simran farms ltd Management discussions

(a) Industry structure and developments

The Indian poultry sector has grown substantially over the past decade and this growth pattern is expected to persist into the coming years. With protein being the need of the hour post-pandemic, rising demand for protein-rich products and the increasing popularity of poultry products, the sector is positioned to become an even larger contributor to the Indian economy. The poultry business drives the Indian meat market with chicken being the most common meat consumed due to its availability, affordability and nutritional benefits. More hotels, restaurants and cafes (HORECA) have developed leading to heightened demand for meat products. With these forces at play, poultry firms are expected to operate at near-full capacity in the coming years. Additionally, to accommodate the increased demand for protein-rich foods, the Indian government has lately undertaken programs to enhance meat exports and local production. By doing so, the industry is expected to develop even more and contribute significantly to the countrys food supply and nutrition security.

Further, the Indian economy is expected to grow in a range of 6.5 - 6.7 per cent in the financial year 2023-24. However, the domestic poultry industry is expected to grow 8-10 per cent in 2023-24 with the Department of Animal Husbandry and Dairying received an allocation of Rs 4,327.85 crore in the Union Budget 2023-24, an increase from Rs 3,105.17 crore in 2022-23 revised estimates. A significant part of the total allocation went to the livestock health and disease control programme i.e. Rs 2,349.71 crore. The Indian poultry sector is now a substantial contribution to the countrys economy.

Looking into the economy aspects, your Company is expected to operate at full capacity driven by volumes and realisations following stable demand and higher penetration of broiler/processed chicken as well as value-added products. Also, earnings are expected to be volatile owing to fluctuations in the raw material prices particularly maize and limited ability to fully pass on cost increases.

(b) Opportunities and Threats

Poultry farming is an important sector of agriculture economy. It plays a vital role in household nutritional security and employment generation in country. The production of poultry and consumption is predicted to grow attributed to opportunities such as shift in food habits, high speed urbanization, increase in awareness of balanced nutrition, low cost, complete source of protein and increased income. Additionally, broiler farming requires least technical skills and investment in comparison to other subsections of poultry industry i.e. Layer farming, Breeder farming etc. Further, the poultry being less expensive is having highest market among all type of meats. However, this sector also faces several threats like transportation, harsh weather, pressure on profit margins due to increased feed costs and emergence and re-emergence of diseases and outbreaks in chicks and broilers. The added increased cost of feed, DOCs (due to transportation charges and the ensuing mortality during long-distance transport) and instability of broiler rates make poultry players always at risk of loss. These factors will continue to be a major threat to the current situation and the strategic future of the poultry industry.

(c) Segment wise or product-wise performance

The Company performs in one segment only i.e. poultry and poultry farming. The Company also deals in one product only i.e. broilers. Hence no information is reportable under this head. Further, the financial performance of the Company is specified at Point No. (g) of this Report.

(d) Industry Outlook

At present, the increasing incorporation of poultry products, such as eggs and meat, in diet due to the rising health consciousness among the masses represents one of the major factors influencing the poultry market positively in India. Besides this, the growing consumption of healthy diets and adoption of active lifestyles to prevent the occurrence of various chronic lifestyle disorders, such as thyroiditis, diabetes, obesity, and arthritis, is offering a favorable market outlook in the country. Apart from this, the increasing popularity of protein-rich and eggetarian diets among fitness enthusiasts and gymgoers to improve their fitness levels, increase bone strength and enhance muscle development is propelling the growth of the market. Additionally, the rising number of quick-service restaurants, hotels, and cafes in India is contributing to the growth of the market.

(e) Risks and concerns

The poultry industry faced a deep contraction in profit margins in the last 2-3 years due to various unprecedented reasons like lack of infrastructure in terms of better logistics, marketing, processing of poultry products, drastic increases in the feed raw materials etc. As a result of that, there is a huge fluctuation in prices of poultry, broiler and eggs sometimes leading to big continuous losses to the poultry industry.

Further, due to the nature of its operations, the Company is exposed to a variety of risks that may arise as a result of environmental, operational, political, legal, human and other factors. The major risks involved in the poultry business include disease outbreak, poor parent stock, severe weather fluctuation, lack of veterinary services and transportation problems. However, these risks and concerns can be dealt with by preparing a risk management plan and therefore the Company has a Risk Management Policy in place which provides for identification of problems that can affect the business and creating plans, processes and methods to deal with the consequences of any adverse event and prevent the activities or events from having a negative impact on the business and operations of the Company.

(f) Internal control systems and their adequacy

The Company has adequate internal controls systems and the same are reviewed regularly. Beside there are documented policies and procedures to support the system, so that all the applicable rules and regulations are complied with; that all transactions are authorized, recorded and reported correctly and adequately and that all the assets of the company are safeguarded and there is no unauthorized use thereof. The Audit Committee reviews reports presented by the internal auditors on a routine basis. Further, the Audit Committee maintains constant dialogue with statutory and internal auditors to ensure that internal control systems are operating effectively.

