indian wood prod share price Management discussions


FY2022 represents the fiscal year 2021-22, from 1 April 2021 to 31 March 2022, and analogously for FY2021 and previously such labelled years.

Global Economic

It is two years into the COVID-19 pandemic and the global community still confronts extreme social and economic strain as the human toll rises and millions remain unemployed. Yet, even with high uncertainty about the path of the pandemic, a way out of this health and economic crisis is increasingly visible. Thanks to the ingenuity of the scientiic community of millions of people are being vaccinated and this is expected to power recoveries in many countries later this year. Economies also continue to adapt to new ways of working despite reduced mobility, leading to a stronger-than-anticipated rebound across regions. Additional fiscal support in large economies, particularly the

States, has further improved the outlook.

As per the latest April 2022 World Economic Outlook (WEO) report, Global growth is projected to slow from an estimated 6.1% in 2021 to 3.6% in 2022 and 2023. This is 0.8 and 0.2 percentage points lower for 2022 and 2023 than projected in January. Beyond 2023, global growth is forecast to decline to about 3.3% over the medium term. War-induced commodity price increases and broadening price pressures have led to 2022 projections of 5.7% in advanced economies and 8.7% in emerging market and developing economies—1.8 and 2.8 percentage points higher than projected last January.

Global growth prospects have weakened significantly amid the war in Ukraine. The World Economic Situation and Prospects as of mid-2022 warned that the global economy may be on the cusp of a new crisis, while still recovering from the pandemic. The war in Ukraine has upended the fragile global recovery, triggering a devastating humanitarian crisis, pushing up food and commodity prices, slowing growth globally and exacerbating inlationary pressures worldwide.

Geopolitical and economic uncertainties are dampening business conidence and investment and further weakening short-term economic prospects.

The war in Ukraine and the sanctions against the Russian Federation have rattled commodity markets, exacerbating supply-side shocks. In 2022, global trade growth is projected to slow down markedly, after a strong rebound in 2021. The conlict has directly disrupted exports of crude oil, natural gas, grains, fertilizer and metals, pushing up energy, food and commodity prices. The Russian Federation and Ukraine are key suppliers of agricultural goods, accounting for 25 per cent of global wheat exports, 16 per cent of corn exports and 56 per cent of exports of sunlower oil.

The world economy is facing substantial inlationary pressures. Global inlation is projected to increase to

6.7% in 2022, twice the average of 2.9% recorded during 2010 2020. Headline inlation in the United inlation States has reached the highest level in four decades.

In developing regions, inlation is rising in Western Asia and Latin America and the Caribbean. Soaring food and energy prices are having knock-on effects on the rest of the economy, as relected in the significant rise in core inlation in many economies as well.

Rising inlation is posing an additional challenge to an inclusive recovery as it disproportionally afects low-income households that spend a much larger share of their income on food items. The decline in real incomes is particularly pronounced in developing countries, where poverty is more prevalent, wage growth remains constrained, and fiscal support measures to alleviate impact of higher oil and food prices on the vulnerable groups are more limited. Surging food inlation worsening food insecurity and pushing many below the poverty line as developing countries are still struggling with economic shocks from the pandemic.

Indian Economic

The last two years have been diicult for the world economy on account of the COVID-19 pandemic. Repeated waves of infection, supply-chain disruptions and, more recently, inlation have created particularly challenging times for policy-making. Faced with these challenges, the Government of Indias immediate response was a bouquet of safety-nets to cushion the impact on vulnerable sections of society and the business sector. It next pushed through a significant increase in capital expenditure on infrastructure to build back medium-term demand as well as aggressively implemented supply-side measures to prepare the economy for a sustained long-term expansion.

