Global Economy
After a disrupted Global economic environment for 2 consequent years,
Normalcy was observed to have returned in the Financial Year 2022-23. Rocky recovery was
predicted, with baseline forecast for growth being estimated to rise at 3.1 % in 2024
after fall from 3.4% to 2.9% in the year 2023, by IMF. The Russia-Ukraine war,
geopolitical tensions, continued supply chain dislocations and climate crisis resulted in
unprecedented inflation and volatility in global commodity and energy prices. The global
political turmoil, not only affected the supply demand for commodities and their prices
directly, but also changed the dynamics of logistics resulting in indirect demand for
commodities internationally, there by affecting the prices. To combat the same, within a
relatively short time frame Central Banks, world over, have increased bank rates pivoting
from supporting growth to combating inflation.
Rapid spread of Covid -19 in China had hampered growth in the year
2022, despite that economy has recovered faster- than-expected. Inflation rate is
anticipated to fall from 8.8% in 2022 to 6.6% in the year 2023 and 4.3% in 2024 but is not
expected to return to the pre-pandemic level of 3.5%.
Banks are burdened with credit losses thereby reducing their
capitalization and profitability. Economic growth is affected as banks have cut down on
lending thereby diminishing the risk-taking capacity of banks. (Reference - IMF). The
global macroeconomic environment will continue to face numerous problems in the future,
including the influence that will continue to be had by the ongoing disputes between
Russia and Ukraine, and global inflation recessionary pressures that are persistent and at
high levels. The stress spectre factor is present in the majority of advanced economies.
Indian Economy Overview
Indian economy was the bright spot in the worldwide recession in FY
2022-23. In order to increase Indias potential for growth, the Indian government has kept
up its push for structural reforms. Amid challenging global geo-political and
macro-economic conditions, Indian GDP recorded a growth of 7% driven by Government capital
expenditure and anticipated pick-up in the private capex cycle. Inflation was witnessed by
Indian Economy at 7.8% in April 2022 however in the Financial Year 2022-23, it eased out
to a level below 6% and averaged out at 6.8%. This lead to the monetary policy measures by
Reserve Bank of India, in order to balance the money in circulation coupled with interest
rates adjustments. There was steep rise in interest cost. The repo rates increased from
4.4% in May 2022 to 6.5% in March 2023 . Increased repo rates had significant impact on
borrowing cost, for both short term and long term funding for corporates. At the end of
the financial year 2022-23, the INR moved from the level of R.s 75 .97 in April 2022 to
level of Rs. 82.16. Further depreciation of INR during the end of the FY 2022-23 of 82.16
as INR stayed at levels closer to Rs.80 since the later part of Quarter 1 for Financial
Year 2022-23, as result the average INR USD exchange rate was at the level over Rs.80 for
the year. The Services sector grew at a higher pace aided by release of pent-up demand for
contact-intensive services, including resumption of business and international travel.
The Government of India continued to make concerted efforts, through
several path-breaking initiatives across the areas of healthcare, infrastructure, social
welfare and digital to support various sections of the economy during these turbulent
times which helped accelerate the pace of resumption of economic activities over the year.
Continued geopolitical tensions, extended global supply chain
disruptions and elevated inflation pose key downside risks for the year ahead. Even as the
Indian economy faces multi-dimensional challenges in the short term, it remains one of the
most dynamic major economies in the world with immense headroom for growth. Some of the
main structural forces behind the expansion of the Indian economy include a favourable
demographic profile, expanding urbanization, and rising wealth.
The Government Policies, Schemes, Initiatives and Activities
Major thrust has been given on structural reforms by Government of
India to raise Indias potential growth. Policy initiatives such as Production Linked
Incentive (PLI), Make in India, National Monetisation Pipeline Schemes, PM Gati shakti
were introduced during the year in a concerted effort of shaping India as a global
manufacturing hub and by strengthening the countrys digital public infrastructure along
with healthcare infrastructure. In an attempt to mitigate the volatility in the operating
environment, smart management macros including fiscal and monetary policies were
introduced.
