• MANAGEMENT DISCUSSION AND ANALYSIS INDIAN ECONOMY:
In general, global economic shocks in the past were severe but spaced out in time. This
changed in the third decade of this millennium. At least three shocks have hit the global
economy since 2020. It all started with the pandemic- induced contraction of the global
output, followed by the Russian-Ukraine conflict leading to a worldwide surge in
inflation. Then, the central banks across economies led by the Federal Reserve responded
with synchronized policy rate hikes to curb inflation. The rate hike by the US Fed drove
capital into the US markets causing the US Dollar to appreciate against most currencies.
This led to the widening of the Current Account Deficits (CAD) and increased inflationary
pressures in net importing economies. The rate hike and persistent inflation also led to a
lowering of the global growth forecasts for 2022 and 2023 by the IMF in its October 2022
update of the World Economic Outlook. The frailties of the Chinese economy further
contributed to weakening the growth forecasts. Slowing global growth apart from monetary
tightening may also lead to a financial contagion emanating from the advanced economies
where the debt of the non-financial sector has risen the most since the global financial
crisis. With inflation persisting in the advanced economies and the central banks hinting
at further rate hikes, downside risks to the global economic outlook appear elevated. The
Indian economy, however, appears to have moved on after its encounter with the pandemic,
staging a full recovery in FY22 ahead of many nations and positioning itself to ascend to
the prepandemic growth path in FY23. Yet in the current year, India has also faced the
challenge of reining in inflation that the European strife accentuated. Measures taken by
the government and RBI, along with the easing of global commodity prices, have finally
managed to bring retail inflation below the RBI upper tolerance target in November 2022.
However, the challenge of the depreciating rupee, although better performing than most
other currencies, persists with the likelihood of further increases in policy rates by the
US Fed. The widening of the CAD may also continue as global commodity prices remain
elevated and the growth momentum of the Indian economy remains strong. The loss of export
stimulus is further possible as the slowing world growth and trade shrinks the global
market size in the second half of the current year. Despite these, agencies worldwide
continue to project India as the fastest-growing major economy at 6.5-7.0 per cent in
FY23. These optimistic growth forecasts stem in part from the resilience of the Indian
economy seen in the rebound of private consumption seamlessly replacing the export stimuli
as the leading driver of growth. The uptick in private consumption has also given a boost
to production activity resulting in an increase in capacity utilisation across sectors.
The rebound in consumption was engineered by the near-universal vaccination coverage
overseen by the government that brought people 2 Economic Survey 2022-23 back to the
streets to spend on contact-based services, such as restaurants, hotels, shopping malls,
and cinemas, among others. The worlds second-largest vaccination drive involving more
than 2 billion doses also served to lift consumer sentiments that may prolong the rebound
in consumption. Vaccinations have facilitated the return of migrant workers to cities to
work in construction sites as the rebound in consumption spilled over into the housing
market. This is evident in the housing market witnessing a significant decline in
inventory overhang to 33 months in Q3 of FY23 from 42 months last year. The Capital
Expenditure (Capex) of the central government, which increased by 63.4 per cent in the
first eight months of FY23, was another growth driver of the Indian economy in the current
year, crowding in the private Capex since the January-March quarter of 2022. On current
trend, it appears that the full years capital expenditure budget will be met. A sustained
increase in private Capex is also imminent with the strengthening of the balance sheets of
the Corporates and the consequent increase in credit financing it has been able to
generate. A much-improved financial health of well-capitalised public sector banks has
positioned them better to increase the credit supply. Consequently, the credit growth to
the Micro, Small, and Medium Enterprises (MSME) sector has been remarkably high, over 30.6
per cent, on average during Jan-Nov 2022, supported by the extended Emergency Credit
Linked Guarantee Scheme (ECLGS) of the Union government. The increase in the overall bank
credit has also been influenced by the shift in borrowers funding choices from volatile
bond markets, where yields have increased, and external commercial borrowings, where
interest and hedging costs have increased, towards banks. If inflation declines in FY24
and if real cost of credit does not rise, then credit growth is likely to be brisk in FY24
IV. INDUSTRY OVERVIEW:
Strengths:
1. Essential Consumer Product: Edible oil is a staple in every household and is a
necessary component of daily diets. This consistent demand provides stability to the
industry.
