ADVANTA INDIA LIMITED
ANNUAL REPORT 2011
Your Directors are pleased to present the 18th Annual Report together with
the audited accounts of your Company for the year ended December 31, 2011.
The financial performance of the Company, for the year ended December 31,
2011. is summarized below:
(Rs. In Lacs)
Consolidated Stand Alone
Description December 31, December 31, December 31, December 31,
2011 2010 2011 2010
other Income 95,214.92 70,652.07 17,044.22 14,052.22
interest, Tax &
Amortization 13,584.90 7,539.66 7,315.10 2,623.93
Exceptional Items (238.24) (1,362.50) Nil Nil
Before Tax (PBT) 2,441.00 (3,016.84) 1,593.66 (2,923.14)
Tax (PAT) 1,292.00 (2,822.82) 1,418.66 (2,923.14)
Tax (Net of Minority
Interest & prior
period adjustment) 1,229.05 (2,745.29) 1,418.66 (2,976.14)
from previous Year 13,654.21 16,399.50 (2,780.57) 195.57
for Appropriations 14,883.26 13,654.21 (1,361.91) (2,780.57)
Dividend Nil Nil Nil Nil
Tax on Dividend Nil Nil Nil Nil
Transfer to General
Reserve Nil Nil Nil Nil
Redemption Reserve 1,418.66 Nil 1,418.66 Nil
Balance Sheet 13,464.60 13,654.21 (2,780.57) (2,780.57)
TOTAL 14,883.26 13,654.21 (1,361.91) (2,780.57)
Conversion rates as on 31st December, 2011:
For Balance Sheet items (Closing Rate) For Profit & Loss Account
1USD = Rs. 53.105 Rs. 48.930
1AUD = Rs. 53.9919 Rs. 49.7841
1EURO = Rs. 68.6993 Rs. 64.2695
1THB = Rs. 1.6827 Rs. 1.5862
1IDR = Rs. 0.00585 Rs. 0.00541
1BRL = Rs. 28.4638 Rs. 27.7180
The global consolidated business of Advanta has grown by an impressive
34.77% in 2011. Sweet Corn crop led the pack with a growth of 88% followed
by Canola at 78%, Corn at 59%, Sunflower at 57% and Sorghum at 21%. Sorghum
continues to be our largest crop contributing about 35% of our business.
Among our subsidiaries we had excellent performances in Argentina,
Thailand, USA and some of our International markets. Adverse weather
conditions in Australia, Thailand and USA led to production losses which
affected our business in the last quarter. Our wheat breeding program in
Australia has started releasing good products to the market which are
getting increasing acceptance from the farmers. New high quality forages
are looking very promising in India.
We continued to invest 11% of our revenues in research. This is an
important investment we are making in order to have a secure future. We
continue to access GM traits through licensing mechanism and are in the
process of introducing GM corn in Brazil and Philippines.
We have improved our inventory management very well in 2011. We are running
very low on stocks in most of our crops by the end of the year. This is a
result of tight production planning and generation of good sales as per
plan. This helped us to improve our working capital management this year.
We improved gross margins of our business from 44% to 46% through improved
prices and reduced cost of goods.
Overall, 2011 was a very good year for Advanta.
During the year, the Company has recorded a consolidated total income of
Rs. 95,214.92 Lacs as against Rs. 70,652.07 Lacs for the previous year,
which is 34.77% higher than that of the previous year. The consolidated
Profit after tax stood at Rs. 1,229.05 Lacs as against loss after tax of
2,745.29) Lacs for the previous year.
As stipulated in the Listing Agreement with the Stock Exchanges, the
consolidated financial statements have been prepared by the Company in
accordance with the relevant accounting standards issued by the Central
Government under Companies (Accounting Standards) Rules, 2006. The audited
consolidated financial statements together with Auditors' Report thereon
form part of the Annual Report.
2012 presents exciting prospects for us. The crop economics of corn,
sunflower and canola look very good for the farmers which should help them
to buy high quality inputs. The weather so far has been holding good.
We expect good growth in all our subsidiaries although some of them will
have a tight availability of seed in 2012. We expect very good growth in
all our crops but more particularly in Canola, Corn, Sunflower and Sweet
We are paying special attention to diversification of production and
building supply chain capabilities in the organization. With considerable
growth projected in some of the International markets like SE Asia, Europe,
North Latin America and Africa we are looking at taking up new production
sites in some of these countries. Corn is expected to drive most of our
future growth and we are paying special attention to building capabilities
in this crop. We are also looking at making processing arrangements in some
of these countries either by ourselves or through outsourcing. We have
reviewed our growth prospects till 2015 and are putting in place plans to
plug the gaps in the required strengths and skills. This is a major area of
investment for us.
