shree krishna paper mills industries ltd Management discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS

The pulp and paper industry is one of the largest industries in the world. The paper industry holds immense potential for growth in India as the per capita consumption globally is one of the lowest. Paper Industry in the country has undergone a transformation of sorts in the last few years. The industry has gone up the sustainability curve and has become far more technologically advanced. India produces a variety of paper types that are often used in writing, packing, printing, and specialty papers. The paper industrys growth is expected to be sustained over the medium term because of economic growth, and structural transformation, transforming demographics, thrust on education and literacy by the Government, increased corporate activity and lifestyle changes and rising demand for improved quality paper.

OPPORTUNITIES AND THREATS

After the disruption caused by the Covid-19 pandemic, when paper consumption nose-dived, the demand has made a robust recovery in the ongoing financial year and has overtaken pre-pandemic levels. In view of the large potential for growth aided by a growing economy, paper industry is expected to continue to grow in Sync with the economic growth recording 6-8% growth per annum. Moving away from single-use plastic is a huge opportunity for the pulp and paper industry. In India, the per capita paper consumption is around 15 kg, which is likely to grow to over 30 kg in the next few years, whereas the global average is close to 60 kg. These numbers itself shows the scope for the Indian paper industry. We have to continuously upgrade the technology to be at par with the quality of international standards.

The Indian paper industry is highly dependent on the availability of raw materials. Any shortage or price fluctuations of these raw materials can adversely affect the industrys operations and profitability. The Indian paper industry is highly competitive, with several large and small players heavily concentrated in a single community. Price competition can affect the industrys profitability.

OUTLOOK

Paper Industry in India is exhibiting one of the fastest growths being witnessed anywhere in the world and is most likely to continue this trajectory in the years to come. The Indian paper industry has trained personnel at all levels, and therefore, it is able to produce high-quality paper with appropriate technology at relatively low labour costs. It has generated significant employment opportunities for the local community, especially in the rural areas, apart from enhancing their income. Paper is an important raw material used in the publication and packaging industries. The growth of the publishing and packaging industries in India is expected to drive the demand for paper in the country. The paper industry is constantly evolving, with modern technologies and processes being developed to improve productivity, efficiency, and quality.

RISKS & CONCERNS

The significance of risk management cannot be overstated, as it directly influences the success of business operations. The Company has a robust risk management framework to identify evaluate, mitigate, monitor and minimize risks to achieve business objectives. Risk Management Framework provides a clear and effective strategy for addressing risks. Risk evaluation and its management is an on-going process within the organization.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has well-equipped and effective internal control systems for different activities so as to minimize the impact of various risks. Such stringent and detailed controls ensure the effective and productive use of resources to the degree that the Companys assets and interests are safeguarded, transactions are approved, registered and properly reported. Apart from this, a well- defined system of internal audit is in place so as to independently review and strengthen these internal controls. The Audit Committee of the Company regularly reviews the reports of internal auditors and recommends steps for further improvement in the internal controls.

FINANCIAL PERFORMANCE

The financial statements of your Company have been prepared in accordance with the Indian Accounting Standard (‘Ind AS) specified under Section 133 of the Companies Act, 2013 and the applicable Rules, as amended from time to time and other applicable provisions. The salient parameters of financial performance are as under:- ( in Lakhs)

	2022-2023	2021-2022
Revenue from Operations	17,787.69	10,347.57
Total Income	17,817.45	10,439.59
Total Expenses	N=RIGHT>17,491.49	10,610.95
Profit/(Loss) before tax	325.96	(171.36)
Exceptional Items	1332.39	--
Tax expenses	402.13	(39.90)
Profit/(Loss) after tax	1256.22	(131.46)
Total Comprehensive Income	1257.09	(135.53)

During the year under review, there is a significant improvement in the performance of the Company. Revenue from operations stood at 17,787.69 lakhs against 10,347.57 lakhs in the last financial year. The Company has achieved profit before tax of at 325.96 lakhs against loss of 171.36 lakhs in the previous financial year 2021-22. In addition, the Company has also earned exceptional item income of 1,332.39 lakhs resulting total profit after tax of 1,256.22 lakhs against loss of 131.46 lakhs in the previous financial year.

HUMAN RESOURCES & INDUSTRIAL RELATIONS

The Company strongly believes that its employees are the most valuable asset and the strategic differentiator. Consistent with every other aspect of its business strategy, the Company recognizes the value of talent within the organization to fuel future growth and progress. Our skilled employees, their expertise, and dedication are vital for achieving operational efficiency, innovation, and sustainable growth. Our endeavor is to provide a work environment where continuous learning and development takes place to meet the changing demands and priorities of the business. The industrial relations within the Company have remained harmonious throughout the year. The Company had 238 employees on its payrolls as on March 31, 2023.

KEY FINANCIAL RATIOS

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018, the Company is required to give details of significant changes (change of 25% or more as compared to the immediately previous financial year) in key financial ratios. Following are the key financial ratios:

Particulars	2022-23	2021-22
Debtors Turnover Ratio	24.78	14.09
Inventory Turnover Ratio	6.43	4.45
Interest Coverage Ratio	5.12	0.70
Current Ratio	1.06	0.90
Debt Equity Ratio	0.89	1.71
Operating Profit Margin (%)	11.59	3.89
Net Profit Margin (%)	7.06	(1.27)
Return on Net Worth	0.50	(0.10)

Reason for significant change:

1. Debtor turnover ratio has been improved due to increase in sales and better recovery from customers.

2. Inventory turnover ratio has been improved due to optimization of inventory holding level.

3. Interest Coverage Ratio has been improved due to improvement in EBIT as compared to last year.

4. Debt equity ratio has been improved due to lower utilization of credit limits and improved net worth than previous year.

5. Operating Profit Margin, Net Profit Margin and Return on Net Worth have been improved due to earning of operational profit along with exceptional income in current year as compared to loss in last year.

CAUTIONARY STATEMENT

The above Management Discussion and Analysis contains certain forward-looking statements within the meaning of applicable security laws and regulations. These pertain to the Companys future business prospects and business profitability, which are subject to several risks and uncertainties and the actual results could materially differ from those in such forward-looking statements. Important factors that could make a difference include, among others, economic conditions affecting demand/ supply and price conditions in the markets, in addition to changes in government regulations, tax laws and other statutes and incidental factors.