Ushanti Colour Management Discussions


TO THE BOARDS REPORT

Management Discussion and Analysis Report

Strategic Location:

Ushanti Colour Chem Limited is highly involved in chemical manufacturing and selling activity and its units located at Vatva,

Ahmedabad with having annual installed capacity of 2820 MT. Companys total production during the year was 1305.05 MT against which sale was made by Company of 1159.251 MT. Company has completed process to transfer its one of Land located at Saykha, Bharuch to its SPV/Subsidiary for fulfilling the altered object of the Company. The said SPV/Subsidiary has initiated the construction work over there and very soon the production activity will be commenced.

In future, Company will make such strategy by which it increase its production and create demand for the manufactured product. By this it will earn high value and serve best to its stakeholders.

A. Industry structure and developments.

India sustained its position as the worlds fastest-growing major economy after remaining mostly insulated from the gloomy global outlook in FY 2022-23. Throughout this year, the domestic economy demonstrated remarkable resistance to global headwinds. The National Statistical Offices (NSO) second advance estimate reveals that the Indian economy is in a sweet spot and expected to clock a growth rate of 7% in FY 2023-24. Amid global uncertainty, the Indian economy continues to be resilient.

Notwithstanding the fact that the post-pandemic private investment recovery is still in its nascent stage, there are early signs that suggest that India is well-positioned for a robust investment upcycle in both the manufacturing and services sectors.

Overall, Indias demand remains conducive to economic growth. India remains bullish about the next fiscal year on the back of its underlying and overall macroeconomic stability. However, it remains cautious about emerging geopolitical and geoeconomic concerns.

The market for dyes and pigments was estimated to be worth US$ 38.2 billion in 2022 and is expected to grow at a CAGR of 5.3% between 2023 to 2030 reaching a market size of US$ 57.8 billion by 2030. During the projection period, the Asia-Pacific region is predicted to experience the fastest CAGR growth in product demand. An expanding building sector, rapid industrialisation, and urbanisation, along with rising disposable income in the regions emerging economies, will be the main driving forces of this sector.

The pigment industry has faced many challenges as other businesses due to current geopolitical events increase in overall inflation, subdued demand, supply chain disruptions, exponential increase in prices of raw materials, energy, and logistics.

B. Opportunities and Threats.

Company has huge opportunity to expand business in the Dye industry. In Dye Industry have only 2 major players across the globe, India and China apart from Indonesia. In China due to increasing environmental norms and strict governmental regulations w.r.t operating a chemical industry there have been shutdowns of many facilities in China which positively impacting the dye industry in India consequently growth in Dye prices. With decrease in total supply, dye manufacturers have huge opportunity both in terms of volume and value and also as per Government of Gujarat Notification via GPCB, Notification no: GPCB/P-1/99/411451 WDT. 4TH MAY 2017 Company has been got permission to manufacture 9 of 11 intermediates at its new plant in Saykha.

India is better placed due to the availability of the ecosystem, feedstock, technology, and compliance required for the industry. The major drivers of the industry include the rising disposable incomes, increasing population, rising demand for cosmetics, growing construction and infrastructure activities, increasing demand from paints and coatings industries and the rising globalisation and urbanisation.

C. Segment wise or product-wise performance.

The Companys business activity falls within a single business segment i.e. Manufacturing Dyes and Intermediates.

Financial Performance

(Amount In lakhs)
Particulars 2022-23 2021-22
Revenue from Operations 4267.83 4775.25
EBDT 340.25 361.91
Profit after Tax 179.70 147.55

During the year under review, your company has earned Revenue from Operation of Rs. 4267.83 lakhs as against Rs. 4775.25 lakhs which recorded reduction of 10.63%.

The Company recorded Earning before Depreciation and Tax of Rs. 340.25 lakhs as against Rs. 361.91 lakhs which recorded a reduction of 5.98%.

The Company recorded Profit after Tax of Rs. 179.70 lakhs as against Rs. 147.55 lakhs which recorded a growth of 21.79%.

