Nitta Gelatin India Ltd Management Discussions.

Gelatin is the commonly used excipient for manufacturing capsules for pharmaceuticals and Nutraceuticals. The market for gelatin is estimated to grow at a CAGR of 6.6% and expected reach $ 3.6 billion by 2023. The growing demand for functional and convenience food & beverage products, increasing application in the pharmaceutical industry, and the rising demand for clean label products drive the demand for gelatin. The increasing demand for gelatin from the Nutraceutical and sports nutrition industrial segment due to its high protein content and increasing applications in the medical and biomedical industries also drives the demand for gelatin. Gelatin is the popular excipient in empty capsules and softgel capsules. 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 they may 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 & 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.

Investments by manufacturers in research and development activities and advancements in technology have led to the development and usage of other sources for producing capsules which are vegetarian in nature, and also provide seamless manufacturing procedures for softgel capsules. The market of health-conscious consumers seeking natural ‘green products is increasing, which is expected to drive the growth of the vegetarian softgel capsules segment. Some of the manufacturers are working on manufacturing capsules using non-gelatin ingredients to cater the increasing demand from the vegetarian consumer base across the globe. The global Collagen Peptides market was valued at USD 716.5 million in 2017; this is projected to grow at a CAGR of 11.6% from 2018, to reach USD 1.3 billion by 2023. 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 peptides 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. Collagen peptide has wide usage in the areas of culinary and food processing sectors. It is mixed 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. Hydrolyzed collagen 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. The growing demand for Collagen Peptide globally give gelatin manufacturers an opportunity to expand the business into more profitable segment. This has affected gelatin availability leading to increase in price. In south east Asia, the increasing demand for collagen peptide derived from fish has led to acute shortage of raw material and huge increase in raw material and collagen peptide price.


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 2019-20. Lockdown due to Covid-19 affected sales in March due to lockdown control measures although Company was given permission to operate, being a supplier to essential products.


Export of Ossein to Japan during the year 2019-20 increased by 5% compared to previous year due to more demand and foreign exchange gain. In the case of Gelatin, exports for the year stood 7% higher than the previous fiscal. The demand was stable. Collagen peptide export revenue was 10% higher than the previous year due to demand from South East Asia, higher price realization and favorable exchange rate. The raw material scarcity, created by increase in demand for fish collagen in South East Asian countries, continued for Fish Collagen Peptide; however situation eased though raw material price is still at high level and it affected the margin and market penetration. The average USD/INR exchange rate for the year 2019-20 was 70.57 as against 69.51 for the previous financial year.

Domestic Market

The domestic demand for Gelatin is showing steady growth trend as India is strengthening its identity as a pharma manufacturing hub. There was also shortage in supply of Gelatin in India. During the Financial year revenue from Gelatin domestic market grew by 17%. Domestic sale of Collagen Peptide reported more than 100% growth in revenue compared to previous financial year. Induction of new customers helped to achieve the increase in revenue. The non-availability of low cost raw material for fish collagen peptide is still continuing and poses a hurdle for market expansion. To ensure quality product, Company still depends on imported raw materials for manufacturing fish collagen peptide. The poultry industry saw slow down due various reasons like flood, feed price increase, fake news on spread of corona virus through chicken etc. It affected the demand for DiCalcium Phosphate (DCP) and prices of DCP dropped almost 10-15% in second half of the financial year 2019-20. Compared to previous year revenue from DCP grew by 42% mainly due to high volume. Last year production volume was low due to interruptions in production

Opportunities and Challenges

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. The demand for empty capsules is expected to rise substantially in the years ahead thanks largely to the overall growth and expansion of the global pharmaceuticals industry. Moreover, the greater demand for nutraceuticals will also provide the global capsules market an opportunity to expand as several food supplements and functional foods are encapsulated to make them convenient for consumption. Gelatin capsule industry consumes roughly 90-95% of all bovine bone gelatin production in India and as per the latest estimates about 750billion 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 get updated with changing industry norms.

The advancement in healthcare and medical field and changes in lifestyle have opened huge opportunity for naturally derived ingredients and gelatin. The tissue engineering and regenerative medicine demands highly purified and biocompatible gelatins, which can become a premium segment for gelatin in the future. Increase in the population of working women and dominance of nuclear double-income families, especially in urban areas, are trends that shape the changing lifestyles of many of consumers and their approach toward healthy lifestyles in emerging economies. Rise in living standards and changes in lifestyles in developing countries contribute to the development of the convenience food market. The Collagen Peptides market, therefore, is estimated to possess greater potential in newer and untapped markets of China, India, Japan, Brazil, and the Middle East. 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.

Major challenges faced by the Company are its high cost of production and limited capacity. The comparatively higher cost of Indian bones and its lower quality makes our product costly for global market. Interruption in operations due to various reasons has also affected the performance of the Company. Due to its low margin, Company has not entered into food applications of Gelatin which is the largest segment of Gelatin.


