Vippy Industries Ltd Management Discussions

ECONOMY-OVERVIEW

Global economic prospects have improved again but the road to recovery in the advanced economies will remain bumpy. World output growth is forecast to reach 3% percent in 2013 and 4 percent in 2014. In advanced economies, activity is expected to gradually accelerate, starting in the second half of 2013. Private demand appears increasingly robust in the United States but still very sluggish in the euro area. In emerging market and developing economies, activity has already picked up steam.

The Indian Economy has experienced its worst slowdown in a decade & the year 2012-13 was challenging year for the economy. The things were bad, but they were not so bad for India Inc. Indian business is now slowly taking a turn for better. A Government trying hard to revive the Economy, moderating inflation, and softening interest rates. Only China and Indonesia are growing faster than India in 2012-13. And in 2013-14, if India grow at the rate projected by many forecasters, only China will grow faster than India in the world. India, only next to China in attracting investments, provides exciting opportunities to people willing to start new business. India, a BRIC nation, has been considered a one of the most favourable countries for doing business in the world at present. Ample manpower, cost competitiveness apart from other factors have led many corporates to Indian shores to do business. The Indian Economy likely to grow at 6.1% to 6.7% in the year 2013-14 from 5% in the previous year 2012-13 as per the Economic Survey of Govt. of India.

INDUSTRY STRUCTURE AND DEVELOPMENTS

India is the worlds fourth largest edible oil economy, after USA, China and Brazil. India, the worlds biggest vegetable oil importer after China, buys almost half of its annual consumption, including palm oil from Malaysia and Indonesia and soya oil from Brazil and Argentina, olive oil from Spain, Italy, Turkey and Greece. According to the Industry estimates, the consumption of edible oil expected to increase from the current level to over 21 Million MT by the year 2015. Due to lower domestic supply, the import of edible oil will rise to meet the demand supply gap. Indian soybean extractions has a high profat (protein & fats) content (49% - 50%) as compared to a(44-48%) profat content of China andAmerican countries and is very well accepted in the international market. Japan, South EastAsia (Vietnam, Thailand, Indonesia, Philippines, Singapore, Malaysia, Cambodia, Myanmar), Taiwan, China, South Korea & Middle East countries are major markets for Indian soybean meal. Solvent-extracted soybean meal is major part of the total oil meals export from India.

The main business of the Company is processing of soya seeds and refining of soya oil for edible propose. The company also produces Lecithin, Soya Meal and Soya Flour, Soya TVP, & varieties of Soya products.

OPPORTUNITY AND THREATS

Opportunities

The edible Oil companies in India presents a significant growth opportunity due to a growing population, income growth, low current per capita consumption and better lifestyle choices and the fact that edible oils are a necessary part of the daily diet for a majority of Indian consumers. India accounts for a major part of global edible oil demand, which has grown over the years but the Indian oilseed crop has historically been insufficient to match oil demand. Per Capita consumption of edible oils in the country as compared to world has been increased since 2007-08. Soyabeans are truly a nutritional superpower. Due to this soya use is getting acceptance in the country as well as in the world in form of textured vegetable protein due to its nutritional properties and the many food manufacturers are used soy protein as a versatile food ingredient in various products that greatly enhance the value of finished foods. The soya proteins are using in different food products, the uses are follows:

1. Soy protein is used in the manufacturing of breads, cookies, crackers and other baked goods, as an ingredient in hot cereal mixes and breakfast bars to boost protein value and quantity.

2. Processed and whole meat products adding soy protein, which provides the product flexibility and cost stability consumers demand.

3. Adding soy protein to meat and poultry products for moisture holding, texture, binding and cohesion, product yield, juiciness, protein quality, appetizing colour and appearance, longer shelf-life, palatability and total nutrition.

4. A number of dairy products are developed with soy protein, including imitation milk, imitation cheese, non-dairy frozen desserts, coffee whiteners, yogurt and others.

Soya is also used as ingredient for non-food products such as candle wax and biodiesel.

Another advantage to Indian soya meal is that Indian soya meal being processed from Non Genetically Modified soya seed in the world.

There is a lot of potential and opportunity for food companies in Indian market because of growing population to feed, younger demographics, better lifestyle choices, increasing health consciousness among the people and increased purchasing power.

India Meteorological Department (IMD) forecasts for the 2013 that Southwest monsoon seasonal rainfall for the country as a whole is most likely to be Normal that is good shine for corps of soyabean in coming Kharif Crops season.

Threats

Our business sector is vulnerable to certain external factors that are often nature(monsoon) related or driven by international developments. The prices of the soyabean continue to be linked to both domestic and international prices and the price of finished products manufactured by the Company fluctuate widely due to national & international factors.

