N K Industries Ltd Management Discussions.

INDUSTRY OVERVIEW

The global castor oil market reached a volume of more than 790.5 Kilotons in 2019. Looking forward, the global castor oil market is expected to experience moderate growth during the forecast period (2020-2025) Castor oil is becoming an essential bio-based raw material which makes it ideal for various industrial applications. As a result, its demand is rising as a potential alternative to petroleum-based chemicals. On account of its distinctive chemical structure, castor oil acts as a major raw material which is used in the production of various end products such as biodiesel, polyurethane adhesives, machining oils, refrigeration lubricants, etc. This versatile nature of castor oil has been contributing towards the propelling growth of the market. As compared to other vegetable oils, castor oil is a healthier and less expensive alternative. Owing to this, food grade castor oil has gained a momentum in the food industry in the form of flavourings, mould inhibitor, food additives and packaging. The global castor oil market is being hindered by the unstable prices of castor beans which is the result of their fluctuating supply. This supply highly depends upon the weather conditions of the region and a long harvesting process of castor beans.

While disruptions of castor oil shipments to China have ease its export to Europe is now threatened with the continent in the grip of the novel coronavirus (Covid-19). Europe is the second largest importer of castor oil from India after China.

Europe accounts for 30-35% of castor oil exports from India, while China makes up 40%. Indias castor oil exports stood at 5.71 lakh metric tonnes in the last fiscal. Most of this goes from Gujarat, as the state is the largest producer and exporter of castor oil in India.

GLOBAL CASTOR OIL MARKET DRIVERS/CONSTRAINTS:

There has been a significant increase in the demand for sustainable and biodegradable products in order to reduce dependency on petrochemicals. This is one of the primary factors which is driving the growth of the global castor oil market.

Some of the other factors which are positively supporting the growth of the market include rising costs of other renewable resources and implementation of strict regulations regarding the use of eco-friendly products by governments across various nations.

However, unstable prices of castor plant, weather uncertainties and shortage of working capital are some of the factors which act as a hindrance towards the market growth.

Global Castor Oil Market 2020-2025 Analysis and Segmentation:

Currently, India is the largest producer of castor seeds and accounts for over 80% of the global production, followed by China and Brazil.

Asia Pacific is the largest consumer of castor oil and is expected to retain the higher growth rate during the next few years due to strong growth in pharmaceuticals and cosmetics industry. China and India have witnessed a major chunk of the production and consumption of castor oil in the Asia Pacific region.

The global Castor Oil market is valued at 1251.9 million USD in 2020 is expected to reach 1522.2 million USD by the end of 2026, growing at a CAGR of 2.8% during 2021-2026.

This report focuses on Castor Oil volume and value at the global level, regional level and company level. From a global perspective, this report represents overall Castor Oil market size by analysing historical data and future prospect. Regionally, this report focuses on several key regions: North America, Europe, China and Japan etc.

RISK AND CONCERNS

The Company is exposed due to disparity resulting into pressure on margin. Moreover non-availability of funds due to sickness of the unit and poor market conditions affects the quick turnaround. However, the Management is aware of the said problems & therefore has designed the system to address the same.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has an adequate system of internal control across all functions such as purchase, sale and acquisitions of fixed assets, cash & bank. Job work is carried out within the time schedule. The Company has set up an Audit Committee

comprising of Non-Executive Independent Directors. The Company has also appointed the firm of Chartered Accountants to carry out Internal Audit, Where one of their function is to review the Internal Control system regularly, with a view to further strengthen the same.

STANDALONE PERFORMANCE

The analysis of standalone performance of the Company is given below:

The profit of the Company before providing for finance cost and depreciation was 62.22 Lacs as against previous year loss of 2132.31 Lacs.

Other Income

The other income is higher at 94.54 Lacs as against 427.41 Lacs in the previous year.

Finance Cost is lower at 0.82 Lacs as against 4.48 Lacs in the previous year.

Depreciation (Including amortization) is lower at 571.38 Lacs as against 671.41 Lacs in the previous year.

Other Comprehensive Income is (17.33) Lacs as compared to (1.45) Lacs in the previous year.

Net loss during the year (After tax) stood at (636.84) Lacs as against (1929.97) Lacs in the previous year.

CONSOLIDATED PERFORMANCE

The analysis of consolidated performance of the Company is given below:

The profit of the Company before providing for finance cost and depreciation was 86.46 Lacs as against previous year loss of 1987.60 Lacs.

Other Income

The other income is lower at 110.71 Lacs as against 439.75 Lacs in the previous year.

Finance Cost is lower at 0.89 Lacs as against 5.64 Lacs in the previous year.

Depreciation (Including amortization) is lower at 603.49 Lacs as against 712.45 Lacs in the previous year.

Other Comprehensive Income is (17.33) Lacs as compared to (1.45) Lacs in the previous year.

Net loss during the year (After tax) stood at (644.26) Lacs as against (1866.41) Lacs in the previous year.

MANPOWER:

The Management is continuously trying to see that the unit runs on job work basis as well as direct sales. Once the funds are available, it will help to enhance the utilization of its capacity and thereby create further employment.

