DIC India Ltd:Annual Report 2023-24 Analysis

DIC India Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History: DIC India Ltd. (formerly Coates of India Ltd.) was established in 1947. It has a rich history rooted in the printing inks and allied materials industry in India.

Headquarters Location and Global Presence: The company’s headquarters are located in Kolkata, India. DIC India is part of the DIC Corporation, a global organization headquartered in Japan. This connection provides DIC India with access to global technologies, R&D, and best practices.

Company Vision and Mission: While publicly available statements of DIC India’s specific vision and mission are limited, they align with the parent company, DIC Corporation, which focuses on:

• Vision: To be a unique global company that offers “Color & Comfort” to people’s lives.
• Mission: To contribute to a sustainable society by providing innovative solutions that enrich people’s lives and protect the global environment.

Key Milestones in their Growth Journey:

• 1947: Establishment as Coates of India Ltd.
• Later: Integration into the global DIC Corporation network.
• Present: DIC India has established itself as a leading player in the Indian printing inks and allied materials market.

Stock Exchange Listing Details and Market Capitalization: DIC India Ltd. is listed on the Bombay Stock Exchange (BSE: 500121). Market capitalization fluctuates based on market conditions. You can find up-to-date information on financial websites like the BSE, NSE, or Google Finance.

Recent Financial Performance Highlights: You can find the most up-to-date financial performance data on DIC India’s official website and on financial news portals by looking for the most recent quarterly or annual reports.

Management Team and Leadership Structure: DIC India’s leadership team typically consists of a Managing Director/CEO and other functional heads (Finance, Operations, Sales, etc.). Specific names and titles can be found on the company’s website or in their annual reports.

Their Products #

Complete Product Portfolio with Categories: DIC India offers a wide range of printing inks and allied materials. The key categories include:

• Sheetfed Inks: For offset printing on paper and board.
• Web Offset Inks: For high-speed printing on web presses.
• Liquid Inks: Primarily used for flexible packaging and labels (Gravure and Flexo inks).
• Specialty Inks: Include inks for specific applications like UV inks, metallic inks, security inks, and coatings.
• Printing Chemicals & Coatings: Varnishes, fountain solutions, and other chemicals used in the printing process.

Flagship or Signature Product Lines: While specific product names may vary, DIC India is known for its high-quality sheetfed and web offset inks, as well as its range of liquid inks for packaging.

Manufacturing Facilities and Production Capacity: DIC India has manufacturing facilities located across India. Specific production capacity figures are generally not publicly disclosed.

Quality Certifications and Standards: DIC India adheres to international quality standards, including ISO certifications for quality management systems.

Any Unique Selling Propositions or Technological Advantages: DIC India leverages the technology and R&D of its parent company, DIC Corporation, providing access to advanced ink formulations, specialized additives, and innovative printing solutions. They also focus on sustainable and eco-friendly ink technologies.

Primary Customers #

Target Industries and Sectors: DIC India serves a broad range of industries, including:

• Printing and Packaging: Commercial printers, packaging converters, label manufacturers.
• Publishing: Newspaper and magazine publishers.

Geographic Markets (Domestic vs. International): DIC India primarily focuses on the domestic Indian market. They may also export to neighboring countries or participate in global supply chains through DIC Corporation.

Major Client Segments (agricultural, industrial, residential, etc.): Primarily targets the industrial printing and packaging segments.

Distribution Network and Sales Channels: DIC India utilizes a combination of direct sales and a network of distributors and dealers to reach its customers across India.

Major Competitors #

Direct Competitors in India and Globally:

• Hubergroup India: Another major player in the Indian printing inks market.
• Sakata Inx: A global ink manufacturer with a presence in India.
• Flint Group: A global player with Indian operations.
• Toyo Ink: Another global ink manufacturer.

How they differentiate from competitors:

• Global Technology: Leverage DIC Corporation’s R&D.
• Wide Product Range: Offering solutions for diverse printing needs.
• Established Reputation: Long-standing presence in the Indian market.
• Focus on Sustainability: Development of eco-friendly inks.

Future Outlook #

Expansion Plans or Growth Strategy: DIC India is expected to continue to grow by:

• Expanding its product portfolio: Focusing on innovative and specialty inks.
• Strengthening its distribution network: Reaching more customers in emerging markets.
• Investing in R&D: Developing sustainable and high-performance inks.

Sustainability Initiatives or ESG Commitments: Aligned with DIC Corporation, DIC India is likely focusing on developing eco-friendly inks, reducing its environmental footprint, and promoting sustainable manufacturing practices.

Industry Trends Affecting their Business:

• Growth in Packaging: Increasing demand for packaging inks due to e-commerce and consumer goods.
• Digital Printing: While a competitor to traditional printing, DIC India is likely exploring digital ink solutions.
• Sustainability: Growing demand for eco-friendly and bio-based inks.
• Raw Material Price Volatility: Fluctuations in raw material prices can impact profitability.

DIC India Limited Performance Analysis #

Three-Year Trend Analysis of Key Financial Metrics #

Key Observations:

• Turnaround: DIC India experienced a challenging 2023, reflected in the loss and negative EPS. However, 2024 demonstrated a strong recovery, with a return to profitability and positive EPS.
• Revenue Stability: While there was a dip in 2023, revenue has been relatively stable, with 2024 showing growth over 2023, exceeding 2022.
• Exceptional items in 2023: The significant loss in 2023 was heavily influenced by the exceptional item related to the Kolkata Plant closure.

Business Segment Performance #

DIC India operates primarily in a single reportable segment: Printing Inks, including newsprint ink, offset ink, liquid ink, and lamination adhesives. Sub-segment trends:

• Packaging Inks & Coatings: Growth drivers in flexible packaging (gravure and flexo inks), applications in food, beverage, and oil packets. The launch of “AquaSmart,” “Hikari HSKF,” “Smart KF,” and “Smart TF” indicates a focus on innovation and sustainability.
• Publication Inks: Products like “Popular,” “Polar,” and “Express” for news inks, and inks for textbooks. Emphasis on minimizing wastage and optimizing the printing process.
• Adhesives: Both solvent-based and solvent-free adhesives, with specific product names and applications. The new plant in Bengaluru for adhesives suggests a strategic focus on growing this sub-segment.
• Mineral Oil Free Ink: Launched Mineral Oil Free (MOF) ink for food packaging.
• Launched UV packaging: High Speed UV inks and LMLO Inks for food, cosmetic, healthcare, pharmaceutical and tobacco.
• Barrier coating and adhesive: Launched functional barrier coating to control the flow of oil, grease, water, moisture, oxygen and other fluids.
• Solar adhesive: Energy saving adhesive for solar cells.

