Shaily Engineering Plastics Ltd: Annual Report 2023-24 Analysis

Overview #

Comprehensive Analysis #

This analysis dissects Shaily Engineering Plastics Limited’s (SEPL) Annual Report for the fiscal year 2023-24, covering financial performance, business segments, risk management, and ESG commitments.

I. Financial Performance:

SEPL reported a consolidated revenue of ₹643.87 crore (₹607.07 crore in FY23), representing a modest 6.06% year-on-year (YoY) growth. This growth, however, masks a significant improvement in profitability. Consolidated EBITDA grew substantially by 28.04% to ₹123.4 crore (₹96.4 crore in FY23), driven by higher margins in the pharmaceutical segment. The EBITDA margin expanded by 330 basis points (bps) to 19.2%, showcasing improved operational efficiency. Net profit surged by 63% to ₹57.3 crore (₹35.1 crore in FY23). Return on Capital Employed (ROCE) improved by 420 bps to 17.7%, indicating better capital utilization. The company’s gearing improved marginally, despite increased borrowings, due to higher profits and efficient capital management.

Key Financial Ratios:

• Revenue Growth: 6.06%
• EBITDA Growth: 28.04%
• EBITDA Margin: 19.2% (up 330 bps)
• Net Profit Growth: 63%
• ROCE: 17.7% (up 420 bps)
• Debt-Equity Ratio: 0.48 (slightly improved)
• Current Ratio: 1.28 (improved liquidity)
• Interest Coverage Ratio: 1.65 (improved)

The report highlights “profitable growth,” where profitability improved despite relatively flat revenue, indicating a shift towards higher-margin products and efficient cost management.

II. Business Segments:

SEPL operates across three main segments:

• Healthcare (16.72% of FY24 revenue): This is the fastest-growing segment, focusing on high-precision medical devices (pen injectors, auto-injectors) for drug delivery systems. SEPL boasts seven patent platforms and strong relationships with major global pharmaceutical companies. The segment’s growth is attributed to increasing demand for specialized devices and IP-protected solutions. The company projects this segment to reach 25% of total revenue within three years.
• Consumer (48.1% of FY24 revenue): This includes home furnishings (both plastic and carbon steel), FMCG packaging, LED lights, and toys. Key clients include Unilever, P&G, and IKEA. Growth in this segment is linked to India’s growing middle class and demand for better quality, value-added products.
• Industrial (35.1% of FY24 revenue): This segment focuses on automotive components, appliances, and high-performance engineering components, including metal-to-plastic conversion for improved efficiency and cost reduction. Key clients include General Electric, Garrett Advancing Motion, and Schaeffler.

The report emphasizes the strategic restructuring around these verticals, leveraging shared processes and material similarities to enhance efficiency and profitability.

III. Risks and Mitigation Measures:

The annual report identifies several key risks:

• Business Operations Risk: Mitigated through a well-defined organizational framework, structured information flow, and secondary positions within each department.
• Liquidity Risk: Managed through rigorous financial planning, daily/monthly cash flow reports, and specialized banking services.
• Credit Risk: Addressed through creditworthiness assessment of customers and provisions for bad debts.
• Logistics Risk: Mitigated through dependable service providers and establishing alternative sources to ensure continuous supply.
• Market Risk: Addressed through diversification and adapting to market dynamics.
• Legal Risk: Mitigated through professional legal advice and careful contract management.

IV. ESG Initiatives:

SEPL demonstrates a strong commitment to ESG principles:

• Environmental: Focuses on reducing environmental impact through:
  • Zero groundwater discharge
  • Increased use of recycled materials (37.06% of polymer in FY24)
  • Renewable energy adoption (18.45% in FY24, aiming for 100%)
  • Implementation of Lean Sigma for waste reduction
  • Investments in rainwater harvesting and sewage treatment plants.
• Social: Emphasizes employee well-being, diversity (18% female employees), and community engagement through:
  • Robust health and safety programs
  • Comprehensive training programs
  • Community development projects (₹25.13 lakh spent in FY24)
  • Women’s empowerment initiatives.
• Governance: Highlights strong corporate governance practices including:
  • A diverse and independent Board of Directors
  • Well-defined committees (Audit, Nomination & Remuneration, Stakeholders’ Relationship, CSR, and Risk Management)
  • Robust risk management framework
  • Compliance with international and national quality standards (ISO 9001, IATF 16949, MDSAP, etc.).

