Atul Ltd 2020-21

Letter to the shareholders Dear Shareholders, Confronted by compounding crises, 2020-21 remained an unprecedented fiscal – the world strived to find its way back from a pandemic as corrosive to the commercial and political order as it has been devastating to lives and livelihood. People, businesses and governments in India too tried to endure, normalise and progress. TeamAtul hadmuch to do – it remained steadfast to the legacy of the reflective Founder, Kasturbhai Lalbhai, of integrity, perseverance, discipline, creating more than consuming and larger purpose, to evolve further and brighten its path forward. The GDP of the world at US$85 tn declined by 3.3%. While the GDP of China at US$15 tn grew by 2.3%, those of other key countries, namely, the USA, Germany, Japan, France and the UK de-grew between 3% and 9%. India was no exception whose GDP at US$3 tn de-grew by 8% – it has been tested anew. These times have taught three lessons: one, there is no substitute for self-discipline, two, health infrastructure needs fast upgradation and three, interdependence, not independence is the way. Our Company is aligned with this and is taking its own small initiatives. Sized at US$4 tn, the world chemical industry declined by 2.6% and sized at US$1.3 tn, the world pharmaceutical industry grew by 1.6%. China at US$1.5 tn and US$0.2 tn and the USA at US$0.7 tn and US$0.5 tn continued to be the biggest in the world chemical industry and the world pharmaceutical industry respectively. The Indian chemical industry at US$136 bn declined by 6.1% and the Indian pharmaceutical industry at US$42 bn grew by 2.4%. As a part of these industries which fulfil so many day-to-day needs of humanity, our Company is well positioned to serve its customers and thus seek to grow. Sales of our Company at ` 3,460 cr (of which ` 301 cr Retail) declined by 10% mainly because of the closure of plants during the first quarter and also due to adverse impact of manufacturing and sales in two businesses. Profit before tax (excluding one-time dividend income of ` 55 cr) at ` 773 cr was lower by 4%. EBIDTA margin at 26% was higher by 200 basis points and RoCE at 28% was lower by 600 basis points. There indeed exists a significant potential to better the performance. The Board has recommended a dividend of 200% (against 150% normal dividend last fiscal). Th ere was a delay in completing projects of ` 725 cr (which are at different stages of execution) related to our Company; all of them will be implemented by the third quarter of 2021-22. Thereafter, standalone sales are expected to go to ` 4,800 cr and sales including those from its subsidiary, joint venture (JV) and associate entities (mentioned below) are expected to go ` 5,500 cr. Further, our Company has taken up a new project via a newly formed 100% subsidiary company (namely Atul Products Ltd) with an investment of ` 700 cr which is expected to be completed in 2022-23. Atul Bioscience Ltd (100% Atul holding) is stabilising its operations at Ambernath site acquired in 2019-20. DPD Ltd (98% Atul holding) saw some benefit of the investment made in 2019-20 and is therefore making further investment during 2021-22. Amal Ltd (49.85% Atul holding) is implementing an expansion project – this is expected to be completed in mid of 2021-22. Anaven LLP (50% JV with Nouryon Holding BV) has completed the project and will step up its operations in 2021- 22. Rudolf Atul Chemicals Ltd (50% JV with Rudolf GmbH) is gradually increasing its market share. Our Company and its subsidiary, JV and associate entities have never undertaken so many projects at a time; so it is also a learning experience. Moreover, the five mandates I had shared with you last year – enhance people productivity, increase manufacturing and other efficiencies (focus on inputs; outputs will take care of themselves), pervade technologies in every function, conserve cash while growing and evolving the future (that is, measure performance by free cash flow) and work with the customers on ideas of high potential – continue, for they remain just as important. The pandemic has brought uncertainties no doubt, but it has also reinforced what we already knew (about discipline, teamwork, for example) and also showed new ways of working (from home, incorporating technology, for example). I appreciate commitment and contribution of every member of team Atul who has worked tirelessly to sustain the operations. On behalf of the team, I wish to assure all customers that notwithstanding the internal structure of our Company, it will act as One Atul to deliver the products, services and solutions they may nee d. 18 Atul Ltd | Annual Report 2020-21