The Management Discussion and Analysis Report has been prepared in accordance with the provisions of Regulation 34(2) (e) of Listing Regulations, read with Schedule V (B) thereto, with a view to provide an analysis of the business and Financial Statements of the Company for FY 2023-24 and should be read in conjunction with the respective Financial Statements and notes thereon. Styrenix Performance Materials Limited (formerly known as INEOS Styrolution India Limited) is the number one producer of AbsolacR ABS and AbsolanR SAN & StyrenixR PS in India. With 51 years of pioneering experience, Styrenix Performance Materials Limited has been the most preferred supplier to its customers and helps them succeed by o ering innovative and sustainable best-in-class solutions, designed to give them a competitive edge in their markets.
ECONOMIC OVERVIEW: GLOBAL ECONOMY:
The baseline forecast is for the world economy to continue growing at 3.2 percent during 2024 and 2025, at the same pace as in 2023.
The global economy remains remarkably resilient, with steady growth and in ation slowing almost as quickly as it rose. The journey has been eventful, starting with -a) supply-chain disruptions in the aftermath of the pandemic, b) an energy and food crisis triggered by Russias - Ukraine con ict, c) Israel Palestine con ict, d) a considerable surge in in ation, which soared to its peak in 2022, and is now declining. e) globally synchronized monetary policy tightening.
However, above events didnt have any material impact on the Companys performance as it has been mitigated through various actions taken by the Company. Source: https://www.imf.org
INDIAN ECONOMY:
The Indian economy showcased resilience in the scal year 2023-24, achieving a robust GDP growth rate of 7.6%, surpassing the 7% growth recorded in the previous scal year (ref: business standard Apr 16, 2024). Overall Polymer demand has grown approx. 8~10% in FY 23-24. Growth in the Automotive Segment is approx. 10%, large appliances have grown approx. 5~7%, and other misc. industry has grown by approx. 12% y-o-y.
According to the World Bank, the Indian economy is anticipated to maintain its strength in the next nancial year, driven by robust investment and service activities. Financial conditions have remained supportive, with domestic credit issuance growing at a rapid pace and nancial soundness indicators showing improvement, including a notable decline in the nonperforming-loan ratio. In ation has largely remained within the Reserve Bank of Indias target range, while tax collection targets have been met due to strong economic activity and enhanced compliance. The growth of industries such as automotive, electronics, and packaging will contribute to the increase in demand for ABS and Polystyrene. Government initiatives promoting manufacturing and infrastructure development can boost the demand for these materials. The governments policy to improve logistics infrastructure, incentives to facilitate industrial production and measures to improve farmers income will support the countrys e orts to grow at a faster pace. Indias ABS and Polystyrene markets continue to be in uenced by global market trends and trade dynamics. Changes in international prices, demand from other countries, and geopolitical factors can have indirect e ects on the Indian market. The government is expected to continue its focus on infrastructure development and attract foreign investment under the "Ease of doing business" program. There is a push towards local manufacturing and being self-reliant as a country.
Economic growth has bene tted the Company to achieve higher sales volume during the nancial year FY 2023-24 and we expect the growth story to continue in nancial year FY 2024-25.
REVIEW OF OPERATIONS:
During the FY 2023-24, the sales volume was 165 KT compared to 149 KT in previous year i.e. increase of 10.74%. We are pleased to report that our capacities for ABS and PS are almost fully utilised, and we are working to enhance capacity via various de-bottlenecking projects and proposed capacity expansion plan.
During FY2023-24, revenue from operations stood at Rs. 2,222.17 Crore vs. Rs. 2,372.27 Crores in FY 2022-23. PBITDA for FY 2023-24 is INR 272.80 Crore (12.3%) vs. INR 290.31 Crore (12.2%) in previous year.
Despite increase in volume, the decline in revenue and pro t is attributed by Global feedstock and Polymer prices. However, the Company has mitigated relevant risk and achieved stable PBITDA %.
PRODUCTS:
The Company provides styrenics applications for many everyday products across a broad range of industries, apart from automotive, electronics, household, construction and healthcare and includes packaging and toys, sports & leisure. With best-in-class production technology, advanced R&D skills, your Company is perfectly equipped to ensure the highest level of quality, e ciency, and innovation. Your Companys product portfolio includes ABSOLACR ABS, ABSOLANR SAN, STYRENIXR PS, which continue to have a preferred market status amongst user industries such as automotive, construction, healthcare, household and electronics. Research and Development towards new product and grade development and processes is yielding good results and has helped the Company to add di erentiated and value added products in its portfolio. The Company has also been augmenting its capacities by de-bottlenecking the process in all its plants and expects to yield results in near future.
