Dear Esteemed Members
A very warm welcome to each one of you at 104th AGM of the Company. In view of theCOVID-19 pandemic like the last year we are once again meeting virtually. This AGM isbeing held through VC/OAVM unlike the physical attendance of the members at acommon venue in earlier years. On behalf of the Board of Directors I thank you all forjoining the meeting. We sincerely hope that you and your family members are safe andhealthy during these unprecedented times. Please accept my sincere condolences if therehas been a bereavement in the families of our members.
Before we begin I would also like to take this opportunity to express my gratitude toall stakeholders for their continued support and trust placed in this Company.
The Business Environment
COVID-19 is "Once in a Century Crisis". The virus has posed an unprecedentedchallenge before the whole world. The global health crisis prompted by COVID-19 inaddition to the enormous human toll has engendered the largest economic shock the worldeconomy has witnessed in the last century. The pandemic and associated lockdown measuresled to a de-facto shutdown of a significant portion of the global economy therebytriggering a global recession this year. The pandemic induced lockdowns led to localregional and global supply disruptions hitting economic activity rendering afirst order' supply shock. This in turn has led to a demand shock both throughdisruptions in the labour market which affected household income and through theprecautionary motive to save which stemmed from the uncertainty amidst the health crisis.The manufacturing sector was hit hard in the first quarter of the year under review buthas since picked up though mining still remains impacted. Construction and Servicessector were hit the hardest due to the pandemic induced requirements of social distancingand minimising of personal interaction. Despite the global pandemic India's agriculturehas remained the silver lining and have been recovering steadily. Government consumptionand net exports have cushioned the growth from diving further down. The Governmentlaunched major structural reforms in agriculture markets labour laws anddefinition of MSMEs.
The COVID-19 pandemic has underscored the need for a resilient logistics sector thatcan respond to emergencies and supply chain disruptions. Various infrastructureinitiatives like Bharatmala Pariyojana Sagarmala Dedicated Freight CorridorsMulti-Modal Logistics are expected to give impetus to the logistics industry. There hadbeen decline in global petroleum prices during FY 2020-21 and this was accompanied byincreased excise duty levies on petroleum products. The fall in petroleum oil andlubricants exports was largely driven by the softening of international crude oil priceswhich plunged in Q1: FY 2020-21 by (-) 54.0 percent and remained muted by (-) 28.7 percentby Q3: FY 2020-21 as compared to the previous year. The export of leather includingleather products like footwear garments and travel goods have reduced significantly fromRs. 32971.08 Crore in FY 2019-20 to Rs.10618.78 Crore in FY 2020-21.
Recently the Government of India has taken various initiatives under the AtmanirbharAbhiyan to enhance the domestic production of steel such as inclusion of SpecialitySteel' incorporating four different product categories for incentives under the ProductionLinked Incentive (PLI) scheme; offering steel to MSMEs that are members of EngineeringExport Promotion Council at export parity price under the Duty Draw Back scheme of DGFT;measures to provide preference to domestically produced iron and steel in Governmentprocurement where aggregates estimate of iron and steel products exceeds Rs. 25 crores;protecting the industry from unfair trade through appropriate remedial measures includingimposition of anti-dumping duty and countervailing duty on the products in which unfairtrade practices were adopted by other countries.
INDUSTRIAL PACKAGING [SBU: IP]
Out of 70 players in India Balmer Lawrie & Co. Ltd. is the market Leader in theIndustrial Packaging industry with a market share of ~34%. SBU: IP operates through sixmanufacturing plants on pan India basis which includes the state-of-the-art facility atNavi Mumbai. Balmer Lawrie's Industrial Packaging is acclaimed for superior productquality high reliability in supplies modern manufacturing systems throughcustomer-centric experienced personnel. It enjoys a high brand value large diverse andgrowing customer base across India and Exports markets. Its focus on continuousimprovement Quality Assurance Innovation and sharp focus on Sustainability & HSEhelps in having an edge over competition.
There are different types of high quality products being manufactured in this SBUranging from Open-Head Tight-Head Plain Lacquered Composite Galvanized TallNecked-In and Conical Drums catering to diverse industry segments and to the best-in-classcustomers in these segments.
