DEAR SHAREHOLDERS,
I AM PLEASED TO SHARETHEANNUAL REPORT OF KIRI INDUSTRIES LIMITED (KIL) FOR FY2023
Consolidated revenue from operations stood at Rs.945 Crore, a decline of 37% compared
to FY2022, and standalone revenue from operations stood at Rs.601 Crore, a decline of 47%
as compared to FY2022. In FY2023, the Consolidated EBITDA amounted to Rs.(-) 34 Crore as
against Rs.123 Crore for FY2022.
The standalone EBITDA amounted to Rs.(-) 86 Crore for FY2023 as against Rs.33 Crore for
FY2022. In FY2023, consolidated earnings after tax including share of profit of associates
amounted to Rs.107 Crore as against Rs.388 Crore in FY2022. During the year standalone
losses widened to Rs.134 Crore as against Rs.9 Crore in FY2022.
Major reasons for lower revenue and negative EBITDA during FY2023 as compared to the
preceding year are (1) Reduction in volumes of Dyes by around 35%, dyes intermediates by
34%, and Basic Chemicals by around 29% on account of subdued demand globally (2) Reduction
in prices of the intermediate by at least 9%
(3) Increase in raw material prices of dyes Intermediates by at least 12%
(4) Increase in GAS and Coal prices by 40% and 22% respectively, and
(5) Increase in Electricity/power rate by 11%.
Due to lower capacity utilization, fixed costs could not be recovered, resulting in
higher operational fixed costs per unit, as reflected in negative earnings. The Company
has incurred substantial Legal costs with respect to the Singapore case(s) which also
impacted the bottom line for the year 2023.
According to the World Bank's Global Economic Prospect Report of June 2023, Global
growth is projected to significantly slow down amid high inflation, tight monetary
policies adopted by various countries, and more restrictive credit conditions.
Global Textile demand is moderate to low amid the expected inflation slowdown. As per
reports, the export-oriented textiles sector in India has been hit hard by weak export
demand, which in turn has impacted the domestic Indian market since export-oriented
Companies have been forced to dump products into the domestic market. In India, spinning
mills normally maintain stock for 1-2 weeks of production. But due to low demand, many
Companies are holding stocks worth one month or more of production, leading to a crisis.
Since the global economy and markets have not changed significantly in the recent past,
Kiri is closely watching the unfolding of economic policies globally. Kiri is taking small
steps forward with utmost caution following a very agile pricing policy to generate
profitable volumes and utilize optimum operational capacities as well as optimum product
mix to ensure that fixed overheads and litigation costs are fully absorbed.
Our legal battle
The year's highlight was our victory in the long protracted international legal battle.
In the matter of DyStar, we emerged victorious in the legal battle against Senda, a
wholly-owned subsidiary of Longsheng Group. On March 3, 2023, Singapore International
Commercial Court (SICC) crystallized and decided the final valuation of our stake at
US$603.8 million - an increase of US$122.2 million (or 25% higher) than the earlier
determined valuation of US$481.6 million giving an effect of the decision of the Court of
Appeal which is Supreme Court of Singapore.
We are now in the last leg of our long legal battle of enforcing the Judgment of the
SICC. The Company has filed an alternate relief application with SICC against Senda and
DyStar to make them jointly and severally liable to make payment of awarded valuation
amount of US$ 603.8 million for our 37.57% stake in DyStar along with interest and further
legal cost. We are awaiting a timeline from the court for the hearing of our application.
Moreover, Senda failed to make payment of the legal cost amount awarded to us and
failed to comply with deadlines granted until January 20, 2023. To secure our receivable,
we have filed a writ of seizure and sale of Senda shares held in DyStar to the extent of
the recovery of legal costs along with interest awarded to Kiri by SICC and upheld by the
Supreme Court of Singapore. The sheriff's office of the Singapore Court took possession of
the said Senda shares. For recovery of legal costs, we have also filed an application with
Singapore Court for the judicial examination of Mr. Ruan Weixiang, Chairman of Lonsgheng
Group and DyStar, former director of Senda, as well as the judicial examination of the
current director of Senda Ms. Fan Jing.
While the result of the legal battle has been very heartening thus far, we are mindful
that we are in the last phase, which is critical for crossing the finishing line. Hence,
we have strengthened our legal team to ensure that we recover our dues at the earliest.
Our medium-term prospects
The prospects for our business vertical appear considerably promising owing to the
shift in the global supply chain brought on by the China+1 strategy and a resurgence in
domestic end- user demand. Credible estimates suggest that India's chemical industry is
expected to touch US$ 300 billion by 2025 (from the current US$ 178 billion level) and
reach the US$ 1 trillion mark by 2040. Moreover,
The Government is deliberating on a strategic roadmap to elevate the Indian textile
industry to reach a milestone of US$250 billion in production (from about US$100 billion
currently). This should provide exciting opportunities for the Specialty Chemicals sector
over the medium term.
Our estimates for FY24
The near-term environment will likely remain uncertain, and hence we look forward to
the future with cautious optimism. We see the business landscape improving steadily over
the next 3-4 quarters.
As demand improves, we will focus on reaching out to untapped global markets. Further,
moderation in input costs, reduction in operational costs, expected higher capacity
utilization, and easing inflation should help us deliver healthy volumes and profitable
growth in the coming quarters. We always remain committed to delivering broad-based growth
with the support of its fully backward integrated manufacturing facilities and strive for
optimum product mix to enhance overall margins to enable the Company absorb its fixed
overheads and achieve normalized revenues and EBITDA in the coming years.
Kiri Management will use all its expertise to revamp its business operations in a
dynamic business environment which has set forth the challenge of absorbing fixed
overheads and recouping to stabilize our core business of dyes, dyes intermediate and
basic chemicals.
We look forward to enhancing the intrinsic value of all stakeholders in Kiri.
Acknowledgment
In closing, on behalf of the Board, I want to thank our regarded investors, legal
advisors, business associates and other stakeholders for placing their trust in our
capacity and expanding their help in our long excursion of steadiness.
I thank all of my colleagues on the Board for their guidance/ co-operation in this
pivotal period of our development, their help and their tremendous support to the
management team.
Warm regards,
Manish Kiri
Chairman & Managing Director.