shree pushkar chemicals fertilizers ltd Management discussions

In 2022, global economies faced significant headwinds as a result of broadening inflationary pressures and due to geopolitical strife in Europe. Global economic activity has also started slowing significantly as a result of monetary policy tightening to combat inflation,less favourable financial conditions and supply chain disruptions caused by geopolitical tensions. The Indian scenario seems better placed, more impressive and encouraging. With a good half of 2023 gone, while the world is in turmoil, recession is coming down in the US which augurs well for India and the world too. All in all, a good futuristic year is expected with the belief that nothing in the world will shake things. Awaiting a more robust and growing Indian economy

1. Industry structure and developments.

a) Chemical Dyestuff Industry.

Dye Intermediate is the main ingredient used for the manufacturing of dyestuff. The global dyes and pigments market size was valued at USD 38.2 billion in 2022 and is expected to expand at a compound annual growth rate (CAGR) of 5.3% from 2023 to 2030. Increasing demand from various application industries such as textiles, paints & coatings, construction, and plastics is expected to drive the market growth. Major producers are actively venturing into enhancing their products by utilizing advanced technologies for the efficient removal of hazardous pollutants during the manufacturing process. Manufacturers are likely to experience varied production costs due to volatility in the prices of raw materials.

The reactive dyes segment dominated the market with a revenue share of more than 57% in 2022. These products are composed of highly colored organic substances and have primary applications in tinting textiles. They have a high resistance to fading and are available in a range of bright shades, which makes them suitable for colouring cotton and rayon. Moreover, they can form a covalent bond with fibres during the process of dyeing. It also includes a parent dye, a linking group, and an active group. These advantages enable them to inhibit characteristics, which are superior and preferable over other dyes used in cellulose fibres. The segment is estimated to expand further at the fastest CAGR from 2023 to 2030.

Countries, such as China, India, Germany, exhibit significant growth potential in the global Chemical sector. At present, India contributes about 6% of the share in the global market with a CAGR of more than 15% in the last decade. The dye market are mostly dominated by reactive and disperse dyes. The demand for reactive and disperse dyes is expected to grow in future as these two dyes are dominant in all the regions.

Dyestuff sector is one of the core chemical industries in India. It is also the second highest export segment in chemical industry. The Indian dyestuff industry is made up of about 1,000 small scale units and 50large organized units. 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.

The major users of dyes in India are textiles, paper, plastics, printing ink and foodstuffs. The textiles sector consumes around 80% of the total production due to high demand for polyester and cotton, globally.

The growth of dye sector in the future continues to depend on the performance of end user industries like paints, textiles, printing inks, paper, plastics and foodstuffs. The changing customer preferences, boom and expansion of infrastructure in certain parts of the world creates new market opportunities for the dye industry.

b) Fertilizer Industry:

Agriculture is the third largest sector of Indian Economy, which contributes around 17% of total GDP of the Country. Fertilizer Industry, with the emerging scenario, plays vital role in the growth of Agriculture Sector. The balanced use of chemical fertilizer is important not only for increasing agricultural productivity but also for sustaining soil fertility. Single Super Phosphate is a multi nutrient fertilizer containing phosphate and sulphur as primary nutrients. SSP is applied as a basal fertilizer being rich in secondary nutrients like calcium and magnesium oxide and several micro nutrients. It is an essential Fertilizer for crops likes Oil seeds, Pulses, Sugarcane, Fruits and Vegetables, Tea etc. and for sulphur deficient soils.

SSP being an indigenously manufactured fertilizer saves on foreign exchange outgo vis a vis imported phosphatic fertilizers. The Ministry of Fertilizers and the Fertilizer Association of India have now laid special focus on improving the quality in the SSP sector. Governments continuous thrust to encourage SSP to substitute imports of DAP and NPK is an indicator of upward trend in the Industrys future.

