Tirupati Starch & Chemicals Ltd Management Discussions.

Your Directors hereby presents the Management Discussion and Analysis Report (MDAR) for the year ended on 31st March, 2019.

INDUSTRY STRUCTURE AND DEVELOPMENTS.

Indian Starch Economy

The Economy of India is the sixth-largest economy in the world measured by nominal GDP and the third - largest by purchasing power parity (PPP). In India, growth is projected to pick up to 7.3 percent in 2019 and 7.5 percent in 2020, supported by the continued recovery of investment and robust consumption amid a more expansionary stance of monetary policy and some expected impetus from fiscal policy. Nevertheless, reflecting the recent revision to the national account numbers that indicated somewhat softer underlying momentum, growth forecasts have been revised downwards by 0.1 percentage points for 2019 and 0.2 percentage points for 2020, respectively.

Our foreign exchange reserves were USD 405.64 billion in the week to March 15, 2019, according to the RBI data. Our GDP is expected to reach USD 6 trillion by FY27 and achieve upper-middle income status on the back of digitization, globalization, favorable demographics, and reforms. The countrys revenue receipts are estimated to touch Rs. 28-30 trillion (USD 385- 412 billion) by 2019 end, owing to government measures to strengthen infrastructure and reforms like GST. India is expected to be the third largest consumer economy as its consumption may reach to USD 4 trillion by 2025, owing to shift in consumer behavior and expenditure pattern, according to BCG; and is estimated to surpass the US to become the second largest economy in terms of PPP by 2040, according to PwC. Macro reforms like GST, bankruptcy code, and setting up of inflation targeting framework are very important ones. We have seen an improvement in ease of doing business. Those are all good measures taken by the government.

IMF has pared Indias growth forecast for the just-concluded fiscal and the next two years, citing softer recent growth and weaker global outlook, but expects the country to retain its place as the fastest growing major economy. According to IMF estimates, Indias economy grew 7.1% in FY19 and is expected to accelerate to 7.3% growth this fiscal and to 7.5% in FY21. All the estimates are 0.2 percentage points less than its previous assessment in January.

Maize, also known as corn, is a versatile crop grown over a range of agro climatic zones. Maize is one of the oldest cultivated crops in the world & in India it is the third most important crop after rice and wheat. The utilization of Corn Starch in wide array of industries and new food consumption habits are the major drivers of the market. The end user industries such as paper, paint, food, textile, pharmaceutical, FMCG and confectionery are witnessing positive growth rate, thus increasing demand for Corn Starch in the country. Half of the maize in India is consumed as poultry feed, 1/5 for human consumption and the rest is consumed for starch production, as cattle feed and in breweries. Corn currently represents the most popular feedstock accounting for around 80% of the total global starch production.

Our agriculture is evolving quickly and our determined pursuit over the past few years to create a strong agricultural foundation to help farmers improve their livelihood is making good progress. The government has been steadfastly pursuing its vision of making farmers the central focus in all activities.

Companys Business Segment:

The Company continues to remain one of the market leaders in the Starch industry. The products of the Company are very well accepted in local and international markets due to its quality and applications. It has its manufacturing unit in Village Sejwaya, Ghatabillod, Dhar, Madhya Pradesh. The company is fully equipped for developing, manufacturing and distribution of Maize

Starch Powder, Dextrose Anhydrous, Tirulose, Vervosize, White Dextrin, Yellow Dextrin as its main products and Hydrol, Maize Bran, Maize Cattle Feed, Maize Germ, Maize Gluton and Maize Husk Dry/ Wet as its bye products. There has been continuous increase in the Maize grinding activity of the Company.

The companys products enjoy an enviable position in the market and this is possible due to quality of the products of the Company and its ability to adhere to the delivery requirements of its international clientele at competitive rates. The Company has received ISO 9001:2008 which certifies the quality standards of the products and processes which the Company adopts to manufacture its products. The efforts have been put to enlarge the product portfolio of the Company by including the high value products to ensure that the bottom line is improved. Efforts are also on to further improve the technical efficiency of the Company with the help of the consultants and experts in the field. It follows a balanced fair business policy for dealing with all stakeholders including its vendors and customers. The Management works with a vision to maximize shareholders value by following fully transparent and most ethical business practices.

