Kothari Indl Management Discussions


Your Directors have pleasure in presenting the management discussion and analysis report for the year ended on March 31, 2023.

1. INDUSTRY STRUCTURE, DEVELOPMENT : India is the third largest producer and consumer of mineral fertiliser globally. Over the years, the Indian fertiliser industry has grown significantly on the back of favourable demand, governments support and increasing agricultural output. Presently, the Government is actively focusing on addressing balanced crop nutrition and improving soil health. The Fertilizers industry has always been an important part of peoples lives in India. The fertilizers industry in India is one of the oldest manufacturing sectors in the country and is currently its largest. The company was engaged in the business of manufacture of Single Super Phosphate (SSP) in the Manufacturing unit situated at Kathivakkam Village,

Ennore, Chennai-600057. The production was shelved/ discontinued due to scarcity of imported quality Raw materials and want for working capital funds. The Board of Directors proposed an alternative solution for capacity expansion, and identified the factory situated at Ennore, which is not being fully utilized by the Company due to lack of fund.. In this regard, the Board has approached and offered M/s.Coromandal International Limited to operate the production facilities on lease basis as they are into similar manufacture as well own mines the question of Raw materials scarcity does not arise which is the backbone of this industry.The Board of Directors leased out the factory for a period of 5 years situated at Ennore, Chennai to M/s. Coromandel International Limited. During the year 2022-2023, the company has diversified into various business such as Drones and

Hotels.

2. OPPORTUNITIES & THREATS : Governments vision to double farmers income by 2024 is likely to increase agri inputs consumption. Improved awareness about soil health and sustainable practices to promote balanced organic fertilizer. Central and State governments support towards drip and microirrigation adoption to improve the resource use efficiency and promote water soluble fertiliser usage. The Government is committed to encourage the healthy growth of Capital Market for development of the Economy. During the year 2022-2023, the company has diversified into various business such as Drones and Hotels. Company has made an application for revocation of suspension to BSE Limited. After revocation of suspension, company will raise capital from the public. The company is exploring other significant business opportunities as part of a diversification scheme which would generate financial outlay and the profitability of the company during the rest of the current financial year 2023-24. The company was engaged in the business of manufacture of Single Super Phosphate (SSP) in the Manufacturing unit situated at Kathivakkam Village,

Ennore, Chennai-600057. The Business is operating under challenging environment due to various factors as high cost of raw material /supplies, high Interest Cost and the banks reducing the borrowing powers and then stopping abruptly funding of the working capital are the factors that have led to the recent negative performance of the Company. In addition to that due to continuous loss the entire net worth is eroded and it is negative now. The production was shelved/discontinued due to scarcity of imported quality Raw materials and want for working capital funds. Our factory was established in the year 1960. The Land, Plant and Machinery and Building is under hypothecation since 1995.Since our factory is very old and situated in Coastal Regulation Zone(CRZ) and near to sea, and Company is required fund to develop the factory so we are unable to run the factory with latest technology. Since our factory is situated near to sea, we have lost 7 acres due to sea erosion.

Several initiatives such as launching of new products, substantial improvements in quality and service, cost reduction etc. were taken in the past. However, the performance of the Unit did not improve. As the Unit is considered no longer viable, after considering various options the Board decided to sell the same in the overall best interest of all the stakeholders, if we get a suitable buyer.

3. SEGMENT-WISE PERFORMANCE : The Companys main business activity is trading of Fertilizers product and its related activities which fall under four reportable segments. The company has rentals income on its property leased out to various tenants subsequent to the close of the financial year. Major portion of the companys rentable space have been parted pursuant to the approval of the shareholders at the Extra-ordinary General Meeting held on 26th February 2019. Pursuant to the approval of the shareholders at the Extra-ordinary

General Meeting of the company held on 26th February 2019, the company sold two floors of Kothari Buildings to M/s.Gemini Iron and Steel Pvt. Ltd and in July 2021 transferred remaining two floors to the financial creditor in full settlement of its claim. The Company has leased out the factory situated at Ennore, Chennai to M/s. Coromandel International Limited. The same has been approved by the shareholders of the company vide EGM held on 07th December 2021.The rental income is likely to be significantly reduced going forward. The Company has majorly focused on quality and production. The company has embarked upon marketing of sanitizers and face masks (health care products) the demand which is increasing due to COVID 19 incidence. These products are well received by hospitals and general public. The company has started the production and marketing of FMCG products in the 2021-2022 financial year. During the year 2022-2023, the company has diversified into various business such as Drones and Hotels. During the year, the Company recorded a total revenue of Rs. 1032.22 Lacs as compared to Rs. 1031.86 Lacs in the previous year. The details of segment-wise performance is furnished in notes to the financial statements.

