Rossari Biotech Ltd:Annual Report 2023-24 Analysis

Rossari Biotech Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Rossari Biotech Ltd. was established in 2003 by Sunil Chari and Jayesh Doshi.

Headquarters Location and Global Presence:

The company’s headquarters are located in Mumbai, India. Rossari Biotech has a presence in several countries globally, exporting its products to various regions.

Company Vision and Mission:

Rossari Biotech’s vision is to become a leading specialty chemicals company by providing innovative and sustainable solutions. Their mission revolves around delivering value to customers through cutting-edge technology and superior quality products.

Key Milestones in Their Growth Journey:

• 2003: Incorporation of Rossari Biotech Limited.
• 2011: Received ISO 9001:2008 certification.
• 2017: Acquisition of textile chemical business of Unitex Speciality Chemicals.
• 2020: Initial Public Offering (IPO) on the Indian Stock Exchanges.
• 2023: Strategic acquisition of Tristar Intermediates Private Limited

Stock Exchange Listing Details and Market Capitalization:

Rossari Biotech is listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

Recent Financial Performance Highlights:

Financial information should be obtained from latest reports and press releases.

Management Team and Leadership Structure:

• Sunil Chari: Managing Director
• Jayesh Doshi: Joint Managing Director
• Other key positions held by experienced professionals in finance, operations, and sales.

Any Notable Awards or Recognitions:

Rossari Biotech has received awards related to their export performance and innovation in the past. Check recent announcements for most up to date awards.

Their Products #

Complete Product Portfolio with Categories:

Rossari Biotech’s product portfolio is categorized into:

• Textile Specialty Chemicals: Pretreatment, dyeing, printing, and finishing chemicals.
• Animal Health and Nutrition: Feed supplements, probiotics, and other animal healthcare products.
• Home and Personal Care: Surfactants, preservatives, and other ingredients for detergents, soaps, and cosmetics.
• Performance Chemicals: Construction chemicals, paints and coatings, and water treatment chemicals.

Flagship or Signature Product Lines:

• Textile Specialty Chemicals: Products catering to sustainable textile production.
• Animal Health & Nutrition: Probiotics for livestock.

Key Technological Innovations or Patents:

Rossari Biotech has patents related to certain chemical formulations and processes. Specific patent details can be found in their annual reports.

Manufacturing Facilities and Production Capacity:

The company operates manufacturing facilities across India. Exact production capacity figures can be obtained from official reports.

Quality Certifications and Standards:

Rossari Biotech holds certifications such as:

• ISO 9001
• Other relevant certifications depending on the product category (e.g., REACH compliance).

Any Unique Selling Propositions or Technological Advantages:

Rossari focuses on providing sustainable and eco-friendly solutions.

Recent Product Launches or R&D Initiatives:

Check the recent annual reports and press releases for information about recent product launches and initiatives.

Primary Customers #

Target Industries and Sectors:

• Textile Industry
• Animal Feed and Nutrition Industry
• Home and Personal Care Industry
• Construction Industry
• Paints and Coatings Industry

Geographic Markets (Domestic vs. International):

Rossari Biotech has a significant presence in the Indian market and exports to various international markets.

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

• Industrial: Textile manufacturers, construction companies, paint manufacturers.
• Agricultural: Animal feed producers, livestock farmers.
• Residential: Consumers using home and personal care products manufactured with Rossari’s ingredients.

Distribution Network and Sales Channels:

Rossari uses a combination of direct sales, distributors, and agents.

Major Competitors #

Direct Competitors in India and Globally:

• India: Pidilite Industries, Fineotex Chemical
• Global: Huntsman Corporation, BASF

How they Differentiate from Competitors:

Rossari Biotech emphasizes sustainable solutions and offers a wide range of products across multiple industries.

Industry Challenges and Opportunities:

• Challenges: Fluctuations in raw material prices, regulatory changes, and competition.
• Opportunities: Growing demand for specialty chemicals, increasing focus on sustainability, and expanding into new markets.

Market Positioning Strategy:

Rossari aims to position itself as a leading provider of innovative and sustainable specialty chemicals.

Future Outlook #

Expansion Plans or Growth Strategy:

Rossari plans to expand its product portfolio, increase its geographical presence, and invest in research and development.

Upcoming Products or Innovations:

Check recent financial reports and press releases for details about upcoming projects.

Sustainability Initiatives or ESG Commitments:

Rossari Biotech is increasing focus on sustainability and ESG (Environmental, Social, and Governance) factors.

