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Temptation Foods LimitedAnnual Report 2008-09
its all in the
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COntentsIntroduction to Temptation Foods
2The Temptation of Sight 7
Our Products 10
Brands 12
The Temptation of Taste 15
The Year 2008-09 18
Q & A with the Managing Director & CEO 20Our Clientele 21
The Temptation of Touch 23
Profile of the Board of Directors 26
Our Social Initiatives 27
The Temptation of Smell
28Directors Report 32The Temptation of Hearing 43Management Discussion & Analysis 46Report on Corporate Governance 56
Auditors Report 66
Financial Statements
70
FOrward lOOking statement
In this Annual Report, we have disclosed forward-looking
information to enable investors to comprehend our prospects
and take informed investment decisions. This report and other
statements - written and oral - that we periodically make, contain
forward-looking statements that set out anticipated results based
on the managements plans and assumptions. We have tried
wherever possible to identify such statements by using words
such as anticipate, estimate, expects, projects, intends,
plans, believes, and words of similar substance in connection
with any discussion of future performance.
We cannot guarantee that these forward-looking statements
will be realised, although we believe we have been prudent
in assumptions. The achievement of results is subject to risks,
uncertainties and even inaccurate assumptions. Should known or
unknown risks or uncertainties materialise or should underlying
assumptions prove inaccurate, actual results could vary materially
from those anticipated, estimated or projected. Readers should
bear this in mind.
We undertake no obligation to publicly update any forward-
looking statements, whether as a result of new information, future
events or otherwise.
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Temptatin is the rt f allpssibilities in life.
There is no morality attached to it.
Without temptation, there would be no progress,
advancement, or growth.
Everything would be as it were.Temptation provides man with the primary
motivation to change things from what is to what
one desires it to be.
It is the inner urge to do something, to make
something, to invent, innovate, to possess.
Temptation has spawned empires, bankrupted
nations, and enriched some beyond all imagination.
It feeds ambition, powers enterprise and provides the
adrenalin to go the extra length and achieve
the impossible.
Temptation is a sensuous experience.
It is perceived via the gateways of sight,
hearing, smell, touch, and taste.
Temptation is one of the most
fundamental of perceptions, and it is
symptom of life as we know it.
I am, therefre I am tempted.
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Temptation Foods Ltd. (TFL) is a major player and one of the largest organised
sector enterprises in the Indian food processing industry. The Company has
made a mark for itself in the Individual Quick Freezing (IQF) processed fruits
and vegetables segment. The Company employees over 256 employees in FY
2008-09; up from a mere 64 in FY 2005-06; and a turnover of Rs. 8,719.81
million. Currently, TFLs businesses include frozen fruits & vegetables,
processed foods, marine foods and ready-to eat foods for the domestic as well as
international markets.
Temptig GrowthTFL has had a remarkable transformation after having been declared as a sick
Company in 1999 due to teething problems and losses over the years. The
growth has been exponential after VBAPL (Venture Business Advisors Private
Limited the current promoters) stepped in. In the last 2 years, the Companys
total income increased by a stupendous 2,098.70% from Rs. 396.59 million
to Rs. 8,719.81 million! This quantum leap was achieved from a small base,
primarily on account of sustained international demand for frozen fruits and
vegetables, our entry into the marine business and the acquisition of the KarenAnand and Ever Fresh brands. TFL has now entered the domestic processed food
industry with an aim of becoming one of the dominant players in the sector.
Ackowlege qality staarsFor a Food processing unit, Quality and Hygiene are the most critical criteria
and TFL has been certied by BVQI for meeting the requirements of Global
Standard For Food Safety (i.e. TFL meets BRC - British Retail Consortium norms)
& achieved Grade-A. The Company has also been certied by BVQI for ISO
22000:2005 i.e. Food Safety Management System.
Expertise i Iivial Qick Freezig (-) 180CIndividual quick freezing is a process of rapidly reducing the temperature of
the fruit/vegetable/meat to between (-) 180C and (-) 240C. Rapid freezing halts
the activities of all micro organisms that cause decay and deteriorate food stuff.
Individual quick freezing of vegetables and fruits keep them farm fresh for up
to a year without the loss of any avour, texture, or colour. The big advantage
of Individual Quick Freezing is that you do not have to defrost the entire
package to take out a small portion, and the food remains fresh till the time of
consumption. Further, processing enhances shelf life of agricultural produce and
thus reduces wastages.
Growig market for froze foosFrozen foods have a growing market in India and in the
rest of the world.
The major market segments for frozen fruits include:
Retail outlets for direct consumption
Hotels, Restaurants, caterers and eateries.
Industries that use food as raw materials and
desire to process them in the lean season.
Export markets.
In the last 2 years, the Companys
total income increased by a
signicant 2,098.70% from
Rs. 396.59 million toRs. 8,719.81 million
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TFL meets BRC - BritishRetail Consortium normsand has achieved Grade-A.The Company has alsobeen certied by
BVQI for ISO22000:2005 i.e.Food Safety Management System
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Missio StatemetBild a high perfrmance rganisatinvia empwering peple
Leverage cre strengths
fr accelerated scalability
Acire ality cstmers
Grw gemetrically
via accretive acisitins
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TFL ValesExcellece
At TFL we strongly believe that the only way to progress is by
offering the best products and the best services to customers. This
is a continuous process at TFL.
Service alog with the proct
We offer the right products, at right prices and at the right time.
Our service to customers is in-built and complimentary to ourproducts.
Cstomer focs
We respect our customers, listen to them and consistently offer
them the services they need. We always say YES to service
demanded by the customer, and have learnt that it is the only
way to develop customer satisfaction. With improved levels
of customer service, we raise the bar, and endeavour to work
towards customer delight.
Social Resposibility
We are committed to positively impact the society we live and
operate in, and realise that the long term success of a Company
is ensured only when it creates value for the shareholders as
well as the society. This includes the farmers who supply us,
our employees, our consumers and the communities where we
operate.
At TFL we strongly believethat the only way to progressis by offering the bestproducts and the best servicesto customers. This is a
continuous process at TFL.
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The Temptati n
of sightY shall pssess and marry the mst beatifl wman in the wrld!
prmised Aphrdite, the Greek gddess f lve and beaty t Paris,
the handsme Prince f Try.
The trouble though, was that she was already married.
The most beautiful woman in the world then was Helen, the daughter of the divine
Zeus and the wife of King Menalus of Sparta, who was the younger brother of the
powerful King Agamemnon of Greece.
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Helens beauty was legendary. As a maiden, it is said that her fathers kingdom was
almost bankrupted by playing host to the never-ending stream of suitors who came,
seeking her hand in marriage.
The young prince Paris went to Sparta, as part of a diplomatic delegation from
Troy. He was accompanied by his righteous and brave elder brother Prince Hector.
He sighted Helen, and stood rooted to the ground, as though he was struck by
lightning. His eyes gleamed and his muscles froze. It was love at rst sight.
Temptatin had snk its sharp teeth int his sl and he cld nt resist its
sedctive call.
Unknown to the righteous Hector, Paris abducts Helen and takes her on board their
ship back to Troy. Much against the wishes of Hector, Paris married Helen once
they were in Troy.
This act enraged King Menalus and Agamemnon, who brought together all the ex
suitors of Helen and launched the biggest armada of a thousand ships to win back
Helen.
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This led to the erce battle for Troy that lasted ten years. After the deaths of
many valiant heroes, including Achilles and Ajax, and the Prince Hector and
Paris, the city fell to the ruse of the Trojan horse.
The legend of the fall of Troy is one of the most important Greek tragedies.
Christopher Marlowe, who wrote of the epic war stated:
Was this the face that launched a thousand ships
And burnt the topless towers of Ilium?
Sweet Helen, make me immortal with a kiss.
For Prince Paris, though, it was the kiss of death.
He saw Helen, and he sccmbed t Temptatin!
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OuRPROduCTS
TFL has grown remarkably, considering its small
beginnings. Today the Company offers one of the largestproduct ranges in the industry. The impressive product
bouquet consists of 50+ types of products, including
frozen fruits & vegetables (F&V), marine food and recipe
foods amongst others.
