Sreechem Resins Ltd Management Discussions.

1. INDIAN ECONOMY:

OVERVIEW: The company manufactures Phenol based resins and derivatives. During the year, demand for resins remained depressed. Companys products are used by refractory units & steel plants. There was dumping of imported refractories by China. As such local industries suffered and there was tremendous competition between refractory units as well as resins manufacturers.

INDUSTRY STRUCTURE & DEVELOPMENT:

In the developing economy, Steel is a vital component to the development. The strength of the Steel Industry shows the growth & development of all major industrial economies. Consumption of Steel is a significant indicator of socio–economic development of the people of the Country. In the last few years, Steel Industry is rapidly expanding in India.

OPPORTUNITIES, FUTURE OUTLOOK &THREATS: The Basic Raw .material – Phenol is manufactured in India by a Government Undertaking and two Private Sector Units and is also imported. Normally there is no problem in procuring the same. But in the last four / five years H.O.C.L Unit remained closed intermittently and supplies remained Erratic frequently during the year. The Company regularly supplies Phenolic Resins to various Refractory manufacturers and to Steel Plants. During the last four / five years there was huge competition from other Resin manufacturers resulting in lower realizations. But due to Covid.19, the Steel Industry has been affected, resulting in overall slowdown in the economy of the country. There was reduction in the prices of raw .materials, which was passed on to the customers, as such there was decrease in the Sales. The company has made production and sales of newly developed product. But due to Covid.19, the customer refused to take the supplies from middle of March 2020. The company is in constant touch with the customer to resume the supplies of the balance ordered quantity. But due to Covid.19, the customer has not yet given instruction to resume the supplies.

2. RESIN INDUSTRY IN INDIA:

There are five – six established manufacturers of Phenolic Resins in India. The industry is dependent on growth of Refractory Industry in the country. But due to import of Re fractories from China, Indian Industry is starved of orders, resulting in huge competitions between the Resin manufacturers. Due to this competition, the reduced raw .materials prices were passed on to the customers fully, resulting in lower Sales.

3. OPPORTUNITIES AND THREATS & OUTLOOK IN THE INDUSTRY:

The Basic Raw .material – Phenol is manufactured in India by a Government Undertaking and two Private Sector Units and is also imported. Normally there is no problem in procuring the same. But in the last four / five years H.O.C.L Unit remained closed intermittently. The Company regularly supplies Phenolic Resins to various Refractory manufacturers and to Steel Plants. During the last four / five years there was huge competition from other Resin manufacturers resulting in competitive realizations. With the introduction of new product, the company expects to increase the overall volume of production and sales and also expects to increase the profitability of the company in the coming years.

4. RISKS AND CONCERNS:

RAW MATERIALS PRICE RISK: There are three manufacturers of our basic raw materials. phenol. Shut down of HOCL Plant intermittently pose a risk of getting supplies as well price increase. Besides that there is fluctuation in the prices of Phenol as it is a crude oil base product, which is imported by the middle man. The Company has business understanding with some of the big customers constituting about 30% of the production and sales. According to the said understanding any increase / decrease in price of basic raw .materials is passed on the customers. In the remaining sales also the Company tries to insulate from any fluctuations in price of basic raw. materials to the fullest extent possible.

OTHER BUSINESS RISKS: There is a risk of imports of Refractories from low cost Chinese Refractories manufacturers as well as resins dumped by China and resulting in lower capacity utilization by the Refractory Units consequently the demand for resins was depressed. However, Company has long association with the Refractory Manufacturers, who are satisfied with the quality of the products of the Company. As such, the Company does not see much risk in marketing the products of the Company. The depreciation of the rupee is a big challenge affecting the cost of inputs. The company is dependent on a single customer for the newly developed product. Any event at the said plant of the customer directly affects our production and sales of the newly developed product.

5. RISK MANAGEMENT & INTERNAL CONTROL SYSTEM:

The Company has a robust Risk Management framework to identify, evaluate business risks and opportunities. This framework seeks to create transparency, minimize adverse impact on the business objectives and enhance the Companys competitive advantage. The business risk framework defines the risk management approach across the enterprise at various levels including documentation and reporting. The framework has different risk models which help in identifying risks trend, exposure and potential impact analysis at a Company level as also separately for business segments. The Company has identified various risks and also has mitigation plans for each risk identified. The Risk Management Policy of the Company is available on our website http://www.sreechem.in/policy.php

The Board has adopted the policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Company s 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 disclosures.

6. DISCUSSION ON FINANCIAL PERFORMANCE:

During the year under review, the Company has made Net Profit of Rs. 25.57 lacs as compared to Loss of Rs. 9.95 lacs in previous year. There was decrease in the prices of raw. materials during the year which the company passed on to the customers. Due to decrease in the prices of raw. materials, prices of Finished Products were also reduced, resulting in lower Sales as compared to last year. As informed to the Members last year, the company developed a new product which was well received by the customer. The company has received orders for the new product, which was partly executed during the year, but due to Covid.19 & lockdown, company had to stop production and despatch of the New Product. The Company continued dialogue with the valued Customers and ultimately they advised us to commence supply of the balance ordered quantity in revised schedule. The company has commenced supply of the balance ordered quantity in accordance with the revised schedule. The Company has commenced supply of the said products from October 2020 Onwards. The Directors are taking every step to resume the full production and to improve the sales and profitability during the current year.

7. KEY FINANCIAL RATIOS:

Particulars 31.03.2020 31.03.2019 Reasons for Change of 25% or more
Debtors Turnover 91 Days 46 Days Due to Covid.19, payment not received and increase sales during Feb & March
Inventory Turnover 49 Days 54 Days .
Interest Coverage Ratio 2.42% 0.69%
Current Ratio 1.35% 1.69%
Debt Equity Ratio NIL NIL
Operating Profit 1.50% .0.03% Company Turned Into Net Profit From Net
Margin 1.49% .0.32% Loss
Net Profit Margin Return on Net Worth 4.51% .1.84%

8. HUMAN RESOURCE:

The Company firmly believes that human resources is an important instrument to provide proper communication of the Company s growth story to its stake holders and plays vital role in the overall prospects of the Company. So the Company takes possible steps for the welfare of its manpower. The employee relationship was cordial throughout the year. We as on 31st March, 2020 have 52 permanent employees on our rolls.

By Order of the Board of Directors For SREECHEM RESINS LIMITED

Sd/.

VIKRAM KABRA

(DIN: 00746232)

Whole Time Director

Sd/.

BINOD SHARMA

(DIN: 00557039)

Managing Director

Date: 25.11.2020

Place: Kolkata