Cautionary Statement : This Management Discussion and Analysis statements of Annual
Report has been included in adherence to the spirit enunciated in the code of Corporate
Governance approved by the Securities and Exchange Board of India, Statement in the
Management Discussion and Analysis describing the Companys objectives, projections
estimates expectation may be "Forward-Looking Statement" within the meaning of
applicable securities laws and regulation. These statements are subject to certain risks
and uncertainties. Actual result could differ materially from those expressed or implied.
Important factors that could make a difference to the Companys operations include
economic conditions affecting demand/supply and price conditions in the Government
policies, economic development, political factors and such other factors beyond the
control of the Company.
• Company uses variety of indicators to measure business health. These include
market share, net sales, organic growth, profit margins, GAAP and Non- GAAP income, cash
flows and return on capital.
• Company also notes that it expects global macroeconomic and market conditions to
remain highly challenging and category growth rates continuing to be slow
Economic Scenario
Global Economy : The world economy in 2022-23 faced high uncertainty due to the
continued impact of adverse events of the last three years notably the COVID-19 pandemic
and Russias invasion of Ukraine. In early 2023, the world economy had started showing
signs of stabilizing after the adverse shocks of the previous year, but this progress was
disrupted by recent financial sector disturbances. Some financial institutions that relied
heavily on low interest rates have been caught off guard by the rapid pace of rate
increases, causing financial stress and raising concerns about stability. In such a
scenario, the world economy saw growth of 3.4% with Advanced Economies growing at 2.7% and
Emerging Markets posting an increase of 4% 2022.
The tightening of global financial conditions is further hindering the recovery
process, resulting in slower income growth and increased unemployment in several
economies. Consequently, the outlook for economic growth in the medium term seems less
optimistic. As a result, IMF has forecasted growth to fall to 2.8% in 2023 before rising
to 3.0% in 2024, which is still lower than the 3.4% growth seen in 2022.
Indian Economy : The Indian economy remained remarkably resilient to global
challenges in F.Y 2022-23. Driven by the pent-up demand, widespread vaccination coverage,
rising employment and substantially higher private consumption, India recovered from
repeated waves of COVID-19 pandemic shock to overtake the UK and become the fifth-largest
economy in the first quarter of FY 2022-23.
However, as the year progressed, Indias economic growth slowed and dropped to 4.4% in
the October-December quarter from 6.3% in July - September. The slowdown resulted from an
easing of pent-up pandemic-era demand, continuing weakness in the manufacturing sector,
and the fading of the pandemics low base effect. But in the fourth quarter, Indias
economic growth accelerated to 6.1%, boosted by government and private capital spending.
This has resulted in full year growth of 7.2%, a level that makes it the worlds
fastest-growing major economy.
Despite the headwinds, India emerged as the fastest growing major economy in the world
and is expected to be one of the top three economic powers in the world over the next
10-15 years, backed by its robust democracy and strong growth trajectory.
Outlook : With strong fundamentals and large domestic demand, the outlook for the
Indian economy remains strong for the coming years. The Governments rapid vaccination
drive, investment in infrastructure creation and focus on improving ease of business are
likely to provide necessary thrust. The economy is also likely to benefit with rising
exports.
India is primarily a domestic demand-driven economy, with consumption and investments
contributing to 70% of the economic activity. With more than 100 unicorns valued at US
$332.7 Billion, India has the third-largest unicorn base in the world. The government is
also focusing on renewable sources to generate energy and is planning to achieve 40% of
its energy from non-fossil sources by 2030. The increased capital spending on
infrastructure and asset-building projects is set to increase growth multipliers for the
economy.
Industry Scenario
Indian FMCG Sector : Fast moving consumer goods (FMCG) is the fourth-largest sector
in the Indian economy. It is expected to increase at a CAGR of 14.9% to reach US $ 220
billion by 2025, from US $ 110 billion in 2020. Three main segments in this sector are
namely Food & Beverages, which account for 19% of the share, Healthcare, which account
for 31% of the share, and Household and Personal Care, which account for the remaining 50%
share. Toiletries and household products are among the top five products sold.
The Consumer Packaged Goods (CPG), or Fast Moving Consumer Goods (FMCG), industry in
India is one of the main drivers of the Indian economy. This sector has been reporting
good growth even during the COVID years, when most other industries were reeling under a
demand crunch, riding on strong consumer shift in favour of natural healthcare products.
While the sector continued to move forward on the growth track in the new fiscal, the
operating environment turned challenging as the year progressed, marked by unprecedented
inflation and its consequential impact on consumption. The frequent price increases and an
overall slump in economic activity put pressure on the purchasing power of consumers
particularly in Rural India. The Central banks decision to increase interest rates during
the quarter to tame Inflation added to the slowdown. Volume growths were heavily impacted
by high rates of inflation.
Despite near term consumption pressure, there are some green shoots which are emerging
such as moderating inflation, improving consumer confidence and increase in government
spending. This should help revive demand and drive consumption of consumer goods in the
future. However, this growth may not represent the complete picture of the FMCG industrys
performance during the year.
FMCG companies have tried to strike a balancing act between passing the risen input
costs to the customer and reduction in pack sizes in order to protect margins, while at
the same time trying to widen their reach through various channels of trade as direct to
consumer and e-commerce have emerged strong contenders to the traditional channel.
The sector faced a sudden and sharp rise in input costs owing to the rise in prices of
crude oil as well as palm oil, the raw materials for several products in the personal and
household care categories. Prices of several items, particularly packaged foods, items for
personal care and household rose anywhere between 4% and 25%.
The consumers may continue to feel the pinch in the current financial year as factors
that caused the price rise are expected to persist during the calendar year 2023-24 at
least.
