Parker Agrochem Exports Ltd Management Discussions

This section contains certain forward-looking statements which are based on the certain assumptions and expectations of certain future events.

Overall Review

The unit of the Company is located at Plot No.3 & 4, Block ‘H at Kandla port, Kandla, Kutch District in Gujarat. The location of the unit is very ideal for the reason that Kandla port is a site recognized by the Government authorities for export and import. The Company has developed petroleum and edible oil storage tanks with connecting pipelines with Port/ Jetty for directly loading & unloading ship. These storage tanks are rented and the rental income shares a major portion of the Companys total income. The Company has in all fourteen storage tanks owned by it.

The Company is also involved in the business of trading in commodities including gold and silver. Hence, at present, the Company continues to carry on the business of renting of storage tank, trading in commodities including gold and silver¹

Industry Structure and developments

There are very few organised players in the field of commodities trading and renting of storage tank. As such these activities are carried out by large number or unorganised players and such activities are also carried out by organised players as incidental/ancillary/other activities. The Commodities trading business is very volatile and risky in nature. There has been sweeping movements in the commodities in which the Company deals. Hence, the company has to take market position after considering various factors. As regards, business of renting of storage tank, there is more or less assured revenue stream. However, due to increased capacity available, the rates/realisation are under pressure. The Company, therefore, enters into firm contract with reputable corporate to have hedge against sudden drop in rent and to optimise its revenue from this segment.

Opportunities and threats

The volatility in the commodity prices provides both opportunities and poses threat. Hence, the Company weigh all aspects before venturing into the commodities trading. Due to general trade depression, lesser import of edible oil, increase in overall tank capacity at Kandla, the rent rates have come down substantially. However, in the time to come, if edible oil industry trade scenario improves, there may be more realisations from the renting of the storage tank.

Internal Control Systems & their adequacy

The Company practices an internal control system which ensures proper handling and management of its assets. The internal control system of the Company is geared towards achieving efficiency in operations, effective monitoring and compliances with all applicable laws and regulations. The Company regularly conducts internal audit programs. The internal control department of the Company functions under the guidelines of the Audit Committee of the Company.

The Company regularly reviews the adequacy and effectiveness of the internal control system and suggests improvement for strengthening them.

Outlook and Opportunities

The Companys one portion of income is dependent on the rent received from letting the tanks, and it is likely to increase in the near future if we get the permission of increase of heights of our storage tanks.

There is a strong undercurrent prevalent in the commodities market also, which is favourable for the company. Our main portion of income is from rent for giving storage tank on hire. At the same time, wherever found appropriate, the Company also undertake trading in commodities and its future market.

Discussion on financial performance with respect to operational performance

The gross turnover of the Company has increased from Rs. 545.50 Lakhs to Rs. 6625.93 Lakhs. However, the profit before tax was decrease from Rs. 101.76 to Rs. 21.85 Lakhs in the previous yearwhich has been transferred to the Balance Sheet.

Financial Performance:

(Rs. In Lakhs

Details of significant changes in key financial ratios are as given below:

During the year under review, the revenue was substantially increased due to trading in commodities/bullion during the year under review which was not done in the previous year. However, on account of the thin margin in commodity business, increased expenses and lower rental income during the year, the company suffered losses during the year at PBT & PAT level and substantial reduction in EBIDTA level. Moreover, this has adversely impacted ratio of Return on equity, Debt service coverage ratio, Net Profit ratio and return on capital employed ratio. Conversely, on account of the manifold increase in turnover of sales &purchase on account of commodity trading the ratio of trade receivables turnover and trade payables turnover has improved significantly. However, overall working capital ratio got deteriorated. In view of loss, ROE could not be calculated during the year. During the year under review due to increase in borrowing and reduction in profitability, there was decrease in interest coverage ratio.

Risks and Concerns

The Company regularly insures all its assets to enable itself in case of any mis-happening. The Company has framed a risk management division which constantly monitors the Indian and international markets and guides the management of any sort of prevailing risk to the Company, as the Company is involved in the business of trading in commodities, gold & silver, which is highly volatile in nature. The commodities, gold & silver prices being internationally traded are affected by the global market demand and supply forces and the dollar rate. The risk management division plays a major role here.

Material Developments in Human Resources and Industrial Relations Front, including number of people employed

The Company has continued to give special attention to Human Resources/Industrial Relations development. Industrial relations remained cordial throughout the year and there was no incidence of strike, lock out etc.

Cautionary Statement

Statement in this Management Discussion and Analysis Report, describing the Companys objectives, estimates and expectations may constitute ‘Forward Looking Statements within the meaning of applicable laws or regulations. Actual results might differ materially from those either expressed or implied.