Jain Irrigation Systems Ltd-DVR Management Discussions

Overall Economic Scenario

The growth slowdown in the last year was broad based, affecting in particular the manufacturing sector. Inflation too moderated during the year, but continued to be above the comfort zone, owing primarily to the elevated level of food inflation. What is particularly worrisome is the slowdown in manufacturing growth that averaged 0.2% per annum in 2013-14. The recent general elections have for the first time thrown up a decisive mandate after more than 2 decades and this is a harbinger of great things to come in future years of the present Government. The steps taken so far are baby steps but have instilled a positive confidence about good governance from the new Prime Minister. Yet, the developments on macro stabilization front, particularly the dramatic improvement in the external economic situation with the current account deficit (CAD) declining to manageable levels after two years of worryingly high levels was the redeeming feature of 2013-14. The fiscal deficit of the Centre as a proportion of GDP also declined for the second year in a row as per the announced medium term policy stance. Reflecting the above and the expectations of a change for the better, financial markets have surged. Moderation in inflation would help ease the monetary policy stance and revive the confidence of investors, and with the global economy expected to recover moderately, particularly on account of performance in some advanced economies, the economy can look forward to better growth prospects in 2014-15 and beyond.

Indias growth declined from an average of 8.3% per annum during 2004-05 to 2011-12 to an average of 4.6% in 2013-14. In addition to the growth slowdown, inflation continued to pose significant challenges. Fortunately, the upward trend of inflation that played a part in slowdown in growth, savings, investment, and consumption, appears to have subsided.

Aided by favourable monsoons, the agricultural and allied sectors achieved a growth of 4.7% in 2013-14 compared to its long-run average of around 3%. The Agricultural and Processed Food Products Export Development Authority (APEDA) declared in its export report that there was overall positive growth of 17.46% in agricultural sector.

During 2013-14, total FDI inflows were $36.4 billion. FDI equity inflows were $ 24.3 billion, showing an increase of 8% as compared to the precious year. Net FDI inflows were $21.6 billion during 2013-14. In recent years, services, construction, telecommunications, computer software and hardware, drugs and pharmaceuticals, automobile industry, power, metallurgical industries, hotels and tourism are sectors that have attracted maximum FDI inflows.

One of the leading Credit Rating Agencies CRISIL has reviewed the Indian Economy Outlook and published a forecast as follows:

Parameter	2013-14	Forecast for 2014-15
GDP Growth	4.9*	6.0
CPI inflation (Average, %)	9.5	8.0
10-year G-sec (Year-end, %)	8.8	8.6
Re/US$ (Year-end)	60.1	62.0
Fiscal Deficit (as a % of GDP)	4.6**	4.6

*CSO Advanced Estimates, **Revised Estimate

1) Overview of Business

Jain Irrigation Systems Limited (JISL) or (Jains) is the flagship Company with 14 subsidiary operating companies (including 2nd step subsidiaries) with diverse businesses across the globe and aggregate revenues of Rs 60 Billion. Your Company is a leading agri-business Company, present in the entire value chain. It is the second largest micro irrigation Company globally and is largest manufacturer of micro irrigation systems in India. It is also the largest manufacturer of Mango pulp, puree and concentrate in the world and the third largest manufacturer of dehydrated onions. JISL is also Indias largest manufacturer of polyethylene pipes, leading PVC pipe manufacture and is furthermore the largest manufacturer of Tissue Culture banana plants in the world. JISL is additionally into hybrid & grafted plants; greenhouses, poly and shade houses, bio-fertilizers, biogas and green energy (solar), solar water heating systems, solar panels, solar water pumps and plastic sheets. Many of these plants are ISO 50000 & HACCP certified and meet International FDA statute requirements. JISL renders consultancy for complete or partial project planning and implementation e.g. watershed or wasteland and/or crop selection and rotation. Over the past few years JISL has done a few of acquisitions and merged a few companies. All acquisitions and mergers have been a strategic fit with the intent of strengthening the business and increasing reach in every segment.

Each of our products is an outcome of an effort to conserve natures precious resources through substitution or value addition. This is the legacy of a deliberate and conscious endeavour that stems from a deep-rooted concern for nature with same intensity for development and growth of agriculture, resulting in higher income for farmers.

2) The Strategy

We have launched a new business model for our main business of micro irrigation systems (MIS). Our goal is to leverage our strengths to continue to expand our business in long term as well as in the short to medium term. We intend to be the best water, food & natural resource management Company, while creating value in entire agriculture value chain.

The principal elements of our current strategy are:

a) Consolidation, while maintaining leadership position - Sustainable Growth

We are currently largest suppliers of micro irrigation systems (MIS) in India. Our strong brand name, extensive agricultural expertise and broad network of dealers has contributed to our aggressive growth in India in last 11 years. Last year we aimed to consolidate this growth by focusing on receivables collection. With significant growth in revenue but lower profitability, we have taken all the pain of consolidation of our MIS business in FY 2013 and stabilized business model in FY 2014, now we are moving in positive revenue growth territory from FY 2015 onwards.

To sustain growth, we have aimed to take end-to-end water solution projects by transporting water, creating new water reservoirs, creating irrigation systems and assisting with agronomy through our canal command area projects. We have successfully completed a handful of such projects. Few African countries have also shown good interest in such projects due to our inherent competencies and technical supremacy in thisfield.

b) Focus on Positive Cash flow and deleveraged Balance Sheet

Not many financing options were available to farming and delayed subsidy on irrigation products had created enhanced burden on Company in the form of stretched receivables. The solution was envisaged in the form of NBFC and it has received support from IFC Washington, who have invested in the Equity Capital of this NBFC. Eventually this entity shall become a role model for other public and private sector bank functioning in rural credit.

The start of our (NBFC) - Sustainable Agro-Commercial Finance Limited (SAFL) will eventually be a role model to create financial liquidity in the farming sector. Cautious steps are being taken to ensure that the building blocks being laid down to build a large rural credit institution are well cemented before higher growth. The process is on and moving in a positive direction and we are happy that farmers have given overwhelming response. A revenue of Rs 100 Crores was achieved in FY 2014. We expect an overall disbursement of Rs 200-250 Crores and approximately 25,000 to 30,000 farmers to be covered till the end of this financial year FY 2015.

According to a farmer survey by Morgan Stanley, conducted in 2012: a) MIS usage among farmers was low; b) water scarcity, better yield and lower costs drive adoption; c) surprisingly, credit availability is a more important enabler than interest rates. d) MIS is a multi-year investment theme. Therefore, NBFC is a step in the right direction.

We have planned to reduce receivables primarily by change in the business model of Micro Irrigation. We have been able to reduce the same by more than Rs 400 Crores in each of last 2 years. Receivables are further expected to come down in FY 2015.

We believe, as we are turning around, we are seeing very good opportunity into various business lines. We have remained last year, very cautious on the receivables. If required, we will bargain with the growth but we will not compromise on cash flow. We shall keep our Capital Expenditure (Capex) under strict discipline. We have revised marginally, our Capital Expenditure target from Rs 130 Crores to Rs 160 Crores for the current financial year. Additional focus is on reducing inventory level.

