RDB Rasayans Ltd Management Discussions

World Economic Conditions

The baseline forecast is for the world economy to continue growing at 3.2 percent during 2024 and 2025, at the same pace as in 2023. A slight acceleration for advanced economies—where growth is expected to rise from 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8 percent in 2025—will be offset by a modest slowdown in emerging market and developing economies from 4.3 percent in 2023 to 4.2 percent in both 2024 and 2025. The forecast for global growth five years from now—at 3.1 percent—is at its lowest in decades. Global inflation is forecast to decline steadily, from 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025, with advanced economies returning to their inflation targets sooner than emerging market and developing economies. Core inflation is generally projected to decline more gradually.

Economic activity was surprisingly resilient through the global disinflation of 2022–23. As global inflation descended from its mid-2022 peak, economic activity grew steadily, defying warnings of stagflation and global recession. However, the pace of expansion is expected to be low by historical standards and the speed of convergence toward higher living-standards for middle- and lower-income countries has slowed, implying persistent global disparities. With inflationary pressures abating more swiftly than expected in many countries, risks to the global outlook are now broadly balanced compared with last year. Monetary policy should ensure that inflation touches down smoothly. A renewed focus on fiscal consolidation is needed to rebuild room for budgetary maneuver and priority investments, and to ensure debt sustainability. Intensifying supply-enhancing reforms are crucial to increase growth towards the higher prepandemic era average and accelerate income convergence. Multilateral cooperation is needed to limit the costs and risks of geoeconomic fragmentation and climate change, speed the transition to green energy, and facilitate debt restructuring.

Indian Economic Conditions

The Indian economy is set to achieve nearly 7% growth in the financial year 2024-25, according to a report released by the Ministry of Finance on Monday. The report attributes this positive outlook to the robust domestic demand that has propelled the country to a growth rate exceeding 7% over the past three years.

Indias economic performance in recent years demonstrates substantial growth, with a 7.2% expansion in 2022-23 and an impressive 8.7% growth in 2021-22. The current financial year, 2023-24, is expected to witness a growth rate of 7.3%, securing Indias position as the fastest-growing major economy.

The report credits the strength in domestic demand, driven by private consumption and investment, to government reforms and initiatives implemented over the past decade. Investments in both physical and digital infrastructure, along with measures to boost manufacturing, have bolstered the supply side, providing a significant boost to economic activity in the country.

According to the report, "In FY25, real GDP growth will likely be closer to 7 per cent," with the potential for the growth rate to surpass 7% by 2030.

The report highlights the ongoing expansion of digital infrastructure, improvements in institutional efficiency, technological progress through collaboration with foreign partners, accelerated human capital formation, and an increasingly favorable investment climate.

It projects that India is poised to become the third-largest economy globally in the next three years, reaching a GDP of USD 5 trillion.

The report states that "India can aspire to become a USD 7 trillion economy in the next six to seven years (by 2030)."

"This will be a significant milestone in the journey to delivering a quality of life and standard of living that match and exceed the aspirations of the Indian people."

Factors contributing to the optimistic economic outlook include firm GDP growth forecasts, manageable inflation levels, political stability at the central government level, and indications that the central bank has concluded its tightening of monetary policy.

Industry Structure & Developments

The rapid pace of industrialization worldwide serves as a primary driver for the growth of the FIBC market. Industries involved in chemical production and agriculture increasingly rely on FIBCs for the efficient transportation of various products, including grains, rice, potatoes, cereals, and liquid chemicals.

Additionally, FIBCs play a crucial role in storing and transporting construction supplies such as carbon black, steel, alloys, minerals, cement, and sand. The market expansion is further fueled by mounting environmental concerns and a growing demand for lightweight, biodegradable bulk packaging materials, especially in the pharmaceutical sector. Pharma-grade FIBCs are specifically designed to store medical items and prevent contamination. The market is also experiencing growth through product advancements, including the development of FIBC variations as hygiene packaging solutions, catering to the rising demand in this sector. Overall, the FIBC Bag market is poised for continued expansion in the coming years due to the increasing demand for sustainable and innovative products, as well as the widespread adoption of technology. By 2032, the global FIBC Bag market size is projected to reach multimillion figures, displaying an unexpected compound annual growth rate between 2024 and 2032 when compared to the figures observed in 2021.

