BKV Industries Ltd Management Discussions.


India emerged the worlds top supplier of shrimps in 2017-18 with an output of 6 lakh tonnes. Shrimp production in the country, after showing a consistent growth in the last decade, is likely to drop by 10 to 15% this year as low prices and fear of spread of diseases among shrimps have forced aquaculture farmers to cut production in the farms.

At present, demand from the US, the largest buyer, is driving the Indian seafood exports. According to a report by trade finance company Drip Capital, there are mixed signals for the shrimp exports in the seasons ahead. While increased competition and decreased demand from Europe seem to be depressing sales, analysts expect Indian shrimp exports to the US will continue to grow by 15-20% this year. The share of Europe in Indian seafood exports has fallen by about 20% in the last 10 years to 16%. The share of the US currently stands at 33%.

Farms in Andhra Pradesh, the largest producer, start stocking activity by January-February. Frozen shrimps account for 70% of the value of the seafood export from the country that touched a record Rs 45,000 crore last year. The first quarter of the current fiscal saw a 7% rise in volumes and over 8% rise in value year-on-year at 299,354 tonnes valued at Rs 10,888 crore.


Farm shrimp production in India is set to fall 15% this fiscal year, farmers and traders said, citing the extensive damage caused by cyclonic storm Gaja that hit Tamil Nadu earlier. They said the storm hit the seafood industry at a time when it was recovering from the impact of a fall in global shrimp prices. . Tamil Nadu is the largest producer of farmed shrimps in the country after Andhra Pradesh. Continuing US ban on wild shrimps caught by vessels not fitted with turtle excluder device (TED), insufficient rainfall and depleting catches have hit seafood exporters on the west coast of India. While exporters on the east coast are predominantly dependent on farmed shrimp, those on the west coast rely more on sea-caught fish. India annually exports around Rs 45,000 crore worth seafood, majority of which is aquaculture shrimps. The Department of State in the US issued a notification in May last year banning wild caught shrimps from countries that do not comply with fishing practices to protect sea turtles. Subsequently, an expert team from the US visited several coastal states in India to assess the fishing methods. There has been no decision on the ban yet.

Further, the seafood industry feels the need for sustainable aquaculture to counter setbacks and increase production. The aquaculture farmers lost money last year when white spot and EHP diseases reduced the shrimp output. This year, the fear of diseases has led many to stock less in farms. Little improvement in global shrimp prices and lack of funding support to farmers are the other reasons for the reluctance of farmers to go for full output.

Despite presence of numerous growth inducing factors, the market is restrained by outbreak of diseases, adverse weather conditions and infrastructure challenges. Further, the market is expected to reach a volume of 1.1 Mill Tonns by 2023, exhibiting a CAGR of 10.3% during the 2018-2023.


Pursuant to SEBI Listing Regulations, the Company had since constituted a Risk Management Committee. The details of the Committee, its terms of reference are given in the corporate governance report. The methodology for risk management primarily involves mapping of risks with strategy, assessing the risks on its importance, identifying de-risking measures and assigning it to risk owners and continuously monitoring the status of the risks. The risks were categorized into strategy & planning, operations and compliance and the risks associated with each risk category was further classified and identified as critical, major and moderate.

The company does not foresee any critical / major risk, as it had given its farm on long term lease, expiring only at the end of first quarter, 2020 and the lessee had been meeting their commitments as per the lease agreement. The maintenance and compliance expenses of the company are taken care through the lease income, hence, the company does not foresee any major risk for its operations in the short and medium term, except in the event of costs for additional regulatory measures. The management periodically reviews the risk management framework to identify the major business risks as applicable to the Company and works out their mitigation strategy.


The Company has well-established processes and defined the roles and responsibilities for people at various levels. The control mechanism also involves well documented policies, authorization guidelines commensurate with the level of responsibility specific to the respective businesses. Adherence to these processes is ensured through frequent internal audits. The internal audits conducted are reviewed by the Audit Committee and requisite guidelines and procedures augment the internal controls. The internal control system is designed to ensure that financial and other records are reliable for preparing financial statements and other information which ensures that all transactions are properly reported and classified in the financial records. However, the Company had given its farm on long term lease and did not carry any other business operations during the year 2018-19 and the lease will be completed only by the end of first quarter of 2020.