V. Overall Assessment:

Shaily Engineering Plastics Limited demonstrates a robust business model with a strong focus on high-precision components, particularly within the growing medical devices sector. The company’s strategic diversification, coupled with its commitment to operational efficiency and ESG principles, positions it well for future growth. The “profitable growth” strategy is noteworthy, suggesting a successful shift towards value-added products and efficient cost management. While the revenue growth in FY24 was modest, the significant improvement in profitability and key financial ratios indicate a strong financial performance. The comprehensive risk management and detailed ESG disclosures further enhance the company’s transparency and credibility. The focus on India’s growing manufacturing sector and its export-oriented strategy presents considerable long-term potential. However, dependence on a few large customers remains a risk to be carefully monitored.

Detailed Analysis #

Balance Sheet #

Asset Analysis #

Based on Shaily Engineering Plastics Limited’s Standalone Financial Statements as of March 31, 2024:

• Total Assets: ₹75,207.89 lakhs (₹68,464.33 lakhs in FY23)
• Current Assets: ₹24,027.31 lakhs (₹23,236.79 lakhs in FY23)
• Cash and Cash Equivalents: ₹441.91 lakhs (₹1,768.57 lakhs in FY23) Note the significant decrease in cash and cash equivalents.
• Accounts Receivable (Trade Receivables): ₹11,174.68 lakhs (₹8,879.39 lakhs in FY23)
• Inventory: ₹8,360.35 lakhs (₹7,297.47 lakhs in FY23)

It’s crucial to remember that these figures are from the standalone financial statements. The consolidated financial statements would include the figures for the subsidiary company, Shaily (UK) Ltd., resulting in higher values for all of these metrics.

Liability Analysis #

Based on Shaily Engineering Plastics Limited’s Standalone Financial Statements as of March 31, 2024:

• Total Liabilities: ₹32,059.65 lakhs (₹28,900.96 lakhs in FY23)
• Current Liabilities: ₹22,696.07 lakhs (₹20,606.06 lakhs in FY23)
• Long-Term Debt: ₹6,983.30 lakhs (₹6,253.46 lakhs in FY23) Note the increase in long-term debt.
• Accounts Payable (Trade Payables): ₹6,716.80 lakhs (₹5,129.42 lakhs in FY23) Note the significant increase in accounts payable.

Again, these figures are from the standalone financial statements. The consolidated financial statements will show higher values due to the inclusion of the subsidiary, Shaily (UK) Ltd.

Equity Analysis #

Based on Shaily Engineering Plastics Limited’s Standalone Financial Statements as of March 31, 2024:

• Shareholders’ Equity: ₹43,148.24 lakhs (₹39,563.37 lakhs in FY23)
• Retained Earnings: ₹23,754.35 lakhs (₹20,211.26 lakhs in FY23)
• Share Capital: ₹917.35 lakhs (₹917.35 lakhs in FY23) Note that while the amount remained the same, the number of shares changed due to a stock split.

These figures are from the standalone financial statements. The consolidated figures will be different due to the inclusion of the subsidiary. Also, note that the “Other Equity” section of the statement of changes in equity includes other components besides retained earnings (securities premium, general reserve, capital reserve, share based payment reserve, cash flow hedge reserve). Retained earnings represent only one portion of the total shareholders’ equity.

Income Statement #

Operating Performance #

The following figures are from Shaily Engineering Plastics Limited’s Standalone Statement of Profit & Loss for the year ended March 31, 2024 (in ₹lakhs):

• Revenue from Operations: ₹61,597.36 lakhs
• Cost of Revenue (Cost of Materials Consumed + Changes in Inventories): ₹37,504.14 lakhs - ₹494.54 lakhs = ₹37,009.60 lakhs
• Gross Profit: ₹61,597.36 lakhs - ₹37,009.60 lakhs = ₹24,587.76 lakhs
• Operating Expenses (Power & Fuel + Employee Benefits Expense + Depreciation & Amortization Expense + Other Expenses): ₹2,918.88 lakhs + ₹5,589.67 lakhs + ₹3,468.72 lakhs + ₹6,601.48 lakhs = ₹18,578.75 lakhs
• Operating Income (Gross Profit - Operating Expenses): ₹24,587.76 lakhs - ₹18,578.75 lakhs = ₹6,009.01 lakhs

Important Note: These calculations use the standalone figures. The consolidated statement of profit and loss will include data from the subsidiary, leading to different values for these items. Also, the classification of expenses might vary slightly depending on the specific accounting treatments used. The annual report itself doesn’t explicitly provide a single “Operating Expenses” line. The above is a calculation based on the expenses explicitly listed that are most appropriately categorized as operating expenses.

