Camson Bio Technologies Ltd Management Discussions.
Socio Economic Environment and the Indian Agriculture Story
India is known for its agricultural economy as its half the population is dependent on this trade economy.
India is the largest producer, consumer and exporter of spices and spice products. Indias fruit production has grown faster than vegetables, making it the second largest fruit producer in the world. Indias horticulture output, is around 314.67 million tonnes (MT) in 2018-19 after the first advance estimate. It ranks third in farm and agriculture outputs. Agricultural export constitutes 10 per cent of the countrys exports and is the fourth-largest exported principal commodity. The agro industry in India is divided into several sub segments such as canned, dairy, processed, frozen food to fisheries, meat, poultry, and food grains.
Indias GDP is expected to grow at 6.81 per cent in FY 2018-19, led by growth in private consumption with Agri and allied sectors Maintaining 15.87% share of the total GDP.
Given the importance of the agriculture sector, the Government of India, in its Budget 2018 19, planned several steps for the sustainable development of agriculture-
Total allocation for rural, agricultural and allied sectors for FY 2017-18 has been increased by 24 per cent year-on-year to Rs 1,87,223 crore (US$ 28.1 billion). A dedicated micro-irrigation fund will be set up by National Bank for Agriculture and Rural Development (NABARD) with a corpus of Rs 5,000 crores (US$ 750 million). The government plans to set up a dairy processing fund of Rs 8,000 crores (US$ 1.2 billion) over three years with initial corpus of Rs 2,000 crores (US$ 300 million).
PKVY (Pradhan Mantri Krishi Vikas Yojana) would be receiving 10 crore rupees more than last year. On Pradhan Mantri Krishi Sinchai Yojana, there is a meagre increase of 600 crores. Fisheries budget increased from 400 crores to 633 crore rupees.
The crop insurance scheme has been allotted Rs 13,000 crore compared to Rs 10,698 crore in the revised estimates of 2017-18 Increasing the volume of institutional credit for agriculture sector from Rs 8.5 lakh crore in 2014-15 to Rs 10 lakh crore in 2017-18, to Rs 11 lakh crore for the year 2018-19. Ground water irrigation scheme under Prime Minister Krishi Sinchai Yojna- Har Khet ko Pani will be taken up in 96 deprived irrigation districts where less than 30% of the land holdings gets assured irrigation presently. Allocated Rs 2600 crore for this purpose.
Some of the recent major government initiatives in the sector are as follows:
The NITI Aayog has proposed various reforms in Indias agriculture sector, including liberal contract farming, direct purchase from farmers by private players, direct sale by farmers to consumers, and single trader license, among other measures, in order to double rural income in the next five years. The Ministry of Agriculture, Government of India, has been conducting various consultations and seeking suggestions from numerous stakeholders in the agriculture sector, in order to devise a strategy to double the income of farmers by 2022. The Maharashtra State Agriculture Marketing Board (MSAMB) has operationalised 31 farmer-to-consumer markets in the state, and plans to open 100 more such markets in the future, which would facilitate better financial remunerations for the farmers by allowing them to directly sell their produce in open markets.
The Ministry of Labour and Employment plans to amend the Minimum Wages Act to raise the daily minimum wage of unskilled agricultural labour in C-class towns to Rs 350 (US$ 5.2) in the central sphere, from the current wage of Rs 160 (US$ 2.4) per day.
The Central Government plans to open at least one Krishi Vigyan Kendra in all districts of the Country, which will provide advanced agriculture technical assistance to the farmers near their farms itself.
The Government of Karnataka plans to invest around Rs 1 trillion (US$ 15.1 billion) for developing irrigation projects across the state to mitigate the impact of deficient rainfall and resulting drought on agriculture in recent years.
The Government of India and the Government of Israel have expressed their commitment to further strengthen bilateral relations in the field of agriculture and allied sectors, as well as enhance cooperation at the government-to-government and business- to-business levels between the two countries, in a bid to further enhance the relationship.
According to the Agriculture Ministry, 50,000 hectares of area is available for coconut cultivation in Bihar, the Coconut Development Board plans to equip the farmers thus making India the world leader in production, productivity, processing for value addition and export of coconut.
Government has taken initiative for sustainable growth .Paramparagat Krishi Vikas Yojana" is an elaborated component of Soil Health Management (SHM) of major project National Mission of Sustainable Agriculture (NMSA ). Under PKVY Organic farming is promoted through adoption of organic village by cluster approach and PGS certification.
The Scheme envisages:
Promotion of commercial organic production through certified organic farming.
The produce will be pesticide residue free and will contribute to improve the health of consumer. It will raise farmers income and create potential market for traders. It will motivate the farmers for natural resource mobilization for input production.
