We are excited about the future and are working hard on a
pipeline that will ensure that the Company continues to move onward and upward. From a
single product, single location, and single customer Company to becoming one of the
country's most diversified FMCG Contract Manufacturers, we have witnessed an all-pervasive
growth. This growth is expected to further amplify on the back of the various Greenfield
and Brownfield expansions we are undertaking along with the other acquisitions.
DEAR SHAREHOLDERS.
Kronos, the God of Opportunity, inspired our Annual Report for FY
2020-2021. We were cautiously optimistic that amid the 'shadow' of the Covid-19 pandemic,
we will find opportunities and that the pandemic will end up being a tailwind for the
Company's growth. I am happy to write that some of that optimism has translated into
results. We had spoken about the possibilities of more acquisitions as the
pandemic-induced economic slowdown resulted in consolidation and made companies realise
the benefits of outsourcing versus having their own factories. Accordingly, we were able
to post the highest-ever revenues and profitability numbers in the Company's history and
achieve our goal of Rs. 2,000 cr.
While the Company had started a manufacturing facility in Goa in FY
1983-1984, the magic of Kronos only came to bear fruit in the last 7-8 years, where we
have been able to hold strong partnerships with our Customers in various geographies and
various product categories. This, backed by a solid team of professionals, has led to
multi-fold revenue growth.
Focusing on absolute numbers, it gives me pleasure to report that our
total revenue for the year stood at Rs. 2,026 cr., recording a 44% y-o-y growth and a
super strong 120.4% growth over the revenues in FY 2016-2017. Additionally, Profit After
tax for the year stood at Rs. 50 cr., i.e., 41 % growth y-o-y and a 134.9% increase
compared to FY 2016-2017. We also clocked an EBITDA of Rs. 120 cr. as against Rs. 93 cr.
in the previous year.
Our continued investment in capex, financed from internal accruals and
debt, has led to a significant gross block of Rs. 633 cr. (on a consolidated basis,
including Capital WiP). This has further led to scalable performance prompting a rating
upgrade from India Ratings.
Further, we invested in Aero Care Personal Products LLP. Aero Care is
involved in manufacturing various colour cosmetics like lipsticks, eye makeup, face
powder, lip gloss, oral care and aftershaves. The unit was taken over in January 2022, and
we are very excited about ramping up this facility to its full potential. Also, we
completed the merger of the Malted Beverages packaging unit in Coimbatore and ATC
Beverages Private Limited.
Our colour cosmetics plant achieved its highest turnover in March 2022.
Likewise, even though the performance of the ATC business was unsatisfactory for the
entire year, the unit achieved its highest turnover in the last quarter of FY 2021 -2022,
post the conclusion of the merger and expansion.
Besides, the new plant in Tamil Nadu started its commercial production
of shoe and the shoe-making facility at Vasai (Mumbai) also started producing Injection
Moulded Sandals and Flip-flops.
As we look at the next phase of growth for the Company, we find that
the environment around us is changing rapidly.
Coming to the immediate future, like the other industries, even the
FMCG industry - our idiomatic bread and butter - took a bit of a beating on account of the
reducing rural demand, increased volatility in commodity pricing, supply chain
disruptions, constant inflationary pressures.
In the medium term, with the pandemic serving as a catalyst, we are
seeing consumer behavioural changes. Increasingly, consumers rely on social media and
digital channels to learn more about products and buy them. This has led to an explosion
of D2C brands, and incumbent brands are also having to relook at their advertising and
distribution strategies. This, in turn, is making FMCG brands demand new capabilities and
capacities from their manufacturing partners - From the ability to scale up new categories
of products to setting up factories in new geographies.
Lastly, we are seeing the need to scale the business responsibly -
whether, in terms of environmental obligations, statutory obligations or sustainability
and corporate governance-led obligations.
Thus, we have decided to get inspired by Goddess Athena and LEAD!
Athena, the Patron Goddess of Weaving and Spinning is also the Goddess of Wisdom and War.
These contrasting qualities are what she uses in helping Heroes like Perseus and Jason to
achieve their quests.