The Indian economy grew 8.7 per cent in 2021-22, with the gross domestic product (GDP) expanding 4.1% in the March quarter from a year ago. The GDP growth for 2021-22 takes the economy above its pre-pandemic level and is an improvement after contracting 6.6% in 2020-21. But the January-March quarter expansion was the weakest in the previous fiscal year. It is lesser than the

5.4% growth seen during the December quarter of 2021-22. Incidentally, the economic growth during the entire fiscal of 2021-22 has gradually spiralled downwards with each quarter.

In the irst quarter of 2021-22, the economic growth had been a stupendous 20.1%, which however was mainly due to the low base effect. In the second quarter it was

8.4%, while it was 5.4% in third quarter. Now for the fourth quarter it has slid down to 4.1%. The GDP for 2021-22 though is lesser than the 8.9% growth estimated by the Ministry of Statistics and Programme Implementation (MoSPI), which releases the GDP data. The 8.7% growth also falls way short of the Reserve Bank of Indias (RBI) estimation of 9.5% of GDP growth for 2021-22. Even the March quarter growth of 4.1% is much lesser than RBIs projection for the period, which was estimated to be at 6.1%.

The overall value of global trade reached the value of $28.5 trillion in FY 2021, 25 per cent higher than FY 2020. Indias exports of both goods and services have been good in 2021- 22. Despite rising trade costs, merchandise exports have crossed the US$30 billion mark in eight consecutive months in FY 2021-22. The reasons for rising trade costs are global supply constraints such as fewer operational shipping vessels, exogenous events such as blockage of the Suez Canal and the Covid-19 pandemic in Chinas port city, Shenzen, etc.

India has been consistently emphasizing on supply-side reforms, rather than a total reliance on demand management. These reforms include deregulation of numerous sectors, simpliication of processes, removal of legacy issues like ‘retrospective tax, privatization and production-linked incentives, higher rural income, and the boost from pent-up household savings in addition to continued emphasis on infrastructure spending by the government. Vaccination has played an important role in minimizing loss of lives, boosting conidence the economy towards the resumption of activity and containing the sequential decline in output due to the second wave. Government CAPEX is budgeted to grow to 2.9% of GDP in FY 2022-23 the highest in nearly two decades. Private corporate investment is also expected to pick up in the second half of the year with improvement in demand leading to increased manufacturing sector capacity utilization and rollout of the Production-Linked Incentive Scheme

India has also been witnessing significant inlationary pressures similar to the global economy. The outlook stands to be impacted given sustained inlation in the next few quarters including the impact of Russia –

Ukraine conlict, quicker tightening of fiinancial conditions with RBIs rate hikes, high oil prices impacting current account balance and fiscal deicit and subsequent

Covid-19 outbreaks. However the Indian economy is well prepared for any challenges that it might face in FY 2022-23.

Indian Katha Industry

In India chewing paan is quite popular. This habit is predominantly followed in eastern India like Assam, West Bengal, Bihar, Orissa., Andhra Pradesh, Tamil Nadu, Karnataka and Maharashtra. In other words paan is consumed in nearly all parts of the country. Katha is one of the essential ingredients in the preparation of paan. The root of usages of Katha in India goes back to ancient time. Katha was in use even before Morya Dynasty as Ayurvedic medicine. However, initial the manufacturing of Katha was carried by unorganized sector. and it is a mass consumption item. Katha and cutch are extracted from wood of Khair tree. These trees with their botanical name as Acacia are found in abundance in the forests of Uttar Pradesh, Bihar, Rajasthan, Gujarat, Himachal

Pradesh and Nepal. There are diferent varieties of tree such as Acacia Sundra, Acacia Catechuoides and Acacia Catechu. Manufacture of Kattha is an important forest based industry.

