Pil Italica Lifestyle Ltd Management Discussions

Annexure B:

PURSUANT TO SEBI (LODR) REGULATIONS, 2015, YOUR DIRECTORS HAVE THE PLEASURE IN PRESENTING THE MANAGEMENT DISCUSSION AND ANALYSIS REPORT FOR THE YEAR ENDED ON MARCH 31, 2024.

GLOBAL ECONOMY

During the disinflationary period of FY23, the global economy displayed remarkable resilience. Despite a decline in global inflation from its peak in mid-2022, economic growth remained robust, outpacing forecasts and sidestepping concerns of stagflation and a global recession. This economic vitality, contrary to the anticipated impact of significant central bank rate hikes aimed at stabilising prices, was supported by stable employment and income growth. Key drivers included higher-than-expected government spending and household consumption, bolstered by an unexpected surge in labour force participation. Additionally, households in major advanced economies utilised substantial savings accumulated during the pandemic, mitigating the immediate effects of rising policy rates, which were further tempered by shifts in mortgage and housing markets from the era of low interest rates.

As we look forward, global growth is projected to maintain a steady pace of 3.2% in 2024 and 2025. While this growth rate is moderate compared to historical standards, it reflects a blend of short-term challenges such as persistent high borrowing costs and the scaling back of fiscal stimuli, alongside long-term impacts from the COVID-19 pandemic and geopolitical tensions. Furthermore, factors such as subdued productivity growth and increased geo-economic fragmentation are expected to moderate the expansion rate.

Inflation is anticipated to align closer to target levels across advanced economies, with global headline inflation projected to decrease from an average of 6.8% in 2023 to 5.9% in 2024, and further to 4.5% in 2025.

This positive trend towards stabilisation is encouraging, as central banks are likely to shift towards more accommodative monetary policies.

The medium-term global growth projection stabilises at 3.1%, reflecting cautious optimism amidst enduring economic disparities that may slow the pace of improvement in living standards, particularly in middle- and lower-income countries. This outlook, while cautious, recognises the resilience and adaptability of global economies facing structural challenges. The growth trajectory, albeit modest, continues to offer opportunities for progress and innovation, particularly as economies adapt to more sustainable and efficient practices.

Despite the challenges, the global economic landscape remains a fertile ground for strategic adaptation and long-term resilience. The relatively steady growth prospects underscore the importance of continued innovation and strategic planning to overcome structural impediments and enhance capital and labour allocation. As we move forward, the focus on fostering a dynamic and inclusive global economy will remain paramount, underscoring our commitment to driving sustainable growth and prosperity.

INDIAN ECONOMY

The Indian economy is poised to maintain its growth trajectory, with forecasts projecting a robust 7% growth rate for FY24, potentially extending into FY25. Should this prediction hold, it would mark the fourth consecutive year post-pandemic where India has achieved or surpassed this growth benchmark. This sustained performance is not only a testament to the resilience and potential of the Indian economy but also enhances its future prospects significantly.

Globally, economies continue to face challenges in sustaining their post-Covid recovery, with recurring shocks such as supply chain disruptions resurfacing in 2024. These disturbances are likely to influence global trade flows, transportation costs, economic output, and inflation. Nonetheless, Indias proven capacity to navigate past adversities, including the Covid pandemic and the subsequent shocks in energy and commodity prices in 2022, fosters a quiet confidence in its ability to manage upcoming challenges effectively.

Looking ahead, several key trends are poised to shape the economic landscape. The era of hyper-globalisation in manufacturing may be concluding, yet this shift does not necessarily herald the onset of de-globalisation. Rather, it signifies a new phase of understanding and possibly redefining the intricacies of global supply chains that have evolved over decades.

Furthermore, the emergence of Artificial Intelligence presents both opportunities and challenges, particularly in the realms of services trade and employment. While advancements in technology may challenge traditional cost competitiveness, they also open avenues for innovation and enhanced service delivery in the digital domain.

