IVP Ltd Management Discussions

Founded in 1929, IVP Limited began its journey in the vegetable oil sector, initially under the aegis of the Tata Group, before transitioning to the stewardship of the Allana Group. This rich heritage set the stage for a legacy of diversification and innovation.

A pivotal moment in our history was the 1965 marking the first foray of an Indian Company into the production of Foundry Chemicals. This strategic collaboration enabled us to pioneer solutions in both ferrous and non-ferrous foundries, enhancing our product range with high-quality resins, coatings, and ancillary products.

The year 2018 marked another significant expansion as we ventured into the production of Polyurethane Chemicals (pu), specifically tailored for the burgeoning footwear and flexible film packaging industries. This diversification further demonstrates

our adaptability and forward-thinking approach in responding to dynamic market demands.

Our state-of-the-art manufacturing facilities in Tarapur and Bengaluru, with a combined annual production capacity of approximately 50,000 metric tons, are testament to our scale and precision in operations.

At IVP Limited, we remain steadfast in our commitment to innovation. Our focus on enhancing product quality and optimizing manufacturing processes is aligned with our strategic vision of not only meeting but also anticipating the needs of our customers. The ongoing exploration for opportunities in import substitution of critical industrial chemicals further reflects our dedication to self-reliance and sustainability.

Global Economy

As per the IMF Economic Outlook report, the global economy in FY 2023-2024 demonstrated resilience, growing at 3.2% despite geopolitical tensions. Advanced economies saw a modest growth increase to 1.7%, while emerging markets experienced a slight deceleration to 4.2%. Inflation, which peaked at 6.8% globally, is on a downward trajectory, projected to fall to 5.9% in 2024.

The conflict in the Middle East has heightened tensions in the region, leading to a surge in oil prices. This increase has implications for the trade balances of countries like India.

Furthermore, attacks on cargo ships in the Red Sea have threatened vital shipping lanes, leading to increased shipping costs and insurance premiums, further straining global supply chains and potentially affecting consumer prices.

The financial outlook for the fiscal year 2024-2025 is marked by a cautiously optimistic stance, with expectations of stable growth. Globally, growth is projected at 3.1% for 2024 and 3.2% for 2025, slightly below the historical average due to factors like high central bank policy rates combating inflation, fiscal support withdrawal, and low productivity growth.

Inflation rates are expected to decline, with global headline inflation predicted to fall to 5.8% in 2024 and 4.4% in 2025. The World Economic Outlook Update suggests that with disinflation and steady growth, the likelihood of a hard landing has receded, and risks to global growth are broadly balanced.

Indian Economy

The Indian economy has shown remarkable resilience in the financial year 2023-2024, with a projected growth rate of 7.3%, maintaining its status as the fastest-growing major economy. This growth is underpinned by robust private consumption and investment, supported by government policies aimed at improving infrastructure and the business ecosystem.

However, in specific sectors in which the Company operates, namely Foundry, Footwear chemicals, there was demand slowdown and increased competition from cheaper imports mainly from China.

In case of Foundry chemicals, the severe slowdown in Tractors and Commercial Vehicles sales offset the demand growth of Foundry Binders and Coatings coming from other industry business.

In case of Footwear, volumes of shoes and sandals did increase substantially in line with increased disposable income, but the focus on weight reduction per pair by shoe makers offset the growth in demand of PU chemicals.

So stagnant industrial chemical markets and intense competition especially with lower priced imports made the previous year challenging for the Company.

Looking ahead, the Indian economy is expected to grow by 7-8% in the financial year 2024-2025. The growth momentum is likely to be driven by continued private sector investment and government spending.

Demand of Industrial chemicals is expected to grow in line with economy.

In conclusion, Indias economic outlook remains positive, with strong growth projections for the coming year.

Industry Structure and Developments

Foundry Chemicals

The Indian foundry industry, a pivotal segment of the nations manufacturing sector, is projected to reach a market size of USD 19.46 billion in 2024, with an anticipated growth to USD 31.77 billion by 2029, marking a CAGR of 10.30%. This growth trajectory is underpinned by technological advancements, such as the shift from traditional cupolas to induction melting, which promises enhanced production efficiency, lower power consumption, and higher profit margins.

Positively, the industrys expansion is fueled by the burgeoning automotive and manufacturing sectors, necessitating precision cast components. But the adoption of electric vehicles can hamper growth in the automotive castings sector.

The industry does grapple with significant challenges. A dearth of skilled manpower, competitive power supply rates, and environmental concerns pose hurdles. Additionally, raw material availability and a short-term demand slowdown could impede medium to long-term investments.

In summary, while the Indian foundry market is poised for robust growth, addressing its workforce and environmental challenges will be crucial for sustaining its upward momentum in FY 2024-2025.

