Raj Packaging Industries Ltd Management Discussions

1. Industry Structure and developments

In present day scenario packaging plays an important role in determining products value. Packaging has played a crucial role in the development of society and the economy. The Indian plastic industry is one of the leading sectors in the countrys economy. The industry has advanced significantly over the past few decades, becoming one of the nations most significant sectors with a considerable base. It currently includes over 30,000 processing units with a majority being Micro, Small, and Medium Enterprises (MSMEs).

Packaging can generally be divided into two main segments: Rigid Packaging and Flexible Packaging. Flexible packaging is a rapidly growing segment of the packaging industry. Flexible packaging has various applications in the food and beverage industry and non-food segments like cosmetics, healthcare, automotives and agricultural to name a few. With wide variety of options available, Plastic is one of the most eminent packaging materials. The materials inert properties, lightweight, versatile usage and low-cost nature have made it preferred choice for packaging worldwide. In comparison to other materials available, plastic provides high strength and stiffness, enhanced durability along with ease in transportation.

India is one of the worlds largest and fastest-growing flexible packaging markets due to factors such as Urbanization adding to demand of packaged foods having extended shelf life along with quality, Rising population with higher and disposable incomes along with need for improved quality of life. The growth in retails business and e-commerce boom entails efficient and customizable packaging and growth in exports all have given new dimension to this industry.

As on today words like Sustainability and Recycling are synonym with Plastic industry. Governments all over are working towards 3Rs, reduce, reuse and recycle. In India Ministry of Environment, Forest and Climate change have brought in PWM (Plastic Waste Management) rules to provide a frame work for managing plastic waste in the country under EPR (Extended Producer Responsibility). Raj Packaging Industry has registered itself with pollution control board under these rules and fulfils the EPR requirements. We are working towards sustainable and recyclable flexible packaging options.

2. Opportunities and Threats / Risks and concerns

Flexible Packaging Industry in India is showing all positive signs, yet the industry faces some of the major challenges. The volatility in the price of raw materials and unpredictable availability issues leads to rising production costs and has resulted in reduction of profit margins of the vendors. Though demand of flexible packaging is showing positive sign, the growth has been pretty slow thus facing overcapacity in the converting industry resulting into price and receivables issue. The industry is hard pressured to maintain margins as well as manage working capital finances. The industry globally has seen rapid changes in technology but in India we are facing lack of this advance technology and market access. In India major vendors in packaging industry are in unorganized sectors which lead to lack of exposure to best manufacturing, marketing and branding practices. Another major issue industries in India are facing is non-availability of skilled man-power and high cost skilled man-power.

The increasing plastic consumption though presents economic opportunities has added to environmental challenges. Flexible packaging, often made from non-recyclable multi-layered materials, contributes significantly to the plastic waste crisis. Government bodies, consumers, and environmental groups are pressuring the industry to reduce its environmental impact and adopt more sustainable practices. Companies need to design for easier collection, segregation, and recycling, though challenges remain due to a lack of consumer awareness, proper and scientific collection methods and centers and effective recycling infrastructure. Implementing sustainable designs and materials is a costly process, requiring new investments in technology, research, and development.

Leveraging its extensive expertise, the company is focusing on sustainability, recyclability, and material reduction to meet regulatory requirements and consumer needs. It is working to fully capitalize on emerging opportunities by delivering tailored solutions that precisely meet customers needs.

3. Segment Wise or Product Wise Performance

During the financial year 2024-25, the Company recorded a total revenue of ^3,048.67 lakhs and a net loss of ^71.51 lakhs, as compared to a revenue of ^3,021.76 lakhs and a net loss of ^141.75 lakhs in the previous financial year 2023-24. The Company operates in a single segment - flexible packaging.

The company is facing significant challenges, including consecutive years of losses after a strong performance period following a prolonged period of stable profitability. The decline in performance is primarily attributed to volatility in raw material prices, driven by domestic pricing pressures and imports pricing. Furthermore, the flexi-packaging industry is currently facing overcapacity issues, resulting in a demand-supply imbalance. This has eroded pricing power across the sector and has reduced the companys ability to set profitable prices, amid the rising input costs. The companys sustain efforts to increase its market share and widen its customer base has not yet given desired results.

Despite these challenges, the Company has shown improvement in reducing its losses and remains committed to restoring profitability. The management is actively undertaking several strategic initiatives, including the development of new products, securing new customers trying to diversify the client base, and optimization of the procurement policy, to enhance operational efficiency and financial performance in the coming years.

4. Business Outlook

The flexible packaging industry holds long-term growth potential, driven by rising consumption, urbanization, and demand from sectors like food, FMCG, and e-commerce. However, short-term challenges such as raw material price volatility, overcapacity, and regulatory pressures may continue to impact margins.

Raj Packaging Industries remains focused on product innovation, cost optimization, customer diversification, and sustainable practices. The Company is confident that these strategic efforts will help improve performance and restore profitability in the coming years.

5. Internal Control system and their adequacy

The company has adequate internal system in place which safeguards all its assets & properties and maintain accuracy of its financial transaction and records.

a. By the means of Secretarial Audit it is ensured that all compliances with various provisions of law, rules and regulation are all complied with.

b. Internal Audits are conducted quarterly and report is presented to Audit Committee and based on the same corrective measures are taken.

Based on the recommendation of various auditors steps are being taken to ensure company adheres to corporate governance best practice

6. Discussion on financial performance with respect to operational performance

During the financial year 2024-25, Raj Packaging Industries financial performance reflected the operational challenges faced by the company. Despite recording a marginal increase in revenue to ^3,048.67 lakhs from ^3,021.76 lakhs in the previous year, the company continued to report a net loss, although reduced from ^141.75 lakhs to ^71.51 lakhs. This improvement in financial results was driven by efforts to optimize operations, control costs, and improve efficiency amid industry-wide pressures such as raw material price volatility and overcapacity.

7. Material developments in human resource/ industrial relations front, including number of people employed

There are no material developments in human resource/ industrial relations front, including number of people employed.

8. Details of significant changes in key financial ratios, along with detailed explanation thereof:

Reason for more than 25% change in Inventory turnover ratio and Interest coverage ratio

Interest Coverage Ratio: The Interest Coverage Ratio improved significantly, although it remains negative (improved by 71.21%). This improvement is mainly due to a reduction in operating losses during FY 202425 compared to the previous year.

9. Details of any change in return on net worth as compared to the immediately previous financial year

The return on net worth as mentioned above is negative during the year for reasons explained above under notes on Business performance.

10. Material developments in human resource/ industrial relations front, including number of people employed

There are no material developments in human resource/ industrial relations front, including number of people employed.

11. Disclosure of Accounting Treatment:

Accounting Treatment of the company is in compliance with existing accounting standards, applicable laws and regulations.

CAUTIONARY STATEMENT

This report may contain "Forward Looking Statements" including, but without limitation, statements relating to the implementation of strategic initiatives, and other statements relating to Raj Packaging future business developments and economic performance. While these Forward-Looking Statements indicate the Companys assessment and future expectations concerning the development of the Companys business, a number of risks, uncertainties and other unknown factors could cause actual developments and results to differ materially from the expectations. These factors include, but are not limited to, general market, macro-economics, governmental and regulatory trends, movements in currency exchange and interest rates, competitive pressures, technological developments, changes in the financial conditions of third parties dealing with the Company, legislative developments, and other key factors that could affect the Companys business and financial performance. Raj Packaging undertakes no obligation to publicly revise any forward-looking statements to reflect future / likely events or circumstances.