Sinnar Bidi Udyog Ltd Management Discussions

Business of the Company:

The Company operates in the tobacco industry, with tobacco processing and trading as its core activity.

Industry Structure and Developments:

Tobacco is one of the major commercial crops in India. India stands 3rd in production of tobacco and in also in its exports. India is the fourth largest consumer of tobacco in the world.

The Tobacco industry contributes significantly to the economy in terms of employment, income and government revenue. The industry also acts as a major foreign exchange earner for the government.

Many types of tobaccos are grown in India. Of the different types grown, flue-cured tobacco, country tobacco, burley, bidi, rustica and chewing tobacco are considered important. Besides tobacco farming and production, the Indian tobacco industry also consists of companies involved in manufacturing, sales and distribution of tobacco products like cigarettes, cigars, beedis and chewing tobacco.

Opportunities and threats:

Opportunities:

The Company has been first to mechanize the tobacco processing, to ensure consistent quality, taste and hygiene. The Tobacco processing plant, which is situated at Nipani inthe state of Karnataka is the strong point of the Company and its expertise is exhibited in developing specialised blends to satisfy its customers.

The major activity of the Company was trading of Tobacco and processing of Tobacco during the year 2014-15, which it plans to continue in the forthcoming period.

Threats:

The major threat to the business is identified as the discouragement to tobacco industry by the Government. With the notification of The Cigarettes and other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003 the demand for tobacco products in general has been declining thereby affecting the turnover of the Company.

Risks and concerns:

Fiscal year ended March 2015 was another tough year for the Indian tobacco industry, continuing its challenging environment from FY14. The increase in excise duty induced pressure on the sales volume of cigarette companies in the sector. The tobacco production index saw a marginal growth in FY15, lower than that of the last fiscal year. Steep increase in excise duties and stringent packaging norms has contributed to the lower consumption of tobacco, thereby affecting demand for Companys products.

Performance of the Company:

The working of the company during the year could be summarized as under:

Abridged Profit & Loss Statement for 2014-15

(Rs. in lacs)

Particulars	2014-15	2013-14
Net Sales	831.48	1214.46
Other Income	7.39	1.46
Total Income	838.87	1215.92
Manufacturing & Other Expenses	479.95	1093.25
PBDIT	88.92	122.67
Depreciation	8.36	6.57
PBIT	80.56	116.10
Interest	69.08	75.81
PBT	11.48	40.29
Current & DifferedTax	6.31	11.23
PAT	5.17	29.06

Internal control systems and their adequacy

The Company has evolved a system of internal control which is adequate to its size and nature of business operations. The internal control system is designed to ensure desired level of control over the transactions. Internal audit plays an important role as it conducts audit of all key business areas as per a pre-drawn audit plan. The internal audit, among other things, looks at internal controls and gives suggestions for strengthening them.

The Company has a strong management information system which is an integral part of control mechanism and clearly defined roles and responsibilities, down the line for all managerial positions.

Material developments in Human Resources/Industrial Relations

The Companys Human Resource philosophy is to work towards building a strong performance driven culture with greater accountability and responsibility at all levels. The personnel at all levels are made to identify their goals, resources and measurement of their achievement ofthe goals was sought.

For the workers in the tobacco industry, the Company has taken innovative employee welfare initiatives. Our deep-rooted work ethics ensure that both the management and workers help each other to achieve the goal of production and distribution of wealth upon principles of equity, reason and common good. We incessantly endeavour to create a scalable business model for our people, our biggest assets. These include working towards the benefit and safety through various welfare activities for the workers and their families, which include comprehensive medical and educational facilities.

Cautionary Statement:

Statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations and predictions may be "forward looking statements" within the meaning of applicable securities law and regulations. Actual results could differ materially from those expressed or implied, important factors that could make difference to the Companys operations include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in the government regulations, tax regimes, economic developments in India and other incidental factors.