TO THE SHAREHOLDERS
We present herewith our Annual Report together with the Audited Financial Statements of your Company for the year ended March 31, 2024; we are pleased to say that our strong performance endures, driven by a skilled management team and by committed employees. These elements are reinforced by a progressive attitude and sound governance.
Financial Results
The results are considered satisfactory, especially given that (a) installed capacities remain unchanged from FY 2022-23; (b) the dielectric films plant had a minor increase in planned downtime for technical enhancement; and (c) there were periods of sub-optimal market economics and conditions. However a resilient bottom-line underscores the effectiveness of our operational strategies and competitive edge.
PBIDT held steady at INR 78.33 crores (INR 78.28 crores). PBDT rose 3.6% to INR 73.32 crores (INR 70.75 crores). Exceptional charges of INR 2.02 crores were accounted for, being compensation demanded by consortium banks against loans rescheduled (without sacrifice) in 2016 and prepaid by us in the previous year. PAT was marginally lower at INR 43.88 crores (INR 45.36 crores). Current tax outflow was notably higher than in previous years.
The Board in accordance with the Dividend Distribution Policy has recommends for shareholders' approval a dividend of INR 2 per share for the year ending March 31, 2024, subject to shareholder approval. This reflects a prudent balance between distributing profits and conserving resources.
Share Capital & Resources
During FY 2021-22 the Company had allotted on a preferential basis 16,40,000 warrants to Malabar India Fund Limited ("Malabar"), a category I foreign portfolio investor (non-promoter, public) and 3,28,000 warrants to promoter group entities at a price of INR 762 per warrant, with initial payment being 25% of the warrant price; each fully paid-up warrant would entitle subscription to and allotment of 1 equity share of INR 10 at a premium of INR 752. The promoter group exercised its entitlements in FY 2022-23 itself; Malabar exercised their entitlement in full during the year under review.
All allotees of these equity shares also received appropriately reserved bonus shares, in the same ratio of 1:2 as allotted to all other shareholders. The total amount raised from this full issue was INR 149.96 crores.
Further capital raises were announced in the year under review to help support our core strategic vision of building global significance in dielectric film industry. We were delighted to receive shareholder approvals at the Extra Ordinary General Meeting held on January 16, 2024 for raising (a) upto INR 140 crores via warrants issued on a preferential basis; and (b) upto INR 150 Crores via Qualified Institutions Placement. We are pleased that the Company's offerings triggered keen interest from reputable, informed and judicious investors, and in a very short time the Company could complete both offerings by issuing and allotting during the year :
(i) 14,35,750 warrants on a preferential basis to 12 subscribers (of which 1,05,750 were to 2 promoter group entities) at an issue price of INR 975 per warrant with initial payment of 35% of the warrant price, and the balance 65% at warrant holder's option within 18 months; each fully paid-up warrant entitles subscription to and allotment of 1 equity share of INR 10 at a premium of INR 965. Initial proceeds of this issue as above are INR 48.99 crores and the issue will aggregate to INR 139.99 crores assuming full conversion of warrants; and
(ii) 13,62,397 fully paid-up equity shares via Qualified Institutions Placement to 21 subscribers, at INR 1101 (face value INR 10 plus premium of INR 1091) per equity share, i.e. at a discount as permitted by regulations of INR 57.32 (or 4.95%) on the floor price of INR 1158.32 per equity share. The proceeds aggregated INR 150 crores.
The Board welcomes all the above investors as esteemed partners to existing stakeholders in the Company's future. The paid-up equity capital now stands at INR 22.03 crores; upon conversion of outstanding warrants when fully paid up, the equity capital will stand at INR 23.47 crores. There has been (and will further be, upon the latter allotment) a material addition to Reserves on account of securities premium; Net Worth stands at INR 560.51 crores (INR 233.55 crores).
Proceeds from all the above issues are being utilized for purposes stated and monitored carefully. Shareholders were kept informed that these latest issues marked the end of our foreseeable capital-raising actions. The capital infusion has been timely and significant; additionally the Company has negligible debt levels, or pay-out obligations on the horizon. So the healthy net cash additions and the enhanced capital resources can be applied to organic growth with confidence.
