i economic overview
Global economic overview
As per IMFs World Economic Outlook Report issued in April, 2023,
global growth is expected to fall to 2.8 percent in 2023 from 3.4 percent in 2022, Global
economy will remain fragile due to impact of various factors like COVID-19, Russia-Ukraine
war, global monetary tightening and Chinas Zero-Covid policy.
However as per IMF global economy is expected to rebound to 3.0 percent
in 2024 due to current downward trend in inflation. IMF predicts global inflation to cool
to 7 percent in 2023 and 4.9 percent in 2024.
Increased geopolitical tensions caused by Russia-Ukraine conflict and
resulting economic sanctions adversely impacted global economic recovery after pandemic.
Economic recovery after COVID-19 pandemic was subdued by supply chain constraints, firm
grip of inflation and interest rates hikes by central banks to curb inflation. Resurgence
of COVID-19 in China and their Zero-COVID policy further impacted economic activity and
aggravated supply chain constrains. Even though counteractive measures of monetary
tightening taken by central banks are stabilizing inflation and cooling demand global
economic outlook remains elusive.
Indian economic review
Indian economy has exhibited extraordinary resilience to rising
inflation and geopolitical crisis. As per NSO GDP grew at 7% annual rate in 2022-23
compared to 8.7% growth in 2021-22. Retail inflation in India was 5.66% in March 2023,
down from 6.44% the previous month.
Indias growth outlook remains strong due to relatively low levels of
inflation, a prudent monetary policy, political stability and several economic reforms in
recent years. The Union Budget 2023-24 includes various measures to boost demand, mainly
through increased public spending on capex, which is expected to stimulate private
investment and improve overall demand. Indian economy became the fifth largest economy in
the world and is well placed to become fourth largest economy by 2025.
ii. industry structure and developments
According to report issued by Indian Brand Equity Foundation (IEBF) the
Indian plastics industry has advanced significantly over past few decades, becoming one of
the Indias most significant sector. Plastic material is becoming increasingly important
across various industries, and per capita consumption is rising quickly. Traditional
materials are being quickly replaced by plastic technology, processing equipment,
expertise and cost-effectiveness.
Indian plastic Industry has over 50,000 plastic processing units
employing more than 50 lakhs people across the Country. It contributes 3.5 Lakh crore to
Indias economy. Almost 80 to 90% of the total manufacturing units are in small and medium
scale sector. The Industry is very fragmented and majority of the manufacturers are from
unorganized sector and very few are from organized sector. The Indian Governments
initiatives like "Atmanibhar Bharat", "Make in India", "Swachh
Bharat" and "Digital India" are contributing to increasing plastics
production and by 2027 it is expected that the plastics industry will generate 10 Lakh
billion annual revenue.
One of the vital components of plastics industry worldwide is
masterbatch, which consists of pigments and additives used for imparting required color
and characteristics to the end products. It is a concentrated mixture of pigments and
additives encapsulated during a heat process into a carrier resin, which is then cooled
and cut into a granular shape. It imparts various properties like Ultraviolet light
resistance, Flame retardation, Anti-fouling, Anti-static, Lubrication, Anti-slip,
Antimicrobial, Anti-oxidant etc to end products. Use of Masterbatches in production
process offers many benefits like cost-effectiveness, easy to use, helps achieve the
desired color and ensures a dirt-free production environment. Your Company is brand and
market leader in manufacturing of Masterbatches and has presence in practically all
segment of Masterbatch i.e. White, Black, Colour, Additive, Polywhite (filler) unlike most
of other competitors who are not present in all segments.
III. OPERATIONAL PERFORMANCE
The brief highlights of operations for the Financial Year 2022-23 are
as under :-
• The revenue from Operations was 76,852 Lakh for FY 2022-23 as
against 71,763 Lakh for FY 2021-22. Growth of 7%.
• Company has achieved highest ever yearly revenue from operations
in the history of the Company which is a milestone.
• Due to financial discipline and effective working capital
management,
• As of 31st Mar 23, there is no bank borrowings (
3356 lakhs as of 31st Mar 22) .
