somany home innovation ltd Management discussions

THE ECONOMIC SCENARIO:

The global economy has been reeling under the impact of numerous challenges over the past years, including geopolitical conflicts and rising inflationary pressures, as well as the resurgence of COVID in China, which have lowered growth prospects. However, Chinas recent border openings are setting the stage for a faster-than-expected recovery.

According to the International Monetary Funds latest estimates, the global GDP growth rate is expected to be 3.4% in CY22, indicating sheer resilience towards recessionary fears. Notwithstanding these headwinds, supply chain disruptions have been widespread. Additionally, geopolitical conflicts have caused crude oil prices to climb, adversely affecting global trade and exacerbating inflationary pressures. In response, Central Banks worldwide, including the US Federal Reserve, have raised rates in a synchronized manner to curb sticky inflation. The International Monetary Fund has recently projected that global growth will experience a slowdown to 2.9% in CY23 but is expected to recover and increase by 3.0% in CY24. A stronger boost from pent-up demand in numerous economies or a sharp decline in inflation is anticipated in the course of 2023. The governments and central banks of the world are expected to play a major role in accelerating economic growth through targeted, need-based measures.

If we look at performances of major economies globally, USA reported GDP growth of 2.1% in 2022 as compared to 5.9% in 2021. China – the second largest economy is expected to contract GDP growth from 8% to 3% in 2022. UK is expected to contract GDP growth from 4.1% in 2022 in comparison to 7.6% in 2021. Japan reported growth of 1.7% in 2022 compared to 1.6% in 2021. Germany reported growth of 1.8% in 2022 as compared to 2.6% in 2021. Thus the global economies continue to remain in a volatile state. Global growth is slowing sharply in the face of reduced investments, elevated inflation and interest rates, along with the consequent supply chain disruptions caused by Russia Ukraine crisis. Additionally, there are fresh headwinds from the banking sector in some advanced economies. OPEC+ is expected to manage the oil supplies in a manner which keeps the oil prices elevated. Uncertainty about the course of the war in Ukraine and its consequences will continue to persist in the near future. The Middle East region is expected to maintain higher investment outlays, and besides oil, the region is also diversifying into clean energy and other industrial sectors.

In this scenario, localization trends, possible rearrangement of the global supply chain and the consequent shift in export hubs and de-carbonization objectives are all factors which are working in favour of India to become the worlds third-largest economy by 2030

THE INDUSTRY SCENARIO:

Increasing usage of Artificial Intelligence, Machine Learning, Analytics, Automation and digital are several technological advancements which are definitely shape the Real Estate Industry in years to come. The real estate industry is under transformation phase due to the increased usage of advance technology and automation. AI in real estate can take many forms. It encompasses analytics that inform investing and decision making as well as automations that help professionals throughout the industry provide an optimal customer experience.

The real estate sector is one of the most globally recognized sectors. Real estate sector comprises four sub sectors - housing, retail, hospitality, and commercial. The real estate market in India is highly fragmented in nature, with multiple players operating in the market. Higher competition among market players is impacting selling prices and land prices, further leading to oversupply in the market. Furthermore, the market is dominated by a few Pan-India branded players and multiple local players. The real estate is the second largest sector in the country after agriculture in terms of providing employment opportunities. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy. As envisaged Real estate sector in India is expected to reach a market size of Rs. 65,000 crore by 2040 from Rs. 12,000 crore in 2019. Retail, hospitality, and commercial real estate are also growing significantly, providing the much-needed infrastructure for Indias growing needs. The growth of the real estate market in the country is supported by increasing industrial activities, rapid urbanization, and improved income levels. This is further contributing to the economy of the country. The recent key policy initiatives e.g. the Real Estate Regulatory Act (RERA) and the Benami Transactions Act are contributing to the development of the real estate sector. The government is also providing a boost to affordable housing construction, interest subsidy for home buyers, service tax exemption, Dividend Distribution Tax (DDT) exemption, PR for foreign investors, etc.

