<dhhead>Management Discussion & Analysis
Report</dhhead>
Industry structure and Development
The fast-moving consumer goods (FMCG) sector is an important
contributor to Indias GDP growth. The sector includes food & dairy products packaged
food products household products drinks and others. The fast moving consumer goods (FMCG)
is the fourth largest sector in the Indian economy. The growth in edible oil consumption
presents an opportunity to build around a sustainable business model to capitalise the
growing business prospects. The rising income level and improvement in living standards
has led to steady increase in demand for edible oils. Your Companys primary business is
food processing - processing of oilseeds refining of crude edible oil for use as cooking
oil manufacturing of soya products and other consumer products. Considering the growing
population and the food habits across India edible oils form an essential part of the
modern diet. The total consumption of edible oil in India is estimated to be more in the
coming days out of which domestic supply is much less due to stagnant production of edible
oil seeds leaving demand-supply gap.
India ranks sixth in the world in terms of nominal gross domestic
product ("GDP") and is the third largest economy in the world in terms of
purchasing power parity ("PPP"). India is estimated to be among the top three
global economies in terms of nominal GDP by Fiscal 2050. Since FY 2005 Indian economys
growth rate has been twice as that of world economy and it is expected to sustain the
growth momentum in the long term. In the wake of COVID-19 Indias normal GDP has
contracted by approximately 3% in FY2021 and is expected to bounce back and reach US$ 4 Tn
by FY 2025. It is also expected that the growth trajectory of Indian economy will enable
India to be among the top 3 global economies by FY 2050
MARKET SIZE
Edible oils are indispensable to Indian cooking. The four key edible
oils palm soybean mustard and sunflower constitute 85-88% of the total consumption in
India in terms of volume. Palm oil is primarily used by the food processing enterprises.
It is also used in blended oils for domestic consumption. Palm and soybean are also being
used by the Hotels Restaurants and Caterers segment. India imports most of its palm oil
consumption. Soybean oil mustard oil and sunflower oil is largely used for domestic
consumption. The other oils include sesame oil coconut oil groundnut oil rice bran oil
amongst others.
GOVERNMENT INITIATIVES
Some of the major initiatives taken by the Government of India to
improve the food processing sector in India are as follows:
Goods and Service Tax (GST)
GST upon being implemented shall replace the multiple indirect taxes
levied on FMCG sector with a uniform simplified and single-point taxation system. A swift
move to the proposed GST may reduce prices bolstering consumption of FMCG products.
Food Security Bill
The Food Security Bill has been passed recently by the Union Cabinet.
As per the bill 5Kg of food grains per person per month will be provided at subsidized
prices by the State Governments under the targeted public distribution system. This is
expected to result in higher inflow of investments into the agriculture sector in the
coming years.
Excise Duty
Excise duty on other beverages and lemonade would be decreased to
reduce retail sale price by 35%. Excise duty on various tobacco products other than beedi
would be increased resulting in retail price of tobacco products going up by 10-15%.
Relaxation of License Rules
Industrial license is not required for almost all food and
agro-processing industries barring certain items such as alcoholic beverages cane sugar
and hydrogenated & animal fats as well as items reserved for exclusive manufacture in
the small-scale sector
COMPANY OVERVIEW
The primary Business of the company is processing of Oils seeds and
paddy Currently the Company is having capacity of 2500 TPD of Solvent Extraction Plant
Soya Refinery of 225 TPD and 500 TPD of Paddy processing Plant. SCL has adopted strategy
to convert its conventional commodity and agro based business into an FMCG Business.
STRENGTHS OF THE BUSINESS
Strong Management team:
While promoters remain closely involved preserving the heritage and
culture of the organisation the business is strongly steered and navigated by a highly
experienced and professional management team. In addition its strong advisory team is also
helping the organisation to drive its strategic agendas for future growth of the Company.
Enduring relationships:
The Company is involved in the food business for more than 30 years and
has built very strong sourcing capabilities by direct procurement of agricultural produce.
This has lead to significant cost economies in procurement.
Presence in a large and fast growing segment:
? The Company is amongst food producers of soya/Paddy/Wheat products in
India.
? The Group has sustained exposure in trading of food grains and pulses
apart from soyabean products wheat products rice oils and other food products.
