MANAGEMENT DISCUSSION AND ANALYSIS
OVERVIEW OF ECONOMY
The Indian economy has been going through challenging times that culminated in lower
than 5 per cent growth of Gross Domestic Product (GDP) at factor cost, at constant prices,
for two consecutive years, i.e. 2012–13 and 2013–14. Persistent uncertainty in
the global outlook, caused by the crisis in the Euro-area and general slowdown in the
global economy impacting the demand for exports, compounded by domestic structural
constraints such as low manufacturing base, delays in project approvals among others, and
inflationary pressures, has resulted in a protracted slowdown. GDP performance in
2013–14 from the production side (comprising agriculture, industry and services);
India’s GDP, during 2013–14, grew and marginally improved to 4.7 per cent as
compared to 4.5 percent in 2012–13. This was due to high growth in agriculture and
allied sectors, which grew at 4.7 per cent compared to their long-run average of 3 per
cent (during 1999–2000 and 2012–13), owing to favourable monsoons.
Concerns around industrial growth persist as slowdown in the industry continued due to
deceleration in mining and quarrying, and a disappointing performance of the manufacturing
sector, with growth averaging 0.2 per cent per annum in the past two years. Thus,
industrial revival is central to sustained revival of overall growth.
The services sector also recorded slow growth due to dismal performance of trade,
transport, and storage. GDP performance in 2013–14 from the demand side (comprising
consumption, investment and net exports); On the demand side, growth of private final
consumption declined to 4.8 per cent, in 2013–14, from 5 per cent in 2012–13.
Fixed investment rate declined steeply in 2013–14 due to reduction in gross fixed
capital formation by 2.1 per cent, which is mainly due to decline in private corporate
investment. This decline is because of high interest rates and tight liquidity resulting
from contractionary monetary policy followed to control inflation and prevent rupee from
depreciating.
Moderate revival of exports, coupled with decline in imports, helped improve net
exports. The share of exports in GDP increased from 24 per cent in 2012–13 to 24.8
per cent in 2013-14, while the share of imports declined from 30.7 per cent to 28.4 per
cent, resulting in improvement in net exports by 3.1 percent points of the GDP.
Inflation, fiscal deficit and Current Account Deficit (CAD); Although the average
Wholesale Price Index (WPI) inflation declined in 2013–14 to 6 per cent, vis--vis
8.9 per cent in 2011–12 and 7.4 per cent in 2012–13, it is still above comfort
level and continues to pose significant challenges. Fiscal deficit of 4.5 per cent of the
GDP in 2013–14, as compared to the budgeted target of 4.8 per cent of GDP, is
indicative of continued focus on fiscal consolidation. With a shortfall in tax revenues
and disinvestment receipts, along with higher-than budgeted subsidies and interest and
pension payments, fiscal consolidation was mainly achieved through reduction in
expenditure from the budgeted levels.
Raising the tax-GDP ratio and furtherance of subsidy reforms are essential for fiscal
consolidation.
CAD reduced to 1.7 per cent in 2013–14 from 4.7 per cent in 2012–13. This was
due to improvement in net exports brought about by restrictions on non-essential imports
and demand slowdown. Improved CAD also brought about improvement in balance of payments.
OUTLOOK FOR 2014–15
With expectation of better performance in manufacturing, improved balance of payments
situation and modest global growth revival, the economy is expected to grow in the range
of 5.4–5.9 per cent in 2014–15. This is because investment revival will happen
gradually; still an elevated level of inflation limits the RBI’s scope to reduce
policy rates; along with the expectation of a below-normal monsoon.
Growth in 2014-15 is expected to remain more on the lower side of the range given the
above, for the following reasons: (i) steps undertaken to restart the investment cycle
(including project clearances and incentives given to industry) are perceived to be
playing out only gradually; (ii) the benign growth outlook in some Asian economies,
particularly China; (iii) still elevated levels of inflation that limit the scope of the
RBI to reduce policy rates; and (iv) the expectation of a below-normal monsoon. Downside
risk also emerges from prolonging of geo-political tensions. On the upside, such factors
as institutional reform to quicken implementation of large projects and a
stronger-than-expected recovery in major advanced economies would help the Indian economy
clock a higher rate of growth. Despite some measures undertaken to address structural
constraints, reversion to a growth rate of around 7–8 per cent can occur only beyond
the ongoing and the next fiscal year.