2. Opportunities and Threats.

The growth of dye sector in the future continues to depend on the performance of end user industries like paints, textiles, printing inks, paper, plastics and foodstuffs. 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, upgradation 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. Globally the high usage of cotton, polyester and the banned vat and azo dyes in some of the countries has paved the way for reactive and disperse dyes. It is expected that in future these two dyes would lead the market. The Industry feels unless the power supply and infrastructure are improved, it would be very difficult to compete globally with rapidly declining duty differentials and appreciation in the value of rupee.

The Company welcomes the Governments plan to introduce DBT subsidy directly to farmers which shall give the farmers unrestricted choice as well as make them understand the real worth of fertilizer used by them.

The Company being into SSP Fertilizer Industry are characterized by advantages like Basic need for agriculture and its development, SSP fertilizer is the lowest priced fertilizer per kg, and preferred by small & marginal farmers, Subsidized by Government of India to control the prices of the input to the farmers.

The Company is in an advantageous position for tapping its already established production capacity with multi- geographical locations; wide spread marketing network and high brand value for its product.

NBS policy as envisaged has attracted new entrants in the market, which in fact shall be better for the wider reach of this long neglected product and establishing the SSP Industry in its right place, However, entry of new entrants in overall bad market conditions has created excess supply in the market resulting into changing consumption and stocking patterns necessitating higher inventories.

SSP fertilisers are based on imported raw-materials which can face severe volatility in prices and foreign currency exchange rates, affecting the profitability of the Company. Agro-Climatic conditions also have a large effect on the performance of the Company.

Uncertainty of monsoon, volatile international market of raw material, seasonal consumption of fertilizer mainly in two months each in Kharif and Rabi, lack of awareness of benefits of SSP consumption amongst farmer fraternity, clubbed with logistics availability/cost and higher requirement of working capital shall remain concerns for the Industry & of the Company These are all factors which are beyond the control of the private enterprise and would continue to be a challenge

3. Segment–wise or Product-wise Performance.

The standalone vertical wise quantitative Sales for the FY2022-23 vis-a-vis that of FY 2021-22 is as under:

VERTICALS	FY 2022-23		FY 2021-22		FY 2022-23	FY 2021-22
	Sales Qty MTA	Amt Rs. Crs.	Sales Qty MTA	Amt Rs. Crs.	% share in Revenue
Chemicals, Dyes and Dyes	36,931	296.91	17,708	259.20	71%	72%
Intermediates
Fertilizer and Allied Products	61,762	122.97	66,961	98.74	29%	28%
Total		419.88		357.94	100%	100%

4. Outlook:

Chemicals Business:

The Indian dyes and dyestuff industry is poised for significant growth, supported by increased demand from various such as textiles, automobiles, and plastics. While the industry faced challenges in the recent past due to consumption downturns and economic slowdowns, it has shown a strong recovery. The growth is fueled by a growing middle-class population and rising per capita incomes, as consumers aspire to improve their lifestyles, leading to higher demand for dyes and pigments. Moreover, evolving customer preferences and the expansion of infrastructure in certain regions present new market opportunities for the dye industry. As a result, the future outlook for the Indian dyes and dyestuff industry remains optimistic and promising.

Fertilizers Business:

The Countrys stress on higher agricultural productivity is expected to lead to a considerably better realization to farmers and increase the demand of fertilizers. The Single Super Phosphate fertilizer is a generic customized fertilizer containing sulphur, calcium & other micro nutrients besides phosphate. The Nutrient Based Subsidy is a long term positive for the Fertilizer Industry, particularly SSP Industry, with free market mechanism encouraging more interaction between producers and farmers for efficient use of fertilizer for better agriculture output.

It is expected that the Country will have a sub normal monsoon in 2023, giving stress to Indian agriculture sector and related industries like Fertilizer in the short term.

In the long term the performance of the Company is expected to be better in coming years considering its basic strengths like high integrated capacity which is already operational, multi-geographical locations and established brands. The well maintained plant and equipments ensure uninterrupted production and distribution of goods.

Credit rating: ICRA Limited has assigned a long-term rating of [ICRA]A+ (pronounced ICRA A Plus). The outlook on the long-term is Stable. The Rating Committee of ICRA has also assigned the short-term rating at [ICRA]A1 (pronounced ICRA A one), which has been as a result of our strict cost control and financial discipline.