4. OUTLOOK : The Company continues to explore the possibilities of expansion and will make the necessary investments when attractive opportunities arise.

Company will continue to focus on improving the quality of customer engagement, creating new infrastructure & strengthening existing operations, promoting a safe work environment, enabling culture for happy and satisfied employees, thereby enhancing its stakeholders value creation. Overall, with a normal monsoon expectation and strengthened business processes, KICL expects to sustain its growth momentum in 2023-24. The company is exploring other significant business opportunities as part of diversification scheme which would generate financial outlay and the profitability of the company during the rest of the current financial year 2023-24.

5. RISK & CONCERNS : Risk management is a very important part of the Companys business policy.

Risk Management structure spans across different levels and the Company, continuously identifies, classifies and formulates mitigation measures.

The key risk management practices include risk assessment, measurement, monitoring, reporting, mitigation actions and integration with strategy and business planning. The Company has a robust Risk

Management framework to identify, evaluate business risks and opportunities. This framework seeks to create transparency, minimize adverse impact on the business objectives and enhance the Companys competitive advantage. The business risk framework defines the risk management approach across the enterprise at various levels including documentation and reporting. The framework has different risk models which help in identifying risks trend, exposure and potential impact analysis at a Company level as also separately for business segments.

6. INTERNAL CONTROL SYSTEMS & THEIR ADEQUEACY : Company has adequate internal controls consistent with the nature of business and size of the operations, to effectively provide for safety of its assets, reliability of financial transactions with adequate checks and balances, adherence to applicable statutes, accounting policies, approval procedures and to ensure optimum use of available resources. These systems are reviewed and improved on a regular basis. The Companys operating and business control procedures ensure efficient use of resources and comply with the procedures and regulatory requirements. There are adequate internal controls to safeguard the assets and protect them against losses from unauthorized use or disposition and the transactions are authorized, recorded and reported correctly. The Audit Committee periodically reviews the internal controls systems and reports their observations to the Board of Directors if any. The Directors have appointed M/s. N. Ganesan & Co., Chartered Accountants as the Internal Auditors of the Company for the FY 2022-23.

7. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE : During the year, the Company has recorded a total turnover of Rs. 1032.22 Lacs as compared to Rs. 1031.86 Lacs in the previous year. The Company has made net loss of Rs. (1744.53) Lacs as compared to net loss of Rs. (1098.85) Lacs of the previous year after providing depreciation, tax, etc. for the year ended 31st March, 2023.

8. HUMAN RESOURCE DEVELOPMENT : Human resources are the most important resources in an organization and need to be used efficiently, because success, stability and growth of an organization depend on its ability in acquiring, utilizing and developing the human resources for the benefit of the organization. There were no incidents of sexual harassment reported during the year under review, in terms of the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The

Company believes that the human resources are vital in giving the Company a Competitive edge in the current business environment. The Companys philosophy is to provide congenial work environment, performance-oriented work culture, knowledge acquisition / dissemination, creativity and responsibility. As in the past, the Company has enjoyed cordial relations with the employees at all levels. The Company continues to run an in-house training program held at regular intervals and aimed at updating their knowledge about issues.

Total number of employees as on 31st March 2023 was 42.

9. KEY FINANCIAL RATIOS:

Description

U/M 2022-23 2021-22

Remarks

Debtors Turnover Days 103.49 86.90 Due to monsoon failure.
Inventory Turnover Days 69.05 65.75 It is in line with the previous year.
Interest coverage ratio Times (0.74) (0.12) Due to increase of interest.
Current ratio Times 0.52 0.87 Due to increase in liability.
Debt Equity ratio - (1.53) (2.27) Due to increase of debt.
Operating Profit Margin % (169.44) (122.27) Due to loss is more as compared to last year.
Net Profit Margin % % (192) (107) Net Loss is more as compared to previous year.
Return on Net worth % 42 39 Due to increase in loss and increase in equity.

By Order of the Board of Directors

For KOTHARI INDUSTRIAL CORPORATION LIMITED PRADIP D KOTHARI Place : Chennai CHAIRMAN Date : 31.08.2023 DIN : 01315682