apis india ltd Management discussions

1. INDUSTRY STRUCTURE AND DEVELOPMENTS

Being into the business of rearing and hiving honey bees for the purpose of generation and export of honey the Company basically carries on the business of apiculture and falls in the Agricultural Industry. The Companies operated in an unexplored apiculture market and focused for bright growth opportunities in future.

GLOBAL ECONOMY

The world economy in 2022-23 faced high uncertainty due to the continued impact of adverse events of the last three years- notably the COVID-19 pandemic and Russias invasion of Ukraine. Inflation rates have skyrocketed to multi-decade highs in many countries, causing central banks to raise interest rates and slow down economic activity to bring inflation back to their targets. In early 2023, the world economy had started showing signs of stabilizing after the adverse shocks of the previous year, but this progress was disrupted by recent financial sector disturbances. Some financial institutions that relied heavily on low interest rates have been caught off guard by the rapid pace of rate increases, causing financial stress and raising concerns about stability. In such a scenario, the world economy saw growth of 3.4% with Advanced Economies growing at 2.7% and Emerging Markets posting an increase of 4% 2022 (Source: IMF World Economic Outlook April 2023).

Returning to the growth rate as seen before the series of shocks that hit the world in 2022 and the recent financial sector disruptions is becoming increasingly difficult. The tightening of global financial conditions is further hindering the recovery process, resulting in slower income growth and increased unemployment in several economies. Consequently, the outlook for economic growth in the medium term seems less optimistic. As a result, IMF has forecasted growth to fall to 2.8% in 2023 before rising to 3.0% in 2024, which is still lower than the 3.4% growth seen in 2022.

INDIAN ECONOMY

Driven by the pent-up demand, wid spread vaccination coverage, rising employment and substantially higher private consumption, India recovered from repeated waves of COVID-19 pandemic shock to overtake the UK and become the fifth-largest economy in the first quarter of FY 2022-23. However, with the global economy entering a phase of severe slowdown, India could not remain insulated from these developments. As the year progressed, Indias economic growth slowed and dropped to 4.4% in the October-December quarter from 6.3% in July- September. The slowdown resulted from an easing of pent-up pandemic-era demand, continuing weakness in the manufacturing sector, and the fading of the pandemics low base effect. But in the fourth quarter, Indias economic growth accelerated to 6.1%, boosted by government and private capital spending. This has resulted in full year growth of 7.2%, a level that makes it the worlds fastest-growing major economy.

Despite the headwinds, India emerged as the fastest growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong growth trajectory.

Outlook

India is primarily a domestic demand-driven economy, with consumption and investments contributing to 70% of the economic activity. With more than 100 unicorns valued at US $332.7 Billion, India has the third-largest unicorn base in the world. The government is also focusing on renewable sources to generate energy and is planning to achieve 40% of its energy from non-fossil sources by 2030. The increased capital spending on infrastructure and asset-building projects is set to increase growth multipliers for the economy.

INDIAN FMCG SECTOR

The Consumer Packaged Goods (CPG), or Fast- Moving Consumer Goods (FMCG), industry in India is one of the main drivers of the Indian economy. This sector has been reporting good growth even during the COVID years, when most other industries were reeling under a demand crunch, riding on strong consumer shift in favour of food products. While the sector continued to move forward on the growth track in the new fiscal, the operating environment turned challenging as the year progressed, marked by unprecedented inflation and its consequential impact on consumption. The frequent price increases and an overall slump in economic activity put pressure on the purchasing power of consumers particularly in Rural India. The Central banks decision to increase interest rates during the quarter to tame Inflation added to the slowdown. Volume growths were heavily impacted by high rates of inflation.

The slump was more pronounced in the heartland or rural India where consumers downgraded to affordable and lower priced packs, and rural growth rates remained below urban growths for all four quarters of the year. The emergence of new-age channels like Modern trade and e-Commerce helped urban markets report strong growth even as traditional channels witnessed a slight slowdown.

Despite near term consumption pressure, there are some green shoots which are emerging such as moderating inflation, improving consumer confidence and increase in government spending. This should help revive demand and drive consumption of consumer goods in the future.

2. OPPOTUNITIES AND THREATS

There is a huge opportunities for honey market to grow in India because of availability of raw material and other incentives provided by the Government. The opportunity in honey product will remain high considering enhanced demand in the international market as well as increase in consumption of domestic market. In India there is ample opportunity for new Retail food business taken up by the company as being increase in per capita income and growing spending on leisure activities.

Due to inflationary pressures, the fluctuation in prices of raw material and high prices of packing material will remain a major threat for honey market. But your Company is taking steps by negotiating with the buyers to get the requisite prices. In the Retail Food Division the product category being new in India, Company has to establish it among consumers and match the Taste preference of customers.

