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Uma Exports Ltd Management Discussions

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Jul 18, 2024|03:32:03 PM

Uma Exports Ltd Share Price Management Discussions

FY2023 represents the fiscal year 2022-23, from 1 April 2022 to 31 March 2023, and analogously for FY2022 and previously such labelled years.

GLOBAL ECONOMY

The Economic Survey 2022-23 comes when global uncertainties are rife. Barely had the pandemic receded, and the war in Ukraine broke out in February 2022. Prices of food, fuel and fertiliser rose sharply. As inflation rates accelerated, central banks of advanced countries scrambled to respond with monetary policy tightening. Many developing countries, particularly in the South Asian region, faced severe economic stress as the combination of weaker currencies, higher import prices, the rising cost of living and a stronger dollar, making debt servicing more expensive, proved too much to handle.

In the second half of 2022, there was a respite for governments and households. Commodity prices peaked and then declined. In the near term, the acute pressure was relieved, although prices of some commodities (e.g., crude oil) remain well above their pre-pandemic levels. For countries dependent on imports, priced and payable in dollars, a global slowdown led by the United States (US) offers a triple relief. Commodity prices decline, and US interest rates peak, as does the US dollar. Capital and current account imbalances abate.

Global economic recovery was well on track until the Russia-Ukraine conflict broke out in February 2022. The conflict has now continued for almost a year, disrupting the restoration of the supply chains disrupted earlier by lockdowns and limited trade tra3c. In the last eleven months, the world economy has faced almost as many disruptions as caused by the pandemic in two years. The conflict caused the prices of critical commodities such as crude oil, natural gas, fertilisers, and wheat to soar. This strengthened the inflationary pressures that the global economic recovery had triggered, backed by massive fiscal stimuli and ultra-accommodative monetary policies undertaken to limit the output contraction in 2020. Inflation in Advanced Economies (AEs), which accounted for most of the global fiscal expansion and monetary easing, breached historical highs. Rising commodity prices also led to higher inflation in the Emerging Market Economies (EMEs), which otherwise were in the lower inflation zone by virtue of their governments undertaking a calibrated fiscal stimulus to address output contraction in 2020

Rising inflation and monetary tightening led to a slowdown in global output beginning in the second half of 2022. The global PMI composite index has been in the contractionary zone since August 2022, while the yearly growth rates of global trade, retail sales, and industrial production have significantly declined in the second half of 2022. The consequent dampening of the global economic outlook, also compounded by expectations of a further increase in borrowing costs, was reflected in the lowering of growth forecasts by the IMF in its October 2022 update of the World Economic Outlook (WEO).

Table 1.1 : Global economic challenges led to a downward revision in growth forecast across countries

Growth Projections (%) Change from WEO Update (July 2022) (%)
2022 2023 2022 2023
World 3.2 2.7 0 -0.2
Advanced Economics 2.4 1.1 -0.1 -0.3
United States 1.6 1 -0.7 0
Euro Area 3.1 0.5 0.5 -0.7
UK 3.6 0.3 0.4 -0.2
Japan 1.7 1.6 0 -0.1
Emerging Market Economics 3.7 3.7 0.1 -0.2
China 3.2 4.4 -0.1 -0.2
India* 6.8 6.1 -0.6 -

Note : *Projection for India is for its fiscal year (Apr-Mar) while for the other economies it is from Jan - Dec.

INDIAN ECONOMY

The Indian economy appears to have moved on after its encounter with the pandemic, staging a full recovery in FY22 ahead of many nations and positioning itself to ascend to the pre-pandemic growth path in FY23. Yet in the current year, India has also faced the challenge of reining in inflation that the European strife accentuated. Measures taken by the government and RBI, along with the easing of global commodity prices, have finally managed to bring retail inflation below the RBI upper tolerance target in November 2022. However, the challenge of the depreciating rupee, although better performing than most other currencies, persists with the likelihood of further increases in policy rates by the US Fed. The widening of the CAD may also continue as global commodity prices remain elevated and the growth momentum of the Indian economy remains strong. The loss of export stimulus is further possible as the slowing world growth and trade shrinks the global market size in the second half of the current year.

Despite these, agencies worldwide continue to project India as the fastest-growing major economy at 6.5-7.0 per cent in FY23. These optimistic growth forecasts stem in part from the resilience of the Indian economy seen in the rebound of private consumption seamlessly replacing the export stimuli as the leading driver of growth. The uptick in private consumption has also given a boost to production activity resulting in an increase in capacity utilisation across sectors.

