Manorama Industries Ltd:Annual Report 2023-24 Analysis

Manorama Industries Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Manorama Industries Ltd. was founded in 2005 by Mrs. Vinita Saraf. It started as a small scale trading operation of sal oil and butter in Raipur.

Headquarters Location and Global Presence:

The company’s headquarters is located in Raipur, Chhattisgarh, India. Manorama Industries has a global presence, exporting its products to various countries including Europe, North America, Asia and Africa.

Company Vision and Mission:

While publicly stated official vision and mission statements are not readily available, based on their operations and public communication, it can be inferred:

• Vision: To be a globally recognized and trusted leader in the specialty fats and oils industry, known for sustainable practices and innovative product development.
• Mission: To extract value from forest resources sustainably, empowering tribal communities, and delivering high-quality, natural ingredients to customers across diverse industries.

Key Milestones in Their Growth Journey:

• 2005: Incorporated as Manorama Industries Private Limited.
• Early Years: Focus on trading and basic processing of sal oil and butter.
• Expansion: Gradual expansion of processing capabilities and product range.
• International Expansion: Entry into export markets.
• Listing: Listed on the stock exchanges.
• Continuous Improvement: Focus on R&D and innovation to improve product offerings and expand target industries.

Stock Exchange Listing Details and Market Capitalization:

Manorama Industries Ltd. is listed on the Bombay Stock Exchange (BSE) with the stock code 543252. As of October 26, 2023, the market capitalization is approximately INR 1,831 Crore.

Recent Financial Performance Highlights:

• Revenue Growth: The company has demonstrated a positive trend in revenue growth. For FY23, the revenue was INR 672.26 Cr.
• Profitability: Profitability is also trending upwards, driven by increased sales and operational efficiency. For FY23, the profit was INR 72.14 Cr.
• Dividend Payout: The company also paid an INR 1.00 per share dividend for FY23.

Management Team and Leadership Structure:

• Mrs. Vinita Saraf: Chairperson & Managing Director
• Mr. Kamal Saraf: Whole Time Director
• The company has a board of directors comprising executive and non-executive directors, ensuring corporate governance.

Any Notable Awards or Recognitions:

Manorama Industries has received recognition for its focus on sustainable sourcing and community development.

Their Products #

Complete Product Portfolio with Categories:

Manorama Industries primarily focuses on specialty fats and oils derived from forest-based resources. Key product categories include:

• Sal Fats: Sal Oil, Sal Stearine, Sal Butter. Used in chocolate, confectionery, and cosmetic industries.
• Mango Fats: Mango Butter. Used in cosmetics, personal care products, and some food applications.
• Kokum Fats: Kokum Butter. Used in cosmetics, pharmaceuticals, and confectionery.
• Other Specialty Fats and Oils: Includes blends and custom formulations.

Flagship or Signature Product Lines:

• Sal Butter: Known for its use as a cocoa butter equivalent in chocolate and confectionery.

Key Technological Innovations or Patents:

Manorama Industries has focused on improving extraction and refining processes to maintain the quality and purity of their specialty fats.

Manufacturing Facilities and Production Capacity:

Manorama Industries has multiple manufacturing facilities in Chhattisgarh.

Quality Certifications and Standards:

The company adheres to various quality certifications and standards relevant to the food and cosmetic industries. They are ISO 9001:2015, ISO 22000:2018, GMP, HACCP, Kosher and Halal certified.

Any Unique Selling Propositions or Technological Advantages:

• Sustainable Sourcing: Focused on responsible sourcing of raw materials from forest communities.
• Natural and Forest-Based: Products derived from natural resources.
• Customized Solutions: Offers customized fat and oil blends to meet specific customer requirements.

Recent Product Launches or R&D Initiatives:

The company continuously explores new applications for its existing products and invests in R&D for new specialty fats and oils.

Primary Customers #

Target Industries and Sectors:

• Chocolate and Confectionery: Sal butter as a cocoa butter alternative.
• Cosmetics and Personal Care: Mango and Kokum butters for moisturizing and emollient properties.
• Pharmaceuticals: Kokum butter for medicinal applications.
• Food Industry: Specialty fats for various food applications.

Geographic Markets (Domestic vs. International):

Manorama Industries serves both domestic and international markets, with a significant portion of its revenue coming from exports.

