workmen this year and the same is in progress.


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

Key Ratios with a variance of more than 25 % compared to the previous year

Key Ratio 2020-21 2019-20 Change Change % Reason for Variance
Interest Coverage Ratio 2.92 1.91 1.01 52% Increase in Profit due to higher realisation of Sales and favourable interest rates have increased the profitability and interest coverage ratios for the year.
Operating Profit Margin 7.0% 4.0% 3.0% 75% Increase in Profit due to higher realisation of Sales and favourable interest rates have increased the profit margin for the year.
Net Profit Margin 5.1% 2.7% 2.4% 88% Increase in Profit due to higher realisation of Sales and favourable interest rates have increased the profit margin for the year.
Return on Networth 11.0% 5.5% 5.5% 99% Increase in Profit due to higher realisation of Sales and favourable interest rates have increased the profit margin for the year.


The Management Discussion and Analysis Report containing your Companys objectives, projections, estimates and expectation may constitute certain statements which are forward looking within the meaning of the applicable Laws and Regulations. Actual results may differ materially from those expressed or implied in the statements. Your Companys operations may inter-alia be affected by the supply and demand situation, input price and availability, changes in Government Regulations, Tax Laws, foreign exchange rate fluctuations and other factors. The Company cannot guarantee the accuracy of assumptions and perceived performance of the Company for the future.

The Management believes that the strategic direction of your Company is sound and will fulfill the Shareholders expectations, both short term and long term.

For and on behalf of the Board of Directors,

07.05.2021 (DIN:05272476)