Groups of farmers would be motivated to take up organic farming under Paramparagat Krishi Vikas Yojana (PKVY). Fifty or more farmers will form a cluster having 50 acre land to take up the organic farming under the scheme. In this way during three years 10,000 clusters will be formed covering 5.0 lakh acre area under organic farming.
There will be no liability on the farmers for expenditure on certification.
Every farmer will be provided Rs. 20,000 per acre in three years for seed to harvesting of crops and to transport produce to the market. Organic farming will be promoted by using traditional resources and the organic products will be linked with the market. It will increase domestic production and certification of organic produce by involving farmers
India is expected to achieve the ambitious goal of doubling farm income by 2022. The agriculture sector in India is expected to generate better momentum in the next few years due to increased investments in agricultural infrastructure such as irrigation facilities, warehousing and cold storage. Furthermore, the growing use of genetically modified crops will likely improve the yield for Indian farmers. India is expected to be self-sufficient in pulses in the coming few years due to concerted efforts of scientists to get early-maturing varieties of pulses and the increase in minimum support price. The government of India targets to increase the average income of a farmer household at current prices to Rs 219,724 (US$ 3,420.21) by 2022-23 from Rs 96,703 (US$ 1,505.27) in 2015-16. Going forward, the adoption of food safety and quality assurance mechanisms such as Total Quality Management (TQM) including ISO 9000, ISO 22000, Hazard Analysis and Critical Control Points (HACCP), Good Manufacturing Practices (GMP) and Good Hygienic Practices (GHP) by the food processing industry will offer several benefits
The Indian Biotechnology Market
The Indian biotech industry holds about 2 per cent share of the global biotech industry. India has emerged as a leading destination for clinical trials, contract research and manufacturing activities owing to the growth in the bio-services sector. With the country offering numerous comparative advantages in terms of R&D facilities, knowledge, skills, and cost effectiveness, the biotechnology industry in India has immense potential to emerge as a global key player.
India currently has a marginal share in the global market for industrial enzymes. Hence, there is an opportunity in focused R&D and knowledge-based innovation in the field of industrial enzymes, which can innovatively replace polluting chemical processes into eco-friendly processes that also deliver environmental sustainability. Another interesting field of study is the area of bio-markers and companion diagnostics, which will enable to optimise the benefits of biotech drugs.
Camson Bio Technologies Limited (" Camson" ) is Indias first integrated IPR driven agricultural biotechnology Company. Founded in 1993, the Company is headquartered in Bangalore, with primary focus on biotech R&D. The Company is a pioneer of Zero residueTM farming products, which uses secondary metabolites (biological origin) of microbes to kill / inhibit pathogens, without the hazardous chemicals.
The Companys strength in the biocides is backed by robust operational efficiency and strong R&D. It places Camson at a very strong position to capitalize on the growth in the industry. To further enhance the Companys technology platform, Camson is also strengthening the R&D team by adding more research scientists with significant knowledge in the field.
Financial Performance: Standalone basis
However, going forward, in light of the business optimization and improvement plan, the Company has raised financial and operational benchmarks across divisions with a key focus on receivables timeline, marketing expenses and cash flow from operations
As of March 31, 2019, the total debt of Rs. 8625.07 Lakhs, Cash and Cash Equivalents were Rs. 6.36 Lakhs, resulting in a Net Debt of Rs. 8618.71 Lakhs.
After the cleanup, the promoter management is confident of good show by the company in future. Your Company has taken stringent action against defaulting dealers, staff & other involved in unethical working.
A new set of nation best distributors are appointed. Company Brand is once again gaining popularity and market share
Opportunities, Risks, Concerns and Threats
Economic Growth: The Indian economy is entering into an exciting phase of growth. It is anticipated that implementation of structural reforms and government initiatives will result in robust investment activity in the agri biotech space. Furthermore, the recent macro-economic indicators confirm the strengthening demand. This will result in further improvement in agriculture sector and fuel consumer demand in the organic space.
Ban on Chemical Fertilizers: The state of Kerala and Sikkim had recently proposed to make the state switch over to organic farming by 2016. To implement this move, 100 government offices across states are being established to ensure procurement of organic and bio farming products for farmers. Given the importance of organic farming and need for developing a sustainable alternative for the traditional agriculture methods, other state government may also follow the suit. This opens up significant opportunities for Camson given already strong market position in the agri biotech space. Any such initiatives by the government to promote agri biotech products will be beneficial for the Companys growth. Agri biotech products have the capability to make a meaningful difference in terms yields, and quantity of produce and ensure availability of chemical free, safe products.
Risks & Concerns
High dependency on monsoon, low irrigation coverage and vagaries of climate are the major risk factors for agriculture. While awareness among farmers about the advantages of crop protection chemicals is gradually increasing, the industry needs to pay special attention to this area. The growth rate of agriculture continues to remain low which also reflects in low growth of the industry.