While the pace of growth of the Indian economy is projected to
decelerate in FY 2023-24 against the backdrop of global macro headwinds as aforestated,
India would continue to be the fastest growing major economy in the world. Key factors
affecting agri output, inflation and consumer demand in 2023 are heatwaves, spatial,
temporal rainfall distribution etc. In addition, we are expected to witness El Nino a
weather phenomenon and impact of this weather phenomenon on monsoon after three
consecutive years of La Nina . A good Rabi harvest, broad-based credit growth and
Governments thrust on capital spending to bolster investment activity supported by
buoyant tax collections, augur well for the economy going forward. Healthier Bank and
Corporate Balance Sheets, improving capacity utilisation levels and structural reforms
represent some of the key positive factors for revival in private capex.
In the Union Budget 2022-23- (reference IBEF)
o Rs. 1.24 lakh crore (US$ 15.9 billion) has been allocated to the
Department of Agriculture, Cooperation and Farmers Welfare.
o Rs. 8,514 crore (US$ 1.1 billion) has been allocated to the
Department of Agricultural Research and Education.
Development of robust value chains to support and strengthen these
sectors remains critical to achieving such multiplier effects and realizing Indias goal
of becoming a US$ 5 trillion economy. As reported in earlier years, enhancing agricultural
productivity and value addition to international standards, while simultaneously improving
market linkages, remain critical to enhance the competitiveness of the agricultural sector
and drive significant increase in farmers income.
Union Budget 2023 made public announcements with focus on expanding
digital infrastructure, direct benefit transfer etc which are expected to boost Indias
competitiveness, enable greater empowerment and foster inclusive growth while maintaining
the path to fiscal consolidation. Sharp step-up in capital expenditure outlay, focus on
infrastructure and promotion of exports are expected to boost domestic manufacturing,
spurring a virtuous consumption-investment-employment cycle. As the Indian economy combats
uncertainties m the external environment, policy interventions focused on supporting
sustainable livelihoods and fostering inclusive growth augur well for the economy.
Structural support would need to be provided to sectors with large economic multiplier
impact; the development of robust domestic agri based value chains hold special importance
in the Indian context given their enormous potential to contribute to national objectives.
In Indian economy, agriculture sector plays crucial role and half of
the Indian workforce is engaged in this sector. India is the leading producer worldwide of
several commodities, including spices, pulses and fruits such as bananas etc. Indias
share in global agri-trade remains low at 3%, while agri exports have grown sharply over
the last few years to reach approximately US$ 53 billion in FY 2022-23.
The Agri sector remains vulnerable to the vagaries of climate change,
facing considerable challenges as a primary source for food, fuel, fibre, fodder and
livelihood security. As per article published in Harvard Business Review, global food
demand is expected to increase up to 98% by 2050. Needs of growing population can be met
with exponential increase in production and productivity, at a time when impact of climate
change is becoming more severe and natural resources are fast depleting. Sustainably
sourced nutritious food is required for evolving consumer preferences. These developments
underline the need to amplify the competitiveness of agri-value chains in order to cater
to the market requirements of the future which is dynamic. India with its tremendous
strengths in agriculture has a unique opportunity to play a leading role in this global
transition and in forging an eco-system of sustainable, regenerative and climate smart
agriculture. As the core catalyst of agricultural transformation, the Governments
initiative to promote Farmer Producer Organisation (FPO) can indeed leverage economies of
scale, create large market access, support market-led production and enable sustainable
agriculture. FPO facilitates a crucial link between individual farmers and market and by
doing so it has tremendous potential to serve as major enabler in augmenting farm
livelihoods.
Your Companys approach.
Prime Fresh has adopted targeted collaborative models to multiply the
scale and create impact of its agri and rural interventions. This collaborative approach
can contribute meaningfully towards building next generation agriculture that is climate
resilient and capable of supporting gainful livelihoods, as opposed to a traditional
transactional approach. Forging partnerships with new age Agri start-ups, tying up with
existing un-utilized Agri infrastructures and tie-ups with farmers and local area
aggregators, are among the various steps taken by PFL towards building massive Agri value
chain. Prime Fresh is working hard to facilitate growth of various stakeholder in entire
value chain. Digitalisation, cross selling, collaboration and value addition has huge
potential to transform agriculture sector and thereby enhancing the potential to increase
productivity and foster structural changes across the value chain enabling efficient use
of resources.