We are modernizing our plants in Thailand and Argentina. These investments
will improve the quality of our products, particularly corn. We are
increasing processing and storage capacities in many of our subsidiaries so
that they can take care of the increasing load of the products.
RESEARCH & DEVELOPMENT:
We continue to invest 11% of our revenues in research. We want to increase
the speed of creating new products through the use of modern technology. We
are increasing the outlay on the use of molecular marker technology in our
We are also building capabilities with a SNP marker platform in our
Argentina biotech laboratory. This will help us to use the latest
technology to enhance the speed and the power of our breeding programs.
We have set up new breeding programs in France and Brazil which will help
us to develop products for Europe and the tropical corn markets. This is a
major investment we are making to increase our global reach.
The Board of Directors do not recommend any dividend for the financial year
ended 31st December, 2011 in view of inadequate profits during the said
year. As such, no amount is proposed to be transferred to General Reserve.
As on date, your Company has five direct subsidiaries: Unicorn Seeds
Private Limited-India; Advanta Seeds Limited-India; Advanta Holdings B.V. -
Netherlands; Advanta Seed International - Mauritius; PT Advanta Seeds
Indonesia -Indonesia. and eleven step-down subsidiaries: Advanta US Inc. -
USA; Advanta Netherlands Holdings B.V. - Netherlands; Advanta Finance B.V.
- Netherlands; Advanta International B.V. - Netherlands; Pacific Seeds
Holding (Thailand) Ltd -Thailand; Advanta Commercio De Sementas LTDA-
Brazil; Pacific Seeds Pty. Ltd. - Australia; Advanta Semillas, SAIC-
Argentina; Pacific Seeds (Thai) Ltd. - Thailand; Long Reach Plant Breeders
Management Pty. Ltd. - Australia; Advanta (B.V.I) Ltd.- British Virgin
Pursuant to the provisions of Section 212 of the Companies Act, 1956, the
Company is required to attach the Directors' Report, Balance Sheet, and
Profit and Loss account and other documents of its subsidiaries along with
its Balance Sheet.
In this regard, it may be noted that pursuant to the directions issued by
the MCA, vide General Circular No.2/ 2011, Dt. 8th February, 2011, general
exemption has been granted to the Companies from complying with the
provisions of Section 212 of the Act in respect of their subsidiaries. This
implies that your Company, being the Holding Company need not attach the
Balance Sheet, Profit and Loss account etc., of its subsidiaries subject to
compliance of certain conditions attached with the said exemption.
In view of the compliance of said conditions, audited consolidated
financial statements for the year ended 31st December, 2011, prepared in
compliance with applicable Accounting Standards is attached herewith.
Further, your Company undertakes that the Annual Accounts of the subsidiary
Companies and the related detailed information will be made available to
its shareholders and to the shareholders of its subsidiary companies
seeking such information at any point of time. Further, the Annual Accounts
of the subsidiary Companies shall also be kept for inspection by any
shareholder in its head office and that of the concerned subsidiary
Further Statement as required under Section 212 in respect of Subsidiaries
is annexed to this Report. Abridged Financial Information of Subsidiaries
is also given on page No. 86 of the Annual Report.
CONSOLIDATED FINANCIAL STATEMENTS:
In accordance with the Accounting Standard AS-21 on Consolidated Financial
Statements read with Accounting Standard AS-23 on Accounting for Investment
in Associates and with reference to Clause 32 of the Listing Agreement,
your Directors present the Audited Consolidated Financial Statements in the
CASH FLOW ANALYSIS:
The Cash Flow Statement for the year under reference in terms of Clause 32
of the Listing Agreement entered by the Company with the Stock Exchanges is
During the year under review the Company has redeemed 2130 Unsecured Non-
Convertible Debentures of Rs. 10,00,000 each aggregating to Rs. 213 Crores
out of 3750 Unsecured Non-Convertible Debentures of Rs. 10,00,000 each
aggregating to Rs. 375 Crores. As on date, the Company has 1620 outstanding
Unsecured Non-Convertible Debentures of Rs. 10,00,000 each aggregating to
Rs. 162 crores.
INCREASE IN SHARE CAPITAL:
Consequent to the issue of 2,223 equity shares of Rs. 10 each to employees
upon exercise of options under Employee Stock Option Scheme - 2006 of the
Company, during the year under review, the paid-up share capital of the
Company increased from Rs. 1,685.20 lacs divided into 16,851,989 equity
shares of Rs. 10/- each to Rs. 1,685.42 lacs divided into 16,854,212 equity
shares of Rs. 10 each.
The particulars of shares allotted during the FY ended 31st December, 2011
and till the date of this Report are as follows:
Date of Allotment Name of the No. of Date of Listing
28.02.2011 David Callachor 2223 05.04.2011 04.04.2011
27.02.2012 H. Sateesh Hegde 4028 26.03.2012 26.03.2012
09.05.2012 Atluri Suresh 504 - -
* since the corresponding number of shares were allotted on the date of
this report itself, the requisite listing application will be made in the
due course of time.