The Promoter Group invested in both above preferential offers, and is subject to longer lock-in periods on their infusion than the others; the prima-facie dilution in promoter holdings are purely a consequence of allotments made to the other subscribers. Some promoter group entities had also supported the Company in 2019 by pledging part of their equity holdings in the Company as additional collateral favouring consortium banks of the Company; after the Company repaid the banks duly in the previous year, the pledges were finally released during the year under review.
Review of Key Business Matters
India, the world's fastest-growing large country, is expanding annually at 6-7%. Private sector confidence is reportedly at its highest since 2010. Already the fifth-largest economy it may rank third by 2027, after America and China. Resilience in manufacturing, massive infrastructure spending, a respectable agricultural output, increasing direct and indirect tax collections and strong foreign exchange reserves - all portend well for sustained growth. Improvements to infrastructure and logistical costs can be expected. Job creation remains an urgent priority. Of course the usual overall risks, including but not limited to policy and monetary policy changes, geopolitics, inflation and climate (e.g. monsoon-led) will always remain. However, recent reports do indicate that there are expectations of a good monsoon, signs of pick-up in rural demand and slowing inflation; there could be a durable, broad-based improvement in consumption.
The global economy continues growing at a modest pace according to OECD's latest outlook which projects global GDP growth of 3.1% in 2024, the same as in 2023, followed by a slight pick-up to 3.2% in 2025. The impact of tight monetary conditions continues to be felt, particularly in housing and credit markets, but global activity is proving relatively resilient. Geopolitics is an indefinite factor. A decline in inflation continues, and private sector confidence is reported to be improving. As a separate observation, global markets for dielectric films have been assessed by various sources to potentially grow so as to occupy foreseeable industry-wide capacity increases, including our plans articulated below.
For the Company's own operations, we are happy to report that despite challenges of capacity limitations and sub-optimal market circumstances, aggregate production across our units grew to 27,891 MT (vs. 26,607 MT in the previous year - adjusted for toll-manufacture from discontinued unit). However, turnover registered lower by 8.9% at INR 465.41 crores (INR 510.97 crores). It bears mentioning, as also indicated in our investor releases, that the drop in top-line value largely associates with softer raw material prices, which reflect on revenue through consequent adjustments in product pricing. The end of toll manufacturing at the erstwhile packaging film unit transferred in FY 2022-23 was also a factor (approx. INR 5 crores, or around 1%). The stability in our physical activity reflects in total production tonnage being 4.8% higher over the previous year. Some higher value-added products, as well as higher interest income, helped mitigate the adverse pressures. The Management's Discussion and Analysis report contains finer details, the broader picture is covered here.
The Barjora dielectric film line maintained its dynamic performance, operating at almost full capacity and consistently adapting to produce thinner films. This helped align our product mix and capabilities with current opportunities with our clients. Enhancements were made to the thickness measurement and control systems, necessitating a brief planned downtime previously mentioned. We believe that favorable market conditions will continue to support our operations.
The Company holds the pole position as the leading and first-mover Indian manufacturer of premium dielectric BOPP films, and is recognized in advanced markets for product quality, innovation and service standards. We have cultivated our own development capabilities, and compete on strong terms against products from manufacturers in Japan, Korea, China and Europe. Due to the need to align capacity with domestic demand, we had to temporarily moderate exports. The sectors of electric vehicles (EVs) and alternative energy are promising for our company's range of competencies.
Consumer durables, including refrigerators manufactured by our OEM customers (key client base for coextruded sheets and thermoformed liners manufactured at Ranjangaon and Greater Noida) faced difficult market conditions during the first half of the year, as would have been seen in quarterly performance reports. The offtakes for consumer durables saw a limited revival in the 3rd quarter and onwards, in anticipation of the festival season and recovery. The white goods' markets improved to some extent towards year end, and one may expect revitalized demand in coming periods; but competitive demands on our clients' end-products frequently translates to pressure on our pricing. The government's PLI scheme has likely tempted some refrigerator manufacturers to create sheet capacity for a part of their requirements. Nevertheless our flexibility with multiple lines, skills and track record built up over years, and our focus on reliability and operational efficiency means most leading brands remain our notable clients.
