MANAGEMENT'S DISCUSSION AND ANALYSIS BUSINESS OVERVIEW Your Company is engaged in the business of growing, harvesting, manufacturing and selling of tea (Orthodox & CTC) in its 7 (seven) Tea Estates as under, located in diverse places in the State of Assam; 1. Dhoedaam Tea Estate 2. Deamoolie Tea Estate 3. Balijan (H) Tea Estate 4. Rajah Alli Tea Estate 5. Thowra Tea Estate 6. Tippuk Tea Estate 7. Zaloni Tea Estate The above Tea Estates are renowned for producing some of the best tea in the world and its products are sold in India and exported to several countries in the world such as Germany, UK, UAE, USA, etc. These Tea Estates have got the ability to produce both "CTC" and "Orthodox" teas. Your Company strives to improve its turnover by focusing on increasing our yield and quality. All seven Tea Estates are partners of the Ethical Tea Partnership (ETP) and have extensive experience in ensuring the products adhere to the strictest of EU Food Safety Norms. Tea is a sector which requires continuous investment to improve the yield. Your Company is investing significantly into uprooting and replanting which decreases the crop in the short term but will increase in 7- 10 years. Rain Forest Alliance: Four Tea Estates of your Company viz, Rajah Alli T.E., Dhoedaam T.E., Deamoolie T.E. and Thowra T.E., are Rainforest Alliance certified and Trusted verified. Rainforest Alliance is a group which works with any agricultural sector to improve the living conditions of the workers, ensure sustainable development and ensures resources are used carefully keeping in mind the environmental hazards and implications associated with it. In the recent past, Rainforest Alliance has been a huge point of concern for many as people are now much conscious about the product they consume and the way it has been manufactured and the processes involved in making the product. Rainforest Alliance has a strict code of compliance, few of them are: 1. Women workers health 2. Protective clothing while working in the factories 3. Proper treatment of water 4. Proper restrooms for the workers in the factories. Rainforest Alliance compliances are audited half yearly by a team of professionals and your Company is proud to mention that in this test we have aced it with a score of 90%. GLOBAL & INDIAN TEA INDUSTRY Overview of the Indian Economy The Republic of India, located in South Asia, is the seventh largest country in the world by area. The population of over 1.2 billion makes it the second most populous country in the world as well as the largest democracy. India's economy is the third largest by purchasing power parity (PPP) and eleventh largest by nominal gross domestic product (GDP), globally. Agriculture Sector in India India is principally an agricultural country. Agriculture, with its allied sectors, is unquestionably the largest livelihood provider in India. Most of the industries also depend upon the sector for their raw materials. At 179.9 million hectares, India holds the second largest agricultural land in the world. Steady investments in technology development, irrigation infrastructure, emphasis on modern agricultural practices and provision of agricultural credit and subsidies are the major factors contributed to agriculture growth. Indian agriculture has undergone rapid transformation in the past two decades. The policy of globalization and liberalization has opened up new avenues for agricultural modernization. This has not only lead to commercialization and diversification, but also triggered various technological and institutional innovations owing to investments from corporate entities. The Immediate challenge to the Ministry of Agriculture when the new Government had taken over, was to sustain the increasing agricultural output of the country in the face of impending deficit rainfall in this year 2014-15. All the requisite brparatory measures were made in coordination with the State governments to have the District-wise contingency action plans in place and to bring in flexibility in the various schemes in order that the States are enabled to cope with any desired changes in the Approved Action Plans for tackling the situation arising out of deficit rainfall. With the perspective the Central Research Institute for Dry Land Agriculture (CRIDA) in collaboration with State Agricultural Universities and the State Governments has brpared crop contingency plans in respect of 576 districts across the country. Further, all necessary and appropriate steps have been taken to meet the seed and fertilizer requirement and to disseminate information and on suitable farming practices to be followed in such a situation. Tea Production in India Tea manufacturing is one of the brmier industries of Assam. It plays a vital role in the economy of the state. About 17 percent of the workers of Assam are engaged in the tea industry. The total area under tea cultivation in Assam is accounting for more than half of the country's total area under tea. In addition to existing large tea gardens owned by both reputed Indian and multinational Companies, the profession of tea plantation in the State has been taken up by common man as business venture at brsent, especially by unemployed youths. Assam is the single largest tea-growing region in the world. The low altitude, rich loamy soil conditions, ample rainfall and a unique climate help it to produce some of the finest orthodox leaf teas. It is these unique environmental conditions that give the teas their special quality, reputation and character and helps orthodox Assam Teas to qualify as a Geographical Indication. The distinctive second flush orthodox Assam teas are valued for their rich taste, bright liquors and are considered to be one of the choicest teas in the world. The Tea production for the second year in succession is under severe stress due to adverse weather conditions resulting in droughty and dry spells brvailing across most tea areas of Assam and West Bengal. This phenomenon was visible in early 2014 resulting in Indian Tea production closing at a shortfall of 15 mn kgs lower in 2014 as compared to the brvious year. The production in Assam Valley had been severely affected with Assam production in 