Fluctuation in Foreign Currency rates may result into both opportunity and threat for us since your Company is predominantly is Export oriented.

3. OUTLOOK

The Company will continue to explore the honey market as a whole and even aims at business expansion and exploration of unhidden areas of work.

4. RISK AND CONCERNS

Due to Increase in demand for the Raw Honey there might be an increase in the price of Raw Material which in turn might affect the margins of the company. The Competition is expected to be more aggressive driving the price pressures. Uncertainty in global economic growth coupled with inflationary pressures might impact the growth of the Company. For its Food division company has to compete with already well established Food chain operators and make a niche for its product in the highly competitive market.

5. RISK MANAGEMENT:

Your Company has laid down procedures to inform the Board members about the risk assessment and risk minimization procedures. The Company is exposed to risk from foreign exchange and price risks.

Foreign Exchange Risk

The Companys policy is to actively manage its long term foreign exchange risk within the framework laid down by the Board. A Volatile dollar rate is always a threat for the business but the Company had minimized such risk by taking dollar based fund facilities from Banks.

Price Risk

There is substantial increase in Raw Material Prices. But your Company is continuously negotiating with the existing vendors to get the requisite price hike.

6. INTERNAL CONTROL & THEIR ADEQUACY:

Your Company believes in formulating adequate and effective internal control system and implementing the same to ensure the protection against misuse or loss of assets and interest of the Company are safeguarded and reliability of the accounting data and accuracy are ensure with proper checks and balances.

The Audit Committee meets periodically reviews the effectiveness and suggests improvement for strengthening them. The culture of self-governance and internal control sustained through varied set of activities including well defined policies and selfcertification on adherence to the policies and procedure. Good governance, sound internal controls forms the habitat in this environment.

The Audit Committee of the Board of Directors, Statutory Auditors and the Business Heads are periodically appraised of the internal audit findings and corrective action taken.

7. SEGMENT WISE PERFORMANCE

Segment wise reporting is not applicable to the Company for the year 2022-23.

8. FINANCIAL OPERATION AND PERFORMANCE:

In the current year, your Company has been successfully achieved the Standalone Net Sales of 33,196.96 Lakh as compare to previous year 29,522.37 Lakh. The Companys Exports of 15,849.12 Lakhs as compare to previous year 12,944.38 Lakhs during the year under review.

During the year, Companys profit before tax has amounted to 1375.66 Lakh (previous year 982.41 Lakh). Earnings per share were 14.93 as compared to 10.51 for the previous year.

Table: 1: Consolidated Income Statement Summary

All figures are in Lacs, unless otherwise stated	FY 2022-23	FY 2021-22	Growth % (Y-o-Y)
Net Sales	33,198.97	29,524.72	12.4
Other operating Income	-	-	-
Revenue from operations	33,198.97	29,524.72	12.4
Material Cost	21,512.38	19,683.11	9.3
% of Revenue from Operations	64.80	66.67
Employee expense	1,886.39	1,873.46	0.7
% of Revenue from Operations	5.68	6.35
Advertisement and publicity	1,965.47	2,399.76	-18.10
% of Revenue from Operations	5.92	8.13
Other Expenses	4,420.79	4,543.43	-2.70
% of Revenue from Operations	13.32	15.39
Operating Profit	3,413.95	1,024.45	233.10
% of Revenue from Operations	10.28	3.47
Other NonOperating Income	0.61	4.18
EBITDA	2,330.49	1,929.26	20.80
% of Revenue from Operations	7.02	6.53
Finance Costs	742.44	727.43	2.10
Depreciation & Amortization	274.71	287.33	-4.40
Profit Before Tax (PBT)	1,313.35	914.50	43.60
Share of profit / (loss) of joint venture	1,089.29	235.61
Exceptional item(s)	24.18	-57.45
Tax Expenses	565.29	331.93	70.30
Minority Interest - Profit/ (Loss)	-	-
PAT (After Minority Int.)	1,825.34	798.17	128.70
% of Revenue from Operations	5.50	2.70

Table. 2: The key ratios arising out of the Companys performance comprised:

All figures are in Rs Lacs, unless otherwise stated	FY 202223	FY 202122	% Change
Inventory Turnover Ratio	2.22	1.74	27.65
Debtor Turnover Ratio	4.06	4.10	-1.07
Creditor Turnover Ratio	3.20	3.07	4.43
Interest Coverage Ratio	2.84	2.75	3.10
Current Ratio	1.54	1.47	5.04
Debt Equity Ratio	0.71	1.08	-33.92
Operating Profit Margin (%)	10.28	3.47	196.22
Net Profit Margin ratio (%)	2.40	2.16	11.55
Return on Net Worth	19.35	16.63	16.39

Inventory Turnover Ratio

Inventory Turnover Ratio saw an improvement from 1.74 in FY 2021-22 to 2.22 in FY 2022-23, due to seasonality of Honey and dates.

