ajanta soya ltd Management discussions

Cautionary Statement

This Management Discussion and Analysis statements of Annual Report has been included in adherence to the spirit enunciated in the code of corporate Governance approved by the Securities and Exchange Board of India, Statement in the Management Discussion and Analysis describing the Companys objectives, projections estimates expectation may be "Forward-Looking Statement" within the meaning of applicable securities laws and regulation. These statements are subject to certain risks and uncertainties. Actual result may differ materially from those either expressed or implied in the statement depending on circumstances. Important factors that could make a difference to the Companys operations include economic conditions affecting demand/supply and price conditions in the Government policies, economic development, political factors and such other factors beyond the control of the Company.

Overview

The Company is engaged in the primary business of manufacturing of Vanaspati and various kinds of refined oil with shortening products for bakery like biscuits, puffs, pastries and other applications.

ASL is a leading manufacturer and marketer of Vanaspati, Edible Oils and Bakery Application since two decades. The company has focused on continuous expansion, across business verticals to consolidate, and its industry leadership over the years. The company is promoted by well established group having and proven track record in the fields of edible oils.

By way of periodical expansion, ASL has increased its production capacity from time & again to cater to changing business environment & varied customer needs. The companys turnover has increased manifold over the decades and is expected to grow substantially in subsequent years. ASL also focuses on in-house research and innovation to be a low- cost manufacturer with high-quality products and innovative customer offerings.

ASL is now a Company with a strong portfolio of brands viz. Dhruv, Anchal and Parv and enjoys reputed market share. ASL also offers its quality products as food ingredients to serve food manufacturers and food service industry.

ASL has strived for its commitment and promises to all the stakeholders and has valued their effort for making it a renowned brand, thereby increasing shareholder value. ASL has always been a front runner in taking all the developmental and social initiatives for its stakeholders including employees, customers, society, investors, promoters, vendors and government bodies.

Advanced technology has been the forte of AJANTA. Its state-of-the-art manufacturing plant has been following the highest standards of quality with an emphasis on sustainability. The Company after successful expansion in its refining capacity is now focusing on increasing the capacity utilization by market expansion for its different products and their variants for growing market demands.

Superior procurement and trading skills, continuous innovation, an endeavor to meet consumer needs and stringent quality control standards have enabled AJANTA to emerge as a highly-respected and admired Edible Oil Company. Company is also investing continuously towards energy saving by adopting appropriate technologies as a measure to contribute to reduction in Industrial Pollution.

The management of the unit is very progressive by nature and the companys affairs are being managed by highly qualified/experienced professionals and the Company is promoted by well-established group having a proven track record in the field of edible oil.

INDUSTRY STRUCTURE, DEVELOPMENTS AND INDUSTRIAL OUTLOOK

At the start of the 2021-22 financial year, global prospects remained highly uncertain one year into the pandemic. New virus mutations and the accumulating human toll raised concerns, even as growing vaccine coverage lifted sentiment. Economic recoveries were diverging across countries and sectors, reflecting variation in pandemic-induced disruptions and the extent of policy support.

The outlook depended not just on the outcome of the battle between the virus and vaccines-it also hinged on how effectively economic policies deployed under high uncertainty can limit lasting damage from this unprecedented crisis. The COVID crisis, which had impacted lives and livelihood across the world and thrown economies into distress, continued to wreak havoc in 2021-22. The year saw the emergence of the delta variant of COVID which left behind a trail of destruction and deaths. While the situation improved by second quarter, the emergence of the Omicron variant towards the end of December once again threw a spanner in the global economy leading to fresh mobility restrictions and slow-down in economic activity.

The year2021-22 was also characterised by high inflation, at levels which had not been seen before. This was further aggravated by the Russia-Ukraine crisis which began in February 2022 leading to a sharp increase in commodity and oil prices.

