Oswal Agro Mills Ltd Management Discussions

Global Economy Overview

According to the World Economic Situation and Prospects as of mid-2024, the world economy is now projected to grow by 2.7 per cent in 2024 (+0.3 percentage points from the January forecast) and 2.8 per cent in 2025 (+0.1 percentage points from the January forecast). On balance, the near-term economic outlook is only cautiously optimistic as economic vulnerabilities remain, amid persistently high interest rates, continuing geopolitical tensions, and increasing climate risks.

Unmet revenue expectations have ushered in a new wave of pragmatism where maintaining a healthy profit margin has become pivotal for corporations due to the uncertain macro outlook. In extreme cases, organizations resorted to cost-cutting measures, such as reducing headcount and cutting discretionary spending. The global real estate sectors outlook for the financial year 2023-24 reflects a mix of opportunities and challenges influenced by economic, demographic, and technological trends. Continued urbanization, especially in emerging markets, drives demand for residential and commercial properties. Post-pandemic economic recovery boosts investor confidence and increases real estate transactions.

Indian Economy Overview

India has bounced back strongly since the pandemic and it is now one of the worlds fastest-growing economies. Its GDP growth for the July- to-September quarter shattered market expectations, growing 7.6% year over year.61 The biggest boost to growth came from a rebound in the industrial sector—auto sales, industrial production, and corporate profits pointed to resilient performance. Double-digit growth in the industry suggests that businesses ramped up production to meet the oncoming demand during festivals. In addition, credit growth and flights taken pointed to buoyancy in the services sector. Indeed, the financial, professional, and real estate services sectors did quite well in the first half of the fiscal year as well.

In the year ahead, improving fundamentals should buttress the underlying strength of GDP growth. We expect the Indian economy to grow between 6.9% and 7.2% through fiscal 2023 to 2024 (April 2023 to March 2024) in our baseline scenario, followed by growth ranging between 6.4% and 6.7% the next fiscal year. Higher government spending on building infrastructure and improving logistics will help reduce the cost of doing business and encourage private investment. The fiscal deficit of the first seven months was just 45% of the budget estimate, which gives the government ample room to focus on infrastructure spending and to support jobs and income.

Bringing more manufacturing opportunities to India, increasing digital adoption across all sectors of the economy, and promoting competitiveness through exports will be important for a sustainable growth trajectory in the long term. India will have to leverage its proximity to a sizable domestic market to increase the scale and scope of economies where it has a competitive advantage. To secure inclusive and widespread growth, it will be necessary to capitalize on the growing environment for trade and investment opportunities by stepping up technological transformation, strengthening governance, and working toward attaining decarbonization targets for sustainability.

Performance overview

During the year 2023-24, the Companys growth was encouraging. The Company always adhere to achieve best in the industry and try to optimise the cost and its efficiency level which translates into increasing the profit margins for the Company. Despite the subdued performance of overall trading sector, your Company earned a profit after tax of Rs. 1.75 crores as against a profit of Rs. 9.38 crores in the previous year.

The Companys performance overview during the financial year 2023-24 is shown below:

(Rs in lakhs)

Business

During the year 2023-24, the Company has dealt in trading of commodities, and has also generated income from interest on inter-corporate deposits, trading in mutual funds and other miscelleneous incomes. Further, the Company has been carrying on the real estate and other non- financial activities since its inception.

Overview of segment wise performance

During the year ended March 31, 2024, the Company was operating under the business of trading, real estate and investing as separate business segments. Details of segment wise revenue, results and capital employed are given under note no. 38 of notes to accounts forming part of the annual report.

Opportunities

The Company is exploring new opportunities for diversification into other sectors through new investments and also exploring possibilities of undertaking some real estate projects, the outlook for which seems to be quite encouraging. The Company is cautiously optimistic in its outlook for the year 2024-25.