Major Client Segments:

• Large Chocolate Manufacturers
• Cosmetic and Personal Care Brands
• Pharmaceutical Companies

Distribution Network and Sales Channels:

The company utilizes a combination of direct sales, distributors, and agents to reach its customers.

Major Competitors #

Direct Competitors in India and Globally:

Key competitors in the specialty fats and oils market include:

• Aarhus Karlshamn (AAK)
• IOI Loders Croklaan
• Wilmar International
• Godrej Agrovet

Comparative Market Share Analysis:

A precise market share breakdown is difficult to obtain due to the fragmented nature of the specialty fats and oils market.

Competitive Advantages and Disadvantages:

• Advantages: Sustainable sourcing, specialization in forest-based fats, close relationships with tribal communities.
• Disadvantages: Dependence on seasonal availability of raw materials, competition from larger global players.

How They Differentiate from Competitors:

Manorama Industries differentiates itself through its focus on sustainable sourcing, natural ingredients, and community empowerment.

Industry Challenges and Opportunities:

• Challenges: Fluctuations in raw material prices, regulatory hurdles, competition from synthetic alternatives.
• Opportunities: Growing demand for natural and sustainable ingredients, expanding applications in the cosmetic and food industries.

Market Positioning Strategy:

Manorama Industries positions itself as a supplier of high-quality, sustainably sourced specialty fats and oils.

Future Outlook #

Expansion Plans or Growth Strategy:

Manorama Industries is focusing on expanding its production capacity, strengthening its distribution network, and developing new products.

Upcoming Products or Innovations:

The company is investing in R&D to develop new specialty fats and oils with enhanced properties and applications.

Sustainability Initiatives or ESG Commitments:

Manorama Industries places a strong emphasis on sustainability and community development. They are actively involved in programs that support tribal communities and promote responsible forest management.

Industry Trends Affecting Their Business:

• Increasing Demand for Natural and Sustainable Ingredients
• Growth in the Cosmetic and Personal Care Industry
• Rising Awareness of Health and Wellness

Long-Term Vision and Strategic Goals:

Manorama Industries aims to be a global leader in the specialty fats and oils industry, known for its sustainable practices, innovative products, and commitment to community empowerment.

Comprehensive Performance Overview #

Detailed Analysis #

Financial Analysis: Manorama Industries Limited (FY 2023-24) #

Comparative Balance Sheet Analysis (FY24 vs FY23) #

Cash Management #

Cash Flow and Liquidity Analysis #

Cash Flow Analysis (FY 2023-24 vs FY 2022-23, INR Lacs) #

• Operating Cash Flow (OCF): Reported at INR -15,025.34 Lacs in FY24, a significant decline from INR 5,981.19 Lacs in FY23. The negative OCF in FY24 was primarily driven by a substantial increase in inventories (INR -23,058.74 Lacs adjustment), outweighing the Profit Before Tax (INR 5,317.16 Lacs) and positive adjustments like Depreciation (INR 1,481.95 Lacs) and Finance Costs (INR 1,112.96 Lacs).
• Investing Cash Flow (ICF): Outflow decreased to INR -6,230.14 Lacs in FY24 from INR -11,307.04 Lacs in FY23. The primary driver remained the Purchase of Property, Plant & Equipment (including CWIP), amounting to INR -3,964.07 Lacs in FY24 (vs. INR -5,782.61 Lacs in FY23). Investments in bank deposits (>3 months maturity) also contributed to the outflow (INR -2,269.46 Lacs in FY24).
• Financing Cash Flow (FCF): Inflow increased significantly to INR 21,697.60 Lacs in FY24 from INR 4,902.58 Lacs in FY23. This was largely due to higher proceeds from Short-Term Borrowings (Net INR 20,495.16 Lacs) and Long-Term Borrowings (INR 3,553.80 Lacs), used to cover the operating cash deficit and investing activities. Finance costs paid (INR -1,112.96 Lacs) and dividends paid (INR -238.40 Lacs) were major outflows.
• Free Cash Flow (FCF) (OCF - Capex): FCF turned significantly negative in FY24 at INR -18,989.41 Lacs (calculated as -15,025.34 - 3,964.07), compared to a positive INR 198.58 Lacs in FY23 (calculated as 5,981.19 - 5,782.61). This indicates cash generated from operations was insufficient to cover capital expenditures in FY24, primarily due to the large working capital absorption.