FOREIGN CURRENCY CONVERTIBLE BONDS:
During the year under review the Company has issued USD 50,000,000 Floating
Rate Guaranteed Convertible Bonds due 2016 Convertible into Ordinary Shares
or Global Depository Shares representing Ordinary Shares of the Company.
The said bonds are listed at Singapore Exchange Limited. Upon full
conversion of these bonds, the equity capital of the Company will increase
by an amount of Rs. 7,94,44,210 comprising of 79,44,421 equity shares of
Rs. 10 each.
During the year, the Company has not received any conversion notice from
the FCCB holders.
Details such as the total bonds issued, bonds converted, expected number of
shares allotted with respect to outstanding FCCBs have been given in detail
in Corporate Governance Report.
In January 2012, the Company has issued 300 units of Commercial Paper (CP)
of face value of Rs. 5 lacs each aggregating to Rs. 15 Crores in de mat
mode, having a tenor of 364 days. M/s. Axis Bank Ltd., Begumpet, Hyderabad
has been appointed as Issuing and Paying Agent. The said instruments were
rated 'CARE A1+(SO)' [A One Plus (Structured Obligation)] by CARE, the
Credit Rating Agency.
Subsequently, the Company redeemed the outstanding Commercial Paper (CP) of
Rs. 15 Crores which were issued in January 2011.
As the members are aware, an enabling resolution was passed in their EGM
held on 17th March, 2011, authorizing the Board to raise funds up to an
amount of Rs. 750 Crores.
In view of the aforesaid, the Company has filed Draft Letter of Offer
(DLOF) for issue of equity shares on rights basis aggregating to an amount
up to Rs. 200 Crores with SEBI on 30.03.2011.
SEBI approval is awaited in this regard.
The Company has neither accepted nor renewed any deposits from public
within the meaning of Section 58A and 58AA of the Companies Act, 1956, and
the Companies (Acceptance of Deposits) Rules, 1975, during the year under
Pursuant to the provisions of Section 256 of the Companies Act, 1956 and
the Articles of Association of the Company Dr. Vasant P. Gandhi and Mr.
Jaidev R. Shroff, Directors of the Company retire by rotation at the
ensuing Annual General Meeting and being eligible, offer themselves for re-
Board of Directors recommends their re-appointment.
SCHEME OF AMALGAMATION AND ARRANGEMENT:
The members may note that the Board of Directors of your Company has
approved the Scheme of amalgamation and arrangement between Advanta India
Limited, the transfer Company and Unicorn Seeds Private Limited, the Wholly
owned Subsidiary of your Company, being the transferor company and their
respective shareholders and creditors (the Scheme).
In this regard, both the Stock Exchanges, BSE and NSE, where the shares of
the Company are listed, have accorded their respective approval to the said
Further, the members may note that the Hon'ble High Court of A.P. vide its
Order, Dt.26th April, 2012 has directed that the respective Meetings of
Equity Shareholders and Trade Creditors of the Company be held on 2nd June,
2012 for the purpose of approving the said Scheme.
AGREEMENT WITH UPL:
With the completion of the pilot project on integration of sales and
marketing function with United Phosphorus Limited (UPL) in India, as a
progression of this process, the Company has entered into a License
Agreement subsequent to the end of the year for transfer of technical know-
how, manufacture and sale of licensed products in consideration of royalty
from UPL. Pursuant to this arrangement the Company has sold its inventories
AUDITORS AND AUDITORS REPORT:
M/s. SR Batliboi and Associates, Chartered Accountants, Auditors of the
Company retires at the ensuing Annual General Meeting. They have expressed
their willingness to continue and confirmed that their appointment, if
made, shall be in accordance with the provisions of Section 224(1B) of the
Companies Act, 1956.
Statutory Auditors of the Company vide Para 8 in their Report on
Consolidated Financial Statements read with Note No. 10 of Schedule 21
(Notes to Consolidated Accounts) have qualified the recognition of deferred
tax assets with respect to the subsidiary companies i.e. Pacific Seeds
Holdings (Thailand) Ltd., Longreach Plant Breeders Management Pty. Ltd., PT
Advanta Seeds Indonesia, Advanta Comercio De Sementes LTDA., Pacific Seeds
Pty Ltd., Advanta Holdings BV and Advanta Semillas SAIC, stating that there
is no virtual certainty to indicate that the said companies will have
sufficient taxable profits against which such deferred tax assets can be
In this regard, your attention is requested to Note No.10 of Schedule 21
(Notes to Consolidated Accounts) on recognition of deferred taxes
containing management's opinion that the said unused losses can be
Auditors of the Company, vide para 9 of their Report on Consolidated
Financial Statements have qualified their Report about 'consolidated
segment information.' Your attention is invited to Note No.19 of Schedule
21, wherein the management explained its view that providing the said
information would be prejudicial to the interest of the Company.
