Mitsu Chem Plast Ltd Management Discussions

GLOBAL ECONOMY

The global economy has been remarkably resilient, with its growth rate estimated at global 3.2%for2024. Significant inflation, geopolitical tensions, and climatic adversities. Notably, the recovery can be largely attributed to the robust expansion of emerging economies and developing markets.

The US economy, in particular, demonstrated noteworthy resilience in 2023, despite experiencing tightening interest rates since early 2022. This growth was primarily driven by increased consumer spending, accompanied by positive contributions from Government expenditure and private business investment.

Furthermore, emerging and developing economies are expected to remain resilient in 2024. Higher interest rates in advanced economies are likely to give rise to a two-tier growth path. While there would be pockets of vulnerability, these economies are projected to continue growing, and contribute positively to the global economy. The Asia-Pacific region is forecasted to showcase the fastest-growth in the global economy in 2024, acting to counterbalance the recessions in the US and the EU. This reflects improving growth prospects in mainland China and continued economic expansion in other major Asian countries like India and Southeast Asia.

However, recent indicators point towards slight moderation in growth for 2024, with projections of a slowdown to 2.7%. High-frequency activity indicators suggest a continuation of moderate growth observed recently. There are also clear signs of strong near-term momentum in India, relative weakness in Europe, and mild near-term growth in most other major economies.

OUTLOOK

In 2024, global GDP growth is anticipated to decelerate to some extent, although the probability of a global recession remains low. The US economy is forecasted to grow at a moderate pace, with a fall in inflation and sustained low unemployment rates. However, there are challenges owing to high public debt levels and the potential for further adverse supply shocks. Central banks are expected to maintain restrictive monetary policy to fight inflation, with the US Federal Reserve forecast rates near the midpoint of 2024. Additionally, a continued decline in global inflation is projected to prompt several central banks worldwide to initiate reductions in interest rates later in the year. This decrease in interest rates is likely to lay the groundwork for stronger global growth in 2025.

(Source: https://www.imf.org/en/Publications/WEO/Issues/2024/01/30/world-economic-outlook-update-january-2024 https://www.imf.org/en/Blogs/Articles/2024/01/14/ai-will-transform-the-global-economy-lets-make-sure-it-benefits-humanity)

INDIAN ECONOMY

The fiscal year 2023-24 has been a period of exceptional economic resilience for India.

The country achieved a notable growth rate of 8.4% in the third quarter, marking a significant high over the preceding six quarters. This striking growth was underpinned by a combination of factors, including healthier corporate and bank balance sheets, a resurgence in rural consumption, and a slight uptick in private consumption. Additionally, the sustained growth in gross fixed capital formation, continuing at a double-digit rate, contributed significantly to this positive economic momentum.

Despite the challenges prevalent in the global market, domestic demand conditions surges observed in e-way bills remainedrobust.Thistrend was evident in the significant and toll collections in February 2024. Furthermore, the Government invested substantially in public infrastructure and the financial sector gained considerable strength. These improvements were pivotal in stabilising the economy amid external uncertainties.

(Source: https://pib.gov.in/PressReleasePage.aspx?PRID=2010223#:~:text=Real%20 GDP%20or%20GDP%20at,7.0%20percent%20in%202022%2D23. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2005313)

OUTLOOK

Looking ahead, Indias economic outlook remains promising, though some challenges are likely to persist. Inflation is projected to average 5.10% during 2024-25, posing a continued hindrance to economic growth. However, India is expected to sustain its robust growth trajectory, with a projected GDP growth rate of 7.6 during the fiscal

While the World Bank forecasts a moderation in growth to 6.3% during FY 2023-24, to startnormalisingpolicy activity in the service sector is anticipated to remain strong with a growth rate of 7.4%. Moreover, investment growth is also anticipated to remain resilient, projected at 8.9%.

INDUSTRY OVERVIEW

Plastic & Packaging Industry Global Overview

In 2024, the Global Plastic Packaging Market is estimated to be valued at 103.48 million tonnes. The forecasts point towards a growth to 121.93 million tonnes by 2029, at a compound annual growth rate (CAGR) of 3.31% during the forecast period (2024-2029). This growth is said to be the result of the expansion in key application industries such as food & beverage, industrial, healthcare, and personal care. Another probable reason behind this upsurge is the increasing intensity of manufacturing and e-commerce activities worldwide.

