GMM Pfaudler Ltd:Annual Report 2023-24 Analysis

GMM Pfaudler Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

GMM Pfaudler traces its origins back to 1962 when Gujarat Machinery Manufacturers (GMM) was established in India. In 1987, a joint venture was formed with Pfaudler Werke AG, Germany, leading to the creation of GMM Pfaudler Ltd. Pfaudler, with its history stretching back to 1884, brought expertise in glass-lined technology.

Headquarters Location and Global Presence:

The company’s headquarters are located in Mumbai, India. GMM Pfaudler has a significant global presence through its subsidiaries and manufacturing facilities across Asia, Europe, and North America.

Company Vision and Mission:

While the specific, publicly stated vision and mission may vary, GMM Pfaudler’s general focus is on:

• Vision: To be a global leader in providing engineered solutions for the chemical and pharmaceutical industries.
• Mission: To deliver innovative, high-quality, and reliable products and services that meet the evolving needs of its customers.

Key Milestones in Their Growth Journey:

• 1962: Gujarat Machinery Manufacturers (GMM) is established.
• 1987: Joint venture with Pfaudler Werke AG, Germany, creating GMM Pfaudler Ltd.
• 2021: Significant acquisitions of MAVAG AG, strengthening its filtration and drying portfolio.

Stock Exchange Listing Details and Market Capitalization:

GMM Pfaudler Ltd. is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Information about the Market Capitalization can be readily found on financial websites like NSE and BSE.

Recent Financial Performance Highlights:

Information about Recent Financial Performance can be readily found on financial websites like NSE and BSE.

Management Team and Leadership Structure:

GMM Pfaudler’s leadership team comprises experienced professionals with backgrounds in engineering, manufacturing, and finance. The company typically follows a hierarchical structure with a Managing Director/CEO at the helm, supported by functional heads overseeing various departments.

Notable Awards or Recognitions:

Information about Notable awards and recognitions can be found on the company’s official website.

Their Products #

Complete Product Portfolio with Categories:

GMM Pfaudler offers a comprehensive range of equipment and solutions, primarily categorized as follows:

• Glass-lined Equipment: Reactors, storage tanks, columns, and accessories.
• Filtration & Drying: Nutsche filters, agitated thin film dryers, and other separation equipment.
• Engineered Systems: Complete process solutions for the chemical and pharmaceutical industries.
• Mixing Solutions: Agitators, mixers, and related components.
• Fluoropolymer Technologies: Products lined with fluoropolymers for corrosion resistance.
• Heavy Fabrication: Custom-engineered equipment made from various alloys.

Flagship or Signature Product Lines:

Glass-lined reactors are considered a flagship product line, known for their corrosion resistance and suitability for demanding chemical processes.

Key Technological Innovations or Patents:

GMM Pfaudler holds patents related to glass-lining technology, mixing systems, and other process equipment designs.

Manufacturing Facilities and Production Capacity:

The company has multiple manufacturing facilities located in India, Europe, and North America. Production capacity information isn’t publicly available in precise figures but is scaled to serve the global customer base.

Quality Certifications and Standards:

GMM Pfaudler adheres to international quality standards, including ISO 9001 and ASME standards for pressure vessels.

Unique Selling Propositions or Technological Advantages:

• Expertise in glass-lining technology and its application in corrosive environments.
• Comprehensive product portfolio, providing end-to-end solutions for process industries.
• Global presence and service network.

Recent Product Launches or R&D Initiatives:

Information about Recent product launches can be found on the company’s official website.

Primary Customers #

Target Industries and Sectors:

• Chemical industry
• Pharmaceutical industry
• Agrochemicals
• Specialty chemicals
• Food and beverage

Geographic Markets (Domestic vs. International):

GMM Pfaudler serves both domestic and international markets.

Distribution Network and Sales Channels:

The company uses a combination of direct sales, distributors, and agents to reach its customers.

Major Competitors #

Direct Competitors in India and Globally:

• Domestic: ISGEC Heavy Engineering, Praj Industries (in certain segments).
• Global: De Dietrich Process Systems, Thaletec GmbH.

