Borosil Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

This discussion covers the financial results and other developments during the financial year 2022-23 in respect of Borosil Limited and its subsidiaries namely Klass Pack Limited (82.49% subsidiary), Borosil Technologies Limited (wholly owned subsidiary) and Acalypha Realty Limited (wholly owned subsidiary).

The financials of the Company have been prepared in accordance with Indian Accounting Standards (IND AS).

Some statements in this discussion pertaining to projections, estimates, expectations or outlook may be forward looking. Actual results may however differ materially from those stated on account of various factors such as changes in government regulations, tax regimes, economic developments, currency exchange rates and interest rate movements, impact of competing products and their pricing, product demand and supply constraints within India and other countries where the Company conducts business. Estimates made with regard to market size of various segments and their respective rates of growth are internal estimates made by the management.

INDUSTRY STRUCTURE AND DEVELOPMENTS:

India is currently the worlds fifth largest economy and one of the fastest-growing large countries. In purchasing power parity terms, India ranks third behind the United States and China. Recovering from the pandemic-induced contraction, Russian-Ukraine conflict and inflation, the Indian economy staged a broad-based recovery across sectors. Gross Domestic Product (GDP) growth rate during FY23 is estimated to be about 7%. Despite global interest rate related headwinds, the Indian economy continues to be resilient and is expected to maintain a mid to high single digit percentage growth momentum over the medium term. Key drivers include sustained investments in logistics infrastructure and increased manufacturing, corporate sector balance sheet improvement and private sector capital expenditure, a fresh credit cycle, digital transformation leading to greater formalization of the economy, deregulation and simplification of compliances, impetus to education and healthcare security and a burgeoning start-up ecosystem.

There are several macro trends at work pushing growth forward:

Positive demographics and growing purchasing capacity

The country has a young population whose average age (28) is the same as in China in 1995 and in 2030 is expected to be 32. This shift in population is expected to have a positive impact on consumption, investment and savings dynamics in the country. According to McKinsey Global Institute, personal income is expected to triple over the next two decades. The percentage of Indias population earning approximately USD 2000 or more in 2005 totalled 46%, representing over 500 million people; by 2025 this is expected to expand to 79%, representing over 1.1 billion people. Individuals earning USD 4500 or more are expected to see the fastest growth. Labour markets have recovered beyond pre-Covid levels and unemployment rates have fallen in both urban and rural areas. This income growth can translate into changing consumption patterns and a larger demand for affordable discretionary products and services. Consumer discretionary spending is gaining share in total consumption. Indias income pyramid offers a unique breadth of consumption.

Urbanization

India has 10-20 million people moving to cities and urban areas annually. Indias urban population is expected to grow from around 345 million at the beginning of the last decade to about 590 million by 2030. This trend is expected to be spread across the country and can unlock many new growth markets. This trend is also leading to other demographic shifts including changes in family structures from large joint families to nuclear ones, the emergence of a large number of dual income households as well as shifts in social norms leading to changes in behaviour.

Digitization trends are accelerating

India is seeing digital transformation at population scale. IndiaStack is a highly inclusive transaction-led model. It is a public utility and provides interoperability, democratizes data and is decentralized. After a sharp demand and supply disruption due to Covid-19, there is emerging clarity about resilient businesses and transformations led by digital. There has been a 2-year leap for digital adoption due to Covid-19. The dramatic penetration of mobile internet access is enabling digitization of consumer habits, distribution and supply chains and access to new channels and provide for a wide range of needs. Digital commerce is taking share from physical markets at an increased pace. Companies are creating brands and products for digital-native consumers. It is also driving premiumization across categories, a deeper reach in smaller markets and a speedier innovation cycle. Digital payments allow the building of credit histories and flow based (not asset based) credit to millions of consumers and small businesses, in turn driving consumption. Aadhaar based digital identification is also facilitating a move from a "prepaid" to a "buy now pay later" economy and a material rise in consumer discretionary spend. The Indian economy is moving from savings-led growth to consumption-led growth.

Rise in Manufacturing

India can be a key beneficiary of the transition to a multipolar world. US-China trade tensions, pandemic- related supply chain disruptions and cost of sanctions demonstrated after Russias invasion of Ukraine, have increased the desirability of just in case over just in time and relying on ones allies than on rivals for economic needs. The government is taking concerted steps to help

the competitiveness of domestic industry. Corporate tax rates have been reduced and further reduced for manufacturing firms incorporated after October 1,2019. In March 2020, the government introduced Production Linked Incentive (PLI) schemes to step up domestic manufacturing capacities. Labour laws are being rationalized. The government is committed to better infrastructure through detailed plans to augment spending and mechanisms to monitor fast implementation of plans. PM Gati Shakti aims to facilitate multimodal connectivity of various infrastructure linkages and efficient logistics. The new National Logistics Policy aims to provide comprehensive development of a logistics ecosystem to ensure quick last-mile delivery, solve end transport related challenges and save manufacturers time and costs.