Thus, we have charted out a plan to reduce our debts by Rs 400 Crores at least by the end of current financial year.

c) Capital fund infusion to achieve sustainable growth.

We had deployed significant long term funds raised in 2012-13 in the year under review and the major benefit of this fund infusion is interest reduction and long term growth fund availability. The other benefit is with improved cash flow and liquidity in the functioning of the corporate finance, the rating will also tend to improve, which will in turn provide us opportunity to access low cost funds at the appropriate time.

During the year under review, the Company has been able to raise fund by allotment of 3% 1,000 Foreign Currency Convertible Bonds (FCCB) of $ 10,000 each due 2017 aggregating $ 10 million, convertible at a price of Rs 115 per share. Share Warrants of Rs 16.2 Crores had been subscribed by Promoters in 2012-13. Now warrants are converted into underlying shares at Rs. 86.30 per share. Additionally an ECB - US$ 14 mn (Total US$ 24 mn) has been received on 29th April, 2013 from DFIs.

d) Managing exchange risk/volatility:

Indian rupee has depreciated significantly against all major currencies. The pressure on cost from all front and mark to market effect on foreign currency borrowing has made us rethink and tweak our strategy for business. We are now more focused on export markets and bidding for overseas projects in Africa and other countries. It has already reflected in Rs 982 Crores of Exports in year under review.

In our Fruit business where major customers are from European and United Kingdom geographies, the rupee depreciation has resulted in a gain to us.

We have achieved net foreign exchange earning in year under review and shall continue the trend in future. We have also built significant overseas operations that shall be generating net surplus in foreign currency.

A) Overseas Holding Companies

a) JISL Overseas Ltd., Mauritius is a wholly owned subsidiary of the Company and was incorporated in 1994 under the laws of Mauritius. JISL Overseas Ltd. acts as a holding Company for the UK and USA based overseas subsidiaries. It holds 54.53 % in Jain Europe Limited and 68.73% in Jain Americas Inc, Ohio, USA. For the year ended 31st March, 2014, JISL Overseas Ltd. had share capital of US$74.06 million. The said Company had a loss of US$ 24,497 for the year ended 31st March, 2014.

b) Jain International Trading B.V., Netherland is a whollyowned subsidiary of the Company and is incorporated in 2010 under the laws of Netherland. For the year ended 31st March, 2014, Jain International Trading B.V. had share capital of US$ 62.97 million. The said Company had a profit of US$ 10,349 for the year ended 31st March, 2014.

c) Jain Overseas B.V., Netherland was a wholly owned subsidiary of the Jain International Trading BV, Netherlands and was incorporated in 2007 under the laws of Netherland. The said Company had a loss of US$ 736,503 for the year ended 31st March, 2014.

d) Jain (Israel) B.V. Netherland is a wholly owned subsidiary of the Jain Overseas BV., Netherlands and was incorporated in 2007 under the laws of Netherland. The said Company had a loss of US$ 1,742,390 for the year ended 31st March, 2014.

e) JISL Global SA, Switzerland is a wholly owned subsidiary of the Jain Overseas BV., Netherlands and was incorporated in 2007 under the laws of Switzerland. The said Company had a profit of CHF 395,468 (approx. US$ 431,129) for the year ended 31st March, 2014.

f) JISL Systems SA, Switzerland is a wholly owned subsidiary of the JISL Global SA., Switzerland and was incorporated in 2007 under the laws of Switzerland. The said Company had a loss of CHF 13,664 (approx. US$ 14,896) for the year ended 31st March, 2014.

g) Jain Irrigation Holdings Inc. Delaware, USA is a subsidiary of the Jain Americas Inc., USA and was incorporated in 2007 under the laws of USA.

B) Overseas Marketing Companies

a) Jain (Americas) Inc., USA is a wholly owned subsidiary of the Company and was incorporated in 1994, under the laws of Ohio, USA. It is our key marketing, distribution and investment arm in the United States. For the year ended 31st March, 2014, Jain (Americas) Inc. had sales of US$ 21.69 million.

b) Jain (Europe) Ltd., UK is a wholly owned subsidiary of the Company and was incorporated in 1996, under English laws. Jain (Europe) Ltd. is our key marketing and distribution arm in the UK and other European countries. For the year ended 31st March, 2014, Jain (Europe) Ltd. had sales of GBP 30.02 million (Equivalent to US$ 47.79 million).

C) Operating Subsidiary Companies

a) Jain Irrigation Inc., USA (Including Chapin Water matics Inc. merged w.e.f. 1st April 2009 and Point Source Irrigation Inc.) is a wholly owned subsidiary of the Company through the Jain (Americas) Inc. Jain Irrigation Inc. is engaged in drip tape manufacturing and distribution business based in California. For the year ended 31st March, 2014, the Company had reported revenue of US$ 65.78 million.

b) Cascade Specialties Inc. USA (Including White Oak Frozen Foods) is a wholly owned subsidiary of the Company through the Jain(Americas) Inc. It is engaged in onion, garlic dehydration and frozen foods business with specialization in natural low bacteria and organic dehydrated products. For the year ended 31st March, 2014, the Company had reported revenue of US$ 32.81 million.

c) NaanDanJain Irrigation Ltd. Israel is a wholly owned subsidiary of the Company through the Jain (Israel) B.V. It is engaged in the manufacturing of drip / sprinkler irrigation. NaanDanJain also has manufacturing facilities in Chile, Brazil, and Spain. For the year ended 31st March, 2014, the Company had reported revenue of NIS 447.74 million (Equivalent to US$ 125.96 million).

d) THE Machines SA, Switzerland is a wholly owned subsidiary of the Company through the JISL Systems SA. It is a Switzerland based manufacturer of plastic extrusion equipment with laser technology. For the year ended 31st March, 2014, the Company had reported revenue of CHF 17.28 million (Equivalent to US$ 18.83 million).

e) Jain Sulama Sistemleri San. Tic. A.S., Turkey is a Turkey based manufacturer of drip / sprinkler irrigation. The Company is owned to the extent of 100% through Jain Overseas B.V. For the year ended 31st March, 2014, the Company had reported revenue of TRL 40.30 million (Equivalent to US$ 20.07 million).

f) SQF 2009 Ltd., UK is based in Sleaford town in Lincolnshire County in the East Midlands region of England. The Company is owned to the extent of 100% through Jain (Europe) Ltd., UK. For the year ended 31st March, 2014, the Company had reported revenue of GBP 40.12 million (Equivalent to US$ 63.86 million).

g) Pro Tool AG, Switzerland is a Switzerland based manufacturer of plastic injection moulds. The Company is owned to the extent of 75% through the THE Machine SA. For the year ended 31st March, 2014 the Company had reported revenue of CHF 2.57 million (Equivalent to US$ 2.80 million). The Company has an option to acquire remaining ownership over the next 8 years from other shareholders at an agreed fixed price.

h) Ex-cel Plastics Limited, Ireland is a start-up venture and is incorporated in 2013 under the laws of Ireland. The Company is wholly owned subsidiaries through Jain (Europe) Limited. The company is engaged in manufacturing of Plastic Sheets. Company is expected to start commercial production from next year.

