Aurangabad Distillery Ltd Management Discussions.

Industry Overview

a. India is one of the fastest growing alcobev markets. The various factors contributing to the growth in alcobev industry include improvement in standards of living, increased globalization with increasing number of Indians making foreign trips for jobs, holidays or education, higher exposure to different lifestyles and a growing culture of social drinking.

b. The Government is implementing the ethanol program in a big way. This will increase the consumption of alcohol, thus helping boost the revenue of distilleries.

c. During the financial year industry did not grow as per expectations due to the general economic slowdown, increase in taxes and duties, flooding in several parts of Maharashtra and general elections in the first quarter. The consumption of alcohol was also lower.

d. Due to scarcity of raw material this leads to increase in pricing, it directly impacted the margins of industry.

e. The nationwide lockdown to control Covid- 19 situation, the consumption of the alcohol substantially decreased which has direct impact on the sales of spirit during the lockdown period. Currently, demand from the customers of rectified spirit is not in a full swing. However slowly and steadily we are on track. Hopefully things will be normalized soon.

SWOT

• Strength - Increased focus of Government on ethanol blending in fuel and delicensing of Denatured Alcohol and stability in potable alcohol after the Hon. Supreme Court clarified the order of highway ban thus resulting in most of the liquor vends opening within the city limits and many panchayats.

• Weakness - Stricter pollution norms and increase in minimum wages will drive the cost of production upwards.

• Opportunities - The de-licensing of industries using denatured spirit will give us opportunities to develop new customers in pharma, cosmetics & perfumeries and chemical industries.

• Threats - Increasing competition in the said sector.

Outlook

India is currently one of the most attractive destinations for the alcobev industry in the world, as our economy is fastest growing economy. Although, current financial year 2020-21 impacted by global slowdown will still have confidence of Indian economy and it will recover very soon from the current situation.

We have already given advances for procurement of molasses so that we have assured supply of raw material in case there is any shortage of raw material as many sugar factories will setup distilleries.

Risks and concerns

This industry has severe monitoring and regulation of the government and applicability of central laws as well as state government laws. Some States have also banned liquor consumption. This increases the risk for the business of the Company.

Internal Financial Control

The Company has engaged the services of an independent Chartered Accountant to carry out the internal audit and ensure that recording and reporting are adequate and proper. The internal controls exist in the system and that sufficient measures are taken to update the internal control system. The system also ensures that all transaction are appropriately authorized, recorded and reported. Exercises for safeguarding assets and protection against unauthorized use are undertaken from time to time.

Human Resource

During the year the Company maintained cordial relationship with its employees. The Human Resource is important asset of the Company. The training and developments needs of the employees have been addressed on continuous basis with time to time internal programmes.