The Real Estate Sector continued to be in very peculiar situation in FY2022 and FY2023. In light of the situation; which was created by COVID-19, the persisting liquidity crunch of sector had worsened and various restrictions imposed by

the Indian Government to curb the pandemic had led to a temporary halt in ongoing real estate projects. This had a domino effect w.r.t. the large scale reverse migration of labourers and disruption in supply chain of materials. While one would assume the pandemic has bought about a standstill in buying of houses on the contrary with companies declaring "Work From Home" or a blended work from home situation, had led to homebuyers buying their own space or a bigger space. Demand for townships with a range of amenities has accelerated after COVID-19 emphasised the importance of having amenities within your project. This may include amenities ranging from a swimming pool to an office center. Availing of cheap home Loans, lucrative payment plans, attractive prices coupled favorable government reforms the sector has seen an increase in home buying activity especially in places where buyers are able to avail taxation benefits. The growth of this sector is well complemented by the growth of the corporate environment and the demand for office space as well as urban and semi-urban accommodations. It is also expected that this sector will incur more non-resident Indian (NRI) investments in both the short term and the long term. Bengaluru is expected to be the most favoured property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun.

Major developers are focusing on affordable and mid-range housing units to meet increasing demand in the country. Moreover, the growth is driven by various factors such as rapid urbanization, a rise in the number of nuclear families, easy availability of home loans, etc.

Government of India along with the governments of respective States has taken several initiatives to encourage development in the sector. The Smart City Project, with a plan to build 100 smart cities, is a prime opportunity for real estate companies. Below are some of the other major Government initiatives:

• Under Union Budget 2022-23, tax deduction up to Rs. 1.5 lakh on interest on housing loan, and tax holiday for

affordable housing projects have been extended until the end of fiscal 2022-23.

• In order to revive around 1,600 stalled housing projects across top cities in the country, the Union Cabinet has approved the setting up of Rs. 25,000 crore alternative investment fund (AIF).
• Government has created an Affordable Housing Fund in the National Housing Bank with an initial corpus of Rs.

10,000 crore using priority sector lending short fall of banks/financial institutions for micro financing of the HFCs.

The Securities and Exchange Board of India (SEBI) has given its approval for the Real Estate Investment Trust (REIT) platform, which has allowed all kind of investors to invest in the Indian real estate market. India currently has three REITs listed with SEBI viz. : Embassy REIT (started in 2017), Brookfield REIT (commenced in 2019), and Mindspace REIT (began in 2020). All three of them are listed and traded on both the BSE and the NSE. It would create an opportunity worth Rs. 1,25,000 crore in the Indian market in the coming years. First REIT launched by global investment firm Blackstone and realty firm Embassy group successfully rose Rs. 4,750 crore. Responding to an increasingly well- informed consumer base and bearing in mind the aspect of globalisation, Indian real estate developers have shifted gears and accepted fresh challenges. The most marked change has been the shift from family owned businesses to that of professionally managed ones. Real estate developers, in meeting the growing need for managing multiple projects across cities, are also investing in centralised processes to source material and organise manpower and hiring qualified professionals in areas like project management, architecture and engineering.

THE COMPANY:

Your Companys strategic focus remains steadfast in capitalizing on the burgeoning opportunities within the dynamic real estate sector. Leveraging the Companys extensive experience in successfully executing affordable housing projects, a substantial gap has been identified in emerging market segments characterized by evolving lifestyle preferences and the integration of technology. These segments encompass shared living spaces such as co-living arrangements, co-working environments, and service apartments, among others. The primary objective of your Company is to meet the evolving demands stemming from shifting societal norms and technological advancements. While continuing to harness the core strength in delivering affordable housing solutions and equally committing to shaping the future of urban living. This strategic diversification of the Company aligns with the overarching goal not only by addressing the contemporary needs of our customers but also by anticipating and adapting to the changing landscape of urban life.

Although not mandatorily applicable under the law; ESG is an integral part of almost every thought while undertaking business operations. We believe Environment – Sustainability – Governance is arguably the most important dimension of every economic activity across the globe. The Company has established robust Governance Framework ensuring transparency, accountability and ethical behaviour. On Environment & Sustainability front the Company takes utmost care to minimise the usage of things which emission carbon. The Company already started taking steps even to gather carbon credit and audit by independent firm to ensure minimum carbon emission through the project executions.

Your Company is actively seeking to grab the available opportunities in these areas and in fact have partnered with prominent player in co working business. Your Company foresee huge business prospects in these unique segment because of increasing attraction and digitization of businesses.

Your company is focusing on creating such platforms that allows people to invest in properties with smaller amounts of capital such as studio units that small, self-contained units with a combined living and sleeping area and Fractional Ownership Units where individuals collectively owns a single asset. Further Company is also working in the direction of embracing blockchain technology to facilitate fractional ownership, streamline transactions and enhance security in real estate.

