golden tobacco ltd share price Management discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

1) Industry Structure and Developments

a) Economic Environment

The global economy was severely impacted by Covid-19 pandemic from early 2020 resulting world GDP into negative figure in 2020 as compared to a growth of 2.8% in 2019. The lockdowns and restrictions in movement and travel have had extensive impact on the entire global economy. The first half of 2020 saw the lockdowns and other restrictions imposed by the Countries across the world to contain the spread of virus. Businesses and Manufacturing facilities were come to a halt completely besides restrictions on movement of the citizens, which resulted in a sharp fall in both consumer demand and industrial output in the first half of 2020. However, in the second half of 2020, the Government started easing out of various curbs to contain the deadly virus resulted in opening and revival of the economy. Major Central Banks have taken significant steps to reduce systemic stress by offering large scale monetary stimulus packages and lending facilities. These central bank policies aimed to strengthen confidence levels, contain the impact of the pandemic and also to attain better position of the countries for rapid economic recovery. The Government also undertook various initiatives for the revival of Infrastructure and Real Estate sector, as a result the sector saw increased investments from both public and private sectors. In the wake of these measures, the Indian economy was able to put itself on the path of a strong recovery and IMF too revised its growth forecast for India for 2021 to a projected 12.1% growth from 7.4% in its early report of 2020.

b) Tobacco Industry

Over the years, tobacco has become an essential part of the Indian socio-culture environment. The Indian cigarette Industry is passing through tough times due to strict Government policies, such as steep tax structure, pictorial warnings and spurt in parallel running of illegal manufacturing units. Cigarette taxes in India are among the highest in the world. Therefore, high tax rates make cigarettes unaffordable to a large section of consumers. As a result they shift towards the consumption of beedi and other forms of smokeless tobacco. Beside this a parallel illegal unorganised industry is running, who are selling the cigarettes at a much lesser price impacting the organised players in this field. Industry also suffered badly due to the COVID-19 pandemic. Consequently, all the players in cigarette industries are facing pricing, margin pressures.

The challenges faced by the tobacco industry in India can be addressed by balancing the tax policies and strict regulations imposed by the Government and furthermore by implementing stricter measures for the parallel unorganised sector.

c) Regulation and Taxation

The regulatory environment has gotten stricter day by day since last many years. After GST came in picture Cigarette taxes (28% GST, and 5% to 36% cess + Specific Cess on Quantity and length basis) in India are among the highest in the world, though it is imperative that revenue sensitive goods like cigarettes are subjected to uniform standard rates of tax applicable to general category of goods to ensure revenue buoyancy and rein in the growth of illicit trade.

Considering the consumption-tax revenue ratio of the overall segment of smoked tobacco, legal cigarettes account for ~10% of consumption and ~86% of tax revenues. This implies that even though smokeless tobacco has the highest rate of consumption, more revenue is earned from legal cigarettes

2) Opportunities, Threats and Future Outlook

The present COVID - 19 situations is the biggest threat to the tobacco sector. Anti smoking campaign has been gaining momentum due to spread of Corona Virus and is now resulting in a decline in the incidence of smoking. Many State Governments have also been issued no smoking advisories in public and has also banned/restricted sale of loose cigarettes in many states which is likely to impact substantially in the volume of cigarette industry.

3) Segment Wise Performance

Your Company is uni-product Company and accordingly segment wise or product wise performance reporting is not applicable to your Company.

4) Risk Management and Concerns

Risk Management forms an integral part of your Companys operations. Your Company continues to focus on a system based approach to business risk management. It broadly involves identification & potential risks, their analysis and impact as also risk mitigation initiatives to address the same. The Companys Risk Management Committee oversees the risk management Process.

5) Internal Control System and their Adequacy

Internal controls encompass a set of rules, policies and procedures to provide reasonable assurance for achievement of the organizational objectives in operational effectiveness and efficiency, reliable financial reporting and compliance with laws, regulations and policies. Your Companys internal control systems are commensurate with the size and nature of its operations, which records transactions and operations; ensures protection against misuse or loss of the Companys assets; ensures efficiency in operations of the plant and facilitates transparency and accuracy of financial reporting. Under the system, the Internal Audit department monitors the effectiveness of the internal control systems and to review the existing financial and operating controls. These reports are placed before the Audit committee. The system is assisted by an Enterprise Resource Planning (ERP) package

6) Discussion on Financial Performance with respect to operational performance

The performance of your Companys operations remained subdued and extremely challenging during the year 2020-21 due to unprecedented pressure on the legal cigarette industry in India mainly due to spread of corona virus steep increase in taxation and intense regulatory pressures including other reasons as explained in the Boards Report which have adversely affected the business of the Company. However, the net turnover for the year 2020-21 was Rs.41.79 crores as against Rs.23.43 crores of the 2019-20. The net profit for the year was 10.09 crores against Rs (6.04) crores loss of the previous year.

7) Material Development in Human Resources/ Industrial Relations

Your Companys Human Resources Management Systems and process are aimed to create a responsive market focused and customer centric and endeavors to move ahead with its most valuable resources, its employees. Your Company is engaged in a constructive relationship with employees with an emphasis on productivity and efficiency and underline safe working practices. As on March 31, 2021 employee strength on roll was 98.

8) Details of significant changes in Key Financial Ratios, along with detailed explanations there for & Details of change in Return on Net Worth

As required under Regulation 34 of the Listing Regulations, Details of changes in Key financial ratios are as follows:

Particulars	FY2020-21	FY2019-20
Debtors turnover ratio-times	25.23	4.35
Inventory turnover ratio-times	2.27	1.29
Interest coverage ratio	2.80	0.79
Current ratio-times	0.04	0.08
Debt equity ratio	-0.01	-0.01
Operating Profit margin (%)	45.94	-59.22
Net Profit margin (%)	18.29	-7.04
Return on net worth (%)	0.01	0.02

9) Cautionary Statement

The statement made in the Management Discussion and Analysis is based on the current scenario and inputs available to the Directors and is a forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied and important factors that could make a difference. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent development, information or events or otherwise.

	For and on behalf of the Board
Place : Vadodara	Vinod Bhatia	Pawan Kumar Malsaria
Date : 13th August, 2021	Independent Director	Wholetime Director & CFO
	DIN: 08235705	DIN:01710944