Shri Vasuprada Plantations Ltd Management Discussions

Annexure – C

A. ECONOMIC REVIEW

The year 2023 witnessed significant headwinds with geopolitical uncertainty, aggressive tightening of monetary policy and stress in banking sector. There was strong resilience seen, especially in the second half of 2023, led by major economies with increase in consumption driven by government and private spending, easing of labour market and supply side pressures and support from fiscal policies in advanced economies. However, elevated debt levels and continuing geopolitical hostilities aggravate risks to global growth and inflation outlook in the medium term.

Global economic growth in 2024 is expected to remain subdued with Central Banks continuing to take a cautious stance on policy rates, withdrawal of fiscal support in advanced economies resulting in focus on budget deficits in a high interest rate environment and low underlying productivity growth. One of the key risks to the outlook is escalation of geopolitical conflicts leading to increase in energy prices, disruption of supply demand balance impacting overall global activity. 2024 is also an election year for several countries including US, UK and India and policy uncertainty can lead to short term weakness in economic environment. Despite all turmoil, India is on track to become the third largest economy by 2027. It is also the fastest growing large economy with the tailwinds of young demographics, improving institutional strength and strong governance. Amidst global headwinds, the Indian economy has displayed strength and grown by 8.2% for financial year 2023-24, mainly driven by sustained investment through an infrastructure driven policy by the Government. Continuous efforts of the Government towards strengthening the domestic economy through enhanced annual outlays for capital spending, policy shifts towards improving the ease of doing business and creation of a world-class digital infrastructure and payments platform have all contributed towards fuelling the GDP growth rate.

Economists estimate that Indias growth story momentum is likely to continue in the next fiscal year with increase in consumption and investment, decline in inflation levels, improving rural demand and strong manufacturing revival. However, headwinds from geopolitical tensions, volatility in international financial markets, continuing sea route trade disruptions and extreme weather events pose risks to the otherwise optimistic outlook. Given its structural reforms, upbeat business and consumer confidence and strengthening physical and digital infrastructure, India is in a better position to overcome these multiple challenges and emerge stronger.

B INDUSTRY STRUCTURE & DEVELOPMENT, SEGMENT-WISE / PRODUCT-WISE PERFORMANCE, OPPORTUNITIES & THREATS AND OUTLOOK TEA

Global Tea production in the calendar year 2023 was higher by around 100 million Kgs compared to previous year with Sri Lanka and Africa being the driving forces behind the surge. The Indian tea crop for the financial year 2023-24 was 1382.03 million Kgs as compared to 1370.83 million kgs in financial year 2022-23. Indias Tea exports, which rose by almost 15% in 2022, was lower in 2023 on the back of the geopolitical situation as India faced challenges in some of the traditional markets including Iran, Russia and Turkey. The double whammy of sluggish domestic consumption and low exports dampened the overall price realisation. Average tea prices at auction centres in North India witnessed a decline of around Rs. 17/- per Kg, while average tea prices at auction centres in South India decreased by approximately 6/- per Kg compared to previous year.

Indian tea industry has been grappling with an acute financial crisis for the past few years as tea prices have failed to keep pace with the increasing cost of production. Indian tea prices have exhibited a compound annual growth rate (CAGR) of approximately 4% over the past decade while the cost of essential inputs have surged at a CAGR of 9-15 % during the same period. The exponential increase in production over the past decade following the emergence of small tea gardens has resulted in surplus teas remaining in the system as domestic consumption levels and exports have not matched the increase in production. The organised industry has lost 1% of the crop every year for a decade majorly due to changing weather patterns and extreme climatic conditions.

The pie of quality tea in total tea production has shrunk over the years. With its aim to improve quality control and transparency through centralised auctions, the Ministry of Commerce recently issued notification mandating the sale of 100 percent dust grade teas through public auctions starting April, 1, 2024. This step where impartial testing for MRL compliance can be conducted will help to identify and map chemical misuse in cultivation of tea. It would lead to better price realisation with a positive impact on the revenue for tea producers, both big and small and also help in providing a safe and sustainable product to the consumer.