Continuing our steps to slash even residual debt, the outstanding Guaranteed Emergency Credit Line for working capital INR 15.31 crores was repaid well before schedule; there is now no term debt relating to existing operations. We believe our disciplined debt reduction and capital infusions have provided a fairly de-risked foundation for the expansions; which we also expect to complete with judicious debt levels, including cover-backed long-term supplier credits.
As approved earlier, in terms of the agreement with Tata Power Renewable Energy Limited and TP Mercury Limited, the Company acquired 26% of the equity capital and rights thereon of TP Mercury Limited for INR 1.36 crores; the latter is classified as an associate company but under its own management. Generation equipment installation is said to be about 90% done; Tata Power had communicated some delays in transmission systems; however we anticipate supply of lower cost solar energy through Open Access to the Company's Ranjangaon unit in FY 2024-25. Operations of the subsidiary Xpro Global Limited were not material, with trading activities remaining curtailed during the year while management focuses on the parents' core activities.
The Company conducts its business affairs with the intentions of delivering long-term shareholder value, and remaining conscious of interests of stakeholders and society. We are delighted to have supported carefully selected, worthy causes under CSR obligations. The Board greatly appreciates the quality and dedication of our human capital at all levels, and their engagement in the performance of the Company. The Board encourages management to act towards a future-ready and action-oriented team, that will uphold the achievement of our objectives and potential.
We pursue inclusion of ESG principles in business conduct and, going forward, expect to further improve our ESG practices. Sound governance is key for us, supported by policies towards compliances and ethical conduct.
Despite predominant positivity and encouraging indicators on a broader scale, it's prudent and realistic for us to highlight that both the global and Indian economic landscapes, along with their positives, should not be assumed as guaranteed. While it's reasonable to anticipate ongoing positive momentum, unforeseen volume or margin fluctuations as well as other disruptions or delays could occur. As a result, outcomes may differ from what was expected, implicit or inferred.
Growth
As mentioned in earlier reports, our preferred approach to increasing business value is by investing for organic growth. The Company intends to maintain a leadership position and increase market presence in its niche product areas, building on manufacturing assets and skills, development, marketing and export competency, and healthy relationships. To build long-term business value in an effective way, we have prioritized fundamentals over short-term targets. The key strategic elements management is pursuing are global scaling of capacity, product advances and sustainable cost competitiveness. It may be mentioned that we share broad information here only to the extent relevant and within boundaries, that in our opinion are reasonably required, in light of the Company's strategic and competitive plans and position.
Our focus is on dielectric films, deriving not only from performance and standing but also driven by strategic positioning in a growing, high-tech niche segment that inspires the planned resource allocation over the coming periods. The fact that we can consistently operate domestically on competitive terms against large duty-free imports from Asia and Europe, and successfully export to advanced markets, additionally authenticates our capabilities. It is important for us to highlight that our technical distinction and top-quality customer service are the outcomes of persistent organizational exertion at every level. This homegrown perspective engenders our immense pride in the Company's India-centric self-sufficiency in technology and skills, which also endorses the true spirit of "Make in India".
The first phase of expansion - to double capacity at the existing location at Barjora - is well underway. Significant progress has been made on implementation at the brownfield site, and management believes we are on track to achieve operations in FY 2024-25 (the current year) as announced earlier; the possibility that European supply-chain issues may delay the arrival of some equipment cannot be fully ruled out, but at present any significant delay in the broad timeline announced is not evident. The accounts reflect capital work-in-progress, advances and part utilization of foreign supplier credits for capex; bank deposits include significant amounts towards capital spending commitments.
