Crop Life Science Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The discussion hereunder covers Companys 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 variation in this outlook.

GLOBAL ECONOMY:

Global economy continues to gradually recover from the pandemic and Russias 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 surprisingly 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 years 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 this 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 Governments budgetary allocations. Indias large domestic economy coupled with the governments 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. Indias inflation trajectory is expected to be significantly impacted by extreme weather conditions like heat waves and the potential for an El Nino 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 10 lakh crore for the next fiscal year, which demonstrates their longterm vision for the economy. Of this amount, a considerable sum of 1.78 lakh crore has been earmarked for the Ministry of Chemicals and Fertilisers, reflecting the Governments emphasis on promoting the chemical and agriculture sectors. Overall, these budgetary allocations signal the Governments 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:

Indias 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.

RBIs 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 6 th 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 20 lakh crore (US$ 276.46 billion) by 2035. Additionally, special incentives through PCPIRs or SEZs (Special 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 was incorporated as Crop Life Science Limited under the provision of the Companies Act, 1956 vide certificate of incorporation dated May 24, 2006 issued by the Asstt. Registrar of Companies, Ahmedabad and Certificate of Commencement of Business dated July 6, 2006 issued by Registrar of Companies, Ahmedabad. The Corporate Identification Number of our Company is U24124GJ2006PLC048297.

Since commencement of business of our Company, we are an agrochemical company engaged in the business of manufacturing, distributing, and marketing of a wide range of agro chemical formulations. Agriculture chemicals consists of Pesticides and Micro Fertilizer, moreover, the pesticides including Insecticides, Fungicides, Herbicides and Weedicides. In the year 2006, we have taken the land (Plot no. 5151, 5165 and 5166) admeasuring area of approximately 5831.10 Square Meters on lease basis for a period of 99 years from Gujarat Industrial Development Corporation ("GIDC") for our manufacturing unit at GIDC Ankleshwar (Gujarat). We had commenced the manufacturing activities of Pesticides and Micro fertilizer in the year 2006-07. In the year 2012, our Company started exporting pesticides to Indonesia. Over a period of time, we have started exporting to Bangladesh, Egypt, Myanmar, Vietnam, Sudan and other countries. Our company is required to obtain various licenses and permission from the government and semi government authorities before commencement of manufacturing of pesticides and fertilizer. The licenses and permission such as registration of our products with Central Insecticides Board ("CIB"), approval from the Directorate of Agriculture, Government of Gujarat, and approval from the Gujarat Pollution Control Board ("GPCB").

With an aim to offer a wide product portfolio across the agri-value chain, we continue to expand our product portfolio by introducing new products. In the year 2007, our Company had started production of more than 25 different range of agro chemical products. Subsequently we keep on adding agro chemical products year to year in our product portfolio. At present, we manufacture and sell various formulations of insecticides, fungicide and herbicides, plant growth regulators, micro fertilizers and weedicides. Currently, our Company has wide range of more than 85 agro chemical products.

With an objective to provide high quality of formulations of agrochemicals to our domestic as well as overseas customers, we have set up state of art manufacturing/formulation units at Ankleshwar, Gujarat. We have a team of qualified technical people for production and quality control. Right from raw material to finished products we keep stringent quality control check to supply best quality of our products. In addition to marketing of our branded products in India, we are also supplying agrochemical formulations in bulk to reputed companies in India as well as to overseas customers.

At present in addition to our manufacturing of our own products, we are also undertaking jobwork for manufacturing pesticides and Micro Fertilizer. Guidance and foresight of our promoters, Rajesh Lunagariya and Ashvin Lunagaria are the driving force behind the growth achieved by the company, having deep knowledge and experience in the intricacies of the Agricultural inputs i.e Pesticides and Fertilizer. Our promoters and whole time directors have allowed us to form a base of trust and integrity which has become our brand identity. This, along with staying at the forefront of having wide range of product has helped us to achieve significant growth in our business over a period of time.

