Ambey Laboratories Ltd Management Discussions

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with our restated financial statements attached in the chapter titled "Financial Information of the Company" beginning on page 197. You should also read the section titled "Risk Factors" on page 30 and the section titled "Forward Looking Statements" on page 19 of this Draft Red Herring Prospectus, which discusses a number of factors and contingencies that could affect our financial condition and results of operations. The following discussion relates to us, and, unless otherwise stated or the context requires otherwise, is based on our Restated financial Statements. Our financial statements have been prepared in accordance with Indian GAAP, the Companies Act and the SEBI (ICDR) Regulations and restated as described in the report of our auditor dated October 31, 2023 which is included in this Draft Red Herring Prospectus under "Financial Statements". The Restated Financial Information has been prepared on a basis that differs in certain material respects from generally accepted accounting principles in other jurisdictions, including US GAAP and IFRS. Our financial year ends on March 31 of each year, and all references to a particular financial year are to the twelve-month period ended March 31 of that year.

Business Overview

Our Company was originally incorporated as a Private Limited Company namely "Ambey Laboratories Private Limited" under the Companies Act, 1956 vide certificate of incorporation dated March 20^th, 1985 issued by Registrar of Companies, NCT of Delhi bearing registration no. 020490. Further, our Company was converted into a Public Limited Company in pursuance of a special resolution passed by the members of our Company at the Extra Ordinary General Meeting held on November 15^th, 2014. A fresh Certificate of Incorporation consequent to conversion was issued on December 30^th, 2014 by the Registrar of Companies, NCT of Delhi and consequently the name of our Company was changed from "Ambey Laboratories Private Limited" to "Ambey Laboratories Limited". Presently, the Companys Corporate Identification Number is U74899DL1985PLC020490.

Ambey Laboratories is engaged in the business of manufacturing of agrochemical products and home hygienic products. Its been over four decades the company serving the agrochemical sector. Our Company is manufacturer and supplier of "2, 4-D base chemicals" with highest quality practice and compliant with Highest Environmental, Health, and Safety (EHS) in chemical industry. The company has Programmable Logic Controller (PLC) and Supervisory Control along with Quality Assurance Department which ensures testing through HPLC, GC, UV etc. at every stage of production at our manufacturing facility installed, integrated and operating at 5 Acres Facility in the region of Behror, Rajasthan, India for manufacturing of "2, 4-D base chemicals".

Our manufacturing Facility located in Behror, Rajasthan, has been certified with ISO 9001:2015 from Quality Research Organization and ISO 14001:2015 from United Accreditation Foundation, a member of International Accreditation forum to maintain highest quality, environmental and safety practices. Our company has obtained certificate of compliance from RoHS Directive (2015/863/EC) European Parliament and commission decision (2005/618/EC) on the restriction of use of certain Hazardous Substance [Lead (Pb), Mercury (Hg), Cadmium (Cd), Hexavalent Chromium (Cr6+), Polybrominated Biphenyls (PBBs) and Polybrominated Diphenyl, Bis (2-Ethylhexyl) phthalate (DEHP), Benzyl butyl phthalate (BBP), Dibutyl phthalate (DBP), Diisobutyl phthalate (DIBP)] ethers (PBDEs) in Electrical and Electrical Equipments.

Due to backward integration of our products, our plant is ZLD (Zero Liquid Discharge) to ensure minimum emissions and waste generation. Along with the state-of-the-art Pilot Plans in our laboratory, we explore downstream products from our core intermediaries to meet and exceed customer expectations and operation ensures organized inflow state of the art manufacturing and supply sustainability to our valued customers.

Presently our company manufactures 2,4-D Acid 98% TC, 2,4-D Sodium 95% SP 2,4-D Amine 866 : 720

: 480g/l SL 2,4-D Ethyl Hexyl Ester 96% TC 2,4-D Ethyl Ester 96% TC Chlorpyriphos 97%TC / 20%EC / 50%EC Thiamethoxam 96%TC / 25%WG / 75%SG Pretilachlor 95%TC / 50%EC / 37%EW Metribuzin 97%TC / 70%WS Hexaconazole 92%TC / 5%SC / 5%EC / 10%EC and Metalaxyl 98%TC / 35%WS for our customer base which comprises of large corporates like Aromatic Rasayan Private Limited, JR Jindal Infraprojects Private Limited; SC Formulator Co. Limited.

