MANAGEMENT DISCUSSION  AND ANALYSIS REPORT

INDUSTRY STRUCTURE & DEVELOPMENT

The primary business of your Company is processing of oilseeds and refining of crude oil for edible use. The Company also produces oil meal, food products from soya and value added products from downstream and upstream businesses.

The domestic edible oil consumption has been steadily growing with per capita consumption of approx. 15 kg (2014-15), it still remains far below the estimated world average per capita consumption of around 22 kg. The demand drivers include consistent disposable income over a period of time, demographic profile, low commodity prices etc. However, the supply growth has been primarily lower due to relative stagnancy in the domestic oil seed output, thereby resulting in India becoming the largest importer of vegetable oil in the world. In view of the demand supply gap, over 60% of the domestic edible oil consumption is met by imports, with Palm and Soya oil accounting for over 84% of the imported volume. The oil meal produced as a result of processing of oil seed, is essentially consumed as poultry, fish and cattle feed. A significant part of soya meal is generally exported to the Asian region even though the domestic demand is fast growing.

The record world-wide production of soyabean in 2014-15 created an over supply in the world market leading to a drastic fall in soya meal prices and a significant drop in global commodity prices resulted in low domestic edible oil prices. Higher price of soya bean in domestic market due to lower domestic crop and lower realization for end products namely soya meal and oil, caused a drastic fall in domestic crushing and export of soya meal. As per industry data, the export of soya bean meal during the year April, 2014 to March, 2015 fell to 6,59,593 MT (approx. Rs. 2063 Crore) from 27,81,985 MT (approx. Rs. 9626 Crore) during the corresponding brvious year.

During the year under review, the international economic situations coupled with steep fall in commodity prices have impacted domestic business sentiments considerably. The landed import prices of vegetable oils in India also moved downward in line with the fall in international prices : Crude palm oil by 32%, Crude Soyabean oil by 23%, Crude sunflower by 16% , while Indian Rupee (with reference to USD) by 2.5%. The steep fall in commodity prices has caused increase in consumption of edible oil and imports and also intense competition and brssure on margins. Your company's performance for the year 2014-15 may be viewed in the context of the above mentioned economic/ market environment.

INDUSTRY OUTLOOK

Keeping in view the weather conditions in the soyabean growing areas and sowing data in the current year , the crop size for the  current year is expected to be better than the brvious year. The industry expects that , considering the steady commodity price trend and the availability of soyabean, the capacity utilization and operating performance would be better than the brvious year.

Keeping in view the expanding domestic consumption of edible oil and the low commodity prices, the volumes of imports will continue to increase to bridge the growing demand- supply gap. This will enhance better utilization of port based refining capacity and performance. The domestic refining industry is operating on highly competitive terms to offer economical prices of refined edible oils to Indian consumers. Any adverse landed cost of inputs due to domestic duty structure would adversely impact the functioning of the refining industry and its associated dependent sectors. Considering the global economic scenario and encouraging business conditions in domestic markets, the industry hopes that the Government of India would set (and review from time to time, as may be required) tariff policy so as to stimulate the domestic industry on a consistent basis and harmonise the interest of domestic farmers, processors and consumers through appropriate and differential import duties between import of crude and refined oils. The industry further hopes that the Government would proactively respond to global factors and genuine requests of the industry on a regular basis so as to foster domestic manufacturing growth and to prop up investments in the domestic manufacturing sector, given the vast potential of edible oil consumption in India.

To bridge the gap between demand and supply .it is ,therefore, essential to increase the availability of vegetable oils from domestic resources by encouraging diversification of land from good grains to oil seeds, increasing productivity of oil seeds, encourage oil palm cultivation, place oil palm cultivation under plantation crops and fullest exploitation of non traditional domestic sources. This will improve capacity utilization, increase production and productivity thereby bring the industry to be competitive in the international market. The biggest beneficiaries would be the marginal farmers whose entire livelihood depend s on the meagre earnings that they get from small piece of land.

