sah polymers ltd Management discussions

OF FINANCIAL CONDITION AND RESULTS OF OPERATION

 

You should read the following discussion of our financial position and results of operations together with our Restated Financial Statements which have been included in this Draft Red Herring Prospectus. The following discussion and analysis of our financial position and results of operations is based on our Restated Financial Statements for the period ended June 30, 2021 and for financial years ended March 31, 2021, 2020 and 2019 including the related notes and reports, included in this Draft Red Herring Prospectus prepared in accordance with requirements of the Companies Act and restated in accordance with the SEBI Regulations, which differ in certain material respects from IFRS, U.S. GAAP and GAAP in other countries. Our Financial Statements, as restated have been derived from our audited financial statements for the respective period and yeRs. Accordingly, the degree to which our Restated Financial Statements will provide meaningful information to a prospective investor in countries other than India is entirely dependent on the readers level offamiliarity with Indian GAAP, Companies Act, SEBI Regulations and other relevant accounting practices in India.

This discussion contains forward-looking statements and reflects our current views with respect to future events and financial performance. Actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors such as those described under "Risk Factors" and "Forward Looking Statements" beginning on pages 25 and 19, respectively, and elsewhere in this Draft Red Herring Prospectus.

Our Financial Year ends on March 31 of each year. Accordingly, all references to a particular Financial Year are to the 12 months ended March 31 of that year.

BUSINESS OVERVIEW:

We are an ISO 9001:2015 certified company, primarily engaged in manufacturing and exporting of Polypropylene (PP)/ High Density Polyethylene (HDPE) Woven Bags, BOPP Laminated Bags and Flexible Intermediate Bulk Containers (FIBCs) HDPE/PP woven fabrics/sacks varying different weight and sizes printed in multi colors as per the requirements of the customers. We cater to cement, Fertilizers, textiles, Food Grains, chemical ,industry . With an experience of more than three decades in the industry, our company has grown to be an institution that supplies and exports bags to over 5 countries across the globe. We offer a diverse portfolio of customised bulk packaging solutions. We believe that our ability to meet stringent quality, introduce designs to meet evolving customer preferences and upgrade in-house processes to increase efficiencies have enabled us to establish in FIBC packaging industry. Various range of our products includes, Circular Type with Cross Corner / Corner Loops, Upanel / 4 Panel Bags, Baffle Bag, Conical Top / Bottom Bag, 4 loop bag, UN bags, Sift Proof bags. Our company is a Del - Credere Associate cum Consignment Stockist (DCA/ CS) of Indian Oil Corporation Limited for polymer trading and is also operating as Dealer Operated Polymer Warehouse (DOPW) of Indian Oil Corporation Limited for their Polymer division.

Domestically for sales of Fabric and Bags, we have presence in 8 states based on sales made during FY 2021 and internationally we supply products in over 5 countries including Africa, Australia, Europe, Middle East and Caribbean. For the three months ended June 30, 2021 and for Fiscals 2021, 2020 and 2019 our revenue from exports contributed 36.34%, 43.94%,50.75% and 53.31%, respectively of our revenue from operations.

We have one manufacturing facility which is located at, Udaipur over 8000 sq. mt. area. Over the years, we have made investments in our manufacturing infrastructure to support our product portfolio requirements and reach.

Our Company is promoted by SAT Industries Limited which is listed on BSE Ltd.

For the three months ended June 31,2021 and for Fiscals 2021, 2020 and 2019, our revenue from operations was Rs. 1391.49 lakhs , Rs. 5506.99 lakhs, 4910.07 lakhs and Rs. 4518.44 lakh, respectively, growing at a CAGR of 10.4% between Fiscal 2019 and Fiscal 2021. Our EBITDA three months ended June 31,2021 and for Fiscals 2021, 2020 and 2019 was Rs. 169.09 Lakhs , Rs. 302.28 Lakhs, Rs. 180.42 Lakhs and U207.64 Lakhs respectively, growing at a CAGR of 20.66% between Fiscal 2019 and Fiscal 2021, while our profit after tax for three months ended June 31,2021 and for Fiscals 2021, 2020 and 2019 was Rs. 111.2 Lakhs , Rs. 127.23 Lakhs, Rs. 29.68 Lakhs and Rs. 37.14 Lakhs respectively, growing at a CAGR of 85.09% between Fiscal 2019 and Fiscal 2021.

For, further details regarding risk involved in Business of the Company and risk in relation to the Issue, refer to chapter titled "Risk Factor and "Our Business" beginning on page 25 and 116 of this Draft Red Herring Prospectus.

SIGNIFICANT DEVELOPMENTS SUBSEQUENT TO THE LAST FINANCIAL PERIOD

In the opinion of the Board of Directors of our Company, since the date of the last financial statements disclosed in this Draft Red Herring Prospectus, there have not arisen any circumstance that materially or adversely affect or are likely to affect the business activities or profitability of our Company or the value of its assets or its ability to pay its material liabilities within the next twelve months except as mentioned below:

1. The Board approved and passed resolution on AugusRs. 21, 2021, to raise funds by making Initial Public Offering.

2. The shareholders approved and passed special resolution on September 13, to authorize the Board of Directors to raise funds by making Initial Public Offering.

FACTORS AFFECTING OUR RESULTS OF OPERATIONS

Our business is subjected to various risks and uncertainties, including those discussed in the section titled "Risk Factors" beginning on page 25 of this Draft Red Herring Prospectus. Our results of operations and financial conditions are affected by numerous factors including the following:

> Volatility in supply and pricing of raw material;

> Outbreak of Covid-19;

> Default or delay in payment from customers;

> Changes in laws, rules & regulations and legal uncertainties;

> Pricing pressures from the competitive business environment;

> Economic and Demographic condition.

