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Gokul Refoils and Solvent Ltd

BSE: 532980 | NSE: GOKUL ISIN: INE020J01029
Market Cap: [Rs.Cr.] 232.80 Face Value: [Rs.] 2
Industry: Solvent Extraction

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Management Discussions

The year 2013-14 was passed through challenging times that culminated in lower than 5%GDP growth for the Indian Economy. With great uncertainty, volatility in both currency& commodity market, Indian Industries have passed through a tough and turbulence timedue to falling profit and substantial reduction in industrial growth. During this year,turnover has increased to Rs. 622701.84 lacs as compared to Rs. 581537.73 with profitafter tax (PAT) reduced to Rs. 308.82 lacs as compared to profit of Rs. 1292.50 lacs inprevious year.

Global Outlook- Edible Oil

World’s consumption of edible oil was to the tune of 82 million MT in 1990-91 andhas doubled in the two decades. Palm, Soya and Rapeseed oil/ Mustard oil are expected toconstitute 64% of the total global oil consumption. From the last two decade, global Palmoil consumption is growing faster than the global edible oil consumption. Global palm oilconsumption has grown by 8.7% Cumulative Annual Growth Rate (CAGR), where as global edibleoil consumption has grown by 4.4% only.

Palm oil is the more popular oil because of its lowest production cost per ton as wellas its worldwide acceptability. The proportion of Palm oil out of total world’s oilconsumption has increased from 13.8% in 1990-91 to 29% in 2012-13. More than 85% of globalpalm oil is produced by Malaysia and Indonesia.

India is the 4th largest edible oil economy after U.S, China and Brazil. Aswe can see that Asian Industries are emerged as the most promising industry at the worldand the Global cues suggest that the next round of growth will come from Asian economieslike China and India which have a growing population to feed, younger demographics, betterlifestyle choices and increased purchasing power due to local development.

The future for food Companies will be fortified by giving the discerning consumer asustainable, healthy and value added choice to create a better life. Edible oil Companieswill create customer loyalty through sustained brand building efforts by catering to thelocal tastes of the consumers.

Overview of Indian Market

The Indian market presents a significant growth opportunity for edible oil playersowing to a growing population, income growth, low current per capita consumption, lowpenetration and the fact that edible oils are a necessary part of the daily diet for amajority of Indian consumers. India accounts for a major part of global edible oil demand,which has grown over the years but the Indian oilseed crop has historically beeninsufficient to match oil demand.

India plays an important role in the global edible oil market, accounting forapproximately 10.2 % share in consumption, 8% in oil seed production, 5.2% in edible oilproduction and 13.6 % in world edible oil imports for oil year (OY) 2011-12. The Indianedible oil market is currently at 18.3 million tonnes and is currently growing at a rateof 3%- 4% per annum but still India’s total requirement of edible oils for projectedpopulation of 1.22 billion is at the projected per capita consumption of about 14.8 kg perannum, which is very low as compared to the world average of 25.91 kg/ annum. As perSolvent Extractors’ Association of India, demand for edible oil is expected toincrease to 23.1 million tonnes by 2020.

Import of edible oil has already been increased from approx 4.71 million ton in 2006-07to approx 11.10 million ton in 2013-14 which is now 61% of total consumption. Palm oil hasthe highest consumption in India followed by soybean oil and mustard oil. India hasimported approx 7.80 million MT of palm oil and approx 3.30 million MT of soft oils incomparison of approx. 8.29 million MT of palm oil and approx 2.09 million MT of soft oilsin last year. The import of soft oils like Soya degummed oil and Sunflower oils areincreasing because of lower price differential with palm oil.

In January, 2014, Government has increased import duty on imported RBD olein from 7.5%to 10% to protect interest of Indian Refiners. Now Government is maintaining dutydifference of 7.5% between crude oils and refined oils for this year,

The edible oil sector in India is largely unorganized with a few organized players.There is a lot of potential and opportunity for organized players in Indian market becauseof growing population to feed younger demographics, better lifestyle choices and increasedpurchasing power due to local development. Integrated players typically operate at highercapacity utilizations and enjoy better price realizations and margins in addition to beingmore equipped to deal with fluctuation in prices and availability of raw material.

