Kilpest India Ltd Management Discussions.

(a) Industry structure and developments Agrochemical

India is the fourth largest global producer of agrochemicals after USA, Japan and China. The industry size was lo the tune of USD 4.4 billion in FY15 and is expected lo grow at 7.5% per annum to reach USD 6.3 billion by FY20. Approximately 50% of the demand comes from domestic consumers and the rest from exports. Global population is expected to cross 9 billion by 2050. Rising population has led to increasing food demand. India is the second most populous country in the world, with its population estimated to grow overtime. To meet the food and nutrition needs of a growing population requires a sustainable approach that puts thrust on increasing productivity against a background of lower yields and decreasing farm sizes. It requires a push from all stakeholders - the farmer, the government and the industry collectively, so that the changing needs of the nation are met.

Increasing demand of food grains for the growing population and declining farmlands have intensillcd pressure for improving farm yields and reducing crop losses due to pesl attacks. Agrochemicals play an immensely important role in agriculture and food security. The agrochemicals industry comprises of insecticides, wcedicides, fungicides, plant growth promoters and regulators, fumigants and rodcnticides as the major product segments. The industry is highly competitive and dynamic but fragmented. The Industry continues to grow in size; due to increase in use of Agro chemicals by farmers due to awareness, increase in farm gate prices of produce and also government schemes emphasis to farmers to increase yield per acre, and due to intensive farming of Pest prone crops like cotton. Chili, Paddy, Soyabean etc.

However, due to global warming and changing weather, erratic monsoon the industry trend becomes uncertain at times.

Molecular Diagnostic Kits Business

Life Sciences market has been growing at a reasonable pace. But now, with more emphasis on research by Govt, and also private companies, the molecular research market shall continue to expand.

For Molecular Diagnostic Market its in the nascent stage in India and lot needs to be done lo pul moleculardiagnosis in the routine diagnostic protocol, like awareness, development of infrastructure etc. Currently, the molecular diagnostic market is dominated by multinationals and highly metro centric. But with launch of cheaper indigenous kits and setting up of new PCR diagnostic centers in smaller towns, the reach lo people will increase along with awareness, which will spark huge growth potential in coming years. In regard to this matter our subsidiary companys project has scaled up well and its diagnostics kits of several parameters are in good demand among the customers.

Molecular Diagnostics Performance

3B BlackBio Biotechlndia Ltd., an Indo-Spanish joint venture in the area of biotechnology molecular diagnostics (PCR based kits) achieved this growth through new and existing tests in diagnostics segment which caters to infectious diseases and oncology markets. Whereas (here has been steady growth in the existing portfolio of infectious diseases markets, a surge in revenues has been observed with newly launched tests in oncology market. Unlike infectious diseases tests which arc season dependent, oncology segment offers a steady growth throughout the year. Additionally, infectious disease segment attracts huge competition from foreign as well as domestic players; on the other hand oncology segment is still a new and upcoming segment with few serious competitors.

Adding to the results we have observed high growth in oncology segment in addition to steady growth in our existing portfolio of infectious diseases tests. We are launching more tests in the coming FY 18-19 which will add to our growth.

On customer relations, we arc now (rusted and preferred business partners with national hospitals and labs. We arc also getting enquiries from overseas. We arc confident of expanding to international markets which could be as early as coming FY 18-19.

On building internal strength of the organization wc arc looking at our current growth which comes from our customers tmst, we have invested into R & D infrastructure and have hired some new talents to increase production capacities.

Further to above, 3B BlackBios R&D under advanced stage of development are very strong, key parameters from Oncology to Blood Screening Kits have been successfully launched in the course of the year and are being marketed under registered Brand TRUPCR.

With all these parameters fully commercialized in 2018-19 the lop line and bottom line will show a speedy growth.

(b) Outlook & Opportunities

Industry offer good opportunity for growth, due to increase in use of Agro chemicals by farmers and due to intensive farming of Pest prone crops like cotton, Chili, Paddy, Soyabean etc..

Good export potential to adjoining countries exists, which has to be tapped and company is continuously getting new products registered in these countries to encash this opportunity.

Life Sciences market offer good opportunity with increased emphasis on research by Govt, and also private companies, the molecular research market shall continue to expand.