The Asia-Pacific currently dominates the global plastic packaging market. This boost in its performance has been due to its robust manufacturing capabilities, rising consumer demand, and expanding industries, fostering sustained market growth. The region accounted for approximately 40% of the global plastic packaging market in 2021.

Furthermore, the plastic packaging segment has promising prospects in the coming years. This can be credited to the introduction of innovative solutions such as active packaging, modified environment packaging, edible packaging, and bioplastic packaging. However, the industry is likely to face challenges due to increasing awareness of sustainability and strict regulations aimed at reducing plastic pollution.

To overcome challenges related to sustainability, companies are coming up with innovative plastic packaging solutions. These include biodegradable polymers for flexible packaging, safe and sustainable packaging options, and environmentally friendly solutions that consume less energy and resources during production. Such innovative efforts aim to relieve cost pressure, while sustaining the integrity of product packaging solutions, reducing waste, and addressing environmental concerns.

(Source: https://www.mordorintelligence.com/industry-reports/plastic-packaging-market)

OUTLOOK

The global market for plastic packaging is experiencing an upward trajectory as the industry is adapting to several changes. These include alterations in the market dynamics, consumer behaviour, and demand patterns. Companies are adapting to the changes by analysing the latest trends, market demands, and statistics. The market growth is driven by the expansion in key application industries, an increase in manufacturing and e-commerce activities, and a robust demand in the Asia-Pacific region. Moreover, companies have started investing in research & development, new market initiatives, and widening of their global presence. These efforts are aimed at capitalising the growing demand for plastic packaging, and driving innovation and sustainability in the market.

(Source: https://www.marketreportsworld.com/enquiry/request-sample/24337709?trk=article-ssr-frontend-pulse_little-text-block)

INDIAN OVERVIEW

In 2024, the countrys plastic packaging market is estimated to be worth US$ 21.77 billion. There are estimates of the market size reaching US$ 25.35 billion by 2029, recording a CAGR of 3.09% during the forecast period (2024-2029). The increasing demand for convenient and portable packaging remains a key growth driver for rigid plastics in Indias food packaging industry. Other factors influencing the demand for rigid plastics in the cosmetics and toiletries industry include their convenience, portability, and tensile strength.

[Source: Plastic Packaging Market Size & Share Analysis - Growth Trends & Forecasts (2024 - 2029)]

The Indian rigid plastic packaging market is poised to clock in a CAGR of 9.36% by 2028, driven by increasing demand from the food processing, pharmaceutical, and from the growing e-commerce personalcareindustries.The market is also benefitting sector, which has led to a noteworthy rise in packaging consumption in India over the past decade. This growth is being fuelled by the increasing usage of the internet and smartphones, as well as the nations ongoing digital transformation.

(Source: https://www.mordorintelligence.com/industry-reports/india-plastic-packaging-market https://www.mordorintelligence.com/industry-reports/india-rigid-plastic-packaging-market)

OUTLOOK

Indias plastic packaging industry is positioned for robust growth, primarily propelled by the food & beverage and consumer goods segments. The escalating concern regarding health and well-being, coupled with heightened awareness regarding waterborne diseases, is fuelling the worldwide demand for packaged drinking water. The increased demand has been observed particularly for the single-serve consumer packaging formats.

As a result, plastic packaging manufacturers are also striving to generate innovative packaging solutions to meet this demand efficiently. Sustainability still remains a significant to pose environmental risks. Consequently, there is a growing inclination towards sustainable and eco-friendly packaging solutions, bolstering the growth of the rigid plastic packaging market.

INDIAN RIGID PLASTIC PACKAGING MARKETS

The market for rigid plastic packaging was valued at US$ 132.54 billion in 2021, and is expected to grow from US$ 139.83 billion in 2022 to US$ 203.42 billion by 2030. This boost in growth is anticipated to clock in a CAGR of 5.5% during the forecast period (2023-2030). The worldwide market is segmented based on the application of rigid plastic packaging in food & beverages, healthcare, cosmetics & toiletries, industrial, and other sectors. Among these segments, food & beverage is projected to hold the largest share in the forecast period.

The rise in global population is likely to result in increased food demand, which entails proper storage and preservation in efficient containers. This chain of events is poised to drive market growth significantly. For instance, McDonalds has been reportedly using153,000 metric tonnes of plastic packaging for its beverage cups, lids, and cutlery, with only 2% recycled content.

