We have pleasure in submitting the Managements Discussion &
Analysis Report ("MDA") on the Companys businesses. We have included
specified matters, to the extent relevant and within boundaries that in our opinion are
reasonably imposed by the Companys strategic and competitive position. An overall
economic overview is covered in the Directors Report. The Indian economy, on the
other hand, moved on from the pandemic, led by private consumption, government investment
and capital formation to emerge as one of the fastest growing economies in the world.
Resilient manufacturing, infrastructure and agricultural sector output, sustained high GST
collection, moderating inflation and reasonable credit growth augur well for the economy;
India is expected to grow at a moderate 6 - 6.5 % in 2023-24. In a general sense, certain
sectors continue to do better than others. Our performance reflects the overall climate in
our markets, impact of strategic steps during the last few years and our position as a key
supplier to, the growing white goods and dielectrics segments. Sales value of the product
and value-add mix grew by over 8% to INR 510.97 crores (INR 471.72 crores), despite fall
in aggregate production volumes by 5.5 % to 27,857 MT (29,508 MT). Global recognition for
Xpro products remains strong and exports were at INR 17.46 crores (INR 22.62 crores
previous year) with Biax division exports higher by about 6% while Coex division exports
were lower mainly due to the disturbed economic conditions in Sri Lanka. Production costs
were controlled with productivity enhancements. PBIDT was higher at INR 78.28 crores, (INR
65.66 crores). All long term (other than towards working capital) loans were re-paid
during the year and the overall debt was brought down by INR 63.97 crores (INR 45.87
crores) including by prepayment of domestic loans and remaining foreign currency
denominated ECBs. Interest and other finance costs were accordingly lower at INR 7.53
crores against INR 13.01 crores in the previous year. Profit after Depreciation (PBT) was
INR 59.23 crores (INR 40.59 crores). Changes in key financial ratios: PBT ratio up from
8.6% to 11.6%, debt service coverage ratio up from 1.87 to 2.55, and debt : equity down
from 0.51 to 0.15 as a consequence of improved operating and financial performance,
reduction in total borrowing and raising of capital. {Other ratios detailed in Notes to
accounts.] During the year, the West Bengal Electricity Regulatory Commission (WBERC) had
determined the power tariff to be levied by DVC (power supplier to Biax Dielectric Films
Unit at Barjora) for the years 2017-18 and onwards, resulting in a retrospective demand
amounting to INR 315.61 lacs to be paid in instalments. The matter has been taken up in
various fora including legal and through association of consumers; however the entire
demand has been provided in the accounts for the year 2022-23, resulting in reduction in
profit to that extent.
The exercise aimed towards identifying and driving various sustainable
cost reduction and operational efficiency improvement initiatives at our production units
undertaken with Deloitte Touche Tohmatsu India LLP was completed during the year. Some
areas offering quick benefits have been implemented, other have been identified for
further study and possible implementation; continuing results are expected to be derived
in future. During the year, the Board has approved equity investment of upto INR 2 Crores
towards 26% equity in a SPV with Tata Power Renewable Energy Limited for sourcing Solar
energy for the Coex division – Ranjangaon Unit under Captive Open Access mode, from a
3.125 MW (approximately 4.5 MWp) facility being set-up. Utilization of this lower cost
energy is expected to commence in early 2024-25. The sale and transfer of erstwhile Unit I
at Barjora (manufacturing packaging grade BOPP films), approved by Shareholders in FY
2019-20) was completed on October 20, 2022; transitory arrangements, including toll
manufacturing at this unit on account of the acquirer, continued till that date. We
believe all our businesses are backed by necessary skills and expertise; our core
competency can be seen to lie in the extrusion field, particularly co-extrusion. Our
market standing is generally representative of the competitiveness of our core operations
and high quality of our products and services. The Company, being essentially a
business-to-business supplier, has its output really determined by the end-markets of its
industrial clients. Resultantly demand and related pricing power of the Company can get
influenced by several factors such as consumer sentiment, production of electrical goods,
and aggressive pricing tactics adopted by foreign suppliers (sometimes due to spillover
from their regular markets). It may be mentioned that the plastics industry as a general
class, particularly in the context of single-use plastics, has been kept entangled with
environmental concerns. None of the Companys product ranges have, however, been
linked with these environmental concerns.
