Economic Overview
Indias economy has now become the fifth-largest in the world on nominal GDP (US
dollars) despite the slower global demand and tightening of monetary policy to manage
inflationary pressures. However, broad-based inflationary pressures and sharp rise in
energy prices following the outbreak of the Ukraine-Russia conflict impacted economic
activity.
Growth momentum significantly weakened in the United States, the European Union and
other developed economies in 2022, adversely impacting the rest of the global economy
through a number of channels. Tightening global financial conditions coupled with a strong
dollar aggravated fiscal and debt vulnerabilities in developing countries. Over 85% of
central banks worldwide tightened monetary policy and raised interest rates in quick
succession since late 2021, to tame inflationary pressures.
The Indian economy is projected to record a relatively healthy Gross Domestic Product
(GDP) growth of 6.1% (Source: IMF) in FY 2023 and is showing signs of moderation. Indias
growth continues to be resilient despite some signs of moderation in growth, although
significant challenges remain in the global environment, India was one of the fastest
growing economies in the world.
Industry Structure and Developments
Indian markets had a quiet FY2023 with major indices closing flat. The year started
with ongoing Russia-Ukraine geopolitical tensions, accelerated monetary tightening by
major central banks, volatility in commodity prices etc. Equity markets, which were down
during the first quarter, bounced back with Sensex and Nifty achieving an all-time high of
63,284 and 18,812 respectively in the month of December 2022. The key factors that
supported the bullish run were relative strong domestic growth, robust corporate earnings,
optimistic growth outlook, large inflows into domestic institutional investors etc. Sensex
and Nifty closed at 58,992 and 17,360 respectively in March 2023, down from all-time high
due to US banking crisis where multiple banks were declared insolvent. Still, India was
the second best equity market performer among the emerging markets in FY2023 after South
Africa. The NBFC sector in India is growing at an exponential rate with its impact
becoming more visible across different sectors.
The consumer confidence also remained positive in rural India mainly supported by 4th
consecutive year of normal monsoon, record food grain production in FY 2023, and
government support through higher MSP, increase in wages under MNREGA and others.
The subsidiarys main business is manufacture and sale of Tea. The Tea crop period
ranges from March to December and the crop yield depends on the weather conditions. The
area under plantation is constant and as such the yield depends to a large extent on
irrigation facilities, better soil management techniques etc.
The production cost of tea comprises of various inputs, manpower and welfare costs.
Manpower accounts for almost 65% of cost. Welfare cost are statutorily required to be met
by the Company including those under the Plantation Labour Act, Minimum Wages Act etc. and
levies imposed by the Central and State authorities from time to time under various other
laws. The Company has completed augmentation of its tea manufacturing facilities located
at Tea Estates in Assam. Company is embarked on the mission to reduce carbon foot print in
the cup of tea we produce. We have taken up adequate soil conservation measures and
application of chemical based inputs like fertilizers and plant protection formulations
are carefully and scientifically designed to minimize the impact on environment. Trustea
certification of our Tea garden is testament to our commitment for green clean
environment. This has helped us to carry out business sustainably.
In 2022, Assam tea production stood at 687.93 million kgs, while in 2021 it was at
667.73 million kgs. Production in 2021 was lower due to less rainfall in the early months
(January, February and March) of the year as well as during the later part of (October,
November and December) 2020.
Opportunities and Threats
Your Company is an Investment Company that seeks opportunities in the capital market.
The unpredictability in the stock indices in the financial year under report represents
both an opportunity and challenge for the Company. There are external risks as well, such
as a more profound slowdown of the global economy than anticipated. The High volatility in
the market along with higher inflation has intensified the competition. We have been
fashioning our own responses to these challenges and we believe that we can turn them into
opportunities, which can unlock growth for us in the future.
Investors should brace for another turbulent year in the financial markets as central
banks fight inflation pushes the global economy towards recession. The three big economies
– the US, EU and China – are all slowing down simultaneously. It is expected
that equity markets may struggle but remain hopeful of a global economic recovery on the
later part of the year.