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Froze F&VFrits Mango (Alphonso, Totapuri, Rajapuri); Red &Yellow Papaya; Orange & Green Melons and Strawberry
among others
Vegetables Green Beans; Okra; Red/Green Capsicum;
Cauliower Florets; Green Peas; Karela; Guwar; Potato;Carrot; Onion; Yam (Suran); Drum Sticks; Tinda;
Tindora; Chillies; Garlic Crush; Chillies+Ginger Crush;
Garlic+Ginger Crush
Ethic Iia Vegetables Surti Papdi Beans; SurtiLilva; Valor papdi; Valor Vilva; Tuvar Yellow; Tuvar Lilva;
Tindora (Smooth Gourd); Punjabi Tinda; Parwal (Pinted
Gourd); Turia and Methi among others
Herbs Basil; Bay Leaf; Chervil; Chives; Fenugreek;Mint; Oregane; Parsley; Sorrel and Thyme
Marie FoosFrozen Tiger Prawns; Shrimps and Other Sea Foods
Recipe FoosJams, Conserves, Salad, Salad Dressings and Sauces
Today the Company offers one of the
largest product ranges in the industry.
The impressive product bouquet consistsof50+ varities of products
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BrasEverfreshTFL acquired the Everfresh brand from Chambal Fertilisers and Chemicals in 2007. Everfresh
is one of the biggest domestic brands in the frozen fruits and vegetables segment. Thebrand offers over 50 different types of IQF (Individually Quick Frozen) vegetables and fruits
such as Green Peas, American Sweet Corn, Baby Corn, Cauliower, Beans, Carrots, Mixed
Vegetables, Broccoli, Palak, Sarson ka Saag, Shredded Coconut and different varieties of fruits
like Alphonso Mango. Everfreshs uncompromising adherence to nutrition, taste, hygiene and
quality standards ensures that products reach the customers as fresh as it was in the farm.
delikaEverfresh is internationally known as Delika and has an impressive product range under
its umbrella. The brand comprises of products like, Green Peas, American Sweet Corn,
Baby Corn, Cauliower, Beans, Carrots, Mixed Vegetables, Broccoli, Palak, Sarson ka
Saag, Shredded Coconut and different varieties of fruits like Alphonso Mango. Everfreshs
uncompromising adherence to nutrition, taste, hygiene and quality standards ensures that theproducts reach the customers with the same freshness it has on the farm.
Kare AaKaren Anand was an acquisition of TFL from Karens Gourmet Kitchen Pvt Ltd. All of
Karen Anands products are meticulously designed to provide consumers with an authentic
international food experience.
Karen Anands product mix in proportion to their contribution to sales turnover
from this segment:
Taken together, these account for a nominal portion of TFLs total
revenues. Conserves, Sauces and Dressings constitute the main
segments under this brand.
Conserves 59%
Jams 10%
Marmalade 10%
Sauces 5%
Mayonnaise 8%
Salad dressings 2%
Honey 6%
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He affed a glden gblet f chctyl, and smiled indlgently,
as he ran his eyes amngst the wmen f his harem.
Who would catch his fancy tonight? Bestirred by the potion, his nerves came to
life, with a vigour that was the pride and glory of his empire! This was a daily ritual
for him. Chocotyl was his favourite potion, and there were whispers in the palace
corridors that it was the secret to his legendary sexual prowess and staying power.
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Montezuma, the mighty King Emperor of the Aztecs took no other beverage other
than chocotyl, a potation of chocolate, avoured with vanilla, and other spices,
reduced to a froth with the consistency of honey. He is reputed to have consistently
drunk over 50 goblets of his favourite brew every day!
The King Emperr did nt realise it then, bt he was histrys rstChchlic.
He had tasted the divine avrs and there was n lking back.
The 600 plus beauties of his harem bore testimony to the aphrodisiac prowess of
chocolate.
Such is the reputation of chocolate, that over the ages that even the legendary
Casanova swore by it. Even the mighty Napoleon is supposed to have chewed on it
before entering his Empresss bed chambers.
The rle f chclate in the mating rital f man and wmen is well
established tday. More recently it has been proven that it not only increases
sexual appetite, but also produces a sense of elation, akin to an orgasm.
Chocolate has been found to contain modest amounts of the stimulants caffeine
and theo-bromine. Chocolate is also known to generate increased levels of
serotonin, a chemical naturally produced by the brain, which is known to reduce
anxiety. The rush of endorphins produced by eating chocolates, particularly dark
chocolates, is most similar to the bliss associated with a healthy sexual relationship.
Chocolate also contains phenyl-ethylamine which is known to stimulate the release
of dopamine into the pleasure centres commonly associated with an orgasm.
From Montezuma to every callow lover during the Valentines day, men insinuate
their love for women with Chocolate in the hope that it will be love at rst bite..
She bit int it, and s she sccmbed t its temptatin!
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THE YEAR 2008-09Fiacial Performace
0 2000 4000 6000 8000 10000
2008-09
2007-08Year
2006-07
Total Icome Rs. million
8720
397
0 100 200 300 400 500 600 700 800
2008-09
2007-08Year
2006-07
EBIdTARs. million
800
323
71
0 100 200 300 400 500 600
2008-09
2007-08Year
2006-07
PAT Rs. million
527
238
58
0 500 1000 1500 2000 2500 3000
2008-09
2007-08Year
2006-07
net Worth Rs. million
2550
2029
307
0 5 10 15 20 25 30
2008-09
2007-08Year
2006-07
25.34
23.65
28.20
0 5 10 15 20 25
2008-09
2007-08Year
2006-07
EPS
21.96
11.42
4.59
growthin 08-09164%
growthin 08-09
growthin 08-09(Before Extra-ordinary Items)
121%
164%
growthin 08-0992%
growthin 08-0926%
3295
Return onAverage Capital Employed
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dEVELOPMEnTS &InITIATIVES duRInGTHE YEARRecet developmets
KGK shifted its production base to a dedicated facility at Nira, near existing
plant at Jejuri; in order to maintain operational synergies. It has launched new
premium branding and packaging initiative.
The Company declared its maiden dividend @ Rs. 0.60 per share.
The Company added new customers in Europe via the Private Label business
route.
Started mango pulp canning operations at a leased plant at Madanapalli. The
product is marketed under the Everfresh brand.
Invested Rs. 300 million to streamline the processing facilities and optimise the
product mix.
The Company was declared free from the sick status as per the July 2008 order
of AAIFR. The Company has therefore been relieved from the purview of SICA.
Acqisitios & IvestmetsThe Company incorporated Temptation Foods International Ltd. (TFIL) in the
British Virgin Islands. The Company will hold 100% shares of TFIL as and when
TFIL issues shares.
As on 31st March, 2009, the Company has acquired 2,856,632 shares,
representing 10.13% of the share capital of the Kohinoor Foods Limited, a
company engaged in Basmati rice and Ready-To-Eat (RTE) business with a global
foot print.
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Q: How do you think the global slowdown will affectTemptation Food?The past year was an exceptional one for the global
economies. There was unprecedented economic turbulence
and a nancial meltdown, and yet, the full impact of the
economic slowdown is still unknown. However in the
processed foods business, we are relatively insulated from
the impact of the slowdown. The industry is based on a basic
requirement, and thus, its demand is comparatively inelastic
compared to other industries.
Q: So, in a relatively at environment, what factorshelped you grow?I think our brand focus and ability to strategically acquire
more and more labels enabled us to have an enhanced
product base. This in turn, allowed us to expand across all
geographies, and add newer areas to our customer prole.
This plus a continuous focus on efciency and productivity,
helped us grow signicantly.
Q: Do you think this momentum will sustain across FY2010?Revenues from direct exports presently form a very small
component of total revenues. In FY 2010, it is likely that
some of our customers will face liquidity issue. However,
we see that as a temporary phenomenon. . We think this
is a short-term phenomenon, and underlying demand will
remain strong in the long term. Were not immune to the
overall economic conditions, but like I explained earlier, the
propensity of our business to get affected is relatively low.
Also, we see a distinct improvement in the global economic
scenario which has led to signicant optimism.
Q: What specic growth plans have you outlined forTemptation Foods?We are planning to expand our presence pan-India through
a mixture of our established acquisitive strategy and organic
growth. We will look going north to Uttaranchal, west
to Gujarat and extend this to the southern states as well.
Temptation Foods is actively evaluating investments in
Agri- Infrastructure, to emerge as an integrated player in ourdomain. In think the next few quarters will see us making
quite a few dramatic moves.
Q: What about the growth in the existing product prole?I think all our brands will grow fairly well, given our strategy to
ensure that the domestic market contributes at least 50 per cent
to our revenues. This is in line with our vision to occupy almost
10-12 per cent of the Indian kitchen. Our export markets will
be driven by the marine foods business. As of today, the KGK
range contributes a marginal portion; however plans are on the
anvil to add capacities and drive growth.
Q: You recently made an apparently unrelatedacquisition in the IT space. Tell us about the benets
you see accruing from it?We have always tried to leverage business relationships at
an equity level for long term value generation, rather than
booking expenses on service contracts, where we see long
term potential. Aptsource, in which we acquired a 70 per
cent stake in January, is a high-end enterprise solutions
consulting rm.