OUR COMPETITIVE STRENGTHS:

1. Our wide and varied range of Products

We are in to manufacturing of wide and varied range of products namely Pesticides and Micro Fertilizer. Pesticides includes Insecticides, Fungicides, Herbicides and Weedicides. We have technical formulations approval for manufacturing insecticides products from Directorate of Agriculture, Krishi Bhavan Gandhinagar including technical formulations for export product only. We believe that comprehensive range of our products helps our distributors to achieve their business objectives and enable us to obtain additional business from existing customers as well as address a larger base of potential new customers.

2. Extensive distribution network

Our Company have grown the depth and breadth of our distributor and wholesaler network rapidly. Our company is having approx 1800 channel distributors and wholesaler outlets chain located over different region of states of our country namely Gujarat, Maharashtra, Uttar Pradesh, Madhya Pradesh, Bihar, West Bengal, Chhattisgarh etc. In addition, we are also exporting agro chemicals products to Bangladesh, Egypt, Myanmar, Vietnam, Sudan and other countries. Our company focuses on building long term relationships with our distributor and wholesaler network in both Tier 2 and Tier 3 cities as well as in Indias largest cities. Our policy is to offer attractive margins to our distributors on seasonal basis to incentivize and motivate them with respect to the distribution of our products versus the products of our competitors.

3. Experienced Promoters, Directors and Management team

Our individual promoters and directors, Rajesh Lunagariya and Ashvin Lunagaria is having experience of more than 15 years in the field of manufacturing of agro chemical namely Pesticides and Micro Fertilizer. Our promoters Directors are backed by experienced core management team who looks after the production, sales and marketing, research & development, legal compliance and finance. We benefit from the experience of the individual Promoters-Directors and core management team which has enabled us to successfully implement our growth strategies.

4. Prime Location of our Factory (Manufacturing Units)

The factory is located in GIDC Industrial area at Ankleswar, Bharuch. In GIDC Ankleshwar, number of chemical industrial units are established. The location is nearby Ankleshwar Railway Station on the main track connecting Gujarat, Maharashtra and Delhi corridor. In this area, all the infrastructure facilities such as power supply, roads, water supply etc. are developed and provided by governments/Local Authorities. All the benefits of infrastructure facilities developed by Government/Local Authorities are reaped by our company.

Ankleshwar enjoys the good connectivity through National Highway roads and railway, which makes the movements of the raw-material as well as finished goods easy and comfortable. Thus, it helps in smooth procurement of raw materials and dispatch of finished goods to our various customers situated in different places of Gujarat, Maharashtra, Uttar Pradesh, Madhya Pradesh, Bihar, West Bengal, Chhattisgarh.

5. Quality Assurance

We have state of the art in-house laboratory in our factory for Research & Development and for Chemical Testing, which keeps track of quality control of our products. All products which are dispatched from the factory premises are inspected by the 2 authorized officials heading the dispatch department. Further, quality check is done at every stage of manufacturing to ensure the adherence to desired specifications. Since, our Company is dedicated towards quality of products, processes and inputs; we get repetitive orders from our buyers, as we are capable of meeting their quality standards, which enables us to maintain our brand image in the market.

OUR BUSINESS STRATEGY

1. Increasing our Product Portfolio:

We continuously strive to add more and more products to our portfolio based on our own market assessment of demand and supply position of these products. With the wide range of the products we also focus on the quality of our formulations. We have set up state of art manufacturing/formulation units at Ankleshwar, Gujarat, so that product expansion is easier to achieve. We have a team of qualified technical people for production and quality control. Right from raw material to finished products we keep stringent quality control check to supply best quality of our products.

2. Increase in geographical presence:

Our wholesalers/distributors are located over different states of our country namely Gujarat, Maharashtra, Uttar Pradesh, Madhya Pradesh, Bihar, West Bengal, Chhattisgarh etc. In addition, we are also exporting agro chemicals products to Bangladesh, Egypt, Myanmar, Vietnam, Sudan and other countries. Our company focuses on building long term relationships with our distributor and wholesaler network in both Tier 2 and Tier 3 cities as well as in Indias largest cities. Our emphasis is on expanding the scale of our operations as well as growing our distributor supply chain network, which we believe will provide attractive opportunities to grow our client base and revenues.

