Stylam Industries Ltd - Annual Report 2023-24 Analysis

Overview #

Detailed Analysis #

This analysis looks into the Stylam Industries Limited annual report for FY2023-24, examining its financial performance, business segments, risk factors, and ESG initiatives.

I. Financial Performance:

FY2023-24 showed a mixed bag for Stylam. While profitability metrics improved significantly, revenue declined slightly. This suggests a successful cost optimization and efficiency drive, but also hints at challenges in the external market.

• Revenue: Decreased marginally by 4% to ₹914 crore from ₹952 crore in FY2022-23. This dip is attributed to global headwinds including the Russia-Ukraine war, inflation, and tepid demand, impacting both export and domestic sales.
• EBITDA: Increased significantly by 18% to ₹183 crore from ₹155 crore, demonstrating successful cost management. EBITDA margin improved substantially to 20% from 16%.
• PAT: Rose by 34% to ₹128 crore from ₹96 crore, highlighting improved profitability despite lower revenue. The PAT margin increased to 14% from 10%. A significant portion of this increase seems due to a reduction in finance costs.
• Debt: The company achieved a significant milestone by becoming debt-free in FY2024, strengthening its balance sheet and providing greater financial flexibility.
• Return on Equity (ROE): Decreased to 20% from 23%, potentially influenced by the increased equity due to retained earnings.
• Return on Capital Employed (ROCE): Remained relatively stable around 30%, indicating efficient capital utilization.
• Interest Coverage Ratio: Showed dramatic improvement, rising to 66.87 from 16.6, reflecting the debt-free status.
• Export Performance: Exports remained a major revenue driver, contributing ₹611 crore (67% of total revenue). While overall revenue declined, export sales showed resilience.

II. Business Segments:

Stylam’s primary business is the manufacturing and sale of decorative laminates and allied products. Key product categories include:

• High-pressure laminates: Used in furniture, cladding, doors, and partitions. The report highlights various types including post-forming, performance (ESD, chemical-resistant, fire-retardant), and specialty laminates (digital, synchro, metallic, unicore, flicker, chalkboards, magnetic).
• Acrylic solid surfaces (Granex): Offer a durable, aesthetically pleasing alternative to natural stone.
• Compact laminates: Durable high-pressure laminates for interior and exterior applications, including cubicles, lockers, and exterior cladding.
• Panels (new segment): The company expanded into laminating impregnated paper onto Medium Density Fiber (MDF) panels, indicating diversification efforts.

The company’s strong global presence, exporting to over 80 countries, positions it well for future growth in various markets. However, the report highlights a decline in domestic construction, affecting laminate flooring sales, indicating potential vulnerability to regional economic downturns.

III. Risks:

The report acknowledges many significant risk factors:

• Geopolitical Instability and Supply Chain Disruptions: The ongoing conflict in the Red Sea region affects supply chains, impacting the availability and cost of raw materials. This is a especially pertinent risk given that the Company’s export revenue depends largely on reliable global supply chains.
• Raw Material Price Volatility: Fluctuations in the prices of wood and metal directly affect profitability.
• Intense Competition: The industry is competitive, leading to potential price wars and margin pressures.
• Economic Downturn: The global economic slowdown has directly impacted demand, especially in the construction sector, leading to a decline in sales.

IV. ESG Initiatives (Environmental, Social, and Governance):

Stylam demonstrates a commitment to ESG principles. Key initiatives include:

• Environmental Stewardship:
  • Energy Efficiency: Transitioning to high GCV fuel and gas for boilers and impregnators, optimizing compressed air use, and installing energy-efficient equipment.
  • Renewable Energy: Plans for a 2 MW solar power plant and a hot water generator using biomass fuel are mentioned.
  • Water Conservation: Rainwater harvesting and water recycling processes.
  • Waste Management: Detailed recycling initiatives, including selling waste for recycling and managing e-waste responsibly.
• Social Responsibility (CSR): ₹1.82 crore contributed to various CSR activities, including infrastructure development in schools, healthcare support, setting up old age homes, and supporting sports associations. Focus is on education, healthcare, care for senior citizens, and combating hunger and malnutrition.
• Governance: Strong corporate governance framework, including independent directors, various board committees (Audit, Nomination & Remuneration, Stakeholder Relationship, CSR, Risk Management), transparent disclosure practices, and compliance with regulations. The company highlights its commitment to talent management and employee well-being.

