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 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 103% of the LPA (Long Period Average). 3 out of the 4 Kharif season months received above normal rainfall viz June (110%), July (93%) and September (135%) while August recorded deficient rainfall.

The year under review was faced with disruptions due to supply chain constraints in the second half of the year and rising input costs. There was minimal disruption due to covid related issues and all teams across the country functioned efficiently. There consistent demand for specialty nutrients during the year with almost normal crop and climatic conditions.

On a standalone basis, the Companys gross revenue increased by 15.39% from Rs. 474.49 Crores to Rs.547.52 Crores. International sales began towards end of the Financial Year with restart of manufacturing in UAE facility.

Manufacturing Base

The total capacity utilization currently stands at 69.42% of the total installed capacity of 95,400 MT p.a. in India. The manufacturing unit at Fujairah, UAE resumed operations in the month of September 2021 and has started manufacturing four value added Sulphur based pastillized products for sale in India and globally. The supply chain constraints however led to availability shortages for imported raw materials, especially those sourced from China. The Indian manufacturing base was expanded with commencement of manufacturing and repacking operations at Vijayawada and Raipur.

HIGHLIGHTS & KEY DEVELOPMENTS

HighLights

Financial Year 2021-22 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 2021-22
Q 1 23.28
Q 2 28.48
H 1 51.77
Q 3 28.61
Q 4 19.62
H 2 48.23
Annual 100%

Cost Management:

There were increase in costs with every passing quarter and profitability remained under pressure since the entire cost increase could not be passed on to the consumers. Certain departments took additional efforts to control expenses especially the treasury and marketing where certain costs were minimized to offset increased costs of imports and logistics.

Despite stringent cost control measures, the overall profitability (PAT) reduced to 4.33% in FY 2021-22 from 5.93% in FY 2020-21

The annual booking bazaars led to orders worth Rs. 574 Crores and a conversion of 95% leading to total revenue of 547.52 crores during FY 2021-22, up by 15.39% compared to previous FY.

New Products:

The R&D processes and market requirements identified the need for certain new product lines which were introduced during FY 2021-22, which are as given below:

Pesticide Range Organic Bio Range Crop Specific Nutrition Products Fisheries Micronutrient Complexes
Nirbhay Caps (Lambda- Cyhalothrin 4.9% Capsule Suspension) Rajat HD (Organic Bactericide) Humiblack (Bio Stimulant) Aries Majorsol- Maize Aquamix (Multi Micronutrient for fishes) Aribor (Boron Ethanolamine)
Paramvir (Profenofos -40 +Cypermethrin 4) Nemocheck (Organic Nematode control) Terrazinc (Zinc Solubilizing Bacteria) Aries Majorsol- Cotton Supermax

 

Pesticide Range Organic Bio Range Crop Specific Nutrition Products Fisheries Micronutrient Complexes
Dhanush (Carbendazim 12% +Mancozeb 63% WP) Orga Prom (Organic Fertilizer) Ariphos (Phosphate Solubilizing Bacteria) Aries Majorsol- Groundnut Zinconite-S
Jahaan (Hexaconozale 5 % EC) Orga Potash (Organic Fertilizer) Nitrofix (Nitrogen Fixing Bacteria) Boronite-S
Haasil (Imidacloprid 17.8 SL) Trishool (Neem Oil -Azadirachtin 1%)

Occupational Health and Safety:

Key measures introduced for occupational Health and Safety during the pandemic continue to remain in force to ensure health and safety of all staff and workers. These included second dose vaccination, online attendance and reporting and use of AIMS App and digital processes.

Successful Digitization:

The following processes are now completely digitized at Aries

1) AIMS – Aries Integrated Management System

2) Khazaana – Awarding reward points to customers and online redemptions

3) Sales force monitoring and reporting

4) 92% of payments from customers are now initiated using online banking and digital payment system.

5) Use of e-parivahaan system to automate logistics and track movement of goods across the country. It also serves as a bidding platform for manufacturing units to lower cost of material movement with a transparent bidding process

KEY EVENTS:

Aries Family – Stronger together

All our units were 100% operational after serving millions of Aries customers throughout the 2020 Pandemic. We are now prepared and equipped for operations despite any and all constraints of the continued impact of Covid-19 in the current FY.

On 10th April, 2021, we distributed Immunity Kits, Face Shield, Masks, etc as an abundant caution to secure health of all staff. We moved on as an united team and always stayed connected with all stake holders and assured them of our services at all times.

All our staff and workers were fully vaccinated before 01 st June, 2021

The All India Customer Annual Meet 2021

The All India Customer Annual Meet was conducted online region-wise on 19th April, 2021. We were constrained to have this meeting online in order to ensure the health and safety of all Dealers/Distributors and Staff. We connected with around 1124 Nos. of dealers/distributors on to a digital platform in two sessions.

