MANAGEMENT DISCUSSION & ANALYSIS
TO THE MEMBERS
Your Directors have pleasure in presenting the Annual Report together with the AuditedFinancial Statements of the Company for the Financial Year ended 31st March2021.
( Rs. in Crore)
|Sales & Other Income ||226.86 |
|Profit before Finance Cost & Depreciation (PBIDT)# ||23.85 |
|Profit after Tax ||7.17 |
|Surplus brought forward ||34.75 |
|Surplus carried to Balance Sheet ||41.92 |
# Before exceptional item of Rs. 386 Crore
Your Directors are pleased to recommend a dividend of Rs. 1.50 /- per Equity Share ofRs. 10/- each (15%) for the Financial Year ended 31st March 2021. The Dividendoutgo subject to approval at the ensuing Annual General Meeting will be Rs. 69.55 Lacs.
PREFERENTIAL ALLOTMENT OF EQUITY SHARES PURSUANT TO CONVERSION OF WARRANTS
As per the terms of 483057 warrants issued to the Promoter & Promoter group on apreferential basis the holder of the warrants exercised the option of converting the saidwarrants into equity shares by paying the balance 75% of the total consideration of theissue value amounting to Rs. 17.53 crores. Accordingly 483057 warrants were convertedinto 483057 Equity Shares of Rs. 10/- each on 17th December 2020.
Consequently the issued subscribed and paid-up equity share capital of the Companyincreased from Rs. 4.15 crore (comprising 4153906 Equity Shares of Rs. 10/- each) to Rs.4.63 crore (comprising 4636963 Equity Shares of Rs. 10/- each).
During the year 2020-2021 your Company has delivered 24% revenue growth compared tothe last year. This performance was possible due to the effectiveness of the "CovidBusiness continuity team" formed in early March 20 to operationalise supply chain bymobilising the entire organisation.
All business segments of the Company except Cotton delivered high double-digitgrowth. As part of the larger growth strategy JK Agri continues to make fundamentalchanges in all the areas of operations to bring efficiency. For example continuous focuson phased product portfolio restructuring program by discontinuing some low margin and oldslow-moving products. The newly launched products in Rice Maize Mustard MilletsSorghum Sudan grass and Cotton have been received well and will start contributingsignificantly to the turnover and profitability of the Company in the coming years. Thedomestic cotton business fell below our expectation but we believe that the recentlyintroduced new products should bring the growth back.
On the export front your Company is carefully expanding its geographical and productfootprint and reducing the overall dependence on the Cotton seeds. Export segment ingeneral continues to face headwinds due to currency & trade logistics issues.
The work that was started last year to improve the performance of vegetable seedbusiness has started delivering positive outcomes. Focus remains on the portfolio refreshand demand generation activities to help drive the grass root level demand and growth. TheCompany has an active business continuity team to ensure that it can successfully run thebusiness amidst Covid-19.
In future JK Agri will continue to focus on executing the journey started recently.Some highlights and updates are:
Portfolio renewal will remain fundamental to deliver the growth of the Company. Duringthe year your Company has successfully launched few crops like Onion & Raddish etc.to complement its basket of offering in vegetable seeds category. Several new products arealso introduced in various other crops. This year the major focus is going towardsimproving the end-to-end supply chain efficiency. In vegetable and field crops a number ofnew products have been launched.
Your company's in-house team did a commendable job by refreshing the appearance of theCompany and its products both online and offline. Customers and channel partners havegiven positive feedback about the change.
Based on the priorities teams will continue to balance its crop and product offeringsthrough combination of in-house research and insourcing from leading players in thesegments.
Our country is large and it is not possible to cover all markets. The Company hasstarted a very focused approach to identify the markets important for it. This will allowJK Agri to plan its business at the village level. The new marketing and sales teamstructure has started working and started delivering better outcomes. In future theCompany's intent is to continually upgrade the quality and capability of teams. To ensurepeople engagement during the pandemic multiple e-learning opportunities have been createdfor all the employees in the Company.
