Management Discussion and Analysis Report a) Industry Structure and developments Gopala Polyplast Limited has been in the HDPE/PP woven sacks industry right from its inception. The Company offers the complete range of HDPE/PP woven bags / sacks with liner, HDPE/PP woven laminated bags, BOPP coated bags, AD Star bags, which are manufactured in our state of the art manufacturing unit. Today the Company is one of the largest manufacturers of PP Woven Sacks for Cement Industry in the Country. The Company has also diversified its activities by setting up facilities for manufacture of textile woven labels. The Indian woven sack industry has also been one of the fastest growing segments of the bulk packaging industry and has registered an annual compounded growth rate of 15% or more over the last decade. Despite being hampered by the Jute Packaging Materials Act (JPMA) by which the Government of India mandates the use of only Hessian (Jute) bags for many high-volume applications like packaging of food-grains and sugar, it produces the equivalent of almost 1 million MT of polypropylene (PP) and high density polyethylene (HDPE) per annum valued at around Rs.10,000-12,000 crores. HDPE bags are used mainly by the fertilizer industry and PP bags are mainly used for the packaging of cement. Of course, this number has been boosted by the periodic shortage of Hessian bags in recent years as a result of which the Government has permitted dilution of the JPMA from time to time until the shortage was overcome. Today, the use of woven sacks is quite extensive for applications ranging from chemicals, fertilizers and cement to a wide variety of products in the 10 to 50 kgs. range. Plastic woven sacks are technically the brferred system as compared to Hessian bags because they provide much better protection to the products. They are also much cheaper - a typical 50 kg. Hessian bag costs about Rs. 25 per bag whereas a PP woven sack costs around Rs. 17 per bag. The growth of organized retailing through huge malls and increase in the demand of ready to wear garments because of changing fashion trends have lead to growth in demand of labels. The Company has made inroads in the domestic garments sector. Due to the debrciation of Rupee against the US Dollar the garment exports from the country has created tremendous opportunity for the label business. b) Opportunities and threats Opportunities : 1. All major players in cement industries are doing their expansion so demand of bags will increase in near future. 2. With the beginning of organised retailing of agro & food products, the packaging requirement with value added PP bags will emerge creating a new market for the company's product. 3. Ready to wear garment in domestic market is increasing due to changing fashion trend will create a new demand for label product for the company. 4. Export, retail packing of sugar and food grain shifting to PP sacks segment. 5. Overall growth in industry Threats : 1. The threats of competition out of new capacities, fluctuation in petrochemical prices may put brssure on the Company's performance. However, raw material price increase is normally passed on to the majority of customers. Also the situation can be tide over by making strategic purchases. 2. The process of making bags from fabric is labour oriented and labours are now in short supply. c) Segment-wise or product-wise performance The details have been furnished under Sl. No. 13 of the notes to the financial statement of the Balance-sheet. d) Outlook Woven polyethylene /polypropylene bags or simply woven HDPE/PP bags are versatile packing materials and are, being used as an innovative and cost-effective packaging concept with light weight and the toughest packaging bags, in mainly cement industries, agricultural, Sugar, fodder, chemicals, fertilizers, Sand, metals and concretes etc. polypropylene bags have special linings that result in better resistant to humid conditions, in turn, leading to prolonged shelf life of the packed products. The HDPE/PP fabrics have high strength along with increased tear resistance. Hence, these bags can withstand rough handling during the process of transportation. HDPE (high density polyethylene) used in order to take advantage of its excellent protective barrier properties. Its chemical resistance properties also make it well suited for items such as containers for household chemicals and detergents. PP (polypropylene) has high tensile strength, making it ideal for use as tough handling material. Because of its high melting point, polypropylene can be hot-filled with products. PP Woven bags are the traditional bags in packaging industry due to their wide variety of usage, flexibility and strength. They are commonly used for packing fertilizers, feeds, grains, Barley, flour, salt, sugar, seeds, explosive, cement, coal, malt, rubbish and other lumpy and fine materials. PP Woven bags are made according to customers brferred specifications as to mesh, denier, G square meter, color, and width that varies from 35cm to 80 cm. Polypropylene bags or sacks are used for packing a wide range of Pulverous and free-flowing goods such as flour, corn, grain, animal feed, sugar, salt. fertilizer, carbon, caustic soda, Cement, calcium carbonate, gypsum, lime, sand etc. Demand for the Company's products depends on the growth in demand for the products of its user industries, such as Cement (about 50%), Fertilizer (about 25%), Chemicals (about 7%), Food Grains (about 6%), Sugar (about 1%), grains in case of HDPE/PP bags. The Indian woven sack industry is expected to grow at the annual compounded growth rate of 11% to 12%. In case of Labels demand depends on the growth of Apparel Industry, which is also expected to grow at the annual compounded growth rate of 11% to 12%. e) Risks and concerns Food grain products are restricted to use PP sacks as stipulated under Jute Packaging Materials (Compulsory Use in Packaging Commodities), Act, 1987, which affects the demand. Though the Company is not affected by the said restriction as its major sales is to Cement sector which consumes about 50% of PP sacks, it definitely impacts the growth plans. f) Internal Control System and their adequacy The company has the internal control systems, which have been found adequate by the management of the company. The company has also constituted an audit committee to further strengthen the internal audit control systems in the Company. g) Discussion on financial performance with respect to operational performance Discussed in the Directors' Report under the heading "State of affairs of the Company." h) Human Resources Development and Industrial Relations The company has a very good team of dedicated persons who are continuously and consistently putting their efforts to pull out the company from its current situation. The initiative and the eagerness in each one of us to keep trying is our most important asset. Through training programmes and value based teachings, we have tried to keep the motivational levels high amongst our people. Industrial relations within the Company as well as public relations with all outside agencies have been most cordial. The Board wishes to place on record its apbrciation for the sustained efforts of all employees towards attaining the brsent performance. i) Material financial commercial transactions, where the management has personal interest which have a potential conflict with the Interest of the Company at large. There are no material financial commercial transactions, where the management has personal interest which have a potential conflict with the Interest of the Company at large. DECLARATION The Board of Directors of the Company at their meeting held on 28/10/2005 have adopted the Code of Conduct for the members of the Board of Directors and Senior Management of the Company and the same has been posted on the website of the Company. As stipulated under the provisions of the sub-clause I(D) (ii) of Clause 49 of the Listing Agreement with the Stock Exchanges, all the Directors and the designated personnel in the Senior Management of the Company have affirmed compliance with their respective Codes for the financial year ended 31/03/2015. For Gopala Polyplast Limited Manoj Somani Managing Director DIN :00119021 |