MANAGEMENT DISCUSSION AND ANALYSIS REPORT Forward Looking Statement Forward-looking statement refl ects the current expectations regarding future results of operations. Actual results, performances or achievements could differ materially from those exbrssed or implied in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of their dates. This Report should be read in conjunction with the fi nancial statements included herein and the notes thereto. Industry Scenario and Developments Food processing industry in India is increasingly seen as a potential source for driving rural economy as it brings synergy between industry and agriculture. A developed food processing industry is expected to lead increase in farm gate prices translating into increased rural incomes, reduce wastages, ensure value addition, promote crop diversification, generate employment opportunities as well as export earnings. With such a large and diversified production base coupled with low manpower cost and modern technology, the Indian food processing sector is poised for growth, if the advantages are leveraged optimally. The growth is driven by the fact that the central government has given a priority status to all agro-processing businesses. Government incentives in the field of mega food parks, cold chain and exports benefi ts are also playing an important role in promoting food processing. The mushroom industry has a bright future due to increasing demand of mushroom worldwide. India is not a major producer of any of the mushroom varieties but it does cultivate mushrooms and has a great potential as an important producer in the future. Business Overview Flex Foods offers a wide range of Vacuum Freeze Dried, Air- Dried, Frozen and IQF (Individually Quick Frozen) product range of mushrooms, herbs, spices and fruits / vegetables, meeting strict quality & hygiene standards. Canned button mushroom in various shapes and sizes is also available as per the customer requirement. Flex Foods Limited is a single point source of supply of Frozen / IQF (Individually Quick Frozen), Air Dried, Canned as well as Freeze Dried products to the customers as per their requirements. A tempting food item i.e. retail packs of Culinary Herbs for Indian customers are also available in four varieties in Flex Foods. Opportunities and Threats The Indian food industry is poised for huge growth, increasing its contribution to world food trade every year. In India the food sector has emerged as a high-growth and high-profit sector due to its immense potential for value addition, particularly within the food processing industry. In order to facilitate and exploit the growth potential of the sector, the government on its part has initiated extensive reforms. Some of the key measures undertaken by the Government include: amendment of the Agriculture Produce Marketing Committee Act, rationalization of food laws, implementation of the National Horticulture mission etc. The government has also outlined a plan to address the low scale of processing activity in the country by setting up the mega food parks, with integrated facilities for procurement, processing, storage and transport. To promote private sector activity and invite foreign investments in the sector the Government allows 100% FDI in the food processing & cold chain infrastructure. However, despite continual efforts and initiatives of the Government to provide the required stimulus to the sector, processing activity is still at a nascent stage in India with low penetration. At the same time, though India is a key producer of food products, having an adequate production base for inputs, productivity levels are very low in the country. The Indian food regulations comprise various food policies that have been enacted at different points of time, and are under the ambit of various ministries of Government of India (GOI). Historically they were introduced to complement and supplement each other in achieving total food sufficiency, safety and quality. The result is that the food sector in India is governed by a number of different statutes rather than a single combrhensive enactment. This incremental approach has lead to incoherence and inconsistency in the food sector regulatory scenario. Since Company has all types of processing facilities i.e. freeze dried, air dried, frozen/ IQF, canned etc., it has attained special status of single point source supplier of processed food products to meet the customer needs of all kind. It also helps the Company to have a better competitive edge over the other suppliers. The Company has also developed its expertise in maintaining the global quality and hygiene standards. The Company is well poised to meet the challenge of competition. It has built up adequate processing capacities to meet the growth potential both in the Domestic and International Markets. Future Outlook The food processing industry is one of the emerging industry throughout the world especially in developing countries like India it is getting a more and more attractive for the agricultural oriented economy. The industry is proving a ray of hope for modernizing the primary sector (agriculture and allied