At an estimated market potential of Rs. 280000 Crore the Indian Packaging industryis growing with around 5 to 6% CAGR. There are two broad segments Industrial and ConsumerPackaging and sub-segments such as Rigid and Flexible. Rigid Industrial Packaging can befurther segmented based on packing size type of packing material of construction etc.
Mild steel drum of 210L capacity is a part of Rigid packing and is used for industrialapplications in the chemicals lubricants fruits and transformer oil industries. SteelDrums are utilised for safe packaging and transportation of liquid and semi-liquid pulpgreases powders chemicals etc. The industry has higher capacity compared to the marketdemand leading to intense competition in the market place. Lubricants chemicalstransformer oils and fruit pulp are the major segments contributing to approx. 90% of SBUsales.
During the year 2020-21 our Asaoti plant was rated in Silver category in the NationalGreen Manufacturing Challenge 2021. Balmer Lawrie retained Silver Rating from Ecovadis a global solutions provider which partners with 300+ leading multinationalorganisations to reduce risk across the supply chain and drive innovation in theirsustainable procurements. The SBU closed its manufacturing plant at Kolkata due tolow market demand in Eastern India.
SBU: IP has been showing consistent growth in volume turnover profitability andprofits. However COVID-19 led to overall compressed demand across industry segments withsales volumes under pressure. In spite of the adverse market situation the SBU was ableto close Financial year 2020-21 with healthy profits.
During the year the SBU maintained healthy profitability despite decrease in volumes.The SBU improved its overall efficiency through continuous Operational Excellence acrossvarious manufacturing units.
The COVID-19 pandemic situation and lockdowns are creating general uncertainty foroverall industry growth and market demand. However it is expected that the GDP would growstrongly in Financial Year 2021-22 with revival in demand. The SBU expects recovery ofbusiness in 2021-22. The SBU anticipates significant growth in the coming years with thebiggest drivers being the chemicals transformer oils and lubes segments. The SBU hasplans to aggressively expand in the Exports segment.
GREASES & LUBRICANTS [SBU: G&L]
Balmer Lawrie pioneered grease manufacturing in India in 1934 at Sewree (Mumbai) and in1937 at Kolkata. With about eight decades of manufacturing experience Balmer Lawrie's"Balmerol" greases are the leaders in their categories. With less than 2% marketshare brand "Balmerol" has an excellent opportunity to grow. The business ofSBU: G&L may be divided into: a) Contract Manufacturing b) Direct Sales c) ChannelSales (Automotive and Industrial) The SBU has witnessed over 30% growth in Channel Salesas compared to last year in spite of a countrywide lockdown on account of the COVID-19pandemic in April and May of the financial year and cut-throat competition and aggressivebrand promotional activity done by the MNC companies while other PSU oil companies playedon huge discounts to keep their volumes intact. However the small pack sales haveregistered growth over FY 2019-20 and there has been an increase in Retail Outlets sellingBalmerol brand which has contributed to better profitability. The Balmerol brand waslaunched in the Nepal market and the SBU intends to sell 300 KL in FY 2021-22 in thismarket. SBU: G&L has pan India operations with three manufacturing plants in KolkataSilvassa and Chennai. Due to long presence in the market the brand has a positive brandImage in Greases and Specialties. During the year under review the SBU has witnessed amarginal de-growth in its top-line as compared to last year triggered by the countrywidelockdown on account of the COVID-19 pandemic in April and May 2020. Consequently therehas been a de-growth in its bottom-line which has also been adversely impacted by anunprecedented spike in base oil prices and other raw materials in the second half of theyear.
The SBU has worked out strategies in the perspective of product substitution costeffective formulations value addition bio-degradable products etc. to combat thechallenge of margins in the coming financial year.
CHEMICALS [SBU: Chemicals]
Balmer Lawrie entered into the Leather Chemicals business in 1983 by taking upmanufacture of Synthetic Fat Liquors in Chennai. Based on indigenous technology BalmerLawrie manufactures end-to-end leather chemicals under the brand Balmol Balsyn Balchemand Balfin at its modern manufacturing facility at Chennai. The Company has also forayedinto Finishing Chemicals. Apart from the leather chemical business the SBU is alsoentering into other synergy chemicals such as textile chemicals and intermediate for agrochemicals business.