V. Overall Assessment:

Stylam Industries demonstrated resilience in a challenging global environment in FY2023-24. The impressive increase in profitability margins, despite a slight revenue decline, indicates effective cost control and operational efficiency improvements. Becoming debt-free is a remarkable achievement. However, the company’s dependence on exports and vulnerability to global economic fluctuations and supply chain disruptions should be carefully considered. The commitment to ESG initiatives is commendable and aligns with growing global concerns about sustainability. Continued focus on innovation and market diversification will be essential for sustained long-term growth. The expansion into the MDF panel lamination segment could provide opportunities for diversification. The company’s success will depend on its ability to manage its risks effectively and capitalize on market opportunities in a rapidly evolving global landscape.

Detailed Analysis #

Balance Sheet #

Asset Analysis #

The values are presented in Indian Rupees (INR) in Lakhs (1 Lakh = 100,000). Remember that these figures are from the standalone financial statements. The consolidated financial statements will have slightly different numbers due to the inclusion of subsidiaries.

Based on the provided annual report:

• Total Assets: ₹60,760.46 Lakh (₹6,076,046,000)
• Current Assets: ₹40,277.14 Lakh (₹4,027,714,000)
• Cash and Cash Equivalents: ₹1,106.36 Lakh (₹110,636,000)
• Accounts Receivable (Trade Receivables): ₹16,207.52 Lakh (₹1,620,752,000)
• Inventory: ₹14,512.01 Lakh (₹1,451,201,000)

It’s important to note that these are year-end figures. Fluctuations in these values will occur throughout the year.

Liability Analysis #

The values are presented in Indian Rupees (INR) in Lakhs (1 Lakh = 100,000). These figures are from the standalone financial statements. Consolidated figures would differ due to the inclusion of subsidiaries.

Based on the provided annual report:

• Total Liabilities: ₹60,760.46 Lakh (₹6,076,046,000)
• Current Liabilities: ₹5,993.06 Lakh (₹599,306,000)
• Long-Term Debt: ₹0 Lakh (The company is debt-free as of the reporting period)
• Accounts Payable (Trade Payables): ₹3,883.80 Lakh (₹388,380,000)

Remember that these are year-end figures, and the values fluctuate throughout the fiscal year. The company’s debt-free status is a key highlight of the report.

Equity Analysis #

The values are in Indian Rupees (INR) in Lakhs (1 Lakh = 100,000), from the standalone financial statements. Consolidated figures will differ.

Based on the provided annual report:

• Shareholders’ Equity: ₹53,656.21 Lakh (₹5,365,621,000)
• Retained Earnings: ₹52,808.81 Lakh (₹5,280,881,000)
• Share Capital: ₹847.40 Lakh (₹84,740,000)

These are year-end figures; the values will fluctuate throughout the fiscal year. Note that the vast majority of shareholders’ equity is composed of retained earnings, indicating significant reinvestment of profits within the company.

Income Statement #

Operating Performance #

The figures are in Indian Rupees (INR) in Lakhs (1 Lakh = 100,000), from the standalone financial statements. Consolidated figures will differ.

Based on the provided annual report:

• Revenue: ₹91,408.25 Lakh (₹9,140,825,000)
• Cost of Revenue: This isn’t explicitly stated as a single line item. To calculate it, we need to add the Cost of raw materials consumed and the Purchase of Stock in Trade. This gives us: ₹45,919.56 Lakh + ₹0.04 Lakh = ₹45,919.60 Lakh (₹4,591,960,000). Note that the change in inventory is not included in cost of revenue.
• Gross Profit: Revenue - Cost of Revenue = ₹91,408.25 Lakh - ₹45,919.60 Lakh = ₹45,488.65 Lakh (₹4,548,865,000)
• Operating Expenses: This includes employee benefit expenses, depreciation and amortization, and other expenses. Summing these up: ₹7,506.14 Lakh + ₹2,226.47 Lakh + ₹18,152.71 Lakh = ₹27,885.32 Lakh (₹2,788,532,000)
• Operating Income (EBIT): Gross Profit - Operating Expenses = ₹45,488.65 Lakh - ₹27,885.32 Lakh = ₹17,603.33 Lakh (₹1,760,333,000)

Important Note: These calculations are based on the information directly provided in the financial statements. Slight discrepancies might arise due to rounding or the inclusion of minor items not explicitly detailed. The report doesn’t present these key metrics in a summarized manner; this requires calculation from individual line items.

Bottom Line Metrics #

The values are in Indian Rupees (INR) in Lakhs (1 Lakh = 100,000), from the standalone financial statements. Consolidated figures would be different.