Industry Trends Affecting Their Business:

• Growing demand for specialty chemicals
• Increasing focus on sustainability and green chemistry
• Regulatory changes
• Technological advancements

Long-Term Vision and Strategic Goals:

Rossari Biotech aims to be a leading global player in the specialty chemicals industry, providing innovative and sustainable solutions to meet the evolving needs of its customers.

Rossari Biotech Limited: FY24 Financial Analysis #

Consolidated Financial Performance (FY24 vs FY23) #

• Revenue Growth: Consolidated revenue from operations increased by 10.5% YoY, reaching ₹18,305.58 million in FY24 from ₹16,558.81 million in FY23. Standalone revenue exhibited stronger growth at 23% YoY to ₹12,029.10 million.
• Profitability: Consolidated EBITDA grew 12.0% YoY to ₹2,497.55 million in FY24 from ₹2,230.24 million in FY23. Consolidated Profit After Tax (PAT) increased significantly by 21.8% YoY to ₹1,306.89 million from ₹1,072.57 million. Standalone PAT rose 39.6% YoY to ₹996.45 million.
• Margins: Consolidated Gross Margin stood at 29.3% and EBITDA Margin at 13.6% in FY24, indicating relative stability despite reported pricing pressures in some segments. The focus on a high-margin product portfolio supported these margins.
• Key Ratios (Consolidated FY24 vs FY23):
  • Current Ratio decreased slightly by 4.76% to 1.81x from 1.90x.
  • Debt-to-Equity Ratio improved, decreasing by 24.18% to 0.10x from 0.14x.
  • Debt Service Coverage Ratio declined significantly by 79.50% to 1.37x from 6.68x, attributed to increased principal repayment on long-term debt.
  • Return on Equity (RoE) improved to 13.02% from 12.33%.
  • Inventory Turnover Ratio increased by 11.49% to 6.34x from 5.69x.
  • Trade Receivables Turnover Ratio decreased slightly by 6.00% to 4.55x from 4.84x.
  • Net Profit Ratio improved to 7.14% from 6.48%.
  • Operating Profit Margin (PBIT Margin) improved to 11.47% from 10.80%.
  • Return on Capital Employed (ROCE) increased to 21% in FY24.
• Analysis: The company demonstrated resilient top-line and bottom-line growth in FY24 despite mixed segment performance and macro challenges. Improved profitability metrics (PAT, RoE, ROCE) suggest effective cost management and benefits from strategic initiatives, although increased debt servicing impacted the DSCR.

Segment Performance Analysis #

Home, Personal Care & Performance Chemicals (HPPC) #

• This segment was the primary growth driver, achieving 18% YoY growth. Performance was underpinned by volume growth in specialty surfactants, non-agro surfactants, phenoxy series products (domestic & export), performance additives, and institutional cleaning chemicals (revenue nearly doubled YoY). This growth significantly outpaces reported global market CAGRs for related sectors.

Textile Specialty Chemicals (TSC) #

• Experienced volume growth, driven by spin finishes and lubricants for yarn/thread. However, overall TSC revenue was impacted by

Detailed Analysis #

Financial Analysis: Rossari Biotech Limited (FY 2023-24) #

Comparative Financial Position (Consolidated) #

The company’s consolidated balance sheet shows growth in overall size between FY23 and FY24.

(Note: Total Equity & Liabilities calculation based on sum differs slightly from Total Assets reported, potentially due to rounding or items not fully captured in the provided snippets. Analysis based on reported figures.)

• Asset growth was driven by increases in both current (12.3%) and non-current assets (9.0%).
• Equity increased significantly (14.6%), primarily due to retained earnings.
• Total liabilities grew modestly (5.1%), with a decrease in non-current liabilities offset by an increase in current liabilities.

Significant Line Item Changes (>10% YoY) (Consolidated) #

Rossari Biotech Limited: Financial Analysis of Operating Performance (FY24) #

Revenue Analysis #

• Consolidated Revenue: Reached INR 18,305.58 million, a 10.5% increase from INR 16,558.81 million in FY23.
• Standalone Revenue: Increased by 23% YoY to INR 12,029.10 million from INR 9,751.72 million in FY23.

