Jindal Poly Films Ltd Management Discussions

COMPANY OVERVIEW

Jindal Poly Films Ltd (JPFL) was incorporated in 1974 and started production of polyester yarn in 1985 at Bulandshahr. The company started manufacturing polyester chips for captive use in 1993. In 1996, JPFL diversified into axially oriented polyethylene terephthalate (BOPET) film and in 2003 into BOPP Films.

The Company did expansion of BOPET capacity from 66,000 MTPA to 91,000 MTPA and BOPP capacity from 13,000 MTPA to 90,000 MTPA during 2004-2006. Further during 2008-2012 BOPET capacity was enhanced to 120,000 MTPA and BOPP to 210,000 MTPA. 2019 onwards further capacity enhancement was done to take BOPP capacity to 2,94,200 TPA and BOPET capacity to 1,70,000 TPA. The Company also expanded its product portfolio into CPP, Thermal films and Capacitor films business. The manufacturing plant at Nasik, Maharashtra is the worlds largest facility at single location for the production of

BOPET and BOPP films.

On 2^nd August 2022 the company has transferred its packaging business to one of its subsidiary named JPFL Films Pvt. Ltd. Additionally, we excel in producing PP-based ‘Spunmelt and ‘Spunbond Nonwoven Fabric, showcasing our adaptability to evolving market needs. Through our subsidiary, SMI Coated Products Private Limited, we offermore than 200 different products of self adhesive labels required by the dynamic label industry.

Backed by an experienced senior management team, we drive innovation with deep industry insights. Leveraging our geographical advantage, we ensure seamless imports and exports for global distribution.

Our company epitomizes innovation, quality, and reliability across packaging films,non-woven fabrics, and labelling solutions.

GLOBAL ECONOMY

In 2022, the global economy faced significant headwinds including the Omicron variant, Russia-Ukraine conflict,unprecedented global monetary tightening, and the slowdown in China. Despite these factors, the economic outcome was more positive than projected. the upcoming However,vulnerabilitydefines fiscal year. The International Monetary Funds (IMF) latest World Economic Outlook report (April 2023) forecasts a moderation in global growth to 2.8% in 2023, down from 3.4% in 2022.

Emerging markets (EMs) are anticipated to outpace developed markets (DMs) in 2023, reversing the trend of the past two years. This uptick will likely be driven by Chinas recovery, facilitated by its departure from a zero-Covid policy, and by robust growth in India and Indonesia, underpinned by domestic demand.

Simultaneously, the concerted tightening of monetary policies by numerous central banks is expected to bear fruit, steering inflation back towards targeted levels. However, the economic scenario isnt without its potential pitfalls. particularly in advanced economies, the potential for U.S. bank failures to ripple out to the broader global economy, and the intensification of the ongoing Ukraine conflict pose significant downside

In 2022, most DM central banks implemented an aggressive rate hike strategy, with the U.S. Federal Reserve increasing the policy rate by a cumulative 425 basis points, reaching between 4.25% and 4.50%. This was the fastest pace of tightening witnessed since the early 1970s. As inflation reaches its peak, major DM central banks are projected to decelerate their rate hike schedules. However, with inflation likely to persist above target levels, policy rates may remain period.

INDIAN ECONOMY

The IMFs World Economic Outlook report (April 2023) predicts a slight slowdown in Indias economic growth from 6.8% in

2022-23 to 6.1% in 2023-24, due to tightening financial conditions and global fundamentals and political stability enable India to maintain its status as the fastest-growing major economy for the third year running. The projected economic growth is attributed to strong domestic demand, healthy consumption growth spurred by recovery in consumer services and increased purchasing power, as well as strengthened investments boosted by private capex and government capital spending. Despite the challenges to exports from slow global growth, Indias increasing share in global manufacturing exports and service exports growth offer some resilience.

Notwithstanding global risks like the Russia-Ukraine conflict and price volatility, India stands ready to enter a phase of rapid, sustained growth, especially with increased private investments in manufacturing and effective utilisation of its service sector advantages.Indiaspromisingpositionas significantglobal manufacturer is evident in rising exports and capacity expansions. This potential is facilitated by government initiatives aimed at reducing logistics costs and improving the ease of doing business. Overall, these elements suggest a bright future for the Indian economy.

