Astral Ltd:Annual Report 2023-24 Analysis

Astral Ltd: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Astral Limited (formerly Astral Poly Technik Limited) was established in 1996. The company was founded by Mr. Sandeep Engineer with the vision of introducing advanced polymer piping systems in India.

Headquarters Location and Global Presence:

The company’s headquarters is located in Ahmedabad, Gujarat, India. While primarily focused on the Indian market, Astral has expanded its presence internationally through exports and strategic acquisitions.

Company Vision and Mission:

• Vision: To be a leader in the building materials industry, globally recognized for innovation, quality, and customer satisfaction.
• Mission: To provide superior quality products and solutions through continuous innovation, advanced technology, and efficient processes, while creating value for stakeholders.

Key Milestones in Their Growth Journey:

• 1996: Incorporation of Astral Poly Technik Limited and commencement of CPVC piping manufacturing.
• 2007: Initial Public Offering (IPO) and listing on the stock exchanges.
• 2014: Acquisition of Seal IT Services UK Limited, expanding into the adhesives and sealants market.
• 2018: Acquisition of Resinova Chemie Limited, further strengthening its presence in the adhesives segment.
• 2022: Renamed from Astral Poly Technik Limited to Astral Limited.

Stock Exchange Listing Details and Market Capitalization:

Astral Ltd. is listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). The company’s market capitalization fluctuates but is a significant player in the Indian building materials sector. (Please check the latest market data for current market capitalization figures.)

Recent Financial Performance Highlights:

(Please refer to Astral Ltd.’s official website or financial news sources for the most up-to-date financial performance highlights. Include key metrics such as revenue growth, profit margins, and earnings per share.)

Management Team and Leadership Structure:

• Chairman & Managing Director: Sandeep Engineer

Their Products #

Complete Product Portfolio with Categories:

Astral Ltd.’s product portfolio is broadly divided into:

• Pipes & Fittings: CPVC, PVC, PPR, HDPE, Drainage Systems
• Adhesives & Sealants: Construction Chemicals, Industrial Adhesives, Plumbing Adhesives
• Paints: Interior & Exterior Emulsions, Enamels, Wood Finishes

Flagship or Signature Product Lines:

• CPVC Pipes & Fittings: Known for their corrosion resistance, durability, and suitability for hot and cold water applications.
• Astral Bond: Adhesives known for superior bonding strength and application-specific formulations.

Key Technological Innovations or Patents:

Astral focuses on continuous product innovation through advanced material research and development, including specialized CPVC compounds, enhanced adhesive formulations, and sustainable paint technologies.

Manufacturing Facilities and Production Capacity:

Astral operates multiple manufacturing facilities across India. Specific production capacity details vary and may not be publicly disclosed for competitive reasons.

Quality Certifications and Standards:

Astral products adhere to various national and international quality standards and certifications, including:

• ISO 9001
• Various BIS standards for pipes and fittings
• Relevant industry-specific certifications

Primary Customers #

Target Industries and Sectors:

• Plumbing
• Construction
• Infrastructure
• Agriculture
• Industrial

Geographic Markets (Domestic vs. International):

Predominantly focused on the domestic Indian market, but also exports to various international markets.

Major Client Segments (Agricultural, Industrial, Residential, etc.):

• Residential construction
• Commercial construction
• Industrial projects
• Agricultural irrigation

Distribution Network and Sales Channels:

Astral uses a wide distribution network through:

• Dealers
• Distributors
• Retail Outlets
• Direct sales to large projects

Major Competitors #

Direct Competitors in India and Globally:

• Pipes & Fittings: Supreme Industries, Finolex Industries, Prince Pipes
• Adhesives: Pidilite Industries (Fevicol), Henkel, Sika
• Paints: Asian Paints, Berger Paints, Kansai Nerolac

How they differentiate from competitors:

Astral differentiates itself through its focus on high-quality products, innovative solutions, a broad product portfolio, and a strong brand reputation. Their focus on CPVC piping gave them a first-mover advantage in India.

Future Outlook #

Expansion Plans or Growth Strategy:

Astral is pursuing organic and inorganic growth through:

• Expanding its product portfolio through new product launches.
• Increasing its manufacturing capacity.
• Exploring strategic acquisitions to enter new markets or strengthen its existing businesses.
• Increasing its international presence through exports and partnerships.

Sustainability Initiatives or ESG Commitments:

Astral is increasingly focusing on sustainability initiatives, including:

• Reducing its carbon footprint.
• Conserving water and energy.
• Developing eco-friendly products.
• Promoting responsible waste management.

