Pursuant to Regulation 34(2) & 53(F) along with Schedule V of the SEBI (Listing
Obligations and Disclosure Requirements) regulations, 2015
White Organic Agro (BSE: WHITEORG) is Mumbai based only listed entity in organic
farming and retail, with a vision to empower the farmers and tap ever-expanding market for
organic food. Mr. Darshak Rupani, Managing Director of White Organic Agro, who took over
the Company in 2010, initially was into diamond trading activity. In the year 2016, he
however realized diamond trading business was losing its sheen and soon led the Company to
diversify into organic food business.
Organic Food Industry Structure, Development & Opportunities:
The scope of organic farming in India has been tremendously increasing. This is mainly
due to the new researches made in the field of agriculture. It has facilitated the farmers
with new measures for more production eliminating the activity of bypass methods. New
techniques which are being innovated are purely related to soil health during organic
farming. Apart from these reasons, the discovery of various new diseases arising out of
artificial production of fruits and vegetables have clearly set the minds of people for a
shift to organic farming.
Health conscious is another important factor for this huge transformation. It could
also be named as the race in the new lifestyle. Consumption of organic products basically
spreads from one person to other. To make it clear, people have reshaped health into
lifestyle. This opens up opportunities for many new entrepreneurs in India with a huge
response from the consumers. The setup costs and maintenance is extremely less since the
method does not involve the use of artificial products for farming
Opportunities in Organic Farming Business
Under organic farming itself, there area number of categories. You can choose any one
of them and specialize in that particular category. By doing this, you will have clear
focus in what you are doing and leadership in the market can be achieved.
If you have a well established contact and proper financial background which can
withstand loss at times, you can concentrate on production of organic fruits and
vegetables which make up about 75% of the market. The term loss was indicated due to
perishable nature of fruits and vegetables. In this category, its either success or loss.
Organic medicines are another group of products which will generate more income. The
shift is not to organic food alone, medicines are also taken when it is organically
produced. Medical field is now prescribing organic medicines for patients to have faster
recovery. If farming alone is not your aim, you can work with researchers or Biotech
professionals to come up with new formulas of medicines with your organic products. Here,
you are elevating the business from raw materials to the next level of finished goods.
Organic farming is a newly emerging concept with huge success and this newness can be
used to increase your profits. On a business view, the demand for these products increase
when the supply is less. Therefore, prices can be higher than the normal prices and this
will not affect your sales. From reports, it is said that there are less outlets for
buying organic products and this means there is a mismatch is supply and demand.
Why Organic Farming in India?
The government of India is now majorly into the development of environment and
agriculture. Organic farming binds both of it in one pack. Since organic farming uses only
bio products which are completely safe for the soil and the environment, the objective of
eco-friendly concept is achieved.
So, starting an organic farm is supported by the Indian government even in financial
aspect. Also, from the point of economic status of the country, organic farming definitely
plays a vital role in increasing it. This is because, there is no need for the use of
imported synthetics for production and this initiates the use of local resources.
There is a huge difference between the conventional farming and organic farming in
sales. Products produced from conventional methods are now considered to be of lower
quality when compared to the ones produced from organic farming. India has been adopting
various methods to increase its export value. In that context, agricultural sector takes
the major part. Export of rice, cereals, cotton etc were previously exported, but profits
gained were less. Now, due to organic farming the cost of production being less, allows
you to have more profit which indirectly affects the governments export value in a
positive way.
Products which have more value in Organic Production
After analysis, it is seen that the production of rice and spices can bring regular
income to new growers. Non-perishable nature of these products allows you to settle your
business taking a longer time. Apart from this reason, spices are of high demand in and
outside India. Foreign countries import spices from India in huge quantities. Thus,
production of these will provide you domestic and international opportunities.
The next in line is the production of cereals. Grading has become a trend in
conventional farming. The producers of cereals grade them according to their quality and
this has clearly shown the consumers about the quality of production. By considering this,
people now shift their interests to standardized quality of organic cereals.
In the end organic farming paves way for environmental health and public health.
employment opportunities will also increase as the industry expands. There are various
schemes for people who do not have a strong financial background. Under the scheme of
National Project on Organic Farming, the government of India offers 60 lakhs for bio
fertilizers and manures.