Indian Economic Overview

The economy recovered above its pre-pandemic level in FY 2021, which ended in March this year. Turning to the first quarter of FY 2022, GDP growth is likely to speed up considerably. Growth in the industrial sector accelerated in April, suggesting it weathered the disruption to power supply caused by record-breaking temperatures well. Moreover, looser Covid-19 restrictions are boosting domestic demand, helping to push the services PMI to an over 11-year high in May. Demand will also be supported by new measures to combat rising inflation, including cuts to fuel duty, a doubling of the fertilizer subsidy, an export ban on wheat and cuts to import tariffs for some raw materials. That said, inflation remained at a near-decade high in May, which together with higher interest rates will be capping momentum. Clubbed with this the sudden Ukraine Russia War pushed up the crude prices globally, which resulted in rise of fuel prices in India by 20% to 30%, and has impacted the costs and profits of all edible oil brands, including ASL. Growth this year is set to slow, but it will still be higher than it was before the pandemic. Consumption will be boosted by the relaxation of Covid-19 restrictions, while increased government spending will add impetus. That said, rising commodity prices pose a downside risk. The Consensus projects GDP to expand 7.4% in FY 2022, which is down 0.1 percentage points from the previous months forecast, and 6.3% in FY 2023. Pertaining to the steps taken by GOI & resulting projections showing fall in prices of edible oil in this year, the demand will go up consistently. Also because of various marketing activities & investments being done by ASL, on its brands, the retail, and modern retail will expand and impact in growth of the brands in edible oil.

GLOBAL ECONOMY OVERVIEW

Since the Covid-19 upheaval, the world started witnessing steady progress for the first time towards the middle of 2021 while also adjusting to the pandemic-related concerns. However, the Russia-Ukraine conflict risks putting the stillrecovering-global economy back on an unpredictable journey. Global supply chain disruptions, rising energy prices, and food shortages are some of the immediate effects of this conflict that can potentially worsen the high inflation and jitter in financial markets caused by the pandemic, thereby challenging investments and economic growth.

Improvement in vaccination rates and other medical solutions proved effective in reducing death rates triggered by the pandemic. However, the possibility of new strains and associated risks & threats cannot still be overlooked entirely. The Russia-Ukraine war and sanctions have led to a surge in prices of key commodities right from oil & gas to wheat, fertilisers, and metals, among others.

On the policy front, the Federal Bank is likely to reverse the quantitative measures implemented to pull the economy out from the effect of the pandemic. Additionally, the Bank also made announcements to increase the federal interest rates for the first time since 2018. Going ahead, the world is likely to witness near-term stagflation, that is, a combination of rising costs and weaker growth. The geopolitical turmoil and the rising interest rates are set to de-track the growth roadmap. As per Fitch Ratings, the global GDP is projected to be 3.5% and 2.8% for 2022 and 2023, respectively.

With the Russia-Ukraine crisis pushing up overall costs of production, including the cost of raw material, transportation and packaging material, Inflation continues to be the biggest concern as we enter the 2022-23 fiscal. Even so, India is expected to be one of the fastest growing economies in the world.

Edible oil constitutes an important component of food expenditure in Indian households. The edible oil industry is one of the most important within the agriculture sector in India, the worlds largest importer from Indonesia and Malaysia and the third largest consumer. India is also the fourth largest oil seed-producing country in the world after USA, China and Brazil. Because of current stagnant domestic vegetable oil supplies, vegetable oil import volumes will continue to fill the majority of the supply-and demand gap over the next decade. However, vegetable oil consumption growth has been putting a lot of pressure on Indias trade balance and budget due to the high dependence on imports. The Indian government might need to step up its efforts to increase domestic oilseed production or pursue other options in order to cater to the countrys rising vegetable oil demand. The favourable consumer dynamics of Indian market like rising disposable incomes, escalating population, urbanization and fast growing health consciousness among Indian population has kept the industry at high pedestrian. All these factors will be the growth benefactors of edible oils in the near future. Also, although Indian per capita consumption of edible oils is on the rise, yet we still lag behind the developed nations of the world which construes as a massive opportunity for edible oil players.

Your Companys performance for the year 2021-22 may be viewed in the context of the above mentioned economic/market environment.

Opportunities and Threats

The continued growth of the Indian Foods marketer presents an enormous opportunity for a steady growth in Revenues and Profits for companies like us. Also, with the rural India being revisited by marketers through the modern retail (haat) philosophy, the opportunity is huge.

Rising Income levels - With income levels rising, the spending on FMCG and value-added products has been on the rise. Affordable innovation would help people buy more of the products from the Company.

Increasing demand for edible oils owing to the burgeoning population and improving economic conditions after corona pandemic is anticipated to remain the key growth driving factor over the forecast period.

Increasing income, urbanisation, changing food habits and deeper penetration of processed foods will be key drivers of future consumption growth of edible oil in the country.

India is also seeing a great increase in life style led diseases like heart ailments and cardio vascular illness which is said to rise much higher than other nations; this creates a potential for healthy edible oil. Competition from Indian and global players remain a matter of concern and probable threat; while the company is well prepared to tackle such issues on an ongoing basis.