• As of 31st Mar 23, there is current investment of
2716 lakhs mainly in liquid mutual fund.
• In FY 22-23, 890 lakhs is capital expenditure on account of
land & building, plant and equipment.
• Other financial details are as given in the Directors Report.
IV. SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE Your Company operates in
one segment only - masterbatches.
V. BUSINESS OUTLOOK, OPPORTUNITIES AND THREATS
Your Company is optimistic about future growth considering that per
capita consumption of plastic products in India is quite lower at 13 Kg as compared to
global average of 30 Kg. Plastics Industry market size is expected to grow at a CAGR of 8
-10% until 2025. Global plastic industry is expected to grow at a CAGR of 3.4% till 2028.
The Indian Chemical and Petrochemical industry, of which plastics is a part, is expected
to attract investment worth 8 Lakh Crore (FICCI).
According to the report issued by IBEF, Packaging and agriculture
industries contribute to almost 46% of the application of plastics in India. Electronics,
home goods, building, furniture account for remaining plastics applications. A wide range
of applications of plastics in agriculture promises to revolutionize Indian agriculture
and provide advantages in terms of conservation and efficient use of water. It can
significantly reduce water use by 30% to 100%.
The plastics packaging market size is expected to grow at a CAGR
between 3% - 4% and is expected to cross USD 325 billion by 2027. The Indian packaging
industry is expected to register a CAGR of approx. 26.7% from 2022 to 2027.
The global masterbatch market size is projected to reach USD 14.3
billion by 2025, at a CAGR of 5.1%. The Indian masterbatch market is expected to reach USD
2.22 billion by 2027 at a CAGR of 11%.
Since last year company has also ventured into Engineering Plastics
compounds and has developed various grades for applications in automobile, electronic
industries. Engineering plastics division has witnessed robust growth of 527% in FY
2022-23 and we expect the growth momentum to continue in time to come.
The increasing demand for lightweight, durable and environment friendly
materials by end user industries like Packaging, Construction, Agriculture etc. Various
Government initiatives like Atmanirbhar Bharat, Make in India, Pradhan Mantri Krishi
Sinchayee Yojana, Smart City Project, establishment of plastic parks will contribute to
boost in demand in coming years.
VI. RISK AND CONCERNS
Risk management is embedded in your Companys operating framework. Your
Company believes that managing risks helps in maximizing returns. The Companys approach
to addressing business risks is comprehensive and includes periodic review of such risks
and a framework for mitigating controls and reporting mechanism of such risks. The risk
management framework is reviewed periodically by the Board and the Audit Committee.
Pursuant to the Companies Act 2013 and the SEBI Regulations, the Board
has authorized the Audit Committee to review the risk management systems of the Company
from time to time. Apart from the usual risks and concerns that affect any commercial,
manufacturing, operational, the key business risks and concern areas identified by the
Company are as under :
a. Operational Issues
The Company has long term raw material supply MOUs and majority
suppliers of the Company are regular in nature.
b. Financial Risks :
i) Currency value and interest rate fluctuations
The Companys policy is to actively manage its foreign exchange risk.
The Company actively manages the interest rate risk by adopting suitable strategies to
minimise the impact of interest rate fluctuations, including maintaining an optimal
balance of different loan types and maturities.
ii) Credit Risk
The Company sell their products by extending credit to customers, with
the attendant risk of payment delays and defaults. To mitigate the risk appropriate
measures like periodic review and rigorous follow-up are put in place for timely
collection of dues from the customer. In last 2 years the debtors balance has reduced
significantly. Credit availability and exposure is another area of risk. However all
exports and domestic sales of the Company are covered under receivable insurance policy
which further mitigate the risk.
iii) Liquidity Risk
The Company realizes that its ability to meet its obligations to its
suppliers and others is linked to timely and regular collection of receivables and
maintaining a healthy credit rating. Review of working capital constituents like inventory
of raw materials, finished goods and receivables are done regularly by the respective
functions and closely monitored by Corporate Finance.
