Mount Everest Mineral Water Ltd Management Discussions

Industrial Structure and Development

The Indian Bottling industry has continued to grow at a healthy space, at around 30%. The entire water category is estimated to be around Rs. 10,000 crores.

The Water Category is divided into 4 sub-categories – viz (i) Packaged Drinking Water, (ii) Natural Mineral Water (iii) Carbonated Water and (iv) Functional Water. In this, the Packaged Drinking Water is by far the largest category.

The bottled industry will continue to show a double digit growth in the coming years. The key brands in the packaged water are Bisleri – Parle Bisleri Ltd, Aquafina – PepsiCo India Holdings Pvt Ltd, Kinley – Coco-Cola India Pvt Ltd. These 3 brands together account for nearly 50% of the Indian bottled market.

Opportunities, outlook, threats and risks

Natural Mineral Water though growing, continues to have a very small share of the entire Water industry, estimated at around Rs. 100 crores. In spite of entry of new players in this space, Himalayan continues to be the widely accepted and accredited brand in the category, and is placed at a premium pedestal and as an image driver. The brand Himalayan has been extended to Carbonated Natural Mineral Water, which shall be marketed as Himalayan Sparkling in the first half of the financial year 2014-15. Also, the flavored variants of Himalayan are in the advanced stage of development.

During the year, the Company has been actively considering the exports of Himalayan to different geographies across the globe, reflecting the international appeal of the brand. In the current year the Company continued its export consignments to Starbucks Singapore. Also, the Company has successfully introduced Himalayan in the Hyper Markets and reputed retail chain of markets in Singapore.

The crude based pet materials constitute up to 80% of the total material costs. Any increase in the global crude oil rate will directly impact the profitability. The impact on freight cost and the distribution challenges is typical to a single source bottler.

The Company which is part of the Tata Beverages Group is marketing, selling and distributing Himalayan water through NourishCo Beverages Limited, a 50:50 Joint Venture Company, set up by Tata Global Beverages Limited and PepsiCo India Holdings Private Limited for marketing, sale and distribution of a portfolio of ‘good for you’ beverages. This partnership has allowed wider and deeper market access for brand Himalayan, riding on Pepsi’s deep and elaborate sales and distribution network and marketing expertise.

The continued legal impasse on the regulatory approvals by the Government appointed statutory agencies has impacted the Company and the industry at large. The early mitigation of this impasse will benefit everyone.

Segment-wise or product wise performance

As stated in Notes to the Accounts for the year under review, Sales and Production of Natural Mineral Water in PET bottles and Sale of Services by way of Product Development Fees continues to be the core activities of the Company.

Internal control systems

The Company is constantly monitoring and improving on its internal control systems to ensure that all Company’s policies, procedures and guidelines are in place and also to make certain that all transactions are authorized, recorded and reported correctly.

Financial & Operating performance

Improvement in the macro economic scenario is happening slowly and yet to convert to enhanced consumer spends in a sustained manner. This has had a rather deleterious effect on the overall business of the Company with major institutions cutting back on their expenses and therefore, consumption of the Company’s branded product. However, the last quarter of the current fiscal year have seen significant improvement in terms of volume offtake. As a result, the Turnover of the Company stood at Rs. 1930 lacs. Further, Product Development Fees received/receivable for the year was Rs. 600 lacs, which was higher than in previous year. The Profit before Tax was at Rs. 239 lacs as compared to a profit of Rs. 54 lacs in the previous year.

Treasury and Liquidity

As at March 31, 2014, the Company has surplus funds of Rs. 2526 lacs, being the residual balance lying unutilized out of the Preferential Allotment made in 2007. The surplus funds were invested in Inter Corporate Deposits (ICD) and units of Mutual Funds.

Human Resources

Your Company lays great emphasis on the importance of human resources and recognizes the fact that no organization can grow without a committed team of employees at all levels. Accordingly, it aims to retain and recruit quality professionals and provide them with a high performance environment. The employees are rewarded on the basis of their performance, longevity in the service, dedication, sincerity and loyalty. No man days were lost on account of strike or dispute during the year and over all relations with the employees and workers remained cordial and harmonious. The total number of employees and workers as on March 31, 2014 was 143 in all.

Cautionary Statement

Statement in this report on Management’s Discussions and Analysis describing the Company’s objectives, projection, may be forward looking statements and are based on certain expectations. Actual results could however differ materially from those expressed or implied. Important factors that could make a difference in the Company’s operations include situation in the sub-continent affecting the tourist inflow in the country, cost of raw materials and other inputs, cost of transportation, change in Government policies and imposition of new duties, taxes or cess.