Real estate provides housing for individuals and families, addressing one of the most fundamental human needs. Meeting the demand for various types of housing, from affordable housing to luxury residences, is crucial for creating vibrant and inclusive communities. To unlock the full potential of real estate, collaboration among various stakeholders including governments, developers, investors, and communities is essential. Your Companys Strategies focuses on sustainable development, inclusivity, innovation, and long-term value creation for both residents and society as a whole.

BUSINESS ENDEAVOUR EVALUATION:

Your Companys comprehensive evaluation of opportunities includes the following parameters:

• Market: Local economic conditions, demand-supply outlook, interest/inflation rate scenario, etc.
• Pre-development: Financing flexibility to fund the early design work, community/political participation/opposition, government stability over the life of the project, environmental problems, site selection and regulatory approval delays, land acquisition, etc.
• Finance: Commercial viability of the project, capacity of the lender to evaluate and speed in providing the credit lines, repayment mechanism, credit availability on viable terms, etc.
• Construction: Viability of the design/technology, availability of labour and raw-material, outlook of raw-material cost, contractor failure, developers access to funds on a timely basis for construction, etc.

Throughout this process, your Company has to identify and mitigate inherent risks that can adversely affect the project. It is broadly evaluated in three parts: 1) preliminary considerations, market analysis, financial analysis, and strategic marketing; 2) site selection and due diligence, land acquisition, deal structure, entitlements, permissions, etc.; and 3) planning and design, construction management, operations and property management. Hence, with sufficient due- diligence the project is selected and execution is carried-out accordingly by your Company.

FINANCIAL RESOURCES:

The foremost source of finance of your Company has traditionally been internal accruals and borrowings from banks. However, at present your Company is totally debt-free. Your Company deems it sufficient to address the ongoing business endeavors.

ABOUT RESIDENTIAL PROJECT VIDA:

The VIDA residential project in GIFT City blends urban living and sophistication, catering to modern professionals with luxury, technology, and a focus on consumer experience. It stands out by using virtual reality to showcase its offerings, departing from traditional real estate methods. Nestled in GIFT Citys financial hub, VIDA offers various apartment options with contemporary designs, green bridges, rooftop terraces, and a vertical green facade. Nila Spaces collaborates with Blocher Partners India to redefine urban living, emphasizing spacious homes, modern amenities, and community spaces inspired by natural patterns. Members enjoy bespoke concierge services through ‘Quintessentially, along with upscale solutions like an Automated Waste Collection System and an exclusive sky park with a jogging track. VIDA represents the real estate industrys technological expansion, with future innovations like 3D printing, IoT, 5G integration, and a focus on environmental, social, and governance (ESG) aspects.

JOINT VENTURES:

In order to share risk and cost, experience and expertise your Company develops certain projects in association with other and has formed associates and joint ventures. This provides a larger scale to your Company to work on specific operations. Your Company looks upon them as partners in its progress and shares with them the rewards of growth. It is your Companys endeavour to build and nurture strong links with the trade based on mutuality of benefits, respect for and cooperation with each other, consistent with consumer interests.

SEGEMENT WISE AND FINANCIAL PERFORMANCE OF OPERATIONS:

The entire operations of the Company constitute a single segment i.e. "Construction and Development of Building

for sale and other Real Estate activities" as per Ind AS 108 "Operating Segments" specified under Section 133 of the

Companies Act 2013. The financial performance of the operations thereof may please be referred in the Directors

Report section under the head "Review of Operations and Financial Performance".

KEY FINANCIAL RATIOS:

The detailed discussion on financial performance is captured in the Directors Report section of this Annual Report,

while analysis of key ratios is furnished further.

