Aristo Bio-Tech & Lifescience Ltd Management Discussions

The discussion hereunder covers Companys performance and its business outlook for the future. This outlook is based on assessment of the current business environment and Government policies. The change in future economic and other developments are likely to cause variation in this outlook.

The Managements views on the Companys Performance and outlook are discussed below:

GLOBAL ECONOMY:

Global growth is projected at 3.1 percent in 2024 and 3.2 percent in 2025, with the 2024 forecast 0.2 percentage point higher than that in the October 2023 World Economic Outlook (WEO) on account of greater-than-expected resilience in the United States and several large emerging market and developing economies, as well as fiscal support in China.

The global macro-economic scenario during the financial year 2023-24 was another period of subdued growth marked by high inflation and interest rates, geo-political tensions, concerns of recession and supply chain constraints. In spite of these challenges and risks, the global economic growth expectations can be viewed with cautious optimism - with a growth rate of 2.7 percent in financial year 2023-2024 as compared to 3 percent in financial year 2022-2023. Inflation is falling faster than expected in most regions, in the midst of unwinding supply-side issues and restrictive monetary policy. Global headline inflation is expected to fall to 5.8 percent in 2024 and to 4.4 percent in 2025, with the 2025 forecast revised down.

INDIAN ECONOMY:

In April, we commenced a new financial year. In May, we learnt that the Indian economy is estimated to have grown 8.2% in real terms in FY24. In June, a new government took office. The National Democratic Alliance government led by Prime Minister Narendra Modi has returned to power with a historic mandate for a third term. His unprecedented third popular mandate signals political and policy continuity. The Indian economy is on a strong wicket and stable footing, demonstrating resilience in the face of geopolitical challenges. The Indian economy has consolidated its post-Covid recovery with policymakers - fiscal and monetary - ensuring economic and financial stability. Nonetheless, change is the only constant for a country with high growth aspirations. For the recovery to be sustained, there has to be heavy lifting on the domestic front because the environment has become extraordinarily difficult to reach agreements on key global issues such as trade, investment and climate.

OUTLOOK:

Global economic growth recovery is underway in major economies, although disparities persist. While the leading indicators signal increased economic activity and geopolitical tensions have eased slightly, recent conflicts continue to pose risks. Despite the global challenges, India stands out with its strong economic performance, highlighting broad based growth across sectors and asserting its pivotal role in supporting the global growth trajectory.

Slowing global trade, as indicated by the United Nations Conference on Trade and Development (UNCTAD), presents a challenging landscape for economies worldwide. Despite these headwinds, Indias trade deficit is expected to decline in the coming years as the PLI scheme deepens its coverage and extends to other sectors. Driven by strong exports and resilient remittances, various international agencies and RBI expect the CAD to GDP ratio to have moderated below 1 per cent in FY2023-24. Additionally, strategic trade agreements like the India-EFTA Trade and Economic Partnership Agreement (TEPA) signal Indias commitment to expanding its global trade footprint and leveraging international partnerships for sustained economic growth.

Overall, India continues to be the fastest-growing major economy with positive assessments of the growth outlook for the current financial year, for India by international organizations and RBI. Accordingly, the IMF, in its April 2024 WEO has revised upwards its estimate of Indias real GDP growth for FY2023-24 to 7.8 per cent from 6.7 per cent in its January 2024 update and 6.3 per cent in its October 2023 WEO.

INDUSTRY STRUCTURE AND DEVELOPMENTS- INDIAN AGROCHEMICAL SECTOR:

The Indian agrochemicals sector is witnessing resurgence after experiencing a subdued performance during the Covid- 19 pandemic, embarking on a trajectory of robust growth. As of 2024, the domestic agrochemicals market stands at an estimated $8.22 billion and is poised to reach $13.08 billion by 2029, growing at a Compound Annual Growth Rate (CAGR) of 4% during the forecast period (2024-2029).