A lucrative portion of Companys turnover comes from exports. This concentration in the export market has helped the Company to get good prices for its products. Export turnover of the Company during the year under review is Rs. 1,47,59,705.52/- (Rupees One Crore Forty Seven Lakhs Fifty Nine Thousand Seven Hundred Five and Fifty Two Paise only). The major export countries of the company include South Africa, Kuwait, Dubai, Durban, Australia and Angola.

OPPORTUNITIES AND THREATS

Opportunities

Our 33 years experience is our strength. We are happy that we are associated with the agri sector which is the main means of income for 57% of the rural Indians, Agri sector contributes a fifth of the countrys gross value added (GVA).

As reported in the media, especially during the elections, small farmers in some states are not able to get the best price for their produce. Recently, our farmers have been continuously improving their output with hybrid seeds and new technologies. Everybody has observed that government is trying to ensure that farmers interests are protected through MSP and timely import bans.

But in the past about 15 months, the industry has bought maize at much higher price than MSP. Especially this year, we are expecting to pay more than 15 - 25% more than the MSP. This particular event will have three effects. Some of our competitors will import maize at reasonable prices. Smaller players in the industry will be requiring sufficient cash flow to sustain. Every next big player will invest in R&D for high value products.

Like any other sector of the economy, only happy and rewarded employees will be productive employees. After making handsome profit from the starch and animal feed this year, farmers will invest more money in new technologies and hybrid seeds to grow more maize. In the next two years, we expect 30% more farmers will grow maize or will switch from other crops to maize. Since the industry is in expansion mode, there will be huge demand for maize over the next three years.

In comparison to rice, maize needs much lesser water and our literacy team is working hard on this front. An efficient food grain supply and cold storage facilities will ensure that none of the farmers output get wasted in going forward.

The US food giant Monsanto spends $1.7 billion annually on R&D globally which is much higher than $1 billion budget for Indian Council for Agricultural Research. Agriculture forms a fifth of our GDP and has got the potential to double this, provided the government brings out meaningful solutions with long term growth strategies and policy framework. Despite smaller average landholding (0.66 hectares in comparison to Indias average of 1.15 hectares), China produces twice the amount of cereals and about four times fruits and vegetables than us. The biggest challenge for our farmers is the lack of access to technology despite interest subventions from banks/government. Hybrid crop verities that adapt to low rainfalls and poor soil yet offering farmers up to 50 percent more are something not known to our farmers.

Our operational excellence initiatives have delivered significant savings & efficiencies and we continue to grow strategically by expanding into new geographies and increasing our capabilities, meticulously catering to the specifications of our customers in food, beverages and feeds. These actions contributed to the improved results we saw in the fourth quarter despite muted margins in some businesses. We are also beginning to see the benefits of our aggressive actions to improve our performance and continue to expect that results will improve as we move through the year.

As we were achieving record results, we were also strengthening our organizational capacity for change and building out the long-term value of our company. Even as strong demand for crops and commodities challenge the supply chain, we continue to capture value for our shareholders.

Our vision is to build on our history of excellence to create a company that continues to evolve with the NATURE and grow adapting to a changing world and to changing customer preferences.

India with its huge population base and low consumption levels offers a massive opportunity for the starch companies to capture. Various changes in the Indian spending patterns as well as consumption boom in the nation have given maize products increased applicability and hence the demand for maize products is ascending. Since most of the starch in India is produced by maize, maize processing companies have sufficient pie of the market to capture. Growing urbanization, changing consumer preferences and rising disposable incomes are another bunch of opportunities for the incumbents. Growing population of India coupled with unavoidable usage of maize products in various industries keeps demand high. One of the trends that have been experienced in the industry is the innovative use of corn starch. Usage of corn starch bags is rising in India on the back of it being bio-degradable and hence environment friendly. Corn starch is also being used in manufacturing of car parts to enhance the car safety aspects. Other trends are emergence of corn oil as an edible oil and also production of ethanol from corn. Maize starch in India is used relentlessly in paper, textile, pharma and food industry. The growth in these consumer industries will evidently be felt in the starch sector also. Also rising demand from the poultry sector will drive the volumes for maize products. Thus there is a huge scope of increase in demand in the coming years.