Castor oil

India, largest producer of Castor seeds in the word, with share of approximately 85% oftotal world crop, followed by Brazil & China. In India, Gujarat leads in castor seedproduction with 70% of total seed production followed by Rajasthan & Andhra Pradesh.Majority of the castor oil produced in India is being exported through Gujarat Ports likeKandla & Mundra. World market demand for castor oil and Castor oil derivatives areincreasing at a pace of 6-7%

Focus on Brands and packed goods

The Indian housewife, both in the urban and rural sector is becoming increasinglyconscious about quality and purity, thus demanding branded edible oil products. This hasresulted in a shift of the Indian consumer from loose and adulterated edible oils tobranded offerings. With increasing quality consciousness, rising incomes andconsolidation, branded sales are likely to grow at 25-30% over the next few years.

As per feedback and response, we believe that consumers relate our brands with purity,smell and taste. Gokul Refoils’ two flagship brands Gokul and Zaika performedexceptionally well in the current year. Today, Gokul is positioned as the premium brandfor the loyal housewife while Zaika is affordable brand. All major brands of Gokul Refoilsreported robust growth for the year. Today, nearly 50% of the Company’s edible oilsales come from the branded segment and retail sales are also significantly increasing inthe proportion.

Marketing & Distribution Strategy

The Company is following a threefold strategy for increasing sales, penetrating newermarkets and strengthening the market share and brands in its current markets. Integratedmanufacturing facilities supported by a strong distribution network would allow theCompany to increasingly focus on branded retail sales.

The FMCG edible oil market can be divided in two Sections in India- urban and rural.During the year, Gokul Refoils developed a twin strategy for both these markets. Also, itsees significant growth opportunity coming from urban areas which are currentlyunder-penetrated and not exposed to its brands and products in the future. As aninitiative to increase its branded sales proportion and visibility of products in theurban markets, the Company has placed its products in Big Bazaar and Reliance Retail.

The semi urban and rural markets are under-penetrated, scattered and operate through“mom and pop” stores. Thus distribution and reach are critical to ensureproducts reach the consumers. Gokul Refoils is creating a pan-India distribution andretail network both in cities and in the interior heartlands through a combination ofC&F agents, distributors and local retailers deepening our retail penetration.

With a well spread and intricately connected distribution network the Company has awell established presence in the states of North East states , West Bengal, Bihar,Jharkhand, Orissa, Maharashtra, Uttar Pradesh, Uttaranchal, Madhya Pradesh, Delhi, Punjab,Haryana, Himachal Pradesh, J&K, Rajasthan and Gujarat.

Financial Review


Turnover achieved for the year ended 31st March, 2014 was 622701.84 lacs ascompared to Rs. 564267.89 lacs of previous year.

Employee cost was 2769.52 for the year 2013-14 as against Rs. 2238.22 lacs for the year2012-13. Earnings before interest, tax, depreciation and amortization (EBITDA) decreasedfrom Rs. 23876.72 lacs to Rs. 13751.21 lacs.

The finance cost of the Company has decreased from Rs. 19292.18 lacs to Rs. 9025.37lacs.

Depreciation (including amortization) was higher at Rs. 3743.21 lacs as against Rs.3654.56 lacs in the previous year primarily on account of addition in castor and othercapacity at Gandhdidham plant (due to capitalization).

Net Profit after tax for the current year Rs. 308.82 against Net Profit for Rs. 1292.50lacs for the previous year.

Earnings per share (EPS) for the year Rs. 0.23 compared to previous year Rs. 0.98.

Balance sheet

Reserve and surplus is increased from 31730.43 lacs in the previous year to 32039.25lacs in the year under review due to net profit of 308.82 lacs.

Long term borrowing is increased from 2312.77 lacs to Rs. 5100 lacs in the current yearas compared to previous year.

Fixed Assets is 33801.56 Rs. lacs in the current year as compared to previous year35042.14 lacs.