Footwear Chemicals

Indias footwear industry is poised for significant growth in FY 2024-2025, with a projected market size of USD 26.06 billion in 2024 and an expected annual growth rate of 4.85%. The sector is buoyed by a growing middle class, increased e-commerce sales, and a shift towards premium and branded footwear. Additionally, the market is likely to benefit from rising disposable incomes, urbanization, and a growing female workforce.

However, the industry faces challenges such as the presence of unorganized players, counterfeit products, and fluctuating raw material prices. Other concerns include timely and efficient delivery, higher customer return rates, and increased costs of reverse logistics.

Overall, while the Indian footwear market shows promising opportunities, especially in non-luxury segments, addressing operational inefficiencies and market fragmentation will be crucial for capitalizing on its potential in the upcoming fiscal year.

Adhesives for Flexible Film Packaging

The flexible film packaging industry in India is expected to witness substantial growth in FY 20242025, driven by the increasing demand from the food and beverage, pharmaceutical, and personal care industries. The market size is forecasted to increase significantly, as companies shift toward flexible packaging due to high logistics costs and the growing retail industry. The capacity for flexible film manufacturing has seen a significant increase.

On the positive side, the industry benefits from cost-effective production and sustainable solutions, catering to the rising consumer preference for convenient packaging options. The growth of e-commerce and the FMCG sector also contribute to the demand for flexible packaging.

However, the industry faces challenges such as fluctuating raw material prices, dynamic regulatory standards, and environmental concerns. The oversupply resulting from significant capacity expansions could lead to reduced profitability. Moreover, there are issues with the effective recycling of mixed plastic waste and the need for modern machinery.

The flexible film packaging industry in India must navigate through the challenges of sustainability and market dynamics to maintain its growth momentum in the upcoming fiscal year.

Financial Performance

During the financial year 2023-24, the Company continued to focus on capacity utilization and sales growth.

Gross Revenues from operations decreased to 554,610 Lakhs in the current year from 566,095 Lakhs in the previous year.

EBIDTA decreased to 53,086 Lakhs as compared to 54,249 Lakhs in the previous year.

Profit before tax (PBT) before exceptional items was also lower at 51,663 Lakhs as compared to 52,505 Lakhs in the previous year. In previous year, Company earned profit of 51,290 Lakhs on assignment of leasehold rights in respect of Investment Property and sale of Investment Property, with this Profit before tax (PBT) for the previous year was 53,795 Lakhs.

Profit after tax (PAT) decreased to 51,228 Lakhs as against 52,802 Lakhs in the previous year.

Strategies for the Future

The Company is consistently launching new grades as per the requirements of customers across all the sectors it caters to. Currently, our primary focus is on enhancing utilization rates within our Foundry, Footwear, and Adhesives Chemicals business to optimize production efficiency and meet market demand effectively. Alongside these efforts, we are also exploring adjacent growth areas. The flexible packaging business, with its promising prospects and potential for higher margins, aligns well with our strategic goals.

Operations

The manufacturing facilities situated in Tarapur and Bengaluru are dedicated to delivering top-notch products and services to their clientele. Upholding this dedication, both sites have continuously embraced advancements in technology and automation.

The Company has integrated operational excellence tools to standardize processes and operations, ensuring their efficiency and effectiveness. These enhancements have empowered the Company to cater to the evolving demands of its customers while remaining competitive in the market.

The incorporation of new technology and automation has yielded enhanced production efficiencies, shortened turnaround times, and elevated quality standards. Consequently, the Company has streamlined its operations, bolstered customer satisfaction, and elevated its overall business performance.

Internal Financial Control Systems

The Company has an independent Internal Audit function with a well-established risk management framework. The scope and authority of the Internal Audit functions are derived from the Internal Audit Plan approved by the Audit Committee. The Company has engaged a reputable external firm to support the Internal Audit function for carrying out the Internal Audit reviews. Reviews are conducted on an ongoing basis based on a comprehensive risk-based audit plan, which is approved by the Audit Committee at the beginning of each year. The Internal Audit team reviews and reports to the management and the Audit Committee about compliance with internal controls, and the efficiency and effectiveness of operations as well as the key process risks. The Audit Committee meets every quarter to review and discuss the various Internal Audit reports, and follow up on action plans of past significant audit issues and compliance with the audit plan.

The Company acknowledges the significance of maintaining robust internal controls to uphold the precision and dependability of its financial reporting, safeguard its assets, and adhere to laws and regulations. Further in pursuit of these goals, the Company has established internal control policies, procedures encompassing operational, financial, and entity-level transactions. These internal control policies and procedures undergo periodic review by Internal auditor as part of their scope to review Internal Financial Controls and are revised to ensure their ongoing efficacy and pertinence.