4) Competitive Strengths

We believe that the following are our principal competitive strengths

a) Strong brand and leadership position in our businesses in India.

We are one of Indias leading manufacturers of micro irrigation systems, piping systems and agro-processed products. Our MIS products are customised to assist in meeting the special requirements of our customers in India. We have worked with farmers to provide them training and introduce them to more advanced processes and technology as well as with Indian state governments and international organisations to develop technology and support new initiatives to assist farmers. We have maintained our leadership position with extensive research and development in plant, in lab and on farm to improve our products. We have built an extensive and loyal distribution and dealership network throughout semi-urban and rural India, selling flagship brands such as Jain Drip, Jain Sprinklers, Jain Pipes, Chapin and Farm Fresh, which are well known in the Indian and international markets. We believe that our strong brand presence and leading market position and understanding of our customers needs makes us well-placed to capitalise on growth opportunities in the Indian and international markets for our products.

b) Total solutions provider across the agricultural value chain.

We have utilised our agriculture expertise and relationships to participate across the agricultural value chain and diversify our revenue. In addition to our micro and sprinkler irrigation systems, plastic piping and solar pumps which are used in irrigation, we also supply bio-tech tissue cultures which help farmers reduce growing time and create higher crop yields. In addition, we work with our customers on a turnkey basis providing engineering, soil and water analysis, water resource estimation, crop planning, irrigation and fertigation scheduling, marketing assistance and other agronomical and technical support and training. We purchase onions, tomatoes and other vegetables for vegetable dehydration from our contract farmers and others and are a major consumer of mangoes for our fruit processing operations. We believe that being involved across the value chain leverages our knowledge, relationships, brand name and strong distribution network to provide total solutions for farmers.

c) Diverse revenue streams from different geographies

We have production and processing facilities across India and our sales have been growing in various states in India and internationally, which makes our sales and production less susceptible to weather or other risks in a particular region. We aim to expand internationally by looking for opportunities for future growth, especially in progressive agriculture markets. Our revenues are further diversified across the wide range of products we sell. Additionally, no single customer accounts for more than 5% of our revenues in Fiscal 2014. This diversification can help insulate our overall sales and operations from adverse conditions affecting any one of our business segments or products, a particular region or a particular customer.

d) Experienced management and large pool of agriculture professionals.

Our senior management team has deep experience in the industries in which we operate. We believe that the experience of our management team in the agriculture sector and international markets will help us increase our penetration internationally and expand the range of our product offerings. Our management team also has long-standing relationships with many of our major customers, distributors/dealers and suppliers. Further, we have one of the largest pools of committed agricultural scientists, technicians and engineers in the private sector in India, comprising over 1,000 agricultural scientists, technicians and engineers. Our after sales support, training and other services are one of our main selling points.

e) Flexible and scalable business model.

We believe that the flexibility and scalability of our existing production facilities and distribution network will help us meet increased demand for our products. Our presence in India with twelve manufacturing plants provides us a low cost, centralised manufacturing base.

The scalability of our existing facilities enables us to increase our production capacity through the installation of new equipment and production lines. Our manufacturing facilities enable us to produce a wide range of products with different specifications, such as inline tubing, flat dripper tubing, PC emitters, sprinkler pipes, impact sprinklers, PVC/ PE pipes, casing and screen pipes and duct pipes with different diameters and working pressure ranges, and processed and dehydrated fruits and vegetables using different organic feedstock. This assists us in meeting the specific demands of our customers and reducing the impact of seasonal changes in production volumes for specific products such as our agro-processed products and piping systems.

f) Wide dealer and distribution network.

We have over 4,000 dealers in India selling our products exclusively. Most of these dealers come from farming backgrounds and are influential in their respective regions. This strong local sales force gives us a deep understanding of the needs of our customers in India and assists us in providing strong after-sales support and sharing our knowledge with our customers. We can leverage our production facilities to further expand our distribution reach by adding dealers in new areas.

5) Overview of Segments

[A] High-Tech Agri Input Products

This segment comprises of Micro and Sprinkler irrigation systems, PVC Pipes, Tissue Culture and other agri inputs. The segment has grown above 15 % YoY growth at Rs 26,112 million during the year under review. The growth was contributed by PVC Pipes and Tissue Culture at 8% and 25% respectively, while the MIS/SIS revenues show a growth of around 22% YoY. The profit before tax for the segment was down by 6% YoY at Rs 4,857 million. The Company has added 2,410 MTpa in MIS and 32,750 MTpa in Piping division to cater to additional demand in the near future.

a) Micro and sprinkler irrigation

i) Industry

The global micro irrigation system market is one of the fastest growing segments of global agricultural industry. This growth is fuelled by Government encouragement for adoption of micro irrigation system as regular practice for future safety due to water scarcity, in order to conserve natural water resources. The Micro Irrigation System Market is dominated by Sprinkler Irrigation Systems, accounting for over 72% of the total MIS demand in past. Your Company is one of the biggest Market players in MIS and enjoys a dominating position in the present scenario. By 2016 the MIS market is expected to reach at USD 3414.7 Million worldwide.

ii) Performance

MIS revenues have shown a growth of 20% by adopting a new business strategy in the previous year. The domestic revenues show a growth of 8.6% YoY while exports show a significant growth of 129%. The business contributed over 41.6% the Companys total turnover. The division is in a phase of cautious growth, by change of business model in the last 2 years. The states of Maharashtra, Andhra Pradesh, Gujarat & Tamil Nadu continue to dominate sales of this division. The business incurred Rs 436 million capex during FY 2014 while adding 2,410 MTpa of capacity.

iii) Opportunity & Outlook

Almost 50% of the arable land in the country is still rain fed. The Government (Central and State) provide upto 50% capital subsidy for promoting the use of Micro Irrigation by farmers. While targeting an agricultural growth rate of 4% per annum, the government had also placed higher targets for farm credit and agriculture investments at 2% plus of the GDP for the XII plan period. In 2010 the Cabinet Committee of Economic Affairs approved the "National Mission on Micro Irrigation" (NMMI) during the Eleventh Plan period. This again demonstrates the sustained focus of the government on pushing micro-irrigation as a tool to conserve water and address the issue of food security. The Union Budget reflected an overall increase in thrust towards agriculture. A new Pradhan Mantri Gram Sinchayee Yojana has been announced in Budget 2014 and allocation of Rs. 1,000/- crores has been made towards the same. However, more details are awaited. MGNREGA has been continued by the new Government with projects substantially linked to Agriculture and allied activities. Similarly, many more initiatives are announced in the Budget for agriculture technology, protein revolution, 2nd green revolution.

Your Company has continued its training and extension activities for the benefit of farmers throughout the country. Thus, during the year under review, the extension activities were carried out in the country covering over 200,000 farmers in 15 states.

iv) Risks & Challenges

The MIS segment is mainly affected by its high initial and maintenance cost while major drivers in this industry identified are cost-effectiveness with fertigation and chemigation.

b) PVC Piping

i) Indian Industry Scenario

PVC Pipes segment of Indian Plastic industry has performed exceptionally well in past few years since it has crossed the mark of Rs 9,000 Crores. The Indian Plastic market is growing at a steady rate of 12%. PVC commands plastic pipe market by dominating over 84% share of the market. In areas like Soil & Wastage Drainage over last few years, PVC pipes have significantly made their presence felt and plastic piping systems continue to gain ground.

