MANAGEMENT DISCUSSION & ANALYSIS 1. The core business of your Company is the manufacture

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1 MANAGEMENT DISCUSSION & ANALYSIS 1. The core business of your Company is the manufacture and marketing of snack foods. 2. Economic Scenario The Government continued its efforts to achieve macro economic stability. Consequently the GDP growth increased from 7.2% in to an estimated 7.6% in The manufacturing and services sectors grew at a faster rate, however a second year of poor monsoon resulted in low agricultural growth. Inflation remained under control and foreign exchange reserves rose smartly during the year. The second consecutive year of poor monsoon has created rural stress in various parts of the country and has also resulted in low rural demand. Market reports and corporate news suggest that the demand cycle has yet to pick up momentum in the FMCG sector. 3. Industry Structure and Its Development The snack food industry consists of two principal segments the traditional ethnic snacks which have been around for generations and the modern snacks which have emerged over the last couple of decades. The traditional ethnic snacks segment consists largely of the unorganized sector alongwith few organized players. Of late there has been a shift in this market from the unorganized to the organized sector. The modern snacks segment consists largely of organized players who employ automated production systems, mass marketing and organized sales and distribution systems across various geographical markets. The products manufactured by this segment have been well accepted by the market resulting in its rapid growth. Barring a few, most players in this segment have only a regional presence and the more successful are continuously attempting to expand their national footprint. Your Company operates in both the market segments. However the modern segment constitutes the bulk of the business. 4. Financial Review During the year the Company recorded sales of H crores thereby growing by 34.7%. The cost of materials remained relatively stable but showed a declining trend in the second half of the year thereby improving margins and profitability. However there are some signs now that the raw material prices may have bottomed out. The EBITDA margins improved from 11.4% to 12.5% and the Profit After Tax more than doubled to H crores and improved from 3.8% to 6.4% as a percentage of sales. The table showing the comparison of the Profit and Loss statement is given below: (H in Lakhs) % Change Sales Other Income (23.3) Cost of materials Employees benefits expenses Other Expenses EBITDA Finance Costs (0.7) Depreciation Exceptional item PBT Tax PAT Diluted EPS (H) As % of Sale Cost of materials Employees Other expenses EBITDA Exceptional item PBT PAT

2 The dividend proposed for the year amounts to H 6.02 Crores as compared to H 3.01 Crores for the previous year. This includes the dividend distribution tax. 5. Business Developments The major developments during the year were as under:- Implementation of innovation in the marketing efforts of the Company. This was instrumental in delivering the sales growth during the year. Consolidating the sales and distribution operations in the existing geographies. Commencement of sales and distribution in the 3 metro cities of the South Zone. Continued investment in the organizational capacity of the business. Commissioning of the brownfield expansion at the Greater Noida facility in December This added capacity of 5000 MT per annum thereby taking the total capacity available to MT per annum. Rationalization of the various pack sizes of the namkeen portfolio. The raw material prices remained stable during the year but are now showing signs of having bottomed out. Initiation of the 2 nd brownfield at Greater Noida for adding further capacity of 10,000 MT per annum at an approximate cost of H 75 crores. This would be financed by a combination of internal accruals and debt. The major work plan for the current year is as under:- To further invest in the organizational capacity and capability of the business. To expand the distribution footprint in all the geographies. To complete the 2 nd brownfield expansion at Greater Noida. To work on new product development. 6. Opportunities & Threats The continued growth of the economy, increasing disposable income, rapid urbanization and rising aspiration offers an immense opportunity for the healthy growth of the business. In order to capture this growth efforts are being made through innovation in marketing, expanding the distribution footprint and working on new product development. Some of the threats faced by the business are uncertain economic conditions and uncertainty in the price of raw materials. 7. Risks and Concern Risk relates to uncertainty about events and the possible outcomes that could have a material impact on performance and future prospects of the Company. At DFM Foods, we have well-defined and integrated risk management policies that include a clear understanding of risk, evaluation of its impact on the business and taking appropriate actions to counter them. Senior management centrally devises the risk management approach, which is prudently cascaded down to managers at various organizational levels, helping the Company mitigate risks early on. 8. Outlook The continued efforts to develop the business should stand it in good stead. However the economic conditions prevailing within the country have a significant role to play in the actual performance. 9. Internal Controls and their Adequacy The Company has proper and adequate internal control systems to ensure that all the assets are safeguarded and that all transactions are authorized, recorded and reported correctly. Regular internal audits and checks are carried out to ensure that the responsibilities are executed effectively and that the systems are adequate. Management continuously reviews the internal control systems and procedures to ensure the efficient conduct of business. The Audit Committee of the board oversees the internal controls within the organization. 10. Human Resources Our employees form the backbone of our organization. Your Company takes pride in the commitment, competence and dedication shown by its employees in all areas of operation. Industrial relations have remained harmonious throughout the year. Your Company endeavors to follow best HR practices across all areas. These cover recruitment, induction, development and training, and appraisal systems which are tied in with defined key result areas. The employee strength rose from 452 in the previous year to 491 as on 31 st March Annual Report