Working Capital Management Efficiency #

• Inventory Turnover Ratio: Decreased substantially from 3.09 in FY23 to 1.68 in FY24, indicating slower inventory movement and a longer holding period. Days Inventory Outstanding (DIO) increased from approx. 118 days to approx. 217 days. The report attributes this to increased inventory levels for upcoming capex.
• Trade Receivables Turnover Ratio: Slightly decreased from 13.92 in FY23 to 13.06 in FY24, suggesting a minor slowdown in collections. Days Sales Outstanding (DSO) increased marginally from approx. 26 days to approx. 28 days. The report’s explanation notes efficient collection processes.
• Trade Payables Turnover Ratio: Decreased drastically

Key Performance Indicators #

Manorama Industries Limited: Financial Analysis (FY 2023-24) #

Revenue and Profitability Metrics #

• Revenue: Rs. 4,570.8 million (30.3% YoY growth)
• EBITDA: Rs. 735.2 million (30.2% YoY growth). EBITDA Margin: 16.08%
• Profit After Tax (PAT): Rs. 401.1 million (34.7% YoY growth). PAT Margin: 8.77%
• Earnings Per Share (EPS): Rs. 6.73 (Adjusted Face Value Rs. 2)
• Return on Equity (ROE): 12.63%
• Return on Capital Employed (ROCE): 10.62%

Market Share and Competitive Position #

• #1 Indian exporter of Sal and Mango-based specialty fats and butter.
• Leading Sal fat manufacturer globally.
• Significant position in Shea-based Cocoa Butter Equivalents (CBE), butters, and fats.
• Serves Fortune 500 companies in luxury/premium confectionery, chocolate, and cosmetics.
• Nearly two decades of management expertise.
• Robust supply chain network in India and West Africa.

Key Products/Services Performance #

• Cocoa Butter Equivalents (CBEs): Replicating cocoa butter properties for chocolate, confectionery, and food applications.
• Sal Butter & Sal Stearin: Derived from Sal seeds, used for moisturizing properties in cosmetics.
• Mango Butter & Mango Stearin: Extracted from Mango kernels, valued in cosmetics for skin-preserving properties.
• Shea Butter & Shea Stearin: Sourced from Shea nuts (West Africa), rich in essential fatty acids, used in cosmetics and as a raw material for CBEs.
• Other Exotic Butters: Includes Kokum Butter and Mowrah Butter, used in cosmetics and traditional applications.
• Cattle Feed (De-oiled Cake - DoC): By-product utilized in the animal feed industry.
• Applications: Food, Chocolate & Confectionery, Cosmetics, and HoReCa industries.

Geographic Distribution and Market Penetration #

• Global Presence: Serves clients across Russia, Latin America, Japan, Europe, Egypt, Turkey, and UAE.
• Domestic Presence: Raw material procurement network across Chhattisgarh, Odisha, Jharkhand, Madhya Pradesh. Manufacturing in Chhattisgarh.
• Revenue Split (FY24): Exports: 43%, Domestic: 57%.
• ‘Three Star Export House’ by the Government of India.

Segment-wise Capex and ROIC #

• Total Capex (as of March 31, 2024): Rs. 210.59 Cr (including Rs. 41.20 Cr Capital WIP).
• Key Expansion Projects (Birkoni Plant):
  • New 300-TPD Solvent Extraction Plant commissioned.
  • New 25,000-TPA Fractionation Plant commissioned (Total Fractionation Capacity: 40,000 TPA).
  • New 30,000-TPA Refinery Plant commissioned (Total Refinery Capacity: 45,000 TPA).
  • Added Seed Milling (Expeller) capacity of 30,000 TPA (Total: 90,000 TPA).
  • Added Interesterification capacity of 15,000 TPA (Total: 30,000 TPA).
  • Constructed new Storage Tanks (2,000 MT capacity, total 8,000 MT).
  • Enhanced Packaging Facility (doubled capacity to 100 MT/day).
  • Built new Warehouses for raw materials and DoC.
  • Automated Refinery and Degumming Plant.
• Return Ratios:
  • Return on Equity (ROE): 12.63%
  • Return on Capital Employed (ROCE): 10.62%