Overall, the packaging and adhesives sub-segments appear to be areas of growth and strategic investment, while publication inks are likely focused on efficiency and market share maintenance.

Major Strategic Initiatives and Their Progress #

• Sustainability:

  • Eco-friendly Products: Developing and commercializing water-based, toluene-free, and mineral oil-free inks. Examples include “AquaSmart” and “MO Free Inks.” Barrier coatings and adhesives are also emphasized.
  • Renewable Energy: Using open-access solar power at the Noida plant and dual-fuel (PNG & Diesel) generators.
  • Waste Reduction: Implementing projects like “Saksham” for zero-waste management in Sayakha.
  • CO2 Emission Reduction: Achieved a 4% reduction in CO2 emissions per ton of product in 2024.
  • Water Conservation: Achieved a 20% reduction in water consumption per ton of product in 2024.

• Operational Efficiency:

  • Cost Productivity: Optimizing supply chain operations and enhancing asset utilization.
  • Digital Transformation: Investments in digital tools and processes for improved customer engagement and operational efficiency.
  • Process improvements Self closing taps, cold and hot insulations, Batch time optimisation, water metering etc.

• Innovation & Product Development:

  • R&D Centers: The Noida and Bengaluru R&D centers are developing new products, processes, and applications.
  • New Product Launches: Examples include “Sigma WAL inks” for wrap-around labels and various specialized adhesives.
  • Future Ready Inks: Innovations in metal deco inks, narrow web printing, and specialized flexible packaging inks.

• Talent Management:

  • Identifying critical development areas for key position holders.
  • Personalized Individual Development Plans (IDPs).
  • Deployment of development centers to evaluate competencies.
  • Introduction of key behavioral training programs.

• Geographical Expansion

  • New Manufacturing facility for Liquid Inks, News Colour Inks & Flexo Inks at Noida Plant
  • New manufacturing facility for Adhesives & PU Resins at Bengaluru plant.

• Kolkata Plant Closure: Completed closure and handed over the leased premises. This was a significant strategic decision to optimize operations.

• CSR Initiatives:

  • Project Deeksha: Improving access to quality education.
  • Project Saksham: Integrated Decentralised Solid Waste Management.

Progress appears strong on sustainability and innovation fronts, with measurable results in emission and water reduction, and multiple new product launches.

Risk Landscape Changes #

Key risks:

• FMCG Demand Slowdown: Reduced consumer spending impacts demand for packaging, affecting ink sales.
• Inflationary Pressures: Elevated input costs (raw materials) strained margins.
• Geopolitical Uncertainties: Global economic uncertainties and supply chain disruptions.
• Raw Material Volatility: Fluctuations in raw material costs and availability.
• Competition: Growing intensity of competition from both multinational players and domestic enterprise.
• Cybersecurity Risk: The company is vunerable to cyber attack and therefore, the company is continuously investing in safeguarding its systems and enhancing cybersecurity measures.
• Regulatory: Compliance risk is a risk factor for the company’s long term sustainability.

Overall, the risk landscape remains challenging, with macroeconomic factors and raw material volatility being key concerns.

ESG Initiatives and Metrics #

• Environmental:

  • CO2 Emission Reduction: 4% reduction per ton of product in 2024.
  • Water Conservation: 20% reduction in water consumption per ton of product in 2024.
  • Waste Management: “Saksham” project for zero waste in Sayakha; focus on waste elimination, reduction, and recycling.
  • Renewable Energy: Use of solar power and dual-fuel generators.
  • Product Stewardship: Developing eco-friendly and sustainable inks (water-based, toluene-free, mineral oil-free).
  • EHS Compliance: Adherence to health, safety, and environmental regulations; internal regulatory compliance portal “Sankalp.”
  • Safety: Securing Karnataka State Safety Award.
  • Zero Reportable Incident: Achieved zero reportable and fire incidents.

• Social:

  • Corporate Social Responsibility (CSR):
    • Project Deeksha: Focus on education in underserved communities.
    • Project Saksham: Integrated waste management in Sayakha, Gujarat.
  • Employee Well-being: Focus on talent management, training, and development. Initiatives like “Moments of Success” for employee recognition.
  • Safety Culture: Emphasis on employee safety and well-being, with a “Safety is License to Operate” philosophy. Training programs and safety initiatives.
  • Employee: 347 employees working in the company.

• Governance:

  • Board Oversight: Board committees (Audit, Nomination & Remuneration, Stakeholders’ Relationship, CSR, Risk Management) actively involved in governance.
  • Code of Conduct: Adherence to a Code of Business Conduct for employees, directors, and stakeholders.
  • Whistleblower Policy: A vigil mechanism for reporting concerns.
  • Transparency: Commitment to transparency and disclosures, including compliance with SEBI Listing Regulations.
  • Risk Management: Risk Management Policy and Committee to identify and mitigate risks.

DIC India demonstrates a strong commitment to ESG, with measurable progress in environmental performance and active social responsibility initiatives.

Management Outlook #

• Business Strategy: Focus on “I-ESG” (Innovation, Environment, Sustainability, and Governance) principles. This includes enhancing operational efficiency, driving sustainability, and strengthening market position through innovative and eco-friendly products.

• DIC Vision 2030: A long-term vision focused on balancing financial profits with social significance. Emphasis on Green, Digital, and Quality of Life (QOL) initiatives.

• Challenges: Acknowledges ongoing risks like inflation, geopolitical uncertainties, and sustainability regulations.

The management outlook is cautiously optimistic, emphasizing sustainability, innovation, and operational efficiency as key drivers for future growth, while acknowledging ongoing economic and industry challenges.

Comparative Analysis with Industry Averages #

• Revenue Growth: The single-digit revenue growth in 2024 is likely in line with, or slightly below, the expected CAGR of 6.5% for the Indian printing ink industry.
• Sustainability: DIC India’s focus on sustainability is likely above the industry average.
• Profitability: The return to profitability in 2024 is positive.
• Innovation: With its 2 R&D centres and new products, the company is investing heavily in innovation and product development.

A more precise comparative analysis would require access to industry reports and financial data of other major players in the Indian printing ink market.

Detailed Analysis #

Financial Analysis of DIC India Limited #

Balance Sheet Analysis (2023-2024) #

This analysis focuses on DIC India Limited’s financial position based on the provided data. Note that specific industry benchmarks are not available within this document.

