REPORT ON MANAGEMENT DISCUSSION AND ANALYSIS Company Overview & Economic Environment Garware Polyester Limited (GPL) is the pioneer and one of the largest exporters of polyester films in India. The Company manufactures Bi-axially Oriented Polyethylene Terephthalate (BOPET) / Polyester Films, Sun Control Films, BOPP films, Thermal Lamination films and Specialty Polyester films of high quality for a variety of end applications. GPL also manufactures the brmium grade heat rejection films based on the latest 'Nano Technology' developed in its in-house R&D facility centre. The Company commissioned the BOPP Plant (Bi-axially oriented Polypropylene) which has gone into commercial operation since August 2014. BOPP is also a raw material that plays an important part in the manufacture of Thermal Lamination Films which are produced on our Thermal Lamination Line. This line was set up as part of the Company's efforts to ensure forward integration. The Company is already backward integrated through the establishment of a Batch Process Polyester Chips plant which ensures a steady stream of supply of chips for the Film Lines. The Company's strength is its integrated manufacturing facilities, R&D Center and specialty products developed for various end applications. 1. Industry Structure and Developments Polyester films has wide applications in a host of industries engaged in the manufacture of flexible packaging, shrink labels, electrical motor and cable insulation, sequin, TV screen, magnetic media, imaging, metallic yarn, laminated films for glass tint, safety application etc. Sun Control films cater to the automobile and real estate sector. The Company has a well-developed marketing network throughout the world, some of the major regions being Europe, USA, Far East, Middle East, Africa, South America etc. The Company has developed a wide network of dedicated customers in Europe, USA, Far East, Middle East, Brazil, Australia, China, Russia, New Zealand, Eastern Europe, Mexico and Africa. In order to expand the business and offer better services to the customers of consumer products in overseas market, the Company has Subsidiary Companies situated in USA and UK besides a branch in UK. This ensures a cohesive global organization that can weave its operations in the above countries. The quality of GPL products is rated amongst the best in the world and the Company pays special attention on customer service and satisfaction due to which the customer base is consistent and increasing. 2. Opportunities and Threats The supply demand situation for polyester films continues to be not favorable as the capacities are exceeding demand The external environment is not conducive and supportive enough to meet the increased supply coming out of the developing and developed countries. This scenario is likely to be continued for some more time until the Global economies and consumption picks up. Due to uncertainty in the advanced economies and continuing euro debt crisis, the Global economy is adversely impacted resulting in weak domestic and external demand. Policy uncertainty, relatively tight money policy with sustained level of high real interest rates accentuated the problem. Furthermore, due to the commoditized nature of BOPET films, the Industry remains highly competitive with brssure on margins. For the Company, the strategy is to focus on the specialty films, launch new products, strengthen network and services and speed up brand building initiatives. Plans are afoot on a marketing warpath, overhauling the product portfolio and penetrate newer markets, launch aggressive advertisement campaigns. The shrink label application film is very well stabilized in the market. With demand outlook for High Shrink films remaining robust, the Company has plans to shift to the Specialty PET shrink Films, where it sees a tremendous opportunity. In thermal film, GPL has developed Gold & Feather Feel Films. The Company therefore hopes to rapidly grow its market share in various film segments. Earnings booster will come out of the recently commissioned BOPP plant as part of a move to diversify into value added products i.e. Thermal Lamination to metalized films. With this, GPL would be the only company in the segment which will be manufacturing BOPET, BOPP, Thermal Lamination and Sun Control Films. GPL derives its strength from its established track record, experienced management, diversified customer and product profile, well recognized brands and integrated manufacturing facilities which are expected to augur well for the company's future growth. The Company has stopped the sale of Sun Control film in Domestic Market for automobile application due to ban imposed by the Judgment of Hon. Subrme Court of India and making efforts to divert its capacity for international market. The Company has increased sale of Sun Control Film for Building segment. 