Grob Tea Co Ltd Management Discussions.

(Forming part of Directors Report for the financial year ended 31st March, 2019)

Industry Structure and Developments : All India black tea production was approximately 1,339 million kgs during the calendar year 2018, as compared to 1321 million kgs of 2017. The excess crop of 18 million kgs has come mainly from small Grower sector, which now produce almost 48% of all India Production. The crop of your Company was marginally higher over last year inspite of Tea Board mandated early closure of manufacturing season.

Opportunity and Threat : The continuous promotional efforts and initiatives taken by the Government/Tea Board including Trustee programme will benefit the industry in the long term. Three of your Companys gardens are now Trustea certified.

Weather condition has become an important factor for all agricultural produce including tea. Global Warming is seriously having its effect in all the tea growing region of the country with rising temperature and unpredictable erratic distribution of rainfall. Pest attack is a major threat to the industry. We practice sustainable agricultural practices, which minimizes the impact of such erratic conditions and with strong irrigation which minimizes the negative impact.

Product –wise Performance :- During the year under review the production of Tea was slightly higher as compared to last year. Sustained effort in improving the quality has resulted in slightly higher realization compared to last year. The details of performance is given below.

Year Production (Lac Kgs) Sales (Lac Kgs) Average Realisation (Rs. Per Kg.)
2018-19 45.51 44.36 173.69
2017-18 45.00 45.07 170.55
Change (%) 1.13% (-)1.58% 1.84%

Outlook : The current season started off well with favourable weather condition during February & March. But prolonged wet spell from late April with limited sunlight effected the leaf growth badly. Lower crop of Kenya is yet to have any significant impact on domestic price or towards export front. The stagnated internal consumption of tea and export coupled with higher production of teas mainly from STG have somewhat depressed the market with sluggish demand. The overall outlook for current year is barely steady.

Risk and Concern : Weather plays an important role in the success or failure of any agriculture industry including plantations. Tea is a perennial crop and hence with climate change, repeated erratic rainfall and weather conditions affects the production of tea crops. Further, tea being the labour intensive industry, shortage of labour in peak season and substantial increase in labour costs, high social cost and other input cost remains the major cause of concern for the industry.

Discussion on Financial Performance with respect to Operational Performance :The company emphasis on continuous improvement of quality tea with latest technology which are resulting in high margin.

Internal Control System and their Adequacy :The Companys internal control system and the level of management are reviewed from time to time to implement information wherever required. The Internal Audit is carried out to a large extent by Professional firm of Chartered Accountant along with the Group Internal Auditor. The Audit Committee of the Board looks into the audit review which is deliberated upon and corrective action taken wherever required.

Information regarding Human Resources/Industrial Relation : The Company deeply appreciates performance and cooperation of the employees for the year and to maintain this cordial relationship for the years to come. Your Company believes in employee empowerment across the entire organization in order to achieve organizational effectiveness. The Company employs over 4118 employees at its tea estate and other establishments in the country. The Industrial relations of the Company was cordial and there were no instances of employee disputes arising during the year.

Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor, including:

Ratios 2017–18 2018-19 % Increase/ Decrease Reasons
Debtors Turnover Ratio 72.19 17.40 -75.89% Sale relating LED division was made in the month of March 2019, therefore the same has affected the debtor turnover ratio of the current financial year.
Interest Coverage Ratio 14.79 7.38 -50.12% Average working capital borrowing was higher during the current financial year due to substantial increase in labour wages.
Debt Equity Ratio 0.10 0.13 26.37% During year end of the current financial year, the Debt position was higher due to higher working capital borrowings utilisation to meet up the cost of the substantial rise in labour wages & higher tea production in month March 2019.
Net Profit Margin (%) 2.40% 1.75% 27 - .10% During the current financial year, Operating Costs increased sharply due to substantial wage increase in Assam as per industry wise agreement & also increase in other input cost which impacted the bottom line of the Company adversely.

Details of any change in Return on Capital employed as compared to the immediately previous financial year along with a detailed explanation thereof:

2017–18 2018-19 % Increase/ Decrease Reasons
7.17 5.58 -22.24% During the current financial year, ROCE decreased by 22.24% due to substantial increase in cost of production of tea made which adversely impacted the profit before tax of the company.

Cautionary Statement

Statements in this Management Discussion and Analysis Report describing the Companys objectives, projections, estimates and expectations may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed or implied due to factors beyond control.

For and on behalf of the Board
Place : Kolkata P. K. AGARWAL I.B.SHARAF
Dated: 23rd May, 2019 Managing Director Executive Director
(DIN NO. 00703745) (DIN NO. 00047266)