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

(INR. in Lakhs)

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

Several line items show significant changes (greater than 10% YoY):

• Capital Work-in-Progress (Non-Current Assets): Decreased significantly by 46.38%, likely due to the completion and capitalization of projects or potentially project cancellations/deferrals.
• Deferred Tax Assets (Non-Current Assets): Decrease of 28.46%.
• Non-Current Tax Assets (Net): Increase of 36.25%.
• Inventories (Current Assets): Increased by 12.84%, potentially indicating increased production or slower sales.
• Cash and Cash Equivalents: Decreased by 19.75%
• Lease Liabilities (Non-current): Decrease of 35.7%.
• Borrowings (Current Liabilities): Decreased by 100%, indicating the Company repaid all its short-term borrowings.
• Trade Payables (MSME): Increase of 20.66%
• Other Current Liabilities: Increase of 17.15%.
• Current Tax Liabilities (Net): Substantial increase, indicating a larger tax liability in the current year.

Working Capital Trends #

Working Capital = Current Assets - Current Liabilities

• 2024: 42,207.44 - 16,857.73 = 25,349.71
• 2023: 39,656.16 - 17,700.05 = 21,956.11

Working capital increased from 2023 to 2024. The increase is driven primarily by an increase in Trade receivables and inventories, while cash decreased.

Asset Quality Metrics #

• Impairment: The notes mention an impairment reversal/charge related to the Kolkata Plant closure.

The inventory turnover increase is minor. The trade receivables turnover is slower, suggesting potential collection issues or longer credit terms.

Debt Structure and Maturity Profile #

• Maturity Profile:
  • Short-Term Borrowings: Reduced to zero in 2024.
  • Lease Liabilities: Split between current (341.49) and non-current (342.70).
  • Trade payable aging is provided in point 22.

The company significantly reduced its debt burden in 2024. The debt-to-equity ratio is very low. The interest coverage ratio is high.

Off-Balance Sheet Items #

• Contingent Liabilities: Note 37 details contingent liabilities related to tax disputes and claims:
  • Income Tax Matters: Not quantified
  • Custom Duty Matters: INR 140.91 Lakhs
  • Excise Duty Matters: INR 836.06 Lakhs
  • Service Tax Matters: INR 1,162.86 Lakhs
  • Sales Tax/VAT/Entry Tax Matters: INR 383.16 Lakhs
  • Goods and Services Tax: INR 41.16 Lakhs
• Commitments: Note 37(b) mentions capital commitments, but there are amounts specified.

The most significant off-balance sheet items are the contingent liabilities related to tax disputes.

Conclusion #

DIC India Limited shows a strong financial position in 2024, with low debt, increased working capital, and a reasonable asset turnover. However, the increase in inventory, the decrease in cash and cash equivalents, and the significant contingent liabilities warrant further investigation. The company’s proactive reduction of debt is a positive sign, but the reasons behind the shifts in asset composition and the potential impact of the contingent liabilities need to be carefully considered. The sharp increase in current tax liabilities also requires explanation.

Financial Analysis of DIC India Limited #

Revenue Breakdown by Segment/Geography with Growth Rates: #

• Segment: DIC India Limited operates primarily in a single segment: “Printing Inks,” which includes newsprint ink, offset ink, and liquid ink used in newspapers, other publications, and packaging industries, also provides lamination adhesive. Because it’s a single segment, there’s no further breakdown by product lines in the financial statements.
• Geography:
  • Domestic: Revenue for FY24: ₹78,539.34 lakhs. Revenue for FY23: ₹74,449.15 lakhs. Growth: 5.5%
  • Export (including deemed exports): Revenue for FY24: ₹9,613.55 lakhs. Revenue for FY23: ₹8,435.99 lakhs. Growth: 13.96%
  • Total Revenue has grown from 82,885.14 Lakhs to 88,152.89 Lakhs, that is by 6.35%.

Cost Structure Analysis: #

The major cost components for DIC India Limited are:

• Cost of Materials Consumed: This is the largest expense, representing 67.7% of total revenue in FY24 (₹59,679.91 lakhs) and 69.5% in FY23 (₹57,645.70 lakhs).
• Purchase of Stock-in-trade: 8.14% of Total income in FY24, and 5.84% in FY23.
• Changes in Inventories: Negative figure represent increase in Inventory.
• Employee Benefits Expense: Represents 7.6% of total revenue in FY24 (₹6,682.15 lakhs) and 8.9% in FY23 (₹7,413.68 lakhs).
• Other Expenses: A significant category, making up 13.02% of total revenue in FY24 (₹11,477.46 lakhs), and 14.09% in FY23 (₹11,684.03 lakhs). This includes a wide variety of costs like power and fuel, freight and forwarding, royalty, and legal/professional fees.
• Depreciation and Amortization: Relatively stable at 1.92% of total revenue in FY24.

Margin Analysis: #

• There is no gross profit data, as cost of goods sold data is split into many components.

EBIT Margin: #

• FY24: (Profit before tax + Finance costs) / Total Income = (2,433.29 + 89.29)/89,169.63= 2.82%
• FY23: (Loss before tax + Finance costs) / Total Income = (-634.29 + 139.31)/83,789.73= -0.59%

Net Profit Margin: #

• FY24: Net Profit / Total Income = 1,914.23 / 89,169.63= 2.15%
• FY23: Net Loss / Total Income = (2,267.62) / 83,789.73 = -2.71%

Margin Trend: #

The EBIT and Net margins both show a shift from loss in 2023 to profit in 2024, indicating a good recovery.

Operating Leverage: #

• It’s difficult to precisely calculate the degree of operating leverage (DOL) without a more detailed breakdown of fixed vs. variable costs. It can be observed that the Company has high fixed cost assets, and the fixed cost would comprise of manufacturing cost, employee cost, and administrative cost.

Non-Recurring Items: #

• Exceptional Items: In FY23, there was a significant exceptional item of ₹(2,299.00) lakhs. It related to the Kolkata plant closure, and includes impairment reversals/charges, write-offs of property, plant and equipment, staff separation costs, and legal/ancillary costs. There were no exceptional items in FY24.

GAAP vs. Non-GAAP Reconciliation: #

• The provided financial statements are prepared in accordance with Indian Accounting Standards (Ind AS), which are converged with IFRS. There is no presentation of non-GAAP measures that would require reconciliation.

EPS Analysis: #

• FY24:
  • Basic EPS: ₹20.85
  • Diluted EPS: ₹20.85
• FY23:
  • Basic EPS: ₹(24.71)
  • Diluted EPS: ₹(24.71)

The EPS shifted from negative to positive. Because there were no potentially dilutive securities (like convertible bonds or stock options), basic and diluted EPS are the same.

