MANAGEMENTD ISCUSSION AND ANALYSIS
(a) Industry Structure and developments
Although the Indian castor seeds production declined in 2013-14 after a record crop in
the year 2011-12, the Indian crop of 11,30,000 Mt along with a record carry forward was
sufficient to fulfill the world demand. At the beginning of the Calendar year 2014, before
the crop from Gujarat, India’s main producer was harvested the carry forward of the
previous crop was estimated between 400,000 to 600,000 Mt. With the demand for seeds
working out in the range of 12 to 14 lac tons, we will see another year of drawing from
the old stock.
The demand for castor oil based products continues to see a stable growth across the
world except China, where a moderation in demand is being witnessed. In the current
scenario India should be able to satisfy the world demand. However, the industry and the
consumers may not have the same cushion of surplus for the next year. It will therefore be
once again upto our farmers to raise the production. In the year of El Nino the industry
will be keeping a close watch on the monsoon and sowing data.
(b) Opportunities & Threats
The world economic growth was pegged at 3% in 2013 as against 3.2% in 2012. The major
western economies led by the USA turned to a path of gradual recovery. The emerging
markets continued to see deceleration in growth. The growth in China flattened to 7.7%.
The geopolitical tensions continue to threaten accelerated growth of the world economy.
With more than 80% of your Company’s production being exported, the state of the
world economy, besides other industrial and scientific developments has an important
bearing on its growth.
Environment being a major concern, the search for green products is likely to intensify
in the future. Castor Oil being a natural, organic, renewable and bio-degradable product
is gaining importance as a green product. With improved irrigation, better quality inputs
and scientific farming there is a substantial scope to improve yields per hectare of
castor seeds. Besides due to its unique chemical structure, it finds myriad applications
in virtually every industry be it agriculture, lubricants, paints, inks, surface coatings,
pharmaceuticals, food, engineering plastics, cosmetics, perfumeries, electricals, rubber
and so on. Your company continues to endeavor to tap these opportunities by focusing on
Research & Development and investing in new capacities, new technologies, new
applications, and new products.
Castor Seeds continue to be a volatile raw material in terms of its price. Being an
agricultural product, it depends on the rainfall and weather conditions prevailing in the
area of castor growing States in the country, though it is a sturdy crop. The limited size
of the crop makes it susceptible to speculation and wild gyration in prices. To mitigate
the effect of uncertain weather, the Company has laid down parameters for inventory
management. The Company has proper mechanism in place to immediately respond to any
unforeseen eventualities. The Company is also cultivating hybrid seeds to improve the
productivity of commercial Castor Seeds
(c) Segment
The Company is organised into three business segments – Castor Oil, Derivatives
and Power Generation.
(d) Outlook
The demand outlook for your Company’s products remains positive. Emphasis on green
eco-friendly products is likely to lead to increase in innovation of new products and uses
of castor oil by the chemical industry. Your Company continues to invest in Research &
Development to tap on new growth opportunities. Your Company is also undertaking a
backward integration program in order to increase the availability of castor seeds.
Barring unforeseen circumstances, your Directors expect satisfactory growth.
(e) Risks and Concerns
The Company’s products are used across geographies in a variety of industries,
thereby to a great extent, mitigating the risks associated with demand for its products on
a long-term basis. The price behavior of raw material depends on the weather pattern in
the castor growing regions, the impact of El Nino on monsoon in these regions, global
demand and inventory, and prices of other oils including Crude Oil and therefore can be
volatile as well as unpredictable. The Company is closely watching the development of
factors affecting the castor seed prices.
The Company restricts its exposure to the price fluctuation of raw materials by
limiting its un hedged exposure.
With the business of the Company growing steadily and demand for trained and
experienced manpower in excess of the supply, the risk of managing the people is very big.
The Company has to retain its existing trained workforce and also attract new talent for
its different operations. To improve the performance of the staff at work; various
refresher training courses are organized to update their knowledge with the latest
technologies and management ideas.