We seek to leverage that expertise and their intellectual
capital to create customised technology and supply chain
management solutions for Temptation Foods, which will
result in tighter operations going ahead. So, rather than
let IT be a cost centre, we have turned it into an equity
investment, which has an independent value, as well as a
signicant accrual to our core business.
Managing the supply chain for food products is a logistics
intensive exercise. Temptation Foods seeks to manage its
growth with critical inputs from information technology
and has, therefore, laid out a plan for advanced systemic
implementation. The acquisition of Aptsource Software is an
important step in that direction.
Q: A major portion of Temptation Foods revenuesare derived from exports. How do you counter theexchange uctuation risk?We cater to a large number of third party exports. We serve
Indian ethnic traders settled overseas. As a matter of fact,
when we began (4/5 years earlier), most of our customers
were ethnic Indian traders, settled abroad, but havingentities in India. As a result of this, they were eager to avail
of the various export incentives. Since then, as a matter
of principle, the billing is done in rupees and the dollar
rates are not taken into account. This unique arrangement
has insulated us from the problems of exchange rate
uctuations.
Q: But still, as your business grows, you may not be ableto exercise this option in all cases. How do you deriskthe business then?In the past couple of years, our major focus has been on
creating a risk-neutral business model. Today, we are
diversied against product because of our range, geography
because of our spread, and customers because of theexcellent relationships we preserve and newer ones that we
build every year. This is the core of the derisking mantra at
Temptation Foods, and I expect it to hold true in the years to
come.
Q: So if you were to sum up your future growth path,what would that be?We are presently on a sharp learning curve, with a focused
determination to provide the best in products and services to
our customers. We are committed to building and sustaining
a high performance organisation via people; leverage
core strengths for accelerated scalability; acquire quality
customers; and grow exponentially through acquisitions and
organic growth, in emerging as an admired and preferred
company in the foods business.
QA&WITH THE MAnAGInGdIRECTOR & CEO MR. VInIT KuMAR
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OuR CLIEnTELETFL has a diverse customer base both in domestic as well as international markets.
We serve giant global corporations in US, Canada, Germany, U.K., Japan and the
Middle East. The domestic patrons include a number of prestigious hotels as well as
large domestic retail chains.
International EthnicDeep Foods, Inc.(USA & Canada), Al Kabeer
International MainstreamFrenzel, Mondial Foods, DKSH
domestic InstitutionalTAJSATS, TAJ, Reliance Fresh , McDonalds, ITC, Radisson, Jaypee
Hotels, Sumeru, Oberoi Hotels & Resorts, Pizza Hut, The Park,
Haldirams , Holiday Inn
domestic Retail (Retail Chains)Big Apple, Metro, ShopRite, Spencers, Big Bazaar, foodworld
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Glbalisatin f trade was
cased by a series f events that
began in the ryal garden f the
famed Yellw Emperr f China
in 3000 B.C.
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Lady Hsi-Ling-Shih, wife f the mythical Yellw Emperr, sat in
her garden, nder a tree sipping tea. Sddenly there was a splash
in the tea cp, and she nticed a white ccn like bject in her
glass. Cris as t what it was, she dipped her ngers int the
tea cp and picked it p. She rlled it in her ngers, and she felt
the senss strands srrnding the ccn nravelling. They
were shiny and smth t tch.
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Lady Hsi-Ling-Shih did not realise it then, but she was the rst to touch silk.
The temptatin f tching and pssessing this senss fabric wld
create the wrlds rst glbal market and pen p the trade rtes
frm China t Central Asia, Arabia, and Byzantim all the way t
Rme!
This was the Silk Road. The worlds rst international trade route
that stretched 4,000 miles from end to end. Trade on the Silk
Rad was a signicant factor in the development of the
great civilizations of China, India, Egypt, Persia, Arabia, and
Rome, and in several respects helped lay the foundations for
the modern world. Although the term the Silk Road implies
a continuous journey, very few who travelled the route
traversed it from end to end. Cargo caravans would
traverse a distance and then be sold to another middle
man who would take it to the next leg. This ensured
the secrecy of the origin of silk- a zealously
guarded monopoly of the Chinese. So coveted
was this fabric by the wealthy lords and ladies
of Rome, that pound of silk sold at a price
equivalent to that of six healthy slaves!Temptation of touch, and the sensation of silk
forged global trade in ancient times.
They tched the fabric, andtherefre they sccmbed tits temptatin!
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Mr. Vinit Kmar, Chairman & Managing DirectorMr. Kumar represents the promoter group. He has over 20 years
experience working with Reliance Industries Ltd., Lummus
Crest B.V., Netherlands, Maharashtra Apex Corp. Ltd., Deki
Electronics Ltd. and Rohem Instruments Pvt. Ltd. He holds a B.E.
in Electronics and Communication from Manipal Institute of
Technology, and an MBA from University of Notre Dame, USA.
He has also attended a course in Corporate Strategy Analysis
from Notre, London.
Dr. (Ms.) Kala Pant, Non-executive DirectorDr. (Ms.) Pant has vast experience in the banking industry and
has been a Director/Consultant/Advisor to a number of Banks
such as IDBI, Dena Bank etc. She has carried out a number of
research projects in Banking, Shipping, Port and Infrastructure
and has published 15+ papers in domestic journals. She has
also presented papers at many seminars. She holds a B.Sc. and
has done her PG Doctoral Research in the eld of Banking andTransport.
Ms. Elizabeth Harringtn, Non-executive DirectorMs. Harrington has over 24 years experience working in Asia as a
Director, Senior Exec, Entrepreneur and Management Consultant
in various global consumer products, retail, healthcare, and
industrial product industries. She is on the board of Chicago
Mercantile Exchange and is a partner in PWC. She is the CEO of
Herrington Global and has published several articles and has had
several talks on China/Asia and Global business strategy. She did
her A.B at Cornell University; Magna Cum Laude and Phi Beta
Kappa.
Mr. E. David Ellingtn, Non-executive DirectorMr. Ellington has vast experience in the eld of fund management
with expertise in equity allocation, governance and Private Equity
& Venture Capital. He runs his own law rm in Beverly Hills
specialising in international, entertainment and new technology
law. He is also a Dotcom Entrepreneur. He holds an M.A. from
Harvard University and a BA, MA JD Law Ran.
Mr. R.V. Jshi, Non-executive DirectorMr. Joshi has over 40 years experience in the eld of Banking,
Finance and Capital Markets, including Security Trading. He has
held the position of a Managing Director at BOI Finance Ltd.,
and Securities Trading Corporation of India Ltd. He has travelled
extensively and has participated in Seminars and Conferences
both in India and overseas. He holds an M. A. in Economics.
Mr. G. Ramchandran, Non-executive Director
Mr. Ramachandran has vast experience in the nancial servicesector and capital market activities. He has held various positions
as Managing/Executive Director in leading industrial/nance
companies in India. He was the VP & CFO at Reliance Capital,
Times Guaranty, Mentor Capitalist and the Executive VP at
Citicorp, JM Morgan Stanley and Ranbaxy. He is a B.Sc. graduate
and a Chartered Accountant.
Ms. B. Gswami, Non-executive DirectorMs. Goswami is a well known Media artist, actress, model
and Compeer. She has 4 years of experience in General
Administration and Management. She holds a BA.
PROFILE OF
THE BOARd OFdIRECTORS
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OuR SOCIAL InITIATIVES
TFL has always nursed a keen desire to be a contributor to
the nations rural growth. In order to make its presence felt in
Indias endeavour of becoming a developed country at par with
the best of nations, Temptation Foods strives to bring about
meaningful changes to the lives of rural people in and around
its various plants. TFLs humble beginnings in the eld of social
responsibilities have kick started with a workable penta-fold
strategy:-
ROSHnITFLs dream project is designed to uplift a small percentage of our fellow
citizens from the bowels of poverty. Since the farmer is the mainstay of
our country, TFL wants to empower him by providing him a wholesomepackage.
Agriculture in India is still largely carried out with outmoded tools and
farming methods. Our immediate agenda includes:
providing the farmer the means to purchase the best seeds
spreading awareness of state-of-the-art machinery
disseminating know-how with the latest inputs and
giving farmers excellent training
Once the farmers reap in the reward of an excellent harvest, TFL will again
assist them by providing at their doorstep, the very best marketing tools
so that their ace harvest reaches the right place at the right time, thereby
fetching them a bountiful price. This will not only elevate their standard of
living, but also give them the necessary condence to proceed with more
such ambitious projects.
dISHAEmpowerment of Women is high on TFLs radar. A dozen fully sanitized
centres have been thrown open for ladies to earn money in their leisure time
by managing certain stages in the processing of TFL products.