DIRECTOR'S RESPONSIBILITY STATEMENT:
To the best of their knowledge and belief and according to the information
and explanations obtained by them, your Directors make the following
statement in terms of Section 217 (2AA) of the Companies Act, 1956:
i. That in the preparation of accounts for the period ended December 31,
2011, the applicable accounting standards have been followed and that no
material departures have been made from the same.
ii. That the selected accounting policies have been applied consistently
and the judgments and estimates are reasonable and prudent so as to give a
true and fair view of the state of the affairs of the Company at the end of
the financial year and of the profit of the Company for that period.
iii. That proper and sufficient care has been taken for the maintenance of
the adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities.
iv. That the Directors had prepared annual accounts for the year ended 31st
December, 2011 on a going concern basis.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT:
Pursuant to the provisions of Clause 49 of the Listing Agreement, a report
on Management Discussion and Analysis is furnished as Annexure - A to this
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS
Particulars with respect to conservation of energy, technology absorption,
foreign exchange earnings and outgo pursuant to Section 217(1) (e) of the
Companies Act, 1956 read with the Companies (Disclosures of particulars in
the report of Board of Directors) Rules, 1988 are provided in Annexure - B
which forms part of this report.
PARTICULARS OF EMPLOYEES:
Particulars of employees as required under section 217(2A) of the Companies
Act, 1956 and the Companies (Particulars of Employees) Rules, 1975 as
amended, forms part of this report. However in pursuance of section
219(1)(b)(iv) of the Companies Act, 1956, this report is being sent to all
the shareholders of the company excluding the aforesaid information and the
said particulars are made available at the registered office of the
Company. Any shareholder interested in obtaining copy of the same may write
to the Company Secretary at the registered office of the Company. None of
the employees listed therein is related to any Director of the Company and
all the employments are contractual in nature.
EMPLOYEES STOCK OPTION PLAN (ESOP):
The Advanta India Limited Employees Stock Option and Shares Plan-2006
(ESOPs) approved by the shareholders on 20th September, 2006 is in force.
In accordance with the said scheme, the Company reserved 1,68,000 Equity
Shares for its employees and for the employees of its subsidiaries on one
to one basis at an exercise price of Rs. 285/- being the market price as
per the valuation report from a Chartered Accountant on the date of grant.
The options were granted with a vesting period spread over 4 years and 6
months. Out of the total options granted, vesting of options granted is
conditional upon the employee's tenor and upon the Company meeting annual
performance benchmarks based on parameters set by the Remuneration
As the intrinsic value (difference between Market price and Excise price)
on the date of the grant was nil, no compensation cost has been recognized
in the financial statements.
The disclosures as required under Clause 12 & 19 of SEBI (Employees Stock
Option Scheme & Employees Stock Purchase Scheme) Guidelines, 1999 are
enclosed as Annexure-C to this Report.
As per Clause 49 of the Listing Agreement with the Stock Exchanges, a
separate section on Corporate Governance practices followed by the Company
together with a certificate from the Company Secretary in practice
confirming compliance is annexed as part of the Annual Report.
The Equity Shares of your Company continue to be listed on Bombay Stock
Exchange Limited (BSE) and National Stock Exchange of India Limited (NSE).
There is no default in payment of Annual listing fees.
DEMATERIALIZATION OF SHARES:
It may be noted that the entire paid up equity share capital of the Company
(except 102 shares) are held in dematerialized form as on 31st December
Your Directors wish to express their grateful appreciation for the valuable
support and co-operation received from customers, investors, lenders,
business associates, banks, financial institutions, various statutory
authorities and society at large.
Your Directors also place on record, their appreciation for the
contribution, commitment and dedication of the employees of the Company and
its subsidiaries at all levels.
For and on behalf of the Board of
Advanta India Limited
Date : 07.05.2012 Vikram R Shroff V.R. Kaundinya
Place: Hyderabad Director Managing Director
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS
Information in accordance with the Companies (Disclosures of Particulars in
the Report of the Board of Directors) Rules, 1988 and forming part of the
Director's Report for the period ended 31st December, 2011:
A. CONSERVATION OF ENERGY:
1. Energy conservation measures taken:
The Company is not a typical manufacturing unit and hence does not consume
substantial energy as such. However, keeping in view the peculiar
characteristics of the manufacturing processes involved in the seed
industry, wherein the Company is involved, the process of drying of seeds
involves fair amount of energy consumption. Hence significant energy
conservation measures have been undertaken during the year.