There are three stages of leather processing such asbeamhousewetendandfinishing.TheSBUisstronger in wet end operations where it is holdingconsiderable market share among the Indian players in India. This year the SBU enteredinto finishing chemicals segment and has launched its own manufactured finishingchemicals. SBU: Chemicals now has an advantage to win more customers with a wider productbasket. There is huge scope in leather chemicals market and thus the SBU has its plan totap the market with both existing and new products. SBU: Chemicals is a market leader inthe Fat Liquors segment and significant market share holder in the Syntan segment. ThisSBU has enough opportunities to grow in other segments like Finishing and Beam House.
In terms of market potential in India the Southern Region holds 44% East is at 23%and North is at 33%. Each region is manufacturing different products. Safety gloves inEast footwear and leather articles in South upholstery and garments in North.
The important new products which were launched last year are finishing chemicals -mainly Binders Lacquers and Hot melt wax. The SBU also entered into the leather tanningprocess with marketing of Basic Chrome Sulphate and based on good response from customersit targeted the high end of this segment successfully. The SBU also forayed into textilechemicals by launching synergy products like textile binder wetting agent etc. It is inthe process of including major range of textile chemicals in its product basket and is nowestablishing infrastructure for textile chemicals.
SBU:Chemicals has introduced new chemicals in Beam House segment like Wetting agentsBasic Chrome Sulphate (BCS) etc. SBU: Chemicals also launched a range of finishingchemicals at its modern manufacturing facility.
The SBU has well equipped Technical Service Center' in all the major leathermanufacturing clusters in India and renders high quality technical service to thetanneries. The SBU developed an eco-friendly metal free tanning process withGluteraldehyde which has been popular now in the market. With a positive brand imagestrong technical service team and increased product basket the SBU has got manyopportunities to improve the business in coming years. In spite of low demand of leather /leather products/ footwear due to the COVID-19 pandemic (Indian Export down by 27%) thisSBU is able to reach 97% volume of previous year.
LOGISTICS INFRASTRUCTURE [SBU: LI]
The logistics industry is considered a crucial sector to boost international trade as aconsequence of digitalisation and globalisation. Logistics being the backbone of Indianeconomy is witnessing transformation in terms of digitalisation and advanced technologiesto ensure quick efficient and economical transport of goods. Advancements in digitaltechnologies changing consumer preferences due to e-commerce Government reforms andshift in service sourcing strategies are expected to lead the transformation of the Indianlogistics ecosystem.
SBU: Logistics Infrastructure comprises of Container Freight Stations (CFS) typicallyset up in the vicinity of Ports Warehousing & Distribution (W&D) TemperatureControlled Warehouses (TCW) and Integrated Check Post (ICP). Presently the Company hasthree state-of-the art CFSs located at Nhava Sheva Chennai and Kolkata. The Company'sWarehousing and Distribution facilities are fully operational at Kolkata and Coimbatorelocations. In addition to this a warehousing and distribution facility is being operatedout of Andhra Pradesh MedTech Zone Ltd. (AMTZ) on Build Operate Manage and Maintain(BOMM) basis over an area of 80000 sq. ft. which includes a cold storage area of 5000 sq.ft. since February 2020. The SBU has three Cold Chains operating at Hyderabad Rai(Haryana) and Patalaganga (Maharashtra). The Company has almost completed setting up aCold Chain at Bhubaneswar (Odisha) which shall be operational by financial year 2021-22.To manage the end-to-end supply chain of the Cold Chain operations the SBU is alsooperating with 18 numbers of 4 MT capacity reefer vehicles on pan India basis. All thereefer vehicles are enabled with GPS for 24x7 monitoring of its location and onlinetemperatures.
The Cold Chain business is emerging as a potential growth area for the Company andtherefore to ensure adequate focus on the business this vertical will be operated as anIndependent SBU termed as " Logicold-Cold Chain Solutions ". India beingan agro based country and with Government schemes giving a thrust to this segment ColdChain is looked upon as the sunrise sector of India. With an increase in demand of dairyfruits vegetable and pharma products in both the domestic and international markets ourCold Chain business has been rightly aligned to serve these segments. The Cold Chain unitat Rai was awarded for "Best Practices in Cold Storage" by CII inthe 5th Cold Chain Award. Our Cold Chain and reefer vehicles are being used for storage ofCOVID-19 vaccines for the vaccine manufacturers viz. Bharat Biotech and Dr. Reddy's Lab.The Covaxin and Sputnik-V vaccines are being stored and distributed from the Cold Chainunit Hyderabad.