OPPORTUNITIES
Amid this chaos, the health-conscious generation is doing all in their fitness routine
that they think they need to keep fit and build immunity-from working out at home to
meditating to going on morning walks. Given the current world health scenario due to the
global Coronavirus pandemic, it has become indispensable to encourage people to gain a
greater sense of control over their physical health.
Continued awareness rising of the benefits of organic production and certification is
imperative, to overcome consumer confusion and the possibility of fraud. There is a need
for continuous consumer education on the meaning and value of organic production and
certification. This requires an ongoing explanation of the costs of producing and
certifying organic products: Organically approved seed, learn to manage fertility and
pests through natural methods, and locate their own market.
The main advantages of Organic Farming in India Rural Economy are as follows -
Organic fertilizers are completely safe and does not produces harmful chemical
compounds
The consumption of chemical fertilizers in comparison to organic fertilizers is always
more, especially in unused cultivable lands.
Moreover, chemical fertilizer needs huge quantities of water to activate its molecule
whereas, organic fertilizers does not need such conditions.
| Further, chemical fertilizers almost always have some harmful effects either on the
farm produce or on the environment. |
| Furthermore, it can also produce harmful chemical compound in combination with
chemical pesticides, used to ward- off harmful pests. |
| It is estimated that there is around 2.4 million hectare of certified forest area for
collection of wild herbs. |
| The actual available area for cultivation of organic agriculture in India is much more
than that is identified and certified so far. |
| India has around 1,426 certified organic farms. |
| India produces approximately 14,000 tons of output annually. |
| It is estimated, that around 190,000 acres of land is under organic farming in India. |
| The total annual production of organic food in India in the last financial year was
120,000 tons. |
| Threats |
| Competition from local and multinational players |
| Execution risk |
| Regulatory changes |
| Attraction and retention of farmers |
| Natural calamities affecting the farms and crops |
Economic Overview
The India organic food market size reached US$ 1,278 Million in 2022. Looking forward,
IMARC Group expects the market to reach US$ 4,602 Million by 2028, exhibiting a growth
rate (CAGR) of 23.8% during 2023-2028. The growing awareness regarding the health benefits
of organic food products, growing consciousness regarding the health hazards associated
with chemical pesticides and fertilizers, and increasing investments by Indian corporate
firms in agritech, agribusinesses and organic farming represent some of the key factors
driving the market.
India Organic Food Market Trends:
The organic food market in India is majorly driven by the higher uptake of organic food
among the masses, especially in the urban regions. This can be attributed to the growing
consciousness regarding the health hazards associated with chemical pesticides and
fertilizers. The demand for organic food in India is also being catalyzed by the strong
support of the government by the implementation of various government schemes, subsidies
and incentives supporting farmers who are adopting organic farming practices. Moreover,
increasing investments by Indian corporate firms in agritech, agribusinesses and organic
farming resulting in the entry of several players in the market is also fueling the
market.. Some of the other factors contributing to the market include rapid urbanization,
growing usage of bio-based fertilizers, the emerging trend of farm mechanization,
inflating disposable income levels, rising popularity of natural and clean label foods,
and extensive research and development (R&D) activities.
(Source: India Organic Food Market Size, Share, Growth 2023-2028 (imarcgroup.com)).
Product wise Performance
Our performance of the organic agro business activity has started reflecting tremendous
response from the market in almost a year of our operations. We have completely migrated
to a pure play organic agro activity providing our inhouse and outsourced services though
the entire value chain of the organic activity (i.e. farming, cultivation, harvesting,
processing, wholesale, retail and exports) following strict quality checks at each level
of activity.
The Company has successfully entered into the organic segment (largely unexplored
market) and has emerged as the only pure play organic agro Company in the listed space. On
account of strong backend that not only enables the Company to cater to the expected
explosive demand but also equips it to penetrate deeper and spread the Companys
geographical reach in the coming years. We are seeing a strong traction in demand for
products. Currently we have over 250 products in portfolio and planning to add more in the
near future.
The Companys focus continues to remain on core organic farming activity with not more
than 1,000 acres for a particular crop. Company is not only targeting the viable aspect of
rapidly growing concept of organic food, but also putting great efforts to educate the
larger society to understand and adapt to better and healthier ways of livelihood.
