temptation foods ltd share price Directors report

TEMPTATION FOODS LIMITED ANNUAL REPORT 2009-2010 DIRECTORS REPORT To, The Members of, Temptation Foods Limited Your Directors have pleasure in presenting the 19th Annual Report together with the audited statement of accounts for the year ended March 31, 2010. Financial Results: (Rupees in Mn.) Particulars 2009-10 2008-09 Income 12,788.01 8,719.81 Less:- Expenditure 11,592.83 7,953.43 Profit Before Tax, Financial Expenses, Depreciation and Extraordinary Items 1,195.18 766.38 Less: Financial Charges 211.09 109.86 Depreciation 113.26 81.34 Profit for the year before Extraordinary Expenses and Taxes 870.83 575.18 Less: Extraordinary Item 119.59 25.19 Profit for the year after Extraordinary Expenses and before Taxes 751.24 549.99 Less : Provision for Taxes & Tax Adjustments 121.79 23.04 Profit After Tax 629.45 526.95 Balance Brought Forward from Previous Year 681.50 172.18 Less: Interim Divided (2008-09) and Dividend Distribution Tax thereon - 17.63 Less: Proposed Final Dividend (2009-10) and Dividend Distribution Tax thereon 22.06 - Surplus carried to Balance Sheet 1,288.89 681.50 Operations: During the year under review, your Company has shown sterling performance in as much as the sales turnover has increased from Rs. 8,700.74 Mns in 2008-09 to Rs. 12,766.48 Mns in 2009-10, representing an increase of about 46.73% and the profit after tax has gone up from Rs. 526.95 Mns to Rs.629.45 Mns representing an increase of about 19.45%. Dividend: Your Directors have recommended a dividend of Rs. 0.75 paise per equity share of Rs. 10 each, fully paid up i.e @ 7.5% for the financial year ended March 31, 2010. The dividend will be paid to members whose names appear in the Register of Members as on August 19, 2010. In respect of shares held in dematerialised form, it will be paid to members whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited as beneficial owners as on August 19, 2010. Business Prospects: In spite of recessionary trends, your Company has achieved a robust growth in sales and margins were safeguarded by initiating backward integration and enhancing production capacities thereby increasing scale of production and controlling the processing costs. The production of all processes food products were brought under one roof at its Jejuri Plant from the outsourced units, so as to have better control over quality. Good monsoon coupled with global recovery augurs well for the business and the Company has ambitious plans in the coming year, with emphasis on expansion by introducing several new variants in all the product segments- sauces, conserves, mayonnaise to cater to the mass market and to re launch the existing product range in attractive packs to consolidate the premium image in the niche market. Forfeiture of Application Money: In the previous year, your company had allotted 7,300,000 warrants including 300,000 warrants allotted to its Directors and its business associates, on preferential basis on August 11, 2008. Each warrant was convertible into one equity share of the Company, fully paid up, at a conversion price of Rs. 200 per share. The option was required to be exercised within a stipulated period of 18 months from the date of allotment. The Warrant holders had paid 10 % of the conversion price at the time of allotment amounting to Rs. 146,000,000/- (Rupees Fourteen Cr Sixty Lakhs), which stands forfeited and credited to the Capital Reserve Account, since the options were not exercised by the concerned allottees within the stipulated period consequent to the sharp decline in the share price. Transfer to General Reserve: During the year, Company has transferred Rs. 2,613,173/- to General Reserves consisting of Special Capital Incentive Rs. 2,500,000/- and Subsidy from Government Rs. 113,173/-, since the said reserves became free on fulfiling the conditions relating thereto. Borrowings: During the year, your company has been sanctioned funded and non-funded working capital limits of Rs. 115 Cr by a bank against the security of the movable and immovable assets of the company and the corporate guarantee from the promoter company. The limits have been draw-down depending upon the requirements of your company. A financial institution renewed working capital of Rs. 49 Cr during the year. Employees Stock Options: 256,600 share options allotted to the employees of the Company under the Employees Stock Option Scheme, 2008 are outstanding. The exercise price was Rs. 150 per share. The price was subsequently revised to Rs. 40 per share by the Board of Directors in its meeting held on April 27, 2009 and confirmed by the shareholders in Annual General Meeting held on August 10, 2009. The disclosures prescribed under the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are annexed hereto. Non Renewal Of Group Gratuity Policy With Lic: Your Company has Employees Group Gratuity Scheme with the Life Insurance Corporation of India (LIC) to fund the defined benefits plan for the qualified employees. The scheme