India and China are the leading countries in the rigid plastic packaging market in the Asia-Pacific region. The region is highly populated, which can bolster the demand for fast-moving consumer goods (FMCG) and consumer durable products. As such, there would be an increased need for proper packaging products, culminating in significant market growth during the forecast period.

(Source: https://www.blueweaveconsulting.com/report/india-rigid-plastic-packaging-market)

OUTLOOK

The most crucial trend shaping the future of the industry is undoubtedly sustainable packaging. The world is increasingly becoming aware of the perils of climate change and recognising that packaging contributes significantly to pollution. As a result, theres a growing demand for packaging made from reusable, recyclable, or biodegradable materials that feature a green supply chain. which taps into the interesting Anothersignificant aspect of individuality. Utilising design and technology, the concept of personalised packaging supports marketing efforts by creating a unique and memorable experience for customers.

Furthermore, both businesses and consumers value packaging that is easy to handle and transport. As a result, theres a notable investment in portable packaging solutions, designed specifically for convenient carrying by residents. This emphasis on innovative and user-friendly packaging is expected to remain popular in the future.

[Source: https://www.skyquestt.com/report/rigid-plastic-packaging-market#:~:text=Global%20Rigid%20Plastic%20Packaging%20Market%20 Insights,period%20(2023%2D2030).]

OPPORTUNITIES

The industry is evolving constantly, with a continuous demand for innovative packaging materials, designs, and technologies. Companies are capitalising on the growing demand for sustainable packaging solutions, such as biodegradable, compostable, and recyclable materials. This shift towards sustainability not only allows companies to differentiate themselves from competitors but also meets the rising demand for eco-friendly products.

Another opportunity is the rising standards of packaging in India. As the country becomes more of a manufacturing hub and witnesses an increase in exports, packaging standards are being elevated to cater to the international market. This trend necessitates the use of better packaging methods such as blow molding, injection molding, roto molding, and others.

Innovation in packaging is also a major opportunity in the market. Plastics can be made re-sealable, reusable, and molded into desired shapes, rigid packs, and innovative designs, which results in consumer-friendly packaging that is easy to handle, dispose of, and store.

New flexible packaging products, such as vacuum pouches, high-temperature retort pouches, and stand-up pouches, may cause a shift in packaging trends.

One of the major opportunities in the market is the increasing demand for packaging from the healthcare industry. The Indian pharmaceutical market is experiencing double-digit growth, and pharmaceutical packaging is becoming an increasingly important component of the drug delivery system. Also, Indias healthcare sector is witnessing bolstered investment, which is leading to the establishment and enhancement of hospitals. As such, there arises a market for hospital furniture suppliers, driven by patients seeking more appealing and comfortable furnishings.

CHALLENGES

Sustainability Initiatives: Embracing sustainable practices and developing eco-friendly alternatives can help mitigate the environmental impact of plastic waste. Also, investing in research & development to create biodegradable or recyclable plastics, while also exploring alternative materials, can align the industry with evolving consumer preferences and regulatory requirements.

Cost Management: Balancing the need for sustainability with maintaining requires careful cost management strategies. This might involve optimising production processes, investing in more efficient technologies, and exploring economies of scale.

These measures can help mitigate the impact of higher production costs associated with sustainable practices.

Regulatory Compliance: Staying abreast of evolving regulations and proactively addressing compliance requirements is essential for long-term viability. It is essential to engage with policymakers, invest in regulatory monitoring systems, and integrate sustainability into corporate strategies. With such an approach, it will be easier to navigate the regulatory landscape effectively.

Innovation and Adaptation:

Prioritising innovation is essential to stay competitive in the face of changing market dynamics. This might involve investing in research & development to create novel materials, exploring circular economy models, and embracing digitalisation to optimise processes and enhance productivity.

COMPANY OVERVIEW

Since 1990, Mitsu Chem Plast Limited (also referred to as ‘Mitsu Chem Plast or ‘the Company) has retained its position as one of the leading manufacturers of world-class blow-molded plastic and injection-molded products. The Company has a diverse range of offerings, spanning different industries, including packaging, healthcare, automotive, and infrastructure. It tailors products for its customers in the blow molding, injection molding, and customised molding (a combination of processes) range.

