N K Industries Ltd Management Discussions

56.5
(-3.70%)
Jul 24, 2024|03:14:53 PM

N K Industries Ltd Share Price Management Discussions

INDUSTRY OVERVIEW

As per expert market research the global castor oil market size has reached 780.9 Kilo Tons in 2022. And looking to the same the publisher expects the market to reach 870.7 Kilo Tons by 2028, showing a growth rate (CAGR) of 1.93% during 20232028.

The rising utilization of castor oil in the production of cosmetics, medicines, toiletries, polyurethane adhesives, machining oils, refrigeration lubricants, etc., represents one of the key factors catalyzing the global castor oil market.

Castor oil exports were at around 6,06,376 Metric Tons in 2022- 23 as compared to 6,62,812 Metric in 2021-22. Going by the current demand and the crop estimate it can be assumed that there would be enough supply to meet the demand. During the year under review various challenges were faced due to Ukraine-Russia conflict. Considering the Geopolitical disturbances and rising interest rates it is expected to keep the demands under control.

India has a large production share of castor and castor oil in the world with almost 90 per cent share. And Gujarat is still the leader in contributing more than 70% per cent in production of castor and castor oil. Rajasthan, Telangana and Andhra Pradesh are few other states in the race. The castor plant appears to have originated in eastern Africa, around Ethiopia. Hot and humid tropical climate is more suitable for Castor growth though it grows in different climatic conditions as well. The major castor-growing countries like India, China, Brazil, Paraguay and Thailand are sharing about 80 per cent of its total area in the world. Castor oil is used in the making of washing soaps, lubricating grease, laxative, surfactants, rubber chemicals, nylons, hydraulic brake fluids, paints and polymers, perfumery products, biodiesel, etc. Castor cake is also used in agriculture as organic manure. Considering the increased and wider use, the price of castor seed has gone up to Rs 7500 per quintal in 2021-22 and its oil was sold at around 16000 per quintal (US&2000/t). It is to be noted that India is exporting castor-seed oil of about Rs6000 to Rs8000 crores per year.

Looking forward, the global castor oil market is expected to experience moderate growth during the forecast period (20262031) 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.

In current year from April to December, 2022 about 4.43 lakh tonnes castor oil has been exported and till March, 2023 it might be around 6 lakh tonnes. Whereas Europe accounts for 25 to 30% & USA 15% & 10% remaining region of castor oil exports from India, while China makes up 50%.

GLOBAL CASTOR OIL MARKET DRIVERS/CONSTRAINTS:

The global castor oil market size reached 780.9 Kilo Tons in 2022. Looking forward, IMARC Group expects the market to reach 870.7 Kilo Tons by 2028, exhibiting a growth rate (CAGR) of 1.93% during 2023-2028. The rising awareness about sanitation and maintaining overall hygiene, increasing number of fast food chains and quick service restaurants (QSRs) offering home delivery and takeaway options, and the growing environmental awareness among the masses represent some of the key factors driving the market.

Some of the major restraints for the castor oil derivatives market are poor extraction techniques, lack of innovation, and higher demand for chemical-based cosmetics, and alternatives.

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.

The Financial highlights of the Company are as under (Rs. In lacs)

PARTICULARS

Standalone

Consolidated

Year Ended 31.03.2023 Year Ended 31.03.2022 Year Ended 31.03.2023 Year Ended 31.03.2022

Revenue from operations

240.56 240.00 1777.47 2033.26

Other Income

40.91 43 40.36 40.59

Total Income

281.47 283.00 1817.83 2073.85

Total Expenditure

487.54 531.10 2053.43 2275.52

Profit / (Loss) before Finance Cost, Depreciation & Amortization and Tax Expenses

180.63 187.23 170.52 256.87

Finance Cost

37.54 0.26 37.57 0.27

Depreciation & Amortization

349.16 435.07 368.55 458.27

Profit Before Tax

(206.07) (248.10) (235.60) (201.67)

(i) Current Tax

-- -- -- 12.00

(ii) Deferred Tax

45.06 61.75 (49.60) (60.99)

(iii) Earlier period tax (written back)

-- -- 0.10 (0.12)

Total Tax (i+ii)

45.06 61.75 (49.50) (49.11)

Profit after Tax

(161.01) (186.35) (186.11) (152.56)

Other Comprehensive Income

10.83 6.51 10.83 6.51

Items that will not be reclassified to profit and loss

15.27 (1.90) 15.27 (1.90)

Total Comprehensive Income

(150.19) (181.73) (175.28) (147.94)

 

Sr Particular

Formula

Ratio

Remarks

No

2022-23 2021-22

(i) (i) Debtors Turnover

Net Credit Sales / Average Debtors

NA NA NA

(ii) (ii) Inventory Turnover

COGS/ AVERAGE INVENTORY

NA NA NA

(iii) (iii) Interest Coverage Ratio

EBIT / INTEREST EXPENSE

NA NA NA

(iv) (iv) Current Ratio

Current Asset / Current Liabilities

7.29 7.24 L / M

(v) (v) Debt Equity Ratio

Total Debt / Total SH Equity

(1.86) (1.86) O / P

(vi) (vi) Operating Profit Margin (%)