It has medicinal values as well and is used in ayurvedic medicines. It cures itching, indigestion, bronchitis and is effective in treatment of leprosy, ulcers, boils, piles, and inthroat diseases etc. Its by-product cutch has various industrial applications. It is one of the important sources of vegetable tanning material used extensively as an additive to the drilling mud used for oil drilling and for preservation of sailing rods, ishing nets, mail bags etc

Both the products are versatile with varied applications. The process of Katha making is a long and arduous process, which takes up to 45 days. Each step in the production process is closely monitored and proper climatic conditions are maintained for optimum colour and quality. Katha (Catechu) is one of the principal ingredients used in the preparation of PAAN from betel leaves, for chewing purposes when, in combination with lime, it gives the characteristic red coloration. With the advent of Paan-Masala and its ever-growing popularity among masses, the usages of katha have increased multi folds during the last 4 decades.

The overall size of the Katha Industries (B to B) is about 2000 crores p.a. with the organized segment being approx. 30%. It has also been estimated that the (B to C) Katha market is approx. 2500 crores per annum, which is mainly consumption in Paan etc The demand of quality

Katha is growing significantly. Our Company continues to be the leading player in Katha Industries

Indian Spice Industry

Since Historic times, India has been a front-runner in the race for export of spices. A spice is a seed, fruit, root, bark, or other plant substance primarily used for lavoring or coloring food. Spices are distinguished from herbs, which are the leaves, lowers, or stems of plants used for lavouring or as a garnish. Indian spices include variety of spices grown across the Indian subcontinent

(a sub-region of South Asia). With diferent climates in diferent parts of the country, India produces a variety of spices, many of which are native to the subcontinent. Others were imported from similar climates and have since been cultivated locally for centuries. Pepper, turmeric, cardamom, and cumin are some examples of Indian spices. A whole dried spice has the longest shelf life, so it can be purchased and stored in larger amounts, making it cheaper on a per-serving basis. A fresh spice, such as ginger, is usually more lavorful than its dried form, but fresh spices are more expensive and have a much shorter shelf life. Some spices are not always available either fresh or whole, for example turmeric, and often must be purchased in ground form. Small seeds, such as fennel and mustard seeds, are often used both whole and in powder form.

Spices are used in diferent forms: whole, chopped, ground, roasted, saut?ed, fried, and as a topping. They blend food to extract the nutrients and bind them in a palatable form. Some spices are added at the end as a lavouring

India is the worlds largest spice producer. It is also the largest consumer and exporter of spices. The overall production of diferent types of spices has been rapidly over the last few years. Production in 2020-21 stood at 10.7 million tonnes growing at an 8% CAGR since 2014-15.

India produces about 75 of the 109 varieties listed by the International Organization for Standardization (ISO). The most produced and exported spices are pepper, cardamom, chilli, ginger, turmeric, coriander, cumin, celery, fennel, fenugreek, garlic, nutmeg & mace, curry powder, spice oils and oleoresins. Out of these spices, chilli, cumin, turmeric, ginger and coriander make up about 76% of the total production.

It is a fact that industry of spice in India is divided. The largest spices-producing states in India are Madhya Pradesh, Rajasthan, Gujarat, Andhra Pradesh, Telangana, Karnataka, Maharashtra, Assam, Orissa, Uttar Pradesh, West Bengal, Tamil Nadu and Kerala.

The production of spices is huge and the farming and small farms continue to play an important role in near future. These farms are usually owned by private Indian Spices Traders and now by companies. The growing ambition and passion of local Indian companies to introduce fresh products has led to new revolutions in the market. In order to meet this demand, various brands are looking towards other countries like Vietnam and China to secure supplies. Sensing the increased profits from export market, the MNCs are also trying to partner with Indian companies with a purpose of meeting the global demands of Indian spices.

The Indian spice market is largely unorganized and the branded segment makes up about 15%. The branded market is dominated by players such as MTR, Catch, Everest, Ramdev etc. Recently, Tata Chemicals has launched its spices brand Tata Sampann Spices. The old culture of buying loose spices and grinding them in old-fashioned equipment called "Chakki" is still dominant, But its reducing Year on Year which opens up the market to organized players .

India is the largest exporter of spice and spice items. For the year 2020-21, the country exported spices worth US$ 4.18 billion, a 34% increase from the year 2019-20.

