Kovilpatti Lakshmi Roller Flour Mills Ltd Management Discussions

INDUSTRY STRUCTURE, DEVELOPMENTS AND FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

Results

The Companys Total income stood at Rs 41,365 lakhs in contrast to Rs 41,116 lakhs achieved during the previous year 2022-23.

The EBIDTA of the Company for FY 2023-24 was Rs 2,653 lakhs compared to Rs 2,825 lakhs in FY 2022-23.

The PAT reported for FY 2023-24 is Rs 781 Lakhs compared to Rs 1,014 lakhs in FY 2022-23.

Capital Investment

Our Company has made a total capital investment of Rs 708 lakhs.

OPPORTUNITIES, THREATS, RISKS & CONCERNS

Food Division

The demand for wheat-based products such as bread, biscuits, pasta, and ready-to-eat meals is increasing, driven by urbanization, changing dietary habits, and an expanding middle class in India. This presents an opportunity for product diversification and market expansion. The governments support through stable MSP (Minimum Support Price) ensures a reliable raw material supply at predictable costs, helping in long-term planning and pricing strategies.

Wheat production in India for FY 2023-24 was estimated to be around 110-112 million metric tons. This was slightly lower than the initial projections due to weather-related disruptions, but still within a stable range compared to previous years. The OMSS (Open Market Sales Scheme) program implemented by the FCI (Food Corporation of India) for the FY 2023-24 was continued till December 2023, to facilitate the sale of surplus food grains, primary wheat, and rice, from the central pool in the open market at pre-determined prices through e-auction in the open market time to time. Which enhances the supply of wheat during the lean season.

Engineering Division

The Indian foundry industry, which is one of the largest globally, continued to be a critical part of the manufacturing sector, supporting industries like automotive, engineering, infrastructure, agriculture, and defense. Despite global economic uncertainties, the demand for castings in India remained strong, driven by robust growth in end-user industries, particularly automotive and infrastructure development.

Indias foundry industry operates over 4,500 foundries with a production capacity of around 12 million metric tons per annum. The sector is diverse, comprising large-scale manufacturers and numerous small and medium enterprises (SMEs).

The industrys focus on technological advancements, sustainability, and government support initiatives contributed to its overall positive outlook. However, managing raw material costs, energy prices, and compliance with environmental regulations remained critical to sustaining profitability and growth.

The industry has the potential for continuous growth and innovation with increasing demand from various sectors and the adoption of new technologies.

SEGMENT-WISE AND PRODUCT-WISE PERFORMANCE

Segment-wise and product-wise results are stated separately under the relevant notes on accounts to the financial statements.

ECONOMIC OUTLOOK FOR THE YEAR

India registered a GDP growth of 8.2% for FY24 (7.2% in FY 2022-23). Government capex registered 25%+ Y-o-Y growth. Inflation moderated to 4.9% Y-o-Y by Mar-24 from an average of 6.7% in FY 2022-23. Core CPI inflation fell to 3.2% (all time low). While Indias economy remains steady, the governments response to global economic shifts and focus on strengthening domestic production and enhancing infrastructure.

The wheat market in India for FY 2024-25 is expected to be influenced by several key factors, including domestic production, government policies, global market dynamics, and climate conditions. Wheat production in FY 2024-25 is expected to be stable, with a projected output of around 110-115 million metric tons, assuming favorable weather conditions. Wheat prices in FY 2024-25 are expected to remain firm, supported by steady demand and the governments Minimum Support Price (MSP) policy. The MSP for wheat is likely to be revised upwards to account for inflationary pressures on input costs, ensuring a remunerative price for farmers. However, price volatility may occur depending on production levels and market supply.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

Planned periodic reviews are carried out resulting in identification of deficiencies and formulation of time bound action plans to improve efficiency. The adequacy of the internal control systems is periodically reviewed by the Audit Committee. This, supplemented with existing periodical management reviews, will enable the Company to improve its monitoring system at all levels.

The Company has internal control procedures commensurate with its size and the nature of its business for purchase of raw materials, plant and machinery, components, other items and sale of goods.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The financial performance of the company during the financial year 2023-2024 has been discussed in the Directors Report and the audited financial statements, which has been prepared in accordance with the requirement of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, 2015, discloses a true and fair view of the performance of the company during the said period.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

The Company believes that its people are a key differentiator, especially in knowledge driven, competitive and a global business environment. Adapting work culture to suit the dynamic balancing of people requirements and employee needs is an ongoing process. Fundamental HR processes which enable higher performance orientation, speed, skill and competency development, talent management are corner stones for the success of any organization. The Company is giving direct employment to 208 employees as in the past, the industrial relations continued to remain cordial in all the divisions of the Company.

DETAILS OF SIGNIFICANT CHANGES (I.E. CHANGE OF 25% OR MORE AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR) IN KEY FINANCIAL RATIOS INCLUDING DETAILS OF ANY CHANGE IN RETURN ON NET WORTH AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR ALONG WITH A DETAILED ExPLANATION THEREOF

Sl. No Description	31-03-2024	31-03-2023	% change	Explanations, if any
1 Current Ratio	1.53	1.65	-7.27%	NA
2 Debt Equity Ratio	1.34	1.45	-7.58%	NA
3 Debt Service Coverage Ratio	2.77	3.64	-23.90%	NA
4 Return on Equity Ratio	11.70%	17.00 %	-31.17%	Due to merger, there is a change in shareholding pattern and due to decrease in profit compared to the last financial year, which impacted the return on equity.
5 Inventory Turnover Ratio	5.96	7.25	-17.80%	NA
6 Trade Receivables turnover ratio	24.98	23.84	4.78%	NA
7 Trade payables turnover ratio	39.36	34.20	15.09%	NA
8 Working capital turnover ratio	12.82	11.77	8.92%	NA
9 Net profit ratio	1.90%	2.50%	-24.00%	NA
10 Return on Capital Employed	17.00%	18.60%	-8.60%	NA
11 Return on Investment	16.60%	26.20%	-36.64%	Due to merger, there is a change in shareholding pattern and due to decrease in profit compared to the last financial year, which impacted the return on investment.

CAUTIONARY STATEMENT

Management Discussion and Analysis forming part of the Directors Report is in Compliance with Corporate Governance Standards incorporated in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 with Stock Exchange and such statements may be "forward looking" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include Economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws and other statutes and other incidental factors.

	For and on behalf of the Board
	Sharath Jagannathan	Suresh Jagannathan
Place : Coimbatore	Managing Director	Executive Chairman
Date : May 22, 2024	DIN : 07298941	DIN : 00011326