Lead Reclaim and Rubber Products Ltd Management Discussions

Our Company is in the business of manufacturing of reclaimed rubber, crumb rubber powder and rubber granules. We believe that we are one of the few companies in our reclaimed rubber industry that can process scrap of Radial tyre, Nylon tyre, Natural tube & butyl inner tube. Our manufacturing facility employs an extensive and stringent quality control mechanism at each stage of the recycling process to ensure that our finished product conforms to the exact requirement of our customers.

Our Company is in the business of manufacturing of reclaimed rubber, crumb rubber powder and rubber granules. Our Company focus on a) saving valuable natural resources by way of recycling; and b) helping our customers fulfil their circularity aspirations through use of our reclaimed rubber products. We believe that we are one of the few companies in our reclaimed rubber industry that can process scrap of Radial tyre , Nylon tyre , Natural tube & butyl inner tube. Our manufacturing facility is situated at 856/4, Sarali Road Village - Pithai, Taluka- Kathalal, Kheda - 387630, Gujarat, which is spread over a total land area of approximately 7790 Sq. mts. with the existing plant occupying approximately 2253 Sq. mts with the total install capacity of 5520 metric tons. Our manufacturing facility employs an extensive and stringent quality control mechanism at each stage of the recycling process to ensure that our finished product conforms to the exact requirement of our customers. As on the date of this Prospectus, our manufacturing facility is accredited with ISO 9001:2015 certifications for quality management system. We are also the member of Rubber Manufacturers Welfare Association.

Our Product Portfolio offers a diversified product range which includes variety of grades, thickness, widths and standards of various grades of whole tyre reclaim rubber, butyl reclaim rubber and natural reclaimed rubber. Currently, we sell our products to companies in the automotive manufacturing sector, distributors and dealers. We also sell our products to foreign buyers located in Sri Lanka, Argentina, Turkey, China, etc through merchant exporters.

At our manufacturing facility, we have an in-house testing laboratory, for testing our raw materials and finished products to match the quality standards as specified and required by our customers. We strive to meet all the environment, health and safety standards in our manufacturing process. Every batch of Reclaimed rubber undergoes various parameters of quality tests.

INDUSTRY OVERVIEW

The Indian Rubber Industry is broadly divided into Tyre and Non Tyre Sectors. India is the 6th largest producer of natural rubber, 2nd largest consumer of natural rubber, 5th largest consumer of natural rubber and synthetic rubber together in the world.

Domestic Tyre Industry fulfils practically 100% requirement of tyres making it a true champion of ‘Aatma Nirbhar Bharat. Nearly 30% of the total domestic tyre production was exported in FY22. Some of the domestic tyre companies are already amongst the top 30 global tyre companies. Tyres play an integral role to ensure mobility including movement of passengers and essential goods across the urban and rural landscape of the country using all types vehicles ranging from carts, tractors, trucks and buses to the latest generation passenger cars that ply on the modern expressways. Various types of tyres are manufactured in India that includes Moped tyre weighing 1.5 Kg to Off the Road tyres for Earthmovers which weigh 1.5 tonnes, Bias Ply tyres to rugged all steel radial truck tyres to high performance passenger car radial and tubeless tyres etc. India is one of the few countries worldwide which has attained self-sufficiency in manufacturing a wide range of tyres for all applications.

In India, the total production of Rubber (NR: 775000 MT & SR: 485165 MT) is 120165 MT in FY 202122, whereas the total consumption of Rubber is (NR 1238000 MT & SR is 723145 MT) is 1961145 MT in FY 21-22 leading to overall gap of 700980 MT of Rubber. The rate of increase in production is observed to be lower than that of consumption over the FY 2020-21 Initiative is already taken to increase the rubber plantation in North-Eastern region to meet the shortfall of the rubber consumption.

Import of natural rubber was 4.10 lakh tonnes in FY 2020-21 and crossed the five-lakh tonne mark again in FY 2021-22 to touch 5.46 lakh tonnes, which is 33% increase.