Bottom Line Metrics #

Based on Shaily Engineering Plastics Limited’s Standalone Statement of Profit & Loss for the year ended March 31, 2024:

• Net Income (Profit for the year): ₹3,612.98 lakhs
• EBITDA (Profit before tax + Interest expense + Depreciation & Amortization): ₹4,868.63 lakhs + ₹1,789.63 lakhs + ₹3,468.72 lakhs = ₹10,126.98 lakhs
• Basic EPS: ₹7.88
• Diluted EPS: ₹7.88

These are the standalone figures. The consolidated statement of profit and loss will provide different values for these metrics due to the inclusion of the subsidiary’s results. Note that the EBITDA calculation here is based on the figures given in the standalone P&L, and some slight variations might occur depending on how certain items are treated.

Cash Flow #

Cash Flow Components #

Based on Shaily Engineering Plastics Limited’s Standalone Statement of Cash Flows for the year ended March 31, 2024 (in ₹lakhs):

• Cash Flow from Operating Activities: ₹7,447.39 lakhs
• Cash Flow from Investing Activities: ₹(9,237.73) lakhs (negative indicating net cash outflow)
• Cash Flow from Financing Activities: ₹463.68 lakhs

These are the standalone cash flow figures. The consolidated statement of cash flows would include the cash flows of the subsidiary, leading to different values for these line items.

Cash Flow Metrics #

Shaily Engineering Plastics Limited’s annual report doesn’t explicitly state free cash flow, capital expenditure, or dividends paid as single line items. We need to calculate these from the provided data:

1. Capital Expenditure (CAPEX):

The report mentions a CAPEX of ₹97.07 crore (₹9707 lakhs) for FY24, including work in progress. This is stated in the Management Discussion and Analysis section.

2. Dividends Paid:

The board recommended a final dividend of ₹1 per equity share (face value ₹2) for FY24. The total number of shares is 4,58,67,510. Therefore, the total dividend payout would be:

₹1/share * 4,58,67,510 shares = ₹4,58,67,510

This translates to ₹458.68 lakhs. This is subject to shareholder approval at the AGM. The report does not state whether the dividend was actually paid. The actual amount paid might be different and would be shown in the subsequent year’s financial statements.

3. Free Cash Flow (FCF):

Free cash flow is calculated as:

FCF = Operating Cash Flow - Capital Expenditures - Dividend Payments

Using the standalone figures (which may differ slightly depending on exact categorization used):

FCF = ₹7,447.39 lakhs - ₹9,707 lakhs - ₹458.68 lakhs = ₹(2,718.29) lakhs

Therefore, according to this calculation using standalone figures, the free cash flow was negative ₹271.83 crore.

Important Note: These calculations are estimates based on the available information. The exact free cash flow figure, as well as the actual dividend paid, might vary based on accounting treatment, and specific items not explicitly categorized. The consolidated figures would further change due to the inclusion of the subsidiary’s data. For precise values, refer to the subsequent year’s financial statement or official announcements.

Profitability Ratios #

To calculate these profitability ratios for Shaily Engineering Plastics Limited, we’ll use the standalone figures from the financial statements. Keep in mind that using the consolidated figures would yield different results. Also, slight variations may be possible due to rounding differences.

Standalone Figures (in ₹lakhs):

• Revenue: ₹61,597.36
• Cost of Revenue: ₹37,009.60 (calculated as Cost of Materials Consumed + Changes in Inventories)
• Gross Profit: ₹24,587.76
• Operating Income: ₹6,009.01 (estimated based on the expenses most appropriately categorized as operating)
• Net Income: ₹3,612.98
• Shareholders’ Equity (Average): ₹(43148.24 + 39563.37)/2 = ₹41,355.81
• Total Assets (Average): ₹(75207.89 + 68464.33)/2 = ₹71,836.11

Profitability Ratios:

• Gross Profit Margin: (Gross Profit / Revenue) * 100 = (₹24,587.76 / ₹61,597.36) * 100 = 39.92%
• Operating Profit Margin: (Operating Income / Revenue) * 100 = (₹6,009.01 / ₹61,597.36) * 100 = 9.76%
• Net Profit Margin: (Net Income / Revenue) * 100 = (₹3,612.98 / ₹61,597.36) * 100 = 5.86%
• Return on Equity (ROE): (Net Income / Average Shareholders’ Equity) * 100 = (₹3,612.98 / ₹41,355.81) * 100 = 8.74%
• Return on Assets (ROA): (Net Income / Average Total Assets) * 100 = (₹3,612.98 / ₹71,836.11) * 100 = 5.04%

Important Note: These calculations are based on the standalone financial statements. The consolidated financial statements would result in different ratios. Additionally, the precise operating income figure is an approximation, as the report doesn’t provide a single line item for this metric, requiring a calculation based on various expense categories.

