Sreechem Resins Ltd Management Discussions

1. GLOBAL ECONOMIC OVERVIEW:

The prices of inferior quality of Coal increased compared to good quality Coal due to European demand for alternative energy. This resulted in paucity of orders for the new products as the customers did not have inferior quality of Coal to consume.

Interest rate increased by Central Banks of all the countries of the World due to higher inflation worldwide continued resulting in higher costs.

2. INDIAN ECONOMIC OVERVIEW:

The Reserve Bank of India also raised interest several times, increasing interest costs during the last two year. This resulted in higher interest and finance charges to the industries. However, the Company reduced the interest cost by keeping inventory under control

India has emerged as the fastest-growing major economy in the world, and is expected to be one of the top three economic powers globally over the next 5-7 years, backed by strong growth of the economy.

3. INDUSTRY STRUCTURE & DEVELOPMENT:

The Company manufactures Phenol based resins and other Allied Products. During the year, demand for resins remained depressed. The 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 resins manufacturers.

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 imports of Refractories from China, Indian Industry is starved of orders, resulting in huge competitions between the Resin manufacturers. Also one new producer has commenced production resulting in further competition.

4. OPPORTUNITIES&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 few 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 few years there was huge competition from other Resin manufacturers resulting in lower net realizations.

5. OUTLOOK:

As informed last year, Sales during the first two quarters of the Financial Year has come down drastically. Orders were received from third quarters onwards, which resulted in improving the profits.

Due to mismatch in prices of good quality Coal and inferior grade Coal and non-availability of inferior quality coal, fresh Orders for the new Products are not received. The situation is still gloomy and there are no Orders in hand for the new Products from first quarter onwards during the current year.

The Basic Raw-material Phenol is manufactured in India by a Government Undertaking and three Private Sector Units and is also imported. Normally there is no problem in procuring the raw-materials. But in the last few 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 few years there was huge competition from other Resin manufacturers resulting in competitive margins.

In-spite of best efforts by the Directors, the Company has not received any orders for the new Products during the current year and the situation is still uncertain. The Directors are trying to secure orders for the new products, but till date they are unable to obtain orders for the new products. In view of the uncertain situations, the Directors had decided to curtail the expenditure last year by retrenching the newly recruited Labours and Staffs and also tried to reduce the other expenditure, wherever possible resulting in improving the profitability.

6. RISKS AND CONCERNS:

The Company has not received fresh orders for the new products till date during the financial year. In-spite of best efforts by the Directors, the Company was unable to obtain orders for the new products and the near future is uncertain.

FRESH ORDERS RISK: The Company is dependent on few customers for the orders of new products. There is risk in procuring regular orders resulting in low capacity utilization.

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 as price increase. Besides that, there is fluctuation in the prices of Phenol (basic raw material) as it is a crude oil base product, which is imported by the middle man. The Company tries to insulate from any fluctuations in price of basic raw-materials to the extent possible by passing on the increase / decrease in the prices of Raw-materials to the customers.

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 Resin products of the Company. The depreciation of the rupee is a big challenge affecting the cost of inputs.

Any event like war, changes in prices of coal and also availability of inferior quality of coal at customers end and policy changes with the customer directly affects our production and sales of the newly developed products. Thus, the profitability may be affected due to said developments.

7. 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 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 disclosures.

The Company is dependent on few customers for sale of the new products. Thus, the management is trying to increase the customer base.

8. DISCUSSION ON FINANCIAL PERFORMANCE:

During the year under review, the Company has made Net Profit of Rs.236.13 lacs as compared to Rs.81.63 lacs in previous year. The reduced profit is due to lower sales in the first two quarters during the financial year. Sales of the company came down substantially. The company turned into losses in the first two quarters of the financial year. In spite of efforts by the Directors, the Orders for new products were not received from the first quarter onwards during the current financial year. The Directors are taking every step to procure orders for the new products, improve the sales, and improve the financials.

KEY FINANCIAL RATIOS:

Particulars	31.03.2024	31.03.2023	Reasons for Change of 25% or more
Debtors Turnover	57 Days	18 Days	More Sales made during last quarter
Inventory Turnover	33 Days	22 Days	More Purchases/ Sales made during last quarter
Interest Coverage Ratio	7.16	1.78	Due to increase in profits
Current Ratio	2.13	1.89	NA
Debt Equity Ratio	NIL	0.08%	N.A
Operating Profit Margin	7.85%	2.08%	Higher operating margins due to control in cost and reduction in other expenses
Net Profit Margin	4.44%	1.07%	Higher margins due to control in cost and reduced other expenses
Return on Net Worth	17.04%	7.14%	Due to higher profits during the year.

9. HUMAN RESOURCE:

The Company firmly believes that human resources is an important instrument to provide proper communication of the Companys growth story to its stake holders and plays vital role in the overall prospects of the Company. The Company takes every possible step for the welfare of its manpower. The employee relationship was cordial throughout the year. The company as on 31^st March, 2024 had 81 permanent employees on our rolls.

Information as per Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014:

1. The ratio of the remuneration of each director to the median employees remuneration for the financial year:

Name of the Directors	Ratio of the Median
Mr. Binod Sharma - Managing Director *	10.45 : 1
Mr. Vikram Kabra - Whole Time Director	27.86 : 1
Mr. Vibhor Sharma -Whole Time Director	27.86 : 1

Note: *The ratio is calculated on the fixed component of the remuneration as on 31.03.2024

2. The percentage increase in remuneration of each director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year:

Name of the Directors	%
Mr. Binod Sharma - Managing Director *	Nil
Mr. Vikram Kabra - Whole Time Director	Nil
Mr. Vibhor Sharma - Whole Time Director	Nil
Prabhu Dayal Somani - Chief Financial Officer	4.09%
Ms. Komal Bhauwala - Company Secretary	10.00%

Note: *The ratio is calculated on the fixed component of the remuneration as on 31.03.2024

3. The percentage increase in the median remuneration of employees in the financial year: 3.37%

4. The number of permanent employees on the rolls of company: 81 Employees as on 31^st March, 2024

5. Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and any exceptional circumstances for increase in the managerial remuneration: Average percentile increase in the salaries of employees other than managerial personnel was 0.02%. Average percentile increase in the salaries of managerial personnel was 0.39%.

6. If remuneration is as per the remuneration policy of the Company: It is hereby affirmed that the remuneration paid is as per the remuneration policy of the Company.