2014 declining by 35 mn kgs below the brvious year i.e. 2013. COMPETITION Tea Industries in the developing countries of Asia are facing huge competition due to inefficiency in the value chain management especially related to land management, plucking efficiency and manufacturing cost. To establish & remain competitive we have designed an efficient distribution network & robust marketing set up. We will also have to continuously strive to reduce the cost of production and increase other operating efficiencies in addition to capture new markets. We have also formulated efficient sales process & improved our service levels to win customers confidence & have positive referrals. Your Company has set up, sales & marketing team for the sale of products. The Company has already appointed distributors and auctioneers for the sale of our products in the various states of India. A strong foundation has been laid for the marketing of the products by creation of the marketing team which was reflected in the sale of current financial year. A full fledged corporate campaign and product campaign is being made for the consumers. The Company believes that a focused brand building exercise will help in developing loyal customer. In order to assess the perception of the Company's product and services, we have started a perception based Customer satisfaction study which will help us in improving our processes. OPPORTUNITIES AND THREATS The diverse agro-climatic conditions brvailing in the tea growing areas of India lend themselves to the production of a wide range of teas (CTC, orthodox), green tea and organic teas. There is availability of modernized and upgraded manufacturing facilities, Labour welfare laws protecting workmen. The biggest opportunity for your Company is the global consumer trend towards health and wellness where tea which is one of the important natural beverages is strongly aligned to this trend. Therefore, it is likely to benefit your Company, now and in the future. The small tea growers form a considerable part of the industry. The recent revised figures show a high production of teas from these small growers in North India. The emerging small grower sector with young plantation profiles and availability of training facilities for plantation managers, supervisory staff and workers for continuous upgradation of their skills is likely to benefit the Company. The old age of the tea bushes - nearly 38 per cent have crossed the economic threshold age limit of 50 years and another 10 per cent on the verge of crossing this limit shortly. High cost of production mainly due to low productivity, high energy cost and high social cost burden, constrained availability of containers, placements of vessels and high ocean freight charges may be a threat to the Company. Threats to the tea business could also arise from cut throat competition, high commodity volatility or dilution of margins may be due to various reasons. The decline of the black tea market in specific countries is also a potential threat. INTERNAL CONTROL SYSTEMS There are well designed internal control systems and procedures in line with the size of operations and business. Your Company has engaged reputed Chartered Accountants for conducting internal audit of all the Gardens and Head Office who are providing internal audit reports. Audit Committee reviews these reports and monitors effectiveness and operational efficiency of internal control systems. Audit Committee is giving valuable recommendations and suggestions for corrective actions from time to time for improving the business processes, systems and internal controls. Annual internal audit plans are brpared by internal auditors in consultation with Audit Committee and audit is conducted in accordance with this plan. Separate department headed by a senior officer looks after internal control systems and assists internal auditors and the Audit Committee and provides desired inputs to them. The Committee also meets the Company's statutory auditors to ascertain, interalia, their views on the adequacy of internal control systems in the Company and keeps the Board of Directors informed of its major observations from time to time. The Risk Management Policy adopted by the Company has further strengthened the internal control system. FINANCIAL PERFORMANCES Your Company had recorded the Total Turnover of Rs. 13,767.81 lakhs and the net profit of Rs. 507.43 lakhs in the current financial year in comparison to the Total Turnover of Rs. 14606.87 lakhs and the net profit of Rs. 2029.20 lakhs respectively in the last financial year. The Company had produced 72,18,441 Kgs of Tea in the current financial year as compared to 77,50,729 Kgs of Tea in the brvious financial year, which is approximately 6.87% decrease from the brvious year. After the adjustments of other expenditures, the Earnings before Interest, debrciation, taxation and amortization is Rs 1,383.45 lakhs in the current financial year as compared with the brvious financial year Rs. 3122.93 lakhs. HUMAN RESOURCES Tea Industry is highly labour intensive. Your Company has employed over approximately 8,500 workers personnel at its Tea Estates and other establishments in India. The employee relations remained satisfactory during the period under review. The Company would like to record its apbrciation of the wholehearted support and dedication from its employees at all levels in maintaining the smooth production and manufacture of tea from all the Tea Estates during the year. CAUTIONARY STATEMENT This report contains projections, estimates and expectations etc. which are just "forward-looking statements". Actual results could differ from those exbrssed or implied in this report. Important factors that may have impact on Company's operations include economic conditions affecting demand / supply and price conditions in the domestic and overseas markets, changes in the Government regulations /policies, tax laws and other statutes and other incidental factors. The Company assumes no responsibility to publicly modify or revise any forward looking statements on the basis of any future events or new information. Actual results may differ from those mentioned in the report. |