Attractive workforce trends, entrepreneurial activity

India is consolidating its advantage of low-cost human resources in sectors such as drug research and discovery, technology services, back office services, customer support, and healthcare and expanding into other sectors, creating global opportunities in leveraging competencies tied to India. A globally linked and technologically sophisticated workforce is also leading to a deep entrepreneurial movement among professionals, leading to disruptive start-ups and availability of capable managers to help scale mid-size enterprises.

The Company conducts its operations in two business segments, namely Consumer Products Division and Scientific and Industrial Products Division.

The brand Borosil has been a household name in India for over five decades and is now well known for high quality kitchen and tableware products. In the last few years, the Companys range of appliances & Vaccum bottles has also been well accepted. Its microwavable range of products and iconic vision glasses are synonymous with the category of Borosilicate glassware.

Borosils vision is to become the most customer centric Company in India. This vision drives our decision making every day from year to year. We have expanded our range of products and solutions to best serve the evolving needs of our customers. Over the last decade the Companys range of offerings to its consumers have grown to encompass various aspects that are part of the cycle of a kitchen in Indian homes. These include kitchen storage products, small kitchen appliances for preparing and cooking food, heating, in-home serving and dining ware and on-the-go storage products. The Consumer Products Business has transformed from marketing a single brand in two categories (microwavable and vision glass) retailed primarily through the general trade to two brands, serving multiple needs brought to its consumers through general trade, large format stores and e-commerce.

Borosil has been the leading brand in laboratory glassware products catering to major industry segments including Pharmaceuticals, Research & Development, Education and Healthcare. These industries including Chemicals and APIs are undergoing rapid growth, with overall demand and Government spending on the rise. This is speeding up process automation and digital transformation leading to optimizing efficiencies in production and hence a significant rise in the volumes of tests and analyses being conducted. Sample preparation methods are now advanced and allow for multiple analyses. Consequently, there is a large market emerging for new equipment, complex process systems and other products. While traditionally the Company used to market laboratory glassware including a wide variety of scientific, industrial and pharmaceutical items sourced from both international and domestic markets, it is now seeing itself evolve from a glassware manufacturer to a solutions provider to its customers for their laboratory and product needs, also offering advanced digital solutions like QR coded volumetric glassware to enable easy integration with digital systems like LIMS. Borosil Technologies Limited designs and develops a range of smart, rugged and practical bench top instruments and equipment under the brand LabQuest by Borosil, which provides a viable alternative at reasonable prices to expensive imports. The Company has also launched its portfolio of Filter Papers, catering to several additional industries like Cement and Testing Labs. Building on its existing customer relationships in the pharmaceuticals industry, the Company caters to their primary packaging needs of vials and ampoules and chromatography vials through Klass Pack Limited. The growing requirements of the API and Chemicals industries can be catered through the Companys entry in the Process Systems business through the acquisition of Goel Scientific Glass Works Limited, who are experts in design, fabrication and installation of Industrial Process Systems for Production and Pilot Plants, maintaining globally accepted quality standards with capabilities to produce customized borosilicate glass vessels up to a capacity of 500 litres. The Company continues to invest in and develop an increasing market with high annual growth for its portfolio products in North America, the Middle East, Europe, South East Asia and Africa.

RISKS AND CONCERNS:

(a) Macro-Economic Factors: In situations of economic constraints, items that are in the nature of discretionary spending are the first to be curtailed. Factors such as low GDP growth and high food inflation can result in postponement of purchase or downtrading from premium to mass market products.

(b) Changing Customer Preferences: Demand can be adversely impacted by a shift in customer and consumer preferences. The Company keeps a close watch on changing trends and identifies new product lines that it can offer to its customers.

(c) Changing Geo-political situation: Our relationship with China has been strained in the recent times. Its known that China is the factory of the world, and in our case too some of our domestic small appliances as well as considerable number of SKUs of the Hydra range are sourced from suppliers in China. In the light of recent developments, this could pose a considerable risk for the consumer business.

(d) Competition: Due to stress on consumer disposable income, customers will look for low priced goods. This may create disruption in the market due to counter and aggressive pricing by competitors (including e- commerce sales through heavy discounting).

(e) Acquisitions: Acquisitions entail deployment of capital and may increase the challenge of improving returns on investment, particularly in the short run. Integration of operations may take time thereby deferring benefits of synergies of unification. The Company contemplates acquisitions with a high strategic fit where it envisages a clear potential to derive synergistic benefits.

(f) Input Costs: Unexpected changes in commodity prices resulting from global demand and supply fluctuations as well as variations in the value of the Indian Rupee versus foreign currencies could lead to an increased cost base with a consequent pressure on margins in the short run.

(g) Global Supply Chains: There may be disruptions in global supply chains leading to delays in procuring raw materials, finished products or capital goods, gaps in fulfilment of demand, increase in inventories and project implementation delays.

