shree hari chemicals export ltd Management discussions

A. INDUSTRY STRUCTURE AND DEVELOPMENT

Covering more than 80,000 commercial products, Indias chemical industry is extremely diversified and can be broadly classified into bulk chemicals, specialty chemicals, petrochemicals, polymers, and fertilisers. India accounts for 16-18% of the world production of dyestuffs and dye intermediates. India holds a strong position in exports and imports of chemicals at a global level and ranks 14th in exports and 8th in imports at global level (excluding pharmaceuticals).

The Indian government recognises chemical industry as a key growth element and forecast to increase share of the chemical sector to ~25% of the GDP in the manufacturing sector by 2025. Under the Union Budget 2023-24, the government allocated Rs. 173.45 crore to the Department of Chemicals and Petrochemicals. The Government of India is considering launching a production linked incentive (PLI) scheme in the chemical sector to boost domestic manufacturing and exports.

A 2034 vision forthe chemicals and petrochemicals sector has been set up by the government to explore opportunities to improve domestic production, reduce imports and attract investments in the sector. The government plans to implement production-link incentive system with 1 0-20% output incentives for the agrochemical sector; to create an end-to-end manufacturing ecosystem through thegrowth ofclusters.

B. OPPORTUNITIES& THREATS Opportunities

At a broader level, structural shifts are going to be critical for Make in India to take shape. While China+1 is still taking form, Indias neighbours and peers have already taken off on a steeperplane. What this brings to the fore, is that it is essential to explore, diversify and build scale by integrating the value chain, and not simply by focusing on a single segment of the industry. Atmanirbhar will succeed, only when the industry builds capabilities across the value chain. This shall reduce dependence on imports, deleverage risks emanating from supply chain disruptions, and more importantly boost the economy.

Threats

India has a strong vision to be a digital economy. In orderto turn this goal into a reality, theIndian chemical Industry has a major role to play. Often the sector faces key challenges such as inadequate infrastructure facilities, high costs of basic raw materials like natural gas and crude oil, high cost

of capital, and the need fortechnological modernization of its facilities. The charter for stabilization has already been prescribed by the government with PLI (Production Linked Incentives) initiatives such as Aatmanirbhar Bharat, Make in India, etc. However, one of the biggest challenges faced as an industry is contracting gross margins due to soaring raw material costs andincreasing operating costs.

C. SEGMENT-WISE OR PRODUCT-WISE PERFOMANCE Since the company operates mainly in single product which is DYE Intermediate - H-Acid (1 -Amino, 8-Napthol, 36 Disulphonic acid), therefore the financial performance is related tothat product.

D. OUTLOOK

At Shree Hari Chemicals Export Limited, we have successfully set-up solar power plants. The same will help to save cost significantly. We also have plans in place to backwardly integratethrough raw material production over the next 3 to 5 years to achieve complete integration. Overall, the future growth prospects for the Company is very bright. Our 2022-23, outlook is to explore the trends that can help organizations turn risks into advantages and capture growth.

E. RISKS & CONCERNS

The Company faces several risks which can affect the smooth functioning of the Companys operations such as Competition risk, foreign currency exchange rate risk, raw material price risk and environmental risk. Risk management at the Company is continuously analyzing and managing all the risks posed to the business.

F. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company follows Internal Control Systems which covers all business aspects to provide reasonable assurance that all assets are safeguarded, transactions are authorized, recorded and reported properly, as per applicable statutes. The Company generally adheres to rules, policy, statutes and laws ensuring that statutory compliances are followed thoroughly. The Companys Audit Committee reviews and takes suitable actions for any deviation, observation or recommendation suggested by the Internal Auditor, who is an independent auditor mandated to conduct internal audit. The Company also adheres to environment protection laws. The employees of the Company follow the Code of Conduct devised for conducting the business of the Company.

G. FINANCIAL PERFORMANCE

(Rs. In Crore except EPS)
Particulars	2022-23	2021-22
Revenue	103.57	80.08
Earnings before interest, depreciation & taxes	-22.48	387.54
Profit Before Tax	-26.45	1.99
Profit for the Year	-19.61	0.69
Total Assets	89.53	93.36
EPS	-44.10	1.57

H. HUMAN RESOURCES / INDUSTRIAL RELATIONS

The Company believes that the quality of the employees is the key to its success and is committed to equip them with skills, enabling them to seamlessly evolve. Company truly values its human resources, who have committed themselves to the Companys Mission and Vision. An effective talent management strategy and an optimum workforce helps us meet the demand for talent in our business. We have been focusing on training and development for enhancing the capabilities of our personnel and building on their core technical skills throughout the year. Company maintained harmonious Industrial relations and believes inhealthy competition.

The Company has total strength of 71 employees.

I. DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

There were significant changes in the following ratios as compared to the immediately previous financial year:

Name of Metric	FY 2022-23	FY 2021-22	% Change increase (decrease)	Explanation in case change is 25% or more, as compared to the previous year
Inventory Turnover	3.85	3.11	23.76	-
Current Ratio	0.81	1.34	(39.78)	Increase in Borrowing
Debt Equity Ratio	1.66	0.60	177.25	Increase in Borrowing and decrease in profitability
Interest Coverage Ratio	-9.76	5.14	(289.96)	Increase in Borrowing
Debtors Turnover	4.60	3.71	23.98	-
Operating Profit Margin (%)	-18.55 %	11.00 %	(168.73)	Increase in price of Raw Material
Net Profit Margin (%)	-19.31%	0.89%	(2277.24)	Decrease in profitability

J. DETAILS OF ANY CHANGE IN RETURN ON NET WORTH

During the year under review the Net Worth of the Company was Rs. 17.94 Crore as against Rs. 37.55 Crore correspondingto previousyear.

The Return on Net Worth was -109% in the currentyear and was 1.86 %inthe previous year.

The Return on Net Worth has now been changed by -110.86% due to market conditions.

CAUTIONARYSTATEMENT

Certain statements made in this Report relating to the Companys outlook, estimates, predictions etc. may constitute forward-looking statements within the meaning of applicable laws and regulations. Actual results may differ from such estimates, whether express or implied. Several factors that could make a difference to Companys operations include climatic conditions and economic conditions affecting demand and supply, changes in Government regulation tax regimes, natural calamities, etc. over whichtheCompany does not haveany direct control.