Comparative Market Share Analysis:

Exact market share figures can be difficult to obtain, but GMM Pfaudler is a leading player in the Indian market and holds a significant share globally in glass-lined equipment.

How They Differentiate From Competitors:

• Strong brand reputation and legacy.
• Wide product portfolio.
• Global service network.

Future Outlook #

Expansion Plans or Growth Strategy:

Information about Expansion plans can be found on the company’s official website.

Industry Trends Affecting Their Business:

• Increasing demand for chemical and pharmaceutical products.
• Growing emphasis on sustainable manufacturing practices.
• Technological advancements in process equipment and automation.

Long-Term Vision and Strategic Goals:

GMM Pfaudler’s long-term vision likely involves:

• Strengthening its position as a global leader.
• Expanding its product portfolio through innovation and acquisitions.
• Focusing on sustainable and environmentally friendly solutions.

Financial Analysis Report: GMM Pfaudler Limited (FY24) #

Key Financial Metrics: 3-Year Trend Analysis #

Consolidated Financial Performance (INR Crores) #

FY23 numbers restated for final fair values of purchase price allocation for Mixel France SAS and Hydro Air Research Italia S.r.l. **Adjusted for the bonus issue of 2:1 completed in July 2022.

Standalone Financial Performance (INR Crores) #

**Adjusted for the bonus issue of 2:1 completed in July 2022.

Analysis of Key Financial Ratios (Consolidated FY24 vs FY23 Restated) #

• Debtors Days: Increased by 2%, indicating a slight extension in the collection period.
• Inventory Days: Decreased by 11%, suggesting more efficient inventory management.
• Interest Coverage Ratio: Decreased by 22%, primarily due to lower PBT and potentially higher finance costs.
• Current Ratio: Improved by 8%, indicating better short-term liquidity.
• Debt Equity Ratio: Decreased by 23%, reflecting a reduction in debt levels and a healthier balance sheet.
• Operating Profit Margin (%): Increased to 13.83% from 13.51% (2% improvement), due to operational efficiencies and pricing improvements, particularly in the international business.
• Net Profit Margin (%): Decreased to 5.05% from 6.62% (-24%), mainly due to factors impacting PBT and a higher effective tax rate or exceptional items affecting PAT more than operating profit.
• Return on Average Net Worth (%): Decreased to 19.49% from 28.42% (-31%), driven by lower PAT and an increase in the net worth base.

Business Segment Performance (Consolidated, FY24) #

Major Strategic Initiatives and Progress (FY24) #

• Acquisitions & Integration:
  • Successfully completed the acquisition of MixPro, Canada (December 2023), strengthening the industrial mixing business. Mixing Technologies platform (Mixion, Mixel, MixPro) to be managed as one business to extract synergies and increase cross-selling.
  • Continued integration of Pfaudler International.
• Operational Excellence & Manufacturing:
  • Operational excellence projects completed/ongoing in Germany, China, Switzerland, and India, leading to throughput improvement and cost reduction.
  • New Edlon site opened in Coatesville, Pennsylvania, for ultra-high purity equipment.
  • Created a low-cost supply chain in Poland for outsourcing non-critical manufacturing.
  • Glass-Lined stock & sale program helped enter price-sensitive markets.
  • Quality improvement programs implemented in India.
  • Value sourcing initiatives and optimization by developing alternate vendors.
• Market & Product Development:
  • Diversification into new industries (Petrochemical, Oil & Gas, Fermentation, Metals & Minerals, Water treatment) making up for shortfalls in core segments.
  • Partnered with Altilium for sustainable cobalt and nickel mining equipment.
  • Development of new drying technology (Vertical Conical Filter Dryer, Continuous Pressure Filter) in India.
  • High-efficiency gas induction impeller (HEGI) patented in India.
  • Hydro Air built a mobile ‘pilot-in-a-container’ unit for E-PVC production.
• Financial Strategy:
  • Focus on strengthening the balance sheet yielded positive results with reduced debt levels and healthier cashflows (Standalone India business).
  • CRISIL ratings outlook upgraded to ‘Positive’ (AA-/A1+).
• Shareholding Changes: DBAG Fund VI completed the sale of its stake; ChrysCapital acquired 9.9%, Patel family purchased 1%.

