Atul Ltd 2019-20

18 Atul Ltd | Annual Report 2019-20 Corporate Overview 01-21 Statutory Reports 22-91 Financial Statements 92-228 Letter to the shareholders Dear Shareholders, 2019-20 ended in an unparalleled manner – Pandemic COVID-19 scripted a new chapter in history and is considered as the biggest test for mankind since World War II. The way people will live, interact, work and travel may not be the same again. We have before us the traditional Indian ways of living and the life and times of our inspiring Founder, Kasturbhai Lalbhai, to guide us personally and professionally during these uncertain times. The world GDP at US$ 87.27 tn grew at 2.9%, slower than 3.6% in 2018. The USA, China, Japan and Germany remained ahead of India. Indian GDP at US$ 2.94 tn grew at 4.2%, slower than 6.8% in 2018. These numbers may remain less relevant in the short-term as the endeavour for the countries will be to decisively overcome the pandemic and for the businesses, to fast adjust to the new normal. In so many ways, this is true for India and also our Company. The world Chemical industry and world Pharmaceutical industry at US$ 4.2 tn and US$ 1.05 tn grew at (9)% and 5.8% and together were 6% of the world GDP. Indian Chemical industry and Indian Pharmaceutical industry at US$ 145 bn and US$ 55 bn grew at 2% and 19% and together were 6.8% of Indian GDP. Most of the products we use in our life are enabled by chemistry. As a diverse entity, driven by science and technology, our Company is well poised to face the future. Our Company attained its best performance so far: compared with 2018-19, sales at ` 3,824 cr were marginally lower; PBT was ` 803 cr against ` 652 cr, EBIDTA margin was 24% against 20% and RoCE was 34% against 32%. The Board declared an interim dividend of 125% to commemorate the 125 th birth anniversary of our Company Founder and declared a further 150% interim dividend; it did not recommend any final dividend as a measure to conserve cash to face the pandemic. Sales were higher on account of volume by 2%, but lower because of price by 3%. During the fiscal, our Company took up projects (other than those mentioned in my last letter) with an investment of ` 69 cr; once completed, our Companywill have the potential to reach sales of ` 5,400 cr (at 90% capacity utilisation) – this is our near-term objective. We have also identified projects with synergy and will decide their schedule of implementation. Atul Bioscience is implementing a project of ` 135 cr in its new facility in Ambernath; DPD doubled its capacity with an investment of ` 17 cr. Amal has short-listed new projects to logically expand. Anaven commenced water trials of its project (which is further delayed because of the pandemic). Rudolf Atul Chemicals strengthened its marketing organisation. Atul Rajasthan Date Palms further stabilised its operations. These entities are making our Company stronger. The focus on social returns along with that on financial returns may be found in the very conception of our Company 73 years ago. Atul Foundation stepped up its support to serve the communities. Atul Institute of Vocational Excellence made and supplied face masks to NGOs and workers of anganwadis . Our Company contributed its mite to the PM CARES Fund and Gujarat Chief Minister Relief Fund to complement the mighty efforts of the Government. Safety of the stakeholders is and will remain a key priority. The only way now to prevent or get cured from COVID-19 is by improving hygiene and equally immunity, and I am happy to share two URLs prepared by team Atul for this purpose. We are also reassessing the organisation structures, redefining new communication methods and redesigning approval processes, etc all to get the best advantages from this adversity. In terms of its market capitalisation, the rank of our Company on NSE improved from 212 to 156. Market capitalisation is substantially a function of performance over time, long-term future and perception about the Management – I value the contribution of every member of team Atul who has given his (her) best in improving the performance, worked with analytic reflection about the past and imaginative reflection about the future and sought and strived for a higher cause. Our Company has five everlasting mandates . One, become world-class in people productivity and remain lean in fixed costs; two , drive efficiency in manufacturing and other processes (focus on inputs; outputs will take care of themselves); three, pervade ‘R&D’ in every function; four, conserve cash while growing and evolving the future (that is, measure performance by free cash-flow) and five , work with customers on ideas with large potential.