The Management at Oriental Trimex Limited is pleased to present the Management
Discussion and Analysis Report, which provides an insight into the Companys business,
Industry structure, developments, outlook, opportunities, concern areas and performance
concerning the operations and other relevant information. This report forms part of the
compliance report on Corporate Governance.
Industry Structure and Development
Marble is a metamorphic rock that forms when limestone is subjected to the heat and
pressure of metamorphism. It is composed primarily of the mineral calcite (CaCO3) and
usually contains other minerals such as clay minerals, micas, quartz, pyrite, iron oxides
and graphite.
Marble is a highly fragmented industry with various manufacturers ranging from large
multinational corporations to small privately-owned companies. The top ten producers viz.
China, India, Iran, Turkey, Italy, Spain, Brazil, Egypt, Portugal and Greece account for
just 3.76% of the market. Marble can be classified based on its colour. Beige and Cream
marbles are assumed to be the most prevalent kind of marble, considering the large stock
of beige marble in Europe. The production of black marble, white marble and green marble
is also considerable.
The global natural stone and marble market size was USD 57.48 Bn in 2019 and is
projected to reach USD 62.58 Bn by 2027, exhibiting a CAGR of 7.57% during the forecast
period. The worlds top ten natural marble producers include China, India, Iran, Turkey,
Italy, Spain, Brazil, Egypt, Portugal and Greece.
A key variable in the performance of marble producers is raw material costs, precisely
the speed at which any increase can be passed through to customers. According to the U.S.
Geological Survey (USGS), stone resources of the world are sufficient to cater to
foreseeable needs. Nevertheless, resources can be limited on a local level or occasionally
on a regional level due to the lack of a particular type of stone. Marble resources are
mainly located in Italy, China, Turkey, Philippines, France, Brazil, USA, India, Morocco,
Austria, Russia, Japan, Portugal and Greece. Italy has abundant resources of high-quality
marble, positioning the nation as a key marble producer and exporter in the world. Turkey
is located in the worlds most prosperous natural stone Alps area. There is a mass of
marble resources from Anatolia to the Thrace region. The marble materials include marble
blocks; to some companies, marble blocks can be satisfied with their products, while to
others, marble blocks have to be purchased from other suppliers. The marble tile price
follows the marble block price with a lag, and movements can inject volatility into
producer margins. In general, most producers structure the majority of their contracts to
include a ‘pass through clause that smooths the impact.
In India, the building & construction segment is estimated to register the highest
growth in the marble market during the forecast period, owing to the increasing demand for
residential and non-residential infrastructure development. In building & construction
applications, marble and granite are highly preferred building materials for application
areas such as flooring, columns, and walls, owing to their physical properties. Rising
demand for infrastructure development in developing countries such as China and India is
fuelling the growth of the building & construction application segment in the marble
and other natural stones market.
MACROECONOMIC OVERVIEW
Global growth prospects have weakened significantly amid the war in Ukraine, rising
energy, food and commodity prices, soaring inflation and tightening monetary policy
stances by major central banks. The world economy is projected to grow by 3.1 per cent in
2022, marking a downward revision of 0.9 percentage points from our previous forecast
released in January 2022. The baseline forecast faces significant downside risks from the
further intensification of the war in Ukraine and potential new waves of the pandemic.
Growth forecasts for the United States, European Union and China have been revised
downward, with the European Union registering the most significant downward revision. The
European Union economy – most directly hit by disruptions in the energy supply from
the Russian Federation – is now expected to grow by 2.7 per cent in 2022, down from
3.9 per cent expected in January. The United States economy is expected to grow by 2.6 per
cent, while China is expected to grow by 4.5 per cent in 2022. The developing countries,
as a group, are projected to grow by 4.1 per cent in 2022, down from 6.7 per cent in 2021.
The United States economy is expected to grow by 2.6 per cent in 2022 and 1.8 per cent
next year, while China is expected to grow by 4.5 per cent in 2022 and 5.2 per cent in
2023. The developing countries, as a group, are projected to grow by 4.1 per cent in 2022,
down from 6.7 per cent in 2021.
