Sat Industries Ltd Management Discussions.

The global Stainless Steel Flexible Hose market is valued at USD 3.25 Bn in 2022, up from USD 2.77 Bn in 2017, delivering a CAGR of 3.32% over the last 5 years. Furthermore, due to its accelerated adoption, the industry is expected to grow at a faster pace in the coming 5 years to USD 4.04 Billion by 2027, delivering a CAGR of 4.48%. Ir terms of volume, the global industrys production stood at 311.4 million metres in 2022. In terms of product categories, the market is broadly divided into two i.e. Strip-wound Hoses that account for a minority 24.30% share and Corrugated Hoses that account for a staggering 75.70% market share. Over the last 5 years, Strip-wound Hoses have slowly and steadily lost their already miniscule market share to superior Corrugated Hoses. In terms of end user industry applications (by volumes) the Piping industry is the single-largest consumer of stainless steel flexible hoses, accounting for a staggering 50.68% of the total consumption, followed by Home Appliances, Chemicals, Air Conditioning & Refrigeration and Automotives.

Geographically, Europe accounts for the largest market share with 31.09% at USD 1.01 Billion, closely followed by North America with 29.11% market share at USD 0.94 Billion. Outside the EU & America, in the APAC region China is the largest consumer with a 20.60% market share at USD 0.67 Bn.

Indian Stainless Steel Hose Market

The Indian stainless steel hose market accounts for 3.85% of the global share as of 2022. India has been one of the fastest growing stainless steel hose markets over the last 5 years, significantly increasing its share in the global markets from a miniscule 2.47% in 2017. Indian markets are estimated to have almost doubled from USD 68.21 Mn in 2017 to USD 125.26 Mn in 2022, delivering a phenomenal growth of 12.93% over the last 5 years. This growth has been delivered from a mix of volume and value growth. While Indian production volumes have increased from 19.04 Mn metres in 2017 to 26.06 Mn metres in 2022, average realisations per metre have grown from USD 3.58 to USD 4.80.

Indian Packaging Industry

Because of its pervasiveness, the packaging industry flourishes alongside a wide range of industries. According to an ASSOCHAM-EY report, the Indian packaging sector was estimated at USD 72.6 bn in FY2020 and is estimated to have grown at a CAGR of 18% during 2016-21. Not only has India become a preferred global supplier for the packaging industry, it has also emerged as one of the largest sectors in the Indian economy. India has a competitive advantage over many global manufacturers, thanks to the availability of skilled labour and lower manufacturing costs. Along with the export market, Indias growing domestic demand, which is being fueled by urbanisation, rising disposable income, and favourable demographics, makes a strong case for increased domestic consumption.

The USD 72.6 Bn market is broadly divided into various materials, which are flexible, rigid, metal, glass and printed cartons, among others.

Indian markets continue to be a net exporter of Stainless Steel Flexible Hoses, with net exports to the tune of 7.85 Mn Metres in 2022. In the coming 5 years, Indias production is expected to grow from 26.07 Mn Metres in 2022 to 31.61 Mn Metres in 2027, of which 24.01 Mn Metres will be domestic consumption and the rest will be net exports to the tune of 7.57 Mn Metres.

Growth Drivers

Superior value proposition as compared to traditional rubber and plastic hoses with better product lifecycle Growing demand for corrosion-resistant flexible hose solution made out of Increasing emphasis on sustainable and environment-friendly products with limited carbon footprint

Flexible packaging holds by far the largest share with ~22% of the market. In recent years, the demand for flexible packaging materials has been increasing faster than the demand for rigid packaging materials. The food and beverage, personal care, and pharmaceutical industries have all contributed a surge in demand for flexible packaging materials.

The dominance of flexible packaging in recent years has been largely owing to its durability, cost-effectiveness, and aesthetic appeal. Monolayer, multilayer films, and multilayered laminate sheets of polymers, including PE, PP, PET, and PVC, are used in flexible packaging. Polyethylene makes up one-third of the plastic products used in Indias packaging industry, while polypropylene makes up 29%.

