Camlin Fine Sciences Ltd:Annual Report 2023-24 Analysis

Camlin Fine Sciences Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History #

Camlin Fine Sciences Ltd. (CFS) was established in 1981. Initially known as Camlin Fine Chemicals, it was part of the larger Camlin Group. The company refocused its business in the late 2000s to specialize in antioxidants and aroma chemicals.

Headquarters Location and Global Presence #

The headquarters of Camlin Fine Sciences is located in Mumbai, India. The company has a global presence with manufacturing facilities, sales offices, and distribution networks across India, China, Mexico, Italy, Brazil, Singapore, and the USA.

Company Vision and Mission #

While the publicly stated vision and mission may vary over time, generally, CFS aims to be a leading global player in the antioxidants and aroma chemicals space, focusing on sustainable and innovative solutions for its customers.

Key Milestones in Their Growth Journey #

• Early Years (1980s-2000s): Initially focused on commodity chemicals, the company later transitioned towards specialty chemicals.
• Restructuring (Late 2000s): Strategic shift to focus on antioxidants (TBHQ, BHA, and other antioxidants) and aroma chemicals.
• Global Expansion: Establishing manufacturing facilities and sales offices in key markets like China, Mexico, and Europe.
• Capacity Expansion & Backward Integration: Investments in increasing production capacity and securing raw material supply chains through backward integration.

Stock Exchange Listing Details and Market Capitalization #

Camlin Fine Sciences is listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). Market capitalization figures fluctuate depending on market conditions.

Recent Financial Performance Highlights #

• Recent financial reports indicate revenue growth driven by increased demand for antioxidants and performance chemicals.
• Profitability has been impacted by raw material price volatility and supply chain disruptions, but the company is focusing on cost optimization.

Management Team and Leadership Structure #

• Ashish Dandekar is the Managing Director & CEO of Camlin Fine Sciences Ltd.
• The company has a well-structured board of directors with expertise in various fields.

Their Products #

Complete Product Portfolio with Categories #

CFS’s product portfolio is primarily focused on:

• Antioxidants: TBHQ (Tertiary Butylhydroquinone), BHA (Butylated Hydroxyanisole), BHT (Butylated Hydroxytoluene), and other specialty antioxidants.
• Aroma Chemicals: Used in the fragrance and flavor industry.
• Performance Chemicals: Used in diverse applications such as animal nutrition, pharmaceuticals, and agrochemicals.

Flagship or Signature Product Lines #

TBHQ is considered a flagship product. The company is one of the leading global producers of TBHQ.

Key Technological Innovations or Patents #

CFS holds patents related to improved manufacturing processes for antioxidants and aroma chemicals, aiming for higher purity and efficiency.

Manufacturing Facilities and Production Capacity #

CFS has multiple manufacturing facilities across the globe. Production capacity details are disclosed periodically in investor presentations and annual reports.

Quality Certifications and Standards #

CFS adheres to various international quality certifications and standards, including:

• ISO certifications
• FSSC 22000

Recent Product Launches or R&D Initiatives #

• Focus on developing sustainable and bio-based antioxidants.
• Expanding the range of aroma chemicals to cater to specific customer needs.

Primary Customers #

Target Industries and Sectors #

• Food Industry: Antioxidants are used to preserve food and prevent rancidity.
• Animal Nutrition: Antioxidants are added to animal feed to improve shelf life and nutritional value.
• Petrochemicals: Antioxidants prevent polymerization and degradation in petrochemical products.
• Agrochemicals: Performance chemicals are used in formulations.
• Fragrance and Flavor Industry: Aroma chemicals provide specific scents and flavors.

Geographic Markets (Domestic vs. International) #

CFS serves both the domestic (Indian) and international markets. A significant portion of their revenue comes from exports to North America, Europe, and Asia.

Distribution Network and Sales Channels #

CFS utilizes a combination of direct sales and distribution networks to reach its customers. They also work with distributors in specific regions to expand their reach.

Major Competitors #

Direct Competitors in India and Globally #

• Eastman Chemical Company
• Lanxess
• SI Group

How They Differentiate from Competitors #

• CFS emphasizes backward integration to control raw material costs and ensure supply chain security.
• Focus on providing customized solutions and technical support to customers.
• Strategic investments in R&D to develop innovative and sustainable products.

Industry Challenges and Opportunities #

• Challenges: Raw material price volatility, supply chain disruptions, and increasing regulatory scrutiny.
• Opportunities: Growing demand for antioxidants in emerging markets, increasing focus on food safety and quality, and the rise of sustainable and bio-based chemicals.

Market Positioning Strategy #

CFS aims to position itself as a reliable and innovative supplier of antioxidants and aroma chemicals, with a focus on sustainability and customer service.

Future Outlook #

Expansion Plans or Growth Strategy #

• Continued investment in capacity expansion to meet growing demand.
• Focus on backward integration to enhance cost competitiveness.
• Expanding the product portfolio through R&D and strategic acquisitions.

Upcoming Products or Innovations #

• Development of novel antioxidants with improved performance and stability.
• Expanding the range of aroma chemicals to cater to specific market segments.

Sustainability Initiatives or ESG Commitments #

• CFS is committed to sustainable manufacturing practices and reducing its environmental footprint.
• Focus on developing bio-based and biodegradable products.

Long-Term Vision and Strategic Goals #

The long-term vision of CFS is to be a leading global player in the antioxidants and aroma chemicals space, delivering sustainable and innovative solutions to its customers while creating value for its stakeholders.

Camlin Fine Sciences Limited (CFS) Financial Analysis Report FY 2023-24 #

Executive Summary #

Camlin Fine Sciences Limited (CFS) reported a challenging financial year 2023-24, marked by a significant decline in profitability on both standalone and consolidated bases. Consolidated revenue from operations saw a marginal decrease, while net losses were substantial, driven by global weak demand, predatory pricing from Chinese manufacturers, temporary plant shutdowns, and impairment provisions. Strategic initiatives focused on market penetration in shelf-life solutions, particularly in North America, and efforts to stabilize the new Vanillin plant. The company continued its ESG focus and managed liquidity through efficient working capital and debt management, including FCCB conversion. The outlook remains cautious, contingent on global economic recovery and mitigation of competitive pressures.

Financial Performance Analysis (FY2022 - FY2024) #

Consolidated Financial Highlights #

(₹ in Lakh)

Consolidated performance in FY24 was impacted by a 4.07% decline in revenue from operations. EBITDA fell by 45.96% year-on-year. The company reported a significant net loss after tax of ₹10,487.51 lakh, compared to a profit of ₹3,981.04 lakh in FY23, primarily due to operational challenges, adverse market conditions, and exceptional impairment provisions of ₹4,980.40 lakh related to subsidiaries in Europe and China.

