venkys india ltd Management discussions

1. Industry Structure and Development :

During the year 2022-23, the world economy dealt with 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 gone up beyond expected levels in many countries as a result central banks in many countries raised interest rates. However, beginning 2023, the world economy had started showing signs of stabilization and it is hoped that the trend will continue. On the other hand, Indias growth continued to be resilient and Indian economy became the fifth largest economy in the world. Indias GDP is estimated to have registered a growth of 7.2% in FY 2022-23 and is expected to continue to be the fastest growing large economy for the third consecutive year. Government of Indias focus to improve infrastructure and other positive measures to increase farmers income are expected to support the economic growth. As far as poultry sector is concerned, after the setback in 2020 due to Covid-19 related issues, there has been a steady recovery and consumption of poultry products has come back to normal levels.

2. Opportunities, Threats, Risks and Concerns :

Growth of poultry sector is expected to continue in the coming years. This optimism is based on the National Institute of Nutritions recommended level of 180 eggs and 11 kgs of meat as per-capita consumption. Sizeable gap is to be filled since the present per-capita consumption is only 82 eggs and 4.9 kgs of meat. This leaves lot of scope for the growth of the poultry sector for the next 10 years at least. Lot of investment is happening in the poultry sector to create infrastructure to enhance the production capacity in number of States in India. However, for the processed chicken segment large scale cold storage capacities yet to establish and, once this happens, it will help the poultry sector to speed up the growth momentum. In terms of risks, the poultry sector faces frequent challenges due to extreme volatility in price movements of maize and soya which causes erosion in profitability.

3. Segment wise Performance: a. Poultry and Poultry Products

The Companys major business segment Poultry and Poultry Products which consist of production and sale of day old broiler and layer chicks, specific pathogen free eggs, processed chicken products and poultry feed. In the financial year 2022-23 this segments turnover was Rs. 1,751.64 Cr. as compared to Rs. 1,711.56 Cr. in the previous year. The segments profit before tax and interest was lower at Rs. 0.54 cr. as compared to Rs. 56.53 Cr. in the previous year.

b. Animal Health Products

The Company has its animal health products manufacturing facility at Pune. This segments sales turnover was Rs. 290.02 Cr. as compared to Rs. 290.03 Cr. in the previous year. Profit before tax and interest was Rs. 59.82 Cr. as against Rs. 57.01 Cr

c. Oilseed

Oilseed segment registered a sales turnover of Rs. 2,307.87 Cr. as compared to Rs. 2,567.81 Cr. in the previous year. Profit before tax and interest was Rs. 58.74 Cr. as against Rs. 134.39 Cr. in the previous year

4. Outlook

With the softening of inflationary pressure globally there is a decline in commodity prices and this is expected to support the economic growth India in the current year. Also, with the monsoon is predicted to be normal in the current year around 96% of long period average, the overall trend will be good for agricultural sector and rural economy of lndia. Since the growth of poultry sector and Venkys is linked to the growth of the Indian economy, it is expected that the poultry sector will continue to grow in the current year Though there will be some margin pressure the first half of the current year ending March, 2024, it is hoped that the financial performance of Venkys will improve thereafter, barring unforeseen circumstances.

5. Internal Control Systems and their adequacy

The internal control system is designed to ensure that all the financial and other records are reliable for preparing financial statements and for maintaining accountability of the assets. The Company has a proper and adequate system of internal controls to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and that transactions are authorised, recorded and reported correctly.

Commensurate with the size of operation, your Company has Internal Audit department which continuously reviews the internal control system by an exclusive programme of Internal Audit. The significant findings are then discussed by the Audit Committee of Directors and corrective measures are initiated. The Audit Committee also monitors the implementation of recommendations made by it.

6. Discussion on Financial Performance with respect to Operational Performance:

The Companys turnover registered a marginal decline of 3.79% at Rs.4,233.68 Cr. as compared to Rs.4,400.29 Cr. in the previous year. The Company registered a profit of Rs. 70.48 Cr. as compared to Rs. 164.78 Cr. in the previous year.

All the long term borrowings of the Company were cleared during the year. The short term borrowings of the Company during the year decreased from Rs.187.14 Cr. to Rs. 185.49 Cr. Finance cost of the Company has increased by 5% from Rs.17.58 Cr. to Rs.18.48 Cr.

Keeping in view liquidity, returns and also safety, the Company has invested certain funds in bank deposit and debt/liquid schemes of mutual funds.

7. Material Development in Human Resources

/ Industrial Relations front, including number of people employed:

In line with VH Groups corporate philosophy, the Human Resource is considered as the most valuable resource in the Company. The focus is on developing a performance culture with high standards of efficiency and innovation. Employee relations at all levels continue to remain cordial. As on 31^st March, 2023 the Company has 5,282 employees.

8. Details of Financial Ratios

Details of significant changes (25% or more) in key financial ratios along with detailed explanation for such change as compared to the previous financial year:

Ratio	As at 31 Mar 2023	As at 31 Mar 2022	Change %	Remarks
Interest Coverage Ratio	6.16	13.89	-55.66%	Reduction in Earning before Interest & Tax
Debt Equity Ratio	0.14	0.15	7.04%	-
Operating Profit Margin (%)	2.64%	5.55%	-52.54%	*
Net Profit Margin (%)	1.66%	3.74%	-55.54%	*

* Reduction in Profit margin for the year as profitability of Poultry & Poultry Product Segment and Oil Seed Segment for the FY 2022-23 have been severally affected due to steep increase in the prices of key Poultry Feed ingredients i.e. Soya and Maize. Also the realizations from Sale of day old chicks & grown up birds, de-oiled cake & oil were lower as compared to the FY 2021-22.