Debtor Turnover Ratio

Debtor Turnover Ratio saw a decline from 4.10 in FY 2021-22 to 4.06 in FY 2022-23, due to timely realization of payment from the debtor.

Creditor Turnover Ratio

Creditor Turnover Ratio saw an improvement from 3.07 in FY 2021-22 to 3.20 in FY 202223, due to purchase of seasonal product of Honey and dates to capture market the time of realization and full of stock.

Interest Coverage Ratio

Interest Coverage Raito saw a improve from 2.75 in FY 2021-22 to 2.84 in FY 2022-23, due to effective utilization of working capital requirement.

Current Ratio

Current Ratio saw a improvement from 1.47 in FY 2021-22 to 1.54 in FY 2022-23, due to repayment/decrease in the current liability of the Company.

Debt Equity Ratio

Debt Equity saw decline from 1.08 in FY 202122 to 0.71 in FY 2022-23, due to decreases/ repayment in the debt of the Company.

Operating Profit Margin

EBITDA in FY 2023 stood at 2330.49 Lakh registering a 20.80% growth over 1929.26 Lakh in FY 2022. In terms of percentage to revenue to operations it stood at 7.02% in FY 2023 against 6.53% in FY 2022. The increase was mainly due to reduction in operational and administrative expenses, which was temporary in nature.

Net Profit Margin

Profit after Tax was at 1825.34 Lakh against 798.17, a growth of 128.70% over previous year. Net margins stood at 5.50% in FY 2023 against 2.70% in FY 2022, due to increase in sale and reduction in operational and administration expenses.

Employee expenses

Personnel expenses has slightly decline by 5.68% of revenue from operations in F.Y 2022-23. Total cost stood at 1886.39 Lakh in FY 2023 against 1873.46 Lakh for FY 2022, the increase was due to retrenchment & operational and administration expenses.

Return on Net Worth

Return on Net Worth increased on account of strong growth in profit after tax during the year.

The companys has generated profit after tax 1825.34 Lakh in the FY 2022-23 as compare to 798.17 in the FY 2021-22. .

9. STRENGTH

Core competency in the unexplored market segment and huge growth prospects in honey and honey related products marks the strength of the Companys product.

10. INDUSTRIAL RELATIONS AND HUMAN

RESOURCE MANAGEMENT:

In an ever-increasing competitive and challenging world, Apis India continues to focus on its people pillar as a key to achieve its core objective of sustainable growth and social objectives. The Company acknowledges the role of the Human Resource (HR) community as a strategic business partner in the organization and continues to invest in a wide variety of HR activities.

During the year under review, the Company continued with its HR strategy and a sharp focus on the following themes:

Employee Engagement

With One Family as one of the core values of the Company, it actively engages with the employees at all levels. The Company looks at engagement as beyond the traditional event- based engagement programmes and at a holistic engagement initiative where the endeavor is to provide clear job knowledge; clarity about the scope of opportunities (both horizontal and vertical); an environment, which promotes learning and sharing; open communication and others. The Company endeavors to provide an engaging environment by ensuring that the above parameters are met. A robust Internal Job Posting system ensures that employees are aware of available prospects. The leadership team actively participates in the quarterly town halls as it answers any and every questions from the employees. Finally, each location has a list of events to continuously engage with the employees and, at times, their families as well. The Hungary plant has a regular programme for employees and their family members called Family Factory Visit and gives an opportunity to the closest relatives of the employees to visit the plant. The Indian plants held various events like festival celebrations, Womens Day celebrations, running and wellness programmes and others.

Performance Management

The performance management process, Horizon, completed its third annual cycle. The Companys performance management system gives ample opportunities to each employee to discuss not only about the performance but also the opportunities available in the organization.

Talent Management

In an increasingly competitive world, talent management has become a key focus area for the HR function in the organisation. The Company actively endeavors that its employees look at job enlargement and rotation opportunities. For the Company, supporting such a journey is a win-win arrangement wherein employees discover avenues of growth and the organisation can leverage well-inducted candidates with a deep understanding of its business and culture. Multiple people across the organisation were given the opportunity to work in new functions or move to a new location.

As on March 31, 2023, in all there were 189 employees on the rolls of the Company. Industrial relations situation in units of the Company continued to be cordial and peaceful.

11. CAUTIONARY STATEMENT:

Statement in this report describing the Companys objectives, projections, estimates and expectations may be forward looking statements within the meaning of applicable laws and regulations. Although we believe our expectations are based on reasonable assumptions, these forwardlooking statements may be influenced by numerous risks and uncertainties which includes raw material availability, prices, cyclical demand and changes in government regulation, tax regimes and other incidental factors that could cause actual outcomes and results to be materially different from those expressed or implied.