Sreechem Resins Ltd Management Discussions

The prices of inferior quality Coal increased about two years ago compared to good quality Coal due to European demand for alternative energy still continues. This resulted in paucity of orders for the new products as the customers did not have imported inferior quality of Coal to consume. This resulted in no enquiry / orders for Coal based Products.

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

The Reserve Bank of India reduced interest rates during the last quarter of the year. However, the Company reduced the interest cost by keeping inventory under control and also due to lower production sales.

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 4-6 years, backed by strong growth of the economy.

The Company manufactures Phenol based resins and other Allied Products. During the year, demand for resins remained depressed. The Companys Resin 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 resulting in lower sales realization.

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 of Resin has commenced production resulting in further competition.

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.

As stated last financial year, Sales during the Financial Year has come down drastically due to no Orders for Coal based Products were received. This resulted in lower Production & Sales during the year.

Due to mismatch in prices of good quality Coal and also non-availability of inferior quality Coal, fresh Orders for the Coal based Specialty Products are not received. The situation is still gloomy and there are no Orders in hand for the new Specialty Products 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 has been 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 Coal-based Products during the 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 tried to reduce the other expenditure, wherever possible.

The Companys R&D Department has developed some consumers Products, which have been well received by the customers. Though the volume is presently very small, but the Directors are focusing to improve the sales of these Products in the years to come.

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

RAW MATERIALS PRICE RISK: There are three manufacturers of our basic raw materials- phenol. Shut down of HOCL Plant intermittently poses a risk of getting supplies as well as price fluctuations from time to time. 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 Middleman. 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 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 affect our production and sales. Thus, profitability may be affected due to said developments.

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 new products. Thus, the management is trying to increase the customer base.

During the year under review, the Company has made Net Loss of Rs. 36.90 lacs as compared to Profit of Rs.236.13 lacs in previous year. The Loss is due to lower sales during the financial year. Sales of the Company came down substantially. In spite of efforts by the Directors, the orders for new products were not received resulting in lower production and sales during the financial year. The Directors are taking every step to procure orders for the new products, improve the sales, and improve the financials.

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 31st March, 2025 had 73 permanent employees on its rolls.