Chemcel Biotech Ltd Management Discussions

CHEMCEL BIO-TECH LIMITED ANNUAL REPORT 2010-2011 MANAGEMENT DISCUSSION AND ANALYSIS a. Industry Over view: With more new projects coming in for preserving in unutilised water going waste into the sea, huge acreages are going to be covered under assured irrigation. The projects are being completed to make available surplus water in full to the land leftover for irrigation. This has changed the entire economical status of the farmers and their purchasing capacities. The land value has gone up multifolded which indicates profitability for cultivating water dependant crops like Paddy, Sugarcance and other commercial crops. This will help the Agrochemical Industry to increase their sales multifolded to meet the growing demand with huge additional acreages coming under assured irrigation through new projects in the coming years. This will help your company to increase the sales on line with the industry. To encash this opportunity, your Company will concentrate more on Agrobased products with the additional funds coming into the system as working capital from the funds earmarked for Biodiesel working capital. Reasons for abandoning Biodiesel project: At the Present market conditions extraction of Bio Diesel by importing Bio crude oil and start operation is un viable. Management Analysis and study revealed that exporters of Biodiesel crude acquired the technology for convertion of Crude into finished biodiesel. With this operation they are able to find their own convertion to be more remunerative than exports. In addition to this they are encouraged by the respective governments for generating additional exployment channel. With this development the availability of crude Bio Diesel oil is bleak. These reasons are convincing us to decide to dispense with the proposed project of Biodiesel which is not at all feasible under the circumstances. Majority of Advances given to farmers for supply of seed returned the money due to non remunerative prices for supply of Jatropha seed and their inclination towards going for more commercial crops due to assured availability of water with new projects now coming in.. Efforts are initiated to recover the balance amounts from farmers . Also efforts are intiated with the machinery suppliers who are convinced to refund the advances made for machinery supplies. Our Biodiesel plant site at Kondapalli, measuring 2260.40 Sq yards located at Plot no.260A, R.S.No.110, 110/1A, Kondapalli village, Ibrahimpatnam mandal, Krishna dist, is not sufficient for accommodating any future enhancement of capacities as and when necessitates any future plans for installing Agro products plant as well. For expanding the existing site, the possibilities are remote as all the borders are locked by roads and existing adjoining Government owned factories. In view of this the Board felt to dispose of this land along with the building and structures and utilize the funds for the expansion and growth of the existing Agro based business. As the abondonment of Bio Diesel business is against to the Prospectus issued by the company, change in the project and change in utilization of funds requires the approval of shareholders. In view of the above, Board recommended for the approval of share holders for abandoning the proposal of Biodiesel plant in this AGM and the fund earmarked for the said purpose can be utilized for the general corporate purpose of your company b. Company Profile The Company being promoted by experienced professionals having associated with the agro chemicals industry for over three decades, is a premier manufacturer engaged in the manufacturing of agro-chemicals and bio products. The companys main products are in three forms viz., Liquids, granules and dusts. The Company is engaged in the manufacturing of agro- chemicals and bio products. The Companys Registered office and factory are located in their own premises at JRD Tata Industrial estate, Kanuru, Vijayawada, The total area of the plot of land is about 1849.02 sq.yards. The Company has two RCC buildings with 3 floors in each building constructed on the plot and all the necessary plant & Machinery & other infrastructure, having spare capacity to meet the future expansions. c. Opportunities With new areas coming under cultivation in a massive way due to Government taking up new projects for preserving water hither to going waste into the sea, the prospects for the sale of agrobased products will increase multifolded in the coming years. This is giving us an opportunity to increase our concentration to meet the additional demand being created by the additional huge acreages coming under cultivation. Your company is planning to increase products range putting more stress on bio products which are yielding more margins. d. Threats, Risks & Concerns Unhealthy competition amongst the manufacturers will force to reduce the margins particularly in agrochemicals. As this is mainly an agro based industry, the behavior of monsoon plays an active role with scanty or excessive rains causing drought/floods and affecting the sales. Remunerative prices to farmers, who is our ultimate consumer, for their produce will also play a vital role in our prospects as their purchasing capacity will be affected. e. Segment Wise Performance: The Company is involved in manufacture of Agro Chemicals and bio- fertilizers. As the Company is doing business in Agrobased products only, segment wise analysis of performance is not required. f. Outlook However, the difficulties ahead of us should not stop us from putting efforts. There is a huge market potential for agrochemicals in India. We believe that the Government from time to time would announce policies and will support a significant and stable market. Further strengthening of the policy guidelines, hastening the policy implementation, initiatives by the state governments, will help us in achieving our mission. g. Discussion on financial performance with respect to operational performance During the year under review the Company has achieved a turnover of Rs. 5022.16 Lakhs as against Rs. 4576.40 Lakhs in the previous year. The Company has earned a Net Profit of Rs. 86.78 Lakhs as against Rs.137.12 Lakhs in the previous year. The Company has made a provision of Rs.28.16 Lakhs for income tax, under consideration. An amount of Rs.137.12 Lakhs from the profits were made to the General Reserve. The Earning per share (EPS) of the Company as on 31.03.2011 was Rs 0.32/- . h. Material developments in Human Resources/Industrial Relations front The Company recognizes the importance and contribution of its employees to the growth and development of the Company. The Company continued to maintain cordial relations with employees and staff. Cautionary Statement Statements in the management discussion and analysis describing the Companys objectives, projections, estimates, expectations may be considered to be forward looking statements and actual results could differ materially from those expressed or implied. Factors which could make a significant difference to the Companys operations include demand supply conditions, market prices, input component costs and availability, monsoon and natural calamities, changes in government regulations and tax laws besides other factors such as litigation, over which the Company may not have any control.