The Companys performance in last couple of quarters represents the acceptance of
products. The Company is continuously working to take the brand "White Organics"
to the target population. For this we have planned different promotional, marketing and
advertising activities, also working towards increasing existing product portfolio and
bring more niche products in product offerings. The Company has witnessed great demand for
products. This gives tremendous confidence to move up the value chain and keep introducing
new products.
The Company will continue to strive towards providing the best possible services
through quality products and help build a stronger and healthier India. Companys efforts
will always be to win over the "Trust and Loyalty" of the consumers thereby
build a great brand "White Organics".
Outlook
The Company constantly endeavors to increase its product portfolio so that it can cater
to diverse customer needs and evolve as one stop solution. With this we can increase the
presence and evoke the brand "White Organics". The motive is to serve
un-adulterated organic food products and contribute considerably in the making of a
healthy India which is principles and values.
The organic industry is expected to deliver exceptional growth globally. The Companys
farming activity and diversified portfolio across food products and health and beauty
provides a wide range of product selection for increasing client engagement. As the only
listed pure play organic food Company, we have first mover advantage. Reports indicate
that the domestic organic food consumption pattern will grow by leaps and bounds riding on
increased consumer awareness and will double in India in the next 10 years driven by
Government initiatives and increased consumption.
Risks and Concerns:
The Company faces the following Risks and Concerns:
Economic Risk
Any business is in a way or other, dependent on the prevailing global economic
conditions. Inflation, changes in tax, trade, fiscal and monetary policies, scarcity of
credit etc. However, we do not expect to be significantly affected by this risk
Risks in Organic Agriculture
Risks that are similar to those in conventional farming, though they may be managed in
different ways in organic farming;
Risks that are different between organic farming and conventional farming, but that may
only be temporary, due to the recent rapid growth in the organic sector;
Risks that greatly different from those of most conventional farmers because of the
different nature of the production and marketing systems.
Production Risks
Organic farming is less restricted in their choice of crops for rotation than
conventional farmers, who risk damage to certain crops from previously applied pesticides.
Organic farming can be affected by the natural calamity, adverse weather conditions and
climatic risks that are similar for organic and conventional farming. On account of harsh
climates, bad weather such as hail or wind can destroy a crop very quickly. Any farmer
without irrigation facilities faces the risk of drought, but as organic farmers
investment in soil quality allows their soils to hold water and withstand drought better
than those of their conventional farmers. Organic producers face less risk than
conventional producers on account of chemical-free pesticides usage.
Thus, we believe we have adequate mitigation in place for trade risk.
Input Risks
Organic farming may face dearth of certified organic seeds, biological pesticides,
specialized farm equipment designed for organic cultural practices and other inputs
because the market they offer to suppliers may be too small to be profitably served by
agribusiness. Concern about the availability of good quality compost that has not been
contaminated by GMOs. The flow of credit to organic producers is limited and can be
difficult to obtain.
Transition Risk
The process of transitioning from conventional to organic agriculture may also pose
production and market risks that do not persist over time. During the transition process,
it faces a steep learning curve as they learn to control pests biologically, manage
nutrient cycles, produce different crops, and tap new markets. Crop yields may drop
initially on some farms as the soil is being rebuilt and beneficial insect populations are
restored. Farmers are unable to command organic premiums until after they have acquired
organic certification, which usually requires a three-year waiting period and which
commands high value of money.
Internal Control Systems and their adequacy
In view of the changes in the Companies Act, the Company has taken additional measures
to strengthen its internal control systems. Additional measures in this regard are fraud
risk assessment, mandatory leave for employees, strengthening background verification
process of new joiners, whistle blower policy and strengthening the process of risk
management. The Company maintains a system of internal controls designed to provide a high
degree of assurance regarding the effectiveness and efficiency of operations, the adequacy
of safeguards for assets, the reliability of financial controls, and compliance with
applicable laws and regulations. The organization is well structured and the policy
guidelines are well documented with pre-defined authority. The Company has also
implemented suitable controls to ensure that all resources are utilized optimally,
financial transactions are reported with accuracy and there is strict adherence to
applicable laws and regulations.
The Company has put in place adequate systems to ensure that assets are safeguarded
against loss from unauthorized use or disposition and that transactions are authorized,
recorded and reported. The Company also has an exhaustive budgetary control system to
monitor all expenditures against approved budgets on an ongoing basis.
