ANNEXURE 7 TO THE BOARDS REPORT
Your Directors have pleasure in presenting the Management Discussion and Analysis
Report for the year ended on March 31, 2023.
ECONOMY, INDUSTRY STRUCTURE AND DEVELOPMENTS IN FOOD CANS AND BATTERY SEGMENTS:
GLOBAL ECONOMIC OVERVIEW:
Global economy is projected to grow by 2.3 per cent in 2023 (+0.4 percentage points
from the January forecast) and 2.5 per cent in 2024 (-0.2 percentage points), a slight
uptick in the global growth forecast for 2023. A sombre picture still remains despite this
uptick, the growth rate is still well below the average growth rate in the two decades
before the pandemic of 3.1 per cent. For many developing countries, growth prospects have
deteriorated amid tightening credit conditions and rising costs of external financing. The
least developed countries are forecast to grow by 4.1 per cent in 2023 and 5.2 per cent in
2024, far below the 7 per cent growth target set in the 2030 Agenda for Sustainable
Development. Global trade remains under pressure due to geopolitical tensions, weakening
global demand and tighter monetary and fiscal policies. The volume of global trade in
goods and services is forecast to grow by 2.3 per cent in 2023, well below the
pre-pandemic trend.
The global metal cans market estimated at USD 65,369.8 million in 2022 and is expected
to expand at a compounded annual growth rate (CAGR) of 6.2% from 2022 to 2030. The
increasing use of metal cans for packaging food & beverage products including fruits,
vegetables, soups, baby foods, poultry, carbonated soft drinks (CSD), alcoholic beverages,
juices, and liquid dairy products driving the market. The benefits associated with metal
packaging include reusability, recyclability, durability, as well as appearance.
The increasing consumption of packaged and processed food & beverages is the
primary factor supporting the market growth. Continuously developing packaging
technologies by the major players across the globe is also one of the major factors
driving the metal cans market. Additionally, developing infrastructure for the recycling
of discarded metal packaging products is further bolstering the demand for metal cans
across the globe.
INDIAN ECONOMIC OVERVIEW:
The United Nationshas projected Indias growth to decelerate to 6 per cent in 2023 from
6.6 percent in 2022. According to the UN Trade and Development Conference (UNCTAD) the
global growth in 2023 is to drop to 2.1%, compared to the 2.2% projected in September
2022, assuming the financial fallout from higher interest rates is contained to the bank
runs and bailouts of the first quarter.
For India, the positive effect of high public and private investment and consumption as
well as rising exports was partly offset by higher energy import bills, which deepened the
current account deficit and ate up reserves. The Reserve Bank of India has started
tightening its policy stance during the spring of 2022 to limit damage caused by foreign
capital outflows, a weakening currency and inflation risks. Higher financing cost slightly
dented buoyant economic activity, and over-leveraging in the corporate sector may become a
factor of financial instability. In view of financing its growth ambitions, the Indian
Government has committed to massive infrastructure investment. In 2020 and 2021 and in the
energy sector alone, funds amounting to USD 160 billion had been committed to fossil and
non-fossil projects alike, the report noted.
The Minister of State for Steel and Rural Development address that Metal sector can
play major role toward self- reliant India and US $ 5 Trillion Economy by 2024-25. As per
ASSOCHAM the current outlook and future trends of Metal Industry has growth due to its
multiple benefits in almost all walks of life. India consumption of steel and other metals
in infrastructure and construction sector accounts for largest share over 65% and the
balance is accounted for the sectors such as engineering, packaging and automotive which
are displaying admirable increase in metal application year after year.
INDUSTRY STRUCTURE AND DEVELOPMENTS:
The India Metal Packaging Market is expected to register a CAGR of 6.52% over the
forecast period. Increased urbanization is one of the significant reasons that are
prompting Companies to increase metal cans and container production capacity. Moreover,
the penetration of organized retail is also compelling market players to ramp up their
capacity.
The Indian metal packaging market is quite competitive. It is moderately fragmented and
consists of significant individual players, such as Ball India (Ball Corporation), Oricon
Enterprises Limited, Casablanca Industries Pvt Ltd, and Hindustan Tin Works Ltd. Many
Companies are increasing their market presence by expanding their operations or entering
into strategic mergers and acquisitions.