SIGNIFICANT ACCOUNTING POLICIES

1. Use of Estimates

The preparation of Restated Financial Information in conformity with GAAP requires that the management of the Company to make estimates and assumptions that affect the reported amounts of income and expenses of the period, the reported balances of assets and liabilities and the disclosures relating to contingent liabilities as of the date of the financial statements. Examples of such estimates include the useful lives of property, plant and equipment and intangible assets, provision for doubtful debts/ advances, future obligations in respect of retirement benefit plans, etc. Difference, if any, between the actual results and estimates is recognized in the period in which the results are known.

2. Accounting Assumptions:-

(i) Going Concern:-

The enterprise is normally viewed as a going concern, that is, as continuing in operation for the foreseeable future. It is assumed that the enterprise has neither the intention nor the necessity of liquidation or of curtailing materially the scale of the operations.

(ii) Consistency:-

It is assumed that accounting policies are consistent from one period to another.

(iii) Accrual:-

Revenues and costs are accrued, that is, recognized as they are earned or incurred (and not as money is received or paid) and recorded in the financial statements of the periods to which they relate. (The considerations affecting the process of matching costs with revenues under the accrual assumption are not dealt with in this Statement.)

3. Valuation of Inventories

Stock of Finished goods are valued at lower of Cost of material consumed plus manufacturing expenses incidental there to or market value. Scrap is valued lower at cost or market value.

4. Cash Flow Statements

Cash flows are reported using the indirect method as set out in Ind As-3 on cash flow statement issued by the Institute of Chartered accountants of India.

5. Depreciation and Amortization

Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Depreciation on tangible fixed assets has been provided on the WDV method as per the useful life prescribed in Schedule II to the Companies Act, 2013.

6. Revenue Recognition

> Revenue is recognized to the extent it is possible that economic benefits will flow to the company and the revenue can be reliably measured and there is a reasonable certainty regarding ultimate collection.

> Revenue from sale of materials/ products is recognized on transfer of all significant risks and rewards of ownership of the goods to the customers, which generally coincides with the dispatch of goods. Sales are stated exclusive of GST/ VAT, trade discounts and sales returns.

> Interest income is recognized on a time proportionate basis taking into account the amount outstanding and the rate applicable.

> Revenue in respect of other income is recognized when no significant uncertainty as to its determination or realization exists.

7. Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment (if any). The cost of a property, plant and equipment comprises its purchase price and any attributable to cost of bringing the asset to its working condition for its intended use. Expenditure on addition, improvements and renewals is capitalized and expenditure for maintenance and repair is charged to Profit and Loss account.

8. Earnings per Share

Basic Earnings per Share is calculated by dividing the net profit after tax for the year attributable to Equity Shareholders of the Company by the weighted average number of Equity Shares outstanding at the end of the year. Diluted earnings per share is calculated by dividing net profit attributable to equity shareholders (after adjustment for diluted earnings) by average number of weighted equity share outstanding at the end of the year.

9. Taxes on Income

Tax expenses comprise of current and deferred tax

Current tax is measured at the amount expected to be paid on the basis of relief and deductions available in accordance with the provisions of Indian Income Tax Act, 1961 and includes Minimum Alternate Tax ("MAT") paid by the company on book profits in accordance with the provisions of the Income Tax Act, 1961. MAT credit is recognised as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period and will be able to set off such MAT credit entitlement.

Deferred income tax reflects the impact of the current year reversible timing differences between the taxable income and accounting income for the Year and reversal of timing differences of the earlier Year. Deferred tax is measured based on the tax rates and tax laws enacted or substantively enacted as at the balance sheet date. Deferred tax assets are recognised only to the extent there is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

In FY 2019-20 and onwards, in pursuant to section 115BAA of the Income Tax Act,1961 announced by Government of India through Taxation Law (Amendment) Bill,2019, the company has as irrevocable option of shifting to lower tax rates along with consequent reduction in certain tax incentives including lapse of accumulated MAT Credit.

10.Impairment of Assets:

An Asset is considered as impaired in accordance with Ind AS -36 "Impairment of Assets" when at the balance sheet date there are indications of impairment and the carrying amount of the asset, or where applicable the cash generating unit to which the assets belongs, exceeds its recoverable amount (i.e. the higher of the assets net selling price and value in use). In assessing the value in use, the estimated future cash flows expected from the continuing use of asset and from its ultimate disposal are discounted to their present values using a predetermined discount rate. The carrying amount is reduced to the recoverable amount and the reduction is recognized as an impairment loss in the profit and loss account.

11. Provision of Contingent Liabilities

In the case of litigations where an outflow of funds is believed to be probable and a reliable estimate of the outcome of the dispute can be made based on managements assessment of specific circumstances of each dispute and relevant external advice, management provides for its best estimate of the liability. Such accruals are by nature complex and can take number of years to resolve and can involve estimation uncertainty. Information about such litigations is provided in notes to the financial statements. Retirement benefits to employee Gratuity:-

The Company provides for gratuity, a defined benefit retirement plan (‘the Gratuity Plan) covering eligible employees. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employees salary and the tenure of employment with the Company. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, performed by an independent actuary, at each Balance Sheet date using the projected unit credit method. The Company has not contributes all ascertained liabilities to any fund. The Company recognizes the net obligation of the gratuity plan in the Balance Sheet as an asset or liability, ‘Employee Benefits. The Companys overall expected long- term rate-of-return on assets has been determined based on consideration of available market information, current provisions of Indian law specifying the instruments in which investments can be made, and historical returns. The discount rate is based on the Government securities yield. Actuarial gain and loss arising from

12. Government Grant

Government Grants are recognized when there is a reasonable assurance that the same will be received. Revenue grants are recognized in the Statement of Profit and Loss. Capital grants relating to specific fixed assets are reduced from the gross value of the respective Fixed Assets. Other capital grants are credited to Capital Reserve.