The Company produced 36,17,561 Kgs of tea during the year ended 31^st March, 2024 against 38,39,051 Kgs for the same period last year. The average price for Assam teas realised by the Company during the year was Rs. 217/- Kg and for South Indian teas was Rs. 105/- per Kg.

COFFFEE

Global coffee production for the financial year 2023-24 is estimated to increase by 5.8% to 178 million bags compared to 168.2 million bags in the previous year. The rise in production is primarily attributed to higher output in Brazil and Vietnam, which is expected to offset the reduced production in Indonesia. The world coffee consumption is projected to grow by 2.2% to 177 million bags with a strong contribution from non-producing countries. Indias coffee crop for 2023-24 is estimated at around 374 million kgs comprising of 261 million kgs of Robusta and 113 million kgs of Arabica. The total crop is 6.25 % higher than 352 million kgs, for the financial year 2022-23 crop estimate. The Coffee Boards higher projections are despite key growing regions witnessing erratic pre-monsoon showers considered crucial for the blossoming and crop setting. Arabica prices rallied sharply in December 2023 reacting to the concern on the damage of crop due to dry weather in Brazil but was short-lived on the forecast for rain. Farmgate prices of Robusta soared to record high tracking the global price trend which are at a high on dip in inventories in key consuming regions of Europe and the disruption in supply chain due to the development in the Red sea region.

Indias coffee exports in the year 2023 scaled a new high in value terms due to the surging trend in global Robusta prices. This is despite a marginal decline in the volumes on reduced offtake by key-buyers in Europe and Russia. The prices are likely to sustain in the near term till the Brazilian harvest starts and inventories are built up in the consuming countries. The increased global demand for coffee particularly among the younger generation has also played some role in driving up the prices.

The Company produced 3,27,458 kgs of coffee comprising of 1,06,144 kgs of Arabica and 2,21,314 kgs of Robusta during the year ended 31^st March, 2024 against 3,63,264 kgs comprising of 1,10,775 kgs of Arabica and 2,52,489 kgs of Robusta harvested for the same period last year. The average price for coffee realised by the Company during the year was higher at Rs. 286/- per kg as compared to Rs. 250/- per kg last year.

RUBBER

Global production of natural rubber is estimated to decline by 1.9 % due to reduction in production from major rubber-producing countries including Malaysia, Indonesia and Thailand. Due to the slow consumption rate of natural rubber, global rubber market witnessed slight bearishness in its trend impacted by accumulation of the existing inventories and sluggish demand from tyres and automotive industries.

The domestic rubber production during 2022-23 was estimated at 8.39 lac tons whereas the consumption was estimated at 13.50 lac tons. During the current year 2023-24, as per Rubber Board projections, the production was estimated to be higher at 8.70 lac tons whereas consumption is estimated to increase to 14.20 lac tons. The natural rubber production in India was nearly 10 lac tons in 2013, but has dropped significantly in last few years because of unremunerative prices and unfavourable weather conditions. This year, rubber growing areas witnessed a significant shift in rainfall pattern with many parts experiencing extended dry conditions in the absence of pre-monsoon showers. Natural rubber prices are unviable for producers due to higher production costs. The prices declined by 8% in 2023 in comparison to previous year due to declining demand from China the major consumer for rubber, lower oil prices and global economic crisis. Additionally, Southeast Asian rubber producing countries are concerned about the potential impact of the European Unions Deforestation Regulation, fearing it would hinder exports to EU nations and other markets. While the compound rubber imports have increased, the government has intervened on its imports by fixing import duty at 25%. However, it wont apply to import from ASEAN countries with whom India has entered into Free Trade Agreement and the import duty remains nil.

The Company produced 11,67,320 kgs of rubber during 2023-24 as against 10,52,090 kgs in the previous year. The average price realised by the Company during the year was Rs. 170/- per kg as against Rs. 149/- per kg last year.

C RISKS & CONCERNS

Effective risk management is a crucial process for any business entity as it can aid in improving operations, prioritizing resources, ensuring regulatory compliance, achieving performance targets, and ultimately preventing potential losses or damages. However, it is important to note that businesses cannot be entirely risk-averse as taking risks is often necessary for profitability. The essence of risk management lies in reducing risks to an acceptable and manageable level on an ongoing basis. This involves a two-step process of identifying existing risks and handling them in ways that best align with the companys objectives. To ensure proper risk management, the Company has established procedures for regular review and mitigation of risks, with periodic reporting to the Board of Directors.