Industry Trends Affecting Their Business:

• Increasing demand for infrastructure development in India.
• Growing awareness of sustainable building practices.
• Technological advancements in building materials.
• Fluctuations in raw material prices.

Long-term Vision and Strategic Goals:

Astral’s long-term vision is to be a leading building materials company, known for its innovation, quality, and customer satisfaction. The strategic goals revolve around achieving sustainable growth, expanding its product portfolio, and increasing its market share.

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics #

• Consolidated revenue from operations increased by 9.36% from FY23 to FY24, reaching ₹56,414 million.
• EBITDA increased by 14.99% year-on-year, reaching ₹9,603 million in FY24.
• Profit Before Tax (before exceptional items) saw an 18.9% increase, reaching ₹7,336 million in FY24.
• Profit After Tax showed an 18.74% increase, reaching ₹5,456 million in FY24.
• Earnings Per Share (EPS) was ₹20.33 in FY24.
• The plumbing segment contributed 73% to the total revenue.
• The Adhesives, Sealants and Paints segment contributed 27% to total revenue.
• The Debt Equity Ratio was maintained at 0.02 for the year ended March 31,2024 and March 31,2023.
• Cash profit for FY24 was ₹7,432 million, a 16.6% year-on-year growth.
• Debtors turnover improved by 1 day, from 25 days in FY23 to 24 days in FY24.
• Inventory turnover also saw improvement from 62 days to 59 days in FY24.
• Interest Coverage Ratio decreased from 36.98 to 28.58.
• Return on Net Worth increased slightly from 17.27% in FY23 to 17.53% in FY24.
• 5-Year CAGR for PBT is 24.42%, EBITDA is 20.64%, and PAT is 21.59%.

Business Segment Performance #

• Plumbing Segment: Revenue was ₹41,420 million, with an EBITDA of ₹7,572 million, marking a 17.96% year-on-year growth. Capacity utilization improved, with production volumes reaching 334,040 MT, a 26.61% year-on-year growth, with the utilization reaching 66% .
• Adhesives, Sealants, and Paints Segment: Revenue was ₹14,994 million, with an EBITDA of ₹2,031 million, showing a year-on-year growth of 5.12%.
• Bathware Segment: Achieved a revenue of ₹61 crores in FY24.

Major Strategic Initiatives and Their Progress #

• Capacity Expansion: Proposed manufacturing units in Hyderabad and Kanpur with capacities of 70,000 MT/p.a. and 60,000 MT/p.a., respectively, are planned. The operationalization of new plants in Guwahati and Cuttack are completed.
• Paints Segment Entry: Astral Paints was launched and will continue to expand. The plan is to increase the product line and also launch in Tamil Nadu, Karnataka, Kerela, and Gujurat. An industry veteran was appointed to lead the paint business.
• Bathware Segment Entry: The company entered into PTMT product portfolio.
• “New Bharat” Initiative: Focus on the rural market for adhesives and sealants to increase the potential.
• Product Innovation: Introduction of new products such as OPVC and Aluminium PEX pipes and PTMT bathware.
• IPL Team Collaboration: Partnered with Chennai Super Kings, Mumbai Indians, Gujarat Titans, Punjab Kings, and Lucknow Super Giants.

Risk Landscape Changes #

• Raw Material Price Volatility: Navigated through strategic pricing and cost management. Anticipated stabilization of raw material prices is expected to support margin expansion.
• Technological Obsolescence: Addressed by development efforts, collaborations and upgradation of manufacturing facilities.

ESG Initiatives and Metrics #

• Green Pro Certification: Received for CPVC Pro and Drain Pro products.
• Renewable Energy: Increased solar energy capacity. Solar panel installations have generated and utilized significant KWH across multiple plants. Also there is the use of Wind Energy.
• CSR Spending: Invested ₹11.23 crore in CSR initiatives, focusing on education, healthcare, village infrastructure support, inclusive growth, environmental conservation, and wildlife habitat protection.
• Training and Development: Increased training hours to over 23,100, enhancing employee skills.
• Waste Management: A total of 4,132.56 metric tons of waste was generated, 348.99 metric tons was recycled or reused.

Management Outlook #

• Anticipates a continued growth rate of 15%, with potential to exceed industry growth rates.
• Expects improved margins in the UK business due to inventory loss stabilization.
• Expects the Bathware segment to break even or achieve single-digit margins in the current fiscal year.
• Projects double-digit growth in the adhesives, sealants and paints business due to new production facilities, reduced logistic costs, and stabilized raw material prices.