The product - wise share of revenue is as under: (Amount in Lakhs)

Key Performance Indicators of our Company (Amount in lakh, except EPS, % and ratios)

1. Revenue from operations is the revenue generated from operations by our Company.
2. Revenue CAGR: The three-year compound annual growth rate in Revenue. [(Ending Value/Beginning Value) ^ (1/N)]-1
3. EBITDA is calculated as Profit before tax + Depreciation + Interest Expenses - Other Income
4. EBITDA Margin is calculated as EBITDA divided by Revenue from Operations
5. EBITDA CAGR: The three-year compound annual growth rate in EBITDA. [(Ending Value/Beginning Value) ^ (1/N)]-1
6. EBIT is Earnings before Finance Cost and taxes.
7. ROCE: Return on Capital Employed is calculated as EBIT divided by capital employed, which is defined as shareholders equity plus long-term debt.
8. Current Ratio: Current Asset over Current Liabilities
9. Operating Cash Flow: Net cash inflow from operating activities
10. PAT is mentioned as profit after tax for the period.
11. PAT Margin is calculated as PAT for the period/year divided by revenue from operations.
12. Net Worth means the aggregate value of the paid-up share capital and reserves and surplus of the company.
13. ROE: Return on Equity is calculated as PAT divided by average shareholders equity
14. EPS: Earning per share is calculated as PAT divide by Weighted No. of equity shares.

Explanation for KPI metrics

KPI	Explanation
Revenue from operation	Revenue from Operations is used by our management to track the revenue profile of the business and in turn helps to assess the overall financial performance of our Company and volume of our business.
Revenue CAGR %	Revenue CAGR informs the management of compounded annual growth rate i.e. Rate at which Companys revenue are growing on annual basis.
EBITDA	EBITDA provides information regarding the operational efficiency of the business
EBITDA Margin (%)	EBITDA Margin (%) is an indicator of the operational profitability and financial performance of our business
EBITDA CAGR %	EBITDA CAGR indicate our compounded growth of the business
ROCE %	ROCE provides how efficiently our Company generates earnings from the capital employed in the business.
Current Ratio	Current ratio indicates the companys ability to bear its short-term obligations
Operating Cash Flow	Operating cash flow shows whether the company is able to generate cash from day-to-day business
PAT	Profit after Tax is an indicator which determine the actual earning available to equity shareholders
PAT Margin (%)	PAT Margin (%) is an indicator of the overall profitability and financial performance of the business.
Net Worth	Net worth is used by the management to ascertain the total value created by the entity and provides a snapshot of current financial position of the entity.
ROC/RONW	ROC/RONW (%) is an indicator which shows how much company is generating

	from its available shareholders funds
EPS	Earning per shares is the companys earnings available of one share of the Company for the period

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

For details in respect of "Statement of Significant Accounting Policies", please refer Restated Financial Statements beginning on page 197 of this Draft Red Herring Prospectus.

Factors Affecting our results of operations

• Any variation in schemes launched by Government of India to boost the steel industry would have an adverse impact on our results of operations and financial condition and cash flows;
• Our ability to compete effectively.
• Inability to identify and understand evolving industry trends, technological advancements, customer preferences and develop new products to meet our customers demands could render our existing products
• obsolete technology may adversely affect our business;
• our inability to achieve desired results from the objects for which funds are raised
• negative cash flows in the future.
• failure to grow or expand within our industry.
• our ability to manage our working capital cycles and generate sufficient cash flow to satisfy any additional working capital requirements.
• our inability to maintain quality standards in our services.
• our inability to successfully implement strategy, growth and expansion plans.
• our ability to attract and retain qualified personnel;
• any adverse outcome in the legal proceedings in which we and our promoters are involved;
• conflict of Interest with affiliated companies, the promoter group & holding Company and other related parties;
• impact of recurrent outbreak of Covid 19 pandemic or any future pandemic;
• market fluctuations and industry dynamics beyond our control;
• Changes in the value of the Rupee and other currencies;
• The occurrence of natural disasters or calamities;

Discussion on Result of Operations

The following discussion on results of operations should be read in conjunction with the Restated Financial Statements for the stub period ended on October 31, 2023 and for the financial years ended on March 31 2023, 2022 and 2021.