Recognizing the pivotal role of the agrochemical industry, the Indian government has identified it as one of the top 12 sectors to attain global leadership, with a projected growth rate of 8-10% through 2025, as reported by the Federation of Indian Chambers of Commerce and Industry (FICCI).

Globally, India is the fourth-largest producer of agrochemicals after the United States, Japan and China. Indias agrochemicals export was estimated to be at US$ 3.12 billion from April 2023 to December 2023.

According to the Indian Council of Agriculture Research (ICAR), approximately 30- 35% of Indias annual crop yield is lost due to pests, weeds, and diseases. Agrochemicals, including crop protection products and pesticides, play a crucial role in mitigating these losses by safeguarding crops against insects, diseases, and weeds.

Fungicides, a key component of agrochemicals, are extensively utilized to combat fungal infections, thereby reducing crop damages. Globally, the fungicide market is projected to reach $22.92 billion by 2027, indicating substantial growth opportunities within the sector.

However, the industry faces challenges such as stiff competition from cheap imports, particularly from China, which can impact profit margins for Indian producers. Moreover, global economic slowdowns and unpredictable weather patterns pose additional challenges by causing fluctuations in demand for agrochemicals. Despite these challenges, the Indian agrochemicals sector remains resilient, driven by innovation, strategic investments, and a favorable regulatory environment.

INDUSTRY DRIVERS:

The key factors of driving the agrochemical industry are:

• Rising demand for agricultural products: Population growth drives the agriculture market as demand for food and agricultural products increases. Rising rural and urban incomes, coupled with changing dietary patterns, support this growth. The market is further fueled by the increased demand for protein-rich foods like meat, dairy, and poultry products. Additionally, the need to convert natural landscapes into agricultural areas to meet the growing food demand drives market growth.

• Government initiatives to promote agriculture: The Indian Government is actively focused on the development of the agricultural sector by implementing various measures. These efforts aim to increase productivity and bolster agricultural production. Research institutions and stakeholders are working collaboratively to develop high- yielding crop varieties, innovative fertilizer and crop specific machinery suitable for small fields. Additionally, initiatives are being undertaken to improve soil health, strengthen credit facilities, crop insurance and infrastructure. A notable initiative, the "Digital Agriculture Mission," has been launched to modernize the agricultural sector and leverage the benefits of digital technologies. These collective endeavors are aimed at driving growth and ensuring the sustainability of agriculture sector.

• Indias rising population: India has emerged as the most populous country in the world overtaking China, with a population of over 1.43 billion people. This large and growing population is putting a strain on the countrys food production system. However, it also presents an opportunity for the agriculture industry to grow and meet the needs of this growing population.

• Increasing investment in agricultural research and development (R&D): The Indian agriculture industry is currently witnessing a steady rise in research and development endeavors. Substantial investments in R&D initiatives are driving the deployment of enhanced technologies, improved supply chain systems, and the utilization of organic

materials for the production of top-notch agricultural goods. These remarkable advancements are bolstering productivity, elevating product quality, and fostering overall growth within the industry.

COMPANY OVERVIEW AND OUTLOOK:

Our Company was originally incorporated on March 17, 2005 as "Aristo Bio-Tech and Lifescience Private Limited" under the provisions of the Companies Act, 1956 with the Registrar of Companies, Maharashtra, Mumbai. Subsequently our Company was converted into Public Limited Company and name of company was changed from "Aristo Bio-Tech and Lifescience Private Limited" to "Aristo Bio-Tech and Lifescience Limited" vide fresh certificate of incorporation dated May 20, 2020 issued by the Registrar of Companies, Mumbai. Further our Company has changed the registered office from State of Maharashtra to Gujarat vide Certificate of Registration of Regional Director order for Change of State dated November 18, 2021 issued by Registrar of Companies, Ahmedabad.

Our Company is an agrochemical company engaged in the manufacturing, formulation, supplying, packaging and job work services in various Pesticides such as Insecticides, Herbicides, Fungicides, Plant Growth Regulators and a wide variety of other Agrochemicals for India as well as for Export. Agrochemical industries are very vast field and deals with production and distribution of pesticides and fertilizers to increase the crop yields. Agrochemicals (Crop protection products/pesticides) are designed to protect crops from insects, diseases and weeds. Currently our company has 257 products registered with CIB&RC for manufacturing and sales.