Lastly, the global imperative for an energy transition underscores an increasingly urgent focus on reducing carbon emissions. Despite the pressures from international bodies and developed nations for developing countries to shift away from fossil fuels, this transition represents an opportunity for India to lead in the adoption of greener energy alternatives, aligning environmental sustainability with economic progress.

In summary, while the global and domestic economic environments present multifaceted challenges, they also offer significant opportunities for strategic growth and innovation. The Indian economy, with its demonstrated resilience and adaptive strategies, is well-positioned to not only navigate these challenges but also capitalise on emerging trends to secure long-term sustainable growth.

INDUSTRY OVERVIEW

Global Plastic Furniture Market Overview

In 2023, the global plastic furniture market was valued at USD 17,966.10 million, demonstrating significant consumer and business interest in this sector. Projections suggest that by 2030, the market will expand to USD 26,308.82 million, growing at a Compound Annual Growth Rate (CAGR) of 5.6%. This growth underscores the sectors dynamic nature and its ability to innovate and adapt to changing consumer preferences.

Plastic furniture is increasingly recognised for its versatility, style, and sustainable qualities, making it a favoured choice in both residential and commercial spaces. The range includes everything from chairs and tables to sofas and storage units, addressing a broad spectrum of functional and aesthetic preferences. The shift towards plastic furniture is driven by its durability, affordability, and lower environmental impact, offering substantial design flexibility and ease of maintenance.

The competitive landscape of the global plastic furniture market features a wide variety of participants, including established manufacturers, innovative new designers, and specialised distributors. These entities are actively responding to escalating demand by introducing ecofriendly materials and customizable product options, catering to the diverse and evolving needs of a global clientele.

This sectors growth not only reflects changing consumer trends but also aligns with broader environmental goals, positioning plastic furniture at the forefront of sustainable living and working environments. The plastic furniture market is poised to continue its trajectory of growth and innovation, further cementing its role in the global furniture industry.

Indian Plastic Furniture Market Overview

The Indian plastic furniture industry is poised for significant growth, driven by an expanding consumer base and evolving market dynamics. Exhibiting remarkable flexibility, this sector has adeptly adapted to the shifting preferences of discerning consumers, offering versatile and cost-effective solutions for a myriad of applications and environments.

Known for its strength, durability, lightweight nature, and environmental benefits, plastic furniture is increasingly favored for its resistance to corrosion, temperature fluctuations, and its exceptional mechanical properties. These qualities make it a preferred choice for both residential and commercial uses, enhancing the functionality and aesthetic appeal of various spaces with options for seating and storage.

In alignment with growing environmental consciousness, numerous manufacturers have pivoted towards sustainable practices, developing product lines that incorporate recycled plastics. This range includes chairs, tables, desks, wardrobes, and cabinets, crafted to meet the increasing demand for eco-friendly products.

As consumer spending and the number of users is expected to rise, the industry is well-prepared to leverage its innovative capabilities to meet diverse consumer preferences. This strategic readiness is set to further strengthen the industrys position in the market, ensuring continued growth and market penetration.

GROWTH DRIVERS

The Indian plastic furniture market is experiencing significant growth, driven by several key factors:

• Demand for Versatility and Durability: The market is primarily driven by the rising demand for lightweight, durable, and adaptable furniture solutions, particularly in residential and commercial spaces.

• Youth Consumer Base: The preference for plastic furniture is increasingly favored by Indias youth, the largest generational group in the country, who are experiencing a rise in disposable income.

• Modern Furniture Demand: There is an increasing desire for upscale and modern furniture, which is anticipated to drive the expansion of the market.

• Environmental Sustainability: Growing awareness among individuals towards eco-friendly alternatives acts as a significant growth-inducing factor, with manufacturers introducing recycled plastic furniture options.

• Urbanisation and Compact Living: The inflating levels of urbanisation and the emerging trend towards compact living spaces are driving the demand for space-efficient furniture.

• Dining Out Trends: The tendency of people eating outside, including increasing restaurants and street food outlets across the country, fuels the demand for easy-to-maintain plastic furniture.

