ceeta industries ltd share price Management discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS

The Fast-Moving Consumer Goods (FMCG) industry is the fourth-largest sector and a significant contributor to the Indian economy. The growth in the FMCG industry is principally driven by rise in income, Change in consumer way of life, a transition to an organised market, increasing rural consumption, increase in e-commerce and digitalization, improved distribution of the FMCG portfolio and a rise in consumer awareness. Moreover, sustainable products influence the purchasing behaviour of consumers. While the urban sector contributes the largest share, the semi-urban and rural sectors experienced substantial growth over the past decade.

Indian Snacks Industry

The Indian packaged food industry ranks sixth globally in terms of production, consumption, exports and anticipated growth. There is an increasing demand for specialty and packaged foods in terms of ready-to-eat snacks. Over the past few years, the packaged food industry in India has witnessed a remarkable surge in demand. The escalating demand for on-the-go food items, particularly among the working and millennial individuals, is primarily driving the India snacks market. Besides this, the inflating urbanization levels, the shifting dietary preferences, and the improving consumer living standards are further augmenting the market growth. This has created a preference for convenient food options that are easily accessible and require minimal cooking efforts. Packaged foods have successfully catered to these preferences by providing ready-to-eat alternatives. With their time-saving benefit, packaged foods have seamlessly integrated into modern-day living, becoming an essential choice for individuals seeking practical and hassle-free meal solutions.

Apart from this, the elevating popularity of snack variants with ethnic tastes based on the diverse food cultures across the country is also catalysing the India snacks market. Moreover, the implementation of several stringent quality standards by the Food Safety and Standards Authority of India (FSSAI) to reduce the risk of digestive problems and food-borne illness is acting as another significant growth-inducing factor. The Indian snacks market size reached INR 38,603 Crore in 2022. The market is expected to reach INR 70,731 Crore by 2028, exhibiting a growth rate (CAGR) of 10.4% during 2023-2028. The rising popularity of convenient food products, increasing implementation of quality standards by the Food Safety and Standards Authority of India (FSSAI), and increasing number of e-commerce brands and distribution channels represent some of the key factors driving the market. (Source: IMARC Group).

FUTURE OUTLOOK

The Company stepped into the FMCG market by entering into the manufacturing of packaged food and the commercial production commenced in the second half of FY 2022-23. The company offers varieties of ready to eat snacks with best quality, unique taste at very much affordable price points under the brand name "Skitos".

The Company caters to a wide range of tastes in various snacks products manufactured by the Company, taking into account local preferences. With strategic planning, the Company is planning to expand its presence by increasing direct access, focussing on smaller towns and rural consumers, and improving cost and capital efficiencies. Consumer preferences and tastes, as well as their needs, are known to the Company. Apart from manufacturing, the Company is also undertaking job work of food products. Your Company has embarked on formalised plans and operational measures that are expected to result in improvement in the present position. The Company shall focus on driving the sales growth and increase in market share by focusing in key potential under penetrated markets and increasing the reach in existing markets. The management expects a rise in overall revenue in FY 2023-24 as compared to FY 2021-22 and making profit for the Company for the in FY 2023-24.

OPPORTUNITIES AND THREATS

The Company is likely to benefit from the emerging trends in food industry. The Company is well positioned to take advantage of the market opportunity and change in consumers food consumption habit with its strong product portfolio. The various threats that the Company addresses include uncertain global economic conditions; changes in fiscal, economic or political conditions in India and the currency risks; increasing competition including from small and unorganized sectors; changing technologies and regulatory changes in the industry the company operates in.

RISKS AND CONCERNS

Risks and concerns are inherent to any business environment and may have a substantial impact on the Companys performance and future prospects. Risk management is an integral part of the Companys long-term business strategy. The Company has a well-defined structure which enable and empower management to identify, assess and manage risk exposure in the organization effectively. It has a risk management policy in place to identify and assess the major key risk areas in the field of market, liquidity (finance), pricing, credit, competition etc. All inherent risks are measured, monitored and regularly reported to the Management. The Company has adequate mitigation plans based on the probability of their occurrence, potential impact and volatility.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The internal control system defines a set of rules, procedures and organisational structures that identify, measure, manage and monitor the main risks, allowing sound and fair operation of the Company in line with pre-established objectives and all the short-term and long term operational goals of the Company. As such this process is aimed at pursuing the values of both procedural and substantial fairness, transparency and accountability, which are key factors for managing the business. Adequate internal financial controls are in place to manage the business affairs of the Company.

Proper procedures are adopted ensuring the orderly and efficient conduct of business, including safeguarding of its assets, prevention and detection of errors and frauds, accuracy and completeness of the accounting records and timely preparation of reliable financial information and the same is reviewed at regular intervals depending upon situation of business of Company and in particular the Internal Auditors ensure that the company as in all material aspects, laid down Internal Financial Controls including operational controls and that such controls are adequate and operating efficiently.

HUMAN RESOURCES DEVELOPMENT/INDUSTRAIL REALTIONS

The Company focuses on enhancing the potential and overall wellbeing of its employees. Employee care and well-being is a top priority. It focuses on building a moral network embellished by fair business practices. The Company provides an engaging workplace environment, growth opportunities and incentives. Your company has sufficient pool of talents in various operational fields. The Human Resource environment has been very smooth throughout the year under review. The total number of employees on the rolls of the Company at various locations as on 31st March, 2023 was 61 as compared number 20 of previous year as on 31st March, 2022.