Cash Management Analysis of DIC India Limited #

Detailed OCF, ICF, FCF Components (INR Lakhs) #

Operating Cash Flow (OCF) #

• Profit Before Tax: 2,433.29 (2024), (2,824.60) (2023)
• Adjustments (Non-Cash & Non-Operating):
  • Depreciation & Amortization: 1,953.35 (2024), 1,877.66 (2023)
  • Finance Costs: 184.39 (2024), 323.17 (2023)
  • Impairment (Reversal)/Charge & Write-off of Property, Plant & Equipment: 0.00 (2024), (2,318.98) (2023)
  • Bad Debt & Advances Written Off: 0.00 (2024), 18.34 (2023)
  • Gain on disposal of PPE: (1.00) (2024), 0.00 (2023)
  • Gain on lease termination: 0.00 (2024), (236.59) (2023)
  • Property, plant and equipment written off: 46.89 (2024), 0.00 (2023)
  • Provision for doubtful debts and advances (net): (17.26) (2024), 9.69 (2023)
  • Liabilities/Provisions No Longer Required, Written Back: (347.38) (2024), (226.62) (2023)
  • Interest Income: (59.09) (2024), (46.42) (2023)
  • Unwinding of discount on security deposit: 1.00 (2024), 1.08 (2023)
  • Diminution in fair value of investment: 0.00 (2024), 6.00 (2023)
  • Unrealised foreign exchange (gain)/loss: 67.94 (2024), (113.52) (2023)
• Changes in Working Capital:
  • (Increase)/Decrease in Trade Receivables: (2,157.89) (2024), 2,405.96 (2023)
  • (Increase)/Decrease in Inventories: (1,595.49) (2024), 951.09 (2023)
  • (Increase)/Decrease in other assets - Other Financial Assets: 67.88 (2024), 110.00 (2023)
  • Increase/(Decrease) in Trade Payables: 44.18 (2024), (3,727.76) (2023)
  • Increase/(Decrease) in provisions: (61.54) (2024), 9.00 (2023)
  • Increase/(Decrease) other liabilities: (423.60) (2024), (73.52) (2023)
  • Increase/(Decrease) other financial liabilities: (639.68) (2024), (205.85) (2023)
• Income Tax Paid (Net of Refund): (553.58) (2024), 323.89 (2023)
• Net OCF: (606.62) (2024), (3,717.27) (2023)

Investing Cash Flow (ICF) #

• Purchase of PPE & Capital Work-in-Progress: (624.64) (2024), (3,481.92) (2023)
• Proceeds from Sale of PPE: 2.00 (2024), 0.00 (2023)
• Change in Bank Balances (Other than Cash & Cash Equivalents): 0.00 (2024), 0.00 (2023)
• Interest Received: 59.09 (2024), 46.42 (2023)
• Net ICF: (563.55) (2024), (3,435.50) (2023)

Financing Cash Flow (FCF) #

• Interest Paid: 154.47 (2024), 0.00 (2023)
• Repayment of Lease Liability: (356.17) (2024), (366.11) (2023)
  • Principal elements of lease payment: (343.33) (2024), (353.12) (2023)
  • Interest elements of lease payment: (12.84) (2024), (12.99) (2023)
• Proceeds from Working Capital Demand Loan: 0.00 (2024), 1,500.00 (2023)
• Repayment of working capital demand loan: (1,500.00) (2024), 0.00 (2023)
• Dividend Paid (Including Amount Transferred to IEPF): 0.00 (2024), (36.72) (2023)
• Net FCF: (1,856.17) (2024), 1,097.17 (2023)

Working Capital Management Efficiency #

• Receivables Turnover Ratio: 3.79 (2024), 4.04 (2023)
• Days Sales Outstanding (DSO): 96.25 days (2024)
• Inventory Turnover Ratio: 6.00 (2024)
• Days Inventory Outstanding (DIO): 60.79 days (2024)
• Payables Turnover Ratio: 5.69 (2024)
• Days Payables Outstanding (DPO): 63.98 days (2024)

Capex Analysis #

• Total additions to Property, Plant and Equipment (including Capital Work-in-Progress): Rs. 624.64 lakhs (2024), Rs. 3,481.92 lakhs (2023)

Dividend and Share Buyback Trends #

• Dividend: A final dividend of INR 4 per share was recommended for 2024. No dividend was paid in 2023.
• Share Buyback: No mention of any share buyback program.

Debt Service Coverage #

• DSCR (including principal payments on leases): 3.93 (2024)
• DSCR (excluding principal portion of lease payments): 12.67 (2024)

Liquidity Position and Cash Conversion Cycle #

• Liquidity Position:
  • Current Ratio: 2.58 (2024)
  • Cash and Cash Equivalents: Rs. 3,284.74 lakhs (2024)
• Cash Conversion Cycle (CCC): 93.06 days

Free Cash Flow Yield Trends #

• Free Cash Flow (FCF): (1,170.17) lakhs (2024)
• Free Cash Flow Yield: Cannot be calculated without Market Capitalization.

Key Observations #

• Improved profitability in 2024, but negative operating and free cash flow.
• Reduced capital expenditures in 2024.
• Increase in receivables and inventory needs further investigation.
• Dividend recommended despite negative free cash flow.
• Low solvency and a high coverage ratio.
• Financial picture is mixed; profitability improved, but cash flow management requires scrutiny.

Financial Analysis of DIC India Limited #

Profitability Ratios (3-Year Trend) #

• ROE: Measures the return generated on shareholders’ equity. The significant improvement in 2024 indicates a return to profitability.
• ROA: Measures how efficiently assets are used to generate profit. The improvement from 2023 to 2024 shows better asset utilization, reflecting the turn to profitability.
• ROIC: Measures the return on the total capital invested (both equity and debt). Here, I’m considering, “Capital Employed” from the report. A positive ROIC in 2024 is an improvement after two years of very low returns.
• Margins:
  • Gross Profit Margin: Calculated from (Revenue - Cost of Materials Consumed - Changes in inventories + Purchase of stock in trade) / Revenue. Remains relatively stable, showing effective Cost of Sales.
  • Operating Profit Margin: Calculated as (Revenue - Operating Expenses) / Revenue, where Operating Expenses include Cost of Materials Consumed, Purchases of stock-in-trade, Change in Inventory, Employee benefit, Depreciation, Other expenses. Improvement in 2024 is likely.
  • Net Profit Margin: Net income divided by revenue. The shift from a negative margin in 2023 to a positive margin in 2024 is the most critical observation.

Trend Analysis: #

The biggest observation for the profitability is the improvement in 2024.

Liquidity Metrics #

• Current Ratio: A healthy current ratio, consistently above 2.0, indicates a strong ability to meet short-term obligations.
• Quick Ratio: Excludes inventories, providing a more conservative measure of liquidity. The quick ratio is also consistently above 1, indicating a solid position.
• Cash ratio Represents company’s ability to pay current liabilities with available cash and cash equivalents.

Trend Analysis: #

Liquidity has remained stable, with the Current Ratio improving from 2022 to 2023 and remaining constant in 2024, and the Quick Ratio improving in 2024.