AALAPWe also dessiminate detailed technical know-how on converting
agricultural waste into Vermicompost (Organic Waste), which is useful
for Soil Enrichment. TFL not only educates them technically, but has also
facilitates bank subsidies for this project. The Jejuri Municipal Corporation
has also been roped in to provide the premises for this project. Temptation
delivers agricultural waste from their plant to the premise and arranges for
the Vermicompost produce to be sold in the nearby markets.
The AALAP project, at present, is benetting 40 families who were below
the poverty line. These are some of the baby steps that TFL is taking. More
such humane projects are in the pipeline.
Proviig Basic Ecatio
Proviig Marketig
a R&d Spport
to Farmers
Empowerig
Wome
Hygiee Awareess
& Traiig
Ehace the
Staar of Livig
of Farmers
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She ated dwn the river Nile n a barge with scented sails.
Along the shoreline near the royal jetty, he stood waiting. She was the consort of his
late mentor Julius Caesar and had left Rome on his death, to return to her Kingdom.
She was Cleopatra, the Queen of Egypt and the empress of perfume, in the words of
some. Her arrival was announced by a gust of perfume, just before her royal barge
docked alongside.
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Anthony, the veteran of innumerable wars, had no chance against this scented attack
on his senses.
Temptatin wafted its way int his heart, and nw Clepatra rightflly
pssessed it.
Fragrances captivate our minds, rejuvenate our senses, and bestow a feeling of
freshness and energy, by their mere presence. Our sense of smell is also part of our
memory as we associate smells with people.
Scents were rst used by priests in prayers as a supplication to the gods. It was rightly
believed, that these rened scents frankincense, myrrh, and sweet oils would tempt,
and persuade the gods to shower favours on man.
Modern perfumes are far more complex as compared to the naturally occurring
perfumes. They have three notes the top note being the one you imbibe when the
perfume is sprayed, the middle note is what remains when the top note evaporates and
what lingers on is the base note that represents the core aroma of the perfume.
What hit and captivated Anthony while he awaited her arrival was the top note, in our
way of thinking. His relationship with her owered into intimacy, delivering the middle
note. The lingering base note of their relationship was passionate love.
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So passionate was their love, that when the false news of her
death reached him, he committed suicide.
The lingering romance of their relationship and its tragic end
still reverberates in public memory.
He smelt her arma, and therefre hesccmbed t her temptatin!
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To
The Members of
Temptatin Fds Limited
Your Directors have pleasure in presenting the 18th Annual Report together with the audited statement of accounts for the year ended
31st March, 2009.
1. FInAnCIAL RESuLTS:(Rs. in Million)
Particlars 2008-09 2007-08
Prot Before Tax, Financial Expenses, Depreciation and Extraordinary Items 799.63 324.21
Less: Financial Charges 143.11 4.68
Depreciation 81.34 45.93
Prot for the year before Extraordinary Expenses and Taxes 575.18 273.60
Less: Extraordinary Item 25.19 -
Prot for the year after Extraordinary Expenses and before Taxes 549.99 273.60
Less : Provision for Taxes 23.04 35.54
Prot After Tax 526.95 238.06
Balance Brought Forward from Previous Year 172.18 (-)65.88
Less: Interim Divided and Dividend Distribution Tax thereon 17.63 -
Surplus carried to Balance Sheet 681.50 172.18
2. OPERATIOnS:During the year under review, your Company has shown
sterling performance inasmuch as the sales turnover has
increased from Rs. 328.05 crores in 2007-08 to Rs. 870.07
crores in 2008-09, representing an increase of about
165% and the prot after tax has gone up from Rs. 23.81
crores to Rs. 52.70 crores, representing an increase of
about 121%.
3. dIVIdEnd:During the year, your Directors declared and paid an
interim dividend of Rs. 0.60 paise per equity share of
Rs. 10 each, fully paid up i.e @ 6%. In order to conserve
the resources of your Company in view of the tight liquidity
position, your Directors do not recommend any further
dividend for the year under review and, hence, the interim
dividend paid may be deemed to be the nal dividend for
the year under review.
4. BuSInESS PROSPECTS:During the year, your Company continued to show robust
growth in its business in all products categories, as the
nancial results reect. All the product categories showed
more than 100% growth in sales. The margins, however,
were under a pressure.
Though the food sector, especially the product categories
in which your Company operates, and the business of your
Company is largely unaffected by the current economic
turmoil and downturn trend all over the world, the
operating environment has become difcult and is expected
to continue to remain so till the situation improves.
The trend in the growth in business across all the product
categories is expected to remain good in the running year,
though the margins would remain tight. The endevour is
to achieve a change in the product mix by increasing the
proportion of the higher value added products and the
branded products.
All the product categories
showed more than
100%growth in sales
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The operations of your Company have been discussed in
details in the Management Discussion and Analysis Report,
which is separately issued under the Corporate Governance
norms prescribed under the Listing Agreement with the
Bombay Stock Exchange.
5. ISSuE OF OPTIOnALLYCOnVERTIBLE BOndS/FCCBS/EQuITY SHARES:Your Company had taken your approval for issue of Fully/
Partly Convertible/Non-convertible Bonds, Equity Shares,
Preference Shares and/or any other nancial instrument in
India or overseas through a QIP/GDR/ADR, etc issue for an
amount up to UD$ 200 Million.
Your Company had initiated the process of issue of
Optionally Convertible Bonds/Equity shares for an amount
up to Rs. 800 crores to Qualied Institutional Buyers. The
terms of issue of the Bonds were nalised and necessary
legal opinions were taken. Bank guarantee up to sixty
percent of the face value was arranged through one of
the leading banks in India to make the issue marketable
and attractive to the potential investors. The Placement
Document for the issue was approved by the Bombay Stock
Exchange.
However, due to the drastic deterioration in the nancial
markets the world over, especially in the second half
of 2008, the issue could not be proceeded with as the
potential investors suspended all new investments and
thereby the long term investments to fund acquisitions
failed.
It is hoped that the situation would improve in the coming
months and the investors would return to the market
and your Company would be successful in raising the
aforementioned amount to fructify its acquisitions.
Your Company has invested in theshares of Kohinoor Foods Limited as along term investment. The peak holdingby your Company during the year wasof 3,634,148 shares, representing
13.47% of the thenshare capital of the Kohinoor FoodsLimited.
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6. ISSuE OF WARRAnTS OnPREFEREnTIAL BASIS:During the year, your Company has allotted 7,000,000
warrants to NRI Tax Services.com Private Limited, 150,000
warrants to the six independent and non-executive
Directors and 150,000 warrants to four of its businessassociates, on preferential basis. Each warrant shall entitle
the holder thereof to apply for one fully paid up equity
share of your Company within 18 months of the allotment
of the warrant. The issue price of Rs. 200/- per warrant
and the conversion price of Rs. 200/- per share are in
compliance with the applicable SEBI guidelines.
7. BORROWInGS:During the year, your Company has been sanctioned
funded and non-funded working capital limits/term loans
over Rs. 200 crores by some banks/nancial institutions
against the security of the movable and immovable assets
of the Company and the corporate guarantee from the
promoter Company. The limits have been draw-down
depending upon the requirements of your Company.
Your Company has also taken loans from certain Non
Banking Finance Companies and share brokers for part
funding of the investment in the shares of Kohinoor Foods
Limited, against, inter alia, the security of the shares of
Kohinoor Foods Limited and from some corporates for
meeting working capital requirements.
8. InVESTMEnT In THE SHARES OF
KOHInOOR FOOdS LIMITEd:Your Company has invested in the shares of KohinoorFoods Limited as a long term investment. The peak holding
by your Company during the year was of 36,34,148 shares,
representing 13.47 % of the then share capital of the
Kohinoor Foods Limited.
Your Company has made the requisite disclosures required
to be made under the regulations under Securities &
Exchange Board of India Act and has complied with all
other statutory / regulatory requirements in respect of
the acquisition of the shares. As mentioned above, your
Company has taken loans from some Non Banking Finance
Companies and some share brokers for part funding the
investment, against, inter alia, the security of the shares of
Kohinoor Foods Limited.
On a petition led by Kohinoor Foods Limited under
section 111A of the Companies Act, 1956, before the
Company Law Board alleging violation by your Company
of the SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997, along with forty ve other
individuals/corporates, all of who were alleged by Kohinoor
Foods Limited to be Persons Acting in Concert in acquiring
shares of Kohinoor Foods Limited, the Company Law Board
had stayed the voting rights of your Company and the
other forty ve individual/corporates. However, pursuant to
proceedings before the Company Law Board, the Honble
Board was subsequently pleased to vacate the stay of the
voting rights and also stayed, till further orders, the holding
of the annual general meetings and other shareholder
meetings by Kohinoor Foods Limited. The Delhi High
Court, on appeal by Kohinoor Foods Limited against the
order of the Honble Board, conrmed the order of theHonble Board. Your Directors state that your Company has
not violated the SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997, and any other regulation/law
in acquiring the shares of Kohinoor Foods Limited and are
condent that the proceedings before the Honble Board
would end in favour of your Company.