Trade payable increased to Rs. 107617.95 lacs from Rs. 101088.71 lacs as compared toprevious year.

Trade receivables increased to Rs. 42099.09 from Rs. 26905.95 lacs as compared toprevious year.

Cash and bank balance reduced from Rs. 86726.30 lacs to 47170.90 lacs.


Consolidated Turnover achieved for the year ended 31st March, 2014 was Rs.624794.78 lacs as compared to previous year of Rs. 566096.57 lacs.

Consolidated Employee cost was Rs. 2769.52 lacs for the year 2013-14 as against 2254.96lacs for the year 2012-13. Consolidated earnings before interest, tax, depreciation andamortization (EBITDA) decreased from Rs. Rs. 23687.54 lacs to Rs. 13805.77 lacs.

The consolidated finance cost of the Company has decreased from Rs. 19401.56 lacs toRs. 9028.72 lacs.

Consolidated Depreciation (including amortization) was higher at Rs. 3744.02 lacs asagainst Rs. 3658.05 lacs lacs in the previous year

Consolidated Net profit after tax for the current year Rs. 358.20 lacs againstconsolidated Net Profit for 988.55 for the previous year.

Consolidated earnings per share (EPS) for the year Rs. 0.27 compared to previous yearRs. 0.75.

Balance sheet

Consolidated Reserve and surplus is increased from 33524.32 lacs in the previous yearto Rs. 34131.26 lacs in the year under review due to net profit of Rs. 358.20 lacs.

Consolidated Long term borrowing is increased from Rs. 2312.77 lacs to Rs. 5100 lacs inthe current year as compared to previous year.

Consolidated Fixed Assets reduced to Rs. 33807.33 lacs in the current year as comparedto previous year 35046.97 lacs.

Consolidated Trade payable increased to Rs. 107480.12 lacs from Rs. 100974.75 lacs ascompared to previous year.

Consolidated Trade receivables increased to Rs. 52314.86 lacs from Rs. 34547.10 lacs ascompared to previous year.

Consolidated Cash and bank balance reduced from Rs. 86833.44 lacs to Rs. 47989.22 lacsdue to fixed deposit placed with various banks as margin money for opening of Letter ofcredits.

Human Assets

At Gokul, people are our most important asset and a source of competitive advantage.Gokul is committed to creating an open and transparent organization that is focused onpeople and their capability, and fostering an environment that enables them to deliversuperior performance. The Human Resources strategy is aimed at talent acquisition,development, motivation and retention. The HR function acts as an effective lever fordriving the company’s strategic initiatives and helps in integrating and aligning allpeople practices to Gokul’s business priorities. The company has an unrelenting focuson talent development.

Green Initiative- Wind Energy and Captive Power Plants

The world is seriously concerned with the matter of global warming and theconsequential impact on the global economy and the environment. It would be, thereforenecessary for your Company to undertake initiatives to support the global movementcombating the adverse impact.

As corporate citizens, we ensure that we conduct our business in a responsible andsustainable way. Energy savings, green power generation, waste recycle and pollutionreduction are some of the key areas where we ensure strict internal control. We are carbonneutral and sensitive to sustainable development for the next generation. We strive tofacilitate an environment policy framework that enables sustainable development. TodayGokul Refoils and Solvent Limited has 6 Wind Turbine Generators (WTGs) with a total powergeneration capacity of 7.5 MW in the states of Gujarat along with co-generation captivepower plant at Haldiya and Gandhidham with the total capacity of 3.7 MW. The investment ingreen power is with a single aim to create a cleaner and pollution free environment.

As a step ahead towards Green business, we are also using castor de-oiled cake as afuel to generate steam for our Gandhidham plant operations.

Corporate Governance- Self control is the Best Control

At the heart of the Company’s Corporate Governance policy is the ideology oftransparency and openness. The senior leadership at Gokul Refoils and Solvent Limited,comprising of the Board of Directors and Senior Management, sincerely believe thatcorporate accountability and corporate governance enable wealth creation. It is believedthat the imperative for good Corporate Governance lies not merely in drafting code ofCorporate Governance but in practicing it.

