Disclaimer
The section contains a discussion on the opinions and perceptions of
the Management on the trends that impact the Company. It has been collated from
Information available publicly and reports by various nodal and governmental agencies that
the Management believes to be accurate at the time publishing this report. The Company
does not undertake or revise any of the opinions or statements expressed in this report
consequent to, inter alia, revisions to the reports mentioned herein, new information,
future events or otherwise.
This Management Discussion and Analysis Report presents a brief
presentation of Companys performance over the previous years and simultaneously attempts
to make a fair and practical analysis of our strengths and weaknesses and our position at
micro level vis a vis the global scenario. While we recapitulate our past performance in
this Annual Report, we have also endeavored to present our areas of focus which we feel
would help the Company to go to next level.
This report contains forward-looking statements, identified by words
like plans, expects, will, anticipates, believes, intends, projects,
estimates and so on. All statements that address expectations or projections about the
future, but not limited to the Companys strategy for growth, product development, market
position, expenditures and financial results, are forward-looking statements. Since these
are based on certain assumptions and expectations of future events, we do not guarantee
that these are accurate or will be realized.
Our actual results, performance or achievements could thus differ from
those projected in any forward-looking statements. We assume no responsibility to publicly
amend, modify or revise any such statements on the basis of subsequent developments,
information or events.
INDUSTRY AND DEVELOPMENTS
Global Market for Frozen Food Industry:
The frozen food market size was valued at $244.3 billion in 2020, and
is estimated to reach $404.8 billion by 2027, registering a CAGR of 5.0% from 2020 to
2027. Frozen food is defined as food products that are preserved under low temperature and
used over a long period. The product market comprises various food products, including
ready meals, vegetables & fruits, potatoes, meat & poultry, seafood, and soup.
Frozen ready meals further include packaged ready-to-eat foods, bakery, snacks, and
desserts. Business buyers such as hotels, caterers, restaurants, and fast food chains are
among major users of frozen food products that include frozen vegetables & fruits,
potatoes, and non-veg products. The global frozen food market size was $285.18 billion in
2022 & is projected to grow from $297.47 billion in 2023 to $412.93 billion in 2030
Frozen meat & poultry and seafood are among the most commonly used
grocery items across North America and Europe. Europe is the largest market of frozen
bakery and desserts. The retail frozen food industry is evolving, and is in its nascent
phase in markets such as India. However, it has witnessed a steady growth since the past
few years.
The world has witnessed a significant growth in the women employment
rate. With increase in number of employed women, it becomes significantly difficult for
them to cook meals, which results in consuming frozen ready meals. For instance, according
to the United States Department of Labour, the U.S. female employment rate in 2020 was
55.9%. Similarly, in China, the women employment rate was around 61.61%, and in South
Africa it was around 46.21%. All these factors collectively drive growth of the market
during the forecast period.
The report segments the market into product type, user, and region. On
the basis of product type, the market is categorized into frozen ready meals, frozen meat
& poultry, frozen seafood, frozen vegetables & fruits, frozen & refrigerated
soups and frozen potatoes. By end user, it is classified into food service industry, and
retail users. Region wise, it is analysed across North America (U.S., Mexico, and Canada),
Europe (Germany, UK, France, Italy, Spain, and rest of Europe), Asia-Pacific (China,
India, Japan, Australia, South Korea, and rest of Asia-Pacific), and LAMEA (Brazil, South
Africa, Argentina and rest of LAMEA).
According to frozen food market analysis On the basis of product type,
the ready meals segment is the largest revenue generator in the current scenario, followed
by frozen meat and poultry products. This is attributed to surge in use of frozen pizza
crusts, bread, and frozen bakery products, which acts as a key driver of the ready meals
segment. Frozen potatoes segment is expected to grow at the fastest CAGR of 5.8% from 2022
to 2032, followed by the segment of frozen seafood products segment, which is expected to
witness a CAGR of 5.6% by 2028. New launches in frozen ready meals owing to increased
investment in R&D of food processing coupled with strengthening distribution network
of frozen food items is expected to contribute significantly to the growth of frozen ready
meals market segment.