13. Current Assets, Loans and Advances

The balance under item of Sundry Debtors, Loans and Advances and Current liabilities are subject to confirmation and reconciliation and consequential adjustments, wherever applicable. However in the opinion of the Management, the realizable value of the current assets, loans and advances in the ordinary course of business will not be less than the value at which they are stated in the Balance Sheet.

OVERVIEW OF REVENUE AND EXPENSES

Revenue and Expenses

Our revenue and expenses are reported in the following manner:

 

Total Revenue

Our Total Revenue comprises of revenue from operations and other income.

 

Revenue from operations: Our revenue from operations comprises of revenue from Manufactured goods such as HDPE and LDPE Bags, traded goods, Job work, Commission- DCA and lease rent and interest income.

 

Other Income: Our other income comprises of Rent, Interest on financial assets on amortised cost, Miscellaneous income and Foreign Exchange Fluctuation.

 

Expenses

Our expenses comprise of cost of materials consumed, purchase of stock-in-trade, Changes in inventories of finished goods, work-in-progress and Stock -in-Trade, employee benefits expense, finance costs, depreciation & amortisation expense and other expenses.

 

Cost of material consumed: Cost of material consumed primarily consists of Purchases in HDPE, LDPE and Color Chemicals

 

Purchase of stock in trade: Purchase of stock in trade includes trade of goods in raw materials.

 

Changes in Inventories of Finished goods and Work in Progress: Changes in inventories of finished goods and work in progress consist of changes in our inventory of finished goods, packing material, stores & consumables as at the beginning and end of the year.

 

Employee benefit expense: Our employee benefit expenses include salaries, wages and bonus, contribution to provident fund and other funds such as ESIC, gratuity and staff welfare expenses.

 

Finance costs: Our finance costs comprise of interest on borrowings, Interest on income Tax, Foreign exchange fluctuation on credit facility and Other borrowing costs - Processing Charges

 

Depreciation & Amortisation expenses: Depreciation & amortisation expenses comprise of depreciation on tangible fixed assets and amortisation on intangible assets.

 

Other expenses: Our other expenses consist of Direct and Indirect expenses. Our direct Expenses include Bag Prinitng Expenses, Bag Stitching expenses, electricity and power, fabric weaving expenses, printing and INK, Sorting and our indirect expenses include Advertise and publicity, Bad Debts, Bank Commission and charges, Books & Periodicals, Brokerage & commission charges, Carriage Outward, Charity and Donations, Commission on sales, Consultancy, Consumption of stores and spare parts, Festival Expenses, Diwali Expense, Domain Name Registration, Early Payment incentive expenses, Economic Rent & Service Charges, , Export Freight , Insurance & other Expenses, Fees & Taxes, Fuel & Lubricant, Godown Rent, Inspection Charges of bags, Inter Unit trasit Expense, Insurance Charges, Transport Expenses, Job charges, Lease Rent, Legal & Professional Expense, Loss on sale of property, plant & equipment, Miscellaneous Expenses, Packing Materials Payment to Auditors: (i) as Audit Fee (ii) for reimbursement of expenses, Postage & Telegram, Rating Charges, Rebate, Claim & Discounts Repairs & Maintenance ( Others ) Sales Promotion Exp. Sales Tax Demand, Staff training expenses, Software Consultancy, Software Expenses, Sorting and counting charges, Stationery & Printing, Subscription & Membership, Telephone and Mobile, Trade Mark registration expenses, Travelling Expenses, Vehicle Running & Maintenance Expenses, Warehouse Management charges and Water Expenses.

Our Results of Operations

The following table sets forth selective financial data from our restated financial statement of profit & loss for the period ended June 30, 2021 and for the financial years ended March 31, 2021, 2020 and 2019 the components of which are also expressed as a percentage of total revenue for such periods:

 

(Rs. in Lakhs)

Particulars	For the Period ended June 30, 2021		For the Year ended March 31, 2021		For the Year ended March 31, 2020		For the Year ended March 31, 2019
	Rs. in Lakhs	(%) *	Rs. in Lakhs	(%) *	Rs. in Lakhs	(%) *	Rs. in Lakhs	(%) *
Income:
Revenue from operations	1391.49	97.9 3	5506.9 9	99.5 0	4910.0 7	98.3 8	4518.4 4	99.0 6
Other income	29.41	2.07	27.43	0.23	80.89	1.62	42.74	0.94
Total Revenue	1420.9	100	5534.4 2	100	4990.9 6	100	4561.1 7	100
Expenses:
Cost of material consumed	1077.22	75.8 1	3120.5 0	56.3 8	3153.6 3	63.1 9	2961.2 8	64.9 2
Changes in Inventory	-201.74	14.2 0	56.42	1.02	5.05	0.10	237.57	5.21
Employee benefit expenses	63.47	4.47	223.75	4.04	215.86	4.33	205.30	4.50
Finance costs	31.02	2.18	86.94	1.57	133.36	2.67	104.27	2.29
Depreciation & amortization expenses	20.44	1.44	80.56	1.46	76.50	1.53	71.18	1.56
Other expenses	258.88	18.2 2	1129.4 8	20.4 1	1171.4 1	23.4 7	899.11	19.7 1
Total Expenses	1286.07	90.5 1	5372.2 1	97.0 7	4939.5 1	98.9 7	4486.2 5	98.3 6
Profit before exceptional and taxes	134.83	9.49	162.21	2.93	51.45	1.03	74.92	1.64
Exceptional Items	-	-	-	-	-	-	-	-
Profit before tax	134.83	9.49	162.21	2.93	51.45	1.03	74.92	1.64
Tax expense :				0.00		0.00		0.00
(i) Current tax	22.51	1.58	27.07	0.49	8.18	0.16	14.48	0.32
(ii) Deferred tax	1.12	0.08	7.91	0.14	13.59	0.27	23.31	0.51
Total Tax Expense	23.63	1.66	34.98	0.63	21.77	0.44	37.79	0.83
Profit for the year	111.2	7.83	127.23	2.30	29.68	0.59	37.13	0.81

 

* (%) column represents percentage of total revenue.