We have decided to help our Heroes, our Customers, achieve their quests
of higher market share by -
Learning about their manufacturing and product development
requirements
Executing by building and running factories that can deliver their
FMCG products
Adapting to changing market conditions by offering them flexibility
in manufacturing models
Delivering to them the right product at the right time.
We plan to learn the Customer's requirements - whether they are
of taking small batches to enable a rapid launch of new products or to optimise
distribution costs by establishing factories closer to the markets. To this end, we will
build our capabilities to handle different geographies and product categories.
Execution continues to remain the foundation on which we build our
customer relationships. This execution takes the form of building up an Ice Cream facility
in 10 months in a state where we have had no prior experience and ensure that the projects
are as per the budget even if the external environment sees massive commodity inflation.
As a Contract Manufacturer, we need to adapt to the changing
needs of our Customers - from being able to deliver 1,500 pieces of fresh Hummus for the
launch of a new brand to 15,000 litons of ice cream. We need to adapt to changing
seasonality of demands and the dynamic nature of the external environment with global and
macro variables.
The ability to deliver the product in full and on time (IFOT) is
what our Customers rely on us for and to be able to execute.
Together, these developments will continue to result in a healthy
financial performance, strengthening our stand of being the 'go-to' Contract Manufacturer,
while redefining this largely 'unorganised' and fragmented sector.
While standing by her Heroes, Athena always carried a shield and a
lance to protect them and help them emerge victorious. Brave and disciplined soldiers win
wars and our teams are like the proverbial 300 standing at the side of our Customers. On
the other hand, peace is won by the wisdom to understand what wars to avoid. Our M&A
strategy so far has been able to differentiate between the genuine opportunities to grow
our businesses versus milestones around our neck which could down us.
We have also been quite active in the M&A space and have tried to
be optimal in terms of our capital allocation to acquisitions. To name a few, we acquired
a 100% stake in Reckitt Benckiser Scholl India Private Limited, marking our entry into the
fast-growing OTC healthcare and wellness segment as a Contract Manufacturer. The acquired
facility is registered as an export-oriented unit and currently exports to more than 20
countries. We also acquired ATC Beverages in Mysuru to open up a new product category for
us, but the Covid-19 pandemic ravaged the Company. Our acquisition of Aero Care has also
paved our entry into colour cosmetics and opened up a new market for us. Both of these
acquisitions posted their highest ever turnovers in the last quarter of FY 2021 -2022.
To summarise, we are highly convinced that Contract Manufacturing, as a
subcategory of the FMCG universe, is very relevant and is becoming even more relevant with
time. This is expected to have a simultaneous impact on the Contract Manufacturing sector.
We believe the next couple of years are going to be exciting in terms of growth for the
Contract Manufacturing industry.
We are excited about the future and are working hard on a pipeline that
shall propel the Company onward and upward. From a single product, single location, and
single customer Company to becoming one of the country's most diversified FMCG Contract
Manufacturers, we have witnessed an all-pervasive growth. This growth is expected to
further amplify on the back of the various Greenfield and Brownfield expansions we are
undertaking along with the other acquisitions. In order to derisk our business model and
further decentralise the operations, we have also commenced evaluating adjacent
fastgrowing sectors within the FMCG space, like health and wellness, ice-creams and colour
cosmetics, which have witnessed tremendous growth in the last one year. We will continue
to invest in CAPEX across various geographies.
We are confident that our Customers will look at our track record of
executing greenfield projects flawlessly & integrating the acquisitions seamlessly. We
are hopeful that they will continue to propel us towards our next goal of achieving the
target of Rs. 4,000 cr. of turnover by FY 2024-2025.
We strongly believe that long-term success is possible only by
connecting economic growth with environmental stewardship and financial performance with
social responsibility. As a socially responsible company, we will always strive to ensure
that our ESG focus is embedded into our strategy and that our growth ambitions are well-
suited with sustainable development practices, conscientiously using the right approach.
On behalf of the Board, I would like to thank all the stakeholders for
their continued loyalty and support. I am also thankful for the strong encouragement of
our Customers, bankers, and business associates. We are looking forward to your assistance
to help us achieve a better year ahead and beyond. Last but not least, I would like to
thank all the employees, Board members and management for their dedicated services and
support that helped us achieve milestones.