Sangal Papers Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Pursuant to Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015.Your Directors have great pleasure in presenting the management discussion and analysis report for the year ended on March 31st, 2024.

Sangal Papers Limited (hereinafter called "The Company") incorporated in the year 1980 and having registered office in the State of Uttar Pradesh. The company is engaged in manufacturing of Writing and Printing Paper, News Print paper, Kraft and wide range of color papers. We manufacture paper on customized requirement of the customers. The management discussed the various aspects and come out with this summary:

A) INDUSTRY STRUCTURE AND DEVELOPMENT:

The Indian Paper Industry which accounts for about 4.5% of global production, in recent times it has registered faster growth rates of about 7%. The domestic demand is expected to grow at about 6 to 7% per annum. Paper Industry plays a very important role in the socio economic development of the country.

Despite several infrastructural hurdles there is strong growth in demand in various segments of the Indian Paper Industry. There is a shift in preference for higher quality products in the market and players are seeing opportunities for profitable growth. So for meeting the growing demand, capacity upgrading, improvement in the quality, is the need of the hour. Industry needs to have cost effective funds and availability of good quality and cost effective raw material and low cost energy.

Financial Performance

Particulars	Financial Year (2023-24)	Financial Year (2022-23)	% Increase/ % Decrease(-)
Turnover(Revenue from Operations) (Rupees In lakhs)	19,033.87	22,610.34	-15.82
Profit Before Tax (Rupees in lakhs)	346.82	479.83	-27.72
Profit After Tax and other comprehensive income(Rupees in lakhs)	242.35	334.46	-27.54
Earnings per share (in Rupees)	18.90	25.90	-27.03

Paper pervades all sectors of our activity from books to bullets and from morning newspaper to nuclear technology. Indian paper industry is highly fragmented with varying sizes.

In global context, India is one of the fastest growing markets for paper and paper consumption and is estimated to touch 30 million tons by 2026-27. Our company is also engaged in manufacturing of news print paper and the newsprint sector in India is governed by the Newsprint Control Order (NCO), 2004.

B) Opportunities and Threats:

The Companys products have been enjoying consistently good brand image and loyalty from the consumers for the past several years and the company is optimistic on increasing the sale of the paper product in India and abroad. There is opportunity to explore global markets due to restrictions on China and the global players are eying on India for their needs.

The Government has also prioritized policies aimed at promoting rapid up-gradation in supply chain systems for retail distribution and export of food materials. The footwear and garment export segment are growing. All these and other trends indicate that there will be better demand for high quality, world class packaging material.

For Indian paper industry, biggest concern is the use of high volume of water and electricity consumption in manufacturing process which creates pollution in the environment. Due to which to reduce such pollution filters and upgradation in technology requires from time to time which involves heavy investment in CAPEX which is a continuous challenge to small scale paper manufactures in this price sensitive commodity (paper) market.

INSTALLED CAPACITY

The Companys current installed capacity is 33,000 MT per annum.

STATE OF THE COMPANY

The following statement on the affairs of the company under review:

1. The Company engaged in single segment i.e. company engaged in manufacturing of Paper.

2. There is no change in status of the company.

3. There is no change in financial year of the company.

4. There was expenditure in capital work in progress of Rs.264.49 Lakhs during the year in plant and machinery for quality improvement, cost effectiveness and value addition.

5. Due to above there is modernization, expansion and diversification during the year.

Your company is manufacturing paper on demand of the Customer, our production and market size is negligible in paper industry. In reference of pricing of writing printing paper and other various variety of paper, our company is very small company by size and value. We are following price decided by the customer and the market forces. We are only price takers and not setters. The price of paper is determined/decided by taking into various factors like quantity, quality etc.

The company is trying hard to utilize the capacity to its optimum level, making use of the best of operational techniques and economical use of the resources. Raw material used by the company is one of the best quality of its category with strong quality checks, the availability of raw material for production depends on the availability in the market as well as price consideration.

Manufacturing of paper involves very high volume of water and electricity, which results in creating pollution to the environment which is one of the biggest threats to the paper industry. To overcome this challenge, industry needs latest technology based machines and pollution reducing equipments or filters to curb pollution which involves high cost and also it takes time to get the environmental clearance from the government.

C) Segment:

Sangal Papers Limited engaged in single segment of business. Manufacturing of Paper is our primary business activity.