Review of Operations for the period ended June 30, 2021 Total Revenue

Our total revenue amounted to Rs. 1420.90 lakhs for the period ended June 30, 2021 which is on account of revenue from operations and other income as described below:

 

Revenue from operations:

Our revenue from operations was Rs. 1391.49 lakhs which was 97.93% of the total revenue for the period ended June 30, 2021. The revenue from operations was on account of sales of Manufactured goods which includes HDPEC and LDPE bags of Rs. 1284.52 lakhs which is 92.31% of total operating revenue while income from trade goods in Raw material is Rs. 36.91 lakhs accounts for 2.65% of total operating revenue. Total income from sales of services which includes Jobwork, commission and Lease rent was Rs. 44.87 lakhs which is 3.22% of our total operating revenue and the interest from business income earned was Rs. 25.19 lakhs which is 1.81%. We engage in continuous manufacturing of new varieties based on the orders of our customers to keep up with the trends and meet our customer requirements

 

Other income:

Our other income amounted to Rs. 29.41 lakhs which is 2.07% of our total revenue for the period ended June 30, 2020. Our other income comprise of Rental income of t 0.12 lakhs, Interest on Interest on financial assets on amortised cost t 0.63 lakhs, Miscellaneous income of Rs. 12.31 lakhs and Foreign Exchange Fluctuation of Rs. 16.35 lakhs.

Expenses

Our total expenses, excluding tax amounted to Rs. 1286.07 lakhs for the period ended June 30, 2021 which is 90.51% of our total revenue.

 

Cost of material consumed:

Our cost of material consumed was Rs. 1077.22 lakhs which is 75.81% of the total revenue for the period ended June 30, 2021. Our cost of material consumed was primarily on account of purchase of HDPE, LDPE and Color Chemicals.

 

Changes in Inventories of Finished goods and Work in Progress

Our changes in inventories of finished goods and work in progress was t(201.74 lakhs which was 14.20% of our total revenue for the period ended June 30, 2021. It was on account of higher level of closing stock at the end of the year.

 

Employee benefits expense:

Our employee benefits expense was Rs. 63.47 lakhs which was 4.47 % of our total revenue for the period ended June 30, 2021. Our employee benefit expenses primarily consist of salaries & wages of Rs. 55.87 lakhs, contribution to provident fund and other funds of Rs. 2.89 lakhs, gratuity expenses of Rs. 2.72 lakhs, staff welfare expenses of Rs. 1.99 lakhs

 

Finance Costs:

Our finance costs was Rs. 31.02 lakhs which was 2.18% of our total revenue for the period ended June 30, 2021 which accounts to Interest on borrowings such as cash credit facilities and term loan availed by the company

 

Depreciation & Amortization:

Our depreciation & amortization expenses were Rs. 20.44 lakhs which was 1.44% of our total revenue for the period ended June 30, 2021.

 

Other Expenses:

Our other expenses was Rs. 258.88 lakhs which was 18.22% of our total revenue for the period ended June 30, 2021. Our expenses majorly comprise of direct expenses of Rs. 140.61 lakhs and indirect expenses of Rs. 118.27 lakhs. Our direct expenses majorly comprise of Bag stitching expense of Rs. 20.35 lakhs, electric and power expense of Rs. 71.05 lakhs, fabric weaving expense of Rs. 20.16 lakhs. Our indirect expenses comprises of Carriage Outward of Rs. 9.48 lakhs, commission on sales of Rs. 10.71 lakhs, Export Freight , Insurance & other Expenses of Rs. 46. 79 lakhs, Repairs & Maintenance (Others) of Rs. 8.02 lakhs.

 

Profit before tax:

Our profit before tax was Rs. 134.83 lakhs which was 9.49 % of our total revenue for the period ended June 30, 2021.

 

Tax expenses

Our tax expense for the period ended June 30, 2021 was Rs. 23.63 lakhs which is 1.66% of our total revenue for the period ended June 30, 2021. It was on account of deferred tax.

 

Profit after tax

Due to the above mentioned reasons, our profit after tax was Rs. 111.20 lakhs which is 7.83% of our total revenue for the period ended June 30, 2021.

FINANCIAL YEAR 2020-21 COMPARED WITH FINANCIAL YEAR 2019-20

 

Total Revenue

Our total revenue increased by 10 % to Rs. 5534.42 lakhs for the financial year 2020-21 from Rs. 4990.95 lakhs for the financial year 2019-20 due to the factors described below:

 

Revenue from operations. Our revenue from operations increased by 12.16 % to Rs. 5,506.99 lakhs for the financial year 2020-21 from Rs. 4,910.07 lakhs for the financial year 2019-20 mainly due to increase in sale of manufactured goods by Rs. 30.90 lakhs such increase was pursuant to to increase in the business from exsiting customer and additions of new customers, increase in trade of goods in raw materials by Rs. 486.99 lakhs, increase in sale of services such as Jobwork by Rs. 107.68 lakhs, which was partially offset by decrease in sale of service in reference to Commission DCA by Rs. 4.54 lakhs, decrease in business interest income by 8.30 lakhs and decrease in export incentive by Rs. 19.25 lakhs such decrease was impacted by Covid 19-Pandemic and due to lockdown. .

 

Other income: Our other income decreased by 66.09% to Rs. 27.43 lakhs for the financial year 2020-21 from Rs.80.89 lakhs for the financial year 2019-20 mainly because of decrease in Foreign Exchange Fluctuation of Rs. 49.36 lakhs.

 

Total Expenses

Our total expenses increased by 8.76% to Rs. 5372.21 lakhs for the financial year 2020-21 from Rs. 4939.51lakhs for the financial year 2019-20, due to the factors described below:

 

Cost of material consumed: The cost of material consumed for the financial year 2020-21 was Rs. 3120.5 lakhs which has decreased by 1.05% as compared to Rs. 3153.63 lakhs in financial year 2019-20. The decrease in cost of material consumed of HDPE and LDPE was in line with decrease in the prices of crude oil.