Ratio	FY2023	FY2022	Detailed explanation
Debtor Turnover	2.99	11.07	The credit policies and collection process of your Company are satisfactory and commensurate to the industry and/or the segment it operates into. Your Company mainly deals with retail/individual buyers, who in turn would approach a bank/FI for sanction of their home-loan. The Collection process of your Company is well established. While, the debtors at 31 March 2023 have Decreased marginally as compared to 31 March 2022, the holding period has increased due to fairly less revenue as compared to previous FY. Hence, this movement in debtor turnover.
In Days	122	33
Inventory Turnover	0.01	0.08	The overall inventory at 31 March 2023 has increase as compared to 31 March 2022; the holding period has increased due to fairly less revenue as compared to previous FY. Hence, this movement in inventory turnover.
In Days	30,393	4,499
Interest Coverage Ratio	0.00	10.09	At 31 March 2023 your Company has become debt-free. For FY 2023, the interest Cost is zero consequent to reduction in Borrowings to zero at 31 March 2023.
Current Ratio	2.61	50.42	Current Liabilities as at 31 March 2023 has increased as compared to 31 March 2022. your Company has modest current liabilities as compared to the current assets at 31 March 2023. It could also indicate that your Company has significant ability to pay short-term obligations or those due within one year.
Debt Equity Ratio	0.00	0.00	During FY2023, your Company has no formal debt.
Operating Profit Margin	(191.44%)	19.73%	During FY 2023, due to fairly less revenue as compared to previous FY there is loss. Hence, this movement in Margin.
Net Profit Margin	(397.33%)	24.22%	During FY 2023, due to fairly less revenue as compared to previous FY there is loss. Hence, this movement in Margin.
Return on Net worth	(3.26%)	1.02%	During FY 2023, due to fairly less revenue as compared to previous FY there is loss. Hence, this movement in return on Net worth.

OUTLOOK, OPPORTUNITIES, AND THREATS:

The biggest opportunity and threats to the Real Estate Industry, as discussed earlier, shall continue be extending usage of AI and automation. The AI is definitely going to transform the way the industry has been doing the activities i.e be it construction, planning, designing, marketing and selling and even after sales services and customer dealings.

As right to adequate housing is a basic human right as shelter is a basic human need. Provision of adequate housing is emerging as a major thrust area for Government and the government accords a very high priority to this task. With all round increase in the cost of land, building materials, labour and infrastructure, affordable housing has become a distant dream for the economically weaker, low income groups, and middle income groups. Hence, the role and intervention of the Government has become all the more important. Sustainable human development cannot be achieved without adequate & affordable housing. Affordable shelter for the masses or creation of productive and responsive housing for all is not a simple technological issue or a mere problem of finance. It is a complex amalgam of a host of factors, which need to be tackled at all levels and in a synchronized manner. Due to rapid pace of urbanization, increasing rural to urban migration and the gap between demand and supply, there is a growing requirement for shelter and related infrastructure in urban areas of the country.

Your Company predominantly focusing on reaping benefits of development at GIFT City – Gujarat. With a vision of becoming a leading global financial and technology hub, the evolution of GIFT City is an opportunity to drive reforms towards providing a thriving financial ecosystem critical to support and expand businesses. GIFT City is inclined to provide the conducive business eco-system, at par or above with leading global financial hubs. GIFT City is an emerging global financial and IT services hub a first of its kind in India, designed to be at or above par with globally benchmarked

business districts. It is supported by state-of-the-art infrastructure encompassing all basic urban infrastructure elements along with an excellent connectivity. Companies from financial services, technology and all other services sector will be targeted as potential occupants within the city.

GIFT City has been recognized as a model for greenfield development of smart cities by Government of Indias "Smart Cities - Mission Statement & Guidelines" of June 2015.

• A Global Financial & IT Hub: with a Domestic Tariff Area & a Multi Services SEZ
• A Globally benchmarked IFSC: (International Financial Services Centre)
• Large Employment opportunities
• A Smart City: with State-of-the-Art Infrastructure
• Integrated urban development: with walk-to-work concept
• GIFT City became Indias first "PLATINIUM" rated city, highest certification as greenfield smart city"

Strategic advantages of having projects presences at GIFT City:

• 20 Mins from Ahmedabad International Airport.
• 15 Mins from Nearest Railway Station.
• On the Banks of Sabarmati River.
• Along National Highway 48 (Delhi-Mumbai Industrial Corridor)
• Metro Connectivity to Ahmedabad (Approved by Govt. of Gujarat)
• 15 Mins from Bullet Train Terminus (Ahmedabad - Mumbai. approved by Govt. of India.)

RISK AND CHALLENGES:

As is typical in expanding business activities your Company has become a subject to a variety of risks, challenges, and threats. It is recognized that risks are not only inherent to any business but are also dynamic in nature. Further, the Company is susceptible to certain risks arising out of various activities undertaken in the normal course of business.

