Aries Agro Ltd Management Discussions.

Forward Looking Statements

This report contains forward looking statements, which may be identified by their use of words like ‘plans, ‘expects, ‘will, ‘anticipates, ‘believes, ‘intends, ‘projects, ‘estimates, or other words of similar meaning. All statements that address expectations or projections about the future, including but not limited to statements about the Companys strategy for growth, product development, market position, expenditures and financial results, are forward looking statements. These forward looking statements, which may include statements relating to future results of operations, financial condition, business prospects, plans and objectives, are based on the current beliefs, assumptions, expectations, estimates, and projections of the Directors and Management of the Company, about the business, industry and markets in which the Company operates. These statements are not guarantees of future performance, and are subject to known and unknown risks, uncertainties, and other factors, many of which are beyond Companys control and difficult to predict, that could alter actual results, performance or achievements to differ materially from those in the forward looking statements. Such statements are not, and should not be construed, as a representation as to future performance or achievements of the Company. In particular, such statements should not be regarded as a projection of future performance of the Company. It should be noted that the actual performance or achievements of the Company may vary significantly from such statements.

OVERVIEW

Overview of Industry:

The Company is part of the growing specialty plant nutrition industry, which is a niche sector within the crop nutrition segment of agricultural inputs. During the year under review the monsoon was at 110% of the LPA (Long Period Average). Only 5 out of 36 Subdivisions recorded deficient rainfall. This implies that 85% of the total area of the country received normal or above normal rainfall. This favourable situation continued in July, August and September 2019 after a slightly late monsoon onset during June 2019. Even the Rabi season had favourable reservoir levels and the Company was able to secure winter season business as planned. However, during the month of March - starting March 22nd 2020, the nationwide lockdown due to Covid-19 pandemic began and this affected the financial year end business to negligible extent. Effectively the sales for the year closed by 2151 March 2020 since nothing was open past this day.

On a standalone basis, the Companys gross revenue increased by 15.98% from Rs.320.31 Crores to Rs.371.50 Crores. On a consolidated basis, international sales were suspended due to nonmanufacturing in UAE facilities.

Manufacturing Base

The total capacity utilization currently stands at 62% of the total installed capacity of 95,400 MT p.a. in India. During the year under review, import substitution continued due to full scale manufacturing at Hyderabad and Chhatral facilities of items that were previously imported. The manufacturing unit at Fujairah, UAE began the process of securing power connection and restarting the machinery for manufacturing of our products. However, due to lockdown conditions, the commencement of production will be delayed by few months. However, it is expected to commence operations in 2020-21. In the meanwhile, fixed costs have been reduced to bare minimum in UAE. Increased focus on the strengthening of the Indian manufacturing base has been extremely beneficial to improve the profitability of the Company.

HIGHLIGHTS & KEY DEVELOPMENTS Highlights

Financial Year 2019-20 was characterized by a very stable and robust demand scenario and the quarterly share of revenue was as under:

Particulars Percentage Share in Annual Revenue 2019-20
Q 1 21.94%
Q 2 30.41%
H 1 52.36%
Q 3 28.53%
Q 4 19.11%
H 2 47.64%
Annual 100%

Stringent cost control measures strengthened with a continued focus on domestic manufacturing showed increase in profitability (PAT) by 4.78%.

Orders received during the annual booking bazaars have assisted in better working capital management. Aries flash sales were conducted for the third year running in April - May 2019.

On a consolidated basis, consolidated PAT showed an improvement in line with domestic business.

Annual Bookings for the year 2019-20 were conducted entirely online and the flash sales during April 2019 led to the total booking of Rs.510.71 Crores from 1431 distributors and dealers. This has enabled well-planned manufacturing and distribution throughout the year.

