MANAGEMENT DISCUSSION AND ANALYSIS REPORT The management Discussion and Analysis provides an overview of the financial, operational and strategic progress made by your Company in the year 2014-15. The discussion shared below should be read together with the Directors' Report and the audited Financial Statements that form part of the Annual Report. INDIAN ECONOMY & INDUSTRY STRUCTURE INDIAN ECONOMY: The Indian GDP grew at 7.3% in 2014-2015 and is poised to grow by 8% in 2015-2016 according to forecasts by OECD, compared to China, which is pegged to grow at 7% during these years. With labour costs spiking in China, India is now expected to emerge as the fastest-growing major economy in 20152016. India's per capita net national income during 2014-2015 is estimated at Rs. 88,538/- (US$1,434), a rise of 10.1% compared with Rs. 80,388 (US$1,302) during 2013- 2014 with a growth rate of 12.3%. Gross fixed capital formation increased from 3% in 2013-14 to 4.1% in 2014-2015. Average retail inflation moderated to 6.3% in 2014-2015 as against 8.9% in 2013-2014. Food inflation declined from 9.5% in 2013-14 to 4.8% in 2014-2015. India's current account could be a surplus in 2015, after 32 consecutive quarters in deficit, and the deficit for the upcoming fiscal year could halve to 0.6% of the GDP from 1.1% during the current fiscal. The Central Statistics Office revised the base year on which comparisons were made to 2011-2012 from 2004-2005. It expanded coverage of manufacturing and included under-rebrsented sectors and data from the corporate database of the government in arriving at the growth figures. Lower oil prices and widesbrad monetary easing brought the world economy to a turning point, with the potential for the acceleration of growth needed in many countries. INDIA'S AGRICULTURE STRUCTURE: The agriculture sector contributed just 15% of India's GDP (Gross Domestic Product) (GDP), but over 50% of the population was still dependent on it. India emerged as a significant agricultural exporter in commodities like cotton, rice, meat, oil meals, pepper and sugar. The agricultural and allied sectors registered a growth of 1.1% during the current financial year. Despite the monsoon rainfall falling 12% short of expectations during 2014-2015, the loss in production was contained at 3.0% over 2013-2014. Agricultural credit flow target for 2014-2015 was fixed at Rs. 8,00,000 crore against which Rs. 3,70,828.6 crore has already been achieved. With additional initiatives from the Central Government to promote the development of a common national market for agricultural commodities through e-platforms, the department approved Rs. 200 crore for promoting the National Agricultural Market, through the ATIF (Agri-tech Infrastructure Fund) (ATIF), which will be implemented during 2014-2017 BUDGET 2015: The Union Budget for 2015-16 recognised the need for increasing agricultural productivity and bettering farmer lives. Three important budgetary provisions are expected to positively impact agriculture: 1. Providing financial support to improve irrigation facilities and fertility for enhancing agricultural productivity 2. Raising agricultural credit limits 3. Creating a unified national agricultural market to fetch a fair price for farm produce The Budget exhibited a keen intent to support organic farming, micro-irrigation and watershed management. KEY GROWTH DRIVERS: The Indian agrochemicals market is supported by strong drivers. The low consumption of crop protection products in India at 0.6 kilograms per hectare compared to the global average of 3 kilograms per hectare offers potential. The availability of cheap labour and low processing costs offers opportunities to MNCs to commission manufacturing hubs in India. The sector is also driven by a growing opportunity for contract manufacturing and research among Indian players due to a large availability of technically skilled labour. INDUSTRY CHALLENGES: Despite robust growth drivers, the Indian agrochemicals industry faces challenges in terms of low farmer awareness (only 25-30% are aware of agrochemical products and usage). With a large number of end users sbrad across the vast Indian landmass, managing inventory and distribution costs remains challenging for industry players. The rising sale of spurious pesticides and spiked bio-pesticides pose a threat to the industry's growth. The effectiveness of supply chain management practices is another area of industry concern. Companies face challenges due to the seasonal nature of demand, unbrdictability of pest attacks and high monsoon dependence. Month-end skews and high inventory across the channel remain perennial industry problems. BUSINESS DRIVERS: • A large population, dependence on agriculture and strong export demand • The emergence of Asia as a global manufacturing hub • Per capita consumption of chemicals in India being lower than Western countries, a trend that appears to be correcting • Rise in GDP and purchasing power generates growing domestic potential • A focus on new segments like specialty and knowledge chemicals • Low-cost manufacturing capability • Skilled science professionals • World-class engineering and R&D capabilities • India exporting about 50% of its production; exports likely to remain a key revenue component OUTLOOK: Under current agricultural policies in India, consumption growth between 2009 and 2050 is likely to be strongest for fruit (246%), vegetables (183%) and dairy products (137%), which together account for 77% of the total projected rise in food consumption by 2050. While the demand for food has largely been met by domestic products, food imports have also risen. MARKETING REVIEW: Market scenario- 2014-15 The area under cultivation of soybean declined marginally while the area under cotton, rice and wheat remained at erstwhile levels. A delayed and sub-par monsoon led to several districts being affected