MANAGEMENT DISCUSSION AND ANALYSIS REPORT
1. Industry Structure and Development :
The global economic growth slowed down during the last year as the recovery that wasexpected at the beginning of the year has not materialised. The agricultural sector inIndia has been growing at a slow pace in the past couple of years. For the year 2012-13the Indian GDP has grown by 5% as compared to 6.5% in 2011-12. While there is someuncertainty in GDP growth rate for the current year, we have to deal with couple ofnegative factors, like high inflation, high fiscal deficit level, currency volatility andsubdued industrial growth. However, in this backdrop the poultry industry continued togrow at satisfactory rates both in broilers and in layers.
The growth rate witnessed by the poultry industry in the recent years is likely tocontinue for the foreseeable future. Presently the poultry industry is a Rs. 75,000 croreindustry that provides direct and indirect employment to 5.00 million (Rs. 50 Lacs) peopleand also supports the economy of over 2 crore agricultural farmers, especially the maizeand soya growers, dependent on this industry. 75% to 80% of the cost of production in thepoultry industry consists of feed ingredients, like maize and soya. With an annualproduction of over 65,000 million eggs, India ranks second in the world in egg production.The broiler production is estimated at 3.5 million tons of chicken meat and India ranks 3rdin the world.
2. Opportunities, Threats, Risks and Concerns :
The vast gap between our present per capita consumption (54 eggs and 3.5 kg. of meat)and National Institute of Nutrition (NIN) recommended level (180 eggs and 11 kg of meat)offers a tremendous opportunity for the growth of poultry industry at least for the nexttwo decades. As the disposable income rises steadily over the years coupled withurbanization in most part of India, the growth in demand for poultry products is likely tosustain.
Lack of adequate cold-chain at key locations and retail infrastructure are the reasonsfor slower than anticipated growth of the processing segment of poultry industry. Highlyvolatile behaviour of feed ingredients prices is also one of the concerns of the poultryindustry.
3. Segmentwise Performance :
a. Poultry and Poultry Products
The Companys major business segment is poultry and poultry products whichconsists of production and sale of day old broiler and layer chicks, specific pathogenfree eggs, processed chicken products and poultry feed. In 2012-13 this segmentsturnover was Rs.92,607 lacs as compared to Rs.71,323 lacs in the last year. The profitbefore tax and interest of this segment was Rs.1,524 lacs as compared to Rs.5,648 lacs inthe previous year.
b. Animal Health Products
The Company has its animal health products manufacturing facility at Pune. Thissegments sales turnover was Rs.10,683 lacs as compared to Rs.9,536 lacs. Profitbefore tax and interest was Rs.1,502 lacs as against Rs.1,596 lacs in the last year.
This segment registered a sales turnover of Rs.46,347 lacs as compared to Rs.25,867lacs last year. Profit before tax and interest was Rs.4,343 lacs as against Rs.1,508 lacsin the previous year.
The outlook for the year 2013-14 appears to be better in terms of overall growth forthe Company. However, any steep increase in cost of poultry feed prices as happenedin the last year will have an impact on the profitability of the Company.
5. Internal Control Systems and their adequacy
The internal control system is designed to ensure that all the financial and otherrecords are reliable for preparing financial statements and for maintaining accountabilityof the assets. The Company has a proper and adequate system of internal controls to ensurethat all assets are safeguarded and protected against loss from unauthorised use ordisposition and that transactions are authorised, recorded and reported correctly.
Commensurate with the size of operation, your Company has Internal Audit Departmentwhich continuously reviews the internal control system by an exclusive programme ofInternal Audit. The significant findings are then discussed by the Audit Committee ofDirectors and corrective measures are initiated. The Audit Committee also monitors theimplementation of recommendations made by it.
6. Discussion on Financial Performance with respect to Operational Performance :
The turnover of the Company registered growth of 44% over the last year from Rs.99,246lacs to Rs.1,42,911 lacs. The profit before tax from operations declined by 31% fromRs.5,719 lacs to Rs.3,920 lacs.
The borrowings of the Company during the year were increased by about 63% fromRs.18,821 lacs to Rs.30,744 lacs. The borrowed funds are being utilized for theexpansion-cum-modernisation programme. Interest cost of the Company has increased by 50%from Rs.1,541 lacs to Rs.2,314 lacs.
Keeping in view liquidity, returns and also safety, the Company has invested certainfunds in bank deposit and debt/liquid schemes of mutual funds.
7. Material Development in Human Resources / Industrial Relations front,including number of people employed :
In line with VH Groups corporate philosophy, the Human Resource is considered asthe most valuable resource in the Company. The focus is on developing a performanceculture with high standards of efficiency and innovation. Employee relations at all levelscontinue to remain cordial. As on 31st March, 2013 the Company has 4,090employees.