Based on the provided annual report:

• Net Income (PAT): ₹1,284.00 Lakh (₹128,400,000)
• EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): ₹1,833.60 Lakh (₹183,360,000)
• Basic EPS: ₹75.75
• Diluted EPS: ₹75.75

Note that the basic and diluted EPS are the same in this case. These are all year-end figures, and the actual values will fluctuate throughout the year. The report presents these values directly, so no calculations are needed.

Cash Flow #

Cash Flow Components #

The values are in Indian Rupees (INR) in Lakhs (1 Lakh = 100,000), from the standalone statement of cash flows. Consolidated figures will differ.

Based on the provided annual report:

• Cash Flow from Operating Activities: ₹11,292.35 Lakh (₹1,129,235,000)
• Cash Flow from Investing Activities: ₹(2,089.07) Lakh (₹-208,907,000) - The negative sign indicates net cash used in investing activities.
• Cash Flow from Financing Activities: ₹(4,677.29) Lakh (₹-467,729,000) - The negative sign indicates net cash used in financing activities.

These are net cash flows for the year. The statement of cash flows provides these values directly; no calculations are required. Note that the negative cash flows from investing and financing activities are largely offset by the positive operating cash flow.

Cash Flow Metrics #

The figures are in Indian Rupees (INR) in Lakhs (1 Lakh = 100,000), and calculated from the standalone financial statements. Consolidated figures would differ. Determining precise free cash flow requires some calculations and assumptions as the report doesn’t explicitly state it.

• Dividends Paid: ₹423.70 Lakh (₹42,370,000) - This is stated directly in the report.

• Capital Expenditure (CAPEX): This isn’t directly given as a single figure but can be approximated from the “Payment for Tangible Assets” line in the Statement of Cash Flows. However, this includes capital work in progress (CWIP), which may not all be CAPEX in a given year. The cash flow statement shows ₹1,941.40 Lakh (₹194,140,000) in payments for tangible assets. A more precise CAPEX figure would require further information from the notes to the accounts or other supplementary data not provided.

• Free Cash Flow (FCF): FCF is typically calculated as Operating Cash Flow - Capital Expenditures. Using the figures from the standalone statement of cash flows:

  FCF ≈ ₹11,292.35 Lakh - ₹1,941.40 Lakh = ₹9,350.95 Lakh (₹935,095,000)

Important Considerations:

• The above FCF calculation is an approximation. A more accurate calculation would require a precise CAPEX number (excluding CWIP that might be capitalized in future years), and potentially adjustments for changes in working capital not already accounted for in operating cash flow.
• The report mentions significant investments in new plant and equipment, which would impact the CAPEX number and thus the FCF calculation. This information is needed for more accurate computation.

The provided data gives a reasonable estimate, but isn’t fully precise for free cash flow. Accessing more detailed notes on the statement of cash flows or supplemental information would refine the calculation.

Financial Ratios #

Profitability Ratios #

These profitability ratios are calculated from the standalone financial statements, and will differ slightly from consolidated figures. The calculations are based on values determined in previous responses, so minor discrepancies are possible due to rounding.

• Gross Profit Margin: (Gross Profit / Revenue) * 100 = (₹4,548,865,000 / ₹9,140,825,000) * 100 ≈ 49.8%

• Operating Profit Margin (EBIT Margin): (Operating Income / Revenue) * 100 = (₹1,760,333,000 / ₹9,140,825,000) * 100 ≈ 19.2%

• Net Profit Margin: (Net Income / Revenue) * 100 = (₹128,400,000 / ₹9,140,825,000) * 100 ≈ 1.4%

• Return on Equity (ROE): (Net Income / Average Shareholders’ Equity) * 100 = (₹128,400,000 / [(₹5,365,621,000 + ₹4,123,944,000)/2]) * 100 ≈ 2.7%

• Return on Assets (ROA): (Net Income / Average Total Assets) * 100 = (₹128,400,000 / [(₹6,076,046,000 + ₹5,384,057,000)/2]) * 100 ≈ 2.1%

Important Note: The ROE and ROA calculations use the average shareholders’ equity and total assets over the period. The exact figures for these averages aren’t explicitly stated in the report, so the calculation uses the beginning and ending balances to create an approximation. Also remember these are standalone figures and will vary from consolidated values. The slight differences from the values reported in the annual report might be because of rounding differences.

Liquidity Ratios #

These liquidity ratios are calculated from the standalone financial statements. Consolidated figures would differ.