According to 2024 new survey, global FIBC Bag market is projected to reach USD 12260 million in 2029, increasing from USD 8727.3 million in 2022, with the CAGR of 4.9% during the period of 2023 to 2029.

Key manufacturers engaged in the FIBC Bag industry include Taihua Group, Greif Flexible Products & Services, Linertech, Caretex, Louis Blockx, Anthente, Norseman, LC Packaging and Nihon Matai, etc. When refers to consumption region, volume of FIBC Bag were sold to North America, Europe and Asia Pacific in 2022. Moreover, China, plays a key role in the whole FIBC Bag market and estimated to attract more attentions from industry insiders and investors.

Strengths and Opportunities:

Your Company is taking all efforts to improve the quality and productivity to get more orders at competitive rates. The strength of the business lies in the manufacture and supply of value added goods to reach the end users. The intense competition with many enterprises fighting for a share in market demands competitive pricing and quality in the product to survive and your company is able to grow under this challenging conditions as result of expertise from decades of experience in the market, quality improvements, innovation, better pricing and servicing of customers and the ability to meet the demand from market.

Saves Money and Space: It is one of the cheapest systems for packaging, bringing a significant cost saving. There is no need for a secondary container because the product is already contained and protected. It saves usable storage space as it is stackable and barely has a volume of its own. The Company is taking all efforts to improve the quality and providing bags as per the needs of the customers at a competitive rate.

Optimizes Handling And Transport: Big Bags can transport up to 300 times their weight. In addition, they are easy to handle, FIBCs have integrated elevation loops, so its not necessary to use any external transport or handling device, and it avoids the need of using pallets or another type of loading unit. The Company is continuously endeavoring to provide the needs of its customers.

Very versatile: Of course, there are standard models in big bags, but it is also possible to make a tailor-made FIBC for a specific product or client to cover any special packaging need. FIBCs can be printed, which is not only great for marketing purposes, but also for information regarding the product or handling or transporting instructions. The Company is providing all types of bags as per the needs of the customers.

Its Environmentally Friendly: Not only is the use of secondary packaging material unnecessary, but there are also more reasons why FIBCs are a sustainable solution. Big bags are reusable and in most cases, its raw material is recyclable.

Weaknesses and Threats:

Availability of labour: There is tremendous shortage of manpower and being a labour intensive industry it has the potential to affect production. However, management has adequate systems in place to constantly monitor manpower requirement, provide internal training and is also introducing new initiatives to reduce attrition rates.

Volatility in Raw Material prices: The prices of polypropylene and polyethylene are fluctuating. This can adversely affect the growth of the bulk container packaging industry as these two products are used in the manufacture of bulk container packaging.

Competition Threats: Though you company is well positioned in the market, yet it is exposed intense competition from other large and small organizations which could put pressure on market share and margins.

Replacement Threats from Substitutes: With the growing alertness against the use of plastic in daily life at an alarming rate, there is a threat of close substitutes.

Effect of Global Conditions: Despite intermittent disruptions during the previous 2(two) years in regular operations of the Company due to COVID - 19 pandemic, requiring lockdown, restrictive measures & other emergency measures, resulting in frequent interruption of working, the Company has been able to perform reasonably during the year ended 31st March, 2024.

Risks and Concerns

1. Your Company operates in Polymer based industry and the price of the polymer is majorly linked with crude oil prices which is fluctuating in nature, so there is an inherent risk of fluctuation of foreign currency which have effect on the prices of the products and earnings of the Company in case of exports.

2. Competitors in the same industry continue to pose a threat to the Company.

3. The Company being located in the eastern part of India has to face certain disadvantages in terms of payment of excess ocean freight and increase in transit time to European countries compared to industries located in the western part of India. The number of main line vessels entering the eastern port are lesser in comparison to western ports. This results in export orders getting effected due to increase in cost and transit period.

4. Your Company is labour intensive industry and the increase in the labour cost is likely affect the Company. However, your Company strives to be cost conscious.

5. The Company operates in Polymer based industry which is highly regulated and therefore any adverse regulations may effect the growth of the Company.