Industrial relations during the year FY 2022-23 remained cordial.

QUALITY AND SAFETY

The Companys top priorities are quality and safety. It ensures that the quality control measures are in place and that the products go through rigorous quality inspections. The Company offers a variety of products across various market segments and the goods are produced in accordance with strict industry standards ensuring quality, safety and nutrition. The Company has been awarded as A+ by Food Safety & Standards Authority of India (FSSAI).

PACKAGING AND PLASTIC WASTE MANAGEMENT

Plastic is essential in securing product safety and preventing leakage. As a responsible organisation, the Company recognises the impact its business operations on the natural ecosystem. Therefore, it is dedicated to shape a greener future by actively engaging in plastic recycling.

SUSTAINABLE MODEL

The Company aims to conserve the environment and develop a sustainable business model. It prioritises energy conservation and ensures optimal energy use in all areas of operations. The Company strongly believe in the concept of minimal wastage and use of eco-friendly equipments.

RELATED PARTY DISCLOSURE

Related party transactions have been disclosed in the notes forming part of the financial statements.

FINANCIAL PERFORMANCE

Financial performance of the Company has been disclosed in the Directors Report.

SEGMENT WISE PERFORMANCE

The Company has three reportable segments such as Packaged Food Products, Granite Division and Other Operations. Summary of the operating Segment for the year is given herein below: ( in Thousands)

Particulars	Packaged Food Products	Granite Division	Other Operations	Total
Segmental Revenue	21872.32	1940.00	30491.71	54304.03
Segment Result (before interest and tax)	(19240.55)	(8595.40)	414.00	(27421.95)
Unallocated Corporate Expenses (net of unallocable income)		-	-	8955.00
Operating Profit/(Loss)		-	-	(18466.95)
Interest Income		-	-	12201.31
Less: Interest Expenses		-	-	4336.00
Net Profit / (Loss) before Tax		-	-	(10601.64)
Other Information
Capital Employed
Net Segment Assets	103489.59	-	991.02	104480.61
Unallocated Assets / (Liabilities)		-	-	156578.82
Net Capital Employed		-	-	261059.43
Capital Expenditure	173921.25	-	73.71	173994.96
Depreciation	4069.73	-	370..27	4440.00

The segment reporting of every quarter for financial year under review is available at the website of the Company at https://ceeta.com/quarterly-report/

KEY FINANCIAL RATIOS

As stipulated in the Regulation 34(3) of SEBI (LODR) Regulations, 2015, the Company reports key financial ratios as follows: a) Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios or sector specific ratios, along with detailed explanations therefor:

Sl. Key Financial Ratios	2022-2023	2021-2022	Variance (in %)
(i) Trade Receivable Turnover Ratio (in times)	20.38	2.23	813.93
(ii) Trade Payable Turnover Ratio (in times)	3.45	3.83	-10.03
(iii) Inventory Turnover Ratio (in times)	2.02	1.97	2.80
(iv) Current Ratio (in times)	1.75	11.73	-85.12
(v) Debt Equity Ratio (in times)	0.44	0.00	100.00
(vi) Debt Service Coverage Ratio (in times)	-0.27	0.83	-131.94
(vii) Net Capital Turnover Ratio (in times)	0.62	0.08	675.06
(viii) Operating Profit Margin (%)*	-11.54	19.30	-159.80
(ix) Net Profit Margin (%)	-31.90	57.75	-155.24
(x) Return on Capital employed (in %)	-1.90	2.43	-178.17
(xi) Return on Investment (in %)	0.39	6.59	-94.05

*Previous Years ratio has been revised due to change in calculation method in the current year.

Notes on significant changes in financial ratios where change is > 25%:

Trade Receivable Turnover Ratio: It has increased by 813.93% because almost 5 times increase in revenue from operation during the current period and low trade receivable in previous year.

Current Ratio: It has decreased by 85.12 % during the current year mainly due to current loans borrowed were utilised in capital expenditure of the company.

Debt Equity Ratio: It has increased by 100% during the current financial year as there was no outstanding debt as on 31st March, 2022

Debt Service Coverage Ratio: It has decreased by 131.94 % during the current financial year as the company started new line of operation in the current year and incurred loss.

Net Capital Turnover Ratio: It has decreased by 675.06 % mainly due to increase in revenue from operation by approx 5 times from previous year.

Operating Profit Margin (%): It has decreased by 159.80% due to commencement of new business and fixed running cost is higher in comparison to revenue.

Net profit Margin (%): It has decreased by 155.24% during the current year as the company started new line of operation in the current FY and the total revenue could not cover the all fixed cost.

Return on Capital Employed: It has decreased by 178.17% during the current year as the company started new line of operation in the current FY and incurred loss.

Return on investment: It has t decreased by 94.05 % mainly due to effect of the higher amount of opening investments kept for short period and given low return at the time of maturity.

b) Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof

Key Financial Ratios	2022-2023	2021-2022	Variance (in %)	Explanations
Return on Net Worth (%)	-4.91	1.76	-379.59	R e d u c e d d u e to commencement of new business and fixed running cost is higher in comparison to revenue.

CAUTIONARY STATEMENT

Statements detailing the Companys objectives, projections, estimates, expectations or predictions are "forward-looking statements" within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Significant factors that could make a difference to the Companys operations include demand-supply conditions, finished goods prices, stock availability and prices, cyclical demand and pricing in the Companys principal markets, changes in Government regulations, tax regimes, political or economic developments and other internal factors. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events.