c. Strategic risks
Emerging businesses, capital expenditure for capacity expansion etc,
are normal strategic risks faced by the Company. However, the Company has well-defined
processes and procedures for investments in capacity expansions and is focused on its core
activity.
d. Regulatory risks
The Company is exposed to risks attached to various statutes, laws and
regulations. The Company is mitigating these risks through regular review of legal
compliances. The Company has implemented an enterprise-wide compliance management system,
capable of effectively tracking and managing regulatory and internal compliance
requirements.
e. Cyber risk
The failure of Information Technology (IT) systems due to malicious
attacks and/or non-compliance with data privacy laws can potentially lead to financial
loss, business disruption and/or damage to the Companys reputation. The Company has in
place a data protection policy. It maintains a cyber security infrastructure. The Company
uses standardised backup tools, services and procedures to ensure that information and
data are stored at two or more diverse locations.
VII. DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS, ALONG WITH
DETAILED EXPLANATIONS THEREFORE
For details of changes in financial ratios please refer to note no. 57
of the notes to accounts.
VIII. DETAILS OF CHANGES IN RETURN ON NETWORTH AS COMPARED TO THE
IMMEDIATELY PREVIOUS FINANCIAL YEAR ALONG WITH A DETAILED EXPLANATION THEREOF :
For details of changes in return on networth please refer to note no.
57 of the notes to accounts.
IX. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY
Your Company has a system of internal controls which is commensurate
with the size and nature of operations. These controls ensure that all the assets are
safeguarded and protected against loss from unauthorised use or disposition and that the
transactions are authorised, recorded and reported diligently. There are well established
policies and procedures in place across your Company.
Audit Team consists of well experienced Members, which constantly
review various aspects of control systems and conduct audit under well laid down audit
programmes to ensure effectiveness of the controls. The said audit team continuously
review the control system and undertakes audit of special areas in-depth.
X. HUMAN RESOURCE
Manpower is the biggest defining factor when it comes to the success of
an organization. We focus our energy and time towards developing our people, nurturing
them and try to bring out their best potential. "Employee Engagement" and
"Employee Experience" are the two areas that are bedrock of all our efforts. We
are intent on making employees feel connected to the organization with both their minds
and hearts.
Our Organization is IMS Certified, we have the standards ISO 9001, ISO
14001 and ISO 45001. We have conducted many trainings like IMS Policy awareness,
Fire-fighting, Fire Hydrant Operation, EHS Basics, Incident Investigation, Material
Handling safety among others. We also conducted trainings on "Living with Core Values
of PBIL " and "Building the culture of Accountability". The Internal
Capability Development initiative "Gyanoday" wherein employees from the
organization give trainings to their colleagues is also continuing with great success.
Many efforts were also put in creating awareness among workers about the losses they face
due to absenteeism which included conducting trainings for them. We have invested on
enhancing the "Employee Experience" through the Tata Chroma software. It
encompasses Organization Management, People Management, Leave Management, Attendance
Management, Performance Appraisal, Career management, Learning Management, Expense
Management, Benefits Management and Managed Payroll Services. This software brings all
aspects of HR under one umbrella. This employee friendly software will enable the
employees to do all they need to do from their desks and increase the speed of working. We
are aiming towards HR excellence through digital transformation. The efforts on the Six
Sigma projects continued with a lot of success in all of them.
The coverage under the policies like - Group Term Life Insurance, Group
Mediclaim Insurance and Group Personal Accident Insurance have continued. Regular health
check-ups, conducting health talks for employees and also conducting dental check-ups for
them are few of the activities that we did to focus on the aspect of employee wellness.
And in our continued efforts to build on employee engagement, we celebrate the birthday of
employees, organize events on Republic Day, Independence Day and Diwali.
The number of people employed on the Rolls of the Company was 468.
XI. CAUTIONARY STATEMENT
Estimation and expectation made in the Report may differ from actual
performance due to various Economic Conditions, Government Policies and other related
factors.
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