"ANNEXURE-D"

DETAILS PERTAINING TO REMUNERATION AS REQUIRED UNDER SECTION 197(12) OF THE COMPANIES ACT, 2013 READ WITH RULE 5(1) OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014

i. The ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year 2019-20 and the percentage increase in remuneration of each Director, Chief Financial Officer, Company Secretary in the Financial Year 2019-20:

Sr. No. Name of the Director/ KMP and Designation Remuneration of Director/ KMP for the financial year 201920 (in Rs.) % increase in Remuneration in the Financial Year 2019-20 Ratio of remuneration of each Director to the median employee of the Company
1 Mr. Nimish K. Patel (Chairman & Managing Director) 30,00,000 13:1
2 Mr. Nilesh K. Patel (Managing Director) 30,00,000 13:1
3 Mr. Hasmukh K. Patel (Whole Time Director) 8,07,792 3.5:1
6 Ms. Mridu Sharma (Independent Director) Nil N.A
7 Mr. Bhawani Singh Yadav (Independent Director) Nil N.A
8 Mr. Snehalbhai Patel (Independent Director)
9 Mr. Ashwinbhai P. Patel (Chief Finance Officer) 6,00,000 N.A
10 Ms. Akanksha A. Srivastava (Company Secretary upto 12th June, 2019) 76,224 N.A
11 Ms. Trusha Shah (Company Secretary w.e.f 14/08/2019) 1,90,815 N.A

ii. The median remuneration of employees of the Company during the year under review was Rs. 2,32,512/- p.a.

iii. Increase in remuneration of Directors and Key Managerial Personnel during the financial year 2019-20 is as per the table above.

iv. The average percentage increase in the median remuneration of employees of the Company during the financial year: 24.75%

v. The number of permanent employees on the rolls of Company: 221 as on March 31, 2020.

vi. The explanation on the relationship between average increase in remuneration and Company performance: The

increase in the remuneration of median employees of the Company is in relation with the industrial standards of similar field.

vii. Comparison of the remuneration of the key managerial personnel against the performance of the Company: Increase in the remuneration of KMP as per the existing industry standards.

viii. Variations in the market capitalization of the Company, price earnings ratio as at the closing date of the current financial year and previous financial year:

(In Lacs)

Particulars As at 31/03/2020 (Current Year) As at 31/03/2019 (Previous Year)
Market Capitalization 1,250.06 2,403.96
Price Earnings Ratio -2.07 -1.25

ix. Percentage increase over decrease in the market quotations of shares of the Company in comparison to the rate at which the Company came out with the last public offer: N.A.

x. Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration:

There was no increase in the salary of employees of the Company during the year under review.

xi. Comparison of the each remuneration of the Key Managerial Personnel against the performance of the Company:

As the Company is having huge accumulated losses there was no increase in the remuneration of Key Managerial Personnel of the Company during the year under review.

xii. The key parameters for any variable component of remuneration availed by the Directors: N.A.

xiii. The median ratio of the remuneration of the highest paid Director to that of the employees who are not Directors but receive remuneration in excess of the highest paid Director during the year: There is no such employee.

xiv. Affirmation that the remuneration is as per the Remuneration Policy of the Company: The Company affirms remuneration is as per the Nomination and Remuneration Policy of the Company.

LIST OF TOP TEN EMPLOYEES OF THE COMPANY PURSUANT TO RULE 5(2) OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014 FOR THE YEAR ENDED 31ST MARCH, 2020.

Sr. No. Name & Age of the Employee Present Designation Remuneration received (monthly remuneration) Qualifications and Experience Date of Commencement of employment Last employment % of Equity Shares held as on 31-03-2020
1. Nimishbhai Keshavlal Patel Chairman and Managing Director 2,50,000 B.com 19.08.1987 3.97%
2. Nileshbhai Keshavlal Patel Managing Director 2,50,000 HSC 19.08.1987 - 2.09%
3. Ashok Baldevbhai Patel Factory Manager 2,24,000 B.com with statistics 01.02.2013 0.26%
4. Anupbhai Manilal Patel Factory Manager 1,53,929 B.com 01.02.2013 0.00%
5. Bansilal Vaktaji Khatri Chief Manager Accounts 1,21,486 B.com 01.02.2013 -
6. Anilkumar Dhirajlal Sanghavi Purchase Manager 1,09,694 B.com 01.02.2013 0.00%
7. Anant Baldevbhai Patel Purchase Executive 1,07,781 B.com 01.02.2013 Hynoup Food and Oil India Limited 0.02%
8. Dharmendrabhai Shankarbhai Patel Incharge Logistics 1,00,647 HSC 01.02.2013 - 0.00%
9. Priyam Nileshbhai Patel CEO 1,00,000 MBA in Corporate Management 10.06.2017 1.41%
10. Shailesh Mansukhlal Doshi Senior Chemist Laboratory 97,684 BSC in Chemistry 01.02.2013 Adani Wilmar Limited 0.00%