According to the World Economic Forum, India - despite attaining food
sufficiency with its 270 million tons of agricultural produce in a year - found itself at
a position of 103 out of a list of 119 countries on the Global Hunger Index. According to
the United Nations (UN) Food and Agriculture Organization (FAO), about US$14 billion
(12.42 billion euros) worth of food is wasted every year in India. PFL is relentlessly
working towards reduction of wastages in fresh produce business by improving the
efficiency in post-harvest supply chain management practices.
Depending on the inherent perishability of the crop and the season, it
is pertinent to note that a substantial quantum of food is wasted in India. Farm wastages
can be reduced, and income can be raised by creating higher level of food processing in
economy and can create a much larger pull for quality agri-commodities. This would require
focused investments in developing product-specific climate-controlled infrastructure as
well as in branded products that benefit large agri-value chains. For providing assured
market linkages to farmer, corporate participation is essential along with investing in
requisite infrastructure. Big thrust on Indias Food Processing sector which will play
pivotal role and will generate multiplier effect which will result in job creation,
managing food inflation in sustainable manner and enhancing rural incomes. In this
context, with an estimated outlay of 10900 crores, the recently announced scheme for Food
processing sector is expected to play critical role in agri exports, building brands for
the global market, boosting investments, farmers incomes and employment generation.
Your Companys business model along with strategic investments to
enhance efficiencies across its operating segments - including agri-commodity sourcing
expertise for various sales channels and different types of customers, is a key source of
competitive advantage, especially against the backdrop of severe inflationary headwinds.
Your Companys initiatives across operating segments are aligned to the national
priorities of enhancing competitiveness of Indian agriculture and industry, generating
large-scale employment opportunities and supporting sustainable livelihoods, by enhancing
the competitiveness of domestic agri-value chains and industry, creating national brand to
maximize value capture in India. Investments made by your Company continue to be guided by
the broad objective of Farmers developments, rural developments, rural employments,
providing opportunities to various marginal and weaker sections of the society there by
creating a sustainable fruit and vegetables supply chain eco system which is
self-scalable.
BUSINESS Key Highlights of FY2023 & financial Results
a) There was a Significant Expansion across all the Business segments
during FY23, resulting in a substantial rise in companys overall Procurement capacity to
more than 1.5 lacs tonnes per Annum (TPA) as of March 2023. Companys total Operational
Capacity has risen to more than 5 lacs TPA across all its locations.
b) Prime Fresh Limited has done major expansion across Maharashtra
(Interior areas in a very useful & important Agribelts), Telangana, DELHI/NCR, Pune,
Mumbai, Ahmedabad, UP. This expansion has led to substantial increase in number of
Collections centres, Distribution centres, warehousing management capabilities &
overall Business execution capabilities.
c) There was all round improvement in client additions, Supply chain
Partnership addition, increase in team size, farmers reach & network expansion during
the FY2023.
d) During the year company also completed the Preferential warrants
shares issue and which has increased companys net worth & liquidity position
providing a huge support to companys growth initiatives.
e) Key Financial Highlights (Standalone):
1) Companys sales during the year has increased by 26% to 95.19 er
2) EBIDTA has risen from 4.92 er to 7.21 a good increase of 46.51 %
3) Profits After Tax has jumped from 3.18.cr to 4.94 er leading to a
rise of 55%
f) Outlook for both the F&V Business and Services Business is
looking pretty strong on the back of massive expansion done during the last 15-18 months.
Team PFL is well prepared & excited for another bumper year ahead on the back of huge
rise in its Capacities, Capabilities, team, network, track record and massive
relationships built across all stakeholders of the company over the last few years.
g) PFLS Board members, Management team and founders are extremely
thankful to all the stakeholders of the company without which this Journey wouldnt have
been possible. We all continue to look forward to work together to build new India which
is Aatma Nirbhar focusing on equality of growth for all Stakeholders.
Your company aspires to reach a business execution worth 600000 tonnes
per annum (Six Lacs TP A) by FY 2028.
