The Management of TEXPLAST INDUSTRIES LTD in its Analysis Report has highlighted
the performance and outlook of the Company in order to comply with the requirement of
Corporate Governance as laid down in Regulations 34 and Schedule V of the Listing
Agreement. However, investors and readers are cautioned that this discussion contains
certain forward looking statements that involve risk and uncertainties.
GLOBAL OVERVIEW:
According to the International Monetary Fund (IMF), the global economy is expected to
grow at approximately 3.2% in 2016. USA is showing signs of strong fundamentals (low
unemployment, consumer spending etc.), which continue to support recovery. Asia
contributed on an average two-thirds to the global economic growth in the past few years
and is expected to continue driving this growth in 2016. Japan is expected to remain
steady while China is expected to witness a marginal slowdown in growth.
Risks to global growth in the form of deflation, slowdown in China, lower commodity
prices and interest rate hike in USA continue to weigh heavily on the growth momentum and
outlook.
GDP growth in Europe is expected to remain low as the strength of supportive factors
(accommodative monetary policy, low energy prices and Euro depreciation) diminishes,
amidst uncertainty relating to Britains referendum, migrant crisis and geo- political
tensions. Europe continues to face multiple headwinds due to high debt levels, a fragile
banking sector and increasing political impasse.
India is expected to continue its growth momentum in Financial Year 2016-17 on the back
of robust manufacturing sector growth. Further, various measures such as Make in India,
Smart Cities, Digital India that the Government has been taking in the last couple of
years are beginning to show results and the gradual implementation of structural reforms
will continue to broaden and contribute towards higher growth.
The global textile industry was affected by volatile raw material and finished goods
prices, result was that the exchange rate fluctuations, increase in costs and inconsistent
governmental policies. The Indian market also witnessed a decline in textile exports.
OUTLOOK OF THE EUROPEAN FLEXIBLE PACKAGING MARKET:
The flexible packaging market in Europe is envisaged to witness steady growth and will
post a moderate CAGR of close to 6% over the forecast period. One of the key factors
spurring the growth prospects of this market is the increasing demand for plastic-based
flexible packaging products. Plastic is one of the major raw materials used for
manufacturing flexible packaging as it is highly versatile and can be easily moulded into
different shapes and sizes. This flexible nature of plastic makes it an ideal packaging
material. Moreover, plastic is lightweight which makes it less expensive that other
materials because of its low handling and carrying costs. With plastic increasingly
replacing metal and glass packaging, its demand is anticipated to increase in the coming
years.
The manufacturers of packaging products are constantly trying to adapt their packaging
designs to suit different requirements as each retail chain has a slightly different
approach toward packaging. Furthermore, merchants tend to demand attractive packaging that
not only uses less shelf space but also increases the shelf life of products. To address
this growing demand, vendors are increasingly focusing on developing small-sized and
attractive packages during the predicted period.
During 2015, the confectionary products segment dominated the market and accounted for
more than 22% of the market share in terms of revenue. The growing demand for
confectionery products in Europe, especially in the Western European countries, will
contribute to the growth prospects of this market until the end of 2020.
Segmentation by raw material and analysis of the flexible packaging market in Europe
• Plastic
• Paper
• Aluminum foil
Plastic led the global flexible packaging market and is expected to reach more than 21
billion by the end of 2020. The primary reason for the increasing popularity of plastics
is its highly versatile nature of plastic, which enables it to be converted into a number
of shapes, sizes, and designs. Also, plastic is more flexible, durable, and cost-effective
than the other materials used for packaging which will lead to its increased adoption
during the predicted period.
The flexible packaging market in Europe is highly fragmented owing to the presence of
several well-established international and local players. There is intense competition
among the market vendors in terms of product differentiation, portfolio, and pricing.
Also, the vendors in the market are expanding their businesses by setting up new
manufacturing plants and launching new products in the emerging countries.
The International Monetary Fund trimmed its outlook for global economic growth, as
anemic output in Europe and Japan hobble the recovery and emerging markets struggle with
rising borrowing costs. The U.S. growth of 2.8% this year should help perk up prospects
for many emerging markets, where output is slowing
INDIAN ECONOMIC REVIEW:
Indian Economy Amid the bleak global economic scenario, India remained a shining beacon
on the fiscal landscape. Indias Gross Domestic Product (GDP) grew 7.6% in FY 2016
compared to 7.2% in FY 2015 but for FY 2017 Indias economic growth was estimated to slow
to 7.1 percent in the year ending March 31 compared to 7.6 percent last year, as per the
Central Statistical Office (CSO), enabling India to retain the tag of the worlds fastest
growing major economy. The overall investment climate, though still short of expectations,
is seen improving. Fast tracking of stalled infrastructure projects, thrust on reforms and
adherence to fiscal deficit target were among the other encouraging economic developments
for the year. The collapse in oil prices, relatively low exposure of India to the current
global financial turbulence, and Indias strong domestic consumption led growth story are
expected to favour the Indian markets. The IMF forecasts India to be the fastest growing
economy even in 2016.