Standalone Financial Highlights #

(₹ in Lakh)

Standalone revenue from operations decreased by 2.05% in FY24. EBITDA witnessed a sharp decline of 78.03%. The standalone entity recorded a net loss of ₹5,138.92 lakh against a profit of ₹4,755.47 lakh in FY23. An exceptional item of ₹192.84 lakh for impairment of investment in CFS Wanglong Flavors (Ningbo) Co., Ltd. (CFSWL) was recorded.

Key Financial Ratios (Standalone Basis) #

The ratios reflect severe stress on profitability and debt servicing capacity at the standalone level in FY24. The reduction in Debt Equity Ratio is a positive outcome of FCCB conversion.

Profitability Analysis #

FY24 saw a significant erosion in profitability. Consolidated gross margins were impacted by global weak demand, predatory pricing by Chinese manufacturers in performance chemicals and aroma products. The temporary shutdown of the Diphenol Plant in CFS Europe SpA adversely affected revenue and EBITDA margins. While shelf-life solutions products showed volume improvement, pricing headwinds impacted gross margins. Delays in stabilization and lower capacity utilization of the Vanillin plant in Dahej also contributed to margin pressure and losses. Impairment provisions further deepened the net loss.

Liquidity and Solvency #

The company managed liquidity through efficient working capital and debt maturity management.

• Standalone Borrowings:
  • Short-term: Increased to ₹23,336.38 lakh (FY24) from ₹21,968.21 lakh (FY23).
  • Long-term: Decreased to ₹25,826.01 lakh (FY24) from ₹38,465.71 lakh (FY23), mainly due to FCCB conversion.
• Consolidated Borrowings:
  • Short-term: Stood at ₹23,346.16 lakh (FY24) compared to ₹23,328.35 lakh (FY23).
  • Long-term: Stood at ₹42,419.60 lakh (FY24) compared to ₹54,630.28 lakh (FY23), also reflecting FCCB conversion.
• Credit Ratings (India Ratings and Research Pvt. Ltd.):
  • Term loan: IND A-/Stable
  • Fund-based limits: IND A-/Stable/IND A2+
  • Non-fund-based limits: IND A2+
  • Long Term Issuer Rating: IND A-/Stable (affirmed)

Equity share capital increased due to ESOP allotment and conversion of ₹102.59 crore worth of FCCBs by IFC into 1,02,58,986 equity shares. No dividend was recommended for FY24 due to losses.

Business Segment Performance #

The company operates primarily in one reportable segment: Speciality Chemicals.

Shelf-Life Solutions #

• North America: Exponential growth, particularly in pet food. Natural blends were a focus. New customer acquisitions and distributor partnerships strengthened market base. Expected to grow significantly.
• Asia Pacific: Volume growth but reduced realization due to competition. Renewed focus on pet food in key countries.
• Mexico (Dresen Quimica): Revenues stable despite challenging environment. Margins affected by international competition and lower market.

Detailed Analysis #

Financial Analysis: Camlin Fine Sciences Limited #

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

Standalone Financials #

Standalone Balance Sheet Summary (₹ in Lakh) #

Revenue Analysis: Camlin Fine Sciences Limited (FY 2023-24) #

Consolidated Revenue #

• FY 2023-24: ₹161,306.20 lakh
• FY 2022-23: ₹1,68,156.40 lakh
• Change: -4.07%

Drivers/Headwinds #

Revenue was impacted by global weak demand, predatory pricing by Chinese manufacturers in performance chemicals and aroma products, and the temporary shutdown of the Diphenol Plant in CFS Europe SpA. The delay in stabilization and lower capacity utilization of the Vanillin plant in Dahej also contributed adversely. Shelf-life solutions showed volume growth, but pricing headwinds impacted gross margins.

Standalone Revenue #

• FY 2023-24: ₹77,326.21 lakh
• FY 2022-23: ₹78,943.57 lakh
• Change: -2.05%

Segment Revenue Breakdown (Standalone) #

• Shelf Life Solutions: 61.26%
• Performance Chemicals: 29.05%
• Aroma Ingredients: 3.97%
• Health & Wellness contribution not explicitly quantified in turnover percentage. Accounting for 94.28% of turnover.

Cash Flow Analysis: Camlin Fine Sciences Limited (FY 2023-24) #

Cash Flow Analysis (Consolidated - FY 2023-24 vs FY 2022-23, ₹ in Lakh) #

Cash Flow from Operating Activities (OCF) #

• FY 2023-24: ₹13,980.77 lakh
• FY 2022-23: ₹5,189.40 lakh

Key Components & Drivers (FY 2023-24) #

• (Loss)/Profit Before Tax: (₹9,023.16 lakh)
• Adjustments for non-cash/non-operating items:
  • Depreciation & Amortization: ₹7,901.67 lakh
  • Finance Costs: ₹6,926.14 lakh
  • Provision for impairment in assets: ₹4,980.40 lakh
  • Revaluation of inventory: ₹3,681.08 lakh
  • Foreign exchange loss (unrealised): ₹3,073.88 lakh
• Operating Profit before Working Capital Changes: ₹15,706.45 lakh
• Working Capital Adjustments:
  • (Increase)/Decrease in Financial Liabilities (Net): ₹(807.28) lakh
  • (Increase)/Decrease in Non-financial Assets (Net): ₹1,912.50 lakh
  • (Increase)/Decrease in Financial Assets (Net): ₹3,982.10 lakh
• Cash Generated from Operations: ₹18,788.95 lakh
• Taxes Paid (Net): (₹4,808.18 lakh)

Analysis #

OCF improved significantly in FY24 despite a pre-tax loss, primarily driven by large positive working capital changes (decrease in financial assets and non-financial assets, and increase in financial liabilities) and substantial non-cash charges like impairment and inventory revaluation being added back.

Cash Flow from Investing Activities (ICF) #

• FY 2023-24: (₹6,087.38 lakh)
• FY 2022-23: (₹12,659.37 lakh)

Key Components (FY 2023-24) #

• Purchase of Property, Plant & Equipment: (₹6,221.95 lakh)
• Interest Received: ₹332.36 lakh

Analysis #

ICF outflow reduced in FY24, mainly due to significantly lower purchases of PPE compared to FY23.

