GLOBAL ECONOMY OVERVIEW
The global economy bounced back strongly in 2021 despite the COVID-19
pandemic, but in 2022, it faced new challenges such as rising fuel and input costs,
geopolitical tensions in
Europe, and increasing interest rates worldwide to combat inflation.
These issues led to higher production costs, which resulted in higher prices for goods and
services, causing global inflation to peak at 8.80%. This led to concerns among central
banks worldwide, resulting in a tightening of monetary policy, higher interest rates, and
increased volatility in financial markets.
Global Forecast Summary
| Global Growth |
Estimate |
Projections |
| (% change Y-o-Y) |
2021 |
2022 |
2023 |
2024 |
| World Output |
6.3 |
3.5 |
3 |
3 |
| US |
5.9 |
2.1 |
1.8 |
1 |
| Euro Area |
5.3 |
3.5 |
0.9 |
1.5 |
| China |
8.4 |
3 |
5.2 |
4.5 |
| Japan |
2.2 |
1 |
1.4 |
1 |
| UK |
7.6 |
4.1 |
0.4 |
1 |
| Advanced Economies |
5.4 |
2.7 |
1.5 |
1.4 |
| Emerging Market and Developing |
6.8 |
4 |
4 |
4.1 |
| Economies |
|
|
|
|
Leading agencies have predicted a decrease in world trade growth in
2023, with a subsequent recovery in 2024, in line with global demand. These predictions
are based on various assumptions, such as the lower costs of fuel and non-fuel goods since
October 2022, as well as increased tightening of policies by major central banks.
According to the World Economic Outlook, January 2023, by the
International Monetary Fund (IMF), According to the World Economic Outlook, July 2023
published by the International Monetary Fund, global growth is projected to fall from an
estimated 3.5 % in 2022 to 3.0 % in both 2023 and 2024. Upside inflation surprises have
been most widespread among advanced economies, with greater variability in emerging
markets and developing economies. As a result, advanced developed economies are expected
to account for nearly three-quarters of global GDP growth in 2023.
Food Processing Industry
The global food processing market was valued at USD 3.18 Trillion in
2022 and is expected to expand at a CAGR of 3.5% during the forecast period, reaching USD
3.92 Trillion by 2028. The global food processing sector transforms raw agricultural
products into finished food products ready for consumption.
It is a crucial component of the food industry and plays a vital role
in meeting the nutritional needs of the growing global population. The sector includes
activities such as meat, dairy, fruit and vegetable, cereal processing, and bakery and
confectionery production. The food processing sector presents opportunities for innovation
and growth, particularly in the areas of health and wellness, convenience, and
sustainability.
(Source:https://www.marketwatch.com/press-release/food-processing-market-scenario-to-acquire-a-35-cagr-in-the-next-years-2023-2028-2023-02-24)
The Indian food processing industry is a significant contributor to the countrys
economy. The industrys market size was Rs. 25,455 Billion in 2022, and is expected
to register a CAGR of 9.05% during the period of 2023-2028, reaching Rs. 45,345
Billion by 2028.
The Ministry of Food Processing Industries (MOFPI) is in charge of
creating schemes and enforcing regulations pertaining to the food processing industry in
India.
Grain, sugar, edible oils, drinks, and dairy products are the major
business areas of Indias food processing industry.
With changing consumer preferences and increasing demand for processed
and packaged food products, the food processing industry in India is expected to grow
significantly. (Source:https://www.imarcgroup.com/indian-food-processing-market)
BUSINESS OVERVIEW
Gujarat Ambuja Exports Limited (herein, referred to as ‘GAEL
or ‘The Company) is a prominent Indian agro-processing company with an industry
presence of over 30 years. The Company specialises in producing maize products, cotton
yarn, and edible oils catering to the food, pharmaceutical, and feed industries both
domestically and globally. GAEL operates through four business segments, namely
agro-processing, cotton yarn, Renewable power, and others.
The agro-processing segment involves the processing and export of
agricultural commodities such as soybean, cottonseed, maize, and other agricultural
commodities. GAEL also manufactures corn starch derivatives, soya derivatives, feed
ingredients, and edible oils GAEL is ok with “to cater to” the food,
pharmaceutical, and feed industries.
Apart from its agro-processing operations, GAEL also produces yarn. The
Company has set up wind and Solar power plants in Gujarat, Madhya Pradesh and Maharashtra,
with a total capacity of 10.45 MW.
With nine manufacturing facilities across India, GAEL exports its
products, including cotton, soybean, maize, and castor seeds, as well as corn starch
derivatives, soya derivatives, feed ingredients, and edible oils, to more than 100
countries worldwide, including USA, Canada, and Europe. In terms of financial performance,
GAEL reported a gross turnover of Rs. 4909 Crores in FY 2022-23. On the exports front, the
Company recorded a turnover of Rs. 1545 Crores in FY 2022-23 against Rs. 1138 Crores in FY
2021-22.
SEGMENT OVERVIEW Maize Processing
The success of the Companys maize processing segment is a crucial
factor driving its growth and expansion in the domestic market. The integrated operations
provide logistical convenience and valuable synergies. The Company is continuously
expanding to meet customer demand and remains a consistent supplier of agro-ingredients.
