MANAGEMENT DISCUSSION AND ANALYSIS

The discussion hereunder covers the financial results of Freshtrop Fruits Limited for the financial year 2014-15 and its business outlook for the future. Certain statements in the 'Management Discussion and Analysis Report' section may be forward looking and are stated as required by applicable laws and regulations. Many factors may affect the actual results, which could be different from what the Directors envisage in terms of the future performance and outlook.

1. INDUSTRY STRUCTURE AND DEVELOPMENT :

GRAPES:-

India has, in the international market emerged as a prominent table grape growing and exporting country. We have an exclusive window for exports of table grapes to EU countries along with a well-established infrastructure of pack-houses and cold storages, well planned and executed national residue monitoring plan ably supported by world class analytical laboratories. This has made Indian table grape exports industry worth Rs. 1200 crores and it has potential to grow further. Further development of technologies on salinity and water management; genetic improvement for salinity and drought tolerance as well as disease resistance will help us in maintaining productivity.

The availability of fruits is confined to specific periods of year and the prices are ruled by the market availability. Low temperature storage of fruits is not economical and hence not in practice for domestic market while raisin making solves the problem of grape perishability to some extent but the price realization is not stable. Further, grape has to compete with other fruits during their availability period in the market for consumer brference and price. In spite of this, the grape growers as an organized sector are persisting with grape cultivation and look forward to new technologies for sustaining the productivity, improving quality, reducing the cost of cultivation, extending the area and the season of harvest, high value end uses especially wine making and raisins.

During 2014-15 season the crop was extraordinarily good in most areas and the advance estimate of NHB, probably recorded in December 2014, indicated record production figure of 26,02,000 MT from 120,000 ha. But rains during January and then hailstorms during February and March destroyed the crop in almost all grape growing areas in the state of Maharashtra.

FOOD PROCESSING:

The Indian food industry is poised for huge growth, increasing its contribution in world food trade every year. In India, the food sector has emerged as a high-profit sector on the back of the scope it offers for value addition, particularly with the food processing industry getting recognised as a high-priority area.

Accounting for about 32 per cent of the country's total food market, the food processing industry is one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth. The total food production in India is likely to double in the next 10 years with the country's domestic food market estimated to reach US$ 258 billion by 2015.

The role of the Indian government has been instrumental in the growth and development of the industry. The government through the Ministry of Food Processing Industries (MoFPI) is making all efforts to encourage investments in the sector. The Indian food processing industry accounts for 32 per cent of the country's total food market, 14 per cent of manufacturing GDP, 13 per cent of India's exports and six per cent of total industrial investment.

Further, the adoption of food safety and quality assurance mechanisms such as Total Quality Management (TQM) including ISO 9000, ISO 22000, Hazard Analysis and Critical Control Points (HACCP), Good Manufacturing Practices (GMP) and Good Hygienic Practices (GHP) by food processing industry enable adherence to stringent quality and hygiene norms and thereby protect consumer health, brpare the industry to face global competition, enhance product acceptance by overseas buyers and keep the industry technologically abreast of international best practices.

The allocation of Rs. 2,000 crore (US$ 319.98 million) as a separate National Bank for Agriculture and Rural Development (NABARD) fund for food processing industries during the Union Budget 2014-15 is all set to give a big boost to this sector in India.

References: Ministry of Pood Processing Industries (MoFPI), Agricultural and Processed Food Products Export Development Authority (APEDA), Media reports and Press Releases, Department of Industrial Policy and Promotion (DIPP), Press Information Bureau (PIB), Confederation of Indian Industries (CII)

2. OPPORTUNITIES AND THREATS:

OPPORTUNITIES

GRAPE:

The country is in the midst of a horticulture revolution. Grape is emerging as an important fruit crop of India; it has the third highest productivity and is the highest among fruit crops in earning foreign exchange. Further, it is receiving importance in creating jobs on the farm and other related sectors

Biotechnology has a considerable potential to address many of the challenges in the grape.

Although, it is important to continuously strive to develop new and better technologies. Their effective delivery mechanism would greatly help in bridging wide gap between the potential and the realized productivity.

Some of the major pests and diseases, threatening the grape industry in other countries (e.g. Botrytis etc.) are not reported form our country. Bio-risk is increasing with climate change and owing to trans-boundary insect-pests and diseases.