By user, the food service industry segment dominated the market,
garnering 58.6% share in 2021, and is expected to continue throughout the frozen food
market forecast period. This is attributed to the fact that the food service industry is
among the major consumers of frozen foods. The food service industry includes hotel
chains, fast food restaurants, cash & carry outlets caterers, and other business
buyers. In addition, the popularity of frozen food in the food service sector is
increasing, as they can be stored and used over a long period of time, which saves
operational costs. Moreover, as they require less time to cook and reduce customer-waiting
time, fast food chains and quick service restaurants have adopted them as substitutes to
fresh ingredients. In addition, increase in internet penetration and quick access to
smartphones have resulted in more purchase through online channels. As a result, several
food chains are shifting toward online portals to enhance online food ordering for these
fast food chains, which, in turn, augment the growth of the product market.
Region wise, Europe was the prominent market in 2021, which accounted
for the maximum share. Large spending capabilities of consumers and economic stability are
some of the major reasons for the growth of the product market in the European region. In
addition, busy lifestyle of consumers acts as a key factor driving the frozen food market
growth. Frozen ready to-eat healthy breakfast segment has gained popularity in recent
years, owing to rise in health-conscious consumers in the region. Europe has been one of
the most lucrative markets for frozen food, owing to the fact that it is home for numerous
food and bakery giants. Moreover, these players operating are continuously striving to
increase their market share by means of effective research & development and product
innovation. In addition, companies are entering into partnerships with other companies to
utilize each others capabilities and outperform the competitors.
THE INDIAN FOOD INDUSTRY
Introduction
The Indian food industry is poised for huge growth, increasing its
contribution to world food trade every year. In India, the food sector has emerged as a
high-growth and high-profit sector due to its immense potential for value addition,
particularly within the food processing industry.
Accounting for about 32 per cent of the countrys total food market,
The Government of India has been instrumental in the growth and development of the food
processing industry. The government through the Ministry of Food Processing Industries
(MoFPI) is making all efforts to encourage investments in the business. It has approved
proposals for joint ventures (JV), foreign collaborations, industrial licenses, and 100
per cent export oriented units.
Market Size
The Indian food and grocery market is the worlds sixth largest, with
retail contributing 70 per cent of the sales. The Indian food processing industry accounts
for 32 per cent of the countrys total food market, one of the largest industries in India
and is ranked fifth in terms of production, consumption, export and expected growth. It
contributes around 20.2 per cent of Gross Value Added (GVA) in Manufacturing and
Agriculture respectively, 19.92 per cent of Indias exports and ten per cent of total
industrial investment. The Indian gourmet food market is currently valued at US$ 1.3
billion and is growing at a Compound Annual Growth Rate (CAGR) of 20 per cent. Indias
organic food market is expected to increase by five times by 2024#.
The online food ordering business in India is in its nascent stage, but
witnessing exponential growth. With online food delivery players like Food Panda, Zomato,
TinyOwl and Swiggy building scale through partnerships, the organized food business has a
huge potential and a promising future. The online food delivery industry grew at 150 per
cent year-on-year with an estimated Gross Merchandise Value (GMV) of US$ 300 million in
2016.
Investments
According to the data provided by the Department of Industrial Policies
and Promotion (DIPP), the food processing sector in India has received around US$ 7.87
billion worth of Foreign Direct Investment (FDI) during the period April 2000-March 2021
The Confederation of Indian Industry (CII) estimates that the food processing sectors have
the potential to attract as much as US$ 33 billion of investment over the next 10 years
and also to generate employment of nine million person-days.
Government Initiatives
Some of the major initiatives taken by the Government of India to
improve the food processing sector in India are as follows:
The Government of India aims to boost growth in the food processing
sector by leveraging reforms such as 100 per cent Foreign direct investment (FDI) in
marketing of food products and various incentives at central and state government level
along with a strong focus on supply chain infrastructure.
In Union Budget 2017-18, the Government of India has set up a dairy
processing infra fund worth Rs 8,000 crore (US$ 1.2 billion).
The Government of India has relaxed foreign direct investment (FDI)
norms for the sector, allowing up to 100 per cent FDI in food product e-commerce through
automatic route.
The Food Safety and Standards Authority of India (FSSAI) plans to
invest around Rs 482 crore (US$ 72.3 million) to strengthen the food testing
infrastructure in India, by upgrading 59 existing food testing laboratories and setting up
62 new mobile testing labs across the country.
The Indian Council for Fertilizer and Nutrient Research (ICFNR) will
adopt international best practices for research in fertiliser sector, which will enable
farmers to get good quality fertilisers at affordable rates and thereby achieve food
security for the common man.