Efficiency Ratios #

• Asset Turnover: Measures how efficiently assets are used to generate sales. The increasing ratio indicates improved asset utilization.
• Inventory Turnover: How many times inventory is sold and replaced over a period. Relatively constant, suggesting stable inventory management.
• Receivables Turnover: How efficiently the company collects its receivables.

Trend Analysis: #

• Asset turnover has improved, showing better asset utilization.
• Inventory management remains stable, with a consistent turnover.
• Receivables collection is also stable.

Leverage Metrics #

• Debt-to-Equity: Very low in all years, decreasing to zero in 2024, meaning the company is primarily financed by equity and has paid of its debt, which is highly positive.
• Interest Coverage: Can’t be calculated in 2023 and 2024.

Trend Analysis: #

Leverage has significantly decreased, indicating a much stronger financial position in terms of debt. The company eliminated borrowings in 2024.

Working Capital Ratios #

Trend Analysis: #

• Working Capital: Has increased significantly, indicating a stronger short-term financial position.
• Working Capital Turnover: The changes in Working Capital Turnover shows that increase in Working Capital.

Key Observations and Strengths #

• Improved Profitability: 2024 showed marked improvement, moving from losses to profit, and all profitability ratios reflecting this positive change.
• Strong Liquidity: Consistently high current and quick ratios signal excellent short-term financial health.
• Low Leverage: Minimal debt, particularly with the elimination of borrowings in 2024, reduces financial risk.
• Stable Efficiency: Inventory and receivables management appear effective and consistent.

DIC India Limited: Financial Performance Analysis 2024 #

Revenue and Profitability Metrics with Growth Rates #

• Revenue from Operations: Increased to INR 88,152.89 lakhs in 2024 (6.35% growth from INR 82,885.14 lakhs in 2023).
• Total Income: Increased to INR 89,167.78 lakhs in 2024 (6.49% growth from INR 83,730.06 lakhs in 2023).
• Profit Before Tax (PBT) after Exceptional Items: INR 2,433.29 lakhs in 2024, compared to a loss of INR (2,633.33) lakhs in 2023.
• Profit After Tax (PAT): INR 1,770.86 lakhs in 2024, compared to a loss of INR (2,267.62) lakhs in 2023.
• Operating Profit Margin: 2.76% in 2024 vs. -0.77% in 2023.
• Net Profit margin: 2.22% in 2024 vs -2.7% in 2023.
• Return on Net Worth: 4.7% in 2024 vs -5.7% in 2023.
• Return on Capital Employed: 6.48% in 2024 vs -0.1% in 2023.
• Earnings Per Share (EPS): INR 19.30 in 2024 (Basic and Diluted) compared to a loss per share of INR (24.70) in 2023.

Market Share and Competitive Position #

• DIC India positions itself as a leading company in the Indian printing, publishing, and packaging industry. The Indian printing ink industry is fragmented with multinational players and SMEs. While specific market share data is unavailable, DIC India’s position suggests a significant market presence.

Key Products/Services Performance #

• Packaging Inks & Coatings (Gravure & Flexo Inks): Key products used in food, beverage, and oil packaging (e.g., “Smart KF/TF,” “Hikari HSKF,” “Polytone”).
• Offset Commercial Inks: Premium brands for printing on LWC, GNP, and SNP (“Fusion G,” “Geos G,” “SynerG EX Plus,” and “Inspira”).
• Mineral Oil Free (MOF) Inks: Focus on sustainability for food packaging.
• UV Packaging & Coatings: High-speed UV inks and specialized coatings, including low migration, low odor (LMLO) inks.
• Publication Inks (News Inks & Text Book Inks): Brands catering to newspapers, textbooks, and commercial printing (“Popular,” “Polar,” and “Express”).
• Adhesives: Solvent-based, solvent-free, and specialized adhesives for pharma applications. The company is positioning itself as “one of the foremost and reliable lamination adhesive manufacturers in India.”
• Solar Adhesives
• Barrier Coatings and Adhesives
• Future-Ready Inks: Metal Deco Inks, Narrow Web Printing solutions, and Flexible Packaging innovations (AquaSmart, Hikari HSKF, Smart KF, Smart TF, etc.).

Geographic Distribution and Market Penetration #

• Presence across India, with a mix of domestic sales and exports.
• Domestic sales accounted for approximately 89.5% of total revenue (INR 78,897.93 lakhs).
• Exports accounted for approximately 10.5% of total revenue (INR 9,254.96 lakhs).
• Manufacturing Facilities: Noida (liquid inks, news color inks, flexo inks), Ahmedabad (news black inks, offset aquatic inks, WB flexo inks), Saykha (liquid inks), and Bengaluru (adhesives & PU resins).

Operational Efficiency Metrics #

• Inventory Turnover Ratio: 5.85 in 2024 (improved from 5.8 in 2023).
• Debtor Turnover Ratio: 3.51 in 2024 (down from 3.81 in 2023).
• CO2 Emission Reduction: Approximately 4% reduction vs. 2023.
• Water Conservation: Approximately 20% reduction in freshwater consumption.
• Safety: Zero reportable incidents across all locations in 2024.

Growth Initiatives and Challenges #

• Growth Initiatives:

  • Innovation: R&D focus on sustainable products (water-based inks, MOF inks, barrier coatings).
  • Sustainability: Reducing environmental impact through renewable energy, waste reduction, and eco-friendly products.
  • Cost Productivity: Supply chain optimization and asset utilization.
  • Digital Transformation: Investments in digital tools.
  • CSR Initiatives: “Deeksha” (education) and “Saksham” (waste management).

• Challenges:

  • FMCG Demand Slowdown: Reduced consumer spending.
  • Inflationary Pressures: Elevated input costs.
  • Geopolitical Uncertainties: Supply chain disruptions and raw material price volatility.
  • Closure of Kolkata Plant: One-time waste increase due to closure.
  • SEBI Settlements.

Risk Analysis of DIC India Limited (Year Ended December 31, 2024) #

This analysis categorizes and evaluates risks faced by DIC India Limited based on the information presented in the 2024 Annual Report excerpts.

Strategic Risks #

Definition: #

Risks that affect the company’s ability to achieve its long-term strategic objectives.

Identified Risks: #

• FMCG Demand Slowdown: Reduced consumer spending, especially in the second half of 2024, impacted the demand for packaging solutions, directly affecting DIC India’s core business.
• Market Competition: The Indian printing ink industry is described as “fragmented,” with both large multinational players and numerous SMEs. This suggests intense competition, putting pressure on pricing and margins.
• Dependence on Ink Products: DIC Vision 2030 explicitly mentions the need to establish a “business portfolio that does not depend solely on ink products,” highlighting a strategic risk of over-reliance on a single product category.

Analysis: #

Operational Risks #

Definition: #

Risks arising from internal processes, systems, people, or external events that disrupt operations.