We use convection techniques, where solar cabinets with photovoltaic cells
are used to convert solar energy into heating energy up to 40 to 42 degree
Celsius, which in turn dries the wet cobs to the desired moisture content.
Using this, we replace Liquefied Petroleum Gas (LPG) with renewable solar
energy, which is green and cost effective. We are also using conduction,
where boilers fired by waste coconut cells, heat water, which in turn is
used to dry the wet cobs. The company is also using machines powered by
variable frequency drive, which are more energy-efficient than the existing
However, on an ongoing basis, identification of new energy saving means and
measures are carried out.
2. Additional Investments and proposals, if any, being implemented for
reduction of consumption of energy:
We are planning to install turbo ventilators in our manufacturing plants to
exhaust fumes, dust and smoke and ensure good uniform ventilation at
premises. Powered by wind, these are noise and pollution free.
3. Impact of the measures at (1) and (2) above for reduction of energy
consumption and consequent impact on the cost of production of goods:
Savings in energy consumption results in low cost of production and
eventual rise in profitability.
4. Total Energy consumption and energy consumption per unit of production:
B. TECHNOLOGY ABSORPTION:
RESEARCH AND DEVELOPMENT (R & D):
1. Specified areas in which R & D carried out by the Company:
a) Identification and development of superior, high yielding pest and
disease resistant proprietary hybrids. Utilization of the Molecular
Breeding Technology to increase the speed and precision in the Breeding
b) Development, testing and specification setting of packaging materials.
2. Benefits derived as a result of the above R & D:
a) Cost reduction, import substitution and strategic resource management.
b) Quality evaluation of seeds.
c) Higher productivity and economic returns to the farming community
consequent to development of high yielding Hybrids.
d) Entering new market segments.
e) Increased speed of introduction of new products.
3. Future Plan of Action:
To continue and extend research in the above areas.
4. Expenditure on R & D:
Description Standalone Consolidated
FY 2011 FY 2010 FY 2011 FY 2010
Capital 105.78 32.35 184.46 121.30
Revenue 858.40 790.87 9216.00 6623.20
Total 964.18 823.22 9400.46 6744.50
R&D Expenditure as
a % of Net Sales 7.35 8.12 10.31 10.32
* The expenditure given above does not include the amount spent on Nutrisun
TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION:
1. Efforts, in brief, made towards technology Absorption, adaptation and
Utilizing plant breeding and bio-technological tools for the development of
high yielding proprietary hybrids suitable for Indian agro climatic
2. Benefits derived as a result of the above efforts:
Product improvement and development leading to cost reduction by
introduction of high yielding superior quality disease and pest resistant
hybrids for the benefit of the Indian farmer.
3. Information reading Imported Technology:
a. Technology Imported : Plant breeding and bio-technology
know-how relating to seeds.
b. Year of Import : Technology up gradation takes
place on a continuous basis
during the year
c. Has Technology been fully absorbed : Yes
d. Future plans of action : To continue ongoing research
C. FOREIGN EXCHANGE EARNINGS AND OUTGO:
1. (a) Activities relating to exports : Export of various Hybrid Seeds in
field crops and vegetable crops
(b) Initiatives taken to increase : Started producing seeds for our
other subsidiaries and for export
markets taking the advantage of
the low cost of production in
(c) Export plans : Company is having ambitious
export plan of hybrid seeds in
the year 2012 by exploring the
possibilities of taking
production of hybrid seeds in
India on behalf of overseas
2. Foreign Exchange used : Current year Previous year
(on stand-alone basis) (Rs. in Lacs) (Rs. in Lacs)
Consumables : - -
Capital Expenditure : - 19.75
Import of Seeds : 407.98 368.51
Travel : 26.27 13.02
Legal and Professional Charges : 58.06 55.63
Other Expenses : 61.57 64.50
Interest : 553.31 -
Reimbursement of expenses : 68.20 -
Total 1175.39 521.41
Foreign Exchange Earned
(On stand-alone basis)
FOB Value of Exports : 548.32 1378.03
Interest Income : 2897.13
Reimbursement of expenses : 1201.22 242.86
Others : 104.47 -
Total 4751.14 4194.93
For and on behalf of the Board of
Advanta India Limited
Date : 07.05.2012 Vikram R Shroff V R Kaundinya
Place: Hyderabad Director Managing Director
Disclosure pursuant to Clause 12 & 19 of SEBI (Employees Stock Option
Scheme & Employees Stock Purchase Scheme) Guidelines, 1999:
Particulars As at 31st December, 2011
Granted during the year Nil
Pricing Formula Black Schools Formula
Vested during the year 11,439
Exercised during the year 2,223
Forfeited during the year 7,970
Lapsed during the year 11,432
Outstanding invested at the
end of the year 5,446
Exercisable vested options at
the end of the year 54,170
Total number of options in force 59,616
Total No of Shares arising as a
result of exercise of option
Variation of Terms of options Nil
Money Released by Exercise of
options during the year Rs. 633,555
Employee wise details of options
granted during the year:
(a) Senior managerial personnel 3028
(b) Any other employee who received
a grant in any one year, Nil
of options amounting to 5% or more of
options granted during the year
(c) Identified employees who were
granted options, Nil
during the year, equal to or exceeding
1% of the issued capital (excluding
outstanding warrants and conversions)
of the Company at the time of the grant.