The ive-year CAGR of Indias spice export was 12%.

In February 2022, the exports of spices from India increased by 7.3% to US$ 291.17 million from US$ 271.4 million in January 2022. In 2020-21, India exported 1.76 million tonnes of spices. This was a 46% increase from 2019-20 exports of 1.21 million tonnes. From 2016-17 to 2020-21, the total exported quantity from India grew at a CAGR of 17%.

For FY21, total volumes of chilli, cumin, turmeric and ginger exports were 0.65, 0.3, 0.18 and 0.15 million tonnes.

This initiative by the Spices Board of India aims to support the exporter to adopt high tech processing technologies and upgrade the existing level of technology for the development of industry and to meet the changing food safety standards of the importing countries. The initiative provides beneits of infrastructure development, promotion of Indian spice brands abroad, setting up infrastructure in the major spice growing centres, promotion of organic spices and special programmes for north-eastern entrepreneurs.

Operations

Katha

Our company is a strong player in the organized section of Katha Industry in India with a market share of scenario. 35~38%. Post launch of GST and E-Way bill, the market share of the unorganized sector was expected to shrink drastically, but unfortunately, still rampant tax evasion continues, but fortunately the Govt is taking proactive steps. We remain hopeful in the coming fiinancial the implementation would improve. We also expect to add new customers in comming year in view of the new plant in J&K now in operations.

During the year as already mentioned above and changes in the prices of Raw Material increased significantly as against inished goods products i.e. Katha which effects in the profit of the Company

The Catechin extraction unit set up in Indonesia through our Joint Venture Company in Singapore is fully operational and Catechin extraction is imported in India and used in the production of the Katha.

Achieving ultimate customer satisfaction is the prime outlook of the Company. To materialize this, the organization has adopted stringent quality control tests from intermediate stages of input of raw materials till output of inished products. To achieve this, we have qualiied team of 20 engineers & chemists who monitor the operation and the quality.

We are well equipped with laboratory facilities and modern equipments such as HPTLC, GLC, Polarimeters, TLC, Spectrophotometer, Moisture meter, Hygroscopes besides Kjeldahl extractor etc.

The Company also owns a research lab having plant & equipments for Pilot Plant scale research for improving quality & research.

During the year under review, the Company has achieved a sales volume of 3443.88 MT Katha in FY2022 as compared to 3210.85 MT in FY 2020 -2021 during the turbulence time. However the sales of Cutch (by-product) increased from 802.08 MT in FY2021 to 1236.33 MT in FY2022, thereby registering a growth of 54.14%.

The Company has recorded a turnover of Rs 17789.63 Lakhs in FY2022, as compared with Rs. 15790.36 Lakhs in FY2021. IWP, with its focus and continuous monitoring of the situation, has been able to achieve desired results coupled with sustained production levels. The trend is likely to continue and we are hopeful to have a better operational and fiinancial performance with the revival of the overall economy during the further FY 2022-2023.

Spices

India has always been known as the land of spices. Given its culinary history and diversity, spices and herbs are an integral part of our culture, tradition, and health practices. To continue this legacy of spices, IWP spices came into existence intending to provide pure, authentic, and yet afordable spices in India. Initially, we began to manufacture Haldi, Dhaniya, and Mirchi powder. But, looking at the popularity and patronization of our products, we also introduced an array of blended spices too. IWP Spices are now available in the states of Bihar Uttar Pradesh, Assam, and Delhi NCR. The IWP Spices demand is growing steadily, today we have over 29 variants of spices and blends, packaged in over 90 packaging options, to suit the requirements of every customer, however, the Company is facing stif competition from the established players which was expected in irst ive years.