Risk Landscape Changes & Mitigation #

• End-User Industry Dependency (Pharmaceuticals & Chemicals): Slowdown in these core sectors, especially agrochemicals impacting glass-lined business in India, remains a key risk.
  • Mitigation: Diversification into new industries and applications through non-GLE and systems business; cross-selling opportunities.
• Commodity Price Volatility & Inflation: Significant uptick in commodity prices can impact margins. Raw material inflation in end-user industries can lead to capex deferment.
  • Mitigation: Cost reduction measures, passing on price increases to end customers where feasible.
• Geopolitical Risks: Ukraine-Russia conflict impacted power costs. Potential disruptions to shipments (e.g., vessel from UK to China blocked by government regulations).
  • Mitigation: Regular review of geopolitical risks by management and devising plans to minimize impact.
• Supply Chain Disruption:
  • Mitigation: Process changes and digital initiatives in supply chain; detailed vendor analysis; onboarding alternate vendors for critical items.
• Intellectual Property: Loss of proprietary designs or infringement.
  • Mitigation: Strengthened documentation and operational framework to respond to potential infringements.
• Human Capital: Attrition and retention of talent.
  • Mitigation: ESOP plan, “NEEV” training calendar, leadership development, enhanced reward and recognition system.
• IT Security/Cybersecurity:
  • Mitigation: Comprehensive IT security management system, regular updating of online infrastructures, firewalls, disaster recovery systems, Security Information Event Management (SIEM) implementation.

The company has an institutionalized Enterprise Risk Management (ERM) Framework, reviewed by the Risk Management Committee (RMC) and an Executive Risk Management Council (ERMC).

ESG Initiatives and Metrics (FY24 Highlights) #

• Environment:
  • 24% reduction in Grid Electricity Consumption.
  • 15% reduction in Water Consumption across all plants.
  • 3% reduction in Total Energy Consumption.
  • 863 tCO2e Emission avoided (largely through 1MW rooftop solar at Karamsad generating 1,204,771 kWh).
  • 99% of Waste Recycled or Reused (97% recycled, 2% reused).
  • 15% reduction in Emission Intensity.
  • All manufacturing sites ISO 14001 & 45001 certified.
  • Re-glassing service refurbished over 445 tons of steel, avoiding an estimated 1,135 tonnes of CO2 emissions.
  • Mixion division technology contributed to recycling 7.4 billion PET bottles (customer process) and advanced recycling for critical metals.
• Social:
  • Zero Reportable work-related injuries.
  • 100% workers trained on health and safety.
  • Over 54,000 lives positively impacted through CSR projects (healthcare, education, environmental sustainability). Employees contributed over 500 volunteer hours.
  • Human Rights Due Diligence assessment conducted.
  • Employee well-being: Health and accident insurance, maternity/paternity benefits, daycare. 100% return-to-work rate for parental leave.
  • Average 5.5 hours of ESG-specific training per employee.
• Governance:
  • 70% independent directors on the Board (as of March 31, 2024, prior to Ms. Nirula’s appointment; after appointment, it increases further).
  • Featured as India’s leading listed ESG Entities 2024 by Dun & Bradstreet.
  • Bronze Sustainability rating from EcoVadis.
  • Comprehensive Code of Conduct & Ethics Policy, Whistle Blower Policy, Anti-Sexual Harassment Policy in place.
  • ESG Steering Committee oversees strategy and implementation.

ESG Targets (3-Year Plan from FY23) #

• Reduce energy intensity.
• Increase share of renewable energy.
• Achieve Zero Waste to Landfill at all manufacturing sites.
• Decrease total water consumption substantially.
• Increase women workforce by a substantial percentage.