The Company has a well defined Policy for risk mitigation which is subject to change as and when required.

Segment Wise Performance

The Company is engaged in the business of manufacture and sale of polymer-based FIBC/woven bags. It also deals in trading of raw materials to further enhance its performance.

Discussion on financial performance with respect to operational performance

During the year under review your Company has achieved revenue of Rs. 10,320.20 lakhs as against Rs. 10943.64 lakhs in the previous year. PBIDT decrease to Rs. 3,365.55 lakhs as compared to Rs. 3,411.84 lakhs in the previous year. PAT for the year under review was Rs. 2,432.12 lakhs which is almost -0.20% lower than that of previous years PAT of Rs. 2436.91 lakhs.

Outlook

Driven by the requirement for FIBC bags your Company is aggressively making effort to expand business activities in West Bengal and also all over India. The Company will continue to tap new global prospects by leveraging its leadership position in the FIBC segment. The Company is optimistic of increasing its revenue by focusing on plastic processing solutions.

Significant Changes in Key Financial Ratios

Pursuant to the provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the details of key financial ratios along with the reasons for significant changes therein are given below:

Sl. No. Particulars	For the year ended March 31st, 2024	For the year ended March 31st, 2023	Reasons for significant change (if any)
1 Debtors Turnover	13.95	16.78	Deviation less than 25%
2 Inventory Turnover	28.31	31.39	Due to decrease in the Revenue of operations owing to reduction in demand in domestic markets.
3 Interest Coverage Ratio	222.66	338.01	Reason for Deviation of more than 25%: due to decrease in finance cost.
4 Current Ratio	30.01	40.32	The company has tried to keep utilisation of cash credit facility from bank at low level, thereby the current liabilities at the end of the year are much less compared to preceding year.
			The earnings of the company have been ploughed back and have been invested in mutual funds, fixed deposits, etc. to maximise returns and utilise idle funds, due to which the current assets have increased and are higher compared to preceding year.
5 Debt Equity Ratio	0.0048	0.0003	Reason for Deviation of more than 25%:
			At the end of current reporting period, the company was required to utilise Overdraft facility and hence the debt has increased and deviation is more than 25%
6 Operating Profit Margin (%)	31.39	29.99	Due decrease in turnover
7 Net Profit Margin (%)	23.48	22.27	Deviation less than 25%.

Note:

1. Above ratios are based on the standalone financial statements of the Company.

2. Significant change means a change of 25% or more as compared to the immediately preceding financial year.

Details of Change in Return on Net Worth As Compared to the Immediately Preceding Financial Year

Particulars	For the year ended March 31, 2024	For the year ended March 31, 2023	Reasons for change (if any)
Return on Net Worth	1.81	1.48	Due to changes in Net Worth & Net Income

Internal Control Systems and their Adequacy

Your company has adequate Internal Audit and Control system across the Company. The internal control systems are competent and provide, among other things, reasonable assurance of recording transactions of operations in all material respects and of providing protection against significant misuse or loss of company assets. The internal processes have been designed to ensure adequate checks and balances at every stage. Internal audit is conducted to assess the adequacy of our internal controls, procedures and processes, and the Audit Committee of the Board reviews their reports. The management duly considers and takes appropriate action on the recommendations made by the Statutory Auditors, Internal Auditors and the Audit Committee of the Board of Directors.

Material developments in Human Resources / Industrial Relations front, including number of people employed

The unstinted effort and hard work of the employees has been the major factor for the growth of your Company. The Company had a total of 90 employees as on 31st March, 2024. Your Company endeavors to maintain very cordial and harmonious relations with its employees.

Disclosure of Accounting Treatment

The Company has prepared its financial statement in accordance with the recognition and measurement principles laid down in Indian Accounting Standards (IND-AS) as prescribed under the Companies Act, 2013 and the rules made thereunder.

Cautionary Statement

Statements in the Management discussion and analysis, describing the Companys objectives, outlook, opportunities and expectations may constitute "Forward Looking Statements" within the meaning of applicable laws and regulations. The Actual result may vary materially from those expressed or implied in the statement. Several factors make a significant difference to the Companys operations including the government regulations, taxation and economic scenario affecting demand and supply condition and other such factors over which the Company does not have any direct control.