In geographic segment, the company is selling its paper in India and exporting to Sri Lanka, Singapore, Nepal, Iran, United Arab Emirates and other various countries.

We have good network of dealers and significant customers base which are scattered around the country and the world.

Financial Performance

Particulars	Financial Year (2023-24)	Financial Year (2022-23)	% Increase/ % Decrease(-)
Turnover (Revenue from Operations) (Rupees In lakhs)	19,033.87	22,610.34	-15.82
Profit Before Tax (Rupees in lakhs)	346.82	479.83	-27.72
Profit After Tax and other comprehensive income (Rupees in lakhs)	242.35	334.46	-27.54
Earnings per share (in Rupees)	18.90	25.90	-27.03

There is a dip in the Turnover and profits in this year as compared to last year due to the fact that in the last year production was 42,181 M.T. as compared to 33,239 M.T this year. This was due to the fact that Machine II was converted to manufacturing of Kraft paper in last year and then again converted to Writing and Printing Paper.

D) Outlook and other concerns:

This Section lists future based statement, it depend on the present and future Market and paper industry situations and also involvement of risk and uncertainties.

Now the Government of India is focusing on overall development of all the sectors with the aim of improving infrastructural facilities. This has resulted in opening of the global markets and more of foreign players are coming in India for fulfilling their demand.

So this will give boost to the Paper Industry as well. There is better flow of materials across the country due to improved infrastructure facilities.

There has also been witnessed strong demand of packaging paper due to increase in organized retail sector. Focus on education sector and other organizations added demand of writing and printing paper too.

For Indian paper industry, biggest concern is the use of high volume of water and electricity consumption in manufacturing process which creates pollution in the environment. Due to which to reduce such pollution filters and up-gradation in technology, funds are required in CAPEX which is a challenge to small scale paper manufacturers in this price sensitive commodity (paper) market.

There was expenditure in capital work in progress of Rs.264.49 Lakhs during the year in plant and machinery for quality improvement, cost effectiveness and value addition.

CARE Ratings or IPMA (Indian Paper Manufacturers Association) estimates a growth of 6 - 7 % on year on year basis and will reach 30 million tons by FY 2026-2027 largely driven by emphasis on education and literacy coupled with growth in organized retail, according to industry body IPMA.

The growth will be largely driven by printing & writing and packaging & paper board segment. The Indian paper industry can be broadly classified into three segments:

1. Printing & writing (P&W): Printing and writing segment caters to office stationary, textbooks, copier papers, notebooks etc. This segment forms 31% of domestic paper industry. Governments thrust on education through steps like Right to Education, Sarva Shiksha Abhiyan, rise in service sector are key factors contributing to the growth of this segment.

2. Packaging & paper board: Packaging paper & board segment caters to tertiary and flexible packaging purposes in industries such as FMCG, food, pharma, textiles etc. This segment forms 47% of the domestic paper industry. This is currently fastest growing segment owing to factors such as rising urbanization, increasing penetration of organized retail, higher growth in FMCG, pharmaceutical.

3. Newsprint: Newsprint serves the newspaper & magazines industry. This segment forms 18% of Indian paper industry. This segment is under stress due to lower growth rates and import threat.

Our actual results could differ materially from those anticipated in these statements a result of certain factors. The company will try or make efforts to increase in the revenue and profit of the company in future. The company will also try to enter in new geographical area for capturing more market and try to increase the percentage to participate in the national and international market. A large portion of the revenue is dependent on the top clients of the company and the loss of any one of major client cloud significantly impact of the business. We may be the subject of litigation which, if adversely determine could harm our business and operating result.

E) Internal Financial Control and their adequacy:

The Company identifies a risk based internal audit scope and assesses the inherent risk in the processes and activities of the department within the company and ensures that appropriate risk management limits, internal control mechanisms and mitigation strategies are in place. The Internal Auditors, via, their internal audit reports, make suggestion for better application of policies and rules relating to the deficiencies/non-compliance of various audit areas and give suggestions/recommendations and control directives like periodic reconciliation, proper authorizations/approvals, processing controls, segregations of duties, maker-checker approach, etc. so as to mitigate the deficiencies and make the process, procedure, systems and functions more robust, accountable, reliable and compliant. The suggestions made by the Internal Auditors and the compliances thereof are placed before the Audit Committee. The Audit Committee of the company, the details of which have been provided in the Corporate Governance Report. The Committee reviews audit reports submitted by the Internal Auditors. Internal Financial Controls Suggestions for improvement are considered and the Committee follows up on the implementation of corrective actions. The Committee also meets the Statutory Auditors to ascertain, inter alia, their views on the adequacy of internal control systems in the company.

