Ravikumar Distilleries Ltd Management Discussions

GLOBAL ECONOMY

The global economy grew at 3.4% in 2022 compared to a growth of 6.2% in 2021 according to the World Economic Outlook, released by the International Monetary Fund (IMF) in April 2023. This slowdown was primarily due to rising central bank rates as a result of high inflation, the impact of the Russia- Ukraine conflict, and sluggish economic activity in China due to a resurgence of Covid-19 pandemic. IMF forecasts the global growth to decline to 2.8% in 2023 and then rise again to 3.0% in 2024, dipping below the pre-Covid-19 pandemic historical average of 3.8% (for the period 2000-2019). IMF expects global inflation to decline in 2023 and 2024, from 8.7% in 2022 to 7.0% in 2023 and 4.9% in 2024. Global headline inflation peaked during the third quarter of 2022, according to IMF. The lower inflation estimates for 2023 are partly due to decline in international fuel and non-fuel commodity prices, as well as the cooling effects of monetary policy tightening. IMF expects the emerging and developing Asia to grow by 5.3% and 5.1% during 2023 and 2024, respectively.

In 2022-23, elevated core inflation led the Reserve Bank of India (RBI) to maintain a tighter stance on the economy. RBI estimates headline inflation to be at 6.8% in 2022-23. However, RBI expects inflation to moderate in 2023-24 to 5.3%, but remain well above its 4% target.

The Government of Indias budgeted estimate for capital expenditure outlay in 2022-23 increased by 35.4% from around ? 5.5 Lakh Crores in 2021-22 to an estimated ? 7.5 Lakh Crores for 2022-23. Further, the Union Budget of 2023- 24 has allocated a substantial amount of approximately ? 10 Lakh Crores for the countrys infrastructure development. This is likely to be a key growth driver for

the Indian economy amid the current volatile macroeconomic conditions.

INDIAN ECONOMY

As per the Economic Survey 2022-24, Indias economic growth in FY23 has been principally led by private consumption and capital formation and they have helped generate employment as seen in the declining urban unemployment rate and in the faster net registration in Employee Provident Fund. Moreover, Worlds second-largest vaccination drive involving more than 2 billion doses also served to lift consumer sentiments that may prolong the rebound in consumption. Still, private capex soon needs to take up the leadership role to put job creation on a fast track.

It also points out that the upside to Indias growth outlook arises from (i) limited health and economic fallout for the rest of the world from the current surge in Covid-19 infections in China and, therefore, continued normalisation of supply chains; (ii) inflationary impulses from the reopening of Chinas economy turning out to be neither significant nor persistent; (iii) recessionary tendencies in major Advanced Economies (AEs) triggering a cessation of monetary tightening and a return of capital flows to India amidst a stable domestic inflation rate below 6 per cent; and (iv) this leading to an improvement in animal spirits and providing further impetus to private sector investment.

The Survey says, the credit growth to the Micro, Small, and Medium Enterprises (MSME) sector has been remarkably high, over 30.6 per cent, on average during Jan-Nov 2022, supported by the extended Emergency Credit Linked Guarantee Scheme (ECLGS) of the Union government. It adds that the recovery of MSMEs is proceeding apace, as is evident in the amounts of Goods and Services Tax (GST) they pay, while the Emergency Credit Linked Guarantee Scheme (ECGLS) is easing their debt servicing concerns.

Apart from this, increase in the overall bank credit has also been influenced by the shift in borrowers funding choices from volatile bond markets, where yields have increased, and external commercial borrowings, where interest and hedging costs have increased, towards banks. If inflation declines in FY24 and if real cost of credit does not rise, then credit growth is likely to be brisk in FY24.

COMPANY

The company is engaged in the business of manufacturing and trade of Indian Made Foreign Liquor (IMFL) under our own brand portfolio as well as under tie up arrangements with other companies. The IMFL comprises of whisky, Brandy, Rum, Gin & Vodka. We started our initial capacity of 7,20,000 cases per annum and a bond capacity of 6300 cases of Excise Bonded warehouse. Presently our plant is having an installed capacity of 14,25,000 cases per annum and 26000 cases of Excise Bonded warehouse.

During the year, the total Income from operations was Rs. 7621.95 lakhs compared to Rs. 2784.65 lakhs in the previous year

recording a net loss of Rs. (217.76) lakhs, as against the net loss of Rs. (1307.44) lacs in the previous year.

Business Outlook:

Indian alcohol market has been flourishing since 2001 and registered growth between 7-12% till 2011 when the growth declined due to heavy import taxes, state government taxes, excise duty and political in stability in election season. The year 2013 was a great fall in Indian alcohol market when the spirits volume actually declined by 2-3% in India. Alcohol industry is a part of huge US$ 12 billion beverage industry of India excluding milk and milk products.

Indian alcohol market is dominated by whisky which falls under spirit category. However, the wine market is expected to show highest growth in the future. The Indian alcohol market is broadly segmented as spirits, beer and wine. Spirits are further sub- segmented into whisky, rum, brandy, vodka, gin and others.

Consumers are largely inclined towards quality alcohol due to increasing disposable income and better standard of living. Other drivers include greater inclination towards social drinking as well as women indulging into alcohol consumption. As India has huge youth population, the demand of alcohol would remain high in the coming years. The market saw a boom in Vodka sales. Youth largely prefer beer and the salaried youth are inclined toward whisky and rum.

There exist quite a few restraints in the market such as high taxes, stringent government regulations on manufacturing and selling liquor, and ban on advertisements among others. Alcohol consumption is also subjected to the overall economys growth in terms of gross net income per capita and household expenditure. Thus, development in the economy would give a thrust to the alcohol market further but less pronounced.

One of the most notable trends is the demand of premium liquor among the consumers. The growth of premium segment would surpass the overall growth of alcohol market due to greater exposure towards foreign brands. India has seen a burst of high net worth individuals in past two decades and the list is ever increasing, which would fuel the growth of market in premium segment.

Risk Factors:

Government regulations affect the Indian Liquor industry introducing structural rigidities. Apart from the high level taxes and levies regulations pertaining to licensing creation or expanding of brewing / distillery and bottling capacities, manufacturing process (grain based and molasses based), distribution and advertising impinge on the industry. Further liquor being a state subject, every state has different regulations (including those on distribution) and tax rate for the industry apart from restrictions as well as levies on the inter-state movement of liquor.

Future Outlook:

During current year, your Company will try to improve the performance with applying optimistic efforts.

Internal Control Systems and their adequacy:

The Managing Director / Whole Time Director certification provided in the report discusses the adequacy of our internal control

systems and procedures

Human Resource Development

The most important asset of the company is its Human Resources.

Cautionary Statements:

Statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectation may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied.

Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor, including not included in Management discussion and analysis report

As given in the notes to accounts.

Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed

explanation thereto

As given in the notes to accounts.