Cash Flow from Financing Activities (FCF) #

• FY 2023-24: (₹8,960.65 lakh)
• FY 2022-23: ₹5,780.28 lakh

Key Components (FY 2023-24) #

• Proceeds from Issue of Equity Shares (ESOP): ₹58.04 lakh
• Proceeds from/(Repayment of) Long-term Borrowings (Net): ₹2,071.54 lakh
• Proceeds from/(Repayment of) Short-term Borrowings (Net): (₹599.23 lakh)
• Payment of Lease Liabilities: (₹1,810.79 lakh)
• Interest Paid: (₹7,017.73 lakh)
• Payment of Preferred Dividend: (₹2,063.07 lakh) (to NCI of a subsidiary)

Analysis #

FY24 saw a significant net outflow from financing activities, driven by substantial interest payments, repayment of lease liabilities, and preferred dividend payouts, despite some proceeds from long-term borrowings. This contrasts with a net inflow in FY23 which was supported by higher proceeds from borrowings.

Free Cash Flow (FCF = OCF - Capex) #

Consolidated Capex (Purchase of PPE from ICF) #

• FY 2023-24: ₹6,221.95 lakh
• FY 2022-23: ₹14,133.77 lakh

Consolidated FCF #

• FY 2023-24: ₹13,980.77 lakh - ₹6,221.95 lakh = ₹7,758.82 lakh
• FY 2022-23: ₹5,189.40 lakh - ₹14,133.77 lakh = (₹8,944.37 lakh)

Analysis #

The company generated positive FCF in FY24 after a negative FCF in FY23. This improvement is due to both higher OCF and lower capex in FY24.

Working Capital Management Efficiency #

• Management Commentary: The Director’s Report (FY24) acknowledges a “challenging year for financing and liquidity” but states the company maneuvered through “efficient working capital and debt maturity management.”

Standalone Ratios (from Annual Report Notes) #

• Inventory Turnover Ratio:
  • FY24: 1.83 times (Previous: 2.18 times).
  • Decrease indicates slower inventory movement.
  • Reason cited: Loss incurred during the year impacting COGS.
• Trade Receivables Turnover Ratio:
  • FY24: 1.56 times (Previous: 1.49 times).
  • Slight improvement.
• Trade Payables Turnover Ratio:
  • FY24: 1.73 times (Previous: 2.05 times).
  • Decrease indicates slower payment to suppliers.
  • Reason cited: Increase in average trade payables.
• Net Working Capital Turnover Ratio:
  • FY24: 2.88 times (Previous: 2.17 times).
  • Improvement.

Consolidated Working Capital (Changes noted in OCF) #

A significant positive impact on OCF in FY24 from working capital changes implies an inflow from reduction in current assets or increase in current liabilities. This includes:

• Decrease in Inventories: (Contributed to positive OCF in “Changes in Inventories…”)
• Decrease in Trade Receivables: (Implied by positive adjustment for “Financial Assets” in OCF)
• Increase in Trade Payables: (Implied by positive adjustment for “Financial Liabilities” in OCF)

Analysis #

While standalone turnover ratios show mixed efficiency (slower inventory and payable turnover, slightly better receivable turnover), the consolidated cash flow indicates an overall net release of cash from working capital in FY24, aiding liquidity.

Financial Analysis of Camlin Fine Sciences Limited - FY2023-24 #

Key Financial Ratios and Performance Analysis #

This analysis is based on excerpts from the Annual Report of Camlin Fine Sciences Limited for the financial year ended March 31, 2024. Standalone ratios are derived from “Note 48: Analytical Ratios” of the standalone financial statements, while consolidated context is drawn from the “Financial Results” and “Annexure ‘2’” (Financial Performance) sections.

Profitability Ratios #

Net Profit Margin (%) #

• Standalone FY2024: (6.65%)
• Standalone FY2023: 6.02%
• Change: Negative variance of 210.32%.
• Reason (as per Note 48): Loss incurred during the year.
• Consolidated PAT:
  • FY2024: ₹ (10,487.51) Lakhs
  • FY2023: ₹ 3,981.04 Lakhs
  • FY2022: ₹ 6,789.51 Lakhs
• Analysis: Significant deterioration in profitability at both standalone and consolidated levels in FY2024, moving from profit to loss. The Directors’ Report attributes this to global weak demand, predatory pricing by Chinese manufacturers, temporary shutdown of the Diphenol Plant in Europe, and delays in stabilization of the Vanillin plant in Dahej. Consolidated results were also impacted by impairment provisions.

Operating Profit Margin (%) (Standalone EBIT Margin) #

• Standalone FY2024: (7.57%)
• Standalone FY2023: 7.70% (as per Note 48)
• Change: Negative variance of 61.10% from Note 48 value.
• Reason (as per Note 48): Loss incurred during the year.
• Consolidated EBITDA:
  • FY2024: ₹ 11,361.02 Lakhs
  • FY2023: ₹ 21,260.70 Lakhs
  • FY2022: ₹ 15,384.12 Lakhs
• Analysis: A sharp decline in operating profitability, mirroring the net profit trend, due to margin pressures and operational challenges.

Return on Equity (ROE) (%) (Standalone) #

• Standalone FY2024: (7.28%)
• Standalone FY2023: 7.51%
• Change: Negative variance of 65.81%.
• Reason (as per Note 48): Loss incurred during the year.
• Analysis: The ability to generate profit from shareholders’ equity has reversed in FY2024, reflecting the net loss.

Return on Capital Employed (ROCE) (%) (Standalone) #

• Standalone FY2024: (0.28%)
• Standalone FY2023: 9.79%
• Change: Negative variance of 102.84%.
• Reason (as per Note 48): Loss incurred during the year.
• Analysis: Indicates a significant decline in the efficiency of capital utilization to generate profits.

Liquidity Ratios (Standalone) #

Current Ratio #

• Standalone FY2024: 1.41
• Standalone FY2023: 1.40
• Change: Slight improvement of 1.83%.
• Analysis: The current ratio remains relatively stable, indicating a consistent ability to meet short-term obligations. Current Assets (Standalone): FY24 ₹85,875.87 Lakhs, FY23 ₹87,645.36 Lakhs. Current Liabilities (Standalone): FY24 ₹60,745.81 Lakhs, FY23 ₹62,629.56 Lakhs.

Quick Ratio (Acid-Test Ratio) #

• Standalone FY2024: 0.99
• Standalone FY2023: 1.00
• Analysis: The quick ratio is stable around 1, suggesting adequate liquid assets to cover current liabilities after excluding inventories.

Cash Ratio #

• Standalone FY2024: 0.019
• Standalone FY2023: 0.004
• Analysis: The cash ratio is very low, indicating a heavy reliance on operating cash flows, inventory, and receivables conversion to meet immediate liabilities. The increase in FY24 is marginal.

Efficiency Ratios (Standalone) #

Inventory Turnover Ratio (Times) #

• Standalone FY2024: 1.75
• Standalone FY2023: 1.90
• Change: Decrease of 7.76%.
• Reason (as per Note 48): Increase in average inventory holding.
• Analysis: Slower movement of inventory in FY2024.