Liquidity Ratios #

To calculate these liquidity ratios for Shaily Engineering Plastics Limited, we’ll use the standalone figures from the balance sheet as of March 31, 2024 (in ₹lakhs):

• Current Assets: ₹24,027.31
• Current Liabilities: ₹22,696.07
• Quick Assets (Current Assets - Inventory): ₹24,027.31 - ₹8,360.35 = ₹15,666.96
• Cash and Cash Equivalents: ₹441.91

Liquidity Ratios:

• Current Ratio: Current Assets / Current Liabilities = ₹24,027.31 / ₹22,696.07 = 1.06
• Quick Ratio: Quick Assets / Current Liabilities = ₹15,666.96 / ₹22,696.07 = 0.69
• Cash Ratio: Cash and Cash Equivalents / Current Liabilities = ₹441.91 / ₹22,696.07 = 0.02

Interpretation:

• Current Ratio of 1.06: This is slightly below the generally accepted ideal range of 1.5 to 2. It suggests that the company might have some short-term liquidity concerns, meaning they may have difficulty meeting their short-term obligations with their current assets.

• Quick Ratio of 0.69: This is considerably below the generally preferred quick ratio of at least 1. It indicates a lower ability to meet its short-term obligations without relying on the sale of inventories.

• Cash Ratio of 0.02: This very low cash ratio indicates a significant reliance on the sale of inventories and other current assets to meet short-term obligations. This is a concerningly low ratio.

Important Note: These calculations use standalone figures. The consolidated ratios will be different. Also, the interpretation of these ratios should be done within the context of the company’s industry, historical performance, and overall financial health. A low current and quick ratio could be problematic if the company cannot readily convert its inventory into cash. The company’s management discussion highlights some attention to working capital management.

Efficiency Ratios #

Calculating efficiency ratios for Shaily Engineering Plastics Limited requires using data from both the income statement and balance sheet. We will use the standalone figures. Remember that consolidated figures would produce different results. Also, there’s some ambiguity regarding precise values depending on what sales/cost figures are used in calculations (e.g., net sales vs. gross sales). We will use the most straightforward approach possible given the available information.

Standalone Figures (in ₹lakhs):

• Net Sales (Revenue): ₹61,597.36
• Average Total Assets: ₹(75,207.89 + 68,464.33)/2 = ₹71,836.11
• Cost of Goods Sold (COGS): ₹37,009.60 (calculated previously as Cost of Materials Consumed + Changes in Inventories)
• Average Inventory: ₹(8,360.35 + 7,297.47)/2 = ₹7,828.91
• Average Accounts Receivable: ₹(11,174.68 + 8,879.39)/2 = ₹10,027.04

Efficiency Ratios:

• Asset Turnover: Net Sales / Average Total Assets = ₹61,597.36 / ₹71,836.11 = 0.86 times
• Inventory Turnover: Cost of Goods Sold / Average Inventory = ₹37,009.60 / ₹7,828.91 = 4.73 times
• Receivables Turnover: Net Sales / Average Accounts Receivable = ₹61,597.36 / ₹10,027.04 = 6.15 times

Interpretation:

• Asset Turnover of 0.86 times: This indicates that for every ₹1 of assets, the company generated ₹0.86 of sales. This is a relatively low turnover, suggesting the company may not be utilizing its assets as efficiently as possible. Further analysis is needed to determine if this is industry-standard or if there’s room for improvement.

• Inventory Turnover of 4.73 times: This means the company sold and replaced its inventory 4.73 times during the year. This is a reasonable turnover rate, though a higher rate would typically be more desirable in many industries. Further analysis would require industry benchmarks for comparison.

• Receivables Turnover of 6.15 times: The company collected and re-generated its receivables 6.15 times during the year. This suggests relatively efficient management of accounts receivables. Again, industry benchmarks are needed for a thorough evaluation.

