Mangalam Seeds Ltd Management Discussions

MANAGEMENT DISCUSSION & ANALYSIS

Indian Economic Overview

The agriculture sector in India is a critical component of the countrys economy, with a substantial impact on employment, food security, and rural development.

Agriculture contributes approximately 17-20% to Indias Gross Domestic Product (GDP). While this share has been gradually declining due to the growth of other sectors, agriculture remains a significant part of the economy.

About 45-50% of the Indian workforce is employed in agriculture. This sector is a major source of livelihood for rural populations, though many are underemployed or work in subsistence farming.

India has around 150 million hectares of net sown area. The land is primarily used for crops like rice, wheat, sugarcane, and pulses. However, land productivity varies widely across regions.

Major food crops include rice, wheat, maize, and pulses. India is one of the worlds largest producers of rice and wheat.

Important cash crops include sugarcane, cotton, tea, and spices. India is also a leading producer of various fruits and vegetables.

While India has made significant strides in improving agricultural productivity, there is still considerable variation in yields between different regions. Efforts are ongoing to enhance productivity through improved technology and practices.

Approximately 45% of the total cropped area is irrigated. The sector relies heavily on monsoon rains, and variability in rainfall can impact agricultural output. There are ongoing efforts to improve irrigation infrastructure and water management. The Indian government implements various schemes and policies to support agriculture, such as the Minimum Support Price (MSP) system, subsidies on fertilizers, and crop insurance schemes. Initiatives like the Pradhan Mantri Krishi Sinchai Yojana (PMKSY) aim to improve irrigation facilities.

Agriculture is highly vulnerable to climate change, with unpredictable weather patterns, droughts, and floods affecting productivity. Issues such as soil erosion, salinization, and nutrient depletion are significant challenges. Farmers often face challenges related to access to markets, fair pricing, and storage facilities, which can impact their income.

The sector is seeing advancements in agricultural technology, including precision farming, genetic modification, and digital tools for better resource management. Efforts are being made to promote these technologies among farmers to increase efficiency and productivity.

Industry Structure and Developments

Indias agricultural sector continued to be a key driver of economic stability and food security during FY 2024-25. The sector registered a healthy average annual growth rate of 4.6% over the past six years and contributed significantly to national Gross Value Added. Agricultural exports remained robust, with India retaining its position as a net exporter of agricultural commodities, driven by increased demand for cereals, pulses, and horticultural products. The Governments policy of fixing Minimum Support Prices (MSPs) at least 50% above the cost of production provided stability and encouraged farmers to diversify into high-value crops, particularly pulses and oilseeds.

The augmentation in the production of coarse grains underscores the significance of promoting nutrient-rich grains within the nation. Supported by the farmer-friendly policies of the Government and the efforts of farmers and scientists, the agricultural sector in India is poised for sustained advancement and further expansion in the upcoming years. These estimations serve as a pivotal gauge of the progress and potential of Indias agricultural industry, accentuating the countrys commitment towards attaining self-reliance in agricultural production and the goal of doubling farmers income.

Outlook

The competition in crop production, particularly concerning value-added traits, is expected to intensify. This trend is driven by the need to address climate change and shifts, which contribute to the increasing complexity of diseases and their impact on the durability of agricultural products. To meet these challenges, there is a growing emphasis on fast-track breeding using new genetic technologies. The expansion of protected and organic cultivation, along with specialized products, is anticipated. Additionally, there is an increasing focus on seed enhancement technologies, which involve the utilization of counted seeds of high value. This shift is driven by the rising demand from professional vegetable growers, who require high- performing seeds. Another significant development is the consolidation of vegetable seed companies.

Multinational corporations (MNCs) are expected to invest more in breeding and technologies to gain a competitive edge in the market. Also, it is projected that the majority of crops will undergo more than 80% hybridization. Over the course of ten years, the vegetable seed market is forecast to grow by 50%. This growth is likely to be accompanied by an increase in the area dedicated to vegetable cultivation, estimated to rise from 9.8 million hectares to 12 million hectares. This expansion is driven by rising demand and market trends. To keep pace with the evolving industry, a more sustainable seed business model is necessary, characterized by robust systems, processes, and well-defined business plans, as adopted by many MNCs. Additionally, the export of vegetable seeds is witnessing an increasing trend, indicating potential opportunities for market expansion and international trade.

Indias Agriculture Sector

India is primarily an agrarian economy. While agriculture is estimated to account for just over 16 percent of the US$ 3.7 trillion economy, the sector employees over 50 percent of the population. India has largely achieved self-sufficiency in production of food grains, delivering strong and fast economic growth for the past several years, and this trend is projected to continue in the future. The country has unique competitive advantages with the largest arable land area (43 percent) of an estimated 150 million hectares and diverse agro-climatic conditions supporting the cultivation of various crops. The agricultural sector indeed plays a vital role in Indian economics, politics, and society.

