Nagarjuna Agri Tech Ltd Management Discussions

(Forms part of Directors Report)

Strengths & Opportunities:

Company is still in the process of exploring the possibility of water resources to get better yields to get back routine products like earlier.

Karnataka State Government support in subsidizing for the replacement of poly sheets and also on planting material, power tariff like other states Maharashtra through SIFA (south Indian floriculture association) Bangalore.

Company is also in the process of developing new verities to suit international markets particularly countries like Japan.

The demand for the Floriculture products not only worldwide even locally (Indian markets) has increasing. Still the problem on drought situation prevailed for more than 6 years.

Risks & weakness:

Professional competinance has improved a lot. After lease agreement got terminated company is operating on its own in a professional way and trying for other export markets for better price realisations.

Still Unforeseen natural hazards, foreign exchange fluctuations, policies like import and export could have an impact on the performance and profitability of the company. Still the treat from other countries like china , Kenya and Ethiopia. at competitive prices has threat to this Industry always.

High turnover and experienced, skilled and competent man power.

Central Government air freight subsidies from APEDA not receiving on time/substantial delays will also affect company performance.

Varieties:

Floriculture products mainly consist of cut flowers, pot plants, cut foilage, seeds bulbs, tubers, rooted cuttings and dried flowers or leaves. The important floricultural crops in the international cut flower trade are rose, carnation, chrysanthemum, gargera, gladiolus, gypsophila, liastris, nerine, orchids, archilea, anthuriu, tulip, and lilies. Floriculture crops like gerberas, carnation, etc. are grown in green houses. The open field crops are chrysanthemum, roses, gaillardia, lily marygold, aster, tuberose etc.

Floriculture in India

Floriculture is an age old farming activity in India having immense potential for generating gainful self-employment among small and marginal farmers. In the recent years it has emerged as a profitable agri-business in India and worldwide as improved standards of living and growing consciousness among the citizens across the globe to live in environment friendly atmosphere has led to an increase in the demand of floriculture products in the developed as well as in the developing countries worldwide. The production and trade of floriculture has increased consistently over the last 10 years. In India, Floriculture industry comprises flower trade, production of nursery plants and potted plants, seed and bulb production, micro propagation and extraction of essential oils. Though the annual domestic demand for the flowers is growing at a rate of over 25% and international demand at around Rs 90,000 crore Indias share in international market of flowers is negligible.

However, India is having a better scope in the future as there is a shift in trend towards tropical flowers and this can be gainfully exploited by country like India with high amount of diversity in indigenous flora.

After liberalization the Government of India identified floriculture as a sunrise industry and accorded it 100 percent export oriented status. The liberalization of industrial and trade policies paved the way for the development of export oriented production of cut flowers. The new seed policy has already made it feasible to import planting material of international varieties. Floriculture products mainly consist of cut flowers, pot plants, cut foliage, seeds bulbs, tubers, rooted cuttings and dried flowers or leaves. The important floricultural crops in the international cut flower trade are rose, carnation, chrysanthemum, gerbera, gladiolus, orchids, anthurium, tulip and lilies.

Marketing

In India Marketing of cut flowers is much unorganized. In most of the Indian cities flowers are brought to wholesale markets, which mostly operate in open yards. From here the flowers are distributed to the local retail outlets which more often than not operate in the open on-road sides, with different flowers arranged in large buckets. In the metropolitan cities, however, there are some good florist show rooms, where flowers are kept under controlled temperature conditions, with considerable attention to value added service. The government is now investing in setting up of auction platforms, as well as organized florist shops with better storage facilities to prolong shelf life. The packaging and transportation of flowers from the farms to the retail markets at present is very unscientific. The flowers, depending on the kind, are packed in gunny bags, bamboo baskets, simple cartons or just wrapped in old newspapers and transported to markets by road, rail or by air. However, the government has provided some assistance for buying refrigerated cargos and built up a large number of export oriented units with excellent facilities of pre-cooling chambers, cold stores and reefer vans.

Export Constraints

In spite of an abundant and varied production base, Indias export of floricultural product is not encouraging. The low performance is attributed to many constraints like non-availability of air space in major airlines. The Indian floriculture industry is facing with a number of challenges mainly related to trade environment, infrastructure and marketing issues such as high import tariff, low availability of perishable carriers, higher freight rates and inadequate refrigerated and transport facilities. At the production level the industry is faced with challenges mostly related to availability of basic inputs including quality seeds and planting materials, efficient irrigation system and skilled manpower. In order to overcome these problems, steps must be taken to reduce import duty on planting material and equipment, reduce airfreight to a reasonable level, provide sufficient cargo space in major airlines and to establish model nurseries for supplying genuine planting material. Training centres should be established for training the personnel in floriculture and allied areas. Exporters should plan and monitor effective quality control measures right from production to post harvesting, storage, and transportation.

Demand and Supply

The demand for flowers is seasonal as it is in most countries. The demand for flowers has two components: a steady component and a seasonal component. The factors which influence the demand are to some extent different for traditional and modern flowers.

(i) Traditional Flowers:

The steady demand for traditional flowers comes from the use of flowers for religious purposes, decoration of homes and for making garlands and wreaths. This demand is particularly strong in Kerala, Karnataka, Tamil Nadu, Odisha and West Bengal, as the use of flowers for above mentioned purposes is part of their local culture. The bulk of seasonal demand comes from festivals and marriages. The demand is generally for specific flowers.

(ii) Modern Flowers:

The bulk of the steady demand for modern flowers comes from institutions like hotels, guest houses and marriage gardens. The demand is concentrated in urban areas. With increasing modernization and globalization the demand for modern flowers from the individual consumers is likely to grow enormously as the trend of "say it with flowers" is increasing and the occasions which call for flower giving will continue to present themselves. Although there is an increasing demand for modern flowers from individuals, institutions continue to be the dominant buyers in the market. The price of these flowers also depends on their demand and varies accordingly.

Risks & weakness:

Professional competinance has improved a lot. After lease agreement got terminated last year company is operating on its own in a professional way and trying for other export markets like Japan for better price realisations.

Still Unforeseen natural hazards, foreign exchange fluctuations, policies like import and export could have an impact on the performance and profitability of the company. Still the treat from other countries like china , Kenya and Ethiopia. at competitive prices has threat to this Industry always.

High turnover and experienced, skilled and competent man power.

Central Government air freight subsidies from APEDA not receiving on time/substantial delays will also affect company performance.