Operating Profit / Total Revenue

(0.73) (0.88) B / A

(vii) (vii) Net Profit Margin (%)

Net Profit / Revenue

(0.57) (0.66) C / A

HUMAN RESOURCE

Throughout the year under review, the Company continues to make strides towards improving HR Processes and Practices to create an organisation for long-term sustainability. The Company emphasises on fostering personal growth and development within an environment that promotes professionalism and excellent performance. The Company has focused on developing staff capabilities as this will enable the company to achieve higher operational standards. The Company sponsors a variety of seminars to help employees grow. Additionally, the Company also organises various training programmes to improve employees abilities.

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.

CAUTIONARY STATEMENT

This "Management Discussion and Analysis" may contain "forward-looking statements" within the meaning of applicable securities laws and regulations if it refers to the Companys goals, plans, estimates, expectations, or predictions. Results might significantly vary from those stated or inferred. The Companys operations can have an impact due to factors like global and Indian demand and supply conditions, finished goods prices, input material availability and prices, cyclical demand and pricing in the Companys key markets, changes to governmental regulations and taxation systems, and economic developments in India and the nations where the Company conducts business, as well as other factors like litigation and labour negotiations. The Company disclaims any obligation to publicly edit, modify, or revise forward-looking statements in light of unforeseen circumstances, new information, or other factors.

"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 2022-23 and the percentage increase in remuneration of each Director, Chief Financial Officer, Company Secretary in the Financial Year 2022-23:

Sr. No. Name of the Director/ KMP and Designation

Remuneration of Director/ KMP for the financial year 2022-23 (in Rs) % increase in Remuneration in the Financial Year 2022-23 Ratio of remuneration of each Director to the median employee of the Company

1. Mr. Nimish K. Patel

(Chairman & Managing Director)

30,00,000 - 13.83:1

2. Mr. Hasmukh K. Patel (Whole Time Director)

8,07,780 - 3.72:1

3. Ms. Mansheel Kaur

(Independent Director) ( w.e.f 07.06.2021)

Nil N.A

4. Mr. Snehalbhai Patel

(Independent Director)

Nil N.A

5. Mr. Ashwinbhai P. Patel (Chief Finance Officer)

6,00,000 - N.A

6. Mr. Priyam N Patel

(Chief Executive Officer)

30,00,000 N.A

7. Ms. Pooja H Khakhi (Company Secretary up to Sept 2022)

2,70,318 - N.A

8. Mr. Divyesh Ashwar (Company Secretary w.e.f. Nov 2022 onawrds)

75,000 N.A

ii. The median remuneration of employees of the Company during the year under review was Rs. 2,56,752/- p.a.

iii. Increase in remuneration of Directors and Key Managerial Personnel during the financial year 2022-23 is as per the table above.

iv. The average percentage Increase in the median remuneration of employees of the Company during the financial year: 18.39%

v. The number of permanent employees on the rolls of Company: 201 as on March 31, 2023.

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 31/03/2023 (Current Year) As at 31/03/2022 (Previous Year)

Market Capitalization

2121.49 2037.36

Price Earnings Ratio

-2.68 -10.94

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:

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, 2023.

Sr. Name & Age of No. the Employee

Present Designation

Remuneration received (monthly remuneration) Qualifications and Experience Date of Commencement of employment Last employment % of Equity Shares held as on 31-03-2022

1. Nimishbhai Keshavlal Patel

Chairman and Managing Director

2,50,000 B.com 19.08.1987 - 3.97%

2. Priyam Nileshbhai Patel

CEO

2,50,000 MBA in Corporate Management 10.06.2017 1.78%

3. Ashok Baldevbhai Patel

Factory Manager

2,52,000 B.com with statistics 01.02.2013 0.26%

4. Anupbhai Manilal Patel

Factory Manager

1,73,171 B.com 01.02.2013 - -

5. Bansilal Vaktaji Khatri

Chief Manager Accounts

1,36,372 B.com 01.11.2009 - -

6. Anilkumar Dhirajlal Sanghavi

Purchase Manager

1,23,474 B.com 01.02.2013 - -

7. Dharmendrabhai Shankarbhai Patel

Incharge Logistics

1,13,228 HSC 01.02.2013 -

8. Shailesh Mansukhlal Doshi

Senior Chemist Laboratory

1,09,895 BSC in Chemistry 01.02.2013 Adani Wilmar Limited

9. Hasmukhbhai Kachrabhai Patel

Executive Director - Projects

67,316 SSC 01.07.1993 -

10. Patel Kalpesh Kumar Chandulal

Manager - HR

63441 MBA - HR 05.10.2017 -

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