Gokul Agro Management Discussions


(Annexure-A to the Directors Report)

Management Discussion and Analysis Report INDUSTRY STRUCTURE AND DEVELOPEMENT: GLOBAL ECONOMIES:

The global cooking oil market is driven by increase in consumption of high-quality edible oils/cooking oils by health-conscious consumers and growing demand from various applications, such as confectionery, primarily in the production of candies.

Edible oils market is expected to reach USD 190.88 billion by 2030, which is USD 102.37 billion in 2022, registering aCAGR of 8.10% during the forecast period of FY 2023-30.

The global castor oil & derivatives market size is expected to reach USD 1.9 Billion by 2030, as per the new report. The market is anticipated to register a CAGR of 5.8% from 2022 to 2030. The demand is attributed to the increase in the consumption of the product by various end-use industries such as coatings, lubricants, medicinal products, and personal care.

INDIAN ECONOMYOUTLOOK:

Edible oils act as an intensive source of energy, delivering essential nutrients to the body, including vitamins A and D. Besides this, they act as a heat transfer medium at high temperatures and enhance taste sensation in spreads and salad dressings. The Food Safety and Standards Authority of India (FSSAI) super vises the manufacture, packaging, and distribution of edible oils in India.

In India, the rising consumer health concerns towards the high prevalence of coronary heart diseases, diabetes, obesity, gastrointestinal disorders, etc., are primarily driving the demand for healthy edible oil. Additionally, the market is further catalyzed by the growing awareness towards several health benefits of organic and low-cholesterol edible oil. As a result, various regional manufacturers have launching healthy product variants enriched with omega-3, vitamins, and natural antioxidants. Moreover, the changing consumer dietary patterns and their hectic work schedules have led to the increasing consumption of processed food items. The rising demand for edible oil in the food processing sector as food preservatives and flavouring agents is also catalyzing the market growth in the country. Additionally, the elevating consumer living standards coupled with the increasing penetration of international culinary trends and are further augmenting the demand for high-quality product variants, such as olive oil, sesame oil, flaxseed oil, etc.

Apart from this, the expanding agriculture sector along with the launch of several initiatives for enhancing the production of oilseeds in the country is also propelling the market. Furthermore, the Indian government is making continuous efforts to increase the domestic availability of edible oil and reduce import dependency. For instance, the government has proposed the National Mission on Edible Oil (NMEO) for meeting the countrys consumption need for edible oil, such as sesame oil, groundnut oil, sa3ower oil, palm oil, etc.

The Indian economy is in robust growth phase with lots of new developments and investment sentiment being upbeat. The RBI expects Indias 2023-24 GDP growth at 6.5%, with quarter Q1 at 8.0%, Q2 at 6.5%, Q3 at 6.0%, and Q4 5.7%. An average GDP of 6.5% for India in a period when many global economies are struggling with higher interest rates, rising inflation and slowing of consumption is truly commendable.

Indian PMI numbers, credit growth and even consumption numbers like Auto sales have been robust for the year so far and with that it looks like that the India GDP can even grow more then the number forecast by RBI.

Indian CPI numbers even though higher @ 4.81% but are still much below RBIs upper tolerance limit of 6%, also the food inflation rose to 4.91% but that is due to vegetable price increase and can be temporary as all round good rains increased the prospects of good crops of all the agricultural products.

The progress of the monsoon have been fairly good in many parts of India and it will have a significant impact on agriculture, animal husbandry and other allied industries. The large portion of Indian population still earns their livelihood from these industries, the good monsoon will enhance purchasing powers of these millions of people who are directly and indirectly connected to Agriculture.

OPPORTUNITIES:

• At GARL we are always in lookout for opportunities where company can grow exponentially and create value for themselves as well as for its stakeholders. In the same endeavour, we planned for setting up of new greenfield edible oil refinery at Krishnapatnam, in Andhra Pradesh to cater the growing needs of the people of the region and to bolster our vision to expand PAN India basis.

• The Government of India is taking measures to increase the domestic production of edible oil seeds. Initiatives like ‘ N a t i o n a l M i s s i o n o n Ed i b l e O i l s a n d ‘O i l Pa l m Development Programme, increasing the minimum support prices of oilseed crops, creation of bu3er stock for oilseeds are being implemented by the Government to boost the production.

• There is a continuously increasing edible oil demand due to rapid urbanisation, changing dietary patterns and the growth of the food processing sector.

• Indias population and low per capita consumption is continuously increasing which will boost the sector significantly.

THREATS:

• Our operations are dependent on the supply of large amounts of raw materials, such as palm oil, soybean oil, sunflower oil and oilseeds. Unfavourable local and global weather patterns may have an adverse effect on the availability of raw materials. However, our internal processes are designed to shift the resources to products with good price parity, which largely mitigates the threat of seasonality of products.

• Commodities tend to go through volatility and are prone to make sharp price moves in short time however with disciplined hedging and being ahead of the market we have been able to address them and deal with them quite well.

