Aristo Bio-Tech & Lifescience Ltd Management Discussions

<dhhead>MANAGEMENT DISCUSSION AND ANALYSIS REPORT </dhhead>

The discussion hereunder covers Company’s performance and its business outlook for the future. This outlook is based on assessment of the current business environment and Government policies. The change in future economic and other developments are likely to cause variat ion in this outlook.

 

The Management’s views on the Company’s Performance and outlook are discussed below:

 

 

 

 

GLOBAL ECONOMY:

 

Global economy continues to gradually recover from the pandemic and Russia’s invasion of Ukraine. According to International Monetary Fund (IMF), Economic activity in the first quarter of the year proved resilient, despite the challenging environment, amid surpris ingly strong labor markets. Energy and food prices have come down sharply from their war-induced peaks, allowing global inflation pressures to ease faster than expected. And financial instability following the March banking turmoil remains contained thanks to forceful action by the US and Swiss authorities. According to IMF, growth will slow from last year’s 3.5 percent to 3 percent this year and next, a 0.2 percentage points upgrade for 2023 from our April projections. Global inflation is projected to decline from 8.7 percent last year to 6.8 percent this year, a 0.2 percentage point downward revision, and 5.2 percent in 2024.

The longer than expected conflict between Ukraine and Russia, which started in February 2022, is expected to weaken the economic recovery, apart from creating one of the largest humanitarian tragedies. The recent resolution of the US debt ceiling standoff and, earlier t his year, strong action by authorities to contain turbulence in US and Swiss banking reduced the immediate risks of financial sector turmoil. This moderated adverse risks to the outlook. However, the balance of risks to global growth remains tilted to the downside. Inflation could remain high and even rise if further shocks occur, including those from an intensification of the war in Ukraine and extreme weather-related events, triggering more restrictive monetary policy. This conflict has also pushed up the price of crude oil and commodities, disrupted the supply of agri-inputs and food, and aggravated the inflationary environment across the world. Food security has become a priority for national governments worldwide which is leading to higher demand for quality agri-inputs.

 

 

 

INDIAN ECONOMY:

 

After contracting by 7.3% in a Covid impacted year of FY 2020-21, Indian economy quickly recovered lost ground and is projected to expand by 8.7% in FY 2021-22, as per the latest advance estimates released by Central Statistical Office (CSO). As per consensus forecasts, GDP growth in FY 2022- 23 is expected to be in the range of 7.0% - 8.2%. The growth is expected to be driven primarily by infrastructure capex spending as reflected in Central Government’s budgetary allocations.

India’s large domestic economy coupled with the government’s enormous public spending, both in the form of planned outlays and direct benefit transfers, led to liquidity infusion into the economy, and helped the country consistently grow. India’s inflation trajectory is expected to be significantly impacted by extreme weather conditions like heat waves and the potential for an El Ni?o year, volatility in international commodity prices and the possibility of a pass-through of input costs to output prices.

 

The capital expenditure for FY 2022-23 stands at 2.9% of GDP, indicating the Governments commitment to investing in the countrys growth. Moreover, the Government has announced an even larger allocation of Rs. 10 lakh crore for the next fiscal year, which demonstrates their long-term vision for the economy. Of this amount, a considerable sum of Rs. 1.78 lakh crore has been earmarked for the Ministry of Chemicals and Fertilisers, reflecting the Government’s emphasis on promoting the chemical and agriculture sectors. Overall, these budgetary allocations signal the Government’s determination to accelerate economic growth and create a more prosperous and resilient India. (Source: Budget 2023, RBI, Economic Survey 22-23, Ministry of Finance)

 

 

OUTLOOK:

 

India’s economy recovered quickly from the pandemic and further growth is expected to be supported by solid domestic demand and increase in capital investments. The International Monetary Fund (IMF) and Reserve Bank of India (RBI) estimate real GDP growth of 6.8% in 2022-23 and 6.1% in 2023-24. The agriculture sector has been growing at an average annual rate of 4.6% over the past six years, and the industrial sector is estimated to grow at 4.5% in FY 2022-23. The services sector saw quick recovery in FY 2021-22, growing 8.4% Y-o-Y, and continued to grow in FY 2022-23.

RBI’s enterprise surveys point to some softening of input cost and output price pressures in manufacturing. Considering these factors, and assuming an average crude oil price (Indian basket) of US$ 95 per barrel, inflation is projected at 6.5% in FY 2022-23, with Q4 at 5.7%. On the assumption of a normal monsoon, CPI inflation is projected at 5.3% for FY 2023-24, with Q1 at 5.0%, Q2 at 5.4%, Q3 at 5.4% and Q4 at 5.6%, and the risks evenly balanced.