The
Companys expertise gives them a competitive edge in the market,
and their strategic location in proximity to raw .
materials,makestheiroperationsmoreefficient
| Particulars |
FY 2022-23 |
FY 2021-22 |
| Domestic Turnover |
2045 |
1,689 |
| Exports Turnover |
1158 |
955 |
| Total Turnover |
3203 |
2,644 |
| EBIT |
438 |
549 |
| Cash Profit |
511 |
623 |
| Cash Profit (in %) |
16% |
24 |
Agro-Processing processingGAEL is a significant industry, with a
focusonquality,innovation, andsustainability. role in Indias renewable energy
sectors
The Company produces and exports cotton yarn, maize, soya, wheat, and
edible oils. Its agro-processing segment has two manufacturing operations - oil seed
crushing and edible oil refining. On one hand, the oil seed crushing operation has
expanded due to favourable monsoons, decreased seed prices, and high export demand. On the
other hand, the downstream operation of edible oil refining has decreased due to factors,
such as crop damage caused by prolonged monsoons, rising seed prices, and a less
competitive environment in the export market.
| Particulars |
FY 2022-23 |
FY 2021-22 |
| Domestic Turnover |
1278 |
1,592 |
| Exports Turnover |
386 |
183 |
| Total Turnover |
1664 |
1,775 |
| EBIT |
39 |
146 |
| Cash Profit |
44 |
153 |
| Cash Profit (in %) |
3% |
9 |
Spinning
GAELs Spinning segment contributes to comparatively lower revenue
and a reduced share to the Companys overall turnover. It constitutes only a minor
fraction and the
Company has been maintaining a consistent production of 42 TPD of yarn
with a manufacturing facility capacity of
65,520 spindles. Even across this segment, GAEL continues to mark its
presence by conducting eco-friendly and pollution-free operations.
| Particulars |
FY 2022-23 |
FY 2021-22 |
| Domestic Turnover |
33 |
237 |
| Exports Turnover |
0 |
6 |
| Total Turnover |
33 |
243 |
| EBIT |
(18) |
(4) |
| Cash Profit/(Loss) |
(12) |
6 |
| Cash Profit (in %) |
(34) |
2 |
Renewable Energy
GAELs commitment to reducing its carbon footprint and
contributing to a green environment is evident through the business renewable energy
segment. Herein, it focusses on developingandoperatingwindpowerprojects.TheCompanys
wind farms in Gujarat have a total installed capacity of 8.45
MW and Solar Power of 1 MW of each in Madhyapradesh and Maharashtra
contributed significantly to its revenue. In addition to wind power, GAEL has undertaken
various initiatives to install biogas engines, biomass-based boilers, and other
energy-saving equipment at its manufacturing units, and has captive power plants at all
its units. With its focus on sustainable energy sectors, GAEL aims to play a significant
and development.
| Particulars |
FY 2022-23b> |
FY 2021-22 |
| Domestic Turnover |
9 |
9 |
| Exports Turnover |
- |
- |
| Total Turnover |
9 |
9 |
| EBIT |
5 |
5 |
| Cash Profit |
7 |
7 |
| Cash Profit (in %) |
85 |
83 |
OPERATIONAL AND FINANCIAL OVERVIEW Operational Overview
The Companys operational revenue was registered at
Rs. 4909 Crores as compared to Rs. 4,670 Crores recorded in the
previous financial year.
Financial Overview based on on the Companys consolidated
Keyfinancial financial statement.
| Particulars |
FY 2022-23 |
FY 2021-22 |
| Debtors Turnover Ratio |
20 |
21 |
| Inventory Turnover Ratio |
7 |
7 |
| Interest Coverage Ratio |
34 |
113 |
| Current Ratio |
3.87 |
2.91 |
| Operating Profit Margin (%) |
11 |
16 |
| Net Profit Margin (%) |
7 |
10 |
| EBIT Margin |
9 |
14 |
| Return on Networth |
14.45 |
25.07 |
| Debt to Equity |
0.09 |
0.13 |
Key financial highlights based on the Companys standalone
financial statement
| Particulars |
FY 2022-23 |
FY 2021-22 |
| Income from Operations |
4,983 |
4,724 |
| EBIT |
454 |
644 |
| EBITDA |
549 |
741 |
| PBT |
441 |
638 |
| PAT |
330 |
475 |
| Particulars |
FY 2022-23 |
FY 2021-22 |
| Depreciation |
95 |
97 |
| EPS |
14 |
21 |
| Material Cost |
3285 |
2,626 |
| Employee Benefit Expenses |
121 |
148 |
| Particulars |
FY 2022-23 |
FY 2021-22 |
| Other Expenses |
766 |
614 |
| Shareholders Fund |
2,443 |
2,127 |
| Non-Current Liabilities |
78 |
73 |
| Current Liabilities |
440 |
563 |
| Non-Current Assets |
1,259 |
1,126 |
| Current Assets |
1,701 |
1,638 |
Risk Management & Concerns
Running a successful business involves navigating a range of risks and
uncertainties. GAEL understands the importance of identifying and managing these risks to
ensure long-term sustainability and growth. An overview of the key risks identified and
analysed by the Company in the current year is presented in the following table. By
proactively managing these risks, GAEL continues to deliver value to its customers,
shareholders, and other stakeholders.