The following seven products were introduced in FY 2019-20

Canemin

Soymin

Grapemin

Hortistar

Majorsol (Wheat Special)

Majorsol (Paddy Plantation Special)

Trishool (Neem Cake)

Key DEVELOPMENTS

The following were key events during the year;

1) Chairmans Club Distributors Meeting and All India Annual Dealers meeting was conducted in Hyderabad in April 2019 with top management, region and state heads and strategic partners to finalize plans for 2019-20.

2) Business meeting with International prospects in Brazil in May 2019.

3) Southern Region customer meet at Tanjore in June 2019.

4) Go Live of the Aries Integrated Order Management System started with Andhra Pradesh / Telangana region in July 2019.

5) Annual Rural Marketing Growth Strategy Summit was held in Mumbai in August 2019.

6) Aries Excellence Mission to Israel to meet Tel Aviv University, Israels Ministry of Agriculture and innovative farmers in urban and rural areas of Israel - September 2019.

7) Analytical Analysis workshop was conducted by our Quality Control team in September 2019 at our Head Office and 20 Nos. of members of Indian Micro-Fertilizers Manufacturers Association (IMMA) attended this workshop.

8) Half Yearly Planning Meeting was conducted in Rishikesh in October, 2019.

9) Exploratory business trip to Sri Lanka in October 2019.

10) Celebration of Aries Foundation Day on 27th November 2019 with Annadanam across the country with Aries Staff in 23

States feeding 1,10,770 number of people in 171 locations with food prepared using crops grown by Aries farmers. We also had a grand celebration of Aries Family Day in Mumbai as a capstone to commemorate this historic occasion

11) Aries was invited to speak at the Vibrant Gujarat 2019 in December 2019.

12) Strategy Meeting with Andhra Pradesh and Telangana Region at Tirupati in January 2020.

13) Planning Meeting for 2020-21 was conducted at Vaishnodevi in February 2020 followed by regional planning meetings in March 2020

14) We participated in various exhibitions viz. Krishi Vigyan Kendra

- Baramati, Maharashtra, Friends of Trees - Ruia College, Mumbai and Lalbaug Mahotsav at Mumbai. We customized our nutrients into a Grow Box, which is an excellent gifting solution ideal for Corporates and individuals as well. This Grow Box was showcased in these exhibitions. These exhibitions catered to different segments of urban customers such as agriculture enthusiast, nurseries, students, hobby growers and home owners.

15) Open interactive session on "New Age Technologies as well as Eco System of Entrepreneurship" with MBA students from Georgetown Universitys McDonough School of Business, USA

- March 2020

16) Apart from the above we had festive and other celebrations throughout the year like Ganesh Chaturthi, Dassera Pooja, Laxmi Pooja, Christmas Celebration, Foundation Day, Family day, Picnic, Potluck Lunch, Sports Day, etc. This enhanced cultural values, brings in spirit of togetherness, increases team spirit and boosts employee morale.

Recognition:

The Indian Chamber of Food & Agriculture conferred on the Company the prestigious India Agri Business Award 2019 for

consistently serving the Indian farmers.

• Felicitated by Zee Business as the "Company of the Year 2019 - Agriculture - Dare to Dream Growth Matters" for our

outstanding contribution in the Agri sector.

• For Fifteen consecutive years Aries Quality Management System was audited and certified as NS-EN ISO 9001:2015 with zero non-compliance report showing complete adherence to international quality standards.

Global Sourcing

Aries has sourced 25% of its total raw materials from overseas suppliers from Germany, Taiwan, South Korea, UAE, China and USA. Most of the purchases are based on contractual buying.

Cost Management

Though trade schemes as a percentage of sales increased by 3.12% overall PAT increased by 4.78% compared to the previous Financial Year. Gross Operating margins (EBIDTA) marginally reduced from 19.81% in FY 2018-19 to 18.23% in FY 2019-20, largely due to increase in cost of raw materials and trade schemes Man Power

The total Man Power of the Company marginally reduced from 924 to 922 during the year under review. Hundred hours of training was made mandatory for all staff in order to be eligible for promotions and also to ensure upskilling. Stringent norms have been set for performance appraisals and manpower costs were in line with presanctioned budgets.