Important Considerations:

• Standalone vs. Consolidated: These ratios are based on standalone data. Consolidated figures would provide a different picture.
• Industry Benchmarks: Comparing these ratios to industry averages is essential for a meaningful assessment of SEPL’s efficiency. Without industry data, the interpretation is limited.
• Data Limitations: Some approximations were necessary in these calculations due to the absence of explicit line items in the financial statements (e.g., using a simple average for assets and receivables). More detailed information would lead to greater precision.

Leverage Ratios #

To calculate these leverage ratios for Shaily Engineering Plastics Limited, we will use the standalone figures from the balance sheet and income statement as of March 31, 2024 (in ₹lakhs). Remember that using consolidated figures would yield different results.

Standalone Figures:

• Total Debt (Long-term debt + Current borrowings): ₹6,983.30 + ₹13,851.88 = ₹20,835.18
• Shareholders’ Equity: ₹43,148.24
• Total Assets: ₹75,207.89
• EBIT (Earnings Before Interest and Taxes): ₹6,009.01 (This is an approximation, calculated previously as operating income)
• Interest Expense: ₹1,789.63

Leverage Ratios:

• Debt-to-Equity Ratio: Total Debt / Shareholders’ Equity = ₹20,835.18 / ₹43,148.24 = 0.48
• Debt-to-Assets Ratio: Total Debt / Total Assets = ₹20,835.18 / ₹75,207.89 = 0.28
• Interest Coverage Ratio: EBIT / Interest Expense = ₹6,009.01 / ₹1,789.63 = 3.36

Interpretation:

• Debt-to-Equity Ratio of 0.48: This indicates that the company has ₹0.48 of debt for every ₹1 of equity. This suggests a moderate level of financial leverage. Whether this is considered high or low depends on industry benchmarks and the company’s overall risk profile.

• Debt-to-Assets Ratio of 0.28: This shows that 28% of the company’s assets are financed by debt. Again, the assessment of whether this is high or low requires comparison to industry averages and the company’s specific circumstances.

• Interest Coverage Ratio of 3.36: This means the company’s earnings before interest and taxes (EBIT) are 3.36 times its interest expense. This indicates a reasonable ability to meet its interest obligations. A higher ratio generally suggests a stronger ability to service debt.

Important Considerations:

• Standalone vs. Consolidated: These ratios are based on standalone data. The consolidated ratios will be different.
• Industry Benchmarks: Comparing these ratios to industry averages is essential for a complete understanding of the company’s financial leverage.
• Qualitative Factors: A thorough evaluation of leverage also considers qualitative factors such as the company’s cash flow generation, profitability, and overall financial health. A company with strong cash flows and high profitability can handle a higher level of debt more easily. A more complete assessment requires analysis of the company’s cash flow statement and other relevant financial information.

Market Analysis #

Market Metrics #

Several of these metrics require information not fully provided in the annual report. We can calculate some, but others require additional market data (like the share price).

1. Market Capitalization:

The report states a market capitalization of ₹2,430 crore (₹243000 lakhs) as of March 31, 2024, on both the BSE and NSE.

2. Price-to-Earnings Ratio (PE Ratio):

The PE ratio cannot be calculated without knowing the current market price per share. The annual report provides the EPS (Earnings Per Share), but the market price is needed to complete the calculation:

PE Ratio = Market Price per Share / Earnings Per Share

3. Price-to-Book Ratio (PB Ratio):

Similar to the PE ratio, the PB ratio requires the market price per share and the book value per share (which can be derived from shareholders’ equity and the number of shares):

PB Ratio = Market Price per Share / Book Value per Share

4. Dividend Yield:

The report states a recommended final dividend of ₹1 per share. To calculate the dividend yield, we need the market price per share:

Dividend Yield = (Annual Dividend per Share / Market Price per Share) * 100

5. Dividend Payout Ratio:

We can estimate the dividend payout ratio using the standalone figures. The recommended dividend is ₹458.68 lakhs, and the net income (standalone) is ₹3612.98 lakhs:

Dividend Payout Ratio = (Dividends Paid / Net Income) * 100 = (₹458.68 lakhs / ₹3612.98 lakhs) * 100 = 12.70%

Note: This is based on the recommended dividend. The actual payout ratio might differ if the shareholders don’t approve the full amount or if there are adjustments.