(h) Counterfeits: Counterfeits, pass-offs and lookalikes are a constant source of unfair competition for leadership brands. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has adequate Internal Control Systems commensurate with its size and nature of business. The internal control systems are designed to ensure that the financial statements are prepared based on reliable information. Internal Audits are continuously conducted by an in-house Internal Audit department of the Company and Internal Audit Reports are reviewed by the Audit Committee on a quarterly basis.

CORPORATE DEVELOPMENTS

Composite Scheme of Arrangement

The Board has proposed to restructure the business of the Company into two separate listed entities by a Composite Scheme of Arrangement. Borosil operates two distinct businesses. The consumer business comprises glassware, non-glassware and Opalware product ranges while the scientific and industrial business is made up of lab glassware, lab instrumentation and primary pharma packaging. Both the businesses have been functioning as separate profit centres with separate business heads and largely independent teams. Each is responsible for delivering on their own profitability and this has been the case for quite a few years. Going forward each of these businesses have distinct capital and operating requirements. The growth path through organic and inorganic growth potential is different which entails different capital raising requirements.

The Companys conversations with various investors also suggest that the two businesses are suited to two different investor profiles. Consequently, the Board has approved a scheme to segregate the two businesses with each business being listed independently on the stock exchanges. The Scheme envisages demerging the Scientific and Industrial Products business of Borosil Limited into Klass Pack Limited. In addition, Borosil Technologies Limited, which is a wholly owned subsidiary of Borosil Limited and under which the LabQuest range of products are developed will also get merged with Klass Pack Limited. Thus, Klass Pack Limited will house the entire Scientific and Industrial Products business including its existing pharma packaging business. It is proposed to rename Klass Pack Limited to Borosil Scientific Limited and list it on the Stock Exchanges i.e. BSE and National Stock Exchange of India Limited.

Upon the implementation of the Scheme, Borosil Limited will house the consumer business of the Company, which is Glassware, non-glassware and Opalware and Borosil Scientific Limited will house the scientific and industrial products business which is Lab glassware, Lab instrumentation and pharma packaging. There would be a few functional / infrastructure support services which will be shared between both the entities.

Listing of Borosil Scientific Limited on the stock exchanges will help to unlock value of the Scientific business for the investors and they can choose to be invested in one or the other or both the businesses. The implementation of the said Scheme is subject to the approval of Honble National Company Law Tribunal, Mumbai Bench.

Acquisition of Goel Scientific Glass Works Ltd.

On April 27, 2023, Klass Pack Limited completed an initial purchase of 90.17% equity shares of Goel Scientific Glass Works Limited (Goel Scientific) from its majority shareholders. Goel Scientific has expertise in design, fabrication and installation of industrial glass process systems and laboratory glassware at its two manufacturing facilities at Vadodara and is one of the leading exporters of process system components worldwide. Goel Scientific has a team of expert glass blowers that are skilled at manufacturing borosilicate glass vessels up to a capacity of 500 litres. Its products find wide use in the R&D and production departments of pharmaceutical, defence, agricultural research and chemical industries. It has built strong relationships with key domestic and international OEMs. During the year ended March 31, 2023, it had an estimated turnover of 66 crore.

Borosils SIP business will derive several synergies with this acquisition. It will add a complimentary product portfolio to Borosils existing range that can leverage Borosils brand and strong sales and distribution network. Borosils R&D capabilities together with Goel Scientifics specialized glass blowing skills will enable the Company to provide its customers with world class made in India products. The combined operations are expected to provide deeper market penetration, entry into new markets, enhanced product offerings and innovative range of products, input cost optimization and potential sourcing benefits.

ANALYSIS OF SEGMENT WISE PERFORMANCE (INCLUDING OPPORTUNITIES AND THREATS)

CONSUMER PRODUCTS:

The Companys Consumer Products segment markets a range of products that cater to the cooking, serving, heating, food storage and dining needs of a modern Indian home. These include microwaveable glassware products, glass tumblers, storage containers, stainless steel cookware, opal dining ware, kitchen appliances, lunch boxes and stainless-steel flasks.

The modern homemaker is looking for convenience in the kitchen and is also more conscious about how he/she presents/serves the meals at home. Microwavable glass products faced the limitation of infrequent use. Borosils expanded range of products aims at everyday usage. The Company has introduced a range of products that cover the entire process of storage, preparation, cooking and serving that empowers its consumers to perform more efficiently. These launches have expanded the field of play for the Company, increasing its addressable market size.

Borosil has been a market leader with over ~60% share in microwavable and heat resistant glassware products over the last several years. Borosil has had the first-mover advantage in the segment of about 100 crore and established for itself an unassailable brand equity over five decades. There is an opportunity to grow the market of microwavable products by increasing usage from re-heating to cooking, baking, storage and serving. Similarly, the Company will take initiatives to promote vision glass (cups, tumblers etc.) for everyday use to provide an impetus to this 440 crore market.

