1. Economy review
1.1 Global economy
Global economy has shown a bounce back in year 2021 after contraction and stress due to
COVID-19 pandemic in 2020. According to International Monetary Fund (IMF), global real GDP
growth rebounded to 6.1% in year 2021 from 3.1% contraction in year 2020. Wide vaccination
coverage, accommodative fiscal policies and relaxation on restriction have helped in
increased consumer spending and industrial activity picked up in most economies. The rise
in fiscal spending and accommodative monetary policies globally further supported this
recovery. Delta wave surge in Q2, 2021 in Asian countries resulted in dampening of mood
and spending. However, United States and Europe have shown positive trend in recovery and
economic activities are picking up momentum. China continues to adopt Zero tolerance to
COVID-19 which continues to be a major challenge to normalisation. Further the supply
chain continues to pose challenge as logistics globally struggles with under capacity and
trade imbalances.
Business investment picked up in response to robust recovery and greater liquidity. As
commodity prices increased, commodity-exporting countries benefited and global trade
witnessed renewed growth in exports. International shipping costs rose to multi-year highs
in September 2021 as ports were choked and container availability became tight. In the
last quarter of CY 2021, the exports of developing countries rose by 30% year over year,
whereas exports of developed economies rose by 15%.
Increased economic activities resulted in increased energy cost and Russia-Ukraine
crisis has posed another new challenge. This has resulted in high cost of raw material
pushing inflation northwards across the world.
Towards the close of the financial year, Inflation in several regions had touched
multi-decadal highs and this has become a major concern for all major economies and fiscal
tightening is taking place at a much faster pace than anticipated.
Outlook
The COVID-19 and Russia -Ukraine conflict are resulting into major realignment of
economies across the world. World is learning to live with COVID and fastest ever
discovery of Vaccine has reposed faith in science and innovation. The worlds eyes are
tentatively set on the Ukraine-Russia war and the potential economic and humanitarian
fallout. The war has heightened fears of global slowdown, supply chain disruptions and
rising inflation, and the IMF expects global growth to moderate to 3.6% in CY 2022. The
consequent effect on various aspects of the global economy, such as commodities and
financial markets, and trade and migration linkages, are evident.
Emerging and developing markets are estimated to grow at slightly -higher rate of 3.8%
in 2022. Policy response is expected to be aggressive, Energy security and alternate
supply chain will be focus area for major economies.
Despite all these challenges, supply-demand imbalance is expected to get resolved and
inflationary pressure will ease out. IMF projects reasonable growth over next 2 years.
1.2 Indian economy
The start of FY 2021-22 was subdued with the surge of the second wave of the
COVID-19-19 pandemic. However, the economy did not completely lose momentum as lockdowns
were localised and government actions were proactive. This was followed by a massive push
towards vaccination that helped to contain severity of any subsequent wave of the
pandemic.
Indias large domestic economy coupled with the governments enormous public spending,
both in the form of planned outlays and direct benefit transfers, led to liquidity
infusion into the economy, and helped the country consistently grow. Despite global supply
chain disruptions and looming uncertainty about the possible resurgence of COVID-19-19
infections across many parts of the world, domestic macroeconomic conditions diverged from
the global configuration and the Indian economy achieved a real GDP expansion of 8.7% in
FY 2021-22.
Though economic parameters have gained ground, rising inflation has been a consistent
worry. The Indias Consumer Price Index (CPI) jumped to a 17-month high of 6.95% in March
2022.
Outlook
I ndias economic growth in FY 2022-23 will be supported by widespread vaccine
coverage, massive public sector spending, easing of regulations, robust export growth, and
the availability of fiscal space to ramp up capital spending for several key sectors.
According to the RBI estimates, Indias GDP is projected to grow in real terms by 7.2%
in the next fiscal year. However, the situation created by the Russia-Ukraine conflict is
likely to drag this down to some extent. Indias unique geopolitical advantage and its
strong economic growth redux afford a certain degree of stability amidst international
volatility. Inflation will continue to be main concern and the RBI has already increased
policy rates to counter inflation and modified its accommodative stance.