Management Outlook #

• Overall: GMM Pfaudler has transformed into a global multinational. Despite macroeconomic challenges (geopolitical conflicts, energy costs, chemical industry slowdown), the company maintained revenue and margins, delivering strong financial performance. International business showed notable profitability improvements.
• India Business (Aseem Joshi, CEO - India): Demonstrated resilience despite slowdown in Specialty & Agrochem, driven by strong performance in non-glass lined technologies and diversification. Focus on new product development and innovation remains crucial.
• International Business (Thomas Kehl, CEO - International; Alexander Pömpner, CFO - International): Achieved notable profitability improvements driven by strong execution, pricing enhancements, and reduced costs (raw materials, energy). Acquisition of MixPro and new Edlon site are key strategic initiatives for growth.
• Key Growth Drivers/Opportunities:
  • Diversification strategy (new products, technologies, industries) is critical.
  • Shift in production from China, Europe, USA to India (China+1).
  • Government support (PLI schemes, Pharma City).
  • Growth in services business through network expansion.
  • Cross-selling

Detailed Analysis #

Financial Position Analysis: GMM Pfaudler Ltd. #

Consolidated Balance Sheet Summary (INR Crores) #

Comparative financial position (2-year comparison).

Cash Management #

Cash Flow and Liquidity Analysis #

Cash Flow Analysis (Consolidated, Figures in ₹ Crores) #

Operating Cash Flow (OCF) #

• Net cash generated from operating activities: FY24: 344.22; FY23: 264.24.
• Profit Before Tax (PBT): FY24: 255.27; FY23: 270.92 (restated).

Key non-cash/operating adjustments to PBT: #

• Depreciation and amortization: FY24: 135.97; FY23: 126.72.
• Finance Cost: FY24: 86.08; FY23: 64.75.
• Share-based payments: FY24: 2.41; FY23: 2.82.
• Unrealised foreign exchange fluctuation (loss)/gain: FY24: 0.67; FY23: (3.20).

Changes in Working Capital: #

• Inventories (Decrease/(Increase)): FY24: 41.20; FY23: (161.41).
• Trade Receivables, loans, other assets (Decrease/(Increase)): FY24: 109.53; FY23: (91.88).
• Trade Payables, provisions, other liabilities ((Decrease)/Increase): FY24: (108.97); FY23: 111.00.
• Direct taxes paid: FY24: (111.19); FY23: (95.91).
• The significant increase in OCF in FY24 is primarily driven by improved working capital management, particularly a decrease in inventories and receivables compared to an increase in the prior year.

Investing Cash Flow (ICF) #

• Net cash used in investing activities: FY24: (100.94); FY23: (111.11).

Key Components: #

• Purchase of Property, Plant and Equipment (PPE) & intangibles: FY24: (136.71); FY23: (172.02).
• Payment towards acquisition of business: FY24: (3.61) (MixPro); FY23: (105.47) (HARI, Mixel).
• Proceeds from sale of PPE: FY24: 6.76; FY23: 1.34.
• Interest received: FY24: 12.83; FY23: 10.58.
• Capex has moderated in FY24 compared to FY23 which included significant acquisition-related outflows.

Financing Cash Flow (FCF) #

• Net cash (used in)/generated from financing activities: FY24: (192.58); FY23: (112.46).

Key Components: #

• Proceeds from short-term borrowings: FY24: 753.65; FY23: 919.07.
• Repayment of short-term borrowings: FY24: (755.23); FY23: (845.76).
• Proceeds from long-term borrowings: FY24: 20.84; FY23: 121.63.
• Repayment of long-term borrowings: FY24: (107.34); FY23: (100.53).
• Finance cost paid: FY24: (79.86); FY23: (61.02).
• Dividend paid: FY24: (8.99); FY23: (8.89).
• Payment of lease liabilities: FY24: (36.43); FY23: (32.42).
• Increased net outflow in FY24 primarily due to higher net repayment of borrowings and increased finance costs paid.