Your Company has led a petition before the Company
Law Board under sections 397 and 398 of the Companies
Act, 1956, against Kohinoor Foods Limited on the grounds
of oppression of minority shareholders and mismanagement
of the affairs of Kohinoor Foods Limited. The petition is
pending before the Honble Board.
9 EMPLOYEES STOCK OPTIOnS:During the year under review, your Company has issued
256,600 options to the employees of your Company
under the Employees Stock Option Scheme, 2008. The
disclosures prescribed under the SEBI (Employee Stock
Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999 are annexed hereto.
10. FIXEd dEPOSITS:Your Company has not accepted any xed deposits
from public during the year under review. There are no
outstanding deposits, which have remained unpaid.
DuRING THE YEAR uNDER REVIEW,
YouR CoMPANY HAS ISSuED 256,600
oPTIoNS To THE EMPLoYEES uNDER
THE EMPLoYEES SToCK oPTIoN
SCHEME, 2008
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11. TEMPTATIOn FOOdSInTERnATIOnAL LIMITEd:Your Company has incorporated a Company by the name
of Temptation Foods International Limited (TFIL), limited
by shares, in the British Virgin Islands of which it will hold
100% of the equity share capital as and when TFIL issues
its shares. As on 31st March, 2009, TFIL has not issued any
shares. Mr. Vinit Kumar, Chairman and Managing Director
and Mr. E. David Ellington, Director, are Directors of TFIL.
TFIL is intended to be used as a special purpose vehicle for
acquisitions of business overseas and/or for raising of funds
overseas.
As TFIL has not issued any capital and has not commenced
any business, the documents and the statements referred
to in section 212 of the Companies Act, 1956, are not
attached to the Balance Sheet as on 31st March, 2009.
12. dIRECTORS RESPOnSIBILITYSTATEMEnT:Pursuant to the provisions of Section 217(2AA) of the
Companies Act, 1956, the Directors hereby state:
a) That in the preparation of the Annual Accounts for
the year ended 31st March, 2009, the applicableAccounting Standards have been followed;
b) That 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 your Company at the end of the nancial year
and of the prot of your Company for the year;
c) That the Directors have taken proper and sufcient
care for the maintenance of adequate accounting
records in accordance with the provisions of this Act
for safeguarding the assets of your Company and for
preventing and detecting fraud and other irregularities;
and
d) That the Directors have prepared the Annual Accounts
on a going concern basis.
13. dIRECTORS:Ms. Bhairavi Goswami and Dr. (Ms.) Kala Pant retire by
rotation at the forthcoming Annual General Meeting, and
being eligible, offer themselves for re-appointment.
14. CORPORATE GOVERnAnCE:Pursuant to Clause 49 of the Listing Agreement, the
following are annexed to this report:
a) a Report on the Corporate Governance and a
Certicate from the Auditors of your Company
regarding compliance of the conditions of Corporate
Governance; and
b) Management Discussion and Analysis Report.
Mr. Vinit Kumar, Chairman and Managing Director,
declares that afrmations have been obtained from the
Directors and the senior management of your Companyas regards compliance with the Code of Conduct norms
prescribed by the Securities and Exchange Board of
India.
15. AddITIOnAL InFORMATIOnPuRSuAnT TO SECTIOn 217:a) Information as per Section 217 (2A) of the Companies
Act, 1956, read with the Companies (Particulars of
Employees) Rules, 1975 is enclosed herewith by way of
an Annexure.
b) Additional information pursuant to Section 217(1)(e)
of the Companies Act, 1956, read with Companies(Disclosure of Particulars) Rules, 1988 is enclosed
herewith by way of an Annexure.
16. AudITORS:M/s. Sharp and Tannan hold the ofce as Auditors of your
Company till the conclusion of the forthcoming Annual
General Meeting and have expressed their willingness to
be reappointed. Their reappointment, if made, would be
within the limits specied under section 224(1-B) of the
Companies Act, 1956. Members are requested to reappoint
them and x their remuneration.
17. ACKnOWLEdGEMEnT:Your Directors take this opportunity to place on record their
appreciation to the contribution made by the employees to
the working of the Company.
Yours Directors also express gratitude to the customers,
suppliers, shareholders, banks, nanciers and investors
for the condence reposed in your Company and for their
continued co-operation during the year under Report.
By Order of the Board of Directors
Place : Mumbai Vinit Kmar
Date : 27th April, 2009 Chairman & Managing Director036 AnnualReport2008-0
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CoMPANY HAS INCoRPoRATED
A CoMPANY BY THE NAME oF
TEMPTATIoN FooDS INTERNATIoNAL
LIMITED (TFIL), LIMITED BY SHARES,
IN THE BRITISH VIRGIN ISLANDS oF
WHICH IT WILL HoLD 100% oF THE
EquITY SHARE CAPITAL AS AND
WHEN TFIL ISSuES ITS SHARES
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Disclsres prescribed nder the SEBI (Emplyee Stck optin Scheme and EmplyeeStck Prchase Scheme) Gidelines, 1999:
a Options granted : 256,600
b Exercise price : Rs. 150/-
c Options vested : Nil
d Options exercised : Nil
e Total number of shares arising on exercise of options : Nil
f Options lapsed : Nil
g Variations in terms of options : None
h Money realised on exercise of options : Nil
i Total number of options in force : 256,600
j Options granted to senior management personnel : Name and Designatin Nmberf optins
(i) Mr. Vipin Chandok, President Mergers and Acquisitions &New Initiatives
10,000
(ii) Mr. Nimish Thakore, President Corporate Affairs andCompany Secretary
15,000
(iii) Mr. Shyam Mahale President Corporate Planning
10,000
(iv) Mr. Sridhar Sarathy BusinessHead Everfresh
30,000
k Any other employee who during the year has been grantedoptions amounting to 5% or more of the options issued during
the year
:Name and Designatin
Nmberf optins
Mr Swapnil Shaha - VP - DomesticSales & Dist.
15,000
l Employees who have been granted options equal to or exceeding1% or more of the issued capital of the Company at the time ofthe grant
: Nil
m Diluted earnings per share considering the issue of shares onexercise of options
:Rs. 20.98
n Proforma Adjusted Net Income and Earnings per Share :Net Income after Taxes andbefore Extraordinary Expenses asReported
Rs. Mn. 552.15
Add: Intrinsic Value CompensationCost
Rs. Mn. 10.39
Less: Fair Value Compensation Cost Rs. Mn. 14.89
Differential EmployeeCompensation Cost
Rs. Mn. 4.50
Adjsted Pr frma Net Incmebefre Etrardinary Epenses
Rs. Mn. 547.65
Net Income after Taxes andafter Extraordinary Expenses asReported
Rs. Mn. 526.96
Add: Intrinsic Value CompensationCost
Rs. Mn. 10.39
Less: Fair Value Compensation Cost Rs. Mn. 14.89
Differential EmployeeCompensation Cost
Rs. Mn. 4.50
Adjsted Pr frma Net Incmeafter Etrardinary Epenses Rs. Mn. 522.45038 Ann
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Basic Earnings Per Share afterTaes and befre EtrardinaryEpenses:
- As Reported Rs. 21.96
- Adjusted Pro- forma Rs. 21.78
Basic Earnings Per Shareafter Taes and EtrardinaryEpenses:
- As Reported Rs. 20.96
- Adjusted Pro- forma Rs. 20.78
Dilted Earnings Per Share afterTaes and befre EtrardinaryEpenses:
- As Reported Rs. 21.94
- Adjusted Pro- forma Rs. 21.76
Dilted Earnings Per Shareafter Taes and EtrardinaryEpenses:
- As Reported Rs. 20.94- Adjusted Pro- forma Rs. 20.78
o Weighted average exercise price of Options granted during theyear whose:
:
(a) Exercise price equals market price Not applicable
(b) Exercise Price is greater than market price Not applicable
(c) Exercise Price is less than the market price Rs. 150/-
Weighted average fair value of Options granted during the yearwhose:
(a) Exercise price equals market price Not applicable
(b) Exercise Price is greater than market price Not applicable
(c) Exercise Price is less than the market price Rs. 200.83
P Description of the Method and the signicant assumptions used
to estimate the fair value of the options:
: The fair value of the options granted has been
estimated using the Black-Scholes option pricingmodel. Each tranche of the vesting has been
considered as a separate grant for the purpose of
valuation. The assumptions used in the estimation of
the same have been detailed below:
Weighted average values of the options granted
during the year:
i. Stock Price i. Rs. 289.65
ii. Volatility ii. 51.81%
iii Risk free rate iii. 9.14%
iv. Exercise Price iv. Rs. 150
v. Time to maturity v. 4.20 years
vi. Dividend yield vi. 0.00
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Particlars f emplyees as per sectin 217(2a) f the Cmpanies Act, 1956 read with theCmpanies (particlars f emplyees) Rles, 1975 and frming part f the Directrs Reprtfr the nancial year ended 31st March, 2009
Name & Age (Years) Designation/ Nature
of Duties
Nature ofEmployment
Remuneration(Rupees)
qualications Experience(Years)
Date ofCommencementof Employment
Last Employment& Designation
A. EMPLOYED FOR THROUGHOUT THE FINANCIAL YEAR AND IN RECEIPT OF REMUNERATION AGGREGATING RS. 24,00,000/- OR MORE PER ANNUM
1. Mr. Vini t Kumar(44)
Chairman &ManagingDirector
Contractual Rs. 4,867,786/- BE (Elct. &Comm.), MBA
19 26-10-2007 Reliance Industries Ltd
2. Mr. Vipin Chandok(50)
President M&A& New Initiatives
Otherwise Rs. 3,226,077/- F.C.A., A.C.S.,LLB(G), B.Com(Hons)
28 01-04-2008 Orix Auto Finance(India)Ltd. (Chief FinancialOfcer & CompanySecretary)
B. EMPLOYED FOR A PART OF THE FINANCIAL YEAR AND IN RECEIPT OF REMUNERATION AGGREGATING RS. 2,00,000/- OR MORE PER MONTH
1. Mr. Raj Halve(45)
President -Brands
Otherwise Rs. 2,025,003/- MMS & B.Com. 23 01-08-2008 BG Broadband India(Chief Marketing &
Strategy Ofcer)
Infrmatin nder sectin 217(1)(e) f the Cmpanies Act, 1956 read with the Cmpanies(disclsre f the particlars in the reprt f the Bard f Directrs) Rles, 1988 and frmingpart f the Directrs Reprt fr the year ended 31st March, 2009.