I ndian government has accelerated its reforms initiatives like Production Linked
Incentives (PLI) schemes and increased infrastructure spending to support the industry.
This will provide resilient demand in economy and its ripple effect on other aspects of
the economy, such as employment and productivity, will bring India back on track in its
medium-to-long-term economic objective.
2. Industry Overview
The chemical industry comprises of companies that produce industrial chemicals. It is
central to any modern industrialized economy, where it converts raw materials such as oil,
natural gas, minerals, etc. into more than 80,000+ products.
Specialty Chemical Market Overview
Importance of Speciality Chemicals in our daily life continues to increase even as
income levels in developing and underdeveloped countries rise. The global specialty
chemicals market is expected to grow at a CAGR of 4.7% from -market size of US$ 641.2
Billion in 2021 - to -US$ 882.6 billion in 2028. The growth is attributed to rising demand
from end-use industries such as agriculture, pulp and paper, pharmaceuticals, personal
care and cosmetics, etc. The Indian specialty chemical industry is expected to outperform
its peers and double its share in the global market7.
COVID-19 has forced us on the need of alternative sourcing locations for chemicals and
India has the potential to become the alternate to China as preferred destination. Hence,
Indian Speciality Chemical industry will see lot more interest from multinational
companies and export growth will be robust in coming years. Government and industry are
taking several steps make this growth coordinated and to reduce dependence of China for
Raw Materials.
Agrochemicals Market Overview
The market size of the global agrochemicals market was US$ 218 billion in 2021 and it
is expected to grow to US$ 281 billion at a CAGR of 2.7% during the forecast period of
2022-2030. This growth is expected to be driven by a growing global population and
shrinking arable land. It is also expected that the agrochemicals market will grow towards
more use of pesticides as a large number of pesticides are expected to go off patent which
will increase their access.
The performance of the global agrochemical market varies across different geographies.
Using exports of agricultural products as a proxy for the size of the agrochemical market,
the largest geographical market is the Asian-Pacific region. This is followed by North
America, Africa, Latin America, and Europe. The size of the agrochemical market in the
Asian-Pacific region is estimated to be the largest because of the huge size of the
agriculture sector. According to the Asian Development Bank, around one-third of
developing Asias people are still employed in agriculture8 9.
| Asia-Pacific |
46% |
| North America |
30% |
| Africa |
9% |
| Latin America |
8% |
| Europe |
4% |
| Middle East |
3% |
| Australia |
0% |
Source: Authors calculations based on data from USDA9
8 Source: https://www.adb.org/sites/default/files/
publication/726556/ado2021-update-theme-chapter.pdf
9 Source: https://apps.fas.usda.gov/opendataweb/home
Within the Asian-Pacific region, India is the third- largest agrochemical market after
Japan and China. The Indian agrochemicals industry was valued at around $ 5.72 billion
last year and is expected to grow at a CAGR of 8-10% through 2025. According to the
ministry of agriculture and farmers welfare, the total area under cultivation in India in
CY 2020 - 21 was 188.595 million hectares out of which 147.349 million hectares were
covered by chemical and biopesticides. The growth in the Indian agrochemical industry is
expected to be driven by the divergence towards cash crops, rising population, and
government initiatives. In addition, India still has 50% of its population dependent on
agriculture and is, therefore, a very important sector. As this sector grows, demand for
Agrochemicals in India will also grow exponentially.
Impact of Climate Change
As per the IPCC, the impact of climate change could soon be irreversible. Some of the
expected impacts of climate change are Increase in temperatures, changes in precipitation
and weather patterns, and a reduction in water availability.
Changing weather conditions can affect the number of insects, diseases, weeds, fungi,
and other pests, which can have a big impact on food availability, affecting food quality,
and reducing agriculture productivity. One of the most vital offerings from the chemical
industry are crop protection products which help control pests and diseases. Thus, the
agrochemical industry is expected to play an important role in fighting climate change
Performance of Crop Protection Chemicals in 2021
The market increased by 5% in 2021 led by global economic recovery following COVID-19.