For Molecular Diagnostic Market it is in the nascent stage in India and lot needs to be done to pul molecular diagnosis in the routine diagnostic protocol, like awareness, development of infrastructure etc. Currcntly, the molecular diagnostic market is dominated by multinationals and highly metro centric. But with launch of cheaper indigenous kits and putting of new PCR diagnostic centers in smaller towns, the reach to people will increase along with awareness, which will spark huge growth potential in coming year. The subsidiary companys business has scaled up well and its diagnostics kits of several parameters arc in good demand among the customers. 3B BlackBio Biotech India Limited will soon be launching further new diagnostics kits in Oncology and Infections sector which arc being demanded by the existing customers.

(c) Risk and concerns

The Industry is depended on monsoon and pest attack. With global warming weather pattern is becoming unpredictable.

Agrochemical sector is monsoon dependent, but as your company is covering a wide geographic area and multiple crop products this vagary is warded off to quite a lot extent.

To some extent the ill effect can be ward off by focusing on irrigated areas, institutional business / warehousing corporation / public health program / exports.

^Development of Molecular diagnostic market / Life Sciences is a slow process, as it requires investments to create new set ups / convince existing customers with free samples to switch there supplier and brand establishing by word of mouth. Thus, one needs to survive for a long lime period in this market to reap the rewards.

(d) Internal control Systems and their adequacy:

The company has an elaborate system of internal controls to ensure optimal utilization of companys resources and protection thereof, facilitating accurate and speedy compilation of accounts and management information reports and compliance with laws and regulations. The company has a well defined organization structure, authority levels and internal guidelines and rules for conducting business transactions. The internal Auditors and companys internal audit department conduct regular audits to ensure adequacy of internal control system, adherence to management instruction and compliance with laws and regulations of the country as well as to suggest improvements.

(c) Discussion on financial performance with respect to operational performance

Agrochemical Industry is facing challenging times currently due to back to back drought year and tough market conditions. Crop yields have been impacted and farmers net realization is also affected badly. The Companys Sales for the FY 2017-18 stood at Rs 1577.19 lac slightly higher by 21.26% as compared to FY 2016-17 which was Rs 1300.65

lac. The Net Profit stands at Rs 52.00 lac which is substantially higher by 126.09% as compared to last year which was Rs 23.00 lac.

To ward off the risk of monsoon and dropping agro-products prices, the company has been increasing its focus on Public Health Business and Export. These two areas will help in warding off the risks associated with agricultural business.

However, this year hopefully the agricultural business will do well as several forecasts have predicted good monsoon. This year will end the back to back drought faced from the last three years by the industry.

The subsidiary has made a wide range of diagnostic kits ranging from infectious diseases to oncology, which arc being accepted by big names customers in diagnostic market. In times to come this subsidiary would become a market leader. Molecular Diagnostic Business sales grew by sales grew by 142.35% and F.BITDA grew from Rs 150.57 lac to Rs 433.13 lac ; NPgrew from Rs 90.20 lac to Rs 290.60 lac.

(f) Human Resources

The Company firmly believes that Human Resources and knowledge capital are vital for business success and creating value for stakeholders. The Company recognizes the fact that people drive business success, strengthening its efforts to build leadership at all levels. The industrial relations at both the units have remained quite cordial with total dedicated efforts from employees.

The total number of employees as on 31 st March, 2018 was 48.

AUDITORS CERTIFICATE ON CORPORATE GOVERNANCE

To,

The Members lCilpcst India Limited

We have examined the compliance of conditions of Corporate Governance by Kilpest India Limited, for the year ended on 3 I st March 2018, as stipulated in applicable provisions of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations,2015 (Regulations).

The compliance of conditions of Corporate Governance is the responsibility of the Management. Our examinations were limited to procedures and implementation thereof, adopted by the Company for ensuring compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression ofopiniononthc financial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of C orporatc Governance as stipulated in applicable provisions of the Regulations.

We further state that such compliance is neither an assurance as to future viability of the Company nor of the efficiency or effectiveness with which the management has conducted the affairs of the Company.

Place: Bhopal For BAHETI &Co.
Date: 23rd May,2018 Chartered Accountants
(DEEPAK BAHETI)
PARTNER
Firm Registration No. 006287C
Membership No. 075063