Flexible Intermediate Bulk Containers (FIBC)

The FIBC (Flexible Intermediate Bulk Container) is a flexible fabric industrial container used to store and transport dry, flowable materials such as grains, horticulture products, sand, fertiliser, and plastic granules.

In the last decade India has emerged as the second largest market leader in this segment after China. According to Global Info Research, the global market for FIBC is expected to grow at a CAGR of 5.0 % to 2023, reaching USD 9.2 billion in 2023 from USD 6.8 billion in 2017. With exports to more than 110 countries, India is the second largest exporter in the FIBC segment following China. Between 2015 and 2019, Indias exports in FIBC grew at a CAGR of 15.6 %. Due to increased use by the mineral and food industries, FIBC has gained prominence in the Indian packaging industry. Further India and Chinas competitive production costs have led to production cuts by developed countries, which is further exacerbated by their own increasing cost of production and stringent regulatory norms.

As per the EXIM Bank of India classification, FIBC market consisting of Textile Sacks and Bags for Packaging as per HS 6305 and Sacks and Bags of Plastic as per HS 3923, are majorly dominated by the Asia- Pacific region.

The Textiles Sacks and bags for packaging market is majorly dominated by Asia Pacific countries that account for 57% of the market share for the FIBC segment. China leads the way with an export value of USD 1,668.1 Million, capturing a market share of 31.8% of the total export share for Textile Sacks (as per HSN code for packing). India is ranked second with an export value of USD 890.5 Million and a market share of 17.0%, followed by Vietnam with 8.2% market share.

The USA captured a share of 2.3% making it the sixth largest exporter.

The Sacks and Bags of Plastic (excluding polymer and ethylene), as per HS 3923, export market is dominated by the Asia-Pacific region which accounts for 35.7% of the total export share. China dominates the market globally, capturing a market share of 28% with an export value of USD 1458.3 Million. India is the second largest exporter with an export value of USD 381.2 Million and a market share of 7.4%. Europe accounts for 18.3% of the total market share with Italy being the highest contributor at USD 327 Million and 6.4% of the total global share, making it the third largest exporter.

Growth Drivers of FIBC

Growing exports of food and horticulture and chemicals

The need to reduce the overall weight of bulk packaging and transporting materials has also been driving the demand for FIBC

Low-cost shale gas, which is utilised as a primary feedstock for chemical manufacture, is driving increased chemical production, which is increasing demand for FIBC bags

Global demand in the chemical, food, and pharmaceutical industries is expected to propel the Indian FIBC business to significant growth

Indian Technology Startup Ecosystem

The past decade has been immense for Indian Tech startups in terms of growth, as it recorded a whopping 39% CAGR with a total tally of approximately 26,000 startups being founded, creating greater opportunities by providing 6.6 Lakh direct jobs and 34.1 Lakh indirect jobs. The India tech startup ecosystem has quickly become one of the major contributor to Indias growth story recording a noteworthy performance in 2021, with 2,250+ new startups established, 42 newly minted unicorns, massive USD 24.1 billion of funding from a pool of 2,400+ investors and 11 IPOs with collective market cap of USD 47.8 Billion and USD 400 Million transferred in wealth across 10,000+ employees. These figures reflect a very positive outlook for the Indian startup ecosystem, and the numbers only seem to grow with each passing year.


USA China India Israel UK Germany
Total number of active unicorns 444 301 70 57 40 23
Total number of unicorns added in 2021 260 146 42 35 22 16
Innovation clusters with at least 1 unicorn 38 20 7 3 6 4
Average time to unicorn (years) 6-8 5-7 5-7 6-8 6-8 5-7

India added the third highest number of Unicorns in 2021 taking the total number of active unicorns to 70 as of January 2022. Retail, Retail Tech, EdTech, Food Tech, SCM and logistics cornered 35% of the investments, with BFSI witnessing a breakout year with 13 Unicorns and 35+ potential unicorns. Additionally, 58% of all tech start-ups raised their first-round in 2021 with a cumulative value of USD 1.1 billion. All of this bodes really well for the Indian startups, as they aspire to add their names to the growing unicorns list of India.