The Rubber Goods Industry excluding tyres and tubes consists of 6711 small and tiny units generating about 6.00 lakh direct jobs. The rubber industry manufactures a wide range of products like rubber cots and aprons, contraceptives, footwear, rubber hoses, cables, camelback, battery boxes, latex products, conveyor belts, surgical gloves, balloons, rubber moulded goods etc. The main raw materials used by the rubber goods manufacturing industry are Natural Rubber, various types of Synthetic Rubber, Carbon Black, Rubber Chemicals etc. The estimated export of rubber goods during 2022-23 is 13661 crores (approx) as against 12718 crores in 2021-22. The estimated of import of rubber goods during 2022-23 is 24970 crores (approx).

Reclaim Rubber production stood at 151195 MT while the consumption stood at 150470 MT.

The Rubber industry is committed to implement sustainable development goals towards carbon neutrality. The Ministry of Environment, Forest and Climate Change has introduced a new amendment called the Hazardous and other Wastes (Management and Transboundary Movement) Amendment Rules 2022 (hereinafter referred to as "Amendment Rules" for "Extended Producer Responsibility (EPR) for Waste Tyre" which came into effect from July 21,2022. EPR is referred as the responsibility imposed on producers of tyres to ensure environmentally and sound management of waste tyre so as to protect the health and environment against any adverse effects which may result from such waste tyre.

Rubber Industry majorly comprising MSME units are considered to be very conservative and hence, does not spend much on R&D and QC activities having limited exposures to global best practices and slow in adopting changes.

GOVERNMENT INITIATIVES

The Government of India encourages foreign investment in the automobile sector and has allowed 100% FDI under the automatic route.

Some of the recent initiatives taken by the Government of India are -

• In February 2022, Nitin Gadkari, Minister of Road Transport and Highways, revealed plans to roll out Bharat NCAP, Indias own vehicle safety assessment program.

• In February 2022, 20 carmakers, including Tata Motors Ltd, Suzuki Motor Gujarat, Mahindra and Mahindra, Hyundai and Kia India Pvt. Ltd, were chosen to receive production-linked incentives (PLI) as part of the governments plan to increase local vehicle manufacturing and attract new investment. The 20 automobile companies have proposed a total investment of around Rs. 45,000 crore (US$ 5.95 billion).

• In the Union Budget 2022-23, the government laid out the following initiatives:

• The government introduced a battery-swapping policy, which will allow drained batteries to be swapped with charged ones at designated charging stations, thus making EVs more viable for potential customers.

• Indias National Highways would be expanded by 25,000 km in 2022-23 under the Prime Ministers Gati Shakti Plan.

• In November 2021, the Union Government added >100 advanced technologies, including alternate fuel systems such as compressed natural gas (CNG), Bharat Stage VI compliant flex fuel engines, electronic control units (ECU) for safety, advanced driver assist systems and e-quadricycles, under the PLI scheme for automobiles.

• In September 2021, the Union Minister for Road, Transport and Highways, Nitin Gadkari announced that government is planning to make it mandatory for car manufacturers to produce flex-fuel engines after getting the required permissions from the Supreme Court of India.

• In September 2021, the Indian government issued notification regarding a PLI scheme for automobile and auto components worth Rs. 25,938 crore (US$ 3.49 billion). This scheme is expected to bring investments of over Rs. 42,500 (US$ 5.74 billion) by 2026, and create 7.5 lakh jobs in India.

• In August 2021, Prime Minister Narendra Modi launched the Vehicle Scrappage Policy, which aims to phase out old polluting vehicles in an environmentally-safe manner.

• The Indian government has planned US$ 3.5 billion in incentives over a five-year period until 2026 under a revamped scheme to encourage production and export of clean technology vehicles.

As of June 2021, Rs. 871 crore (US$ 117 million) has been spent under the FAME-II scheme, 87,659 electric vehicles have been supported through incentives and 6,265 electric buses have been sanctioned to various state/city transportation undertakings.

