The management of CKP Products Limited presents the analysis of the Company for the
year ended on 31st March, 2019 and its outlook for the future. This outlook is based on
assessment of the current business environment. It may vary due to future economic and
other developments both in India and abroad. This
Management Discussion and Analysis ("MDAR") for the year ended on 31st March,
2019 contains financial highlights but does not contain the complete financial statements
of the Company. It should be read in conjunction with the Companys audited financial
statements for the year ended on 31st March 2019.
Indian Economy and Business Outlook:
The International Monetary Fund (IMF) has pared Indias growth forecast for the
just-concluded fiscal and the next two years, citing softer recent growth and weaker
global outlook, but expects the country to retain its place as the fastest growing major
economy. According to IMF estimates, Indias economy grew 7.1% in financial year 2018-19
and is expected to accelerate to 7.3% growth during 2019-20.
Trade tensions, rising interest rates, dollar appreciation, capital outflows and
volatile oil prices were some of the challenges faced by emerging market and developing
economies in the second half of 2018, some of which are expected to carry over in 2019.
Improved momentum in emerging market and developing economies is projected to continue
into 2020. However, activity in advanced economies is projected to continue to slow down
as the impact of US fiscal stimulus fades. India will be a beneficiary of revival in
investment and robust consumption demand, coupled with a more expansionary stance of
monetary policy and some expected impetus from fiscal policy.
Important steps have been taken to strengthen financial sector balance sheets,
including accelerated resolution of non-performing assets under a simplified bankruptcy
framework. Further, the Budget 2019-20 proposed direct cash transfer programme for farmers
and the middle-class tax relief measures which will provide a significant fiscal stimulus.
The governments thrust on rural spending, infrastructure creation and irrigation spending
are expected to provide support to rural incomes over the short to medium term. Indias
favorable demographics should continue to assist strong growth rates in the coming years
and the roadmap has been laid to propel India to become a US$ 5 trillion economy over the
next few years.
Global Scenario:
The global edible oil market is segmented into palm, soya bean, sunflower, olive, corn
and canola oils, as well as specialty blended oils and others. The global edible oils
market is expected to register a CAGR of 5.1% through the forecast period to reach the
value of US$ 130.3 billion at the end of 2024. The global edible oils market is segmented
on the basis of region, into North America, Europe, Asia Pacific, Latin America and
Middle-East and Africa (MEA). Asia Pacific is projected to dominate the global market and
is expected to account for 42.40% at the end of 2024.
Indian Scenario:
Edible oil constitutes an important component of food expenditure in Indian households.
The edible oil industry is one of the most important within the agriculture sector in
India, the worlds largest importer from Indonesia and Malaysia and the third largest
consumer. India is also the fourth largest oil seed-producing country in the world after
USA, China and Brazil. In all, nine types of oilseeds are produced in India. Of the nine,
soya bean, ground nut, and mustard are the major oilseeds produced in the country.
Consumption of vegetable oils have increased due to a rise in overall household income,
surging retail sector, increasing health awareness, growing population and increasing
demand.
India is a USD 2 trillion economy with a population of over 1.2 Billion people. Edible
Oil is an important component of the household food basket. The total production of edible
oil in the country is around 9 Million MT, while the domestic requirement is around 23
Million MT. The demand-supply gap is bridged by imports. It is the worlds largest edible
oil importer, with oil and oil seed turnover of USD 25 Billion and import-export turnover
of around USD 13 Billion. India is importing around 14 Million tonnes of edible oil per
annum at the cost of approximately USD 11 Billion per annum. India accounts for 4% of
global vegetable oil production, 12% of global consumption and 21% of global traded
volumes.
Overview of Indian Edible Oil Industry:
Oilseeds and edible oils are two of the most sensitive essential commodities. India
contributes about 6-7% of the world oilseeds production. Major Indian states such as
Gujarat, Rajasthan, and Bihar utilize a major quantity of oil for deep frying purposes
than as generic cooking oil. Rising income levels among the middle class in aforementioned
states have driven the demand for low-fat oils as a result of rising number of chronic
disease cases along with increasing awareness among consumers. Strong demand for coconut
oil emerging from the southern part of India is also anticipated to foster industry growth
over the forecast period. (Source: Ministry of Agriculture)
As per estimates, Indian vegetable oil demand shall grow significantly with a CAGR of
3% to exceed 34 million tonne by 2030, with the per capita consumption pegged at 24 kg in
2030, due to rising disposable income and population growth.
Our Business Overview:
Our Vision is "To be recognized as a thoroughly modern, diversified organization
that contributes to global economic productivity and is considered a best in class partner
to do business with." Today the Company stands strong as CKP Products Limited. CKP
Products is a leading integrated edible oil trading company. The Indian edible oils &
fats industry can be bifurcated into packaged and loose segment. The packaged business is
growing at 20-25% p.a. when compared to the overall industry growth of around 5%. Hence
CKP Products is focusing on the bulk trading of oils. CKP Products is focusing on the
trading of Palmolein oil (which is the fastest growing category and contributes to 40% of
all oil consumed in the country) & Sunflower oil (being the preferred oil among the
household consumers). In addition to this, the company is also investing in the areas of
manufacturing and marketing of specialty fats as well as other products catering to food
and beverage segment along with bulk trading of agro-commodities.
CKP Products bulk trading deals with buying and selling of crude and refined Palm,
Sesame, Rice bran, Sunflower, Soya bean, Ground Nut & Cotton Seed Oil and other Agro
commodity. The bulk oil is traded through a network of brokers. As one of Indias leading
companies in the edible oil sector, CKP Products has deep understanding of agro-commodity
and farmer community issues. CKP Products strives to set new benchmarks in the industry
with our product quality and service levels.
