Olympic Oil Industries Ltd Management Discussions.
Indian Gross Domestic Product (GDP) is expected to have grown at 6.8% for the Financial Year 2018-19 as compared to a growth rate of 7.2% in the previous Financial Year, as per the recent estimates from Central Statistical Organization (CSO). Despite a lower growth rate vis-a-vis previous year, India remains one of the fastest growing economies in the world.
Industry Structure and Development Agriculture Industry
Financial Year 2018-19 was a tough year for the agriculture sector. Overall monsoon was lower than normal, being 9% lower than long period average rainfall (LPA - measured for the trailing 10 year period). Rainfall distribution was erratic and patchy and more than one- third of the districts of the country reported deficient rainfall and states of Gujarat, Maharashtra, West Bengal, Jharkhand, were severely hit. Further, as per the latest estimates, agriculture and allied activities are estimated to have grown at lower rate of 2.9% in the Financial Year 2018-19 compared to growth of 5% in the previous Financial Year. In terms of food grain production, for the Financial Year 2018-19 total production was estimated at Rs. 283.37 million tonnes which is lower than the previous year production of Rs. 285.01 million tonnes.
For the Financial Year 2019-20, the Indian Meteorological Department (IMD), in its recent monsoon forecast for the season, has predicted a normal monsoon with rainfall expected to be at 96% of the LPA (with a model error of +/- 4%). IMD expects country to have well-distributed rainfall and highlights that El Nino conditions will remain weak during the monsoon in the current year. Chances of a good monsoon is a positive sign for the agriculture sector as major portion of the countrys crop production is dependent on monsoon. Government has announced multiple measures in the interim budget with a purpose of boosting farmers income. Interim Budget aimed at bringing stability to farm income and provide relief to small farmers. Under major agriculture and rural schemes, an amount of around Rs.1.2 trillion has been allocated and an additional Rs.1.6 trillion has been allocated for agriculture and animal husbandry sector. Increase in allocation over last year is mainly due to the large allocation made for income support scheme. These schemes and measures, if implemented well, can bring lot of benefits to farmers and agriculture economy in the long run.
According to a report released by Indian Paper Manufacturers Association (IPMA) detailing the paper industry overview for 20182019, the per capita paper consumption in India is currently around 13-kgs, while the global average is 57-kgs. This is projected to increase to at least 17-kgs by 2024-25.Indias share in world production of paper is about 3.7%, with estimated production of over 15- million.
The report said the paper industry has the market size of more than 17-million tonnes of paper and growing at around 7% per annum Meanwhile, the annual turnover of the paper industry is estimated to be Rs 60,000-crore, with around INR 4,500-crore contribution to the exchequer. The industry provides direct employment to 0.5-million persons, and indirectly to around 1.5-million.
According to the report, the reasons for growth of paper industry in country are continuous demand for education and literacy, increasing organized retail, growth in e-Commerce, FMCG, pharma/ healthcare sector, demand of quality packaging, ban on plastic (especially polythene bags) and increment in demand of eco-friendly paper bags, continuously increasing demand of ready-to-eat food and printed stationary.
The Economic Survey report 2018-19 has projected Indias FY20 economic growth rate at 7%. Coming just a day before Indias Budget 2019, the Economic Survey showed the health of the Indian economy and projected Indias economic growth for the fiscal year 2019-20. All eyes were on Budget 2019 and Economic Survey 2019 after a recent data released by the Government showed a slump in GDP growth rate and high rate of unemployment in the country. The Economic Survey revealed signs of Indias economic revival and challenges ahead. It showcased the health of various indicators like jobs, farm sector, manufacturing, services, education, etc.
Opportunities & Threats
* Pricing & Rising Costs and availability of Raw Materials
The industry is very much dependent on raw materials. Any price volatility of these raw materials and adjust to the same could adversely affect our results of operations and profitability.
* Domestic Markets
We try and tap every lawful opportunity coming our way and follow a focused approach and increased marketing efforts. All these have resulted in increased growth of the Company in the recent years. In the coming years, we shall strive harder to build a strong reputation for ourselves and carve a niche for our commodities.
