It gives me immense pleasure to share with you that your companycontinued its growth journey in what was one of the most challenging years in the lastdecade from an economical perspective. We had a phenomenal financial performance infinancial year 2019-20 our consolidated revenue grew 25% against the previous financialyear to INR 1862 Mn the EBITDA grew by 58% to INR 282 Mn margin with EBITDA margins atrecord highs in our company's history of 15.15% and our Net Profit grew by 75% to INR126 Mn with PAT margins at 6.77%.
We are indeed living through unprecedented and difficult times. Thenovel Coronavirus has caused multitude of challenges for countries across the globe andhas also escalated an economic slump in business conditions. The government of Indiaintervened by taking prompt and quick measures to contain the spread of the virus andlater focus on boosting demand. At Captain we responded to this extra ordinary situationby being well prepared through our strong core competencies and robust business model.
With our consistent and sustainable performance during the year westand confident even in such difficult times. Our company's strong brand recallextensive distribution network increasing domestic and international presence state ofthe art technologies and high quality product range are the true strengths of our businessperformance.
As you know over the last few years we expanded our reach from onestate to fifteen more states and also commercialised our second plant in Kurnool AndhraPradesh. With our right expansion strategies we are well-poised to cater a largercustomer base optimise
logistic cost explore potential opportunities in the country andeventually increase market share. Our world class manufacturing facilities producesuperior quality products that are reliabile and durable which has helped increase thecustomer loyalty and the Captain brand recall.
Our business has been well supported by the push from the governmentand we whole-heartedly welcome the move of the government to set up a new Jal ShaktiMinistry' and their emphasis "Har Khet Ko Pani" initiative. Other programsand initiatives launched by the government including Pradhan Mantri Krishi Sinchai Yojana(PMKSY) and increased allocation towards agricultural and allied activities namelyirrigation facilities building agri-market infrastructure and the introduction of theKisan credit card to farmers has lead to a rise in demand for micro irrigation systemsand other ancillary products.
At Captain we have always focused on sustainability that would offergrowth to our stakeholders. Going forward the Company is well positioned to surge aheadwith long term sustainable financial performance. We remain focused on achieving growthand delivering quality products. The underlying fundamentals of the business areundoubtedly robust.
In conclusion I would like to express my appreciation to the entireteam at Captain Polyplast for their commitment passion and hard work and I would alsolike to express my gratitude to our key stakeholders customers bankers and vendors fortheir continued support in our growth journey.
Yours sincerely Ramesh Khichadia
Management Discussion & Analysis
Global Economy Overview
The financial year 2020 started off with rising issues on trade betweenthe world's two largest economies - US and China. US and China together account for40% of the global GDP and the trade disputes between them had an adverse effect on theglobal economy and sentiment overall. This impact was not only seen in the commodities andfinancial markets (equities bonds currencies) but it also impacted the output andprofitability of firms leading to deterred investment decisions of businesses. The globaleconomy was struggling to regain a broad-based recovery as a result of the lingeringimpact of growing trade protectionism trade disputes among major trading partnersfalling commodity and energy prices. Brexit was the other major event that took place inJanuary 2020 after the public referendum in 2016 and years of negotiations. The impact ofBrexit is expected to hurt the UK economy primarily due to 2020 having the weakest exportgrowth since 2009 and business investments contracting by 0.7%.
The year ended with outbreak of Covid-19 pandemic. Covid-19 effectscame in as a supply side shock first with disruption in global supply chains but withtime the shutdown of manufacturing units across the world had put challenges on thedemand side where the availability of goods and services was impacted. Advanced economiesas a group are likely to experience an economic contraction in 2020 of about 7.8% of GDPwith the U.S. economy projected by the IMF to decline by 5.9% about twice the rate ofdecline experienced in 2009 during the financial crisis. The rate of economic growth inthe Euro area is projected to decline by 7.5% of GDP. The IMF also argues that recovery ofthe global economy could be weaker than projected as a result of: lingering uncertaintyabout possible contagion lack of confidence and permanent closure of businesses andshifts in the behaviour of firms and households. The global trade volumes are projected todecline between 13% and 32% in 2020 as a result of the economic impact of COVID-19.
In order to cushion the economy from unprecedented impact ofcoronavirus United State House Democrats
passed a USD 3 trillion coronavirus relief bill on 15th April 2020.The Federal Reserve lowered its key interest rate to near zero on March 15 2020.ln otheractions the People's Bank of China cut its reserve requirements for Chinese bankspotentially easing borrowing costs for firms and adding $79 billion in funds to stimulatethe Chinese economy. OPEC and Russia reportedly agreed to cut oil production by 10 millionbarrels per day. G-20 finance ministers and central bank governors announced their supportfor the proposed agreement by Saudi Arabia and Russia to reduce oil production.
