Kothari Fermentation & Biochem Ltd

BSE: 507474 | NSE:  | ISIN: INE991B01010 
Market Cap: [Rs.Cr.] 14.82 | Face Value: [Rs.] 10
Industry: Food - Processing - Indian

Management Discussions
MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management of Kothari Fermentation & Biochem Ltd. is pleased to present itsTwelfth Analysis report covering segment wise performance and outlook.

Indian economy passed through one of its toughest phases in the financial year 2013-14.High inflation, weak demand, depreciating currency, rising cost of industrial input, tightliquidity with high cost of borrowing - all this took the consumer and investmentsentiments to a new low. At 4.7%, the country recorded its second successive year of sub5% GDP growth.

In such an environment, the growing companies are often hampered by business systemsthat simply cannot keep up with the changing requirements. Your company too faced withhigh costs of raw materials, consumables, etc. The power costs also rose by around 15%which too decelerated the growth of the company.

The company operates in only one segment of Manufacturing Yeast during the year2013-14.

Industry Structure and Developments

The Indian Yeast Industry comprises of three major companies which are manufacturingyeast including our company. The other two companies are multi-nationals. Your company isthe only Indian Company which is in the business of manufacturing of Yeast. With anexcellent team of technical and commercial professionals with expertise in yeastsmanufacture, we offer better quality products in comparison to the products of the othermultinational companies.

Opportunities and Threats

The growth of yeast market is directly linked to the increasing trend of processed andfast food items, especially bakery items. As per the current trend, India is presently oneof the most promising markets for Baker's yeast, as its demand is continuously increasingwith the rise in population and changing habits of Bakery products. India's estimated percapita consumption of bread, as compared to other European and developing countries ofAsia is amongst the lowest.

The company is constantly working to enter into markets, other than Bakeries, and hadengaged a team of talented scientists and engineers to develop technologies for themanufacturing of Yeast based products needed for Distilleries, Feed, Food Pharmaceuticalsand Biotech Industries.

But a major threat to the growth of the company is competition from Multi NationalCompanies (MNCs) in yeast industry in India. The company through its continuous Researchand Development efforts has been able to maintain the quality of yeast products ascompared with the multinational companies. Also continuous increase in cost of rawmaterials, power tariffs and fuel costs are deterrent to the growth and profitability ofthe company.

Further the yeast industries are subjected to pollution problems and the company hasachieved zero discharge of polluted water by installing MEE (Multi Effect Evaporator).

Awards and Recognitions

The company has received the First Award under the category of Private Manufacturing(Small) Organization by the prestigious Institute of Cost Accountants of India on theoccasion of its "11th National Award for Excellence in Cost Management, 2013".The Jury was headed by Dr. Justice Arijit Pasayat, former Justice of Supreme Court ofIndia.

Segment wise Performance

Manufacturing of Yeast is the only business segment of the Company during the year2013-2014. The brand names - Kothari "SUNRISE", "KF" and "FOURSEASONS" have been well established in the domestic market.

The comparison of financial data with previous year's data, is provided under theheading "Discussion on Financial Performance with respect to OperationalPerformance" later in this Report.

Future Outlook

The company is regularly reviewing its whole structure and making changes for futureimprovements. Your directors are making all efforts for increasing production during thecurrent year. The company is constantly working to enter into markets for themanufacturing of Yeast based products needed for Distilleries, Feed, Food Pharmaceuticalsand Biotech Industries. But, various control systems have been deployed for the reductionof costs and improving of the operating efficiencies 'Molasses', the basic raw material ofthe company, is a by-product of the sugar mills. And the Sugar Mills are not running in acomfortable position, thereby, affecting the availability of molasses. This fall in thesupply, have considerably increased the prices. However, continuous increase in cost ofraw materials, power tariffs and fuel costs are deterrent to the growth and profitabilityof the company. The Company is making all efforts to earn profits in current year byutilizing its available resources more effectively and efficiently.

Internal Control System and their adequacy

The Company has an internal control system with proper internal delegation ofauthority, supervision, checks and procedures. This system is reviewed and updatedperiodically in order to improve the same to meet the business requirements. The InternalAuditor of the Company has ensured adequacy and compliance of Internal Control System andthat it commensurate with the size and nature of the Company and also suggests necessarychecks and balances to increase the effectiveness of the system. The Board of Directors,Audit Committee and the Management ensure that the internal control system operateeffectively within the organization.

Discussion on Financial Performance with respect to Operational Performance

2013-14 (Rs. in lacs) 2012-13 (Rs. in lacs)
Particulars Manufacturing of Yeast Manufacturing of Yeast
a) Production (MT) 11462 9702
b) Revenue
— Net sales 5062.57 4390.50
b) Result
— Before Tax & Interest 182.40 356.05
Less:
i) Finance Exp. 126.93 118.22
ii) Other Unallocable Exp.
Net Profit before Tax. 55.47 237.83
c) Capital Employed 2807.84 2769.91

Material Developments in Human Resources/Industrial Relations Front, including numberof people employed

The Company believes that the competence and commitment of its people are the keydrivers for growth of the organization. There have been excellent relations between theemployees at various levels and the management. The managers' help employees identifyobstacles and teach them leadership techniques through training, mentoring and coaching.The Company responds to genuine grievances of employees in order to foster warm andcordial relationships between the management and the employees, increases job satisfactionof employees and ensures that employees can add value to their lives. There were 152persons directly employed by the Company during the previous financial year on an averagebasis.

Cautionary Statement

Statements in this report on Management Discussion and Analysis describing theCompany's objectives, projections, estimates, expectations or predictions may be"forward looking statements" within the meaning of applicable securities laws orregulations. These statements are based on certain assumptions and expectations of futureevents. Actual results may differ materially from those expressed or implied. Importantfactors that could make a difference to the Company's operations include global anddomestic demand supply conditions, finished goods prices, raw material cost andavailability, changes in Government regulations, tax regimes, economic developments withinIndia and other factors such as litigation and industrial relations. The Company assumesno responsibility to publicly amend, modify or revise any forward looking statements, onthe basis of any subsequent developments, information or events.

For and on behalf of the Board
Place: New Delhi Pramod Kumar Kothari
Date : 14th August, 2014 Chairman & Managing Director
   
Futures & Options Quote
Future Data Not present
Key Information

Key Executives:

Pramod Kumar Kothari , Chairman & Managing Director

Prasanna Kumar Pagaria , Director

Ratan Lal Dudheria , Director

Kapil Dev Puri , Director


Company Head Office / Quarters:

16 Community Centre,
1st Floor Saket,
New Delhi,
New Delhi-110017
Phone : New Delhi-91-011-26963167 / New Delhi-
Fax : New Delhi- / New Delhi-
E-mail : kfbl@airtelmail.in
Web :

Registrars:

Abhipra Capital Ltd
GF Abhipra Complex,A-387 G T Karnel Rd,Azadpur,Delhi - 110033

 
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