* International Markets
The Company is continuously trying to build a large overseas business and revenue from export business accounts for a sizeable component of Companys total turnover. The company is continuously tapping potentially new markets and exporting a wide range of products to these countries.
The Company deals in bulk quantities of multiple commodities. Product wise performance of the company is as follows:
(Figures in Rupees)
|3||Minerals and metals||-||2,336,057,479 y|
Outlook Paper Industry
The outlook for the global paper and forest products industry has been changed to negative from stable, Moodys Investors Service says in a new report. Global operating income will decline over the next 12 to 18 months, as wood product and pulp prices ease from recent peaks.
The negative outlook for the global paper and forest products industry reflects a 2%-4% decline in industry operating income over the next year or so," said Ed Sustar, a Moodys Senior Vice President. "Increasing paper packaging prices and demand for paper packaging and pulp will only partially offset rising input costs, declining demand for paper and lower wood product and market pulp prices."
The outlook for the paper packaging and tissue subsector remains stable, Sustar adds. Most Moodys-rated paper and forest product companies will generate modestly stronger operating earnings this year as growing demand and higher prices across several substrates offset escalating labor and freight costs.
Risk and concerns
Growth of unorganized sector and threat from local regional players.
Change in freight and forwarding charges.
General economic and business conditions.
Our Companys ability to successfully implement our growth strategy, fluctuation in Exchange rates.
Prices of raw materials.
Changes in laws and regulations relating to the industry in which we operate.
Changes in political and social conditions in India.
Internal Control Systems and their adequacy
The Companys internal control procedures are tailored to match the organizations pace of growth and increasing complexity of operations. This ensures compliance to various policies, practices and statutes.
We have an independent and adequate system of Internal Control which enables reliable financial reporting, safeguard of assets and encourages adherence to management policies. The Company has a system for speedy compilation of accounts and management information reports to comply with applicable laws and regulations.
We have a reasonable budgetary control system so that the management can monthly review actual performance against the budget. A well-defined organization structure is in place with authority level, internal rules and guidelines for conducting business transactions. Discussion on Financial Performance with respect to operational performance The Break-up of Revenue and Costs of Company is as given below:
(Rupees in Lakhs)
|Sales & Income from Operation|
|Interest received as operating Income||2,50,59,557||27,47,69,985|
|Increase/Decrease in Stocks||-||24,47,680|
|Administrative And Other Expenditure||43,97,78,544||32,84,55,822|
|Interest and Financial Charges||7,95,29,698||7,82,27,788|
|Profit /(Loss) Before Extra-Ordinary Items and Tax||(49,47,26,967)||2,79,32,766|
|Less: Provision For Current Tax||0.00||95,00,000|
|Short/(Excess) Provision of Income Tax for Last Year Written Off/(Back)||22,85,475||-12,60,375|
|Profit/ (Loss) After Tax||(49,70,52,003)||1,90,08,732|
|OTHER COMPREHENSIVE INCOME|
|A) Items that will not be reclassified to Profit & Loss||-5,58,810||73,041|
|B) Items that will be reclassified to Profit & Loss||0||0|
|Total Profit for the year||-49,76,10,813||1,90,81,773|
|Earning Per Share||-174.36||6.69|
1. Total Income
Our revenue has decreased from Rs. 12,34,92,77,078 (FY 2017-18) to Rs. 17,36,24,242 (FY 2018-19) at a rate of 98.59%. There is no Sales in an export market as compared Rs. 11,65,57,80,425 (FY 2017-18) and sales in domestic market has decreased from Rs. 40,64,23,257 (FY 2017-18) to Rs. 14,72,49,405 (FY 2018-19).
2. Operating Expenditure
The operating expenditure has decreased from Rs. 11,90,57,12,270 (FY 2017-18) to Rs. 14,04,41,034 (FY 2018-19). There has been a decrease of 98.82% .
