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RDB Rasayans Ltd Management Discussions

138
(0.33%)
Jul 15, 2024|09:59:00 AM

RDB Rasayans Ltd Share Price Management Discussions

World Economic Conditions

As per the global estimates that there will be decline in the economic growth mainly due to the war between Russia and Ukraine. The economic damage caused due to the war between the two countries has contributed to significant slowdown in global growth in the year 2022. The new variants of COVID-19 has resulted in re-imposing of mobility restrictions globally. Rising energy prices and supply disruptions have resulted in higher and more board-based inflation than anticipated.

While many economies are on the path to recovery on the back of measures towards virus containment, Vaccination drives, stimulus packages etc., the outlook remains challenging on account of divergence in the shape and pace of recovery as well as the potential for medium-to-long term economic scarring from the crisis. ‘Multispeed recoveries are underway across regions and income groups, marked by stark differences in the pace of vaccine rollout, extent of economic policy support, and structural factors such as reliance on contact-intensive sectors such as tourism in the case of certain countries. Multilateral efforts to respond to the humanitarian crisis, prevent further economic fragmentation, maintain global liquidity, manage debt distress, tackle climate change and end of the pandemic is essential.

Indian Economic Conditions

Indias economy has been mending after the second wave of COVID-19 in the f.y. 2021-22. It has impacted the trade activities globally but due to the pro-active steps taken by the government like quick vaccination drives India was able to recover from the hardships caused due to the second wave of the pandemic. Indias GDP growth for the financial year 2022-23 is estimated at 8 to 8.5%.

Considering the speed with which the government is trying to vaccinated the Indian population, it is expected that there will be significant growth in domestic consumption.

Even as the Indian economy faces multi-dimensional challenges in the short term, it remains one of the most dynamic major economies in the world with huge potential. With structural drivers of growth firmly in place, the pace of economic growth is expected to pick up over time. Policy announcements in the Union Budget are expected to provide further impetus to build Indias competitiveness and foster inclusive growth. Notwithstanding the execution challenges in the near term, reforms announced in the agricultural sector hold promise to foster a new era of growth for farmers and rural India that comprise nearly half of the countrys workforce.

Industry Structure & Developments

Rapid industrialization across the globe is one of the key factors driving the growth of FIBC market. Chemical and agriculture product manufacturers are increasingly using FIBCs to handle grains, rice, potatoes, cereals and liquid chemicals. These bags are also used to store and transport construction materials, such as carbon black, steel, alloys, minerals, cement and sand. Furthermore, increasing environmental consciousness among the masses and the rising demand for lightweight, biodegradable and bulk packaging material for pharmaceutical products, is also stimulating the market growth. Food-grade FIBC bags are manufactured using virgin polypropylene resins that aid in preventing spoilage of perishable goods and are suited for storing packaged products in bulk quantities.

In the year 2021 the second wave of the COVID-19 pandemic had hit and it had impacted the world in the same manner as the first wave. Most of the industries have been greatly impacted during the second wave as well and FIBC (Flexible Intermediate Bulk Container) industries have also been greatly affected. With the slowdown in world economic growth, the FIBC (Flexible Intermediate Bulk Container) industry has also suffered a certain impact, but still maintained a relatively optimistic growth, the past four years, FIBC (Flexible Intermediate Bulk Container) market size to maintain the average annual growth rate of 15 from 2015 to 2021, analysts believe that in the next few years, FIBC (Flexible Intermediate Bulk Container) market size will be further expanded, we expect that by 2025. The Company still has been able to maintain its market and growth in the pandemic.

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.

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 Pandemic COVID-19: The vigorous spread of COVID-19 pandemic including the more lethal second wave continues to affect the businesses across India and the operations of the Company. Despite intermittent disruptions during the year 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, 2021. The actual impact of COVID-19s impact would be recognized prospectively at a later date through monitoring the prevalent future economic conditions its impact. In view of the situation still being uncertain, with increased number of cases reported every day, we are unable to assess the extent and duration of COVID-19s overall impact on the Companys business operations at this stage.

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. There are many new industries that are coming up having same line of business and therefore this will lead to increase in the risk with respect to margin and market capitalization of 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 to affect the Company. However, your Company strives to be cost conscious.

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 primarily 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. 1,23,00,51,103 as against Rs. 92,39,03,759 in the previous year. PBT rose to Rs. 27,57,86,825 as compared to Rs. 26,81,83,892 in the previous year. PAT for the year under review was Rs. 22,05,46,301 which is almost 16.03% higher than the previous years PAT of Rs 19,00,67,432.

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. Particulars No. For the year ended March 31st, 2022 For the year ended March 31st, 2021 Reasons for significant change (if any)
1 Debtors Turnover 6.97 6.43 Due to increase in Debtors and Turnover
2 Inventory Turnover 42.08 42.75 Due to increase in Inventory and Turnover
3 Interest Coverage Ratio 112.88 171.45 Due to increase in income and decrease in the interest Expense
4 Current Ratio 8.25 5.78 Due to increase in current Assets and current Liabilities
5 Debt Equity Ratio 0.03 0.21 Due to increase in borrowings
6 Operating Profit Margin (%) 22.62 0.26 Due to increase in other income and turnover
7 Net Profit Margin (%) 17.93 20.57 Due to increase in other income and turnover

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, 2022 For the year ended March 31, 2021 Reasons for change (if any)
Return on Net Worth 19.06 16.40 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 92 employees as on 31st March, 2022. 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 Acr, 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.

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