Your Company continues to focus on innovative solutions to create more value for its customers.
Through relentless research and development e orts, we continually introduce new products, blends and other value added grades, enhancing our portfolio with di erentiated and value-added erings.
RATINGS:
Care Edge Ratings reported "Stable" outlook on Long-term / Short-term bank facilities of the Company (Rs. 650 crores). The "Stable" outlook on the rating of the Company re ects CARE Ratings Limiteds expectation of sustenance of its comfortable nancial risk pro le on the back of stable operations and healthy demand prospects in the near to medium term. The credit rating as received by the Company from Credit Rating Agency for long term / short term bank facilities, as of March 31, 2024, is CARE A+, STABLE / CARE A1+ [Single A Plus; Outlook: Stable/ A One Plus].
INDUSTRY STRUCTURE & DEVELOPMENTS:
In an ever-changing economic and business landscape, characterized by evolving consumer preferences, rapid technological advancements, and globalization, the Company operates across various sectors, including automotive, home appliances, electrical and electronics, construction, packaging, and healthcare. This dynamic environment fosters intense competition, prompting our clients to prioritize cost-e ective and innovative solutions. With a steadfast commitment to empowering our customers, we strive to be their trusted partner in achieving success in their respective markets. By o ering superior product solutions tailored to their needs, we aim to equip them with the tools necessary to maintain a competitive edge and drive growth.
OPPORTUNITIES:
The current landscape presents signi cant opportunities for the polymer industry, particularly in India. With a burgeoning population, an expanding middle class and increasing per capita income, the demand is also on the rise. Initiatives like "Make in India" and the "Smart Cities Mission" are driving the need for polymer-based products across various sectors. Moreover, Indias automotive sector, one of the largest globally, is poised for further growth, presenting opportunities for styrenics manufacturers to supply components and materials. The anticipated surge in demand for household appliances like air conditioners and refrigerators further adds to the potential for market participation.
The packaging industry continues to thrive due to urbanization, lifestyle changes, and the surge of e-commerce. Polystyrene manufacturers stand to bene t by o ering innovative and sustainable packaging solutions to meet this demand.
Furthermore, the increasing demand for consumer electronics in developing countries, fueled by rising disposable incomes and urbanization, presents another avenue for growth. As digitization activities continue to grow, the consumption of electronics products is expected to rise, contributing to the expansion of the target market. Overall, the combination of evolving consumer preferences, infrastructure development initiatives, and technological advancements presents a promising landscape for the polymer industry to capitalize on various opportunities for growth and innovation.
THREATS:
Polymer manufacturing continues to rely heavily on the availability and prices of key imported raw materials like Styrene and Acrylonitrile which in turn depends on crude oil, natural gas and other backward value chain feedstocks. Therefore, uctuations in raw material prices can signi cantly impact the costs and margins. Also, since India imports a signi cant amount of polymer resins to meet its increasing domestic demand, it creates pressure on domestic manufacturers which may result in lower prices and margins.
Being key player in Polymer segment, one of the major risks is waste management and environmental pollution for which careful attention and proactive measures to mitigate related risks have been taken.
The BRSR report also mentions actions taken by the Company on other ESG matters.
The depletion of fossil-fuel-based raw materials also threatens our sustainability. Fluctuations in raw material prices, particularly crude oil and natural gas, pose challenges for domestic manufacturers, especially in regions heavily reliant on imports. Furthermore, increasing global concerns and regulations around plastic waste compel us to adapt to sustainable alternatives and stricter environmental standards. Therefore, to address these threats e ectively, we invest in research and development, explore sustainable options, and maintain a proactive stance to capitalize on opportunities and ensure long-term viability in the face of these challenges.
OUTLOOK:
Your Company continues to monitor changes in general economic situation and is prepared to take measures to safeguard its business operations. Our close association with key OEMs in automotive and household segments has enabled us to drive pro table growth and we expect it to continue in the coming year. Our organizational focus on key industry segments ensures a deep understanding of their needs and will enable new product introductions for the speci c industry. Your Company utilizes its R&D capabilities to develop new products for the automotive, household and healthcare segments and maintains a strong intellectual property position. Indian household items penetration in Urban and Rural is growing much faster due to increase in per capita income and spending. Overall, Polymer demand is likely to grow much higher than GDP growth. We expect the automotive business, both for two-wheelers and four wheelers including EV segment, to remain strong for the coming year and grow approx. 7-10% y-o-y. Apart from demand growth, the increase in size of the product like larger refrigerator, TV, washing machine also helps increase sales volume.