On February 2022, Food Safety and Standards Authority of India paved the way for
packaging drinking water in non-transparent packaging solutions like aluminum beverage
cans. Ball Corporation welcomed the move as it will help the Company address the issues on
the sustainability front and contribute to the Governments initiative to regulate
single-use plastics and provide the end consumer with an eco-friendly alternative.
OPPORTUNITIES, RISKS, THREATS AND CONCERNS:
The government of India is taking initiatives to lower the prices of raw materials and
increase domestic availability. For instance, in May 2022, the Government of India waived
customs duty on importing some raw materials, including ferronickel and coking coal, used
by the steel industry, a development which will lower the cost for the domestic industry
and reduce the prices. In addition, the duty on iron ore exports increased up to 50%, and
on a few steel intermediaries to 15%. Developments like these that are undertaken by
private and government organizations are drivers for metal packaging, such as metal cans
and containers in India.
The change in customers tastes and preferences in whitewashing their houses and
painting their walls with different colors is propelling the demand for paints containers
in a smaller size to reduce wastage and save cost. These paints come in small metal
containers, providing easy handling and transportation. Additionally, the growing
construction industry in India will propel the demand for paint and coating in the
commercial and residential sectors. For instance, according to the Ministry of Statistics
and Programme Implementation (MoSPI), Indias construction industry accounted for INR 3.38
trillion in the second quarter of 2022 compared to INR 2.67 trillion in the first quarter
of 2022. All this is expected to support the demand for metal cans in the forecast
timeframe.
Despite the immense opportunity, the industry in India is going through one of its
toughest times now. The major issue is the mandatory imposition of the BIS standard vide
steel and steel products QCO dated July 17, 2020 - issued by the Ministry of Steel.
The quality control order has mandated use of only BIS certified material like
tinplate/tin-free steel for tin cans and also imposed condition of use of BIS material for
manufacture of various imported components steel products like easy-open ends, peel-off
ends, etc., which the industry imports from various countries in different sizes and
specifications as they are virtually not manufactured in the country.
There are many reasons for the resistance of the metal packaging industry to the
imposition of BIS. The QCO has been issued at a time when the entire industry is already
stressed, trying to retune the business owing to the pandemic. Besides, it is practically
impossible to force the international suppliers to go for BIS certifications as the
process for getting BIS licence is quite cumbersome and costly.
From the perspective of international suppliers of tin plates, India is fairly a small
market so they are not very keen to get into lengthy bureaucratic and cost intensive BIS
certification procedures. As a result, the foreign suppliers have halted shipping tin
plates to India and this has led to acute shortage in the domestic market.
OUTLOOK AND CHALLENGES:
The market is already favouring the industry in terms of demand, but now much is
dependent on government policies. As soon as they become favourable, the Indian metal
packaging industry will have a promising future ahead. By withdrawing the mandatory
certification, the foreign suppliers will restart shipping tin plates to India; there is a
huge shortage in the domestic market now. Furthermore, to make the environment more
conducive and in order to promote localisation of steel products, the government should
provide soft loans, payable over more than 10 years, for the packaging industry. Also,
since metal packaging is 100 per cent recyclable, environment-friendly and a sustainable
packaging material, the government should introduce a scheme that incentivises the user
industry to make use of such packaging material.
Moreover the exorbitant price increase in tinplate, consequently cans, may compel the
existing customers to move away from metal packaging to other alternative packaging
options, especially in the food, beverage and paint sectors. The industry which is mainly
concentrated in the MSME sector will not be able to survive the hefty price increase of
tinplate, loss of business to alternative packaging materials and an upsurge in working
capital requirements.
The industry imports both prime and non-prime materials for manufacture of tin
containers/various products for food and non-food segments. The industry is able to use
non-prime material for manufacture of tin containers for non-edible products like paints,
chemicals, etc., and various other products like stationery items, lanterns, etc.
Non-prime materials are commercially cheaper and can be conveniently used in India where
availability of labour is comparatively cost efficient and the cans/products are
manufactured either manually or in a semi-automatic process. In case of imposition of BIS,
such non-prime material will not be available to the metal packaging units in the MSME
sector. It means that they will have to depend on the prime material which is around 35
per cent more expensive than the non-prime material and which is already in short-supply.
SEGMENTWISE PERFORMANCE:
The Company products constitute metal packaging and hence there is no separate
disclosure on segment reporting.
