MANAGEMENT DISCUSSION AND ANALYSIS
GLOBAL CHEMICAL SCENARIO
The overall global economy was affected in the recent past due to COVID-19 pandemic and
the economic output is still expected to remain below pre-pandemic operations. Though the
global recovery has been showing some sign of revival, it is still uncertain as to how the
revival will happen. The recovery paths have been different across different countries as
well as across sectors. The reasons for this uncertainty depend on many factors the main
among them is the access to vaccines for the citizens in different countries. Various
governments in developed as well as emerging economies have offered different stimulus
packages but the impact of the same is yet to be seen clearly.
INDIAN CHEMICAL SCENARIO
The government of India had imposed a lockdown in public movement and economic activity
from the 4th week of March 2020. Though essential business and services were excluded from
this lockdown this had a serious impact on the overall activity in the economy and the
countries did suffer a major setback.
With the pandemic gradually coming under control and the major drive for vaccination,
the economy is showing significant sign of revival, though it will be difficult to make
any concrete statement on the rate at which the revival will happen. However, one can
certainly say that the overall environment is becoming positive gradually and the country
expects to come to normalcy in next few Quarters. Since Indian economy depends much on
agriculture and this sector is probably the least impacted by the lockdown, this gives a
ray of hope to us for the sustainability and revival of our industrial sector.
OVERVIEW OF SPECIALITY CHEMICALS SECTOR
Speciality Chemical industry is known for its end use performance enhancing
applications. Its a blend of base chemicals and marketed on the basis of their quality or
utility, rather than product composition or brand. Products are relatively high value, but
low volume molecules as compared to basic chemicals or commodity chemical products.
GLOBAL SPECIALITY CHEMICALS MARKET
Going through the various reports and based on the past experiences, the global
speciality chemical markets should grow at a CAGR of 5-6% annually. As new applications
keep developing for the end consumer products, the demand for speciality chemicals
required for these applications will continue to rise. India has an important role to play
in this sector since our country has all the relevant infrastructure such as talent and
resources for development of such products. This segment is essentially driven by
extensive product research and innovation as against the mass consumption of heavy
chemicals. Many a times, speciality chemicals are required for specific applications which
calls for articulate technology and a good customer services.
India is the 6th largest producer and consumption of chemicals worldwide. The
speciality chemicals industry in India is growing at a rate of 13-14% on account of
domestic consumption and exports to other countries. The industry services both the local
as well as global market. The key speciality chemicals segments in India are
pharmaceuticals, agro chemicals, paints, construction chemicals, dyes and pigments,
personal care, etc. Closure of manufacturing plants in the European union and China on
account of increasing environmental concern has opened up new opportunities for Indian
manufacturers to take advantage of the demand-supply gap. Indian speciality chemical
industry can certainly avail this opportunity while addressing the environmental, health
and safety issues related to this industry.
SECTOR WISE OUTLOOK
Your company is engaged in manufacturing of speciality chemicals required for
a. Pharmaceuticals
b. Industrial chemicals
c. Feed and nutrition
d. Fragrance & flavours
India has a significant position in pharmaceuticals segment w.r.t. manufacture of APIs
and formulations. The domestic market for pharmaceuticals is driven by the growing
population and various healthcare measures taken by the Government of India. India also
exports its products to a large number of developing countries and is quite competitive in
terms of costing. The growth of this sector is expected to in the range of 9-10% y-o-y.
Speciality chemicals require for other industrial applications are catalyst, reagents,
additives, etc. Fertilizer is one of the main industrial segment in which speciality
chemicals are required. Other segments which require speciality chemicals include
construction chemicals, paints and pigments, polymer sciences and agrochemicals.
Feed and nutrition requirements are alike for humans, animals as well as plants. With a
growing awareness regarding health consciousness, the requirement of nutrients for human
consumptions are growing. The nutrients create healthy bodies by bridging gap in the
vitamins and supplements. They also provide to build a stronger immunity levels. The
animal livestock also requires support of nutrients in order to increase their weight and
also for better fertility. The growth of animal husbandry in India is on account of
growing demand for food for increasing population apart from the increased nutritional
values provided by them. The agricultural sector also requires nutritional supplements
which foster the plant growth. Since India is having a dominant growth segment for fruits,
food grains and vegetables. The demand for such nutrients is always on the increase.