 

Purchases of Stock-in-Trade: the purchases of stock in trade increased to 674.56 lakhs in FY 2020- 2021 from 183.7 lakhs resulting to change by 267.21% due to sale of raw materials to other parties

 

Changes in Inventories ofFinished goods: Our changes in inventory of finished goods increased by 1017.23% to Rs. 56.42 lakhs in financial year 2020-2021 from Rs. 5.05 lakhs in financial year 2019-2020. This was primarily due to higher level of closing stock at end of financial year 2020-2021 compared to financial year 2019-2020.

 

Employee benefits expenses: Our employee benefit expenses increased by 3.66 % to Rs. 223.75 lakhs for the financial year 2020-21 from Rs. 215.86 lakhs for the financial year 2019-20. The increase was mainly on account of increase in gratuity by Rs. 5.42 lakhs and increase in staff welfare expenses by Rs. 5.19 lakhs. However, this increase was partially offset by decrease in Salaries, wages and bonus and Contribution to provident and other funds by Rs. 2.53 lakhs and 0.19 lakhs respectively.

 

Finance costs: Our finance costs decreased by 34.80 % to Rs. 86.94 lakhs for the financial year 2020-21 from Rs. 133.36 lakhs for the financial year 2019-20. Decrease interest of borrowings and decrease in Foreign exchange fluctuation on credit facility by 0.95 lakhs and 19.10 lakhs respectively.

 

Depreciation & amortization expense: Our depreciation & amortization expense increased by 5.31% to Rs. 80.56 lakhs for the financial year 2020-21 from Rs. 76.5 lakhs for the financial year 2019-20. Net addition to depreciable gross block was 222.13 lakhs for financial year 2020-21 and Rs. 84.74 lakhs in the financial year 2019-20.

 

Other expenses: Our other expenses decreased by 3.57% to Rs. 1129.48.00 lakhs for the financial year 2020-21 from Rs. 1171.41 lakhs for the financial year 2019-20. The decrease was on account of decrease in indirect expense majorly in consultancy charges by Rs. 33.04 lakhs, Consumption of stores and spare parts by Rs. 20.15 lakhs, Export Freight, Insurance & other Expenses by Rs. 29.81 lakhs, Sales Promotion Exp. By Rs. 23.80 lakhs, etc. in the financial year 2019-2020 in comparison to 2020-2021

 

Profit before taxes: Our profit before taxes increased by 215.29% to Rs. 162.21 lakhs for the financial year 202021 from Rs. 51.44 lakhs for the financial year 2019-20. The increase in profits was on account of increase in overall revenue of the organization. The overall profitability margins of the company have been improved in the financial year 2020-21 as compare to financial year 2019-20.The PBT to total revenue was 2.93% for financial year 202021 and 1.03% for financial year 2019-20.

 

Tax expenses: Our tax expenses increased by 60.68% to Rs. 34.98 lakhs for the financial year 2020-21 from Rs. 21.77 lakhs for the financial year 2019-20 due to the increase in deferred tax expense.

 

Profit after tax: Due to reasons mentioned above, our profit after tax increased by 328.70% to Rs. 127.23 lakhs for the financial year 2020-21 from Rs. 29.67 lakhs for the financial year 2019-20.

FINANCIAL YEAR 2019-20 COMPARED WITH FINANCIAL YEAR 2018-19

 

Total Revenue

Our total revenue increased by 9.42% to Rs. 4990.95 lakhs for the financial year 2019-20 from Rs. 4,561.17 lakhs for the financial year 2018-19 due to the factors described below:

 

Revenue from operations: Our revenue from operations increased by 8.67% to Rs. 4,910.07 lakhs for the financial year 2019-20 from Rs. 4518.44 lakhs for the financial year 2018-19 mainly due to increase in revenue from the existing customers and new customers by Rs. 391.63 lakhs.

 

Other income: Our other income increased by 89.28% to Rs. 80.89 lakhs for the financial year 2019-20 from Rs. 42.74 lakhs for the financial year 2018-19 mainly because of increase in Foreign Exchange Fluctuation by Rs. 39.20 lakhs.

 

Total Expenses

Our total expenses increased by 10.10% to Rs. 4939.51 lakhs for the financial year 2019-20 from Rs. 4486.25 lakhs for the financial year 2018-19, due to the factors described below:

 

Cost of material consumed: Our cost of material consumed increased by 6.50% to Rs. 2961.28 lakhs for the financial year 2019-20 from Rs. 3153.63 lakhs for the financial year 2018-19. The increase was in line with the increase in overall revenue of the company.

 

Purchases of Stock-in-Trade: our Purchases of Stock-in-Trade increased by 2336.34% to 183.7 lakhs from 7.54 lakhs from 2018-19 to 2019-20 due to increase in trading of raw materials.

 

Changes in Inventories of Finished goods and Work in Progress: Our changes in inventory of finished goods, work in progress and stock -in-trade reduced by 97.87% to Rs. 5.05 lakhs in financial year 2019-20 from Rs. 237.57 lakhs in financial year 2018-19.

 

Employee benefits expenses: Our employee benefit expenses increased by 5.14% to Rs. 215.86 lakhs for the financial year 2019-20 from Rs. 205.3 lakhs for the financial year 2018-19. The increase was mainly due to increase in salaries & wages by Rs. 10.87 lakhs,

 

Finance costs: Our finance costs increased by 27.89% to Rs. 133.36 lakhs for the financial year 2019-20 from Rs. 104.27 lakhs for the financial year 2018-19. Increase in our finance cost was primarily due to additional expense of Foreign exchange fluctuation on credit facility of Rs. 19.50 lakhs in the financial year 2019-20 which was partially offset by decrease in other borrowing costs - processing charges by Rs. 2.50 lakhs.