Geographic Revenue Analysis

(Amount In lakhs)

Particulars 2022-2023 2021-22
Domestic 3101.41898 3325.99436
Export 1128.79168 1425.33390

D. Outlook.

The company expects positivity in revenue and growth in FY 2023-24. Revenue will be generated by focusing on:-

Reduce cost of the Company in various fields, if possible. Increase of local and Exports as much possible.

Modernization of manufacturing process to improvise quality and reduction of costs.

The Company is quite confident that the overall productivity, profitability would improve in a sustainable manner, as a result of this strategy.

Outlook as provided above is based on certain assumption and expectation of future events, eco-political and other development across the country, the Company cannot guarantee that from the bases of these, company will generate revenue. Bases of the Companys actual results, performance or achievements could thus differ from those projected in above dictated key bases or dictated in any other forward looking statement. The Company assumes no responsibility to publicly amend or review any such statement on the basis of subsequent development, information or events.

E. Risks and concerns.

Major risk in Chemical Industry is Company deals in hazardous chemicals. Hence here there is huge amount of compliance risk wherein it is obvious to state that if the Company fails to comply with Environmental Laws and Regulations, the results of operations will be adversely affected, another is Company faces tough competition in terms of pricing and customer base. Further, there is contingency on the longevity of benefit accruing due to restrictions in China. There may be turnaround in Chinas dye industry, which possess huge threat to Indian market.

F. Internal control systems and their adequacy.

The Company has an adequate and efficient internal control system, which provides protection to all its assets against loss from unauthorised use and for correct reporting of transactions. The Company has put in place proper controls, which are reviewed at regular intervals to ensure that transactions are properly authorised and correctly reported and assets are safeguarded. The Audit Committee of the Board addresses issue raised by Auditor, if any. The internal control system is implemented to safeguard the companys assets from loss and damages. To keep constant check on cost structure and to provide adequate financial and accounting controls and implement accounting standards. In addition to above, the Company has formulated a vigil Mechanism (Whistle Blower Policy) for its Directors and Employees of the Company for reporting genuine concern about unethical practices and suspected malpractices.

G. Discussion on financial performance with respect to operational performance.

During the year under review, Company earned from its Operation of Rs. 4267.83 lakhs as against Rs. 4775.25 lakhs which recorded a reduction of 10.63%.

The Company recorded Profit before Tax of Rs. 173.11 lakhs as against Rs. 199.47 lakhs which recorded a reduction of 13.22%.

The Company recorded Net Profit of Rs. 179.70 lakhs as against Rs. 147.55 lakhs which recorded a growth of 21.79%.

H. Material developments in Human Resources / Industrial Relations front, including number of people employed.

The Company has in place adequate number of employees as required in its registered office and its factory and also hire from contractor as and when needed. Professionals with required amount of experience and knowledge are hired on need to need basis by the Company.

The Industrial relation of the Company with various suppliers, customers, financial lenders and employee is cordial. There are total 56 Employees on payroll of the Company.

I. Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor, including:

Particulars

FY ended March 31, 2023

FY ended March 31, 2022

% Change between Current FY & Previous FY

Explanation

Current Ratio

1.87

1.19

58.10

The ratio is increased due to increase in current assets.

Debt-Equity Ratio

0.08

0.20

(59.03%)

The ratio is decreased due to loan repayment.

Debt Service Coverage Ratio N.A. 9.13 N.A. N.A.
Return on Equity Ratio 4.45 4.46 (-0.34) N.A.

Inventory turnover ratio

5.89

12.85

(54.16%)

The ratio is decreased due to increase in average inventories.

Trade Receivables turnover ratio

4.35

4.76

(8.66%)

N.A.

Trade payables turnover ratio

4.06

5.63

(27.90%)

The ratio is decreased due to increase in average suppliers.

Net capital turnover ratio

4.12

15.52

(73.49%)

The ratio is decreased due to increase in Net Working Capital.

Net profit ratio

4.21

3.11

(35.57%)

The ratio is increased due to increase in Profit as compare to Turnover.

Return on Capital employed

4.45

6.81

(34.69%)

The ratio is decreased due to increase in capital employed.

Return on investment

44.59

11.22

297.28%

The ratio is increased due to sale of investment.