Retina Paints Ltd Management Discussions

<dhhead>MANAGEMENT DISCUSISON AND ANALYSIS REPORT INDIAN ECONOMY OVERVIEW </dhhead>

The Indian economy demonstrated resilience amid geopolitical tensions and high inflation-induced global economic headwind and, according to the final estimates of the National Statistical Office (NSO), is set to register a growth of 7.2% in FY23. The better-than-expected performance in FY23 can be attributed to the strong performance of the economy in the fourth quarter. The Gross Value Added (GVA) in the economy is reckoned to have risen 7% in 2022-23, compared to 8.8% in 2021-22. The NSO also revised GDP and GVA numbers lower for the first half of last year, but bumped up the third quarter figures slightly. The first quarter’s GDP growth in 2022-23 is now pegged at 13.1%, followed by a 6.2% rise in the second quarter and 4.5% growth in the third quarter. In GVA terms, the final three months of 2022-23 recorded a three-quarter high of 6.5%. The growth estimates for the first and second quarters were pared to 11.9% and 5.4% respectively, while the third quarter GVA growth was revised higher to 4.7%.

 

INDUSTRY STRUCTURE AND DEVELOPMENTS PAINT INDUSTRY

The Indian paint industry is undergoing a gradual transition in consumer preferences from conventional whitewashing methods to a preference for high-quality paints such as emulsions and enamel paints. This shift in consumer choice serves as the fundamental catalyst for the growth and stability of the industry. The industry was valued at Rs. 62,000 Crore in FY 2023. It is expected to attain a substantial growth and reach a market size of Rs. 1 lakh Crore by FY 2028. This trend aligns with the sectors consistent attainment of a Compound Annual Growth Rate (CAGR) in the double digits over the past few years. Due to Indias robust economic fundamentals, promising growth prospects and renewed enthusiasm for the "Make in India" initiative, the Indian Paint Industry is poised for a prosperous and vibrant future.

During the financial year 2022-23, the Paints & Coatings industry experienced a favorable development with the softening of raw material prices from their previous highs. As raw materials account for approximately 55-60% of the input costs, price corrections in crude oil and other essential components resulted in improved margins for the industry.

 

OPPORTUNITIES INNOVATION AND R&D

There are opportunities to develop new, innovative paint products. This could include environmentally-friendly paints, paints that help with heat insulation, anti-microbial coatings, or long-lasting paints that resist weathering.

 

GOVERNMENT INITIATIVES

The Government’s focus on initiatives like ‘Smart Cities’ and the ‘Housing for All’ scheme, which aim to boost manufacturing and infrastructure while providing affordable housing, could significantly increase the demand for paints and coatings.

 

E-COMMERCE

Online sales platforms provide an opportunity to reach a broader market. Brands that can successfully navigate the e-commerce space and provide online services (such as colour visualisation tools, virtual home decoration apps, and online consultations) will likely have a significant advantage.

 

CHALLENGES

 

RAW MATERIAL PRICING AND AVAILABILITY

The price and accessibility of essential raw materials such as titanium dioxide, pigments, resins, and solvents, predominantly reliant on imports, are susceptible to volatility caused by global economic dynamics, trade policies, and geopolitical events. These fluctuations have the potential to exert a substantial influence on the cost framework and profitability of paint companies.

 

ENVIRONMENTAL REGULATIONS

In response to the growing global focus on environmental conservation, stringent regulations have been implemented to control the emission of volatile organic compounds from paints. Compliance with these regulations necessitates the development of novel, environmentally friendly formulations, which can be a resource-intensive and time-consuming process.

 

INFRASTRUCTURE CHALLENGES

The transportation and storage of paint products can pose significant challenges in India, particularly in rural areas, where infrastructure is insufficient. These logistical hurdles have the potential to escalate costs and hinder access to potential markets.

 

SEGMENT WISE PERFORMANCE

At present, the Company is engaged only in manufacturing and selling of paints and there is no other separate reportable segment. a) Revenue from operations increased to Rs. 1,09,446.11 thousands as against Rs. 72,691.26 thousands in the previous year a growth of 50.56%.

b) Profit After Tax (PAT) of the Company stood at Rs. 3,007.08 thousands as against Rs. 1,563.81 thousands for the previous year registering a growth of 92.29% in PAT.