Key Financial Ratios as on March 31, 2024

In accordance with SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018 the Company is required to give details of significant changes (change of 25% or more as compared to the immediately previous financial year) in key sector-specific financial ratios.

The Company has identified the following ratios as key financial ratios:

Particulars	2023-24	2022-23
Debtors Turnover	127	115
(Number of Days)
Inventory Turnover	69	57
(Number of Days)
Current Ratio (x)	1.29	1.18
Interest Coverage Ratio (x)	2.91	3.05
Debt Equity Ratio (x)*	0.69	1.01
Operating Profit Margin (%)	4.64	5.64
Net Profit Margin (%)**	2.25	4.24

The reason for variation in key ratios (change of 25% or more as compared to the immediately previous financial year) are as under.

*In the current financial year, Company has generated positive cash flows from operating activities, which led to reduction in borrowings. **In the current financial year, Companys revenues has decreased substantially due to general slowdown in the demand of its products, which in turn affected the profitability of the Company as compared to the previous financial year.

Opportunities, Threats, Risks and Concerns

The Company is proactive in identifying potential risks and undertakes requisite measures to mitigate them. Risk management actions undergo periodic review by both management and auditors, with the status reported to the Audit Committee. Suggestions offered by the Audit Committee are implemented and regularly reviewed. Management has identified various opportunities, risks, and threats that could affect the Companys operations.

Opportunities

• Rise in domestic consumption offers an opportunity for the Company to grow. A further push to increase market share is a significant opportunity.

• Exploration of market potential in neighbouring countries.

• Diversification of supply-chains by global companies away from traditional manufacturing markets.

Risks

• Supply chain disruptions due to geo-political tensions as well as attacks on cargo ships in the Red Sea could lead to production delays as well as increased costs.

• The chemical sector in India is subject to stringent regulations and the environmental protection and safety standards are continually evolving. These changes could lead to operational disruptions.

• As a significant portion of the chemical industrys transactions are international, fluctuations in currency exchange rates can impact profitability. A weakening rupee can make imports more expensive and exports less competitive.

• The Management has identified machinery breakdowns as a potential risk that could disrupt production activities.

Threats

• The Indian chemical market is attractive due to its growth potential, which could lead to an influx of new manufacturers. This increased competition can pressure existing companies, especially in terms of price competition and market share.

• Rapid technological advancements can disrupt the market and is a threat to the Companys operations.

• The chemical manufacturing business requires substantial working capital to manage inventory, raw materials, and day-to-day operations. Fluctuations in raw material prices or delays in payments can strain financial resources, affecting the Companys ability to operate efficiently.

Management is implementing necessary measures to mitigate these risks and threats, while exploring avenues to capitalize on opportunities to ensure the seamless operation of the business.

Research and Development

The Company views R&D as a pivotal component of its strategy, persistently evaluating outcomes to attain sustainable growth aligned with market dynamics. The research team is committed to delivering efficient solutions to customers through ongoing product development and process enhancement, incorporating cost-saving initiatives like import substitutions. Moreover, the team prioritizes the creation of new grades to maintain a competitive edge. The team continues to formulate numerous new products to meet evolving customer needs, thereby broadening the Companys product range.

Human Resources

The Company initiated various employee engagement initiatives, with a focus on Health and Wellness training for support. Monthly wellness seminars were conducted to uplift employee morale and foster a mindset centered on safety, health, and well-being. The Human Resources Department played a pivotal role in steering the organizations people development strategy, instituting frameworks for talent recognition and annual performance- based rewards and recognition. Industrial relations remained harmonious and congenial throughout the year. The total number of permanent employees as on March 31, 2024 was 208.

Health, Safety and Environment

The Company is dedicated to ongoing enhancement of its Quality, Environment, Occupational Health, and Safety Management practices. Both the Corporate Office and factory sites have adopted an Integrated Management System (IMS) comprising ISO 9001:2015, ISO 14001:2015, and ISO 45001:2018 certifications, all of which were successfully recertified this year.

In line with its commitment to sustainable development, the Company is proactively reducing effluent loads, decreasing energy and water consumption, minimizing plant emissions, and promoting green practices at its factory sites. Furthermore, manual controls have been replaced with Process Automation controls to enhance safety and process outcomes.

Maintaining its zero accident policy, the Company provided refresher safety training to all employees across all sites to raise awareness and mitigate unsafe incidents.

The Company continues its tradition of active participation in Safety Week, engaging in various safety-themed competitions and initiatives to highlight safety issues. Both management and workers enthusiastically participated in this event.

Cautionary Statement

Statements in the Management Discussion and Analysis Report describing your Companys objectives, projections, estimates and expectations may be interpreted as "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to Companys operations include economic conditions affecting demand/ supply, price conditions in the domestic and overseas markets in which the Company operates, changes in Government regulations, tax laws and other statutes.