INDUSTRY OVERVIEW

Our company continually propels growth and delivers value to its stakeholders within the Packaging Films, Non-Woven Fabrics and Labelling Solutions.

Packaging Films Industry*

With a CAGR of 4.1% from 2023-2033 the packaging film market is expected to be valued at USD 149.6 Billion in

2023. The market is to hit USD 223.5 Billion by 2033. Factors buttressing this anticipated growth comprise a rise in disposable incomes, enhanced living standards, and shifting consumer behaviours. The transformative journey and of similar entities have also been shaped by the rapid emergence of eCommerce, changing consumer tastes, a growing appetite for processed food items, commitments to sustainability, and technological leaps.

In 2022 the global BOPP film industry was valued at around USD 16.5 billion. Global BOPP film extrusion capacity reached 13.6 Mtpa in 2022 with an additional 553 ktpa installed during the year vis-?-vis an annual demand growth of about 340 kt. The global BOPET packaging films market has the potential to expand at a 5.5% CAGR from US$

7.14billion in 2023 to US$ 12.31 billion by 2033. On both supply and demand side, there is dominance of Asian producers and the Asian markets are the largest consumers, predominately China and India.

Reflectingon its varied sectoral reach, the flexible packaging domain in India, presents expansive business prospects. The current times have marked an amplified demand for flexible packaging solutions across several industries, notably in areas such as food & beverages, personal care, hygiene, and pharmaceuticals. With the guidance, novel packaging trends, such as smart, green, and tamper-proof packaging, are making inroads into the FMCG sectors.

Recent investments in capacity have massively outpaced demand and difficult market conditions globally have resulted in inventory buildup by the end of 2022 as demand slumped with a drop in consumer buying sentiment. It is forecasted that inventory built up will take some time to be consumed and it is likely that 2023 consumption and production will remain subdued. Exports from India have been hit by the economic slowdown in core international markets that are impacted by the Russia-Ukraine war and rising inflation connected to the very high energy prices in Europe.

Non-Woven Fabrics Industry**

The Global non-woven fabrics market was valued at US$ 30.76 billion in 2022 and is expected to reach US$ 60.23 billion by 2032, with a compound annual growth rate (CAGR) of 7% during the forecast period 2023 to 2032. This surge represents an advancement at a CAGR of 7.0% over the forecast period. Sales of non-woven fabrics are experiencing a pronounced uptick owing to their unique engineering and high-tech properties. These fabrics, unlike traditional materials that necessitate knitting or weaving, offer superior handling and performance advantages.

The robust demand for non-woven fabrics is buoyed by their wide-ranging applications, from manufacturing interlinings, insulation and protective clothing, and industrial workwear, to footwear and chemical defence suits. Consequently, these fabrics are experiencing broad adoption across diverse industries. These sectors include but are not limited to more, thereby driving the expansion and evolution of the non-woven hygiene,personalcare,automotive,filtration, fabrics market.

Labelling Solutions Industry

The global labels market size is set to reach a valuation of US$ 41.75 billion in 2023 and accelerate at a CAGR of 4.9% from 2023 to 2033. Factors like rising demand for packaged perishable products, expansion of the e-commerce sector and increasing digitization are expected to augment sales of labels.

Indian label industry has emerged strongly from the pandemics shadow and is growing steadily. 2022 saw a large number of new startup companies in sectors such as food, beverage and personal care driving demand growth and innovation in the Indian label industry.

The raw material (RM) price trends, after peaking in Y22Q2 and Y22Q3, experienced a downturn by Y23Q2. This favourable shift in RM prices, in tandem with strategies from entities, augments a brighter industry outlook.

BUSINESS OVERVIEW (Segment wise/Product wise performance)

Our company boasts a diverse portfolio across sectors such as Packaging Films, Non-Woven Fabrics and Labelling Industry. The chart below showcases the comprehensive array of products that Jindal Poly manufactures: Packaging Films: The company is engaged in manufacturing a comprehensive range of products. This includes BOPP, BOPET (Thick and Thin), CPP, Lamination, Metallized Films, Coated Films, Thermal Lamination Films, and Capacitor Films.