Average polymer growth expected to be around 9~10% looking to demand growth.
In FY 2023-24, the ABS market in India has reached approximately 300 KT and we expect it to grow at a CAGR (Compound Annual Growth Rate) of approx. 9% until the scal year 2030. Indias Polystyrene market demand stood at 280 KT in FY 2023-24 and is projected to grow at a CAGR (Compound Annual Growth Rate) of approx. 5% until the scal year 2030.
RISK MANAGEMENT REPORT:
Your Directors wish to state that risk management and control practices have been deployed across all the functions and functional evaluation of rating probability and impact is being constantly monitored under the guidance of the Risk Management Committee. The critical / high ranking risks and mitigating steps and measures applied or to be applied, are discussed internally with functional leaders and then discussed by the Risk Management Committee before being presented to the Board. Company has integrated its risk monitoring procedures in accordance with prudent business practices. The objectives of the Companys risk management framework comprise the following: a. To identify, assess, prioritize and manage existing as well as new risks in a planned and coordinated manner; b. To increase the e ectiveness of internal and external reporting structure; and c. To develop a risk culture that encourages employees to identify risks and associated opportunities and respond to them with appropriate actions. The Chairman and the Managing Director carry out the risk assessment on an ongoing basis and take measures and e ective steps to mitigate / reduce impact and control the same from time to time. They provide overall directions in controlling / mitigating risks generally and are in complete know of the organizational risks potential. The Company has a proper system to ensure compliance of legal / regulatory requirements that are applicable to the Company.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:
Your Companys internal control systems are adequate and commensurate with the size of operations. These controls ensure that transactions are authorized, recorded and reported on time. They ensure that assets are safeguarded and protected against loss or unauthorized disposal. The internal auditors of the Company, M/s. Sharp & Tannan Associates, carried out audits in di erent areas of your Companys operations. Post-audit reviews were carried out to ensure that audit recommendations were implemented. The audit committee reviews the adequacy and e ectiveness of the internal control systems, signi cant audit observations and monitors the sustainability of remedial measures.
FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:
Financial performance and review of operations form part of the Boards report which details the Companys nancial and operational performance.
MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED:
Our employees are our most important assets. As of March 31, 2024, the Company employed 404 permanent employees, 47 employees on xed term contracts and 552 employees on contractual basis, through contractors. Our culture and reputation as a global leader in the styrenics industry enables us to recruit and retain some of the best available talent in India. Our Human Resource (HR) division acts both as a service provider and as a governance unit in the various employee-related elds of work. The scope of activity includes attraction, selection and talent development and rewarding of employees, while also overseeing organizational leadership and culture and ensuring compliance with employment and various applicable labour laws. Companys HR fosters a trusting and open culture by promoting mutual respect and fairness throughout the entire organization. The management has a strong belief that the industrial relations will remain cordial and harmoniousand continues to be so in the year ahead. The directors believe that continuous HR interaction has and would lead to a healthy environment and a strong relationship of mutual trust.
KEY FINANCIAL RATIOS:
Sr. No. | Particulars | March 31, 2024 | March 31, 2023 | Explanation for Signi cant Change (Above 25%) |
1 | Operating Pro t (EBITDA) % | 12.30% | 12.20% | |
2 | Net Pro t Margin % | 7.79% | 7.71% | |
3 | Return on Net worth % | 24.10% | 23.30% | |
4 | Debtors Turnover Ratio | 8.52 | 8.95 | |
5 | Inventory Turnover Ratio | 7.24 | 8.39 | |
6 | Current Ratio | 2.71 | 2.30 | |
7 | Long Term Debt Equity Ratio | 0.01 | 0.01 | |
8 | Interest Coverage Ratio | 85.89 | 50.71 | Change is driven by reduction in lease liability |
ACCOUNTING TREATMENT :
The nancial statements of the Company for the nancial year ended March 31, 2024 were prepared in accordance with IND-AS, which are the prescribed Accounting Standards.
SAFETY, HEALTH & ENVIRONMENT (SHE):
The Company is deeply committed to combining economic success with environmental and social responsibility. Guided by corporate value of "Responsibility" and Companys SHE policy, Company is continually working to meet the highest standards of corporate citizenship by protecting the health and safety of individuals, by safeguarding the environment, and by creating positive impact on the community it does business with.
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