In bigger cities, PVC has captured a large portion of the market. Plastic PVC pipes are the most suitable and poised to replace cement pipes. In areas like roof, gutter drainage, PVC pipes have vital role to play. In building and construction section, PVC pipes has a total market of around Rs 2,000 crores which forms 31% of the current market. New area for penetration of PVC pipes is Roof gutter systems which have a total market share of 5%, i.e. Rs 1,200 crores. There is huge unsatisfied demand for irrigation in India and the demand for quality PVC pipes remains unabated.

ii) Performance

During FY 2014, this business contributed about 20% to the turnover of the Company. The revenues grew at 8% in FY 2014 over the last years level. The capacity addition during FY 2014 was 32,750 MTpa in the year under review at a cost of Rs 343 Mn..

iii) Opportunity & Outlook

The new government has declared priority for Infrastructure Projects and these projects need a large quantity of speciality pipes. Housing has gained huge importance with the governments Mission of giving a House to every Indian in 10 years. The building products segment viz plumbing pipes, sewerage, rain water harvesting etc will hence have a steady growth. Piping industry for next decade will grow again at around 15% CAGR which is mainly because of demand in agriculture pipes, plumbing pipes and industrial pipes. There is growing awareness amongst the users of the pipes who are demanding quality and specific brands that are known to provide quality can escalate their growth like your Company.

The kind of investment which has been planned by the Company shall certainly act as stimulant for exponential growth in demand for pipes in next 4-5 years. It is upto Plastic Pipe Industry to make all round efforts to ensure major share comes to Plastic PVC Pipes. Industry can no more afford to be just a mere supplier of pipes but to graduate to a total turnkey contractor as quality of plastic pipes have come under scanner at various points of time.

iv) Risks & Challenges

There is a need to keep vigil on the quality of products being offered in market place as many players have joined the wagon. Constant increase in prices of Raw Material is a severe issue for the PVC Pipes since it has a direct effect over the prices of finished goods. Due to heavy anti dumping duty, cost of PVC resin has been artificially increased by domestic processors, affecting end product demand.

c) Biotech Tissue Culture

i) Industry

This industry covers around 46 established commercial Tissue Culture Units and their annual production capacity ranges between 1 Million to 5 Million and aggregate production capacity of around 180 Million plantlets annually. The States like Maharashtra, Andhra Pradesh, Karnataka and Kerala house major Tissue Culture Units. The State Agriculture Department, Agri-Export Zones (AEZs), Sugar Industry and Private farmers are the major consumers of Tissue Culture Processing Plants (TCPs) while other industries like Paper industry, Medicinal Plant Industry and State Forest Departments have been using TCPs on small scale.

There are around 140 Sugar factories operating all over the Country, which have high awareness about the benefits of TCPs over conventional methods. However, at present only 6.7% are using TCPs but a larger number of this group are expected to shift over to TCPs in the forthcoming 3 to 5 years.

Additionally a number of progressive farmers and nurseries functioning in the states like Andhra Pradesh, Maharashtra, Tamil Nadu, West Bengal etc are the major consumers of TCPs especially for flowers, sugar cane, banana and medicinal plants.

ii) Performance

This business contributed about 2% to corporate turnover of the Company. The revenues crossed Rs 840 million a growth of 25% YoY. The Company spent Rs 119 million on Capex to add 10 million Tissue Culture plants capacity during the year under review.

iii) Opportunity & Outlook

The Department of Agriculture and Co-operation under the Ministry of Agriculture has taken an initiative for promotion of horticulture such as provision for assistance up to Rs 21 lakh and Rs 10 lakh for setting up tissue culture units in Public and Private sector respectively subject to a maximum of 20% of the project cost.

Under the Integrated Development of Fruits Scheme assistance is given for purchase of planting material under the area expansion programme by way of Rs 30,000 per hectare for plants of Banana and Pineapple, Rs 7,000 per hectare for plants of Amla, date palm, Rs 10,000 per hectare for plants of mango, apple, papaya and pomegranate and Rs 70,000 per hectare for plants of grapes and strawberry.

In addition to the same, 50% subsidy is being given to farmers for purchase of tissue culture banana by Andhra Pradesh State Agriculture Department under Macro Management Scheme. Karnataka Government is giving capital subsidy of 20% on investment in setting up Tissue Culture units and Gujarat and Maharashtra also gives 6% subsidy on power consumption.

The Government has proposed for development of biotech clusters as in Faridabad and Bengaluru will be scaled up and taken to the highest international quality which will include global partnerships in accessing model-organism resources for disease biology, stem cell biology and for high-end electron microscopy. The nascent agri-biotech cluster in Mohali will also be scaled up to include plant-genetic and phenotype platforms and secondary agriculture will also be a major thrust there through collaborations in the public and private sector. In addition, two new clusters, in Pune and Kolkata will be established. The Global Partnerships will be developed under Indias leadership to transform the Delhi Component of the International Centre for Genetic Engineering and Biotechnology (ICGEB) into a world-leader in life sciences and biotechnology.

To this industry as a priority sector many financial institutions are also providing financial facility like Canara Bank has opened a special cell for financing high tech Agricultural projects. And NABARD under its re-financing scheme has already supported around 30 projects so far.

iv) Risks & Challenges

Some of the challenges faced by the industry are short shelf life, stringent quality requirements and uncertainty of rejection of consignments. Despite these obstacles market players have been endeavouring to exploit the international markets. However, there is need for proper management of operations by selected alternatives for costly inputs and thrust on developing indigenous varieties with enhanced traits, resulting in improvement of sustainability.

[B]Industrial Products

The segment business includes the varied business lines like PVC Sheets, PE pipes for industrial applications, Fruit processing, onion and vegetable dehydration and Solar Green Energy. The revenues in this segment have shown a growth of about 34% at Rs 13,449 million. The major contributors to growth were PE Piping 64.3%, Sheets 40%, Fruit 25.5% and Dehydrated Vegetables by 8.7%, while revenues of Solar degrew by about 30% during the year under review.

a) PE Piping

i) Industry

PE pipes have captured around 15% market share of Indian Plastic Pipe Market. PE pipes in last 4-5 years have certainly left the mark in user minds in no uncertain terms with the result that more and more users are opting for PE pipes due to its techno-commercial superiority. That is the reason for higher growth of PE pipes over last three years at 13%. In only single water transportation section the PE pipes has touched the turnover amount of Rs 6,139 crores. Foul water from any establishment required to have a pipeline taking it upto the main sewage line of the corporation. Water transportation is a Rs 1,000 crores market mainly patronized by bigger cities in India. Telecom ducts has total market size of Rs 700 crores and growing at a remarkable pace day by day and expected to grow 25% considering the expansion plans of Telecom Companies. Drinking water segment also contributes to the growth of PE pipes market i.e. Rs 3,800 crores. Gas transportation segment is also developing very fast and has tremendous potential.