Detailed Analysis #

Segment-Wise Financial Analysis - Astral Limited #

3-Year Comparative Analysis of Assets, Liabilities, and Equity #

( ’ in Million)

Significant Changes in Major Line Items (>10% YoY) #

( ’ in Million)

Working Capital Trends #

( ’ in Million)

• Net Working Capital increased by ‘1442 Millions in comparison to last year.

Working Capital Ratios:

• Current Ratio has increased indicating an increase in Holding Current Assets.
• Net Working Capital Turnover has increase indicating a better management in working capital operations.

Debt Structure and Maturity Profile #

( ’ in Million)

• Long-term Borrowings are majorly unsecured.

Off-Balance Sheet Items #

• Contingent Liabilities: INR 27 Million (Previous year: INR 94 Million), primarily related to income tax and indirect tax matters.
• Capital Commitments: INR 2,491 Million (Previous Year: INR 1,142 Million)
• Letters of credit INR: 1,170 Million (Previous year: 596 Million)

Operating Performance #

Revenue Breakdown by Segment/Geography with Growth Rates #

• Plumbing: FY24 revenue of ₹41,420 million, contributing 73% of total revenue, with a year-on-year growth of 17.96% in revenue, and 24% growth in volume.
• Paints and Adhesives: FY24 revenue of ₹14,994 million, contributing 27% of total revenue, with a year-on-year growth of 5.12%.
• Bathware: Reported a revenue of ₹61 Crores
• Geographic Breakdown: Revenue from operations within India was ₹52,133 million in FY24, whereas operations outside India contributed ₹4,281 million. Revenue from within India grew 9.3% while outside India grew by 10.7%.

Cost Structure Analysis #

• Cost of Materials Consumed: Represented a major expense, with ₹31,277 million reported, including raw material and packing material consumption, in the standalone financials. The consolidated cost of raw materials consumed was at 34,774.
• Employee Benefit Expenses: Increased significantly by 39%, reaching ₹4,384 million for the year ended March 31, 2024, compared to ₹3,193 million in the previous year, in consolidated financials. The increase is 27% and 29% for standalone.
• Other Expenses: Other expenses, including power and fuel, freight and forwarding, and advertisement expenses, form a considerable portion of the cost structure.

Margin Analysis (Gross, Operating, Net) with Trends #

• EBITDA Margin (Consolidated): 17.02% for FY24, demonstrating an increase of 5.15% from 16.19% in FY23.
• PAT Margin (Consolidated): 9.67% for FY24, compared to 8.91% in FY23, an increase of 8.57%.

Non-Recurring Items #

• The Holding Company reported an Exceptional Item pertaining to the loss on the settlement of a fire insurance claim in FY23 for ’ 18 Million.

EPS Analysis (Basic/Diluted) #

• Basic EPS (Consolidated): ₹20.33 for FY24, an increase from ₹17.00 in FY23.
• Diluted EPS (Consolidated): ₹20.33 for FY24, an increase from ₹17.00 in FY23.

Cash Flow and Liquidity Analysis #

OCF, ICF, FCF Components (Consolidated) #

• OCF: Increased to ₹8,234 million in FY23-24 from ₹5,569 million in FY22-23, driven by improved profit before tax and favorable changes in working capital.
• ICF: Net cash outflow from investing activities was ₹5,410 million in FY23-24, compared to ₹4,797 million in the previous year. The Increase is attributable to the increased Payments for fixed assets purchases.
• FCF: The company increased cash and cash equivalents by 799 million during the year. An additional 266 million was added in other comprehensive income.

Working Capital Management Efficiency (Consolidated) #

• Inventory turnover ratio slightly decreased from 4.29 in FY22-23 to 3.97 in FY23-24, representing a slightly slower inventory movement.
• Trade receivables turnover ratio also decreased from 21.28 to 20.31, representing a slightly slower in collection.
• Trade payables turnover ratio decreased from 4.54 to 4.22, indicating the Group is less fast in paying its creditors.
• Net working capital turnover ratio improved from 6.41 to 7.19, indicating an improved cash conversion cycle.

Capex Analysis #

• Total capital expenditure during the period on tangible assets can be observed with a total for the current year of 5,244 million INR, compared to 2,913 Million INR in the previous year.

Dividend and Share Buyback Trends (Consolidated) #

• Total dividend paid (interim + final) amounted to ₹1,007 million in FY23-24, compared to ₹603 million in FY22-23.
• A final dividend of ₹2.25 per share was declared, subject to shareholder approval.

Debt Service Coverage (Consolidated) #

• Debt service coverage ratio improved significantly from 10.98 in FY22-23 to 26.00 in FY23-24, primarily due to the repayment of long-term borrowing and, secondarily, with an increase of 14.99% of EBITDA.