The essential good nature of agriculture products prevented the crop protection industry
from being impacted by the lockdown. However, the industry was indirectly impacted by
shipment delays at ports, availability of raw materials, and reduced demand for certain
products.
Global Crop Protection Market by region 2021
| Asia Pacific |
32.3% |
| Latin America |
25.1% |
| Europe |
21.6% |
| North America |
7.6% |
| Middle East and Africa |
3.5% |
The performance of the agrochemical industry differed across geographical regions. The
Asia Pacific market is the largest and fastest-growing region. It grew by 8% compared to
last year, with China, India, and Japan witnessing growth in their agrochemical sector. In
Australia, where severe drought impacted the production of the crops in recent years,
rainfall returned in the 2020/21 season which significantly boosted the market growth
during the year. In recent years, the European market has been shrinking because of strict
regulations and unfavourable weather events. In 2021, however, the region bucked this
general trend, with a particularly strong growth of 7% being achieved. Similarly, both the
US and Canadian markets are looking generally favorable with higher production of key
crops - corn and soybean areas are helping drive market growth. In contrast, during 2021,
Latin America notably declined, falling by around 3.0%. The depreciation of currencies in
Latin America, particularly so for Brazil which is the largest market for agrochemicals,
against the US dollar. In addition to forex, a major influence limiting performance in the
season has been dry conditions which have impacted the crop production.
Role of CRAMS in Evolving Agrochemical Industry
The last few decades have seen the agrochemical industry continuously evolve because of
the emergence of new pests, safety and environment friendliness, biodiversity protection,
resistance management, climate changes, and efficient product utilization rate.
Approximately 80% of the global market is dominated by generics and the rest is accounted
for by the new active ingredients. In the generics segment, countries like China and India
have a big presence. The rate of new active ingredients entering the market has
significantly declined because of long product development cycles (~10+ years), huge
investments (~$300 Million), and strict regulations. Global companies have started to
outsource various stages of product development to CROs (Contract Research Organisations)
and CRAMS (Contract Research and Manufacturing). As a result, the global market for CRAMS
is expected to grow at a CAGR of 10% from 2020-2024. MNCs like BASF, Bayer, and Syngenta
are already outsourcing more than 70% of their production to either Europe, China, or
India. The increasing costs in Europe and the COVID-19-19 pandemic have helped India
become a favourable destination for manufacturing agrochemicals and availing services from
CROs.
India Market Review
The Chemical industry in India is a highly diversified market, with over 80,000
commercial products. Globally, India is a major player in the global market ranking 11th
in export of chemicals and 6th in import of chemicals7. Domestically, the chemical
industry is an important source of employment, with the industry employing more than 2
million people8.
The Chemical sector, including performance chemicals, Agrochemicals, and Speciality
Chemicals, is poised for exponential growth over the next few years. Demand is growing and
new applications are emerging. This coupled with a rebalancing of global supply chain
offers a unique opportunity for India as a country and several global MNCs are looking to
expand their presence in India. The government of India is encouraging the Industry to
partner with these MNCs for industrial development.
The production of agrochemicals (ex fertiliser) has grown at a CAGR of about 5% in the
last five years. The industry is expected to grow at a CAGR of 8-10% by 2025. The
agrochemical industry plays a key role in India, with 50% of its total production being
exported. Globally, India is the fourth largest producer and fifth largest exporter of
agrochemicals.
The Crop Protection chemicals market in India is estimated at $3.3 billion in 2021 (in
real terms) and grew at a rate of about 8% over 2020. Key trends in the market are a
growing need for enhancement of agricultural productivity, and an increase in the adoption
of biopesticides. The drivers of growth in the crop protection industry are better timing
and spatial distribution of rainfall, higher pest incidence via a-vis last year, and steps
by the government to improve farm income.
The spread of coronavirus is expected to have a positive impact on the Indian crop
protection chemicals market, largely through reduced manpower resulting from restrictions
on the movement of migrant labour. It is expected that this has driven farmers to adopt
more pesticides, particularly herbicides with weeding done by hand in large parts of the
country.
