Shree Hari Chemicals Export Ltd Management Discussions.

A. INDUSTRY STRUCTURE AND DEVELOPMENT

Dyestuff sector is one of the core chemical industries in India. It is also the second highest export segment in chemical industry. Maharashtra and Gujarat account for 90% of dyestuff production in India due to the availability of raw materials and dominance of textile industry in these regions. Globally the dyestuffs industry has seen an impressive growth.

Initially the industry s production bases were mostly in the west, but in the last few years, they have been shifting to the East. The dye markets are mostly dominated by reactive and disperse dyes. The demand for reactive acid and disperse dyes is expected to grow in future as these two dyes are dominant in all the regions. The demand for reactive and disperse dyes are common in all the regions whereas vat and other dyes are stagnant.

The growth of dye sector in the future continues to depend on the performance of end user industries like textiles, paints, printing inks, paper. The changing customer preferences, boom and expansion of infrastructure in certain parts of the world creates new market opportunities for the dye industry. To achieve global standards the industry needs to put efforts in critical areas so as to adopt aggressive growth and focus on exports, R&D, co-marketing alliances, up-gradation of manufacturing facility, contract manufacturing with companies having established markets, identification of areas of core competence, consolidation, collaboration by cluster development, outsourcing, environmental consciousness, cost reduction etc. The industry is likely to see many new dyeing technologies coming into the market with the help of good technical expertise and R&D achievements.

B. OPPORTUNITY & THREATS

Pollution and effluent problems have become the single biggest factor in restricting the growth of the dyestuff industry in the developed nations. Tighter rules and regulations, strict laws and high standard for treatment of the effluents have forced these countries to look for better opportunities without sacrificing their interest. If India has to capitalize on these opportunities, then there seems to be no harm in encouraging this industry in the country provided proper measures are taken for effluent treatment.

Shutdown of capacities in China due to the environmental issues is likely to continue in the near term.

Apart from professional marketing, the need of the hour is disciplined marketing by the Indian manufacturers. It has to be realized that cutting prices at unrealistic levels only harms the national interest.

The world market for textiles is growing and, therefore, the demand for dyes will continue to grow in future.

Low per capita consumption of dyes and dyestuff products compared to other countries and India s fast growth are attracting many international manufacturers to the Indian market.

Under penetrated Indian Market: Compared to the developed economies and China, current penetration of specialty chemicals in Indian market is very low. Further, with a favorable demographic profile and growth of domestic consumption led by a burgeoning middle-class, demand of Dyes & Dyestuff is bound to increase.

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, 3-6 Disulphonic acid), therefore the financial performance is related to that product.

D. OUTLOOK

India is competent to manufacture all types of dyes which are in good demand and as the product of the Company is an Intermediate for the dyestuff making it a preferred source of dyes.

E. RISKS & CONCERNS

The industry also faces several challenges on the environmental front, as the company is falling under red category, any stringent norms fixed by the regulators, Volatility in prices of raw material especially crude oil and transportation cost can adversely affect the business operations and can thin out margin of the Company, Irregular supply of the raw materials may affect the working of the company.

F. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company follows Internal Control Systems which are covering 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 thoroughly followed.

The Company s 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 follows the Code of Conduct devised for conducting the business of the Company.

G. FINANCIAL PERFORMANCE (Rs. In lakhs)

Particulars 2018-2019 2017-2018 % Changes
Total quantity of sales (MT) 1131.101 1602.589 (29.42)
Income from operations (Rs) 5052.13 5463.73 (7.53)
Profit before interest, Depreciation and Tax (Rs) (126.02) (827.02) 84.67
Interest Expenditure (Rs) 7.95 10.27 (22.69)
Depreciation (Rs) 287.44 365.55 (21.36)
Net Profit (Rs) (364.70) (873.48) 58.25

H. HUMAN RESOURCES / INDUSTRIAL RELATIONS

The Company recognizes the importance of the quality and competence of its workforce towards sustained growth of the Company. The management allocates sufficient attention in training the workforce to ensure that they are well equipped to take up challenging projects, and ensure their timely delivery by sticking to target schedules. The Company offers a host of measures like incentives to the employees directly involved in timely completion of such projects. Employee development activities such as workshops, presentations etc. have been organized during the year for continual capacity building and capability enhancement of employees.

The Company presently has 87 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:

i. Debtors Turnover : - 10.19 : 6.30
ii. Current Ratio : - 3.78 : 2.57
iii. Operating/Net Profit Margin : - 62.11 %

J. DETAILS OF ANY CHANGE IN RETURN ON NET WORTH

During the year under review the Net Worth of the Company was Rs. 37.64 Lakhs as against Rs. 41.30 Lakhs corresponding to previous year. The loss in the current year was Rs. 364.70 Lakhs as against loss of Rs. 873.48 Lakhs in the previous year.

The Return/(loss) on Net Worth was (9.49 %) in the current year and was (21.20 %) in the previous year.

The Return/(loss) on Net Worth has now been changed by 55.24 % due to curtail of expenses and development of an Environment of Loss Prevention.

CAUTIONARY STATEMENT

Certain statements made in this Report relating to the Company s 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 Company s operations include climatic conditions and economic conditions affecting demand and supply, changes in Government regulation tax regimes, natural calamities, etc. over which the Company does not have any direct control.