MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS SEGMENT :

Your company is one of the large manufacturers of Starch and its derivatives in India. It has manufacturing facilities in four states i.e. Phagwara in Punjab, Gurplah in Himachal Pradesh, Malda in West Bengal and Nizamabad in Telengana. The company is fully equipped for developing, manufacturing and distribution of Maize Starch, Dextrins, Liquid Glucose, Malto-dextrins, Dextrose Monohydrate, Dextrose Anhydrous, Sorbitol 70% Sol. and bye products like Maize Oil, Maize Oil Cake, Corn Gluten etc. The manufacturing facilities have well equipped Research & Development units to continuously improve the product-line and their applications.

The company's products enjoy an enviable position in the market and the company believes that quality is the lifeline of every business. 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.

The company's products find extensive use mainly in four vital sectors like Food, Textiles, Pharmaceuticals and Paper. The multi-locational brsence of the company has enabled it to increase its market visibility with extensive geographical reach and broader customer base. The Company has an excellent customer profile, which includes multinational companies and leading corporates in the field of Food, FMCG, Textile, Pharmaceuticals and Papers etc.

The Starch Industry appears to be in the take off stage in the country as per capita consumption of Maize Starch is much lower than the world average. Even, our neighboring country China's per capita consumption of starch is 4-5 times higher than that of our per capita consumption. So, the industry in our country has to grow at a faster pace, to at least come near the world average.

The products of the industry find wider use in Food Industry where phenomenal growth is expected due to fast changing food habits of the working class in the country. Presently, Maize Starch has a very limited use in India whereas it finds more than 1000 applications in the developing countries. Nearly one-fourth of stock keeping units in a modern grocery store contain Starch in one form or the other, ranging from Tooth Paste, Detergent, Paper, Dyes, Soaps to artificial sweeteners. Starch also finds wider application in food containers, plastic food packaging, baby food powder, medicines, vitamin tablets, textile products, candies and so on. The use of Maize Starch in the manufacture of biodegradable plastic packaging offers an excellent opportunity for the industry as Govt. moves to ban the use of plastic packaging to control environmental hazards.

The industry faces major threats/risk on the raw material front as Maize is its 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.

Corn Milling Industry is one of the largest consumers of Corn worldwide. About two-third of starch produced globally is made out of Corn. Indian Starch industry consumes about 14-15% of total Maize produced in the country. The annual Maize production, which had reached a level of 25+ Million tons, has come down drastically in the last two years owing to consecutive droughts. The crop has been adversely affected in major Maize growing states of the country like Karnataka, Maharashtra, Telangana & Andhra Pradesh. Total global yearly production of Maize is much higher at 950+ Million Tons with USA, Argentina, Brazil & Ukrain producing about 80% of the total production in the world.

Maize production, in India, continues to be in the primitive stage and has a very long way to go to come of age. Besides, low acreage, country's productivity is less than half of the global average production of Maize per hectare. Currently hybrids constitute only about 35% of the area in India against 80% in the U.S. So, spurring Maize production in the country is a technological intervention in the form of hybridization. The area under Maize hybrids needs to be expanded every year to achieve a surge in production, which has a potential to double in the next 10 years, if there is a clear focus on increasing productivity.

It is also important to ensure proper price discovery of Maize and employ better marketing practices to offer better realization for the small and marginal farmers and optimize costs to the consumers.

Other concerns / risks include competition in the market place, low demand for Company's products due to poor economic conditions and consequent margin risks.

PERFORMANCE AND FUTURE OUTLOOK :

The sales and other income of the Company has improved from Rs. 534 crores to Rs. 568 crores despite there being a demand combrssion for some finished goods used by the FMCG sector which was adversely affected from poor rural demand due to consecutive droughts in the Country. The Earnings before Interest, tax and Debrciation came in at Rs. 63.07 crores (Rs.65.55 crores) which after interest of Rs.15.28 crores (Rs.17.77 crores) and debrciation of Rs.12.11 crores (Rs.13.29 crores) resulted in Net profit before tax at Rs. 35.68 crores 34.49 Crores). Substantial reduction in interest cost has been achieved due to prudent fund management and lower carrying cost of raw material. Company continuous to enjoy good credit ratings from the rating agency. The availability of basic raw material being maize remains a concern throughout the year due to consecutive droughts in the major maize producing states of the country. The availability of the basic raw material at higher price did impact the operating margin of the Company.

RESEARCH & DEVELOPMENT (R&D) :

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. As new technologies are being constantly introduced in the market space, which is essential for remaining competitive in today's era. Your company mainly focuses on technology that is expected to deliver the most promising long-term results and deliver high quality products to add value to the customer's business.

HUMAN RESOURCE DEVELOPMENT :

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. Human resource (HR) is an important asset of a business unit. Well-trained, loyal and efficient team of workers brings success and stability to any business. In Sukhjit, there are good HR practices and processes in place 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. It is necessary to develop good and satisfactory human resource climate for growth and survival of business. The key themes of the company can only be achieved by enhancing the skilled talent pool through good HRD practices, strengthening long-term entrebrneurial 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 STATEMENT :

Good expectations stated in this Management Discussion & Analysis may be ''Forward Looking Statements'' within the meaning of the applicable securities - laws and regulations, future results may be different as company's operations, may be affected by change in the demand and supply, price in the domestic and international markets, changes in Government Regulations, Tax Laws or other statutes and more importantly production and availability of the basic raw material, which is an agricultural produce.