In Summary:

We can only definitively provide the market capitalization from the report (₹2,430 crore). Calculating the PE ratio, PB ratio, and dividend yield requires the current market price per share, which is not included in the annual report itself. We have provided an estimated dividend payout ratio based on the recommended dividend. You would need to obtain the current market share price from a financial website to complete the calculation of the missing ratios.

Business Analysis #

Segment Analysis #

Shaily Engineering Plastics Limited’s Annual Report for FY24 provides segment information, but it’s not entirely comprehensive in terms of market share and precise geographic breakdowns. We’ll summarize the available data:

Important Notes:

• Operating Margins: The annual report does not explicitly provide operating margins for each segment. Calculations would require more detailed segment-specific income statements.
• Market Share: The report does not provide precise market share data for each segment. This would require external market research data.
• Geographic Presence: The report does mention global presence and strong positions in certain markets (India, Europe, US). However, detailed regional revenue breakdowns aren’t included.
• Revenue Growth for Consumer and Industrial: The report doesn’t present YoY revenue growth for the Consumer and Industrial segments individually. Overall revenue growth of 6.06% is reported, but it’s unclear how this growth is distributed across the three segments.

To obtain a complete picture of market shares and a more precise geographical breakdown of revenue, you would need to consult external market research reports or financial databases. The information available in the annual report is more qualitative than quantitative for segment specifics.

Risk Assessment #

Shaily Engineering Plastics Limited’s annual report doesn’t explicitly categorize risks or provide numerical assessments of impact severity and likelihood. However, we can summarize the key risks, their descriptions, and the mitigation strategies discussed:

I. Key Risk Factors:

II. Qualitative Assessment (Impact & Likelihood):

The report does not provide quantitative assessments (e.g., high, medium, low) for the likelihood or severity of these risks. A full risk assessment would require a separate analysis beyond the annual report’s information. However, a qualitative assessment can be inferred from the detail and prominence given to certain risks in the report.

For example, the detailed discussion of risk mitigation for liquidity suggests that this is considered a significant risk. Similarly, the substantial detail regarding HSE risks and mitigation implies a high focus on this area, suggesting the management’s concern about the associated impact and likelihood.

III. Trends:

The risk profile of the company is largely influenced by factors impacting both the global and Indian markets:

• Geopolitical Instability and Global Slowdowns: The report specifically mentions the impact of the Ukraine-Russia war and Red Sea disturbances on logistics costs and overall market sentiment. This highlights a persistent risk related to global economic uncertainty.
• India’s Growing Economy: India’s growth provides both opportunities and challenges. The rising demand and changes in consumer behavior offer growth prospects, but increased competition in India’s manufacturing sector remains a risk.
• Technological Advancements: The need for continuous technology upgrades is identified as a key challenge, indicating that the company needs to adapt and innovate constantly to stay competitive.
• Supply Chain Disruptions: Global supply chain disruptions continue to be a major concern and highlight the need for the company to proactively manage suppliers and diversify its sourcing strategies.
• ESG Concerns: The rising prominence of ESG factors presents both an opportunity and a challenge. Meeting increasingly stringent environmental and social standards requires continuous investment and adaptation, but doing so also improves a company’s reputation, and access to funds, creating a competitive advantage.

IV. Limitations:

The report offers a good overview of the risks, but a full and in-depth risk assessment would require additional quantitative analysis, detailed risk scoring/ranking, and likely industry benchmarks for comparison. The qualitative assessment provided here is based on the prominence given to various risks and mitigation strategies in the report.

Strategic Overview #

Management Assessment #

Shaily Engineering Plastics Limited’s management highlights several key strategic priorities, competitive advantages, market conditions, challenges, and opportunities in its annual report:

I. Key Strategies:

• Business Restructuring: Reorganizing the business around three core verticals – Healthcare, Consumer, and Industrial – to enhance focus, efficiency, and profitability. This strategy leverages shared processes and material similarities within each vertical.

• Intellectual Property (IP) Development: Investing heavily in R&D to develop proprietary technologies and patent platforms, particularly in the medical devices sector. This aims to create a wider competitive moat and transition from one-off transactions to long-term, higher-margin contracts with key clients.

• Healthcare Segment Focus: Deepening investment and expertise in the healthcare segment, particularly in specialized medical devices (weight-loss combination drugs). This leverages the segment’s resilience to economic downturns and high margins.

• Capacity Expansion Timing: Strategic capacity expansion timed with growing customer demand, aiming for optimal capacity utilization to maximize capital efficiency.

