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S H Kelkar & Company Ltd.

BSE: 539450 Sector: Industrials
NSE: SHK ISIN Code: INE500L01026
BSE 00:00 | 30 Jul 169.10 5.55
(3.39%)
OPEN

160.05

HIGH

171.20

LOW

160.05

NSE 00:00 | 30 Jul 169.45 5.55
(3.39%)
OPEN

163.10

HIGH

171.20

LOW

163.10

OPEN 160.05
PREVIOUS CLOSE 163.55
VOLUME 31045
52-Week high 189.80
52-Week low 70.95
P/E 29.88
Mkt Cap.(Rs cr) 2,390
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 160.05
CLOSE 163.55
VOLUME 31045
52-Week high 189.80
52-Week low 70.95
P/E 29.88
Mkt Cap.(Rs cr) 2,390
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

S H Kelkar & Company Ltd. (SHK) - Chairman Speech

Company chairman speech

Dear Shareholders

I present our Annual Report for FY 2019-20 with the promise that the resilience we havedisplayed in this challenging present will take us towards a future that is resurgent andfilled with opportunities.

As we speak there has been turbulence behind us and there may be some turmoil ahead ofus too. But what we deliver to the world are fragrances and flavours which appeal tohuman senses even more than sight and sound. We create unique olfactory experiences thatdrive sales for a range of fast-moving consumer goods (FMCG). Local at heart and global inmindset our extremely agile way of working places us in a unique position to partner withmajor multi-nationals as well as domestic companies. Our rich legacy and global growth areequally important to us and we have dedicated sales and creative teams to optimallyservice both the segments.

As long as the consumer economy exists and grows new and unique business opportunitieswould continue opening up for us. With processing and packaging of FMCG becoming moreadvanced and companies competing to enhance their product appeal we remain at the centreof the dynamic fragrances and flavours industry building on our strong brand propositionglobal reach and established presence in all the key segments. Going forward we shallkeep the 3I (India Italy Indonesia) - 3C (categories) strategy at the centre of ouroperations.

During the year under review we were set for a double-digit growth but for the suddenimpact of COVID-19 and the lockdown across India and many other countries. Our very strongorder book for March 2020 alone could have propelled us to a 12% year-on-year growth. Wealso achieved cost efficiencies after moving some operations from Europe to India and bygiving each division within Keva more autonomy.

Our measures to tighten the bottom line and increase operational efficiency include thefollowing: Across the Keva business divisions we set up strategic business units witheach SBU given full control over its own costs revenues and resource allocation forresearch & development. Besides making the divisions self-sufficient and more drivento produce results independently this move also makes our Company more agile and betterprepared to respond to every business opportunity present and future. The increasedautonomy lets every SBU take its decision-making still closer to the market. Our fabriccare studio in Singapore is a global centre of excellence one that will take our 3I-3Cstrategy forward. The studio proves our commitment to investing in research to createmarket-leading products.

Assessing the market scenario and growth pockets we focussed on the consolidation ofour advantages and the streamlining of each vertical rather than on new initiatives amove that we consider prudent.

The seamless relocation of our operations from Barneveld in the Netherlands to Mahadin Maharashtra (India) was concluded and led to a significant lowering of expenses. OurMahad facility began operating at full capacity by December 2019 within one year ofcommencing operations which is exceptional for bulk chemical manufacturing and itcontinued to do so up to February 2020 right until the point when COVID-19 really madeits impact.

Our facilities were back at 70% to 100% production capacity by the end of April 2020.

We revamped our Mumbai headquarters and built a state-of-the-art laboratory forflavours. This will enhance our image and credibility in a space where the entry barriersare high and new entrants have to make a huge effort to grow. There are greatopportunities here and we have already won noteworthy business from major names in thepackaged food and beverages industry.

We had our first sampling of an Ayurvedic product for a major MNC client which was abreakthrough for us. There is huge scope in the natural ingredients and immunity-boostersbusiness after this contagion and we are exploring several opportunities here.

While growth infine fragrances became muted following the pandemic and its economicimpact we are confident of offsetting this by catering to the increasing demand forhygiene products including soaps hand wash sanitisers and household cleaning products.Our R&D pipeline was ready with ingredients and fragrances for soaps and sanitiserswhich enabled us to quickly partner with several sanitiser manufacturers to tap into theclimbing demand.

Key emerging markets in the SAMEA region (South Asia Middle East Africa) continued togive us significant business in 2019 even as the domestic market in India saw a slowdown.Our fragrance division went beyond FMCG products and made inroads into industrialapplications.

The lockdown imposed nationally towards the end of FY 2019-20 prevented us fromexecuting ourorders causing an estimated Rs 30 Cr loss in the last 10 days of March 2020.Our growth was undoubtedly interrupted by the pandemic but we are moving towards the nextphase by identifying new avenues of growth.

