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AksharChem (India)

BSE: 524598|NSE: AKSHARCHEM|ISIN: INE542B01011|SECTOR: Dyes & Pigments
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Mar 15
Chairman's Speech (AksharChem (India)) Year : Mar '16

Dear Shareholders,

i am pleased to present to you the 2015-16 annual report of the Company. The year has been a challenging one for the industry as slowing global economy led to sluggish demand from the global textiles and paints industry. Geopolitical tensions, slowdown in global trade, weakening oil prices and instability in financial markets continue to weigh down the global economic sentiments.

This turbulence led to a decline in the prices of our products. As a result, despite a 5.31% growth in sales volumes our revenues declined 6% from Rs. 19,982 lakhs in 2014-15 to Rs. 18,771 lakhs in 2015-16. However, initiatives to enhance shop floor management, operational efficiencies, supply chain efficiencies and optimum utilization of resources enabled us to reduce overheads and achieve higher margins. Our EBITDA and PAT margins increased 228 and 86 basis points respectively to 17.38% and 8.86% respectively in 2015-16.

The key challenges faced by the industry in the international market are the escalating manufacturing costs driven by high finance and electricity costs. Though, your Company is in a comfortable position with an interest cover of 11.61x in 201516 compared to 9.56x in 2014-15 and a debt:equity of 0.37 as on March 31, 2016; a decline in such costs would make our product more competitive in the international markets and enhance overseas revenues that account for nearly 81.76% of the total sales.

The knowledge edge The chemical business space is all about knowledge cycle -acquiring, exploring, reaching depths, widening scope, innovating and then again acquiring new one. I am glad that through years of hard work and perseverance we developed core competencies (in the field of dyes and pigments manufacturing) and an ability to constantly improve processes and quality. This puts us amongst the unique league of low-cost, quality-conscious and environment-friendly companies. Our reputation in the industry has enabled us to expand geographically, even to countries that have strict quality and environment compliance norms. Moreover, most of our customers are leading and internationally renowned downstream chemical companies.

Some of the initiatives undertaken by us to sharpen our knowledge edge include:

- Employing the best R&D experts and providing them a conducive work and learning environment to enable them nurture their skills and focus on product and process improvements. These experts are also motivated to participate in various international seminars to gain and share knowledge.

- Providing regular training to employees from internal as well as external sources for advancement and up gradation of the technology and work culture.

- Being proactive and setting up a world-class environment management systems and effluent treatment plant to reduce carbon footprint. Placing us amongst the few companies meeting the stringent international environment compliances. Though, such investments led to increase in debt cost in short-term, in the long-run it shall provide significant revenue growth visibility by providing us the necessary environment clearance to easily enter new region and market our products.

Demand scenario As per the IMF, the global economy is expected to witness slower growth in 2016 growing 3.1% and then pick up momentum by growing 3.4% in 2017. The US market is expected to improve backed by reviving housing industry, strengthening balance sheet and no fiscal drag. Euro area would remain sluggish driven by ageing population, low demand and implications of Brexit. While the emerging and developing nations are expected to sustain its growth momentum and drive the overall global economy growth. The economic growth in these nations is expected to drive the global textiles and paints industry in the near future.

The global textile market is expected to grow from 76 million tonnes (worth USD 1,500 bn) in 2012 to 95 million tonnes (USD 1,800 bn) in 2020 driven by strong apparel demand from the Asia Pacific, Middle East & Africa and Latin America. While the global paints and coatings market is expected to grow at a compounded rate of 5.5% during 2014-20 from USD

121.9 bn in 2013 to USD

176.5 bn in 2020. (Source: World Economic Outlook:

IMF, GherziTextil Organization, Persistence Market Research)

Message to shareholders We strongly focus on augmenting our research and development activities with the objective of widening our product line and customer base. Further, the Company plans to debottleneck existing capacities to enhance production capacity with relatively lower capital investment.

With the expected near-term revival of the global textiles and paints market, the Company through its knowledge, experience, scale and strong product portfolio is ready to capitalize on the opportunity and grow strongly in the coming years while reinforcing our positions the most profitable dyes and pigments manufacturer in the world.

Regards,

Mrs. Paru M. Jaykrishna

Chairperson

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