• E-commerce Influence: The expanding e-commerce industry in India provides consumers with convenient access to a wide range of furniture options, enhancing the markets reach and growth.

• Foreign Direct Investment: The 100% Foreign Direct Investment (FDI) policy for townships and settlement development projects has drawn foreign investors to the Indian market, bolstering the furniture industry.

• Demand for Easy-to-Clean Furniture: The escalating demand for easy-to-clean furniture variants in homes and commercial settings is anticipated to further fuel market growth across the country.

These factors collectively contribute to the dynamic expansion and continued evolution of the plastic furniture market in India.

COMPANY OVERVIEW

Established in 1992, PIL Italica has been a key player in the plastic furniture industry for over three decades, evolving from its origins in Udaipur, Rajasthan, to a nationwide network with corporate and marketing offices in Mumbai and Delhi.

The Company has acquired the Umerkui (Silvassa) furniture unit from Kisan Mouldings Limited, marking a significant milestone in the companys expansion strategy. This acquisition encompasses the procurement of land, building, and all other assets situated at the Umerkui unit.

By strategically acquiring this unit, PIL Italica Lifestyle Limited is positioning itself to strengthen its presence in the southern and western regions of India. Leveraging the enhanced logistics and delivery advantages offered by the strategic location of Silvassa, the Company aims to streamline operations and capitalize on seamless transportation networks across the country.

With an existing capacity of 6,050 MTPA at the Udaipur facility and an additional 2,400 MTPA capacity at the Umerkui plant in Silvassa, the total production capacity now stands at 8,450 MTPA. This expansion enhances the companys manufacturing capabilities while also reinforcing its commitment to meeting the evolving needs of its customer

Beyond mere commercial interests, PIL Italica sees itself as a personal endeavour, deeply invested in understanding and meeting customer needs. Their focus extends beyond functionality to the creation of comfortable and aesthetically pleasing furniture, guided by a commitment to quality evident in their ISO 9001:2015 accreditation and CE certified products.

PIL Italicas product range spans a diverse array, from plastic chairs, tables, and storage bins to wooden furniture, showcasing their dedication to innovation and advanced manufacturing techniques.

FY24 PERFORMANCE OVERVIEW

(RS IN LACS)

Particulars	FY24	FY23	Growth
Total Income	9,725.19	8,535.32	13.94%
EBIDTA	812.40	586.49	38.52%
EBIDTA (%)	8.35%	6.87%	148bps
Profit Before Tax (PBT)	619.79	406.72	52.39%
Profit After Tax (PAT)	461.95	304.36	51.78%
PAT (%)	4.75%	3.57%	118bps

FINANCIAL RATIOS

Particulars	Numerator	Denominator	March 31, 2024	March 31, 2023	Variance	Remark
Current Ratio	Current Assets	Current Liabilities	3.11	4.15	-25.06%	In view of increase of Utilization of CC limit
Debt - Equity Ratio	Total Debt	Shareholders Equity	0.31	0.25	24.00%	-
Debt Service Coverage Ratio	EBITDA	Interest plus Principal	6.41	5.19	23.51%	-
Return on Equity (ROE)	Net Profits After Taxes	Average Shareholders Equity	6.43%	4.44%	44.81%	In view of increase in profit
Inventory Turnover Ratio	Sale of products	Average Inventory	5.49%	5.28%	3.98%	-
Trade Receivables Turnover Ratio	Revenue	Average Trade Receivable	15.16	15.79	-3.98%	-
Trade Payables Turnover Ratio	Net Credit Purchases	Average Trade Payables	21.29	21.51	-1.02%	-
Net Capital Turnover Ratio	Net Sales	Working Capital	2.20	1.59	38.36%	In view of increase in sales
Net Profit Ratio	Net Profit	Net Sales	4.89%	3.67%	33.24%	view of increase in profit
Return on capital employed (ROCE)	Earning before interest and taxes	Capital Employed (4)	8.36%	6.64%	25.91%	In view of increase in profit
Return on Investment(ROI) Unquoted	Income generated from investments	Time weighted average investments	No income generated from investment.

