kothari fermentation biochem ltd share price Management discussions

The Management of Kothari Fermentation 8 Biochem Ltd. is pleased to present its 21st Analysis Report covering its overall performance and outlook.

Your Company is in the business of Manufacturing Yeast and its derivatives during the year. Various types of Yeast are produced, e.g. Bakers yeast, Nutritional yeast, Feed yeast, Seasoning yeast, Distiller yeast and Bio-ethanol yeast. Yeast is used in various end-use applications in the Food, Distillery, Feed, Pharmaceuticals, and Other Biotechnology sectors.

Industry Structure and Developments

The Yeast Industry in India comprises of four major companies which are manufacturing yeast including our company and there is also one small manufacturer producing a small quantity of bakers fresh yeast. The other major manufacturers are AB Mauri, Saf Yeast and Oriental Yeast which are multinational Companies. Your company faces stiff competition from these companies, but sustaining by strategically managing the Company.

The potential for expansion of yeast market in India is very high with countrys own demand. As one of the largest cane sugar producer country, India has sufficient supply of cane molasses which is the main raw material for yeast industry. However, the molasses is now also used for production of ethanol, which is being mixed with petrol, this has increased the prices of molasses tremendously and has dented the profitability of your company to large extent. The molasses prices are dependent on agroclimatic condition and Governments decision to increase ethanol blending.

The setting up yeast manufacturing plant needs very high Capital cost as practically all equipments are made in high grade stainless steel. Power requirement is also very high as large aeration system and large volume of liquids are handled using high power pumps automated control systems, separation and packing systems. Molasses is available round the year but the prices are favourable during 5 to 6 functioning months of Sugar Mills Production. Also the effluent generated with molasses as main raw material with high BOD and COD effluent requiring complex, elaborate and expensive treatment equipment posing challenges to the yeast industry. Making high quality yeast at low cost to meet continuously changing needs of baking industry, reducing carbon foot print and pollution control are biggest challenges in front of Indian and Global yeast industry.

The increased cost of bakery raw material pressurized bakers either to increase their selling price or reduction in production of Bread/ Biscuits. This resulted downtrend in demand of main bakery grade yeast.

Opportunities and Threats

The increasing trend of processed and fast food habits impacts the growth of yeast market. India is presently one of the most promising markets for yeast, as its demand is continuously increasing with the rise in population and changing their eating habits to processed foods. Due to presence of intense competition from multinational Companies, the company is constantly working to enter into new markets, other than Bakeries, and had developed technologies for the manufacturing of Yeast based products needed for Distilleries, Feed, Food, Biotech and Pharmaceutical Industries.

Segment wise Performance

Manufacturing of Yeast is the only business segment of the Company during the year 2022-2023. The brand names - Kothari "SUNRISE", "KF", "SUPER FAST INSTANT YEAST", "ALCOMAX DISTILLERS INSTANT YEAST" and "FOUR SEASONS have been well established in the domestic market.

The comparison of financial data with previous years data is provided as under:

Discussion on Financial Performance with respect to Operational Performance

Particulars	2022-23 (Rs. In lacs)	2021-22 (Rs. in lacs)
	Manufacturing of Yeast
a) Production (MT)	16835	16542
b) Revenue
- Net sales	11027.46	9702.74
c) Result
- Before Tax 8 Finance cost	319.85	452.74
Less:
i) Finance cost.	291.00	302.09
ii) Other Un-allocable Exp	-	-
Net Profit before Tax.	28.85	150.65
d) Net worth	6084.68	6057.38
e) PBT/NW (%)	0.47	2.49

The company recorded a capacity utilization of 80.17% of its production facilities during the year. The company is having installed capacity of 25000 MT and operative capacity of 21000 MT.

KEY FINANCIAL RATIOS

SI. No.	Particulars	FY 23	FY 22	Explanation
1.	Operating Profit Margin	2.81%	4.48%	Reduction in profits due to high material cost.
2.	Net Profit Margin	0.17%	0.32%	Reduction in profits on account of reduced margins.
3.	Return(PAT) on Net Worth	0.32%	0.51%	Reduction on account of reduced margins.

Future Outlook

The company is regularly reviewing its whole structure and making changes for future improvements. Various control systems are also deployed for the reduction of costs and improving of operating efficiencies. The Companys sales have gradually shifted from fresh Yeast which is used in the bakery to various dried yeast product which is used in Distillery, pharma, Animal Feed industries, and nutrition food products. This shows the increase in demand for instant dried yeast in the market.The Company is constantly trying to be profitable by utilizing its available resources more effectively and efficiently.

Internal Control System and their adequacy

The Company has an internal control system with proper internal delegation of authority, supervision, checks and procedures. This system is reviewed and updated periodically in order to improve the same to meet the business requirements. The Internal Auditor of the Company has ensured adequacy and compliance of Internal Control System and that it commensurate with the size and nature of the Company and also suggests necessary checks and balances to increase the effectiveness of the system.The Board of Directors, Audit Committee and the Management ensure that the internal control system operate effectively within the organization.

Material Developments in Human Resources/lndustrial Relations Front, including number of people employed

The Company believes that the competence and commitment of its people are the key drivers for growth of the organization. There have been excellent relations between the employees at various levels and the management. The managers help employees identify obstacles and teach them leadership techniques through training, mentoring and coaching. The Company responds to genuine grievances of employees in order to foster warm and cordial relationships between the management and the employees. This practice increases job satisfaction of employees and ensures that employees can add value to their livelihood. There were 202 persons directly employed by the Company during the previous financial year on an average basis.

Forward Looking & Cautionary Statement:

Statements in this report on Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be "forward looking statements" within the meaning of applicable securities laws or regulations. These statements are based on certain assumptions and expectations of future events. Actual results may differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include global and domestic demand supply conditions, finished goods prices, raw material cost and availability, changes in Government regulations, tax regimes, economic developments within India and other factors such as litigation and industrial relations. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events.

	For and on behalf of the Board
	Sd/-
Place: New Delhi	Pramod Kumar Kothari
Date: 28thAugust, 2023	Chairman & Managing Director