Operational Efficiency Metrics #

• Cost Reduction Programme (CRP): Implemented through initiatives like ‘Rupee-A-Day’ (RAD) and ‘War Against Wastages’ (WAR) Teams.
• Efficiency Gains from Capex: Expected cost savings, enhanced production control, and improved inventory management.
• Key Financial Ratios (Changes >25% YoY):
  • Current Ratio: Decreased (1.60 vs 2.82)
  • Debt-Equity Ratio: Increased (1.02 vs 0.38)
  • Debt Service Coverage Ratio: Decreased (1.36 vs 2.10)
  • Return on Equity: Increased (12.63% vs 9.56%)
  • Inventory Turnover Ratio: Decreased (0.97 vs 1.63)
  • Trade Receivables Turnover Ratio: Increased (12.02 vs 10.18)
  • Trade Payables Turnover Ratio: Decreased (8.25 vs 15.63)
  • Net Capital Turnover Ratio: Increased (2.17 vs 1.35)
• EBITDA Margin: Remained stable at 16.08%.

Growth Initiatives and Challenges #

• Growth Strategies:
  • Capacity Expansion & Optimization
  • Market Diversification
  • Innovation & NPD
  • Leveraging Government Initiatives
  • Enhanced Operational Efficiencies
• Identified Risks & Concerns:
  • Environmental & Social Risks
  • Regulatory & Compliance
  • Shifts in Consumer Behavior
  • Supply Chain Disruptions
  • Foreign Exchange (Forex) Risk
  • Cybersecurity Risks
  • Competition & Market Saturation

Manorama Industries Limited: Risk Analysis (FY 2023-24) #

Strategic Risks #

Shifts in Consumer Behavior & Preferences #

• Analysis: Reduced demand for premium/luxury products due to economic downturns or changing health/ethical preferences poses a risk. Increasing demand for sustainable/ethical products presents an opportunity.
• Severity: Medium-High
• Likelihood: Medium
• Trend: Increasing
• Mitigation: Geographic diversification, product innovation (CBEs, specialty fats), R&D focus, emphasis on sustainable/ethical sourcing (Fair Trade, Organic certifications).
• Control Effectiveness: High
• Potential Financial Impact: Negative (Reduced sales/pricing). Positive (Increased market share/margins).

Competition and Market Saturation #

• Analysis: Risk from existing players and new entrants in the specialty fats and CBE market.
• Severity: Medium
• Likelihood: Medium
• Trend: Stable to Increasing
• Mitigation: Leadership position, R&D/Innovation, focus on quality and bespoke solutions, strong supply chain, marquee clientele, capacity expansion.
• Control Effectiveness: High
• Potential Financial Impact: Negative (Price pressure, loss of market share).

Execution Risk on Capacity Expansion #

• Analysis: Significant capex undertaken for capacity expansion. Failure to effectively operationalize, achieve expected efficiencies, or secure demand poses a risk. Delays noted in CWIP original timelines.
• Severity: High
• Likelihood: Medium
• Trend: Current
• Mitigation: Phased expansion, experienced management, strong customer base, securing contracts, operational efficiency (automation, cost reduction).
• Control Effectiveness: Monitored
• Potential Financial Impact: Negative (Underutilization, delayed ROI, increased debt). Positive (Revenue/profitability growth if successful).

Operational Risks #

Supply Chain Disruptions & Raw Material Availability #

• Analysis: Dependence on tree-borne seeds sourced from forests in India and West Africa. Exposed to risks from natural disasters, political instability, logistics issues, climate change impacts, and dependence on tribal communities.
• Severity: High
• Likelihood: Medium-High
• Trend: Increasing
• Mitigation: Robust supply network, strategic plant location, sourcing diversification, supplier engagement, traceability systems, raw material availability policy.
• Control Effectiveness: Medium-High
• Potential Financial Impact: Negative (Increased raw material costs, production stoppages, inability to meet demand).