There are many constraints affecting the smooth functioning of the industry in which your Company operates. The table below provides a brief overview of the most significant risks and your companys approach to managing them.

Risk	Explanation	Mitigation approach
Pandemic risk	Any epidemic/pandemic can cause interruption/disruption in the execution and business	Your Company categorises Project sites into High, Medium and Low based on perception of such risk and the sites are mandated to be operated with strict adherence to the government/ HSE guidelines. Your Company focuses to ensure the health and safety of all employees, labourers, suppliers and channel partners, while initiating stringent measures to control costs and strengthen cash flows.
Health and Safety at projects	Any employee, labour, worker is hurt or killed by an accident at work.	Apart from the QMS, project execution policy/ processes, loss prevention programmes, insurance, etc. your Company ensures to initiate development and construction of the Project, only post identifying, defining and addressing all such risk propositions and dynamics. Your Company also ensure to share sufficient knowledge about such risks and imparts adequate training to all the employees, labourers, workers, so as to tackle such risks. Zero accident programs supported by proactive near miss reporting aims at the avoidance of all workplace accidents.
Health and Safety related to your Companys construction	Person or persons are hurt or injured as a result of your Companys construction failure or defect. Stability/ sturdiness of the structure is compromised.	Your Company follows strict design and validation rules for all projects, and fully adheres to stipulated requirements for safety and structural sturdiness. Your Company ensures implementation of detailed instructions of the client, Architect, Structural Engineer, PMC, etc. to ensure the fulfilment of requirements and your Companys quality standards. Your Companys overall approach to quality management assures conformance and performance to the highest level.

 

Risk	Explanation	Mitigation approach
Interest rate risk	Your Companys interest costs are impacted by market rates.	Your Companys liquidity and borrowing are managed by professional at Senior management level. The interest rate exposure of your Company is reduced by matching the duration of investments and borrowings.
Credit risk	The flat-buyers ability to pay can have an impact on the financial result.	As per your Companys policy only the flat-buyers that get loan from bank/FI/NBFC/HFC and/or who can establish sufficient assets/investments/liquidity are entertained. Receipt plan is drawn per prospective flat-buyer, and is continuously monitored.
Liquidity risk	Acceptable liquidity levels are required in order to achieve desired financial results.	Based on the networth alongwith the relevant financial- matrix, your Company is favourably placed, while in addition it has developed sufficient creditworthiness to seek financial assistance from banks.
Market risk	Your Companys competitors find ways to sell at dramatically lower cost or with better amenities.	Your Company aims to be the cost and value leader, meaning striving to innovate and bring new and increased value through the innovation to our customers while at the same time working to assure that your Companys operations are world class in terms of efficiency, cost and waste avoidance. Your Company has developed proprietary knowledge with different technologies, while the management provides highest importance to the Quality perspective to ensure long-term sustainable growth.
	Your Companys customers could be impacted by a major economic downturn.	The demand-supply gap for the subject flats at the project site is positive for short-to-long term. Your Company had done internal assessment as well as through an international property consultant of very high repute. Your Company uses market data intelligence to follow and anticipate developments – allowing proactive management of changing market conditions.

Your Company is operating in a business which is cyclic in nature and in which; the price is mainly driven by the demand and supply factors. It is not largely based on the cost of the product. Timely supply of raw material like cement, steel, bricks are essential for timely completion of the projects. Shortage of labour and raw material may delay the execution of projects of the Company. The real estate projects are capital intensive in nature. The Companys business requires long-term commitment of capital to meet the financial requirement of long-term projects. Further, timely availability of skilled and technical personnel is also one of the key challenges. Real-estate projects are mainly dependent on the economic scenarios and any adverse events affecting the whole economy may deteriorate the industry as well. Any significant change in government policy in promoting Affordable Housing could pose a threat. Further, the approval process and time for projects are generally uncertain which may delay the execution and thereby affect financials.

Your Company has in place an effective risk management mechanism to identify potential risk and its timely mitigation. Please refer the COVID-19 section, part of this Report, for detailed comments on the affects, response, and future-

readiness of your Company.

CORPORATE GOVERNANCE:

Your Companys Corporate Governance philosophy is based on the total transparency, integrity, fairness, equity, accountability and commitments to the values. Your Company is committed to the best governance practices that create long term sustainable shareholder value. With the object of your Company to conduct its business in a highly professional manner and thereby enhance trust and confidence of all its stakeholders, your Company has devised a complete compliance of Corporate Governance norms. Your Company firmly believes that definite Corporate Governance leads to the optimal utilization of resources and enhances the value of the enterprise and an ethical behavior of the enterprise leads to honoring and protecting the rights of all the stakeholders. Sound Corporate Governance practices and ethical business conduct always remain at the core of your Companys value system.

