A. CAUTIONARY STATEMENT:
The statements in the "Management Discussion and Analysis Report" describe
the Companys objectives, projections, expectations, estimates or forecasts which may be
"forward-looking statements" within the meaning of the applicable laws and
regulations. Actual results may differ substantially or materially from those expressed or
implied therein due to risks and uncertainties. Important factors that could influence the
Companys operations, inter alia, include global and domestic demand and supply conditions
affecting selling prices of finished goods, input availability and prices, changes in
government regulations, tax laws, economic, political developments within the country and
other factors such as litigations and industrial relations.
B. COMPANY OVERVIEW:
Sheetal Cool Products Limited has grown up and got its wings presently spread over 6
major states of India such as Gujarat, Rajasthan, Madhya Pradesh, Maharashtra, Kashmir and
Noida (UP) and more than 10 nations abroad like USA, Switzerland, Singapore, Australia
Africa, Nepal, etc. The company has acquired BRCGS (Brand Reputation Compliance for Global
Standard), FSMA (Food Safety Modernization Act) & EIC (The Export Inspection Council)
certificates along with FSSAI, ISO 22000:2018, ISO 9001:2015 etc. For manufacturing more
than eight categories of food products under a single plant. It is also counted, as per
Economic Times, as one among the top 150 fastest growing companies in India. Sheetal is in
the Top 500 High-Growth Companies of Asia-Pacific 2021 ranking created by The Financial
Times, Nikkei, and Statista.
C. INDUSTRY STRUCTURE AND DEVELOPMENT GLOBAL ECONOMY:
Global growth is projected to fall from an estimated 3.5 percent in 2022 to 3.0 percent
in both 2023 and 2024. While the forecast for 2023 is modestly higher than predicted in
the April 2023 World Economic Outlook (WEO), it remains weak by historical standards. The
rise in central bank policy rates to fight inflation continues to weigh on economic
activity. Global headline inflation is expected to fall from 8.7 percent in 2022 to 6.8
percent in 2023 and 5.2 percent in 2024. Underlying (core) inflation is projected to
decline more gradually, and forecasts for inflation in 2024 have been revised upward.
The recent resolution of the US debt ceiling standoff and, earlier this year, strong
action by authorities to contain turbulence in US and Swiss banking reduced the immediate
risks of financial sector turmoil. This moderated adverse risks to the outlook. However,
the balance of risks to global growth remains tilted to the downside. Inflation could
remain high and even rise if further shocks occur, including those from an intensification
of the war in Ukraine and extreme weather-related events, triggering more restrictive
monetary policy. Financial sector turbulence could resume as markets adjust to further
policy tightening by central banks. Chinas recovery could slow, in part as a result of
unresolved real estate problems, with negative cross-border spillovers. Sovereign debt
distress could spread to a wider group of economies. On the upside, inflation could fall
faster than expected, reducing the need for tight monetary policy, and domestic demand
could again prove more resilient.
In most economies, the priority remains achieving sustained disinflation while ensuring
financial stability. Therefore, central banks should remain focused on restoring price
stability and strengthen financial supervision and risk monitoring. Should market strains
materialize, countries should provide liquidity promptly while mitigating the possibility
of moral hazard. They should also build fiscal buffers, with the composition of fiscal
adjustment ensuring targeted support for the most vulnerable. Improvements to the supply
side of the economy would facilitate fiscal consolidation and a smoother decline of
inflation toward target levels.
D. INDIAN ECONOMY:
Amidst strong global headwinds, the Indian economy is expected to have recorded a
growth of 7.0 per cent in real GDP in 2022-23. A sustained recovery in discretionary
spending, particularly in contact intensive services, restoration of consumer confidence,
high festival season spending after two consecutive years of COVID-19 induced isolation
and the governments thrust on capex provided impetus to the growth momentum. In the
second half of the year, however, the pace of year-on-year growth moderated because of
unfavorable base effects, weakening private consumption demand caused by high inflation,
slowdown in export growth and sustained input cost pressures.
The National Statistical Office (NSO) on February 28, 2023 indicated that aggregate
demand, measured by real GDP, registered a growth of 7.0 per cent in 2022-23 vis-a-vis 9.1
per cent growth a year ago.
