Khemani Distributors & Marketing Ltd Management Discussions.

INDUSTRY STRUCTURE AND DEVELOPMENTS

Indian economy is going through difficult times. Growth in the economy has been slowing down and there has been clear slowdown in the consumption in India. Disposable income of Indian consumer is on decline 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. 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.

The General election 2019 has again given unprecedented mandate to the current government. We are hoping to see a revival in the economic growth and consumption in the economy. 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

2018-2019

2017-2018

FMCG 6,061.88 6,886.58
Dealing in Securities 41.07 183.70

Dividend income, which is included in to dealing in securities, was received during the year 2018-2019 of Rs. 26.79 lacs compare to previous year 2017-2018 of Rs.268.20 lacs.

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. 6,102.96 Lakh compare to previous year’s operating income of Rs 7,070.28 Lakh. The company incurred profit before tax of Rs. 315.68 Lakh compared to previous year’s profit of Rs. 302.04 and profit after tax of the Company is Rs. 254.69 Lakh compare to previous year’s profit after tax of Rs. 296.27 Lakh.

a) Revenue from operation

In Rs.

FY 2018-2019

FY 2017-2018

% Change

Revenue from Operation 610,296,183 707,028,299 (13.68)
Other Income 24,277,867 14,359,072 376.96
Total Revenue 634,574,050 721,387,371 (12.03)

 

b) Purchase of stock in trade
In Rs.

FY 2018-2019

FY 2017-2018

% Change

Purchase of stock in trade 576,146,105 657,393,649 (12.36)
c) Finance Cost
In Rs.

FY 2018-2019

FY 2017-2018

% Change

Finance Cost 1,680,357 7,432,868 (77.39)
d) Employee benefit expense
In Rs.

FY 2018-2019

FY 2017-2018

% Change

Employee benefit expenses 8,390,129.00 6,688,255 25.45
e) Net profit after
In Rs.

FY 2018-2019

FY 2017-2018

% Change

Net profit 25,469,664 29,627,411 (14.03)

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.