ii) Performance

The business at Rs 4,640 million grew by 61.8% mostly due to increased revenues, by 76% in domestic business. This business contributed about 12% to corporate turnover of the Company. The business in domestic area is mainly catering to infrastructure sector segments like Telecom, Gas, Pipelines of water etc which segments show a significant growth.

iii) Opportunity & Outlook

Governments massive drive towards improving infrastructure in the Country has been giving positive vibes to the PE Pipes segment of the market. Planned investment of Rs 13.23 trillion shall provide ample opportunities for enormous demand for PE pipes. There is PE pipe network of gas transportation of 1,000 km and current consumption at about 4,000 MTA. Pressure irrigation is a new concept in making water available to farmers through pipes instead of canals. After branch canal, field canal is replaced by a PE piping grid with pumps. Total pipe requirement is 750 MTs at an average of 50kg/Ha. Plastic PE pipe penetration level in Drinking Water segment is currently at 30%. Irrigation-Sprinkler and drip segment has current market size of Rs 2,600 crores and PE pipes in the sizes range of 20mm to 75mm are most commonly used. For drip it is LLDPE and for sprinkler it is HDPE. Government subsidy has been playing a dominant role so far.

iv) Risks & Challenges

The price of Steel climbing up faster than polymers is a major positive for the industry, however for delay in decision making of Government proving a strong obstacle for the implementation of ambitious projects. Cost of new innovation of technologies also contributes to increase in the R&D cost of the Company.

b) Onion and vegetable dehydration

i) Industry

India ranks first in the world in production of fruits and second in vegetables, accounting roughly 10 and 15 percent, respectively, of total global production. India has a strong and dynamic food processing sector playing a vital role in diversifying the agricultural sector, improving value addition opportunities and creating surplus food for agro-food products. Presently, a mere 2.2 percent of fruits and vegetables are processed, even as the country ranks second in the world in terms of production. This is comparatively low when compared to other countries like Brazil (30 percent), USA (70 percent) and Malaysia (82 percent). The National policy aims to increase the percentage of food being processed in the country to 25 percent by 2025. Food processing adds value, enhances shelf life of the perishable agro-food products and encourages crop diversification.

Dehydrated vegetables are being increasingly used as they retain their culinary quality and palatability, and bring about economy in storage space and transport cost. Besides, there is optimum utilization of the product during the glut season, and saving of packaging material and tinplate. Dehydrated onion is used extensively in overseas countries as a condiment. This standard is intended to help in the quality control of dehydrated onion for exports. Dehydrated Onions have been produced in small quantities since the Nineteenth century. Dehydrated onions were supplied to British Naval expeditions in the mid-nineteenth century and dehydrated Onions have been produced in sizable quantities during subsequent Wars, primarily for consumption by armed forces, but also for civilian use. Since the quality of these products when Rehydrated compared favorably with fresh vegetables or other types of processed onions, their usage declined rapidly after each war. However, the processing techniques employed in the production of dehydrated onions have improved greatly since World War II, particularly since the late 1950s, and as a result the quality of dehydrated vegetables has improved. At the same time the demand for convenience foods has been increasing and dehydrated onions have benefited accordingly.

ii) Performance

The business has grown over 9.1%% CAGR in last 5 years. It achieved a revenue level of Rs 2,006 million in FY 2014 a growth of 8.7% YoY. The capacity of existing 19,000 MTpa is increased by addition of 3,800 MTpa during the year under review. This business contributed just about 4.7% to corporate turnover of the Company. The business maintains all necessary and desirable quality standards for a food product business and even beyond most of times as the product is exported to MNCs. This provides an opportunity to integrate the business of dealing with farmers for inputs as well as output towards ONE STOP SHOP concept of the Company.

iii) Opportunity & Outlook

The Indian food processing sector is highly competitive. There are a large number of players in the organised as well as unorganized sector. The organised sector is small but growing - for example, it forms around 48 per cent of the fruits and vegetable processing. The sector offers potential for growth and a large number of Multi National Corporations have entered into India to leverage this opportunity. These players face competition from strong Indian brands. Companies have adopted various strategies to maintain and increase their market share in India.

These include competitive pricing, aggressive advertising campaign, expansion plans etc.

Although dehydration is an energy intensive process yet fruits and vegetables can be converted into value added products by using the solar energy options and exploiting the remote area labor force. Dehydrated products have potential market nationally and internationally. There is a wide range of agricultural products, which can be dehydrated and marketed locally or internationally. The increased shelf life and ease of transportation leads to export avenues in international market especially to UAE, Saudi Arabia, Central Asian Republics where these products are already well known and fetch high price. If dehydrated fruits and vegetables plant is managed efficiently, we can earn good revenue in the form of foreign exchange by exporting dehydrated fruits & vegetables which will indirectly improve the status of farming community.

iv) Risks & Challenges

Despite the huge scope of growth there are some factors which pulls the pace of this industry back such as the increase in local as well as international competition especially on cost and supply chain patterns. Adherence of strict quality & environment standards by importing countries resultantly increasing the production cost which is also a concern for the industry. Threat of adverse legislation by the Government also has potential to affect the industry. Occurrence of Natural Calamities may result in lower crop production. Large producers or big brands might manipulate the market for their profit maximization. Bargaining power of suppliers also plays a vital role in this dehydration industry. Lack of interest by farmers due to poor pricing, & long term storage constraint can interrupt the final product supply.

c) Fruit processing

i) Industry

The fruit and vegetable processing industry has a huge potential in India, with India ranking 2nd in the world in production of fruits and vegetables but is at the lower rung of the value chain in terms of processing. The availability of fruits and vegetables is varied due to diverse agro climatic conditions. Despite the large production of fruits and vegetables, it is estimated that only approximately 6 per cent of total agro output of India is currently processed as against up to 60-80 per cent in some developed countries. Indias share in the global food trade is only 1.5%. All of this implies that there is a great potential to grow this industry. An increase from 6% to 20% in terms of processing and increase in value addition from 20% to 30% will translate into quantum jump in the size of the processed fruit and vegetable industry.

As value of trade is advantageous in agriculture and processed foods between India and Gulf Region, in retail as one of the largest sectors in global economy of around USD 7 trillion. The prime factor for non-competitiveness is due to its cost and quality of marketing channels. India is a small organised retail and also the least competitive of all. At present small players dominate the Indian food processing industry. There has been large production of fruits and vegetables due to favorable monsoon in last year. The installed capacity of Indias fruit and vegetable sub sector has increased from 1.1 million tons in January 1993 to 2.1 million tons in 2006 it is estimated that processing fruits and vegetables accounts for around 2.5% of Indias total production. The major items of this sub sector include fruits pulps and juices, ready to serve beverages, canned fruits and vegetables. Globally demand for fruits juices is increasing day by day for fruits like Mango, Papaya, Banana etc. and it seems like it shall have a greater increment in this ratio further.

ii) Performance

The business contributes over 11% of corporate turnover and is growing steadily through the years, the 5 year CAGR being 15.7%. The business reported revenue of Rs 4,476 million a higher growth of 24.1% YoY. The Capex of Rs 225 million was incurred by the business during FY 2014. It has maintained all quality certification required and necessary for a food business.

iii) Opportunity & Outlook

Indias Economic development has registered a growth rate of 8% over 2006-2010 but tapered off thereafter. Contributing to this flourishing economy is the agriculture sector, where productivity is showing an increasing trend. Keeping pace with the world production of Fruits and Vegetables the production in India has also grown and now accounts for 15% of worlds vegetable production and 8% of worlds fruit production. The focus has now changed from grains and cereals to fruits and vegetables owing to change in consumption pattern resulting in increase in demand.