With this, real GDP in level terms surpassed the pre pandemic level of 2019-20 by 9.9
per cent. For the previous three years, GDP growth numbers were revised up by 20 bps
(2019-20), 80 bps (2020-21) and 40 bps (2021-22) indicating that the growth momentum was
stronger than what early estimates suggested. While both consumption and investment demand
gained traction, adverse external demand conditions and the resultant larger deficit in
net exports dragged down growth in 2022-23. Real GDP growth at 9.6 per cent remained
robust during H1:2022-23 with a sharp acceleration in momentum from Q1 to Q2:2022- 23. In
Q3:2022-23, however, the momentum moderated. (Source:
https://m.rbi.org.in/scripts/AnnualReportPublications.aspx?Id=1344
Industry Structure and developments.
Overview of Global Dairy Industry
Market Overview:
"Dairy Market: Global Industry Trends, Share, Size, Growth, Opportunity and
Forecast 2023-2028," the global dairy market is expected to exhibit a CAGR of 5.79%
during 2023-2028. Dairy products are produced by using milk harvested from animals. Some
of the common dairy items include cheese, ice cream, butter, and yogurt. Dairy production
plants employ two types of processing, namely heat treatment and dehydration. These
processes help to extend the shelf life and ensure the safety of the end-product for human
consumption. Dairy products are rich in carbohydrates, protein, calcium, potassium,
phosphorus, riboflavin, and vitamins A, D, and B12. These compounds offer several health
benefits, like supporting body growth, building and repairing muscle tissues, maintaining
strong bones, and regulating blood pressure.
There has been an increase in the demand for ready-to-eat (RTE) products, such as
butter, frozen desserts, milk powder, and yogurt, which is contributing to the market
growth. Subsequently, evolving food habits have further led to the establishment of
fast-food chains and quick service restaurants (QSR), wherein different varieties of
cheese, condensed milk, buttermilk, and sour milk are employed as major ingredients.
Moreover, the rising availability of flavored milk and ice creams in innovative flavors,
such as chocolate, strawberry, vanilla, and almond, is acting as a growth-inducing factor.
Apart from this, key players in developing regions are consistently investing in improving
the milk procurement network and promoting domestic dairy farming practices, which is
creating a positive outlook for the market. In addition to this, the advent of modern
retail facilities and improvement in cold chain logistics, particularly in emerging
economies, are further supporting the market growth. A significant increase in research
and development (R&D) activities in the dairy industry to introduce novel product
variants and expand existing product portfolios is fueling the market growth further.
Other factors, such as rising health concerns, increasing population and rapid
urbanization and industrialization, are also driving the global dairy market growth.
Overview of Dairy Industry in India:
The dairy market in India reached a value of INR 14,899.8 billion in 2022. Looking
forward, IMARC Group expects the market to reach INR 31,185.7 billion by 2028, exhibiting
at a CAGR of 13.2 % during 2023-2028.
India has been the leading producer and consumer of dairy products worldwide since 1998
with a sustained growth in the availability of milk and milk products. Dairy activities
form an essential part of the rural Indian economy, serving as an important source of
employment and income. India also has the largest bovine population in the world. However,
the milk production per animal is significantly low as compared to the other major dairy
producers. Moreover, nearly all the dairy produce in India is consumed domestically, with
most of it being sold as fluid milk. Because of this, the Indian dairy industry holds
tremendous potential for value-addition and overall development.
E. KEY BUSINESS SEGMENTS:
The Company is a diversified, research and development focused food processing Company
with operations in three key business verticals i.e. milk and milk products, Frozen Foods
and namkeen products. The company is diversified in other sub-segments like bakery
products, sweets and frozen vegetables. Detailed information of two key busi ness segments
are as below:
MILK AND MILK PRODUCTS:
Sheetal began as a milk and milk products company, and is now known for its 100% pure
milk ice creams, which set it apart from competitors who mostly offer frozen
desserts.Sheetal has three ice cream brands: Sheetal, JAdore, and Rich Cream Ice
Creams.Sheetal brand offers over 170 products in a variety of categories, including cups,
premium cups, ripple special, sugar free, jamel lassi, kids special, candies, kulfi,
cones, novelties, classic series, sandwich, cakes, tubs, party pack, and catering pack.