At the back of a strong equity market, companies raised USD 6.2 billion through public market listing with an average oversubscription to the tune of 67x. A total of 29% of the startups were from the emerging hubs of the country such as, Ahmedabad, Surat, Kolkata, Jaipur, Indore, Lucknow etc., while the other 71% was contributed by the established hubs such as, Banglore, Delhi, Mumbai, Hyderabad, Pune and Chennai. What is interesting is the fact that the emerging hubs have witnessed an increase of 15% in share of all startups in the last 5 years. Moreover, women-led startup stories have become more compelling with 1015% of all startups having at least one woman co-founder (or founder) and 10 Unicorns with one woman co-founder. These reflect how the country is on a wave of creating thriving businesses that are here to stay and leave a lasting mark.

On the investment front, Indian startups witnessed active participation from both institutional and angel investors in 2021, with the number of unique investors growing multifold.

Corporate participation also increased, with a total of 260+ unique corporations active in 2021 which is up from 170 in 2020. 175+ unique corporations invested in startups in 2021 with 52% of them being global MNCs.

EdTech startups

Another booming space in India is the EdTech space, where investment and innovation both seem to flourish.

The top 5 sectors constitute 51% of the Indian tech startups ecosystem, and EdTech accounts for 13% of the share, which is the highest among all. In 2021, 140+ Ed-tech startups received funding in India.

Top 5 Sectors with Highest investments in Seed Stage (in 2021)

In fact, EdTech was one of the top 5 sectors with the highest investment in seed stage in 2021, raising a high capital of USD 97 million.

Within EdTech, companies are keenly focused on K-12, and on upskilling, reskilling and immersive learning as their key offerings.

Some of the other popular and emerging focus areas of EdTech include vernacular education, classroom digitisation, personalised learning, workforce upskilling, education financing, non-academic courses and learning management solutions.

It is important to note that in 2021, two of the top 5 largest investment deals were in the EdTech space, with Byjus raising the largest investment deal to the tune of USD 1,110 million from several investors like Tiger Global, Baron Funds and B Capital Group, and Unacademy raising USD 440 million from several institutional investors like Soft bank, Vision Fund, Temasek, Tiger Global and 6 other investors. Moreover, mergers and acquisitions have become central to EdTech companies as it aids in adding more expertise to its name. For instance, Byjuss has acquired over 17 companies in a span of 7 years to become the largest EdTech startup in the country.

Growth Drivers of the Startup Ecosystem

Ecosystem Support: State government, local incubators and accelerators, and academia have played a crucial role in the growth of startups Maharashtra startup policy 2018-23, Tamil Nadu startup & Innovation policy 2018-23, Telangana innovation policy 2017-23 amongst others
Investor led Initiatives: Kalaari Capital - CXXO initiative for helping women founders access capital, coaching and leverage the power of a community The Government of India has approved the Startup India Seed Fund Scheme with a corpus of ? 945 crore (USD 131 million), which is aimed at providing financial assistance to startups for proof of concept, prototype, development, product trials, market entry and commercialisation
Changing perception towards entrepreneurship and increase in social acceptability of entrepreneurship as a career
Digital revolution aided by internet penetration has enabled small businesses to grow and expand globally The liberation in relation to One Person Companies (OPCs) is helping young startups and innovators with limited funds formalise their business at an early stage
Government Initiatives like Tax Exemption, Patent & Trademark concession and aid in research & development have encouraged people to pursue entrepreneurship In an attempt to lower the compliance burden on startups, the Finance Minister also proposed to revise the definition of small companies under the Companies Act, 2013 by increasing their capitalisation threshold from not exceeding ? 50 lakh to not exceeding ? 2 crore, and turnover from not exceeding ? 2 crore to not exceeding ? 20 crore
Several state governments have announced policies to encourage entrepreneurship. Some of these states include


Ratios FY21 FY22 % Change Remarks
Total Debt to Equity (Times) 0.36 0.43 19% NA
Current Ratio (Times) 2.27 1.87 -18% NA
Interest Coverage Ratio (Times) 2.47 7.82 217% Due to significantly higher EBIT
Debtors Turnover (Times) 3.88 5.16 33% Due to better trade receivable management
Inventory Turnover (Times) 3.45 4.81 39% Due to better inventory management
Operating Profit Margin (%) 12.8% 18.1% 42% Due to better profitability & scale in Sah Polymers and Aeroflex Industries
Net Profit Margin (%) 4.6% 11.2% 142% Due to better profitability & scale in Sah Polymers and Aeroflex Industries