F) Financial Performance:

Funds (Equity):

AS per present capital structure of the company i.e. we have authorized capital of Rs. 7,00,00,000/- divided into 70,00,000 equity share of Rs. 10/- each. The issued, subscribed and paid-up capital is Rs. 1,30,72,600/- divided into 13,07,260 equity share of Rs. 10/- each.

Other Funds (Other equity):

Particulars	Financial Year (2023-24)	Financial Year % (2022-23)	% Increase/ Decrease(-)
Revaluation Reserve(Rs. In lakhs)	48.56	48.56	0
Retained Earnings(Rs. In lakhs)	3,976.30	3,733.95	6.49

Revenue from Operations:

Particulars	Financial Year (2023-24)	Financial Year (2022-23)	% Increase/ % Decrease(-)
Turnover(Revenue from Operations(Rs. In lakhs	19,033.87	22,610.34	-15.82
Other Income(Rs. In lakhs)	99.16	202.03	-50.92
Profit Before Tax (Rs. in lakhs)	346.82	479.83	-27.72
Profit After Tax and other comprehensive income(Rs.in lakhs)	242.35	334.46	-27.54
Earnings per share in( Rupees)	18.90	25.90	-27.02

G) Human Resources Relationship:

As per human resources relationship policy of the company recognizes the importance of human value and ensures that proper encouragement both moral and financial is extended to employees to motivate them and as well as we protects the right of the employee/workers and provide a comfortable environment to the employee/workers. The company is a paper manufacturing industry, we are maintaining a culture and custom for our employee to attract and retain the best talent. During the year under review, your Company enjoyed cordial relationship with workers and employees at all levels.

Employees of the company are essential assets of the company. Our company believes for welfare and development of the company as well as employees. As at 31st March, 2024, the company employed 230 permanent employees.

H) Details of significant changes:

During the financial year 2023-2024, changes in financials and operating position of the company.

Financial Ratios:

Sr.no.	Ratio	Definition	UOM	2023-24	2022-23	% change
1	Debtor Turnover	Net credit Sale/Average Account Receivable	Times	7.12	8.51	-16.33%
2	Inventory Turnover	Sale/Avg. Inventory	Times	8.44	11.66	-27.62%
3	Interest Coverage ratio	EBIT/Finance Cost	Times	1.37	3.47	-60.52%
4	Current Ratio	Current Assets/ Current Liabilities	Times	1.54	1.46	5.48%
5	Debt equity Ratio	Debt/Equity	%	0.66	0.67	-1.49%
6	Operation Profit Margin	EBIT/Sale	%	3.15	2.98	5.70%
7	Net Profit Margin	Net profit/Total Revenue	%	1.3	1.5	-13.33%

The Company reported a decline of 15.82% in its sales due to change in the product mix due to which production declined from last year as machine II was changed to manufacturing of Kraft from Writing & Printing paper and then again changed from Kraft to Writing and Printing paper.

The Company reported decrease of 16.33% in Debtor Turnover Ratio during the financial year 2023-2024 as compared to last year due to better operations. Company reported decrease of 27.62% in Inventory Turnover Ratio during the financial year 2023-2024 due to better operations. The Company reported decrease of 60.52% in Interest Coverage Ratio during the financial year 202324 due to increase of Finance Cost and decrease of profit. The Company reported 5.48% increase in Current Ratio during the financial year 2023-2024 due to increase in current assets.

There is negligible decrease of 1.49% in Debt Equity Ratio during the financial year 2023-2024. The Company reported a growth of 5.70% in Operating Profit Margin during the financial year 2023-24 due to better operations. Company reported decline of 13.33% in Net Profit Margin due to Taxation effect.

I) Announcement:

The statements in the "Management Discussion and Analysis Report" section describes the Companys objectives, projections, estimates, expectations and predictions, which may be "forward looking statements" within the meaning of the applicable laws and regulations. The annual results can differ materially from those expressed or implied, depending upon the economic and climatic conditions, Government policies and other incidental factors.

	For and on behalf of the Board of Directors
Date: 05/08/2024	Amit Sangal	Himanshu Sangal
Place: Mawana	Whole Time Director/CFO	Managing Director
	DIN-00091486	DIN - 00091324