2. Diverse Product Range: The industry offers a wide variety of edible oils,
including olive oil, sunflower oil, soybean oil, palm oil, etc., catering to different
consumer preferences and health considerations.
3. Global Trade Opportunities: Edible oil is a globally traded commodity, leading
to export opportunities for producing countries and import opportunities for consuming
countries.
4. Technological Advancements: The industry has benefited from technological
advancements in production, processing, and packaging, leading to increased efficiency and
improved quality.
5. Health and Nutrition Trends: Growing awareness of health-conscious diets has led
to increased demand for healthier oil options like olive oil and avocado oil.
Weaknesses:
1. Price Volatility: Edible oil prices can be highly volatile due to factors like
crop yields, weather conditions, geopolitical issues, and currency fluctuations.
2. Environmental Concerns: The production of certain edible oils, such as palm oil,
has been associated with deforestation, biodiversity loss, and environmental degradation,
leading to negative public perception.
3. Quality Control Challenges: Ensuring consistent quality can be a challenge due
to variations in raw materials, production processes, and storage conditions.
4. Health Considerations: While some oils are perceived as healthy, others are
considered less healthy due to their saturated fat content. This can affect consumer
choices and industry reputation.
5. Competition: The industry is highly competitive, with both large multinational
corporations and smaller local players vying for market share. This can lead to price wars
and reduced profit margins.
Opportunities:
1. Health and Wellness Trend: Increasing consumer awareness about health and
wellness presents an opportunity to market and promote healthier oil options, such as
those rich in omega-3 fatty acids or low in saturated fats.
2. Innovation in Product Development: Developing innovative products like infused
oils, fortified oils, and blends can attract a broader consumer base and cater to evolving
tastes.
3. Emerging Markets: Growing economies and changing dietary habits in
emerging markets provide untapped growth opportunities for edible oil consumption.
4. Sustainable Production Practices: Adopting sustainable and environmentally
friendly practices in oil production can enhance the industrys reputation and appeal to
eco-conscious consumers.
5. E-commerce and Direct-to-Consumer Sales: Online platforms provide a direct
avenue for reaching consumers, enabling easier marketing and distribution of specialized
oil products.
Threats:
1. Regulatory Changes: Changes in food safety and labeling regulations can impact
production processes, packaging, and marketing strategies.
2. Health Concerns: Negative perceptions about the health effects of certain oils,
such as those high in trans fats, can lead to decreased consumption and demand.
3. Substitute Products: Consumers might opt for alternative cooking options, such
as butter or ghee, which can affect the demand for edible oils.
4. Geopolitical Instability: Political and economic instability in major producing
or consuming regions can disrupt the supply chain and lead to price fluctuations.
5. Consumer Preferences: Rapid shifts in consumer preferences, such as a sudden
shift towards plant-based diets, can impact the demand for different types of edible oils.
• Internal control systems and their adequacy
The Company has adequate internal control systems with appropriate controls and checks.
Effective measures are taken to ensure that all assets of the Company are protected and
all transactions are recorded in conformity with accepted accounting principles. As stated
in the report of the board, it is implementation of systems, particularly cost control
measures that has resulted in the increased profitability. The internal audit department
regularly conducts review of the financial and operating controls in all areas of the
Companys operations including transaction checks and significant issues, if any, are
brought to the attention of the audit committee.
• Material developments in Human Resources/Industrial Relations Front including
number of people employed.
The Company continues to focus on its core values of quality, integrity, leadership,
and respect for people. Relations between the Company and the employees continue to be
cordial at all locations.
• Cautionary Statement
Statements in this Management Discussion and Analysis describing the Companys
objectives, projections, estimates and expectations may be ‘forward looking
statements within the meaning of applicable laws and regulations. Actual results might
differ substantially or materially from those expressed or implied. Important developments
that could affect the Companys operations include unavailability of finance at
competitive rates, competition, significant changes in economic environment in India,
regulatory provisions, tax laws, litigations, exchange rate fluctuations, interest and
other costs
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