 

Depreciation & amortization expense: Our depreciation & amortization expense increased by 7.47 % to Rs. 76.50 lakhs for the financial year 2019-20 from Rs. 71.18 lakhs for the financial year 2018-19. Net addition to gross block was Rs. 84.74 lakhs for financial year 2019-20 as compared to Rs. 71.65 lakhs for the financial year 2018-19.

 

Other expenses: Our other expenses increased by 30.29% to Rs. 1171.41 lakhs for the financial year 2019-20 from Rs. 899.11 lakhs for the financial year 2018-19. The increase was on account of increase in direct expense majorly in Bag Printing Expenses by Rs. 45.78 lakhs and on account of indirect expenses which was majorly in Bank commission and charges by Rs. 47.20 lakhs, in consultancy charges by Rs. 41.67 lakhs, Export, freight , insurance and other expenses by Rs. 36.46 lakhs in the financial year 2019-2020 in comparison to 2020-2021.

 

Profit before taxes: Our profit before taxes decreased by 31.33% to Rs. 51.44 lakhs for the financial year 2019-20 from Rs. 74.92 lakhs for the financial year 2019-20. The decrease in profit was in line with decrease in overall revenue of the company and also on account high purchases of stock in trade.

 

Tax expenses: Our tax expenses decreased by 42.39 % to Rs. 21.77 lakhs for the financial year 2019-20 from Rs. 37.79 lakhs for the financial year 2018-19 mainly due to decrease in deferred tax expense by Rs. 16.02 for the financial year 2019-20 compared to financial year 2018-19.

 

Profit after tax: Due to reasons mentioned above, our profit after tax decreased by 20.08 % to Rs. 29.68 lakhs for the financial year 2019-20 from Rs. 37.13 lakhs for the financial year 2018-19.

 

Other Key Ratios

Particulars	For the period ended June 30,	For the year ended March 31,
	2021*	2021	2020	2019
Fixed Asset Turnover Ratio	0.98	4.09	3.88	3.60
Debt Equity Ratio	0.85	0.88	0.67	0.72
Current Ratio	1.42	1.42	1.43	1.38
Inventory Turnover Ratio	1.66	5.51	5.53	4.29

 

*Not Annualized

Fixed Asset Turnover Ratio: This is defined as revenue from operations divided by total property, plant & equipment, based on Restated Financial Statements. Total property, plant & equipment does not include capital work-in-progress.

 

Debt Equity Ratio: This is defined as total debt divided by total shareholder funds. Total debt is the sum of long term borrowings, short-term borrowings & current maturity of long term debt, based on Restated Financial Statements.

 

Current Ratio: This is defined as current assets divided by current liabilities, based on Restated Financial Statements.

 

Inventory Turnover Ratio: This is defined as revenue from operations divided by closing inventories, based on Restated Financial Information.

 

Cash Flow

The table below summaries our cash flows from our Restated Financial Information for the period ended June 30, 2021 and for the financial years 2021, 2020 and 2019:

(Rs. in lakhs)

Particulars	For the Period ended June 30, 2021	For year ended March 31,
		2021	2020	2019
Net cash flow generated from/ (utilized in) operating activities (A)	(72.19)	142.23	263.33	332.07
Net cash flow utilized in investing activities (B)	(21.92)	(236.37)	(87.30)	(97.26)
Net cash flow generated from/ (utilized in) financing activities (C)	(15.62)	85.71	(166.32)	(161.43)
Net (decrease)/ increase in cash & cash equivalents (A+B+C)	(109.73)	(8.43)	9.71	73.38
Cash and cash equivalents at the beginning of the period/ year	194.30	50.20	152.41	76.15
Cash and cash equivalents at the end of the period/ year	20.48	194.30	104.32	152.41

 

Operating Activities

For the period ended June 30, 2021

Our net cash used from operating activities was Rs. 72.19 lakhs for period ended June 30, 2020. Our operating profit before working capital changes was Rs. 189.01 lakhs for three months ended June 30, 2021 which was primarily adjusted by depreciation of Rs. 20.44 lakhs, payment of interest of Rs. 31.02 lakhs, provisions of gratuity of Rs. 2.72 lakhs, decrease in trade receivables by Rs. 85.01 increase in other current liabilities and provisions of Rs.55.10 lakhs, increase in loan by Rs. 294.44 lakhs, other bank balances of Rs. 45.63 lakhs, Increase in trade payables by Rs. 62.69lakhs, increase in other non current assets by Rs. 16.78 lakhs, increase in non current financial assets of

Rs.50.29 Lakh, decrease in other current assets of 8.21 lakhs, increase in stock of Rs. 154.71 lakhs, income tax refund off Rs. 1.62 lakhs.

 

Financial year 2020-21

Our net cash generated from operating activities was Rs. 142.23 lakhs for the financial year 2020-21. Our operating profit before working capital changes was Rs. 328.54 lakhs for the financial year 2020-21 which was primarily adjusted for depreciation of Rs. 80.56 lakhs payment of Interest of Rs. 82.25 lakhs and loss on sale of property of Rs. 3.52 lakhs, increase in trade receivables of Rs.69.42 lakhs, Increase in other current liabilities and provision byRs. 77.66 lakhs, increase in financial liabilities of Rs. 75.47 lakhs, increase in loan by Rs. 82 lakhs, other bank balances of Rs. 15 lakhs, decrease in trade payables of Rs. 107.14 lakhs, decrease in non current assets of Rs. 7.53 lakhs, increase in non current financial assets of Rs. 3.81 lakhs, increase in other current assets by Rs. 241.36 lakhs, increase in tax assets by Rs. 1.79 lakhs, by increase in stock of Rs. 10.80 lakhs, income tax refund of Rs. 9.85 lakhs

 