INDIAN INDUSTRIAL OVERVIEW:
Indian packaging industry turnover to reached $32 billion in 2015-16 & expected to
reach by 2020 $73 billion:
With a turnover of $24.6 billion and a growth rate of 13% to 15% annually, the Indian
packaging industry is expected to reach $32 billion by 2020. Heres a look at key facts
and drivers.
The per-capita consumption of packaged beverages and food in India is still very low
compared to other regions. However, expenditure on these products has doubled in the last
five years. Within the next five years it will increase by another 14 per cent annually,
as the demand for processed food is rising due to growing disposable incomes,
urbanization, and a young population.
Keep an eye on the Indian foodservice industry too. Currently its estimated to be
nearly $13.79 billion. But its growing at a healthy compound annual growth rate (CAGR) of
17 per cent, which has significant implications for the packaging sector.
Plans are currently in place, thanks to public and private funding, to establish 30 to
40 mega food parks. Corresponding infrastructure for packing, packaging transport, and
refrigeration are part of these plans, so this development is expected to give food
manufacturing — and, by extension, packaging—a big boost. In fact, by 2015 more
than $25 billion is to be pumped into the food sector and the required infrastructure.
Packaging has an annual global turnover of about $550 billion, and Indias share is
about $16.5 billion per annum. According to a recent Mckinsey report, there will be a
ten-fold increase in Indias middle class population by 2025, which will further trigger
the consumption of packaging materials. This will bring another growth spurt to packaging,
says the Mckinsey report, which also notes that the country needs more packaging
professionals.
According to the Packaging Industry Association of India (PIAI), packaging in India is
one of the fastest growing sectors, partly because it spans almost every industry segment.
Right from packaging of food and beverages, fruits and vegetables, drugs and medicines, to
highly dangerous products, packaging has led to greater specialization and sophistication
over a period of years.
At present, the Indian Packaging Industry is ranked 11th in the world, and industry
experts are of the opinion that packaging in India is expected to grow to $16.5 billion by
2015. However, according to a report conducted by the New Delhi based Centre for Market
Research & Social Development, packaging in India is highly fragmented and has 22,000
firms, including raw material manufacturers, machinery suppliers, and providers of
ancillary materials and services. Moreover, 85% of these firms are Micro, Small &
Medium Enterprises (MSMEs). As the industry grows and matures, there is expected to be a
trend towards consolidation as supply side companies merge and acquire smaller companies
to increase scale, reduce competition, and improve bargaining power with customers, the
report said.
The future of the Indian packaging industry is very good, the report notes, if
investment materializes. The growth of the domestic market will be good and export
potential is substantial, too, if its properly addressed. If organized retail takes off
as expected, growth opportunities are substantial, and enormous potential exists in
converting wasted food into valuable product. To maximize the potential that packaging
represents, the Indian government is in consultation with a number of industry experts.
For example, PIAI is formulating effective policies and guidelines aimed at helping Indian
companies gain in the international market.
The per capita consumption of packaging in India is merely 4.3 kg per person per annum
(Figure 1). By comparison, Germany is at 42 kg and Taiwan at 20 kg. According to
Purandeswari, the challenges that the industry is facing today include lack of regulatory
clarity in packaging, insufficient consumer awareness of sustainable packaging, and
uncertainty about green packaging materials. In the Indian packaging industry, processed
food packaging represents 48% of the total, personal care packaging is 27%, pharma is 6%,
and the rest is 19% (Figure 2).
The packaging market in India seems set for the next level of growth. Strong favorable
demographic factors such as increasing disposable income levels and rising consumer
awareness and demand for processed food are helpful. So is the rise of the Indian middle
class, which is expected to go from todays 50 million to 583 million in 2025. Also
important is that the worlds multinational giants are taking rapid strides in Indias
food, beverage, health and beauty, and pharmaceuticals sectors. This will also drive
growth in packaging. These factors are forcing both packaging suppliers and end users to
shift from bulk packaging to retail, unit-level, small-sized packaging. In addition,
exploding organized retail growth and newly relaxed investment norms in retail and other
sectors augur well for the packaging market in India.