Trade Receivables Turnover Ratio (Times) #

• Standalone FY2024: 1.53
• Standalone FY2023: 1.63
• Change: Decrease of 5.58%.
• Reason (as per Note 48): Increase in average trade receivables.
• Analysis: Indicates a slight slowdown in the collection of receivables.

Asset Turnover Ratio #

• Standalone FY2024: 0.488
• Analysis: Limited by FY22 data for a precise calculation of FY23 and comparison.

Camlin Fine Sciences Limited (CFSL) - FY 2023-24 Financial Analysis #

Revenue and Profitability Analysis #

CFSL reported a decline in consolidated revenue from operations to ₹161,306.20 lakh in FY24 from ₹1,68,156.40 lakh in FY23. The company experienced a significant shift from a profit after tax (PAT) of ₹3,981.04 lakh in FY23 to a loss after tax & exceptional items of ₹10,487.51 lakh in FY24. Consolidated EBITDA also saw a sharp decrease to ₹11,169.45 lakh from ₹21,830.16 lakh.

Standalone revenue from operations marginally decreased to ₹77,326.21 lakh in FY24 from ₹78,943.57 lakh in FY23. Standalone operations also moved to a loss after tax of ₹5,138.92 lakh from a PAT of ₹4,755.47 lakh. Standalone EBITDA fell drastically to ₹2,757.70 lakh from ₹12,792.23 lakh.

Key Drags on Profitability: #

• Global weak demand and predatory pricing by Chinese manufacturers significantly impacted performance chemicals and aroma products.
• Temporary shutdown of the Diphenol Plant in CFS Europe SpA, Italy, reduced revenue and gross margins, adversely affecting EBITDA.
• Despite volume improvements in shelf-life solutions, pricing headwinds severely impacted gross margins.
• Delayed stabilization and lower capacity utilization of the Vanillin manufacturing plant in Dahej negatively affected revenues and profitability.
• Consolidated results were further impacted by impairment provisions of ₹4,980.40 lakh for subsidiaries in Europe and China.
• Standalone Interest Service Coverage Ratio declined by 74.17% due to losses. Operating Profit Margin and Net Profit Margin (standalone) declined by 61.10% and 210.32% respectively. Return on Net Worth (standalone) fell by 65.81%.

Market Share and Competitive Position #

The company faces intense competition, particularly from Chinese manufacturers employing predatory pricing strategies in performance chemicals and aroma ingredients. The Shelf-Life Solutions business in North America benefited from a strategic partnership with a leading distributor, strengthening its market position against competitors using China-sourced materials. The “NaSure” natural antioxidant portfolio is identified as a cornerstone of success, reflecting a commitment to quality and sustainability. CFS Dresen (Mexico) is positioned as a leading supplier in Animal Nutrition and Food sectors in Latin America. The Aroma sector globally experienced challenging conditions, with CFSL mirroring these trends but anticipating a turnaround.

Key Products/Services Performance #

Shelf-Life Solutions: #

• North America: Showed exponential growth, with pet food contributing over half of the segment’s annual revenue. Focus on natural blends, new customer acquisition, and distributor partnerships drove performance. Strong future growth is anticipated.
• Asia Pacific: Achieved volume growth but experienced reduced realizations due to competition. A renewed focus on the pet food segment is underway.
• Latin America (CFS Dresen & South America): Mexico revenues remained stable despite challenges. South America showed respectable growth in revenue and profitability post-restructuring, with antioxidant and animal nutrition businesses performing well. Biodiesel in Brazil performed exceptionally, while the Argentina biodiesel vertical was shut down.

Performance Chemicals: #

Suffered from depressed global consumer demand, leading to reduced operating capacities. Chinese low-pricing strategy impacted the market. CFSL maintained sales volumes and customer retention. New approvals in the USA and Europe are expected to drive future business. CFS Europe SpA was severely affected by the diphenol market slowdown, halting diphenol production. The company is evaluating plant reconversion for alternative performance chemicals.

Aroma Ingredients: #

The launch of Vanillin and Ethyl Vanillin faced challenges from lower global demand and aggressive Chinese pricing. Partnerships with F&B distributors and positive responses from F&F companies are improving outlook. Focus is on delivering high-quality products and gaining domestic market share.

Health & Wellness (AlgalR Nutrapharms): #

Improved production processes for Algal DHA Oil yielded superior results and enabled the launch of higher-grade products. Increased demand for algal DHA biomass in the feed industry due to the crude fish oil availability crisis. The company is strategically positioned for geographic expansion and market penetration.

Geographic Distribution and Market Penetration #

• North America: Strong growth in Shelf-Life Solutions, leveraging new client acquisitions and distributor networks.
• Asia Pacific: Focus on expanding Shelf-Life Solutions

Risk Profile: Camlin Fine Sciences Limited #

Strategic Risks #

Risk Description #

Exposure to intense competition, particularly from Chinese manufacturers engaging in predatory pricing and creating excessive supply, impacting market share and pricing power, especially in Performance Chemicals and Aroma Ingredients (Vanillin). Delays and inefficiencies in stabilizing new large-scale projects (e.g., Vanillin plant in Dahej) leading to underutilization and delayed ROI. Dependence on global economic conditions and geopolitical stability, which can affect demand and supply chains. Risks associated with market penetration in new segments and geographies.

Severity #

High. Evidenced by direct impacts on revenue, margins, and profitability (e.g., Vanillin business losses, Diphenol plant shutdown).

Likelihood #

High. Competitive pressures are ongoing, and project stabilization issues have materialized.

Trend #

Stable to Increasing. Chinese competition is a persistent threat. Project-specific risks decrease upon stabilization but new strategic initiatives introduce new risks. Geopolitical and economic uncertainties globally remain elevated.

Mitigation Strategies #

• Rejigging strategy for Vanillin sales to match current market prices, albeit at lower margins.
• Focus on innovation, new product development (e.g., higher grades of Algal DHA, new products in Performance Chemicals), and product diversification.
• Market expansion, new client acquisition, and partnerships with distributors (e.g., F&B distributor for Vanillin, North American distributor for antioxidants).
• Emphasis on quality and sustainability to differentiate products.
• Rationalizing production to match market demand and optimize costs.
• Exploring reconversion of facilities (e.g., Diphenol plant in Italy for performance chemicals).

Control Effectiveness #

Mixed. Shelf-life solutions show strong growth through strategic initiatives. However, Vanillin and Performance Chemicals face significant headwinds. The company is actively adapting strategies.

Potential Financial Impact #

• Reduced revenues and gross margins (explicitly stated for FY 2023-24 due to weak demand and pricing).
• Loss of margin on Vanillin sales and inventory mark-to-market.
• EBITDA margin adversely affected by Diphenol plant shutdown in Europe.
• Impairment of assets if strategic shifts are unsuccessful or market conditions persistently deteriorate.
• Consolidated loss after tax & exceptional items of ₹10,487.51 lakh in FY 2023-24 vs. profit of ₹3,981.04 lakh in FY 2022-23. Standalone loss of ₹5,138.92 lakh vs. profit of ₹4,755.47 lakh.