Cybersecurity Risks #

• Analysis: Potential for data breaches, hacking, and malware impacting operations, sensitive information, reputation, and finances.
• Severity: Medium-High
• Likelihood: Medium
• Trend: Increasing
• Mitigation: Use of robust cybersecurity measures (encryption, vulnerability assessments, training, expert partnerships), cyber security framework mentioned in BRSR.
• Control Effectiveness: Stated as robust, but specific details not provided.
• Potential Financial Impact: Negative (Operational disruption, remediation, reputational damage, fines).

Operational Efficiency & Quality Control #

• Analysis: Maintaining manufacturing excellence, product quality, and cost-effectiveness, especially post-expansion.
• Severity: Medium-High
• Likelihood: Low-Medium
• Trend: Stable
• Mitigation: Numerous certifications, DSIR-accredited R&D, integrated quality management system, automation initiatives, Cost Reduction Programme, 5S implementation.
• Control Effectiveness: High
• Potential Financial Impact: Negative (Product recalls, loss of customer confidence, increased operating costs). Positive (Cost savings, enhanced reputation).

Financial Risks #

Foreign Exchange (Forex) Risk #

• Analysis: Significant export operations and raw material imports expose the company to currency fluctuations.
• Severity: Medium-High
• Likelihood: High
• Trend: Stable
• Mitigation: Comprehensive risk management policy, hedging techniques (forward contracts), natural hedge (exports vs imports).
• Control Effectiveness: Stated as comprehensive policy in place.
• Potential Financial Impact: Both Negative and Positive impacts on revenue, costs, and profitability.

Liquidity Risk #

• Analysis: Ensuring sufficient funds to meet obligations, especially with increased debt levels post-capex.
• Severity: Medium
• Likelihood: Low-Medium
• Trend: Increasing
• Mitigation: Monitoring cash balances, access to credit facilities, capital management objectives.
• Control Effectiveness: Adequate
• Potential Financial Impact: Negative (Inability to meet obligations, increased borrowing costs).

Strategic Analysis of Manorama Industries Limited #

Long-Term Strategic Goals and Progress #

Manorama Industries Limited (MIL) aims for leadership in specialty fats and butters through continuous innovation, co-development, and geographic/segment expansion. Key goals include becoming the first-choice solution provider, creating growth opportunities, rewarding stakeholders, uplifting tribal communities, and ensuring customer delight. Progress is evident through significant capacity expansion, establishing a solvent extraction plant, constructing new storage/warehouses, and automating processes. Strategic progress includes market diversification efforts and the incorporation of new wholly-owned subsidiaries in the UAE and Nigeria, with plans for five more in Africa and investment in Russia.

Competitive Advantages and Market Positioning #

MIL positions itself as a global leader, particularly as the #1 Indian exporter of Sal and Mango-based specialty fats/butter and the world’s leading Sal fat manufacturer. Key differentiators include:

• Robust Supply Chain: Extensive network involving millions of tribals and numerous collection centers across India and West Africa, ensuring sustainable and traceable raw material sourcing. Strategic plant location near forests and Visakhapatnam port facilitates raw material access.
• Raw Material Availability: Low-risk policy supported by sourcing from vast forest resources in India and Africa.
• Manufacturing Excellence: State-of-the-art, certified manufacturing complex with recently expanded capacities.
• R&D Capabilities: Government (DSIR) accredited MILCOA R&D center driving innovation and customized product development.
• Marquee Clientele: Serves Fortune 500 companies in luxury chocolate, confectionery, and cosmetics.
• Management Expertise: Nearly two decades of experience in the specialty fats sector.

Innovation Initiatives and R&D Effectiveness #

Innovation is central to MIL’s strategy, driven by the DSIR-accredited MILCOA® Innovation & Research Centre. Initiatives focus on developing sustainable, high-quality specialty fats, butters, and CBEs. R&D effectiveness is demonstrated by:

• Development of customized, trans-fat-free fats and CBEs for diverse applications.
• Launch of specific product lines under the MILCOA® brand.
• Collaboration with customer R&D teams for co-development.
• Investment in advanced analytical tools and qualified personnel.
• Focus on sustainable solutions aligning with market trends.
• Successful implementation of 5S methodology for operational efficiency.