Policy impetus
The import dependence of the Indian agrochemical industry for raw materials has
prompted the government to introduce several initiatives. For example, the government has
taken several steps for increasing investment such as enhanced institutional credit to
farmers; promotion of scientific warehousing infrastructure for increasing the shelf life
of agricultural produce; setting up of Agri-tech Infrastructure Fund for making farming
competitive and profitable; developing commercial organic farming, etc. The government is
also implementing various schemes for the supply of farm inputs, like seeds, fertilizers,
agricultural machinery & equipment, irrigation facilities, institutional credit, etc.,
at subsidized rates to the farmers in the country. The result of these initiatives has
been an increase in the contribution of the agricultural sector to Indias GDP. The
percentage share of GVA (Gross Value Add) of agriculture & allied sector to the total
economy was 17.6 percent in FY 2018-19 to 20.2 percent in FY 2021-22.
7 This excludes pharmaceutical products.
8 Source for entire paragraph: https://www.investindia.gov.in/ sector/chemicals
Growth Drivers
China plus one strategy
The global agrochemical industry is dominated by China. Due to growing environmental
concerns, many specialty chemical companies in China have ceased their activities, and
industries that rely on specialty chemicals are diversifying to different countries.
Consequently, Indian manufacturers are looking at expanding their portfolio with
value-added products. Rising demand from domestic as well as overseas companies for Indian
agrochemicals brings an immense opportunity for growth in the coming years.
Import Substitutes
The Indian Speciality Chemicals Industry is heavily dependent on imports. The
government is nudging domestic producers to fulfil this demand. The situation has been
exacerbated by the war impeding imports. This can push Indian producers to meet domestic
demand.
Domestic Consumption
The average per hectare consumption of agrochemicals in India is approximately 10% of
that in the US and the UK, and 5% of that in Japan and China. As awareness and access
increase in India, domestic consumption has immense potential to grow.
Patent Expiry
Patent expiry is an important source of growth for pharmaceutical companies. It is
estimated that 100+ agrochemicals are expected to go off-patent in the next two years.
This presents a potentially lucrative opportunity for companies in the agrochemical
space.
Company overview
Established in 1975, Punjab Chemicals and Crop Protection Limited have evolved from a
generic chemical company into a leading contract research and manufacturing company
operating in single segment i.e. "Performance chemicals" mainly focusing on
agrochemicals and specialty chemicals. Our three state-of-the-art manufacturing facilities
across India ensure uninterrupted production. Our motto has always been customer
centricity where we align customer experience, customer value, and customer life cycle.
PCCPL is the go-to CRAMS provider for both domestic and international agrochemical
companies, thus positioned to gain further advantages as the industry expands. The company
has a comprehensive product portfolio, strong brand presence, and a wide distribution
network. All products are well accepted in the domestic retail market and are also
exported to large MNCs and brands across five continents.
In the fast growing CRAMs market, PCCPL aims to become a major Indian player in the
segment and a preferred partner for manufacturing high-tech performance chemicals. We have
a long and proven
history of manufacturing and exporting to various agrochemicals and specialty
chemicals, thereby giving us the chance to increase the volume and add new products under
CRAMS or for outright sale. We have initiated discussions with several big companies to
explore such options and are also working to strengthen R&D capability and technical
capabilities to cater to these new business opportunities. We have long-term associations
with several leading global players and are working to strengthen this relationship with
new products and increased business.
The Companys strategy for the coming years is to add value by forwarding integration
for various agrochemicals and industrial chemicals. The thrust will be towards value-added
agrochemical products in the international market, particularly in Europe, USA, Canada,
and Latin America. Our R&D is geared towards introducing the latest agrochemicals and
specialty chemicals in domestic and international markets. The aim, as always, will be to
meet customer expectations of providing the right quality within desired timelines.
Our strategic priorities include long-term contracts signed with multiple international
players. New product launches and registrations are also in the pipeline that will enhance
the top and bottom lines in the medium-to- long term.