• Current Ratio: (Current Assets / Current Liabilities) = ₹4,027,714,000 / ₹599,306,000 ≈ 6.72

• Quick Ratio: [(Current Assets - Inventories) / Current Liabilities] = (₹4,027,714,000 - ₹1,451,201,000) / ₹599,306,000 ≈ 4.30

• Cash Ratio: [(Cash and Cash Equivalents) / Current Liabilities] = ₹110,636,000 / ₹599,306,000 ≈ 0.18

These ratios provide insights into the company’s ability to meet its short-term obligations. A high current ratio indicates strong liquidity, but a very high ratio might also suggest inefficient use of assets. The quick ratio is a more stringent measure, excluding inventories which may not be readily convertible to cash. The cash ratio focuses solely on the most liquid assets. These values are approximations based on the data provided. The actual figures may show slight variations due to rounding differences in the raw data provided.

Efficiency Ratios #

These efficiency ratios are calculated from the standalone financial statements; consolidated figures would differ. The calculations use approximations for averages where precise mid-year values aren’t provided.

• Asset Turnover: (Revenue / Average Total Assets) = ₹9,140,825,000 / [(₹6,076,046,000 + ₹5,384,057,000) / 2] ≈ 1.50

• Inventory Turnover: (Cost of Goods Sold / Average Inventory) = ₹4,591,960,000 / [(₹1,451,201,000 + ₹1,598,244,000) / 2] ≈ 2.98

• Receivables Turnover: (Revenue / Average Accounts Receivable) = ₹9,140,825,000 / [(₹1,620,752,000 + ₹1,258,483,000) / 2] ≈ 6.40

Important Notes:

• Average Values: The calculations use the average of the beginning and ending balances for total assets, inventory, and accounts receivable because precise mid-year values aren’t available in the report. This is a common approximation method.
• Cost of Goods Sold (COGS): The precise COGS isn’t explicitly stated; the calculation uses the cost of raw materials consumed (adjusted for changes in inventory) and purchase of stock in trade, as a proxy for COGS.
• Variations: There might be slight variations in these ratios compared to what might be reported in a professional financial analysis due to rounding and the approximated average values used in the calculations.

These ratios provide insights into how effectively Stylam uses its assets to generate sales. Higher turnover ratios generally suggest greater efficiency, but there are industry-specific considerations and benchmarks that would be necessary to interpret these numbers meaningfully.

Leverage Ratios #

These use ratios are calculated from the standalone financial statements. Consolidated figures would be different. The company’s debt-free status significantly impacts these ratios.

• Debt-to-Equity Ratio: (Total Debt / Shareholders’ Equity) = ₹0 / ₹5,365,621,000 = 0.00. The company is debt-free, so this ratio is zero.

• Debt-to-Assets Ratio: (Total Debt / Total Assets) = ₹0 / ₹6,076,046,000 = 0.00. The company is debt-free, resulting in a zero ratio.

• Interest Coverage Ratio: (Earnings Before Interest and Taxes (EBIT) / Interest Expense) = ₹1,760,333,000 / ₹0 = undefined. Since the company has no interest expense due to its debt-free status, this ratio is undefined. However, the annual report itself provides the value of 66.87 which is calculated using EBITDA instead of EBIT.

Because Stylam is debt-free, the debt-based use ratios are all zero. This significantly reduces financial risk. The high interest coverage ratio (66.87) as reported in the annual report, further reinforces the company’s strong financial health. However, future debt levels should be monitored.

Market Analysis #

Market Metrics #

The annual report doesn’t directly provide market capitalization, P/E ratio, P/B ratio, or dividend yield. These are market-based metrics that require current market price information and total outstanding shares, which are not included in the provided annual report.

• Market Cap: This requires the current market price per share multiplied by the total number of outstanding shares. This information is not in the annual report.

• P/E Ratio (Price-to-Earnings Ratio): This requires the current market price per share divided by the earnings per share (EPS). Both the current market price and the EPS from the current year are needed, which are not provided in the annual report.

• P/B Ratio (Price-to-Book Ratio): This needs the current market price per share divided by the book value per share (Shareholders’ Equity / Number of Outstanding Shares). Again, the current market price is missing.

• Dividend Yield: (Annual Dividend per Share / Current Market Price per Share) * 100. The annual dividend per share can be calculated from the information provided in the annual report (₹2.5 interim dividend and a potential final dividend to be decided), but the current market price is absent.

• Dividend Payout Ratio: (Dividends Paid / Net Income) * 100 = (₹42,370,000 / ₹128,400,000) * 100 ≈ 33.0% (Note: This calculation only uses the interim dividend. The final dividend payment isn’t yet determined, so this is an incomplete measure.)

In summary, to calculate market-based valuation ratios (market cap, P/E, P/B, dividend yield), one needs real-time stock market data which is not part of this annual report. Only the dividend payout ratio (based on interim dividend only) can be calculated with the information provided.

