Girdharilal Sugar & Allied Industries Ltd Management Discussions

Industry Structure and Development

The company is having a Dairy plant where it process milk to manufacture pure ghee and skimmed milk powder at its manufacturing facilities at 45/47-A, Industrial Area No.1, A.B. Road, Dewas. The Dairy business though subdued in F.Y 2018-19, yet is expected to grow in future and the company would like to take advantage of the brand image of its dairy products. The company has taken steps to modernize Dairy business.

The company is also having a Soya Solvent Plant for processing of soya bean seed to extract oil and DOC. However, due to disparity in soya operations for the last few years, the management of the company has decided to close the Soya Unit till favorable economies in the Soya operations. However the soya scenario looks dim in the next Financial Year also.

Economic Backdrop and Financial Environment

The Companys Dairy Plant is situated at Malwa Region of Madhya Pradesh which is rich in milk production. Being first in Private Sector in Dairy business at M.P., the Company is having advantages in procurement of milk and other inputs inspite of competition and other bottlenecks. The management is continuously exploring new sources of milk procurement as well as new market for finished goods to improve the profit margin. Similarly to attain higher production capacity utilization, the Company is entering into processing arrangement with milk cooperatives.

Outlook

The company carries a strong goodwill due to its fair dealings and straight policies. The company believes that its long association and strategic arrangement with the farmers, suppliers, customers, banks and government will be quiet beneficial in the long run and shall provide various opportunities to the company in Dairy business. The company is trying to keep up with the pace of growth of the Indian Economy.

Opportunities

The recent modernization and expansion programme completed during F.Y. 2018-19 has enabled the company to reduce cost of production substantially. The Management has also plan to introduce new value added products in the near future. The Company is also trying to tap new areas for marketing its Dairy Products.

Threats

The biggest threat faced by the Company is the establishment of smaller capacity Dairy Plants at milk producing area which may affect the margins of existing plants due to higher procurement cost of milk. The prevailing price of dairy products in international market as well as Govt policies may affect the margins in the Dairy Industry.

Internal Control System and Adequacy

The Company has adequate internal control procedure commensurate with its size and nature of the business. The internal control system is supplemented by regular reviews by management and well-documented policies and guidelines to ensure reliability of financial and all other records to prepare financial statements. The Company continuously upgrades these systems in line with best accounting practices. The company is benefited from having a team of professionals as promoter and independent directors who are capable of exercising various checks and controls effectively.

Human Resources

The Company has impressive record of maintaining human relations at all levels in past. Due to the professional approach of the management, the company has rarely faced any unrest or discomfort in connection with employees relation even during restructuring of employees/labour force post closure of soya operations. The employees relation remained cordial during the year.