Anil Ltd Management Discussions

OVERVIEW:

The Indian Economy is on a sustained growth phase and if some estimates from IMF and other institutions are to be believed, the Indian Economy is said to be in a much better position as compared to other economies. The vision ahead looks good for India as an emerging Economy. The latest estimates predict India’s economic growth to be at 7.5% in this year followed by further acceleration to 7.8% in 2016-17 and 7.9% in 2017-18. The reducing crude prices together with economic reforms has given a boost to domestic demand and allowed India to achieve faster growth despite sluggish exports.

On the other hand the global business has witnessed a deflationary business environment during the year. Economies like India, who are dependent on imports of various items, were helped by the above phenomenon to maintain and improve their economic scenario. Depending on the product profile it also had a positive as well as negative impact on economies of these countries.

The India Meteorological Department has predicted normal or in excess monsoon for the year 2016, and India, being a major agricultural country, would be relieved from the misery of drought of past two years. It is predicted that the rains in 2016 would be between 104 and 110 percent of the normal average and it will be fairly distributed across the Country. However, sluggish performance of private sector, pressure from implementation of the 7th pay commission and a potential increase in prices of products, which India mainly imports, in the coming year would be risk factors for the Economy. The acceleration in growth however can be achieved by the reforms like implementing GST, power sector reforms, better export growth and judicious use of allocated resources for boosting growth by the states.

BUSINESS OVERVIEW:

Your Company has achieved a turnover of Rs. 114164.54 Lakhs in Financial Year 2015-16 in comparison to Rs. 93270.86 Lakhs in financial year 2014-15 and earned Rs. 4925.58 Lakhs from exports. Profit After Tax (PAT) of the Company increased to Rs. 5559.34 Lakhs in 2015-16 from Rs. 5493.35 Lakhs in 2014-15. The Earning per share (EPS) reached to Rs. 53.10 for the year 2015-16 from Rs. 52.42 in 2014-15.

While the performance for FY 2016 is satisfactory, it would be appropriate to mention certain material developments which are likely to adversely impact the company’s performance in near term.

Agro-commodities like maize are primary inputs for our production are mainly grown in rain-fed areas. Last two years of drought have curtailed supply of these agro-commodities. The draught impacted us in two ways, one our input cost went up because of rising agro-commodity prices, two our sales and collection in rural markets got impacted due to pricing being under pressure and collection being slow. The higher agro-commodity price which we were not able to pass on to the markets has put pressure on our margins. Poor collection resulted in higher borrowing and higher interest costs. The prices of Maize have increased significantly and its adverse impact is likely to be felt in FY 2016-17.

As the overall economy has also remained sluggish, the Paper and Textile industries specifically are not faring well. Due to the sluggishness in the economy and these industries not doing well, the margins from sales to these industries have also been under pressure. Due to this, extended credit had to be provided to these industries.

With the manufacturing facility at Bapunagar now being in the midst of the city, surrounded by residential and commercial areas, your company constantly and regularly faces environmental and logistic challenges. As the process of manufacturing starch from maize has a typical smell, there are frequent complaints made by the people residing in the surrounding area to the Environmental Agencies/AMC.

Your Company is also facing a huge challenge on the logistics front as the trucks movement is allowed only between 10 p.m. and 6 a.m.

In view of the aforementioned problems, your Company is working out a long term plan to permanently resolve the said issues.

ENVIRONMENT, HEALTH AND SAFETY (EHS):

Your Company on a regular basis makes investments in the environmental areas. Your Company has invested in ETP and the Boiler for its smooth functioning and up keeping during the year under review. Every year at ANIL we celebrate "The World Environment Day" on 5th of June, with a pledge –‘We love our Mother Nature’–. The employees and workers participate in this in large numbers.

Your Company ensures that it gives high priority to work life balance, to achieve the same it has taken various initiatives through employee engagement programs. Towards this end we had organised medical camps, yoga sessions, sessions on sanitation and also educated our team on the importance of a clean environment around their homes and the work place.

Your Company maintains high priority towards keeping the highest standards of safety norms. We encourage employees and workers to become familiar with safety equipment. During Safety Week celebration different Safety competitions were organized for Staff & Workers like Slogan writing competition, Essay writing competition, Poster making competition & Safety Quiz competitions. A training session was conducted on Safety which also included Fire

Mock drill for awareness to use Safety Equipment like Fire Extinguisher & Fire Hydrant Line.

INTERNAL CONTROL SYSTEM & THEIR ADEQUACY:

Internal control system includes review of internal control over financial reporting. Your Company has a separate Audit Team comprising of experts in the field of Audit and System, the Company has also appointed "M/s. Shah & Patel", Chartered Accountants as an independent internal auditor, who monitors systems and processes for ensuring the prudent financial control, accountability and integrity in every part of our organization.

CERTIFICATIONS

Your Company is an ISO 9001:2008 certified Company and along with this the Company has obtained HALAL, GOTS and KOSHER Certificates also.

HUMAN RESOURCES / INDUSTRIAL RELATIONS:

Human Resource brings energy and synergy in the organization and acts as a catalyst in bringing about a wholesome development in our work-life. It has been our constant endeavour to come up with initiatives that would support and enable our people to perform better. Your Company has separate portal facility for its employees to give them easy access to organizational information.

With a view to foster a culture of intellectual cross pollination and to equip every employee with modern techniques, during the year under review your Company has organized seminars, programs on developments of skills and has also organized various tournaments and competitions round the year, which fosters healthy competition amongst the employees and develops the spirit of sportsmanship. To create a self-motivated system, ANIL has also organized cultural activities, festivals, seminars and talks periodically for the all-round development of its employees.

Opportunity & Strength

Your Company believes that competitive strength includes leadership in providing innovative solutions. With the retail and the health care industry growing the demand for our products in the food, feed and pharma industry is also growing. The opportunity for growth in these industries for our products is good. With a strong R &D focus on development of products for the above industries there is a very good opportunity to increase sales in these industries.

Threats & Risks

Your Company recognizes the importance of a well-structured system to identify and manage the different elements of risk. Pricing and availability of various agro commodities and demand from rural markets is dependent on the monsoon, which is a risk. There are various other risks pertaining to environment problems and logistic problems created due to location within city limits, weakness in textile and paper industry, development and retention of human resources, compliance and regulatory activities, data security and recovery systems. To ensure our long-term corporate success, your company has effectively identified, analysed the risk factors and will mitigate by appropriate means long term plans to negate these threats.

FORWARD LOOKING STATEMENT:

Certain statements in the Management Discussion and Analysis which address the Company’s objective, projections, estimates, expectations may be "forward-looking statements" within the meaning of applicable laws and regulations in force. These are based on certain assumptions and expectations of future events, the Company cannot guarantee that these are accurate or will be realized exactly. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company’s operations include, among others, economic conditions affecting demand / supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws and other statutes and incidental factor. The Company assumes no responsibility to change/modify any forward-looking statement on the basis of any subsequent developments or events.