Jadore Ice Creams has over 73 flavors in the following categories: cups, cones, candy,
bar, sticks, naturals, novelties, cakes, pastry, and take home. Rich Creams come in over
10 varieties.Sheetal Cool Products Ltd also offers a variety of milk and milk products,
including:Sheetal Gold, Sheetal Silver, Sheetal Taza, Sheetal Slim N Trim, Sheetal Tea
Special, Sheetal Anytime Tea, Sheetal Curd, Sheetal Buttermilk, Sheetal Butter. These
products are all made with high-quality ingredients and are stored in a way that preserves
their freshness.
NAMKEEN, BAKERY PRODUCTS AND FROZEN ITEMS:
The namkeen segment is having a wide range of 88+ varieties with delicious taste ,
quality and hygiene at a reasonable cost is its remarkable trademark. Sheetal Frozen Food
Segment has been established with remarkable characteristics of Sheetal Cool Products.
Pizza, Pav bhaji, varieties of Parathas , Vada Pav, Chinese Bhel, etc are some of the
delicious frozen food products from our manufacturing unit. The bakery products are
Cookies, Khari, Rusk, Bread, Pav, etc. There are also differently flavored sweets, daily
used frozen vegetables etc.
F. BUSINESS OPPORTUNITIES AND OUTLOOKS:
The Budget 2022-23 seeks to lay the foundation of the Indian economy over the Amrit
Kaal period of the next 25 years leading to 100 years of independence in 2047. The
government is emphasizing the role of PM GatiShakti, Inclusive Development, Productivity
Enhancement & Investment, Sunrise Opportunities, Energy Transition and Climate Action,
as well as Financing of Investments.
India is one of the fastest growing economies globally and the Government of India is
determined to make it a five trillion economy by 2025. A growing working population and
rapid urbanization will drive strong consumption growth, boosting demand for dairy and
dairy products in India. Product innovation is always needed as consumers not only prefer
safe ingredients and additives but also useful ones. We creates opportunities mainly in
product innovation, specialized products, and product extensions for the various existing
food processors. Consumers have become aggressive in demanding better, safer, and
convenient food products and are willing to pay a higher price for health and convenience.
The performance of the company is expected to improve with stabilized economic
situation in India and across the globe. We expect this trend to continue at least in the
foreseeable future. Hence, the Company does not see any medium to long term risks in the
companys ability to continue as a going concern and in meeting its liabilities as and
when they fall due.
G. CHALLENGES/THREATS:
Unseasonal Rainfall Impact: One of the significant setbacks we encountered this year
was the unexpected and untimely rainfall in Gujarat, which is one of the largest ice cream
markets in India. Sales for the last quarter of this year experienced a sharp decline as
compared to the corresponding period in the previous year. Typically, March marks the
onset of warmer weather and a surge in ice cream sales, but these unusual weather
conditions disrupted our sales cycle.
Despite these formidable obstacles, our commitment to delivering the highest-quality
products at exceptionally competitive prices remains unwavering. We are well-prepared to
confront and overcome these challenges as we continue our journey forward.
H. Segment - wise or product - wise performance:
Segment Reporting as defined in Ind AS 108 is not applicable since the Company operates
in only one segment.
I. Risk and Concern
1. The Company is facing risk and concern with respect to Susceptibility of
profitability to changes in government policies and environmental conditions along with
volatility in raw material prices Milk prices: Milk Prices are sensitive to government
policies as marked by Minimum Support Price and other regulations. Milk being a major raw
material for SCPL, makes it susceptible to government regulations and to risks related to
volatility in global milk powder prices. The key raw materials for manufacturing ice-cream
are skimmed milk powder, milk, butter, and cream, which the company procures from local
dairies or farmers.
2. The Company is facing risk and concern with respect to Seasonality of demand as well
as challenges arising from changing consumer tastes and preferences.
3. The Company is facing risk and concern with respect to High competition in the ice
cream segment from the organized as well as unorganized markets: Indian ice-cream market
is largely dominated by un- organized players with innumerable small and seasonal
companies doing the business in various regions. Further, there are large number of big
and medium-sized ice-cream companies in India which leads to a highly competitive
environment. Although, there is a huge opportunity for industry players since India is one
of the fastest growing markets for ice-cream consumption due to its large population and
growing per capita income; however, the company faces high competition from various other
established brands like Amul, Havmor, Kwality Walls, Cream Bell, Mother Dairy, Vadilal,
Top N Town, Dinshaws, etc in its various key markets However, Company is equipped to
meet the challenges by better marketing tactics and effective management to overcome all
such challenges.
J. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:
The Company has in place an adequate system of internal control commensurate with its
size and nature of business. The system provides reasonable assurance in respect of
providing financial and operational information, complying with applicable statutes,
safeguarding of assets of the Company and ensuring compliance with corporate policies.
The Company has availed the services of independent professional firm for Internal
Audit, which checks the effectiveness of the internal controls with an objective to
provide an independent, objective, and reasonable assurance of the adequacy and
effectiveness of the Companys risk management, control, and governance processes. The
scope and authority of the Internal Audit activity are approved by the Audit Committee.
Internal Auditor reports directly to the Audit Committee of Board. Audit Committee
periodically reviews the Internal Audit Reports and issues guidance and advice. The Audit
Committee also seeks the views/opinions of statutory auditors on the adequacy of the
internal control systems in the Company. Minutes of the Audit Committee are put up to the
Board of Directors. The Companys Audit Committee reviews adherence to internal control
systems, internal audit reports and legal compliances. This committee reviews all the
results of the Company and recommends the same to the Board for its approval.
K. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES:
Our people are our strongest asset. The Company invests in building best-in-class
teams, led by exceptional professionals. Over the years, the Company has nurtured a
meritocratic, empowering, and caring culture that encourages excellence. The Company
encourages the development of talent by providing its people with opportunities to sharpen
their capabilities, encouraging innovation, lateral thinking, and developing multiple
skills. Through this approach, it prepares its people for future leadership roles.
The management is focused on a transformational Human Resources Strategy, which
supports the constant reinforcement of our competitive advantage. During the year, the
Companys industrial relations remained cordial with its employees.
The Company has 1534 employees as of the closure of the Financial Year.
L. PROGRESS DURING THE YEAR:
The company has taken certain steps in the last year to increase the growth which
resulted into maintain the turnover. Highlights of certain steps as follows:
In a significant step forward, Sheetal successfully entered a Memorandum of
Understanding (MOU) with the esteemed Adani Group, opening new avenues for collaboration
and growth.
Following the successful completion of our US export, we have seen a significant
increase in demand for our products. We have also started exporting to other countries,
such as Singapore, Japan, South Korea, Seychelles, and more. This has allowed us to win
the hearts of millions of people with our delicious products.
To meet the growing demand, we have expanded our distribution network and now have
channel partners in over 6 more states. We are committed to providing our products to as
many people as possible, and we believe that this expansion will help us achieve our goal.
M. Financial Performance: Comparison of F.Y 2022-2023 with F.Y 2021-22.
Financial Performance with Respect to Operational Performance is discussed in the main
part of the Report.
Details of Key Financial Ratio are given below:
Reason for change for more than 25%
| Ratios |
2022-23 |
2021-22 |
Change % |
Details of Significant Change |
| Current Ratio (In times) |
1.77 |
1.76 |
0.89% |
- |
| Debt-Equity Ratio (In times) |
0.92 |
1.01 |
-9.64% |
- |
| Inventory Turnover Ratio (In times) |
1.60 |
2.24 |
-28.59% |
Refer Note No. 1 |
| Debtors Turnover Ratio (In times) |
28.42 |
24.85 |
14.39% |
- |
| Interest Coverage Ratio (In times) |
6.00 |
8.24 |
-27.18% |
Refer Note No.2 |
| Net Profit Ratio |
6.01% |
5.61% |
7.13% |
- |
| Operating Profit Margin |
16.67% |
14.40% |
15.80% |
- |
| Return on Net worth |
24.51% |
28.64% |
-14.44% |
- |
1. Inventory Turnover Ratio
Due to the increase in inventories during the year, inventory turnover ratio has
decreased in the current year.
2. Interest Coverage Ratio
In CY the interest coverage ratio is decreased, as the interest expenses is increased
during the year on account of maximum utilization of Companys short-term funds.
N. Details of any change in Return on Net Worth as compared to the immediately previous
financial year along with
a detailed explanation thereof: Return on Net Worth is decreased in current year, as
the average net worth of the company is increased as compared to previous year.
Disclosure of Accounting Treatment:
In the preparation of financial statements, there is no treatment different from that
prescribed in an Accounting Standard has been followed during the financial year under
review.
|
By Order of the Board of Directors |
|
For Sheetal Cool Products Limited |
|
Bhupatbhai D. Bhuva |
| Date: September 02, 2023 |
Chairman & Managing Director |
| Place: Amreli |
[DIN: 06616061] |
+91-9892691696