Business Analysis #

Segment Analysis #

The annual report doesn’t explicitly break down revenue and operating margins by segment. It primarily focuses on the overall business performance and does not provide detailed segmental analysis as required by Ind AS 108. The report mentions that the main business activity falls under one segment, “Laminates.” Therefore, a precise breakdown of segmental performance is unavailable.

Based on the provided report, we can infer the following about Stylam’s business segments:

1. Laminates:

• Name: High-pressure laminates (HPL) and allied products.
• Revenue: The vast majority of Stylam’s ₹914 crore revenue likely comes from this segment. Precise revenue figures are not available due to the lack of segment reporting in the report.
• Growth Rate: The overall revenue experienced a slight decline in FY2023-24, this decline is likely reflected in the Laminates segment. Precise growth rates for individual segments are not available.
• Operating Margin: The overall EBITDA margin improved to 20% in FY2023-24. While it is probable that Laminates segment also experienced an increase in operating margin; precise figures are unavailable.
• Market Share: The report claims Stylam is India’s largest laminate-producing group, but no precise market share data is provided.
• Key Products: HPL, post-forming laminates, performance laminates (ESD, chemical-resistant, fire-retardant), specialty laminates (digital prints, synchronised, metallic, unicore, flicker, magnetic, etc.), high gloss laminates, and anti-fingerprint laminates.
• Geographic Presence: Domestic market (India) and international markets (exports to over 80 countries).

2. Acrylic Solid Surfaces:

• Name: Granex (and possibly other brands)
• Revenue: The revenue contribution of this segment is not specified in the report.
• Growth Rate: Not specified.
• Operating Margin: Not specified.
• Market Share: The report mentions Stylam is a pioneer in Solid Acrylic surfaces in India, but doesn’t give market share data.
• Key Products: Granex acrylic solid surfaces, used in countertops, sinks, and other applications.
• Geographic Presence: Primarily domestic (India), with potential for international expansion.

3. Panels (New Segment):

• Name: Short-cycle press capacity for laminating impregnated paper on MDF panels.
• Revenue: Revenue figures are not provided for this new segment.
• Growth Rate: This segment is new so no meaningful growth rate is available.
• Operating Margin: Not specified.
• Market Share: Not specified, as this segment is newly established.
• Key Products: Impregnated paper laminated on MDF panels.
• Geographic Presence: Likely focused initially on the domestic Indian market, though potential for export exists.

In summary: The annual report lacks detailed segmental information. A complete analysis requires supplementary data or a more detailed breakdown of business segments provided by Stylam. While we can identify the segments and their core product offerings, revenue, profit, and market share data are insufficient for a detailed analysis.

Risk Assessment #

The annual report identifies many key risk factors but doesn’t provide a structured assessment of impact severity, likelihood, or detailed mitigation strategies in a quantitative or qualitative matrix. We can, however, categorize and describe the risks based on the information provided.

I. Risk Categories and Descriptions:

The key risk factors can be broadly categorized as:

A. Market Risks:

• Geopolitical Instability and Supply Chain Disruptions: The Red Sea region’s instability and increased attacks on shipping routes disrupt global supply chains, impacting the timely delivery of raw materials and finished goods. This affects both procurement costs and export sales.
• Demand Volatility: Changes in global and domestic economic conditions, including construction activity, directly impact demand for Stylam’s products. A downturn in the construction or furniture sectors would negatively affect sales.
• Raw Material Price Volatility: Fluctuations in the prices of wood, metal, and other raw materials significantly impact production costs and profitability. This requires effective hedging or pricing strategies.
• Intense Competition: The decorative laminate industry is competitive, leading to price wars and margin pressures. Innovation and product differentiation are critical for maintaining competitiveness.

B. Operational Risks:

• Manufacturing Disruptions: Production disruptions due to equipment failures, labor issues, or unforeseen events could significantly impact output and delivery schedules. Robust maintenance and contingency planning are important.
• Product Quality and Safety: Maintaining consistent high quality and ensuring product safety are essential for customer satisfaction and brand reputation. Strong quality control systems and adherence to safety standards are critical.
• Environmental Regulations: Compliance with increasingly stringent environmental regulations necessitates investments in sustainable technologies and practices. Failure to comply can lead to penalties and reputational damage.

C. Financial Risks:

• Currency Fluctuations: Exposure to foreign exchange risks (USD and EUR) affects the profitability of export sales and the cost of imported raw materials. Hedging strategies are needed to mitigate this.
• Credit Risk: Risk of non-payment from customers.