Quantitative Risk Metrics & YoY Changes #

• Revenue from Operations (Consolidated): ₹161,306.20 lakh (FY24) vs. ₹1,68,156.40 lakh (FY23), a decrease of 4.07%.
• EBITDA (Consolidated): ₹11,174.61 lakh (FY24) vs. ₹21,117.61 lakh (FY23), a decrease of 47.08%.
• (Loss)/Profit After Tax (Consolidated): (₹10,487.51) lakh (FY24) vs. ₹3,981.04 lakh (FY23).

Operational Risks #

Risk Description #

Risks related to manufacturing processes, including plant shutdowns (e.g., temporary shutdown of Diphenol Plant in CFS Europe), production inefficiencies, and product stabilization issues. Supply chain disruptions. Health, Safety, and Environmental (HSE) hazards inherent in chemical manufacturing. Cybersecurity threats and IT infrastructure vulnerabilities.

Severity #

Medium to High. Plant shutdowns and production issues have direct financial consequences. HSE incidents can lead to regulatory action, reputational damage, and financial liabilities.

Likelihood #

Medium. Operational issues can occur despite controls. Supply chain risks depend on external factors.

Trend #

Stable. Ongoing efforts to improve operational efficiency and safety, but external factors like supply chain stability can fluctuate. Cybersecurity risk is generally increasing globally.

Mitigation Strategies #

• Continuous improvement in production processes (e.g., Algal DHA oil yield improvement).
• Planned reconversion of Diphenol plant to mitigate impact of market slowdown.
• Investment in IT infrastructure, deployment of cybersecurity tools (firewalls, monitoring, encryption), periodic disaster recovery drills, and third-party vulnerability testing.
• Robust HSE policies, internal and external audits (ISO 9001/14001), Process Safety Management system including HAZOP.
• Employee training on safety, Code of Conduct, and POSH.
• Emphasis on resource conservation (e.g., use of brickettes instead of coal, exploring solar/wind energy, water recycling).

Control Effectiveness #

Internal controls and frameworks (Risk Management Committee, Audit Committee) are in place. ESG initiatives demonstrate a focus on operational sustainability. IT systems are actively managed.

Potential Financial Impact #

• CFS Europe SpA Diphenol plant shutdown led to reduced revenue, gross margins, and adverse EBITDA impact. Exceptional item includes impairment provisions for subsidiaries in Europe (CFS Europe inventory write-down of ₹2,279.56 lakh) and China.
• Costs associated with production inefficiencies or delays.
• Potential fines or compensation for environmental or safety non-compliance (e.g., NGT matter for Tarapur MIDC, contingent liability of ₹1,712.31 lakh, though stayed and contested).

Quantitative Risk Metrics & YoY Changes #

• Energy Consumption (Standalone, Total): 1,252,688 GJ (FY24) vs 1,286,659 GJ (FY23). (Annexure E & BRSR)
• Water Withdrawal (Standalone, Total): 300,997 KL (FY24) vs 254,515 KL (FY23). (BRSR)

Camlin Fine Sciences Limited (CFS) FY 2023-24 Financial Performance Analysis #

Consolidated Financial Performance #

• Revenue from Operations: Decreased to ₹161,306.20 lakh from ₹1,68,156.40 lakh.
• Loss After Tax & Exceptional Items: ₹10,487.51 lakh (FY 2022-23: Profit of ₹3,981.04 lakh).
• EBITDA: Declined to ₹11,853.39 lakh from ₹21,808.93 lakh.

Key Drivers for Performance Decline #

• Global weak demand and predatory pricing impacting performance chemicals and aroma products.
• Temporary shutdown of Diphenol Plant in CFS Europe SpA, Italy.
• Pricing headwinds in shelf-life solutions products.
• Delayed stabilisation and lower capacity utilisation of the Vanillin manufacturing plant in Dahej.
• Impairment provisions of ₹4,980.40 lakh on subsidiaries in Europe and China.

Standalone Financial Performance #

• Revenue from Operations: Marginally decreased to ₹77,326.21 lakh from ₹78,943.57 lakh.
• Loss After Tax & Exceptional Items: ₹5,138.92 lakh (FY 2022-23: Profit of ₹4,755.47 lakh).
• EBITDA: Dropped to ₹2,890.28 lakh from ₹12,365.19 lakh.
• Exceptional Item: Impairment provision of ₹192.84 lakh in respect of investment in CFSWL.

Business Segment & Strategic Highlights #

• Shelf-Life Solutions: Volume growth across geographies, particularly in the USA. Asia Pacific saw volume growth but reduced realisations. South American operations showed improved profitability.
• Performance Chemicals: Faced depressed consumer demand and low pricing. Diphenol plant at CFS Europe SpA (Italy) was shut down.
• Aroma Ingredients: Vanillin and Ethyl Vanillin launched, facing challenges from lower global demand and Chinese predatory pricing.
• Health & Wellness (AlgalR Nutrapharms): Improved production processes for Algal DHA Oil. Increased demand for algal DHA biomass in the feed industry.
• Vanillin Plant (Dahej): Commenced production but faced challenges, product stabilization issues, and competitive pressure. Production was rationalized.

Financial Position & Liquidity #

• Borrowings (Standalone):
  • Short-term borrowings increased to ₹23,336.38 lakh from ₹21,968.21 lakh.
  • Long-term borrowings decreased to ₹25,826.01 lakh from ₹38,465.71 lakh.
• Borrowings (Consolidated):
  • Short-term borrowings: ₹23,346.16 lakh (FY23: ₹23,328.35 lakh).
  • Long-term borrowings: ₹42,419.60 lakh (FY23: ₹54,630.28 lakh).
• Credit Rating: India Ratings and Research Pvt. Ltd. affirmed Long Term Issuer Rating at ‘IND A-’ with a stable outlook.
• Capital Expenditure (Consolidated): Incurred ₹4,196.86 lakh on tangible assets. CWIP as on March 31, 2024, was ₹4,556.45 lakh.

Equity & Corporate Developments #

• ESOP Allotment: 1,00,225 equity shares under ESOP 2018 and 12,500 equity shares under ESOP 2020 were issued and allotted.
• FCCB Conversion: 1,02,58,986 equity shares allotted to International Finance Corporation (IFC).
• Open Offer & Change in Promoter Group: Infinity Direct Holdings et al. became part of the promoter group and exercising joint control.
• Subsidiary Structure: Dresen Quimica SAPI De CV and its subsidiaries became 100% subsidiaries of the Company.
• Dividend: No dividend recommended for FY 2023-24.