M&A Strategy and Execution #

MIL’s stated strategy includes expansion through strategic acquisitions and partnerships. Recent execution focuses on organic geographic expansion via subsidiary formation:

• Incorporation of Wholly Owned Subsidiary (WOS) in UAE: Manorama Mena Trading LLC (July 2024).
• Incorporation of WOS in Nigeria: Manorama Savanna Limited (July 2024).
• Active process of incorporating five additional WOS across Ghana, Burkina Faso, Benin, Togo, and Ivory Coast.
• Strategic investment in Manorama Rus LLC (Russia).

Management’s Track Record in Execution #

Management demonstrates a strong track record based on:

• Financial Performance: Consistent growth over five years, with significant YoY increases in FY23-24 revenue and PAT.
• Capacity Expansion: Successful commissioning and commercialization of major expansion projects enhancing production capabilities significantly.
• Milestone Achievement: Successful IPO (2018), migration to BSE Mainboard (2021), listing on NSE (2022), and securing major contracts with global companies.
• Operational Management: Maintaining a complex, sustainable supply chain involving millions of tribals, achieving numerous international certifications, and implementing efficiency programs.
• Awards & Recognition: Recipient of multiple export excellence and processing awards.

Capital Allocation Strategy #

MIL’s capital allocation prioritizes growth and operational enhancement:

• Significant Capex: Investment in capacity expansion (new plants, machinery, storage, automation).
• Funding Mix: Utilized debt financing to support expansion.
• Shareholder Returns: Maintains a Dividend Distribution Policy and recommended a final dividend for FY23-24. Executed a 1:5 stock split in FY23-24.
• Strategic Investments: Allocation towards establishing international subsidiaries and investment in a Russian entity.
• R&D Investment: Ongoing investment in the MILCOA R&D Centre.

Organizational Changes and Their Impact #

Key organizational developments include:

• Board Adjustments: Re-appointment of Independent Directors and re-designation of Chairperson.
• KMP Changes: Appointment of a new Company Secretary & Compliance Officer.
• International Expansion: Establishment of new WOS in UAE and Nigeria, with plans for more in Africa and investment in Russia.
• Stable Senior Management: Presence of experienced personnel in key roles provides operational continuity.

ESG Framework #

ESG and Sustainability Analysis #

1. Environmental Metrics and Targets #

Energy #

• ISO 50001:2018 certified for energy management.
• Transitioned from coal to rice husk fuel for boilers (6 TPH, 16 TPH, 22 TPH capacities), targeting approx. 25,000 carbon credits annually via Gold Standard partnership. The new 22 TPH boiler is noted as energy-efficient.
• Installed a 4.2 MW renewable energy generation facility.
• Implementing solar power, energy-efficient appliances, lighting automation, LED lighting, VFDs, and maximizing natural light, aligning with Indian Green Building Council (IGBC) principles.
• Steam condensate recovery system implemented for process steam energy savings.

Water #

• Focus on water stewardship, minimizing freshwater/municipal water consumption (primarily used for cooling).
• Compliance with Pollution Control Board norms claimed; regular checks by internal/external labs.
• Water reuse in cooling towers mentioned.
• Mechanism for Zero Liquid Discharge implemented (treated water reused internally).

Waste Management #

• Minimal waste generation reported, primarily ETP sludge and packaging materials.
• Waste (including by-products) sent to SPCB-approved recyclers; no landfilling or incineration claimed. ETP sludge managed via authorized recyclers; packaging reused/recycled; E-waste returned via buyback policy.
• Hazardous waste (used oil) sold to approved agencies.

Emissions #

• Shift to rice husk aims to mitigate carbon emissions.

Biodiversity #

• Utilizes Non-Timber Forest Products (NTFPs) like Sal, Mowrah, Kokum, Mango seeds.
• Supports rural/tribal communities in growing native trees, potentially reducing timber logging reliance.
• Fair-Trade certification implies ethical/sustainable practices.
• Plantation programs conducted with tribal women (India, Ghana) and around offices.
• Collaboration with local communities/environmental groups on reforestation mentioned.

Targets #

• Primary quantifiable target is ~25,000 carbon credits/year. Implicit targets include continuous improvement via ISO standards (14001, 50001) and IGBC principles, reducing reliance on conventional energy, and promoting biodiversity.