The demographic profile of the consumers has been changing. With increase in disposable incomes and standard of living, the consumption pattern is shifting from basic foods to more healthy, convenience foods resulting in growing demand for processed food in general and processed fruits and vegetables in particular. There is a marked shift in the International markets with emphasis being laid on wellness products and products having nutritive/therapeutic properties. There is also a shift from the usual products such as Citrus and Apple to more exotic products like Mango, Guava, and Pomegranate, which are increasingly being researched for their wellness aspects.

Indias share in the global fruit trade is around 1.6%. Pickles, Jams, Chutneys and dehydrated vegetables have been receiving increasing demands from the global market and Indian Economy has larger scope in this sector. Developing markets such as China and Africa are new segments for Indian fruits processing industry and possess potential to produce good returns. The demand for tropical fruit purees and concentrates and processed vegetables is growing rapidly within India as well as in International markets. The new format stores have added a different dimension to the distribution and sale of products, opening up opportunities, hitherto nonexistent. The packaged juices/ fruit beverages have seen a growth of more than 30% YoY and the consumption of fruits and vegetables as whole has shown an increase of 2.3% CAGR whereas that of cereals has decreased.

Your Company is working over innovating new and advanced techniques of processing fruits and vegetables to provide highest possible quality. Orange is the largest processed and consumed Juice in the World. Your Company has prepared plans to cultivate the processing variety of oranges in our country.

iv) Risks & Challenges

The biggest challenge in any agro-processing business is the availability of required quantity of raw material at the right time and at the right price. The changing climatic conditions are adding uncertainty to the entire agriculture and horticulture sector with a year of plenty followed by severe scarcity. To mitigate this risk the Company is pro-actively working to expand its sourcing base and is promoting the concept of integrated development of agriculture and establishing backward linkages. The successful model of contract farming in Onion and integrated development in case of Banana is being extended to other fruit crops such as Mango, Pomegranate and Tomato. Company has successfully evolved the concept of Ultra High Density plantation of Mango, which has revolutionised mango growing, making it one of the most profitable crops for the farmers.

The other major risk is the ever increasing cost of energy. The spiralling fuel oil prices are not only mounting pressure on the processing costs, but also directly and indirectly increasing the cost of various inputs. Due to moody rainy season there has been always uncertainty about availability of raw material at proper time and in proper quantity. Perishable nature of fruits and vegetables is the main reason short shelf life of the same. The successful model of Contract farming in Onion and Banana is being extended to other fruit crops such as Mango and Tomato. Increasing cost of labour is also a concern for the industry. There are some trade barriers which form an obstacle for importing any technology or product from abroad.

d) PVC Sheets

i) Industry

Green building concept is growing at very high pace and providing space for PVC products including PVC windows, wood PVC composite boards, flooring etc. Our determined efforts to establish the concept of Life Cycle Cost amongst the users of PVC Doors and windows is conserving energy, reducing replacement cost and faster installation is being largely accepted. Governmental guidelines/ codes such as Eco Homes, GRIHA code for new buildings, promoting the Green Building Concept and PVC products like PVC Doors can help to earn star ratings for the buildings.

ii) Performance

The business contributed about 5% to the corporate turnover of the Company. This business has grown by 40% to Rs 2,134 million in current year. The domestic revenues have grown up by 10% and export also shows a higher growth of 44%, thus resulting in overall growth.

iii) Opportunity & Outlook

The increasing demand for PVC Sheets in growing economies such as China, India, Turkey, Poland etc. is driving the global market for PVC Sheets. This segment has been commercialised and used in consumer products, industrial products, agricultural products and construction. The global plastic films and sheets market is fragmented and markets such as North America and Europe are matured. However, the Asia-Pacific market shows huge potential to grow. The rising disposable income of middle class in India and China is expected to drive the plastic films and sheets market in the coming decade.

PVC products are distinguished by their longevity, low cost for maintenance and recyclability. Their lifecycle costs are correspondingly low. Your Company has been offering cost effective products at highest possible quality. This is the reason why the Company has been a market leader. Doors, windows and many other products made by PVC Sheets carry more durability as compared to same products made by wood or metal.

iv) Risks & Challenges

The sudden boom in Real estate sector has made it difficult for lower middle class section of society to deal in housing sector which forms a major part of the population and it has a direct impact over the industry also. Though the PVC products are cost effective but the inflation has countered the purchasing power of retail consumer.

The cut-throat competition in global market is leading the market players towards price war. Your Company has opted for a strategy of relying on providing superior quality products which will prove fruitful in the upcoming years.

e) Green Energy

Even though the Company operates in various segments of the Solar business including Solar Pumps, Solar PV Module, Solar Power, Solar Thermal systems, Solar appliances, the following paragraphs are focussed on Solar PV Module, their applications like pumps and Solar Power segment, as its contribution is the highest in the Green Energy division.

i) Industry Structure

India receives sun radiation over 3,287,240 sqkm area which is equal to 5,000 trillion KWh every year. There are 5 largest Solar PV cell producing countries i.e. Japan, China, Germany, Taiwan and the United States. In India there are around 90 companies into Solar PV which includes 9 manufacturers of Solar cells and 19 manufacturers of PV modules. Another 60 companies are engaged in the assembly and supply of Solar PV Systems. Global Solar PV market has been growing substantially, especially in developed countries. Investors have started taking interest in setting up large scale vertically integrated manufacturing facilities, due to Special Intensive Package Programme. Rapid economic development has provided an impetus to the Countrys power generation sector; India is the Sixth largest country in power generation.

ii) Performance

The business comprises of Solar Photovoltaic, Solar Thermal, Solar and Biogas Power businesses.

This business contributed under 4% to corporate turnover of the Company. The revenues for segment were Rs 1,538 million reflecting degrowth of about 30%. The Capex incurred by the business was Rs 169 million. The segment holds potential for future growth and could achieve significant position in corporate turnover in future.

iii) Opportunity & Outlook

Through Semi-conductor Policy Government of India is offering capital subsidy of 20% for manufacturing plants in SEZs and 25% for manufacturing plants other than SEZs, on the condition that Net Present Value of investment should be at least Rs 1,000 crores. To meet present deficit of Indian Power Sector the generation capacity needs to be doubled in next 10 years from the current level of 142,000 MW. GOI mandated that electricity utilities purchase power from renewable sources. Target for electricity generation through this green route is fixed at 20% by 2020. The Government has also proposed to take up Ultra Mega Solar Power Projects in Rajasthan, Gujarat, Tamil Nadu, and Laddakh in J&k, a sum of Rs 500 Crores is set aside for this. A Government scheme is being launched for solar power driven agricultural pump sets and water pumping stations for energizing one lakh pumps, a sum of Rs 400 Crores is proposed to be allocated for this and also an additional Rs 100 Crores is set aside for the development of 1 MW Solar Parks on the banks of canals.

