MANAGEMENT DISCUSSION AND ANALYSIS REPORT The Company is currently engaged in Manufacturing and Selling of crystal white sugar, trading in Stores items used by Sugar Industry and Construction. Construction mainly includes trading of construction rights. SUGAR INDUSTRY Sugar crops in many parts of the world are projected to expand in response to rising demand for sugar and other uses and relatively high market prices. World sugar production is expected to increase by 50 Mt to reach over 209 Mt in 2020-21. The bulk of the additional sugar production will come from the developing countries. India, the second largest global producer and the world’s leading consumer, is expected to boost production substantially to 32 Mt of sugar per year, on average, in the coming decade, or some 50% higher than in 2008-10, when production fell sharply. Annual sugar output will continue to be subject to periodic large swings in response to the longstanding production cycle. Some other countries of Asia, such as China and Pakistan, are also expected to continue to experience milder forms of production cycles, which contribute to fluctuations in production and their import volumes. Outside this group, an expansion drive underway in Thailand is expected to continue as investment projects currently in the pipeline come on stream, lifting production to around 8.7 Mt by 2020-21, and maintaining its position as the world’s third largest producer. Global sugar consumption has continued to increase despite the continuing economic difficulties in many developed countries, compounded by the period of high sugar prices and increased volatility. This has slowed sugar use at the start of the Outlook period and slower consumption growth is expected to continue over the longer term as world sugar prices average higher in real terms. Global consumption is projected to grow at 2.2% p.a. to 2020-21, and down from 2.6% p.a. in the brvious ten years. The developing countries will continue to experience the strongest growth in sugar consumption, fuelled by rising incomes and populations, although with considerable variation between countries. The sugar deficit regions of Asia and the Far East as well as Africa, will be responsible for most of the expansion in use. In contrast, sugar consumption in many developed countries, with their mature sugar markets, are expected to show little or no growth. Total consumption in these countries is expected to increase from 48Mt to nearly 52 Mt over the projection period. This reflects, among other things, slowing population growth and dietary shifts that are underway as a result of increasing health awareness and concerns with obesity and related health issues. Sugar is one of the essential items not only in the household sector but also in various industrial formulations in pharmaceutical sector, confectionery, soft drinks, sweets etc. The consumption of sugar in the country is on the increase due to population growth as also due to various development plans of the Government. Still the per capita sugar consumption in India is much lower than the world standard and even from the developing countries. However, the per capita consumption of sugar is on the increase on account of improved standard of living and the changing life style of rural masses which now brfers sugar than any other alternate sweet ening material. The Sugar industry has production cycles related to Cane production. This leads to sharp swings in prices. The crushing period varies from region to region. The crushing begins in October/November and goes on till April/May in all states except in Southern states like Tamil Nadu, Andhra Pradesh etc where it continues till July- August. Indian Sugar industry is highly fragmented with private sector, Co-operatives etc along with the unorganized players. The unorganized players mainly produce Gur and Khandsari which are less refined forms of Sugar. Our Strategy We would intensify efforts in improving quantity and quality of Cane availability. We are taking all the steps to improve Cane quantity and quality in Sugar season 2014-15. CONSTRUCTION The Company is also engaged in the business of construction and selling of residential houses and trading of construction rights. The Company has not undertaken any major construction project. Presently, it has very small construction activities which include purchase and sell of construction rights. However, it has plans to expand its construction activities by undertaking large housing projects comprising economy aswell as luxurious residential houses. The Indian construction industry is an integral part of the Indian economy and an important portion of investments into the development of the Indian Economy takes place through the construction industry. The construction industry is expected to grow with further economic development, industrialisation, urbanisation and improvements in the standard of living. According to Indian Infrastructure, the Indian construction industry accounts for more than 5% of India’s GDP and is the second largest employer after agriculture, employing nearly 32 million people. In the course of liberalization of the Indian economy, the Government has placed a priority on infrastructure development and emphasised the involvement of private capital and management in order to respond to the growing demand for new infrastructure projects. SEGMENTWISE PERFORMANCE Presently, the Company mainly deals in two segments: I. Sugar II. Construction Segment Reporting as per point no.8 to note 18 of the Audited Statements of Account. RISKS & MITIGATIONS Industry risk The Company’s growth is largely dependent on the growth of the sugar industry. However, India’s low per capita sugar consumption compared with a global trend provides enough room for growth in the sector. Further, since sugar is an essential and brferred sweetener, it seldom faces any slackening demand in the country. Raw material risk Rising sugarcane prices and non-availability could adversely affect the Company. However, Company’s Sugar Mill is located in the cane-rich areas of Bihar and its focused cane development team encourages farmers to enhance yield and plantation acreage. The proposed sector de-control in terms of introducing the Fair price mechanism for purchase of raw material will adequately help the ailing industry to recover. Moreover, the proposed revenue-sharing formula by the Rangarajan Committee will ensure cane prices are fixed at 75 percent of the sugar price realisation, strengthening the Industry’s global competitiveness. Cyclicality risk Operating in a cyclical business,weak operational efficiency could affect profitability. The Company’s immediate future plans to invest in its ancillary business, co-generated power by using by-product baggage and distillery plant, will impart a robust competitive edge to protect fortunes from cyclicality. Moreover, its infrastructure, which is suitable for 15000 TCD capacity, will enable the Company to run its assets beyond the sugar season. Regulatory risks Unfavorable government policies could derail business plans. The government constituted the Rangarajan Committee to progressively de-control the sugar sector. INTERNAL CONTROL SYSTEMS THEIR ADEQUACY Our Company has a proper and adequate system of internal control to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and that the transactions are authorized recorded and reported correctly. The Internal control system is designed to ensure that financial and other records are reliable for brparing financial information and other data and for maintaining accountability of assets. There is an elaborate internal audit system which is done by Independent firm of Internal Auditors. Their reports on the internal controls and their adequacy are regularly discussed with the Management and corrective measures wherever required, are taken and continuously monitored. The Audit Committee of the Board meets regularly to review the adequacy of internal controls; internal audit finding sand the corrective actions are taken, if necessary. The Management is reasonably satisfied about the adequacy of these internal control systems. DISCUSSIONONFINANCIAL PERFORMANCEWITHRESPECT TOOPERATIONAL PERFORMANCE Revenue The Total Income during the year under review, stood at Rs.200.42 lacs as against Rs. 1932.30 lacs in the brvious Financial Year. Profits Profit before Interest, Debrciation and Tax stood at 97.86 lacs, showing a marginal decrease from brvious financial year which stood at 813.98 lacs. Profit after Tax amounting to Rs. 59.56 lacs, compared to 217.84 in the brvious financial year. Earnings Per Shares (EPS) The Company recorded an EPS of Rs. 0.32 per equity shares of Rs. 10/- each during 2014-15. MATERIAL DEVELOPMENTINHUMANRESOURCES/INDUSTRIAL RELATIONS FRONT A cordial industrial relations environment brvailed in the Company during the year, barring witness of recent agitation by workers to enforce their own demands. There was constant focus on all rounds organizational development. Regular promotions are granted and succession plans are effectively implemented. Our system of compensation is as per the market trends and job requirements. Other benefits to employees are provided for motivation. CAUTION STATEMENT The above mentioned statements are only “forward looking statements” based on certain assumptions/expectations. The Company’s actual performance could differ materially from those exbrssed/projected depending upon changes in various factors. The Company does not assume any responsibility to any change(s) in “forward looking statements”, on the basis of subsequent development, information or events etc. B. K. Nopany Managing Director |