Priorities for boosting growth include reviving investments, strengthening
macro-economic stability, creating non-agricultural jobs, developing infrastructure and
fostering agricultural development.
CONDITION OF THE INDUSTRIAL SECTORS
All round high inflation in commodities and manufactured products led to significant
increase in input costs across the sectors. In addition, crude prices moved up, which also
had an impact on transportation costs and packaging costs. Overall, Financial Year 2013-14
was a very challenging year in terms of input cost inflation and managing material costs.
1. INDUSTRY STRUCTURE & DEVELOPMENT
The Company is engaged in the manufacture and export of fresh, chilled and frozen meat
and meat products. The Products of the company are widely acceptable and consumed in a
large quantity worldwide. The Company, together with its Subsidiary Company, M/s Hind Agro
Industries Ltd. is one of the largest exporter of the meat and meat products from northern
India. Your company is trying to increase its margins and turnover by exploring new
international markets. The focus of the company is to improve the business strategy,
production integration, and enhanced economies of scale, cost reduction and aggressive
marketing, thereby increase the business by supplying the existing product range in the
existing as well as in the alternative markets.
2. SEGMENTWISE/PRODUCTWISE PERFORMANCE
Your Company has only one segment of product, which is "Fresh & Frozen
Meat". During the year under review (i.e.2013-14), as compared to the previous year
(i.e.2012-13), there has been increase in the Total Production and in the Sales Value made
by the Company.
2.1 PRODUCTIONANDCAPACITYUTILISATION
Production achieved during the year under review is 8289.486 M.T. as compared to
2346.011 M.T. during the previous year, which shows an increase of 253.34% over the
previous year. The capacity utilization as a percentage of installed capacity increased
from 9.38% to 33.16% over the same period.
2.2 SALES TURNOVER
The Company achieved highest ever turnover of Rs 15607.24 Lacs during the year 2013-14,
as compared to Rs 15163.16 Lacs during the previous year 2012-13.
3. FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
3.1 RAW MATERIALS AND PACKING COST
The Raw Material Consumed to Sales is 85.72% during the year under review as compared
to 23.34% in the previous year. The Consumption of Packing Material Cost to Sales
decreased to 0.27% in the year 2013-14, from 0.58% in the year 2012-13.
3.2 INTEREST COST
The Financial Cost in the year 2013-14 was at Rs 1067.61 Lacs as against Rs 1358.83
Lacs in 2012-13.
4. OPPORTUNITIES AND THREATS
4.1 OPPORTUNITIES
With the rich experience of the Promoters of the Company in Meat Industry and having a
sound network in the Global Market, the Company will definitely continue to achieve its
targets of being a leader in this field. The Company is having the services of a highly
qualified and experienced work force and enjoys a very healthy industrial environment for
its growth and development. The Company along with its Subsidiary Company i.e. M/s Hind
Agro Industries Limited, enjoy a significant share of Meat Export Industry and command a
greater acceptability of their products internationally. The Government is extending its
full support to the Export Industry and making its efforts in opening-up new alternate
markets for the export.
India has the largest livestock population in the world.
The decrease in the rate of INR (Indian Rupee) in comparison with the USD (US Dollar)
is the favourable condition as the company is billing to its overseas customers in USD.
4.2 THREATS
High hidden infrastructure costs like indirect taxes, poor roads, erratic power &
water supply, oil prices, low economies of scale, that continue to impede global
competitiveness and export performance, remains a cause of concern for the company.
Emerging of new players in the meat industry results in increase in competition. The
quality of raw material depends upon the health of livestock, which needs to be disease
free for being worthy of acceptance in the international market.
Since the meat and meat products of the Company are in a chilled and frozen form, the
same are highly perishable in nature. So, strict care is required to continuously maintain
the temperature to a certain freezing level during transit to avoid any contamination of
the high value products of the Company. Political unrest in the importing countries.
5. HIGH SECURITY REGISTRATION PLATE PROJECT
The Commercial Production for the High Security Registration Plate was commenced from
25th March, 2010. The said project at Baddi, in the State of Himachal Pradesh,
is in progress and we are applying for the tenders in various states. Your Company is
hopeful that the large scale work on High Security Registration Plate will start soon.