Our Company supplies its products across 20 states i.e. Assam, Andhra Pradesh, Bihar, Chhattisgarh, Gujarat, Haryana, Jammu & Kashmir, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttarakhand, Uttar Pradesh, West Bengal and 15 Countries i.e. Armenia, Australia, Bangladesh, Belgium, Cambodia, Germany, Italy, Kenya, Moldova, New Zealand, Poland, South Africa, UAE, Ukraine and Vietnam.

Our Company is manufacturing agrochemicals such as Insecticides, Herbicides, Fungicides and Plant Growth Regulators which are directly sold to our customers and is also engaged in job work as per customer requirements.

Our company has adequate production and quality control system. All formulations are strictly tested with the latest available guidelines and testing methods by our in-house Quality Control Lab personnel. High Performance Liquid Chromatography (HPLC), Ultraviolet Spectrography (UV) and Gas Chromatography (GC) are used to ensure top quality Raw materials and formulation testing and release. Strict testing for all Packing materials like Tin, HDPE bottles, Coextruded bottles, Fluorinated HDPE bottles, Pet bottles, Labels, Mono cartons, Corrugated boxes, Laminated pouches is also done as per the Food and Agriculture Organization of the United Nations (FAO) and Bureau of Indian Standards (BIS) guidelines and testing methods. All Finished goods are re-tested and counter samples are stored separately in sample storage rooms.

OPPORTUNITIES AND THREATS:

Opportunities:

o Feeding the growing India and global population. With rising population, the government is focused on the food security of the nation.

o Protecting crops and increasing yields are essential for ensuring food security and supporting economic growth. By minimizing losses caused by pests, diseases, or environmental factors, the government can maintain a stable and sufficient food supply

o The anticipated development of precision farming is likely to revolutionize the present-day farming techniques. Precision farming adopts a holistic approach aimed at preserving the well-being of fields and soil, with an emphasis on enhancing both the quality and quantity of yield while minimizing environmental impact. It is anticipated that this will lead to an increase in the utilization of agrochemicals.

o Agrochemicals play a crucial role in addressing climate change by enabling more sustainable agricultural practices through integrated pest management and precision agriculture approaches.

Threats:

o Increasing stringency of regulatory requirements. The slow pace of registration process for new molecules is a major challenge for the agrochemical industry. This leads to high R&D and time costs, which makes it difficult for companies to launch new products.

o Pests are becoming increasingly resistant to pesticides, which is making it difficult to control pests and protect crops. This is a major challenge for the agrochemical industry, and it is one that is likely to become more significant in the years to come.

o Agrochemical inventories have been at elevated levels after the kharif season, because of the erratic rainfalls and weak demand. This has led to higher sales returns and a decline in profitability for agrochemical companies.

o The market and customer requirements are undergoing accelerated pace of change within and in adjacent markets. With regulations becoming stringent, it could be difficult to meet the requirement within the stipulated time.

RISK AND CONCERNS:

A well-defined risk management mechanism covering the risk mapping and trend analysis, risk exposure, potential impact and risk mitigation process is in place. The objective of the mechanism is to minimize the impact of risks identified and taking advance actions to mitigate it. The mechanism works on the principles of probability of occurrence and impact, if triggered. A detailed exercise is being carried out to identify, evaluate, monitor and manage both business and non-business risks.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE:

The Companys operation predominantly comprises of only one segment. In view of the same, separate segmental information is not required to be disclosed as per the requirement of Indian Accounting Standard 108 Operating Segment. Your company deals in various products such as Fungicides, herbicides, Weedicides, Insecticides and many more.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

(Amount J in Lakhs)