The persistent efforts are visible in the qualitative and quantitative
performance of your company. On a consolidated basis, your companys net sales for FY 2023
have grown by 26.68 % YoY to Rs. 99.35 Crores. The Profit after Tax (PAT) has shown strong
jump of 53% YoY to Rs. 5.07 Crores.
Your company, Prime Fresh Limited led by dynamic management and aptly
supported by experienced team, is an integrated player operating across Fruits &
Vegetables Value Chain and service provider for large corporate and retail giants. There
is exponential growth expected in the rate of organization of F & V trade, over
the next 8-10 years, which provides huge opportunity for organized players like your
company Prime Fresh. Organised F & V industry is expected to grow from USD 25
Bn in FY 2023 to USD JS0Bn by FY 2030
Opportunities and Developments
Indian Fruits and Vegetables Industry
The estimated nominal GDP growth for the year is 15.9% (first half:
22.3%; second half: 10.5%), indicating the inflationary pressures in the economy, while
the real GDP growth for the year is estimated at 7.0% (first half: 9.6%; second half:
4.8%). In real terms agriculture grew by 3.3% while on soft base Services and Industry
sectors grew by 9.4% and 3.6% respectively. Consumption demand has remained subdued in
rural markets and for discretionary categories in urban markets, with steep inflation
eating into household categories. Fresh Fruit market is expected to grow annually by 6.
79% and most revenue is generated in India (US$105.10 bn in 2023). Volume is expected to
amount to 303.70 bn kg by 2028. Volume growth of 4.4% is expected in the year 2024 in
Fresh Fruit Markets.
There are tremendous opportunities for export in India as it has vast
production base. India exported fruits and vegetables worth Rs. 13185.30 crores/1635.95
USD Millions during the year 2022-23 which comprised fresh fruits worth Rs. 6219.46
crores/770.70 USD Millions and vegetables worth Rs. 6965.83 crores/865.24 USD Millions.
The processed fruits and vegetables including of pulses exported to be Rs. 18,090.80
crores/ USD 2,248.96 million which comprised of processed vegetables including of pulses
Rs. 12,146.32 Crose/ USD 1,511.14 million and processed fruits and juices Rs. 5,944.49
crores/ USD 737 .81 million in 2022-23.
Our country exported Mangoes, bananas, grapes, oranges and pomegranates
m large portion in fruits export category while mixed vegetables, green chilli, tomatoes,
onions and potatoes contributed majorly to vegetable export.
Bangladesh, Nepal, Sri Lanka, United Arab Emirates, Netherland, Qatar,
Malaysia, Oman and Iraq are major destinations for the Indian fresh fruits and vegetables.
Saudi Arab, China, USA, UAE, Netherland and Bangladesh are major destinations for Indian
Processed fruits and vegetables .
Though Indias share in the global market is nearly 1 % only, there is
increasing acceptance of horticulture produce from the country. This has occurred due to
concurrent developments in the areas i.e. state-of-the-art in cold chain infrastructure
and quality assurance measures . Apart from large investments pumped in by the private
sector, the public sector has also taken the initiative with APEDA for setting up several
Centers for Perishable Cargoes and integrated post-harvest handling facilities in the
country. Capacity-building initiatives at the farmers , processors and exporters levels
have also contributed towards this effort.
Indias horticulture products are becoming increasingly popular due to
advancements in cold chain infrastructure, research, contemporary post-harvest
technologies, supportive governmental policies and quality control procedures. Indias
food industry is large and its biggest fruit -producing states are Andhra Pradesh,
Maharashtra, Madhya Pradesh, Uttar Pradesh, Tamil Nadu, Karnataka and Gujrat. The major
vegetable-producing states are Uttar Pradesh, Madhya Pradesh, West Bengal, Bihar, Gujrat,
Odisha and Maharashtra. (IBEF).
Government has taken initiatives to promote exports of fruits and
vegetables. Some of the reforms are as follows:
| • 100% Foreign Direct Investment (FDI) permitted for the food
processing sector. |
| • Agriculture Export Policy (AEP). |
| • Direct involvement of Farmers in Exports |
| 1. Farmer Connect Portal |
| 2. Traceability System |
| • Addressing Transport and Logistics issues. (IBEF) |
Apart from large investments pumped in by the private sector, the
public sector has also taken the initiative with APEDA for setting up several centres for
perishable cargoes and integrated post-harvest handling facilities in the country.
