PG Foils Ltd Management Discussions.

The management of P G Foils Limited presents the analysis of performance of the company for the year 2016-17 and its outlook for the future. The outlook is based on assessment of the current business environment. It may very due to future economic and other developments.

Industry Scenario

The financial year 2016-17 was one of the most challenging and a difficult period for all industries and most particularly industries in the business of commodities. Global economy which was at lower trajectory of growth has started to slowly improve. Global economy growth was 3.1% in 2016 and is expected to grow to 3.4% in 2017 and 3.6% in 2018 as per IMF forecast. First half of 2016 witnessed depressed commodity prices and the second half witnessed sharp upward movements in the prices. The Indian rupee also strengthened during the last quarter of FY 16-17.

The Demonetization of Indian currency in November 2016 had an impact in the market and created slump in GDP but the situation has started reversing. The GDP of India is expected to be 7.2% and India is the fastest growing economy in the world. The likely implementation of GST reform from July 2017 will also boost the market sentiments in 2017-18. The inflation is also under control and industrial manufacturing is also improving.

Under the Make in India initiative, the Government of India aims to increase the share of the manufacturing sector to the gross domestic product (GDP) to 25% by 2022, from 16%. Business conditions in the Indian manufacturing sector continue to remain positive.

Future outlook

India has imposed Anti dumping duty on a Chinese chemical used in Pharma industry & Aluminium foil to protect domestic industry from cheap imports. Anti-dumping steps are taken to ensure fair trade and provide a level-playing field to the domestic industry. They are not a measure to restrict import or cause an unjustified increase in cost of products. While an anti-dumping duty of up to $1.63 per kg was imposed on aluminum foil, up to $8.71 per kg duty was slapped on imports of amoxicillin, used in pharmaceuticals. The duty on both the products would be effective for a period of five years, the finance ministry has said in separate notifications.

We also expect increase in production and quality improvement due to up gradation of technology at various processes in our units in last one year.

We look forward improvement in foil demand on account of growth of pharmaceutical industry by 10% to 15%.

Operational performance

Company achieved a Gross turnover excluding trading turnover of Rs. 249.61 Crores as against Rs. 232.44 Crores in the previous year and production for the year 8372.96 MT as against last year 6860.93 Mt.

Financial Performance

Profit before tax for the year is Rs. 24.01 Crores compared to profit of Rs. 14.08 Crores in last year, higher mainly due to extraordinary receipts.

Company contributed a total Rs.24.94 Crores to the National Exchequer as Excise Duty.

Resources & Liquidity

Company continues to maintain its conservative financial profile. Company Banked with IDBI Bank Limited for their working capital needs. Company has sufficient working capital limits of Rs. 115 Crores from IDBI Bank Ltd at concessional and extremely competitive interest rate. Presently Company is not availing any cash credit facility due to ample liquidity. Cash Flow for less than 2 years is adequate to extinguish its entire debts timely. Company made most of local purchases on cash basis at discounted rates but overseas purchases are on credit basis on cheaper interest rates under buyers credit facility.

Opportunities and outlook

Company has opportunity to increase production and sales turnover due to acceptance of product by most of the major Pharma Companies in India & Bangladesh and close of few foil manufacturers in country. Company also sees opportunity in improvement in margin due to possibility of imposition of Anti-Dumping Duty.


Due to downfall in metal and grannual rates customers may ask for rate reduction and more import activities from China and other countries at lower rate if no Anti dumping duty impose by Government.

Risks and Concerns

The Risk Management framework of your Company ensures regular review by management to proactively identify the emerging risks, to do risk evaluation and risk prioritization along with development of risk mitigation plans and action taken to minimize the impact of the risk. The framework requires that the Risk Management Committee be periodically informed about risk minimization procedures adopted by your Company. These processes are also periodically reviewed by management. The various risks, including the risks related to the economy, regulation, competition, technology etc., are documented, monitored and managed efficiently.

Your company faces risk with similar to those faced by companies operating in the non ferrous metal sector. The volatility of the primary metal LME linked price on account of fluctuation in $ and LME continues to be a key issue and success or failure is linked on how effectively companies are able to manage their purchase to tide over these critical periods. The company is exposing to risk from fluctuations in foreign exchange as nearly 95% of foil stock purchase is linked with dollar rate. Profitability may also be affected on account of competition from existing and prospective manufactures of the same products and cheap import from China.


The companys contribution to foreign exchange earnings amounted to Rs. 2448.28 Lacs during the year under review and the total foreign exchange utilized by the company amounted to Rs.1710.85 Lacs the details of which are provided in annexure to the directors report. Company is presently exporting to various countries and further trying to increase export to developed countries. Company already appointed a very senior professional for development of export market. Company is concentrating on Bangladesh foil market and expects to achieve almost 2/3rd foil market shares in years to come.

Human Resources

The Human Resource philosophy and strategy of your Company is to attract and retain the best talent, be an employer of choice and create a holistic workplace environment, where employees get opportunities to realize their potential. Companies are judged on career growth prospects, rewards, work life balance, Performance evaluation and stability. Our standing here is a reflection of not just our employees view but also of the larger Indian workforce which responded. Considering the long term business goals, your Company has ensured that the Human Resources strategy is in line with and complementary to the business strategy.

It is your companys belief that people are at the heart of corporate & constitute the primary source of sustainable competitive advantage. The trust of your companys human resource development efforts therefore is to create a responsive and market driven organization. Your company continues its focus on strengthening competitiveness in all its business. Your directors look forward to the future with confidence.

The company has followed a conscious policy of providing training to Management Staff through in-house and external programme, for upgrading personal and technical skills in relevant areas of functional disciplines.

Internal Control System

The Companys internal control systems are commensurate with the nature of its business and the size and complexity of its operations. The internal controls cover operations, financial reporting, compliance with applicable laws and regulations, safeguarding assets from unauthorized use and ensure compliance of corporate policies.

The Audit Committee of the Board of Directors also periodically reviews audit plans, external auditor observations and recommendations, significant risk area assessments and adequacy of internal controls.

Cautionary Statement

Statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations may constitute a "forward-looking statement" 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 economic conditions affecting demand/ supply and price conditions in the domestic markets in which the Company operates, changes in the Government Regulations, tax laws and other statutes and other incidental factors.