Location Advantage:
? The companys operations in the heartland of the soya & Paddy
& wheat belt of India gives it a major Locational advantage reducing the logistics
costs substantially.
? The plants are located in Madhya Pradesh which is a power surplus
state and hence the Company has access to cheap and uninterrupted power supply.
? The region has good access to skilled and semi skilled labour.
Consistent Quality
By way of stringent quality assurance norms and state of-the-art
technology with a high degree of automation the Company ensures robust quality control.
Critical tests are performed at each stage of manufacturing. The Companys unwavering
focus on quality and innovation backed by deep consumer insights world-class R&D and
an efficient and responsive supply chain will further strengthen its leadership position.
To achieve successful growth and profitability the Company relies on
its greatest assets - its intellectual capital. The Companys human resource practice
revolves around LET: Learning Empowermssent and Togetherness. SCL values its employees and
invests towards capability building with a long-term orientation. The Company has been
building its skill-sets by adding new competences through hiring grooming of internal
talent and functional capability building. The Companys value-system guides its actions
and behaviour in everyday business which creates a unique culture at Sanwaria Consumer
Limited. These values are the DNA of the organisation which are ingrained in every member
across hierarchies and geographies.
Information Technology
The Company is enhancing the use of Information Technology tools and
applications in their business processes to become more competitive efficient and
effective. Its robust IT infrastructure acts as a growth enabler and helps achieve cost
leadership process orientation and higher productivity. Better IT applications are helping
us reach target market segments more cost effectively track data improve productivity
levels and maximise our returns on investment. The Company has made investments towards
various modules in line with Goods and Service tax (GST).
Research and Development
The Companys research and development programme are central to
expanding value to its products and to keeping aligned to new global flavour trends and
technologies. The R&D team is dedicated towards deepening the Companys pipeline of
products focused on consumers looking for health and convenient options.
Opportunities
In the wake of COVID-19 Indias normal GDP has contracted by
approximately 3% in FY2021 and is expected to bounce back and reach US$ 4 Tn by FY 2025.
It is also expected that the growth trajectory of Indian economy will enable India to be
among the top 3 global economies by FY 2050.
Growing awareness easier access and changing lifestyle are the key
growth drivers for the consumer market. The focus on agriculture MSMEs education
healthcare infrastructure and tax rebate under Union Budget 2019- 20 was expected to
directly impact the FMCG sector. Initiatives undertaken to increase the disposable income
in the hands of common man especially from rural areas will be beneficial for the sector.
(source https://www. ibef.org/archives/industry/fmcg-reports/indian-
fmcgindustry-analysis-september-2020)
Increasing presence on e-commerce platform:
It is estimated that 40% of all FMCG purchases in India will be online
by 2020 thereby making it a US$ 5-6 billion business opportunity. Owing to their innate
desires to live independently and well Indians are spending like never before on platforms
like e-commerce. They are now looking for products and services that can be bought with
convenience.
RISK AND CONCERNS
As per the Order of Honble National Company Law Tribunal
("NCLT") Indore Bench the Company was under CIRP with effect from May 29 2020.
CAUTIONARY STATEMEN
Certain statements in the Management Discussion and Analysis section
may be forward-looking and are stated as required by applicable laws and regulations. Many
factors may affect the actual results which would be different from what the Directors
envisage in terms of the future performance and outlook. Investors are cautioned that this
discussion contains forward looking statement that involve risks and uncertainties
including but not limited to risks inherent in the Companys growth strategy dependence on
certain businesses dependence on availability of qualified and trained manpower and other
factors discussed. The discussion and analysis should be read in conjunction with the
Companys financial statements and notes on accounts.
These documents signed by Resolution Professional on behalf of Company
pursuant to the admission of application for CIRP against the company, the Honble NCLT,
Indore bench vide its said order dated 29/05/2020 has appointed the Mr. Rajeev Goel, as
the Interim Resolution Professional ("IRP") of the Company, Further, this is to
inform you that Mr. Gautam Mittal, was appointed as the resolution Professional in second
COC meeting and his appointment was confirmed vide order dated 04.09.2020 for conducting
the CIRP and to exercise all powers and duties in pursuant to the provisions of the IBC.
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