GLOBAL DISTRIBUTION:

International clients are located in Nepal and Taiwan. Distributors in Nepal have put up their own manufacturing unit to support and increase sales and distribution network of Aries Products throughout

Nepal. Company endeavours to create export market in other countries and is confident of increasing exports.

Outlook:

The year 2020-21 is a land mark year immediately following our Golden Jubilee and the Company being classified under "Essential Commodities" continued to function from April 2020 with workforce as per the lockdown norms. The demand has been extremely strong and by adding several locations in addition to the existing factories, the Company has been able to meet the demand of farming community across India despite lockdown conditions. The year 2020-21 Annual Distributors Meet was conducted online with a record number of close to 850 dealers connecting from 26 states on video conferencing platform on 19th April 2020. This was followed by App only bookings for the year 2020-21 with record booking of Rs. 620.51 Crores conducted entirely online. We are sure with a conversion of 70 - 75%, expect to achieve Gross revenue of Rs. 440/- Crores in the FY 2020-21. In the current year we shall also introduce high density Zinc tablets, high density NPKs, Neem Oil, small range of Pesticides and specially designed nutrients for urban gardens and hydroponic farms. During the lockdown period, digitization of the entire Company and several processes was completed way ahead of schedule. This included sales, marketing, admin and accounts departments. Automation also assisted in business continuity at the manufacturing facilities and we were able to function with prescribed levels of workforce as notified at various times by the Govt. of India and various State Governments. Despite the lockdown, Vijayawada unit construction was completed ahead of time and machineries is expected to be installed and production to commence during 2020-21. Our R&D farm at Raipur is currently producing 4 crops including Moringa, Turmeric, Cucumber and Tomato. The construction of the first phase of our manufacturing facility at Raipur will also be completed towards the end of 2020

21. Our goal of achieving 100% recyclable packaging has already been achieved and new sustainable packaging solutions are being continuously identified for our flagship brands.

SEGMENTWISE / PRODUOTWISE PERFORMANCE

As the Companys business activity falls within a single primary business segment, the disclosure requirements of Accounting Standard (Ind AS-108) " Operating Segments ", are not applicable. RISK MANAGEMENT & INTERNAL CONTROLS Risk Management

The Company has a Risk Management Policy.

The Company manages, monitors and reports on the principal risks and uncertainties that can impact its ability to achieve its strategic objectives. The Companys management systems, organizational structures, processes, standards, code of conduct and behaviour together form the Aries Risk Management Systems (ARMS) that governs how the Company conducts its business and manages associated risks.

The Company has in place adequate Internal Financial Controls with reference to Financial Statements. During the year, such controls were tested and no reportable material weakness were observed.

Internal Control System

The Company has an extensive system of internal controls to ensure optimal utilization of resources and accurate reporting of financial transactions and strict compliance with applicable laws and regulations. The Company has put in place sufficient systems to ensure that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are authorized, recorded and reported correctly.

Threats and Opportunities

The external factors which could serve as possible threat to the business would include erratic spread of the rainfall and water availability in the reservoirs, fluctuations in oil and gas prices, foreign

exchange rate fluctuations, shortages of key raw materials, pricing pressure, indirect and direct substitutes, etc.

The extended lockdown, which has covered almost the entire summer and monsoon has created risks of high logistic costs, unavailability of factory labour and volatile USD and fuel rates. Therefore cost management is a top priority and every step will need to be taken to control costs and to maintain profitability despite rising cost conditions.

Opportunities would include meeting the high demand in the rural areas, which was highly unaffected by the pandemic. Agri business and farming are perhaps the only areas where lockdown was exempted. The labour, which has moved to the villages from the cities, are also creating additional labour force in the villages, leading to more land area under cultivation. The acceptance of digital methods of information delivery by farmers is creating new opportunities for promoting Aries products with limited visits by sales staff in lockdown conditions. Intensive training and development using virtual means of communication has also been carried out during the lockdown months and this knowledge increase is another emerging opportunity.