Liquidity Position and Cash Conversion Cycle (Consolidated) #

• Current ratio was 1.71 as of March 31, 2024, a slight reduction from 1.84 the prior year.
• Cash and cash equivalents increased to ₹6,094 million from ₹5,295 million, indicating improvement in immediate liquidity.
• The net working capital turnover improvement from 6.41 to 7.19 indicates faster conversion of working capital to sales.

Financial Analysis of Astral Limited: Key Performance Indicators (KPIs) #

Profitability Ratios (3-Year Trends) #

• Consolidated ROE: FY24: 17.53%, FY23: 17.27%, FY22: Data Not Available (DNA). Increased by 1.49% in the current year.
• Consolidated Net Profit Margin: FY24: 9.67%, FY23: 8.91%, FY22: DNA. Increased by 8.57%.
• Consolidated EBITDA Margin: FY24: 17.02%, FY23: 16.19%, FY22: DNA. Increased by 5.15%.
• Segment Margins (EBITDA):
  • Plumbing: FY24: 18.28% (Calculated: 7,572/41,420), FY23: DNA, FY22: DNA.
  • Paints and Adhesives: FY24: 13.54% (Calculated: 2031/14994), FY23: DNA, FY22: DNA.
• Consolidated Return on Net worth: FY24: 17.53%, FY23: 17.27%, FY22: DNA. Increased by 1.49%

Liquidity Metrics #

• Consolidated Current Ratio: FY24: 1.77, FY23: 1.72. Increased current ratio indicates improved performance.

Efficiency Ratios #

• Consolidated Inventory Turnover Ratio: FY24: 3.97, FY23: 4.42
• Consolidated Trade Receivables Turnover Ratio: FY24: 17.54, FY23: 17.50

Leverage Metrics #

• Consolidated Debt-Equity Ratio: FY24: 0.02, FY23: 0.02. Ratio remained at the same level.
• Consolidated Interest Coverage Ratio: FY24: 28.58, FY23: 36.98. Decreased by 22.71%.

Working Capital Ratios #

• Consolidated Net Working Capital Turnover Ratio: FY24: 7.94, FY23: 7.17. Increased by 10.73%

Astral Limited Business Segments Analysis #

Segment Performance Overview #

Revenue and Profitability #

• Plumbing:
  • FY24 Revenue: ₹41,420 million (17.96% YoY growth)
  • FY24 EBITDA: ₹7,572 million (24% volume growth)
  • Contributed 73% of total consolidated revenue.
• Adhesives, Sealants and Paints:
  • FY24 Revenue: ₹14,994 million (27% of total revenue)
  • FY24 EBITDA: ₹2,031 million (5.12% YoY growth)
  • Paints business faced a slight de-growth.
  • Bathware reported operations revenue of 61 crores.

Market Share and Competitive Position #

• Plumbing: Holds a commanding market share in the domestic CPVC and PVC pipe industry.
• Adhesives: Flagship brand “BondTite” has captured significant market share.
• Paints: Aims to capture substantial market share across various segments (economy to luxury).
• Bathware: Expects to break even or achieve single-digit margins in FY25.

Key Products/Services Performance #

• Plumbing:
  • Growth fueled by high-quality new products and segments.
  • Production volumes reached 334,040 MT (26.61% YoY growth), with capacity utilization at 66%.
  • Fire sprinkler business saw substantial growth with UL certification.
  • OPVC pipes introduction as a new product.
• Adhesives and Sealants:
  • Operationalization of the Dahej plant enhanced production capacity and efficiency.
  • “New Bharat” initiative has tapped into the rural market.
  • UK operations faced challenges due to inventory losses but are on a positive trajectory.
• Paints:
  • Launched a comprehensive range of products, including interior and exterior emulsions, primers, and putties.
• Bathware:
  • Introduced PTMT product portfolio.

Geographic Distribution and Market Penetration #

• Plumbing:
  • Guwahati and Cuttack plants are fully operational.
  • Proposed manufacturing units in Hyderabad and Kanpur for capacity expansion.
• Adhesives and Sealants:
  • Dahej plant operational, enhancing cost competitiveness.
  • UK operations are showing positive signs.
• Paints:
  • Plans to launch Astral-branded paint products in Tamil Nadu, Karnataka, Kerala, and Gujarat.
  • Overall 31 Export countries.