Nevertheless it has been a challenging time for governments and theircitizens alike with fighting off against the spread of the virus and passing hugestimulus packages to support people and businesses. Effective policies are essential toforestall the possibility of worse outcomes and the necessary measures to reducecontagion and protect lives are an important investment in long-term human and economichealth.
Seeking Alpha - Feb 2020 Asia Times - March 2020 Economic Times - Feb2020 S&P Global - May 2019 CNBC - Sept 2019 and Youth Ki Awaaz - Nov 2019
Indian Economy Overview
The Indian economy started FY20 on a dull note owing to the ongoingliquidity crisis. In order to achieve the government's vision of making India a USD 5trillion economy by 2025 the finance ministry slashed domestic corporate tax rates to25.17% during midyear. Considering the conditions attached to this rate few companieshave taken the benefit of the lower rate.
The Current Account Deficit narrowed primarily on account of lowernon-oil non-gold imports and robust services exports supported by software travel andfinancial services. India's crude oil import bill fell by 9% Y-o-Y to $102 billion in2019-20 on account of price crash; though volumes remained fairly unchanged. Foreign fundoutflows and the Fed's grim prognosis for the US economy further weighed on the rupeeas it touched 77 against US dollar in April 2020. The CPI inflation stands at 5.84% YoYinMarch 2020 higherfrom 2.86%Y-o-Yin March 2019. As per ICRA CPI inflation is expected tocool to around 4.0% with downside bias in FY2021 from 4.8% in FY2020 due to likely muteddemand for non-essential items weak pricing power for producers and favourable baseeffect for food items. According to the Indian Budget 2020 the real GDP growth wasestimated at 5.0% in the financial year 2019-20 but due to the recent COVID-19 crisis hasensured that FY2021 will be a challenging one for India and the world. As per Fitchratings India's GDP growth is likely to slip to 0.8% for FY21 on account of expectedfall in consumer spending to 0.3% from 5.5% a year ago and an expected contraction of 3.5%in fixed capital investments.
The Indian economy was on a recovery path from the lower demandpositions that were existing when the Covid-19 pandemic hit us in the last few days of theyear and the related measures taken by the Govt resulted in slowdown of demand. While onone hand the rate of growth of the pandemic was relatively contained the lockdownimpacted the distribution channels and the Sales for the year and also for the subsequentquarter. The pace and scale of lifting lockdown for India may depend on the availabilityof the crucial testing capabilities which is essential to get a better handle on thespread of the virus granular data and technology to track and trace infections and thebuild-up of healthcare facilities to treat patients. Government of India'sannouncements of a fiscal stimulus of Rs. 20 Lakh crores (10% of GDP) aims at savingthe lockdown battered economy by providing tax breaks incentives for domesticmanufacturing and credit guarantee for loans to MSMEs.
RBI announced slew of measures to address the liquidity concerns offinancial institutions by means of targeted long-term repo operations to help easeliquidity of NBFCs HFCs and MFIs. India's crude oil import bill is likely to shrinkin the current fiscal year as domestic demand has sharply fallen due to nationwidelockdown. With IMD monsoon forecast coming at near normal levels agricultural sectorcould turn out to be the lone bright spot as winter crop (Rabi) is being harvested and theimpact of this pandemic is not seen
across the farmland areas of the country.
The uncertainty about further contagion of this pandemic and thevaccine development establishment closures structural shifts in firm and householdbehaviour which may lead to a longer lasting supply chain disruption and weakness inaggregate demand would potentially cause a major hurdle in growth of the fastest growingtrillion-dollar economy going into FY21.
Forbes India - March 2020 Live Mint - Feb 2020 ET BFSI.com - Dec2019 IBEF - March 2020 Economic Times India Budget 2020.
Global Micro-Irrigation Industry
The Global Micro-Irrigation Systems Market size surpassed USD 5 billionand is projected to register a CAGR of 13% from 2017 to 2024. Growing necessity for waterconservation owing to rising population and decreasing water reserves will drivemicro-irrigation systems market. Increasing concern pertaining to water becoming athreatened commodity farmers and other stakeholders in agricultural sector have beenseeking novel techniques for enhancing productivity from the limited amount of water.Ability of microirrigation systems to economize water in agriculture sector and bring morearable land under irrigation will support market expansion for the projected period.
Strong economic benefits of micro-irrigation systems will influencemarket growth over the forecast timeframe. Low pumping needs automation and flexibilitywill promulgate overall industry growth as it has positive impact on production costs.Additionally ability of micro-irrigation system to support all types of land terrain isfurther anticipated to fuel market growth. Participation of the government regulatorybodies due to environmental concerns coupled with reduction in water and fertilizers usageis projected to drive this segments growth. Increase in the number of subsidies providedby government to the farmers will support product scope. High initial investment cost canbe one of the factors that may create hinderance for market growth.