provides for lump sum payment to employees on retirement, death while in employment or termination of employment of an amount equivalent to 15 days salary for every completed year of service or part thereof in excess of six months, provided the employee has completed five years in service. The said policy has not been renewed by your Company. In view of the above, LIC has not given the detailed disclosure required under AS-15. The disclosure in the notes to accounts is based on the renewal notice received from LIC which in opinion of your Company satisfies the requirements relating to disclosure of gratuity liability as per AS-15.The Auditor in their report has mentioned regarding non renewal of Group Gratuity Policy with Life Insurance Corporation of India. Your Company is in the process of exploring alternate avenues with regard to renewing the Group Gratuity Policy with LIC or to make payment of Gratuity liability from its own internal sources. Fixed Deposits: Your Company has not accepted any fixed deposits from public during the year under review. There are no outstanding deposits, which have remained unpaid. Temptation Foods Fze (Fze): Your company has incorporated a company by the name of Temptation Foods FZE (FZE), limited by shares, in the Sharjah Airport Free Trade Zone, of which it is likely to hold 51% of the equity share capital. Temptation Foods FZE (FZE), is intended to be used as a special purpose vehicle for acquisitions of business overseas and /or for raising of funds overseas. Temptation Foods International Limited: Your Company had incorporated Temptation Foods International Limited (TFIL), in the British Virgin Islands (BVI). Your Company currently envisages that the purpose for which TFIL is formed may not materialize now and hence Company did not pay BVI Annual License Fees. As the said fees are not paid, the above said Company has been stuck off from the BVI Government Register and hence it is not a subsidiary of your company. As per BVI laws, company can be restored at anytime up to ten years after the strike off date by paying prescribed fees. As and when required your Company will restore the name of above said company. Disinvestment in the Shares of Kohinoor Foods Limited (KFL): Keeping in view the declining market price of equity shares of KFL, your Company decided to disinvest/sell the shares of KFL, in order to prevent further loss to your Company. By selling the said equity shares of KFL, your company suffered a loss of Rs. 119,589,019/-. The Directors of the Company had visualised an appreciation in price and consequential profits, but due to adverse market scenario, the same did not materialize. Inspection Under Section 209A of the Companies Act, 1956: During the year, inspection under Section 209 A of the Companies Act, 1956 has been carried out by the office of Ministry of Corporate Affairs. No irregularities other than of a compoundable nature has been observed by the Investigating authority. Your Company is in the process of filing compounding applications with the Authorities against the observations / remarks of the Investigating authority. Directors: Dr. S. Kaushik was appointed as an additional Director w.e.f. January 29, 2010. In terms of Section 260 of the Companies Act, 1956, he shall hold office only up to the date of the ensuing Annual General Meeting. The Company has received notice in writing from a member proposing his candidature for the office of Director liable to retire by rotation. Mr.R.V.Joshi and Mr. G.Ramachandran resigned as Directors from the Board with effect from January 29, 2010 and May 28, 2010 respectively. The Board places on record its deep sense of appreciation for the valuable contributions made by them during their tenure as Directors of the Company. Ms. Elizabeth Harrington retires by rotation and being eligible, offers herself for re-appointment at the forthcoming Annual General Meeting. Directors Responsibility Statement: Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors Responsibility Statement, it is hereby confirmed : a) That in the preparation of the Annual Accounts for the year ended March 31, 2010, the applicable Accounting Standards have been followed and proper explanations were provided for material departures, if any. b) That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the Financial Year and of the profit of the Company for the year. c) That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. d) That the Directors have prepared the Annual Accounts for the Financial Year ended March 31, 2010 on a going 19.45% concern basis. Corporate Governance: Your Company has been practicing the principles of good Corporate Governance over the years and it is a continuous and ongoing process. A detailed report on Corporate Governance practices followed by your Company in terms of Clause 49(vi) of the Listing Agreement with Stock Exchange is provided separately in this Annual Report. Secretarial Audit: As per SEBI requirement, Secretarial audit is being carried out at specific