3. Outlook Exports Plain Film: The Company has maintained its record of being the top exporter of polyester films and bagged the top exporter award from Plexconcil. With the introduction of variety and high quality product offerings, the Company is fully confident of maintaining its strong position in exports. Presently Company products are being successfully sold in China, Europe, Eastern Europe, USA, South America, Africa, Middle East, Far-East, Australia, New Zealand etc. Sun Control Film: The Company has successfully launched multiple brands, new products and with aggressive and innovative marketing strategies. The Company has introduced Infrared rejection films which can reduce infrared heat up to 92% apart from UV reduction of 95%. The Company has also introduced technology based films. The Company has also developed the film to filter the mobile tower radiation. The growth in Sun Control films is expected to be sustained during the coming years. Sun Control films are brsently being marketed throughout the world and our consistent high-class quality and better customer orientation are highly valued in the market. The Company plans to market window films in the Realty Sector aggressively and the thrust will continue to be for exports. The Consumer Division Products of the Company are marketed in Europe through its Subsidiary / Branch in UK and in the USA market by Global Pet Films Inc. (GPF), a wholly owned subsidiary of GPIL. The aim is to expand export base and through the above Branch/Subsidiary catapult international operations into a major growth driver. The company through its subsidiary Global Pet Films Inc. (GPF) USA has been catering to customers across USA. GPF is the marketer of the brand 'GLOBAL WINDOW FILMS' which is registered in the US and is one the most popular brands. The subsidiary is catering to Russia, Europe, Asia-Pacific and Africa marketing films under the brand "Garware Sun Control". Thermal Film: With variety and high quality product offerings in thermal lamination films, the Company is fully confident of growing its share in the export market. With setting up of the BOPP plant, the Input films for thermal Lamination will be available within thereby rendering the operations cost effective. GPL has developed Gold & Feather feel films at this division and focusing on increasing exports volume for these speciality products. Domestic Market: Growing Retail sector, increasing brference towards packaged items, liberalization and rising middleclass is expected to increase with the consumption of Polyester Films thereby adding to growth of this segment in the domestic market. Increased usage of window films in offices, commercial buildings and malls will continue to add to the growth of the Company's business in the brmium segment of window films. 4. Review of Operation The financial statements have been brpared in compliance with the requirements of the Companies Act, 2013 and the applicable accounting standards. 5. Internal Control Systems and their Adequacy The Company has sound systems of internal control and checks, which are supplemented by a regular internal audit commensurate with the size of its business and nature of its operations. The Audit Committee of the Board meets at regular intervals and actively reviews the internal control systems, which are reflected in the internal audit reports. Suitable corrective actions are initiated wherever necessary. 6. Material Developments in HR / Industrial Relations Your Company has a well-qualified and experienced team of professionals who have contributed to the performance of the Company. Labour relations at all Company locations continue to remain cordial with no industrial unrest during the year under review. 7. Risks and Concerns Due to the volatility of crude oil prices and debrciation / apbrciation of Rupee vis-a-vis US dollar, the raw material prices has been exhibiting a volatile trend for the Company's products is sensitive to changes in industry capacity and output levels, cyclical changes in regional and global economic conditions and changes in consumer demand. Significant addition in capacities by competitors has heated the competition. The Central and State tax scheme in India is extensive and subject to change from time to time. The Company is subject to risks arising from volatile foreign exchange market as well as interest rate fluctuations, which could adversely affect its business operational results. The Company will continue to focus on cost control and cost effective measures and give dedicated thrust to exports. The Company has endeavored to monitor and mitigate these risks. 8. Cautionary Statement The statements in report of the Board of Directors and the Management Discussion & Analysis Report describing the Company's outlook, estimates or brdictions may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those exbrssed or implied since the Company's operations are influenced by many external and internal factors beyond the control of the Company. The Company takes no responsibility for keeping the members updated on changes in these factors except as may be statutorily required from time to time |