 

OUTLOOK

The Company has recently relaunched its products that are now made available to the dealers. This development is expected to make a substantial contribution to the Company’s overall growth. Also, introduction of new products both in the water based category and in the enamel category will help the company to grow faster and in multiples. Furthermore, the newly established plant , located at Rayaraopet, Ghatkesar, Hyderabad, has recently started commercial production.

 

RISK AND CONCERNS

Risk management plays a crucial role in corporate governance and strategy development. We recognize that risk assessment and mitigation are ongoing processes that must adapt to the evolving risk landscape, encompassing short-term, medium-term, and long-term challenges. We believe that implementing systematic risk management practices is essential for effectively navigating towards our business objectives and ensuring sustainable growth in a volatile and complex environment. These risks continually evolve and change, both in terms of their impact and the likelihood of their occurrence. We understand the importance of operating within the dynamics of the paints and coatings industry and taking calculated risks to maintain our relevance in the market.

Our responsible management team and functional heads identify risks, followed by the formulation of appropriate mitigating actions. Through our risk management framework, we strive to provide reasonable assurance that our business objectives will be achieved, and our obligations to various stakeholders can be fulfilled. The Board oversees the implementation of risk mitigation measures for key risks, as identified by the Audit Committee, which meets at least four times year.

 

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has established internal control systems that are appropriate for the nature of its business, as well as the scale and complexity of its operations. These systems include well-defined policies and procedures designed to ensure the effectiveness and efficiency of its operations, reliability of financial reporting, compliance with applicable laws and regulations, prevention and detection of fraud and errors, and safeguarding of assets. Regular examinations by internal auditors will be conducted to assess the adequacy and effectiveness of these internal controls, following a risk-based audit strategy. The internal audit plan is reviewed and approved by the Audit Committee, which also evaluates the sufficiency and effectiveness of the Company’s internal financial controls and monitors the implementation of audit recommendations. The Audit Committee is kept informed of significant audit findings and activities, and appropriate corrective measures are undertaken accordingly.

 

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT

The Company relies heavily on its human resources to propel its operations, accomplish its objectives, and sustain its competitive advantage. It is committed to establishing a robust leadership succession plan while concurrently cultivating a secure, inclusive, and diverse workforce. Several training initiatives are regularly implemented to consistently engage with employees. The all-encompassing culture plays a pivotal role in fostering high performance among individuals and cultivating a sustainable business environment. Employees are the pillars of your Company and a major resource for the future. Its their inexorable commitment that helps your Company to create space that enhance quality of life. Keeping the spirits high at workplace needs a sound mental and physical fitness and deep-rooted culture which promotes work life balance.

Your Companys focus is to continue building organizational capability and capacity, leverage and nurture key talent, encourage meritocracy and enhance people utilization aligned with the business strategy. As on March 31, 2023 your Company had 26 employees.

 

KEY FINANCIAL RATIOS

Particulars	Unit of Measure ment	31.03.2023	31.03.2022	Variation in %
Current Ratio	Times	1.93	1.50	22.20%
Debt-Equity Ratio	Times	0.17	1.70	(889.12%)
Debt Service Coverage Ratio	Times	0.27	0.20	26.19%
Return on Equity Ratio	In %	4.05	9.04	(123.39%)
Inventory Turnover Ratio	Times	3.08	2.48	19.30%
Trade receivables	Times	2.79	1.97	29.25%
Turnover Ratio
Trade payables	Times	2.72	2.16	20.71%
Turnover Ratio
Net Capital Turnover Ratio	Times	2.18	2.78	(27.16%)
Net Profit Ratio	In %	2.75	2.15	21.70%
Return on Capital Employed	In %	0.05	0.09	(61.89%)
Return on Investment (Assets)	In %	-	-	-

 

Reason for variation in ratios of more than 25% change is mainly due to increase in the shareholders’ funds due to fresh / bonus issue of equity shares during the year.

 

DISCLOSURE OF ACCOUNTING TREATMENT

In the preparation of the financial statements for the year ended 31^st March,

2023, the applicable Accounting Standards ("AS") have been followed.