The rebound in consumption was engineered by the near-universal vaccination coverage overseen by the government that brought people back to the streets to spend on contact-based services, such as restaurants, hotels, shopping malls, and cinemas, among others. The worlds second-largest vaccination drive involving more than 2 billion doses also served to lift consumer sentiments that may prolong the rebound in consumption. Vaccinations have facilitated the return of migrant workers to cities to work in construction sites as the rebound in consumption spilled over into the housing market.

This is evident in the housing market witnessing a significant decline in inventory overhang to 33 months in Q3 of FY23 from 42 months last year. Indias economic growth in FY23 has been principally led by private consumption and capital formation. It has helped generate employment as seen in the declining urban unemployment rate and in the faster net registration in Employee Provident Fund. Still, private capex soon needs to take up the leadership role to put job creation on a fast track. Recovery of MSMEs is proceeding apace, as is evident in the amounts of Goods and Services Tax (GST) they pay, while the Emergency Credit Linked Guarantee Scheme (ECGLS) is easing their debt servicing concerns.

The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) has been directly providing jobs in rural areas and indirectly creating opportunities for rural households to diversify their sources of income generation. Schemes like PM-Kisan and PM Garib Kalyan Yojana have helped in ensuring food security in the country, and their impact was also endorsed by the United Nations Development Programme (UNDP). The results of the National Family Health Survey (NFHS) also show improvement in rural welfare indicators from FY16 to FY20, covering aspects like gender, fertility rate, household amenities, and women empowerment.

RECENT DEVELOPMENTS

India is primarily a domestic demand-driven economy, with consumption and investments contributing 70% to the countrys economic activity. According to World Bank, India must continue to prioritise lowering inequality while also launching growth-oriented policies to boost the economy. In view of this, the country witnessed many developments in the recent past, some of which are mentioned below.

• Indias agricultural and processed food products exports up by 13% to USD 19.69 billion in nine months of current fiscal (2022-23) compared to the same period last year. Export of processed fruits & vegetables up by 30.36 % to USD 1472 million in nine months of current fiscal.

• Continuing the trend from the previous year, the exports of agricultural and processed food products rose by 13.00% in the nine months of the current Financial Year 2022-23 (April-December) in comparison with the corresponding period of FY 2021-22, according to the provisional data released by the Directorate General of Commercial Intelligence and Statistics (DGCI&S). The overall export of APEDA products increased to USD 19.7 billion in April-December 2022 from USD 17.5 billion over the same period of the last fiscal.

• The initiatives taken by the Agricultural and Processed Food Products Export Development Authority (APEDA) that works under the Ministry of Commerce and Industry, Government of India has helped the country in achieving 84.00% of its total export target for the year 2022-23 in nine months of the current fiscal.

• As per the DGCI&S provisional data, processed fruits and vegetables recorded a growth of 30.36% (April-December 2022), while fresh fruits and vegetables registered 4.00% growth in compare to corresponding months of the previous year.

• In April-December, 2021, fresh fruits were exported to the tune of USD 1078 million that increased to USD 1121 million in the corresponding months of the current fiscal. Exports of processed F&V jumped to USD 1472 million in nine months of the current fiscal from USD 1129 million in the corresponding months of the previous year.

• The export of pulses has witnessed an increase of 80.38% in nine months of the current fiscal in compare to the same months of the last fiscal as the export of lentils increased from USD 242 million (April-December 2021-22) to USD 436 million (April-December 2022-23).

• Basmati Rice exports witnessed a growth of 40.26% in nine months of FY 2022-23 as its export increased from USD 2379 million (April-December 2021) to USD 3337 million (April-December 2022), while the export of non-Basmati rice registered a growth of 4.00% in nine months of current fiscal. Non-basmati rice export increased to USD 4663 million in nine months of the current fiscal from USD 4512 million in the corresponding months of the previous year.

• As per the DGCI&S data, the countrys agricultural products exports had grown by 19.92% during 2021-22 to touch USD 50 billion. The growth rate is significant as it is over and above the growth of 17.66 per cent at USD 41.87 billion achieved in 2020-21 and has been achieved in spite of unprecedented logistical challenges in the form of high freight rates and container shortages, etc.

• India is the largest exporter of spice and spice items. During 2022-23, the export of spices/spice products from the country has been 14,04,357 tons valued Rs.31761 crore (3952.60 million US$).

• In September 2022, the exports of spices from India increased by 6.62% to US$ 330.46 million. In 2021-22, India exported 1.53 million tonnes of spices. From 2017-18 to 2021-22, the total exported quantity from India grew at a CAGR of 10.47%.

