Khemani Distributors & Marketing Ltd Management Discussions.

INDUSTRY STRUCTURE AND DEVELOPMENTS

COVID pandemic has changed the world in a material way. Indian economy was already going through difficult times and COVID has added to the woes of economy and citizens of India Millions of people have lost jobs and thousands of SMEs have lost business. Disposable income of Indian consumer has significantly declined. and we have been witnessing this in our trade. While from structural point of view, FMCG sector is likely to do well over longer period of time but the challenges of short term are real and creating slow down.

The urban segment (accounts for a revenue share of around 55 per cent) is the largest contributor to the overall revenue generated by the FMCG sector in India. However, in the last few years, the FMCG market has grown at a faster pace in rural India compared with urban India. Even the impact COVID crisis is limited in the rural areas. Agriculture output will be all time high.Due to government spending and schemes, Semi-urban and rural segments are growing at a faster pace than urban Indian. FMCG products account for 50 per cent of total rural spending.

Current government is working hard on reviving the economy. We are hoping to see a revival in the economic growth and consumption in the economy in the next year We will continue to closely watch and try to capture every opportunity in the sector. We do not want to take undesirable risks at the same time.

Khemani Distributors & Marketing Limited are currently engaged in the business of trading in FMCG products of Hindustan Unilever Limited ("HUL") as a ‘redistribution stockiest in Surat, Gujarat. Our product portfolio includes (a) personal care products; (b) home care products; and (c) food and drinks products.

We primarily cater to the retailers and wholesalers of Surat wherein we supply the above range of HUL FMCG products. Currently, we are catering to approximately 3,500 retailers and wholesalers located in Surat. We are also involved in the business of carrying on trading activities by dealing in stock market in all kinds of securities and other financial products.

OPPORTUNITIES

We will continue to explore new opportunities in the consumer space. Surat is developing and growing very rapidly. We are confident that we shall grow in the coming years.

THREATS

The FMCG industry includes various companies that cater to the needs of the consumers on a daily basis. On the basis of similarity of product offering, we consider FMCG companies other than HUL as our competitors. Competition within the distribution segment focuses primarily on the quality of product sold, brand value and quality of customer service.

SEGMENT WISE PERFORMANCE

Company currently engaged in the business of trading in FMCG products of Hindustan Unilever Limited (HUL) as a redistribution of stockiest for all existing and future products manufactured or marketed or distributed or supplied by HUL.

Khemani Distributors & Marketing Limited is also involved in the business of carrying on trading activities by dealing in stock market in all kinds of securities and other financial products.

Below given segment wise revenue generated.

(Rs. in Lacs)
Segment 2019-2020 2018-2019
FMCG 4,245.50 6,061.88
Dealing in Securities -1,573.32 41.07

RISKS AND CONCERNS

a) Company considers FMCG companies other than HUL as our competitors. In particular, we compete with other traders operating in the markets in which we are present. Our competitors may have advantages over us.

b) Company is currently engaged in the business of trading in FMCG products. Any slowdown in the rate of growth of the FMCG industry would seriously impact our own growth prospects and may result in decline in profit.

c) Global economic and political factors that are beyond control, influence forecasts and directly affect performance. These factors include interest rates, rates of economic growth, fiscal and monetary policies of governments, inflation, deflation, foreign exchange fluctuations, consumer credit availability, fluctuations in commodities markets, consumer debt levels, unemployment trends and other matters that influence consumer confidence, spending and tourism.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

There is an adequate internal control procedure commensurate with the size of the company and nature of the business for the purchase of inventory, fixed assets and for the sale of goods or services.

Company has constituted audit committee to overlook internal control system and their adequacy. Audit committee regularly review and give it recommendation on proper internal control system.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The total operating income of the company for the year under review is Rs. 2,672.17 Lacs compare to previous years operating income of Rs 6,102.96 Lacs. The company incurred profit before tax of Rs. -1245.04 Lacs (Loss) compared to previous years profit of Rs. 315.68 and profit after tax of the Company is Rs. -884.35 Lacs (Loss) compare to previous years profit after tax of Rs 254.70 Lacs.

a) Revenue from operation
In Rs.
FY 2019-2020 FY 2018-2019 % Change
Revenue from Operation 26,72,17,218 61,02,96,183 (56.22)
Other Income 3,71,26,321 2,42,77,867 53.92
Total Revenue 30,43,43,539 63,45,74,050 (52.04)
b) Purchase of stock in trade
In Rs.
FY 2019-2020 FY 2018-2019 % Change
Purchase of stock in trade 39,96,96,449 57,61,46,105 (30.63)
c) Finance Cost
In Rs.
FY 2019-2020 FY 2018-2019 % Change
Finance Cost 43,95,722 16,80,357 161.59
d) Employee benefit expense
In Rs.
FY 2019-2020 FY 2018-2019 % Change
Employee benefit expenses 74,05,689 83,90,129.00 (11.73)
e) Net profit after
In Rs.
FY 2019-2020 FY 2018-2019 % Change
Net profit -8,84,34,643 2,54,69,664 (447.22)

HUMAN RESOURCES

Company endeavor to hire most suitable and qualified persons and looking to most suitable person to specific task and area of work. Company is in the process of establishing most suitable policy to identify and recruit employee in organization. Company is in marketing and distribution of HUL product hence it required highly professional person in the marketing and sales.