This strategic manufacturing facility is situated in Nashik, Maharashtra. It boasts a substantial production capacity for BOPP total capacity 2,94,200 TPA, for BOPET total capacity 1,70,000 TPA, for CPP total capacity 33,600 TPA, exemplifying the operational magnitude and its dedication to fulfilling customer requirements. Packaging film business recorded revenue of

Rs. 3,806 cr. in F. Y. 2023

Non-Woven Fabrics: Global Nonwovens is Indias premier spunmelt nonwoven manufacturer, equipped with three advanced

ReicofilR R5 & R4S multi-beam composite spunmelt lines (SSMMS) from Germany. With a production capacity of 58,000 MT, the company caters to global sectors including hygiene, medical, and industrial, serving numerous multinational entities in the personal care domain. Non-woven business recorded revenue of Rs. 525 cr. in F. Y. 2023.

The Company has established unparalleled standards in process efficiency, product premium raw materials and emphasizing continuous R&D. Noteworthy international certifications include ISO 9001:2005, ISO

14001:2015, ISO 45001:2018, ISO 13485:2016, SEDEX SMETA, and CYBER VADIS. Moreover, Global Nonwovens recently achieved silver medallist status by Eco-Vadis, a globally renowned business sustainability rating platform.

Labelling Solutions: Following a strategic takeover via Jindal Polypack Limited—a wholly-owned subsidiary, the company, through its step-down subsidiary, SMI Coated Products Pvt. Ltd, ventured into the labelling solutions business, signifying a notable diversification. Committing to a sustainable future, SMI Coated Products Private Limited stands at the vanguard of innovating products championing carbon neutrality for brands. Emphasizing its eco-centric approach, the Ambernath MIDC Plant under SMI Coated Products Pvt. Ltd has integrated a solar setup, projected to counterbalance up to 25% of its energy consumption. Labelling Solutions business recorded revenue of Rs. 385 cr. in F. Y. 2023.

Product Development and Quality Enhancement

In the relentless pursuit of innovation, Jindal Poly consistently advances and refines its product portfolio. This involves developing new products and enhancing the quality across key divisions, such as Packaging Films, Non-Woven Fabrics and Labelling Solutions. As it navigates the future, there remains an unwavering commitment to evolve, striving to deliver increasingly efficient and reliable solutions.

FINANCIAL PERFORMANCE

The following are the key financial highlights for the period ended 31 ^st March 2023.

( in Lakhs.)

Particulars	2022-2023		2021-2022
	Standalone	Consolidated	Standalone	Consolidated
Total Income	3,04,438	5,39,750	6,14,884	6,17,731
Profit from Operations (before Exceptional Items and Tax)	86,837	72,195	1,53,072	1,53,058
Exceptional Items +/(-)	1,09,478	(22,697)	10,557	10,557
Share of Net Profit/(Loss) of associate	-	(276)	-	(9)
Profit before tax	1,96,315	49,497	1,63,629	1,63,615
Profit after tax for the year	1,74,118	35,573	1,19,427	1,19,624

The reported financial results reflect the impact of the business transfer during the fiscal year. Its important to note that this transition period represents a strategic decision to focus on the thriving non-woven business, which is expected to drive future growth and profitability.

Change in Key Financial Ratios:

The changes in key financial ratios provide valuable insights into the performance and fiscal year. These ratios reflect the companys ability to manage various aspects of its operations. Here are some notable observations:

Particulars	2022-2023	2021-2022	Change %
	Standalone	Standalone
1 Trade Receivable Turnover Ratio	14.22	37.95	(63)%
2 Current Ratio	11.27	2.05	451%
3 Inventory Turnover Ratio	5.02	7.34	(32)%
4 Net Profit Ratio (%)	26	20	28%
5 Return on Capital Employed(%)	14	30	(51)%
6 Operating Profit Margin (%)	23	19	23%
7 Interest Coverage Ratio	42.57	58.92	(28)%
8 Debt Equity Ratio	0.14	0.32	57%

because of transfer of packaging films business during the year *Thereasonofsignificant effective from 2 ^nd August 2022.