INTERNAL CONTROL SYSTEM AND ITS ADEQUACY:
The Company has a proper and adequate system of internal controls to ensure that all
assets are safeguarded, and protected against loss from unauthorized use or disposition.
Various Checks and balances ensure that transactions are authorised, recorded, and
reported correctly. The Company has an extensive system of internal controls which ensures
optimal utilization and protection of resources, accurate reporting of financial
transactions and compliance with applicable laws and regulations and internal policies and
procedures.
The internal control system is regularly reviewed by the Audit Committee and has well
documented policies and guidelines to ensure reliability of financial and all other
records to prepare financial statements and other data.
CORPORATE POLICIES:
HUMAN RESOURCES/ INDUSTRIAL RELATIONS:
The Company maintains a cordial relationship with its employees by creating a positive
work environment, with focus on improving productivity and efficiency. The Company has a
team of qualified and dedicated personnel contributing to the better performance of the
operations and processes of the Company. Constant training continues to be the focus for
developing and honing the skill sets and competency levels of employees in the
organization in line with the business standards and requirement. The Company firmly
believes that well trained man power at every level provides the true competitive
advantage in its business and hence the Company invests resources in training. The
Companys endeavor is to offer fair and reasonable compensation to its employees based on
the market benchmarks.
TPM/ISO/IMS:
Your Company has completed the seventeenth year of TPM (Total Productive Maintenance)
programme to sensitize employees in safe and clean working environment enabling, zero
accidents and breakdowns, highly skilled teams with high OEE rates and customer are clear
through good quality, less cost and timely delivery.
Your Company is ISO 9001:2015 certified for Quality Management Systems (QMS). The ISO
version is upgraded from ISO 9001:2008 to ISO 9001:2015 by stringent audits from
TUV-Rheinland. Through this your Company is committed to be competitive and efficient
ensuring to achieve customer satisfaction with Continual process improvements. Your
Company is making continuous efforts for improvement in the processes, Quality Management
Systems (QMS) and skill building.
In addition to Quality Management Systems, your Company is also FSSC-22000 certified
for Food Safety Systems Certificate (FSSC) which was received in the financial year
Dec-2022. This will help in maintaining and monitoring of Hazard and Critical Control
Points (HACCP) during the process of manufacturing metal cans for food packaging. The
certification helps to set standards for hygiene of employees and the surroundings which
will impact in hygienic packaging for processed food. As the Companys policy of FSMS
speaks, it prevents contamination in source and ensures product safety, while also
complying with the applicable statutory and regulatory requirements.
CAUTIONARY STATEMENT:
Statements in this report describing the Companys objectives, expectations or
forecasting may be forward looking within the meaning of applicable laws and regulations.
The actual results may differ materially from those expressed in this statement. Important
factors that could make a difference to the Companys operations include economic
conditions affecting demand/supply and price conditions in the domestic and also
international markets, changes in the Government regulations, tax laws, other statutes and
also many exogenous variables. The Company assumes no responsibility to publicly amend,
modify and revise any forward looking statements, on the basis of any subsequent
development, information or events or otherwise.
SIGNIFICANT CHANGES IN KEY RATIOS:
In Accordance with SEBI (Listing Obligation and Disclosure Requirement Regulations
2018) Amendment regulations 2018, The Company is required to give details of significant
Changes).
S.No. |
Particulars |
Ratios |
|
|
2022-23 |
2021-22 |
| 1 |
Debtor Turnover Ratio |
8.90 |
7.99 |
| 2 |
Inventory Turnover |
5.14 |
4.04 |
| 3 |
Interest Coverage Ratio |
2.14 |
1.94 |
| 4 |
Current Ratio |
1.49 |
1.42 |
| 5 |
Debt Equity Ratio |
1.35 |
1.25 |
| 6 |
Operating Profit Margin(%) |
9.89 |
10.37 |
| 7 |
Net Profit Margin(%) |
2.44 |
2.16 |
Place : Bengaluru |
For and on behalf of the Board |
Date : 15 th May, 2023 |
For Shetron Limited |
|
Diwakar S Shetty |
|
Executive Chairman |
|
DIN: 00432755 |
|
[Address: Divya Bunglow, Dr. R.S. Jain Marg, |
|
Gandhigram Road, Juhu, Mumbai 400049] |
+91-9892691696