The Company is working to create and implement a digitalisation road map. This willhelp to bring a digital focus on traceability of products visualisation of theinformation and enhanced customer connect.
Our people engagement enabled by team-based structure is very focused on the teamgoals. Your Company continues to implement several innovative ways to engage with people.Various recognition and reward schemes were implemented. Second year in a row your Companyhas earned the distinction of "Great Place to Work" by the Great Place toWork Institute a global certification body.
INDUSTRY OVERVIEW AND OUTLOOK
Covid-19 situation in the current year is more serious than last year as virus seems tohave penetrated deep in the country. Food is a basic need; hence we believe that impact onthis sector will be far lower as compared to discretionary items of consumption. Monsoonoutlook for the year 2021 is positive. Commodity prices for most crops are holding firm.Pandemic has increased the awareness about the need to eat healthy food and that shouldauger well for fruits and vegetables. In the short-term consumption of vegetables andfruits may get adversely impacted due to lower demand in the HoReCa (Hotels Restaurantsand Canteens) segment and supply chain challenges leading to lower realisation for thefarmers.
Resurgence of Covid-19 across the country has caused more wide-spread disruption acrosscomplete supply chain in recent months. The Company expects challenging times across thevalue chain in the current fiscal year and softer environment for Maize and Vegetableseeds. Overall demand for Cotton seed may trend lower due to increased use of unauthorisedtechnologies like herbicide tolerant cotton.
On the positive side in the last year Indian agriculture overall performed wellaided by good rainfall good reservoir levels soil moisture and commodity prices in2020-21. India is likely to report another big year as far as agriculture is concerned.
Government continues to implement policies to improve agriculture and taking multiplesteps to double farmers income. Government in a very calibrated manner continues toincrease the minimum support price of the crops. The Commission for Agricultural Costs andPrices (CACP) has recommended higher support prices for 17 kharif crops.
RESEARCH AND DEVELOPMENT
Last year your Company further sharpened it's focus on R&D by directing resourcestowards the modern trend and customer needs. R&D teams have started working on hybridssuitable for multiple Agro climatic conditions including select African and ASEAN markets.To improve the probability of outcome in the shortest possible time our biotech team andplant breeders have been using marker assisted breeding techniques across the crops. Theteams have also started focusing on production research to improve the cost effectivenessof multiplication. The Company continues to strengthen field trials and testing network toimprove success rate.
OPPORTUNITIES THREATS RISK AND CONCERNS
Agriculture food system is basic to human survival. With the increasing populationincreasing food demand and expansion of the modern retail the focus on agriculture isgoing to more intense. Seeds will play a very important role in dealing with thechallenges posed by the climate change.
In recent past Government of India has unleashed many initiatives to improve farmincome. Increasing role of FPOs (Farmer Producer Organisations) and Fintech players withincreasing investment on processing and modern supply chain are visible. The constantincrease in Minimum Support Price (MSP) will enable the farmers to get an assured andremunerative price for their produce encouraging them to increase the production.
The Company is very hopeful that the above- mentioned factors will help in fuelling thegrowth of Seed Industry. There could also be an opportunity to improve our basket of inputofferings to the farmers in future.
Threats Risk and Concerns
While demand side of agriculture remains strong external climatic factors continue toalways impact the production cycle. We have seen the increased focus of the Government todeal with such challenges especially Irrigation and Crop Insurance. Changing consumerbehaviours due to Covid-19 could also have an impact on cropping patterns.
On the policy side India need better enabling environment that protects intellectualproperty and allows introduction of modern technologies in agriculture.
HUMAN RESOURCE DEVELOPMENT
Future of Work: A New Era in Human Resources
Future of Work represents a fundamental change in the working world. The Covid-19pandemic casts a new light on people at work and society. Trends such as digitalisationglobalisation global networking and demographic change have added a fair amount ofcomplexity to how we work.
New skills are needed to move away from traditional and inflexible work structures thatare simply no longer up to the challenges of rapidly changing work environments.
