Rishiroop Rubber International Ltd Management Discussions

INDUSTRY STRUCTURE

The rubber industry is one of the key sectors of the Indian economy. India is the fourth largest producer of natural rubber and the third largest consumer of the polymer. As far as consumption of natural and synthetic rubber together is concerned, the country occupies the fourth position.

Your company is in the business of manufacturing of polymer blends consumed mainly by the medium and small scale sector which accounts for over 50% of production of rubber goods in non-tyre industrial products. The polymer blends are used in the manufacture of petrol hoses, LPG tubing, O-rings, seals & gaskets, printing & textile rollers, cable sheathing, automotive components, etc. Polymer compounding is the science of developing rubber mixtures with suitable raw materials and their doses to achieve optimal processing and performance in the end rubber product. It is a critical intermediate product for the medium and small unit making various rubber products.

Besides Polymer blends, the Company also sells other complimentary products sourced from abroad.

Due to fragmented structure of the user industry the market is highly price competitive.

ECONOMY AND MARKETS India Economy Trends :

Indian economic growth rate is projected to decelerate to a 11-year low of five per cent in 2019-20 mainly due to poor showing by manufacturing and construction sectors. Indian economy has been effected by a sharper-than- expected slowdown in economies, a re-escalation of regional geopolitical tensions, and a setback in reforms to address impaired balance sheets in the financial and corporate sectors.

The Gross Domestic Product (GDP) data released by the statistics department showed that Indias economy slowed to 3.1% in Q4 of 2019-20. While during 2019-20 period, the economy grew at 4.2% compared to 6.1% in 2018-19.

During the year under review, due to stagnation in industrial segments using rubber, there was slack demand for the Company products.

FINANCE AND ACCOUNTS

The following financial review is intended to convey the managements perspective on the financial performance of the company at the end of the financial year 2019-20.

The financial statements have been prepared in compliance with the requirements to the Companies Act, 2013 and generally accepted Accounting Principles in India.

FINANCIAL PERFORMANCE

Profit/(Loss) before taxation (PBT) for the current financial year 2019-20 is Rs. (331.47) lacs as compared to Rs. 850.87 lacs for the previous year. During the year, Company has accounted for a notional loss on fair value of Investments of Rs. (449.74) lacs, which has arisen mainly because of fluctuation in value of the investment portfolio on account of collapse of the Indian stock market in last quarter of financial year 2019-20. Fixed Assets viz. Property, Plant and Equipment were valued at Rs. 185.00 lacs at the end of the financial year. Total inventories reduced from Rs. 1237.58 lacs to Rs. 1139.85 lacs. Other income in the year under review was Rs. 76.67 lacs as compared to Rs. 234.29 lacs

OPPORTUNITIES AND THREATS

The Company is continuing to customize and promote its new grades of polymer blends to meet the requirements of domestic and international markets.

There is intense competition and prices of raw materials continue to be volatile in view of the global situation. Foreign exchange management during the current scenario is critical, as the company imports significant portion of its raw material requirements.

OUTLOOK

It is expected that due to measures announced by Government and Reserve Bank of India, the industries may be on revival path due to local potential demand and also depending on how soon the COVID pandemic is curtailed. The time line is uncertain at present but in the long run industries and economy are expected to bounce back.

RISKS AND CONCERNS

The price of Synthetic rubber and other raw materials have been quite volatile during the period under review. Further, future economic uncertainty may impact demand and margins for the Companys products. Also surplus synthetic rubber (SR) production capacity in the country, continues to be one of the main challenges facing the SR industry.

INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company has an adequate system of internal control commensurate with the size and the nature of its business, which ensures that transactions are recorded, authorized and reported correctly apart from safeguarding its assets against loss from wastage, unauthorized use, and removal.

The internal control system is supplemented by documented policies, guidelines, and procedures. The Companys internal auditors continuously monitors the effectiveness of the internal controls with a view to provide to the Audit Committee and the Board of Directors an independent, objective and reasonable assurance of the adequacy of the organizations internal controls and risk management procedures. The Internal Auditor submits detailed reports on quarterly basis to the Audit Committee and management. The Audit Committee reviews these reports with the executive management with a view to provide oversight of the internal control system.

The Company reviews its policies, guidelines, and procedures of internal control on an ongoing basis in view of the ever changing business environment.

SEGMENT

The primary segment that your Company operates in is Polymers and Polymer Compounds, and their related products.

MATERIAL DEVELOPMENT IN HUMAN RESOURCES AND INDUSTRIAL RELATION FRONT

The Company is maintaining good relations with its employees and currently employs about 39 employees in all categories. The Company values and understands the need for continuous growth and development of its people in order to have greater productivity and provide job satisfaction and also equip them to meet growing organizational challenges. Your Company has genuine concern and top priority for safety and welfare of its employees.

INFORMATION TECHNOLOGY

Information Technology has become inevitable and integral to strategic planning and efficient management of operations. Your Company continues to strategically invest in Information Technology looking at it as vital to business growth.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

CORPORATE GOVERNANCE

Your Company is in compliance with the governance requirements provided under the Companies Act, 2013, the aforesaid Companies (Amendment) Act, SEBI (Listing Agreement and Disclosure Requirement) Regulation, 2015, the applicable Secretarial Standards issued by the Institute of Company Secretaries of India and approved by the Central Government.

The Company has in place all the statutory committees as required by the law. Details of Committees are given in the Corporate Governance Report.

The policies framed and adopted by the Company in compliance with statutory requirements are available on the website of the Company http://www.rishiroop.in/investors/corporate-governance/policies/

The SEBI (Listing Agreement and Disclosure Requirement) Regulations, 2015 also provided for formulating the Code of Conduct for members of the Board and Senior Management, Codes of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information and Code of Conduct to regulate, monitor and report trading by its employees and other connected persons. Your Company has formulated the above codes and abided with the regulations.

STATUTORY COMPLIANCE

A declaration is made at the Board Meetings regarding Compliance with provisions of various statutes after obtaining confirmation from all the units of the Company. The Company Secretary ensures compliance with the SEBI regulations and provisions of the Listing Agreement.