(Rs. In Lakhs)

Particulars	For the period ended 31-Oct- 23	% of Total Income	For the year ended 31-Mar- 23	% of Total Income	For the year ended 31- Mar-22	% of Total Income	For the year ended 31- Mar-21	% of Total Income
Income
I Revenue from Operations	6,993.36	99.82%	10,482.12	97.57%	8,460.07	99.40%	8,173.94	99.17%
II Other Income	12.24	0.18%	261.35	2.43%	51.12	0.60%	67.60	0.83%
III Total	7,005.60	100%	10,743.47	100%	8,511.19	100%	8,241.54	100%

Income
IV Expenditure
(a) Cost of Material Consumed	6,244.27	89.13%	9,294.15	86.50%	6,991.03	82.13%	6,447.80	78.23%
(b) Change in Inventories	(429.43)	(6.12)%	(302.97)	(2.82)%	(101.34)	(1.19)%	187.55	2.27%
(c) Employee Benefit Expenses	103.00	1.47%	241.50	2.24%	195.03	2.29%	191.02	2.31%
(d) Other Expenses	113.62	1.62%	408.06	3.79%	341.26	4%	374.57	4.54%
V Total Expenses	6,031.46	86.09%	9,640.74	89.73%	7,425.98	87.24%	7,200.94	87.37%
VI. Profit Before Interest, Depreciation and Tax	974.14	13.90%	1,102.73	10.26%	1,085.21	12.75%	1,040.60	12.62%
VII. Depreciation and amortization expense	196.20	2.80%	296.26	2.75%	297.03	3.48%	322.22	3.90%
VIII Profit Before Interest and Tax (VI-VII)	777.93	11.10%	806.47	7.5%	788.18	9.26%	718.38	8.71%
IX Financial Charges	101.54	1.44%	183.73	1.71%	305.11	3.58%	409.53	4.96%
X Profit Before Exceptional and Extraordinary Items and Taxes (VIII- IX)	676.39	9.65%	622.74	5.79%	483.07	5.67%	308.85	3.74%
XI Exceptional Items - Prior period items	-	-	0.83	0.007	-	-	-	-
XII Profit Before Extraordinary Items and Taxes (X-XI)	676.39	9.65%	621.91	5.78%	483.07	5.67%	308.85	3.74%
XIII Extraordinary Items	-	-	-	-	-	-	-	-

XIV Profit Before Tax (XII-XIII)	676.39	9.65%	621.91	5.78%	483.07	5.67%	308.85	3.74%
XV Tax Expenses
Current tax	112.90	1.61%	103.81	0.96%	80.63	0.94%	51.55	0.62%
Current tax for earlier year	10.00	0.14%	-	-	-	-	-	-
Deferred tax charge(benefit)	193.54	2.76%	164.98	1.53%	125.60	1.47%	(724.83)	(8.79)%
MAT credit entitlement	(112.90)	(1.61)%	(103.81)	(0.96)%	(80.63)	(0.94)%	(51.55)	(0.62)%
Total tax Expenses	203.54	2.90%	164.98	1.53%	125.60	1.47%	(724.83)	(8.79)%
Net Profit/(Loss) for the Year (XIV-XV)	472.86	6.74%	456.93	4.25%	357.47	4.2%	1,033.67	12.54%

Revenue from operations:

Revenue from operations mainly consists of Sale of Products.

Other Income:

Other income primarily comprises of Commission income, Interest income, Export incentives, foreign exchange fluctuation, Other miscellaneous income.

Total Expenses:

Total expenses consist of Cost of Material Consumed, Change in Inventories, Employee Benefit Expenses, Other Expenses, Depreciation and amortization expense, Financial Charges.

Employee benefits expense:

Employee benefits expense primarily comprises of Salaries, Wages & Bonus, Director Renumeration, Gratuity Leave encashment, Staff Welfare.