As per our earlier announcement(s), the second new line was to be set up at another appropriate location. After a careful study of relevant factors, and as a step towards enlarging our successful footprint in the dielectric film industry's global supply chain, the Board approved the setting up of a subsidiary in the United Arab Emirates. A wholly-owned subsidiary named "Xpro Dielectric Films FZ-LLC" is being incorporated in the current year, as a Limited Liability Company in the Free (trade) Zone, in the emirate of Ras al Khaimah, UAE ("RAK"). The core equipment is already on order, and work on the ground will begin shortly, so as to align with our articulated intent of starting operations in FY 2025-26.
The Ras Al Khaimah Economic Zone ("RAKEZ") is an industrial hub and a large economic zone. The Free Zone under RAKEZ has excellent infrastructure. A number of industrial companies (including Indian) are successfully operating in the region of the facilities being allotted to us. Ras Al Khaimah also provides efficient access to both shipping and global markets - which are important for our business plans. In due course we also hope to nurture development competencies here, to work in hand-in-hand with our home team.
Shareholders will be pleased to note from the above that we anticipate, barring unforeseen circumstances, to be within the indicated time span (keeping in mind long core equipment delivery periods) for both these expansions, as originally articulated in our report for FY 2021-22. All key equipment is state-of-the-art and sourced from proven manufacturers.
The future outlook for dielectric capacitor films appears promising based on multiple research studies, with several trends and developments shaping the market. Technological advancements are a driver for this market, which services multiple and diverse applications from household appliances to renewable energy sectors. The trend towards miniaturization in electronics, and smart capacitors, can boost demand for high-performance films. Polypropylene dielectric film remains a top choice for many high-performance capacitor applications; it is reasonable to expect that it will continue to play a vital role in the capacitor industry and related fields for much time to come.
Therefore, further to current commitments, management has under active consideration an extension of the Company's current investment cycle, by adding one more advanced line aiming to start operations in FY 2026-27. This will then be the fourth line under Xpro's umbrella dedicated to dielectric films. We anticipate, based also on external assessments, that the Indian and international markets should together be able to fully consume the ultimate production capabilities and capacities. This addition, when made, will further reinforce our ongoing vision of remaining in a globally significant industry position in the "non-China" and high-quality space.
Management is also evaluating locations for this line that can optimize the ability to competitively serve Indian and global markets. The aggregate outlay for all the above schemes, including this fourth line, could aggregate to around INR 800 crores. Considering our resources, expected cash accruals, and net long-term suppliers' credit over the investment period, we should be able to execute this with nominal debt. Thereafter this cycle of organic growth will conclude, and we will have an opportunity to pause and review progress and the future course, as all capacities fully stabilize and consolidate.
Directors And Key Management Personnel
Recognising that four Independent Directors would compulsorily retire in FY 2024-25, the Board took appropriate steps to identify suitable persons with relevant knowledge, experience and balance of skills (while meeting requirements of the Companies Act, 2013 and Regulation 16(1)(b) of LODR on independence of directors) to join the Board as Independent Directors. Accordingly, upon recommendations of the Remuneration and Nomination Committee, Sri Manoj Mohanka (initially as Additional Director) and Ms. Nandini Khaitan were appointed as Non-Executive Independent Directors to hold office for a term of five years with effect from September 1, 2023 and February 1, 2024 respectively. Shareholders approved these appointments through postal ballot on September 28, 2023 and at the Extra-Ordinary General Meeting held on January 16, 2024 respectively. The Board will thus remain compliant on composition, going forward.
Independent Directors Sri Amitabha Guha, Sri Ashok Jha, Sri Utsav Parekh and Sri S. Ragothaman will all be completing the permitted maximum of 2 terms of upto 5 years each, implemented since the Companies Act, 2013 came into effect, and will consequently retire in July 2024. The respected Directors have faithfully and untiringly worked for furthering the interests of the Company and its stakeholders. The Board places on record its deepest appreciation of the valuable services and guidance rendered by them during their respective tenures on the Board and on its committees.