IMMA National Crop Nutrition Summit

Was conducted in Delhi on 8th May 2021 under the leadership of Dr. Rahul Mirchandani, President – Indian Micro-fertilizers Manufacturers Association (IMMA)

International Organic Certification

On 20th May 2021, we received International Organic Certification from UK Cert An International Certification Body having expertize in Quality Systems, Standardisation and Training. This global certification will be an edge to us and will also assist in exports and develop business in Indias Organic states.

Initially received certification for the following products viz. Orgaprom, Orgafert, Orgapotash, Marino Gold, Endomyco, Orgabor, Trishool (Neem Cake), Humiblack and Nemocheck

The second set of 9 more products were added to the above on 19 June 2021 viz. Antox, Hydropro, Agripro, ProZinc, Calpro, Terrazinc, Ariphos, Nitrofix, Trishool (Neem Oil)

Drone Based Spraying of Micronutrients

On 20th May 2021, in the firsts of many, Aries received License from the Ministry of Civil Aviation, Govt. of India for drone-based spraying of micronutrients in agricultural fields at 25 locations across India. Notably, Aries was also first company to do aerial sprays of micronutrients using Aircraft in Gujarat way back in the 1970s. 100 Days Aries Drone Yatra began on 24-Jul-2021 in a village near Bulandshahar, with our team spraying nutrients on Sugarcane and Rice fields. The farmers and dealers who witnessed the demos and were in awe of the time, labour and water saving technology.

Planning Meetings & Product Training Sessions:

Conducted product training and brain storming sessions were conducted throughout the year – for various products like Rajat HD, Bio Fertilizers, Humiblack, Major Sol (Cotton, Maize and Groundnut), Orgaprom, Orgapotash, Super max, Zinconite, Boronite, etc Crop based training sessions on Banana, Betelvine, Cabbage, Cauliflower, Conducted Core Group Meetings for our Core team - Marketing and Operations in September 2021 and February 2022. The North and West Region heads visited Kartarpur, Pakistan Conducted virtual meeting on 6th January, 2022 for protected cultivation. Also participated in the Kisan Exhibition at Pune from 2nd to 6th February, 2022.

First Bilateral Interaction between India and Sri Lanka on Organic Agriculture

The High Commission of India – Colombo, CII National Agriculture Council and Ceylon Chamber of Commerce had a first Bilateral

Interaction between India and Sri Lanka on Organic Agriculture on 1st July 20221 and we were proud to deliver the lead address from Indian Industry and identify products and solutions that India can offer to the Island nation for safe and sustainable agriculture

Launch of Aries Mascot – Jeevan – A National Campaign

Aries is known for Quality orientation, Innovation and Trustworthiness since more than five decades. Aries Mascot Jeevan, a face that represents our identity to the world was launched on 19th July, 2021 across India. ‘Jeevan is a symbol of Strength, Knowledge and Wisdom, which are the core values of Aries. We celebrated the launch of Jeevan across India. Jeevan is a progressive farmer who not only uses our products but also spreads awareness to the farming community about the benefits of using Aries products.

Expansion of our Manufacturing Base:

20th July 2021: Aries Hyderabad Factory Shed - Phase 3 was inaugurated

26 August 2021: Mirabelle Agro Manufacturing Pvt. Ltd. a subsidiary of Aries commenced operations at Chhatral, Gujarat.

16th Sept 2021: Ceremonial Ground Breaking Pooja for new land acquired at GIDC Saykha near Bharuch, Dahej Port, Gujarat

27th January 2022: Inaugurated Phase 2 of Vijayawada factory and operations began in Feb 2022

6th February 2022: Aries Raipur Unit – Phase 1 started packing operations

Aries Virtual Town Hall Meeting

Was conducted on 27th August 2021 to commemorate the Aries Spirit that ensured business continuity during 500 unprecedented days of the pandemic. The whole country was witnessing Cost

Emergency and this meeting was to discuss and share views to firm up Cost Management Steps. Also discussed in detail New Products Campaign and Organic Products Movement.

52nd Foundation Day

On 27th November 2021 we celebrated yet another Foundation Day with hard work, passion and purpose. We trained farmers at over 300 farmer meetings, fed over 12000 people at Annadaanam activities across the country and carried out successfully ‘Aries Supermax Launch and also had bumper Shubham Sales and collection on that auspicious day.