Indian government has accelerated its reforms initiatives like Production Linked Incentives (PLI) schemes and increased infrastructure spending to support the industry. This will provide resilient demand in economy and its ripple effect on other aspects of the economy, such as employment and productivity, will bring India back on track in its medium- to long-term economic objective.

 

INDIAN AGROCHEMICAL SECTOR:

The Indian chemical industry is the 6th largest producer of agrochemicals in the world globally and 3rd in Asia. India is the 4th largest producer of agrochemicals globally. India ranks 14th in chemical products’ exports and 8th in imports. The Indian chemical industry stood at US$ 232 billion in 2022, and is expected to reach US$ 304 billion by 2025, registering a CAGR of 9.3%. The cumulative FDI equity inflow in the chemical industry (excluding fertilisers) was US$ 20.96 billion from April 2000 to December 2022. This constituted 3.35% of the total FDI inflow across sectors. The Indian industry has two major advantages - relatively low manufacturing costs and the ability and expertise in efficient handling of toxic and hazardous products and processes. Availability of technically trained manpower, seasonal domestic demand and production capacities for generics built to cater to overseas markets are the other reasons for strong exports. India has been attracting multinationals due to good domestic growth opportunities. Domestic segment has been witnessing a steady increase in market acceptance of new generation molecules.

The Indian chemical industry has numerous opportunities, considering the supply chain disruption in China and the trade conflict among the US, Europe and China. Anti-pollution measures in China will also create opportunities for the Indian chemical industry in specific segments. The dedicated integrated manufacturing hubs under Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIR) policy is expected to attract an investment of Rs. 20 lakh crore (US$ 276.46 billion) by 2035. Additionally, special incentives through PCPIRs or SEZs (Specia l Economic Zones) to encourage downstream units will enhance production and further boost the industry growth. (Source: Union Budget 2023, IBEF, Ministry of Commerce, Expert Market Research)

 

 

 

INDUSTRY DRIVERS:

The key factors of driving the agrochemical industry are:

• With the growing population there is an increase in the need to fulfil the demand for food sufficiency and food security. This continues to drive the growth of agrochemicals industry.
• With fewer arable acres per capita, agrochemicals are becoming more important in maximizing farmer yields; arable land is projected to shrink from half an acre per person now to less than one-third of an acre per person by 2050.
• Plant diseases and pests have become more common as a result of changing environmental conditions. Also, climate fluctuations have a substantial impact on crop productivity

 

COMPANY OVERVIEW:

Our Company is an agrochemical company engaged in the manufacturing, formulation, supplying, packaging and job work services in various Pesticides such as Insecticides, Herbicides, Fungicides, Plant Growth Regulators and a wide variety of other Agrochemicals for India as well as for Export. Agrochemical industries are very vast field and deals with production and distribution of pesticides and fertilizers to increase the crop yields. Agrochemicals (Crop protection products/pesticides) are designed to protect crops from insects, diseases and weeds. Currently our company has 182 products registered with CIB&RC for manufacturing and sales.Our Company supplies its products across 20 states i.e. Assam, Andhra Pradesh, Bihar, Chhattisgarh, Gujarat, Haryana, Jammu & Kashmir, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Punjab, R ajasthan, Tamil Nadu, Telangana, Uttarakhand, Uttar Pradesh, West Bengal and 15 Countries i.e. Armenia, Australia, Bangladesh, Belgium, Cambodia, Germany, Italy, Kenya, Moldova, New Zealand, Poland, South Africa, UAE, Ukraine and Vietnam.

Our company has adequate production and quality control system. All formulations are strictly tested with the latest available guidelines and testing methods by our in-house Quality Control Lab personnel. High Performance Liquid Chromatography (HPLC), Ultraviolet Spectrography (UV) and Gas Chromatography (GC) are used to ensure top quality Raw materials and formulation testing and release. Strict testing for all Packing materials like Tin, HDPE bottles, Coextruded bottles, Fluorinated HDPE bottles, Pet bottles, Labels, Mono cartons, Corrugated boxes, Laminat ed pouches is also done as per the Food and Agriculture Organization of the United Nations (FAO) and Bureau of Indian Standards (BIS) guidelines and testing methods. All Finished goods are re-tested and counter samples are stored separately in sample storage rooms.