Micro Irrigation in India
In order to increase water use efficiency at farm level EconomicSurvey 2019-20 advises further penetration of micro irrigation to ensure a sustainableagricultural practice. It says that there is good scope to use this technology in closelyspaced crops like rice wheat onion and potato. In 2018-19 over 12 lakh hectare land isunder microirrigation according to government data.
Highlights of the Union Budget 2020-21
The Budget 2020-21 has identified Agriculture Sector as one ofthe key drivers of the economy.
As per the Union Budget 2020-21 government will work with StateGovernments to allow farmers to benefit from e-NAM.
The government announced plans to launch Krishi Udaan oninternational and national routes.
PM-KUSUM scheme expanded to support 20 lakh farmers for settingup stand-alone solar pumps and further help another 15 lakh farmers solarise theirgrid-connected pump sets.
INR 1.34 lakh crore (US$ 19.23 billion) allocated for Ministryof Agriculture and Farmers' Welfare.
Allocated Rs 8363 crore (US$ 1.20 billion) to Department ofAgricultural Research and Education.
Government Policies supporting the sector growth
Pradhan Mantri Krishi Sinchai Yojana (PMKSY)
The Government of India has been implementing
Centrally Sponsored Scheme on Micro Irrigation with the objective toenhance water use efficiency in the agriculture sector. Under the scheme technologicalinterventions like drip & sprinkler irrigation systems are promoted to encourage thefarmers to use them for conservation and saving of water & improved yield.
The scheme ensures access to the means of irrigation to allagricultural farms in the country to produce per drop more crop' thus bringingmuch desired rural prosperity.
To increase agricultural production and productivity byincreasing availability of water and its efficient use.
PMKSY has been approved for implementation across the countrywith an outlay of Rs. 50000 crore in five years.
Pradhan Mantri Kisan Samman Nidhi Yojana
Prime Minister of India launched the Pradhan Mantri KisanSamman Nidhi Yojana (PM-Kisan) and transferred Rs 2021 crore (US$ 284.48 million)
to the bank accounts of more than 10 million beneficiaries on February242019.
After the budget announcement of Pradhan Mantri Samman NidhiYojana eligible farmers will get Rs 6000 (US$ 85.84) in three instalments.
Pradhan Mantri Annadata Aay SanraksHan Abhiyan'
In September 2018 the Government of India announced Rs 15053crore (US$ 2.25 billion) procurement policy under which states can decide thecompensation scheme and can also partner with private agencies to ensure fair prices forfarmers in the country.
Agricultural Export Policy 2018
Harness export potential of Indian agriculture through suitablepolicy instruments to make India global power in agriculture and raise farmers'income.
The new policy aims to increase India's agriculturalexports to US$ 60 billion by 2022 and US$ 100 billion in the next few years with a stabletrade policy regime.
Micro Irrigation Fund
A dedicated Micro Irrigation Fund created with NABARD has beenapproved with an initial corpus of Rs. 5000 crore (Rs. 2000 crore for 2018-19 & Rs.3000 crore for 2019-20) for encouraging public and private investments in Microirrigation.
The main objective of the fund is to facilitate the States inmobilizing the resources for expanding coverage of Micro Irrigation. MIF would not onlyfacilitate States in incentivizing and mobilizing resources for achieving the targetenvisaged under PMKSY-PDMC but also in bringing additional coverage through special andinnovative initiatives by State Governments.
Atmanirbhar Bharat Package (Agriculture)
Measures worth Rs 1.5 lakh crore focused on the agriculture andallied sectors including dairy animal husbandry and fisheries as the government announcedsteps to strengthen the overall farm sector. Rs 1 lakh crore has been allocated to
agriculture infrastructure fund for farm-gate infrastructure includingusing it for setting up cold chains and post-harvest management infrastructure.
Dismantling monopolies of age old APMC's who were oftenblamed for unfair trading and had become a barrier for farmers to get a fair price ontheir produce was another notable decision taken by the government.
The proposed Central law to allow farmers to sell to anyoneoutside the APMC yard will bring greater competition amongst buyers lower the mandi feeand the commission for Arhatiyas (commission agents) and reduce other cesses that manystate governments have been imposing on APMC markets. India will have one common marketfor Agri-Produce.
Contract farming - This reform announcement has received a lotof positive press. Prima facie the assurance of a price to the farmers at the time ofsowing will help them take cropping decisions based on forward prices. Usually farmersrefer to last year's prices and take sowing decisions. This system could minimisetheir market risks and offer better realization for their produce.