Company and Industry Structure
Company operations are focused around our core competencies viz.
Polymers Business, structured into 2 operating divisions. Each operating division is kept
self-sufficient managerially to perform its own duties and functions, with support
provided at a corporate level as and when required. A summary of performance is given
below:
| POLYMERS BUSINESS |
|
2023 |
|
2022 |
|
Production MT |
Net Sales INR crores |
Production MT |
Net Sales INR crores |
| Biax division |
3,635 |
159.75 |
3,833 |
129.21 |
| Biax division (toll manufacture) |
1,250 |
5.09 |
1,756 |
8.83 |
| Coex division |
22,972 |
346.13 |
23,919 |
333.68 |
|
27,857 |
510.97 |
29,508 |
471.72 |
(Net of inter-unit adjustments; Production includes sheet for captive
consumption for forming)
The industry structure in the field of polymers processing is spread
wide, from miniscule to fairly large capacities. There is usually no direct thumb-rule in
terms of "size vs. profitability"; it is possible for players to work out their
own viable economics depending upon various factors, mainly a combination of product mix
and market segment or niche. Supply chain linkages to clients play an additional role for
some. Since polymers are generally freely available at prices synchronized to global
prices, market focus besides technical and service competence has been the key to success.
It is fair to say that the Company is a mid-sized player with significant strengths in its
market segments, but remains subject to usual market pressures. In the overall, the
Companys operations are relatively capital intensive; raw material and power
constitute the largest proportions of direct costs. We believe that opportunities are
substantial both in terms of market growth and product diversity and that threats from
replacement products are not significant. The main raw materials used by the Company are
Thermoplastic Resins (such as Polypropylene, including special grades for dielectric
films, Styrenic Polymers and LD/LLD Polyethylene, etc.).
We firmly recognize that total customer satisfaction is the key to our
success. Our aim is to build sound customer relationships through creation of value for
them, and in the process earn an equitable return for ourselves. Quality is built into
products through appropriate manufacturing technology and work methods. Manufacturing at
all units is carried out by suitably qualified personnel under strict quality standards.
Continuous product development for specific applications and equipment up-gradation has
helped us in proactively developing technically sustainable solutions with clear customer
benefits. Integrated Management Systems (IMS) covering Quality, Environmental, Energy
Policies and Safety & Health standards at Biax division, Barjora have been duly
certified under ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018. Biax Barjora unit
manufacturing dielectric films is also certified under IATF 16949:2016 which is mandatory
for organizations manufacturing parts for the automotive industry. Similarly, Quality
Management Systems at Coex division manufacturing unit at Greater Noida and Ranjangaon are
certified under relevant ISO 9001:2015 standards. The Environmental Management Systems at
Ranjangaon and Greater Noida units are duly certified under ISO 14001:2015 standards.
Energy management and conservation systems at Barjora Unit and Greater Noida unit have
been accredited under ISO 50001:2018. Manufacturing units also adopt and conform to
specialized quality systems and methods as may be required by major customers. The
Companys Coex division - Greater Noida Unit has received a Bronze rating under the
Green Co initiative reflecting adoption of a life cycle approach towards ecological
sustainability and steps taken to make products, services and operations greener. The
Company consistently receives awards on recognition and appreciation for vendor support,
product development, quality and excellence by leading customers. During the year, the
Company was recognized as "Best Extrusion Processor" by Modern Plastics. Awards
during the year include ‘Product Innovator of the Year in Petrochemicals and
‘Sustainability Excellence in Safety in Petrochemicals at the INDIA CHEM 2022
(under the auspices of the Ministry of Chemicals & Fertilizers); the Gold Award at the
14th Quality Council of India DL Shah Quality Awards of the National Board of Quality
Promotion; and at the 47th ELCINA Awards, 2nd Prize for ‘Excellence in Quality
Management, 2nd Prize for ‘Environment Management and Certificate of
Merit for ‘Excellence in Exports 2021-22.