periodicity by a Practicing Company Secretary. The findings of the audit have been satisfactory. Additional Information Pursuant To Section 217: a) Information as per Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 is enclosed herewith by way of an Annexure. b) Additional information pursuant to Section 217(1) (e) of the Companies Act, 1956, read with Companies (Disclosure of Particulars) Rules, 1988 is enclosed herewith by way of an Annexure. Auditors: M/s. Sharp and Tannan, Chartered Accountants, hold the office as Auditors of your Company till the conclusion of the forthcoming Annual General Meeting and have expressed their willingness to be reappointed. Their reappointment, if made, would be within the limits specified under section 224(1-B) of the Companies Act, 1956. Members are requested to reappoint them and fix their remuneration. Acknowledgement: Your Directors take this opportunity to place on record their appreciation to the contribution made by the employees to the working of the Company. Yours Directors also express gratitude to the customers, suppliers, shareholders, banks, financiers and investors for the confidence reposed in your Company and for their continued co-operation during the year under Report. By Order of the Board of Directors Sd/- Vinit Kumar Chairman & Managing Director Place : Mumbai Date : May 28, 2010 Disclosures prescribed under the SEBI: (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 annexed to Directors Report: a. Options granted : 256,600 b. Exercise price : Rs. 40/- (In the AGM of the Company held on 10th Aug, 09, the exercise price of Rs. 150/- was revised to Rs. 40/- per share). c. Options vested : Nil d. Options exercised : Nil e. Total number of shares arising on : Nil exercise of options f. Options lapsed : Nil g. Variations in terms of options : None h. Money realised on exercise of : Nil options i. Total number of options in force : 256,600 j. 1) Options granted to senior management personnel: Name and Designation : Number of Options i) Mr. Vipin Chandok, President - Mergers and Acquisitions & New Initiatives : 10,000 ii) Mr. Nimish Thakore, President - Corporate Affairs and Company Secretary : 15,000 iii) Mr. Shyam Mahale - President - Corporate Planning : 10,000 iv) Mr. Sridhar Sarathy Business Head - Everfresh. : 30,000 v) Mr. Swapnil Shaha Vice President - Domestic Sales & Distribution : 15,000 k. Any other employee who during the year has been granted options amounting to 5% or more of the options issued during the year Nil : Nil l. Employees who have been granted options equal to or exceeding 1% or more of the issued capital of the company at the time of the grant : Nil m. Diluted earnings per share after Extra Ordinary Items and after considering the issue of shares on exercise of options : Rs. 25.04 n. Proforma Adjusted Net Income and Earnings per Share: Net Income after Taxes and before Extraordinary Expenses - as Reported : Rs. 749.04 Mn. Add: Intrinsic Value Compensation Cost : Rs. 10.39 Mn. Less: Fair Value Compensation Cost : Rs. 23.09 Mn. Compensation Cost Differential Employee Compensation Cost : Rs. 12.70 Mn. Adjusted Pro forma Net Income before Extraordinary Expenses : Rs. 736.34 Mn. Net Income after Taxes and after Extraordinary Expenses - as Reported : Rs. 629.45 Mn. Add: Intrinsic Value Compensation Cost : Rs. 10.39 Mn. Less: Fair Value Compensation Cost : Rs. 23.09 Mn. Differential Employee Compensation Cost : Rs. 12.70 Mn. Adjusted Pro forma Net Income after Extraordinary Expenses : Rs. 616.75 Mn. Basic Earnings Per Share after Taxes and before Extraordinary Expenses: - As Reported : Rs. 29.79 - Adjusted Pro-forma : Rs. 29.29 Basic Earnings Per Share after Taxes and after Extraordinary Expenses: - As Reported : Rs. 25.04 - Adjusted Pro-forma : Rs. 24.53 Diluted Earnings Per Share after Taxes and before Extraordinary Expenses: - As Reported : Rs. 29.79 - Adjusted Pro-forma : Rs. 29.29 Diluted Earnings Per Share after Taxes and after Extraordinary Expenses: - As Reported : Rs. 25.04 - Adjusted Pro-forma : Rs. 24.53 o Weighted average exercise price of : During the year no additional Options granted during the year whose options were granted. a) Exercise price equals market price : Not applicable b) Exercise Price is greater than : Not applicable market price c) Exercise Price is less than the : Not applicable market price Weighted average fair value of Options granted during the year whose: a) Exercise price equals market price : Not applicable b) Exercise Price is greater than : Not applicable market price c) Exercise Price is less than the : Not applicable market price p. Description of the Method and the : The fair value of the options significant assumptions used to granted has been estimated estimate the fair value of the options: using the Black-Scholes option pricing model. Each tranche of the vesting has been considered as a separate grant for the purpose of valuation. The assumptions used in the estimation of the same have been detailed below: Weighted average values of the options