Key Proposed Resolutions for 31st AGM (July 31, 2024) #

• Ordinary Business:
  • Adoption of Audited Financial Statements (Standalone & Consolidated) for FY 2023-24.
  • Re-appointment of Ms. Anagha Dandekar (Non-Executive Director).
  • Re-appointment of Mr. Harsha Raghavan (Non-Executive Director).
• Special Business:
  • Ratification of remuneration of Cost Auditor (M/s. ABK & Associates) for FY 2024-25.
  • Re-appointment of Mr. Ashish Dandekar as Chairman & Managing Director for 3 years w.e.f. August 1, 2024.

Financial Performance Analysis: Camlin Fine Sciences Limited (FY 2023-24) #

Executive Summary #

Camlin Fine Sciences Limited (CFS) reported a challenging financial year 2023-24, marked by a decline in consolidated revenue and a significant shift from profit to loss. Consolidated revenue from operations stood at ₹161,306.20 lakh, a decrease from ₹1,68,156.40 lakh in FY23. The company incurred a consolidated loss after tax & exceptional items of ₹10,487.51 lakh, compared to a profit of ₹3,981.04 lakh in the previous year. Standalone performance mirrored this trend, with revenue at ₹77,326.21 lakh (FY23: ₹78,943.57 lakh) and a loss after tax of ₹5,138.92 lakh (FY23: profit of ₹4,755.47 lakh). Key factors impacting performance include global weak demand, predatory pricing by Chinese manufacturers, temporary shutdown of the Diphenol plant in Italy, delayed stabilization and lower capacity utilization of the Vanillin plant in Dahej, and impairment provisions amounting to ₹4,980.40 lakh for European and Chinese subsidiaries. Consequently, no dividend has been recommended.

Revenue and Profitability Analysis #

• Consolidated Revenue: Declined by 4.07% YoY to ₹161,306.20 lakh.
• Consolidated EBITDA: Fell to ₹11,067.08 lakh from ₹21,832.37 lakh in FY23, a decrease of 49.31%. This indicates severe pressure on operating margins.
• Consolidated (Loss)/Profit Before Tax & Exceptional Items: Stood at a loss of ₹4,180.31 lakh compared to a profit of ₹9,395.25 lakh in FY23.
• Consolidated Exceptional Items: An expense of ₹4,980.40 lakh was booked, primarily due to impairment provisions.
• Consolidated Net (Loss)/Profit After Tax: ₹(10,487.51) lakh versus ₹3,981.04 lakh in FY23.
• Standalone Revenue: Decreased by 2.05% YoY to ₹77,326.21 lakh.
• Standalone EBITDA: Dropped to ₹2,948.50 lakh from ₹12,846.56 lakh in FY23, a 77.05% decline.
• Standalone (Loss)/Profit Before Tax & Exceptional Items: ₹(5,010.52) lakh compared to a profit of ₹6,492.78 lakh in FY23. An exceptional item (impairment) of ₹192.84 lakh was recorded.
• Standalone Net (Loss)/Profit After Tax: ₹(5,138.92) lakh versus ₹4,755.47 lakh in FY23.

The primary drivers for the decline in revenues and profitability were external market conditions (weak demand, Chinese competition) and internal operational challenges (plant shutdowns, stabilization delays). The Diphenol plant shutdown in CFS Europe SpA particularly impacted revenues and EBITDA margins. While volume improved in shelf-life solutions, pricing headwinds eroded gross margins.

Segment Performance and Strategic Highlights #

The company operates in Shelf-Life Solutions, Aroma Ingredients, Performance Chemicals, and Health & Wellness.

• Shelf-Life Solutions: North America showed exponential growth, driven by pet food and natural blends. Asia Pacific experienced volume growth but lower realization due to competition. Mexico faced margin pressure. South America saw a turnaround due to restructuring. The biodiesel vertical performed well in Brazil.
• Performance Chemicals: Suffered from depressed consumer demand and Chinese predatory pricing. CFS maintained volumes and secured new approvals in the US/Europe. The Diphenol plant (CFS Europe) shutdown significantly impacted this segment; reconversion plans are being evaluated.
• Aroma Ingredients: The launch of Vanillin and Ethyl Vanillin faced challenges from lower global demand and Chinese competition. A partnership with a major F&B distributor is a positive step.
• Health & Wellness: Improved production processes for Algal DHA Oil and launched higher grades. Increased demand for algal DHA biomass in the feed industry due to crude fish oil availability crisis.
• Vanillin Plant (Dahej): Commercialization encountered initial stabilization issues and intense competition. The strategy has been adjusted, with sales commencing at current prices, impacting margins.

Camlin Fine Sciences Limited (CFS) - FY 2023-24 Financial Analysis #

Executive Summary #

Camlin Fine Sciences Limited (CFS) faced a challenging FY 2023-24, marked by significant losses at both standalone and consolidated levels. Global macroeconomic headwinds, predatory pricing from Chinese manufacturers, and internal operational challenges, particularly with the new Vanillin plant and the temporary shutdown of the Diphenol plant in Europe, severely impacted revenues and profitability. Despite volume growth in certain segments like Shelf-Life Solutions in North America, margin pressures were substantial. The company is undertaking strategic readjustments, focusing on product diversification, market penetration, and operational efficiencies to navigate the current environment and position for future recovery.

Financial Performance Analysis #

Consolidated Performance #

• Revenue from Operations: Decreased by 4.07% to ₹161,306.20 lakh in FY24 from ₹1,68,156.40 lakh in FY23.
• EBITDA: Fell sharply by 46.78% to ₹11,204.76 lakh from ₹21,052.46 lakh.
• Loss Before Tax (LBT) & Exceptional Items: Stood at ₹4,479.49 lakh compared to a Profit Before Tax (PBT) of ₹9,000.17 lakh in FY23.
• Exceptional Items: An impairment provision of ₹4,980.40 lakh was recorded, primarily related to subsidiaries in Europe and China.
• Loss After Tax (LAT): Reported a significant LAT of ₹10,487.51 lakh, a stark contrast to a Profit After Tax (PAT) of ₹3,981.04 lakh in FY23.
• Total Comprehensive Loss: ₹8,744.97 lakh compared to a Total Comprehensive Income of ₹6,112.89 lakh in the previous year.

