Management Discussion Management Discussion and Analysis detailing the Company's objectives and expectationsis a “forward looking statement” within the meaning of applicable securitieslaws and regulations. Actual results could differ materially from those expressed orimplied depending upon global and Indian demand-supply conditions, changes in Governmentregulations, tax regimes, economic developments within India and overseas.
INDUSTRY STRUCTURE AND DEVELOPMENT
The dairy industry plays an important role in the socio-economic development of India.The dairy industry in India is instrumental in providing cheap nutritional food to thevast population of India and also generates huge employment opportunities for people inrural places.
The main aim of National Dairy Development Board (NDDB) is to accelerate the pace ofdairy development in the country and attract new investments.
India is a wonderland country for investors looking for investment opportunities in thedairy industry. The dairy industry holds great potential for investment in India andpromises high returns to the investors.
There are different sectors within the dairy industry that promise great businessinvestment opportunities as the Indian cattle yield less milk as compared to their foreigncounterparts. The Indian cattle breeders are looking for ways to improve milk yieldthrough improved breeding practices. Thus, there is a huge potential available for foreigninvestors to invest in dairy sector for breeding of high-quality buffaloes as well ascows. There is also great scope for investment in milk based value added food productsthrough biotech interventions particularly the introduction of dairy biologics, enzymes,pro-biotics, coloring and flavoring materials for food processing. Producingbio-preservative ingredients based on dairy fermentation, such as pediococcin, aciophilin,bulgarican, and Nisin contained in dairy powder, present a great promise as investmentopportunity.
Thus, the dairy industry in India has huge investment opportunities in a variety ofsectors. The investors are all set to gain profitable returns on their investment.
QUALITY & FOOD SAFETY POLICY
The Company being an ISO 9001:2000, HACCP-IS: 15000 and Agmark approved company, theCompany's Quality Policy is: -
“Company is committed to manufacture and supply nutritional and safe products tosatisfy customer requirements by a motivated team using eco-friendly measures withcontinual improvement in quality and food safety” The Company has consistently shownquality improvement with regard to various processes, keeping strict control ondeviations. Customer complaints are resolved using laid down systems of quality assurance.Several initiatives are being taken to further improve customer satisfaction in consonancewith the Company's quality policy.
FINANCIAL PERFORMANCE
During the year, your Company has scaled new heights and set several new benchmarks interms of sales, profits, networth and assets. Turnover for the year was 1054.10 croreagainst 582.80 crore in the previous year, reflecting a growth of 81%.
Profit after tax, for the year was 17.94 crore as against 9.38 crores for the previousyear, registering an increase of 91%.
OPPORTUNITIES & THREATS
Strengths and Opportunities:
• Great potential for export of milk products.
• Established and expanding domestic market for dairy products.
• Increasing demand for fluid milk as well as value added Products.
• By product Utilization for import substitution.
• Huge Employment generation & opportunities for Self employment.
• Liberalized Government policies in dairy sector.
• Availability of large resources of unconventional feeds and fodders for Dairyowners.
• Availability of diverse germplasm of dairy cattle and buffaloes that have uniquefeatures like heat tolerance, disease resistance, draft ability and ability to survive,breed and produce under stress conditions.
• Availability of animal production technologies for faster development andeffective implementation.
• Integrated structure for marketing of milk and milk products.
• Integrated structure for livestock marketing through regulated markets.
• Market information intelligence system for milk and milk products.
Weaknesses and Threats:
• Entry of Multi National Companies manufacturing dairy products in Domesticmarket.
• Increasing chemical contaminants as well as residual antibiotics in milk.
• Poor microbiological quality of milk.
• Incentive on export of quality feed ingredients particularly cakes.
• Deficiency of molasses, a rich source of energy and binding agent in feedindustry and constituent of urea molasses mineral lick.
• Excessive grazing pressure on marginal and small community lands resulting incomplete degradation of land.
• Extinction of the indigenous breeds of cattle due to indiscriminate use ofcrossbreeding programme to enhance milk production.
• The liberalization of the Dairy Industry is likely to be exploited bymulti-nationals. They will be interested in manufacturing milk products which yield highprofits. It will create milk shortage in the country adversely affecting the consumer.