SAT Industries Limited (SAT), with almost four decades of experience, is an incubator of both conventional cash-flow generating businesses and new-age startups. It is a listed entity that has diverse businesses under its portfolio, which ranges across multiple industries. Some of the key business activities undertaken by its various subsidiaries and associates are manufacturing, education, leasing, domestic trading, import and export, finance and investments.

SAT, listed on the Bombay Stock Exchange since 1985, has created a solid reputation for itself in these years. It is an investor and strategic partner to numerous startups engaged in various industries. In the future, SAT Industries hopes to foray into businesses that add further value to its stakeholders.

FY22 Performance Discussion

The Company recorded its highest ever consolidated topline of f 346.73 crores in FY22 compared to f 204.76 crores in the previous year, a staggering 69% increase. This increase was driven by a significant increase in the scale of operations of both of its flagship businesses, i.e. Aeroflex Industries and Sah Polymers. The Company also witnessed an overall increase of 530 bps in EBITDA margin from 12.8% in FY21 to 18.1% in FY22, led by a surge in the sale of value added, high margin products & economies of scale due to higher capacity utilisation. As a result, its PAT stood at an all-time high of ? 38.71 crores in FY22 compared to ? 9.44 crores in the previous year,a massive increase of 310.0% year on year.


Well keep accelerating growth in both cash-generating operations and high-growth startups. Sah Polymers and Aeroflex Industries operations are witnessing significant growth opportunities.

Aeroflex Industries focus on aerospace & satellite, renewables, battery management, robotics, drones, and semiconductor industries, which have significant entry barriers due to their specific product requirements and rigorous quality standards, will prove to be a differentiating factor for the company in the long run. Aeroflex Industries is prototyping products for some of these industries and is approaching final product approvals.

In the long-term, it wants a significant amount of our business from these sunrise sectors, which will differentiate it from traditional SS flow solution providers.

Sah Polymers has been focusing on FIBCs growing demand. Indias growing role in the global FIBC supply chain has boosted its business. Furthermore, Sah Polymers is working on capitalising on market trends, such as a shift to higher capacity (1 to 2.5 tonnes, instead of traditional 100 kg solutions) and tailored bulk packaging solutions. We believe this will help us grow faster and optimise our profit margins, allowing us to move toward more customised and value- added products.

SAT Industries, along with all its Group companies are witnessing a robust demand environment, coupled with growing scale of operations, supported by strategic investments, that lead to a positive outlook for the coming few years.

Internal Control and Adequacy

The Companys proper and adequate system of internal control ensures that all its assets are safeguarded and protected against losses from unauthorised use or disposition, and that all transactions are authorised, recorded and reported appropriately. The Company has deployed an effective mechanism to achieve optimum and effective utilisation of resources, efficiency in operations, monitoring thereof and compliance with applicable laws. Further, the auditors have also expressed that the Companys internal control systems are adequate and satisfactory.

Human Resource Development and Industrial Relations

SAT Industries believes that its human resources are one of the most crucial assets and critical enablers of the Groups growth. To that extent, the Group engages with its employees to hone their skill sets and equip them with knowledge and know-how. It is also deeply invested in establishing its brand name to attract and retain the best talent in the market. During the period under review, employee relations continued to be healthy, cordial and harmonious at all levels, and the Group aims to maintain such relations with the employees going forward as well. As of March 31, 2022 the Group has 890 people across all its group companies.

Risks & Risk Mitigation

The Company mitigates its key risks across all levels of business operations by identifying and assessing risks while keeping business objectives in mind.

It also helps to monitor the efficiency and effectiveness of risk responses against strategic, operational, financial and compliance risks. However, there remains a significant threat of uncertainties due to Covid-19 along with geopolitical distress, global trade war, fluctuations in commodities prices and volatile forex movement.

