Director's report and management discussion


Chairman’s message

In the message to the stakeholders the Chairman Mr. R. A. Shah has mentioned how the global economic conditions were challenging for the financial year 2013-14. He also states that as per the latest reports by the IMF strong growth is expected in various foreign markets like Central and South American, Middle East and African, the ASEAN region as well as India because of exports and increase in domestic demand. He also wishes the newly formed government good luck. The company wishes to align itself with national goals of increasing per capital income, reducing income disparities, and alleviating poverty.

Increase in the health awareness among the population has brought about a change in the consumption pattern of the company’s tobacco products. The continually increasing tax rates on tobacco products has made it necessary for the company to strike a fine balance between the twin objectives of business growth and legal compliance. Technical advancements and wellness trends are leading companies to produce products aimed at harm reduction. He also thanks all the stake holders for continued support in the company’s endeavor.

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President’s message

The President Mr K. K. Modi has mentioned the company’s turnover at has mentioned the company’s turnover at INR 4,196 crore with a growth of 15.2% over the previous year. Despite the closure of one of the manufacturing plant at Andheri, Mumbai the company recorded a 7.6% increase in the profits before tax at INR 255 crores. The company has also witnessed a 31% growth in revenue in the non-tobacco sector to reach 270 crores. The company has also declared a dividend of INR 40 per share.

There was a management change because of the sad demise of a vastly experienced and able leader Mr. S. Seru after prolonged illness. The new management is focusing on developing a performance driven culture to smoothen its growth.

In the near future the company wishes to expand its international businesses by tie-ups, collaborations etc. for entering into new markets like Latin America, Middle East and Africa. The company is committed to produce innovative products across all categories with a clear goal of harm reduction. The company aims to invest in manufacturing capabilities to match global standards and also upgrade people skills. Despite the new budget not favouring tobacco products, the company will aim to achieve sustainable growth under all circumstances. Mr. K. K. Modi thanks all the shareholders and stakeholders for their never-ending trust in the Company’s leadership and assures of growth.

Financial Highlights: Trends

  1. Gross Revenue (Ref. pg 4 of Annual Report):

The gross revenue of the company has increased continuously since 2004-05 till 2012-13. The gross revenue for the previous year 2012-13 is INR 4,196 crores a substantial increase over the previous year mark which was around INR 3,750 crores. The company managed to increase its revenues despite tough economic conditions which is commendable.

  1. PAT (Ref. pg 4 of Annual Report):

The company has also managed to maintain same profit after tax levels slightly above INR 150 crores. There was not much of an increase in the overall profits because of the increases in the tax rates as well as changing consumer behavior.

  1. Book value per equity share (Ref. pg 4 of Annual Report):

A financial measure that represents a per share assessment of the minimum value of a company's equity. More specifically, this value is determined by relating the original value of a firm's common stock adjusted for any outflow (dividends and stock buybacks) and inflow (retained earnings) modifiers to the amount of shares outstanding. Calculated as:

Book Value Of Equity Per Share (BVPS)

  1. EPS (Ref. pg 4 of Annual Report):
  2. Shareholders’s funds (Ref. pg 4 of Annual Report):
  3. Market capitalization (Ref. pg 4 of Annual Report):

The year under review, started with a cautious sentiment and a difficult time for the global economic activity.

However, with things getting under control the business situation improved gradually. Major economic zones

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saw divergent growth during the year. While the US economy strengthened, Euro Zone saw a turbulent

economic phase. On the other hand, developing economies such as Latin America, Middle East and Africa

witnessed a sluggish growth.

The domestic economy continued on its challenging trajectory, with growth at decadal low. The domestic

industrial sector saw persistent slowdown, despite measures being taken by the government. The currency as

well as demand was under pressure, compounded by high inflation and steepening input costs.

With recovery on the anvil and favourable economic dynamics, the domestic environment is slowly

changing. Demand is expected to resurge, as fiscal conditions improve and developed economies rebound.

However, geopolitical risks in other developing economies have increased and will be important to keep

an eye on.

While global growth is projected to improve from 3.3 per cent in 2013-14 to 3.6 per cent, growth in

advanced economies is expected to lag the global growth at 2 per cent. Fiscal tightening and accommodative

monetary conditions are likely to be the key contributing factors. Growth in the developing economies is

projected to be in the 5% range in 2014-15. With geopolitical risks withering down in the developing

nations, performance of your Company’s export division is further likely to benefit.


Globally, the tobacco industry has grown by around 3 per cent in value terms to USD 783 billion in FY14.

The global cigarette volumes have declined by 1 per cent in FY14, whereas the value has grown by 3 per

cent. Increasing taxes & widening regulations are impeding growth of cigarette volumes globally.

The Indian tobacco industry is estimated to be around USD 13 billion in FY14. Cigarette constitute 61 per

cent of the total value, followed by Bidi (23 per cent) & Chewing tobacco (16 per cent).

Indian cigarette market has shown a decline of around 3 per cent in volume, impacted by pricing pressure

and growing health concerns. However, the price hikes taken by the industry have resulted in a value growth

of 14 per cent over the previous year. The 64mm segment, aided by favourable taxation, has grown by two

& half times in volume terms as compared to last year. Premiumisation trend has continued with growing

Kings Segment (KSFT), which now accounts for more than 15 per cent of the industry’s volumes. The growth

in King Size has been driven by Lights/Milds variants due to the perception of reduced harm. However,

the Regular Size Filter (RSFT) category, which forms the body of the industry has lost industry’s share from

76.9 per cent in FY13 to 66.3 per cent in FY14. There has been increased up-trading from Premium RSFT to

KSFT segment this year, due to reduced price difference. Also, the industry continues to face the challenge

of illicit trade. With growing health concerns, consumers are also exploring new generation products such

as e-cigarettes, nicotine gums, etc.

Indian leaf tobacco exports were higher as compared to last year, both in volume and value terms.

Regulation and Taxation

With global tobacco regulatory environment becoming stricter by the day, businesses are facing a

daunting task of growing top-line and bottom-line. In India too, over the past few years the Union