The Company is also working on the management of Integrated Check Post (ICP) operationsand has already started managing the ICP at Jogbani and Raxaul Bihar. Both the Unitsperformed well as compared to last year. Besides this the SBU is in the process ofassessing feasibility of operating other ICPs at different locations.
The LI vertical was awarded "Champion of Supply Chain Management 2020"by The Economic Times. Warehousing activity continued to perform well during the year dueto better utilisation of space and the business segment of Temperature ControlledWarehouses has also started looking up. SBU: LI is planning to expand its footprints inthe Warehousing and Distribution industry by setting up an additional Warehousing facilityat Kolkata during the FY 2021-22.
LOGISTICS SERVICES [SBU: LS]
The logistics industry in India considered to be the lifeline of the country holdsimmense significance as it connects various markets suppliers and customers dotted acrossthe country and has now been firmly embedded as an integral part of the national GDPvalue chain. The Indian logistic industry is highly fragmented with a large number ofunorganised players. The Global Freight Forwarding market contracted by 8.7% in 2020recording its worst year since the financial crisis as a result of the pandemic. Despitethe segment being highly fragmented with a large number of unorganised players BalmerLawrie's credibility as a PSU strong pan India presence worldwide network of Associatesrobust technology and the transition of customers towards organised players with skillsexpertise and financial strength shall help it to remain entrenched in the market andcarry the brand of most reliable service provider. Designing an adaptive and resilientsupply chain shall be key factor to tackle the COVID-19 butterfly effect. During the yeardespite severe disruptions on account of the pandemic the SBU achieved top line andbottom line growth of around 40% and 38% respectively as compared to the previous year.The growth was driven by incremental business in nearly all activities of FreightForwarding notably in Ocean Freight and Air Export activities. The SBU was able to retainits major GOI and CPSU customers and was also able to initiate some-new activities fromthose contracted customers. The SBU is now focusing on the private sector especially inAir Export and also eyeing the business of handling project cargo of private customers.With increased focus on healthcare and Government reforms to boost the infrastructure andmanufacturing units the SBU aims at pharma and engineering goods EXIM market in thecoming years. Major focus has been emphasised to enhance Customer Delight' byproviding one stop logistics solutions aligning Logistics Services along withInfrastructure and 3PL services.
The SBU is in the process of implementing some new IT initiatives like online customersurvey feedback and customised IT solutions for faster dedicated and focused time boundservice and delivery.
The SBU has been working closely with its worldwide Agents & Associates. The SBU istaking adequate steps to mitigate the challenges through its established and growingglobal associate network and offering clients single window logistics solutions under oneumbrella. The SBU has revamped its existing technology and has plans to further upgrade itin the near future to meet future business challenges.
The outlook for Indian freight Forwarders is positive primarily on account ofGovernment policy like Atmanirbhar Bharat which is expected to boost exports and the Makein India initiative that may see several foreign companies setting up manufacturingfacilities in India.
TRAVEL & VACATIONS [SBU: T&V] Travel
As one of the largest travel and tour operators in the country Balmer Lawrie Travel& Vacations provides end-to-end domestic and international travel services including -ticketing tourism and MICE related services to its clients.