The Ministry of Food Processing Industries announced a scheme for Human
Resource Development (HRD) in the food processing sector. The HRD scheme is being
implemented through State Governments under the National Mission on Food Processing. The
scheme has the following four components:
Creation of infrastructure facilities for degree/diploma courses in
food processing sector
Entrepreneurship Development Programmed (EDP)
Food Processing Training Centers (FPTC)
Training at recognized institutions at State/National level
Road Ahead
Going forward, the adoption of food safety and quality assurance
mechanisms such as Total Quality Management (TQM) including ISO 9000, ISO 22000, Hazard
Analysis and Critical Control Points (HACCP), Good Manufacturing Practices (GMP) and Good
Hygienic Practices (GHP) by the food processing industry offers several benefits. It would
enable adherence to stringent quality and hygiene norms and thereby protect consumer
health, prepare the industry to face global competition, enhance product acceptance by
overseas buyers and keep the industry technologically abreast of international best
practices.
Exports of processed food and related products
During FY21-22, Indias exports of processed food and related products
(inclusive of animal products) stood at US$ 25.6 billion.
Main export destinations for food products have been the Middle East
and Southeast Asia.
In FY23* Indias exports stood at US$ 32.6 billion.
Frozen Foods Market in India
In recent years, the demand for frozen food has witnessed sharp growth
in India. The rapid growth in the number of modern retail stores and online grocery
stores, along with proper refrigeration facilities are the key factors influencing this
demand. Improved shelf-life and packaging of frozen foods has further propelled growth.
Market insights:
The frozen food market was valued at INR 177.07 Bn in 2021 and is
anticipated to reach INR 224.90 Bn by 2025, expanding at a compound annual growth rate
(CAGR) of ~5.2% during the 2022 2030 period. Rise in the number of millennial and gen-Z
consumers opting for convenience food, improved awareness and acceptance of frozen food
among the urban and semi-urban people are some of the significant factors that push the
market forward. Development of the cold chain infrastructure in India and constant support
are further propelling the market. However, proper cold storage and supply infrastructure
are yet to develop adequately and this is a barrier to the growth of frozen food markets
growth.
Segment insights:
Based on sales channel, the market is segmented into retailers, food
service providers, and exporters. In terms of revenue, the export segment dominated the
frozen food market, accounting for 52.3% of the overall revenue share in 2021. The
retailers segment (online and offline stores) was valued at INR 36.4 Bn in 2021 and is
expected to show maximum growth rate during the forecast period, expanding at a CAGR of
~18.64%. The food service providers segment was valued at INR 36.4 Bn in 2021 and is
expected to reach INR 102.46 Bn by 2025.
COVID-19 impact analysis:
The frozen food business in India was disrupted due to the pandemic and
several prominent manufacturers incurred huge losses due to the shutdown of food joints.
However, the overall market witnessed a mixed impact experiencing both positive and
negative growth. On the one hand, the demand from food service sectors declined and on the
other hand, the online sale of packaged ready-to-eat snacks skyrocketed. Consumers seeking
frozen snacks in local flavors helped bring in new product ranges during lockdown.
Consumers perception toward the processed frozen food products changed positively as the
manufacture and packaging of these items were done in a hygienic way ensuring
sanitization. Online orders of frozen foods and groceries also increased during the
nationwide lockdown. The government also introduced policies such as Integrated
Development of Horticulture (MIDH) which have provided financial support for building and
enhancing cold storage facilities in India, amid the COVID-19 crisis.
| Strengths |
Opportunities |
Threats |
| Experienced Management: |
Market Space: |
Risk due to Liquidity: |
| The Company has a very good experienced Management team. Mr.
A Sri Nagaveer, the Chief Executive Officer posses more than 20 years of experience in the
field of Frozen Food business. |
Currently, the Company is operating in the states of
Telangana and Andhra Pradesh and with the upcoming facility and increased production, we
have the Immediate Market space to expand to adjacent states like Karnataka, Maharashtra,
Odisha, Tamil Nadu and also exploring the option of Exporting our products to various
Middle-East & South- East Asian Nations. |
We are the growing MSME with limited resources of funding
that has been accessed for establishing our new facility. |
|
|
However, due to the sudden spread of coVID19 pandemic, our
regular cash- flow(s) are being adjusted for the day-to- day working capital and the same
time we are at the hope of overcoming these threats in coming days. |
| Good Employee Vintage: |
|
|
| All most all the Key Management Personnel are with the
Company since longer-time of more than 5 years and are qualified staff at Senior and
Middle-level(s) |
|
|
| Established Brand Name: |
|
Threat due to change of Life-style of people in view of
CoVID19 pandemic: |
| We operate in Brand sensitive market and developed it through
a sustainable growth process over the period of last 17 years and majority of our products
are under the brand name "Frozen Kings", "Cornclub" and
the rest are branded with "Samosa" |
|
In the initial days of spread of Pandemic, there were lot of
opinions that the virus is being infected with the fruits, vegetables and frozen Items.