Recognizing the important role of internal scrutiny, the Company has an internal audit
function which is empowered to examine the adequacy of, and compliance with, policies,
plans and statutory requirements. It is also responsible for assessing and improving the
effectiveness of risk management, control and governance process.
Periodical audit and verification of the systems enables the various business groups to
plug any shortcomings in time. As stated earlier the Company has improved effectiveness of
the risk management process wherein it evaluates the Companys risk management system and
suggests improvement in strengthening risk mitigation measures for all key operations,
controls and governance process. In addition, the top management and the Audit committee
of the Board periodically review the findings and ensure corrective measures are taken.
Discussion on Financial Performance with respect to Operational Performance
In continuation with the operational performance highlighted in the introductory
paragraph and product wise performance, the performance of the Company for the financial
year ended March 31, 2023, is as follows:
Total Net revenue stood at Rs.173.35 crore for the year ended March 31, 2023, as
against Rs.148.08 crore for the corresponding previous period last year.
The EBIDTA (earnings before interest, depreciation and tax) was Rs. 2.60 crore for the
year ended March 31, 2023, as against Rs. 10.85 crore for the corresponding previous
period
The profit after tax for the financial year ended March 31, 2023 was Rs. 1.23 crore as
against Rs. 8.78 crore for the corresponding previous period
Material Development in Human Resources
The Company has Human Relations and Industrial Relations policies in force. These are
reviewed and updated regularly in line with the Companys strategic plans. The Human
Relations team continually conducts training programs for the development of employees.
The Company aims to develop the potential of every individual associated with the
Company as a part of its business goal. Respecting the experienced and mentoring the young
talent has been the bedrock for the Companys successful growth. The Companys employees
age bracket represents a healthy mix of experienced and willing-to-experience employees.
Human resources are the principal drivers of change. They push the levers that take
futuristic businesses to the next level of excellence and achievement. The Company focuses
on providing individual development and growth in a work culture that enables cross-
pollination of ideas, ensures high performance and remains empowering.
Details relating to top employees shall be placed at the registered office of the
Company for inspection by the Members of the Company.
The Management of the Company has been diligent in drawing up the said assumptions,
expectations, predictions and forecasts as on date. However, considering the dynamic
business and regulatory environment, it assumes no responsibility to publicly amend,
modify or revise forward looking statements, on the basis of any subsequent developments,
information or events. Actual results may differ materially from those expressed in the
statement. Important factors that could influence the Companys operations include changes
in government regulations, tax laws, economic developments within the country and such
other factors globally
The financial statements have been prepared in compliance with the requirements of the
Companies Act, 2013, relevant Indian Accounting Standards. Please refer Directors Report
in this respect.
Key Financial Ratios
In accordance with the SEBI (Listing Obligations and Disclosure Requirements 2018)
(Amendment) Regulations, 2018, the Company is required to give details of significant
changes (change of 25% or more as compared to the immediately preceding financial year) in
key financial ratios. There were no significant changes in the key financial ratios as
compared to previous financial year, comparative data is as under:
| Particulars |
FY23 |
FY22 |
| (i) Debtors Turnover |
45.52 |
3.72 |
| (ii) Inventory Turnover |
0 |
22.97 |
| (iii) Interest Coverage Ratio |
4.90% |
2.08% |
| (iv) Current Ratio |
4.84 |
1.85 |
| (v) Debt Equity Ratio |
0.23 |
0.00 |
| (vi) Operating Profit Margin (%) |
1.50% |
7.66% |
| (vii) Net Profit Margin (%) |
0.71% |
5.93% |
| (viii)Return on Networth (%) |
2.26% |
16.28% |
*Net worth for the current year (2022-23) is Rs.5461.14 Lakhs and in the previous year
(2021-2022), the networth was Rs. 5391.32 Lakhs. The Same has increased due to profit
earned during the year. Retained earnings are reduced on account of tax adjustments
related to prior years by Rs.52.42 Lakhs. Current year net profit after tax is Rs. 123.60
Lakhs and has decreased by 86% percent as compared to previous year.
Pursuant to Regulation 34(2) & 53(F) along with Schedule V of the SEBI (Listing
Obligations and Disclosure requirements) regulations, 2015
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