granted during the year F.Y. 2008-09: i) Stock Price : i) Rs. 289.65 ii) Volatility : ii) 51.81% iii) Risk free rate : iii) 9.14% iv) Exercise Price : iv) Rs. 40/- (In the AGM of the Company held on 10th Aug, 09, the exercise price of Rs. 150/- was revised to Rs. 40/- per share). v) Time to maturity : v) 4.20 years vi) Dividend yield : vi) 0.00 Information Under Section 217(1)(E) of The Companies Act, 1956 Read With The Companies (Disclosure Of The Particulars In The Report Of The Board Of Directors) Rules, 1988 And Forming Part Of The Directors Report For The Year Ended 31st March, 2010. Particulars Year ended Year ended 31st March, 31st March, 2010 2009 1. Power and fuel Consumption: i) Electricity: a) Purchased units 8,479,146 7,999,361 Total Amount (Rs.) 55,486,311 46,911,070 Rate / Unit (Rs.) 6.54 5.86 b) Own Generation Through Diesel Generators: Units 191,218 803,212 Units per Litre of Diesel Oil Cost/Unit 9.93 8.83 ii) Coal Nil Nil iii) Light Diesel Oil - - Quantity (Litres) 3,603,513 1,743,771 Total Amount (Rs.) 154,499,774 72,272,137 Average Rate (Rs.) 42.87 41.45 iv) Other/Internal Generation Nil Nil 2. Consumption per unit of production (Mt): Electricity (Units) 406.37 340.66 Diesel Oil (Litres) 172.70 74.26 3. Technology Absorption, Adaptation and Innovaton: - NIL - 4. Foreign exchange earnings and outgo: Particulars relating to foreign exchange earnings and outgo appear in Note No. 24 (g) and (f) of Schedule B being Notes forming part of the Accounts. MANAGEMENT DISCUSSION AND ANALYSIS TFLs business consists of frozen food and processed food. The Company processes and individually quick freezes fruits, vegetables and marine food. TFLs other products are conserves, jams, marmalade, sauces, mayonnaise, salad dressings and honey. During the year, the Company has also forayed into the agri-infrastructure industry, initially with a major stake a Mega Food Park, in one of the largest fruit and vegetable producing states in the Country. THE INDIAN FOOD PROCESSING INDUSTRY: The food processing industry is one of the largest in India. Highly fragmented, most of the sectoral revenue comes from the unorganized sector. The small organised sector is growing at a fast pace. The sub-segments of the food processing sector are fruits and vegetables, milk and milk products, beer and alcoholic beverages, meat and poultry, marine products, grain processing, packaged or convenience food and packaged drinks. The subsegments in which TFL is present are fruits and vegetables, marine products and packaged or convenience foods. The largest component of household consumption expenditure is food and food products. Indias current food consumption is estimated to be at Rs 8,60,000 crore. Processed food accounts for Rs. 4,60,000 crore and primary processed food (includes packed fruits and vegetables, packed milk etc) accounts for Rs. 2,80,000 crore (source:www.ssrn.com). During the last five years, food processing has reduced the food wastage by Rs 8,000 crores and the current level of food wastage is Rs 50,000 crores annually. (source: Business Line, 18 February 2010). Indias fast food market is growing at 30-35% every year (source: Indian Fast Food Market Analysis by RNCOS). The food processing industry grew from 6% in 2009 to around 14.9% in 2010 (source: www.ibef.org). It is expected that the processed food sector will grow to over Rs. 13.50 trillion by 2015 from Rs. 8.2 trillion in 2009-10. The retail food sector is expected to grow to US$150 billion by 2025 (source: McKinsey Research). Indias total food production is likely to double in the next 10 years, leveraging an opportunity for large investments in food and food processing technologies, especially in areas of canning, dairy and food processing, specialty processing, packaging, frozen food or refrigeration and thermo processing. FDI in the food processing sector is expected to reach Rs 1,200 crore in 2010-11. Besides, by 2020, the Indian food processing sector would touch US$318 billion (source: www.ibef.org). India ranks fifth in terms of food production, food consumption, food export and expected growth. The industry size is significant and it is growing at a rapid pace. But the share of the processing industry is relatively low with only about 1.3% of the fruits and vegetables produced going through secondary processing, compared to over 80% in the USA. In India, the low levels of food processing are due to poor storage infrastructure and poor marketing and distribution network. A. Comparison of Food Processing Levels: India is the second largest vegetable producer and third largest fruit producer globally. The country is the worlds largest producer of mangos and bananas. It is among the worlds top five producers for several other fruits and vegetables like onions, cauliflowers, pineapples and oranges, among others. India produces 41% of the worlds mangoes, 30% of cauliflowers, 28% of tea, 23% of cashews, 36% of green peas and 10% of onions (source: Indian Fast Food Market Analysis by RNCOS). However, the