Identified Risks: #

• Supply Chain Disruptions: Geopolitical uncertainties and global economic conditions are mentioned as factors disrupting supply chains, impacting raw material availability and pricing.
• Raw Material Price Volatility: The report explicitly mentions “volatility in raw material costs.” This is a direct operational risk affecting production costs and margins.
• Environment, Health & Safety: At DIC India it is our responsibility to raise awareness about environmental issues that are a part of our industry, including issues raised by regulatory and customer-driven forces.

Analysis: #

Financial Risks #

Definition: #

Risks related to the company’s financial stability, including credit, liquidity, and market risks (specifically currency and interest rate risks).

Identified Risks: #

• Inflationary Pressures: Explicitly mentioned as a major factor impacting margins.
• Currency Risk: Exposure to fluctuations in the Rupee against benchmark dollar rates, affecting import costs and export revenues.
• Interest Rate Risk: Mentioned, but less significant given the company’s low debt levels in 2024.
• Credit Risk: Risk of customer default, where they adopt a credit rating approach.

Analysis: #

Quantitative: #

Interest Coverage Ratio significantly improved YoY, but this is skewed by the 2023 loss. Debt-Equity Ratio improved significantly due to repayment of debt.

Compliance/Regulatory Risks #

Definition: #

Risks of non-compliance with laws and regulations.

Identified Risks: #

• Environmental Regulations: The increasing focus on sustainability and stricter environmental regulations represents a compliance risk.
• SEBI Regulations: The report mentions a suo moto settlement application filed with SEBI for “inadvertent omission in disclosure” related to senior management changes and related party transactions. This indicates a past compliance failure.
• Kolkata Plant Closure: Legal and statutory approval and compliance in the closure of the Kolkata Plant.

Analysis: #

Emerging Risks #

Definition: #

Risks that are new, evolving, or difficult to quantify.

Identified Risks: #

• Technological Disruption: The report mentions advancements in digital and flexographic printing, requiring specialized inks. This implies a risk of the company’s existing products becoming obsolete if they don’t adapt.
• Climate Change related Regulations: Although not explicitly stated as a risk, the company’s focus on sustainability suggests an awareness of potential future regulations related to carbon emissions, waste management, and resource usage, which could impose new costs or require significant changes in operations.

Analysis: #

Overall Summary and Year-over-Year Changes #

• Improved Financial Risk Profile: The company significantly reduced its debt in 2024, improving its financial stability and reducing interest rate risk.
• Ongoing Operational and Strategic Risks: Raw material price volatility and FMCG demand slowdown remain key challenges, requiring continuous cost management and adaptation.
• Increased Focus on Compliance: The SEBI settlement highlights the importance of robust compliance procedures.
• Emerging Risks on the Horizon: Technological disruption and climate-related regulations pose long-term challenges that require proactive management.
• The shift from loss to profit is a positive sign.

Key Recommendations #

• Quantify Risks: Develop a more quantitative risk assessment framework, assigning probabilities and potential financial impacts to each identified risk.
• Scenario Planning: Conduct scenario planning exercises to assess the potential impact of various risk events (e.g., significant raw material price increases, major regulatory changes).
• Enhance Risk Reporting: Provide more detailed information on risk mitigation strategies and their effectiveness in future reports.
• Strengthen Monitoring: Continuously monitor the external environment for emerging risks and changes in existing risk profiles.
• Diversification: Continue to act on their Vision 2023 strategy of product diversification.

DIC India Limited - 2024 Annual Report Analysis #

Long-Term Strategic Goals and Progress #

• DIC Vision 2030: Aligned with DIC Group’s Vision 2030, emphasizing a balance between financial profits and social significance, becoming a “global company trusted by society” focusing on Green, Digital, and Quality of Life (QOL) initiatives.
• Sustainability Goals: Focused on carbon neutrality and operational eco-efficiency, including CO2 emission reduction (4% reduction achieved in 2024) and water conservation (20% reduction in freshwater consumption).
• Business Portfolio Diversification: Goal to reduce dependency on ink products and establish a broader portfolio, focusing on five priority business areas (vaguely stated in the “Green, Digital, and Quality of Life” context).
• Financial Goals: Focus on increasing top line and returning to profitability.

Competitive Advantages and Market Positioning #

• Market Leadership: Claims to be one of the largest companies in the printing, publishing, and packaging industry in India.
• DIC Group Affiliation: Access to global technology, R&D, and best practices through DIC Corporation, Japan.
• Product Portfolio Breadth: Offers a wide range of inks (packaging, offset, UV, publication, etc.), adhesives, and coatings.
• Customer Relationships: Aims to be the “supplier of choice” for esteemed customers.
• Innovation and Customization: R&D centers in Noida and Bengaluru focus on new product development and customization for clients.

Innovation Initiatives and R&D Effectiveness #

• R&D Focus: Emphasis on environmentally friendly and sustainable product development (e.g., water-based inks, mineral oil-free inks, barrier coatings, low migration inks).
• Specific Innovations:
  • Water-based flexible inks (AquaSmart)
  • Toluene and Ketone-free inks (Hikari HSKF, Smart KF/TF)
  • Metal Deco Inks
  • Products for Narrow Web Printing
  • Barrier coatings and adhesives
• R&D Spending: INR 702.24 lakh (0.80% of turnover) in 2024.
• Collaboration with Parent Company: R&D efforts are in collaboration with DIC Corporation, Japan.
• R and D Effectiveness: Implied through product commercialization, and business expansion.

Management’s Track Record in Execution #

• Turnaround is taking place.
• Operational Efficiency: Initiatives to improve operational efficiency, including open access solar power, VFDs for drives, and throughput efficiency improvements. Focus on reducing energy usage and CO2 emissions.
• Safety Record: Strong safety record with zero reportable incidents in 2024.
• Adaptability: Acknowledges the challenging economic environment and highlights the company’s resilience and adaptation strategies.
• Strategic Focus: Focus on Innovation, Environment, Sustainability, and Governance.

Capital Allocation Strategy #

• Dividend Policy: Final dividend of INR 4 per share.
• Retained Earnings: Majority of earnings retained in the profit and loss account.
• Capex: Capital expenditure, especially in R&D (INR 45.92 Lakh) and energy conservation equipment.
• Debt Management: Reduction in debt, with a net cash position.
• The company does not follow section 135 of CSR and has provided reasoning for not doing so.

Organizational Changes and Their Impact #

• Key Managerial Personnel Changes:
  • Resignation of the Company Secretary and Corp GM-Legal, followed by a new appointment.
  • Resignation and appointment of new Heads for HR and Sales & Marketing
  • Superannuation of the Chief Technology Officer and a new appointment.
• Appointment of Non-Executive Additional Director, Mr. Hayato Kashiwagi.
• Closure of Kolkata plant.

