Narmada Gelatines Ltd Management Discussions.

Economy Overview

Despite continuing sluggishness in globaldemand, the realGDPgrowth oflndia registered a modestgrowth of5.0percentin 2019-20as compared to 6.8 percent in 2018-19. G lobal confidence in the Indian economy improved as reflected in growing inflows of net Foreign Directlnvestment(FDI) and an all-time high accumulation offoreign exchange reserves India moving up by 14positionsto 63"1 rank in 2019 World BanksEase ofDoing Business 2020 Re port, hasamong others, contributed to the increase in globalconfidence in Indian economy. India hasemerged asan importantplayerin the world on the backofhigh G DPgrowth and announcement/implementation ofcriticaI measuresinthecurrentyearand lastfewyears

Indias G DP growth for the 2020-21 fiscal is expected to slow down to 3.2 per cent. The C OVID-19 pandemic is expected to result in signiflcantadverse economic impactsglobally.

However, 2020sawa significantly changed scenario with the outbreakofthe C0VID-19pandemic. Thiswasfbllowed by strong actionsby the govemmentsacrossthe world in the form of a global lockdown to stem the rate of spread of the disease. Despite relief measures provided in the form of easing of monetary policy by centra I banksand fiscal pa ckagesannounced by government, we are expected to see a contraction in global economy. Currently, the analyst consensus is a degrowth thisyearand then a gradual recovery nextyear- however, itismarked with uncertainty depending on the ground situation, that is the duration oflockd own, growth in infection rate with the opening up ofeconomies timeline fordevelopmentofvaccine and others

Smilarto the global outlook, the Indian economy wasp rejected to growata strange rpace in 2020-21 than the previousyear, supported by monetary and fiscal stimulus and loweroil prices However, the unprecedented COVID-19 pandemic, and the subsequent nationwide lockdown by the G ovemment, along with other necessary measures to contain the pandemic, have made experts re vise theirforecasts significantly, with possible contraction ofthe Indian GDPin during the financial year 2020-21. In the shortterm, the lockdown could also potentially lead to a flna nc ia I distress both forconsumersand companies including disruptionsin money sup ply and genera I liquidity.

Industry Structure and Developments

The global gelatin market iscurrently being driven by an increasing demand fbrfunctional and convenience foods growth in end-user industries rising health awarenessand growth in emerging markets Gelatin hasmultiple applicationsacrossvariousindustriesincluding food & beverage, pharmaceutical, biomedical, persona lea re, and othertechnicalareas

The food and beverage sectorcurrently represents the largestend-use sectorfollowed by nutraceuticals pharmaceuticals cosmetics and others In the food and beverage sector, gelatin iswidelyused in bakeriesand confectionaries wine fining, meatproducts etc. In the nutraceuticals sector, it is used in nutritional bars and protein drinks In the pharmaceutical sector, it is used in making hard and soft capsulesstabilizersforoilemulsionsglycerinated gela tin forsuppositolies etc.

The worldwide marketforG ela tin isexpected to growata CAG Rofroughly 2.8%overthe nextfive years

However, food security concemsand threatofvegan gelatin substitutes a re some ofthe factors hindering the marketgrowth. G rowing regulatory issues primarily in the food industry and environment, are also challengesfordomestic gelatin manufacturers

Opportunitiesand Threats, Outlook, Risksand Concerns

Due to Covid-19nearly the whole world hasgone into lockdown, and businessesacrossthe globe are operating in fearofan impending collapse ofg lobal financial markets This situation, clubbed with sluggish economic growth in the previousyear, especially in a developing country like India, islea ding to extremely volatile marketconditions

The lockdown hasaffected the purchase ofourmain rawmaterialcrushed bone. The slaughterhousesare not functioning due to lower exportsand lower consumption of meat in the country. The restaurants are closed, the hiccup in transportation for this particular commodity continue sand ithasresulted in an overall shortage ofover50%forthe industry. Difficulty in sourcing good quality rawmateria I and rise inrawmaterialpricescontinue asanareasofconcem.