During the pandemic crisis our focus has been to protect both emotional and physicalhealth of the people. Your Company implemented several proactive measures like Doctors'connect medical assistance & opened frequent open channels of Communications. Thishelped in getting better appreciation of employees' feelings importantly listening andresponding. The success of HR Strategy shall depend on our ability to retain motivatedevelop and continue to attract employees with the skills and experience to help theCompany master challenges and make the most of opportunities. We have been on theforefront to understand and make changes to adjust to digitally enabled workplace.
Purpose People and Process are the vital aspects that comprise the organisationalperformance management strategy. As part of the growth agenda the Company continues toinvest in the capability building of its people across all levels. New members have joinedthe JKAGL Strategic Leadership Team. Transformation of the business with a globalperspective & emerging challenges is the key objective.
Effective people policies covering all the aspects of the business that are importantto the employees are in place. When transparency is part of workplace culture it comesalong with trust communication and greater levels of employee engagement. The policychanges implemented in alignment with the best industry practices had enhanced motivationamongst the employees in-turn reflecting a positive surge in short and medium andlong-term growth opportunities.
Contemporary Outlook at workplace having aggressive strategic decisions with time bounddeliverables. Driving culture of meritocracy based on contribution to business andE-learnings had showcased a transformation change in systems and people reflecting in longterm growth.
The Company has been working with internal and external faculty of elite institutionslike IIMs towards leveraging and developing skills of High Performers across all segments.As an outcome there has been an improvement in Employee Engagement Survey's &"Great Place to Work" Certification being an Employer-of-Choice'recognition is retained by the Company.
These milestones will sharpen our objectives further in the journey to build aHigh-Trust High-Performance Culture.
KEY CHANGES IN FINANCIAL INDICATORS
|. Particu lars ||Units ||As at 31.03.2021 ||As at 31.03.2020 ||Re marks |
|1 Debtors T urnover ||Times ||3.21 ||2.62 ||Better Working Capital Manage ment |
|2 Inventory T urnover ||Times ||0.91 ||1.07 || |
|3 Current Ratio ||Times ||1.58 ||1.57 || |
|4 Debt Equity Ratio ||Times ||0.18 ||0.34 ||Infusion of Equity Capital |
|5 Interest Coverage Ratio ||Times ||3.70 ||(0.43) ||Increase in Turn- over |
|6 Operating Profit Margin ||% ||10.79% ||-2.14% || |
|7 Net Profit Margin ||% ||4.42% ||-9.05% || |
|8 Return on Net worth ||% ||5.30% ||-9.71% || |
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has in place Internal Control Systems commensurate with the nature of itsbusiness size and complexity of its operations. These systems are regularly tested fortheir effectiveness by Statutory as well as Internal Auditor. The Internal Auditor reviewson regular basis to check its adequacy and also to verify all statutory compliances. Basedon the Internal Audit Programme approved by the Audit Committee of the Board the InternalAuditor carry out regular internal audits covering all offices factory and key areas ofbusiness. Reports of the Internal Auditor are placed before the Audit Committee onquarterly basis for review. The Audit Committee regularly reviews the reports anddiscusses the actions taken with the management in addition to reviewing the effectivenessof the internal control systems and monitoring the implementation of auditrecommendations. There are adequate checks & balances in place wherein deviation fromthe systems laid-out are clearly identified and corrective actions are taken in therespective areas wherever required.
INTERNAL FINANCIAL CONTROLS
The Company has laid down Internal Financial Controls Systems Policies and Procedureswith reference to Financial Statements. The systems policies and procedures are reviewedfrom time to time and are updated. These are designed to ensure adherence to the Company'spolicies safeguarding of its assets & interests prevention & detection of frauds& errors accuracy & completeness of financial records and proper conduct ofbusiness of the Company. The Company also has a robust Management Information System whichnot only facilitates speedy business decisions but also helps in timely preparation andsharing of reliable financial information across various levels in the Company. Thetransactional controls built in SAP ERP systems ensures appropriate segregation of dutiesappropriate level of approval mechanisms and maintenance of various records. All suchcontrols are assessed during the year. Regular audits and review processes ensure thatsuch systems are reinforced on on-going basis. Based on the review of the InternalFinancial Control Systems during the year by the Management and the Auditors of theCompany no material reportable weakness was observed in the Internal Financial ControlSystems during the financial year.