Capacity-building unit
Revenue in the Vegetables market amounts to US$97.66bn in 2023. The
market is expected to grow annually by 9.05% (CAGR 2023-2028).
Indias top agri export items
|
2020-21 |
2021-22 |
2022-23 |
| Non-Basmati rice |
4,810.80 |
6,133.63 |
6,355.75 |
| Su2ar |
2,789.91 |
4,602.65 |
5,770.64 |
| Basmati Rice |
4,018.41 |
3,537.49 |
4,787.50 |
| Soices |
3,983.98 |
3,896.03 |
3,787.08 |
| Raw Cottom |
1,897.21 |
2,816.24 |
781.43 |
| Oil meals |
1,585.04 |
1,031.94 |
1,600.90 |
| Wheat |
567.93 |
2,122.13 |
1,519.69 |
| Fruits & Ve2etables |
1,492.51 |
1,692.48 |
1,788.65 |
| Total* |
41,895.68 |
50,240.21 |
53,145.89 |
| In$ million |
|
|
|
| *Includes all other items |
|
|
|
FRESH ONIONS
India is the second-largest onion-growing country in the world. The
Indian onions are famous for their pungency and are available round the year. Indian
onions have two crop cycles, first harvesting which starts from November to January and
the second harvesting from January to May.
India Facts and Figures :
There is a lot of demand for Indian Onion in the world. The country has
exported 2,525,258.35 MT of fresh onion to the world, worth Rs. 4,522.79 crores/ 561.38
USD Millions during the year 2022-23 .
Opportunities
As per the various reports, estimates and research academicians the
size of Indian F&V industry is estimated to be around 25 Lacs Crores (25,00,000
crores). The market share of organized players is estimated to be between 8-13%. This
provides huge opportunity to many corporates; new startups and well experienced players
like Prime Fresh Limited to be a part of huge growth shift from unorganized to organized
players.
Developments
There are several developments happening in Fruit Vegetable Supply
chain sector over the last 6 years. There are more than 200 startups who have come up and
raised huge sums of money across various spheres of the sector like farming, seeds and
fertilizers, post harvesting, storage, processing, distribution exports, private market
set ups and logistics. As discussed in the Economic overview section, Government and
various government agencies have come up with several number of schemes for the growth of
Fruit Vegetable supply chain sector. The banks, financial institutions, private equity
funds, venture capital funds, corporate houses and family offices have been taking deep
and serious interest for the development ofF&V sector.
| Challenges |
| Companies need to cope up with massive volatility and uncertainty on
climate changes related issues. There is a huge spike in cost of manpower and
transportation related costs. Consumers are still unwilling to pay more for essentials
like fruits and vegetables. |
| Cost of food packaging, labour, logistics and supply chain management has
increased further for the sector. The cost of technology, higher management cost,
increased expenses for market development and market intelligence will impact the margins
in the business going forward. |
| Threats |
| Weather challenges. |
| Completely unorganized, volatile and highly competitive. |
| Entry of large stamps with huge capital and capacity to bum resources. |
| Huge manpower costs and higher handling charges, |
| Requirement of a highly experienced and technically qualified team, with
sound knowledge of growing belts, seasonality, etc. Maintaining such skilled manpower is
highly expensive and challenging. |
COMPANYS OUTLOOK
Growth of existing Operations
• Prime intends to expand the supply chain operations &
more efficiently utilize capacities built across India, to help augment growth in
sales with its existing & new customers.
• This involves improving & upscaling procurement
capabilities ( e.g. through contract farming),optimizing supply chain activities,
value adding to few SKUs and expanding distribution in relates geography.
Huge Capacity Utilization ahead
• Readily expanded infrastructure to support in handling a
larger volume of F&V produce and support the distribution to farther
geographies from farms and CCs. ( North, NE & South)
New Initiatives (Exports, B2C)
• Prime aims to grow its revenue through distribution of F & V
produce to other countries, for which it intends to deepen its exports of certain
F&V categories.