II. Qualitative Assessment (Impact and Likelihood):

A precise quantification of impact severity and likelihood is not provided in the report. However, a qualitative assessment can be made:

• High Impact, High Likelihood: Geopolitical instability & supply chain disruptions, demand volatility, raw material price volatility.
• High Impact, Moderate Likelihood: Manufacturing disruptions, product quality & safety issues, environmental regulations, currency fluctuations.
• Moderate Impact, Moderate Likelihood: Credit risk.

III. Mitigation Strategies (Qualitative):

The report mentions some general mitigation strategies, but lacks detailed plans:

• Diversification: Expanding into new product segments (MDF panels) and markets reduces dependence on single products or regions.
• Cost Optimization: Improving efficiency and reducing production costs enhances profitability and resilience to price fluctuations.
• Strong Quality Control: Ensures high-quality products, minimizing returns and reputational damage.
• Sustainable Practices: Minimizing environmental impact and complying with regulations reduces risks and enhances brand reputation.
• Hedging: Using derivative instruments to manage currency exchange rate risks.
• Credit Policy: Establishing procedures for evaluating and managing credit risk.

IV. Trends:

• Increased Geopolitical Uncertainty: Global instability and supply chain vulnerability are likely to persist.
• Stringent Environmental Regulations: Environmental compliance costs will probably continue to rise.
• Emphasis on Sustainability: Demand for eco-friendly and sustainable products will likely increase.
• Technological Advancements: The industry will continue to see innovation in materials and manufacturing processes.

Limitations:

The annual report offers a high-level overview of risks. A detailed risk assessment, with quantified impact and likelihood scores, and detailed mitigation strategies is not presented. This detailed analysis would require supplementary information.

Strategic Overview #

Management Assessment #

Stylam’s annual report highlights many key strategies, competitive advantages, market conditions, challenges, and opportunities. However, the level of detail varies.

I. Key Strategies:

• Product Diversification: Expanding product offerings beyond traditional high-pressure laminates to include solid acrylic surfaces and the new MDF panel lamination segment. This strategy aims to reduce reliance on a single product category and cater to a broader customer base.
• Global Expansion: Leveraging its existing export network and participating in international trade shows to expand into new markets. The focus appears to be on regions with growing construction and furniture industries.
• Cost Optimization and Efficiency Improvements: Implementing measures to improve operational efficiency, reduce costs, and improve profitability margins. This has clearly been a successful strategy in FY2023-24.
• Focus on Value-Added Products: Increasing the share of higher-margin, value-added products (specialty laminates, performance laminates) within its portfolio.
• Sustainability Initiatives: Embracing ESG principles to minimize environmental impact, promote social responsibility, and improve brand reputation. This is presented as a key long-term strategy.

II. Competitive Advantages:

• Technological Leadership: Stylam highlights its pioneering role in introducing the PU+ Lacquer Coating process in India, leading to superior product quality and differentiation.
• Large-Scale Manufacturing: Operating Asia’s largest single-location laminate manufacturing plant offers significant cost advantages and production capacity.
• Established Global Presence: A wide distribution network and strong international relationships support expansion into new markets.
• Brand Recognition: The report points to increased brand visibility and recognition through various marketing initiatives.

III. Market Conditions:

• Global Economic Uncertainty: High inflation, supply chain disruptions, and geopolitical instability create headwinds for the industry.
• Growth in Emerging Markets: Developing economies offer significant growth potential for decorative laminates and allied products.
• Increasing Demand for Sustainable Products: Consumers and businesses are increasingly prioritizing sustainability, creating opportunities for companies with eco-friendly products and practices.
• Competition: The market is highly competitive, with both domestic and international players vying for market share.

IV. Challenges:

• Raw Material Price Volatility: Fluctuations in the price of raw materials present ongoing challenges to profitability.
• Supply Chain Disruptions: Geopolitical instability and shipping disruptions create significant risks to production and delivery.
• Economic Slowdown: Reduced construction and renovation activities, especially in the domestic market, impact demand.
• Intense Competition: Competition necessitates continuous innovation and differentiation to maintain market share.

V. Opportunities:

• Growth in Infrastructure Development: Government initiatives aimed at infrastructure development (Smart Cities Mission, etc.) should increase demand for building materials, including laminates.
• Expansion into New Markets: Untapped markets in developing countries offer growth opportunities for Stylam’s products.
• Demand for Sustainable Products: The growing focus on sustainability presents opportunities to offer eco-friendly solutions.
• Product Diversification: New product lines such as the MDF panel lamination offer potential for revenue growth and diversification.
• Technological Advancements: Developing and utilizing advanced manufacturing processes and introducing innovative products can improve competitiveness.