Threats

The industry faces major threats on the raw material front as Maize being basic raw material, which is an agriculture produce. The availability and price of Maize remain very volatile as its production/cultivation is subject to natural vagaries. The industrys raw material being agricultural in nature is subject to price fluctuations as well as production uncertainty. The industry is also faced with challenges like growing competition in the sector. The price of Maize and all other input costs may go up further in view of monsoon, which may affect the margins of the industry. A few reasons for dampened growth include volatile raw material supply, the competitive need for bio-energy as well as the relationship between oil prices and agricultural raw materials. The main reason why the good potential for corn starch in India remains untapped is because there is a legal restriction related to the use of modified starches in the country.

SEGMENT–WISE OR PRODUCT-WISE PERFORMANCE

The Company is engaged in developing, manufacturing and distribution of Maize Starch Powder, Dextrose Anhydrous, Maize Starch Powder, Tirulose, Vervosize, White Dextrin, Yellow Dextrin as its main products and Hydrol, Maize Bran, Maize Cattle Feed, Maize Germ, Maize Gluton, Maize Husk Dry/ Wet as its bye products in local as well as international market. The Total Sales of the Main products of the company is Rs. 2,27,31,70,946.64/- as compared to Rs. 2,19,63,22,290/- for the previous year and the total of the Bye products, consignment sales and other sales of the company is Rs. 68,29,75,116.01/- as compared to Rs. 63,43,35,578 /- for the previous year.

The Total Sales of the company has increased to Rs. 2,27,31,70,946.64/- in the current financial year 2018-19 as compared to Rs. 2,19,63,22,290/- in the previous financial year 2017-18 which amounted to an overall increase of 3.50 % in the Total Sales of the company.

RISKS AND CONCERNS

Government policies, mandates, and regulations specifically affecting the agricultural sector and related industries; regulatory policies or matters that affect a variety of businesses; and political instability could adversely affect the Companys operating results.

Agricultural production and trade flows are subject to government policies, mandates, and regulations. Governmental policies affecting the agricultural industry, such as taxes, tariffs, duties, subsidies, incentives, foreign exchange rates, and import / export restrictions on agricultural commodities and commodity products, including policies related to genetically modified organisms, product safety and labeling, renewable fuels, and low carbon fuel mandates, can influence the planting of certain crops, the location and size of crop production, whether unprocessed or processed commodity products are traded, the volume and types of imports and exports, the availability and competitiveness of feed stocks as raw materials, the viability and volume of production of certain of the Company s products and industry profitability.

The Companys operating results could be affected by changes in other governmental policies, mandates, and regulations including monetary, fiscal and environmental policies, laws, regulations, acquisition approvals, and other activities of governments, agencies, and similar organizations. These risks include but are not limited to changes in a countrys or regions economic or political conditions, local labor conditions and regulations, reduced protection of intellectual property rights, changes in the regulatory or legal environment, restrictions on currency exchange activities, currency exchange fluctuations, burdensome taxes and tariffs, enforceability of legal agreements and judgments.

The Companys strategy involves expanding the volume and diversity of products it merchandises and processes, expanding the global reach of its core model, and expanding its value-added product portfolio. Government policies, including anti-trust and competition law, trade restrictions, food safety regulations, and other government regulations and mandates, can impact the Companys ability to execute this strategy successfully.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has proper internal control system, which provides adequate safeguards and effective monitoring of the transactions and ensures that all assets are safeguarded and protected against loss from unauthorized use or disposition. The Company has appointed a firm of Chartered Accountants as Internal Auditors and has an effective internal control system to ensure that all the transactions are properly executed and recorded. The systems are also reviewed by the management, statutory auditors and audit committee of the Company to ensure efficiency and transparency in the operations of the Company. The system is also in place to ensure that all applicable statutory and legal formalities are complied with. The management of company has the responsibility for establishing and maintaining internal controls for financial reporting, to evaluate the effectiveness of internal control systems of the company pertaining to financial reporting and they have to disclose to the auditors and the Audit Committee, deficiencies in the design or operation of such internal controls, if any, of which they are aware and the steps they have taken or propose to take to rectify the deficiencies.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE.