THE INDIAN CONSTRUCTION MARKET
The macro-environment during the year was one of uncertainty and volatility. Prolonged
monsoons, floods in many key states, and a general sombre mood in the economy with no
aggressive consumer demand resulted in a low market in the housing sector. The
unprecedented real estate slowdown and the credit crisis impacted the market for Marble
and Granites. As we came to the end of the financial year, the world and then India were
hit by the COVID-19 pandemic, bringing businesses to a standstill across industries and
markets. Throughout the year, demand was at absolute low levels and showed a slowly
declining trend, but we see this as a temporary phenomenon.
The real estate sector and consumer spending shall soon pick up and demonstrate
exuberance and witness a complete turnaround with signs of revival in industrial activity
and rapid growth in global economic performance once a treatment for COVID-19 is in place.
Real estate in India also indicates signs of reviving during this time, with the return
of liquidity in the real estate sector through various packages announced by the
government to provide liquidity in recent months. Cash flows of realty players improved
due to easy finance available at lower rates, resulting in renewed construction of stalled
projects and a few new launches.
India, the largest economy in the region, is expected to grow by 6.4 per cent in 2022,
well below the 8.8 per cent growth in 2021, as higher inflationary pressures and uneven
labour market recovery will curb private consumption and investment, it said. For the
fiscal year 2023, Indias growth is forecast to be 6%.
OPPORTUNITY AND THREATS
While the long-awaited construction boom in India is nowhere on the horizon, there is
some improvement in construction activity in some parts of the vast country. Bangalore and
its surrounding area, the NCR (National Capital Region) and some other cities are where
stone people sell more than before. But there are also thousands of unsold upmarket flats
in buildings in major cities like Mumbai and Delhi NCR, and many building companies are in
severe financial trouble. A nationwide construction boom is still some years away.
The imports of marble blocks have increased dramatically since the liberalisation of
the import policy. Greater competition due to the entrance of many more Indian companies
selling imported marble has meant there has also been a decline in retail prices. The
export-oriented Marble and granite industry continues to struggle due to increasing
artificial stone competition.
The Indian stone industry is steadily becoming more inward-looking. A decade ago, it
was exports that determined the growth and investment of the stone companies. Now, the
local market has become the main engine for the development of most stone companies.
The outlook in South Asia has deteriorated in recent months against the backdrop of the
ongoing conflict in Ukraine, higher commodity prices, and potential adverse spillover
effects from monetary tightening in the United States.
Segment-wise or product-performance
The company operates in the "flooring Product Segment" and "marble
articles items". It undertakes the trading and processing of imported marbles. The
companys main products are marble slabs, marble tiles, and cut-to-size slabs per the
buyers specifications.
The Companys performance during the last three years is as follows:
Year |
Turnover (Rs. in Millions) |
Increase in % |
2019-20 |
748 |
3% |
2020-21 |
182 |
(72%) |
2021-22 |
185 |
1.54% |
The companys business performance is directly related to the real-estate sector &
infrastructure. Presently, the market conditions in these sectors are prolonged because of
sluggish market demands. Consequently, the company has shown a dip in its sales from the
previous financial.
Outlook
The company, for a long time in this business, has had contacts with many dealers/
shopkeepers of marble in various cities. These dealers keep visiting and buying, which may
not happen every month but on an alternate month basis; hence, this is one channel
available to the company for its product sales. There are few dealers franchisees to
which the company initially helped them establish their business in their initial stages
who keep on exclusively buying for their requirements from the company. The company has a
devoted marketing team for retail and project sales. In the past, the company has dealt
with all developers in India. Hence, when there is a requirement from their side to
receive such information, the companys marketing staff starts follow-up with their
purchase department, arranges their visit to our factories and finalises the transaction.
Participation in exhibitions and other platforms is also an additional way to reach
customers.
As such, the company will have no CAPEX plan shortly. However, the company has plans to
export its products to Middle East countries, for which the company has been in touch with
various buyers and project people in the past three years. The company will make exports
from its units near Kolkata and Chennai.
Since the International Airport at Jewar in Greater Noida, the formal process of
handing over 1334 hectares of land to Noida International Airport Limited has been
completed. Construction for the airports phase-1 already started in August 2021; the
companys one unit being nearby will be an advantageous situation for the company, meeting
demands of materials from infra project developers and construction of hotels in its
nearby area as supporting infrastructure to the International Airport.