Segment Performance #

• Home, Personal Care, and Performance Chemicals (HPPC): Primary growth driver, with approximately 18% YoY growth (Consolidated). Key contributors included specialty surfactants, non-agro surfactants, phenoxy series products (domestic and export), institutional cleaning products, and performance additives. Volume growth was significant.
• Textile Specialty Chemicals (TSC): Experienced volume growth, particularly in spin finishes and lubricants for yarn/thread. However, overall TSC revenue was impacted by softer pricing, despite visible product demand. Management anticipates recovery.
• Animal Health and Nutrition (AHN): Performance was subdued due to lower demand and industry headwinds during the year.

Geographic Performance #

• Export share increased significantly, reaching approximately 24% of total consolidated revenue in FY24. Target growth markets include Bangladesh, Turkey, Latin America, and the US. European sales faced challenges due to recessionary trends.

Cost Structure Analysis #

• Consolidated Key Expenses (FY24):
  • Cost of Materials Consumed: INR 12,103.83 million
  • Purchases of Stock-in-Trade: INR 1,072.50 million
  • Changes in Inventories: INR (772.06) million
  • Employee Benefits Expense: INR 1,113.89 million
  • Finance Costs: INR 210.37 million
  • Depreciation and Amortisation: INR 579.50 million
  • Other Expenses: INR 1,990.59 million
• Raw Materials: Prices reportedly stabilized in Q3 and Q4 FY24 after earlier fluctuations.
• Cost Management: Initiatives include backward integration (e.g., silicon oils via Romakk JV, surfactant inputs via Unitop/Tristar) to reduce raw material dependency and improve margins. SAP S/4 HANA implementation across the group aims to enhance operational efficiency.

Margin Analysis #

• Consolidated Gross Margin: Stood at 29.3% in FY24, reflecting stability compared to the previous year.
• Consolidated EBITDA: Increased by 12% YoY to INR 2,497.55 million from INR 2,230.24 million in FY23.
• Consolidated EBITDA Margin: Reported at 13.6% in FY24.
• Consolidated Profit After Tax (PAT): Grew to INR 1,306.89 million from INR 1,072.57 million in FY23.
• Consolidated Net Profit Margin: Improved to 7.13% in FY24 from 6.48% in FY23.
• Margin Pressure: Management commentary noted pressure on margins due to the formulation and innovation-centric nature of the business.

Operating Leverage #

• Consolidated EBITDA growth (12%) slightly outpaced revenue growth (10.5%).
• Significant planned CAPEX (INR 1,780 million for FY25 completion) in capacity expansion (Dahej, Unitop ethoxylation) will increase the fixed asset base.
• SAP implementation is aimed at increased operational efficiency.

Cash Flow and Liquidity Analysis: Rossari Biotech Limited (FY 2023-24) #

Operating Cash Flow (OCF) #

Net cash generated from operating activities amounted to ₹1,219.82 million. This was derived from Profit Before Tax (PBT) of ₹1,725.19 million, adjusted for non-cash/non-operating items (e.g., Depreciation/Amortisation ₹490.86M, Finance Costs ₹293.19M, Share-based payments ₹9.17M) leading to operating profit before working capital changes of ₹2,619.85 million. Working capital adjustments included an increase in Trade Receivables/Other Assets (-₹1,012.66M), an increase in Inventories (-₹529.72M), and an increase in Trade Payables/Other Liabilities (+₹484.62M). Cash generated from operations was ₹1,562.09 million, reduced by income taxes paid (-₹342.27M).

Investing Cash Flow (ICF) #

Net cash used in investing activities was ₹777.05 million. Major outflows included payments for Property, Plant & Equipment (PPE) and Intangibles (₹1,053.95M) and acquisition of remaining stake in a subsidiary (Tristar) (₹169.33M). Key inflows included net redemption from Mutual Funds (₹405.82M) and Interest received (₹69.17M).

Financing Cash Flow (FCF) #

Net cash used in financing activities was ₹391.99 million. Significant outflows comprised repayment of long-term borrowings (₹175.79M), interest paid (₹263.97M), payment of lease liabilities (₹65.04M), and dividend paid (₹27.58M). Inflows included proceeds from short-term borrowings (net ₹100.00M) and proceeds from the issue of equity shares (₹38.45M).

Free Cash Flow (FCF) #

FCF is estimated at ₹165.87 million (₹1,219.82M OCF - ₹1,053.95M Capex from ICF).

