Mihika Industries Ltd Management Discussions.

The Management Discussion and Analysis Report has to be read in conjunction with the Companys financial statements, covering overall performance and outlook of its activities which read as follows-

TRADE STRUCTURE AND DEVELOPMENT

The jute industry has seen significant increase in investments in the recent past due to need for improved efficiencies and economies of scale in the face of increasing labour costs and competition from dumped exports from Bangladesh. Jute textiles are covered under the Essential Commodities Act, 1955 as it is predominantly used for packaging of food grains which are essential commodities. The Company has recovered significantly after the first wave of COVID-19 in 2020 and could recover the earlier losses due to lockdown. The second wave is now rising and to contain the second wave, Jute Industry has been allowed to operate only at 30% capacity by the government of West Bengal in terms of their order dated 7th May, 2021. The road ahead in this regard is uncertain.

Precisely, Jute Industry has lost the market share on production of jute bags for packaging of food grains. The Jute Industry can only hope to regain the market in future when operations become stable. Movement towards jute-based consumer goods aided by increasing environmental awareness and lifestyle changes is quite perceptible. The prices have skyrocketed to highest ever levels and shown a steep rise of 50% within one year. More disturbingly, there is a physical shortage of raw jute and there is not enough jute for the industry to operate at full capacity till new season jute arrives in July/August 2021. Production is likely to be affected till such time as new jute arrives. High raw jute prices have been passed on to consumers and in many applications the levels are not economical for end users.

However, having combatted such scenario during the first wave, we hope to be successful again. Your directors stand in solidarity with the nation in such challenging time. Your directors stand in solidarity with the nation in such challenging times.

OPPORTUNITIES

There is rising awareness about disposal issues leading to high total cost of using synthetic; here lies the opportunity to offer jute consumer products including jute bags as a mass consumption product. Acceptance of jute products are increasing due to its biodegradability as well as eco-friendly nature.

Jutes versatile applications have been already started for lifestyle and promotional bags, decorative, apparels, composites, upholstery furnishings, and also non-woven for both technical and non-technical purpose. Number of Research & Developments are going on in these fields. The industry would do well to take advantage of such various developments.

Usage of eco-friendly jute sacs for packaging food grains is in sync with the government adopted UN sustainability goals of alleviating poverty, zero hunger, responsible consumption/production and climate change.

Hence, continued compulsory jute packaging for food grains is likely to be an environmental necessity as well in times to come.

THREATS/RISKS AND CONCERNS

Following are the major areas of risks and concerns:

(a) Conversion cost such as Wages, Power, Insurance etc. have been increased to a large extent resulting in higher cost of production.

(b) COVID 19 is a major threat to the Jute Industry and a matter of concern as the operations could affect any time.

(c) Seasonal shortages of labour due to adhocabsenteeism, change in new migrant labour availability patterns, shortage of skilled labour and union activism further add to high man power costs.

(d) Attempt made for artificially lowering/capping the price being paid for sacking supplied by the industry for Packaging food grains to various government agencies is an area of concern.

(e) Despite its eco-friendly nature and ability to with stand multiple use, jute industry is forced to plead its case each year for extension of JPM Act, 1987.

(f) Unbridled increase in wage costs without linkage to productivity in the face of competition from Bangladeshi jute products produced with cheap de-unionised labour and dumped into India.

(g) As an agricultural product, Jute is at the mercy of the vagaries of weather.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

The Company operates primarily in one business segment viz. trading of Raw Jute activities in India and accordingly this is the only Single Reportable Segment.

OUTLOOK

The raw jute crop in the previous season had been badly impacted because of the effect of Cyclone Amphan in month of May 2020 followed by continuous heavy rains. This resulted into crop shortage and all-time high prices of Raw Jute during the year. In the ensuing season because of good weather conditions the crop is expected to be good and availability of Raw Jute throughout the year will be normal at reasonable prices. Your management is sustaining its efforts to improve the efficiency and productivity resulting into better performance. With increased focus on increased farmer income and assurance of a remunerative Minimum Support Price, demand for packaging products will try to sustain in Covid Market.

It is seen that jute-based consumer products are gaining increasing acceptance. With the increasing aversion to plasticbags owing to pollution threats, increased usage of jute products can be expected.

The Company endeavors to be an important player in the field of Raw Jute trade and trying to combat the issues faced due to Covid 19 outbreak. There is good prospect of expanding business in this trade.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has proper and adequate internal control systems to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and all transactions are authorized, recorded and reported properly. The Internal Auditors are mandated to carry out periodical audit and report on areas of non-compliances/weaknesses. Corrective actions in case of reported deficiencies, if any, are taken actively to further strengthen the internal control systems. These reports are reviewed by the Audit Committee of the Board of Directors for follow-up action and instructions are issued for taking necessary measures. The Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls with reference to financial statements were operating effectively as at 31st March, 2021, based on the essential components of internal controls over financial reporting criteria established by the Company.

FINANCIAL AND OPERATIONAL PERFORMANCE

The financial and operational performances are separately elaborated in the Directors Report.

DEVELOPMENT IN HUMAN RESOURCES

Since development in human resource is needed for the organizations growth and to maintain its sustainability in the long run. The Company has continued its endeavor in maintaining peace and harmony at all levels of employment in the organization in the year under review. The Company is continuing its efforts through training to enhance competence of its manpower to make them more resourceful in their present job and also to prepare them for future roles. The Company has also introduced staff welfare schemes under which benefits are provided to deserving members of staff.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

There has been no significant change (i.e., change of 25% or more as compared to the immediately previous financial year) in any key financial ratios viz. debtors turnover, inventories turnover, current ratio, debt-equity ratio, and operating profit margin. The Company has decided to report following Key Ratio:

KEY RATIOS

Particulars F.Y. 2020-21 F.Y. 2019-20
Current Ratio 10825.97:1 16283.07:1
Debt Equity Ratio 0:01 0:01
Debt Coverage Ratio Nil Nil
Return on Equity Ratio -0.02 -0.01
Inventory Turnover Ratio Nil Nil
Trade receivable Turnover Ratio Nil 2
Trade Payable Turnover Ratio Nil Nil
Net Capital Turnover Ratio 0.18 0.18
Net Profit Ratio -0.09 -0.02
Return on Capital Employed -0.01 -0.00
Return On Investment Nil Nil

CAUTIONARY STATEMENT

The Statement in the Managements Discussion and Analysis Report detailing the Companys objectives, projections, estimates, expectations, or predictions may be "forward looking statements" within the meaning of applicable securities laws and regulations. These statements being based on certain assumptions and expectation of future events, actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include changes in Government regulations and tax regime, economic developments within India and abroad, financial markets etc. The Company assumes no responsibility in respect of forward-looking statements that may be revised or modified in future on the basis of subsequent developments, information, or events. The financial statements are prepared in accordance with the Companies (Indian Accounting Standards) Rules, 2015. The management of the Company has used estimates and judgments relating to the financial statements on a prudent and reasonable basis, in order that the financial statements reflect true and fair picture, the state of affairs and profit for the year. The above discussions on our financial condition and result of operations should be read together with our audited financial statements and the notes to these statements included in the Annual Report.

For and on behalf of the Board
Manoj Sethia
Place: Kolkata Chairman
Date: 3rd September, 2021 DIN:00585491