Risk Impact
Both global output and Indias GDP contracted sharply during the year due to the
COVID-19 crisis. Even as the economic performance is expected to bounce back in 2022-23
— both in India and across the world — the uncertainty and challenges posed by
the pandemic continue. These can directly impact the real estate sectors performance and,
hence, the Company. Recent global meltdown in reality and housing sector and Industry
downturns might impede infrastructure development in user industries like real estate,
SEZs, industrial, urban infrastructure, and aviation, adversely affecting the Companys
business and earnings.
Risk mitigation
Over the last several decades, the Indian marble and granite industry has been
dramatically modernised to meet global standards. Natural and Engineered/Fabricated
stones, sculptures and monuments processed in India have been used mainly by large
infrastructure companies. They have immensely helped revive the marble and granite
industry in India. All three units of the company have state-of-the-art imported
machinery, and the company has started to focus on development work and retail customers.
The Govt. is quite keen for NCR to have a second airport, which is almost near completion
and ready for operation of flights by the middle of the year 2026. We see a massive
potential of supplying our material for this airport and the nearby hotels and commercial
space, which would come up alongside the Airport.
Since the company has its manufacturing facility in Greater Noida, there would be a
cost advantage in supplying material to the site.
Risk measurement
The Companys share in the premium quality marble flooring industry is likely to
increase considerably as it is the only company having processing units in the National
capital Region very near to Delhi—similarly, one of few units in or around Chennai
and Kolkata.
Internal Control Systems and Their Adequacy
The Company has state-of-the-art marble processing plants in Greater Noida in Uttar
Pradesh, Gummidipoondi in Tamilnadu and Singur in West Bengal, which are comparable to the
best in the country equipped with the requisite machinery. A strict 100% inspection system
is adapted for collecting rough blocks for the final inspection. The Company maintains the
best quality standards to meet the ever-changing expectations of buyers country-wide, be
it in terms of product quality or delivery.
The Companys processes are ISO certified, and it is a member of the Chemicals and
Allied Products Export Promotion Council, Associated Chamber of Commerce and Industry of
India, Federation of Indian Granite and Stone Industry, All India Granites and Stone
Association, Centre for Development of Stones and CAPEXIL.
The Company has an Internal Audit System, Which derives the scope and authority from
the Audit Committee. The Audit Committee reviews the adequacy and effectiveness of
internal control.
Statutory Compliance
On obtaining confirmation from the various units/departments of the Company of having
complied with all the statutory requirements, a declaration regarding compliance with the
provisions of the various statutes is made by the Managing Director at each Board Meeting.
The legal & secretarial department of the Company ensures compliance with SEBI
regulations and provisions of the LODR. The Compliance Officer for the prevention of
insider trading ensures compliance with the Companys Guidelines on Insider Trading.
Contingent Liabilities
Details of contingent liabilities are given in Note 23 to the Notes on Balance Sheet
and Profit and Loss Account.
Material developments in the Human Resources/Industrial Relations front, including the
number of people employed.
The key personnel staffing for the marble processing unit, mining operations in Orissa,
Marketing, Finance, Legal, and Planning are technically and professionally qualified.
Continuous in-house training programs are conducted in various disciplines, which help in
achieving organisational growth in the right direction. The Company maintains cordial
relations with its employees and takes all possible care for their welfare.
Shareholders value commitment and philosophy
The Company expects to protect and enhance shareholder value through several
initiatives. The comprehensive nature of the Companys financial and business disclosures
reflects its increasing transparency.
Cautionary Statement
Statements in this management discussion and analysis describing the Companys
objectives, projections, estimates and expectations may be ‘forward-looking
statements within the meaning of applicable laws and regulations. Actual results may
differ substantially or materially from those expressed or implied. Significant
developments that could influence the Companys operations include global and domestic
financial market conditions affecting the interest rates, availability of resources for
the financial sector, lending market, changes in regulatory directions issued by the
Government, tax laws, economic situation, significant changes in the political and
economic environment in India, applicable statutes, litigations, labour relations and
interest costs and other unforeseen events if any.
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