Outlook

The company aims to leverage market opportunities through strategic project launches, enhanced customer service, and sustainable development practices. Continued focus on financial discipline and operational excellence will be key to maintaining growth momentum and delivering value to our stakeholders.

Challenges

While the management of your Company is confident of creating and exploiting the opportunities, it finds the following challenges:

(i) Economic Uncertainty

(ii) Interest Rates and Financing

(iii) Regulatory Changes

(iv) Supply and Demand Imbalance Risks & concerns

The Company is exposed to specific risks that are particular to its businesses and the environment within which it operates, including inter alia, market risk, competition risk, human resource risk, execution risk and significant downturn in the economic cycle. It is endeavour of the management that the profitability of the Company is insulated to the extent possible from all the above risks by taking appropriate steps for mitigating the risks in a proper manner.

Human resources

The Company is committed to ensuring that all are treated with dignity and respect. We have been taking utmost care of our people and providing them with the best working facilities. The Human Resources and the Legal and Secretarial departments in collaboration with other functions ensure protection against sexual harassment of women and men in the workplace and for the prevention and redressal of complaints in this regard. We also aim to build a safe environment to work in and to ensure a sense of belongingness, that they are heard here, among the workers. We provide various learning opportunities to enhance the skills and knowledge the workers already possess.

Internal Control Systems

Adequate internal control systems commensurate with the nature of the Companys business, size and complexity of its operations are in place and have been operating satisfactorily.

Internal control systems comprising of policies and procedures are designed to ensure reliability of financial reporting, timely feedback on achievement of operational and strategic goals, compliance with policies, procedure, applicable laws and regulations. Internal control systems are designed to ensure that all assets and resources are acquired economically, used efficiently and adequately protected.

Discussion on financial performance with respect to operational performance

The companys major operations are in trading activities. It also deals in financing activities like extending of inter-corporate deposits. The company earned a profit after tax of Rs. 1.75 Crores as against a profit after tax of Rs. 9.38 Crores in the previous year.

The company revenue from operations comprises of revenue from trading activities of Rs. 1.87 crores for financial year 2023-24. Furthermore, the company is actively trading in commodities in financial year 2023-24.

Apart from trading segment, during the year, the Company has also received income from interest on Inter-Corporate deposits (ICDs) and investments in mutual funds. The future outlook of the company remains positive and encouraging considering the fact the economy is picking up pace post the implementation of unlock of the economy in phased manner and declining impact of the COVID-19.

Key financial ratios

A comparative table showing synopsis of financial year 2023-24 vs. 2022-23 of Key Financial Ratios is provided below:

Risk Management

The Board takes responsibility for the total process of risk management in the organization. The Company follows well- established and detailed risk assessment and minimization procedures, which are periodically reviewed by the Board.

The Company takes a very structured approach to the identification and quantification of each risk and has a comprehensive Board approved risk management policy. The scope of the Audit Committee includes review of the Companys financial and risk management policies. The Audit Committee reviews the Audit reports covering operational, financial and other business risk areas.

Disclosure of Accounting Treatment

The standalone & consolidated financial statements for the year ended March 31,2024 have been prepared and presented on a going concern basis under the historical cost convention (except for certain financial instruments which are measured at fair values), on the accrual basis of accounting and comply with the Indian Accounting Standards prescribed by Section 133 of the Companies Act, 2013 (‘the Act) read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules issued there after, other pronouncements of the Institute of Chartered Accountants of India, guidelines issued by Securities and exchange board of India (SEBI) and the relevant provisions of the Companies Act, 2013 (to the extent notified)/Companies Act, 1956.

Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or are vision to an existing accounting standard requires a change in the accounting policy hitherto in use.

Cautionary Statement

Statements in the Management Discussion and Analysis Report describing your Companys objectives, projections, estimates and expectations may be interpreted as "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 Companys operations include economic conditions affecting demand/ supply, price conditions in the domestic and overseas markets in which the Company operates, changes in Government regulations, tax laws and other statutes.