Rising young working population - An increasing young urban population is expected to grow from 31 per cent in FY 2011 to 36 per cent in FY 2036. The food sector is thus likely to see a growth in consumption.

Demand for edible oils in the domestic market is great and one of the trends emerging in the market that will have a positive impact on the growth of the market up to pre-Covid -19 pandemic. But the Covid-19 Pandemic have influenced negatively on the consumption of Edible oils. Fluctuating price of raw material, restrictions on exports and imports imposed due to Covid-19 restrictions and guidelines imposed by WTO are the major challenges in the market. The fluctuation in the price is also due to various reasons such as environmental factors, crop diseases, and others. A fluctuation in the price of raw materials may have an adverse impact on the growth of the market during the forecast period. The continuing digitization of todays world presents both an opportunity and a threat. An opportunity because it enables the Company to communicate with and deliver to consumers in a far more focused manner than was possible in the predigital age. However, it is also a threat because it enables smaller competitors to reach out to consumers in a manner not possible in the pre-digital age because of the high costs of legacy distribution systems.

The consistent rise in import of edible oil to bridge the demand-supply gap impacts the trade imbalance and results in significant outflow of foreign exchange. There is strong need to improve the production and productivity of domestic oil seed sector and promote domestic supply of edible oil to address the growing the demand -supply gap imbalance.

The Direct risks are from the monsoon outlook, domestic and international production figures of mustered seeds, soyabean crop, palm oil and the government policies affecting rate of interest and duties applicable on the traded commodities.

Fluctuating price of raw material is one of the major challenges in the market. The fluctuation in the price is due to various reasons such as environmental factors, crop diseases, and others. A fluctuation in the price of raw materials may have an adverse impact on the growth of the market during the forecast period. However, the deficit between production and consumption of edible oils is increasing rapidly, even after importing millions of tons of oil creating more demand for the edible oil.

Risks and Concerns

The key determinants of business risk profile of edible oil companies are their ability to overcome the regulatory risk and agro-climatic conditions. Other operational factors include operating efficiency, product diversity, market position, and ability to secure raw material as well as the commodity price and forex-risk management systems. Risk financial position and returns metrics, capital structure, ability to generate positive cash flows from operations and the adequacy of the same in relation to its contractual debt service obligations.

Your Company is exposed to commodity price fluctuations in its business the edible oil prices in India are directly correlated to international oil price movements and currency movements that make profitability vulnerable to unexpected fluctuations.

Risks are an integral part of any business environment and it is essential that we create structures and processes that are capable of identifying and effectively mitigating them. For us, the risks are multi-dimensional and therefore we look at it in a holistic manner, straddling both, the external environment and the internal processes. These risks can be broadly classified into following categories: Strategic Risk, Compliance and Governance Risk, Financial Risk, Environmental Risk, Operational Risk and Social Risk.

Further, Key risks for the edible oils sector include risks from change in import-export regulations; change in the minimum support price (MSP) on oilseeds offered by the government; high dependence on monsoons and finally, the risk arising out of exchange rate fluctuations. Procurement of oilseeds at the right price and quantity, optimum utilization of processing units, their strategic location, a strong brand name and diversification of product offerings are likely to be the key success determinants for players.

Increase in the number of competing brands in the marketplace, counter campaigning and aggressive pricing by competitors have the potential to create a disruption.

Changing consumer preference and Demand can be adversely affected due to shift in consumer preferences, especially those induced by the pandemic. Given the potential of social media, the speed of such a shift could be unparalleled.

The key determinants of business risk profile of the company are their ability to overcome the regulatory risk and agroclimatic conditions. Other operational factors include operating efficiency, product diversity, market position, and ability to secure raw material as well as the commodity price.

The profitability of edible oil companies is significantly influenced by regulatory changes and remains highly susceptible to the changes in the duty differential between import duties on crude and refined oil by the Government of India (GOI). Also, the profitability of these companies depends on the changes in the export tax levied by exporting countries, mainly Indonesia and Malaysia (that account for most of palm oil imports).

Risk Management

Your Company continues to place a strong emphasis on the risk management and has successfully introduced and adopted various measures for hedging the price fluctuations in order to minimize its impact on profitability. Also, your Company has initiated setting-up of a framework to upgrade itself to a robust risk management system. Further Your Company is well geared with multi-processing capabilities to cater to the variances and changing consumer preferences. Thus, your Directors are optimistic in utilizing the production capacities and to overcome the post COVID-19 pandemic, to ensure better working results in the ensuing years.