Business Review
Financial Highlights (Consolidated)
Profit and Loss Summary
|
|
|
(Rs in crores) |
| Particulars |
FY22 |
FY21 |
Change (%) |
| Net Sales & Operating Income |
933.46 |
678.18 |
37.64% |
| Other Income |
0.93 |
1.83 |
-49.18% |
| Total Income |
934.39 |
680.01 |
37.41% |
| EBITDA |
140.62 |
97.33 |
44.48% |
| Depreciation |
16.67 |
14.86 |
12.18% |
| EBIT |
123.95 |
82.47 |
50.30% |
| Interest & other Finance charges |
12.34 |
13.46 |
-8.32% |
| Profit before Tax |
111.61 |
69.01 |
61.73% |
| Tax Expense |
28.15 |
19.93 |
41.24% |
| Profit after Tax |
83.46 |
49.08 |
70.05% |
| Other Comprehensive income / (expense) for the year (net of tax) |
0.08 |
(0.46) |
-117.39% |
| Total comprehensive income for the year |
83.54 |
48.62 |
71.82% |
| Earnings per share (EPS) Basic and diluted (in Rs) |
68.07 |
40.03 |
70.05% |
Revenue
Revenue increased by 37.64% year over year to Rs 933.46 crore in FY 2021-22. The
increase was driven by contribution from better realisations during the year in addition
to growth across existing products. In the CRAMS space, the Companys R&D team is
making fresh inroads into product and process research on several new molecules. The
Company is continuously looking for new molecules to be added to its product portfolio and
is in dialogue with various existing and new customers.
The Derabassi plant contributed 664 crores to the total revenue through agrochemicals
sales in FY2021- 22 as compared to 501 crore in the previous year, a yoy increase of 32%.
The Speciality and Other Chemicals division at the Lalru plant achieved revenue growth of
26% to 156 crores as compared to 124 crores a year ago. The Pune plant revenue increased
113% year over year to 111 crores.
Export revenue increased by 15.1% to Rs 487 crore while domestic revenues jumped to Rs
446 crore, up 74%. The share of export to domestic sales was 52:48 as compared to 62:38 a
year ago.
EBITDA
The EBITDA for the year FY 2021-22 was the highest ever at Rs 140.62 crore, an increase
of 44.48% from a
year ago. Higher revenues along with increasing margin on account of product mix led to
EBITDA outpacing the revenue growth. EBITDA margin improved by 90bps to 15% for the year.
PAT
The Company has recorded its highest ever PAT in FY 2021-22. PAT increased to Rs 83.46
crore from Rs 49.08 crore, up 70% year over year. PAT margin has grown 2.5 times from 3.5%
in FY 2017-18 to 8.9% in FY 2021-22. This improvement is owing to improved efficiency and
higher contribution.
Capital Structure
The debt to equity ratio improved to 0.4x from 0.5x a year on account of strong
financial performance and record PAT, even as debt moved up to Rs 87 from Rs 75 crore a
year ago. The Company is on track to become debt free over the next few years.
Working Capital
Working capital days increase to 43 in FY 2021-22 from 12 days a year ago. The increase
was driven primarily by an increase in inventory due to higher raw material prices as well
as higher stocks to prevent any disruptions in production given supply chain disruptions.