• For FY22, total volumes of chilli, cumin, turmeric and ginger exports were 0.55, 0.21, 0.15 and 0.14 million tonnes.

INDIAN AGRICULTURAL INDUSTRY

India is one of the major players in the agriculture sector worldwide and it is the primary source of livelihood for ~55% of Indias population. India has the worlds largest cattle herd (buffaloes), largest area planted to wheat, rice, and cotton, and is the largest producer of milk, pulses, and spices in the world. It is the second-largest producer of fruit, vegetables, tea, farmed fish, cotton, sugarcane, wheat, rice, cotton, and sugar. Agriculture sector in India holds the record for second-largest agricultural land in the world generating employment for about half of the countrys population. Thus, farmers become an integral part of the sector to provide us with means of sustenance.

The Indian agricultural sector is predicted to increase to US$ 24 billion by 2025. Indian food and grocery market is the worlds sixth largest, with retail contributing 70% of the sales. As per First Advance Estimates for FY23 (Kharif only), total food grain production in the country is estimated at 149.92 million tonnes. Rapid population expansion in India is the main factor driving the industry. The rising income levels in rural and urban areas, which have contributed to an increase in the demand for agricultural products across the nation, provide additional support for this. In accordance with this, the market is being stimulated by the growing adoption of cutting-edge techniques including block chain, artificial intelligence (AI), geographic information systems (GIS), drones, and remote sensing technologies, as well as the release of various e-farming applications. With the use of conventional farming methods, theres comparatively less improvement in efficiency and agricultural yields which resulted in lower productivity. Due to this concern, the government initiated the fourth wave of revolution in the agricultural sector to introduce technological advancement in these activities to improve yields and promote the involvement of the population in this sector.

OPERATIONS

Our Company is engaged into trading and marketing of agricultural produce and commodities such as sugar, spices like dry red chillies, turmeric, coriander, cumin seeds, food grains like rice, wheat, corn, sorghum and tea, pulses and agricultural feed like soyabean meal and rice bran de-oiled cake. We import lentils, faba beans, black urad dal and tur dal in India in bulk quantities. Our major imports are from Canada, Australia and Burma. We are B2B traders, highly specialized in sugar and Lentils. We maintain stocks and distribute them to di3erent institutional parties like manufacturers, exporters, etc. We provide them in bulk quantities.

Our Company has developed business strategy to switch over exports/imports from one commodity to another with change in demand or inconsistency in pricing for any commodity during any season. This policy adopted by the management ensures that the Company does not pass through a lean period during the year.

COUNTRY WISE PRODUCT WISE EXPORT 2022-23

(Rs. in lakhs)

ALIGN=RIGHT>-
Products Country Product %
Bangladesh UAE Sri Lanka Singapore Australia Hong Kong Benin Rest of World Total
Black Matpe - 230.12 - - - - - - 230.12 0.28%
Chick Peas 2,541.02 - - - - - - - 2,541.02 3.14%
Green Peas - 18.44 - - - - - - 18.44 0.02%
Lentils 372.88 - - - - - - - 372.88 0.46%
Maize 22,313.12 - - - 1,252.05 - - - 23,565.17 29.09%
Onion - 10.48 - - - - - - 10.48 0.01%
Rapseed DOC 283.55 - - - - - - - 283.55 0.35%
Rice 501.39 5,484.64 203.42 283.96 - 1,346.17 1,027.80 1,871.26 10,718.64 13.23%
Soya 1,277.78 2,863.14 - - 951.64 - - 1,182.02 6,274.58 7.74%
Sugar - 13,156.05 14,298.40 5,716.87 - 519.77 72.84 1,795.14 35,559.07 43.89%
Wheat 1,184.26 - - - - - - - 1,184.26 1.46%
Wheat Flour - 50.70 108.62 - - - - 159.32 0.20%
Yellow Peas - 100.14 - - - - - - 100.14 0.12%
Total 28,474.00 21,913.71 14,610.44 6,000.83 2,203.69 1,865.94 1,100.64 4,848.42 81,017.67 -
Country % 35.15% 27.05% 18.03% 7.41% 2.72% 2.30% 1.36% 5.98% 100.00% -

COUNTRY WISE PRODUCT WISE IMPORT 2022-23

(Rs. in lakhs)

Products Country Grand
Australia Canada Netherland Singapore South Africa Tanzania UAE Total
Black Matpe - - - 492.36 - - - 492.36
Kidney Beans - - - - 151.19 - 202.31 353.51
Lentils 3,962.05 2,789.14 10,740.68 4,378.05 - - 72.28 21,942.19
Paper - - 34.98 - - - - 34.98
Toor - - - 327.82 - 334.59 2,317.63 2,980.04
Total 3,962.05 2,789.14 10,775.65 5,198.23 151.19 334.59 2,592.23 25,803.07