• Any adverse government policies or decisions both at exporting countries and in India can have a temporary impact on the supply – demand.

RISK MANAGEMENT AND ADEQUACY OF INTERNAL FINANCIAL CONTROLS:

RISK MANAGEMENT

The Company has a well-defined process in place to ensure appropriate identification and treatment of risks. Risk identification exercise is inter-woven with the annual planning cycle which ensures both regularity and comprehensiveness. The identification of risk is done at strategic, business, operational and process levels. While the mitigation plan and actions for risks belonging to strategic, business and key critical operational risks are driven by senior leadership, and for rest of the risks, operating managers drive the conception and subsequent actioning of mitigation plans.

The key strategic, business and operational risks which are significant in terms of their impact to the overall objectives of the Company along with status of mitigation plans are periodically presented and discussed in the Committee Meetings. The Company, through its risk management process, aims to contain the risks within its appetite. There are no risks which in opinion of the Board threaten the operations and existence of the Company.

ADEQUACY OF INTERNAL FINANCIAL CONTROLS:

We have implemented a robust internal financial controls (IFC) framework within the company. The Internal Financial Controls have been documented and embedded in the business processes. Design and operating effectiveness of controls are tested by the management. Internal auditor has issued an unqualified report after checking the effectiveness of these controls. The management believes that strengthening IFC is a continuous process and therefore it will continue its efforts to make the controls smarter with focus on preventive and automated controls as opposed to mitigating manual controls. The company has robust ERP and other supplementary IT systems which are integral part of internal control framework. The company continues to constantly leverage technology in enhancing the internal controls. On a voluntary basis, we endeavour to implement the same in our subsidiary Companies.

HUMAN RESOURCES

The Company recognizes that thecompetence of its workforce is crucial to achieve success and GARL is dedicated to provideemployeeswith the skills necessary to keepup with continuous technologicaladvancements. Throughout theyear, t h e C o m p a n y h o s t e d t r a i n i n g i n i t i a t i v e s i n v a r i o u s domains,including technical skills,interpersonal skills, operationalexcellence, general and advancedmanagement, leadershipqualities, customer focus, safety,values, and ethical standards. The Companys workforce hasbeen enriched through a culturebased on enthusiasm, exposureto various market conditions,emotional involvement, andempowerment over the years.

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.

Our Objective on Human Resource to provide direction and clarity in the day-to-day administration of Human Resources and to provide standard reference to employees in u n d e r s t a n d i n g t h e i r r i g h t s a n d c a r r y i n g o u t t h e i r responsibilities.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

During the Financial Year 2022-23, we achieved a strong 1.68 % increase in our revenue compared to the previous year. This financial performance was driven by our stellar export performance and consistent domestic performance. Over the years we have expanded our capacity, developed our expertise and broadened product base to drive this growth of the Company.

Particulars

FY 2022-23

FY 2020-21

YoY Change (in %)

Standalone Consolidated Standalone Consolidated Standalone Consolidated
Revenue 10,08,281 10,73,980 10,21,079 10,38,411 3.42 (1.25)
EBITDA 25,632 29,831 21,225 24,149 23.53 20.76
PAT 10,470 13,240 10,297 12,290 7.73 1.68

Net Worth

55237.41 65060.86 40654.03 47028.04 38.34 35.87

SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS (STANDALONE)

Ratios

FY 2022-23 FY 2021-22 Change %

FY 2020-21

Debtors Turnover Ratio 37.74 38.7 -2.48% NA
Inventory Turnover Ratio 16.27 21.24 -23.40% NA

Interest Coverage Ratio (in times)

2.97 4.18 -28.95%

The interest coverage ratio is a debt and profitability ratio used to determine how easily a company can pay interest on its outstanding debt. Through strategicplant expansions and modernization investments,we have successfully elevated our productivity, resulting in a substantial rise in EBIT. However, with the substantial increase in Alternate Reference Rate during the period under review, financing cost of the company has increased.

Current Ratio (in times) 1.26 1.2 5.00% NA
Debt Equity Ratio (in times) 2.44 2.49 -2.01% NA
Operating Profit Margin (%) 2.54 2.08 22.12% NA
Net Profit Margin (%) (PBT) 1.04 1.01 2.97% NA

Return on Net Worth (%)

18.96 25.33 -25.15%

The Return on Net Worth of a company is a critical financial metric that measures the profitability of the company in generating earnings from its shareholders equity. The main reason for decrease in this ratio is due to year end increased equity capital.

Cautionary Statement:

The statements made in the Management Discussion and Analysis Report of the Company describing the Companys goals, expectations and predictions, among others, do contain some forward-looking views of the management. The actual performance of the Company is dependent on several external factors, many of which are beyond the control of the management, viz. growth of Indian economy, continuation of industrial reforms, fluctuations in value of Rupee in the foreign exchange market, volatility in commodity prices, applicable laws / regulations, tax structure, domestic / international industry scenario, movement in international prices of raw materials and economic developments within the country, among others.