| Risk |
Impact |
Mitigation |
| Competition Risk |
Competition in the agro-processing and export industry can
impact the Companys market share and pricing power. |
A strong focus on maintaining high-quality standards,
developing strong relationships with customers and suppliers, and investing in research
and development enables the Company to stay ahead of the competition. |
| Credit Risk |
The risk of non-payment or default by customers or suppliers
can affect the Companys cash flows and profitability. |
A rigorous credit risk assessment process at GAEL is in place
to evaluate the creditworthiness of its customers and suppliers. It also has a strong
credit monitoring and collection mechanism to ensure timely payments. |
| Technology Risk |
Technological disruptions or failures can impact the
Companys operations and supply chain. |
Investment in technology infrastructure enables GAEL to
ensure that its operations are resilient to technological risks. It also has a strong
disaster recovery and business continuity plan in place to minimise the impact of any
technological disruptions. |
| Environmental Risk |
Climate change, water scarcity, and other environmental
factors can impact the Companys supply chain and operations. |
Implementation of sustainable practices across GAELs
business operations, such as water conservation, renewable energy adoption, and waste
management, helps to mitigate this risk. It also collaborates with suppliers to ensure
that they adopt sustainable practices. This helps to minimise the Companys exposure
to environmental risks. |
| Fluctuations in Company. Commodity Prices |
Volatility in commodity prices can affect the profitability |
A risk management strategy has been implemented at GAEL to
hedge against commodity price fluctuations by using derivatives, entering into forward
contracts and options contracts, and maintaining healthy inventory levels. |
| Currency Risk |
Currency fluctuations can impact the Companys revenue
and profitability, particularly in the case of exports. |
Hedging mechanisms like forward contracts and options
contracts are undertaken by the Company to mitigate currency risk. |
| Regulatory Changes |
Changes in Government policies, rules, and regulations could
have a negative impact on the Companys operations. |
The regulatory environment is monitored actively and the
Company adapts its operations accordingly. It has a strong compliance programme in place
to ensure adherence to all relevant regulations and standards. |
| Supply Chain Disruptions |
Disruptions in the supply chain, including logistics,
transportation, and warehousing, could affect the Companys ability to deliver
products to customers. |
Various measures are undertaken by the Company to enhance its
supply chain resilience, including multi-sourcing of raw materials, improving warehouse
management, and leveraging technology to optimise logistics operations. |
| Natural Calamities |
Natural disasters such as floods, droughts, and earthquakes
can affect the Companys operations and supply chain. |
A comprehensive disaster management plan has been implemented
to minimise the impact of natural calamities. The Company has invested in infrastructure
to improve its ability to manage natural disasters and minimise disruption to its
operations. |
Internal Control Systems and their Adequacy
GAEL and its Management have established robust Internal Control
systems to ensure the accuracy of financial reporting and protect against potential losses
or unauthorised use of assets. These controls help in the optimal utilisation of the
Companys resources while also ensuring that transactions are properly authorised,
recorded, and reported to the Management. The Company continually improves and tests its
internal controls to ensure the effectiveness of Management and operating procedures. It
adheres to accounting standards and guidelines for maintaining books of accounts and
financial statement reporting.
To assess the effectiveness of internal controls, independent internal
auditors are appointed to conduct risk-based audits throughout the year. The Audit
Committee of the Board of
Directors receives a summary of the auditors observations, and
thereon, the necessary corrective measures are undertaken on a prompt basis. Internal
control systems are designed to keep a check on operational efficiencies, adherence to
applicable laws and regulations, and the reliability of financial reporting.
Human Resources
The Company recognises the importance and strategic value of its human
capital as well as the cultural diversity and dignity of all employees, regardless of
their position. It prioritises employee empowerment to achieve organisational
effectiveness and fosters a corporate environment that promotes self-motivation and
teamwork. The Company has successfully created a motivated workforce through regular
upskilling and training programmes, incentivising superior performance, and building a
creative workplace. It is committed to being an employer of choice, building an inclusive
culture, and maintaining a strong talent pipeline through progressive employee relations
policies. The Management invests in people through training programmes to keep employees
competent and up-to-date with the changing business environment. All levels of employees
receive continuous training and development, and industrial relations remain cordial. As
of March 31, 2023, the Company had 2,435 employees on its payroll.
Cautionary Statement
Statements in the Management Discussion and Analysis
Report describing the Companys projections, estimates and
expectations may be interpreted as ‘forward-looking statements within the
meaning of applicable securities laws and regulations. Actual results could differ from
those expressed or implied. Important factors that could make a difference to its
operations include economic conditions affecting demand/supply, price conditions in the
domestic and international markets in which it operates, and changes in Government
regulations, tax laws, and other statutes. The Company assumes no responsibility to
publicly amend, modify, or revise any ‘forward-looking statements based on any
subsequent development, information, or events.
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