The Indian kitchen storage is still dominated by plastic and steel containers. Glass storage products currently have very low penetration. However, there is a growing awareness about the health hazards of storing foods in most types of plastics. While stainless steel is safe it has the disadvantage of being opaque. Borosil has introduced a range of dry and wet glass storage products keeping in mind the requirements of the Indian kitchen. With the dual motivations of health consciousness and concern for the environment, there is a noticeable shift from plastic. Borosil sees a significant headroom for growth in this 700 crore market by increasing the penetration of glass storage containers.

Borosil has also diversified into range of non-glass products including storage containers, flasks & bottles, stainless steel cookware, non-stick cookware, kitchen tools and accessories. This wide product portfolio enables the Company to cater to various segments of the consumer market and capture a larger customer base.

In the post-Covid world, the need for a safe environment and healthy food has increased. People prefer home cooking rather than dining-out. Borosils Kitchen small appliances reduce the chores of cutting, chopping, steaming, toasting and make cooking more convenient, efficient and enjoyable. Borosil has positioned its high-quality kitchen appliances at the mass premium end of the 9000 crore market backed-up with impeccable after-sales service.

A number of the products introduced have received a very positive response and gained wide consumer acceptance. Hydra flasks and bottles fared extremely well. Trek and Coffeemate have also seen good traction. Post pandemic, there is an increased trend amongst customers towards carrying their own beverages while on the go. Customers are also shifting from plastic to stainless steel bottles.

In the serving ware category, the Companys thrust has been market expansion of opal ware. Opal intrinsically has several properties that make it an ideal choice for everyday usage by the consumer. Opal is made of toughened glass that is chip and break-resistant while being lightweight making it amenable for daily use. The products are bone-ash free, making them vegetarian friendly. It is easy to clean, dishwasher-proof, and can be used in the microwave for reheating. It also retains a whiteness that does not stain or fade. It lends itself to elegant designs and can be used for serving everyday meals at home. Moreover, it can be made available at an affordable price point providing the opportunity to convert users from melamine, bone china and steel. Borosil expects the 900 crore opal ware category to continue to grow at 15-20% in the medium term.

Consumer products have fared very well in FY 2022-23. Consumer Products achieved a revenue of 741.8 crore in FY23, an increase of 29.5% over FY22.

Sales of Consumer Products comprised sales of Glassware of 178.0 crore (a growth of 21.9% over last year), Non-Glassware of 303.2 (an increase of 46.2% over FY22) and Opalware of 260.6 crore (a growth of 18.7%). Glassware comprises our microwavable range, the vision glass range as well as glass kitchen storage, lunch boxes, glass bottles etc. The non-glassware portfolio includes Steel Serve Fresh, the Hydra range and small kitchen appliances. Opalware is the serving ware range under the brand Larah.

Having established itself in the categories of storage, kitchen appliances and opal ware, Borosil has de-risked its Consumer Products portfolio from the erstwhile microwaveable and vision glass dependent business.

Sales Channels

Borosil consumer products have a well-established national distribution network that extends across various channels, including traditional brick & mortar stores, large format retail platforms, online stores, and institutional sales. The widespread presence enables the Company to reach out to a large customer base and ensures that its products are easily accessible to consumers.

The Company sells products to about 200 plus distributors who in turn service more than 20,000 retailers in over 100 cities with an addition of over 2700 new unique retailers in the year 2022-23.

The distribution channels are serviced by over 100 sales personnel on the ground. This sales force is now digitally enabled with field assist applications to book orders, monitor secondary sales and to record feedback from the market. With additions to the product range, the throughput per store and the productivity of the sales force is also increasing.

The Trade channel welcomes the expansion in the range of products which helps them to offer a wider choice of products to consumers who visit their stores.

Higher sales per store is leading to strengthening of the relationship with the trade partners. Moreover, Borosils obsession with quality ensures that its trade partners have to deal with minimal consumer complaints.

The Company services its consumers from the armed forces and the police through central procurement organizations such as the Canteen Stores Department (CSD). An additional channel is Business-to- Business where customers purchase the Companys brands to offer as schemes along with their products through their distribution partners or use them in corporate gifting.

Over the past few years, the Company has focused on building a robust online channel to complement its traditional offline sales channels. The Companys products are listed on popular marketplaces such as Amazon and Flipkart. It also markets its range of products on its brand website www.myborosil.com. The online channel has provided access to Brand Borosil to consumers in Tier-2 and Tier-3 towns in the country. The Company also aims at introducing unique SKUs for the e-commerce channel, to avoid potential conflict with the Large format stores and General Trade channels.

The Companys website www.myborosil.com has been designed for seamless navigation even for the first- time online shoppers. The Company has built-up an ecosystem for the entire D2C business with its own Digital marketing team, performance marketing, inhouse creative team and production studio. This helps to launch product offerings on the website much faster. The organization also intends to offer differentiated products on the D2C website to attract new traffic.