The agro-climatic conditions of India offer an opportunity to produce globally competitive oil seeds, given the right policy environment and support. It is desired that the Integrated Scheme of oil seeds, Pulses, Oil palm and Maize (ISOPOM) and National Mission on Oil seeds and Oil Palm (NMOOP) focus on increasing availability of high quality seed materials to the producers. Given the growing dependency of imports for such a basic commodity of mass consumption, it is believed that strong and speedy policy actions such as amendments in relevant laws for stimulating investments and reduction of transaction costs, use of technology and mechanization for fostering productivity and conservation of natural resources, steps for remunerative prices of products for farmers without consumer price increase, better agro infrastructure connectivity between production, storage distribution and supply in the market place etc. would be needed to boost higher growth of domestic supply .

The Indian economy is showing signs of strength , backed by improvement in overall business sentiments. The pattern of consumption of edible oil is moving towards packed and/or branded form due to factors such as rising incomes coupled with changes in household demographics, improving health consciousness, growing organized retail improving reach of the products across the country, visual advertisements etc.. Given the growth in the overall edible oil consumption, keeping in view the discerning and value conscious need of the growing consumer base, the growth in packed segment has been growing almost twice of the overall edible oil growth in the recent past. The trend is expected to continue due to low base and vast potential.

BUSINESS STRATEGY

The size, diversity and the overall steady growth of the edible oil industry in India offer great potential for the company to proactively adopt strategies to sustain leadership position in the Industry. The company is pursuing business strategies considering strong business potential in the front end and back end activities and also related businesses to strengthen the core business focus.

Keeping in view the growth in the retail segment of edible oil and food products , the company would continue to aggressively focus on investing resources to cater to the growing brsence in the branded segment and expand visibility in the market place by leveraging the distribution network, existing brand potential and offering value added products to consumers. The focus is also oriented towards achieving continuous improvement in product, process, service offerings to efficiently serve our growing customer base..

The company has already secured procurement rights for the development and sourcing of oil palm over 2,00,000 Hectares of land, suitable for the cultivation, across various states in India, and set up commensurate processing capacities/facilities appropriate to the requirements. We have encouraged farmers to expand the domestic palm plantation with planted area of over 55,000 hectares for sourcing Fresh Fruit Bunches (FFB) of Palm and achieved crushing of FFB over 3,00,000 MT during year 2014-15. Despite the challenging the task of scale ability, your company has resolved to step up the efforts resulting in increase in the area of oil palm plantation in the coming years, thereby contributing to income of farmers, the regional development and increase in domestic oil production. We believe that our initiatives will entail long term procurement efficiencies due to captive sourcing and integration of activities and support to sustain the profitability in the times to come. The active completion of oil palm plantation in India will be one of the key focus drivers in the future.

The productivity in Indian soya seed yield per hectare is woefully low as compared to the developed countries for a variety of reasons. Considering our leadership position in the industry and the need for improvement in the yield for the benefit of farming community, industry and country, we have entered into a Joint venture with a reputed and experienced Canadian organization having domain expertise and proven track research and  development track record in the area of improvement of yield of soya crop , both in terms of yield per hectare and oil content in soya seed. The research work is in progress. We believe that the success of this venture will prove beneficial entailing higher income for farmers, greater availability of seeds for crushing by the industry and larger volume of export of soya meal and production of oil (and thereby reducing import bill) and cascading effect to the rural economy. We thus hope that our initiatives in this regard would contribute and benefit the nation as a whole.

The company is in the processing of adding businesses with diversification to support our sustainable growth strategy, leverage our upstream and downstream strengths and sustain brsence in agro and export market segments , within the overall product portfolio in agro sector. In the recent past, We have made significant improvement in our brsence in the businesses of manufacture of guar and castor products which have high farmer and export orientation. We believe that this will support sustainable linkages with the farming community and our growing brsence in the international markets through export of value added products.

Apart from the above, the company is also evaluating and reviewing the business processes keeping the following areas under consideration:

(a) Incorporation of design of our products to address social and environmental concerns.