FINANCIAL PERFORMANCE

Though impacted by the COVID-19 disruption the year ended on 31 March 2020 gave us aTotal Income of Rs 1122.06 Cr up by 4.72% from Rs 1071.48 Cr for the year ended on 31March 2019. However Total Expenses also increased during the corresponding period fromRs 956.63 Cr to Rs 1032.28 Cr. The impairment of plants and machineries and manufacturingfacilities in the Netherlands along with other closure costs in respect of theNetherlands facility resulted in a one-time exceptional expense of Rs 36.5 Cr. Profitafter Tax after the abovementioned exceptional item and including the share of profit(net of depreciation on assets comprised in the purchase price paid) in Creative Flavours& Fragrances SpA Italy and other joint ventures was Rs 35.9 Cr as against Rs 88.3 Crduring the previous year.

Despite the dividend payment of Rs 13.4 Cr and the raw material crisis during the yearunder review our net debt position is maintained at Rs 299 Cr in line with the previousyear `_299 Cr. We believe that our recent cost rationalisation efforts will bring downexpenses and help us control the bottom line while we continue with our efforts topenetrate new territories and new areas of fragrances and flavours.

PASSING ON THE BATON

A major internal change in the Company was the transition of our Managing Director Mr.Ramesh Vaze to the position of Non-Executive Chairman of the Board in September 2019.Consequently I have taken on additional responsibilities in my capacity as the CEO. With50+ years in the service of Keva Mr. Ramesh Vaze has given us an unparalleled repositoryof knowledge and values that will guide us in the years to come helping us grow both athome and overseas.

This is a turning point for Keva as consumer preferences and buying habits are seeinga shift in the ‘new normal' brought about by COVID-19. Our Company now has a teamthat is more attuned to the transformed global scenario. With an eye on growing ourexports business we have brought about changes in the management revising the allocationof responsibilities and creating new ones.

COVID_19 RESPONSE

During the contagion we did everything possible to maintain employees' health andsafety while trying to restart operations as soon as permitted by the government.

Aside from the mandatory health checks and sanitisation at our offices and facilitiesthat still required the physical presence of employees we also implemented work fromhome. Life insurance cover was provided to all the employees in addition to the grouphealth insurance cover that they already have.

As for our CSR (Corporate Social Responsibility) activities we modified those toalleviate the suffering of the disadvantaged during the COVID-19 pandemic when many dailywagers had no income. Partnering with Roti Foundation Mumbai our Company was engaged inproviding meals to the underprivileged and daily wage workers. The support provided by S HKelkar and Company Limited was utilised to feed 75000 daily wagers and migrants. As ourplants began to reopen we put in place every precaution necessary. We do not know yetwhat shape the pandemic will take - whether there will be a second wave or not - but wehave learnt much during this time and our keen focus on safety will keep our employees outof harm's way.

GROWTHO UTLOOK

The future of the fragrances and flavours industry is secure as it caters to end-userindustries that will remain an indispensable part of global consumers' lives. In Indiathe pandemic may have hit jobs and spending power in the short to medium-term but in thelong-term the country will get back on the growth track.

Growth in the economy with its resultant preference for trustworthy brands and finefragrances and natural flavours is highly beneficial for our Company. If MNCs shift theirsourcing of FMCG chemicals from China to India following the pandemic then we are at theforefront of seizing that opportunity. The European fragrance operations now coming fullyunder our control has put us in a better position to nimbly strategise and redraw theroute map if the market so requires. We also have the unique advantage of being in thebirthplace of Ayurveda in a country that has introduced the world to the healing power ofnaturals. We have already begun receiving many client briefs in the health and hygienespace and we expect rapid development in this area.

Europe is at the centre of the global fragrance industry setting trends for the world.Acquisition of 51% stake of Creative Flavours & Fragrances SpA (CFF) leading Italiancompany headquartered in the fashion capital of Milan has opened up enormous growthopportunities in the fine fragrances and fabric care segments for Keva. CFF has given usaccess in the premium product markets of Europe while also giving us a head-start in theemerging markets of Asia. We are confident of benefiting greatly from the access to CFF'screative development centres and expertise.

Based on traditional knowledge and cutting-edge research in state-of-the-art labsKeva's products are fit to compete with the best in the international market.

CONCLUSION

A new chapter in the Keva story opens in this new normal. You have been there with usthrough it all and we cannot emphasise enough how much your support means to us. I takethis opportunity to thank each of our stakeholder groups - employees management businesschannel partners and shareholders - for being there for Keva. A special thanks toemployees who have enabled us during the peak of the COVID-19 crisis to maintain theessential services that are part of Keva's overall operations helping us to contribute toa stronger India.

Kedar Vaze

Whole-time Director & Group CEO