Garware Synthetics Ltd Management Discussions

Pursuant to schedule V of the SEBI (LODR) Regulation, 2015, Management Discussion and Analysis Report form a part of the Annual Report of the Company. It indicates the Companys movement in the external environment Vis-a -Vis its own strengths and resources.

World Economy

Thankfully, 2022-23 (FY2023) saw the effects of Covid abate significantly, with citizens as well as businesses finally reverting to normalcy. However, the flip side was the impact of inflationary trends, supply chain disruptions emanating from China, and the Russia-Ukraine conflict impacting commodity prices. Indias retail, or consumer price, inflation remained high and for much of the year was above 6%. To combat this, the RBI regularly raised its policy repo rate, starting May 2022, with cumulative increase being 250 basis points. In addition, thanks to higher global commodity prices and depreciation of the Indian rupee, the current account deficit increased.

INDIAN ECONOMY

Despite a challenging external environment, Indias economy has remained buoyant given strong macroeconomic fundamentals. The third monetary policy of 2022-23 announced by the Reserve Bank of India in the months of April and May 2022 indicates a firm recovery in domestic economic activity, substantiated by movements in railway freight and port traffic, domestic air traffic, steel consumption, cement product, bank credits and GST collections. As urban demand recovers, rural demand is also witnessing gradual improvement. That said, the adverse impact of geopolitical situations, elevated commodity prices, and slowdown in the world economy continue to weigh on the countrys economic outlook. RBIs move to hike the overall repo rate might slightly affect the industry for a very short term, but this move will tame inflation ultimately benefiting the sector. The effect of the hike is expected to be offset by the improving pent-up demand and positive buyer sentiment.

INDUSTRY STRUCTURE AND DEVELOPMENT

Garware Synthetics Limited manufactures wide range of bristles made from Nylon 6, 66, 610, PBT, Polypropylene, which finds extensive application in various Brush Industries. Recently Company has developed nylon sutures, which was currently imported into our country. These sutures are used mainly for medical purpose. The management is trying its best to improve the working of the Company.

OPPORTUNITIES AND THREATS

Your company has got good demand for its products due to high quality standards. The company can produce almost 570 MT per year if work at its full capacity. However, the Company is not producing the sufficient quantity of products due to scarcity of the Working Capital. At the same time, many potential markets are untapped due to shortage of raw material. In spite of all odds, the Company is still enjoying the reputation on grounds of quality.

Our raw materials are petro- based products. In the current year oil prices were also high. This has resulted in increasing the raw material prices considerably. As the market could not absorb all the raw material prices, resulted into loss of sale and reduces company profit margin.

Your management is of the opinion that the following determining factors of Opportunities and Threats would play a vital role in case of your company.

FACTOR FOR OPPORTUNITY

1. Additional production capacity to meet the market demand and achieve economies of scale.

2. Use of latest technology to facilitate further reduction in wastages and improvement in quality.

3. The company has brand equity and a reputation in the industry for producing quality products, its continuous service and customer care.

4. The Company is a pioneer in plastic industry.

FACTOR FOR THREATS

1. Your company faces competition from the unorganized sector in the industry.

2. Your company faces adversity due to volatile raw material Prices.

3. Your company suffers from huge amount of power shortage. Due to the power- cutting in company factory established, the Company suffered amount of production loss during the current year and the same trend will continue in the next year also as the area of production is not having adequate power generating capacity.

HUMAN RESOURCES DEVELOPMENT:

The total numbers of employees as on 31st March, 2023 were 65. The industrial relations in all units of the Company continue to be cordial. Your Company believes that its employees are its core strength and development of people is a key priority for the organization to drive business objectives and goals. Robust HR policies are in place which enables building a stronger performance culture.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

The Company has a compact organization Structure which helps it run business operation smoothly. The Company has adequate internal control system, commensurate with the size and nature of its operations. Audit Committee, the details of which has been provided in the Corporate Governance Report has been entrusted with detailed terms of reference to review and look into proper recording of transactions and preparation of financial statement. One of the important functions of the Audit Committee is to review the adequacy of internal control systems and compliance thereof.

CAUTIONARY STATEMENT:

Statements in this report on Management Discussion and Analysis, describing the Companys objectives, projections, estimates, expectations or predictions may be forward looking, considering the applicable laws and regulations. These statements are based on certain assumptions and expectation of future events. Actual results could, however, differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include finished goods prices, raw materials costs and availability, global and domestic demand-supply conditions, fluctuations in exchange rates, changes in Government regulations and tax structure, economic developments within India and the countries with which the Company has business contacts. The Company assumes no responsibility in respect of the forward looking statements herein, which may undergo changes in future on the basis of subsequent developments, information or events