Cash Flow Analysis (Standalone, Figures in ₹ Crores) #

Operating Cash Flow (OCF) #

• Net cash generated from operating activities: FY24: 156.53; FY23: 113.03.
• PBT: FY24: 69.67; FY23: 130.99.

Key adjustments: #

• Depreciation: FY24: 30.36; FY23: 28.87.
• Finance Cost: FY24: 24.83; FY23: 19.70.
• Working capital changes: Notably, a decrease in Trade Receivables (FY24: 18.61 vs FY23: (83.83) increase) and a smaller decrease in Inventories (FY24: 2.66 vs FY23: 38.34 decrease) contributed positively.

Investing Cash Flow (ICF) #

• Net cash used in investing activities: FY24: (78.16); FY23: (347.05).

Key Components: #

• Purchase of PPE & intangibles: FY24: (70.21); FY23: (78.88).
• Purchase of balance share in subsidiary: FY23: (173.38).
• Significant reduction in net ICF outflow in FY24 due to absence of large subsidiary investments made in FY23.

Financing Cash Flow (FCF) #

• Net cash (used in)/generated from financing activities: FY24: (78.08); FY23: 229.28.

Key Components: #

• Net (repayment)/proceeds from short-term borrowings: FY24: (2.37); FY23: 219.60.
• Net repayment of long-term borrowings: FY24: (41.83); FY23: (14.10).
• Shift from net inflow to outflow due to net repayment of borrowings in FY24 versus net proceeds in FY23.

Risk Framework: GMM Pfaudler Limited (FY23-24) #

Overall Risk Management Framework #

GMM Pfaudler utilizes an institutionalized Enterprise Risk Management (ERM) Framework, overseen by a Board-level Risk Management Committee (RMC) and an Executive Risk Management Council (ERMC). The framework includes risk identification, assessment, treatment, review, and monitoring, benchmarked against industry best practices and COSO standards. The company also maintains a Business Continuity Policy.

Strategic Risks #

Market Downturn & End-User Industry Performance #

• Risk: Market Downturn & End-User Industry Performance (Pharmaceuticals, Chemicals, Agrochemicals)
• Severity: High. Dependent on capex cycles of core end-user industries. FY24 saw a slowdown in core chemical/pharma and a steep decline in agrochemical capex.
• Likelihood: Medium to High. Cyclical nature of industries and macroeconomic factors influence this.
• Trend: Current impact noted with subdued order intake.
• Mitigation Strategies: Diversification into non-glass lined (non-GLE) technologies, systems business, and new industries (Petrochemical, Oil & Gas, Fermentation, Metals & Minerals, Water treatment). Focus on cross-selling and new applications (green chemistry, renewables, recycling).
• Control Effectiveness: Diversification strategy reported as helping to make up for shortfalls.
• Potential Financial Impact: Reduced order intake, lower revenue growth, pressure on profitability if diversification does not offset core industry slowdown.

Geopolitical Instability & Trade Disruptions #

• Risk: Geopolitical Instability & Trade Disruptions
• Severity: Medium to High. Can impact delivery approvals, supply chains, and energy costs (e.g., Ukraine-Russia conflict impact on power costs).
• Likelihood: Medium. Current global environment presents ongoing uncertainty.
• Trend: Ongoing. Example cited: inability to ship a vessel from UK to China due to government regulations.
• Mitigation Strategies: Regular review of geopolitical risks by management, devising plans to minimize impact. Diversified manufacturing footprint (20 facilities, 4 continents) offers some resilience.
• Control Effectiveness: Proactive monitoring and planning.
• Potential Financial Impact: Increased operational costs, project delays, loss of sales, impact on international business profitability.

M&A Integration and Synergy Realization #

• Risk: M&A Integration and Synergy Realization
• Severity: Medium. Successful integration is key to realizing value from acquisitions (e.g., MixPro, Pfaudler International).
• Likelihood: Medium. Inherent in any M&A activity.
• Trend: Company has an active M&A strategy (MixPro acquired Dec 2023).
• Mitigation Strategies: Focus on deeper integration across geographies, creating a global mindset, value sourcing, operational excellence initiatives. MixPro integration to strengthen industrial mixing business.
• Control Effectiveness: Management focus on integration; Pfaudler International integration highlighted as successful.
• Potential Financial Impact: Failure to achieve expected synergies, write-downs of goodwill, slower growth than anticipated.