International Buyer Seller Meet:

On 10th February 2022, Confederation of Indian Industry (CII) in partnership with the Indian Micro-fertilizers Manufacturers

Association (IMMA) organized the first edition of the International

Buyer- Seller Meet with almost 100 agricultural input companies in attendance from India, Sri Lanka, Nepal, Brunei, Mexico, United Kingdom and United Arab Emirates. The event had distinguished speakers from partner countries including, Mr. P. K. Swain, Additional Secretary, Ministry of Agriculture, Govt. of India, Mr.Rohit Vadhwana, First Secretary (Economic), High Commission of India, London, Mr. Varatharaja Kumaraguru, CEO / Country Manager,

YBSL (Sri Lanka), Mr. Raunak Goyal, National Vice Chairman, Young Indians (India), Ms. Puan Hajah Siti Juhaidah Binti Haji Mohd Junaidi, Head Unit of International Affairs and Public Relation, Dept of Agriculture and Agri Food, Ministry of Primary Resources (Brunei) amongst many others

Social Media Presence

Covid fast tracked the digitization at all levels. The Aries social media channels are active throughout due to the rapid digitization.

Agromax our You Tube Channel, Twitter, Instagram and Facebook feeds were continuously updated with stories of ‘real people within the Aries Network who had created excellence. Most of the farmers meetings were conducted online with group of farmers being trained by the Aries team for a series of online trainings, branded Aries Fasal Sabha. Farmers provided testimonials, Aries Fasal Sabhas built a weekly knowledge sharing dialogue on select crops. Whatsapp groups with staff, farmers and distributors were active with updates on everything relevant to Aries Business. Technical aspects of the Companys products were communicated digitally through a series of 15 Fasal Sabha sessions on various crops. An average reach of 20,000 audience per session was recorded on Facebook application.

Social Media Campaigns

Urban product launch: - Aries introduced a range of Products for Urban Farming, ready to nourish Urban Gardens. These products are designed especially keeping in mind the need of Urban farming market

Enabled Missed Call Service: We conducted a nationwide social media campaign in June 2021 to encourage and solicit farmers with ready information. They need to just give a missed call and they will receive a link with a simple form. Once they fill the form with requisite details, our representative called them and gave readymade solutions for their crop nutrition related queries.

Ecommerce Presence: Continued listing our products on third party portals viz. Amazon and Flipkart which helped us to expansion of urban markets.

Outcomes & Recognition :

With a series of tough and timely choices, Aries evolved – stronger, versatile, spirited and vibrant.

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

Listed among CNN News 18 The Most Influential Leader of New

India 2021 - Brave Leadership for a bold new era

National Award for Excellence in Manufacturing under the category – Best Operational Excellence – 2021 by CMO Asia & World Manufacturing Congress & Awards

Aries Agro featured in Fortune India Magazine – "Aries Agro – Staying Unique in the Pursuit of Excellence"

Dare to Dream Awards 2021 – Company of the Year – Agriculture presented by TV9 Network – this award is a testament to the resilience of the India agricultural sector and has brought us closer to the "Atmanirbhar Bharat".

Our CMD nominated to have a seat on the Bureau of Indian Standards Soil Quality and Fertilizers Sectional Committee in the capacity as President of IMMA.

Global Sourcing

Aries has sourced 27 % of its total raw materials from overseas suppliers from China, USA, Turkey and UAE. Most of the purchases are based on contractual buying.

Man Power

The total Man Power of the Company increased from 946 to 1002 during the year under review.

Ensuring Job Security:

While most organizations were laying off hundreds and thousands of staff in FY 2021-22 due to the lockdown, Aries ensured that our business continuity was ensured by all teams, it was essential to support every member of the Aries family with job security and stability. Salaries and wages were released earlier than usual, not a single person was laid off due to the pandemic, incentives for and cost control were paid well before time, annual increments and promotions post appraisals were announced as scheduled and provision was also made to adjust any available paid leave (no matter under what category) against quarantine and sick days.

In the Financial Year 2021-22, 208 new employees joined Aries.

Particulars FY 2021-22
New joinees FY 2021-22 208
% of staff receiving increment FY 2021-22 42%
% of staff receiving promotion FY 2021-22 38%
No. of employees on roll as on March 2022 1002

Training and Upskilling

In line with the Company Policy all staff members undergo 100 hrs training sessions were conducted online and physical mode on the following major topics:

Crop based training sessions on Banana, Betelvine, Cabbage, Cauliflower,

Product based training session on Bio Fertilizers, Humiblack, Rajat HD, Major Sol (Cotton, Maize and Groundnut), Orgaprom, Orgapotash, Super max, Zinconite, Boronite, etc

Global Distribution:

Carried out activities relating to exports, initiatives taken to increase exports, development of new export markets for products and services and export plans. International clients are located in Kenya, Nepal, UAE and Taiwan. Sales were booked for Kenya, Nepal, UAE and Taiwan. Registration process started in Nigeria and Bangladesh. Distributors in Nepal have put up their own manufacturing unit to support and increase sales and distribution network throughout Nepal. The total exports and global sales constituted 0.25% of our group revenue during the Financial Year 2021-22.