1 POWER AND FUEL CONSUMPTION
Sr.N.
ParticlarsYear ended
31st March, 2009Year ended
31st March, 2008
1. Electricity:
a) Purchased units 7,999,361 2,067,507
Total Amount (Rs.) 46,911,070 10,177,013
Rate/Unit (Rs.) 5.86 4.92
b) Own Generation Through Diesel Generators:
Units 803,212 343,595
Units per Litre of Diesel Oil Cost/Unit 8.83 8.90
2. Cal Nil Nil
3. Light Diesel oil:
Quantity (Litres) 1,743,771 1,173,969
Total Amount (Rs.) 72,272,137 40,176,560
Average Rate (Rs.) 41.45 34.22
4. other/Internal Generatin Nil Nil
2 CONSUMPTION PER UNIT OF PRODUCTION (MT)
Electricity (units) 340.66 243.62Diesel oil (Litres) 74.26 28.79
3 TECHNOLOGY ABSORPTION, ADAPTION AND INNOVATON
NIL
4 FOREIGN EXCHANGFE EARNINGS AND OUTGO
Particulars relating to foreign exchange earnings and outgo appear in Note No. 20 (g) and (f) respectively of Schedule Q, being
Notes forming part of the Accounts.
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At the premiere f his Ninth Symphny, he had t
be trned rnd t see the tmlts applase f
the adience. Slwly, tears trickled dwn his face,
since he cld hear nthing.
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Beethoven, the worlds greatest composer of classical western music was deaf. Perhaps
it is a testimony to his acute sense of loss (or is it loss of sense?), that the symphonies
he wrote when he became deaf still give untold pleasure to the millions who listen tothem.
Hearing is the most under-rated of our senses. While in listening to music, it is elevated,
in normal life, we take it for granted. Beethovens loss was particularly tragic as he
played music for people to hear, and when he himself could not hear, discrimination
became difcult. All of Beethovens musical compositions were written and it is
widely believed, that Beethoven, could see his music, or visualise it. He did use
ingenious ways to listen to his music. Beethoven used a special rod attached to the
soundboard on a piano that he would bitethe vibrations would then transfer from the
piano to his jaw and increase his perception of the sound.Hearing is part f speaking. The capability f ne witht the ther is
meaningless. It is Temptatin betrayed by graticatin.
Hearing elevates the senses, enlivens the mood and helps us connect to the world
around us. We hear people, animals, birds, and we can decipher their feelings even
without understanding their language. Hearing music is one of the most abstract
experiences where mere melodies, beats and incantations communicate sensations.
Hearing is the very essence of life. It is when you stop hearing the rhythmic beat of the
heart that you know life has ended, the orchestration has stopped. In some ways, may
be that was the music that Beethovan continued to hear even after he became deaf.
He heard the divine rhythm that reired n ear andtherefre he sccmbed t the temptatin!
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InduSTRY STRuCTuRE And dEVELOPMEnTSEvolution of Global Food Demand
India is at an early stage in the evolution of food consumption patterns. Going forward, increase in demand is expected for
prepared meals, snacks and convenience foods. At the next stage, the demand for functional, organic and diet foods will
increase substantially. In future, the food consumption pattern of the burgeoning middle class is expected to change, therebysignicantly diversifying the mix of products being bought by the consumers.
processing industry ranks 5th in size. The food processing
industry accounts for 13% of the countrys exports and 6% of
total industrial investment. Food processing industry in India
has a dominant position as it is twice the size of the 2nd largest
sector (banking) and much larger than all the others. The sector
is estimated to grow at a steady rate into the future and reach
Rs. 13.5 trillion in terms of total business by 2014-15. During
this period, there is expected to be a clear shift in the product
mix from primary processed food to value-added food. It is
estimated that the level of processing and value addition will
improve by 2014-15. For instance in Foods and Vegetables
sector, it is estimated that the processing will improve from
1.4% in 2003-04 to 15% in 2014-15 with a 5% value addition.
Currently the total business in the processed food segment
accounts for Rs. 4,600 billion, making it the single largest
industry in India. Yet, the industry is at a basic level of
processing with miniscule value addition.
The Indian food market is estimated at over US$ 182 billion,
and accounts for about two thirds of the total Indian retail
market. Further, according to consultancy rm McKinsey & Co,
the retail food sector in India is likely to grow from around US$
70 billion in 2008 to US$ 150 billion by 2025, accounting for a
large chunk of the world food industry, which would grow from
US$ 175 billion to US$ 400 billion by 2025.
FOOd PROCESSInG InduSTRYGlobally, the processed food industry is estimated to clock
business of around US$ 3.6 trillion. Only 6% of the processed
foods are traded across borders compared to 16% of major bulk
agricultural commodities. U.S.A., EU and Japan accounts for
over 60% of total retail processed food sales.
In processed foods, Indias share accounts for only 1.3% of
global volumes of F&V (2.3% in terms of value) and 15% of
milk produced. Despite the low percentage volumes, the food
Diet/functional/
organic foods
North America,Japan, Western Eurpoe,
Australia
Convenience
foods Eastern Eurpoe
Snacks/prepared
meals
India, China
Latin America
Carbohydrate
staples
Africa
(Sub-Saharan)
Surviving
Source : Rabobank Research
Mass Market Convenience FoodService Snacking
Quality Hygiene High Technology
Dairy, meat, egg,
sugar, processedmass market
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Poor infrastructure for storage, marketing and distribution
of food products are some of the key reasons for low level
of processing. These constraints are serious because, they
contribute to the post harvest loss of 25% to 40% of the
countrys agricultural produce.
Primary processing of agricultural produce stands at around
40% in China, 30% in Thailand, 70% in Brazil and 80% in
Malaysia. As compared to these countries, in India it accounts
for a meagre 20% with massive wastage. India is the second
largest producer of fruits (53 MMT) and vegetables (126 MMT).
The installed capacity for processing of fruits and vegetables
has gone up from 1.108 MMT in 1993 to 2.474 MMT in 2007.
However, the industry is still in nascent stage with secondary
processing level of around 2.20% of total fruits and vegetables
produced, which is signicantly lower as compared to U.S.A.
(80%), Australia (25%), and Germany (33%). Indias share in the
world trade of processed fruits and vegetables is still less than
1%. The government expects the processing in this sector togrow to 25% of total produce by 2025.