Segment-wise CAPEX and ROIC #

• Overall:
  • FY24 Capital Expenditure: ₹5,757 million (Consolidated).
  • Increased plumbing business installed capacity by 15.12% (from 290,176 MT to 334,040 MT).
  • FY24 Consolidated ROCE: 24.42%
• Plumbing:
  • Proposed new facilities at Hyderabad (70,000 MT/p.a) and Kanpur (60,000 MT/p.a)

Operational Efficiency Metrics #

• Plumbing: Decentralized manufacturing strategy reduced logistical costs and improved supply chain efficiency. Capacity utilization improved.
• Adhesives: Operationalization of the state-of-the-art facility at Dahej enhancing production efficiency and cost competitiveness.

Growth Initiatives and Challenges #

• Growth Initiatives:
  • Plumbing: Expanding manufacturing footprint with new units in Hyderabad and Kanpur. Introducing new products like OPVC and aluminum PEX pipes.
  • Adhesives and Sealants: Focus on backward integration and the “New Bharat” initiative for rural market penetration.
  • Paints: Strategic marketing campaigns and dealer loyalty programs. Planned expansion in South and West India.
  • Bathware: Focusing on innovation and quality to strengthen distribution network.
• Challenges:
  • Adhesives and Sealants (UK): Faced challenges due to inventory losses and raw material price fluctuations, impacting EBITDA margin, in spite of improved margins.
  • Overall: Inflation and input cost volatility, particularly in polymers and chemicals, presented challenges that were navigated through strategic pricing adjustments and cost management.
• Overall: Anticipates continued growth rate of 15%.

Segment-Wise Financial Analysis - Astral Limited #

Plumbing Segment (Pipes, Fittings, Water Tanks, and Bathware) #

Strategic Risks #

• Severity: High
• Likelihood: Medium
• Trend: Stable
• Mitigation Strategies: Capacity expansion, new product introductions, and NSF certification.
• Control Effectiveness: Partially Effective
• Potential Financial Impact: Not Quantifiable

Operational Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Decreasing
• Mitigation Strategies: Decentralized manufacturing strategy and strengthening the distribution network.
• Control Effectiveness: Effective
• Potential Financial Impact: Not quantifiable

Financial Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Stable
• Mitigation Strategies: Strategic pricing adjustments and cost management initiatives.
• Control Effectiveness: Effective
• Potential Financial Impact: Lower polymer prices

Compliance/Regulatory Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Obtaining certifications (Green Pro, NSF, DIBT & SKZ)
• Control Effectiveness: Effective
• Potential Financial Impact: Not Quantifiable

Paints and Adhesives Segment #

Strategic Risks #

• Severity: High
• Likelihood: High
• Trend: Potentially Improving
• Mitigation Strategies: Operationalization of the Dahej plant, New Bharat initiative, and strategic marketing for Astral Paints.
• Control Effectiveness: Partially effective
• Potential Financial Impact: Not directly quantifiable

Operational Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Improving
• Mitigation Strategies: Focus on backward integration, innovative product launches, and the New Bharat initiative.
• Control Effectiveness: Partially effective
• Potential Financial Impact: Inventory losses in the UK were significant but not quantified.

Financial Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Improving
• Mitigation Strategies: Strategic pricing, cost management, and planned expansion.
• Control Effectiveness: Partially effective
• Potential Financial Impact: Not Directly quantifiable

Strategic Analysis of Astral Limited #

Long-Term Strategic Goals and Progress #

• Plumbing: Aiming for leadership in building materials with innovation, sustainability, and customer satisfaction. Progress is shown by a 24% growth, new product launches, and expanded manufacturing (Guwahati, Cuttack, and proposed units in Hyderabad and Kanpur).
• Adhesives and Sealants: Goals include capturing significant market share. Operationalization of the Dahej plant is enhancing production capacity. The “New Bharat” initiative targets rural market penetration.
• Paints: Long-term diversification strategy with planned product launches in key states to capture market share. Restructuring and system implementations (SAP) indicate progress.
• Bathware: Expanding product portfolio through the introduction of new products aligned to strategic vision.

Competitive Advantages and Market Positioning #

• Plumbing: Strong position as India’s Most Trusted Pipe Brand. Pioneering CPVC piping systems and continuous product innovation (e.g., low-noise drainage pipes, lead-free uPVC pipes) provide a competitive edge. Extensive distribution network (over 229,000 dealers and 3,303 distributors) bolsters market reach.
• Adhesive and Sealants: BondTite is the flagship brand of Astral and is capturing a significant market share.
• Paints: Leveraging the existing distribution network and brand equity of Astral constitutes a key competitive advantage.
• Bathware: Appointment of industry professionals and product range shows focus.