Competition #

• Risk: Competition
• Severity: Medium. Operates in competitive global markets.
• Likelihood: High.
• Trend: Constant.
• Mitigation Strategies: Technology leadership, strong brand, modernized manufacturing, broad sales/service network, innovation (e.g., HEGI impeller patent), preferred choice in high-value orders.
• Control Effectiveness: Stated market leadership in corrosion-resistant technologies.
• Potential Financial Impact: Price pressures, margin erosion, loss of market share.

GMM Pfaudler Ltd. - FY23-24 Analysis #

Corporate Action Summary #

The company has issued a notice for its 61st Annual General Meeting (AGM) to be held on August 9, 2024, via Video Conferencing. Key corporate actions proposed include:

• Dividend: Confirmation of interim dividend (₹1.00/share) paid during FY24 and declaration of a final dividend of ₹1.00/share for FY24. Total dividend for FY24: ₹2.00/share. Record date for final dividend is August 2, 2024.
• Director Re-appointment: Mr. Ashok Patel (Non-Executive Director) retires by rotation and seeks re-appointment.
• Borrowing Limits: Special resolution to increase borrowing limits beyond those prescribed under Section 180(1)(c) of the Companies Act, 2013, up to ₹1,300 Crores or the maximum statutory limit, whichever is higher. This is to support growth plans for the next three years (up to FY27).
• Creation of Security: Special resolution to approve the creation of security on company assets for borrowings under Section 180(1)(a), linked to the enhanced borrowing limits.
• Independent Director Appointment: Special resolution for the appointment of Ms. Shilpa Divekar Nirula as an Independent Director for a five-year term effective May 22, 2024. This appointment increases the proportion of independent directors on the Board to 70% upon shareholder approval.
• Auditor Remuneration: Ratification of remuneration of ₹1,82,000 plus applicable GST to M/s. Dalwadi & Associates, Cost Accountants, for FY25.

Financial Performance Analysis (FY24) #

Consolidated Performance #

• Revenue from operations grew by 8.46% to ₹3,446 crores in FY24 from ₹3,178 crores in FY23 (restated).
• EBITDA (excluding other income) increased by 11% to ₹477 crores from ₹429 crores (before exceptional item), with the EBITDA margin improving to 13.8% from 13.51%. This indicates enhanced operational efficiency and benefits from acquisitions and international business improvements.
• Profit Before Tax (PBT) decreased by 5.78% to ₹255 crores from ₹271 crores (before exceptional item).
• Profit After Tax (PAT) declined by 17.24% to ₹174 crores from ₹210 crores.
• Earnings Per Share (EPS) stood at ₹39.80, down from ₹46.95 in FY23 (adjusted for bonus).
• Return on Capital Employed (ROCE) was 21%.
• The international business demonstrated remarkable profitability improvements driven by strong execution, pricing enhancements, and reduced raw material/energy costs.
• FY23 figures were restated due to final fair value purchase price allocation for Mixel France SAS and Hydro Air Research Italia S.r.l.

Standalone Performance #

• Revenue from operations decreased by 4.11% to ₹1,031 crores in FY24 from ₹1,075 crores in FY23.
• EBITDA (excluding other income) fell to ₹139 crores from ₹171 crores.
• PBT saw a significant decline of 46.81% to ₹70 crores from ₹131 crores.
• PAT decreased by 48.40% to ₹51.05 crores from ₹98.94 crores.
• The standalone performance was impacted by a slowdown in the Specialty & Agrochem sector in India, particularly affecting the glass-lined business due to a steep decline in agrochemical capex. However, diversification into non-glass lined technologies helped mitigate some impact.

