J D Orgochem Ltd Management Discussions

Industry Structure and Developments

Dyestuff and dye intermediate industry constitute one of the major components of chemical industry having vital role in the growing Indian economy. India produces nearly 16% of all dyestuff and dye intermediates in the world. The Indian Dyestuff Industry has transformed from being import dependent to an export driven industry. The Indian colourants sector is major player in global market with estimated share of 15%. Inorganic & organic chemicals, dye & pigments, plastics, synthetic rubber, filaments, and other products are exported in large quantities from India. The Company operates into single segment with products comprising from Dyes and Dyes Intermediates which are colouring materials having its customer base in several industries such as Textile, Plastic, Paper, Ink etc.

Opportunities and Performance

Dyes predominately find application in textiles with almost 80% of its production being used by textile sector. The other end applications involves paper, adhesives, art supplies, food and beverages, ceramics, construction, cosmetics, glass, paints, plastics and soap. With the consistent shift in the manufacturing base for Dyes and Dye-intermediates from the western countries to the Asian countries, there will be more opportunities for Dyes manufacturers. The textile industry is expected to grow due to several factors such as growing population, increasing disposable income, and changing consumer trends. Low-cost of manufacturing in Asia-Pacific region and high demand for textile dyes in the region are driving the global textile dyes market.

During financial Year 2022-23 the Company achieved sales revenue of Rs.98.40 Lakhs as compared to Rs.146.20 Lakhs in financial Year 2021-22. During the year the sales of Dyes was 50 MT as compared to 80 MT in previous year. The Company has not been able to achieve significant growth in revenues and operating profits due to its inability to restart manufacturing activity.

Outlook and Strategy

The long-term growth prospects of the Indian economy being positive, the textile industry is also expected to grow in view of growing population, increasing disposable income, and changing consumer trends. The growing demand for textile dyes for various fiber types, such as cotton, polyester, and viscose, is expected to fuel the growth of the textile dyes market. The industry is likely to see new dyeing technologies coming into the market with the help of good technical expertise and R&D achievements.

The Board of Directors of the Company has approved the Composite Scheme of Arrangement amongst the three companies being Jaysynth Dyestuff (India) Limited ("Transferor Company 1"), Jaysynth Impex Private Limited ("Transferor Company 2") and the Company ("Transferee Company") and their respective shareholders and creditors, under Section 230 and 232 and other applicable provisions of the Act. The Scheme provides for absorption of Transferor Companies with and into Transferee Company (with effect from Appointed date 01^st April, 2023) and in consideration thereof, the Transferee Company shall issue equity shares and preference shares to the shareholders of Transferor Company 1 and Transferor Company 2 respectively. Upon sanction and implementation of the Scheme, the merged entity will be able to tap into new business opportunities thereby unlocking growth opportunities and achieve economies of scale for better operational efficiency. Upon sanction of the said scheme, the Company will be able to undertake manufacturing operations at its Patalganga plant.

Risks, Concerns and Threats

Stringent environmental regulations may hamper the growth of the dyes & pigment industry. Most of the advanced countries are imposing new and more stringent ecological norms which can restricts the exporters capability to grow, as complying with ecological norms is too expensive. Also the regulations are having an adverse effect on the availability of raw material and intermediate input products for the industry. Exchange-rate fluctuations, increase in prices of Crude Oil and down-stream petrochemicals, etc are all areas of concern which company may face from time to time.

Internal Control Systems and their adequacy

The Company has a proper and adequate internal control systems ensure there is efficient use and protection of resources and compliance with policies, procedures and statutory requirements. There are well-documented guidelines, procedures and processes, integral to the overall governance, laws and regulations. An independent firm of chartered accountants carries out the internal audit across the organization. The internal auditors review the adequacy, integrity and reliability of control systems and suggest improvements. The internal auditor conducts extensive reviews and process improvements identified during the reviews, are communicated to the management on an on-going basis. Significant observations made by the internal auditors and the follow up actions thereon are reported periodically to the Audit Committee of the Board of Directors. The Audit Committee monitors the implementation of the audit recommendations.

Discussion on Financial Performance with respect to Operational Performance

Material Developments in Human Resources/ Industrial Relations Front

The Company believes that growth of the Company largely depends on the contribution and efforts of the employees and understands the importance of the workforce. It always lays an emphasis on creating an environment which is favorable for the employees. During the year under review, the Company entered into Memorandum of Settlement with workmen of the said Turbhe unit, through Dyes and Chemical Workers Union, for full and final settlement of dues and all pending disputes and litigation between them before any courts and /or legal forums. Further details on same are provided in Boards Report. Company has only four employees on the pay roll as on 31^st March, 2023.

Cautionary Statement:

Certain statements made in this Report relating to the Companys outlook, estimates, predictions etc. may constitute "forward looking statements" within the meaning of applicable laws and regulations. Actual results may differ from such estimates, whether express or implied. Several factors that could make a difference to Companys operations include climatic conditions and economic conditions affecting demand and supply, changes in Government regulation tax regimes, natural calamities, etc. over which the Company does not have any direct control.