On the fiip side, the Indian equity market seems comfortably seated in an optimism
zone, on the back of an ebbing fear of rate hikes in a recessionary environment and a
lower valuation premium for emerging markets. As the fundamentals of the Indian macro
economic are intact, it is expected that India will continue to remain as a bright spot
among other emerging countries and market will continue to move northward. The NBFC sector
has been hit by a series of defaults by some of the prominent players like IL&FS and
DHFL. These defaults have led to a liquidity crisis in the sector, resulting in a slowdown
in credit growth. The RBI has also tightened the regulatory framework for NBFCs to prevent
any further defaults and to ensure the stability of the financial system. Despite the
challenges, the future of NBFCs in India looks promising. The sector is expected to grow
at a CAGR of 18.5% between 2021 and 2026, according to a report by ResearchAndMarkets.com.
The growth is expected to be driven by various factors like the increasing demand for
credit, the governments initiatives to promote financial inclusion, and the rise of
digitalization.
Tea remains the favourite Indian beverage with a high consumer preference for boiled
milk tea. In Tea growing areas of Assam, we are witnessing intense heat or continuous
rainfall, both of which are creating impediments to anticipated production of quality and
quantity. This is also intensifying the sudden pest attack. However, at Cinnatolliah Tea
Limited, we practice sustainable agriculture with practices of irrigation, drainage, shade
planting etc. which somewhat negates the impacts.
Performance
The Company operates in single segment which is to invest, deal etc. in securities.
Apart from its operations in investment in securities, the Company also continues to be
engaged in business of Tea Manufacturing and processing through its subsidiary company i.e
Cinnatolliah Tea Limited. There has been no change during the year under review in the
nature of business pursued by the Company.
The increase in production this year was from Kenya, Turkey and Vietnam, whereas all
the others recorded a shortfall in production with India taking the lead.
The Disclosure as stipulated under Regulation 34(3) read with Schedule V Clause B of
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, are as follows:
a. The Debtors Turnover Ratio and Inventory Turnover Ratio as on 31st March, 2023 are Nil;
b. Interest Coverage Ratio and Current Ratio as on 31st March, 2023 are 88.87 and 70.31 as
compared to 48.14 and 114.89 in the previous financial year due to higher proflt before
tax; c. The Net Proflt Margin for the current financial year is 70.16% compared to 74.32%
in the previous financial year. In addition to above, there was change in return on Net
Worth to the tune of 2.26% as compared to 1.14% in the immediately previous financial year
due to higher proflt after tax.
Outlook
The global economy is expected to grow 2.8% in 2023, influenced by the ongoing
Russia-Ukraine conflict. Concurrently, global infiation is projected to fall marginally to
7%. Despite these challenges, there are positive elements within the global economic
landscape. There are green shoots of economic revival, marked by an increase in rural
growth during the last quarter and appreciable decline in consumer price index inflation.
The economic growth momentum of the country is largely dependent on ongoing global
events that pose downside risk to growth. India is currently the third-largest
middle-class market, after China and the United States and is expected to be the largest
in another decade. There are many macro indicators painting positive picture for economic
recovery in 2022 and these include prospects of a new investment cycle, continued momentum
of investment in new-age companies and successful listings and an earnings growth outlook
for FY 2022 and 2023.
The Indian tea market is expected to exhibit a CAGR of 4.5% in the period between 2022
and 2027. India is among the largest producers and consumers of tea globally. The
increasing consumer preference for premium and packaged tea brands is accelerating market
growth. Growing consumer awareness regarding the health and medicinal benefits of organic
and Green Tea variants are also contributing to market growth. Over the recent years, the
out-of- home market for tea has been expanding as various tea lounges have mushroomed
across the globe. Proliferating online retail channels are anticipated to drive market
growth, with 5.9% CAGR over the forecast period. The popularity of online apps, coupled
with the availability of discounts, and easy product delivery has benefited the markets
supply chain. This factor is expected to bode well for the growth of the segment over the
forecast period.
Further, the draft tea bill intends to remove archaic or redundant provisions, do away
with licences, promote ease of doing business and boost exports from the sector, an
official said. The commerce ministry has proposed to repeal the 68-year old Tea Act, 1953
and introduce a new legislation Tea (Promotion and Development) Bill, 2022.
The demand for tea in the Middle East and Africa (MEA) is expected to proliferate.