India is among the highest-ranking countries in production volume for various commodities like rice, cotton, dairy, fruits, vegetables, meat and seafood, but the nation has access to only 60 percent of the produce due to lack of storage infrastructure, which leads to an estimated loss of up to 40 percent of the produce. In fact, these losses are estimated at $13 billion annually.

Over the past decade, agriculture and horticulture outputs have seen record growth year-afteryear. Yet, crop yields are still generally lower compared to the world average. This low productivity is due to many factors such as erratic monsoons (over 50 percent of cultivated land is monsoon dependent), shrinking groundwater resources, decline in soil fertility, inefficiency in the food distribution system, lack of storage, transportation, lack of awareness in the use of modern agricultural practices and technologies among the farming community, unpredictable weather, small average farm sizes of 1.08 hectares, and agricultural subsidies that distort market signals and hamper productivity-enhancing investment.

The agricultural sector in India is witnessing a shift from traditional farming to organic farming, horticulture, aquaculture, poultry, and dairy production. The demand for fresh and processed products of all types is increasing due to rapid urbanization, the rise in incomes, and changing consumption habits of the population. The growth of an efficient cold chain network from "farm to fork" will help curb the current spoilage rate of agricultural output while helping producers capture value as products retain quality and give extra benefit to consumers.

Farmers Income

The average income of farmers in India is relatively low compared to other professions. Estimates vary, but as of recent data, the average monthly income of a farmer is around Rs.10,000 to Rs.15,000. This figure can fluctuate based on factors like crop yields, market prices, and input costs. Income levels can differ significantly between regions. Farmers in states like Punjab, Haryana, and Maharashtra may have higher incomes due to better infrastructure and access to markets, while those in less developed states often face lower incomes. Several government programs aim to enhance farmer welfare and income, including the Pradhan Mantri Krishi Sinchai Yojana (PMKSY) for irrigation and the National Agriculture Market (eNAM) for better price discovery.

Programs like the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) provide direct income support to farmers, aiming to alleviate financial stress and improve livelihoods.

Efforts to boost interest in farming

Enhanced curriculum in schools and universities focusing on modern agricultural practices and technology aims to spark interest among students. Institutions like the Indian Council of Agricultural Research (ICAR) offer specialized courses and research opportunities. Programs such as the Skill Development Scheme under the Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY) provide training in various agricultural skills, including advanced farming techniques and entrepreneurship. The introduction of technologies like precision farming, drones, and soil sensors makes farming more efficient and less labor-intensive, attracting tech- savvy individuals. Platforms like e-NAM (National Agriculture Market) and various mobile apps help farmers access real-time market information, weather forecasts, and expert advice, making farming more data-driven and attractive. Government schemes offer subsidies for purchasing modern equipment, seeds, and fertilizers. This financial support can reduce the initial investment burden and encourage interest in farming. Easy access to credit through programs like Kisan Credit Cards (KCC) helps farmers manage their finances and invest in better farming practices. Initiatives to facilitate direct marketing, such as Farmers Markets and online platforms, help farmers get better prices for their produce. Encouraging value addition through agro-processing, packaging, and branding helps farmers diversify their income sources and improve profitability. Government programs and NGOs promote organic farming through training, certification, and marketing support, appealing to environmentally conscious individuals. Initiatives focusing on sustainable practices, such as soil conservation and water- efficient farming, attract those interested in eco-friendly agriculture. Public campaigns and educational programs aim to improve the perception of farming as a viable and rewarding career option, emphasizing its importance to national food security and rural development.

Mangalam Seeds Overview

Mangalam Seeds specializes in the production of various types of seeds, including field crops (like cereals and pulses) and horticultural crops (such as vegetables and flowers). The company emphasizes the quality and reliability of its seeds, often focusing on high-yield and disease- resistant varieties. Mangalam Seeds invests in research and development to enhance seed quality and develop new varieties suited to different climatic conditions and agricultural needs. The company may collaborate with research institutions and agricultural universities to advance its seed technology. Apart from supplying seeds, Mangalam Seeds might offer advisory services to farmers on best practices for planting and crop management. Adoption of modern agricultural technologies and practices to support farmers in maximizing their crop productivity. Mangalam Seeds operates in various regions within India, catering to the diverse agricultural needs across different states. The companys market presence may extend to international markets depending on its export capabilities.