Investments in innovation and technology have led to the emergence of high-quality options in the market. Despite these developments, Mitsu Chem Plast remains firm in upholding its distinctive core philosophies, unique motives, and above all, its persistent commitment to driving customer success.

Currently, Mitsu Chem Plast boasts over 500 SKUs and caters to more than 30 Fortune 500 customers in India. Backed by a strong R&D team developing sustainable, unique, and import substitute products, the Company has contributed to the Make in India initiative. Mitsu Chem Plast has expanded its capacity by setting up new manufacturing units in Tarapur and Khalapur. This has helped the Company deliver niche products and create exceptional value for its clients. Renowned for its well-equipped operating units, advanced technologies, and skilled team, Mitsu Chem Plast remains dedicated to providing superior-quality solutions.

PRODUCT VERTICALS

Verticals	Products
Molded Industrial Packaging	Blow-molded and injection-molded items, such as containers, bottles, jars carboy, top-open drums from 100 ml to 250 litres, and injection-molded pails from 500 grams to 20 kgs
Hospital Furniture Parts	Hospital-bed parts, hospital-bed accessories, side-trolleys, overbed tables, and spine boards, among others
Others	Plastic Parts of sturdy and well-built chairs, tables, and storage solutions and medical devices like pregnancy kits, malaria kits, HIV kits, and inhalers etc.

MOLDED INDUSTRIAL PACKAGING

Mitsu Chem Plast offers an extensive range of Molded industrial packaging products tailored to meet the unique requirements of its clients. The Company crafts packaging solutions by Molding top-quality materials, including plastics and composites, into various sizes and shapes suitable for industrial use.

Its diverse product portfolio includes blow-molded products like drums (wide-mouth, narrow-mouth and open-top), bottles, jars (ranging from 100 ml to 250 litres), jerry cans, pet containers (revolutionary eco-friendly PET containers) and barrels. Additionally, the Company manufactures injection molded products such as caps, lids, closures, handles, measuring cups, and pails ranging from 500 grams to 20 kgs. All its products are designed to meet diverse industrial packaging needs, and ensure reliability and durability in storage and transportation.

HOSPITAL FURNITURE PARTS

Mitsu Chem Plast is a trusted manufacturer and supplier of furniture parts for hospitals, and is well-renowned for the superior quality and durability. The Company offers a wide range of products, including bedside-locker parts, spine boards, CPR boards, bed-head panels, footboards, side-rails, and IV stands, all among others.

Notably, all these products are made using robust materials such as ABS plastic and stainless steel. This ensures that they deliver a long-lasting and resilient performance. Furthermore, the products are renowned for their safety, reliability, and ergonomic design, and are favoured by healthcare facilities for their ease of installation and maintenance. On the whole, Mitsu Chem Plasts hospital furniture parts provide healthcare sector with dependable solutions that enhance patient care and comfort.

OTHERS

Mitsu Chem Plast specialises in manufacturing plastic parts to meet the polymer-based product needs of various industries, such as the infrastructure and medical sectors. These parts are applied for manufacturing a variety of items, ranging from school chairs and bus seats to stadium seats. Also includes, tables, and storage solutions and medical devices such as pregnancy kits, malaria kits, HIV kits, and inhalers.

Products	Revenue ( in Lakhs)	%
Molded Industrial Packaging	26,674.42	85.70
Hospital Furniture Parts	3,004.58	9.65
Others	1,445.99	4.65

KEY RATIOS

Year	2022-23	2023-24	% Change	Reason for Change
Return on Net Worth	18.90	11.16	(41%)	Margin drop due to rising input cost.

RISK MANAGEMENT

Mitsu Chem Plast is committed to safeguarding its business from potential risks that might affect its operations and revenue. As such, the Company has proactively identified several key risks and implemented mitigative measures to safeguard its business adequately.

This strategic approach ensures the ongoing protection and sustainability of Mitsu Chem Plasts operations. In turn, it helps secure the Companys future in a dynamic business environment. The details of these actions are outlined below:

Supply Chain Risks: Mitsu Chem Plast has adopted several mitigation strategies to combat potential risks to its supply chain. These include diversifying the supplier base, utilising advanced forecasting tools, maintaining buffer stocks, and prioritising transparency and communication with suppliers. Such measures effectively contribute to reducing the potential negative impacts of supply chain disruptions.

