Poona Dal and Oil Industries Ltd Management Discussions.

• Industry structure and developments

India occupies a prominent position in the world oilseeds industry with contribution of around 10% in worldwide production. But the demand of edible oils (extracted from oilseeds in addition to palm oil) is significantly higher than the domestic production, leading to dependence on imports (60% of requirement). In FY2016 Indias total edible oil demand stood at 24 mn tonnes out of which 9 mn tonnes was met from domestic production and 15 mn tonnes met from imports. The latter valued at around Rs. 65,000 crore, constituted around 2.5% of Indias total import bill.

The key constraints limiting the growth in production of oilseeds include lack of suitable varieties, high-costs of cultivation, lack of timely availability of inputs, and low & fluctuating prices. As the majority of the area under oilseeds cultivation is still rain fed (around 75%), there is significant impact of vagaries of monsoon on the overall productivity of oilseeds crops.

The products of the Company fall into two segments namely oil and food grains. The oil industry consists of several players, both organized and unorganized. Severe recessionary conditions in previous years have taken a toll of some of these players and as mentioned in the previous annual report, the oil industry continues to be in the grip of a severe recession, which may persist for a year or two. Both oil and food grains depend to a large extent on the monsoon and a favorable monsoon would have a significant impact on both the industries.

• Opportunities and threats

The products of the Company are largely agro based and performance would depend to a large extent on the vagaries of the monsoon. A serious threat to the oil division is the availability of imported edible oil at comparatively lower prices, which continues to have a significant impact on the prospects of the Company. However, the Company is able to sustain profitability by strict adherence to quality and standards.

The consistent rise in import of edible oil to bridge the demand - supply gap impacts the trade imbalance and results in significant outflow of foreign exchange. There is strong need to improve the production and productivity of domestic oil seed sector and promote domestic supply of edible oil to address the growing the demand -supply gap imbalance.

• Outlook

The future outlook particularly in the area of food grains is encouraging. However, given international trends, the oil division may come under some pressure, on account of low margins prevalent.

• Risk and Concerns

Your Company is exposed to commodity price fluctuations in its business. All major raw materials as well as finished goods being agro-based are subject to market price variations. Prices of these commodities continue to be linked to both domestic and international prices, which in turn are dependent on various Macro/ Micro factors. Also Commodities are increasingly becoming asset classes. Prices of the Raw materials and finished products manufactured by your Company fluctuate widely due to a host of local and international factors. Your Company continues to place a strong emphasis on the risk management and has successfully introduced and adopted various measures for hedging the price fluctuations in order to minimize its impact on profitability. Also, your Company has initiated setting-up of a framework to upgrade itself to a robust risk management system.

• 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.

• Discussions on financial performance with respect to operational performance.

Sales during the year were Rs.18902.28Lakhs compared with Rs. 29458.34 Lakhs in the previous year. Profit before tax was Rs.305.46 Lakhs compared with the previous year figure of Rs. 1402.97Lakhs. The borrowings by Company have not had significant impact on profits.

• 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.