India continuesto be categorised as"Negligible Risk" underBSE categorisation. With increasing level of awarenesson environmental hazards the state authorities a re upgrading pollution control norms regularly and the industry is now required to address the issue of environmentwith more commitment. Yourcom pa ny continuesto take a II necessary stepsto comply with pollution control norms

Segment-wise orproduct-wise performance

The Company iseng aged in only one segment namely manufacture and sale ofgelatine and related productslike ossein and di-calcium phosphate (DC P) and assuch there are no reportable segmentsasperlnd AS-108" Opera ting Segments"

Intemalflnancialcontrolsand itsadequacy

The Companys Internal Financial Control framework iscommensurate with the size and the nature of itsoperations These have been designed to provide reasonable assurance aboutrecording and providing reliable financialand operationalinformation, complying with applicable statutes safeguarding assets from unauthorized use, executing transactions with proper authorization and ensuring compliance ofCorporate Policies

The Company ha sla id down p raced uresand policiesto guide the operationsofthe business The Company ha sa well-defined delegation ofpowerwith authority limitsto approve revenue aswellasexpenditure. Functionalheadsare responsible to ensure compliance with the policiesand procedureslaid down bythe management.

Hie Company hasappointed reputed firm ofChartered Accountantsto carry out intemalaud its Hie auditisbased on a focused and risk basad interna I audit plan, which isrevie wed and approved each yea rby the AuditCommittee ofthe Company.

The AuditCommittee reviews reports submitted by internal auditors Suggestions to improve any process are considered by the managementand the AuditCommittee fbllowsup on corrective actionstaken bythe management. The AuditCommittee also meetsthe Companysstatutory auditors to ascertain, inter a lia, theirviewson the adequacy of internal control systemsand keepsthe Board of Directorsinformed ofitsmajorobservationsperiodically.

The operating managementassessed the effectivenessofthe Companysintemalcontrolsoverfinancialreporting asof31stMarch 2020. M/s Lodha & Co., the Statutory A uditorsofthe Company audited the financialstatementsincluded in thisAnnualReportand have issued a reporton the interna I contraIsoverfinancia I re porting (asdefined in Section 143ofthe CompaniesAct, 2013).

Based on devaluation (asprovided underSection 177ofthe CompaniesAct, 2013and Clause 18ofSEBI Listing Regulations), the Audit Committee hasconcluded thatasof31stMarch 2020, the IntemalFinancialControlswere adequate and operating effectively.

Human Resources/lndustrial Relations

The Companyshuman resourcesagenda continuesto remain focused on the developmentofitsemployees building capabilitiesin the organization and progressive employee relationspolicies The Company addressed training and developmentneedsofitsworkforce in technicaland behaviouralareasby deploying intemaland external faculty. During the year2018-19a memorandum ofunderstanding wasreached and signed with the employees! union fora period offive years

The Company recognisesthe importance ofitsemployeesand the pride, passion and drive they possessto take the organisation to new heights During the year, Company worked with strength of 470 employees The Company provides employees with numerous opportunitiesto increase their knowledge, skills a nd abilitiesand enablesthem to grow in theircareers The Company successfully adds value to the employees! talentthrough resultdriven training, while encouraging and rewarding excellence.

Industrial relations remained cordial throughout the year. Your Directors place on record theirsincere appreciation ofthe significant contributionsmade and the continued supportextended byallemployeesatalllevelsto the Companysoperationsduring the year.

Financial and operational performanee

The financial highlights for the year 2019-20 a re asfollows: (Rs. lacs)

2020 2019 Variance
Revenue from Operations 13,425.00 12,568.20 856.80
Profit before tax 1,783.83 1,323.86 459.97
Pro fit after taxation 1,287.97 1,006.30 281.67

The improved performance is mainly driven by increased salesvolume and higherprice realisation ofproducts Significantchanges in key financial ratios

In accordance with the Listing Regulations the Company isrequired to give detailsofsignificantchangesin the key financial ratios During the year, the significantchangesin financial ratiosof the Company, which are more than 25% ascompared to the previousyearare summarized below:

Financial Ratio FY 2019-20 FY 2018-19 Change (%) Reason forchange
Operating profitmargin (%) 9.58% 6.58% +4883% Improved margin realisation and
Return on Networth 9.46% 7.58% + 24.84% highervolumes

Cautionary Statement

Certain statementsmade in the ManagementDiscussion and Ana lysis Reportrela ting to the Companysobjectives projections outlook, expectations estimatesand othersmay constitute forward looking statements within the meaning ofapplicable lawsand regulations Actual resultsmay differfrom such expectationswhetherexpressed orimplied. Several factorscould make significantdifference to the Companysoperations These include raw material availability, import and exports of raw material and finished goods economic conditions affecting demand and supply, government regulations changes in taxation, natural calamities period of lockdown and Covid-19overwhich the Companydoesnothave anydirectcontrol.