• Customer Supply Chain Integration: Becoming a preferred and integrated part of its global customers’ supply chains to enhance revenue predictability and long-term partnerships.

• ESG Integration: Aligning plants, processes, and practices with evolving ESG standards to enhance reputation, attract investors, and contribute to responsible citizenship.

II. Competitive Advantages:

• Legacy and Experience: 41 years of experience in the engineered plastics sector, building a strong reputation for quality and reliability.

• Esteemed Clientele: Long-standing relationships with prestigious global brands, indicating a proven track record and high customer loyalty.

• Quality Commitment: Stringent quality control processes and certifications (IATF 16949, ISO 9001, MDSAP, etc.) reinforce customer trust.

• Value Addition: Providing customized solutions and leveraging R&D capabilities to offer IP-protected, high-value products.

• Technology Investments: Investing in cutting-edge manufacturing technologies to reduce operational expenses and enhance efficiency.

• Indian Manufacturing Base: Leveraging the cost advantages and growing manufacturing strength of India to serve global customers competitively.

III. Market Conditions:

• Global Slowdown: Challenges in major global markets (US, Europe) due to economic slowdowns, geopolitical conflicts, and disrupted supply chains.

• India’s Growth Story: India’s rapid economic growth, expanding middle class, and government initiatives (Make in India, PLI scheme) are creating significant opportunities.

• Shifting Supply Chains: Global companies are relocating manufacturing away from China, presenting a chance for Indian manufacturers to capture market share.

• Demand for High-Precision Components: Growing demand for high-precision and technologically complex products across various sectors (healthcare, automotive, consumer goods).

• Increased Focus on ESG: Greater investor and consumer emphasis on environmental and social responsibility.

IV. Challenges:

• Global Economic Uncertainty: Navigating global economic slowdowns and geopolitical instability.

• Competition: Facing increased competition in both global and domestic markets.

• Supply Chain Disruptions: Managing potential disruptions to the supply chain.

• Meeting Stringent Quality Standards: Maintaining its reputation for exceptional quality in a highly demanding environment.

• Talent Acquisition and Retention: Attracting and retaining skilled professionals in a competitive labor market.

V. Opportunities:

• India’s Economic Growth: Capitalizing on India’s continued economic growth and expanding consumption market.

• Global Supply Chain Restructuring: Benefiting from the relocation of manufacturing from China to India.

• Growth in Healthcare: Expanding market share in the high-growth medical devices segment.

• Metal-to-Plastic Conversion: Leveraging expertise in replacing metal components with plastic equivalents across various industries.

• Sustainable Products and Practices: Meeting increasing demand for environmentally friendly products and sustainable manufacturing practices.

In summary, Shaily Engineering Plastics Limited’s strategy hinges on leveraging its existing strengths (quality, customer relationships, technology) to navigate global challenges and capitalize on opportunities presented by India’s growth and shifting global manufacturing landscapes. The focus on IP development and the healthcare segment appears to be a key element of their growth strategy, supported by a strong commitment to responsible business practices.

ESG Ratings #

The annual report for Shaily Engineering Plastics Limited does not include ESG ratings from any external rating agencies (e.g., MSCI, Sustainalytics, Refinitiv). The report details the company’s own ESG initiatives and policies but doesn’t cite any scores or rankings from independent ESG assessment providers. To find ESG ratings, you would need to consult external ESG rating agencies directly or utilize financial databases that compile this information.

ESG Initiatives #

Shaily Engineering Plastics Limited’s annual report details several environmental, social, and governance (ESG) initiatives, but lacks specific quantifiable metrics in some areas. Here’s a summary based on the report:

I. Environmental Initiatives:

• Reducing Water Consumption: Implementing zero groundwater discharge policies across most plants and actively pursuing water-positive status. Utilizing treated sewage water and rainwater harvesting. Employing RO reject water in washrooms and closed-loop reuse of effluent treatment plant water in manufacturing processes.

• Renewable Energy Adoption: Significant investment in renewable energy sources, aiming for 100% renewable electricity across all plants in the coming years. Currently at 18.45% renewable energy usage.

• Waste Reduction: Utilizing Lean Sigma principles to reduce waste across operations, reintroducing plastic waste back into the manufacturing process, and disposing of waste through GPCB-approved agencies. 37.06% of raw material used was from recycled polymer. Aims to reduce and manage air, water, and solid waste streams.