Further, the management keeps an eagles eye view on domestic and foreign markets related to the products the Company manufactures and the raw materials required.

The management also monitors the worldwide socio-economic changes and currency fluctuation changes to minimise the risks.

There are no risks which, in the opinion of the Board, are of the nature that can threaten the existence of the Company.

However, the risks that are generally dealt with in the regular course of business and must be taken care of are - economic risk, technology risk, fluctuations in foreign exchange rates and raw material prices which the Company regularly monitors with a proactive approach adopted by the management to evaluate and mitigate these potential risks. In addition, an additional risk arising out of the Covid-19 pandemic cannot be ruled out, which may lead to a possible future lockdown or a temporary closure.


Safety Risk Our manufacturing facility is subject to various stringent safety laws and regulations. Non-adherence to process and workforce safety requirements, safety laws and regulations may impact business continuity and reputation. COVID-19 contagion poses risk to workforce health and safety, and may lead to business disruptions. Sat Industries has a robust governance mechanism for safety, health, environment and sustainability where reviews are undertaken at multiple levels. To help inculcate a best- in-class safety culture amongst our workers, we have taken up several initiatives to mitigate hazards and reduce risks. The Company has implemented various safety procedures related to handling machines, installing and using suitable tools and equipment through regular inspection at plant locations, and providing training and awareness across the workplace.
The Company, through its subsidiaries, has conducted a COVID Vaccination drive to ensure that all the employees are fully vaccinated, and regular medical check-up is duly undertaken to ensure the safety of all employees.
Regulatory Risk Our operations are governed by various statutes encompassing law and regulations for environment and climate change, trade measures, competition, taxes, mining and others. Any deviation in compliance and adherence has the potential to not only impact our operating performance but also dent our reputation. The continuously evolving regulatory scenario, resulting in changes of the statutory provisions and introduction of newer ones, make compliance more complex. At SAT, we make sure that the law of the land is fully complied with. In addition, we update our teams internally on all the regulatory amendments and ensure that there is no non-compliance.
Commodity Fluctuation Risk The Companys performance is closely linked with that of the steel industry. Any material changes in demand-supply scenarios within the steel sector, in India or abroad, may impact its performance. We have been running a structured cost reduction journey for the past few years to improve profitability and mitigate the risk of commodity price inflation. However, we do not put our production cycle at risk for the sake of buying inputs at lower prices.
Supply Chain Risk The supply chain network is subjected to physical and environmental destruction, trade restrictions due to geopolitical tensions and disruptions of supplies. The developing rail, road, port infrastructure, handling facilities and dependence on outsourced partners may lead to disruption of operations. The Company focuses specifically on the resilience of its supply chain and the efficiency of launching its models to market. We work closely with our suppliers to define inventory maintenance norms, build safety stocks, and explore localisation and alternative sources, among others.
We continue to maintain and develop strong partnerships with key strategic suppliers to ensure a stable future supply of components. We have been taking steps to find substitutes, protect volatility by way of hedging and take price increases in a calibrated manner to mitigate the impact of price rises.
Credit Risk The Companys debt servicing capabilities could get affected due to major volatility in financial markets and in a changing interest rate scenario. Further, the Company is also exposed to currency risks arising due to a considerable amount of import and export of goods it undertakes. The Company has kept a broader outlook on the markets, covering not only the foreign exchange risks but also other risks associated with the financial assets and liabilities, such as interest rate and credit risks. The management aims to:
- Create a sustainable business planning environment by reducing the impact of currency and interest rate fluctuations on the Companys business plan.
- Achieve greater predictability of earnings by determining the financial value of the expected earnings in advance
- The risk of fluctuation in foreign currency exchange rates is mitigated through a natural hedge as the group imports and exports in foreign exchange for its export business.
Investment Risk The company invests in various startups in disruptive sectors, which result in capital loss in some cases and would have a severe impact on its profitability. The Company has established clear goals, making it easier to decide which assets to invest in. The Company has a diversified portfolio of investments in startups in various sectors, which will help in mitigating the risk. In addition, the Company has a robust internal team of professionals with relevant expertise to understand the market situations and take decisions for investing the funds.