Outlook:

The year 2022-23 is the 53rd year of operations and the Company has planned to strengthen its range of products by finding domestic sources of raw materials to reduce the impact of import supply chain disruption and high costs as well as intensive campaigning to establish products launched in the recent two years. During 2022-23 only variants of few products will be introduced primarily with the aim of reducing cost of application to the farmers and to keep fixed costs under control. No major new product concepts will be introduced. The astronomical increase in certain essential raw material prices has necessitated alternative formulations, reducing pack sizes and providing combination packs coupled with multiple products sale during a sales call. Substitutes for certain products like EDTA Chelates and water soluble NPKs, which are facing high cost escalation have been identified within the Aries range itself and demand creation for these substitutes will ensure demand is met with cost effective alternatives. 2022-23 annual booking was conducted online with 1258 dealers from 26 states using our Booking App. This is expected to achieve gross revenue of Rs. 625 Crores in FY 2022-23

Segmentwise / Productwise 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 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.

Risk of weakening rupee leading to increase in import costs, high logistic costs due to increase in fuel costs and high cost of raw materials remained threats to profitability.

Opportunities to be captured include creating demand for cheaper substitutes of higher cost products, expanding into bulk and institutional business, reducing costs through technology integration with raw materials being purchased inhouse through our subsidiaries. The opportunity of increasing distribution network in few states where Aries is not present including Goa, Nagaland, etc will also be carried out in the current Financial Year.

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 crop nutrition will increase number of products the farmers purchase from the Aries range.

COST MANAGEMENT (STANDALONE)

As trade schemes as a percentage of sales marginally increased by 0.13% overall PAT decreased by (15.97)% compared to the previous

Financial Year. Gross Operating margins (EBIDTA) reduced from 16.36% in FY 2020-21 to 12.86% in FY 2021-22, largely due to increase in cost of raw materials.

FINANCIAL PERFORMANCE (STANDALONE)

The Companys Sales Turnover for the financial year ended March 31, 2022 increased to Rs. 54,752.45 Lakhs from Rs. 47,449.83 Lakhs in the previous year, reflecting an increase of 15.39%.

Total expenses for the year was Rs.42,174.71 Lakhs as against Rs. 35,660.49 Lakhs in the previous year.

Profit Before Tax reduced to Rs. 2,655.02 Lakhs during the year as against Rs. 3,008.19 Lakhs in the previous year.

Tax provision for the year was Rs. 752.64 Lakhs as against Rs. 744.27 Lakhs in the previous year which translates 1.71 % on FY 21-22 Net Sales.

Profit After Tax for the year was Rs. 1,902.32 Lakhs as against Rs. 2,263.91 Lakhs in the previous year which is 4.33% of FY 21-22 Net Sales.

Debtors Turnover (on Net Sales) for the year was 88 days as against 104 days in the previous year.

Inventory Turnover (on Net Sales) for the year was 122 days as against 135 days in the previous year.

Operating Profit Margin (on Net Sales) for the year was 12.86 % as against 16.36 % in the previous year.

Net Profit Margin (on Net Sales) for the year was 4.33 % as against 5.93 % in the previous year.( Due to the possible impact of Covid 19 the purchase cost of raw material and traded products has increased).

RESOURCES & LIQUIDITY (STANDALONE)

As on March 31, 2022, the Net Worth of the Company stood at Rs. 20,864.92 Lakhs as against Rs. 19,052.57 Lakhs.

As on March 31, 2022, the Company had a Debt / Equity ratio of 0.53 as against 0.75 in the previous year. The Company has not raised any Deposits from the public. (Revenue growth alongwith higher efficiency on working capital improvement has resulted in improvement of ratio).

As on March 31, 2022, Interest Coverage Ratio was 2.33 as against 2.41 in the previous year.

As on March 31, 2022, Current Ratio was 1.60 as against 1.49 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:

At the end of the financial year there were 1002 employees under the permanent rolls and NIL under contract. We have an ongoing arrangement with few labour supplier organizations for our various locations.

We have 175 workers in our permanent employment and sizeable numbers on contract, working in our factories. The detailed breakup of the same is as under:

Sr. No. Particular Employees 2021-22
1. Skilled 56
2. Semi-Skilled 22
3. Unskilled 97
Sub- Total 175
4. Contract Labour 290
TOTAL 465

The Department wise breakup of our manpower is as under:

Sr. No Name of the Department 2021-22
1. Directors 01
2. Accounts, Personnel & Administration, Legal & Secretarial 165
3. Production(Staff and Workers), R&D and Spray Dryer Operators 188
4. Sales 648
TOTAL 1002

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 47,974 units of power during the Financial Year 2021-22, of which 41,801 units were consumed by the facility and the balance 6,173 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.

• Eighteen number of Aries products are organic certified by UK Cert.

Non Polluting:

All Aries factories have zero effluents and produce no harmful emissions