Asset and liability composition (Consolidated)
|
|
|
(Rs in crores) |
|
FY22 |
FY21 |
Change (%) |
| Liability |
|
|
|
| Equity Share Capital |
12.26 |
12.26 |
- |
| Reserves and Surplus |
213.36 |
132.27 |
61.31% |
| Total Equity |
225.62 |
144.53 |
56.11% |
| Borrowings |
87.28 |
81.41 |
7.21% |
| Trade Payables |
132.17 |
113.50 |
16.45% |
| Other Liabilities and provisions |
112.19 |
111.56 |
0.56% |
| Total Liabilities |
331.64 |
306.47 |
8.21% |
| Total Equity and Liabilities |
557.26 |
451.00 |
-23.56% |
| Assets |
|
|
|
| Fixed assets |
210.97 |
187.57 |
12.48% |
| Inventories |
153.72 |
101.30 |
51.75% |
| Trade Receivables |
111.83 |
83.84 |
33.38% |
| Cash and Cash Equivalents |
8.42 |
11.56 |
-27.16% |
| Balances with banks and Money at call and short notice |
2.83 |
2.85 |
-0.70% |
| Investments |
1.37 |
1.28 |
7.03% |
| Advances & Other Assets |
68.12 |
62.60 |
8.82% |
| Total Assets |
557.26 |
451.00 |
23.56% |
Key Ratios
| Ratio Analysis (Consolidated) |
FY22 |
FY21 |
Change (%) |
Detailed explanation for Significant change i.e. 25% or more |
| Current Ratio |
1.29 |
1.09 |
18.44% |
NA |
| Debt Equity Ratio |
1.44 |
2.08 |
-30.47%* |
Decrease due to the increase in profit |
| Debt service coverage ratio |
0.43 |
0.32 |
33.10% |
Decrease due to increase in profit |
| Return on Equity / Return on Investment |
45.09% |
40.52% |
11.30% |
NA |
| Inventory Turnover |
7.32 |
7.22 |
1.35% |
NA |
| Trade receivables turnover ratio |
9.54 |
10.31 |
-7.50% |
NA |
| Trade payables turnover ratio |
5.03 |
4.13 |
21.76% |
NA |
| Net Capital Turnover Ratio |
12.81 |
35.04 |
-63.43% |
Decrease due to Increase in net working capital which is primarily
increase in Inventory and Trade receivables |
| Net Profit Ratio (%) |
0.09 |
0.07 |
23.54% |
NA |
| Return on Capital employed |
0.40 |
0.35 |
16.07% |
NA |
| Interest coverage ratio |
10.04 |
6.13 |
63.94% |
Increase due to increase in EBIDTA |
| Operating profit margin |
13.27 |
12.13 |
9.38% |
NA |
Detail of any change in return on net worth as compared to the immediately previous
financial year along with detailed explanation thereof,
|
FY 22 |
FY 21 |
Change % |
Reason |
| Return on Net worth |
36.99 |
33.96 |
8.93% |
Due to increase in PAT |
SCOT Analysis
Strengths
• Developed an efficient cost-competitive process over the last decade and is
maximising the export potential.
• Availability of technically trained manpower and surplus production capacity to
fulfil incremental demands
• A collaborative business model where clients support advance funding the
production.
• A consistent track record with domestic clients and a preferred partner of
choice for MNC clients.
• Prudent capital allocation driving growth in ROCE
• A strong balance sheet with low to moderate debt
Challenges & Risks
• Long gestation period to develop molecules and receive registrations for
commercialisation. On the positive side, this leads to long-term contracts with clients
and better client stickiness
• The seasonal nature of the demand from the domestic agriculture sector. However
the Export revenues help smoothen the seasonality in domestic sales
Opportunities
• China+1 strategy of global MNCs provides Indian agrochemical producers with a
readily available and approachable market
• The growing world population and the need to provide food security to both
producers and consumers of agricultural products give the segment a lot of room to
innovate and grow.
• Unattended domestic requirements owing to the war-induced supply chain
disruption have created a gap that domestic producers will fill
Threats & concerns
• The unpredictability of the constantly changing global conditions has
exacerbated with the Russia- Ukraine conflict, leading to a rise in energy and raw
material prices
Human Resources
PCCPL has always believed in human empowerment and regards human capital as one of the
organisations most valuable assets. A productive workforce helps in growth, advancement,
profitability, and shareholder value. Given our high growth outlook, we are building a
confident team and also implementing processes and systems for future growth.
During the year, the Company continued to work on enhancing HR policies and processes
to improve
performance. The purpose is to develop a value system and behavioural skills that allow
it to achieve the Companys short and long-term objectives.
Our primary consideration during the pandemic was the safety, enablement, and
engagement of our 1,213 strong workforces. In addition to rigorous implementation of
Business Continuity Plans, the Company set up work- from-home infrastructure and mandated
appropriate health and safety norms and advisories. To ensure the safety of the workforce,
software for thermal and mask recognition was implemented, which is an AI-based solution
integrated with the attendance software. The Company also organised seven vaccination
camps where COVID-19 vaccines were provided to the employees and contract workers free of
cost.