industries) in these developing nations. The primary sector plays a vital role in Indian economy and it is regarded as the 'back bone' of the economy. Indian food processing industry is poised for explosive growth driven by changing demographics, growing population and rapid urbanization. These factors will increase the demand for value added products and thus improve the prospects of food processing industry in India. Risks & Concerns Risk is an integral part of business. Risk can be broadly categorized into two broad categories: one Risk Associated at the Transactional Level and the other Risk Associated at the Decision Making Level. Risk Associated at operational level can arise out of operations, financial dealings and / or compliances of legal system. The Company has appropriate control mechanism and operating effectiveness of Internal Financial Controls & Legal Compliance System. Risk Associated at the Decision Making levels are political, social & economic, technology, capital structure, foreign exchange & interest rate etc. These risk are evaluated in detail before taking any strategic & financial decision. Internal Control System, their Adequacy and operative effectiveness The Company has laid down internal financial controls to be followed by the Company and such policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business, the safeguarding of its assets, the brvention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely brparation of reliable financial information. The Company has also laid down an adequate system for legal compliances. It has created appropriate structures with proper delegations of duties and responsibilities of employees at each level on enterprise basis which ensures the proper adherence and compliance of such systems. Both the Internal Financial Control and Enterprise Legal Compliance System are subject to review by the Management in respect of their adequacy and operative effectiveness which in turn are also reviewed by the Internal Auditors, Statutory Auditors and Audit Committee. Finally, the Board of Directors of the Company also review and take note of them. Human Resources/Industrial Relations The company lays due emphasis on sound Human Resource Management practices and appraisal systems with focus on cordial employer-employee relations to ensure higher level of productivity and operational efficiency. Adequate initiatives have been taken to strengthen and develop its human resources as a key strength through continuous training inputs and focused development plan. As on 31st March 2016, the total number of permanent employee in the Company were 500. Environment, Occupational Health & Safety Your Company is committed to conducting its operations with due regard to the environment and providing a safe and healthy workplace for employees. The collective endeavor of your Company's employees at all levels is directed towards sustaining and continuously improving standards of environment, occupational health and safety in a bid to attain and exceed international benchmarks. Analysis of Financial Performance and Operational Performance The accompanying financial statements have been brpared in accordance with the requirements of the Companies Act, 2013 and Generally Accepted Accounting Principles and Accounting Standards brvailing in India. CURRENT ASSETS LOANS & ADVANCES Inventories Inventories include stock of raw material, consumables, work-in-progress, finished goods and packing material. Total inventories were Rs 1805.33 lacs, as at 31st March 2016 as against Rs.1622.21 lacs as at 31st March 2015. This rebrsents 108.21% & 118.42% of the consumption of raw material for 31.03.2016 and 31.03.2015 respectively. Sundry Debtors Sundry debtors were Rs 1866.31 lacs as at 31st March, 2016 as against Rs. 1226.81 lacs as at 31st March, 2015. Debtors as a percentage of total revenue from operation were 22.52 % for the current year as against 16.93 % for the brvious year. Cash and Bank Balances Cash and bank balances were 11.40 % of total assets as on 31st March, 2016 as against 5.24 % as on 31st March, 2015 Loans & Advances Loans & Advances mainly comprise of loans to staff, advances recoverable in cash or kind, advance taxes and security deposits. Advances recoverable in cash or kind or for value to be received are mainly towards amount paid in advance for value and services to be received in future. Security deposits mainly rebrsent deposit for electricity. Net Deferred Tax Assets Deferred tax liabilities of Rs. 755.66 lacs rebrsent closing balance of net deferred tax liabilities after adjusting total deferred tax assets and deferred tax liabilities as on 31.03.2016. It has been calculated in accordance with Accounting Standard -22 "Accounting for Taxes on Income" issued by the Institute of Chartered Accountants of India. CURRENT LIABILITIES & PROVISIONS Current Liabilities Sundry Creditors include amount payable to vendors for supply of goods and services. Advances from customers rebrsent amount for which material has not yet been delivered. Other liabilities include amounts payables to staff/workers for earned leave, bonus, salary and overtime besides taxes. |