(ANNEXURE ‘B TO THE DIRECTORS REPORT
OVERVIEW
TEA
India holds the distinction of being the worlds foremost producer and
consumer of black tea. Despite its population, the tea consumption in India constitutes 19
percent of global consumption, although the per capita consumption remains relatively
modest. Approximately 81 percent of the overall tea production caters to domestic demand,
while the remaining 19 percent is earmarked for export. Beyond bolstering valuable foreign
exchange reserves, the tea industry stands as a pivotal revenue generator for the states
engaged in tea cultivation. The industrys most salient hallmark lies in its capacity to
furnish direct employment to over a million labourers, with a notable proportion being
women. This attribute underscores its socioeconomic significance. (Source Annual Report
2022-23, Ministry of Commerce)
Outlook
The total tea production in India in 2022-23 was 1374.97 million kgs as
against 1344.40 million kgs in the previous year. The all- India auction average price was
180.14 for the F.Y 2022-2023 as against 171.21 for the F.Y 2021-2022. (Source Tea
Board) The Tea Industry is bifurcated into two distinct segments: the premium quality
segment and the medium to low-grade segment. The proliferation of inexpensive teas have
exerted a detrimental influence on the pricing dynamics across all tea categories. The
company has consistently refined its field practices to enhance output quality. Renowned
for producing premium-grade teas, the company has effectively met the demands of its
esteemed clientele. Operating within the high-quality segment, the company stands to
benefit from potential increases in the value of superior teas.
OVERVIEW
Rubber
The production of Natural Rubber (NR) in the country during the 2022-23
period reached 839,000 tonnes, marking a notable growth of 8.3% in comparison to the
775,000 tonnes achieved in 2021-22. During the fiscal year 2022-23, the domestic
consumption of Natural Rubber (NR) was 1,350,000 tonnes. This marked a notable surge of
9.0% compared to the preceding years consumption of 1,238,000 tonnes in 2021-22. The
automotive tyre sector experienced a growth rate of 4.8% in 2022-23, presenting a contrast
to the substantial 15.9% expansion observed in 2021-22. Concurrently, the broader realm of
general rubber goods showcased a remarkable growth rate of 20.4% in 2022-23, in stark
contrast to the 5.6% growth recorded in 2021-22. Amidst this dynamic landscape, the auto
tire manufacturing sector emerged as a dominant player, contributing significantly to the
overall NR consumption in the country. Specifically, it captured a considerable 70.3%
share of the total NR consumption during the fiscal year 2022-23. In terms of NR
utilization within the industry, 41.4% was attributed to Ribbed Smoke Sheets (RSS), 48.8%
to Technically Specified Rubber (TSR), and 7.4% to latex concentrates, in the year
2022-23.
Outlook
India has one of the worlds most extensive road network, and the
Government is steadfastly committed to further enhancing it by constructing additional
economic corridors, border and coastal roads, and expressways. These ambitious endeavors
are aimed at amplifying the robustness of the highway infrastructure across the nation.
Often heralded as the vital part of the countrys economy, the Indian commercial vehicle
industry has played a pivotal role in facilitating the growth of both automobile sales and
the transportation of goods through roadways. Industrial rubber products are crafted from
either natural rubber or synthetic rubber compounds, meticulously engineered to exhibit
targeted characteristics like flexibility, robustness, resistance to chemicals and
weathering, thermal insulation, and effective vibration management and are used in widely
in different industries. We expect demand of rubber to improve on account of demand across
a spectrum of end-use industries. This eclectic list includes automotive, construction,
manufacturing, oil and gas, aerospace, and healthcare. Within these sectors, rubber
products assume vital roles, performing diverse tasks such as composing tires, forming
seals, gaskets, hoses, belts, conveyor belts, etc.
Throughout 2023 and 2024, the industrys growth trajectory is expected
to persist, bolstered by heightened demand across various downstream sectors.
Particularly, a surge within these sectors, encompassing but not limited to automotive
manufacturing (largely driven by increased investments in electric vehicles due to
government incentives), the production of indispensable medical supplies such as latex
gloves and medical devices, alongside the rapidly expanding construction domain, will
significantly reinforce the rubber industrys expansion.
Moreover, the construction sectors strategic plans to amplify
investments in infrastructure projects will seamlessly convert into a heightened demand
for rubber. This collective surge in demand from a spectrum of avenues is primed to act as
a potent catalyst, propelling the continuous growth of the rubber industry throughout the
aforementioned period.
The company remains confident in its ability to uphold a strong market
position, supported by its well-established brand image cultivated over the years,
exceptional service capabilities, and a diverse portfolio of high-quality products.
OPPORTUNITIES AND THREATS
Tea and Rubber plantation is dependent on the vagaries of nature, to
combat this we continuously improve our methods in harvesting methodology. It is also
labour intensive and subject to stringent labour laws. High labour cost, social cost, high
infrastructure cost and rising energy and other input costs remain its major problems.