Other Expenses:

Other Expenses consists of Expenses like: Audit remuneration ,Advertisement expenses, Bank Charges

,Business promotion expenses, Bad debts, Documentation expenses, Communication expenses, Commission Expenses, Research & development Expenditure, Discount, Donation expenses, Electricity expenses, Freight outward, Insurance expenses, Legal & professional expenses, Office expense, Printing & stationery, Rates and taxes, Repair & maintenance of Building and Others Rental expenses, Travelling and conveyance expenses, Vehicle Running & Maintenance and Other miscellaneous expenses.

Finance Charges:

Our Finance charges includes Interest on Term Loan.

PERIOD ENDED OCTOBER 31, 2023 COMPARED WITH THE FINANCIAL YEAR ENDED MARCH 31, 2023

Total Income:

Total income for the period ended October 31, 2023 stood at Rs. 7005.60 Lakhs whereas in Financial Year 2022-33 the same stood at Rs. 10,743.47 Lakhs representing an increase of 11.79%. The main reason of increase was incremental revenue from existing customers.

Revenue from Operations:

During the period ended October 31, 2023 revenue from operations stood at Rs. 6,993.36 Lakhs whereas in Financial Year 2022-33 the same stood at Rs. 10,482.12 Lakhs representing an increase of 14.37%. The main reason of increase was addition of new business line.

Other Income:

During the period ended October 31, 2023 the other income of our Company stood at to Rs. 12.24 Lakhs as against Rs. 261.35 lakhs in the Financial Year 2022-23 representing a decrease by 91.97%. This decrease was due to the fact that during the Financial Year 2022-23 the Company earned a typical income due to premature payment of loan. However, the same was not received during the period ended October 31, 2023.

Total Expenses

The total expense for the period ended October 31, 2023 stood at Rs. 6,031.46 Lakhs whereas in Financial Year 2022-23 the same stood at Rs. 9,640.74 Lakhs representing an increase of 7.25%. Such increase was due to more raw material and consumables purchased due to increase in production.

Employee benefits expense:

Our Company has incurred Rs. 103.00 Lakhs as Employee benefits expense during the period ended October 31, 2023 as compared to Rs. 241.50 Lakhs in the financial year 2022-23 representing a fall of 26.88%. The decrease was due to due to reduction of manpower based on economies of scale.

Financial Charges:

Our Company has incurred Rs. 101.54 Lakhs as finance cost during the period ended October 31, 2023 as compared to Rs. 183.73 Lakhs in the financial year 2022-23. The decrease of 5.25% was due to change in working capital structure.

Other Expenses:

Our Company has incurred Rs. 113.62 Lakhs during the period ended October 31, 2023 on other expenses as against Rs. 408.06 Lakhs during the financial year 2022-23. There was a fall of 52.27 % mainly due to better controls on general overhead expenses.

Restated Profit before tax:

Net profit before tax for the period ended October 31, 2023 increased to Rs. 676.39 Lakhs as compared to

Rs. 621.91 Lakhs in the financial year 2022-23. The increase of 86.45% was majorly due to factors as mentioned above.

Restated profit after tax:

As a result of the foregoing factors, our profit after tax increase to Rs. 472.86 Lakhs in the period ended October 31, 2023 as compared to Rs. 456.93 lakhs in financial year 2022-23. Consequently, our PAT Marginexpanded to 77.40% during this period.

FINANCIAL YEAR 2023 COMPARED TO FINANCIAL YEAR 2022

Total Income:

Total income for the financial year 2022-23 stood at Rs. 10,743.47 Lakhs whereas in Financial Year 2021- 22 the same stood at Rs. 8511.19 Lakhs representing an increase of 26.227%. The main reason of increase was multiple new customer acquisition.

Revenue from Operations:

During the financial year 2022-23 the net revenue from operation of our Company increased to Rs. 10,482.12 Lakhs as against Rs. 8,460.07 Lakhs in the Financial Year 2021-22 representing an increase of 23.9%. The main reason of increase was due to increase in total turnover and other incomes.

Other Income:

During the financial year 2022-23 the other income of our Company increased to Rs. 261.35 Lakhs as against Rs. 51.12 lakhs in the Financial Year 2021-22 representing an increase of 411.24% which was due to application of new Cost control tools.

Total Expenses

The total expense for the financial year 2022-23 increased to Rs. 9,640.74 Lakhs from Rs. 7,425.98 lakhs in the Financial Year 2021-22 representing an increase of 29.82%. Such increase was due to more raw material and consumables purchased due to increase in production.