FMCG InduSTRYIn the midst of an economic slowdown, India is the victim of
apprehensions regarding decline in consumption expenditure.
In reality, while metros are witnessing 6-7% volume growth,
other tier 1 cities are registering growth rates at 10-12%, and
rural markets are growing at 20%+. The reducing relevance
of FMCG spend to the overall consumption spend (just 7-8%
of the wallet share) insulates FMCG spends from any pressure
of spending cuts. The shift to premium products and brands
in personal care and rapidly growing packaged foods market
is driving value growth. On the other hand, with 610 million
population residing in rural India, these markets are driving
volume growth as consumers shift their purchase preference
from unorganised and homemade to organised sectors.
FMCG spend in India is merely 7%-8% of the total consumer
spend and less than 5% of the overall income. Expenditure on
food is the largest among all the FMCG segments as depicted in
the pie-chart below
Source: Ministry of Food Processing; Annual Report 2006-07; IDBI Capital MarketServices
%
Processig
level
35
40
35
30
25
20
15
10
5
0
20
26
2
6
Fruits &Vegetables
MilkDaiy
Meat PoultryProducts
MarineProducts
Processig Level i IiaFoo-Processig istry
Source: Ministry of Food Processing; Annual Report 2006-07;IDBI Capital Market Services
Processed Foods,4600, 37%
Banking,2300, 19%
IT/ITES,1790, 15%
Pharma,1125, 9%
Automobile,1040, 9%
Telecom,850, 7%Construction, 460, 4%
Processed Foods Banking IT/ITES Pharma
Automobile Telecom Construction
Market Size of Istries i Iia(Rs. Billio, %)
Expeitre mix i FMCG sector
Source: Business World Marketing Whitebook
Food Home Improvement Rent, Fuel & Power
Health CareLeisure & Entertainment
Transportation & CommunicationOthers Grocery
Foods 39%
HomeImprovement 4%
Rent, Fuel & Po wer 13%
Leisure &Entertainment 4 %
HealthCare 8%
Transportation &Communication20%
Others 8%
Grocery 4%
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BuSInESS OVERVIEWCmpany Prle
TFL, with its Individual Quick Freeze Technology, is at the
forefront of the Indian food processing industry. In operation
since 1991, TFL now is one of the largest organised sector,publicly listed companies in the industry. Its impressive
product offerings include frozen Fruits & Vegetables, FMCG
food products like Conserves, Jams, Marmalade, Sauces,
Mayonnaise, Salad dressings, Honey and Marine Products. TFL
plans to use the acquisition route to enter the markets for edible
oil, rice and ready-to-eat segments.
COMPETITIVE STREnGTHSLcatinal Advantages
Temptation Foods Ltd. currently uses 9 facilities across India
to produce over 50 different types of products. Out of these
9 facilities, 5 are outsourced, 1 is leased and 2 are owned.TFL sources its raw materials from across the country with the
majority procured from North and West regions. The plants
are located near the sources of raw materials. Recently, a KGK
plant was shifted to Nira, near existing plant at Jejuri to maintain
operational synergies. Being closer to the source of raw material
is the biggest commercial benet that TFL passes on to its
consumers. The locations of the plants and the sources of supply
are shown below.
MARInE PROduCTSMarine business is a high volume and low margin business with average margins of around 5-6%. India is the third largest sh producer
in the world and second largest inland sh producer. Fish production has increased from 0.75 MMT in 1950-51 to 6.86 MMT in 2006-
07. Despite this, India exports only around 8% of its production. In 2005-06, its contribution to total GDP was around 1%. Indias
substantial shery resources are underutilised, despite the huge potential to increase the output from this sector. Processing of sh into
canned and frozen forms is carried out entirely for export purpose.
Proctio a export of marie procts
Source: Ministry of Agriculture of India, IDBI Capital Market Services
Producton Export Export as a Percentage of production
FY51
FY61
FY71
FY81
FY91
FY01
FY02
FY03
FY04
FY05
FY06
FY07
10%
8%
6%
4%
2%
0%
8
6
4
2
0
Volume(AMT)
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Brand Strategy
TFL offers branded food products across all of its product categories. It aims to extend its reach across all food categories and thus
acquire 15%-20% market share of Indian kitchen. As a part of its initiative to integrate with international markets, TFL follows a two-
pronged strategy
1. Bringing top-quality International brands to the emerging Indian markets
2. Successfully marketing the Indian ethnic brands abroad
TFL has been investing in, and consolidating its brands. During the year, the Company took steps towards maturating its brands
Everfresh and Karen Anand by adding to the product base while simultaneously increasing its distribution networks.
TFLs RAW MATERIAL SUPPLYING REGIONS
Uttranchal
Uttar Pradesh
Maharashtra
Andhara Pradesh
Fruits & Vegetables
Marine Products
Ready-to-eat
Punjab
Delhi
TFL PLANT LOCATIONS
Jallandhar (2 Plants)
Vishakhapatnam
Owned Plants
KarnalRudrapur (3 Plants)
Jejuri
Sonipat
Outsourced Plants
Leased Plants
Price Pints
Prdct
Reach
Rediline category
(play in broader category)
Extend existing brands in new categories
Launch India specic brands
Launch mass market brands
Low Value SKUs
Aggresively penetrate markets
Increase institutional sales
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Acquisition Strategy
TFL has been on an acquisition spree. Inorganic growth has
been the Companys mainstay in terms of strategy. It aims at
further acquisitions in order to increase its market share, widen
its product base, and create value for its shareholders. At the
same time, it wishes to ensure that it acquires and owns the
brand rather than merely producing or distributing products
belonging to brands owned by others. It proposes acquisitions in
India as well as abroad.
Supply Chain
TFL tries to bridge the gap between the manufacturing of
product to the consumer off take by continuously trying to
improve and channelise effective supply chain management
with faster distribution network. Also, stringent quality norms
are followed for procurement and processing of fresh fruits
and vegetables and then converting them into frozen fruits and
vegetables.
Procurement is done during the season and stored and sold
during non season periods. The products are transported by
refrigerated vans at (-) 180C and minimal handling is ensured
till the depots so that the temperature of the product remains
intact. The Cold Chain (owned/leased) is made of state-of-art
technology to ensure that proper temperatures and quality is
maintained throughout the year. TFLs supply chain is very
robust which ensures that best quality product reaches to the
consumers through its retail outlets and modern trade formats.
Performance Review
During the year 2008-09, the Company registered 164.44%
increase in the total income from Rs. 329.48 crores in 2007-
08 to Rs. 871.98 crores. The Companys EBIDTA increased by
147.86% from Rs. 32.26 crores in 2007-08 to Rs. 79.96 crores in
2008-09. The Companys PAT also increased by 121.34% from
Rs. 23.81 crores in 2007-08 to Rs. 52.70 crores in 2008-09.
Export Performance
During the year 2008-09, the Company made exports worth
Rs. 38.46 crores as against Rs. 30.51 crores in 2007-08, thusregistering an increase of 26.06%. Exports thus constitute 4.42%
of the total revenues of the Company in FY 09.
Present Financial Status
Net Worth Rs. 255.05 crores
Current Ratio 2.92
Debt-Equity Ratio 0.43
Stock Turnover Ratio 18.69 Times
Average Receivables Collection Period 69 days
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Strength
Entrepreneur led, professionally managed and experienced
management team
Strong Brand equity with wide variety of products
Locational advantage, with close proximity to raw material
sources, export points and domestic consumption centres
Wide geographic coverage
Large domestic and international customer base
Strategic relationships with suppliers, customers and supply
chain vendors
Adaptation to new and improved systems and processes
opprtnities
Offering other value-added products under existing strong
brands such as Everfresh & Karen Anand
Growth in the Indian retail space with a spurt in the
organised retail play by players like Big Bazaar, RelianceFresh, Six Ten etc. has increased demand for packaged foods
across income groups
Full integration of acquired companies/businesses will unlock
value in terms of economies of scale and group synergies
Favourable Government policies
SWOT AnALYSIS
Weakness
Exports business exposes the Company to exchange risk
Over dependence on marine business
Highly capital intensive business
Threats
Entry of major players into domestic market eg. Penguin
Inability to manage properly the high growth volumes as well
as the acquisitions
High volatility in prices of commodities which are raw
materials for the Company
Food safety and product liability issues because Companys
products are sold to various global chains
Domestic private label driving down margins and prices
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Internal Cntrl
The Company has adequate internal control procedures
commensurate with the size and nature of its business. These
business control procedures ensure efcient use and protection
of the resources and also compliance with the policies,
procedures and statutory requirements. The internal control
systems provide for well documented guidelines, authorisation
and approval procedures. During the year, the Company has set
up an independent Internal Audit Department, which reports
directly to the Managing Director. The Company also carries out
internal audit through an external agency. The prime objective
of such audit is to test the adequacy and effectiveness of all
internal controls laid down by the management and to suggest
improvements.