Plantation industry in India faces several pressing challenges. Labour shortages and rising labour cost aggravated by the migration of workers to other industries impacts cultivation and production. Climate change disrupts weather patterns leading to erratic yields. Pests and disease threaten crops necessitating increased pesticide use. These challenges combined with market fluctuations affects the overall sustainability and profitability of the plantation industry necessitating innovative solutions and sustainable practices.

To mitigate these issues, the Company focuses on strategic planning, demand forecasting and market diversification. The Company has made substantial investment in irrigation to minimise the impact on crop due to change in climatic conditions. The Company follows TRA and UPASI guidelines on good agricultural practices for its estates on field practices and integral pest management. The Company has invested in Trustea certification programs to manage environmental risks and ensure long term sustainability of its tea operations. It also helps to mitigate possible risks related to food safety and quality of product. The Company is committed to embracing superior agricultural practices that will invariably enhance the yield of its crops. By consistently adopting these best practices, the Company is poised to not only achieve greater output but also uphold the quality that defines its products.

D. INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY

The Company has in place adequate systems of internal control commensurate with its size and the nature of its operations which have been designed to provide reasonable assurance with regards to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorised use or losses, executing transactions with proper authorisation and ensuring compliance of corporate policies. The Internal Auditors, Cost Auditors, Secretarial Auditors and the Statutory Auditors are also responsible for checks during the course of their respective audits.

The Audit Committee of the Board reviews audit reports submitted by the Internal Auditors. Suggestions for improvement are considered and the Audit Committee follows up the implementation of the corrective actions. The Committee also meets the Companys Statutory Auditors to ascertain, inter alia, their views on the adequacy of internal control systems in the Company and keeps the Board of Directors informed of its major observations from time to time.

E. FINANCIAL & OPERATIONAL PERFORMANCE

The details of Financial Performance and Operational Performance have been provided in the Report of the Directors.

F. HUMAN RESOURCE DEVELOPMENT / INDUSTRIAL RELATIONS

The Company believes that a progressive organisation can attain its full potential by developing and maintaining a cordial work culture that promotes happiness at workplace. Our constant endeavours are on sustaining an engaged and skilled workforce.

With years of continuous effort, weve been able to craft a unique and comprehensive performance management system that helps teams work to their potential by providing them necessary support and guidance. The system achieves a perfect balance between development, growth, rewards, conversations and strengthens the manager subordinate relationships. As on 31st March, 2024, there were 2942 permanent employees on the rolls of the Company. The Company has been maintaining exceptionally good relations with its labour force and with the employee friendly approach being adopted by it, the industrial relations continue to remain cordial.

G. SIGNIFICANT CHANGES (MORE THAN 25%) IN KEY FINANCIAL RATIOS, ALONG WITH DETAILED EXPLANATIONS

During Financial Year 2023-24, there was no significant change in Debtors Turnover Ratio, Inventory Turnover Ratio, Interest Coverage Ratio, Current Ratio, Debt Equity Ratio compared to that of Previous Year.

• In view of the losses incurred by the Company for the year ended 31^st March, 2024 and 31^st March, 2023, Operating Profit Margin, Net Profit Margin and Return on Networth is not calculated.

H. CAUTIONARY STATEMENT

The statements made in the Managements Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be "Forward Looking Statements" within the meaning of applicable Securities Laws & Regulations and are based on the currently held beliefs and assumptions of our management, which are expressed in good faith and in their opinion, reasonable. Actual results could differ from those expressed and implied since the Companys operations are influenced by many external and internal factors beyond the control of the Company. Several factors could make a significant difference to the Companys operations which includes climatic conditions, economic conditions affecting demand and supply, government regulations and taxation, natural calamities, raw material price changes, domestic supply and prices conditions, companys success in attracting and retaining Key Personnel, integration and re-structuring activities, general business and economic conditions over which the Company does not have any direct control.