The company likely has an extensive distribution network to ensure the availability of its seeds across various agricultural regions. Like many seed companies, Mangalam Seeds may focus on sustainable farming practices, including environmentally friendly seed production methods and promoting sustainable agriculture. The company might engage in CSR activities related to rural development, farmer welfare, and community support. Specific financial performance details are typically available in annual reports or financial statements, which provide insights into the companys revenue, profitability, and growth trajectory. The company faces challenges common to the seed industry, such as fluctuating agricultural policies, climate change impacts, and competition in the seed market. There are opportunities for growth in the form of expanding product lines, entering new markets, and adopting advanced agricultural technologies.

A. BUSINESS HIGHLIGHTS

Turnover:

Mangalam Seeds Limited has turnover of Rs. 94,32,30,218/- in FY 2024-25 and Rs. 1,00,05,03,187/- in FY 2023-2024.

Employee Benefit Expenses:

Employees emoluments (other than managerial remuneration) is Rs. 3,37,07,890/- during the year as against Rs. 3,16,85,227/- during the previous year.

Administrative and Selling Expenses:

Major components of administrative and other expenses include Bank Charges & Commission, Sales Promotion & Presentation, Brokerage & Commission, Site Exp., Legal and Professional Tax, Rent, listing fees, insurance premium, Sundry Exp., Bad Debts written off, etc.

Depreciation:

Depreciation charge for the current year came to Rs.1,20,15,921.00 as against Rs. 1,13,01,743.00 of the previous year.

Provision for Tax:

The Company has made provision towards Current Tax of Rs. 2,07,32,376.00 Deferred taxes of Rs. 4,01,495.00 & short provision of Rs. 6,07,364.00 and as against Current Tax of Rs. 2,65,49,060.00 deferred tax was 8,36,143.00 & short provision of Rs.(36,459)of the previous year.

Profit/Loss after Tax:

The Company has made profit after tax for the current year is Rs. 10,10,62,481.00 as against profit of Rs. 13,18,37,928.00 during the previous year. The Directors are hopeful for the better performance in the future.

Earnings per Share:

Basic and diluted earnings per share for the current year worked out to Rs. 9.20 as against Rs. 12.01 of the previous year.

B. SEGMENT WISE PERFORMANCE:

The Company operates in a the sale of seeds, which has remained the core strength and focus area of the business. Concentrating on this segment enables the Company to channel its resources, expertise, and R&D towards delivering superior quality seeds that cater to the evolving needs of farmers. This focused approach not only strengthens the Companys market presence but also helps in maintaining consistency, efficiency, and long-term growth prospects.

The Company involved in crop Research and Development through breeding, Production of seeds, processing, packing and marketing of high performing hybrid and open pollinated varieties of agricultural crops. Your company has adopted various marketing strategies for sustained growth including increase in number of clients / customers to reduce the dependency on any single client / customer

C. BUSINESS OVERVIEW:

Industries overview:

The management is confident of improvement in the companys working in the near future with fast growth. The seed industry has witnessed a substantial change in the past century, with farmers re- lying on purchasing seeds from market with better traits rather than relying on seeds from previous seasons harvest. Developments in seed technology have increased the momentum of the industrys growth, and the introduction of genetically modified crops has further boosted the seed market.

Diversified Product Portfolio:

The Companys product portfolio covers a diversified range of agricultural seeds that cater to the varied needs of farmers. Its offerings include Grain Seeds, Oil Seeds, Spicy Seeds, Pulse Seeds, Fiber Seeds, Fodder Seeds, Kitchen Garden Vegetables, and Hybrid Vegetables. With such a wide variety, the Company enables its customers to source multiple seed requirements from a single reliable vendor, strengthening long-term relationships and creating opportunities to serve both existing and new customers more effectively.

Well Equipped Research and Development facility:

Company has a well-equipped Research and Development facility to improve quality of the products and to produce high performance of agriculture seeds. The R&D team includes plant breeders, crop protection specialists, agronomists, seed technologists, biotechnologists and physiologists.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

KEY FINANCIAL RATIOS:

Ratios	FY 2024-25	FY 2023-24
Current Ratio	1.63	1.71
Debt-Equity Ratio	0.76	0.77
Debt-Service Coverage Ratio	2.34	3.73
Inventory Turnover Ratio	2.04	3.47
Long term debt to working	0.63	0.67
Capital
Current liability Ratio	0.34	0.31
Debtors Turnover Ratio	5.08	6.31
Total Debts to Total Assets	0.39	0.41
Net Profit Ratio	0.11	0.13
Interest Service Coverage Ratio	4.48	7.89
Operating Profit Margin	0.17	0.18

D. SWOT ANALYSIS OF THE COMPANY

Strengths:

a. Indepth knowledge of industry

b. In-house Research and Development (R&D) unit

c. Broadbase Distribution Network

d. Robust and scalable distribution

Weaknesses:

a. Dependency upon external factors like climate, weather conditions

b. Hybrid seeds are costlier than natural seeds, farmer prefers natural seeds rather than Hybrid seeds

c. T ime period for developing product is long

Opportunities:

a. Government initiative to promote agriculture industry will help our industry to grow

b. Continues development in R&D work resulting into yielding of new product (seed)

c. Abundant water, electricity and subsidies to farmer by government will help the agriculture industry to grow

d. Growing demand for stress-tolerant crops

Threats:

a. Competition from producer of certified seed

b. Industry is prone to changes in government policies

c. No entry barriers in our industry which puts us to the threat of competition from new entrants

d. Fluctuations in the market prices.