COVID-19 had a massive impact on the travel industry in FY 2020-21. With travel bansfor a substantial period (domestic & international) along with customer uncertaintyit's difficult to state just how much the pandemic has devastated the revenues ofairlines. The sector is expected to become smaller in years to come; as per industrytraffic won't return to 2019 levels before 2024. (Source: World Tourism Organization). TheSBU has been the most severely impacted amongst all businesses under the COVID-19 crisisand travel has come to a complete standstill effective March 2020. However despite theSBU facing challenges in terms of changes in airlines strategy to cut distribution costdenial of segment fee by GDS reduction in commission and stiff competition by onlineportals and technology firms it has strengthened its operation sales and softwarecapabilities increased its clientele bringing more clients on SSBT / SBT by offeringholistic cost-effective customised services to corporate clients. In order to reduce ouroperation cost we have also tried to venture in the private sector by delivering superiorservice to our customers. During these lean times the travel vertical has not onlyfocused on improving the technology backbone but has also been in constant touch with theCorporates and retail customers to communicate safe travel policies destinationinformation and engage with them in the digital space. The SBU has explored the rightnetwork partners and has leveraged the in-demand technology to offer customers bouquet ofservices in the coming years. SBU: T&V has also enhanced its visibility on the digitalplatforms and made its B2C site robust with all services available on the same platform.Various initiatives have been implemented and the IT team is constantly assessing varioustools to help the business stay ahead of competition. However in view of future businessoperations and growth potential over next 3-5 years the SBU had undergone major internalrestructuring in terms of creating 4 regional Operational HUBs for a lean and efficientbusiness structure going forward. As a result of business restructuring the SBU has beenable to save infrastructure and other fixed overheads by Rs. 3.40 Crore on annual basis.Going forward the SBU is planning to create One HUB (centralized) at Delhi in order tobring more efficiency and plug in any leakages. This will enable better service deliveryand provision for Relationship Managers in all cities which will ensure more sales ofvarious products like Hotel Cabs Insurance etc. The SBU shall be supplementing thetraditional strength of Ticketing for Government & PSUs by penetrating into a diverseand much larger Corporate customer base with complementary offerings such asaccommodation land MICE services etc. and emerge as a One Stop Solution provider for anInstitution's travel and hospitality needs.
The COVID-19 pandemic has placed the tourism industry under immense financial strain.Travel & tourism is undoubtedly one of the worst-hit sectors. Though there was asignificant drop of about 81% in the overall business compared to the previous year arelative growth of 20% in Corporate Business was achieved by Vacations to make up for theshortfall in Retail & MICE as a result of the challenging business environment /significant industry slowdown in FY 2020-21. The SBU has undergone major internal businessrestructuring and closure of 4 branches for a lean and efficient business structure whichhas yielded a savings of around Rs. 4.54 Crore. Overall economic slowdown stateelections and higher airfares owing to the pandemic impacted both retail and B2B sales.In the current pandemic situation people are avoiding group tours and continuing to go onsolo trips. Hence there were no GIT tours and FIT was restricted to few countries as mostof the borders were closed during the FY 2020-21. Corporate business within India was alsonot stable due to periodic waves of pandemic hitting various regions. The Vacationsvertical tried to market virtual events and successfully entered in this segment. Therewere cancellations of booked tours and highly reduced forward booking pipelines. Toexploit the opportunities the Vacations vertical is adeptly putting out domestic as wellas international short-haul programmes. During these testing times the vertical hasresearched and accordingly planned strategic actions to grab the market once it opens. Theproducts have been designed and manpower have been trained online to deal with the changesin the industry. Through social media and proactive collaboration with the Travelvertical the marketing team is keeping the interest in the destinations alive so thatconsumers have a desire to travel there once the restrictions are lifted.
REFINERY & OIL FIELD SERVICES [SBU: ROFS]
The SBU: Refinery & Oilfield Services is engaged in the activity of Mechanized OilySludge Processing and Hydrocarbon Recovery from Crude Oil Storage tanks and Lagoons. Thisactivity pertaining to pollution prevention and oily waste recycling through recovery ofhydrocarbons is a niche segment in the oil & gas industry.
Due to the impact of COVID-19 there was a downturn in demand for sludge processingservices in FY 2020-21. The same can be attributed to several factors such as overalldownturn in demand for petroleum products lower crude prices in the international marketand also austerity measures employed by many clients resulting in cutback inexpenditures.
The SBU continues to enjoy approximately 60% market share in the oily sludge processingsegment in India. The renewed focus on energy conservation and sustainable development isexpected to result in stricter pollution control laws in the long term acting as acatalyst for increased demand for waste recycling services such as oily sludge processingresulting in overall expansion of market demand. The SBU intends to leverage itsexperience in project execution and wide base of satisfied clientele to foray into alliedservice areas such as tank overhauling corrosion prevention services and tank cleaningthrough chemical process.
The operational performance was at par with the previous year mainly due to advanceorder booking for the SBU. The new order booking was sluggish due to reduced demand in themarket.