Key Financials Overview*:
*Note: Consolidation figures have been taken into consideration except figures of
Share Capital in (Rs.).
Segment Wise Performance:
At present company is operating under only one segment namely trading in edible oils.
Outlook:
On the basis of the product, the market has been segmented into palm oil, soybean oil,
mustard oil, sunflower, groundnut oil, rice bran oil, and blended oil. Palm oil emerged as
the dominant segment with over 30% of the overall market revenue. Our Company is on track
with strategy implementation. The long-term outlook of edible oil demand in India is
favorable on expectation of increasing population, increase in per capita consumption
which in turn would be driven by changing lifestyles, growing urbanization, increasing
proportion of middle-class population and steadily rising affluence levels.
The segment is still in the budding phase and offers lucrative opportunities to
industry participants over the forecast period.
Risks and Concerns:
Our Company faces general risks inherent in any business including political, legal,
geographical, economical, environmental and competition risks and takes appropriate steps
to mitigate them and reduce their impact to the extent possible.
The key risks to which your Company is exposed includes:
• Price Volatility: Our Company is exposed to commodity price fluctuations in its
business. All major raw materials as well as finished goods, being agro-based, are subject
to market price variations. Prices of these commodities continue to be linked to both
domestic and international prices, which in turn are dependent on various macro and micro
factors.
• Attracting and Retaining Talent: The cost for retaining the talented labour in
the company has also increased significantly. Cost of Retaining the talented is very high.
• Currency Volatility: Our Company is exposed to risks arising out of volatility
in foreign currencies, the exposure on this account extends to: (a) Products imported for
sale in domestic markets; (b) Products exported to other territories and Foreign Currency
Loans.
• Heightened Competition: Todays market is one of compelling competitiveness.
Winning new customers is difficult but retaining them is much more difficult as clients
are continuously bombarded with options. It is expected that the competition will increase
steadily and it will be the survival of the fittest.
• Government Policies: The policies announced by the Government have been
progressive and are expected to remain likewise in future, and have generally taken an
equitable view towards various stake holders, including domestic farmers, industry, and
consumers.
Risk management is a structured, consistent and continuous process across the entire
organization for identifying, assessing, deciding on responses to and reporting on
opportunities and threats that may affect the achievement of its objectives. Risk
management does not aim at eliminating the risks, as that would simultaneously eliminate
all chances of rewards/opportunities. Instead it is focused at ensuring that these risks
are known and addressed through a pragmatic and effective risk management process.
The Company has a risk identification and management framework appropriate to it and to
the business environment under which it operates. Risks are being identified at regular
intervals by the Board. The Board of Directors is responsible for the assessment,
formulation and implementation of guidelines, managing key risks, risk minimization
procedures and periodicals review with respect to risks concerned with the operations of
the company. The Company has built a strong culture of managing risk in a structured
manner.
Risk Mitigation Strategies carried by the Board are enlisted below:
• Identification of the diverse risks faced by the company either it be internal
substantive risk or external socio-economic-political risk.
• Risk Management through appropriate mitigation strategies within the general
framework at appropriate management level & their reporting.
• Monitoring the progress of the implementation of such strategies and subjecting
them to periodical audit and review.
Internal Control Systems and their Adequacy:
The Company is responsible for establishing and maintaining adequate and effective
internal controls and the preparation & presentation of financial statements,
including assertions on the internal financial controls in accordance with a broad
criterion that it has set for itself. This internal control system is aimed at providing
assurance of our operational effectiveness and efficiency, compliance with laws &
regulations, asset safeguarding & reliability of financial and management reporting.
The Company strictly adheres to the internal control systems as laid down and updated
from time to time. The internal audit team carries out extensive audit of all operations
at regular intervals. The company implements the policies and procedures so as to
safeguard the assets and interests of the company. The internal control systems are
implemented with a view to achieve good ethical culture within the organisation. The
internal control systems would ensure that all the vulnerabilities are detected in a
timely manner and corrective actions are taken promptly.
Based on its evaluation (as defined in section 177 of the Companies Act, 2013 and
clause 18 of the SEBI (Listing Obligations and Disclosures Requirements) Regulations,
2015, our audit committee has concluded that as of 31st March, 2019, our internal
financial controls were adequate and operating effectively.
The Company is staffed by experienced qualified professionals who play an important
role in designing, implementing, maintaining and monitoring the internal control
environment.
Human resource and Industrial Relations:
We believe, ‘People are the most valued resource of an organisation. Their
interests and welfare is our prime concern. We strive to explore their best by creating
opportunities for growth and development, while maintaining discipline and demeanour in
consonance to the culture and values of the organisation. In the process, a set of
parameters addressing all dimensions have been created. We also have a full-fledged manual
on HR policies, which underpins and brings together the various codes of practices
relating to specific aspects of Human Resources.
Human Resource Management is a dynamic function, which needs to adapt to the changing
business needs of the organization. Thus, the manual provides the basic guidelines to
channelize the HR initiatives in the organisation but may not provide exhaustive solutions
to problems, which keep emerging at regular times in the organization.
Personnel are the biggest strength of any Company as they play a pivotal role in the
transformation journey of the organization by ensuring efficiency and promoting the right
culture. The company is committed to grow its talent pool by developing skills internally
and acquiring the best talent in the industry. As at 31st March, 2019, there were 8
permanent employees on the rolls of your Company.
Cautionary Statement:
There are certain Statements which have been made in the Management Discussion and
Analysis Report describing the estimates, expectations or predictions, may be read as
‘forward-looking statements within the meaning of applicable laws and regulations.
The actual results may differ materially from those expressed or implied. The important
factors that would make a difference to the Companys operations include demand-supply
conditions, raw material prices, changes in Government Policies, Governing Laws, Tax
regimes, global economic developments and other factors such as litigation and labor
negotiations.
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