FOOD PROCESSING:

In order to promote food processing industries, increase level of processing and exploit the potential of domestic and international market for processed food products, Vision Document-2015 was brpared by the Ministry, which envisaged trebling the size of investment in the processed food sector by increasing the level of processing of perishables from 6 per cent to 20 per cent, value addition from 20 per cent to 35 per cent and share in global food trade from 1.5 per cent to 3 per cent by 2015. To achieve these targets, an investment of Rs.100,000 crore (US$ 16 billion) is required by the year 2015.

The Ministry of Food Processing Industries has taken some new initiatives to develop the food processing sector which will also help to enhance the incomes of farmers and export of agro and processed foods among others. The government has also approved the setting up of five numbers of Mega Food Parks in the states of Bihar, Maharashtra, Himachal Pradesh and Chattisgarh.

THREATS / CHALLENGES

GRAPES:

> Climate revolution:

Grape is one such crop that is highly sensitive to climatic changes. As majority of the grape growing vineyards in India are located in semi-arid tropics, the problems of irrigation water availability and salinity will only get aggravated due to climate change.

Untimely rains and cold waves have recently brought in uncertainty in productivity for grapes, due to increased risk of diseases, less fruitfulness and impairing berry development, Research on protected cultivation may help in reducing such risks.

Increasing quality and sustained optimum production of table grapes under tropical conditions at competitive price is another major issue facing the industry. Abiotic and biotic stresses like continuous drought, soil and water salinity and the high incidence of diseases and pests are major factors that could affect the quality of grapes.

FOOD PROCESSING:

High level of wastages in perishables is a challenge but endeavor of the Government is to promote food processing industry to catalyze reduction of wastage of agricultural produce and ensuring higher returns to the farmers. With a view to promote the sector, the Government has been strengthening infrastructure by supporting creation of Cold chain and Mega Food Park under the Central Sector Scheme of Infrastructure Development. Recently, Ministry has sanctioned 17 new Mega Food Parks to attract investment in the sector and will sanction approx. 30 more new Cold Chain projects.

3. SEGMENT WISE PERFORMANCE :

> The Company has identified following segments as reportable segments:

> 1) Fresh Fruits

> 2) Food Processing

> Details of Segment wise performance are given at respective place of in this report.

4. FUTURE OUTLOOK :

Increasing the production and productivity of grape to meet the demand of growing population is the prime goal for next four decades. Sustaining the productivity under adverse conditions and diversification for value addition and consumer brference are other important goals. Due to awareness of consumers and increase in purchasing power, demand of quality produce is increasing brsently. Therefore, development of technologies for the production of quality grapes and processed products will be another goal.

5. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY :

The Company has adequate Internal control systems commensurate with its size and operations to ensure orderly and efficient conduct of business while safeguarding the assets, quality, safety, procurements, finance and accounts and reducing and detecting error.

6. FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE :

The financial performance of the Company is described in the Director's Report under the head "Financial Results" and "Review of Operations".

7. MATERIAL DEVELOPMENT IN HUMAN RESOURCES AND INDUSTRIAL RELATIONS FRONT :

The Company routinely undertakes employee development activities keeping in mind the professional requirements of the employees as well as the growth of the Company.

The Company has embarked on the path to formalize its CSR commitments - and is perhaps the only company in India in the fresh produce export sector to move in this direction. This is not only going to result in better integration within the supply chain but also offer a significant competitive edge in marketing our products in the developed markets across the world.

The Industrial Relations were cordial throughout the year with no incidence of strike or lockouts.

CAUTIONARY NOTE

Statements in the Management Discussion and Analysis describing the Company's objectives, projections, estimates, expectations and others may constitute "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results may differ from those exbrssed or implied. Several factors that could significantly impact the Company's operations include economic conditions affecting demand, supply and price conditions in the domestic and overseas markets, changes in the Government regulations, tax laws and other statutes, climatic conditions and such incidental factors over which the Company does not have any direct control.

The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

References: Ministry of Food Processing Industries (MoFPI), Agricultural and Processed Food Products Export Development Authority (APEDA), Media reports and Press Releases, Department of Industrial Policy and Promotion (DIPP), Press Information Bureau (PIB), Confederation of Indian Industries (CII), National Research Centre for Grapes, Pune)