Innovation Initiatives and R&D Effectiveness #

• Plumbing: Continuous R&D is evident, with innovations like low-noise drainage pipes, lead-free uPVC pipes, and NSF-certified water tanks with anti-viral copper shield technology. R&D expenditure of ₹19.43 million in FY 23-24.
• Adhesives and Sealants: Focus on product development of eco-friendly and sustainable products, with low VOC content.
• Paints: Development of a comprehensive range of products, including interior and exterior emulsions, primers, and putties, demonstrates a commitment to innovation in this new segment.
• Bathware: Focus is on R&D to improve design and functionality.

M&A Strategy and Execution #

• The acquisition of a controlling stake in Gem Paints Private Limited (now Astral Coatings Private Limited) showcases Astral’s strategic expansion into the Paints segment. Completed the acquisition of 80% of equity shares of Gem Paints.
• The Scheme of Arrangement involving Gem Paints and Esha Paints highlights a strategic restructuring to optimize the acquired business.

Management’s Track Record in Execution #

• Consistent revenue and profitability growth in the plumbing segment, along with capacity expansion, indicate effective management execution.
• Operationalization of new plants (Guwahati, Cuttack, Dahej) demonstrates project management capabilities.
• Successful launch and market penetration of new products (e.g., Astral Paints) shows management’s ability to execute diversification strategies.
• Great Place to Work certification for three consecutive years reflects management’s focus on human resources.

Capital Allocation Strategy #

• Significant capital expenditure (₹19.43 million in plant & machinery, factory building, and R&D in FY 23-24) indicates a focus on growth and expansion.
• Investments in renewable energy (solar power installations) demonstrate a commitment to sustainability.
• Dividend payments (Interim and proposed Final) and share buybacks reflect a balanced approach to rewarding shareholders.

Organizational Changes and their Impact #

• Operationalization of new manufacturing facilities (Guwahati, Cuttack, Dahej) represents organizational expansion, increasing production capacity and market reach.
• The “New Bharat” initiative in the adhesives and sealants segment indicates a focus on expanding distribution and brand presence in rural markets.
• The appointment of new Whole Time Directors enhances operational efficiency.

ESG Framework #

Environmental Metrics and Targets #

• Energy Consumption: Total energy consumption for FY 23-24 was 595,329.53 GJ, increased from 478,299.71 GJ in FY 22-23. The increase resulted from commissioning of operations at 2 new facilities and improved tracking.
• Energy Intensity: Energy intensity per Million INR of turnover was 11.67 GJ in FY 23-24, compared to 10.37 GJ in FY 22-23.
• Renewable Energy: 16% of total energy consumption in the Santej Plant and 17% in the Dholka plant were from renewable sources. Solar power capacity was increased and green power was procured from windmills.
• Water Withdrawal: Total water withdrawal for FY 23-24 was 117,224.01 kiloliters, increased from 105,799.00 kiloliters in FY 22-23.
• Water Consumption: Total water consumption for FY 23-24 was 117,224.01 kilolitres.
• Water Intensity: Water intensity per rupee of turnover was 22.97 kl per INR Crore.
• Waste Management: Total waste generated in FY 23-24 was 4,132.56 metric tonnes. Waste management practices include recycling and disposal as per Hazardous Waste Management rules.
• GHG Emissions: Scope 1 emissions were 4,757.09 tCO2e, and Scope 2 emissions were 88,722.33 tCO2e in FY 23-24.
• Air Emissions: Emitted 0.60 tons of NOx and 0.23 tons of SOx in FY 23-24.
• Green Certification: CPVC Pro and Drain Pro products received Green Pro certification, and Astral Fire Pro received ISI certification. Water tanks were also certified by NSF.

Social Responsibility Programs #

• CSR Expenditure: The Company spent ₹ 112.32 Million on CSR activities, meeting the 2% of average net profit requirement.
• Focus Areas: Initiatives included education (Sarathi and Abhaya projects), healthcare (Aarogyam project, support for GMERS Medical College), village infrastructure support, inclusive growth programs (Sanjivani and Disha projects), environmental conservation (Paryavaran Project), and wildlife conservation projects.
• Community Engagement: CC road construction and village infrastructure support.

Governance Structure and Effectiveness #

• Board Composition: The Board consists of 10 Directors, with 5 Executive and 5 Non-Executive Independent Directors.
• Board Meetings: The Board met 4 times during FY 23-24, with high attendance rates.
• Committees: The Company has Audit, Stakeholders’ Relationship, Nomination and Remuneration, Risk Management, and CSR Committees in place, all constituted as per statutory requirements.
• Code of Conduct: A Code of Conduct for Board Members & Senior Management Personnel is adopted and affirmed.
• Whistle-Blower Policy: A Vigil mechanism and Whistle-blower policy are in place.
• Related Party Transactions: Transactions were at arm’s length and in the ordinary course of business.