3. Administrative and other expenses
The administrative expenses have been increased from Rs. 32,84,55,822 (FY 2017-18) to Rs. 43,97,78,544 (FY 2018-19). There has been an increase of 33.89%.
4. Interest and Financial Charges
Net Financial Charges has increased from Rs. 7,82,27,788 (FY 2017-18) to Rs. 7,95,29,698 (FY 2018-19). There has been an increase of 123.96%.
The Depreciation cost has decreased from Rs. 15,00,969 (FY 2017-18) to Rs. 10,23,344 (FY 2018-19).
6. Net Profit
Net profit has been decreased from Rs. 1,90,08,732 (FY 2017-18) to Net loss of Rs. 49,70,52,003 (FY 2018-19).
7. Other Factors
I. Known trends or uncertainties
The world economy has witnessed an unprecedented economic crisis causing severe recessionary trends in various countries.
II. Dependence on Single or few suppliers/customers
The Customer base of our Company is very strong, as we do not deal with a single customer or supplier. We have a very cordial relationship with all customers and suppliers with whom we have been dealing for a very long time. KYC norms are followed in all seriousness.
III. Significant developments subsequent to last financial year
In the opinion of the Directors, there are no significant changes since the date of the last financial statements, which could materially affect the operations, and Profitability of our Company.
Human Resource and Industrial Relations
Industrial relations of the company were cordial during the year and continue to remain peaceful at the principal offices at Mumbai, Kanpur and New Delhi and at other offices and all the employees are working with the company for a common objective. Olympic Oil Industries Limited had 10 employees on payroll on the date of this report.
Significant Changes in Financial Ratios:
|Sr.no||Key Financial Ratio||Financial||year||Change (%)|
|1||Interest Coverage Ratio||-5.65||1.81||-411.89%|
|2||Debt Equity Ratio||-9.40||1.57||-697.42%|
|3||Operating Profit Margin (%)||-244.73%||0.29%||-84921.6%|
|4||Net Profit Margin (%)||-337.94%||0.16%||-213721%|
|5||Return on Networth||445.30%||4.95%||8891.51% >|
Significant changes in financial ratios due to lower volume and finance cost.
Statements in this Report describing your Companys objectives, projections, estimates and expectations or predictions, may be forward looking statements are within the meaning of the applicable laws and regulations. Actual results might differ substantially or materially from those expressed and implied. Important developments that could affect your Companys operations include a downtrend in the international market, fall in on-site, offshore rates and significant changes in political and economic environment, environment standards, tax laws, litigations and labour relations.
DISCLOSURES PURSUANT TO SECTION 197(12) OF THE COMPANIES ACT, 2013 READ WITH RULE 5(1) OF COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014:
1. The ratio of the remuneration of each director to the median remuneration of the employees of the Company for the financial year :
|Name of Director||Designation||Ratio|
|Sharad Bhartia*||Whole Time Director||NA|
|Nipun Verma||Whole Time Director||1.7:1|
* Resigned as Whole Time Director on December 18, 2018.
2. The percentage increase in remuneration of each Director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year:
|Name of Director||Designation||% of increase in remuneration|
|Sharad Bhartia||Whole Time Director||NA*|
|Nipun Verma||Whole Time Director||-|
|Manoj Kumar Upadhyay||Chief Financial Officer||-|
|Mahesh Kuwalekar||Company Secretary||28.57%|
* Resigned as Whole Time Director on December 18, 2018
3. The percentage increase in the median remuneration of employees in the financial year 2018-19:
The Percentage Increase in the median remuneration of employees in the financial year 2018-19 is 11.63%.
4. The number of permanent employees on the rolls of Company as on 31st March, 2019:
Total number of permanent employees on the rolls of company as on 31st March, 2019 is 10.
5. 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.
|Average salary of all employees (excluding Managerial Remuneration)||10.03|
During the year under review there is no increase in managerial remuneration.
6. It is hereby affirmed that the remuneration paid is as per the Remuneration Policy for Directors, Key Managerial personnel and Senior Management
The Company is in compliance with its Nomination, Remuneration and Compensation policy.