scenario is rapidly changing, nationally and internationally. In the domestic market, with growing urbanization, burgeoning middle class, rising income, emergence of organized retailing, the consumer mindset and preferences are evolving towards value-added, packaged and branded products. The international scenario for processed and packaged fruits and vegetables is also undergoing a remarkable shift. Indias capability to produce international quality products is turning international demand to India. As per Food Processing Industries Minister, Subodh Kant Sahai, the food processing industry requires a minimum Rs 1,000 crore investment to strengthen infrastructure. The sector has been granted Rs 400 crore in Budget 2010-11, up from Rs 280 crores allocated last year. The sector has the potential to provide employment or business opportunities to people across the social pyramid. During the last financial year, this sector attracted around Rs 700 crores FDI (source: www. mofpi.nic.in). Domestic and international demand for processed foods, especially frozen foods, is increasing exponentially. Over the years, the domestic frozen F&V grew around 10-12% annually, which is expected to gain further momentum when modern retail chains penetrate the Tier II and Tier III cities. THE MARINE FOOD INDUSTRY: India currently accounts for a small share of the global market in the marine food segment. It exports only about 6 lac tons of marine food, which is valued at about US$2 billion. Indias 8,000 km coast line, 28000 km of rivers and millions of hectares of reservoirs and brackish water, along with an economic zone of around 75 km, contributes to the marine food segment. The government has aggressive targets to increase the exports of marine foods to over US$5 billion in three years (source: Business Line, 18 February 2010) GOVERNMENT SUPPORT: In recent years, government policies have been directed towards facilitating the organized sector, liberalizing agri-marketing laws and FDI policies, rationalizing tax laws and improving capital subsidies. These initiatives channelized investments towards improving productivity, infrastructure and logistics and the consequent industry growth. The government has formulated a Vision-2015 action plan with specific targets to treble the size of the food processing industry from around US$70 billion to about US$210 billion. The levels of processing of perishables would be increased from 6 per cent to 20 per cent. The government wishes to enhance Indias share in global food trade from 1.5 per cent to 3 per cent, and it has plans to invest US$21.9 billion in the food processing industry over the next five years (source:mofpi.nic.in). To further support the food processing sector, the Ministry of Food Processing Industries has proposed to set up the National Institute of Food Technology, Entrepreneurship and Management (NIFTEM). The Food Processing industry is included in the list of Priority Sector Lending for banks. Fruit and vegetable processing units have been completely exempted from paying excise duty. The Ministry of Food Processing Industry would assist in the setting up of more food processing units, creating 10 million jobs by 2015 (source:mofpi.nic.in). The government is also keen to set up more Food Parks. External commercial borrowing will be made available for cold storage or cold room facility including farm level pre-cooling, for preservation or storage of agriculture and allied produce, marine products and meat. Automatic approval for foreign equity up to 100 per cent is permitted for most of the processed food items. BUSINESS OVERVIEW: Competitive Strengths of TFL: * TFL enjoys a locational advantage as all plants are located near the raw material sources. The raw materials are sourced from North and West regions. TFL has a plant in North India at Sonepat and in West India at Jejuri * Strong brand equity and a wide products variety * Wide geographic coverage with international presence * Use of modern technologies and processes * Strategic relationships with customers, suppliers and supply chain vendors * Professionally managed and experienced management team TFLS Strategy: The Company is well positioned and equipped to exploit the enormous opportunity that exists in the food processing industry. It is following a three-pronged strategy to optimize shareholder value, based on the following: * Grow existing business: Maximize revenues through private label packing * Move up value chain: Own brands and aggregate undervalued food brands * Enter into other key verticals: Leverage management strengths and drive synergies TFLs conscious de-risking strategy involves the following: * De-risk international exposure: Reduce dependence on international markets by building a robust, sustainable and profitable domestic retail business. * De-risk customer dependence: Reduce dependence on key anchor customers. This has been done successfully with large new export buyers acquired during the year. * De-risk cyclicality: Reduce impact of cyclical