The details of revenue from Export and other than export for March 31,2023 and previous four years on Standalone basis are as under:

( in Lakhs)

Category 2023 2022 2021 2020 2019
Amount % Amount % Amount % Amount % Amount %
Export 81,017.67 56.35% 38,356.64 30.30% 7,168.21 10.08% 4,226.85 6.49% 12367.77 44.75%
Domestic 62,142.50 43.22% 87,663.83 69.24% 63097.31 88.74% 6,06,74.91 93.14% 15081.23 54.57%
Other Income 609.67 0.43% 587.93 0.46% 834.25 1.17% 245.09 0.38% 185.41 0.67%

The highlights of the financial results for the year ended March 31, 2023 and the corresponding figure for the previous year are as under:

(Rs. in lakhs)

PARTICULARS Standalone Consolidated
2022-23 2021-22 2022-23 2021-22
Revenue from Operations 14,31,460.17 1,26,020.48 1,48,552.42 1,27,699.07
Other Income 609.67 587.93 765.45 1,022.24
Total Income 1,43,769.84 1,26,608.41 1,49,317.87 1,28,721.31
Total Expenditure 1,40,186.21 1,23,361.73 1,45,602.47 1,25,466.47
Profit before tax 3,583.63 3,246.67 3,715.40 3,254.82
Current Tax 906.46 822.57 906.46 822.57
Income tax Adjustment 8.08 22.59 8.08 22.59
Deferred Tax Adjustment -1.35 (6.33) -1.35 (6.33)
Profit after Tax 2670.44 2,407.84 2,802.21 2,415.99
Basic Earnings per share 7.90 9.64 8.29 9.67

Quality Assurance

Our Company strives to maintain quality of the products it provides to the end consumer. Our Company engages quality control agencies like SGS India, Geo Chem & Intertek India Private Limited to monitor the quantum and quality of the products procured through vessel or container. These agencies conduct detailed survey and analyse the quality of the agricultural produce or commodities on several parameters. Thereafter, a report is issued by them based on which our Company decides to accept the agricultural produce or commodities procured through the vessel or container.

Marketing Approach

The overall marketing of our products is supervised by our Managing Director. The effciency of the marketing network is critical for success of our Company. Our success lies in the strength of our relationship with the customers who have been associated with our Company. Our team through their vast experience and good rapport with clients owing to timely and quality delivery of service plays an instrumental role in creating and expanding a work platform for our Company. Our relationship with the clients is strong and established. To retain our customers, our team regularly interacts with them and focuses on gaining an insight into the additional needs of customers. We intend to expand our existing customer base by expanding to other geographies.

Warehousing Facility

Our Company imports and exports the procured agricultural produce and commodities both directly and through other merchants and brokers. The logistics set up and the nature of commodities being dealt by the Company does not necessitate a need of permanent warehousing facilities. The Company presently exports its consignments from a number of Indian ports like Mundra, Jawaharlal Nehru Port Trust, Kandla, Chennai, Kakinaka and Visakhapatnam.

Opportunities:
• Growing and untapped market
• Growing spending by the government in agriculture sector
• Largely unorganized market of agriculture
• Growing requirement of food with regional imbalance distribution of crops
• Shortage of food grain post Russia-Ukraine war
• Increase in crop prices
Threats:
• Growing competition due no entry barrier in informal sector
• Changes in Government Policy
• Lesser rainfall effecting crop
• Rapidly changing climate
• More than 5 billion tonnes of soil are washed every year taking with it 6 million tonnes of nutrients.
• 41% of farmers want to leave agriculture if any other option was available (A survey by National Sample Survey Organization (2005))
Future Outlook
• Increasing demand for food grain
• Increase investment by government in agriculture sector
• Market expansion of UMA by entering new geography and adding new products in portfolio
• Increasing demand for Indian food grain across the world particularly in other Asian countries

RISKS AND CONCERN

Risk and its Management: Risk accompanies prospects. As a responsible corporate, it is the endeavor of the management to minimize the risks inherent in the business with the view to maximize returns from business situations.

The architecture: At the heart of the Companys risk mitigation strategy is a comprehensive and integrated risk management framework that comprises prudential norms, structured reporting and control. This approach ensures that the risk management discipline is centrally initiated by the senior management but prudently decentralized across the organization, percolating to managers at various organizational levels helping them mitigate risks at the transactional level.

