The Management of Pacific Industries Limited is pleased to present the
Management Discussion and Analysis Report, which lucidly explains the Companys
business, industry structure, opportunities and concerns, performance of the Company with
respect to the operations and other relevant information. Management Discussion and
Analysis forms a part of the compliance report on Corporate Governance.
- Global Economy 2023
In 2022, the major economies faced considerable macroeconomic
challenges as a result of a geopolitical crisis in Europe and broadening inflationary
pressures. Economic growth is being adversely affected by the persistent surge in interest
rates by Central Banks to fight inflation and the ongoing food and energy crises in
Europe. In CY*2022, growth was dented by the unexpected resurgence of COVID in China.
However, the recent border openings have opened the door for a sooner-than-expected
recovery. It is likely that global inflation would decelerate from 8.7% in 2022 to 6.8% in
2023 and 5.2% in 2024 [Source: IMF World Economic Outlook, July 2023]. In the course of
2023, higher growth from pent-up demand in several economies or a quicker decline in
inflation are anticipated.Despite the headwinds, the economy is being buoyed by an upswing
in household spending and an influx of foreign capital. Amid the ongoing Russia-Ukraine
conflict and the synchronised rate hikes by the Central Banks, global growth is expected
to slow down to 3.0% in CY*2023, from 3.5% in CY*2022.1 The IMF predicts that India and
China will contribute more than half of the global growth in FY23.
- Outlook
The global economy has partially recovered following the easing of
inflationary pressures. As a result, going forward, taming inflation is one of the top
priorities of policymakers. Central Banks across the globe are endeavouring to strike a
balance between supporting economic growth and curbing inflationary concerns. The
economys health is expected to improve with proper monetary policy regulation, the
resolution of geopolitical conflicts, the mitigation of supply-chain disruptions and
effective management of pandemic aftereffects.
- Indian economy
Based on the estimates of the National Statistical Office (NSO), real
GDP growth is predicted to be 7.2% in FY2022-2023.3 According to the World Bank, India is
expected to be one of the top seven emerging market and developing economies (EMDEs). The
pent-up demand for contact-intensive services is a major factor in the 7.7% growth in
private consumption that is anticipated for FY23. According to a sectoral analysis, the
Central Government and State governments increased capex helped fuel strong building
activity, which created numerous employment opportunities. In FY23, the services sector is
expected to expand by 9.1%, with contact-intensive services such as trade, hotel
accommodations and transportation expected to grow by 13.7%. The growth of the financial,
real estate and professional services industries is anticipated to moderate to 6.4%,
possibly as a result of the slowdown in credit growth caused by rising interest rates and
the slowdown in the demand for software and professional services globally. India is on
track to become a USD 3 trillion economy by the conclusion of FY23. Within the next seven
years, it is predicted to reach USD 7 trillion. In FY2022, the Indian rupee continued to
be one of the least volatile currencies among its Asian counterparts, and it has remained
remarkably resilient so far. Seasonally adjusted capacity utilisation rose to 74.5% in Q2
of FY 2022-23, according to the RBI. On the other hand, the drag from net external demand
persisted despite a decline in merchandise exports in Q3 of FY2022-23.6
- Outlook
There are early signs that India is prepared for a greater investment
upcycle in the industrial and services sectors, even though the post-COVID private
investment recovery is still in its early stages. The number of ongoing private investment
projects in the industrial sector has been consistently growing over time. The volume of
e-way invoices generated, electronic toll collections and sustained rise in GST
collections, all point to a positive trend. Manufacturing activity continues to expand
gradually, as shown by indicators including the PMI for manufacturing, the Index of
Industrial Production and the Index of Core Industries (ICI). Services sector indicators
(UPI transactions, high credit demand) also point to additional recovery. Overall,
Indias demand environment continues to be favourable for sustaining economic growth.
India is confident going into the upcoming fiscal year due to its underlying and overall
macroeconomic stability, but it remains vigilant about geopolitical and geoeconomic
concerns
- Stone Industry Overview
- Global Granite Stone Industry
The size of the global granite market attained a valuation of USD
17,363.02 million in the year 2021. It is projected to witness growth at a Compound Annual
Growth Rate (CAGR) of 3.2%, to reach an estimated value of USD 20,978.75 million by the
year 2027.8 In the year 2022, the global granite market encountered several challenges,
including inflationary pressures in major global economies and supply chain disruptions
resulting from the war in Europe. However, in spite of these global headwinds, the global
granite market demonstrated significant growth. The upsurge in demand for granite is
primarily driven by its expanded usage in diverse construction applications, such as
kitchen countertops, bath vanity tops, backsplashes, and bathroom sinks & basins. The
enduring allure of granite for residential purposes, coupled with increased investments in
construction projects, has further accelerated the markets growth trajectory. Apart from
construction applications, granite finds extensive use in sculpture and memorials, as well
as in engineering and other diverse sectors. This multifaceted materials resistance
to rust and its ability to retain its colour indefinitely, especially in the context of
granite countertops, play pivotal roles in driving the overall market growth.