STRENGTHS:

Holding the title as Indias preeminent producer of Poly Films, with state-of-the-art facility and advanced technologies, exemplifying cost-efficiency, meticulously designed to guarantee optimal production efficacy, setting a benchmark in the industry.

OPPORTUNITIES AND THREATS

Opportunities:

Consumer demand for eco-friendly packaging presents opportunities for manufacturers to offer sustainable solutions.

Embracing advanced production processes and printing techniques enables companies to provide cutting-edge products.

T ailoring packaging films to specific industry needs and collaborating closely with clients can drive market expansion.

Leveraging competitive pricing and strong distribution networks, Indian manufacturers can explore international markets growing demand.

E-commerce boom presents an opportunity for the flexible packaging industry to innovate and tap into new revenue streams in this growing market.

Threats:

Events like the Russia-Ukraine war and evolving regulations create market uncertainties and compliance challenges.

Market fluctuations in raw material prices, such as polypropylene and polyethylene terephthalate, impact profitability.

Rapid changes in consumer preferences, economic conditions, and global trade dynamics require adaptability for sustained growth.

Stringent environmental regulations may impose further costs, making it even more challenging for the flexible packaging industry to maintain profitability amid escalating operational expenses.

Rise in consumer preference for eco-friendly alternatives could erode market share, adding to the operational and strategic challenges faced by the traditional flexible packaging industry.

Overcapacity in Packaging Films Industry.

By addressing these threats and capitalizing on opportunities, our company can leverage its market presence, diverse product range, and strategic focus on key growth areas.

COMPANY OUTLOOK

The future is expected to be promising in light of the prospective growth in the flexible packaging, non-woven fabrics and

Labelling Solutions. Strategic acquisitions, such as the recent takeover of JPF Netherlands Investment B.V., along with its three operational subsidiaries are set to capitalize on these industry trends. This move not only enriches the product portfolio but also expands the geographical footprint, reinforcing a strong market position in Europe. The broadened product range, including specialty, nylon,coated, filmsand laminates, is geared to serve diverse industries like food, pharma, metalized and luxury sectors.

Your company through Jindal Polypack Limited a wholly-owned subsidiary has proudly integrated SMI Coated Products

Pvt. Ltd, trusted name in the production and marketing of gummed paper, films, and self-adhesive sheets production. This acquisitionexemplifies bringing with it prospects of improved operational synergies, advantageous raw material procurement, and new business development avenues. With this strategic amalgamation, the company is poised to reinforce its industry stance and unveil an array of exciting opportunities for its stakeholders.

Further, an important recent milestone for the company is the successful commissioning of the capacity expansion project at the Global Non-Woven Division at the Nashik Plant. This expansion from 36,000 MT to 58,000 MT indicates a firm to meet the growing demand in the non-woven fabrics market and the capability to deliver high-quality products in larger volumes.

Emerging market trends, particularly towards sustainable and eco-friendly packaging, have been acknowledged. Product offerings are being adapted to align with the rising consumer demand for environmentally friendly alternatives, thereby ensuring long-term sustainability of business operations. The e-commerce boom is anticipated to heighten the demand for innovative packaging solutions, and readiness to address the needs of this growing market has been demonstrated.

However, recognition of the challenges ahead is clear. Geopolitical uncertainties, potential fluctuations in raw material prices, and stringent environmental regulations point to the need for a robust risk management strategy. The demonstrated adaptability and resilience, which have contributed to a leadership position in the packaging industry, will be key in navigating these challenges.

SUSTAINABILITY INITIATIVES AND CORPORATE SOCIAL RESPONSIBILITY

Emphasizing environmental stewardship, our company implements sustainable practices in its operations, including energy conservation, waste reduction, and water management strategies. Beyond internal operations, the company engages with local communities through social development programs, focusing on education, healthcare, and environmental awareness. Through the integration of sustainability into business practices, the company creates enduring value for stakeholders and contributes to a greener, more socially responsible future. This approach underscores the companys belief in the essential role of sustainable businesses in nurturing a sustainable society. For more comprehensive understanding refer Business Responsibility and Sustainability Report and Annual Report on CSR forming part of this Annual Report, which provide further insights into the Companys initiatives towards Environment, Sustainable sourcing, Social Obligations and Governance.