The Annual Return as required under Section 92 and Section 134 of the Companies Act2013 read with Rules made thereunder is available on the website of the Company atwww.jkagri.com
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
The particulars of loans given guarantees or securities provided and investments madeas required under the provisions of Section 186 of the Companies Act 2013 are given inthe Notes to Financial Statements.
RELATED PARTY TRANSACTIONS
During the Financial Year ended 31st March 2021 all the contracts orarrangements or transactions entered into by the Company with the Related Parties were inthe ordinary course of business and on arm's length basis and were in compliance with theapplicable provisions of the Companies Act 2013 and the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015.
Further the Company has not entered into any contract or arrangement or transactionwith the related parties which could be considered material in accordance with the policyof the Company on materiality of Related Party Transactions. In view of the abovedisclosure in Form AOC-2 is not applicable. The Related Party Transaction Policy asapproved by the Board is available on the website of the Company.
Maintenance of cost records as specified by the Central Government under sub-section(1) of section 148 of the Companies Act 2013 is not required by the Company.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
Shri Vikrampati Singhania (DIN: 00040659) Managing Director of the Company retires byrotation and being eligible offers himself for re-appointment at the ensuing AnnualGeneral Meeting (AGM). The Board recommend his re appointment.
The Board on the recommendation of the Nomination and Remuneration Committee alsoapproved increase in the salary range of Shri Vikrampati Singhania from Rs. 23 lacs permonth Rs. 55 lacs per month to Rs. 23 lacs per month Rs. 65 lacs per month w.e.f. 1stApril 2021 and payment of minimum remuneration to him for his remaining term i.e. from 1slApril 2021 to 6lh May 2023 subject to requisite approval of the Members of theCompany. Further pursuant to Regulation 17(1 A) of the Listing Regulations the Board hasalso approved continuation of directorship of Dr. Raghupati Singhania (DIN: 00036129)Non-executive Director liable to retire by rotation who would be attaining the age ofseventy five (75) years on 8th December 2021. The Board has recommendednecessary Special Resolutions in this regard for approval of the Shareholders at theensuing AGM.
All Independent Directors of the Company have given declarations that they meet thecriteria of independence as provided in Section 149 of the Companies Act 2013 andRegulation 16 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015.
There were no changes in the Directors/ Key Managerial Personnel of the Company duringthe period under review.
CONSERVATION OF ENERGY ETC.
The details as required under Section 134(3)(m) of the Companies Act 2013 read withthe Companies (Accounts) Rules 2014 are annexed to this Report as Annexure -1 and formspart of it.
The Company has neither invited nor accepted any deposits from the public.
(a) Statutory Auditors and their Report
M/s BGJC & Associates LLP Chartered Accountants (ICAI Firm Registration Number-003304N) were appointed as Statutory Auditors of the Company for a second term of fiveconsecutive years commenced from the conclusion of 19th AGM held on 27thAugust 2019 till the conclusion of 24th AGM.
The observations of the Auditors in their Report on Accounts and the FinancialStatements read with relevant notes are self-explanatory. The Auditor's Report does notcontain any qualifications reservations or adverse remarks.
(b) Secretarial Auditor and Secretarial Audit Report
Pursuant to the provisions of Section 204 of the Companies Act 2013 the Board ofDirectors appointed Shri Namo Narain Agarwal Company Secretary in Practice as SecretarialAuditor to carry out Secretarial Audit of the Company for the Financial Year 2020-21.
The Report given by him for the said Financial Year in the prescribed format is annexedto this Report as Annexure-2. The Secretarial Audit Report does not contain anyqualifications reservations or adverse remarks.