- Indian Granite Stone Industry
The Indian granite industry has garnered widespread recognition as a
major player in the global stone market. Acclaimed for its diverse array of colours,
remarkable durability, and intricate patterns, Indian granite commands a prominent status
in both the construction and decorative domains worldwide. India stands among the leading
producers and exporters of granite, making a substantial contribution to the nations
economic expansion. The industry is predominantly concentrated in the southern states of
Tamil Nadu, Karnataka, Andhra Pradesh, and Telangana, where abundant granite reserves are
found. These regions have become major granite clusters with numerous quarries and
processing units, fostering a competitive and thriving business environment. During recent
times, the Indian granite industry has encountered various challenges and undergone
significant changes. Environmental issues, especially pertaining to sustainable quarrying
methods, have spurred the government to implement more stringent regulations to mitigate
the environmental impact. Granite quarrying has frequently faced criticism for its
potential to induce land degradation and biodiversity loss, thereby prompting the adoption
of sustainable mining practices. The Indian granite industry has also adapted to
technological advancements, with increased investment in modern machinery and processing
units. This has enhanced production capabilities and improved the overall quality of
finished granite products, meeting international standards and demands. Despite its
strengths, the industry has encountered obstacles like fluctuating international demand,
changing global economic conditions, and competition from other granite-producing
countries. To remain competitive, Indian granite exporters are continually exploring new
markets and diversifying their product offerings.
- Quartz
Quartz is an important material with several functions. Sand, a
necessary component of glass manufacturing, is made from tiny quartz stones. There are
several uses for quartz rock crystals in electronic devices. It functions as an oscillator
for radios, watches, scales and intervention of optics. Sandblasting, breaking glass and
cutting delicate stones all use quartz for grating. As major silicon semiconductors are
made using quartz, it is mostly employed in the personal computer industry. The expanding
sales of various electronic gadgets, such as tablets, phones, desktop computers and
laptops, have raised the demand for semiconductors. The global quartz market was worth USD
7.2 billion in CY2022. By CY2028,the market is expected to reach USD 10.4 billion, with a
compound annual growth rate (CAGR) of 5.8% between CY2023 and CY2028.9 The rapid
development of technology and the widespread use of quartz crystals in the construction of
frequency filters, controllers and timers in electronic circuits are fuelling growth in
the market. Quartz is also used in the manufacturing of solar cells, which are gaining
popularity as renewable energy sources. In the upcoming years, demand for quartz is
anticipated to rise as solar energy usage increases. Energy-efficient lighting, such as
LED bulbs, is produced using quartz and is gaining popularity as an alternative to
conventional incandescent bulbs. Quartz is an important product in this industry since it
is necessary for the manufacturing of concrete, tiles and other building materials. It is
projected that higher infrastructure investment, particularly in emerging economies, will
eventually raise the demand for quartz.
- Countertop market Overview
The global demand for countertops is projected to experience a steady
growth rate of 4.3% per year, reaching 711 million square meters in 2027, with an
estimated value of $54.6 billion. This growth will be driven by a surge in countertop
installations in both residential and non-residential settings, as they continue to be
preferred over freestanding or wall-mounted fixtures in kitchens and bathrooms.
Furthermore, the demand for countertops will receive a boost from the increasing trend of
residential remodelling, where countertop replacement remains one of the most popular and
sought-after methods to upgrade kitchens and bathrooms. As a result, the countertop market
is expected to witness significant advancements, driven by the demand for improved
aesthetics and functionality in various living and commercial spaces. Despite the positive
growth outlook for the countertop market, there are certain factors that may restrain
further gains. Weak new housing outlooks in key regions such as the US, China, Japan,
South Korea, and Europe are expected to limit the expansion of the market. Furthermore,
there is a possibility of a deceleration in the global market value through 2027. This is
primarily attributed to the unusually high price levels experienced in 2022, which were
influenced by inflationary pressures. As a result, the countertop market may face
challenges in sustaining the same rate of growth as in previous years.