Shareholders had approved through postal ballot on May 19, 2023, the re-appointment of Sri Sidharth Birla, Chairman for a term of 3 years effective March 1, 2023. The Board has on recommendation by the Remuneration and Nomination Committee re-appointed Sri C Bhaskar as Managing Director & Chief Executive Officer for a term of 3 years with effect from January 1, 2024; shareholders approved this through postal ballot on September 28, 2023. Smt. Madhushree Birla retires by rotation at the ensuing Annual General Meeting. Being eligible, she offers herself for re-appointment in terms of Section 149, 152 and other applicable provisions of the Companies Act, 2013. During the year, seven Board Meetings were convened and held as per details in the annexed Corporate Governance Report. The Independent Directors met separately on March 11, 2024 as required.
Statutory And Other Matters
Information as per the requirements of the Companies Act, 2013 ("the Act"), our report on Corporate Governance and the Managements' Discussion & Analysis Report form a part of this Report and are annexed hereto. The Annual Return (Form MGT-7) is available on the Company's website at www.xproindia.com/annual-reports.html and information on conservation of energy, technology absorption & foreign exchange earnings and outgo is furnished in annexure hereto.
The Company has received necessary declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as per Section 149(6) of the Companies Act, 2013 and SEBI Listing Regulations, 2015 and this has been noted by the Board. The Board also confirms that the Independent Directors appointed during the year meet the criteria of expertise, experience and integrity in terms of the Act. The Board has, on recommendation of the Remuneration and Nomination Committee, framed a policy for appointment and remuneration of Directors and Senior Managerial Personnel and criteria for determining independence and relevant matters (policy and criteria are annexed; also available at www.xproindia.com/Codes/XILPolicyRemuneration.pdf). Pursuant to provisions of the Act and SEBI Listing Regulations, 2015, the Board carried out annual evaluation of its performance, and individually for all directors, as well as evaluation of all its Committees. A questionnaire was circulated to all Directors. The concerned Director does not participate in a meeting while he/she is being evaluated. The Remuneration and Nomination Committee also evaluated the performance of each Director. Evaluation of the Chairman and non-independent Directors was carried out at the meeting of Independent Directors.
The Company has formulated a Policy for determining material subsidiaries as required under Regulation 16(1)(c) of the SEBI Listing Regulations, 2015 (available at www.xproindia.com/Codes/XILPolMatSubs.pdf). At the end of the year the Company had one wholly owned subsidiary viz. Xpro Global Limited; TP Mercury Limited is the only Associated company. A statement containing the salient features of the Financial Statement of Subsidiary Company and Associate Company in the prescribed format annexed herewith in Form AOC -1 as required.
The Company has constituted a Risk Management Committee of the Board to, inter alia, review business risks with the responsibility of implementing and monitoring the Risk Management Policy on a periodic basis. The main objective of such policy is to ensure sustainable business growth with stability and to promote a proactive approach in reporting, evaluating and resolving risks associated with the Company's business and processes. The Board is informed about the identified risks, assessment thereof and minimization procedures and identification of risk elements which in the opinion of the Committee may threaten existence of the Company. The Company has an internal control system commensurate with its size of operations. Internal audit is carried out by external agencies which report to the Audit Committee. During the course of internal audit, the efficacy and adequacy of internal control systems is also evaluated and all corrective actions are taken, based on reports or whenever merited.
The Company has not granted any loan or issued any guarantee or made any investment to which the provisions of Section 186 of the Act apply. The Company does not invite or accept any Deposits and accordingly there are none outstanding on March 31, 2024. Transactions with related parties during the year were in the ordinary course of business and on arm's length basis. There are no material related party transactions entered into by the Company which may have a potential conflict of interest with that of the Company and to which Section 188(1) of the Act applies. Accordingly Form AOC-2 is not required to be annexed. As required under provisions of the Act and Regulation 23 of SEBI Listing Regulations, 2015, all proposed Related Party Transactions are placed before the Audit Committee for approval or for omnibus approval as necessary; a statement of all such transactions is also placed for review. The policy on Related Party Transactions is uploaded on the website at www.xproindia.com/Codes/XILPolRelPartyTrans.pdf. The Audit Committee is compliant with Section 177 of the Act and Regulation 18 of SEBI Listing Regulations, 2015; details are given in our Corporate Governance Report. There was no instance where the Board did not accept any recommendation of the Audit Committee. The Company has a vigil mechanism for directors and employees under a Whistle Blower Policy; no employee is denied access to the Audit Committee in this regard. The policy provides for safe guards through Protected Disclosures against victimization of persons who use such mechanism, is displayed on the Company's website and is also annexed herewith. Information pursuant to Section 197(12) of the Act read with Rule 5 (as amended) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed. A committee looks into complaints, if any, under The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013; no complaint was filed during the year and none are pending.