The financial statements are prepared in compliance with the requirements of the Companies Act, 2013 and Generally Accepted Accounting Principles in India including Ind AS. The management accepts the responsibility of integrity and objectivity of the financial statements and the basis for various estimates and the judgments used in preparing the financial statements. During March, 2013, the company entered into a lease agreement of its Farm for a period of 84 months with effect from July, 2013, as the promoters have decided to meet with lease income, the fixed expenses and statutory compliance costs. The company is proposing to explore the profitable business opportunities, when the lease term is completed to improve the financial performance of the company. With these steps, the company could perform reasonably and ended up with a net loss from operations Rs. 22.96 Lakhs after providing the depreciation for Rs. 0.85 Lakhs, excluding expenses of remeasurement of employee benefits of Rs. 0.63 lakhs during the year.

Particulars Rs. In Lakhs
Farm Lease Income 32.67
EBIDTA ( Excluding OCI) (21.72)

Material Developments in human resources / industrial relations, including number of people employed:

The company had given its farm on long term lease and in addition to the fixed lease income, the company has been carrying out only the compliances and maintaining its assets. It had employed only five employees during the year, which includes the Managing Director. During the year ended 31st March, 2019, the relations with Lessee and Employees are very cordial.

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

Debtors Turnover:

As there are no receivables at the year end, it is Not Applicable.

Inventory Turnover:

The company do not have any Inventory, as the farm is given on lease, and hence it is Not Applicable

Interest Coverage Ratio:

The company has not raised any funds other than Interest Free Unsecured Loan from Managing Director, hence Not Applicable.

Current Ratio:

As the company has got only fixed income from the Lease of the Farm and all the expenses, including the compliance expenses of the company are met with the above income. However, during the year, the company to have good relations with the surrounding villages and for income tax appeal purposes, had to borrow additional funds from the Managing Director on short term basis. Hence, the Current Ratio had come down to 0.16, as at the end of 31st March, 2019 (Previous year 0.07).

Debt Equity Ratio:

As the company had not borrowed any long term funds and been operating through its own sources for long time, the debt equity ratio is only 0.01 as at the end of 31st March, 2019 (Previous year 0.01).

Operating Profit Margin (%):

Due to additional compliance and other costs incurred to maintain good relations with the villagers, the company has incurred Operating Margin/(Loss) on turnover for the year ended 31st March, 2019 at (70.28%) (Previous year 0.93%).

Net Profit Margin (%):

Due to additional compliance and other costs incurred to maintain good relations with the villagers, the company has incurred Net Profit Margin (Loss) on turnover for the year ended 31st March, 2019 at (72.22%) (Previous year 207.79%).

Details of Changes in Return on Net Worth:

Though there was an operating margin of Rs.29,643/- for the year 2017-18, due to revaluation surplus on Land credited to profit and loss during the year ended 31st March, 2018, the return on Net Worth was 16.66%. However, due to additional compliance charges and other costs incurred to maintain good relations with the villagers, the companys return on Net Worth for the year ended 31st March, 2019 had come down to 6.30%


In a challenging and competitive environment, the Company believes that people are the key to success and continues to focus on people capabilities by leveraging technology and creating a learning environment. During the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.


The management discussion and analysis report containing your Companys objectives, projections, estimates and expectation may constitute certain statements, which are forward looking within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied in the statement. As the company had given its farm assets on long term lease and that being the only source of income for the company, changes in the government regulations, compliance frame work, tax laws and other factors, may affect the future earnings of the company. The Company cannot guarantee the accuracy of the assumptions and perceived performance of the Company in future.


Where in the preparation of financial statements during the year there was no different treatment from that prescribed in an accounting standard followed.