- Outlook for Granite and Quartz Surface
The projected growth of global demand for engineered stone countertops
is estimated at a robust 9.3% per year, reaching 128 million square meters by 2027.
Engineered stone has experienced rapid expansion in its share of the global countertop
market, rising from 7% of sales in 2012 to 14% in 2022 . Its popularity has soared,
particularly in the large US market, owing to its appealing aesthetics, durability, and
ease of maintenance in comparison to natural stone. This has positioned engineered stone
as the most preferred countertop material in the US. The continued strong sales increases
and increasing market share can be attributed to several factors:
• A growing variety of colours in line with current design trends
sourced from both domestic and foreign
suppliers, offering consumers a wide range of options to suit their
preferences.
• The increased availability of non-Breton equipment, mainly
manufactured in China, which has allowed
producers to significantly enhance their production capacity.
• The abundance of low-cost quartz slabs from the Asia/Pacific
region, Africa/Mideast region and other
locations has made engineered stone production more cost-effective,
further driving its popularity.
• The establishment of broader distribution networks for
engineered stone has made these countertops more
accessible and widely available, contributing to their growing demand.
Financial Result:-
| Particulars |
Standalone (F.Y.) |
|
2022-23 |
2022-21 |
| Revenue from Operations and Other Income |
19,048.01 |
28,626.52 |
| Less: Operating Cost |
17,028.99 |
25,556.74 |
| Operating Profit/PBDIT |
2019.02 |
3069.78 |
| Less: Interest & Finance Charges |
799.92 |
662.59 |
| Less: Depreciation & Amortization Expenses |
1134.66 |
1,088.32 |
| Profit Before Tax and Exceptional Items |
84.44 |
1318.86 |
| Add: Exceptional items |
- |
- |
| Profit Before Tax |
84.44 |
1318.86 |
| Less: Provision for Tax |
(19.46) |
374.34 |
| Less: Prior Period Adjustment |
- |
- |
| Profit After Tax |
103.90 |
944.50 |
| Total Other Comprehensive income |
(20.44) |
45.94 |
| Total Comprehensive Income for the year |
83.46 |
990.44 |
- INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has a sound internal control system, which ensures that (a)
its financial reports are reliable, (b) its operations are effective and efficient, and
(c) its activities comply with applicable laws and regulations. The internal control
systems are further supplemented by internal audit carried out by an independent Chartered
Accountant and periodical review by the Management. The Internal Audit process is designed
to review the adequacy of internal control checks in the system and covers all the
significant areas of the Companys operations.
The Audit Committee of the Board of Directors reviews the adequacy and
effectiveness of the internal control systems and tracks the implementation of corrective
actions. Significant audit observations and corrective actions taken by the Management are
presented to the Audit Committee. To maintain its objectivity and independence, the
Internal Audit reports are submitted to the Chairman of the Audit Committee. Audit
Committee plays a key role in providing assurance to the Board of Directors.
- CSR ACTIVITIES
Your Company believes that as a responsible corporate citizen, it must
address the needs of underprivileged and committed to serving them. The Company is keen to
fulfill its social responsibility by being actively involved in a variety of public
services projects. We encourage collaboration with various NGOs to support in CSR
activities at group level.
- HUMAN RESOURCES
The Company believes in making the optimum utilization of all the
available resources, to achieve this, human power is highly important and thus the Company
time over has been taking newer and effective initiatives for improving the human resource
strength and creating a conducive and healthy work atmosphere.
The Company consider its Human Resource as the most valuable resource
which has to be nurtured well and equipped to meet the challenges posed by the dynamics of
business developments. The Company continuously provide training to its employees both
in-house as well as through reputed Institutes. The staffs are highly motivated due to
good work culture, training, remuneration packages and the values, which the Company
maintains. The Board of Directors would like to record their appreciation of the efficient
and loyal service rendered by the Companys employees.
- DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL
PERFORMANCE.
The Company achieved Revenues from Operations and Other Income (gross)
of 19,048.01 Lakhs during the financial year ended 31st March, 2023,. The
profit after tax 103.90 Lakhs during the year. The Management is confident of rebound in
the economy and expect growth coming back in the ensuing years.
- CAUTIONARY STATEMENT
Statement in this Managements Discussion and Analysis detailing
the Companys objectives, projections, estimates, estimates, expectations or
predictions are -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 global and Indian demand-supply conditions, finished goods prices, feedstock
availability and prices, cyclical demand and pricing in the Companys principal
markets, changes in Government regulations, tax regimes, economic developments within
India and the countries within which the Company conducts business and other factors such
as litigation and labour negotiations.
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