by drought. The rabi crops were damaged because of untimely heavy rains in Northern, Central and Western India. Commodity prices of key crops like cotton, paddy, soybean and corn declined significantly. Pest threats veered between low to medium for important crops. Company's Performance in 2014-2015 Performed reasonably well despite adverse market conditions, by coming up with new and crop-focused products. Challenges and mitigation Lower pest threats, unsupportive monsoons and unfavourable commodity prices moderated crop protection investments. Company countered this reality by identifying growth markets, redeploying resources to enhance awareness. Strengths An ability to react proactively to changing market dynamics and emerge with pertinent products. A willingness to expand manufacturing capabilities to meet increasing demands, especially in emerging markets like Brazil and India, among others. A large distribution network to ensure that products are able to reaches the deepest consumption Pockets. SAFETY HEALTH AND ENVIRONMENT: Overview Company's prioritizes employee safety, health and environment to reinforce its respect as a responsible corporate. Environment management Company undertakes constant efforts to lift up environmental performance and is putting its best efforts to enhance the treatment and disposal of effluents satisfying the relevant norms of the pollution control authorities. Safety Employee safety is of paramount importance at Company. Any activity that appears unsafe to anyone can be immediately stopped. The Company designed safety training programmes for contract labourers, making attendance and compliance compulsory. The Company displayed safety visual display boards across the plants along with the temperature points in each working unit. Health Company took adequate measures to ensure better employee health. The employees underwent health checkups each year. The Company commissioned health centres in units, manned by doctors and nurses. All employees were provided brcautionary first-aid training. INTERNAL CONTROL SYSTEM: The Company has proper and adequate system of internal controls which ensure that all the assets are adequately safeguarded. Accordingly, your Company has appropriate internal control systems for business processes with regard to its operations, financial reporting and compliance with applicable laws and regulations. The Company maintains an adequate and effective internal control system commensurate with its size and nature of business. These internal policies ensure efficient use and protection of company's assets and resources, compliance with policies and statues as well as promptness of financial and operational report. The Company has proper and adequate systems of internal controls which ensure that all the assets are safeguarded and that all transactions are authorized recorded and reported correctly The company maintains adequate and effective control system and suitable monitoring procedures with regard to the purchase of raw materials, stores, plant & machinery, equipment and other assets as well as sale of goods. The finance and commercial functions have been structured to provide adequate support and controls for the business of the company. INDUSTRIAL RELATIONS AND HUMAN RESOURCE DEVELOPMENT: Company has undertaken various measures to boost the efficiency and effectiveness of its manpower and other measure to improve sourcing of talent, improving employee's satisfaction, skill development and retention of talent. Your Company believes that human resources are the most brcious assets of the Company. Company's ongoing thrust is to maintain productive work culture and to orient the employees to effectively face the new and emerging challenges emanating from the competitive environment. Your Company is privileged to have the right blend of professionals and executives in the organization and makes sincere efforts to ensure numerous opportunities for their growth in the organization. The industry relations situation was cordial and harmonious and continues to be so at brsent. Extensive training was given to workers on personal effectiveness, corporate compliance, first aid, safe driving, emergency handling and fire fighting, health and employee safety and risk assessment. The Company considers that its relationship with its employees as vital and ensures that employees feel valued and is endeavoring to create an environment and culture within which every employees can put his best efforts and maximize his contribution. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE: The financial performance of the company has been steadily improving throughout the year. There has been an increase in sales to Rs. 16,445.37 Lacs from Rs. 14,022.10 Lacs in FY 2013-14. The Company has recorded a profit of Rs. 308.86 Lacs. The key objectives of future financial strategy of the company are: • To arrange cost efficient funds for the growth plans of the company • To provide financial flexibility in the Balance sheet for Contingencies • To manage foreign exchange exposure effectively • To develop strategy to focus on EPS accretion. CAUTIONARY STATEMENT: Statements in this report on Management Discussion and Analysis describing the company's objectives, projections, estimates, expectations or brdictions may be "forward looking statements" within the meaning of applicable security laws or regulations. These statements are based on certain assumptions and expectation of future events. Actual results could however differ from those exbrssed or implied. Many important factors including global and domestic demand-supply conditions, prices, raw materials costs and availability, change in government regulations, tax laws and other statutes, force majeure may affect the actual result which could be different from what the director's envisage in terms of future performance and outlook. |