3. Extensive Marketing Set up:

Our company has established a dedicated marketing set up at Baroda, which includes call centre for two way communication with the farmers who are end users of our products. This office provides guidance to the farmers with regard to methodology to use our products and resolves their queries if any. As a result, it built a long term healthy relationship with the farmers and it creates a satisfactory environment among the farmers and also helps us to grow our client base and revenues.

4. Strengthening up our business through effective branding and promotional activities:

As our business requires us to reach out to individual farmers as well as distribution partners, the effort and the exercise around product development is logistically challenging and requires significant time and effort to make sure we are reaching our target audience. We also intend to strengthen our existing brand building activities including dealer training programs, field demonstrations, field shows, farmers training programs and participation in various national and international exhibitions for marketing our products. We believe that growth in our products segment will lead to growth of our revenues and profitability.

SWOT ANALYSIS

Strengths	Weakness
Experienced Promoters, Directors and Core Management Team	Lengthy and time-consuming process for R&D and various approval from Government and Semi G o vernment Authorities for agro chemical products
Latest and advanced technology and Infrastructure
Wide spread of Distribution network	High cost involved in R&D and government approvals for agro chemical product.
State of the art, in-house laboratory - Research and analytical Laboratory for Chemical Testing with wide spectrum of products
	Requirement o f Foreign G o vernment approvals for exporting our products
Exports to a number of countries
Opportunities	Threats
Growth in demand of Food grains	Integrated Pest Management (IPM) & rising demand for organic farming Highly dependence on natural climate, Rain etc.
Huge Export Potential
	Seasonal and Cyclical Business
	Frequently changing in G overnment and Regulatory Norms

Key Financial Ratio:

Key Ratios	F.Y. 2022-23	F.Y. 2021- 22	% of Change in Ratio	Explanations
Current Ratio	1.56	1.47	6.14%	-
Debt-Equity Ratio	0.64	0.59	8.08%	-
Return on Equity Ratio	0.11	0.08	29.25%	The profitability of the company has increased in relation to the shareholders equity, the company has generated higher net profit with a corresponding lower change in the average shareholders equity, the overall increase in profitability can be attributed to increase in turnover of the company and other factors in comparison to the previous year.
Inventory Turnover Ratio	3.81	2.30	65.32%	Cost of Goods Sold has increased in comparison to the previous year, purchase were made on credit and increase in purchase as compared to previous year has impacted the ratio, in previous year some c ash purchase were also there.
Trade Payable Turnover Ratio	4.56	2.46	85.25%	Cost of Goods Sold has increased in comparison to the previous year, purchase were made on credit and increase in purchase as compared to previous year has impacted the ratio, in previous year some c ash purchase were also there. In comparison there is a small change in the Average trade payables, hence the main reason for c hange is increase in purchase
Trade Receivables Turnover Ratio	3.78	3.24	16.65%	-
Net Profit Ratio	3.10	2.76	12.46%	-
EBIDTA (in Lakhs)	1257.70	809.02	-	-
Net Worth (in Lakhs)	4055.41	3601.86	-	-

Cautionary Statement:

Statements in this Management Discussion and Analysis contain “Forward-Looking Statements” including, but without limitation, statements relating to the implementation of strategic initiatives, and other statements relating to the Companys future business developments and economic performance. While these forward-looking statements indicate our assessment and future expectations concerning the development of our business, several risks, uncertainties, and other unknown factors could cause actual developments and results to differ materially from our expectations. These factors include but are not limited to, general market, macro-economic, governmental and regulatory trends, movements in currency exchange and interest rates, competitive pressures, technological developments, changes in the financial conditions of third parties dealing with the Company, legislative developments, and other key factors that could affect our business and financial performance. The Company undertakes no obligation to publicly revise any forward-looking statements to reflect future/ likely events or circumstances.