variations in raw material procurement prices and availability by building a robust contract farming network and capturing value right across the food chain. BRAND STRATEGY: TFL offers branded food products across all of its product categories and aims to extend its reach to a cognitive market share of the Indian kitchen. The Company has been investing and consolidating its brands. During the year, it took steps towards maturing its brands (Everfresh and Karen Anand) by adding to the product base, while simultaneously increasing its distribution networks. ACQUISITION STRATEGY: The Companys mainstay has been inorganic growth to increase market share, widen product base and create shareholder value. It also wishes to ensure its own brands, rather than merely producing or distributing products belonging to brands owned by others. SUPPLY CHAIN: TFL tries to bridge the gap between product manufacture and consumer offtake through continuous efforts to effectively improve and channelize the supply chain management. Stringent quality norms are followed for procurement and processing of fresh fruits and vegetables and then converting them into frozen products. The procurement is done during the season and stored and sold during non season periods. The products are thereafter transported by refrigerated vans at - 180C. Minimal handling during transportation ensures that product temperature remains intact. The Cold Chain (owned/leased) is based on state-of-theart technologies to ensure maintenance of required temperatures and quality throughout the year. The robust supply chain ensures that customers receive the best quality products. PERFORMANCE REVIEW OF TFL DURING 2009-10: The Company continued to achieve record growths in all business segments, for the fourth year in a row, with production, procurement and sales volumes and values recording substantial jumps. FROZEN FRUITS AND VEGETABLES: The Company continued its position as the largest player in the domestic frozen fruits and vegetables business in the country, with a Rs. 8,479.45 million sales turnover. Since its acquisition of the Everfresh Brand, TFL has religiously increased the product range to include several new frozen fruits and vegetables. TFL has scaled up operations manifold, including outsourcing of productions to units in raw material producing areas. While green peas and sweet corn continue to constitute a bulk of this business, other products are also gradually gaining popularity. The Company expects to be able to continue to grow this business segment, in terms of gross revenue and net revenue. PROCESSED FOODS BUSINESS: The Company bought the business of Karen Anands Gourmet Kitchen late last year, including the Karen Anand brand, covering a wide range of conserves, jams, sauces, mayonnaise and dressings. The brand, known for high end, quality products, has been positioned to cater to the premium segment in the processed food market. During the year, the Company introduced an economy range of jams, sauces and other products under the Everfresh brand to cater to the mass market. It has also introduced packaged honey under this brand in select markets, which received encouraging response. The Company expects the processed food business to grow significantly in the coming years, as the sales and distribution synergies between Karen Anand and Everfresh come into play and with the proposed addition of new and more value-added products to the range. On the whole, during the current year, the Company increased its total income to Rs. 12788.02 million from Rs. 8719.81 million in 2008-09, registering a 47% year-on-year growth. Its PBIDT surged to Rs. 1075.59 million from Rs. 741.20 million in 2008-09, registering a 45.11% year-on- year growth. The Companys PAT jumped to Rs. 629.45 million from Rs. 526.95 million in 2008-09, registering a 19.45% year-on-year growth. NEW INITIATIVES: As a part of the Companys philosophy of growth in related areas, the Company has decided to complement its strong capabilities in the Food Processing Sector, by creating an equally strong capability in the backward linkages for the Food processing sector ie the post harvest agri infrastructure sector. Under this initiative, the Company has acquired a major stake in a Food Park being established at Jangipur in West Bengal in one of the highest fruit and vegetable producing regions in the country - the highly fertile Gangetic plains. The Park is being set up in under Ministry of Food Processing Scheme for Mega Food Parks and involves a grant of Rs 50 cr. The Food Park is being set up, based on a Hub and Spoke Model, involving the creation of an elaborate and well laid out arrangement covering procurement, cleaning, sorting, grading, packing of raw materials from the surrounding regions, to ensure continuous, consistent and quality supplies of raw materials to the processing units coming up in the Park. The Company is in advanced stages of acquisition of similar stakes in more Food Parks and Modern Terminal Markets for fruits and