The Company will continue to execute a multi-channel distribution strategy through which it can reach its consumers. It will seek to strengthen each of these distribution channels through increased reach, depth of SKU range within each outlet and increased sales force productivity for the offline channels. Borosil will leverage the online channels to reach new consumers, engage with them every day and reach them even in tier 2 and tier 3 cities. The Company does not cater significantly to the HoReCa (Hotels, Restaurants & Catering) channel which is a commodity play with low margins.

Brand communication

The Company has taken major initiatives to engage with its potential customer base through digital marketing wherein it has rolled out successful digital brand campaigns, social engagement and influencer marketing programs.

Borosils digital brand campaigns and consistent engagement programs with Celebrity influencers-like Chef Harpal Sokhi & Shehnaaz Gill, in FY 2022-23 created higher brand saliency, affinity and positive impact during the festive season.

Borosil has initiated plans to leverage Sports marketing programs as a strategy to connect with its target audience going forward. The Company has tied up with Indian Olympic Association and Inspire Institute of Sports and strive to achieve the countrys larger goals to give India a new position on the scoreboard of International sports.

Consumer products have recently refreshed the brand identity and positioning of "Larah" backed up with customer research data conducted across end-user groups, distributors and retailers. With the aim to target the modern Indian women who juggle various roles and strive for the best in every sphere of life, Larah aims to provide quality opal ware that empowers these women every day.

Repositioned with the tagline "My Home, My Way," the brand underscores womens choices and efforts to showcase their craft and personality as well as their commitment to making healthy, savvy and sustainable choices for their homes and loved ones. Creating an immersive experience, the brand has unveiled a new logo featuring a deep aubergine hue, personifying todays women that reflects their unique identity through virtues such as self-assurance and confidence.

Sales Automation Transformation:

FY23 was a continuation of the sales automation journey that was initiated a year back with implementation of Distributor Management System (DMS) integrated to SAP. Field assist is now implemented for Large Format Stores, CSD/CPC as well. This provides the Sales Leadership with meaningful and result-oriented data at Dealer, Region, District, Town, Division, Sub-Category and Category level. All discussions are based on DMS data and the Business Intelligence tool helps in finding opportunities to increase revenue through various reports such as dealer level Cross-Selling reports. Information on unique covered outlets, unique productive outlets and order filled summaries are easily accessible. Sales Force Automation is enabling better manpower management and improved

sales productivity.

Profitability:

During FY23, the Company experienced inflation in input costs. There was a surge in power and fuel which comprise a significant component of manufacturing costs. Freight costs and prices of raw materials and packing materials also saw significant increase. The Company has cautiously chosen to pass on these increased costs in a phased manner with some lags hoping for commodity prices to settle over the next few months. At the same time the Company continued to invest in advertising and brand building for the long- term. Advertising & Sales promotion expenses of the consumer products division were 7.7% of consumer product revenues. The division earned an EBITDA of 84.7 crore (before exceptional and one-time items), translating to an EBITDA margin of 11.4% as against an EBITDA margin of 16.4% during FY22.

Expansion Plan

Post-covid, there has been a tailwind towards customers being aware of the ill-effect of plastics in their daily life and hence a switch towards more healthier alternatives like glass serving and storage solutions. Increased usage of glass in daily life will result in market expansion.

With the borosilicate pressware products showing good traction, the Company has reached a scale to justify its own manufacturing facilities, to reduce dependence on growing uncertainty in global supply chain and to achieve cost benefit. The Company has commenced setting up Indias first borosilicate glass pressware capacity of 25 tonnes per day (TPD) at Jaipur at an estimated project cost of 75 crore. This capacity is expected to go on stream by the second quarter of FY24 and meet the Companys sales requirements over the next 2-3 years.

The Companys opal ware plant at Jaipur currently operates at full capacity to meet the demand of Larah. We started our second furnace for Opalware in the month of December, 2022 followed by commercial production in the month of January, 2023 and consequently we doubled our capacity from 42 TPD to 84 TPD.

Supply Chain:

The Company has shifted to a 3PL strategy for its supply chain and logistics, starting with operations of its Bhiwandi warehouse in the West, Farukhnagar in the North, Kolkata in the East and its Bangalore warehouse in the South.

3PL has provided the Company with a State-of-the-art Warehouse Management System (WMS) at a low cost with rapid deployment. It is also highly scalable and suitable to Borosils plans of rapid growth across its sales channels and product categories.

CAPITAL EMPLOYED:

As on March 31,2023, the Consumer Products business had operating capital employed (without considering Investments, goodwill and capital work-in-progress) of about 324 crore (as compared to 297.8 crore on March 31, 2022). The Jaipur furnace was commissioned in the first week of January 2023 and accordingly the capital employed has been considered. The consumer business maintains an average working capital of 55 days of sales. The fixed assets as of March 31, 2023 (including capital work in progress, capital advance and Capital Creditors) were 402.9 crore. After the implementation of the Borosilicate facility and the expansion of the Larah capacity, the maintenance and plant upgradation including furnace rebuild capex in the business is anticipated to be about 30 crore each year.