OUTLOOK

PIL ItaLica Lifestyle Limited is poised for a dynamic future, driven by our strategic initiatives and a clear focus on market expansion and product innovation.

Our strategy revolves around three core pillars: enhancing manufacturing capabilities, deepening market penetration, and prioritising sustainability. The acquisition of the Umerkui Furniture unit from Kisan Mouldings and our ongoing efforts to expand the dealer and distributor network, particularly in the southern and western markets, underscore our commitment to strengthening our operational base and market reach. With a total production capacity now standing at 8,450 MTPA, we are well-positioned to meet the growing demands of our customers.

Looking ahead, we are intensifying our focus on the eastern Indian markets, where we plan to establish robust distribution networks and fulfilment centres.

This strategic expansion will enable us to deliver our products more efficiently, thereby enhancing customer satisfaction and competitive positioning. Additionally, we are committed to diversifying our product offerings with the introduction of new value-added products, particularly in the kids furniture and education furniture categories. This move aligns with our goal of becoming a pan-Indian player and capturing a larger share of the domestic market.

Our sustainability initiatives remain a cornerstone of our strategic outlook. All the wastage generated during the manufacturing process is being reused thereby reducing our carbon footprint. As we advance, we are also investing in digital tools and marketing strategies to enhance our brand visibility and streamline operations. With these initiatives, we are confident in our ability to achieve a 15% growth in our topline and an improvement of at least 150 basis points in EBITDA margins in FY25. Our unwavering dedication to innovation, operational excellence, and sustainability will continue to drive our success in the years to come.

INTERNAL CONTROL AND ADEQUACY

The Company maintains a robust system of internal control to safeguard and protect its assets from unauthorised use or disposal, ensuring that all transactions are duly authorised, recorded, and reported. Additionally, it has implemented an efficient mechanism to optimise resource utilisation, enhance operational efficiency, monitor operations, and ensure compliance with relevant laws. The auditors have affirmed the adequacy and effectiveness of the Companys internal control systems.

HUMAN RESOURCE DEVELOPMENT AND INDUSTRIAL RELATIONS

PIL Italica Lifestyle places great value on its human resources, considering them as vital assets essential for the Companys growth. As such, the Company actively engages with its employees to enhance their skills and knowledge. Moreover, PIL Italica Lifestyle is committed to building its brand reputation to attract and retain top talent in the industry. Throughout the reviewed period, employee relations remained positive and cooperative across all levels, reflecting the Companys ongoing efforts to maintain such healthy relationships in the future. As of March 31, 2024, the Company employed 205 individuals across its group entities.

RISKS, CONCERNS AND RISK MITIGATION

The Company faces several risks in its business operations. It aims to mitigate the potential impact of financial market unpredictability on its performance

Safety risk

The manufacturing facilities must comply with stringent safety regulations. Failure to adhere to safety requirements may affect business continuity and reputation.

Supply chain risk

: The supply chain is vulnerable to physical and environmental damage, trade restrictions due to geopolitical tensions, and disruptions in supplies. Infrastructure development and reliance on outsourced partners may also disrupt operations.

Credit risk

Volatility in financial markets and changing interest rates could affect the ability to service Rs.debt. Additionally, increased reliance on exports may expose the Company to currency risks in the future.

Commodity fluctuation risk

The Companys performance is closely tied to the plastic furniture industry. Changes in demand- supply dynamics, both domestically and internationally, may impact the Companys performance.

Regulatory risk

Various laws and regulations govern the operations, covering areas such as the environment, climate change, trade, competition, and taxes. Non-compliance could not only affect operating performance but also damage the reputation of the Company. Regulatory changes further increase the complexity of compliance.

	For and on behalf of the Board of Directors
	Sd/-
	Daud Ali
	Managing Director
	DIN:00185336
Place: Udaipur (Raj.)	Sd/-
Date: May 09, 2024	Narendra Bhanawat
	Whole Time Director & CFO
	DIN:00146824