ESG Analysis of DIC India Limited #

Environmental Metrics and Targets #

• CO2 Emission Reduction: DIC India has implemented projects resulting in an approximate 4% reduction in CO2 emissions compared to 2023. Key initiatives include:
  • Open Access Solar Power & Dual fuel (PNG & Diesel) at the Noida plant.
  • Operational efficiency improvements across all plants (VFD for drives, throughput efficiency for grinding mills, batch size increases, LED lighting).
• Water Conservation: The company achieved approximately a 20% reduction in freshwater consumption through various initiatives, such as:
  • Self-closing taps.
  • Improved insulation.
  • Batch time optimization.
  • Water metering and leakage reduction.
• Waste Management: DIC India follows a waste management procedure prioritizing prevention, reuse, recycling, recovery, and disposal. While there was a one-time increase in waste due to the closure of the Kolkata plant in 2024, all manufacturing locations are actively involved in waste reduction and recycling.
• Eco-Efficiency: Despite increased production, the company achieved excellent performance in operational eco-efficiency parameters.
• Sustainability Policy: Strive to meet local regulatory requirements, and proactively work with government, industry trade groups, and business partners in the value chain to better define, measure, and promote sustainability.
• Specific Water: Various initiatives taken to reduce water consumption.

Social Responsibility Programs #

• Project Deeksha: In partnership with Learning Links Foundation, this program focuses on improving education in underserved community schools near Saykha. It targets learning gaps in literacy and numeracy for underprivileged students, using an activity-based approach. It also emphasizes wellness and hygiene practices.
• Project Saksham: An Integrated Decentralized Solid Waste Management initiative in Sayakha Gram Panchayat, Gujarat. In partnership with Feedback Foundation Charitable Trust, it aims for a ‘Zero Waste & Zero Cost’ model. It includes awareness campaigns, capacity-building workshops, and citizen engagement to foster responsible waste management. A Mini Sanitation Park is a key feature for processing segregated waste.
• Voluntary CSR contribution of Rs 18.80 Lakh.

Governance Structure and Effectiveness #

• Board Composition: As of December 31, 2024, the Board consists of eight members: one Executive Director, three Non-Executive Non-Independent Directors, and four Independent Directors (including one woman). This structure aims for a balance of executive and independent oversight.
• Board Committees: The company has four statutory Board-level committees:
  • Audit Committee
  • Stakeholders’ Relationship Committee
  • Nomination and Remuneration Committee
  • Corporate Social Responsibility Committee
  • Risk Management Committee
• Code of Conduct: DIC India has a Code of Business Conduct for employees, executives, and non-executive directors, covering ethics, anti-corruption, and other governance aspects.
• Whistle Blower Policy and Vigil Mechanism: There is a whistle blower Policy and Vigil Mechanism, which is in compliance with the provisions of Section 177 of the Companies Act, 2013 and Regulation 22 of the SEBI Listing Regulations.
• Nomination & Remuneration Policy: A clear policy is in place to guide the appointment, evaluation, and remuneration of directors, key managerial personnel, and senior management.
• Compliance: The company emphasizes compliance with the Companies Act, 2013, SEBI Listing Regulations, and applicable Secretarial Standards.
• Transparency: Financial results are published in newspapers and on the company website.

Sustainability Investments and ROI #

• Specific investments mentioned include:
  • Dual fuel at 125kVA DG sets, Noida plant: Rs. 9.19 Lakh
  • Old AC replacement at Ahmedabad plant: Rs. 1.68 Lakh
  • Installation of efficient air compressor at Noida Rs. 29.13 Lakh
  • Installation of efficient Chiller unit at Noida Rs. 36.38 Lakh
  • Replacement of IE2 motors by IE3 efficient motors at Bangalore plant Rs. 4.6 lakh
  • R&D expenditure (recurring): INR 656.32 Lakh.
  • R&D expenditure (Capital Expenditure): INR 45.92 Lakh
  • Total R&D expenditure as a % of total Turnover: 0.80%
• Solar Power: Open access for Noida.
• Product Innovation: Development of eco-friendly and toluene-free inks, and barrier functional coatings aimed at easy recyclability.
• The document does not explicitly detail the financial ROI of specific sustainability measures.

Regulatory Compliance and Future Preparations #

• Compliance: The company states its commitment to complying with all relevant environmental, health, and safety regulations. It uses an internal regulatory compliance portal (“Sankalp”) to monitor compliances across India.
• Secretarial Audit: The Secretarial Audit Report confirms compliance with the Companies Act, 2013, Secretarial Standards, and SEBI regulations, with a note about a suo moto settlement application filed with SEBI for certain inadvertent disclosure delays.
• Future Preparations: DIC India’s “DIC Vision 2030” highlights a focus on becoming a “global company trusted by society” by establishing a business portfolio that goes beyond ink products and emphasizes carbon neutrality. The five priority business areas are related to a “Green, Digital, and Quality of Life (QOL)” society.
• Settlement application suo moto filed by the company has been noted by the Secretarial Auditor in their report.

Forward Outlook: Analysis of DIC India’s Strategic Direction #

Management Guidance and Assumptions #

• Economic Outlook: Management anticipates a resilient but slowing Indian economy in 2024, with inflation and global uncertainties affecting consumer spending.
• Industry-Specific: Focus on sustainability and cost efficiency in the Indian market as key drivers.
• Operational Efficiency: Ongoing improvements in operational efficiency, supply chain optimization, and asset utilization for cost control.
• Sustainability: Increasing importance of sustainability from a regulatory and customer demand perspective.
• Risk Management: Consideration of inflation, geopolitical problems, and sustainability regulations.
• Going Concern Basis: Assessment of the company’s ability to continue business operations.

Market Growth Forecasts #

• Overall Printing Ink Industry: Forecasted CAGR of 6.5% for the Indian printing ink industry between 2022 and 2027, reaching INR 27 billion by 2027 (Research and Markets).
• Specific Segments: Strong demand anticipated for flexible packaging inks due to growth in food and beverage and e-commerce sectors.
• DIC India’s Growth: Aim to participate in (and potentially outpace) overall market growth, particularly in sustainable product categories.

Planned Strategic Initiatives #

• I-ESG Focus: Core strategy revolving around Innovation, Environment, Sustainability, and Governance (I-ESG).
• Operational Efficiency: Emphasis on cost management, digital transformation, and supply chain optimization.
• Sustainability: Investments in renewable energy, waste reduction, and development of eco-friendly products.
• Product Innovation: Focus on developing advanced packaging solutions.
• Digital Transformation: Use of digital tools to improve customer engagement, efficiency, and market responsiveness.
• DIC Vision 2030: Focus on Green, Digital, and Quality of Life (QOL), with a business portfolio for sustainable prosperity.
• Talent and Manpower: Investment in key skills required to aid sustainable business growth.