Countries such as Turkey and Iran are some of the leading consumers globally. Good
liquoring CTC teas will continue to rule the market. Indian Orthodox is set to remain
bullish for well-made teas.
Risks and Concerns
Your Company follows a risk management process for identification, categorization and
prioritization of various risks like operational, financial, legal and other business
risks. The Chief Financial Officer aided by the Internal Auditor reviews the effectiveness
of the process at regular intervals and reports the same to the Audit Committee and the
Board.
As per Risk Management framework and procedures, management treat various category of
risks and take appropriate actions for its mitigation. Company has the process of
communication, consultation, monitoring and periodical review of the risks and
effectiveness of the mitigation plan. The Company has in place a mechanism to identify,
assess, monitor and mitigate various risks to key business objectives. Major risks
identified by the businesses and functions are systematically addressed through mitigating
actions on a continuing basis. The Company is mainly exposed to market risks in the form
of reduction in value of its investment and fall in return due to dip in the investee
companys performance. Delay in repayment by the borrower companies can affect liquidity
and redeployment scope. The Company is also exposed to fluctuation of economy and industry
cycle.
The Audit Committee periodically reviews the efficiancy of Internal Financial Control
Systems and risk mitigation process.
Internal Control Systems and their adequacy
The Companys internal audit is conducted as per the Annual Audit Plan approved by the
Audit Committee.
It lays emphasis to check on process controls, measures undertaken by the Company to
monitor risk and to check for leakages or frauds.
Further, Statutory Auditors verified the systems and processes and confirmed that the
Internal Financial Controls system over financial reporting are adequate and such controls
are operating effectively.
The Company has an Internal Control System, commensurate with the size, scale and
complexity of its operations. The Audit Committee periodically reviews the efficiancy of
Internal Financial Control Systems and risk mitigation process. Your Board believes that
appropriate procedures, controls and monitoring assessment procedures are in place and
considered adequate.
The Company has an adequate system of internal control implemented by the management
towards achieving efficiency in operations, optimum utilization of resources and effective
monitoring thereof and compliance with applicable laws. The Internal Auditors were
suggested with audit plan based on the risk profile of business activities of the
organization, which were approved by the Audit Committee. The adequacy of the internal
control system is reviewed by the Audit Committee of the Board of Directors. The
efficiency of the internal checks and control systems are verified by the Internal
Auditors as well as the Statutory Auditors. The Audit Committee reviews the internal audit
plan, adequacy and effectiveness of the internal control system, significant audit
observations and monitors the sustainability of remedial measures.
Your Board believes that appropriate procedures, controls and monitoring assessment
procedures are in place and considered adequate.
Human Resources
In keeping with our employee-first approach, we have steadily instituted measures to
assure ourselves of the well-being of all our employees. The Company is into a continuous
process of providing a safe work environment for our employees and stakeholders. Steps
have been taken to inculcate a performance-oriented culture by focusing and laying more
emphasis on the performance management system. It has been Companys endeavour to attract
talent from the most reputed institutions to meet the requirements of various functions.
The Company will strengthen its operative staff s as and when need arises.
Cautionary Statement
Statements in this Management Discussion and Analysis describing the Companys outlook,
objectives, projections, estimates and expectations may be ‘forward looking
statement within the meaning of applicable laws or regulations. Actual results may difier
from those expressed or implied. Important factors that could make a difierence to the
Companys operations include changes in Government regulations and tax-regime, economic
developments within India and abroad, financial markets, etc. The Company assumes no
responsibility in respect of forward-looking statements that may be revised or modifled in
future on the basis of subsequent developments, information or events. The Financial
Statements are prepared under historical cost convention, on accrual basis of accounting,
and in accordance with the provisions of the Companies Act, 2013 (the Act) and comply with
the Accounting Standards notified under Section 133 of the Act read with the Indian
Accounting Standards Rules, 2015. The management has used estimates and judgments relating
to the Financial Statements on a prudent and reasonable basis, in order that the Financial
Statements reflect in a true and fair manner, the state of affairs and proflt/ loss for
the year. This report should be read in conjunction with the Financial Statements included
herein and the notes thereto.
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