OUTLOOK:

The Company believes that the household penetration in India for its products remains low with significant headroom for growth available. Consumer products aims at touching the consumers life at all stages of the cycle of a kitchen through storage, preparation, cooking, heating and serving. Across most of these categories (glassware, opalware, Hydra flasks and bottles) the Company will focus on market expansion. In the kitchen appliances market, it aims to increase share in the mass-premium segment.

In the consumer products business, the Company expects to expand the glassware market, maintaining quality and price leadership. The glassware market has a CAGR of 10%-11%. With its focus on increasing the occasions for use and daily use and being supported by a shift away from plastics towards glass, the Company expects to grow its glassware range by about 20% each year over the medium term. The Opalware market is growing at 14%-15%. Larah has grown at a faster CAGR over the last few years. With new capacity coming on stream and the ability to offer a wider range of product designs, the Company expects Larah to clock a medium-term growth rate of about 25%.

The non-glassware market segment (appliances and Hydra flasks and bottles) is growing at about 9% each year. Borosils products have delivered a much higher rate of growth albeit on a small base. Focus on high product and after-sales service quality and the introduction of thoughtful innovations in product design are expected to grow the non-glassware segment by about 20% in the medium-term.

The Company expects to achieve its plans through marketing investments, continual enhancement of Customer Experience to increase consumer mindshare, automation of the systems and processes to improve efficiency and productivity and investments in capacity and improvisation of supply chain efficacy to ensure servicing of demand.

SCIENTIFIC AND INDUSTRIAL PRODUCTS:

The Borosil brand has been a generic name for 3.3 low expansion laboratory glassware in India for decades and remains the undisputed market leader with over 67% market share. In the laboratory industry, Borosil stands for quality, reliability and trust. This leadership position has been achieved and sustained by working closely with customers and providing them with products and solutions that meet the specific needs of their laboratory applications. The Borosil Lab Glassware catalogue lists over 2000 SKUs!

Continual upgrading of manufacturing technologies and backend processes has made Borosils Lab Glassware manufacturing one of the most modern facilities in the world. With an evolved and wide-reaching supply chain, a laboratory technician in India is able to order and receive laboratory glassware on almost the same day. Our recently launched online Dealer Portal is set to revolutionize our communication with our channel partners. It serves our dealers to use technology to speed up and optimize their processes. It helps automate the customer feedback and service processing mechanism and also provides an app-based solution to expedite the product installation process at the click of a button. It is among our many endeavours towards process automation and advancement.

Analytical laboratories in the pharmaceutical industry are a prime user of Borosil calibrated glassware. Calibrated glassware is used for precise sample preparation before analysis using complex analytical techniques like liquid chromatography or mass spectroscopy. With India being a key supplier of generic drugs to the regulated markets, pharmaceutical laboratories use Borosil calibrated glassware confidently for audits by regulatory bodies.

Over the last few years, Scientific and Industrial Products business has been building new avenues for growth to reduce its dependence on the 300 crore laboratory glassware market which is growing at a modest mid- single digit per year. It has identified three new pillars of growth viz. Benchtop instruments under the brand LabQuest by Borosil including the newly launched patented Bottle Top Dispensers, primary packaging glass vials and ampoules for the pharmaceutical industry under Klass Pack and establishing our presence in the export markets for laboratory glassware and analytical vials at a high growth rate. In addition to this, the Company has entered into the filter paper product category which is used by its existing and new laboratory customers.

The division registered a turnover of 285.3 crore as compared to ? 266.9 crores in FY22, a growth of 6.9%. In Laboratory Glassware, Borosil achieved Net Sales of 187.2 crore during FY23, a growth of 19.9% over FY22. Both educational institutes and Government funded research institutes that were facing revival challenges owing to Covid related impact, bounced back to normal activity and demand. With the Governments focus on digital processes, the Government online e-marketplace portal is an avenue for growth - where we experience rising demand.

The Company has been building exports of laboratory glassware and analytical vials as an additional vector of growth. The exports segment has witnessed a historic growth in these segments establishing a very strong foothold with OEM business in North America, Europe and the Middle East and product presence in over 70 countries around the world. The Company has now established distributorships in a number of countries in Asia, North America, the Middle East, Europe and Africa. The development of large OEM accounts has paved the way for a consistently growing demand. During FY23, exports of laboratory glassware and analytical vials were 29.9 crore, with a growth of over 48.5% on FY 22.

The Lab Instrumentation business under Labquest has been gaining traction and grew from 21.3 crore in FY22 to 25.6 crore in FY23, a growth of 20.3%. Most of the research institutes, schools and colleges have resumed and this facilitates bringing business back to normal levels. With LabQuest, our strategy was to expand our sales with existing customers of Lab Glassware and add new customers. With over 67% market share in Lab Glassware, Borosil has a wide customer base across industries and institutes where a lab exists approximating about 8000 customers. This gives the Company low customer concentration risk as also a large network of customers for the LabQuest team to tap into. The Company expects to accelerate its growth to over 25% in the medium term and will aim to garner share in the 570 crore with a focus on Nutrition, Environment and Process Sciences.