Over the years, China has emerged as a major producer and supplier of raw materials and intermediates for the industry. Its internal dynamics, its large-scale production capacities, foreign trade policies, its currency policies, its other domestic and pricing policies have direct bearing on the global industry. Several China-origin agrochemicals are being registered for imports in India which is bound to increase competition pressure on the Indian manufacturers. In India, some regulatory changes are in the offing which may impose restrictions on import of agrochemicals which are indigenously manufactured and may give boost to ocal manufacturing. The size of the Indian agrochemicals plants is small in comparison to Chinese plants, blunting competitive edge of the Indian players.
Growing popularity of organic food coupled with increasing use of bio-pesticides and other biological products also pose challenge to synthetic agrochemicals. This, however, also presents an opportunity to the industry for making forays into the new, growing segment of biological products. Increasing share of new generation/ patented molecules also poses risk to the industry which is largely old and conventional generics in nature.
Africa and South America account for a significant share in the Companys exports. These markets, however, carry higher credit, economic and political risks. The Company addresses these risks by following appropriate credit policies and by taking credit insurance.
The Company faces continuing and unavoidable threat from unfavorable weather conditions particularly the rainfall variability. Agriculture business is highly dependent on weather especially in India where only about 45% of the net sown areas have access to irrigation. Droughts, natural calamities or excess rainfall can have negative impact on the crop production which can in turn impact the product sales and can greatly impact farmer sentiment and hinders the market demand and sales for the crop protection products. Additionally, the type of crop that can be grown is affected by changes in temperatures and the length of growing season. Weather variability and climate change, modifies the soil condition and water availability for the agriculture. Though these natural factors can never be completely eliminated they can be kept under check through pro-active and prompt responses.
Quality Certification: Control Union
Control Union (CU) is an international organization, offering certification for companies operating in agri, food and allied sectors including agriculture, food, feed, forest products, textiles and bio-energy. The certification is internationally accepted by various authorities and widely recognized.
Your Company holds the certification by the Control Union in the area of Organic Cultivation. Camson is one of the very few companies operating in India to receive such certification, which is a matter of honor and pride for your Company. This certification continues to strengthen our presence in the organic space, globally.
Camson Bio Technologies has obtained certification under OHSAS 18001: 2007 from Occupational Health and Safety Management Systems
Internal Control Systems & Adequacy
Camson lays significant emphasis on ensuring best-in-class standards for internal control systems and is committed to the principle of prudent growth. The Company has adequate systems for internal control, which are commensurate with its size and operational complexities in place. The same are discussed in detail, in the Directors Report.
Human Resources Development
Human Resource Development stands at heart of Camsons corporate strategy and your Company acknowledges that human resource is critical for the overall growth and success of the organization. The Human Resource Department of the Company is highly focused on enhancing stakeholder value by ensuring a right fit between the HR policies and the overall strategic direction of the Company. The Company, being involved in the agriculture business needs to interact and work with farmers located in the countrys villages. This requires special skills that need to be upgraded on yearly basis with inputs on the latest technology advances combined with a strong commercial orientation. We have laid down HR policies and several best practices such as an incentive policy and stock options to encourage the employee fraternity. Your Company has recruited experienced industry professionals to meet the current and future needs of the organization. There has been a constant endeavor to facilitate the overall development of the employees, with the intention to create leaders for tomorrow. Your Company is an equal opportunity employer which seeks to recruit and appoint the best talent for a job without any discrimination and a special focus is given on enhancing the workforce diversity.
As of 31st March, 2019, the Company had a total employee count of 23. As part of our Human Resource Development, we regularly organize in-house and external training programs for our employees. Your Company also follows a transparent appraisal system for our employees. There were no financial or commercial transactions that resulted in a conflict of interest between senior management and the Company. During the fiscal year under review, there has been no loss of production at any of the Companys R&D/ manufacturing facility due to industrial unrest.
Statements in this Management Discussion and Analysis contains " forward looking statements" including, but without limitation, statements relating to the implementation of strategic initiatives, and other statements relating to Camsons future business developments and economic performance. While these forward looking statements indicate our assessment and future expectations concerning the development of our business, a number of risks, uncertainties and other unknown factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to, general market, macro-economic, governmental and regulatory trends, movements in currency exchange and interest rates, competitive pressures, technological developments, changes in the financial conditions of third parties dealing with us, legislative developments, and other key factors that could affect our business and financial performance. Camson undertakes no obligation to publicly revise any forward looking statements to reflect future / likely events or circumstances.
|Place: Bangalore||For and on behalf of the Board of Directors|
|Date: 28h May, 2019|