Opportunities would also include growth in product range as well as expansion into unserved markets in India and abroad. Increasing awareness levels amongst existing customers on balanced nutrition will increase number of products the farmers purchase from the Aries range.

Financial Performance:

The Companys Sales Turnover for the financial year ended March 31, 2020 increased to Rs. 37,150.08 Lakhs from Rs.32,030.91 Lakhs in the previous year, reflecting an increase of 15.98%.

Total expenses for the year was Rs.28,522.03 Lakhs as against Rs. 25,009.09 Lakhs in the previous year.

Profit Before Tax increased to Rs.2,308.80 Lakhs during the year as against Rs. 2,273.98 Lakhs in the previous year.

Tax provision for the year was Rs. 747.73 Lakhs as against Rs. 784.18 Lakhs in the previous year which translates to 2.52 % on FY 19-20 Sales.

Profit After Tax for the year was Rs. 1,561.06 Lakhs as against Rs. 1,489.80 Lakhs in the previous year which is 5.27% of FY 19-20 Net Sales.

Debtors Turnover(on Net Sales) for the year was 125 days as against 137 days in the previous year.

Inventory Turnover(on Net Sales) for the year was 171 days as against 179 days in the previous year.

Operating Profit Margin(on Net Sales) for the year was 18.23 % as against 19.81% in the previous year.

Net Profit Margin(on Net Sales) for the year was 5.27 % as against 5.62% in the previous year.

Resources and LiouiDiTY:

As on March 31, 2020, the Net Worth of the Company stood at Rs.16,817.20 Lakhs as against Rs. 15,679.80 Lakhs.

As on March 31, 2020, the Company had a Debt / Equity ratio of 0.89. The Company has not raised any Deposits from the public.

As on March 31,2020, Interest Coverage Ratio was 2.11 as against 1.92 in the previous year.

As on March 31, 2020, Current Ratio was 1.44 as against 1.41 in the previous year.

DISCLOSURE OF ACCOUNTING TREATMENT

The Financial Statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under Section 133 of the Companies Act, 2013 ("the Act") and other relevant provisions of the Act.

Human Resources:

As at the end of the financial year there were 922 employees under the permanent rolls and 300 plus under contract. We have an ongoing arrangement with few labour supplier organizations for our various locations.

We have 122 workers in our permanent employment and sizeable numbers on contract, working in our factories. The detailed breakup of the same is as under:

Sr. Particular No. Employees 2019-20
1. Skilled 19
2. Semi-Skilled 9
3. Unskilled 94
Sub- Total 122
4. Contract Labour 300
TOTAL 422

The Department wise breakup of our manpower is as under:

Sr. Name of the Department No No. of Staff 2019-20
1. Directors 01
2. Accounts, Personnel & Administration, Legal & Secretarial 165
3. Production(Staff and Workers), R&D and Spray Dryer Operators 172
4. Sales 584
TOTAL 922

Health/ safety/Environment Sensitivity

Health through nutrition:

• The Company promotes "Balanced Nutrition as a National Imperative", building resistance of crops to pests and diseases and hence lowering the usage of harmful and expensive pesticides

Environment Sensitivity:

• The Solar Power Generation System at its manufacturing unit in Hyderabad has generated 84,113 units of power during the Financial Year 2019-20, of which 71,154 units were consumed by the facility and the balance 12,959 units were sold to the grid.

• All Aries products are based on the philosophy of "Use less chemicals and use safe chemicals" - low doses of chemically inert and cost effective nutrient complexes

• The entire range of Aries Chelates are environmentally safe

• All our packaging for powders and liquids have been converted into 100% recyclable forms. Fourteen number of Aries products are organic

Non Polluting:

• All Aries factories have zero effluents and produce no harmful emissions