Shortage of labour during peak season in some pockets and rising labour cost is also a
cause for concern. the unorganized sector constitutes a substantial share of approximately
52%. This segments production costs remain notably lower, primarily due to their omission
of various social security benefits mandated by the Plantation Labour Act, a contrast to
the provisions offered by the organized sector. The cost advantage in tea and rubber
production from small-scale growers, coupled with challenges such as climate change,
intense competition from exporting nations, price pressure in the global export market,
and a labor shortage collectively pose a significant threat to the tea and rubber
plantation industry These problems have to be addressed by improving labour productivity
through mechanization.
Guided by an awareness of prevailing macro trends, our companys
strategy is firmly oriented towards enhancing performance through a proactive pursuit of
innovation. This entails establishing points of differentiation through both existing and
novel product offerings, while simultaneously elevating our position in the value chain
and striving to curtail costs. The anticipated stabilization of rubber prices, coupled
with the noteworthy volume growth in tea and rubber, achieved through our proprietary and
acquired operations, should further augment our overall performance.
Our company is committed to embracing superior agricultural practices
that will invariably enhance the yields of both tea and rubber crops. By consistently
adopting these best practices, we are poised to not only achieve greater output but also
uphold the quality that defines our products.
INTERNAL CONTROL SYSTEM
HML has implemented a robust Internal Control system that aligns
appropriately with its scale and operational nature. These measures have been meticulously
devised to offer a reasonable level of assurance concerning the accurate recording and
provision of dependable financial and operational data, adherence to relevant legal
statutes, protection of assets against unauthorized usage or loss, facilitation of
transactions with precision, and alignment with corporate policies. These Internal Control
mechanisms are further reinforced by regular managerial evaluations, comprehensive
documentation of policies and procedures, as well as the conduct of internal audits.
A pivotal component of our governance structure is the Audit Committee,
the particulars of which are expounded upon in the Corporate Governance report. This
committee is entrusted with the task of reviewing the comprehensive Audit Reports
furnished by the Internal Auditors. Any recommendations for enhancement are thoroughly
evaluated, and the Audit Committee actively supervises the implementation of rectification
measures. Additionally, the committee engages in discussions with the Companys statutory
auditors, seeking their expert insights into the adequacy of the internal control systems.
Notably, the Audit Committee diligently apprises the Board of Directors about its key
observations on a periodic basis.
HUMAN RESOURCES
HML employs 7350 number of permanent employees across its tea and
rubber plantations. During the year under review the Company garnered distinction by
securing the 26th spot in Indias esteemed "Best Companies to Work For" list of
2023. This recognition was conferred as a result of an exhaustive survey conducted jointly
by the Great Place To Work Institute and the Economic Times. The Company deeply
appreciates its employees and would like to extend sincere gratitude for their unwavering
dedication and steadfast support.Their cohesive commitment has undeniably played a pivotal
role in shaping the Companys success during these trying times.
Finance
The total income during the year stood at 49388.10 Lakhs. EBITDA
(Earnings Before Interest, Tax, and Depreciation) was at a profit of 3437.18Lakhs. The
Profit Before Tax was at 1777.75 Lakhs.
| Key financial Ratios |
As at 31-Mar-23 |
As at 31-Mar-22 |
| Debtors Turnover |
26.50 |
23.25 |
| Current ratio |
0.47 |
0.51 |
| Debt-Equity Ratio, |
0.59 |
0.62 |
| Debt Service Coverage Ratio |
0.59 |
0.74 |
| Inventory tunrover ratio |
12.62 |
12.85 |
| Net profit ratio |
3.60% |
4.80% |
| Operating Profit Margin (%) |
6.06% |
7.11% |
| Net Profit Margin (%) |
3.61% |
4.80% |
| Return on Net Worth (%) |
11.70% |
15.25% |
The total borrowings have reduced by 1,014.18 and the retained
earnings have increased by 2,284.79, which has resulted in better debt equity
ratio.Significant variance in profitability ratios is on account of lesser profit in
rubber business and consequent reduction in overall profitability.
The Performance of tea and rubber is detailed below.
Tea:
The Tea harvested from own gardens during FY 2022-23 is at MT 10,688
(10404 MT in the FY 2021-22). Bought leaf operations in tea for FY 2022-23 is at 3488 MT
(3553 MT in FY 2021-22). For the year ended March 31,2022, the average price realized per
kg of tea was 148.69 as against 135.49 realized during the Previous Year.
Rubber:
The Rubber harvested from own gardens stood at 6624 MT during FY
2022-23 and is higher than 5963 MT achieved during FY 2021-22. Bought operations in Rubber
for the FY 2022-23 is at 5495 MT which is higher than the 4754 MT of FY 2021-22. For the
year ended March 31, 2023, the average price realized per kg of rubber was 166.04 as
against 197.97 realized during the previous year. 140 hectares in Kumbazha Rubber Estate
encroached by trespassers, continue to remain untapped.
CAUTIONARY STATEMENT
Statements in the Management Discussion and Analysis describing the
Companys objectives, projections, estimates and expectations are "forward looking
statements" within the meaning of applicable securities laws and regulations. Actual
result could defer materially from those expressed or implied. Significant factors that
could make a difference to the Companys operations include domestic and internal economic
conditions affecting demand and supply, commodity prices, changes in Government
regulations, tax regimes and other statutes. Market data and product information contained
in this Report have been based on information gathered from various published and
unpublished reports and their accuracy, reliability and completeness cannot always be
assured.
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