IWP Spices are accredited with the coveted ISO

22000:2005 certiication and are also HACCP FSSAI certiied. Our Company is using highly technologies and our packaging units. We procure choicest Raw Material with Special Quality checks (Purity, Quality, and rich taste), Grinding under high standards and Durable packaging, the pure and authentic spices/ blends are manufactured at our production units. We dont use artiicial colours or illers in the production process. For considerable production, the high-capacity machines are engaged. The machines are user-friendly and do not afect production eicacy.

The Spice Division has recorded a turnover of Rs. 1,230.29 lakhs in FY2022 as compared to Rs.1,283.46 lakhs in FY2021. Spice Division due to a higher focus on brand awareness and with more expenditure on retailer-level schemes this division continues to incur cash losses. We also are taking aggressive steps to achieve better performance by using specific software with artiicial intelligence to expand our B to C and through online sales to retailers.

Opportunities:

l Growing and untapped market l Absence of large player in organized Katha Industry l Largely unorganized market of Spices with only ~15% market share held by branded players l Strong acceptability of IWP brand amongst the mass consumption segment customers l Strong demand for the small packet spices in the mass consumption segment customers with lower disposable income

Threats:

l Impact of Covid-19 Pandemic l Growing competition from the other similar manufacturers in informal sector l Changes in Government Policy l Strong presence of large branded spices manufacturers

Future Outlook

l Increasing demand for Premium quality Katha

l Increasing awareness amongst the consumers and about the quality of packed spice leading to growing demand for branded packed spices.

l Market expansion of IWP Spices by introducing other product categories

Financial and operational Performance:

Production Performance:

At present, the Company has two business segments viz. Katha and Spices. Our Company is one of the leading manufacturers of Katha in India. Our company has recorded total revenue from operation of Rs.15243.31 Lakhs, being 85.69% of the total turnover from the sale of Katha and Rs. 1230.29 Lakhs being 6.92% of the total turnover from Spices.

During FY21-22, the Company has produced 3443.88 MT of Katha as compared to 3210.85 MT in FY 20-21.

The operational performance of the Company during the period under review was stable. We intend to achieve sustainable and profitable growth through our consistent efforts.

Operating Results:

Key highlights of fiinancial performance for the Company for FY2022 on standalone basis are tabulated below:

(Rs. in Lacs)
Particulars FY2022 FY2021 FY2020
Sales and Other 17789.63 15,790.36 19,491.15
Income
Earnings before 927.80 1,129.60 2,080.09
interest, tax,
depreciation and
amortisation
Proit before Tax (118.19) 50.77 1,047.64
Proit after Tax (103.73) 32.74 758.98
EPS (0.16) 0.05 1.19

However on consolidated basis, revenue from operations for FY2022 at Rs 17789.63 Lakhs. tax ("PAT") for the year was Rs. (58.47) Lakhs.

Risks and Concern

Risk and its Management: Risk accompanies prospects. As a responsible corporate, it is the endeavor of the management to minimize the risks inherent in the business with the view to maximize returns from business situations.

The architecture: At the heart of the Companys risk mitigation strategy is a comprehensive and integrated risk management framework that comprises prudential norms, structured reporting and control. This approach ensures that the risk management discipline is centrally initiated by the senior management but prudently decentralized across the organization, percolating to managers at various organizational levels helping them mitigate risks at the transactional level.

The discipline: The Company has clearly identiied and segregated its risks into separate components, namely operational, fiinancial, strategic and growth execution. All the identiied risks are inter-linked with the Annual

Business Plans of the Company, so as to facilitate Company-wide reviews.

The review: A Risk Management Committee of the Board of Directors, comprising Board Members, has been constituted to review periodically updates on risks, implementation of mitigation plans and adequacy thereof, identiication of new risk areas etc.

The Board of Directors also reviews the Risk identiication process and mitigation plans senior executive has been entrusted at all the levels of business operation in the Company whose role is not only to identify the Risk but also to educate about the identiied risk and to develop Risk Management culture within the business.