RISK MANAGEMENT

The company operates with a proactive stance towards risk identification, impact operations, financial performance, or reputation. A robust risk management framework is utilized to anticipate and address various types of risks, such as market volatility, supply chain disruptions, regulatory changes, and competitive pressures. Emerging risks are continually monitored, and mitigation strategies are adopted to minimize potential impacts. By placing a high priority on risk management, the company strives to ensure long-term sustainability and resilience in an ever-evolving market environment.

The Company has identified following categories of risks associated with the business: political, social, and economic risks, market risk, technology selection risk, capital structuring risk, exchange and interest rate risk, credit risk, liquidity risk, foreign currency risk, and commodity price risk. The Management evaluates these risks prior to making decisions in these areas. Following the Companys established Risk Management Process, the Risk Management Committee and Audit Committee thoroughly assess the implementation and compliance of the Companys Enterprise Risk Management System. They also gauge its sufficiency and effectiveness.

Additionally, the Board reviews the Audit Committees recommendations concerning the establishment, compliance, sufficiency, and effectiveness of the Companys Enterprise Risk Management framework.

CORPORATE GOVERNANCE

Our companys Board of Directors comprises experienced professionals who bring diverse expertise and perspectives to the table. We adhere to rigorous governance policies and procedures that ensure accountability, integrity, and fairness in our decision-making processes. We maintain open and transparent communication channels with our shareholders, providing them with timely and accurate information about our performance, strategies, and risks. Additionally, we have established committees to oversee key areas such as audit, risk management, and corporate social responsibility, further strengthening our governance framework. By nurturing a culture of ethical conduct and responsible business practices, we aim to maintain the trust and confidence of our stakeholders.

HUMAN RESOURCES AND TALENT MANAGEMENT

Our company foster a culture of inclusivity, collaboration, and continuous learning, where every employee is encouraged to reach their full potential. Our talent management initiatives focus on attracting and retaining top talent in the industry, nurturing their skills through training and development programs, and providing growth opportunities within the organization. We also emphasize employee engagement and work-life balance, ensuring a healthy and supportive work environment. By investing in our employees professional growth and well-being, we build a motivated and high-performing workforce that drives our success. The total number of employees in the Company stands at 250.

INDUSTRIAL RELATIONS

During the year under review, harmonious industrial relations were maintained in your Company.

INTERNAL CONTROL SYSTEM

Our internal control framework encompasses policies, procedures, and monitoring mechanisms that promote adherence to regulatory requirements and ethical standards. We have established clear lines of authority, segregation of duties, and comprehensive risk assessment processes. Regular internal audits and reviews are conducted to assess the effectiveness of our control systems and identify areas for improvement. By strengthening our internal control system, we enhance transparency, minimize the risk of fraud or errors, and protect the interests of our stakeholders. The Audit Committee regularly reviews significant audit findings, adequacy and reliability of financial reporting and internal control and risk management frameworks.

Overall, our company is well-positioned in the industry, with a focus on strategic decisions, customer-centric approaches, innovation, and sustainable growth. The companys commitment to operational excellence, market expansion, and stakeholder engagement positions it for continued success in the ever-evolving business landscape.

RESEARCH AND DEVELOPMENT

Research and development (R&D) play a crucial role in our companys growth and innovation. We have a dedicated R&D team that continuously explores new technologies, materials, and processes to enhance our product offerings. Our R&D initiatives focus on improving product quality, developing new applications, products to address emerging market trends. Through collaboration with industry experts, academic institutions, and customers, we stay at the forefront of technological advancements. By investing in R&D, we aim to meet evolving customer needs, drive product innovation, and maintain our competitive advantage in the market.

CAUTIONARY STATEMENT

This report contains forward-looking statements that reflect the Companys current expectations, projections, and intentions regarding its objectives, plans, or goals. These statements are subject to certain risks and uncertainties, including domestic and international economic conditions, change in Government regulations, tax regime and other factors that could cause actual results to differ materially. The Company cautions readers not to place undue reliance on these forward-looking statements, as they are based on information available at the time of the report and are subject to change. The Company undertakes no obligation to update or revise any forward-looking statements, and readers are advised to carefully consider the risk factors and uncertainties discussed in the report.