Mahaan Foods Ltd Management Discussions.

INDUSTRY STRUCTURE, OUTLOOK AND DEVELOPMENT

India has been the leading producer and consumer of dairy products worldwide since 1998 with a sustained growth in the availability of milk and milk products. Dairy activities form an essential part of the rural Indian economy, serving as an important source of employment and income. Moreover, nearly all of the dairy produce in India is consumed domestically, with the majority of it being sold as fluid milk. On account of this, the Indian dairy industry holds tremendous potential for value-addition and overall development. There are many Opportunities and Challenges in the Indian Dairy Industry. Dairy products are a major source of cheap and nutritious food to millions of people in India and the only acceptable source of animal protein for a large vegetarian segment of the Indian population. The laws regulating the safety and quality of food are in existence since 1899. The number of legislations and quality standards has also increased substantially with the passage of time and growth of the industry. The food sector in India is governed by a multiplicity of laws under different

Ministries. The "Food Safety and Standards Act, 2006", aims to integrate the food safety laws in the country in order to systematically and scientifically develop the food processing industry and shift from a regulatory regime to self-compliance. Organized dairy sector is growing and investor interest in dairy industry is also quite high. The main aim of the Indian dairy industry is to enhance milk production and upgrade milk processing system by using innovative technologies.

OPPORTUNITIES AND THREATS

Opportunities

(i) With increased income levels, demand of milk products has gone up. This would mean higher consumption of conventional milk products as also introduction of new milk based products. (ii) Milk is a preferred source of protein by Indian populace. Milk and milk products are therefore likely to get preference from consumers who look for protein rich food. (iii) India is the largest producer of buffalo milk which is a preferred variety of milk for making certain type of cheese. It offers a good export opportunity for Indian cheese made of buffalo milk.

Threats

(i) Milk prices are expected to increase due to lower supply of Milk, resulting into higher cost.

(ii) Production of milk in India is very widely scattered in rural areas and at vast distances from the places of consumption i.e. urban areas.

(iii) The trend of adulterated Ghee continues to plague the market which is a serious health risk for the consumers. (iv) With increase in education level of young farmers, there is a tendency among the young folk to prefer white collar jobs over conventional dairy farming profession.

GROWTH OUTLOOK

The Indian economy is the fastest growing major economy and is projected to grow faster in the coming years. Rapid urbanization has led to a major increase in the demand for packaged/processed foods, favorably impacting the dairy industry in the country. In the era of digitization and increased access to actionable information, the Indian populace is becoming health and product quality conscious, which has led to the improved variety of food products available in the country. The increase in working population is leading to increased demand for convenient healthy and tasty products by the consumers.

Milk production as well as production of milk products by organized sector is expected to grow at a robust pace. Higher rate of growth is expected in value added dairy products. Western dairy products, which currently occupy a small space, are likely to grow on a faster clip. Packaged milk and products are likely to progressively replace loose milk and products.

EXPANSION PLANS

The Company holds on to its long term vision of becoming a significant player in Dairy space.

RISKS & CONCERNS

With rise in education level of rural population, young generation of farmers is showing apathy for their ancestral profession. There is a tendency in them to prefer white collar jobs over dairy farming in its present form. Government - both Central and State - have increased their focus on ensuring safe food products including milk products to the consumer. However, due to the lack of adequate testing equipments in Government labs, lot of fear and confusion has been created in the minds of industry as well as consumers.

SEGMENT WISE /PRODUCT WISE REPORTING

Your Company does not have the segment or product wise performance.

INTERNAL CONTROL AND GOVERNANCE

The Company has internal control system commensurate with the size and nature of the business which is monitored for its effectiveness on continuous basis. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorized use, executing transactions with proper authorization and ensuring compliance with corporate policies.

The Company has appointed M/s Naresh Kumar & Co., Chartered Accountants, (FRN 005987N), New Delhi to oversee and carry out internal audit of its activities.

The internal audit reports are reviewed by the Audit Committee periodically. Based on its evaluation (as defined in section 177 of Companies Act 2013 and Clause 18 of SEBI Regulations 2015), the Audit Committee has concluded that, as of March 31, 2020, the Companys internal financial controls were adequate and operating effectively.

FINANCIAL AND OPERATIONAL PERFORMANCE

The Company achieved gross turnover including other income of Rs. 588.10 Lakh and post net profit of Rs. 105.55 lakh for the financial year ended on 31st March, 2020 as against gross turnover including other income of Rs. 135.01 Lakh and net profit of Rs. 319.45 Lakh in the previous financial year.

RATIO ANALYSIS

Ratios Units FY 2020 IND-AS FY 2019
1. Debtors Turnover Ratio Times 10.04 1.40
2. Inventory Turnover Ratio Times 94.46 0.70
3. Interest Coverage Ratio Times NIL NIL
4. Current Ratio Times 12.25 16.21
5. Debt-Equity Ratio Times NIL NIL
6. Operating Profit Margin % 27.90 30.80
7. Net Profit Margin % 19.89 31.45
8. Earning Per Share 3.02 9.13

HUMAN RESOURCE AND INDUSTRIAL RELATIONS

The Company continues to emphasize on optimization of the human resources. The company is having only 2 employees on its permanent rolls.

DISCLOSURE OF ACCOUNTING TREATMENT

In the preparation of the financial statements, the Company has followed the Accounting Standards referred to in Section 133 of the Companies Act, 2013. The significant accounting policies which are consistently applied are set out in the Notes to the Financial Statements

CAUTIONARY STATEMENT

Certain statements made in this report relating to the Companys objectives, projections, outlook, expectations, estimates, among others may constitute ‘forward-looking statements within the meaning of applicable laws and regulations. Actual results may differ from such expectations, projections etc., whether express or implied.

Several factors could make a significant difference to the Companys operations. These include climatic conditions, economic conditions affecting demand and supply, government regulations and taxation, natural calamity, currency rate changes, among others over which the Company does not have any direct control.