• Prime also intends to venture into supply of F&V to
consumers directly, (ex. packaged sale of Pomegranate arils). PFL intends to build City
Distribution Business tapping huge GT clients.
• Strengthen its domestic distribution network, B2C and
Risks and concerns
Every business has both Risk and Return and they are inseparable. As a
responsible management, the Companys principal endeavor is to achieve maximum returns.
Your company has implemented maker checker concept to minimize risks and expenses through
detailed studies and interaction with experts. The Company has developed a comprehensive
framework of robust mechanisms and processes to identify risks that may negatively impact
its operations and profitability. It has well-placed risk monitoring systems for swift
response to safeguard itself from the permanent loss of capital and ensure sustenance of
operational performance.
Internal control system and their adequacy
The Company and the Management has established adequate Internal
Control systems to ensure reliable financial reporting. Internal Controls also help in
assessing, evaluating, safeguarding and shielding the Company from losses and unofficial
use or deposition of assets. This ensures that the Companys resources are put to optimum
use and all transactions are authorized, recorded and reported correctly to the
Management. The Company constantly refines its internal controls to ensure effectiveness
and efficiencies of operating procedures. The Company always adheres to set guidelines and
follows all Accounting Standards prescribed for maintenance of books of accounts and
reporting of financial statements. These standards require appointed Independent Internal
Auditors to plan risk-based audits and execute audits to assess the effectiveness of
internal control over various areas of operations and financial reporting throughout the
year.
Material developments in human resource / industrial development front,
including number of people employed.
The Company recognizes human capital as an extremely important and
strategic resource and honors the dignity of each employee irrespective of position and
highly values the cultural diversities of employees. Your Company believes in employee
empowerment across the entire organization in order to achieve organizational
effectiveness. Further, special efforts are made to identify specific training needs to
hone the skills of the employees. Human Resources continue to get primary focus of the
management and your Company considers its human resources amongst its most valuable
assets. As at the financial year ended March 31 , 2020, there were total 229 number of
employees and workers on the payroll of the Company.
Cautionary Statement
Statements in the Management Discussion and Analysis describing the
Companys objectives, projections, estimates, expectations and others may constitute
"forward-looking statements" within the meaning of applicable securities laws
and regulations. Actual results may differ from those expressed or implied. Several
factors that could significantly impact the Companys operations include economic
conditions affecting demand, supply and price conditions in the domestic and overseas
markets, changes in the Government regulations, tax laws and other statutes, climatic
conditions and such incidental factors over which the Company does not have any direct
control.
DETAILS OF SIGNIFICANT CHANGES (I.E. CHANGE OF 25% OR MORE AS COMPARED
TO THE IMMEDIATELY PREVIOUS FINANCEIAL YEAR) IN KEY FINANCIAL RATIOS, ALONG WITH DETAILED
EXPLANATIONS THEREFOR
| Ratio |
March 31, 2023 |
March 31, 2022 |
Deviation |
| Debtors Turnover |
4.52 |
4.33 |
4.37% |
| Inventories Turnover |
27.06 |
32.56 |
-16.91% |
| Interest Coverage |
23.32 |
10.64 |
119.22% |
| Ratio* |
|
|
|
| Current Ratio |
4.66 |
4.19 |
11.16% |
| Debt Equity Ratio |
0.15 |
0.20 |
-22.90% |
| Operating Profit |
0.07 |
0.06 |
16.34% |
| Margin |
|
|
|
| Net Profit Margin |
0.05 |
0.04 |
23 .08% |
| Return on Net Worth |
0.20 |
0.17 |
17.17% |
*Interest Coverage Ratio: Due to Substantial improvement in
profitability and infusion of new equity capital resulting into less utilization of cash
credit facilities. Also the Company is making repayments of Business loans with higher
costs over the last 2 years resulting in lower interest cost and payments to banks and
NBFCs.
| REFERENCES (BIBLIOGRAPHY) |
| 1) www.ibef.org |
| 2) Horticultural Statistics, Ministry of Agriculture, Govt. oflndia |
| 3) Statisca |
| 4) APEDA and data available on google. |
| 5) Annual reports of other companies |
| 6) Research reports by various analysts |
| 7) Economic Times |
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