The pharma packaging business of glass vials and ampoules under Klass Pack achieved Net Sales of 72.5 crore. This could be attributed to several key accounts navigating US FDA related challenges and the waning of the intensely high demands experienced during the pandemic for vaccine related supplies. This business caters to packaging for injectable formulation, ophthalmic and dental products and sample carrier for analytical instruments. It provides Borosils pharmaceutical customers in the 1350 crore market, a credible alternative for their packaging needs. A growing segment is the analytical vials business which has helped in building partnerships with large global organizations. The production facility and output has passed stringent audits by its customers. Once on-boarded, this proves to be a significant entry barrier to competition. Klass Pack is exploring new opportunities in pre-filled syringes, cartridges and siliconized vials. Some new products planned for this year include large OD vials in 100ml and additional products in the tubular product profile in the form of Droppers, Inserts for HPLC Vials and Shell Vials. For the portfolio of products at Klass Pack, the domestic and exports markets are expected to grow at 15% and 25%, respectively. In addition, the Company sees an increased opportunity to export, particularly to markets in Asia and Europe.

Profitability:

During FY23, the Scientific and Industrial Products Division earned an EBITDA of 51.7 crore (before exceptional and one-time items) translating to an EBITDA margin of 18.1% as against an EBITDA margin of 22.6% during FY22.

Supply Chain:

The Company manufactures almost its entire requirement of scientific products in-house. For its Lab glassware range of products, it purchases glass tubes conforming to ISO standards. The Companys manufacturing facilities are equipped with the latest technology and highly advanced processes for delivering error free output conforming to ISO/ ASTM standards. It also has an NABL accredited calibration laboratory in house and so its customers get products such as Burettes, Pipettes, Cylinders & Volumetric flasks certified A class, saving a considerable amount of time & cost. In order to reduce the uncertainties around global supply chains as well as the cost of importing tubes, the Company is evaluating alternative sources.

The instrumentation range under the brand LabQuest began by getting products manufactured through third parties. Based on the growing demand for these products, the Company commenced its own manufacturing for some of these products through its wholly owned subsidiary, Borosil Technologies Ltd. Borosils commitment to innovation is reflected in its investment in a state-of- the-art design and development centre for new laboratory instrumentation products in Pune. Spanning 36,000 square feet, Borosil Technologies employs talented individuals in the field of design, electronics, mechanical and chemical engineering to work on emerging technologies in the lab space. All Borosil products are designed based on actual conversations with lab scientists and users, ensuring high reliability and performance at a great value. The newly launched patented Bottle Top Dispensers are set to create a breakthrough, providing good quality, in-house, made in India products at reasonable prices in a market segment that was dominated by expensive international brands imported into the country. These Bottle Top Dispensers offer an efficient dispensing solution for critical laboratory solvents in the LHS segment.

Borosils Nutrition & Environment product category owes its success to the Companys significant investment in research and development. The use of specialized equipment for proximate analysis has enabled the estimation of protein content in various industries such as food, feed, agriculture, and pollution through our flagship complex Nitrogen estimation systems (Kjeldahl). As the demand for instruments for drinking and effluent water testing continues to rise, Borosil is expanding its presence in water analysis through technology collaborations. The facility has several new features, including a state-of-the-art NABL-certified calibration lab that meets accreditation standards. The Company has also established an analytical application lab that is equipped to meet the requirements of developing testing protocols. Additionally, it has moved electronics manufacturing in-house to maintain greater control over quality and reliability, and has set up component testing laboratories to ensure the quality of its products.

Borosil Technologies established a clean room facility to manufacture liquid handling products that meet international standards. Furthermore, it has made significant investments to expand its product offerings in the food and nutrition portfolio for both domestic and export markets. The Company believes that this will create substantial growth opportunities for its business.

Overall, these developments demonstrate Borosils commitment to providing high-quality products that meet the needs of its customers. We are constantly striving to improve our capabilities and deliver innovative solutions that exceed all expectations.

The pharma packaging range is produced at Borosil KlassPacks own facilities at Nashik. In order to meet the growing demand in this segment, the Company decided to expand the capacity at its Nashik plant and now can supply over 325 million tubular glass vials and 775 million ampoules per annum.

Expansion in the glassware manufacturing facilities will continue with the goal of improving the turnaround time and being able to respond to custom requirements of scientists swiftly.

CAPITAL EMPLOYED:

As on March 31, 2023, the Scientific and Industrial Products business had operating capital employed (without considering Investments, goodwill and capital work-in-progress) of 234.2 crore (as compared to 213.2 crore on March 31, 2022).