Key Performance Indicators #

Segment Performance Analysis #

Risk Management Analysis: Rossari Biotech Limited (FY 2023-24) #

Risk Management Framework Overview #

Rossari Biotech Limited integrates a structured risk management process into its operations, encompassing strategic, operational, financial, and compliance domains. The Risk Management Committee (RMC), overseen by the Board, develops, implements, and monitors risk management plans, ensuring risks are managed within acceptable limits. The process includes risk identification, categorization, mitigation planning, management review, RMC evaluation, and Board updates. Internal controls, including those related to financial reporting, are established and reviewed for adequacy by internal and statutory auditors, with findings reported to the Audit Committee.

Analysis by Risk Category #

1. Strategic Risks #

Competition / Customer Concentration #

• Severity/Likelihood: Moderate
• Trend: Ongoing
• Mitigation: Strengthened sales network, diverse product portfolio, R&D focus, cost-cutting measures, diversification of customer base, long-term client relationships, international market expansion.
• Control Effectiveness: Seemingly effective.
• Potential Financial Impact: Adverse impact on financial standing, market share, and profitability.

Raw Material Price Volatility & Availability #

• Severity/Likelihood: High historically, moderate currently
• Trend: Decreasing volatility in H2 FY24, but geopolitical factors maintain uncertainty.
• Mitigation: Robust risk management structure, ability to switch between raw material sets, potential to pass on price increases, backward integration, focus on reducing import dependency.
• Control Effectiveness: Partially effective.
• Potential Financial Impact: Negative impact on gross margins and profitability.

Talent Retention and Succession Planning #

• Severity/Likelihood: Moderate
• Trend: Stable/Improving
• Mitigation: Supportive work environment, competitive compensation/benefits, talent development programs, internal promotions, succession planning policy, employee well-being programs.
• Control Effectiveness: Appears effective.
• Potential Financial Impact: Negative impact on productivity, innovation, and institutional knowledge.

Climate Change Transition Risk #

• Severity/Likelihood: Moderate to High Long-Term
• Trend: Increasing external pressure and market demand for sustainable solutions.
• Mitigation: Investment in green chemistry, focus on eco-friendly products, developing products with low carbon footprints, obtaining eco-labels, investment in renewable energy, enhancing resource efficiency.
• Control Effectiveness: Proactive investments and product development.
• Potential Financial Impact: Opportunity for market share gain with green products; risk of losing market share or facing penalties.

2. Operational Risks #

Manufacturing Operations & Capacity #

• Severity/Likelihood: Moderate
• Trend: Decreasing risk with capacity expansions.
• Mitigation: Adaptable manufacturing facilities, multi-location strategy, planned capacity expansions, focus on operational excellence and automation, implementation of SAP S/4 HANA.
• Control Effectiveness: Effective management.
• Potential Financial Impact: Disruptions could lead to revenue loss and increased costs.

Supply Chain Disruptions #

• Severity/Likelihood: Moderate
• Trend: Heightened awareness.
• Mitigation: Supplier diversification, geographic sourcing dispersal, commonality/standardization practices, backward integration efforts, maintaining stable/timely supplies, collaboration across group entities.
• Control Effectiveness: Appears managed.
• Potential Financial Impact: Delays or cost increases impacting production schedules and margins.

Health and Safety (H&S) #

• Severity/Likelihood: High potential impact, managed to Low likelihood.
• Trend: Continuous focus.
• Mitigation: ISO certifications, dedicated safety teams, regular audits, PPE protocols, HAZOP, HIRA, PSSR, Near-Miss reporting, emergency response plans, regular training, focus on employee well-being.
• Control Effectiveness: High.
• Potential Financial Impact: Incidents could lead to operational disruption, reputational damage, fines, and litigation.

Quality Assurance & Certifications #

• Severity/Likelihood: Moderate
• Trend: Stable
• Mitigation: Strong R&D focus, state-of-the-art R&D/QC facilities, adherence to quality standards (ISO certified), ZDHC Level 3 certification, customer-centric approach.
• Control Effectiveness: Effective.
• Potential Financial Impact: Loss of customers, reputational damage, product recalls.

3. Financial Risks #

Margin Pressure #

• Severity/Likelihood: Moderate
• Trend: Ongoing
• Mitigation: Focus on high-margin products, R&D for cost reduction/formulation efficiency, backward integration, operational efficiencies, cross-selling synergies from acquisitions.
• Control Effectiveness: Partially effective.
• Potential Financial Impact: Reduced profitability if margins cannot be sustained or improved.

Foreign Exchange (FX) Risk #

• Severity/Likelihood: Moderate to High
• Trend: Increasing exposure due to higher export share.
• Mitigation: Natural hedge, use of forward exchange contracts, monitoring by management.