Bengal Tea & Fab Management Discussions


(Forming part of Directors Report for the financial year ended 31st March, 2023)

TEA DIVISION

Industry Structure and Developments: India is one of the largest Black Tea producer in the world producing approximately 1371 million kgs during the financial year 2022-23. Markets have been marginally higher for good quality teas whereas common medium teas remained steady resulting in increase in realization than the previous year

Opportunities and Threats: The continuous promotional efforts and better marketing and brand building initiatives taken jointly by the Government/Tea Board including TRUSTEA programmes are likely to benefit the industry in the long term.

Erratic weather conditions and shortage of labour are the main threats to the industry.

Product-wise Performance: During the year under review, the production of Black Tea for your company were marginally lower as compared to previous year. Prices were lower for teas produced mainly due to inclement weather. Lower Production coupled with lower realization adversely affected the profit of the Tea Division. The gist of performance of the division during the financial year 2022-23 is as under:

Black Tea*
Production (Lakh Kgs) Sales (Lakh Kgs) Average Realisation (/Kgs)
2022-23 20.40 20.34 243.39
2021-22 20.80 20.43 266.96
Change (%) (1.92) (0.44) (8.83)

*excludes operation of traded goods

Outlook: Due to the fear of recession worldwide there is lower demand which is likely to impact the average realization of teas. Russia- Ukraine war could affect the off take of teas which could adversely impact the Indian tea average realization. Looking at the increased crop in last two seasons, it seems the country is headed towards a year of cropping of around 1400 million kgs. This could have an adverse impact on realization. However, focus on manufacture of better quality teas and lower cost of production should augur well for the division.

Risks & Concerns: Besides climatic conditions, global production, the rising growth of bought leaf sector, shortage of labour during peak season, increase in wages and other costs could affect the fortunes of the Tea Industry.

Discussion on financial performance with respect to operational performance:

During the year under review, lower production coupled with lower realization has adversely affected the profit of the Tea Division, TEXTILE DIVISION

The sale of all fixed assets and equipment situated at the Textile Division- Discontinued Operations i.e. Asarwa Mills, Ahmedabad, Gujarat have been completed. The demolition of the factory building situated at Ahmedabad, Gujarat is nearing completion, after which steps will be taken for the sale of the aforesaid land.

Key Financial Ratios

A. Details of significant changes (i.e. change of 25% or more as compared to the immediately preceding previous financial year) in key financial ratios or sector specific ratios along with detailed explanations therefor:

Sl. Key Financial Ratios

Including Discontinued Operations

No 2022-23 2021-22 Difference (%) Explanation
1 Debtors Turnover Ratio (times) 39.74 17.00 133.77 The ratio has improved due to faster realisation of the sale proceeds.
2 Inventory Turnover Ratio (times) 2.06 3.07 (32.77) Low inventory ratio was due to closure of textile division and non-realisation of land held under Real Estate Division.
3 Interest Coverage Ratio (times)# 0.33 1.81 (81.52) Reduction in profit margin during the financial year and debit balance in the current borrowings during the previous financial year have resulted in huge variance in the ratio.
4 Current Ratio(times) 3.91 6.88 (43.23) Current ratio was higher during the previous financial year mainly on account of large Cash and Cash equivalents balance at 31.03.2022 due to realization from disposal of "Assets pertaining to Disposal Group".
5 Debt Equity Ratio(times) 0.06 0.01 692.03 Due to Debit balance in the Short Term borrowings following deposit of proceeds of sale of Asarwa house during the previous financial year, ratio are not comparable.
6 Operating Profit Margin (%)# 4.76 2.24 257.59 Operating Profit Margin improved mainly on account of closure of Textile Division.
7 Net Profit Margin (%)# 1.17 (1.22) 468.85 Net Profit Margin improved mainly on account of closure of Textile Division

#Excluding Profit from Exceptional Item

B. Details of any change in Return on Net Worth as compared to the immediately preceding previous financial year along with a detailed explanation thereof:

Sl. Key Financial Ratios No 2022-23 2021-22 Difference (%) Explanation
1 Return on Net Worth (%) (1.14) 10.78 (110.60) Return on net worth has been impacted adversely due to reduced earnings in Tea Division coupled with write down of value of land held stock in trade, as detailed in Note no. 10.4 of the financial statement.

Internal Control Systems and their Adequacy: The Company has laid down guidelines, procedures and policies for better management control which are periodically tested and supplemented by an extensive internal audit programme. Significant findings are placed before the Audit Committee and the corrective measures are recommended for implementation. In the opinion of the management, the existing internal checks and controls are effective and adequate.

Information regarding Human Resources/Industrial Relations: The relationships were cordial with the employees throughout the year. The total numbers of manpower employed by the Tea Division as on 31st March, 2023 was 1520.

Cautionary Statement: The forward-looking statements and the views expressed in the Management Discussion and Analysis Report are based on certain assumptions. The actual results, performances or achievements may differ materially from those stated therein. The Company would not be held liable, in any manner, if the future turns out to be quite different, even materially.

For & on behalf of the Board
Bengal Tea & Fabrics Limited
Sd/-
Place: Kolkata Adarsh Kanoria
Dated: 25th May, 2023 Chairman & Managing Director
(DIN: 00027290)