Company’s Philosophy on Corporate Governance is built on rich legacy of fair,transparent and effective governance which includes strong emphasis on human values,individual dignity and adherence to honest, ethical and professional conduct. Going ahead,we see qualitative participation from the independent Directors in the board to ensurestrategic inputs and world class governance practices.

Risk and Concern

The main areas of concerns are:

1. The overall scenario is also impacted by volatility in commodity and currencyprices. Your Company makes use of forward cover/ hedge mechanism to manage these risks.The Company’s raw materials as well as finished products are traded in futures marketwhich gives opportunity to hedge the price risks related to raw material and finishedgoods.

2. Government policies play an important role in the businesses of your Company. Thepolicies announced by the Government have been progressive and are expected to remainlikewise in future, and have generally taken an equitable view towards various stakeholders, including domestic farmers, industry, consumers etc.

3. Ocean freight, port congestions, storage infrastructure could contribute tochallenges faced by your Company, as substantial part of the international operations ofyour Company is within the Asian region, and given the growing import and exportactivities of your Company, the element of freight is not likely to cause any adverseeffect on the operational performance. Your Company has a pro-active information andmanagement system to address the issues arising out of port congestions to the maximumextent possible and has also made sufficient arrangements for storage infrastructure atthe ports.

4. Domestic availability of oil seeds also depends upon weather and monsoon conditionsYour Company has processing facilities at two ports as well as inland location andtherefore, the business model of your Company is designed to carry-on a majority of itsproduction operations in situations of extreme changes in weather conditions.

5. Your Company is exposed to risks arising out of changes in rates of foreigncurrencies, the exposures on this account extends to products imported for sale indomestic markets, exported to other territories. Your Company utilizes the hedginginstruments available in the markets on an ongoing basis and manages the currencyexposures pro-actively.

6. Fuel prices continue to be an area of concern as fuel is widely used inmanufacturing and distribution operations and has a direct impact on total costs.

Internal Control System and their adequacy

In view of the management, the Company has adequate internal control system for thebusiness processes followed by the Company. External and internal Auditors carry outperiodical review of the functioning and suggest changes if required. The Company has alsoa sound budgetary control system with frequent reviews of actual performance as againstthose budgeted.

The Audit Committee of the Board meets periodically to review various aspects ofperformance of the Company and also reviews the adequacy and effectiveness of the internalcontrol system and suggests improvement for strengthening them from time to time. ExternalAuditor also attends this Meeting and conveys their views on the business process and alsoof the policies of financial disclosures. When found necessary, the Committee also givessuggestions on this matter.

Risk Management

The Company has set in place the policy for corporate risk assessment and mitigationBusiness Risk Assessment procedures and for self-assessment of business risks, operatingcontrols and compliance with Corporate Policies. There is an ongoing process to track theevolution of the risks and delivery of mitigating action plans.

Gokul, like any other enterprise having national as well global business interests, isexposed to business risks which may be internal as well as external. In the broadestsense, we define risk as the eventuality of not achieving our financial, operative, orstrategic goals as planned. To ensure our long-term corporate success, it is thereforeessential that risks be effectively identified, analyzed and then mitigated by means ofappropriate control measures. We have a comprehensive risk management system in place,which enables us to recognize and analyze risks early and to take the appropriate action.This system is implemented as an integral part of our business processes across the entireGokul operations and includes recording, monitoring, and controlling internal enterprisebusiness risks and addressing them through informed and objective strategies.


It has been a tough year for consumer goods companies in India with input pressures andadverse currency movements squeezing margins. Controlling costs in an in inflationaryscenario was one of the biggest challenges faced by your Company during the year underreview. Gokul effectively tackled this challenge with a mix of strategic planning and useof intelligent sourcing mechanisms like calibrated hedging and e-sourcing of rawmaterials.

Sustainability in Challenging Times

Successful businesses are sustainable businesses –in good times and even more so,in periods of uncertainty. In good times, such companies thrive and set new performancebenchmarks. In times of challenge, they possess the inner resilience and the robustsystems that help them navigate through cross currents and pull through to the future.Tough times pose searching questions about the caliber of an organization’s people,policies and practices.