3 DIRECTORS REPORT Dear Shareholders, Your Directors have pleasure in presenting their report along with the audited accounts of the Company for the year ended 31 st March, Financial Results The financial results as compared to the previous year are as under:- Year ended 31 st March, 2016 (H in Lakhs) Year ended 31 st March, 2015 Revenue from operations 38,951 28,925 Profit before interest, financial expenses and depreciation 4,874 3,287 Interest & financial expenses Depreciation and amortization Profit before exceptional items and tax 3,650 2,125 Exceptional items Profit before tax 3,650 1,719 Tax expense 1, Net profit for the year 2,504 1,101 Add Surplus brought forward Available for appropriation 2,987 1,384 Appropriations Dividend Tax on proposed dividend Transfer to General Reserve Balance Carried forward 2, Dividend Your Directors have recommended the payment of dividend of H 5/- per equity share of H 10/- each for the financial year ended 31 st March, 2016 amounting to H 6.02 Crores inclusive of dividend distribution tax of H 1.02 Crores. The dividend payment is subject to the approval of members at the ensuing Annual General Meeting. The dividend will be paid to members whose names would appear on the Register of Members as on 15 th July, Transfer to Reserves The Company proposes to transfer R 2.50 Crores to the General Reserve out of the amount available for appropriation. Operational Review and the State of Company s Affairs The details on operational review and the state of Company s affairs are provided in the Management s Discussion and Analysis Report forming part of this Annual Report. Management s Discussion and Analysis Report Management s Discussion and Analysis Report for the year under review, as stipulated under Regulation 34(2)(e) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is presented in a separate section forming part of the Annual Report. Subsidiaries, Joint Ventures and Associate Companies During the year the Company disposed off its investment in DFM Agro Limited. As at the end of the financial year, the Company does not have any subsidiary, Joint Ventures or Associate Company. Directors Responsibility Statement Your Directors state that: a) in the preparation of the annual accounts for the year ended 31 st March, 2016 the applicable accounting standards have been followed and there are no material departures from the same; b) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31 st March, 2016 and of the profit of the Company for the year ended on that date; c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; 8

4 d) the Directors have prepared the annual accounts on a going concern basis; e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. Corporate Governance The Company is committed to maintain the highest standards of Corporate Governance and adhere to the corporate governance requirements set out by SEBI. The report on Corporate Governance as stipulated under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms an integral part of this Report. The requisite certificate from the auditors of the Company confirming compliance is attached to the report on Corporate Governance. Contracts and Agreements with Related Parties All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the normal course of business and on an arm s length basis. During the year, the Company had not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions. Prior omnibus approval is obtained for related party transactions which are of repetitive nature and entered in the ordinary course of business and at arm s length. All related party transactions are placed before the Audit Committee for review and approval. The policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Company s website at the link Your Directors draw attention of the members to Note 34 to the financial statement which sets out related party disclosures. Corporate Social Responsibility (CSR) The Corporate Social Responsibility Committee of the Board has formulated and recommended a CSR Policy to the Board indicating the activities to be undertaken by the Company. The same has been approved by the Board. The CSR Policy can be accessed at the following weblink The Company has spent a sum of H Lakhs during the year on CSR activities, which amounts to 2.02% of the average net profits of last three financial years. The Annual Report on CSR activities is enclosed as Annexure 1. Risk Management Your Directors continually evaluate the risks faced by the Company which could affect its business operations or threaten its existence. The Company takes appropriate risk containment measures and manages the same on an ongoing basis. Internal Financial Controls The Company has in place adequate financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weaknesses in the design or operation were observed. Directors and Key Managerial Personnel Directors Mr. Mohit Jain retires by rotation at the ensuing annual general meeting and being eligible offers himself for re-appointment. The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of Independence as prescribed both under the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, The Company has devised a policy for performance evaluation of Independent Directors, Board Committees, Board and other individual Directors which include criteria for performance evaluation of the Non-executive Directors and Executive Directors. The policies relating to selection of Directors, determining their independence and the remuneration policy for Directors and key managerial personnel is attached as Annexure 2. The details of programmes for familiarization of Independent Directors with the Company are put up on the website of the Company at the following weblink: com/download/corporate/familarization-programme-forindependent-directors.pdf Key Managerial Personnel Mr. Raju Singh Tomer has been appointed as Company Secretary of the Company with effect from 10 th February, 2016, in place of Mr. Parvinder Singh Arora who ceased to be the Company Secretary on 31 st December, Employees Stock Option Scheme During the financial year, the Company had granted 2,00,000 Employee Stock options to 2 employees. Out of them 1 employee resigned from the services of the Company during the year and as such 1,00,000 unvested options granted to him stands terminated. The Company has received a certificate from the Auditors of the Company that the Scheme has been implemented in accordance with the SEBI Guidelines and the resolution passed by the members. The certificate would be placed at the Annual General Meeting for inspection by members. Annual Report