Financial year 2019-20

Our net cash generated from operating activities was Rs. 263.33 lakhs for the financial year 2019-20. Our operating profit before working capital changes was Rs. 262.10 lakhs for the financial year 2019-20 which was primarily adjusted depreciation of Rs. 76.50 lakhs, payment of Interest of Rs. 133.36 lakhs, by provisions of leave encashment of 0.79 lakhs, increase in trade receivables of Rs. 25. 91 lakhs, decrease in financial liabilities of Rs. 62.50 lakhs, increase in other current liabilities and provisions of Rs. 27.41 lakhs, decrease in financial assets by Rs. 82 lakhs, increase in trade payables by Rs. 51.06 lakhs, increase in other non current assets by Rs. 3.19 lakhs, increase in non current financial assets of Rs. 32.29 lakhs, decrease in other current assets by Rs. 102.37 lakhs, increase in tax assets by Rs. 25.29 lakhs, decrease in stock by Rs. 18.09 lakhs and refund of Income tax amount of Rs. 17.10 lakhs.

 

Financial year 2018-2019

Our net cash generated from operating activities was Rs. 332.07 lakhs for the financial year 2018-19. Our operating profit before working capital changes was Rs. 260.00 lakhs for the financial year 2018-19 which was primarily adjusted by of depreciation of Rs. 71.18 lakhs, payment of Interest of Rs. 98.92 lakhs, loss on sale of property, plant and equipment of Rs. 14.51 lakhs, by provisions of leave encashment of 0.47 lakhs, increase in trade receivables of Rs. 444.38 lakhs, increase in financial liabilities of Rs. 478.22 lakhs, decrease in other current liabilities and provisions of Rs. 111.57 lakhs, increase in financial assets by Rs. 2.03 lakhs, increase in trade payables by Rs. 128.72 lakhs, decrease in other non-current assets by Rs. 9.45 lakhs, increase in other current assets by Rs. 203.92 lakhs, decrease in stock by Rs. 221.41 lakhs and refund of Income tax amount of Rs. 7.89 lakhs.

 

Investing Activities

For the period ended June 30, 2021

Net cash used in investing activities was Rs. 21.92 lakhs for the period ended June 30, 2021. This was primarily on account of purchase of fixed assets amounting to Rs. 0.94 lakhs and work in progress of Rs. 20.98 lakhs.

 

Financial year 2020-21

Net cash used in investing activities was Rs. 236.37 lakhs for the financial year 2020-21. This was primarily on account of purchase of fixed assets of Rs. 235.22 lakhs and Rs. 1.75 lakhs towards working progress which was partially offset by sale of fixed assets amounting to Rs. 0.60 lakhs

 

Financial year 2019-20

Net cash used in investing activities was Rs. 87.30 lakhs for the financial year 2019-20. This was primarily on account of purchase of fixed assets amounting to Rs. 87.30 lakhs

 

Financial year 2018-19

Net cash used in investing activities was Rs. 97.26 lakhs for the financial year 2018-19. This was basically on account of purchase of fixed assets amounting to Rs. 106.65 lakhs which was partially offset by sale of fixed assets of Rs. 9.39 lakhs.

 

Financing Activities

For the period ended June 30, 2021

Net cash used in financing activities for the period ended June 30, 2021 was Rs. 15.62 lakhs. This was primarily on account of interest paid of Rs. 31.02lakhs which was partially offset by increase in borrowings by Rs. 15.40 lakhs.

 

Financial year 2020-21

Net cash generated in financing activities for the financial year 2020-21 was Rs. 85.71 lakhs. This was primarily on account of repayment of borrowings of Rs. 89.67 lakhs, increase in borrowing of Rs. 78.29 l akhs, interest paid of Rs. 82.25 lakhs.

 

Financial year 2019-20

Net cash used in financing activities for the financial year 2019-20 was Rs. 166.32 lakhs. This was primarily on account of repayment of borrowings of Rs. 32.96 and interest paid of Rs. 133.36 lakhs..

 

Financial year 2017-18

Net cash used in financing activities for the financial year 2018-19 was Rs. 161.43 lakhs. This was primarily on account of repayment of loan of Rs. 62.51 lakhs and interest paid of Rs. 98.92 lakhs

 

Financial Indebtedness

As on June 30, 2021 the total outstanding borrowings of our Company is Rs. 1,330.54 lakhs which included long - term borrowings of Rs. 89.67 lakhs, short term borrowings of Rs. 1180.53 lakhs and current maturities of long term debt of Rs. 60.34 lakhs. For further details, refer chapter titled "Financial Indebtedness" beginning on page 182 of this Draft Red Herring Prospectus.

 

(Rs. in lakhs)

Particulars	As at June 30, 2021
Long Term Borrowings (A)
Secured Loans
- From Banks & Financial Institution	89.67
Sub Total (A)
Short Term Borrowings (B)	89.67
Secured and unsecured loan	1180.53
Sub Total (B)	1180.53
Current Maturities of Long Term Borrowings (C)	60.34
Total (A)+(B)+(C)	1330.54

In the event, any of our lenders declare an event of default, such current and any future defaults could lead to acceleration of our repayment obligations, termination of one or more of our financing agreements or force us to sell our assets, any of which could adversely affect our business, results of operations and financial condition.

 

Related Party Transactions

Related party transactions with certain of our promoters, directors and their entities and relatives primarily relates to remuneration payable, consultancy received, interest paid, purchase & sale of goods, loans & deposits taken & paid, advance to suppliers and Issue of Equity Shares. For further details of such related parties under Ind AS 24, refer chapter titled "Financial Statements" beginning on page 164 of this Draft Red Herring Prospectus.