Diluted Earnings Per Share (EPS)
pursuant to issue of Shares on Rs. 8.34
exercise of options calculated
in accordance with Accounting Standard 20.
The Difference between the employee
compensation cost using the intrinsic
value of the stock options, and the
employee compensation Rs. 7.66 Lacs
cost that shall have been
recognized if it had used the fair value
of the options.
The impact of this difference on
profit Profit reduced by Rs. 7.66 Lacs
Basic EPS of the Company. Rs. 8.42
Weighted average exercise price of
options where exercise price is Rs. 285/-
less than market price
Weighted average exercise price of
options where exercise price is -
equal to or exceeds market price
Weighted average fair value of
options where exercise Rs. 285/-
price is less than market price
Weighted average fair value of
options where exercise price is
equal to or exceeds market price
Description of the method and
significant assumptions used during
the year to estimate the fair values
of options, including the following
weighted average information:
a) Risk free interest rate 7.50% per annum
b) Expected life Vesting period + 18 months
c) Expected volatility 43%
d) Expected dividends and 1.40% per annum
e) The price of the underlying share
in market at the time of option grant. Unlisted Company
MANAGEMENT DISCUSSION AND ANALYSIS:
Mankind witnessed the first ray of biotechnology when wine from grapes was
made and yeast was discovered. Though not pronounced, biotechnology did get
into action centuries ago. With the advent of agriculture in the civilized
world, a sort of technology of leavening bread, melting grains and making
cheese became a domestic activity, until Liven Hook discovered the cell and
Louis Pester discovered the process of pasteurization. The biological
science went into an upward spiral when the double helix of the DNA was
unfolded to the world in the early part of the 20th Century.
INDUSTRY STRUCTURE AND DEVELOPMENTS:
Growth in agriculture is twice as effective in reducing poverty as growth
in other sectors.
Though the economic growth in the other nations was below average, the
Asian economies, particularly India and China, recorded robust growth. The
year also faced head winds, such as European sovereign debt crises,
political upheaval in middle-east, spill-over from the Japanese natural
disaster and the high oil & other commodities prices as well as monetary
tightening in emerging market economies to contain inflationary pressures.
Agriculture in India has a significant history. As of 2011, India has a
large and diverse agricultural sector, accounting, on average, for about 16
percent of GDP and 10 percent of export earnings. India's arable land area
of 159.7 million hectares (394.6 million acres) is the second largest in
the world, after the United States. Its gross irrigated crop area of 82.6
million hectares (215.6 million acres) is the largest in the world. India
has grown to become among the top three global producers of a broad range
of crops, including wheat, rice, pulses, cotton, peanuts, fruits and
vegetables. Worldwide, as of 2011, India has the largest herds of buffalo
and cattle, is the largest producer of milk and has one of the largest and
fastest growing poultry industries. Agriculture is demographical the
broadest economic sector and plays a significant role in the overall socio-
economic fabric of India.
In fiscal year ending December 2011, with a normal monsoon season, Indian
agriculture accomplished an all time record production of 85.9 million tons
of wheat, a 6.3 percent increase from a year earlier. Rice output in India
also hit a new record at 95.3 million tons, a 7% increase from the year
earlier. Lentils and many other food staples production also increased year
over year. Indian farmers, thus produced about 71 kilograms of wheat and 80
kilograms of rice for every member of Indian population in 2011. The per
capita supply of rice every year in India is now higher than the per capita
consumption of rice every year in Japan.
India exported about 2 billion kilograms each of wheat and rice in 2011 to
Africa, Nepal, Bangladesh and other regions of the world.
The magazine released by the World Bank, 'India Country Overview 2011'
briefed Indian Agriculture as follows:
'With a population of just over 1.2 billion, India is the world's largest
democracy. In the past decade, the country has witnessed accelerated
economic growth, emerged as a global player with the world's fourth largest
economy in purchasing power parity terms, and made progress towards
achieving most of the Millennium Development Goals. India's integration
into the global economy has been accompanied by impressive economic growth
that has brought significant economic and social benefits to the country.
Nevertheless, disparities in income and human development are on the rise.
