APEEJAY TEA LIMITED
(Formerly AFT Industries Limited)
ANNUAL REPORT 2006-2007
MANAGEMENT DISCUSSION AND ANALYSIS
Industry Structure and Developments
The year 2006-07 continued to justify the predicted trend of a general
firming of tea markets both domestic and international. Similar to stock
out situations like previous years seem to further substantiate the fact.
Shortage of crop in Kenya and instability in Sri Lankan production scenario
and increase in the domestic off take of approximately 3% during 2006-07
led to a definite increase in the demand of tea, which was thought to be
somewhat stagnating earlier. Opening of Indian sector to big organsied
players and overseas investments are bound to have a positive impact of the
overall tea trading scenario.
Clarity in the market brought about by the Tea Board Regulations and VAT
implementation are also reasons for an overall improvement in the market
Opportunities, Threats, Risks and Concerns
The Tea Board of India has launched a vigorous advertisement campaign to
promote tea drinking among Indians as a health drink. The demand for tea is
growing annually and the preference for branded tea is gradually
increasing. The Company has so far concentrated on selling by auction and
direct sales but with the changing scenario, it has launched its
Mahamantra' brand in November, 2006 in certain states. The Company is also
gearing up to launch other brands by the end of the current financial year.
By entering the retail market with consumer packs with a differentiated set
of values for the consumer, the Company intends to reach the masses. It
also intends to tie up with the organized retail chains to help in reaching
the huge Indian market both urban and rural. Though the export figures show
almost the same volume, captive supplies to overseas brand is poised to
increase. Subtle change in the grade mix will also add value to exports.
Some of the risk factors faced constantly at the gardens are competition
from bought leaf factories, high labour cost, increasing cost of power,
fuel and other inputs, bandhs and disruptions due to civil unrest and lack
of infrastructure development.
Your Company currently operates in the Domestic market segment mainly.
Direct exports have reduced due to major international clients opening up
their own procurement branches in India. We continue to be a major supplier
to all such clients.
Efforts to continuously upgrade quality of our produce, giving thrust to
marketability and consumer satisfaction and ensuring best realization
remain our prime objective. Our thrust has been on Crop and Quality
oriented Pruning Cycle. Already our investment in the factories have
improved quality and productivity considerably. Monitoring of uprooting/
replanting, labour productivity overheads and socioeconomic factors
prevalent at the plantations continues to be the area of core
Internal Control Systems and their Adequacy
Messrs. Lodha & Co., Chartered Accountants, Internal Auditors of the
Company conduct regular internal audit and check the various internal
control measures implemented by the Company on a regular basis during their
visits to the various gardens and factories and submit regular reports to
the management. The Audit Committee of the Board also provides guidance on
various matters of internal control and audit.
Financial and Operating Performance
The Company made a profit of Rs. 68.51 Lakhs after taking into
consideration fringe benefit tax of Rs. 27 Lakhs as compared to the net
loss of Rs. 691.34 Lakhs of previous year. Stringent cost control,
monitoring of the working capital cycle, etc and measures to increase
production have been adopted by the Company. Notwithstanding the above, the
Company has continued to produce highest quality of teas during the year
ended under review.
Industrial Relations and Human Resource Development
During the Financial year 2006-07, the Industrial Relations and Human
Resource Management have been excellent. The encouraging relations have
been achieved due to high degree of involvement and dedication of employees
at all levels. Several initiatives have been taken during the year to
promote and develop the skills and competencies of the employees.
The focus during the year has been on communication as well as training and
development. A number of training programmes have been imparted to enhance
the technical and behavioural skills of employees covering topics like
Legal Procedural Issues under various relevant statutes, Stress Monitoring
and Management, Change Management, Negotiation Skills, Business
Communication & Presentation Skills, IR & Discipline at workplace, Time
Management, Ethics Policy, Motivation & Personality Development and
Performance Review & Mentoring. Employee motivation and encouragement is of
paramount importance and in view of the same Employee Of The Period
Scheme' has been relaunched with vigour in a modified format. Employees are
adjudged and nominated for this scheme based on their extraordinary
performance and receive a cash award along with a certificate as a
testimonial of their contribution to the Company. The Long Service award
function in the gardens was attended by all executives and their spouses.
There is a constant endeavour to develop processes with an objective of
continuous improvement and a culture of process excellence.
Any statement made in the Management Discussion and Analysis Report
relating to Company's objectives, projections, outlook, expectations,
estimates, etc. may constitute 'forward looking statements' within the
meaning of applicable laws and regulations. Actual results may differ from
such expectations, projections, etc. whether expressed or implied. Several
factors could make a significant difference to the Company's operations
which include climatic conditions, economic conditions affecting
demand/supply, Government regulations, tax laws, other statutes and such
other incidental factors.