The demand for sludge processing services is expected to be lower in the near term. TheMarket preference is poised to move towards technologies requiring minimal manualintervention such as closed loop systems robotic cleaning technologies and online tankcleaning through chemical method. The SBU aims to maintain market leadership in the
Sludge Processing space through technological upgradation and incorporation of newtechnologies for reducing processing time and manual intervention in sludge processing.Alternative processes such as chemical cleaning technology is also being explored foraugmentation of service offerings.
OVERALL FINANCIAL PERFORMANCE
The Company recorded net turnover of Rs.159276.79 Lakhs during Financial Year 2020-21as against Rs.161216.14 Lakhs in Financial Year 2019-20 which is a decrease ofapproximately 1.20% over last year. The Company recorded a Profit Before Tax ofRs.15664.97 Lakhs in Financial Year 2020-21 as against Rs. 23244.21 Lakhs in FinancialYear 2019-20. The decrease is attributable to the COVID-19 pandemic and the performance ofSBU: Travel & Vacations which has been affected due to the same.
Corporate governance essentially involves balancing the interests of your Company'smany stakeholders such as shareholders management customers suppliers financiers theGovernment and the community. Your Company's culture policies relationship withstakeholders and loyalty to values is reflected in the Corporate Governance Report.Following are the five pillars of Governance that the Company conforms to as a part of itscommitment to adopt global best practices: l High accountability to itsstakeholders l Absolute transparency in its reporting system and adherence todisclosure compliance l High ethical standards in the conduct of business with duecompliance of laws and regulations l Enhancement in the stakeholders' value onconsistent basis l Contributing to the enrichment of quality of life of thecommunity through discharge of Corporate Social Responsibility and promotion ofSustainable Development.
The Companies Act 2013 is being amended almost regularly. Similarly ListingRegulations are also amended frequently. Your Company is making best efforts to adapt andcomply with the changing statutes and continues to comply with the Corporate Governanceguidelines / norms to the extent within its control.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Balmer Lawrie is committed to conducting its business in a socially responsible mannerand be responsive to the needs of society at large. Consistently the organisation hasundertaken various CSR initiatives for the last few decades driving sustainabledevelopment and growth for its stakeholders. In line with this the Company has beendriving various projects independently around its units and establishments across thecountry and has also been supporting various programs initiated by the Government of Indialike the Clean India Mission and Skill Development Institutes. Balmer Lawrie's CSRinitiatives are driven by two Flagship Programs Balmer Lawrie Initiative forSelf-Sustenance [BLISS] and Samaj Mein Balmer Lawrie [SAMBAL]. While the first Program isdirected at providing and improving the long-term economic sustenance of theunderprivileged the second Program aims at improving the living standards and quality oflife of the population in and around the Company's area of operation.
To extend its commitment towards a sustainable society Balmer Lawrie has undertakenvarious innovative CSR programs. In March 2020 the Government of India declared COVID-19crisis. As a responsible corporate citizen Balmer Lawrie contributed Rs.100 Lakhs fromits CSR Fund to the PM CARES Fund so that our health system can be strengthened to fightagainst the pandemic. The Company also made efforts to construct a quarantine home atRamakrishna Mission Belur Math Howrah to help communities during the pandemic. As partof its Swachh Bharat' initiatives the Company distributed masks sanitizers glovesand other COVID-19 protective items to the disadvantaged communities in its operationalareas.
A total sum of Rs. 514.15 Lakhs was spent during the Financial Year 2020-21 towardsCSR activities.
Ithank all of you for your presence here today. I will always look forward to yourcontinued support and best wishes. On behalf of the Board of Directors I would like toconvey to you our sincere gratitude. I acknowledge the continued support and guidance ofour Administrative Ministry the Ministry of Petroleum & Natural Gas Government ofIndia for the guidance and encouragement provided to your Company. I also wish to thankother Ministries of the Government of India and other Governmental authorities for theircooperation.
I would also like to thank our holding company Balmer Lawrie Investments Ltd. ourvalued shareholders customers vendors business associates bankers financialinstitutions and other stakeholders for their continued support and co-operation.
Finally I must convey my gratitude to my colleagues on the Board for their wisecounsel and valued involvement.
|Adika Ratna Sekhar |
|Chairman & Managing Director - (Additional Charge) |
|and Director (Human Resource & Corporate Affairs) |
|and Director (Manufacturing Businesses) - (Additional Charge) |
|Date: 6th August 2021 |