6. FUTURE PROJECTS
Your Subsidiary Company, M/s Hind Agro Industry Limited, has completed the construction
work at the site of Chennai Municipal Corporation Modern Slaughter House at Perambur,
Chennai which was bagged on Design, Build, Operate and Transfer (DBOT) basis. The plant is
ready to commence commercial production and the same may be started at any time after
redressing some local and political issues.
7. OUTLOOK
India is one of the very few economies in the world which is growing at a commendable
speed and promises a huge opportunity for exports. The economy is expected to grow by more
than 7% in the fiscal 2014-15. With more than 56% of World’s Buffalo population in
India, Buffalo meat export has huge potential. Further, Government is taking measures to
increase the export by planning to take steps in areas of increasing the supply of quality
livestock through scientific rearing practices, improvement in disease status in respect
of diseases like Foot and Mouth Disease (FMD) by creating disease free zones, better
implementation of existing plan scheme for livestock health and disease control. With all
these measures being taken up by the Government and end of Political unrest in Middle
East, your company is hopeful that the Financial Year 2014-15 will be much better.
8. RISKS AND CONCERNS
The following are the areas of concern:
The meat industry is very competitive, and the pressure continues to increase through
the entry of new players, consolidation of existing players and expansion of operations by
existing players. Changes in Indian as well as Foreign Government Policies and Regulations
present a major area of concern for the Industry.
Meat is more prone to disease which affects its export.
Volatility in the exchange rate of Indian Rupee as compared to USD is also an area of
concern.
9. HUMAN RESOURCE AND INDUSTRIAL RELATIONS
Hind’s people are the Company’s most important asset and source of
competitive advantage. All employees of Hind are considered leaders and encouraged to take
responsibility to do their best that they can while meeting business needs. Our success
depends entirely on the strength of our talent pool which we build by fostering an
environment and continually investing in them to enable them to deliver superior
performance. Our Human Resource strategy is aimed at talent acquisition, development,
motivation and retention. The Company has been able to maintain an excellent industrial
rapport with its employees with no industrial dispute or conflict. The Company’s
Commitment to maintain harmony in Industrial Relations has resulted in achieving high
productivity standards in the Industry.
10. INTERNALCONTROLSYSTEMSANDITSADEQUACY
As an intrinsic part of the overall Governance process, the Company has in place a well
established Internal Audit which covers all aspects of financial and operational controls.
The Company adheres to and abides by the strict Internal Control and Management
Information System. The Company has maintained an inbuilt Internal Audit System looked
after by a highly experienced and qualified team of professionals. It is also pertinent to
note that a summary of audit observations and action taken by the management are placed
before and discussed at the Audit Committee Meetings. The suggestions and directions of
Audit Committee are recorded and action taken accordingly.
11. SOCIAL RESPONSIBILITY AND COMMUNITY DEVELOPMENT
The Company is making its regular efforts in improving the socio–economic
environment in and around the factory, especially towards maintaining clean and green
pollution free surroundings, improving the quality of life of its suppliers, employees and
all concerned, through its efficient functioning and by taking all precautions against all
sorts of environmental hazards. Special care for conserving the scarce natural and
infrastructures resources like electricity, fuel energy, water, steam etc. is taken for
avoiding wastages. Developing and improving the agricultural resources, especially
livestock, is given an utmost priority by the Company. The Company is fully conscious of
its social responsibilities and has been discharging them to the fullest extent.
12. FORWARD LOOKING AND CAUTIONARY STATEMENTS:
Statements in this Management Discussion and Analysis describing the Company’s
objectives, projections, estimates and expectations may be ‘forward looking
statements’ within the meaning of applicable laws and regulations. Actual results may
differ substantially or materially from those expressed or implied. The risks and
uncertainties relating to these statements include, but are not limited to, risks and
uncertainties regarding fluctuation in Foreign Exchange, fluctuations in earnings, our
ability to manage growth, intense competition, wage increase in India, reduced demand for
meat, withdrawal of Government incentives, legal restrictions on export outside India,
statutory legislations and regulations affecting operations, including tax obligations and
other allied factors. The Company does not undertake to update any forward looking
statements that may be made from time to time by or on behalf of the Company.
|
ON BEHALF OF THE BOARD |
|
FOR HIND INDUSTRIES LIMITED |
| NEW DELHI |
SIRAJUDDIN QURESHI |
| AUGUST 14, 2014 |
CHAIRMAN & MANAGING DIRECTOR |
+91-9892691696