5. Risks and concerns.

Uncertainty of monsoon, volatile international market of raw material, seasonal consumption of fertilizer mainly in two months each in Kharif and Rabi, lack of awareness benefits of SSP consumption amongst farmer fraternity, clubbed with logistics availability/cost and higher requirement of working capital shall remain concerns for the Industry & of the Company.

NBS support from time to time may not match with actual input costs hence may affect profitable operations.

Further with the tightening of the already prevailing stringent pollution control norms in India, poses a need for improved economies of scale involving larger capital outlays, pose a threat to the industry, specifically to the units in the unorganized sector.

6. Internal control systems and their adequacy.

The Company ensures the orderly and efficient conduct of its business, including adherence to Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013. The Statutory Auditors while conducting the statutory audit, review and evaluate the internal controls and their observations are discussed with the Audit Committee of the Board. Other statutory requirements especially, in respect of pharmaceutical business are also vigorously followed in order to have better internal controls over the affairs of the Company.

7. Discussion on financial performance with respect to operational performance on consolidated basis During the

Last 5 Years:

Viewing the operational performance over the years, the Company has till last year been maintaining steady progress over has still beentheyears maintaining termsofsalesandprofits. its operational efficiency as can be observed from the cost of raw material to sales and the profitability margins such as EBIDTA margin and PAT margin.

Our continued efforts on improvement in the process yields, better cost control measures, and better inventory management, helped in reducing the raw material cost from 66.96% in FY2019 to 63.00% during FY 2023. Going ahead, as the capacity utilization increases, operating leverage will play and have a positive impact on the overall profitability of the Company.

8. Material developments in Human Resources / Industrial Relations front, including number of people employed.

The ability to attract, onboard, develop and engage the right kind of talent is crucial to an organizations long term success. Company strongly believes in continuously taking steps towards talent management, leadership development, employee engagement. Employees are the back - bone of good organization and to motivate them to achieve greater heights, the Company undertook various HR initiatives towards their development, enhancement and retention. The Company considers its highly motivated and well-maintained team as its most valuable asset. As on 31.03.2023, the Company has employed 459 peoples at various locations in India.

Considering the health and safety of the employees of the Company and in line with the advisories, orders and directions issued by both State and Central Government in order to prevent the spread the corona virus (Covid19) outbreak, the Company has carried out operations at plant level as per advisories from time to time. Further the Company has also implemented Work from Home Policy to ensure the safety of employees post covid19 issue. The Company has also taken up with the respective health authorities for vaccination of all its employee.

Amidst all the pressures and demands of the growing business, Industrial Relations continued to be reasonably cordial. ratios (i.e. change of 25% or more as compared to the immediately 9. Detailsofsignificant previous financial year):

PARTICULARS	YEAR ENDED 31-03-2023	YEAR ENDED 31-03-2023	YEAR ENDED 31-03-2022	YEAR ENDED 31-03-2022
	Consolidated	Standalone	Consolidated	Standalone
RATIOS
Debtors turnover (Times)	6.15	4.89	6.81	5.44
Inventory turnover (Times)	4.94	4.19	4.87	4.66
Interest coverage ratio	11.34	142.12	29.17	189.98
Current ratio	1.83	2.01	1.56	1.65
Debt equity ratio	0.16	0.07	0.24	0.13
Operating profit margin %	11.03%	11.20%	15.48%	15.50%
Net profit margin %	5.44%	3.34%	9.51%	10.12%

CAUTIONARY STATEMENT: Some of the statements in the report may be forward looking and are stated as required by applicable laws & regulations. Many factors may affect the actual results, which could be different from what the Directors envisage in terms of future performance and outlook. The Companys Performance is dependent on several external factors such as performance fluctuationof prices of raw material and finished products monsoons,governmentpolicy, and also their availability, and not to say the least, the pandemic situation in the country, which could adversely affect the operations of the Company.