During the year under review, the Companys total revenue is 2,27,77,21,638.54/- (Rupees Two Twenty Seven Crores Seventy Seven Lacs Twenty One Thousand and Six Hundred Thirty Eight Only) for the Financial Year ended 31st March, 2019 as compared to Rs. 2,20,69,90,037/- (Rupees Two Twenty Crores Sixty Nine Lacs Forty Ninety Thousand and Thirty Seven Only) for the Financial Year ended 31st March, 2018 and Company reported a profit of Rs. 3,24,01,050.61/- (Rupees Three Crore Twenty Four Lacs One Thousand and Fifty Only) for the Financial Year ended 31st March, 2019 as compared to a profit of Rs. 1,77,29,143/- (Rupees One Crore Seventy Seven Lacs Twenty Nine Thousand and One Hundred Forty Three Only) for the Financial Year ended 31st March, 2018.

Export turnover of the Company during the year under review is Rs. 1,47,59,705.52/- (Rupees One Crore Forty Seven Lakhs Fifty Nine Thousand Seven Hundred Five and Fifty Two Paise only).

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED.

Industrial Relations

The Company has always valued its workforce as their biggest asset. The Company has pool of competitive, dedicated and enthusiastic personnel which is the driving force behind its accelerated growth. The Companys policies and practices ensure a favorable working environment with innovation and motivation. The Company organizes regular training programs for the workers and executives to ensure that their efficiency remains high and motivation increases. The Company provides ample opportunity to its employees to sharpen their skills by organizing visits of experts in its plant. The Company has been able to retain its employees for years and has ensured that they also grow with the growth of the Company. The industrial relations continued to remain cordial at all levels of employees during the year.

Research & Development

The R&D of your company gives it the competitive edge to meet emerging challenges and ensure that the Company always stays on the path of innovation. The manufacturing facilities have well equipped Research & Development units to continuously improve the product-line and their applications. As new technologies are being constantly introduced in the market space, which is essential for remaining competitive in todays era.

Human Resource Development

Human resource (HR) is an important asset of a business unit. It is rightly said that machines are important in the production process but the man behind the machines is more important. He transforms the lifeless factors of production into useful products. Well-trained, loyal and efficient team of workers brings success and stability to any business. There are good HR practices and processes in the company to ensure that the employees remain happy & motivated at all levels. Your company takes pride in the fact that we consider employees as human resources and not just resources. The key themes of the company can only be achieved by enhancing the skilled talent pool through good HRD practices, strengthening long-term entrepreneurial environment. For this, the company carries out various training programs and knowledge sharing sessions to create awareness amongst the employees, their medical care, creating sense of security, building superior work places, creating new roles for potentials/ prospective employees and maintain highest standards of safety norms etc.

CAUTIONARY NOTE

Certain statements in the Management Discussion and Analysis section may be forward-looking and are stated as required by applicable laws and regulations. Many factors may affect the actual results, which would be different from what the Directors envisage in terms of the future performance and outlook. Investors are cautioned that this discussion contains forward looking statement that involve risks and uncertainties including, but not limited to, risks inherent in the Companys growth strategy, dependence on certain businesses, dependence on availability of qualified and trained manpower and other factors discussed. The discussion and analysis should be read in conjunction with the Companys financial statements and notes on accounts.

For and on behalf of the Board of Directors

Place: INDORE RAMDAS GOYAL AMIT MODI
Date: 12.08.2019 CHAIRMAN MANAGING DIRECTOR
DIN: 00150037 DIN: 03124351