Vegetables. The initiative is intended to equip the Company with strong capabilities and flexibility to capture value, across the value chain. The Company expects to leverage further on this capability for further forays in this business. RISKS AND CONCERNS: Some major areas of risks and concerns, which might impede future growth comprise the following: * Weak supply chain * Inadequate cold chain infrastructure * Availability and cost of power A WEAK SUPPLY CHAIN: A major constraint in the rapid development of organized food processing industry is a weak supply chain. Indias agri-based food production is characterized by: * Bulk production is done by small and marginal farms. * Producers get only about 30% of produce value, while trade intermediaries pocket the balance without corresponding value addition. * Wastages are high at around 35%. * The supply chain is highly unreliable. * No primary processing infrastructure at the production sites; absence of credible institutions to streamline supply chain. * Producers are processors are delinked TFL is making efforts to increase sourcing through contract farming of the required produce. INADEQUATE COLD CHAIN INFRASTRUCTURE: Inadequate quality cold chain infrastructure for handling frozen fruits and vegetables is another area of concern for both the industry and the Company. Its frozen products require storage and handling at -180C requiring large investments. The Company is seriously considering to embark upon this activity on a pan- India basis. AVAILABILITY AND COST OF POWER: In food processing --- particularly in frozen foods - power constitutes the single largest expense head after raw material. The availability of quality power, in required quantities, consistently, at affordable costs is essential for the industry to operate and grow. Across most states in the country, continuous availability of quality power is an area of major concern. Most processors are, therefore, forced to invest in and depend on costly liquid fuel based stand-by power generation facilities, with adverse effects on economics. The Company has been making efforts with the concerned governments to address this on a priority basis. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY: The Companys elaborate internal control systems ensure efficient use and protection of resources and compliance with policies, procedures and statutory requirements. The internal control systems comprise well documented guidelines, authorization and approval procedures, including audit. Intrinsic to the overall governance process, the Company has institutionalised a well established Internal Audit framework, which covers all aspects of financial and operational controls and entails a balanced bottom-up and top-down approach, covering all units, functions and departments. The head of the Internal Audit Department reports directly to the Chairman of the Audit Committee of the Board of Directors, ensuring independence. Internal Audits are performed by an in-house team of professionals and additionally by an independent firm of Chartered Accountants. Reviews are conducted on an ongoing basis, based on an audit plan, which is approved by the Audit Committee at the beginning of the year. Audit findings and recommendations are presented by the Head Audit to the Audit Committee on a quarterly basis. Emphasis is laid on closure of agreed actions and root cause analysis of issues, ensuring that issues are addressed comprehensively. HUMAN RESOURCES: TFLs encouraging performance is the result of a disciplined, focused work culture and involves sustained efforts to retain its workforce. During the year, significant resources and efforts were devoted to people engagement initiatives to support a performance driven culture and to enhance passion for higher productivity. To empower talent and prepare its people with necessary skills, the Company continued to provide employees with appropriate access to training and corresponding development plans including international exposures, wherever feasible. The staff training needs at various levels are periodically assessed and training programmes are conducted using internal resources and/or by engaging external trainers/facilities. The Company works with a Key Responsibility Area based review and recognition strategy that aligns efforts and rewards results. It has an elaborate ESOP plan to reward performance and enable employees to share the benefits of Companys growth. TFL recruited a number of employees at all levels during the year, taking the employee count to 165 as on 31st March, 2010. The Company plans to continue to institute internal surveys to enhance HR practices in line with global standards. CAUTIONARY STATEMENT: Statement in the Management Discussion and Analysis described the Companys objectives, projections, estimates and expectations may be forward-looking statements within the meaning of applicable securities, laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws, vagaries of nature and other incidental factors.