Key counter measures: TheCompanyhasinstitutionalized certainriskmitigationproceduresoutlineasunder: l Roles and responsibilities of the various entities in relation to risk management have been clearly laid down. A range of responsibilities, from the strategic to the operational, is speciied therein. These role deinitions, inter alia, are aimed at ensuring after formulation of appropriate risk management policies and procedures, their effective implementation, independent monitoring and reporting by internal audit. l Appropriate structures are in place to proactively monitor and manage the inherent risks in businesses with proper risk proiling. l Wherever possible and necessary, appropriate insurance cover is taken for fiinancial risk mitigation. Conirmation of compliance with applicable statutory requirements are obtained from the respective unit/ divisions and subjected to an elaborate veriication process. l Quarterly reports on statutory compliances, duly certiied, are submitted to the Audit Committee as well as the Board of Directors for review. l Status of Demand/Notices on the Company, under various Acts and Rules, as well as status of litigations are reported to the Board of Directors every quarter.

Internal Control Systems

The Company has both external and internal audit systems in place. Auditors have access to all records and information of the Company. The Board recognizes the work of the auditors as an independent check on the information received from the management on the operations and performance of the Company. The Board and the management periodically review the indings and recommendations of the statutory and internal auditors and takes corrective actions whenever necessary. The. A Company maintains a system of internal controls designed to provide reasonable assurance regarding: l Efectiveness and eiciency of operations. l Adequacy of safeguards for assets. l Reliability of fiinancial controls. l Compliance with applicable laws and regulations.

Corporate Social Responsibility

Companys CSR policy covers activities in the ield of eradication of extreme hunger and poverty, promotion of education, promotion of gender equality, empowerment of women, improvement of mental health, slum area development and rural development projects, employment enhancing vocational skills, ensuring environmental sustainability, sanitation including contribution to Swachh Bharat Kosh set up by the Central Government, ensuring animal welfare, contribution to the Prime Ministers National Relief Fund or any other project set up by the Central Government.

The Company has created a trust in the name of IWP CSR Trust for undertaking CSR activities for and on behalf of the Company.

During FY2021-22, in compliance with Section 135 of the Act, an amount of Rs.24.42 Lakhs is required to be spent by the Company on CSR activities. The Company has spent Rs.24.42 Lakhs as CSR activities towards Animal Welfare, Women Empowerment and Upliftment of People with disability through IWP CSR Trust. There are no unspent CSR amount as on 31st March 2022.

Human Resources and Industrial Relations

Our employees are our core resource and the Company has continuously evolved policies to strengthen its employee value proposition. Your Company was able to attract and retain best talent in the market and the same can be felt in the past growth of the Company. The Company is constantly working on providing the best working environment to its Human Resources with a view to inculcate leadership, autonomy and towards this objective; your company spends large efforts training. Your Company shall always place all necessary emphasis on continuous development of its Human Resources. The belief "great people create great organization" has been at the core of the Companys approach to its people.

Key Ratios

Particulars FY 2021 FY 2022
Revenue (Rs. In lacs) 15790.36 17789.63
Net Proit After Tax 32.74 (103.73)
(Rs. In lacs)
Earnings per share 0.05 (0.16)
Operating Proit Margin (%) 4.66% 3.05%
Net Proit Margin (%) 0.21% (0.58) %
Return on Net worth 0.09% (0.29) %
Current Ratio (times) 1.43 1.43
Debtors Turnover (times) 3.37 3.80
Debt-equity (times) 0.49 0.52
Interest Coverage Ratio 1.07 0.82
(times)

Cautionary Statement

Statements in this Management Discussion and Analysis report detailing the Companys objectives, projections, estimates, expectations or predictions may be "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could difer materially from those expressed or implied. Important factors that could make a diference to the Companys operations include global and Indian demand-supply conditions, raw material prices, inished goods prices, cyclical demand and pricing in the Companys products and their principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries with which the Company conducts business and other factors such as litigation and/or labor negotiations.