Hman Resrces
The good performance of the Company requires a disciplined,
focused work culture and demands an ongoing effort to sustain
an engaged workforce. During the year, signicant resources
and efforts were devoted to people engagement initiatives
to support a performance driven culture and to enhance the
passion for a higher level of productivity. To empower talent
and prepare its people with necessary skills, the Company
continued to provide employees with appropriate access to
training and corresponding development plans including
international exposures, where feasible.
The Company recruited a large number of employees at all
levels during the year. The Company plans to continue to
institute internal climate surveys to ne tune the HR practices.
The Company works with a Key Responsibility Area based
review and recognition strategy that aligns efforts, while
rewarding results. An ESOP plan was instituted in 2008-09 and
256,600 options were issued to the employees of the Company.
The training needs of staff at various levels are periodically
assessed and training programmes are conducted using internal
resources and/or by engaging external trainers/facilities. TheCompany employed a total of 256 employees as on 31st March,
2009 spread over all its plants and at ofces.
otlk
India, with an arable land of 184 million hectares has an annual
production of 90 Million Metric Tone (MMT) of milk (highest in
the world), 179 MMT of fruits and vegetables (second largest),
204 MMT of food grains (third largest), and 6.3 MMT of sh
(third largest). Despite being one of the largest food producers,
India accounts for less than 1.5% of international food trade.
Domestic demand in the industry is expected to rise with
increasing per capita income, increased urbanisation, improved
standard of living, changing lifestyle of burgeoning middle class,
and increase in the percentage of women in the work force. It
is a well known fact that rising urbanisation increases and rising
per capita GDP within cities, provide companies with large
economies of agglomeration for any business activity.
Food production in India is expected to grow two-fold over the
next 10-years leaving immense scope for food processing sector.
Indian food processing industry is expected to grow at around
20% CAGR, becoming Rs. 15 trillion industry by 2015. Ministry
of Food Processing in its vision document 2015, has estimated
the size of food sector to triple, processing level of perishable
products to increase from 6% to 20% and Indias share in globalfood trade to increase from 1.5% to 3%.
The Indian food industry is mainly unorganised with 75% units
belonging to unorganised players. It has been identied that by
2014-15 a total of Rs. 910 billion investment will be required
in the Indian food processing industry to meet the growing
demand for processed food. Research shows that the announced
investments by the Indian government through their various
departments and agencies would only be to the tune of approx.
Rs. 60 billion. This huge gap between Investment Required vs.
Investment proposed creates an opportunity for the companies
in the food processing domain for future growth.
Driving growth in the food processing sector holds the key to
changing the labour intensive practices in the Indian agriculture
sector. Inefcient marketing systems are already being targeted.
Policies are now promoting the participation of private
investors who would promote efciency in food processing
and agriculture marketing systems. These are just the initial
stages of development and enhanced efciencies by improving
productivity and investments, will be a source of power for the
food processing sector in the future. In other words, the two
sectors share a symbiotic relationship and changes to either will
impact the other.
In this backdrop, the Government of India has a vision, strategy andaction plan for the food processing sector. This strategy addresses
issues of taxation, organised retail, infrastructure development,
marketing interventions and regulations, strengthening of
institutions and issues of food safety and regulations. The Vision
2015 strategy released in 2003-04 envisages:
A three fold increase in the size of the processed food sector
to close to US$ 300 billion by 2015
Increasing level of processing of perishables from 6% to 20%
Value addition to increase from 20% to 35%
Increase share in global food trade from 1.5% to 3%
Increase the share of value added products in food
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RISK REVIEW
1 ECoNoMIC DoWNTuRNThe slowing global economy has impacted the Indian
economy as well. A slowdown in the economic growth
in India could cause the business of the Company
to suffer. The performance and the growth of the
Companys business are necessarily dependent on the
overall health of the Indian economy.
Mitigatin
The Company has a wide portfolio of products under
each of its brands. It is planning 4 more acquisitions to
widen its product base and extend its global reach.
4DEPENDENCE oN SuPPLY CHAINMANAGEMENT
The success of food processing business is dependent
on supply chain management as inefciencies could
lead to unavailability of raw materials. It is critical to
identify vendors who shall provide quality products in
proper time. This criticality increases especially in case
of perishable commodities.
Mitigatin
TFL has tried to keep optimum inventory at their
factories in order to control its working capital
requirements. Food items require efcient supply
chain management as this involves items which are
perishable or have limited shelf life. For some of
its products TFL also outsources the supply chain
management to third party sources.2INCoRRECT DEMAND FoRECASTINGSome of TFLs products are seasonal. So TFL has to
buy raw materials in anticipation of demand for the
same. This requires accurate demand forecasting. Any
mismatch between forecast and actual demand could
lead to excess inventories.
Mitigatin
In case of any excess inventory, some products are sold
either at a discount or are disposed off.
5GEo PoLITICAL RISKSTFLs ability to counter international competition forall or specic products could be adversely affected if
any country or countries propagate their goods more
effectively than we can.
Mitigatin
TFL is striving to diversify its products as well
as focusing on more than one market for its
products and keeps a close watch on any such
changes taking place.3FoREx RISKTFL is exposed to foreign currency risk as some portion
of the revenue is derived from exports.
Mitigatin
As a business policy, TFL strives to bill the exports
in Indian Rupees to avoid or reduce the exposure to
foreign currency risk.
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PREFACEYour Company endeavours to strengthen the Corporate Governance prevalent and practiced by the Company with the passage of time,
even going beyond what is required statutorily, treating the statutory requirements as the minimum requirement.
The objective is to be a well managed Corporate Governed Company working in the interest of its shareholders, investors and other
constituents.
A. MAndATORY REQuIREMEnTS:
1. Companys Philosophy on Code of Governance:Your Company is fully committed to the principles of transparency, integrity and accountability in all spheres of its operations
and has been practicing the principles of good corporate governance. In keeping with this commitment, your Company has
been upholding fair and ethical business and corporate practices and transparency in its dealings and continuously endeavours
to review, strengthen and upgrade its systems and processes so as to bring in transparency and efciency in its various business
segments.
2. Board of Directors and Board Meetings:
The Board is headed by Mr. Vinit Kumar, who is the Chairman & Managing Director. The Board is composed of eminent
persons with considerable professional experience in diverse elds. With the exception of Mr. Vinit Kumar, who is non-
independent, all the other Directors are Independent and Non-Executive.
The details of the Board of Directors as on the date and the meetings attended by them are as under:-
Name f theDirectr
Categryf Directr-ship
N. f Bard Meetingheld dring the year
dring his/her tenre as
Directr and nmber f
Bard Meetings attended
Attendanceat the
last AGM
N. fther
Directr-
ships as held
N. fCmmittees
f which
Member
Remarks
Held Attended
Mr. Vinit Kumar Non- Independent
& Executive
Director
6 6 Yes 2 - -
Dr. (Ms.)
Kala Pant
Independent
& Non-Executive
6 6 Yes 3 7 -
Mr. R.V. Joshi Independent
& Non-Executive
6 6 Yes 2 6 -
Mr. E. David
Ellington
Independe nt
& Non-Executive
6 1 No - - -
Mr. G.
Ramachandran
Independent
& Non-Executive
6 5 Yes 13 3 -
Ms. Elizabeth
Harrington
Independent
& Non-Executive
6 2 No 2 3 -
Ms. Bhairavi
Goswami
Independent
& Non-Executive
6 5 Yes 1 3 -
During the year under review, 6 (Six Board Meetings were held, the dates being: 5th April, 2008, 12th May, 2008, 29th July,
2008, 9th September, 2008, 31st October, 2008, and 28th January, 2009.
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3. Meetings of Committees of Directors:
(a) Adit Cmmittee:
The Audit Committee of the Company was constituted and made functional w.e.f. 6th January, 2006. The Audit
Committee at present comprises of the following four non-executive directors:
i) Dr. (Ms.) Kala Pant, Chairperson
ii) Mr. G. Ramachandran
iii) Mr. R. V. Joshi
iv) Ms. Bhairavi Goswami
The role and terms of reference of the Audit Committee briey include review of internal Audit Reports and the StatutoryAuditors Report on the nancial statements, general interaction with the internal Auditors and statutory Auditors, selection
and establishment of accounting policies, review of nancial statements, both quarterly and annual before submission to
the Board, review of Management discussion and analysis of nancial condition and results of operations and review of
performance of statutory and internal auditors and adequacy of internal control systems and other matters specied under
Clause 49 of the Listing Agreement a
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