Domestic availability of soyabean seeds, Government policies, fluctuation in fuel price, International crops of soyabean, demand supply gap and instability in foreign exchange rate may affect the business of the company.

The main threats to the Company are inadequate water supply, insufficient power supply in plants of the Company which are situated in Dewas, State of Madhya Pradesh.

SEGMENT WISE PERFORMANCE

The Company is operating in one segment only; hence segment wise reporting is not applicable.

FUTURE OUTLOOK

The demand of soya oil is continuously increasing in India due to high growth in income levels, increasing trend in spending and better living standards. The Demand of soya value added products is continuously increasing in food industry speedily.

The consumption of edible oil in packaged form given tremendous business opportunities to expand business volume in retail segment. Your company, significantly strengthening business process for quality, scalability, sustainability and visibility in the area of branded products. Your company is expanding its distribution channels across the country, broad base its products range and invest in brand position/promotion programs to achieve the objective.

The Indian soya meal being processed from Non Genetically Modified (Non GMO) soya seed, gives a value advantage in India as well rest of the World. Your company is continuously striving and shuffling its products mix to establish itself as a producer of Non- GMO soya value added products not only in the India but in the global area, the company strategically transforming itself to be recognized name in soya products and show its presence in Indian Market as well as International Market.

RISK AND CONCERN

The main areas of concerns are:

1. The global economic uncertainties

2. The volatility in soyabean prices

3. Government polices play an important role in the business of the Company. The policies announced by the Government have been progressive and are expected to remain likewise in future, and have generally taken an equitable view towards stakeholders, including domestic farmers, industry, consumers etc.

4. Domestic availability of soya seeds depends upon weather and monsoon conditions.

5. Uncertainities in international fuel/crude prices is continue to be an area of concern as fuel is widely used in manufacturing and distribution operations and has a direct impact on total costs.

The company has risk management policy to identify the nature and magnitude of risk associated with the Company and to take steps for mitigating the impact of such risks. These are reviewed periodically and placed before the Board.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an adequate internal control systems to ensure protection of assets against loss from unauthorized use or disposal, proper maintain of accounting records and adherence to Companys Policies and procedures. The Company has an Internal Audit System which commensurate with its size and nature of its business. Reports of the Internal Auditor are reviewed by the senior management and are also placed before the Audit Committee of the Directors.

FINANCIAL ANALYSIS

(In Crores)

Particulars	2012-13	2011-12	Growth(%)
Total Revenue	1229.82	973.83	26.29%
Total Expenses	1203.80	948.75	26.88%
Profit before Financial Costs, Depreciation and Amortization & Tax	26.02	25.08	3.75%
Less: Financial Costs	1.56	1.39	12.23%
Less: Depreciation and Amortization	4.26	4.03	5.71 %
Profit before Tax	20.20	19.66	2.75%
Less: Tax Expenses	4.03	3.99	1.00%
Profit after Tax	16.17	15.67	3.19%

The Company recorded a turnover of " 1229.82 Crores during the year 2012-13 as compared to " 973.83 Crores during the previous financial year and this represents a 26.29 % increase compared to previous financial year. The Company achieved Earning before Finance Costs, Depreciation and Tax of " 26.02 Crores for the year 2012-13 against " 25.08 Crores in the previous financial year and this represents a 3.75% increase compared to previous financial year. The Profit after tax of "16.17 Crores during the year 2012-13 against " 15.67 Crores in the previous year and this represents a 3.19% increase compared to previous financial year.

DEVELOPMENT IN HUMAN RESOURCE AND INDUSTRIAL RELATIONS

The Companys Human Resource policies and strategies seek to ensure a high level of motivation among employees so that they play a significant role in achieving the Companys goals. The Individual Performance Management Systems adopted by the Company is continuously strengthened to ensure that employee appraisals are transparent and aligned to corporate goals. Roles and responsibilities are clearly defined at all levels. A performance based compensation policy to enable the employees to develop a sense of ownership with the organization. Company recognizes the importance of the providing training and development opportunities to its employees to enhance their skills and experience, which in turn enables the Company to achieve its business objectives. The Company conducts/arrange training programme time to time for employees of the company to enable them up -gradation of their skill.

The Company accords highest priority to ensure safety and protection of health of its employees. The Company believes that safety and health are essential to, and form an integral part of, every HR development Endeavour. Industrial Relations remained cordial, peaceful and healthy with the employees.

CAUTIONARY STATEMENT

Statements in the "Management Discussion and Analysis" describing 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, among others, economic conditions affecting demand/ supply and price conditions in the domestic and overseas markets in which your Company operates, changes in the govt. regulations, tax laws and other statutes and incidental factors.