However, the World Health Organization (WHO) declared that the impact with this is very
low and people are now slowly getting habituated to the pre-coVID19 lifestyle. Hence we
are in the risk of meeting our operational performance targets. In order to mitigate this,
your company is taking all the precautions of hygiene and getting awareness among all the
customers about the same and also maintaining the required safety precautions as well. |
| Acceptance and Credibility across Vendors and Farmers: |
Temperature Control Fleets: |
|
| We have developed goodwill among the Market participants,
Vendors, Supermarkets, and all our Farmers, Intermediaries of the Supply chain process and
Distribution and all MNCs and other customers who are continuously supporting us all the
time. |
The Company has more than 17 fleet(s) with the facility of
Temperature control(s) and storage for Distribution and Transportation of goods, that help
us in very much better way to reach our market(s) in a defined and Planned way. |
|
SEGMENT-WISE & PRODUCT WISE REVENUE
Segment wise Reporting is Not Applicable. Entire operations of the
Company relate to only one segment.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUECY
The internal control systems adopted by the Company are adequate and
appropriate to its operations. The system has been designed to ensure that assets and
interest of the Company are protected and dependability of accounting data and its
accuracy are ensured with proper checks and balances.
The Company has appointed an Internal Auditor, to oversee and carry out
an internal audit of the Companys activities. The audit is based on an Internal Audit
Plan, which is reviewed each year in consultation with the Statutory Auditors and the
Audit Committee.
The Internal Audit process is designed to review the adequacy of
internal control checks in the system and covers all significant areas of the Company
operations. The Company has an Audit Committee, the details of which have been provided in
the Corporate Governance Report. The Audit Committee reviews audit reports submitted by
the Internal Auditors.
The Companys Audit committee meets the Companys Statutory Auditors to
ascertain their views on the adequacy of Internal Control Systems in the Company and keeps
the Board of Directors informed of its major observations at periodic intervals.
OTHER RISKS AND CONCERNS
The success of our business depends greatly on our ability to
effectively implement our business and growth strategies. We plan to increase our sales
from the prepared foods or our self-branded foods being sold under the brand of
"Frozen Kings". We also plan to explore additional geographies as well as
ramping up our processing capabilities.
We believe our experience and expertise will help us in executing these
business strategies; however, we may not be able to execute our strategies in time or at
all in the future. Further, our growth strategies could place significant demand on our
management team and other resources and would require us to continuously develop and
improve our operational, financial and other controls, none of which can be assured. Any
failure on our part to scale up our infrastructure and management could cause disruptions
to our business and could be detrimental to our long- term business outlook.
FINANCIAL PERFORMANCE Vs OPERATIONAL PERFORMANCE
Dur revenue from operations on standalone basis increased to 7,954.75
Lakhs from 5977.38 Lakhs in the previous year, at an increase rate of 33.08%. Your Company
has posted yet another impressive year of performance. Out of the total revenue approx.
90% has been generated from the sale of Frozen Products and there is a substantial
increase in sale of other products as well.
| Particulars (Amount in Lakhs) |
FY 2022-23 |
FY 2021-22 |
| Income |
|
|
| Manufacturing & Processing |
8,020.00 |
7,932.98 |
| Sales and Trading |
32.31 |
21.77 |
| Other Income |
6.13 |
41.57 |
| Total |
8,058.44 |
7,996.32 |
| Particulars (Amount in Lakhs) |
FY 2021-22 |
FY 2021-22 |
| Expenditure |
|
|
| Cost of Product & Service |
7,218.87 |
7,107.58 |
| Employee Benefit Expenses |
304.10 |
237.42 |
| Financial Expenses |
222.46 |
232.92 |
| Depreciation & Amortization |
59.47 |
63.67 |
| Other Expenses |
195.98 |
197.26 |
| Total |
8,000.88 |
7,838.90 |
The Companys (Standalone basis) Networth as of FY 2022-23 has been
increased to an extent of 42.47 Lakhs and your Earnings per share stood at 0.79
Cost of products & services mentioned above is net of changes in
inventories of finished goods, work in progress and stock-in-trade.