While the forecast for packaging in India is promising, there are some challenges. For
example, will stakeholders in the Indian packaging sector be able to leverage the right
technologies to match emerging trends? Also problematic is the lack of regulatory clarity
arising from multiple legislations that define the sector; as more global players enter,
this will need to be addressed. And as consumers grow increasingly aware of the benefits
of sustainable packaging, this will require a shift to more green materials and
innovations that require investments in R&D as well as infrastructure.
Smithers Pira expects the global packaging industry to grow to $820 billion by 2016,
and the Indian packaging industry is growing at a rate of about 18 percent annually.
Packaging of essential products like food, beverage, milk, vegetable, food grains, and
pharma are the key driving segments because of the huge domestic consumption.
So what it all comes down to is that packaging represents enormous opportunities for
India—if key investments are made, regulations ironed out, and opportunities seized.
Introduction
The Indian Packaging Industry is growing at more than 11% per annum and is expected to
cross a turnover of $21.59bn by 2015. India stands at the 11th position in the world
packaging industry, which is $550-billion, and with the rising consumer demand and new
technologies, it is expected to grow at 18-20 per cent from the current 15 per cent. At
the expected growth pace Indian Packaging Industry will soon climb up to the 4th position
in the world packaging industry.
Indias textiles sector is one of the oldest industries in Indian economy dating back
several centuries. Even today, textiles sector is one of the largest contributors to
Indias exports with approximately 11 per cent of total exports. The textiles industry is
also labour intensive and is one of the largest employers. The industry realized export
earnings worth US$ 41.4 billion in 2014-15, a growth of 5.4 per centA. The textile
industry has two broad segments. First, the unorganized sector consists of handloom,
handicrafts and sericulture, which are operated on a small scale and through traditional
tools and methods. The second is the organized sector consisting of spinning, apparel and
garments segment which apply modern machinery and techniques such as economies of scale.
The textile industry employs about 40 million workers and 60 million indirectly.
Indias overall textile exports during FY 2015-16 stood at US$ 40 billion.
The Indian textiles industry is extremely varied, with the hand-spun and hand-woven
textiles sectors at one end of the spectrum, while the capital intensive sophisticated
mills sector at the other end of the spectrum. The close linkage of the textile industry
to agriculture (for raw materials such as cotton) and the ancient culture and traditions
of the country in terms of textiles make the Indian textiles sector unique in comparison
to the industries of other countries. The Indian textile industry has the capacity to
produce a wide variety of products suitable to different market segments, both within
India and across the world.
Market Size
The Indian textiles industry, currently estimated at around US$ 108 billion, is
expected to reach US$ 223 billion by 2021. The industry is the second largest employer
after agriculture, providing employment to over 45 million people directly and 60 million
people indirectly. The Indian Textile Industry contributes approximately 5 per cent to
Indias Gross Domestic Product (GDP), and 14 per cent to overall Index of Industrial
Production (IIP).
The Indian textile industry has the potential to reach US$ 500 billion in size#. The
growth implies domestic sales to rise to US$ 315 billion from currently US$ 68 billion. At
the same time, exports are implied to increase to US$ 185 billion from approximately US$
41 billion currently.
Investments
The textiles sector has witnessed a spurt in investment during the last five years. The
industry (including dyed and printed) attracted Foreign Direct Investment (FDI) worth US$
1.85 billion during April 2000 to March 2016.
Some of the major investments in the Indian textiles industry are as follows:
• One of the leading manufacturers and exporters of terry towel, home textile,
yarn and paper in India, has entered into a partnership with French firm Lagardere Active
Group, to launch a premium range of home textiles under the renowned French lifestyle
brand Elle Decor in India.
• Raymond Group has signed a Memorandum of Understanding (MoU) with Maharashtra
government for setting up a textile manufacturing plant with an investment of Rs 1,400
crore (US$ 207.53 million) in Maharashtras Amravati district.
• Grasim Industries has invested Rs 100 crore (US$ 14.82 million) to develop its
first fabric brand, Liva, which it will distribute through 1,000 outlets as part of a
plan to stay in sync with changing consumer behaviour.
OPPORTUNITIES & THREATS:
OPPORTUNITIES:
India is today recognized as one of the best sourcing destinations for garments,
textiles, accessories and finish: It provides a perfect blend of fashion, design, quality,
patterns, textures, colours and finish.