In summary: Stylam’s strategy focuses on diversification, global expansion, and sustainable growth. The company’s competitive advantages lie in technological leadership, large-scale manufacturing, a strong global presence, and brand recognition. However, it faces challenges from global economic uncertainty, supply chain disruptions, raw material price volatility, and intense competition. The opportunities identified center on leveraging infrastructure development, expanding into new markets, and capitalizing on the growing demand for sustainable products. The level of detail in the report regarding strategy implementation and specific targets is limited.

ESG Ratings #

The provided annual report does not include ESG ratings from any external rating agencies. While the report details Stylam’s ESG initiatives extensively, it doesn’t mention any scores or ratings from organizations like MSCI, Sustainalytics, Refinitiv, or others that provide such assessments. To find ESG ratings, one would need to consult specialized ESG data providers or search for Stylam’s ratings on those agencies’ websites.

ESG Initiatives #

Stylam’s annual report details its Environmental, Social, and Governance (ESG) initiatives, but lacks specific quantitative data in some areas (e.g., precise carbon footprint). Here’s a summary based on the provided information:

I. Environmental Initiatives:

• Energy Efficiency: The company highlights efforts to improve energy efficiency by switching to high GCV fuel and cleaner gas for boilers and impregnators, optimizing compressed air use, and installing energy-efficient equipment. Specific energy savings or reductions in carbon emissions aren’t quantified.
• Renewable Energy Adoption: Plans to install a 2 MW solar power plant and a biomass-fueled hot water generator are mentioned, but the timeline and impact aren’t detailed. This shows ambition towards renewable energy sources.
• Water Conservation: The company employs rainwater harvesting and water recycling processes to reduce freshwater consumption. However, water usage data isn’t quantified.
• Waste Management: Stylam has implemented detailed recycling programs. Waste materials from manufacturing are sold for recycling, and e-waste is managed using a buy-back policy. The report doesn’t quantify waste reduction or diversion rates.

II. Carbon Footprint:

The annual report does not provide a precise carbon footprint measurement. The company’s actions towards energy efficiency and renewable energy suggest an intention to reduce its carbon footprint, but without specific emissions data, any quantitative assessment is not possible.

III. Social Initiatives:

Stylam’s Corporate Social Responsibility (CSR) initiatives focus on many key areas:

• Education: Providing resources (furniture, paint, fans, stationery) to primary and high schools.
• Healthcare: Monetary contributions to healthcare institutions.
• Senior Citizen Care: Supporting old age homes.
• Sports Promotion: Providing financial support to sports associations.
• Combating Hunger and Malnutrition: Monetary contributions to charitable organizations.
• Apprenticeship Training: Providing support for apprenticeship programs, aligning with the National Apprenticeship Promotion Scheme (NAPS) and Furniture & Fittings Skill Council (FFSC).

The report provides a monetary amount of ₹1.82 crore spent on CSR activities, but does not quantify the impact (number of beneficiaries, improvements in education/healthcare quality, etc.).

IV. Governance Practices:

Stylam emphasizes robust corporate governance practices:

• Board Composition: A various Board with independent directors.
• Board Committees: Multiple committees (Audit, Nomination & Remuneration, Stakeholder Relationship, CSR, Risk Management) oversee various aspects of the company’s operations.
• Compliance: Adherence to applicable laws, regulations, and accounting standards.
• Transparency: Open disclosure of financial and non-financial information.
• Whistleblower Policy: A mechanism for employees and stakeholders to raise concerns about wrongdoing.
• Code of Conduct: Ethical guidelines for employees and business partners.

V. Sustainability Goals:

The report doesn’t explicitly list quantified sustainability goals (e.g., percentage reduction in emissions, water usage, waste generation by a specific year). The management discussion mentions long-term goals related to reducing freshwater consumption, optimizing energy usage, and increasing renewable energy use.

In summary: Stylam demonstrates a commitment to ESG through various initiatives, but the report is largely qualitative in nature, especially with regards to environmental impact. Concrete data on carbon emissions, water usage, waste reduction, and CSR impact would significantly improve the assessment of the company’s sustainability performance. The lack of specific, measurable, achievable, relevant, and time-bound (SMART) goals also limits a thorough evaluation.

Additional Information #

Operational Metrics #

Based on the provided annual report:

• R&D Expenditure: The report doesn’t provide a specific figure for R&D expenditure. While it mentions R&D activities focused on new product development, process improvement, and product quality enhancement, a monetary value for R&D investment isn’t disclosed.