• Carbon Emission Monitoring: Monitoring CO2 emissions from power and fuel consumption. Plans to install 1 MW of solar power in FY25.

II. Carbon Footprint:

The report lacks a comprehensive disclosure of its total Scope 1, 2, and 3 greenhouse gas emissions. The report does mention the metric of total Scope 1 and Scope 2 emissions, and the intensity for both current and previous years. While the company is monitoring its carbon footprint, specific quantitative data is limited. Further details would require external data sources or direct inquiry to SEPL.

III. Social Initiatives:

• Employee Well-being: Focus on employee health and safety through regular medical checkups, a 24/7 occupational health center, employee insurance, and various employee engagement programs. Maintaining 18% female employment and aiming for improved gender diversity.

• Community Development: Supporting education, skill development, sanitation, animal care, and health initiatives in communities around its manufacturing facilities. Spent ₹25.13 lakh on CSR activities in FY24. Includes support for orphanages, schools for disabled children, and assistance for local health centers.

• Supply Chain Ethics: Maintaining a stable ecosystem of vendors through long-term partnerships and periodic audits. A commitment to fair labor practices is highlighted, though specific details are limited.

IV. Governance Practices:

• Board Composition: A diverse Board comprising executive directors and independent directors, including a significant number of independent directors and female representation, designed to ensure good corporate governance.

• Committees: Dedicated committees (Audit, Nomination & Remuneration, Stakeholders’ Relationship, CSR, and Risk Management) oversee various aspects of the business and promote responsible decision-making.

• Compliance: Strict adherence to various quality, environmental, health, and safety standards and certifications. A commitment to transparent financial reporting and ethical conduct is expressed.

• Vigil Mechanism: A formal “Whistleblower Policy” in place to encourage reporting of unethical behavior and ensure employee protection.

V. Sustainability Goals:

The annual report does not provide explicit, clearly defined sustainability goals with quantifiable targets and deadlines. While various initiatives show a commitment to sustainability, there’s a lack of formal targets such as emission reductions targets, renewable energy targets, or waste reduction targets with specific timeframes. The report showcases ambitions (100% renewable energy, water-positive status, etc.) but lacks formal, measurable, achievable, relevant, and time-bound (SMART) goals.

In Summary:

Shaily Engineering Plastics Limited demonstrates a proactive approach to ESG through a range of initiatives. However, the report’s limited disclosure of key metrics hinders a complete quantitative assessment of its environmental performance and progress toward specific sustainability goals. Further information from the company would be needed for a more complete understanding.

Additional Information #

Operational Metrics #

The standalone financial statements for Shaily Engineering Plastics Limited show that R&D expenditure for FY24 was ₹0. This is explicitly stated in Annexure B of the annual report.

The employee count (including permanent and non-permanent employees, excluding contract workers) as of March 31, 2024, was 815. This is stated in the “Employees” section of the annual report. The consolidated employee count is higher, 2,474, including contract workers.

Key Events #

Shaily Engineering Plastics Limited’s annual report highlights several significant events during FY2024:

• Completion of Pharma Facility Expansion: The expansion of the pharmaceutical manufacturing facility was completed.

• Business Development in Key Segments: Significant business development occurred across all three segments:

  • Healthcare: Secured four new contracts for pen and auto-injectors; commenced a new applicator project; achieved third global ranking in pen injectors and auto-injectors.
  • Consumer: Secured new orders for components in new packaging development for the FMCG segment; and additional volumes for carbon steel home furnishings.
  • Industrial: Secured new business for appliance knobs and three new products with two automotive customers.

• Stock Split: The equity shares of the company were subdivided from a face value of ₹10 to ₹2, to improve liquidity and encourage wider participation.

• New Tool Room and Metrology Facilities: The commissioning of a new state-of-the-art tool room with CNC machines for manufacturing high-precision molds and the addition of a CT scanner to the metrology facilities represent significant investments in enhancing manufacturing capabilities and precision.

• Changes in Key Managerial Personnel: Mr. Ashish Somani resigned as Chief Financial Officer, and Mr. Sanjay Shah was appointed in his place. Subsequently, Mr. Paresh Jain was appointed CFO, while Mr. Sanjay Shah continued as Chief Strategy Officer.

These events indicate a period of significant investment in capacity expansion, technological advancement, and business development, particularly within the high-growth healthcare sector. The changes in key management personnel are also noteworthy. However, the report doesn’t specify if there were any acquisitions or divestitures during the fiscal year.