2. Social Responsibility Programs #

Workforce (411 permanent employees as of 31 Mar 2024) #

• Certified ‘Great Place to Work®’.
• Health & Safety: ISO 45001 certified system covers the entire plant/offices. HIRA conducted for routine/non-routine activities. Processes exist for hazard reporting and work stoppage. Annual medical check-ups, health insurance, and access to non-occupational medical services provided. Regular safety training (PPE, Fire, Emergency, HIRA, LOTO, Chemical Safety, First Aid, etc.). LTIFR reported as Nil for FY24 & FY23.
• Well-being: Measures include health/accident insurance, maternity/paternity benefits (coverage percentages provided in BRSR). Retirement benefits (PF, Gratuity, ESI) provided and deposited as required.
• DEI: Equal opportunity policy exists. Commitment to equal pay for women stated. Premises not currently fully accessible per Rights of Persons with Disabilities Act, 2016, though a policy is in place (July 2023).
• Training: 100% coverage claimed for employees/workers on various topics including technical skills (HPLC, Cooling process, Boiler troubleshooting), safety, quality systems (FSSC 22000, 5S, QMS), resource conservation, and human rights (implicitly via SA8000/policy training).
• Grievance Redressal: Mechanisms exist for all employee/worker categories via HR, supervisors, Vigil Mechanism/Whistleblower policy. No complaints reported for Sexual Harassment, Discrimination, Child Labour, Forced Labour in FY24.
• Human Rights: Commitment aligned with UN Global Compact. Policies against forced/child labor, harassment, discrimination. Certifications: Fair Trade, SEDEX, SA8000, Ecovadis. Human rights requirements included in business agreements.

Manorama Industries Limited (FY 2023-24) Financial Analysis #

Company Overview & Business Model #

Manorama Industries Limited (MIL) manufactures and supplies tree-borne, plant-based specialty fats and butters, primarily Cocoa Butter Equivalents (CBEs). Raw materials include Sal seeds, Shea nuts, and Mango kernels. Key products include Sal Butter/Stearin, Shea Butter/Stearin, Mango Butter/Stearin, Kokum Butter, Mowrah Butter, and De-Oiled Cake (DOC) used for cattle feed. MIL aims to be a global leader, especially in Sal and Mango-based CBEs, serving high-end markets like luxury chocolate, confectionery, cosmetics, HoReCa, and bakery industries. The company emphasizes sustainability, integrating tribal communities for raw material collection in India and West Africa. They also hold international certifications (FSSC 22000, ISO standards, RSPO, Fair Trade, Organic, etc.) and operate a DSIR-accredited R&D center (MILCOA).

Financial Performance (FY 2023-24) #

• Revenue: Rs. 4,570.8 million, a 30.3% YoY growth (FY23: Rs. 3,508.0 million), driven by volume expansion. The revenue mix was Domestic 57% / Exports 43%.
• Profitability:
  • EBITDA increased by 30.2% YoY to Rs. 735.2 million (FY23: Rs. 564.5 million). EBITDA margin remained stable at 16.1%.
  • Profit After Tax (PAT) grew by 34.7% YoY to Rs. 401.1 million (FY23: Rs. 297.8 million). PAT Margin improved slightly to 8.8%.

Key Ratios & Explanations for Significant Changes (>25% Variance YoY) #

• Debt-Equity Ratio: Increased from 0.38 to 1.03 due to increased short-term working capital for procurements and potentially increased borrowings for capex.
• Debt Service Coverage Ratio: Decreased from 1.84 to 1.26 due to increased interest rates on short-term working capital loans.
• Inventory Turnover Ratio: Decreased from 5.08 to 1.68 due to increased inventory levels for new capex.
• Trade Payables Turnover Ratio: Decreased from 117.12 to 15.85 due to extended payment terms with suppliers.
• Net Capital Turnover Ratio: Decreased from 3.04 to 2.23 due to effective use of working capital, reflecting a higher working capital base due to inventory/borrowings.

Dividend #

The Board recommended a final dividend of Rs. 0.40 per equity share (20% of face value Rs. 2/-), subject to shareholder approval.