Sources of Funds
Currently as of March 31, 2023, we have only one class of shares i.e.,
Equity Shares of nominal value 10/- each. Our Authorized Share Capital is 6.50 Crores
divided into 65,00,000 equity shares of 10/- each. The Issued, Subscribed and Paid Up
capital stood at 5,36,67,750 divided into 53,66,775 Equity Shares of 10/- each.
Other than that, of the Equity, the Company posses certain reserves
added back to the Equity shown as Reserve and Surplus as of March 31, 2023.
Investments
Your company has not made any new investment during the period under
review, Further, the investments made by the Company in its following wholly owned
subsidiaries continue to remain as such during the year under review:
Squarepeg Distribution Services (P) Ltd.
Polar Cube Cold Storage Solutions (P) Ltd.
Outlook
Currently the Company has the manufacturing facility of producing near
35,000 to 100,000 pieces of product(s) every day. However, with a view to ease-out the
complex process of manufacturing and to enhance the production capacities, we are
bringing-up a new Manufacturing facility near to the Vijayawada within a space of 80,000
square feet area with the required Food Safety standards that will boost our production
facilities to almost 3 times to the existing capacities.
HUMAN RESOURCES / INDUSTRIAL RELATIONS
Our Company, being a man-power intensive unit, employs skilled as well
as unskilled employees. The employees are trained in order to deliver the appropriate mix
and taste while making corn samosas and other eatables and placed high important to
employees.
Currently the company is providing the Provident Fund, ESI benefits to
all the eligible employees and providing Health Insurance facility for all the senior
employee(s). The Staff vintage with our organization is high.
Details of significant changes (i.e. change of 25% or more as compared
to the immediately previous financial year) in key financial ratios, along with detailed
explanations therefor, including:
Key Financial Indicators:
|
Standalone |
Consolidated |
|
| Sr. No. Particulars |
FY 2022-23 |
FY 2021-22 |
FY 2022-23 |
FY 2021-22 |
Explanation |
| 1 Debtors Turnover Ratio (Times) |
35.52 |
7.73 |
29.44 |
5.55 |
Debtors recovery rate has come to normal from PY |
| 2 Inventory Turnover |
2.32 |
2.21 |
3.71 |
2.24 |
Not Applicable |
| 3 Interest Coverage |
1.26 |
1.68 |
1.39 |
1.78 |
Not Applicable |
| 4 Current Ratio |
1.19 |
1.19 |
1.10 |
1.23 |
Not Applicable |
| 5 Debt Equity Ratio |
1.15 |
0.46 |
1.29 |
0.54 |
Not Applicable |
| 6 Operating Profit Margin |
4.21% |
4.91% |
4.54% |
5.23% |
Not Applicable |
| 7 Net Profit Margin |
1% |
1.35% |
0.82% |
1.56% |
Not Applicable |
| 8 Return on Net worth |
4% |
3.75% |
2.25% |
4.38% |
Not Applicable |
Number of People Employed:
As on 31st March 2023, the employee strength was 217 staff members.
Disclosure of Accounting Treatment
These financial statements have been prepared in accordance with the
generally accepted accounting principles in India under the historical cost convention on
accrual basis. Pursuant to section 133 of the Companies Act, 2013 read with Rule 7(1) of
the Companies (Accounts) Rules, 2014, till the standards of accounting or any addendum
thereto are prescribed by Central Government in consultation and recommendation of the
National Financial Reporting Authority, the existing Accounting Standards notified under
the Companies Act, 1956 shall continue to apply.
There has been no deviation in the accounting treatment from that
prescribed in the Accounting Standards.
Awards : Nil
Certifications:
ISO 22000: 2018 Food Safety Management System · ISO 9001 : 2015
Quality Management System
Cautionary Statement
This report contains forward-looking statements extracted from reports
of Government Authorities / Bodies, Industry Associations etc. available on the public
domain which may involve risks and uncertainties including, but not limited to, economic
conditions, government policies, dependence on certain businesses and other factors.
Actual results, performance or achievements could differ materially from those expressed
or implied in such forward-looking statements. This report should be read in conjunction
with the financial statements included herein and the notes thereto. We assume no
responsibility to publicly amend, modify or revise any such statements on the basis of
subsequent developments, information or events.
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