Human resource / Industrial relations

The Company recognizes the importance and contribution of its human resources for its growth and development and is committed to the development of its people.

At Ajanta Soya Limited., equal importance is given to the development of the Companys human resource. ASL has always recruited the best talent available in the industry - people with years of expertise and experience behind them. The Company considers its employees to be the most valuable asset and is committed to provide a conducive work environment to enable each individual to fully realize his or her potential. The human resource programmes focus on strengthening key areas of Enhancing individual and organization readiness for future challenges. Management is investing in enhancing technical and managerial skills of employees for building competencies needed for growth plans. Our business review & performance improvement process continues to put focus on performance and periodic review of each of our businesses and individuals.

The Company has cordial relations with employees and staff. There are no industrial relations problems during the year and the Company does not anticipate any material problems on this count in the current year.

The total number of permanent employees of Ajanta Soya Limited as on 31^st March, 2022 was 89 (Eighty Nine).

Internal Control Systems and Adequacy

The Company has established internal control systems for ensuring optimum use of resources and safeguarding the assets. The Internal Control Systems and procedure are adequate and commensurate with the size of the Company. These are routinely tested and certified and which covered all offices, factories and key business areas. The Internal audit team reviews the quality of planning and execution of all ongoing projects and activities involving significant expenditure to ensure that management controls are adequate to yield "value for money". Though the various risks associated with the business cannot be eliminated completely, all efforts are made to minimise the impact of such risks on the operations of the Company. The Internal Control Systems and procedure are adequate and commensurate with the size of the Company. These business control procedures ensure efficient use and protection of the resources and compliance with the policies, procedures and status.

Product wise Performance

Presently the Company has been dealing in Vanaspati & Refined Oil. The details of the Vanaspati & Refined Oil business segment is as follows:

Product	Sales
	Current Year (2021-22)	Previous Year (2020-21)
	Quantity (MT)	Value (Rs. in Lakhs)	Quantity (MT)	Value (Rs. in Lakhs)
Vanaspati/ Refined Oils	95,071.709	1,34,514.15	1,01,780.424	93,139.56

Financial Highlights

Particulars	Current Year (2022)	Previous Year (2021)
Revenue from operations	1,34,514.15	93,139.56
Other Income	515.92	763.05
Profit/(Loss) before exceptional Items and Tax	4,986.25	4,058.28
Exceptional Items (Net)	0.00	0.00
Profit/(Loss) before Tax	4,986.25	4,058.28
Tax Expense	766.32	1,544.18
Profit/(Loss) after Tax	4,219.93	2,514.10
Other Comprehensive Income (Net of Tax)	163.60	12.21
Total Comprehensive Income	4,383.53	2,526.31
Transfer to Reserve	Nil	Nil
Reserves and surpluses	10,397.35	6,177.43
Earning per share	26.22	15.62

Company Performance

During the year under review total income of the Company was Rs. 1,35,030.07 Lakhs as against Rs. 93,902.61 Lakhs in the previous year. The total expenses of the Company were Rs. 1,30,043.82 Lakhs during the year as compared to Rs. 89,844.33 during the previous year. During the year the Company had earned a profit after tax of the year of Rs. 4,219.93 Lakhs against a profit after tax of Rs. 2,514.10 Lakhs in the previous year. Your Directors are putting in their best efforts to improve the performance of the Company by increasing the throughput of the plant.

Key Financial Ratios:

Particular	FY 2021-22	FY 2020-21	Changes(%)	Reason
Debtor Turnover	66.88	54.38	22.99	Not Applicable
Inventory Turnover	15.63	23.09	(32.31)	Decreased in Inventory Turnover Ratio on account of higher inventory in transit at year end.
Interest Coverage Ratio	57.43	24.03	138.99	Interest Coverage Ratio has been increased due to reduction in Finance Cost and increase in earnings before interest & tax.
Current Ratio	1.58	1.58	0%	Not Applicable
Debt Equity Ratio	1.10	0.92	19.57	Not Applicable
Operating Profit Margin	3.53	3.90	(9.49)	Not Applicable
Net Profit Margin	3.14	2.70	16.30	Not Applicable
Return on Net worth	0.34	0.32	6.25	Not Applicable