Plastiblends India Ltd Management Discussions

I ECONOMIC OVERVIEW

Global economic overview

Global economy is showing signs of improvement, although growth remains modest. The risk of global recession has receded, however mounting geopolitical tension could create hazards for the world economy. Factors like slowing growth, sluggish global trade and tight financial conditions are adversely impacting economic growth in developing economies. Attacks on Red Sea shipping increased costs and disrupted production resulting in raising of prices.

Global economy has experienced significant challenges and shift over the past few years in the form of post pandemic supply chain disruptions, Russia-Ukraine conflict and resulting energy crisis, Israel – Hamas war and its impact on oil prices, surge in inflation leading to monetary policy tightening by central banks around the world to curb inflation.

Despite these challenges, the global economy has shown remarkable resilience, steady growth and a slowdown in inflation have been observed. The International monetary fund (IMF) projects that global growth will hold steady at 3.2 per cent in 2024 and 2025 with declining inflation.

Indian economic review

Despite facing challenges, India has maintained a robust growth trajectory. The National Statistical Organisation (NSO) anticipates Indias GDP to grow for FY24 at 7.3%, echoing the vision of "Viksit Bharat". Indias large and diverse consumer base along with young workforce, fuels economic activity. It is the fifth-largest economy in the world and is poised to retain its position as the worlds fastest-growing major economy. This positive trajectory underscores the Governments strategic fiscal policies, transitioning from pandemic relief to targeted public investment, thereby bolstering economic capacity and fostering sustainable growth.

Indias digital revolution has been remarkable. The adoption of mobile technology, e-commerce and digital payments has transformed the way people live and do business. Investments in infrastructure—such as roads, railways, airports, and smart cities—have improved connectivity and productivity. Initiatives like "Make in India" have encouraged domestic manufacturing and attracted foreign direct investment. The Reserve Bank of India (RBI) has successfully harnessed inflation while simultaneously sustaining economic growth.

II. INDUSTRY STRUCTURE AND DEVELOPMENTS

Your Company is operating in manufacturing of various types of masterbatches and compounds which are essential ingredients for the plastic processing industry. The Company has maintained its brand and market leadership position since its formal years and was first to get DSIR recognition for its inhouse R & D unit. Your Company has presence in practically all category of Masterbatches i.e. White, Black, Colour, Additive and Polywhite (filler) distinguishing us from most other competitors who focus on specific category.

Masterbatches are used to impart colour and various special properties to the final product manufactured by plastic processing units. Though the cost of masterbatches in the final plastic product is very low, but its quality is very important for attaining the desired properties of the end product. 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.

Indian plastic Industry has over 50,000 plastic processing units employing more than 50 lakh people across the Country both directly & indirectly. It contributes 3.5 Lakh crore to Indias economy. Almost 80 to 90% of the total manufacturing units are in small & medium scale sector. The Industry is very fragmented and majority of the manufacturers are from unorganized sector and very few are from organized sector.

III. OPERATIONAL PERFORMANCE

The brief highlights of operations for the Financial Year 2023-24 are as under :-

The revenue from Operations was highest ever in the history of the Company of 80,216 Lakh for FY 2023-24 as against 76,852 Lakh for FY 2022-23.

EBIDTA margin grew by 66 bps from 7.16% in FY 22-23 to 7.82% in FY23-24.

PBT margin grew by 101 bps from 4.75% in FY 22-23 to 5.75% in FY23-24.

PAT margin grew by 81 bps from 3.49% in FY 22-23 to 4.30% in FY23-24.

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

The per capita plastic consumption in India has seen significant growth over the past few decades. In last three decades, plastic consumption in India increased 23-fold, reaching approximately 21 million tons. During this period, per capita plastic consumption rose from just one kilogram per inhabitant to 15 kilograms. However, its interesting to note that compared to the global average of 30 kilograms, Indias per capita consumption is still relatively lower. In fact, India accounts for approximately six percent of global plastics use, making it the third-largest consumer of plastic material, following China and the United States. According to AIPMA Indian Plastic Industry is poised for rapid growth. The size of the Plastic Industry is projected to grow from 3.5 Lakh Crore in 2022-23 to 10 Lakhs Crore in 2027-28 and export of plastic products is expected to grow from 0.4 Lakh Crore to 1 Lakh Crore.

The demand for plastic products has surged across diverse sectors, including packaging, agriculture, healthcare, infrastructure automotive & gas transportation and consumer goods. Plastics is a wonder material with wider applications across various sectors. Plastics offer versatility, cost effectiveness, durability making them preferred choice in various applications.

Packaging Industry is a major driver of plastics boom in India. The demand for flexible packaging is rising across the globe. Nearly 40% of the polymer production goes into packaging sector. Packaging is currently the 5th largest sector of Indian economy. Indian plastic packaging market is expected to grow at a CAGR of 3.09% to reach USD 25.35 billion by 2030.

The rising population, increased spending power, rapid urbanization and development of retail sector are factors augmenting the growth of packaging industry.

However factors like uninterrupted electric supply at reasonable prices, stable foreign exchange, availability of funds at lower interest rates and uncertainty regarding regulations are some of the factors that remain to be desired by plastic processing units.

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 sells 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 standardized 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 unauthorized use or disposition and that the transactions are authorized, 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

We refer to Human Resource as Human Capital, one of the biggest assets of our Organization. Human Resource is given utmost importance in our organization for they are the ones that man the machines and forge the way to big achievements. Organization culture is one of our biggest drivers for success.

We have three major standards in our organization: ISO 9001, ISO 14001 and ISO 45001 and we regularly conduct trainings on Integrated Management System (IMS) Awareness, IMS Policy, Safety, Aspect Impact Identification, Hazard Identification and Risk Assessment, Fire-fighting, Material Handling, Environment Health & Safety Basics.

Up-Skilling of our team is a big priority for us and under this initiative we conducted trainings on MS-Excel and PowerPoint for our staff so that they can revise the nitty-gritty of the topics along with learning the advanced themes. Workshops on Kaizen and Wastage Control were also done to help the employees learn and implement the concepts. A major highlight of the year was the "Trust" event in which the "Traveler" and the "Guide" interacted in an example of experiential learning. The main element that was: how trust is critical for the effective functioning of the organization and how it can be established. The efforts on the Six Sigma projects continue.

Other trainings held were the Internal Capability Development initiative "Gyanoday", in which the employees share their knowledge with the team. "Living with Core Values of Plastiblends" where in we highlight importance of the values: Trust, Integrity, Transparency, Empowerment, Innovation and Commitment in the regular, day to day behavior of the employees. We also imparted trainings on the losses faced by the workers due to absenteeism to bring an awareness among them. Since we place so much focus on our manpower, we also organized a workshop on "Interview Skills" for the seniors in our team. This workshop was highly engaging and it involved conduct of mock interviews by the participants in the training.

Under the umbrella of employee engagement, we also organize monthly Birthday Parties. We also organized Republic Day & Independence Day Celebrations, Yoga Day Celebrations, Diwali Celebrations and World Heart Day Celebrations. On 22nd January 2024, India witnessed the grand consecration ceremony or "Pran Pratishtha," of the Ram temple in Ayodhya. The Company organized a special celebration to honor Ram Lallas Pran Pratishtha. It was indeed a historic milestone for India. We also organized medical check-up camps for our employees. The digital transformation of HR continues with the help of TCS Chroma software. The coverage under the policies like – Group Term Life Insurance, Group Mediclaim Insurance and Group Personal Accident Insurance have continued.

The number of people employed on the Rolls of the Company was 477.

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.