Capital Expenditure Plans #

• Specific Projects: Investments focused on energy conservation and efficiency.
  • Dual fuel (PNG & Diesel) for DG sets at the Noida plant.
  • Initiatives in manufacturing operations to reduce energy.
  • Open Access Solar Power at Noida Plant.
• R&D Expenditure: INR 45.92 Lakh spent on capital expenditure for R&D, with total R&D expenditure at INR 702.24 Lakh (0.80% of total turnover).

Efficiency Improvement Targets #

• CO2 Emission Reduction: Approximately 4% reduction in CO2 emissions versus 2023.
• Water Conservation: 20% reduction in freshwater consumption.
• Operational Eco-Efficiency: Excellent performance against operational eco-efficiency parameters.

Potential Challenges and Opportunities #

• Challenges:
  • FMCG Demand Slowdown
  • Inflationary Pressures
  • Geopolitical Uncertainties
  • Regulatory Compliance
  • Competition
• Opportunities:
  • Growing Demand for Sustainable Products
  • Technological Advancements
  • Flexible Packaging Growth
  • Expansion into New Customers
  • Cost and Quality Advantage
  • CSR Initiatives

Scenario Analysis and Sensitivity (Inferred) #

• Scenario 1: Continued Inflation and Economic Slowdown
  • Impact: Pressure on margins, reduced demand for packaging inks, and potentially delayed investments.
  • Mitigation: Focus on cost efficiency and operational improvements.
• Scenario 2: Rapid Adoption of Sustainable Packaging
  • Impact: Increased demand for eco-friendly product lines.
  • Mitigation: R&D investments and product innovation.
• Scenario 3: Increased Regulatory Pressure
  • Impact: Increased compliance costs.
  • Mitigation: Proactive investment in sustainable technologies and processes.
• Sensitivity to Raw Material Prices: Mitigation through strategic sourcing and hedging.
• Sensitivity to Foreign Exchange Rates: Mitigation through hedging strategies.

Key Points #

• The Board recommended a final dividend of Rs. 4 per share, subject to member approval.
• Robust internal financial controls, periodically reviewed.
• Closure and dismantling of Kolkata Plant during the year 2024.

Audit and Compliance Analysis of DIC India Limited #

Auditor’s Opinion and Qualifications #

• Opinion: Unmodified opinion issued by Price Waterhouse Chartered Accountants LLP, indicating a true and fair view of DIC India Limited’s financial position.
• Qualifications:
  • Books of accounts maintained in electronic mode have not been maintained on a daily basis on servers physically located in India.
  • Audit log is not maintained in case of modification by certain users with specific access for database changes made through the application.

Key Accounting Policies #

• Basis of Preparation: Complies with Ind AS and prepared under the historical cost convention, except for certain financial assets/liabilities and defined employee benefit plans.
• Revenue Recognition: Recognized when control of goods is transferred to the customer.
• Property, Plant and Equipment: Freehold land is carried at historical cost; other items stated at cost net of accumulated depreciation and impairment.
• Inventories: Valued at the lower of cost and net realizable value.
• Employee Benefits: Defined benefit plans accounted for based on actuarial valuation.
• Leases: Follows right-of-use asset and lease liability accounting.
• Financial Assets: Measured at amortized cost or fair value; expected credit loss model used for impairment.
• Foreign Currency: Transactions recorded at prevailing exchange rate; monetary items translated at year-end rates.
• Changes in Accounting Policies: Amendments to Ind AS adopted with no material impact.

Internal Control Effectiveness #

• Auditor’s Opinion: Adequate internal financial controls system operating effectively as at December 31, 2024.
• Management’s Assertion: Robust internal financial controls exist, including SAP ERP systems, procedural manuals, and regular internal audits.

Regulatory Compliance Status #

• Generally Compliant: Complied with applicable statutory provisions.
• Noted Non-Compliance:
  • Suo moto settlement application with SEBI for omission in disclosure related to change in senior managerial personnel. SEBI directed the company to pay settlement amount of INR 34.32 lakh.
    • Approval and recommendation in the Nomination and Remuneration Committee in respect to the change in its Senior Management under Regulation 19(4) read with Part D of Schedule II of the Securities and Exchange Board (Listing Obligations and Disclosure Requirements) Regulation
    • Disclosure to stock exchange about change in senior management under Regulation 30 read with Para A sub-para 7 & 7 C of Part A of Schedule III of SEBI LODR Regulation.
• Other Compliances:
  • Whistle Blower Policy and Vigil Mechanism in place.
  • Code of conduct adopted.
  • Nomination and Remuneration Policy and Related Party Transaction Policy in place.
  • Complied with secretarial standards.

Legal Proceedings and Potential Impact #

• Pending Litigations: Relate to income tax, customs duty, excise duty, service tax, sales tax/VAT/entry tax, and goods and services tax. Provisions made where deemed necessary.
• Kolkata Plant Closure: Favorable judgment received; Labour Department appeal pending. Management does not foresee any potential liability.
• Contingent Liabilities: Relate to claims not acknowledged as debts for income tax and various indirect tax matters.

Related Party Transactions #

• Disclosure: Disclosed in Note 43.
• Arm’s Length Basis: Transactions in the ordinary course of business and on an arm’s length basis.
• Types of Transactions: Sales and purchases of goods, management service fees, reimbursement of expenses, royalty payments, and remuneration to key management personnel.
• Omnibus Approval: Audit Committee provides omnibus approval and reviews quarterly.

Subsequent Events #

• Dividend Recommendation: Final dividend of Rs. 4 per share recommended on February 21, 2025.
• Kolkata Plant Closure: Handed over the possession of leasehold land of the closed Kolkata Plant to the lessor.
• Director Resignation: Mr. Ryohei Kohashi has resigned from the Board with effect from January 01, 2025.

Analysis of Accounting Quality #

• Positive Indicators:
  • Unmodified audit opinion.
  • Use of Ind AS.
  • Detailed disclosures.
  • Consistent application of accounting policies.
  • Use of actuarial valuations for employee benefits.
  • Use of expected credit loss model for impairment.
• Negative Indicators:
  • Books of accounts maintained in electronic mode have not been maintained on a daily basis on servers physically located in India.
  • Audit log is not maintained in case of modification by certain users with specific access for database changes made through the application.

Regulatory Risk Assessment #

• Moderate Risk:
  • Regulatory risk related to SEBI regulations.
  • Instances of delay/non-compliance being rectified.
  • Pending legal matters pose some risk.
  • Compliance with MSMED Act disclosures.