Strategic Initiatives & Outlook #

• Capacity Expansion: Significant capital expenditure at the Birkoni plant (Rs. 210.59 Cr as of Mar 31, 2024). Key expansions include Seed Milling, Solvent Extraction, Refinery, Interesterification, Fractionation, Storage, Packaging, and Warehousing. Objectives are to meet global demand, reduce costs, improve yield, enhance production control, inventory management, operational efficiency, and market competitiveness.
• Market Strategy: Focus on market diversification, leveraging growing demand for CBEs and specialty fats/butter, capitalizing on high cocoa butter prices, and targeting emerging economies.
• Innovation & R&D: MILCOA R&D Centre focuses on developing new products, alternative applications, and customized solutions, emphasizing trans-fat-free, sustainable, and ethical alternatives, and implementing 5S methodology for operational efficiency.
• Efficiency Improvements: Cost Reduction Programme (CRP) implemented, automation of refinery and degumming plant, shift from coal to rice husk fuel for boilers (targeting carbon credits), and adherence to Indian Green Building Council (IGBC) principles.
• Management Guidance & Assumptions: Management expects the capacity expansion to drive “significant growth in both revenue and profitability” and improve production efficiency. Revenue guidance upgraded to INR 750+ Crores for FY 2025, assuming successful commissioning and ramp-up of new capacities, continued strong demand, stable raw material sourcing, effective cost management, and ability to leverage market trends.

Market Growth Forecasts #

• Global CBE Market: Projected to grow from USD 1,189M (2023) to USD 2,030M (2032) at 6.12% CAGR.

Financial Analysis of Manorama Industries Limited (FY 2023-24) #

Auditor’s Opinion and Qualifications #

The Independent Auditors, M/s. O P Singhania & Co., issued an unmodified opinion on the standalone financial statements for the year ended March 31, 2024, indicating a true and fair view in accordance with Indian Accounting Standards (Ind AS). No Key Audit Matters were highlighted, and the audit report confirms compliance with the Companies Act, 2013.

Key Accounting Policies and Changes #

The Company prepares its financial statements under Ind AS on a historical cost basis. Key policies include:

• Revenue Recognition: Ind AS 115 compliant, recognized upon transfer of control.
• Property, Plant & Equipment (PPE): Carried at cost less accumulated depreciation and impairment. Depreciation uses the Written Down Value (WDV) method.
• Inventories: Valued at the lower of cost (Weighted Average/FIFO) and net realizable value.
• Borrowing Costs: Capitalized if attributable to qualifying assets.
• Financial Instruments: Classified and measured at amortized cost, FVTOCI, or FVTPL.
• Foreign Currency Transactions: Recorded at the exchange rate on the transaction date.
• Leases: Applies the short-term lease recognition exemption.

Amendments to various Ind AS standards became effective April 1, 2023, but had no significant impact. The Company opted for the new tax regime under Section 115BAA.

Internal Control Effectiveness #

Management asserts adequate internal financial controls (IFC), and the Statutory Auditors issued an unmodified opinion on the IFC’s adequacy and operating effectiveness. An audit trail feature was operational in the accounting software. Overall assessment indicates effective internal controls over financial reporting.

Regulatory Compliance Status #

The Secretarial Audit Report confirms compliance with applicable laws and regulations. The Corporate Governance report confirms compliance with SEBI Listing Regulations. The company demonstrates a high level of compliance, suggesting low immediate regulatory risk. However, operations in regulated sectors and international expansion entail moderate ongoing regulatory risk.

Legal Proceedings and Potential Impact #

No significant orders impacting going concern status were reported. Contingent liabilities include disputed Goods and Services Tax (Rs. 19.13 lacs) and TDS defaults (Rs. 18.70 lacs), which appear immaterial.

Related Party Transactions (RPTs) #

Key RPTs include Shea Nut purchases from Manorama Africa Limited and remuneration to KMP and Directors. All transactions are stated to be conducted at arm’s length. Shareholder approval is sought for future material RPTs with Manorama Africa Limited, Manorama Savanna Limited (WOS), and Manorama Mena Trading LLC (WOS) up to Rs 825 Crores.

Subsequent Events #

• Incorporation of Wholly Owned Subsidiaries (WOS): Manorama Mena Trading LLC (UAE) and Manorama Savanna Limited (Nigeria).
• Process initiated for incorporating WOS in Ghana, Burkina Faso, Benin, Togo, and Ivory Coast.
• Planned strategic investment in Manorama Rus LLC (Russia).
• Change of registered office address effective August 1, 2024.