5 The applicable disclosures as stipulated under the SEBI Guidelines as on March 31, 2016 with regard to the Employee Stock Option Plan 2014 of the Company are provided in Annexure 3 to this Report. Auditors and Auditors Report Statutory Auditor M/s. Deloitte Haskins & Sells, (Firm Registration No N), Chartered Accountants had been appointed as statutory auditors of the Company from the conclusion of the 21 st Annual General Meeting of the Company held on 31 st July, 2014 till the conclusion of the 4 th consecutive Annual General Meeting therefrom, subject to ratification of their appointment at every Annual General Meeting. The Notes on financial statements, referred to in the Auditors Report, are self-explanatory and do not call for any further comments. The Auditors Report does not contain any qualification, reservation or adverse remark. Secretarial Auditor The Board had appointed Mrs. Sunita Mathur, Practicing Company Secretary, to conduct the Secretarial Audit for the Financial Year The Secretarial Audit Report is annexed as Annexure 4. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark. Public Deposits During the year under review, your Company has not accepted any public deposit under Chapter V of the Companies Act, Disclosures CSR Committee The CSR Committee comprises Mr. Mohit Jain as Chairman, Mr. Mohit Satyanand and Mr. Sarat Chandra Nanda as members. Audit Committee The Audit Committee comprises of Independent Directors namely Mr. Pradeep Dinodia as Chairman, Mr. Mohit Satyanand and Mr. Sarat Chandra Nanda as members. Vigil Mechanism The Company promotes ethical behaviour in all its business activities and has put in place a mechanism for reporting illegal or unethical behaviour. The Company has a Vigil Mechanism and Whistle Blower Policy under which the employees are free to report violations of applicable laws and regulations and the Code of Conduct. Employees may also report to the Chairman of the Audit Committee. Meetings of the Board Five Board meetings were held during the year. For further details please refer to the Report on Corporate Governance which forms part of this Annual Report. Particulars of Loans and Guarantees given, Securities provided and investments made The Company has neither given any loans or guarantees nor provided any securities covered under the provisions of Section 186 of the Companies Act, Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo The particulars relating to energy conservation, technology absorption, foreign exchange earnings and outgo are provided in Annexure 5 to this Report. Extract of Annual Return The extract of Annual Return of the Company is provided in Annexure 6 to this Report. Particulars of Employees and Related Disclosures Disclosures relating to remuneration and other details as required under Section 197(12) of the Companies Act 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are given in Annexure 7A. A statement showing the names and other particulars of the employees drawing remuneration in excess of the limits specified in terms of the provision of Section 197(12) of the Companies Act 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are attached as Annexure 7B. General Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review: 1. Issue of equity shares with differential rights as to dividend, voting or otherwise. 2. Issue of shares (including sweat equity shares) to employees of the Company. 3. Neither the Managing Director nor the Whole-time Directors of the Company receive any remuneration or commission from any of its subsidiaries. 4. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company s operations in future. Your Directors further state that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, Acknowledgement Your Directors would like to place on record their sincere gratitude for the assistance and cooperation received from all the banks. They also wish to place on record their appreciation for the loyal and devoted services rendered by all categories of employees. Place: New Delhi Date: 11 th May, 2016 On behalf of the Board Mohit Jain Chairman 10