Number of policy measures has been announced by the Government to boost investments
which includes an investment allowance for manufacturing companies, policy measures for
creating affordable housing and addressing requirements of agriculture sector through
measures other than price supports. Various measures are being adopted taken to address
requirements of mining and power generation sectors which will remove supply bottlenecks
to a number of sectors. With the governments initiative to boost infrastructure projects,
NBFCs can also look for growth in asset financing.
THREATS:
It is to be noted that Indias position in global arena is on a shaky platform as it is
facing tough competition from its neighboring countries such as China & Bangladesh.
Talking about these three Asian countries the labor in Bangladesh is cheapest and Indias
labor is costliest. The fuel prices in India are the highest among these countries. China
is the leader in exports with more than 40% market share.
Threats like high inflation, high interest rates, liquidity issues, decrease in value
of Indian Currency, political changes etc. act as a barricades for the Companys business.
The growth of the Companys assets and ability to raise funds depends significantly on the
economy. Due to unfavorable events in the Indian economy, the consumers sentiments can be
affected and in turn impact consumer decision to purchase financial products. Various
other factors such as cut throat competition from a broad range of financial services
providers and changes in regulatory framework could impact the Companys operations.
RISK MANAGEMENT:
Texplast Industries Ltd was mainly engaged in Manufacturing & Trading of
flexible packaging bags as its principal business.
In an interdependent, fast-moving world, organizations are increasingly confronted by
risks that are complex in nature and global in consequence. Such risks can be difficult to
anticipate and respond to, even for the most seasoned business leaders.
An economic slowdown or other factors that affect the economic health of the country
may affect our business. Our net income may get reduced if Government of India slashes the
subsidies given. Changes in the policies of the Government of India or political
instability could delay the further liberalization of Indian economy, which could impact
our business prospects. Our failure to complete the orders in agreed time frame may
negatively affect our profitability. Our client contracts are often conditioned on our
performance, which, if unsatisfactory, could result in lesser revenues.
FINANCIAL PERFORMANCE
Company has earned the loss as on 31.03.2017 of Rs. 2, 43, 34,400/- as against Rs.
2,33,513,508/- in the previous year ended 31st March, 2016. The profit (Loss) before tax
was Rs. 2, 43, 34,400/- as against the loss of Rs. 233,513,508/- in the previous year
ended 31st March, 2016
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:
The Board of Directors of the Company is responsible for ensuring that Internal
Financial Controls have been laid down in the Company and that such controls are adequate
and operating effectively. The foundation of Internal Financial Controls (IFC) lies in the
Companies Code of Conduct, policies and procedures adopted by the Management, corporate
strategies, annual management reviews, management system certifications and the risk
management framework.
The Company has appointed its own Internal Audit system, the scope and authority of the
Internal Audit function is to maintain its objectivity and independence, the Internal
Audit function reports to the Chairman of the Audit Committee.
The Internal Audit team monitors and evaluates the efficacy and adequacy of internal
control systems in the Company, accounting procedures and policies of the Company. Based
on the report of internal audit function, process owners undertake corrective action(s) in
their respective area(s). Significant audit observations and corrective action(s) thereon
are presented to the Audit Committee.
The Audit Committee reviews the reports submitted by the Internal Audit team annually.
HUMAN RESOURCES/INDUSTRIAL RELATIONS:
The Company regards its human resources as amongst its most valuable assets and
proactively reviews policies and processes by creating a work environment that encourages
initiative, provides challenges and opportunities and recognizes the performance and
potential of its employees attracting and retaining the best manpower available by
providing high degree of motivation, training and structured compensation was the main
thrust this year.
CAUTIONARY STATEMENT:
This report contains forward-looking statements based on certain assumptions and
expectations of future events. Actual performance, results or achievements may differ from
those expressed or implied in any such forward looking statements. The Company assumes no
responsibility to publicly amend, modify or revise any forward looking statements, on the
basis of any subsequent developments, information or events.
|
By order of the Board |
| Place: Mumbai |
|
|
| Date: 14th August, 2017 |
For TEXPLAST INDUSTRIES LIMITED |
| Regd. Off.: Gut No 39/40 |
Sd/- |
Sd/- |
| Village NehroliTaluka, |
Sukumar Nandlal Shah |
Anupkumar Jhunjhunwala |
| Wada Thane-421312 |
(Managing Director) |
(Director) |
|
Din: 00202546 |
Din: 01914605 |
+91-9892691696