OPPORTUNITIES, THREATS AND CONCERN

Opportunities in areas such as testing, certification and R&D infrastructure for leveraging the potential of the industry. Alternately, research spending for import substitutions is very low and there is an opportunity to increase. Even though there are several schemes floated by the government specifically for the sector, but for a reason mentioned above, the adaptation due to slow to low uptake of changes opportunities provided to the industry further impacts the output and aggravates the challenges. Further, The foundation for success for such integrated players has been laid GOIs introduction of Extended Producer Responsibility (EPR) for Tyres and Plastics, apart from other 9 sectors of the economy. The regulation has prompted brand owners and material manufacturers to invest along with material recovery and recycling companies for improved value addition. India could be a leader in shared mobility by 2030, providing opportunities for electric and autonomous vehicles. Focus is shifting to electric vehicles to reduce emissions. The electric vehicles industry is likely to create five crore jobs by 2030. Government aims to build India into a R&D hub.

Non-availability of raw materials like synthetic rubber in India is one of the major challenges which needs to be addressed by bringing appropriate technology collaboration / Joint ventures to facilitate Make in India.

OUTLOOK

With focus on sustainability at its peak, demand for recycled materials remains robust across the company. We continue to be confident of improve of market share of companies business by increased substitution and new product introductions. The Tyre industry experts in India are expecting an uptick in the market for next 3 years on back of available new capacities, anticipated economic and infrastructure growth and internationally rubber consumption is expected to notably recover driven by expected growth in auto sector and rebound in China.

INTERNAL CONTROL FRAMEWORK

Your Company conducts its business with integrity and high standards of ethical behaviour, and in compliance with the laws and regulations that govern its business. Your Company has a established framework of internal controls in operation, supported by standard operating procedures, policies and 11th Annual Report 2022-23

guidelines, including self-assessment exercises. The Company time to time seek evaluating the adequacy of all internal controls and ensuring that operating and business units adhere to internal processes and procedures as well as to regulatory and legal requirements.

PEOPLE AND PRACTICES:

The Board of Directors continues to challenge the management and push for higher targets. The Boards well-rounded experience comprises individuals with experience in tyre industry, Financial Market rubber industry, etc. The Board continues to provide long term direction to the Company and engages actively towards initiatives inputs on the Companys long-term vision.

The Company recognizes the importance and contribution of its human resources for its growth and development and values their talent, integrity and dedication. With the focus to develop leadership talent from within, the Company conduct various programmes. Employee motivation is key to organization success. On these lines, the Company conducts its various social programs and motivate them. As on March 31,2023, the Company has 19 employees.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

Your Company has achieved a total income of ? 895 Lakh during the year under review as against ? 1037 Lakh in the previous financial year. The net profit after tax of the Company for the year under review is ? 83 Lakh as compared to profit of ? 50 Lakh for the previous year. The net profit before tax for the year under review is ? 69 Lakh as compared to profit of ? 68 Lakh for the previous year. FINANCIAL RATIOS

Particulars	As at 31-32023	As at 31-3-2022	% Variance
Current Ratio	2.32	0.95	143.23
Debt-Equity Ratio	0.25	0.96	(74.47)
Debt Service Coverage Ratio	5.14	0.56	817.96
Return on equity ratio	12.15	32.11	(62.17)
Inventory Turnover Ratio	3.40	7.06	(51.87)
Trade Receivables Turnover Ratio	14.82	15.55	(4.72)
Trade payables Turnover Ratio	6.72	7.45	(9.78)
Net Capital Turnover Ratio	1.54	(54.31)	(102.84)
Net Profit Ratio	9.54	4.83	95.70
Return on Capital Employed	6.86	15.92	(56.90)

CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis Report containing the objectives, expectations or predictions of the company may be forward-looking within the meaning of securities laws and regulations. Actual results may differ materially from those expressed in the statement. The operations of the Company could be influenced by various factors such as domestic and global demand and supply conditions affecting sales volumes and selling prices of finished goods, input availability and cost, tax laws, economic developments within the country and other factors such as litigation and industrial relations.