PARTICULARS OF REMUNERATION
Disclosure of the ratio of the remuneration of each director to the median employee'sremuneration and other requisite details pursuant to Section 197(12) of the Companies Act2013 (Act) read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 is annexed to this Report as Annexure - 3. FurtherParticulars of Employees pursuant to Rule 5(2) & (3) of the above Rules forms part ofthis Report. Flowever in terms of provisions of Section 136 of the Act the Report andAccounts are being sent to all the Members of the Company and others entitled theretoexcluding the said Particulars of Employees. The said information is available forinspection at the Registered Office of the Company during business hours on working daysof the Company up to the ensuing AGM. Any member interested in obtaining such particularsmay write to the Company Secretary.
CORPORATE SOCIAL RESPONSIBILITY
Your Company believes in the process of giving back to the society and aims tocontribute to sustainable growth of the society at large. Besides undertaking projects foroverall development and welfare of the society your Company has been working closely withthe farming community in areas of imparting agricultura I knowledge promoting preventivehealthcare skill development and livelihood enhancement projects.
The Company has requisite Corporate Social Responsibility (CSR) Policy in accordancewith the provisions of the Companies Act 2013 and rules made thereunder. The CSR Policyis disclosed on the website of the Company at www.jkagri.com
The Annual Report on the CSR activities undertaken by the Company during the FinancialYear under review in the prescribed format is annexed to this Report as Annexure - 4.
CHANGE IN THE NATURE OF BUSINESS
During the Financial Year under review there was no change in the nature of businessof the Company.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS
During the Financial Year under review there were no significant and material orderspassed by the Regulators or Courts or Tribunals which could impact the going concernstatus of the Company and its future operations.
COMPLIANCE OF SECRETARIAL STANDARDS
Based on the Secretarial Audit Report of the Secretarial Auditor the Company has dulycomplied with the applicable Secretarial Standards on Meetings of Board of Directors andGeneral Meetings issued by the Institute of Company Secretaries of India.
Your Company reaffirms its commitment to best corporate governance practices. Pursuantto Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 a Management Discussion and Analysis Corporate Governance Report and Auditors'Certificate regarding compliance of conditions of Corporate Governance are made a part ofthis Report. The Corporate Governance Report also covers the following:
(a) Particulars of the four Board Meetings held during the Financial Year under review.
(b) Salient features of the Nomination and Remuneration Policy including changestherein.
(c) The manner in which formal annual evaluation of the performance of the Board ofDirectors of its Committees and of individual Directors has been made.
(d) The details with respect to Composition of Audit Committee and establishment ofVigil Mechanism.
(e) Details regarding Risk Management.
(f) Disclosures in relation to the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013.
DIRECTORS' RESPONSIBILITY STATEMENT
As required under Section 134(3)(c) of the Companies Act 2013 your Directors statethat-
(a) in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures;
(b) the accounting policies have been selected and applied consistently and judgmentsand estimates made are reasonable and prudent so as to give a true and fair view of thestate of affairs of the Company at the end of the financial year and of the profit andloss of the Company for that period;
(c) proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the said Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
(d) the annual accounts have been prepared on a going concern basis;
(e) the internal financial controls to be followed by the Company have been laid downand that such internal financial controls are adequate and were operating effectively; and
(f) the proper systems to ensure compliance with the provisions of all applicable lawshave been devised and that such systems were adequate and operating effectively.
"Management's Discussion & Analysis Report" contains forward lookingstatements which may be identified by the use of the words in that direction or connotingthe same. All statements that address expectation or projections about the futureincluding but not limited to statements about the Company's strategy for growth productdevelopment market position expenditures and financial results are forward lookingstatements. The Company's actual results performance or achievements could thus differmaterially from those projected in such forward- looking statements. The Company assumesno responsibility to publicly amend modify or revise any forward - looking statements onthe basis of any subsequent development information or events.
Your Directors wish to acknowledge and place on record the commitment and dedication onthe part of the employees of your Company in achieving good results.
Your Directors would also like to acknowledge and record their appreciation of thecontinued support and assistance received by the Company from its valued CustomersDealers Suppliers Shareholders Banks and various Central and State Government Agencies.
|On behalf of the Board of Directors |
|Date: 3rd May 2021 ||Bharat Hari Singhania |
|Place: New Delhi ||Chairman |