E. RISKS AND CONCERNS:

Mangalam Seeds Ltd. mainly focuses on its strong manpower base and technical expertise as the key drivers of growth. Apart from risks arising out of changes in governmental policies and regulatory frameworks, the business is also exposed to certain operational and industry- related risks such as climatic variations, input cost fluctuations, and competition. These risks are regularly monitored and mitigated through timely corrective actions, adoption of improved practices, and continuous engagement with stakeholders. The Company has also taken necessary measures to safeguard its assets, resources, and overall business interests.

F. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The company has proper and adequate system of internal controls commensurate with its size and nature of operations to provide reasonable assurance that all assets are safeguarded, transactions are authorized, recorded and reported properly and to monitor internal business process, financial reporting and compliance with applicable laws. The internal control system has been designed so as to ensure that the financial and other records are reliable and reflects a true and fair view of the state of the Companys business. A qualified and independent committee of the Board of Directors actively reviews the adequacy and effectiveness of internal control systems and suggests improvements for strengthening them.

G. HUMAN RESOURCE MANAGEMENT:

The Company believes that human resource is the most important assets of the organization. It is not shown in the corporate balance sheet, but influences appreciably the growth, progress, profits and the shareholders values. During the year your company continued its efforts aimed at improving the HR policies and processes to enhance its performance. The vision and mission of the company is to create culture and value system and behavioral skills to insure achievement of its short- and long-term objectives. Employees growth and learning have become a fundamental part of organizations business strategy in light of the everchanging normal. The time demands to believe in a culture of constant learning and upscaling our skills to keep up with the ever-growing dynamic world. Capability building of employees is a continuous process and is of prime importance in Mangalam. There are regular trainings which are conducted for employees as per their job-related requirements to be more effective in their current role and help them in preparing for their next role. The trainings are designed as per the learning needs of employees and in consultation with our stakeholders. The trainings are conducted through various modes, including classroom training, on-the-job learning, and training using technological platforms etc. The Company plans multiple learning interventions in partnership with its internal in-house experts and externally with the support of vendors.

H. ENVIRONMENT SAFETY. HEALTH AND ENERGY CONSERVATION

Safety at workplaces of paramount importance to the Company. It continuously strives to ensure various training and awareness programs are conducted throughout the year. The aim is to maintain the highest standards of safety across factories and workplaces and ensure the latest best practices are implemented across the business to bring operational efficiencies and save energy.

I. RISK MITIGATION FRAMEWORK

Despite the strong growth drivers, the Indian agrochemicals industry faces challenges in terms of low awareness among a large number of end-users spread across the geography. Managing inventory and distribution costs is a challenge for the industry players in the wake of volatility in the business environment. The performance of the crop protection industry and other Agriinputs is dependent on monsoons, pest and disease incidences on crops. Agrochemical companies face issues due to the seasonal nature of demand, the unpredictability of pest attacks and the high dependence on monsoons. Compliance with growing regulatory norms is a continuing requirement and could lead to delays in obtaining necessary approvals. Changes in guidelines or policies in various geographies may also lead to sudden disruption of business in specified products. Many agrochemical companies have foreign exchange exposure either in the form of forex loans or exports and imports. For companies that operate largely in the domestic arena, any major forex movement may affect profitability due to fluctuating import costs. While on the one side input costs could increase, weak monsoons could reduce pricing flexibility, thereby affecting margins. To minimize the risk, a comprehensive and integrated risk management framework is followed.

J. CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis contain "Forward-Looking Statements" including, but without limitation, statements relating to the implementation of strategic initiatives, and other statements relating to future business developments and economic performance. While these forward-looking statements indicate our assessment and future expectations concerning the development of our business, several risks, uncertainties, and other unknown factors could cause actual developments and results to differ materially from our expectations. These factors include but are not limited to, general market, macro-economic, governmental and regulatory trends, movements in currency exchange and interest rates, competitive pressures, technological developments, changes in the financial conditions of third parties dealing with us, legislative developments, and other key factors that could affect our business and financial performance. Mangalam undertakes no obligation to publicly revise any forward-looking statements to reflect future/ likely events or circumstances.