The Government has taken action for maximum utilization of solar power, it is proposed to exempt from basic customs duty viz:

- specified inputs for use in the manufacture of EVA sheets and back sheets;

- flat copper wire for the manufacture of PV ribbons.

A concessional basic customs duty of 5 percent is also being extended to machinery and equipment required for setting up of a project for solar energy production.

Introduction of State-level Renewable Purchase Obligations (RPOs), increasing demand supply mismatch and an increase in short-term trading prices has shifted the approach towards alternate power sources. Four Market segments seem to have the maximum potential in upcoming years i.e.

i. Rural electrification.

ii. Grid interactive Solar PV power plants.

iii. Back-up Power for Telecom.

iv. Roof based Solar PV systems.

Ministry of New and Renewable Energy (MNRE) has decided to support grid interactive solar power generation projects in the form of subsidy limited to only 50 MW capacity.

Integrated Energy Policy has assessed that India needs, at the very least, to increase its primary energy supply by 3-4 times and its electricity generation capacity by about 6 times to 800 GW by 2031-32.

In March 2013 MNRE announced that the total Solar PV module manufacturing capacity in India touched 2000 MW. According to MNRE, India had a Solar Cell manufacturing capacity of 848 MW and Ingot & Wafer manufacturing capacity of 15 MW at the end of 2012. There is no Polysilicon production capacity, only company that seems to be interested in exploring the option of setting up Polysilicon plant is the PSU and Maharatna Bharat Heavy Electricals Limited (BHEL).

National Solar Mission has made it mandatory installation of Solar Thermals on upcoming constructions through Building Bye-laws. It has also announced direct cash subsidy on systems installed. Property tax rebates and Electricity Bill rebates are also available. Pollution Control Boards have mandated Solar Thermal installation in commercial sectors to avoid penalty. 80% accelerated depreciation could be availed over industrial application.

iv) Risks & Challenges

Although there is plenty of scope for growth of Solar Power Industries there are some factors which have been construed as obstacles in the path of success. Some of them are discussed as follows.

• High cost of energy production and lack of adequate supply of basic feedstock.

• Relatively low amount of Development of Technology.

• Lack of awareness, especially in Rural Areas.

• Lack of strong Government initiative.

6) Risks and concerns at corporate level

The Company has significant experience in managing risks related to farming, weather, seasonality, global markets, currency fluctuation and impact of government policy. During last few very volatile years, this experience and expertise has helped Company to navigate turbulent times in a smooth manner resulting in sustained growth, improved margins and increasing market share, despite historical financial meltdown and violent disruption of all types of global markets.

The risk management, inter alia, provides for periodical review of the procedures to ensure that executive management controls the risks through a properly defined framework. The Company has identified the risks and their owners within the organisation and the following risks have emerged as the top 5 risks:

• Continuous fund requirement due to longer tenure for receivables

• Seasonality in agriculture and monsoon

• Currency fluctuations

• Aggressive strategies of competition & mushrooming of smaller and lower quality competitors

• Integration and profitability of acquisitions

Continuous fund requirement: Challenges in managing cash to cash cycle (payment for procurement to collection for sales) needs continuous fund infusion. This results in increased long term capital requirements. This risk is especially relevant for a growth oriented Company and the kind of business Company operates in.

Seasonality in agriculture: Companys performance is also dependent on the seasonality in agriculture sector.

Currency fluctuations: Adverse changes (appreciation) in the exchange rates leading to erosion in export income. Also large amount of Company borrowing is in foreign currency, therefore, adverse (Depreciation) exchange rate movement of Rupee can result into notional loss for mark to market accounting treatment. However, Company is a net foreign exchange earner and has a natural hedge not only on trade related transactions but also partially on debt raised in foreign currency.

Aggressive strategies of competition: The competition adopts aggressive strategies (large sales force, credits, products offered at multiple price points etc.) and competition from unorganised sector (aggressive pricing) results in pressure on sales/ margins.

Integration of acquisitions: Inability to capitalize on the opportunities arising from the acquisitions due to sub optimal integration of the people, process and technology from the acquired entities is one of the risks associated with the recently completed acquisitions.

7) Analysis of the Standalone Financial Performance

a) Net sales

Business	2013-14	2012-13	Change	Change%
Micro Irrigation Systems	16,833	14,030	2,803	20.0%
Piping Systems	12,519	10,166	2,353	23.1%
Agro processed Products	6,485	5,309	1,176	22.2%
Plastic Sheets	2,134	1,517	617	40.7%
Other Products	2,537	3,039	-502	-16.5%
Net sales	40,508	34,061	6,447	18.9%
Domestic	30,748	27,571	3,177	11.5%
Export	9,760	6,490	3,270	50.4%
Export to Total	24.1%	19.1%

Sales excludes incentives

Net Sales on standalone basis have increased by 18.9% to Rs 40,508 million vis-a-vis Rs 34,061 million in the previous year. This increase in revenues is in Micro Irrigation Systems, Plastic Piping Systems, and Agro processed products and Plastic sheets. Our total domestic revenue increased by 11.5% in fiscal 2014 to Rs 30,748 million from Rs 27,571 million in fiscal 2013. The revenues from exports have increased by 50.4% in fiscal 2014 to Rs 9,760 million from Rs 6,490 million in fiscal 2013. Export sales accounted for 24.1% standalone sales in fiscal 2014 as compared to 19.1% in fiscal 2013.

i) Micro Irrigation Systems: Revenues from domestic sales of our Micro Irrigation Systems increased by 8.6% in fiscal year 2014 to Rs 13,799 million from Rs 12,707 million in fiscal year 2013, primarily due to increased sales in States like Maharashtra, Karnataka and Rajasthan. Exports of Micro Irrigation Systems has increased by 129.4% to Rs 3,034 million from Rs 1,323 million as compared to same period previous year mainly due to project sales in African continent.

ii) Piping Products: Revenues from domestic sales of our Piping Systems increased by 26.6% in fiscal 2014 to Rs 11,983 million from Rs 9,466 million in fiscal 2013. The revenues from export of Piping Products decreased by 23.5% in fiscal 2014 to Rs 535 million from Rs 700 million in fiscal 2013.

iii) Agro-Processed Products: Revenue from exports of Agro-Processed Products increased by 35.3% in fiscal 2014 to Rs 4,183 million from Rs 3,092 million in fiscal mainly due increase in sales in middle east. Revenues from domestic sales of our Agro-Processed Products increased by 3.8% in fiscal 2014 to Rs 2,302 million from Rs 2,217 million in fiscal 2013.

iv) Plastic Sheets: Revenues from our Plastic Sheet products increased by 40.7% in fiscal 2014 to Rs 2,134 million from ^1,517 million in fiscal 2013, mainly due to increase in sales in European market.