(b) Initiatives on energy efficiency, renewable energy ,clean technology.

(c) Establishment of long term relationship with farmers/ vendors /customers to facilitate inclusion of growth strategy.

(d) Identification of opportunities to recycle products and reuse to the extent possible.

(e) Community development and incorporation of social responsibility in our business model.

Your Company is of the view that the initiatives in the above mentioned areas will improve the product mix and enhance the margin profile in future. Keeping in view the scale of operations and the overall growth, your company believes that the strategic moves will prove beneficial for the Company and the stakeholders in the long term.

INFORMATION TECHNOLOGY

SAP has been implemented in all plants, depots, regional offices and head office of the Company enabling alignment of strategies and operations, better supply chain control at operational level and access to consolidated data of the Company through integrated system.

This has enabled higher level of stakeholders' services, like Collection of Fresh Fruit Bunches online through Hand held devices and Integrating the same in Real Time with SAP, Ware House Management and Tank Management System to know status of Material Warehouse Wise and Tank Wise. Customer Complaint System is extended to our Guargum Division and Vendor Complaint System rolled out in our Soap Division.

HUMAN RESOURCES

The Human Resources Framework has been approved which defines the key processes that HR personnel will be focusing on. As a result of the new HR Framework, a new appraisal format, Performance Improvement form, was rolled out for all junior and middle level managers in the company. Today, we have "SMART" Goal sheets & developmental plans after "Performance Review & Goal Setting" training was given for these levels. The Talent Management process was developed and approved by the Executive Committee. The Talent Identification process was implemented in one HUB of the Edible Oil business. Engineering and Management graduates were recruited and inducted under the revamped the Professional Trainee scheme that was developed in last financial year.

Our business review & performance improvement process continues to put focus on performance and periodic review of each of our businesses and individuals.

RISK AND CONCERNS

Price Volatility

Your Company is exposed to commodity price fluctuations in its business. All major raw materials as well as finished goods being agro-based are subject to market price variations. Prices of these commodities continue to be linked to both domestic and international prices, which in turn are dependent on various Macro / Micro factors. Also Commodities are increasingly becoming asset classes. Prices of the Raw materials and finished products manufactured by your Company fluctuate widely due to a host of local and international factors. Your Company continues to place a strong emphasis on the risk management and has successfully introduced and adopted various measures for hedging the price fluctuations in order to minimise its impact on profitability. Also, your Company has initiated setting-up of a framework to upgrade itself to a robust risk management system.

Government Policies

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 various stake holders, including domestic farmers, industry, consumers etc.

Freight & Port Infrastructure

A substantial part of the international operations of your Company are within the Asian region, and given the following import and export activities of your Company, the element of freight is not likely to cause any adverse effect on the operational performance. Your Company has a proactive information and management system to address the issues arising out of port congestions to the maximum extent possible and has also made sufficient arrangements for storage infrastructure at the ports.

Weather Conditions & Monsoon

Your Company has processing facilities at major ports and several inland locations, and therefore, the business model of your Company is designed to carry-on a majority of its production operations even in situations of extreme changes in weather conditions due to balanced business model to cater to the strong domestic consumption in India.

Volatility in Foreign Currencies

Your Company is exposed to risks arising out of volatility in foreign currencies, the exposure on this account extends to:

(a) Products imported for sale in domestic markets; (b) Products exported to other territories and Foreign currency Loans.

Your Company utilises the hedging instruments available in the markets on an ongoing basis and manages the currency exposures pro-actively.

Fuel Prices

Fuel prices continue to be an area of concern as fuel particularly Coal is widely used in manufacturing operations has a direct impact on total costs. Your Company has taken productivity linked measures aimed at controlling costs and taken further steps to focus on production of high margin products.

Domestic Economy

Adverse changes in disposable income may impact consumption pattern. Your Company has multi processing capabilities to cater to the variances and changing consumer brferences. Also keeping in view the overall growth of the economy, emerging health consciousness and growing retail in India, it is expected that the packaged edible oil consumption will continue to outgrow the overall edible oil growth.