 

Contingent Liabilities

The following table sets forth our contingent liabilities as of As at June 30, 2021 and for the Financial year 202021 as per Restated Financial Statement:

(Rs. In Lakhs)

Particulars	As at June 30, 2021	For the Financial Year ended as on March 31, 2021
Tax Matters	3.93	3.93

Particulars	As at June 30, 2021	For the Financial Year ended as on March 31, 2021
Bank Guarantee issued not acknowledged as debts	407.65	407.65
Total	411.58	411.58

It is not practical for our Company to estimate the timings of cash outflow, if any in respect of above pending resolutions of the respective proceedings. For further details, refer chapter titled "Financial Statements" beginning on page 164 of this Draft Red Herring Prospectus.

 

Off-Balance Sheet Items

We do not have any other off-balance sheet arrangements, derivative instruments or other relationships with any entity that have been established for the purposes of facilitating off-balance sheet arrangements.

 

Qualitative Disclosure about Market Risk

Financial Market Risks

Market risk is the risk of loss related to adverse changes in market prices, including interest rate risk. We are exposed to interest rate risk, inflation and credit risk in the normal course of our business.

Interest Rate Risk

Our financial results are subject to changes in interest rates, which may affect our debt service obligations and our access to funds.

Liquidity risk

Liquidity risk is the risk that we will encounter difficulties in meeting the obligations associated with our financial liabilities that are settled by delivering cash or another financial asset. Our approach to managing liquidity is to ensure, to the extent possible, that we will have sufficient liquidity to meet our liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to our reputation. We manage liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

Effect of Inflation

We are affected by inflation as it has an impact on the raw material cost, wages, etc. In line with changing inflation rates, we rework our margins so as to absorb the inflationary impact.

Credit Risk

We are exposed to credit risk on monies owed to us by our customers. If our customers do not pay us promptly, or at all, we may have to make provisions for or write-off such amounts.

Reservations, Qualifications and Adverse Remarks

Except as disclosed in chapter titled "Financial Statements" beginning on page 164 of this Draft Red Herring Prospectus, there have been no reservations, qualifications and adverse remarks.

Details of Default, if any, including therein the Amount Involved, Duration of Default and Present Status, in Repayment of Statutory Dues or Repayment of Debentures or Repayment of Deposits or Repayment of Loans from any Bank or Financial Institution

Except as disclosed in chapter titled "Financial Statements" beginning on page 164 of this Draft Red Herring Prospectus, there have been no defaults in payment of statutory dues or repayment of debentures & interest thereon or repayment of deposits & interest thereon or repayment of loans from any bank or financial institution and interest thereon by the Company.

Material Frauds

There are no material frauds, as reported by our statutory auditor, committed against our Company, in the last three Fiscals.

Unusual or Infrequent Events or Transactions

As on date, there have been no unusual or infrequent events or transactions including unusual trends on account of business activity, unusual items of income, change of accounting policies and discretionary reduction of expenses.

Significant Economic Changes that Materially Affected or are Likely to Affect Income from Continuing Operations

Indian rules and regulations as well as the overall growth of the Indian economy have a significant bearing on our operations. Major changes in these factors can significantly impact income from continuing operations.

There are no significant economic changes that materially affected our Company‘s operations or are likely to affect income from continuing operations except as described in chapter titled "Risk Factors " beginning on page 25 of this Draft Red Herring Prospectus.

Known Trends or Uncertainties that have had or are expected to have a Material Adverse Impact on Sales, Revenue or Income from Continuing Operations

Other than as described in the section titled "Risk Factors" beginning on page 25 of this Draft Red Herring Prospectus and in this chapter, to our knowledge there are no known trends or uncertainties that are expected to have a material adverse impact on revenues or income of our Company from continuing operations.

Future Changes in Relationship between Costs and Revenues, in Case of Events Such as Future Increase in Labour or Material Costs or Prices that will Cause a Material Change are known

Other than as described in chapter titled "Risk Factors" beginning on page 25 of this Draft Red Herring Prospectus and in this section, to our knowledge there are no known factors that might affect the future relationship between cost and revenue.

Extent to which Material Increases in Net Sales or Revenue are due to Increased Sales Volume, Introduction of New Products or Services or Increased Sales Prices

Changes in revenue in the last three financial years are as explained in the part "Financial Year 2020-21 compared with financial year 2019-20 and Financial Year 2019-20 Compared With Financial Year 2018-19" above.

Total Turnover of Each Major Industry Segment in Which the Issuer Operates Our company works under single reportable Industry segment.

Competitive Conditions

We have competition with Indian and international manufacturers & traders and our results of operations could be affected by competition in the polymers sector in India. We expect competition to intensify due to possible new entrants in the market, existing competitors further expanding their operations and our entry into new markets where we may compete with well-established unorganized companies / entities. This we believe may impact our financial condition and operations. For details, please refer to the chapter titled "Risk Factors" beginning on page 25 of this Draft Red Herring Prospectus.

Increase in income

Increases in our income are due to the factors described above in this chapter under "Significant Factors Affecting Our Results of Operations" and chapter titled "Risk Factors" beginning on page 25 of this Draft Red Herring Prospectus.

Status of any Publicly Announced New Products or Business Segments

Except as disclosed elsewhere in the Draft Red Herring Prospectus, we have not announced and do not expect to announce in the near future any new products or business segments.

Significant Dependence on a Single or Few Customers

Significant proportion of our revenues have historically been derived from a limited number of customers. The % of Contribution of our Companys customers and suppliers vis a vis the revenue from operations and raw materials purchase respectively for the period ended on June 30, 2020 and for the financial year ended as on March 31, 2021 based on Restated Financial Statement are as follows:

Particulars	Suppliers		Customers
	As at June 30, 2021	As on March 31, 2021	As at June 30, 2021	As on March 31, 2021
Top 5 (%)	43.94	88.16	66.31	73.68
Top 10 (%)	56.43	99.08	97.96	96.50

Seasonality of Business

The nature of our business is not seasonal. For further details please refer chapter titled "Risk Factors " beginning on page 25 of this Draft Red Herring Prospectus.