The Scientific and Industrial Products business maintains an average working capital of 112 days of sales. The fixed assets (including capital work in progress and advances) as of March 31,2023 were 146.9 crore. After the implementation of the expansion projects, maintenance and plant upgradation capex in the business is anticipated to be about 10 crore each year.

OUTLOOK:

In the Scientific and Industrial Products business, the Company expects to maintain its dominant market leadership in the lab glassware segment in India. The market is expected to grow at 6% to 8%. The Company has also begun to grow an international franchise and will focus on North America, Middle East, Europe Africa and South East Asia. In the Export market, the Company is focusing on OEM developments and is fast building a base that is expected to yield strong revenue in the coming years. LabQuest for lab instrumentation, pharma packaging with KlassPack and the newly acquired Goel Scientific - Process Systems business provide three additional avenues of growth. The Industrial process systems will accelerate the development of many innovative solutions

like enhanced resistance of glass sections for specialty sectors to modularity & full system automation. Overall, the Scientific and Industrial Products business is expected to grow by 15% to 17% y-o-y for the next three years.

The laboratory glassware and equipment industries have regained growth momentum after the pandemic. The Government spending in Education, Health and R&D is also substantially increasing. Klass Pack being a primary packaging supplier to Pharma injectable manufacturers, is expected to see a rise in demand in the near-term. The acquisition of Goel Scientific is expected to lead to business expansion through long term expertise in Chemical Process Systems, Reactors & Accessories (Chemical Synthesis, Pilot and Commercial Chemical Manufacturing) and capabilities in domains like specialty industrial systems such as wiped film evaporators and rotary evaporators. In the medium to long-term we expect greater investments by pharma companies and government institutions in research and development globally which elevates the demand for the lab glassware and lab instrumentation businesses.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES, INDUSTRIAL RELATIONS AND NUMBER OF PEOPLE EMPLOYED:

We are Indias pioneers and leading multi-vertical glass manufacturing, providing our worldwide customers with solutions that improve their lives. The exponential growth path that we have embarked upon with global presence is possible only because of the untiring and relentless support and commitment of our people.

At Borosil, it is our endeavour to provide employees with an open, transparent and empowered environment, where everyone feels valued and cared for. Over the years, some of the key factors that have contributed to our growth are:

• Shared Vision

• People Driven Company

• Culture of Trust and Transparency

• Home Grown Management

• Empowerment given across all levels

• Welcoming of new ideas

• Open door policy

• Loyal employees with decade long tenures

• Supportive Management

• Alignment of Individual aspiration to organizational goals.

In partnership with an external agency, the HR department is also facilitating the creation of a future-ready organization by way of setting up the required organizational structure, assessing the leadership skills, key talent and potential of our team to shoulder this responsibility. This ensures attraction, retention, motivation and engagement of Talent for exposure to new roles and growth.

The Learning and Development (L&D) vertical which has got formally institutionalized focuses on providing such opportunities for employees to continuously learn, grow and excel in the organization. Our L&D initiatives are designed by understanding the business needs and the training programs rolled-out to address those business challenges. The Impact study conducted thereafter helps measure and evaluate the effectiveness of the trainings imparted and implementation of the learnings for enhanced productivity and performance. The focus is towards creating a holistic developmental journey aligned to ones role and grooming Future-Fit leaders.

Our values of Integrity, Customer Focus, Respect, Continual Improvement, Accountability, Safety are our guiding light in all that we do, which is reinforced through all our communication channels and connects with our people.

Like always, we owe the continued success of our journey to our people and their passion!

The Company has 881 permanent employees as on March 31,2023.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

The operational performance improved significantly during the year with Net Sales growing by 22.3% on a consolidated basis. The Company achieved healthy growth across all its business lines. EBITDA (before exceptional and one-time items) was 13.5% on a consolidated basis. Consolidated Profit after tax for the year ended March 31,2023 was 90.2 crore against 85.2 crore during the previous year.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS, ALONG-WITH DETAILED EXPLANATIONS:

Ratios (Based on Standalone Financials)	2022-23	2021-22	Change (%)	Explanation where changes is more than 25%
Debtors Turnover Ratio	13.48	13.15	2.6	-
Inventory Turnover Ratio	4.96	4.97	(0.2)	-
Interest Coverage Ratio	62.28	139.68	(55.4)	Due to increase in Borrowings
Current Ratio	2.18	3.85	(43.5)	Due to increase in Current Borrowings and other liabilities
Debt Equity Ratio	0.10	-	100	Due to increase in Borrowings
Operating Profit Margin %	12.96%	14.99%	(13.5)	-
Net Profit Margin %	9.83%	10.32%	(4.8)	-
Return on Net Worth %	11.51%	10.56%	9.0	Due to increase in net profit by 21.5% whereas average capital employed increased by 11.5%.

	For and on behalf of the Board of Directors
	P. K. Kheruka
Place : Mumbai	Chairman
Date : May 22, 2023	DIN:00016909