The analysis also shows that the 'strengths' and 'opportunities' far outweigh'weaknesses' and 'threats'. Strengths & opportunities are fundamental and weaknesses& threats are transitory.
SEGMENT WISE / PRODUCT WISE REPORTING
The Company is primarily engaged in the business of manufacture, purchase and sales ofa wide range of Dairy products like ghee, skimmed milk powder, curd, whole milk powder,dairy whitener, lactose and milk. The income from these activities and export of dairyproducts is not materially significant in financial terms. Accordingly segment informationhas not been disclosed.
RISK AND CONCERNS
The major risk and concerns attributed to the performance of the company are:
a. Although the export sales are less in comparison to domestic sales, fluctuation inforeign exchange rates and international prices of dairy products may influence theperformance of the company.
b. Increase in input costs, change in tax structure, change in interest rates, changesin Government policies/ laws of land, development and stability of Indian economy againstthe negative external and internal forces may also impact the overall performance of thecompany.
c. Profitability may be affected on account of competition from existing andprospective manufacturers of the company's products.
d. Dairy business is primarily influenced by monsoon. Unfavorable monsoon may affectthe milk availability and Company may not get milk upto installed capacity and demand.
ADEQUACY OF INTERNAL CONTROL SYSTEMS
The Company has in place the proper and adequate systems of internal controls. Suchinternal controls are according to the nature of its business and size of its operations,in order to ensure that all assets are safeguarded against loss from unauthorized use ordisposition and that all transactions are authorized, recorded and reported correctly andadequately.
The performance of the Company is regularly reviewed by the Audit Committee and/or theBoard of Directors to ensure that it is in consonance with the overall corporate policyand in line with pre-set objectives. The Audit Committee of the Board is headed by anon-executive independent Director and all audit findings are reported on a quarterlybasis to it.
HUMAN RESOURCE DEVELOPMENT
Being a manufacturing Company, workers form an important link in the chain of growth.The Company maintained a cordial relationship with its personnel during the year underreview. The workers are motivated with better service conditions, which is at par with thebest in the industry. During the year under review, the Company had undertaken extensivesteps for optimizing the use of its manpower through, productivity improvement, and roleenrichment. There is a continuous focus on enhancing productivity in all facets of ouroperations.
INDUSTRIAL RELATIONS
The industrial relations in the Company with the workers at all levels are very cordialand are expected to remain cordial in future as well. The Management acknowledges thecontribution of all employees in increasing its turnover manifolds.
CORPORATE SOCIAL RESPONSIBILITY
The Company is presently operating four Milk Chilling Centres (MCCs) in Haryana, eachcentre covers about 100 village spread over 8-10 procurement routes. Each village levelmilk collection point has 80-90 farmers pouring milk. Each centre generates avenues forearning livelihood for about 8000 farmers, thus bringing economic upliftment in the area.
The Company organizes various animal health and fertility camps and village meetingsregularly to discuss the requirements of the farmers and fulfilling the needs forVaccination, AI, Cattle feed and facilitating the loan requirements of the farmers throughfinancial institutions. Further these camps also educate the farmers on the generalquality of life improvement and hygienic living standards, other social issues will besubsequently addressed. The milk procurement team broadly advises and provides guidelinesto the participating farmers as under:
Animal Health: In order to increase the milch animal productivity, the veterinarians ofthe Company based in the rural areas look after the health of the animals, and advise thefarmers on latest practices of livestock diseases, health and management.
Artificial Insemination (AI): The doctor also takes care of AI needs of the farmer'sanimals. Semen and facilities for artificial insemination are procured from the best andthe reputed sources producing semen in India.
Cattle Feed: the Company provides good quality and balanced cattle feed at cost priceto take care of nutrition needs of the milk animals.
FMD vaccination: An annual FMD vaccination program is organized for vaccination ofanimals to protect them against Foot and Mouth disease. The vaccinations are done atsubsidized cost.
DISCLAIMER STATEMENT
Statements in this report describing the current industry structure, outlook,opportunities etc. reflect the assessment and perception of the Company, which are basedon certain assumptions, and expectations of future events. The Company cannot guaranteethat these assumptions and expectations are accurate. The Company's actual results,performance, or achievements could thus differ materially from those projected in any suchforward-looking statements.