Preliminary estimates suggest that in 2009-10 the combined all India
poverty rate was 32% compared to 37% in 2004-05. Going forward, it will be
essential for India to build a productive, competitive and diversified
agricultural sector and facilitate rural, non-farm entrepreneur ship and
employment. Encouraging policies that promote competition in agricultural
marketing will ensure that farmers receive better prices.'
The global seed industry had a good year in 2011 with better weather in
many parts of the world, except for the drought in Southern parts of US.
The GM crops acreage continues to grow rapidly.
The global seed market is currently being driven by the increasing
acceptance and adoption of GM crops. The GM crops market size has grown to
more than 150m ha in 2011. Corn and soybean still lead this revolution.
Advent's participation in this segment is still at early stages. We have GM
canola in Australia, GM corn in Argentina and GM cotton in India. Our GM
business is expected to grow rapidly in the next three years.
The sorghum market is an important component of the global seed market.
This market is primarily located in USA, Mexico, Argentina and Australia.
Large sorghum acreages in India and Africa provide staple food to large
populations. Advanta has a 26% share in the global sorghum market and is a
leader in this market.
Some of the significant developments related to the seed industry in India
during the last two years have been discussed below.
The Government of India imposed a moratorium on the development of Bt
brinjal in February 2010. This moratorium has brought in a certain level of
uncertainty in the development and the future of GM food crops in India.
The regulatory process for the introduction of GM crops has also now
prescribed obtaining a No Objection Certificate (NOC) from each of the
state governments before undertaking GM crop trials in those states. This
measure has considerably slowed down the regulatory process for GM crops in
India as many states have not given the NOCs in 2011. These measures are
expected to delay the introduction of more GM traits in India.
The new seed bill has been waiting for introduction in the Parliament for
some time now. The introduction has got delayed due to lack of political
consensus on certain provisions in the proposed law. The proposed law
prescribes a product registration system in India for the first time. This
is good for responsible seed companies like Advanta.
Advanta India endeavors to breed improved hybrid varieties of field (rice,
cotton, mustard, forage & grain sorghums, corn, sunflower and pearl millet)
and vegetable (okra, hot pepper, brinjal, gourds) crops to increase the
productivity and profitability of Indian farmers.
Investment in Agriculture R&D is the most effective way of ensuring food
security and economic growth. The pressing need is for quality seed of
varieties and hybrids that are not only high yielding but resilient to less
input- water, fertilizers etc. Thus food security is interwoven with the
seed security. Advanta's R&D targeted its research for developing hybrids
that excel in the market with quality assurance.
Your Company with vast experience in seed production of major agricultural
crops backed by a very strong in-house R&D program for crops sorghum,
sunflower, rice and several vegetable crops nurtured a competitive edge in
seed and agribusiness.
OPPORTUNITIES AND OUTLOOK:
The fundamentals of the Agriculture sector continue to be robust and will
drive growth in the years to come. The future of the seed industry in India
is expected to be very good, with the demand for branded and quality seeds
increasing. Seeds will be an important contributor to the targeted 4%
growth in agriculture.
Agriculture is gaining significance the world over with the rising needs
from cultivation coupled with limited availability of land under cropping
against the backdrop of the growing population. It is given that most of
this need will be met by increasing productivity and making efficient use
of natural resources which will see more constraints into the future.
In India, the changing demographics and increasing aspirations is leading
to a varied set of expectations in the farming sector. The Government too
is seized of all these perspectives and is devoting increased attention to
the farming needs.
Government Initiative: The Union Government is planning the largest farm-
loan relief package in the country's history- totaling at least 32,000
crore-and proposals to this effect will be unveiled when the Union Budget
is presented on 29 February 2011.
The package, which could end up totaling as much as Rs. 90,000 crore
depending on the final shape of the proposals, is at the core of efforts by
the ruling United Progressive Alliance and its largest constituent, the
Congress party, to revive Indian agriculture and hopefully ride back to
power in elections due in about a year.
People familiar with the process of creating the package say it will have
several components-from a waiver of interest on some loans to the complete
writing off of not just stressed assets (or bad loans) but even those loans
that have been rescheduled.
The Company remains focused on its key objectives of profitable and
sustainable growth, maximizing operational efficiencies and striving to
attain the highest standards of quality, safety and productivity through -
continuous breeding research efforts, new product offerings, aggressive
sales and marketing strategies, a strong brand, far-reaching distribution
infrastructure and investments in people development, the Company is
hopeful of maintaining its performance going forward. Efforts at offering
better technologies, that provide better value to the farmer, while
mitigating external risks, have been generally well received both by the
Government and the farmer. Continued success in these efforts is critical
to maintain these growth prospects.
Some of the early indicators for 2012 are very positive.
