The year gone by has been extraordinary by any measure. The external challenges of theCOVID-19 pandemic increase in the cost of raw material and other adverse operatingconditions prevailing through the year led to internal disruptions. Economic conditionswere uncertain and customer sentiments ebbed and flowed with each passing week and month.
The two waves of COVID-19 has undeniably caused catastrophic global upheaval duringFY2021. It is believed that the changes forced upon humanity are unlikely to be reversedpresenting us with a new normal. Its impact on India too has been largely disruptive interms of economic activity. These are difficult times but great disruptions often presentgreater opportunities and serve as inflection points to bring out the best in each one ofus.
It has been several months since the pandemic engulfed the world and yet thereremains uncertainty regarding medium and long-term impact of this crisis and the likelyshape and pace of the recovery.
A challenging year
The broader economy as well as several industries faced considerable changes followingsevere and extended lockdowns restrictions on manufacturing units social distancingnorms and store closures. The year of unprecedented challenges due to the pandemic and theconsequent nationwide lockdown impacted our operations in all geographies. Even though theFMCG industry faced a situation of largely resilient customer demand it was impacted byshutting down of manufacturing plants with the ongoing pandemic and the second wave ofCOVID-19 in 2021. As things stand now the scale speed and spread of the second wave ofCOVID-19 and the possibility of its third wave has once again given a push-back to theeconomy.
At Prataap Snacks we have aligned ourselves with speed and agility to these fast-pacedchanges and quickly moved to stabilise operations and ensure business continuity. It tookrelatively longer to recommence operations at our mother plant which comprises 50% oftotal capacity as Indore was a designated hot spot and in the containment zone forCOVID-19. However our Guwahati plants and our wide network of 3P facilities served uswell and enabled us to resume production at these locations.
Combating the challenge
The second wave presented new challenges but this time we were better preparedresulting in lesser disruptions across operations. We remained focussed on restoringnormalcy in business operations while positioning ourselves to capitalise on increasedcustomer acceptance of alternate channels for go-to-market.
These challenges were temporary in nature and we are confident that we will reboundstrongly as the restrictions in various states and regions have been eased and as thecommodity cycle reverses. The structural improvements undertaken will accrue morelong-lasting benefits which along with the healthy balance sheet will help us to elevatethe growth trajectory and performance metrics going forward.
During the year under review on-the-go demand continued to be subdued as schools andtransport channels which are the key drivers continue to remain closed. Urban centresremained weak due to various restrictions imposed. However reverse migration has helpedmove consumption trends to India's smaller cities helping in brisk sale of packaged goods.
Performance in Fy2021
Our performance in FY2021 was impacted by two significant external challenges first was the pandemic-led disruption that impacted sales volumes as outdoor and socialactivities continue to remain muted. Secondly the adverse cyclicality in input pricesplaced significant pressure on profitability. Palm oil a major raw material componentexperienced a rise of 30% during the year compared to its full-year average price inFY2020. However the ongoing cost optimisation and process re-engineering initiativestaken up by the Company helped us mitigate the impact of higher palm oil prices to a largeextent.
Our Income from Operations stood at Rs 117109 lakhs. Operating EBITDA translated intoa margin of 5.4% while Profit After Tax recorded a margin of 1.2%.
overcoming challenges optimising opportunities.
During challenging times we capitalised on market recovery to deliver a healthyrebound in the second half of the year. We continued to maintain steady financial positionwith robust liquidity. Even during challenging times our diverse product portfolio atstrategic price points and pack sizes facilitated us in bearing the challengingenvironment.
At Prataap Snacks we are further deepening our reach in the rural pockets to help uscreate some cushion for the shortfalls from the top urban centres. We shored up ourefforts to get more distributors in India's smaller cities and towns. We have recoupedwith last year's performance primarily because we penetrated deeper in smaller towns andrural areas. We are also setting up a new facility in Kolkata to enhance our reach in theeastern markets of India which is expected to become operational during FY2022.
Driving growth through Avadh
During the year we acquired a further 10.48% stake in Avadh Snacks for an aggregatevalue of Rs 3300 lakhs. Post the aforesaid acquisition our holding in Avadh Snacksstands increased to 90.48% of its paid-up equity share capital. With its unique businessmodel Avadh Snacks is a super value player offering higher value for money to itsconsumers.
Today it is one of the fastest-growing and the fourth-largest snacks player inGujarat commanding approx. 6% market share in a state which is one of India's largestsnacks markets. All its products and variants are a huge hit in the state. Avadh hasmanaged to deliver 25% revenue CAGR over the past five years. In the fourth quarter ofFY2021 even as brands continued to face challenging times owing to reduced economicactivity and declining consumption Avadh Snacks delivered double-digit growthyear-on-year.
During the year the capacity of Rajkot facility was increased by 50%. Moving ahead wealso plan to take Avadh products out of Gujarat to the neighbouring states of MadhyaPradesh Maharashtra and Rajasthan. We plan to achieve this by leveraging the existingdistribution network of Prataap Snacks. Additionally we expect the brand to deliver goodgrowth momentum in the coming years. On the reverse side we also plan to exploit thesynergies for Yellow Diamond products on the Avadh platform. As the two baskets complementeach other we foresee exciting opportunities to expand the Yellow Diamond productssynergistically with Avadh and vice versa.
Today we continue to serve our consumers with high-quality tasty affordable and safesnacks offerings produced with native ingredients catering to different regional tastesand flavours. Despite the current unpredictable environment we remain upbeat about apositive market outlook. Reopening of schools colleges and other educational institutionsis expected to revive demand for FMCG products which are primarily out-of-homeconsumption.
We are clearly defining the way forward for further improvement in our businessperformance leading to greater profitability through a sharper consumer-focussedstrategies notwithstanding the short-term disruptions to the economy and industry as aresult of the COVID pandemic.
Though times are tough and unpredictable currently we are confident of our ability todeliver growth and increase shareholder value in the coming year as has been demonstratedover the years.
On this note I would like to conclude by thanking all our consumers trade partnersvendors employees and shareholders on behalf of Prataap Snacks for your unwaveringsupport and trust.
|Thank You |
|Arvind Mehta |
|Chairman and Executive Director |