Particulars	F.Y. 2023-24	F.Y. 2022-23
Revenue From Operations	24,514.79	21,785.56
Other Income	18.04	32.72
Total Income	24,532.83	21,818.28
Less: Total Expenses before Depreciation, Finance Cost and Tax	23665.59	20915.41
Profit before Depreciation, Finance Cost and Tax	867.24	902.87
Less: Depreciation	157.07	153.62
Less: Finance Cost	169.41	275.34
Profit Before Tax	540.76	473.91
Less: Short Provision of Taxes in Earlier Year	0.31	0.83
Less: Current Tax	138.69	126.21
Less: Deferred tax Liability (Asset)	12.19	-9.37
Profit after Tax	389.57	356.22

FY 2024 was a challenging year with headwinds in the form of supply chain uncertainties and rising costs. However, our resilient portfolio allowed us to enhance the value of our offerings and better our operating profitability. During the financial year 2023-24 the revenue from operation stood at Rs. 24,514.79 Lakhs as compare to Rs. 21,785.56 Lakhs during the previous financial year 2022-23, which is a show around 12.53% increase in the revenue. The landscape shifted notably in the fourth quarter as concerns over supply chain reliability diminished, with distributors shifting their focus towards efficient inventory management. The Company delivered a resilient performance and met the revenue and debt reduction guidance provided to the market at the beginning of the year, however fell short on EBITD.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has a proper and adequate system of Internal Controls to commensurate with the size and nature of its operations to ensure that all assets are safeguarded against unauthorized use or disposal, safeguarding true and fair reporting and compliance with all applicable regulatory laws and company policies. Internal Audit Reports are reviewed by the Audit Committee of the Board.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS:

The Company believes that human resource is the most important assets of the organization. It is not shown in the corporate balance sheet, but influences appreciably the growth, progress, profits and the shareholders values. During the year your company continued its efforts aimed at improving the HR policies and processes to enhance its performance. The vision and mission of the company is to create culture and value system and behavioral skills to insure achievement of its short- and long-term objectives. As on March 31, 2024, the Company had total 50 full time employees. The industrial relations have remained harmonious throughout the year.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS, ALONG WITH DETAILED EXPLANATIONS THEREFOR:

Ratio	As at 31st March, 2024	As at 31st March, 2023	% of Change in Ratio	Explanations
Inventory Turnover	6.91	7.90	-13%	Increase in inventory
Interest Coverage Ratio	4.69	3.97	18%	Not applicable
Current Ratio	7.46	1.39	437%	Increase in Inventory and Trade Receivables
Debt Equity Ratio	0.62	0.75	-17%	Due to decrease in debt
Net Profit Margin/ Operating Profit Margin	0.0148	0.0149	0%	Not applicable
Return on Net Worth/ Return on Equity Ratio	0.12	0.14	-15%	Due to increase in turnover as well as profit for the year
Debt Service Turnover Ration	0.38	0.34	12%	Due to increase in turnover as well as profit for the year
Trade Receivable Turnover Ratio	4.80	5.60	-14%	Companys collection of accounts receivable is efficient
Trade Payable Turnover Ratio	10.36	5.02	107%	Company is making payments to its creditors on time
Net Capital Turnover Ratio	4.30	9.19	-53%	Company is being very efficient in using a companys short-term assets and liabilities for supporting sales
Return on Capital Employed	0.156	0.164	-5%	Not applicable
Return on Investment	0.116	0.118	-2%	Not applicable

CAUTIONARY NOTE:

Statements in the Management Discussion and Analysis report may be forward looking statements within the meaning of the applicable laws and regulations. Actual results may differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include among other, climatic conditions, 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.

Registered office:	For and on behalf of Board of Directors
E-24/25/26, G.I.D.C., Ta. Savli,	Aristo Bio-Tech and Lifescience Limited
Manjusar, Vadodara-391775, Gujarat.	CIN: L01100GJ2005PLC127397

 

Place : Vadodara	Narendra Singh Barhat	Ketankumar Harkantbhai Joshi
Date : August 28, 2024	Chairman and Managing Director	WTD & CFO
	DIN: 00310306	DIN: 02089127