Biax division
Biax division manufactures a range of special purpose Polypropylene
based Dielectric Films (Capacitor Films) on dedicated sophisticated and automated
production lines, Our focus and strategic intent remains dedicated within our core
strengths to special products and niche markets, largely thin films for specialized
electrical applications, where we remain the significant domestic producer and which
together with consistent high quality and service standards has enabled us to maintain
high capacity utilization. Customers in sophisticated segments have upgraded their
processes and equipment thus requiring upgraded film products. The broad portfolio of low,
medium and high voltage applications in standard and high temperature grade dielectric
films ranging from 3 micron to 16 microns for metallized polypropylene as well as oil
impregnated capacitors, developed as import substitutes conforming to international
standards, have brought substantial benefits to Indian capacitor manufacturing units,
while already contributing substantially to the overall performance of the Company. Our
available capacity is fully utilized, maintaining a respectable domestic market share
through the year (over 30% - with the balance being substantially met through imports),
besides export opportunities pursued from a strategic and long term intent (at almost 9%
of total dielectric film sale during the year). Besides growth in conventional
applications, growth in the electric automobile (EV) segment and non-conventional energy
(mainly Solar) is expected to substantially add to the market potential. Development
activities for semi-rough films and ultra-thin films are continuously undertaken; hazy
films for power capacitors and semi-rough film developed for locomotive applications are
now commercialized and part of the product range. Considering the need for additional
capacity, we have placed firm orders for two manufacturing lines (together with required
ancillary equipment) on reputed well established European Suppliers. The first of the new
lines, which would essentially double capacity at the existing facility at Barjora, is
expected to be shipped from Europe towards year-end. The second line is expected to be
shipped end-2024, taking into account long equipment delivery periods - which incidentally
is the critical-path activity for this investment. Project implementation work is
proceeding to schedule. Production at Unit II (dielectric films unit) was 3,635 MT.
Production on job-work basis (1,250 MT) was carried out on Unit I line (erstwhile
packaging film line) till October 20, 2022, while awaiting transfer of the Unit. Total
production at Biax division during the year was 4,885 MT; sales at INR 164.84 crores were
nearly 20% higher reflecting the drive towards higher value add product-mix.
Coex division
Coex division manufactures coextruded sheets, thermoformed refrigerator
liners and coextruded cast films. Our products are usually custom-made to customer needs
and based on various polymers including ABS, Polystyrene, PP and PE. Applications for the
Xpro product range are wide, including sheets for refrigerator liners, disposable
containers, automotive parts, etc. Cast films are high clarity films including stretch
wrap and cling, specially formulated films for medical disposables, hygiene films, and
others for packaging. India remains one of the fastest growing consumer appliances markets
globally with higher disposable incomes, easing in consumer credit, the growing working
population rural electrification and the work-from-home concept being the key drivers of
demand. The production of refrigerators in India, comprising a key market for products of
the Coex division, at 15.2 million units during the year, reflected a growth of nearly 17%
over the previous year, and is reflective of the growth potential of this segment. A rapid
recovery in the first quarter gave way to a depressed market for consumer durables during
the second and third quarter of the year, with the fourth quarter showing a production
pickup in expectation of strong demand recovery and a good summer. In the overall,
production of sheets and liners during the year was lower by about 3%. We continue to be
the leading supplier of sheets and liners to the white goods industry through consistent
focus on product quality, development, reliability and superior service, which have also
been recognized by major customers; these factors helped us to sustain market share. New
products and applications continue to be developed in association with key customers. In
the cast films segment, our focus has been on special films and continuous innovation.
Overall volumes in cast films from Ranjangaon was about 8 % lower than in the previous
year. Within our major market segments for cast films, the hygiene segment continues to
exhibit consistent growth in excess of 10% per annum, with the medical disposables and
adult incontinent product segments, in particular, poised for high growth; the release
film segment also grew reflecting our continued strong presence in the tyres and tread
segment. Steps are being continuously taken to optimize the production capabilities and
improve production efficiencies on available cast film lines. Reflecting overall market
circumstances, the total production of sheets, including as liners, (adjusted for
inter-unit transfers) and cast films at Coex division was at 22,972 MT during the year
with sales value at INR 346.13 crores.