Standalone Performance #

• Revenue from Operations: Marginally declined by 2.05% to ₹77,326.21 lakh from ₹78,943.57 lakh.
• EBITDA: Decreased by 61.00% to ₹2,919.83 lakh from ₹7,486.19 lakh.
• Loss Before Tax (LBT) & Exceptional Items: ₹5,277.98 lakh compared to a PBT of ₹6,254.97 lakh.
• Exceptional Items: An impairment provision of ₹192.84 lakh for investment in CFS Wanglong Flavors (Ningbo) Co., Ltd.
• Loss After Tax (LAT): ₹5,138.92 lakh against a PAT of ₹4,755.47 lakh in FY23.
• Total Comprehensive Loss: ₹5,144.48 lakh compared to a Total Comprehensive Income of ₹4,698.58 lakh.

Key Drivers of Performance #

• Negative Impacts:
  • Global weak demand and predatory pricing by Chinese manufacturers, particularly impacting Performance Chemicals and Aroma products.
  • Temporary shutdown of the Diphenol Plant in CFS Europe SpA, Italy, reducing revenue and EBITDA margins.
  • Pricing headwinds in shelf-life solutions, impacting gross margins despite volume improvements.
  • Delayed stabilization and lower capacity utilization of the Vanillin manufacturing plant in Dahej, affecting revenues and profitability.
  • Significant impairment provisions on account of subsidiaries.
• Positive Impacts (Mitigating Factors):
  • Volume growth in shelf-life solutions, especially in the USA, driven by new client acquisition and innovation.

Financial Ratios (Standalone) #

• Interest Service Coverage Ratio: Declined significantly to (0.01) times from 2.14 times, indicating difficulty in servicing interest payments due to losses.
• Debt Equity Ratio: Improved to 0.36 from 0.60, primarily due to the conversion of Foreign Currency Convertible Bonds (FCCBs) into equity, reducing outstanding debt.
• Operating Profit Margin (%): Dropped to (7.57)% from 7.70%, reflecting severe pressure on profitability from operations.
• Net Profit Margin (%): Turned negative to (6.65)% from 6.02% due to the net loss incurred.
• Return on Net Worth (%): Became negative at (7.18)% compared to 7.40% in FY23, a direct consequence of the net loss and a slight increase in net worth (due to FCCB conversion and share premium offsetting the loss).

Business Segment Performance & Strategy #

Shelf-Life Solutions #

• North America: Stellar performance, particularly in pet food (over half of regional revenue) and natural blends. Growth driven by new customers, distributor partnerships, and sustainability focus. Expected to grow significantly.
• Asia Pacific: Volume growth but reduced realizations due to competition and lower prices for key products. Renewed focus on pet food in key countries.
• Mexico (Dresen Quimica): Stable revenues despite challenging microeconomic environment and price competition. New product lines and customer acquisitions expected to yield future benefits.
• South America: Respectable growth in revenue and profitability post-restructuring. Antioxidant business saw volume and margin growth. Biodiesel performed well in Brazil. Animal nutrition business also grew. Focus on customized blends and new market segments for future growth.

Performance Chemicals #

• Affected by depressed consumer demand globally, leading to reduced operating capacities and low pricing by Chinese manufacturers, causing plant closures in Europe/USA.
• CFS maintained volumes, ensuring customer retention. Received new approvals in USA/Europe, expecting robust future business. Successfully tested new products.
• CFS Europe SpA: Severely affected by diphenols market slowdown, leading to production stoppage from August 2023. Evaluating plant reconversion for alternative performance chemicals. Efforts to build shelf-life solutions business in the region.

Aroma Ingredients (Vanillin & Ethyl Vanillin) #

• Launched in domestic and international markets targeting F&F and F&B segments.
• Faced stiff challenges from lower global demand and predatory pricing by Chinese manufacturers.
• Partnered with a major F&B distributor. Positive response from F&F companies. Committed to high-quality product and market share gain in F&F, F&B, and industrial (agro) markets.

Health & Wellness (AlgalR Nutrapharms) #

• Improved production processes for Algal DHA Oil, leading to superior yield and launch of higher grades.
• Partnered with multiple distributors in APAC. Increased demand for algal DHA biomass in feed industry due to crude fish oil availability crisis.
• Strategically positioned for geographic expansion and market penetration.

Research & Development #

• Focus on innovation, optimization, new products, better yields, and cleaner/greener processes.
• CFS Europe R&D focused on new diphenols derivatives and feed additives.

Operational & Financial Management #

• Capital Expenditure: Consolidated capex on tangible assets was ₹4,196.86 lakh. Capital work-in-progress stood at ₹4,556.45 lakh as of March 31, 2024.
• Finance & Liquidity:
  • Challenging year due to margin pressure, lack of revenue growth, and inventory accumulation.
  • Managed through efficient working capital and debt maturity management.
  • Standalone short-term borrowings: ₹23,336.38 lakh (FY24) vs ₹21,968.21 lakh (FY23).
  • Consolidated short-term borrowings: ₹23,346.16 lakh (FY24) vs ₹23,328.35 lakh (FY23).
  • Standalone long-term borrowings: ₹25,826.01 lakh (FY24) vs ₹38,465.71 lakh (FY23), reduction mainly due to FCCB conversion.
  • Consolidated long-term borrowings: ₹42,419.60 lakh (FY24) vs ₹54,630.28 lakh (FY23).
• Credit Rating (India Ratings and Research Pvt. Ltd.):
  • Term loan: IND A-/Stable
  • Fund-based limits: IND A-/Stable/IND A2+
  • Non-fund-based limits: IND A2+
  • Long Term Issuer Rating: IND A-/Stable
• Equity Share Capital:
  • Issued 1,00,225 shares (ESOP 2018) and 12,500 shares (ESOP 2020).
  • Allotted 1,02,58,986 shares to IFC upon conversion of FCCBs at ₹105/share.
• Dividend: No dividend recommended for FY24 due to losses and to conserve retained earnings for future growth.

Management Discussion & Analysis Outlook #

• Global Economy: Signs of brightening, modest growth. Inflation falling, private sector confidence improving. Softer outcomes in Europe offset by strong US and emerging markets. Risks: Geopolitical tensions (Middle East), high debt-service burdens, potential for inflation to persist. AI presents productivity opportunities.
• Indian Economy: Projected growth of 6.5% in 2024 (UNCTAD). Fastest-growing major economy. Driven by public investment, services sector, and domestic demand. Multinationals diversifying supply chains to India. Challenges: Declining non-oil merchandise exports, moderated service exports, reduced foreign investments, sluggish private investment. Political stability post-election is key.
• Global Chemical Industry: Challenging 2024 with weak demand, abundant supply. Constrained volumes and margins. China’s aggressive capacity expansion and predatory pricing impacting global prices. High inflation/interest rates constrain demand in US/Europe. Opportunities in energy transition (lithium, battery manufacturing, clean ammonia).
• Indian Chemical Industry: Strong tailwinds from China+1 strategy, supply chain diversification, and domestic demand. Specialty chemicals market projected to grow at >12% CAGR (2020-2025). Government initiatives (PCPIR, PLI) supportive. Focus on R&D, capex, acquisitions, economies of scale crucial.