(g) Discussion on financial performance with respect to operational performance

The Standalone and Consolidated Financial Statements of the Company have been prepared in accordance with Ind AS as per the Companies (Indian Accounting Standards) Rules, 2015 and in compliance with the requirements of the Companies Act, 2013 and the Regulations issued by the Securities and Exchange Board of India (SEBI).

The highlights on Companys financial performance for the FY 2022-23 are as follows:

(Amount in Lakhs except EPS)

	Standalone Year Ended		Consolidated Year Ended
Particulars	March 31,	March 31,	March 31,	March 31,
	2023	2022	2023	2022
Total Income	36726.87	39384.78	36726.87	39384.78
Total Expenditure	36430.31	38666.12	36417.05	38652.76
Profit/Loss before	296.56	718.66	309.82	732.02
exceptional items and tax
Exceptional items	39.01	266.52	39.77	266.52
Tax Expenses:	(13.69)	(49.39)	(10.25)	(29.28)
Profit/Loss after tax and	349.26	1034.57	359.84	1027.82
before comprehensive
income
Total Comprehensive	340.95	1033.72	351.53	1026.97
income for the year
Earnings per share	9.21	27.29	9.44	27.14
(in Rs.)

The growth of poultry sector and your Company is linked to the growth of the Indian economy. With the economy showing signs of growth, we anticipate a steady growth in the current year. Further, due to increasing popularity of protein-rich and eggetarian diets, the demand for broiler and eggs was increased in year 2022. Also, the primary ingredients of feed like maize and soybean became costly. The maize prices have grown significantly by 32 per cent on an annual basis in the first nine months of FY23. This was due to the growing global demand for Indian maize following the Russia-Ukraine conflict, which has subsequently resulted in an increase in the average feed price. Earlier, the rising soybean prices had been putting pressure on feed costs, which have moderated in the current fiscal. Therefore, the profits of the Company reduced due to severe fluctuations in the feed prices. However, in a highly volatile environment wherein the cost of poultry feed stays at higher levels, the management has made all its endeavor to deal with this challenge in the most efficient manner while trying to pass on the increase in input costs at regular intervals so as to maintain and improve the Companys financials. Therefore, it is considered that the Company has achieved admirable financial growth with respect to its operational performance during the year under review despite of the trade disruptions, lockdowns, closure of restaurants and a steep rise in production cost.

(h) Material developments in Human Resources/Industrial Relations front, including number of people employed

The Companys strength lies in its Human resources. The employees are highly motivated and well equipped to meet the organizational goals at all times. The Company maintains healthy and motivating work environment with its employees, customers & suppliers through various measures. This has helped the Company to recruit and retain skilled work force which would result in timely completion of the assignments and tasks. As on 31st March, 2023 the Company has 551 employees.

(i) Details of significant changes in the key ratios

As per the amendment made under Schedule V to the Listing Regulations read with Regulation 34(3) of the Listing Regulations, details of key financial ratios and any changes in return on net worth of the Company are given below:

Particulars	2022-23	2021-22	Change (in %)	Remark
Debtors turnover	40.75	49.31	-17.35	There has been decrease in Turnover as compared to FY 2021-22 and an increase in average trade receivables.
Inventory turnover	4.89	7.32	-33.17	There has been increase in average Inventory.
Interest coverage ratio	16.63	37.32	-55.43	There has been an increase in interest expense during the year. The EBIT has also declined due to substantial increase in cost of materials consumed. This increase in mainly due to steep rise in prices of inputs.
Current ratio	1.04	1.03	0.95	-
Debt-Equity ratio	0.03	0.01	264.03	There has been Significant increase in finance cost during the year.
Operating profit margin (%)	1.29	2.81	-54.09	There has been decrease in Turnover as compared to FY 2021-22
Net profit margin (%) or sector-specific equivalent ratio as applicable	0.91	1.95	-53.33	There has been decrease in Turnover as compared to FY 2021-22.

(j) Details of change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof

Particulars	2022-23	2021-22	Change
			(in %)
Return on Net Worth (%)	11.57	47.88	-75.83

Reason for change in Return on Net Worth: There has been decline in equity due to losses faced by the company. Further, there has been decrease in Turnover as compared to last financial year and comparatively increment in most of the expenses.

(k) Cautionary Statement

Some of the Statements in Management discussion and Analysis describing companys objective may be "forward looking statement" within the meaning of applicable Securities law and Regulations. Actual results may differ substantially or materially from those expressed or implied. Important factors that could influence companys operation include various global and domestic economic factor.