Sustainability Investments and ROI #

• Energy Conservation Investments: The Company invested ₹ 26.09 Million in energy conservation equipment.
• R&D Investment: Investment on developing special testing equipment and new formulations (low VOC).
• Green Building: Dholka facility is certified green, and the company plans to expand this.

Regulatory Compliance and Future Preparations #

• Compliance: The Company states compliance with the Companies Act, 2013, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, and applicable accounting standards (Ind AS), and with environmental laws including Water and Air Pollution Act.
• Internal Controls: The Company has institutionalized internal controls and risk management systems.
• EPR: Registered under Extended Producer Responsibility.
• Audit Trail: Company has implemented audit trail, and are improving the software to encompass direct data changes.

Astral Limited: Segment-Wise Financial Analysis #

Plumbing (Pipes, Fittings, Water Tanks, and Bathware) #

Management Guidance and Assumptions #

• Plumbing business growth fueled by the introduction of high-quality new products and segments, also by the expansion of manufacturing capabilities.
• Assumed growth in Fire Sprinkler business, supported by key approvals like UL certification, and the operationalization of the Guwahati and Cuttack plants.

Market Growth Forecasts #

• The Indian plastic pipes industry is projected to grow at a CAGR of 14.18%.
• The Indian water tank market expected to grow at CAGR 8-10%.

Planned Strategic Initiatives #

• Continued expansion of manufacturing footprint with proposed units in Hyderabad and Kanpur.
• Introduction of new products, including OPVC and aluminum PEX pipes.
• Continued expansion of its bathware product portfolio and strengthening its distribution network.

Capital Expenditure Plans #

• Increased installed capacity of plumbing business by 15.12% from 290176 M.T. to 334040 M.T. during FY 23-24.
• Incurred capital expenditure of ₹19.43 million towards plant & machineries, factory building, and other capital expenditure for the plumbing segment.
• Proposed manufacturing units in Hyderabad and Kanpur with capacities of 70,000 MT/p.a. and 60,000 MT/p.a., respectively.

Efficiency Improvement Targets #

• Capacity utilization in the plumbing segment improved, with production volumes reaching 334,040 MT, with a 26.61% year-on-year growth.
• Decentralized manufacturing strategy aims to enhance logistical efficiency and market reach.
• About 9,03,148.15 KHW energy saved in Pipe Segment, 8,973 KWH energy saved in Bathware.

Potential Challenges and Opportunities #

• Challenges:

  • Managing raw material price volatility, particularly for polymers.
  • Intense competition from existing and new players.
  • Technological Obsolescence.

• Opportunities:

  • Government initiatives like the Jal Jeevan Mission and “Nal se Jal” are expected to be significant growth drivers.
  • Rapid urbanization and the “Housing for All” initiative are driving demand.
  • Growing agricultural demand for irrigation systems.
  • Technological advancements, such as low-noise drainage pipes and anti-bacterial pipes.
  • Shift towards the organized sector and branded products.
  • Cross-selling opportunities with the expansion into bathware.

Scenario Analysis & Sensitivity #

• Sensitivity to Raw Material Price Volatility: The anticipated stabilization of raw material prices should support margin expansion. Failure of raw material prices to stabilize presents downside risk to projected EBITDA margins.
• Sensitivity to Government Spending: A reduction or delay in government spending on infrastructure projects (e.g., “Nal se Jal”) could negatively impact demand for plumbing products.

Paints and Adhesives #

Management Guidance and Assumptions #

• Management anticipates double-digit growth, driven by stabilization of raw material prices and improved operational efficiency, especially from the Dahej plant.
• The company plans to launch Astral-branded paint products in Tamil Nadu, Karnataka, Kerala, and Gujarat in the coming months
• The New Bharat initiative is expected to continue driving growth in rural markets for adhesives.
• Management forecasts a revenue target of 15% to 20% in the paints business within next few years.

Market Growth Forecasts #

• Indian adhesives and sealants market is projected to grow at a CAGR of 8-10% from 2024 to 2032.
• Indian paints industry is projected to grow at a CAGR of 8-10% over the next few years.

Planned Strategic Initiatives #

• Expansion of product portfolio and strengthening of distribution network in both adhesives and paints.
• Focus on innovation and quality, including eco-friendly and sustainable product formulations.
• Leveraging synergies from the acquisition of Astral Coatings Private Limited (formerly Gem Paints Private Limited).
• The company plans to launch Astral-branded paint products in Tamil Nadu, Karnataka, Kerala, and Gujarat in the coming months.
• To strengthen its leadership in this segment, Astral has appointed an industry veteran from Nerolac Paints to lead the paint business.