v) Other products: Other products include Solar Water Heating systems, Solar Photovoltaic Systems, Tissue Culture Plants and Agricultural products. Revenues from other products decreased by 16.5% in fiscal 2014 to Rs 2,537 million from Rs 3,039 million in the fiscal 2013, mainly due to decrease in sale of solar products.

b) Operating Income

Particulars	2013-14	2012-13	Change	Change%
Incentives & Assistance	823	1,048	-225	-21.5%

Operating income includes accrued export incentives & assistance under VKYU Scheme & Transport Assistance Scheme of GOI for our agro processed products division and Mega Project incentive from Maharashtra Government.

c) Raw materials consumption

Particulars	2013-14	2012-13	Change	Change%
Polymers, Chemicals & additives, Fruits & Vegetables, Consumables, packing material,etc.	25,441	21,688	3,753	17.3%

Raw materials consumption increased by 17.3% to Rs 25,441 million as compared to Rs 21,688 million in the previous year mainly due to increase in polymer by 26.8% and Fruit & Vegetables by 23.7%. During the same period, polymer consumption increased to 210,479 MT from 178,385 MT in previous year The consumption of fruits and vegetables has increased to 230,700 MT from 228,069 MT representing a increase of 1.15%.

d) Other Expenses

Particulars	2013-14	2012-13	Change	Change%
Other Expenses	7,343	6,755	589	8.7%

Other Expenses increased by 8.7 % to Rs 7,343 million as compared to Rs 6,755 million in the previous year, mainly due to the increased stores and spares, Export selling expenses and miscellaneous expenses.

e) Employees Benefit Expenses

Particulars	2013-14	2012-13	Change	Change%
Employees Benefit Expenses	2,302	1,737	565	32.5%

Employee costs increased by 32.5% to Rs 2,302 million as compared to Rs 1,737 million in the previous year. The increase is mainly due to higher employee compensation and new employment.

f) Finance Costs

Particulars	2013-14	2012-13	Change	Change%
Interest Expense	3,523	3,757	-234	-6.2%
Bank charges	385	355	30	8.5%
Loss on foreign currency translation	1,865	934	931	99.7%
Total	5,773	5,046	727	14.4%
Less: Interest Income	154	215	-61	-28.4%
Less: Gain on foreign currency translations	-	-	0	-
Interest & Finance Charges (Net)	5,619	4,831	788	16.3%

The net Finance Cost increased by 16.3% to Rs 5,619 million as compared to Rs 4,831 million in the previous year, mainly due to long term loans raised for growth capex, increase in working capital utilization for growth as well as delay in subsidy disbursement by Government and increase in interest rate. The overall finance cost is 13.9% in of net sales in current year as against 14.2% in previous year.

g) Fixed Assets

Particulars	2013-14	2012-13	Change	Change%
Gross Block (net of disposal)	28,417	27,072	1,345	5.0%
Less:Depreciation	8,393	7,347	1,046	14.2%
Net Block	20,024	19,725	299	1.5%

Gross block increased by Rs 1,345 million during the year, mainly due to expansion & modernization plan implemented across all divisions. In the current year we have increased installed capacities in plastic processing to 611,240 MT as compared to 576,080 MT in previous year, substantial increase of 10 million plantlets in Tissue Culture and 3800 MT in Vegetable & Onion Dehydration.

h) Investments

Particulars	2013-14	2012-13	Change	Change%
Investment in wholly owned subsidiary (WoS)	6,706	6,958	(252)	(3.6%)
Other Investment	605	45	560	1,244.4%

The decrease of Rs 252 million in investments is mainly on account of redemption of preference shares. Increase in Other Investment is mainly on account of capital/ loan to Sustainable Agro Commercial FinanceLtd. (SAFL) the NBFC.

i) Inventories

Particulars	2013-14	2012-13	Change	Change%
Inventories	11,731	11,570	160	1.4%

The overall inventory has increased by Rs 160 million during the current year compared to previous year.

j) Trade Receivables

Particulars	2013-14	2012-13	Change	Change%
Gross Receivables	15,228	16,245	-1,017	-6.3%
Less: Provision Doubtful Debts	381	258	122	47.3%
Net Receivables	14,847	15,987	-1,140	-7.1%

The decrease in net receivable was 7.1% at Rs 14,847 million compared to Rs 15,987 million in the previous year mainly due to collection from government subsidy of MIS receivables.

k) Short Term Loans and Advances

Particulars	2013-14	2012-13	Change	Change%
Short Term Loans & Advances	5,852	3,952	1,900	48.1%

Short Term Loans & Advances increased by Rs 1,900 million in Current year mainly due to increase in advance for Trade Purchase.

l) Current Liabilities

Particulars	2013-14	2012-13	Change	Change%
Current Liabilities	30,921	30,433	488	1.6%

Current Liabilities decreased by Rs 488 million to Rs 30,921 million in current year from Rs 30,433 million in the previous year mainly due to decrease in short term borrowing by Rs 757 million and other currency liabilities by Rs 395 million.

m) Long Term Borrowing

Particulars	2013-14	2012-13	Change	Change%
Long Term Borrowing	12,476	12,144	332	2.7%

The Long Term Borrowing has increased by Rs 332 million to Rs 12,476 million in the current year from Rs 12,144 million in the previous year.

n) Shareholders Funds

Particulars	Equity Capital	Share Premium	Other Reserves	Retained Earnings	Share Warrants	Total
Balance as on 1st April 2013	909.83	9,998.36	3,951.13	8,345.49	161.81	23,366.62
a) Changes during the year (Equity Shares)	-	-	-	-	-	-
b) Conversion of Warrants	15.00	632.25	-	-	(161.81)	485.44
) Adjustment for unrealized gain/ loss due
) to hedging derivatives
d) Adjustment for ESOPs	-	-	-	-	-	-
e) FCCB Redemption premium	-	(78.59)	-	-	-	(78.59)
f) Equity share issue expenses	-	(13.31)	-	-	-	(13.31)
g) Allotted during the year	-	-	-	-	-	-
h) Profits for the Year	-	-	-	39.03	-	39.03
i) Profit transferred to General Reserve	-	-	27.10	(27.10)	-	-
j) Dividend (incl. Dividend Tax)	-	-	-	(270.50)	-	(270.50)
Sub Total (a to j)	15.00	540.35	27.10	(258.57)	(161.81)	162.07
Balance as on 31st March 2014	924.83	10,538.71	3,978.23	8,086.92	-	23,528.69

A Refer Note No. (2), (3) & (4) of financial statements. o) Dividend

The Board has proposed to pay dividend on Ordinary Equity Shares and DVR Equity Shares @ Rs 0.50 per share (25%) to all eligible Shareholders, subject to approval of Shareholders at the ensuing AGM. The dividend cash-outgo (including dividend tax) would be Rs 270 million as against Rs 266 million in the previous year. The dividend pay-out as percent of Net Profit works out to 693.06% as compared to 88.39% in previous year.

Particulars	2013-14	2012-13	Change	Change%
Equity Dividend	231	227	4	1.76%

Disclaimer: The Management cautions that some of statements above are directional and forward looking and do not represent correctness of the underlying projections as they are dependent on various factors some of which may be outside control of management.