The discipline:

The Company has clearly identified and segregated its risks into separate components, namely operational, financial, strategic and growth execution. All the identified risks are inter-linked with the Annual Business Plans of the Company, so as to facilitate Company-wide reviews. The review: A Risk Management Committee of the Board of Directors, comprising Board Members, has been constituted to review periodically updates on identified risks, implementation of mitigation plans and adequacy thereof, identification of new risk areas etc. The Board of Directors also reviews the Risk identification process and mitigation plans regularly. A senior executive has been entrusted at all the levels of business operation in the Company whose role is not only to identify the Risk but also to educate about the identified risk and to develop Risk Management culture within the business.

Key counter measures: The Company has institutionalized certain risk mitigation procedures outline as under:

• Roles and responsibilities of the various entities in relation to risk management have been clearly laid down. A range of responsibilities, from the strategic to the operational, is specified therein. These role definitions, inter alia, are aimed at ensuring formulation of appropriate risk management policies and procedures, their effective implementation, independent monitoring and reporting by internal audit.

• Appropriate structures are in place to proactively monitor and manage the inherent risks in businesses with proper risk profiling.

• Wherever possible and necessary, appropriate insurance cover is taken for financial risk mitigation. Confirmation of compliance with applicable statutory requirements are obtained from the respective unit/divisions and subjected to an elaborate verification process.

• Quarterly reports on statutory compliances, duly certified, are submitted to the Audit Committee as well as the Board of Directors for review.

• Status of Demand/Notices on the Company, under various Acts and Rules, as well as status of litigations are reported to the Board of Directors every quarter.

INTERNAL CONTROL SYSTEMS

The Company has both external and internal audit systems in place. Auditors have access to all records and information of the Company. The Board recognizes the work of the auditors as an independent check on the information received from the management on the operations and performance of the Company. The Board and the management periodically review the findings and recommendations of the statutory and internal auditors and takes corrective actions whenever necessary.

The Company maintains a system of internal controls designed to provide reasonable assurance regarding:
• Effectiveness and effciency of operations.
• Adequacy of safeguards for assets.
• Reliability of financial controls.
• Compliance with applicable laws and regulations.

CORPORATE SOCIAL RESPONSIBILITY

Your Company is conscious of its Social Responsibility and the environment in which it operates. Over the years, the Company aimed towards improving the lives of the people.

The Companys CSR policy covers activities in the field of eradication of extreme hunger and poverty, promotion of education, promotion of gender equality, empowerment of women, improvement of mental health, slum area development and rural development projects, employment enhancing vocational skills, ensuring environmental sustainability, animal welfare, sanitation including contribution to fund set up by the Central Government, contribution to the Prime Ministers National Relief Fund or any other project set up by the Central Government.

During FY2022-23, as per Section 135 of the Act, an amount of Rs 39.72 Lakhs was required to be spent by the Company on CSR activities. The Company has spent Rs. 2.50 lakhs during FY2023, towards education of under privileged children, and it was decided to spend the balance by way of contribution to the a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year, as permitted under proviso to section 135(5) of the Companies Act, 2013. Accordingly, Rs. 37.22 Lakhs was paid to the Prime Ministers National Relief Fund.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

Our employees are our core resource and the Company has continuously evolved policies to strengthen its employee value proposition. Your Company was able to attract and retain best talent in the market and the same can be felt in the past growth of the Company. The Company is constantly working on providing the best working environment to its Human Resources with a view to inculcate leadership, autonomy and towards this objective; your company spends large efforts on training. Your Company shall always place all necessary emphasis on continuous development of its Human Resources. The belief "great people create great organization" has been at the core of the Companys approach to its people.

KEY RATIOS

Particulars* FY 2023 FY 2022
Revenue (Rs. in Lacs) 1,43,160.17 1,26,020.48
Net Profit After Tax (Rs. in Lacs) 2,670.44 2,407.84
Earnings per share (in Rs.) 7.90 9.64
Operating Profit Margin (%) 2.87 3.51
Net Profit Margin (%) 1.87 1.91
Return on Net worth 21.02 40.80
Current Ratio (times) 1.88 1.40
Debtors Turnover(times) 17.11 32.39
Debt-equity (times) 0.65 0.39
Interest Coverage Ratio(times) 8.13 3.75

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis report detailing the Companys objectives, projections, estimates, expectations or predictions 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 global and Indian demand supply conditions, raw material prices, finished goods prices, cyclical demand and pricing in the Companys products and their principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries with which the Company conducts business and other factors such as litigation and / or labor negotiations.

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