The Company has taken many initiatives for reducing carbon footprint. In its pursuit to utilize renewable source of energy the Company has installed Solar Power generation Unit of Capacity 20 KW at its Corporate Office for lighting purpose,generating 80 KWH/day. It is noteworthy that compared to 2017-18 period, CO2 emission reduced to the tune of 4309 MT in 2019-20as result of various initiatives rolled out. The major initiatives underway are :

(i) Specific Fuel reduction by Efficiency Improvement & Usage of Carbon neutral fuels

(ii) Fossil Fuel Reduction by Usage of Biogas

(iii) Raw Material Transportation by Coastal shipping instead of trucks

(iv) Specific Power reduction by Improving Efficiencies

(v) Employee Travel reduction by usage of Video Conferencing /Skype etc.


We have never seen before a near shut down of the modern global economy in the setting of an ongoing COVID-19 pandemic and restoring normalcy is going to be a massive challenge. As other 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 sectors 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 Corona virus (COVID-19) has compromised many companies in the Gelatin market 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 say17%. 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 new 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. 6.87 crores for the current year as against pre-tax loss of Rs. 3.67 crores for the previous financial year. The post-tax profit for the current year is Rs. 7.89 crores whereas it stood at a loss of Rs. 2.64 crores for 2018-19. Other comprehensive loss (net of tax) for the current year is Rs. 5.88 crores as against other comprehensive income of Rs. 1.12 crores for the previous year. The increase in other comprehensive loss during the year is attributable to the mark-to-market loss incurred on account of 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. 8.70 per share as against- Rs. 2.90 (negative) per share during the previous fiscal.


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

1. Competency Mapping: Competencies refer to the inherent traits and behaviours that enable an employee to excel in his role. Competency Mapping is an exercise to identify the gaps between the competency values of each employee vis-a-vis the competency requirements of their current role. The exercise, which was started in the previous year was completed for all employees this year.

2. Competency Gap Assessment: Following completion of Competency Mapping exercise, each employee has a personalised competency gap filling development program designed to fill his or her individual gaps. The deployment of the development program is scheduled for the year 2020-21. This is expected to augment the competency at individual level for higher levels of performance.

3. Talent Dialogue: The Company recognizes that each employees journey is different as is their individual aspirations. In order to ensure that each employees career is developed in the Company with this in mind, the Company carried out one to one discussions with each employee to get an idea of their challenges, aspirations, and apprehensions. These inputs are then built into their development plan

4. Organizational Restructuring: Following the establishment of the organizations Vision, Mission and Values as well as the Companys long term strategy being articulated better, it is imperative that the organization structure is in line with the new direction of the Company. The new organisation structure, which is expected to realign the Companys internal structure to better cater to the stakeholders interests, was approved by the top management and is set to be deployed in the financial year 2020-21.

5. Succession Plan: A succession plan is a framework put in place to ensure that critical roles in the Company would not suddenly become vacant and that there are contingency plans for dealing with emergencies apart from planning for career progression. This involves systematically identifying and developing employees in the lower level to fill the shoes of the critical roles of the organisation over time. Currently, the Company has identified the critical positions and is developing developmental plans to meet the required competency to occupy the position, as and when the requirement or the opportunity arises.

6. Reward & Recognition Schemes: Recognising and rewarding the right behaviour pushes employees to perform better as well as reinforce what the Company expects from each of them. This year, the Company redesigned and revised many of our Reward & Recognition schemes including schemes like "Best Employee Award", "Kaizen Scheme", and the "5S scheme" to capture the exceptional performance of employees of the Company and encourage positive behaviour in others.

7. Fun @ NGIL – It is important for employees of the NGIL to have fun too while at work. This initiative by the Company is intended to have enjoyable experiences while also ensuring that they approach work with a positive and relaxed attitude. This includes practices like morning yoga and exercise sessions, playing sports as a team, playing piped music during office hours, etc.

As on 31st March, 2020 the total permanent employee strength of the Company was 470.


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, including:

Key Ratio 2019-20 2018-19 Change Change Reason for Variance %

Debtors 7.20 4.38 2.82 64% Improved Collections from Debtors Turnover Ratio

Interest 1.91 0.54 1.38 257% Profitability increased due to higher Capacity Coverage utilisation compared to the Previous year and loan Ratio repayments Operating 4.00% 2.80% 1.20% 44% Profitability increased due to higher Capacity Profit Margin utilisation compared to the Previous year when the plant operations were affected due to disruptions on account of flood and non availability of water for process requirements Net Profit 2.70% -1.00% 3.70% 366% Profitability increased due to higher Capacity Margin utilisation compared to the Previous year when the plant operations were affected due to disruptions on account of flood and non availability of water for process requirements

Change in Networth

Key Ratios 2019-20 2018-19 Change Change Reason for Variance
Return on Networth 5.50% -1.80% 7.40% 398% Profitability increased due to higher Capacity utilisation compared to the Previous year when the plant operations were affected due to disruptions on account of flood and non availability of water for process requirements


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,