There was no change in the nature of business of the Company during the financial year. There are no significant and material orders passed by any Regulators or Courts/Tribunals which impact the going concern status of the Company and its future operations. There have been no material changes and commitments, if any, affecting the financial position of the Company which have occurred between the end of the Financial Year of the Company to which the Financial Statements relate and the date of this Report.
The committee on Corporate Social Responsibility (CSR) is compliant with Section 135 of the Companies Act, 2013; details are furnished in the Corporate Governance Report. CSR activities are carried on mainly through implementing agencies or via contribution to approved funds. The CSR Policy and the annual report on CSR are annexed herewith. The Company is among the top 1,000 listed entities based on market capitalization on March 31, 2024. A Dividend Distribution Policy was adopted and is available at www.xproindia.com/Codes/XILDivDistPolicy.pdf. The ‘Business Responsibility and Sustainability Report' (BRSR) under Regulation 34(2)(f) of SEBI (LODR) Regulations is annexed and forms part of this Annual Report. The Company has complied with applicable Secretarial Standards issued by the Institute of Company Secretaries of India.
Directors' Responsibility Statement
As per Regulation 17(8) of SEBI Listing Regulations, 2015 the CEO and CFO certified the financial statements; which have been reviewed by the Audit Committee and taken on record by the Board. Having taken reasonable and bonafide care, pursuant to Section 134(3)(c) of the Act, the Directors indicate that (i) in preparation of the annual accounts, applicable accounting standards had been followed along with proper explanations relating to material departures; (ii) the Directors selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the year; (iii) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) the Directors had prepared the annual accounts on a going concern basis; (v) the directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and (vi) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Auditors' Observations
The observations of Statutory Auditors and Secretarial Auditors are routine, and in the nature of general disclosures.
Auditors
M/s Walker Chandiok & Co LLP, Chartered Accountants, were re-appointed as Statutory Auditors at the 25th Annual General Meeting ("AGM") held on June 24, 2022 to hold office for a second and final term of 5 (Five) consecutive years from conclusion of the 25th AGM till the conclusion of the 30th AGM.
Pursuant to Section 204 of the Act, Sri Girish Bhatia, practicing Company Secretary, was appointed to undertake Secretarial Audit. The report of Secretarial Auditor is annexed herewith. The Company made and maintained cost records as prescribed under the Companies Act, 2013. Cost Audit for the year ended March 31, 2024 is carried out by M/s Sanghavi Randeria & Associates, Cost Accountants, Mumbai (Registration No. 00175). The Board, on recommendation by the Audit Committee, has appointed the said M/s Sanghavi Randeria & Associates to conduct audit of cost records for the year ending March 31, 2025; under Section 148 (3) of the Act their remuneration requires approval at the ensuing AGM.
Acknowledgements
We place on record our sincere appreciation of (a) the valuable cooperation and support received at all times by the Company from all its Bankers, particularly the lead bank, State Bank of India, (b) all concerned Government and other authorities; and (c) the trust and faith of our shareholders/investors and stakeholders. We record the extremely valuable cooperation and support of the teams of RAKEZ (Ras Al Khaimah Economic Zone) and other authorities there. Relations with employees were generally cordial. We record our appreciation of the sincere and dedicated services of all employees, in their efforts of working towards a positive period and the growth of the Company.