Key Financial Ratio Changes (Consolidated, YoY % Change >25%) #

• Interest Coverage Ratio: -22% (Deterioration, likely due to higher finance costs relative to EBITDA or lower PBT).
• Return on average net worth (%): -31% (Significant decrease due to lower PAT and potentially increased net worth base).

Business Strategy and Operational Highlights #

• Transformation & Diversification: The company has transformed into a global entity with 20 facilities across 4 continents. A key strategic thrust is diversification beyond core pharma and chemical sectors into adjacent industries like Petrochemical, Oil & Gas, Fermentation, Metals & Minerals, and Water Treatment. This strategy is proving crucial in offsetting slowdowns in traditional segments.
• Mergers & Acquisitions:
  • Completed acquisition of MixPro, Canada (December 2023), strengthening the industrial mixing business.
  • Previous acquisitions (De Dietrich India, JDS, Hydro Air Research Italia, Mixel) are integral to portfolio expansion and cross-selling.
• Operational Excellence & Cost Management:
  • Continued focus on manufacturing efficiencies, on-time delivery, and value-sourcing initiatives.
  • Establishment of a low-cost supply chain in Poland for outsourcing non-critical manufacturing.
  • “Glass-lined stock & sale program” to penetrate price-sensitive markets.
  • Emphasis on strengthening the balance sheet and enhancing cash flow through working capital management and cost-saving, leading to reduced debt.
• Service Network Expansion: Inaugurated new service centers in Taubaté, Brazil, and Torre di Mosto, Italy, aligning with the strategy to grow the services business.
• Innovation: New Edlon site in Coatesville, Pennsylvania, for ultra-high purity equipment. Development of new products like Vertical Conical Filter Dryer (VCFD) and Continuous Pressure Filter (CPF) in India. Patented HEGI gas induction impeller in India.
• Market Presence: Strong brand and market leadership in corrosion-resistant technologies. Active participation in global trade fairs like ACHEMA 2024 to showcase capabilities.
• Order Intake: Subdued in FY24 due to slowdown in core chemical and pharma sectors, especially a decline in agrochemical capex in India impacting glass-lined business. Diversification strategy is helping to make up for this shortfall.

Financial Analysis Report: GMM Pfaudler Limited (FY 2023-24) #

Auditor’s Opinion and Qualifications #

Standalone Financial Statements #

The Statutory Auditors, Deloitte Haskins & Sells, Chartered Accountants, issued an unmodified opinion on the standalone financial statements for the year ended March 31, 2024.

Key Audit Matter (Standalone) #

Revenue recognition on customer-specific contracts where performance obligations are satisfied over time (Ind AS 115). This involves significant judgment in assessing criteria and estimates related to future costs, final contract outcome, and stage of completion.

Consolidated Financial Statements #

The Statutory Auditors, Deloitte Haskins & Sells, Chartered Accountants, issued an unmodified opinion on the consolidated financial statements for the year ended March 31, 2024.

Key Audit Matter (Consolidated) #

Revenue recognition on customer-specific contracts, similar to the standalone statements.

Other Matters (Consolidated) #

The audit relied on the reports of other auditors for 2 subsidiaries and the consolidated financial information of another subsidiary (comprising 20 sub-subsidiaries). These components represent total assets of ₹2,705.59 Crores, total revenues of ₹2,621.60 Crores, and net cash inflows of ₹21.31 Crores. Conversion adjustments for foreign subsidiaries from local GAAP to Ind AS were audited by Deloitte Haskins & Sells.

Key Accounting Policies and Changes #

Basis of Preparation #

Financial statements are prepared on a historical cost basis, except for certain financial instruments at fair value, in accordance with Ind AS.