The Annual Return for the FY2022 is available at the website of your Company at www.nilaspaces.com under the investor segment. A separate report on Corporate Governance is provided together with a Certificate from the Practicing Company Secretary of your Company regarding compliance of conditions of Corporate Governance as stipulated under Listing Regulations. A Certificate of the CEO and CFO of your Company in terms of Listing Regulations, inter alia, confirming the correctness of the financial statements and cash flow statements, adequacy of the internal control measures and reporting of matters to the Audit Committee is part of this Annual Report.

WORK CULTURE AND HUMAN RESOURCES:

The management believes in team work and a corporate environment which is self-motivating. Your Company has successfully developed a work force of people over a period of time i.e. 20 Nos. at 31 March 2022. The top management is acting as the governing force in creating and maintaining the corporate work culture. The businesses that your Company engages in are primarily people-driven. Our Vision is to raise our own benchmarks with every successive endeavour and it is possible only by making every employee a fully engaged and aligned team member. Your Company continues to remain focused on reinforcing the key thrust areas i.e. being the employer of choice, building an inclusive culture, building a strong talent pipeline, building capabilities in the organization and continuing to focus on progressive employee relations policies. Accordingly, our HR policies are centered around the creation of an environment that attracts, nurtures and rewards high-caliber talent. Young engineers gain the opportunity to operate on the frontlines of technology and associate with projects of scale and complexity. We drive sustainable growth and have been instrumental in bringing in thought leadership in building strong employee relations. There is no material development in HR. Your Company continued to build on the Diversity and Inclusion agenda through building leadership capability and recognizing line managers who provide a simple, flexible and respectful work environment for their teams. Your Company is developing future leaders and having the best people practices. A structured leadership development initiative has helped to build a robust talent pipeline at all levels. Our HR organisation is well-geared towards attraction and retention of engineering talent in an ecosystem that provides long-cycle professional development opportunities in various facets of civil urban infrastructure and caters to career building aspirations of talent at all levels.

INTERNAL CONTROL SYSTEM:

The Corporate Governance Policy guides the conduct of affairs of your Company and clearly delineates the roles, responsibilities and authorities at each level of its three-tiered governance structure and key functionaries involved in governance. The Code of Conduct commits management to financial and accounting policies, systems and processes. The Corporate Governance Policy and the Code of Conduct stand widely communicated across the Company at all times, and, together with the ‘Strategy of Organisation, Planning & Review Processes and the Risk Management Framework provide the foundation for Internal Financial Controls with reference to your Companys Financial Statements. Such Financial Statements are prepared on the basis of the Significant Accounting Policies that are carefully selected by management and approved by the Audit Committee and the Board. These Policies are supported by the Corporate Accounting and Systems Policies that apply to the entity as a whole to implement the tenets of Corporate Governance and the Significant Accounting Policies uniformly across the Company. The Accounting Policies are reviewed and updated from time to time. These, in turn are supported by a set of divisional policies and SOPs that have been established for individual businesses. Your Company uses ERP System as a business enabler and also to maintain its Books of Account.

The SOPs in tandem with transactional controls built into the ERP Systems ensure appropriate segregation of duties, tiered approval mechanisms and maintenance of supporting records. The Information Management Policy reinforces the control environment. The systems, SOPs and controls are reviewed by divisional management and audited by Internal Audit whose findings and recommendations are reviewed by the Audit Committee and tracked through to implementation. Your Company has in place adequate internal financial controls with reference to the Financial Statements. Such controls have been tested during the year and no reportable material weakness in the design or operation was observed. Nonetheless your Company recognises that any internal financial control framework, no matter how well designed, has inherent limitations and accordingly, regular audit and review processes ensure that such systems are reinforced on an on-going basis. Your Company has also put in place comprehensive systems and procedural guidelines concerning other areas of business, too, like budgeting, execution, material management, quality, safety, procurement, asset management, human resources etc., which are adequate and necessary considering the size and level of operations of the Company. The management has been making constant efforts to review and upgrade existing systems and processes to gear up and meet the changing needs of the business.