Concentration Risk: Mitsu Chem Plast faces concentration risk arising from reliance on a small number of customers or suppliers. The Company, operating across diverse industries, serves over 30 customers with its top-tier products. In addition, the Company aims to expand its customer base, retain current clients, and fortify its supplier network.

To fulfil these objectives, the Company has planned product launches and a robust go to-market strategy.

Quality Risk: Mitsu Chem Plast regards the excellence of its products as its topmost priority. Risks to the quality of the products can include potential defects, safety concerns or recalls. To mitigate such risks and uphold its reputation, the Company adopts rigorous quality control processes, conducts regular tests, and adheres to industry standards. Furthermore, the strategies for mitigation include obtaining ISO certifications, ongoing monitoring, and gathering customer feedback to continually improve product quality and safety.

Human Resource Risk: Mitsu Chem Plast acknowledges the pivotal role of its employees in driving its success. The Company endeavours to retain key management personnel to counter any negative impacts on its business, financial condition, and results. To achieve this goal, the Company implements effective recruitment and retention practices, competitive compensation strategies, and recognition programmes to retain and motivate top talent.

Compliance Risk: Mitsu Chem Plast recognises the risks arising from the failure to adhere to pertinent laws, regulations, and industry standards. Such failures can potentially lead to legal penalties, reputational harm, and operational disruptions for Mitsu Chem Plast. To address this risk, the Company has implemented a comprehensive compliance program. This program entails regular monitoring and updating of policies and procedures, internal audits, and employee training initiatives. Additionally, Mitsu Chem Plast engages with legal and regulatory experts to ensure compliance with relevant regulations.

Environmental, Health & Safety Risk: Misu Chem Plast faces the risk of its manufacturing processes potentially impacting the environment. The possible effects include pollution, waste generation, and carbon emissions. The Company is highly aware of these risks and is dedicated to safeguarding the environment with proper measures to mitigate the same. To that end, it has embraced sustainable manufacturing practices, minimised waste and emissions, and complied with environmental regulations. The Company is also actively exploring eco-friendly alternatives and technologies to rule out this risk.

HUMAN RESOURCES

Mitsu Chem Plast places a high priority on investing in human capital as a fundamental aspect of its business strategy. To achieve this objective, the Company employs various approaches, including intellectual, motivational, and emotional nurturing, to develop and enhance this invaluable asset. The goal of implementing these approaches is to cultivate a motivated, inspired, and emotionally intelligent workforce capable of driving the organisations success.

The Company organises training and development programmes to continually improve its work practices. These programmes focus on making the workforce aware of technological advancements, enhancing their technical skills, and boosting productivity. Such an approach helps foster continuous improvement and organisational growth.

Additionally, Mitsu Chem Plast has established a dedicated HR department to provide structured support for addressing queries and implementing suggestions. This department serves as a means of facilitating effective communication and cultivating a collaborative work environment.

Mitsu Chem Plast adheres to seven core values, namely employee welfare, quality consciousness, customer delight, innovations, cost-cutting without cutting corners, value engineering, and environmental friendliness. These values are ingrained in every member of the organisation and serve as a driving force for enhancing employee performance across all operational levels.438 Total number of employees associated with Mitsu Chem Plast. (Figures as of March 31 2024)

INTERNAL CONTROL SYSTEM

Mitsu Chem Plasts internal control systems and internal audit processes are meticulously designed to safeguard the assets and resources of the organisation. These systems and processes also provide reasonable assurance regarding the reliability of financial reporting and operational data. The Company ensures all processes adhere to established policies, procedures, and statutory requirements. For this purpose, it has developed comprehensive guidelines and procedures for authorisation and approvals, including regular audits. The internal audit system encompasses all financial and operational controls across divisions, functions, and departments. The Companys internal auditors conduct regular reviews of various functions within the organisation and identify opportunities for improvement.

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis Report describing the Companys objectives, estimates etc. may be ‘Forward looking statements within the applicable laws and regulations. The statements in this Management Discussion and Analysis Report could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in the Governmental regulations, tax regimes, forex markets, economic developments within India and the countries with which the Company conducts business and other incidental factors. The Company takes no responsibility for any consequences of the decisions made, based on such statement and holds no obligation to update these in future.