FINANCIAL PERFORMANCE:
|
|
(Rs. in Lakhs) |
| Particulars |
2020-21 |
2019-20 |
| Total Revenue |
4598.41 |
5732.53 |
| Total Expenditure |
4687.99 |
6863.99 |
| Profit Before Tax & Exceptional Items |
(89.52) |
(1131.37) |
| Profit Before Tax |
314.94 |
(1131.37) |
| Tax Expenses |
113.58 |
332.27 |
| Profit After Tax |
201.37 |
(1463.63) |
CAPACITY UTILISATION:
The volumetric and rated production capacities of the existing units of OSCL are as
under:
| Production Units |
Activity Undertaken |
In Tonne Per Annum |
Capacity |
|
|
Volumetric Capacity |
Rated Capacity |
Production in FY19 |
Utilisation (%) |
| Unit No 1, Badlapur |
Inorganic Derivatives |
1100 |
800 |
300 |
37.47% |
| Unit No 2, Badlapur* |
Organic Intermediates |
- |
- |
- |
- |
| Unit No 3, Badlapur |
Dedicated facility for Selenium Sulphide |
75 |
20 |
4 |
20.70% |
| Unit No. 4, Badlapur |
Centralize Warehouse |
- |
- |
- |
- |
| Total |
|
1175 |
820 |
304 |
37.06% |
* capacity for Unit- 2, is not exist due to fire breakout on 26.11.2019
The volumetric capacities indicate the aggregate volumes of all the reactors installed
in the respective Unit. The rated capacity signifies the expected production in tonnage
for a given product mix which is commonly being manufactured in the respective Unit. The
aggregate capacity will therefore not match with the actual production in tonnage because
the production in tonnage will depend on the following factors:
a) The number of stages involved in each product;
b) The reaction time cycle in each stage of the process;
c) The dilution involved in each of the process step;
d) The type of product mix produced in a given quarter.
Other factors which influence the tonnage capacity include:
(i) Processing required for recovery of solvents for reuse;
(ii) Reactor occupancy for recovery of by-products or side streams and purification
thereof;
(iii) Down time arising out of cleaning of equipments for changeover of products in
line with the SOP.
The percent utilization of the capacity may appear to vary marginally Q-o-Q on account
of various factors listed above.
Installed capacities of manufacturing units of the Company are not dedicated for any
single product. Installed capacities are interchangeable for different compounds based on
product demand.
Considering the changes in product mix, multifunctioning capacities of the machineries
and variation in production cycle of the product mix, predefining of production capacity
of the machineries is not possible.
SWOT ANALYSIS:
HUMAN RESOURCES
The Company takes pride in commitment, competency and dedication shown by its employees
in all areas of business. Your Companys human resource agenda continues to remain focused
on reinforcing key thrust areas, building an exclusive culture and a strong talent
pipeline, building capabilities in the organization and continuing to focus on progressive
employee relations policy.
The current work force has a good mix of workers at all levels. The average age bracket
of the employees represents a healthy mix of senior experienced personnel alongwith young
enthusiastic individuals. HR Department has selected key performance indicators for
different positions on the basis of which the performance of every employee is evaluated.
The management believes that every individual should be given an opportunity to develop
his/her potential.
ENVIRONMENT, HEALTH & SAFETY POLICY
At OSCL, we constantly upgrade our manufacturing processes by adopting to best
available technology, which is environmentally sustainable and safe to operate. Our aim is
to have processes that have ‘zero impact on employees and the environment. We fo
llow efficient manufacturing processes by using minimum energy and raw materials. The
effluents generated at our manufacturing units are treated on-site to meet all the
standards set by regulatory authorities.
RESEARCH AND DEVELOPMENT
Research and Development (R&D) plays a pivotal role in innovation and invention of
new molecules. New product development is always a priority for OSCL as needs of consumers
is constantly changing, globally. Apart from new product development, its paramount for
speciality chemicals company to develop and upgrade existing products. Investment on
research and development (R&D) is never wasted as the right kind of product and
breakthrough can help the company to have an edge over competitors.
OSCL emboldens R&D to cater to the need of our customers, and we have developed a
number of niche molecules chemicals as per customer specifications for pharmaceutical
industries, FMCG, fragrance and flovours.
INTERNAL CONTROL SYSTEMS
The Board is responsible for establishing and maintaining adequate internal financial
control as per Section 134 of the Act. Your Company has in place an adequate system of
internal controls to ensure compliance with various policies, practices and statutes in
keeping with the organizations pace of growth and increasing complexity of operations. It
has procedures covering all financial and operating functions and processes. These have
been designed to provide a reasonable assurance with regards to maintaining of proper
accounting controls for ensuring reliability of financial reporting, monitoring of
operations, protecting assets from unauthorized use or losses and compliance with
regulations. Key controls have been tested during the year and corrective and preventive
actions are taken for any weakness.
The internal controls and governance process are duly reviewed for their adequacy and
effectiveness through periodic audits by independent Internal Audit Function. The Audit
Committee of the Board of Directors actively reviews the adequacy and effectiveness of the
internal control systems and suggests improvements to strengthen the same. The Audit
Committee of the Board of Directors, Statutory Auditors and the Business Heads are
periodically apprised of the internal audit findings and corrective actions taken. Audit
plays a key role in providing assurance to the Board of Directors. Significant audit
observations and corrective actions taken by the management are presented to the Audit
Committee of the Board. To maintain its objectivity and independence, the Internal Audit
function reports to the Chairman of the Audit Committee.
CAUTIONARY STATEMENT
Statements in the "Management Discussion and Analysis" describing the
Companys objectives, projections, estimates, expectations may be "forward- looking
statements" within the meaning of applicable securities laws and regulations. Actual
results could differ materially from those expressed or implied. Important factors that
could make a difference to the Companys operations include climatic conditions, economic
conditions affecting demand/ supply and price conditions in the domestic and overseas
markets in which the Company operates, changes in the Government regulations, tax laws and
other statutes and other incidental factors.
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