Dear fellow shareholders
Welcome to the ice make families. As witnessed by your in recent past your companycame out with an sme ipo and got its equity shares listed on sme platform of nse (nseemerge) in december 2017. We have seen behemoth over-subscription in our i po with thetrust support and confidence of investors and valued shareholders like you. With thisletter i take this opportunity to share with you my thoughts and beliefs for the future.
Positive macro-economic potential
The indian economy is in a consolidation phase after a series of structural reformsover the past two years. This consolidation will be largely driven by the players in themicro small and medium enterprises (msme) sector. The sentiments are highly positiveespecially in the manufacturing segment with improving orders and capacity utilisations.As a further boost to this segment the government announced a reduction in corporate taxrates. This will further allow all the msmes like us to invest the additional surplus andalso help in job creation.
The positive macro-economic scenario augurs quite well for our business. As you areaware we are into the business of refrigeration products handling temperature-controlledequipment and its related logistics. It is anticipated that the cold chain market isexpected to witness a 14-16% cagr between 2017-22. The optimism is largely driven by thefollowing facts:
1. The organised players comprise a mere 10% of the cold storage market in india. Withthe implementation of goods and service tax (gst) the focus has shifted to organisedsegment.
2. Uneven monsoon patterns and global warming are driving continuous demands for singleand multi-commodity storage space in india.
3. Temperature controlled warehouses (tcw) comprise 90% of the cold chain industry andplay a key role in storing the harvests reducing wastages and spoilage and ensuringminimum price fluctuations. With the advent of quick-service restaurants organised retailand rising demand of processed food the tcw segment is expected to witness a cagr of14-16% between 2017-22.
4. Temperature-controlled vehicles (tcv) or reefer are equipped with activerefrigeration for temperature- controlled transfer of perishable products. According to astudy by national centre for cold-chain development (nccd) there are around 15000 unitsof registered reefer vehicles against a demand of 62000 such vehicles. This augurs wellfor our tcv segment.
5. 100% fdi in food and retail sector will generate additional demand from theorganised segment.
Currently we are utilising less than 50% of our total installed capacities. We areevenly poised to cater to the demand arising from the above stated facts. The company doesnot require any major additional capex and is well positioned to capture this growth.
The condenser coils and evaporator coils are essential component of the condenser andevaporator respectively. They are integrated into the refrigeration equipment. Atpresent the condenser coils are procured from the domestic markets while a majority ofevaporator coils are imported. As a measure to reduce external dependency and lead timewe are integrating backwards and setting up the coil manufacturing facility at dantali.This will optimise our manufacturing cost and give us a pricing advantage. It should benoted that out of total raw materials consumed the coil cost contributes to around 8%.This backward integration would reduce the company's cost of production. The facility willbe operational by the end of 2018-19.
We understand the power of technology and its resultant benefits and hence invest intechnological upgradation across both our units gandhinagar (dantali) and chennai. We areinstalling latest laser cutting machines upgrading the puf foaming technologies addingnew models of bulk milk chillers and carrying our other ancillary improvements in thesystem assembly. We have replaced obsolete machineries at chennai by installing autocontrolled shearing machine and cnc press break machine purchasing pyramid type sheetbending machine. We are looking forward to acquire new machinaries such as mig weldingmachine. We are also trying to upgrade the fabrication shop with new hand tools andpneumatic tools and investing in information technology and surveillance system forincreasing product efficiency and improving the quality of our products.
Solar-powered cold rooms
The company launched eco-friendly and energy efficient solar cold rooms during the yearwith a storage space of about 4-5 metric ton. It will help retain the quality freshnessshelflife and reduce wastage of perishable farm products. Besides it will also play asignificant role in the distant rural area which are not yet electrified or where powersupply is poor. The government's rural-centric budget and their support through 40% to 50%subsidy scheme to solar refrigeration units to make them affordable augurs well for us.It is expected that with proper utilisation of the solar based cold storages it can leadto over 30%-40% increase in the farmer's income. The company is keeping no stone unturnedtowards creating farmer awareness and help them double their income and reap strongbenefits from the good quality cold storage facilities.
Key strategic priorities
Going ahead we have charted out few strategic priorities that will drive our growth inthe coming years. These include:
1. Building a technology-intensive asset base to achieve scale and efficiencies.
2. Focussing on r&d and innovation to drive home better products and solutions.
3. Building long-term customer relationships across india and abroad through productmarketing brand building promotion after-sale services and relationship- buildingactivities with key stakeholders.
4. Strengthening after-sale service network to reinforce our brand image andvisibility.
5. Exploring opportunities in the ammonia refrigerant segment. Our technically soundmanufacturing facility gives us the edge to match the industry standards and penetrateinto the newer customer segment.
The team effort
Our dedicated team across all the business verticals remains our company's legacy ofinnovation and continuous improvement. They are the key factors to our consistentperformance and our success in addressing the ever- changing needs of consumers.
On behalf of the board of directors and the senior leadership team i hereby assure youthat we have effective growth strategies in place. Our business is aligned with today'sconsumers and are well-positioned for the future. We were and we will stay committed tobuilding the value of your investment in ice make.
Chandrakant p. Patel
Chairman & managing director