• Employee Count: The report provides a breakdown of employees and workers:

  • Permanent Employees: 464 (including 12 females and 1 differently abled)
  • Permanent Workers: 617 (all male)
  • Other than Permanent Employees: 0
  • Other than Permanent Workers: 678 (all male)

  Total: 1759 employees and workers.

To get a precise R&D expenditure, one would need to examine the notes to the financial statements or other supplementary information that wasn’t part of the provided document.

Key Events #

Based on the annual report, the most significant events during the fiscal year 2023-24 for Stylam Industries Limited were:

• Becoming Debt-Free: The company successfully reduced its net debt and achieved a debt-free status, significantly strengthening its financial position and providing greater financial flexibility. This is presented as a major accomplishment.

• Expansion into MDF Panel Lamination: Stylam expanded its product portfolio by adding a short-cycle press capacity for laminating impregnated paper onto Medium Density Fiber (MDF) panels. This diversification strategy aims to tap into new market segments and reduce reliance on its core laminate business.

• Modular Expansion at Existing Facilities: The company invested ₹30 crore in a modular expansion at its existing facilities to increase production capacity. This reflects a commitment to enhancing operational capabilities.

• Construction of New Laminate Plant: The report mentions the ongoing construction of a new laminate manufacturing plant adjacent to its existing facility. This expansion aims to increase capacity and further solidify its market position.

• Interim Dividend Payment: The company declared and paid an interim dividend of ₹2.5 per equity share.

While the report mentions participation in various international exhibitions and continued efforts in marketing and CSR, the above events are presented as the most significant achievements and strategic developments of the company during the fiscal year.

Audit Information #

Auditor’s Opinion:

The independent auditor, Mittal Goel & Associates, Chartered Accountants, expressed an unmodified (unqualified) opinion on both the standalone and consolidated financial statements of Stylam Industries Limited for the fiscal year ended March 31, 2024. This means the auditors found the financial statements to be presented fairly in accordance with Indian Accounting Standards (Ind AS) and other generally accepted accounting principles in India. The audit report did, however, highlight “Revenue Recognition” as a Key Audit Matter (KAM), indicating a focus on the company’s processes for recognizing revenue and mitigating the risk of misstatement.

Key Accounting Policies:

Several key accounting policies are detailed in the annual report’s notes to the financial statements. Key among these are:

• Property, Plant, and Equipment (PPE): PPE is recorded at cost less accumulated depreciation and impairment. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Subsequent expenditures are capitalized only when specific criteria are met.
• Intangible Assets: Intangible assets acquired separately are recorded at cost less accumulated amortization and impairment. Amortization is done on a straight-line basis over the useful life.
• Inventories: Inventories are valued at the lower of cost (FIFO method) and net realizable value. Different valuation methods are used for raw materials, work-in-progress, finished goods, and waste.
• Financial Instruments: Financial assets are initially recognized at fair value plus transaction costs (except trade receivables without significant financing component). Financial liabilities are initially recognized at fair value, less transaction costs. Impairment provisions are made for financial assets based on assessments of default risk and expected cash losses. The company uses derivative financial instruments for hedging purposes and accounts for those according to Ind AS.
• Revenue Recognition: Revenue is recognized when the Company satisfies its performance obligations (transfer of control of goods to the customer). This is generally at the point of shipment or delivery. Revenue is recorded net of GST and adjustments are made for foreign currency gains/losses on export transactions.
• Employee Benefits: Short-term employee benefits are expensed as services are provided. Defined contribution plans are expensed as contributions are made. Defined benefit plans (gratuity and compensated absences) are accounted for based on actuarial valuations.
• Income Taxes: The tax expense includes current and deferred tax. Current tax is measured at the amount expected to be paid or received, and deferred tax reflects temporary differences between carrying amounts and tax bases.
• Foreign Currency Transactions: Transactions are initially recorded at the exchange rate at the transaction date. Monetary items are translated at the reporting date’s exchange rate, with exchange differences recognized in profit or loss.
• Provisions: Provisions are recognized when the Company has a present obligation as a result of past events, it is probable that the outflow of resources will be required to settle the obligation, and in respect of which a reliable estimate can be made. Contingent liabilities are disclosed but not recognized.
• Segment Reporting: The company operates primarily within one segment (“Laminates”). Detailed segmental financial information isn’t provided, as the revenues and gross profits of other segments are below the threshold for separate disclosure.

These are the key accounting policies. The detailed notes to the accounts contain further explanations and specific treatments. The application of these policies involves judgments and estimations that impact the reported figures.