They also test the organization’s resolve to remain steadfastly by its values.Gokul’s success in addressing and overcoming challenges is a ‘live’ andcontinuing demonstration of the quality of its systems and the caliber of its people andprocesses.

A Way Forward

To meet the challenges amidst growing industry size and the need to consolidate, yourCompany has initiated several measures on proactive basis, which will allow your Companyto build-on its current presence and market share in the edible oil and Industrialproducts like castor oil and meals. Your Company is thus poised to undertake the businessopportunities arising from leadership position in the industry.

Your company is focusing on driving cost and operational efficiencies by use of latestand modern technology confirming to global standards will provide an edge to itself andits business partners and place it at a better pedestal as compared to its peers. YourCompany will continue to strengthen itself in areas of sourcing raw materials from pointsof origin, reducing inefficiencies in supply chain and logistics, capabilities to processat multiple locations, improvements in product quality and increased sales of brandedproducts in retail segment.

The consumption of edible oil in packed form, given its current low base and vastuntapped potential, offer tremendous business opportunities to expand business volumes inretail segment. Your Company, having a large base of branded sales, is strongly orientedto capitalize the growing business opportunities in this direction and set ambitioustargets to scale up its presence in branded segment. Your Company will significantlyundertake strengthening business processes for quality, scalability, sustainability andvisibility in the area of branded products. Your Company will expand its distributionchannels across the country, broad base its product range and invest in brand position /promotion programs to achieve the objective.

Your Company is strengthening the existing internal business processes, commensuratewith the internal control systems more particularly in the areas of Marketing, Informationtechnology, Human resource systems and Risk management and is thus gearing-up to meet thechallenges ahead.

Your Company is of the view that strategic initiatives in the above mentioned areaswill prove beneficial for the Company and the stakeholders in the long term.

Cautionary Statement

Statements in this Management Discussion and Analysis describing the Company’sobjectives, projections, estimates and expectations may be forward lookingstatements’ within the meaning of applicable laws and regulations. Actual results maydiffer substantially or materially from those expressed or implied. Important developmentsthat could affect the Company’s operations include a downward trend in the FMCGindustry, rise in input costs, exchange rate fluctuations, and significant changes inpolitical and economic environment in India, environment standards, tax laws, litigationand labour relations.

Shareholders are cautioned that certain data and information external to the Company isincluded in this section. Though these data and information are based on sources believedto be reliable, no representation is made on their accuracy or comprehensiveness. Further,though utmost care has been taken to ensure that the opinions expressed by the managementherein contain their perceptions on most of the important trends having a material impacton the Company’s operations, no representation is made that the following presents anexhaustive coverage on and of all issues related to the same. The opinions expressed bythe management may contain certain forward-looking statements in the current scenario,which is extremely dynamic and increasingly fraught with risks and uncertainties. Actualresults, performances, achievements or sequence of events may be materially different fromthe views expressed herein. Shareholders are hence cautioned not to place undue relianceon these statements, and are advised to conduct their own investigation and analysis ofthe information contained or referred to in this section before taking any action withregard to their own specific objectives. Further, the discussion following herein reflectsthe perceptions on major issues as on date and the opinions expressed here are subject tochange without notice. The Company undertakes no obligation to publicly update or reviseany of the opinions or forward-looking statements expressed in this section, consequent tonew information, future events, or otherwise.

Futures & Options Quote
Future Data Not present
Key Information

Key Executives:

Balvantsinh C Rajput , Chairman & Managing Director

Kanubhai J Thakkar , Non Executive Director

Dipooba Devada , Director

Piyushchandra Vyas , Director

Company Head Office / Quarters:

State Highway No 41,
Nr Sujanpur Patia,
Phone : Gujarat-91-2767-222075/220975 / Gujarat-
Fax : Gujarat-91-2767-223475 / Gujarat-
E-mail : mail@gokulgroup.com
Web : http://www.gokulgroup.com


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