With liberal FDI norms, the Indian FMCG sector has seen robust FDI inflows that has
helped it to enhance capacities and reach within retail markets. Also, with supply chain
issues faced in the aftermath of the COVID-19 pandemic, capital utilisation is being aimed
at closing the supply chain gaps through manufacturing. Programmes like Make In India are
further encouraging FMCG sector to reinvest in manufacturing and R&D.
Indias FMCG sector has traditionally been urban dominated, with the segment accounting
for nearly 65% of overall sales. In recent years though, the rural segment has been
growing faster and is poised to grow to US$ 220 billion by 2025. In FY 2022-23, the steep
rise in prices which was more pronounced in rural areas saw the segment hit hard,
resulting in decline in volume. However, with expectation of good monsoon and additional
spending by Government in programmes like rural employment scheme, this market is poised
for growth.
Sustainability is a growing area of concern for customers and an increasingly active
area of action for FMCG players. While the trend is being led by FMCG players that are
global leaders, several mid and small size companies have made sustainable FMCG products
their core business and their niche to operate in. This is driving consumer consciousness
as it has been established globally on an average 34% of population were willing to pay
more for a sustainable brand. This number is higher among Gen Z and millennials at 39% and
42% respectively.
Outlook : Outlook for the industry continues to be positive in the long term on
account of two key factors:
i. Demographics: The Indian FMCG customer is increasingly young, has growing
aspirations, is brand conscious, and is looking for trendy products.
ii. Internet-driven growth: As internet penetration continues to increase, it
will bring more digital customers into the FMCG market.
A report by CRISIL expects the sector to post double-digit growth of ~12% during FY
2022-23, despite challenges in the near- to medium-term in the form of unprecedented food
inflation, persistent rise in commodity prices and freight charges, as well as uncertainty
in the international markets.
Liquidity and Capital Resources : The company expects cash flow from operations
will be sufficient to meet the foreseeable business operating and recurring cash needs
(including for debt services, capital expenditures, dividend, cost resulting from the
Restructuring Program). The company believes to follow the program and generate the
revenue with the best possible manner.
Opportunities & Threats : The opportunities for Soap and Detergent industries
are due to rise in income of urban and rural population and the demand for detergent is
growing steadily. Cost effectiveness and timely delivery schedule is boosting the export
of production made by soap and detergent companies. Now-a-days due to availability of Big
Bazars, Reliance fresh etc. the end users of production can direct approach through this
retail chain. People become conscious about their health and hygiene especially after
pandemic which increase the requirements of this industry. On the other hand the soap and
detergent face threats from due to difficulty in keeping consumers loyal to Companys
brand. Consumers are price sensitive and shift to other brand in view of promotional
offers. Higher advertisement and promotional expenses are required for better brand
building.
Product wise Performance : Presently the Company has been dealing in only one
segment, i.e., Soap and Detergents. The details of the Soap and Detergents business
segment is as follows :
| Product |
Sales |
|
Current Year (2022-23) |
Previous Year (2021-22) |
|
Quantity (MT) |
Value (Rs in Lacs) |
Quantity (MT) |
Value (Rs in Lacs) |
| Soap & Detergent |
24390 |
12412 |
20760 |
9269 |
Key Financial Ratios:
| Particular |
FY 2022-23 |
FY 2021-22 |
| Debtor Turnover |
53.36:1 |
50.44:1 |
| Inventory Turnover |
2.31:1 |
1.99:1 |
| Interest Coverage Ratio |
4.81:1 |
5.9:1 |
| Current Ratio |
1.59:1 |
1.2:1 |
| Debt Equity Ratio |
0.35:1 |
0.5:1 |
| Operating Profit Margin |
1.57% |
1.16% |
| Net Profit Margin |
1.99% |
1.81% |
| Return on Net Worth |
13.59% |
9.57% |
Risks & Concern : The Company is exposed to major risk and concern like higher
raw material cost, internal cost, transportation cost and advertisement cost and
increasing competition from multinational and domestic companies.
Human resource / Industrial relations : Management is keen on following the best
practices for attracting, retaining and enhancing human resources of the Company. The
companys Industrial relations continued to be harmonious during the year under review.
The Company continue to invest in people through various initiatives which enable the work
force to meet out the production requirements and challenges related thereto and to infuse
positive enthusiasm towards the organization.
Internal Control Systems and Adequacy : The Internal Control Systems and procedure
are adequate and commensurate with the size of the Company. The company has implemented
suitable controls on ongoing basis to assure that all resources are utilized optimally,
financial transactions are reported with the accuracy and all applicable laws and
regulations are strictly complied with. The Company has a well-placed, proper and adequate
IFC system which ensures that all assets are safeguarded and protected and that the
transactions are authorised, recorded and reported correctly. The Companys IFC system
also comprises due compliances with Companys policies and Standard Operating Procedures
(SOPs) and audit and compliance by in-house Internal Audit Division, supplemented by
internal audit checks from M/s Jay Pee & Associates, Chartered Accountants, the
Internal Auditors and various transaction auditors. The Internal Auditors independently
evaluate the adequacy of internal controls and concurrently audit the majority of the
transactions in value terms. Independence of the audit and compliance is ensured by direct
reporting of Internal Audit Division and Internal Auditors to the Audit Committee of the
Board. During the year the Internal auditors have also been engaged for providing
assistance in improvising IFC framework (including preparation of Risk & Control
Matrices for various processes) and deployment of Self Assessment Tool. MDA is being one
of very efficient way to provide meaningful and highly useful information to the
investors. Any improvements in MDA and its presentation, format will lead to good
corporate governance practice and a healthy relationship between companies and the
investor-community.
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