Key Policies Applied Consistently #

• Revenue Recognition: For fixed-price contracts, revenue is recognized using the percentage-of-completion (POC) method based on cost incurred to total estimated costs. Variable consideration is recognized when a significant reversal is improbable.
• Property, Plant & Equipment (PPE): Stated at cost less accumulated depreciation and impairment. Depreciation is on a straight-line method based on Schedule II of the Companies Act, 2013, with specific useful lives assessed for certain assets (e.g., Burning Plant & Machinery: 3 years, Solar Power Plant: 10 years).
• Intangible Assets: Carried at cost less accumulated amortization and impairment. Amortized on a straight-line basis over estimated useful lives (e.g., Computer Software: 3-6 years, Process Knowhow: 10 years, Technology/Trademark/Customer Relationships acquired in business combinations: 20 years).
• Goodwill: Represents excess of consideration over the fair value of net identifiable assets acquired in a business combination. Tested annually for impairment.
• Inventories: Valued at the lower of cost (weighted average) and net realizable value.
• Financial Instruments: Classified and measured as per Ind AS 109 (amortized cost, FVTPL, FVTOCI). ECL model applied for trade receivables.
• Leases (Ind AS 116): Right-of-Use (ROU) assets and lease liabilities recognized for leases, except short-term and low-value leases.
• Employee Benefits: Defined contribution and defined benefit plans accounted for as per Ind AS 19. Share-based payments (ESOP 2021) accounted for using fair value method.
• Business Combinations (Ind AS 103): Accounted for using the acquisition method.

Changes in Accounting Policies/Estimates #

• No new mandatory Ind AS amendments were notified by MCA for FY24.
• Consolidated Financials (FY23 Restatement): The Group completed the final determination of fair values for Purchase Price Allocation (PPA) related to the FY23 acquisitions of Hydro Air Research Italia S.r.l (HARI) and Mixel France SAS (Mixel) & Mixel Agitator Co. Ltd. This resulted in a restatement of the FY23 consolidated figures for Profit Before Tax, Profit After Tax, Total Other Comprehensive Income, Non-Current Assets, Current Assets, Total Equity, Non-Current Liabilities, and Current Liabilities.
• Provisional PPA (Consolidated FY24): The acquisition of Professional Mixing Equipment Inc. (‘MixPro’) in December 2023 is provisionally accounted for, with final PPA determination pending.

Internal Control Effectiveness #

Auditor’s Assessment #

The Statutory Auditors reported that the Company (Parent) and its Indian subsidiary have, in all material respects, an adequate internal financial control system over financial reporting, and such controls were operating effectively as of March 31, 2024.

Management’s Assertion #

• Internal controls are adequate and commensurate with the nature, size, and complexity of operations.
• No material or serious lapses were observed by Internal Auditors (Ernst & Young LLP).
• The Audit Committee periodically reviews the adequacy and effectiveness of internal financial controls.
• The Company uses LN ERP System. Implemented advanced solutions for threat detection (XDR) and Data Loss Prevention (DLP).
• Statutory Auditors confirmed adequacy and operating effectiveness in accordance with Section 143(3)(i) of the Companies Act, 2013.
• Audit trail (edit log) facility in accounting software operated throughout the year for relevant transactions, as per Companies (Accounts) Amendment Rules, 2021 (effective April 1, 2023).

Regulatory Compliance Status #

Secretarial Audit #

M/s. Rathi & Associates, Practicing Company Secretaries, reported compliance with the statutory provisions of the Companies Act 2013, Securities Contracts (Regulation) Act 1956, Depositories Act 1996, FEMA 1999 (to the extent of FDI, ODI, ECB), and specified SEBI Regulations (Insider Trading, Takeovers, LODR, SBEB). They confirmed proper Board processes and compliance mechanisms.

Board’s Report #

Confirmed no adverse orders from regulators/courts/tribunals impacting going concern status or future operations. Applicable Secretarial Standards were complied with.

Corporate Governance Report #

The Company confirmed compliance with mandatory requirements of SEBI Listing Regulations.

Large Corporate Framework (SEBI) #

Identified as a Large Corporate based on FY23 financials but did not raise long-term borrowings in FY24. As per the revised framework (Oct 2023), the Company is not a Large Corporate as of March 31, 2024.

IEPF Transfers #

Unclaimed dividends and corresponding shares transferred to IEPF as per statutory requirements.