OTHER MATTERS Environment and Safety
We firmly believe that safe and healthy working conditions in factories
and other premises are as necessary and important as production, productivity and quality.
Our policy requires conduct of activities to take foremost account of health and safety of
all concerned, besides conservation of natural resources and protection of the environment
to the extent possible. All necessary steps are taken towards our intent and policy of a
safe working environment. We adhere to all Environmental laws as applicable at each
location and are responding effectively to the changing regulations around plastic waste
management.
Human Resources
Employees represent our greatest asset and potential. It is only
through motivated, creative and business-minded employees that we can achieve our aims.
Involvement, commitment, teamwork and updating of skills and knowledge are integral to our
objectives of advancing a professional, productive high performance culture, built on
trust and mutual respect. Permanent employment is 203 (last year 261); reduction being
mainly due to transfer of packaging film unit.
Others
Global development banks have projected a moderate economic growth for
India in the coming year, due to factors such global slowdown, tight monetary conditions,
and elevated oil prices and expect economic growth in 2023-24 to be nearer 6.4% down from
estimated 6.8 in the previous year. Future growth would be driven by private consumption
and investment, the governments continuing infrastructure push, and fiscal prudence.
Logistics, demand patterns and labour remain uncertain variables. The global situation may
further be compounded by the geo-political uncertainties arising from the war in Europe,
and weather related shocks. We continue taking steps to conserve and protect liquidity
while learning to adapt thinking and operations with agility to the new normal. Barring
any unforeseeable or extraordinary disruptive policy actions, there are no further or
typical areas of risks or concerns outside the usual course of business, or the state of
the economy, foreseeable at this time. Our primary manufacturing processes (including
extrusion) are well established and our focus remains on process and efficiency
improvements, and product & application development to provide a competitive edge.
Internal control systems have been found to be adequate and are continuously reviewed for
improvements. Our team is committed to the Boards dictates on standards of conduct
as well as good governance and exercise of due diligence. We have taken all care to comply
with applicable laws and regulations. The Company continues its initiatives towards
operational improvements with a special emphasis on quality, control of overheads and
broad-basing of markets, while focusing on managing uncertainties in a proactive manner.
While domestic demand is expected to remain the main driver of growth, export market
expansion is also a key target area. Positive policy actions towards growth, global
climate change and steps towards control of carbon dioxide emission, control on inflation
and rural income support are expected to translate into improved market sentiment boosting
domestic and global consumption. However, the external environment, including tightening
financial markets, pressures generated by imports competing with some products, potential
crude and polymer price volatility and rupee volatility, continues to remain challenging.
In the overall our outlook continues to remain one of cautious optimism. Our sincere
thanks are due to all employees and teammates whose dedicated and hard work allowed
results to be achieved. We are grateful to all our Bankers and all concerned Authorities
for their continued support, and to all our customers for their faith and confidence. We
remain committed to fullest customer satisfaction.
CAUTIONARY STATEMENT
Statements or narratives in this Report which seek to describe the
Companys objectives, reasonable expectations, projections, estimates or predictions,
or the Companys assessment of external circumstances (beyond its control) going
forward, may be considered to be "forward-looking statements" within the meaning
of applicable securities laws or regulations. Actual future results could differ
materially from any expressed or implied. Additional important factors that could make a
difference to the Companys operations and results include global and Indian
containment, medical and economic recovery from possible recurrences of the Covid-19 &
variants driven pandemic and, demand-supply conditions, effects of any extraordinary
policy actions - domestic or global, finished goods prices, feedstock availability and
prices, power tariffs, cyclical demand and pricing in the Companys markets, changes
in Government regulations, tax and tariff regimes, economic policies and developments
within India and countries with which the Company conducts business besides other factors
including but not limited to natural events, litigation and labour matters.
For and on behalf of the Management Team
| New Delhi |
C. Bhaskar |
| May 22, 2023 |
Managing Director & Chief Executive
Officer |
|
(DIN: 00003343) |
+91-9892691696