Corporate Social Responsibility
The Company is a strong believer in Corporate Social Responsibilities (CSR) and pledges
to contribute to the development of society. PCCPLs CSR Policy focuses on the social
environment and economic necessities of the underprivileged.
This year PCCPL spent Rs 76 Lakhs on health care, education, rural development, and
poverty eradication, with a thrust on promoting education. Below are the key highlights:
• Supporting education through developing infrastructure at schools
• Health initiatives
• Donations to NGOs that serve the underprivileged community
Outlook
PCCPL aims to become a major Indian player in the fast-growing CRAMs segment and a
preferred partner for manufacturing high-tech performance chemicals. Having achieved
landmark EBITDA and PAT in its history, the Company now is ready to step on to the next
leg of growth in the regions of Latin America, South Asia, and the European Union.
The aim, as always, will be to meet customer expectations of providing the right
quality within desired timelines. The company will take advantage of the competitive
Indian market by forging relationships with formulators and launching new products.
Its financial strategy is prudent capital allocation that drives growth in ROCE. The
Company is on track to be a net debt-free company. The Company is targeting annual sales
of 1,500 Crores in the next 2 years and increasing its EBITDA margin by 2-3% through a
higher share of CRAMs revenue.
These operational and leverage-related goals will set PCCPL up for achieving its
near-term growth goals while guiding it towards its aims of achieving sustainable income
and profitability.
Information Technology
Adapting digitally has become the top priority for companies across industries in the
post-pandemic world. The Company has also paced to the next level by improving on some key
processes, and upgrading its Information Technology infrastructure which includes
software, hardware, networking, and security.
The objective is to lead all business processes to as much automation as possible to
increase efficiency and accuracy. The Company has developed a framework that utilises
various technologies and platforms to offer a seamless and integrated experience to our
partners and clients.
The Company has implemented an integrated Enterprise Resource Planning System that uses
SAP B1 Hana Ver 10 and G-suite cloud backup to secure critical data across all plant and
office locations.
Compliance
The Company has a robust compliance management system that issues proactive warnings in
the event of any infractions. The independent Audit Committee and/or the Board of
Directors examine the Companys performance regularly to verify that it aligns with the
overall company policy and predefined objectives.
Internal Controls and Adequacy
The company has adequate systems of internal control commensurate with its size and the
nature of its operations. The controls provide reasonable assurance that financials and
operational information will be recorded reliably and in compliance with applicable
statutes. They also safeguard assets from unauthorized use or losses, execute transactions
with proper authorization, and ensure compliance with corporate policies.
The company has a well-defined manual for delegation of authority for revenue and
expenditure approvals. The company uses the SAP system to record data for accounting,
consolidation, and management information purposes, connecting different locations for
information exchange.
The Companys Internal auditors ensure the smooth functioning of risk management
policies, and build an organisation-wide awareness of risks, across businesses and
corporate functions. They develop formal reporting and monitoring processes and build risk
management maintenance plans that keep the information updated and refreshed. They also
deploy an ERM framework in key business areas and corporate functions aligning risk
management with the business planning exercise.
The company has an Audit Committee of the Board of Directors, the details of which have
been provided in the corporate governance report. The Audit Committee reviews audit
reports submitted by the internal auditors. Suggestions for improvement are considered,
and the audit committee follows up on the implementation of corrective actions. The
committee also meets the companys statutory auditors to ascertain, inter alia, their
views on the adequacy of internal control systems in the company and keeps the board of
directors informed of its key observations from time to time.
Cautionary Statement
Statements made in the Management Discussion and Analysis describing the Companys
objectives, projections, estimates, and expectations may be "Forward-looking
statements" within the meaning of applicable securities laws and regulations. The
actual results might differ materially from those expressed or implied depending upon
factors such as climatic conditions, global and domestic demand-supply conditions,
finished goods prices, raw materials cost and availability, foreign exchange market
movements, changes in Governmental regulations and tax structure, economic and political
developments within India and the countries with which the Company has business. All the
mandatory informations have been included in the MDA section, however if any are
unavailable in this section are mentioned elsewhere in the Annual report
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