kings infra ventures ltd Management discussions


1. THE ECONOMIC SCENARIO Macroeconomic Overview:

The global economic landscape in 2022 presented a complex blend of favorable and unfavorable developments, ultimately contributing to a period of modest growth.

Initial expectations had centred around a resurgence of the global economy following the severe disruptions caused by COVID-19 in 2021, with hopes of a return to normalcy. However, reality deviated from these anticipations as the world encountered a series of formidable challenges.

The aftermath of the pandemic, marked by lingering disruptions, continued to cast a shadow over economies worldwide. As per the latest estimates by the International Monetary Fund, the global GDP growth rate is estimated to be 3.4% in CY22 showing resilience towards the reversionary fears. Additionally, protracted geopolitical tensions, notably the conflict between Ukraine and Russia, further strained global stability. Crude oil prices soared, global trade was impacted and inflationary pressures worsened.

Anticipations for 2023 bring the promise of a more robust resurgence, with two prominent factors poised to drive this renewal: a substantial uptick in pent-up demand across several economies and an anticipated decrease in inflation. The worlds emerging and developing economies are expected to emerge as pivotal contributors to the acceleration of global economic growth.

Furthermore, a silver lining on the horizon is the projection of declining global inflation rates. After peaking at 8.8% in the calendar year 2022, experts anticipate a gradual descent to 6.6% in 2023 and an even more subdued 4.3% in 2024. This decline in inflation rates could alleviate some of the economic pressures experienced in recent times, fostering an environment conducive to sustainable growth and stability.

*Source: IMF Word Economic Outlook January, 2023 Industry Overview:

The major contributing factors for decline in exports during 2022 were decline in demand from main markets like USA, Europe and China etc., caused by high inflation, impact of COVID-19, Ukraine- Russia war, slow moment of inventories. Despite these challenges, India remains one of the major producers, processors, and exporters of shrimp globally. The country benefits from multiple factors such as its long coastline, conducive climate, and government incentives, which have driven a growing interest in the sector.

The Fisheries and Aquaculture Sectors pivotal role in ensuring global food security and nutrition is gaining increasing recognition. Thus, concerted efforts are essential for attaining sustainability and equity in global fisheries and aquaculture practices.

The Indian Government, acknowledging the vital significance of sustainable aquaculture practices, is proactively advocating for responsible farming techniques.

These combined initiatives are poised to underpin the ongoing expansion and triumph of Indias Aquaculture industry

The Union Budget for 2023-24 has also injected fresh impetus into the aquaculture sector. The Indian government has introduced the Pradhan Mantri Matsya Sampada Yojana (PMMSY), a new flagship program with substantial funding of ?20,050 Crores (US $2.46 billion), aimed at fostering the growth and expansion of the fisheries sector in the country.

In line with the vision of the Indian government, our company has taken on a pioneering role in catalyzing Blue Revolution 2.0. We are committed to delivering state-of-the-art technologies that are redefining Indias aquaculture sector, ensuring its long-term sustainability and alignment with the Sustainable Development Goals for 2030.

Business Overview

The Companys major expansion in the aquaculture division, along with launch of subsidiaries SISTA 360 and Mariculture Tech Park, is progressing on expected lines. Company hopes to bring a total transformation in the aquaculture industry in the country with its special focus on technology development in sustainable and traceable aquaculture.

The Companys financial statements were prepared in accordance with Indian Accounting Standards (hereinafter referred to as the Ind AS) as notified by Ministry of Corporate Affairs pursuant to Section 133 of the Companies Act, 2013 (Act) read with of the Companies (Indian Accounting Standards) Rules, 2015 as amended and other relevant provisions of the Act.

Strengths, Weakness, Opportunities and Threats:

Strengths:

Our company stands among the pioneers in the seafood and aquaculture industry in the nation. Surging ahead in the field, the company has entered into numerous partnerships and agreements with institutions and market players.

Kings Infra has signed a pact with the Central Institute of Fisheries Technology for developing ready to eat and ready to serve fish products by adopting steam or water immersion technology capable of achieving very long shelf life under normal room temperature without using any chemical additives or preservatives in accordance with the stipulations of the US FDA and other regulatory. Hence the improved process requires less chemical use. We have also entered into an agreement with CIFT for licencing a new technology for production of Chitin and Chitosan from shrimp shell that is normally a waste product generated from the processing of shrimps. The new processes improve the chitin and chitosan quality and incur less cost for the process. The protein separated can be used for many products including feed and other bio active molecules. The innovative project would also help in providing an opportunity for optimising ingredients, processing and heating conditions of the region-specific ethnic dishes. These developments are in line with the companys vision of building a fully integrated, zero waste, sustainable food producer.