The demand for castor oil and its products is dependent on the overseas markets as more
than 80% of the industries production is exported. The threat of new entrants and
competition due to aggressive trading policies adopted by them continue to be of concern.
The Company has focused its efforts on marketing and introducing new products thereby
mitigating to a certain extent, the effect of recession / slowdown in the industry.
Unrestricted speculation and high volatility due to trading in commodity exchange could
have a negative effect on the growth of the industry
Your Company has been engaged in several legal cases in connection with or incidental
to its business operations. These include service, excise and customs cases, etc. filed by
and against the Company. These cases are being pursued with due importance and in
consultation with legal experts in the respective areas. Your Board believes that the
outcome of these cases is unlikely to cause a material adverse effect on the
company’s profitability or business performance.
Your Company has a contingent liability of Rs. 583.14 lacs as on March 31, 20014.
Attention of the shareholders is drawn to the explanations mentioned in point no. 31 of
the Notes to Financial statements forming integral part of the balance sheet as on March
31, 2014. In view of the present status and based on legal advice received, your Board of
Directors are of the opinion that no provision is required to be made against these
contingent liabilities as of now.
(f) Foreign Exchange
Volatile currency movements can affect the profits of the Company. Your management
continues to take steps hedge foreign exchange exposure to mitigate the risks of
appreciation of Rupee against the Dollar.
(g) Internal Control and its adequacy
The Company’s Internal Control Department is headed by an experienced and
qualified Executive and the Department regularly reviews business process and controls in
consultation with the Statutory Auditors and Internal Auditors, and also interacts with
the Audit Committee of the Company. Internal Control system adopted by the Company
effectively ensures that all assets are safeguarded and protected against any loss from
unauthorised use.
(h) Financial / operational performance.
The Company’s Financial Performance & Analysis:
|
|
(Rs. In lacs) |
| particulars |
2013-2014 |
2012-2013 |
| Sales turnover |
67,518.40 |
122,821.24 |
| P B I D T |
7,826.13 |
7,438.26 |
| Finance cost |
2,172.20 |
2,720.52 |
| Profit after Finance cost |
5,653.93 |
4,717.74 |
| Depreciation |
974.79 |
910.04 |
| Provision for taxation - Current Tax |
640.00 |
728.50 |
| - Deferred Tax |
543.36 |
442.26 |
| MAT Credit entitlement |
(235.83) |
(59.59) |
| Short / (Excess Provision of earlier years) |
|
(76.69) |
| net profit |
3,731.61 |
2,773.22 |
(i) Human Resources / Industrial Relations
Industrial Relations have continued to be harmonious throughout the year. Measures for
safety of employees training, welfare and development have continued to receive top
priorities.
During the year under review, total stand-alone manpower is 348.
(j) Cautionary Statement
Statements in this "Management Discussion and Analysis" describing the
Company’s objectives, projections, estimates, expectations or predictions may be
"forward looking statements" within the meaning of applicable securities laws
and regulations. Actual results could differ materially from those expressed or implied.
Important factors that could make difference to the Company’s operations include
global and Indian demand and supply conditions and finished goods prices, changes in
government regulations, tax regimes, economic developments within India and the countries
within which the Company conducts business and other factors such as litigation, etc.
DECLARATION REGARDING COMPLIANCE BY BOARD MEMBERS AND SENIOR MANAGEMENT PERSONNEL WITH
THE COMPANY’S CODE OF CONDUCT.
This is to confirm that the Company has adopted a Code of Conduct for its Board Members
and Senior Management Personnel. The Code is available on the Company’s web site.
I confirm that the Company has in respect of the financial year ended March 31, 2014,
received from the Members of the Board and the Senior Management team of the Company, a
declaration of compliance with the Code of Conduct as applicable to them.
For the purpose of this declaration, Senior Management Personnel means, all senior
members of the Management Team, one level below the Executive Directors such as
Divisional/Departmental Heads, other functional heads and Secretary of the Company, as on
March 31, 2014.
| Place: Mumbai. |
HEMANT V. UDESHI |
| Date: July 5, 2014 |
Managing Director |
+91-9892691696