Risk Management & Internal Controls #

• Key Risks: Technological, strategic, operational, foreign exchange, health & safety, environmental, financial, compliance & control.
• Risk Management Framework: Robust governance structure involving risk owners, senior leadership, Risk Management Committee, Audit Committee, and Board. Periodic reviews of key risks, gradation, and mitigation. Currency risk mitigated by forex management policy and natural hedge. Inflationary pressures monitored.
• Internal Financial Controls: Adequate system with documented policies and procedures covering financial and operating functions. Monitored by Risk Management and Audit Committees. External internal audit firm conducts risk-based audits. No significant changes in internal control over financial reporting reported.

Corporate Governance & AGM Highlights #

• Key AGM Resolutions (Ordinary & Special):
  • Adoption of audited standalone and consolidated financial statements for FY24.
  • Re-appointment of Ms. Anagha Dandekar and Mr. Harsha Raghavan as Non-Executive Directors.
  • Ratification of Cost Auditor’s remuneration for FY25 (M/s. ABK & Associates, ₹1,60,000).
  • Re-appointment of Mr. Ashish Dandekar as Chairman & Managing Director for 3 years from Aug 1, 2024
  • Re-appointment of Mr. Nirmal Momaya as Managing Director for 3 years from June 1, 2024
  • Re-appointment of Mr. Arjun Dukane as Executive Director -Technical for 3 years from June 1, 2024
  • Re-appointment of Mr. Amol Shah as Independent Non-Executive Director for a second term of 5 years from Aug 2, 2024.
• Board Composition & Skills: Board comprises executive, non-executive, and independent directors with diverse skills in business development, marketing, technical, finance, law, and engineering.
• Committees: Audit, Nomination & Remuneration, Stakeholders Relationship, CSR, Compensation, and Risk Management Committees are in place.

Future Outlook & Strategy #

• Company Strategy: Maintain steady focus on key markets for penetration, portfolio differentiation, and margin maximization. Focus on markets for technically innovative products with high technology barriers. Leverage global presence, growing scale, reliable supply chain, rationalized cost structure, synergies, R&D, and technology.
• Specific Initiatives:
  • Vanillin Plant (Dahej): Rejigged strategy, commenced sales at current prices despite margin loss, rationalized production. Aggressively pushing Vanillin in domestic market.
  • Shelf-Life Solutions (USA): Continue focus on pet food and natural blends, new customer acquisition, distributor partnerships, and sustainability messaging.
  • Performance Chemicals: Leverage new approvals in USA/Europe. Expect agrochemical market revival. Evaluate reconversion of Diphenols plant (Italy) for alternative performance chemicals.
  • Health & Wellness: Geographic expansion and market penetration for Algal DHA, capitalizing on crude fish oil crisis.
• Management’s Steps for Improvement: Expand scale across key markets, maximize portfolio, reach more customers, strengthen margins. Aggressively pursuing and implementing strategies to improve financial performance.
• ESG: Emphasis on sustainable products (food/feed preservation), developing sustainable solutions (Algal DHA), reducing carbon footprint.

Audit & Compliance Analysis: Camlin Fine Sciences Limited (FY 2023-24) #

Auditor’s Opinion and Qualifications #

Standalone Financial Statements #

• Opinion: Kalyaniwalla & Mistry LLP issued an unmodified opinion, stating the standalone Ind-AS financial statements give a true and fair view as at March 31, 2024.
  • Emphasis of Matter: Note 39 highlighted the impairment of investment in and assets of CFS Wanglong Flavors (Ningbo) Co., Ltd. (CFSWL) due to a penalty and settlement. An impairment provision of ₹192.84 lakh was made. The auditor’s opinion was not modified.
  • Key Audit Matter: “Exposure in group entities” was highlighted (28% of total assets), noting recoverability depends on future cash flows.

Consolidated Financial Statements #

• Opinion: An unmodified opinion was issued, stating the consolidated Ind-AS financial statements give a true and fair view.
  • Emphasis of Matter: Similar to standalone, referencing Note 39 on CFSWL. The consolidated impairment provision was ₹2,700.84 lakh. The opinion was not modified.
  • Other Matters: The auditors relied on other auditors’ reports for twelve foreign and two Indian subsidiaries. Financials of four foreign subsidiaries were unaudited but deemed not material. The opinion was not modified.

CARO Report (Consolidated) #

• A qualification was noted regarding a subsidiary, AlgalR Nutrapharms Private Limited, under Clause vii(a) (undisputed statutory dues).

Key Accounting Policies and Changes #

• Financial statements are prepared in accordance with Indian Accounting Standards (Ind AS). Accounting policies have been consistently applied, and no new standards or amendments were notified by MCA for FY 2023-24.
• Basis of Preparation: Going concern, historical cost (except certain financial instruments at fair value), accrual basis. Consolidated financials of a subsidiary in a hyperinflationary economy (Argentina) are restated.
• Key Estimates: Significant judgments include useful lives of PPE/intangibles, defined benefit obligations, ESOP valuation, provisions/contingencies, deferred tax assets, financial instrument fair values, impairment of assets, lease liabilities, and discounted cash flow projections.

Specific Policies #

• Revenue Recognition: Sale of goods upon transfer of control; services as performance obligations are met.
• Inventories: Valued at lower of cost (weighted average) and net realizable value.
• PPE: Cost less accumulated depreciation and impairment. Depreciation on Straight Line Method (SLM) per Schedule II, or based on technical evaluation.
• Intangible Assets: Cost less accumulated amortization (SLM over useful lives). Goodwill on consolidation is tested for impairment annually.
• Impairment: Non-financial assets reviewed at each reporting date. Financial assets assessed using Expected Credit Loss (ECL) model.
• Leases (Ind AS 116): Right-of-Use (ROU) assets and lease liabilities recognized, with certain exemptions.
• Borrowing Costs: Capitalized for qualifying assets; others expensed.
• Foreign Currency: Transactions recorded at spot rates; monetary items restated at closing rates. Exchange differences generally routed through P&L, except for FCTR for foreign operations.

Internal Control Effectiveness #

• Management Responsibility: The Board of Directors confirmed responsibility for establishing, maintaining, and operating the effectiveness of internal financial controls.
• Auditor’s Opinion (Standalone - Annexure B): The Company has an adequate internal financial controls system with reference to financial statements, operating effectively as at March 31, 2024.
• Auditor’s Opinion (Consolidated - Annexure A): The Holding Company and its Indian subsidiaries have an adequate internal financial controls system, operating effectively. This opinion relies on other auditors’ reports for certain subsidiaries.