Kings Infra, renowned for its pioneering contributions to semi-intensive aquaculture farming in India, has stood as a prominent figure in marine product processing and export for the past four decades. Venturing into the retail consumer market marks yet another significant milestone in the companys illustrious four-decade journey. King Fresh Seafood represents the yet another stride in Kings Infras comprehensive vision of evolving into a farm-to-fork enterprise, implemented gradually and systematically.

Our company has entered into MoU with Atomes Group to advance and promote antibiotic-free, sustainable, and traceable aquaculture practices within the country.

The deal between the two companies will enable antibiotic-free aquaculture products which will enable better access and acceptability of the aquaculture products in the international market.

The company, after stabilising its proprietary aquaculture technologies is presently focussing to build a sustainable and traceable supply chain so that the companys products can be placed higher in the value chain. These strategies have attracted in getting reputed International companies like Shanghai RSF Trading Company for Kings RISHIFU brand and JH&Co for the US market entry, associated with Kings Infra which will improve the top line and bottom line of the business exponentially.

These initiatives have propelled Kings Infra to secure a steadfast position in the market. The company is now poised to take further strides, aiming not only to sustain but also to enhance its market presence and recognition.

Weakness:

Challenges persist within the Indian aquaculture industry, characterized by inadequate supply of power, water, availability of skilled workers, non-availability of various clearances, regulatory uncertainty, lack of clear policies and unregulated input raw material costs. Furthermore, the industry grapples with an insufficient infrastructure, high energy costs and limited financial support for aqua-farmers.

Despite concerted efforts by the government and stakeholders to mitigate these issues, the aquaculture sector continues to confront a spectrum of challenges.

Opportunities:

In recent years, the global seafood market has experienced consistent growth, driven by the increasing recognition of its health benefits. The growing awareness of seafoods nutritional value and protein content creates a conducive environment for heightened consumption. India, with its long coastline, farming community, and availability of land and labour, has emerged as a major player in the global shrimp industry. The demand for shrimp transcends the food industry and extends into diverse sectors, including pharmaceuticals, healthcare, and cosmetics

Threats:

The aquaculture industry, confronts a spectrum of challenges and threats. The aquaculture industrys dependence on weather makes it vulnerable to natural disasters, which can impact production and logistics. Price volatility for shrimp globally, fluctuating exchange rates, rising raw material and ocean freight costs, and anti-dumping duties imposed by the US are significant threats. However, exploring local market prospects, maintaining trace ability, adopting scientific pond management, and prudent pricing and foreign exchange management can help mitigate these threats.

Thus, mitigating the threat, company is already focused on farm to fork integration in the aquaculture and seafood industry. As a part of this initiative Kings Infra is starting commercial production of ready to cook and ready to eat fishery products aimed at the domestic and international market.

Internal Control Mechanisms and their Sufficiency:

The company maintains a robust and effective internal control system, guaranteeing the protection of all assets against unauthorized use or disposal and ensuring the proper authorization, accurate recording, and correct reporting of all transactions. Moreover, this internal control system is meticulously crafted to enhance the reliability of financial and non-financial records, facilitating the preparation of accurate financial statements and upholding asset accountability.

The company has enlisted the services of an independent Chartered Accountant firm as its Internal Auditor, tasked with ensuring the companys compliance with all statutory obligations. Additionally, the finance department collaborates with the Internal Auditor to conduct periodic risk assessments encompassing both internal and external factors across all functional departments within the organization. These assessments lead to the identification of potential risks, followed by the implementation of preventive measures tailored to the severity of the identified risks.

Human Resources / Industrial Relations:

The aquaculture demands a qualified and well-trained workforce proficient in these operations. The company consistently executes comprehensive training initiatives aimed at enhancing employee awareness and skill sets. Regular training, coupled with incentives, salary increments, and various welfare provisions, stands as a cornerstone of our commitment to fostering robust labour relations. Additionally, we diligently adhere to all government-prescribed safety measures at our workplaces and offer work-from-home options for our employees, ensuring a safe and conducive work environment.

FINANCIAL PERFORMANCE

An overview of the financial performance is given in the Directors Report. The Audit Committee constituted by the Board of Directors periodically reviews the financial performance and reporting systems.

Disclaimer:

This section contains a discussion on the opinions and perceptions of the Management on the trends that impact the Company. It has been collated from information available publicly and reports by various nodal and governmental agencies that the management believes to be accurate at the time of publishing this report. The Company does not undertake to update or revise any of the opinions or statements expressed in this report, consequent to, inter alia, revisions to the reports mentioned herein, new information, future events, or otherwise.

Kochi

30.08.2023

For and on behalf of the Board of Directors

Sd/-

Shaji Baby John Chairman & Managing Director

DIN: 01018603