 

 

 

OPPORTUNITIES AND THREATS:

 

Opportunities	Threats
? Government initiative to promote agriculture industry will help our industry to grow ? Abundant water, electricity and subsidies to farmer by government will help the agriculture industry to grow ? Continues development in R&D work resulting into yielding of new product	? Change in Government policies ? New entrants in the market and intense competition by existing players ? Technology may become obsolete due to Innovation in Technology ? Fluctuations in Raw Material prices ? Unfavourable weather conditions

 

RISK AND CONCERNS:

A well-defined risk management mechanism covering the risk mapping and trend analysis, risk exposure, potential impact and risk mitigation process is in place. The objective of the mechanism is to minimize the impact of risks identified and taking advance actions to mitigate it. The mechanism works on the principles of probability of occurrence and impact, if triggered. A detailed exercise is being carried out to identify, evaluate, monitor and manage both business and non-business risks.

 

 

 

SEGMENT–WISE OR PRODUCT-WISE PERFORMANCE:

The Company’s operation predominantly comprises of only one segment. In view of the same, separate segmental information is n ot required to be disclosed as per the requirement of Indian Accounting Standard 108 Operating Segment.

 

 

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

(Amount in Lakhs)

 

Particulars	F.Y. 2022-23	F.Y. 2021-22
Revenue from Operations	21,785.56	16,576.35
Other Income	32.72	26.94
Total Income	21,818.27	16,603.29
Less: Total Expenses before Depreciation, Finance Cost and Tax	20,915.40	16,059.03
Profit before Depreciation, Finance Cost and Tax	902.87	544.26
Less: Depreciation	153.62	109.89
Less: Finance Cost	275.34	236.34
Profit Before Tax	473.91	198.03
Less: Short Provision of Taxes in Earlier Year	0.83	0.00
Less: Current Tax	126.21	47.38
Less: Deferred tax Liability (Asset)	(9.37)	7.27
Profit after Tax	356.22	143.38

 

 

During the year under review, your Company has met and exceeded your expectations and have delivered a robust performance on all fronts. During the financial year 2022-23 the revenue from operation stood at Rs. 21,785.56 Lakhs as compare to Rs. 16,576.35 Lakhs during the previous financial year 2021-22, which is a shows around 31.43% increase in the revenue; it is noteworthy to mention that your Company has delivered this growth despite the fall of raw material prices at such low levels during Q4FY23.

 

 

 

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has a proper and adequate system of Internal Controls to commensurate with the size and nature of its operations to ensure that all assets are safeguarded against unauthorized use or disposal, safeguarding true and fair reporting and compliance with all applicable regulatory laws and company policies. Internal Audit Reports are reviewed by the Audit Committee of the Board.

 

 

 

HUMAN RESOURCES AND INDUSTRIAL RELATIONS:

The Company believes that human resource is the most important assets of the organization. It is not shown in the corporate balance sheet, but influences appreciably the growth, progress, profits and the shareholders’ values. During the year your company continued its efforts aimed at improving the HR policies and processes to enhance its performance. The vision and mission of the company is to create cultur e and value system and behavioral skills to insure achievement of its short- and long-term objectives. As on March 31, 2023, the Company had total 58 full time employees. The industrial relations have remained harmonious throughout the year.

 

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS, ALONG WITH DETAILED EXPLANATIONS THEREFOR:

 

Ratio	As at 31st March, 2023	As at 31st March, 2022	% of Change in Ratio	Explanations
Debtors Turnover	5.60	5.03	11%	Companys collection of accounts receivable is efficient
Inventory Turnover	7.90	5.89	34.13%	Increase in turnover as increased in demand.
Interest Coverage Ratio	0.34	0.18	89%	Due to increase in turnover as well as Operating profit of the company
Current Ratio	1.40	1.23	14.00%	Increase in Inventory holding as raw material prices were decrease.
Debt Equity Ratio	0.75	1.71	(56%)	Issued additional Shares at premium
Net Profit Margin	0.015	0.007	112%	Increase in net margin
Return on Net Worth	0.12	0.10	22%	Increase in Net profit

 

 

 

CAUTIONARY NOTE:

Statement made in the Management Discussion and Analysis Report describing the Company’s objectives, projections, estimates, expectations may be "Forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to the Company’s operations include economic conditions affecting demand supply and price conditions in the markets in which the company operates changes in the government regulations, tax laws & other statutes and other incidental factors.