* The sunflower market and the corn markets continue to be very strong in
2012. There is a tight supply of sorghum seed because of drought in US. We
will launch GM corn in Brazil and Philippines with outsourced products this
year We are expecting our canola business to grow substantially compared to
2011 giving a big boost to our Australian business.
* The growth in Latin America is expected to be very strong in many parts
like Argentina, Venezuela, Ecuador, etc. We expect a big jump in the corn
business in Thailand and Indonesia. This year could be a significant one in
the history of corn business in Advanta. We will see a substantial increase
in the wheat business of Longreach due to increasing acceptance of our
* Sweet corn and other vegetables business should see a good growth in this
year. We already have good growth oriented indents for our sweet corn from
* We will launch our sunflower in Europe for the first time. This is a
major step forward for our International business. Rice and corn businesses
in India should grow well based on our product performance and the
Government subsidy programs
SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE Business Segment:
The Company has considered hybrid seed business segment as the primary
segment for disclosure. The Company is engaged in research, development,
production and distribution of Hybrid seeds, which in the context of
Accounting Standard 17, India is considered the only Business Segment.
Our sales are predominantly generated from international markets
contributing about 85% to total sales and about 15% of the sales are
generated from domestic markets. Secondary segmental information is based
on the geographical location of the customers. The geographical segment
have been disclosed based on revenues within India (sales to customers in
India) and revenues outside India (sales to customers located outside
India). The relevant information has been given at Para 8 under Schedule T,
(Notes to Accounts)
RISKS, CONCERNS AND THREATS:
Agricultural activities are still greatly dependent upon the vagaries of
the monsoon and upon soil conditions, availability of skilled labour,
quality inputs and farm credit. Non-availability of adequate irrigation
facilities in most parts of the country restricts the acreage and
possibility of a 2nd crop in the year. Macro economic factors like post
recession effect, inadequate rainfall, subdued demand, political
uncertainty and social upheavals and acts of god may also affect the
business of your Company and also the industry at large. Government of
India has been supportive of technology advancement and improvement in
agriculture techniques in the country. The business of the Company is
dependent on various laws, regulations and policies announced from time to
time. Any developments in these areas affecting the freedom of the Company
to operate may adversely affect the business and growth of the Company.
Major fluctuations in total rainfall and its distribution affect the crop
acreages, pest incidence and overall productivity and have a direct
correlation with sales.
Exchange rate fluctuations between Dollar and Rupee could also impact
revenues as well as costs in the foreseeable future. The rising crude
prices could have an impact on the costs and prices of various products.
Apart from the quantum, timing and even distribution of rainfall are
critical for the domestic business. The situation in 2011 was better than
what it was in 2010. Farmers' willingness and ability to spend will be an
important driver to demand generation. Strong support prices and better
availability of credit will ease the pressure on the farming community.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:
Advanta has a robust internal audit and control system which is a process
overseen by the Board of Directors, Management and other personnel and
provides reasonable assurance regarding the effectiveness and efficiency of
operations, reliability of financial reporting and compliance with
applicable laws and regulations.
The Company's internal Audit function is staffed with qualified and
experienced people. It appraises, periodically, its activities and audit
findings to the audit committee, statutory auditors and the management. The
observations and suggestions of the internal audit are reviewed by the
Audit Committee periodically. Adequate follow up measures are taken to
overcome the pointed weaknesses, if any. The standard operating Procedures
(SOPs) put in place by the company is in line with the best global
practices and has been laid down across the process flows along with
authority controls for each activity.
DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL
The Company has recorded a consolidated total income of Rs. 95214.92 Lacs
as against Rs. 70652.07 Lacs for the previous year, which is 34.77% higher
than that of the previous year. The consolidated profit after tax stood at
Rs. 1229.05 lacs as against loss after tax of Rs. (2745.29) Lacs for the
MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS FRONT
INCLUDING NUMBER OF PEOPLE EMPLOYED.:
The Company believes that the quality of the employees is the key to its
success in the long run and is committed to provide necessary human
resource development and training opportunities to equip them with skill,
enabling them to adopt the contemporary technological advancements.
An atmosphere of cordial relations with the employees has prevailed in the
organization all over the world.
During the year, the Company has organized training programs for all
categories of employees in different areas such as technical/skill
development, behavioral, Business excellence, customer orientation, safety,
company values and code of conduct and product training.
As on 31st December 2011, the employee strength was 876.
Statements in the Management Discussion and Analysis describing the
Company's objectives, projections, estimates and expectations may be
'forward-looking statements' within the meaning of applicable laws and
regulations. Actual results could differ substantially or materially from
those expressed or implied. Important factors that could effect the
company's operations include a downward trend in the Domestic Industry,
Monsoon, rise in input cost, exchange rate fluctuations and significant
change in Political & Economic environment in India, environment standards,
litigations, changes in the Government regulations, tax laws, statutes and
other incidental factors.