Capital Expenditure Plans #

• Continued investment in R&D for new formulations and product offerings.

Efficiency Improvement Targets #

• Operationalization of the Dahej plant has improved cost efficiency and product consistency.

Potential Challenges and Opportunities #

• Challenges:

  • Competition in the paints and adhesives markets.
  • Raw material price volatility (though expected to stabilize).
  • UK operations faced challenges due to fluctuations in raw material prices, resulting in a lower EBITDA margin.

• Opportunities:

  • Growing construction industry, rising automotive production, and increasing packaging requirements are driving demand for adhesives and sealants.
  • “Make in India” initiative is enhancing manufacturing competitiveness.
  • Urbanization and rising disposable incomes are boosting demand for decorative paints.
  • Expansion into rural markets presents significant growth potential.
  • Shift towards premium and luxury paint products.

Scenario Analysis & Sensitivity #

• Sensitivity to Raw Material Prices: While management anticipates stabilization, unexpected increases in polymer and chemical prices could pressure margins.
• Sensitivity to Market Share Capture: The success of Astral Paints hinges on its ability to gain a substantial market share. Lower-than-expected market penetration would negatively impact revenue projections.
• Sensitivity to UK Operations: Continued challenges in the UK market due to inventory losses could negatively impact overall segment profitability.

Audit and Compliance Analysis #

Auditor’s Opinion and Qualifications #

• The auditors issued an unmodified (clean) opinion on the standalone and consolidated financial statements, indicating compliance with accounting principles generally accepted in India.
• The audit opinion relies, in part, on the reports of other auditors for four subsidiaries and one joint venture.
• Audit trail feature was not enabled for direct changes to data, Holding Company, and Indian Subsidiary has initiated steps to enable the same.

Key Accounting Policies and Changes #

• The Group has adopted the following policies and changes:
  • The definition of accounting estimates.
  • Disclosure of accounting policies
  • Deferred tax related to assets and liabilities arising from a single transaction.
• Changes in the accounting policy has had an impact on the disclosures of accounting policies, but not on the measurement, recognition, or presentation of any items in the Group’s consolidated financial statements.
• Accounting policies were consistently applied, except for new standards adopted.

Internal Control Effectiveness #

• The auditors stated that the Holding Company and its Indian Subsidiary maintained adequate internal financial controls over financial reporting, and these controls operated effectively as of March 31, 2024.
• During the audit for the Holding Company, the audit trail feature in the accounting software was not enabled for direct changes to data, although the Company initiated steps to enable it.

Regulatory Compliance Status #

• The Company complied with statutory provisions, the Companies Act, 2013, SEBI Regulations, and applicable accounting standards.
• Paid annual listing fees to BSE and NSE for FY 23-24 & 24-25.
• Interim and final dividend was declared and paid, in compliance with relevant regulations.
• Astral Coatings Private Limited is deemed a material subsidiary.
• No material non compliances in regard to the statutory compliances.

Legal Proceedings and Potential Impact #

• The Company disclosed the impact of pending litigations in the notes to the financial statements (Note 33 for Standalone and Consolidated, respectively).
• Contingent Liabilities:
  • Standalone: Disclosed contingent liabilities related to Income Tax and GST/VAT/Central Sales Tax.
  • Consolidated: Also disclosed contingent liabilities for Income Tax and GST/VAT/Central Sales Tax.

Related Party Transactions #

• Transactions with related parties are disclosed in the notes (Note 36 & 37 for Standalone and Consolidated, respectively). The Company claims these transactions are at arm’s length.
• During the financial year 23-24, the Holding Company completed the acquisition of 80% equity shares of GPPL (51% against redemption of optionally Convertible Debentures, and 29% equity shares towards Second Tranche acquisition.
• Related party transactions are subject to Audit Committee and Board approval, with an omnibus approval process for repetitive transactions.

Subsequent Events #

• The Board of Directors proposed a final dividend of ₹2.25 per share, subject to shareholder approval at the AGM.
• Name of GPPL has been changed to Astral Coatings Private Limited.

Accounting Quality and Regulatory Risk Assessment #

• The absence of a modified audit opinion and reported adherence to accounting standards suggest adequate accounting quality. However, reliance on management’s estimates (e.g., goodwill impairment, recoverable amounts) and the identified issues with accounting software audit trail pose potential, but relatively minor, risks.
• The Company’s compliance with listing regulations, tax laws, and disclosure requirements is presented as robust, with no significant non-compliances.