Employee benefits expense:

Our Company has incurred Rs. 241.50 Lakhs as Employee benefits expense during the financial year 2022- 23 as compared to Rs.195.03 Lakhs in the financial year 2021-22 representing an increase of 23.82%. The increase was due to increase in higher employee and labour cost due to increase in production.

Financial Charges:

Our Company has incurred Rs. 183.73 Lakhs as finance cost during the financial year 2022-23 as compared to Rs. 305.11 Lakhs in the financial year 2021-22. The decrease of 39.78% was due to change in working capital structure.

Other Expenses:

Our Company has incurred Rs. 408.06 Lakhs during the Financial Year 2022-23 on other expenses as against

Rs. 341.26 Lakhs during the financial year 2021-22. There was an increase of 19.57% mainly due to Audit remuneration, Advertisement expenses, Bank Charges, Business promotion expenses, Bad debts, Documentation expenses, Communication expenses, Commission Expenses, Research & development Expenditure, Discount, Donation expenses, Electricity expenses, Freight outward, Insurance expenses, Legal & professional expenses, Office expense, Printing & stationery, Rates and taxes, Repair & maintenance of Building and Others Rental expenses, Travelling and conveyance expenses, Vehicle Running & Maintenance and Other miscellaneous expenses.

Restated Profit before tax:

Net profit before tax for the financial year 2022-23 increased to Rs. 621.91 Lakhs as compared to Rs. 483.07 Lakhs in the financial year 2021-22. The increase of 28.74% was majorly due to factors as mentioned above.

Restated profit after tax:

As a result of the foregoing factors, our profit after tax increase to Rs. 456.93 Lakhs in financial year 2022- 23 as compared to Rs. 357.47 lakhs in financial year 2021-22. Consequently, our PAT Marginexpanded to 27.82% in financial year 2022-23.

FINANCIAL YEAR 2022 COMPARED TO FINANCIAL YEAR 2021

Total Income:

Total income for the financial year 2021-22 stood at Rs. 8,511.19 Lakhs whereas in Financial Year 2020-21 the same stood at Rs. 8,241.54 Lakhs representing an increase of 3.27 %.

Revenue from Operations

During the financial year 2021-22 the net revenue from operation of our Company increased to Rs. 8,460.07 Lakhs as against Rs. 8 1 7 3 . 9 4 Lakhs in the Financial Year 2020-21 representing an increase of 3.5%. The main reason of increase was due to increase in the total turnover and other incomes.

Other Income:

During the financial year 2021-22 the other income of our Company stood at Rs. 51.12 Lakhs as against

67.60 Lakhs in the Financial Year 2020-21 representing a decrease of 24.37%.

Total Expenses

The total expense for the financial year 2021-22 increased to Rs. 7,425.98 Lakhs from Rs. 7,200.94 lakhs in the Financial Year 2020-21 representing an increase of 3.125%. Such increase was due to more raw material and consumables purchased due to increase in production.

Employee benefits expense:

Our Company has incurred Rs. 195.03 Lakhs as Employee benefits expense during the financial year 2021- 22 as compared to Rs. 191.02 Lakhs in the financial year 2020-21. The increase of 2.099% was due to higher

employee and labour cost due to increase in production.

Financial Charges

Our Company has incurred Rs. 305.11 Lakhs as financial charges during the financial year 2021-22 as compared to Rs. 409 . 53 Lakhs in the financial year 2020-21. The decrease of 25.49% was due to production process and product quality is updated.

Other Expenses:

Our Company has incurred Rs. 341.26 Lakhs during the Financial Year 2021-22 on other expenses as against Rs. 374.57 Lakhs during the financial year 2020-21. There was a decrease of 8.89% mainly due to General overhead expenses reduced due to cost controls.

Restated profit before tax:

Net profit before tax for the financial year 2021-22 increased to Rs. 483.07 Lakhs as compared to Rs. 308.85 Lakhs in the financial year 2020-21. The increase of 56.40% was due to factors as mentioned above.

Restated profit after tax:

As a result of the foregoing factors, our profit after tax decrease to Rs. 357.47 Lakhs in financial year 2021-22 as compared to Rs. 1,033.67 lakhs in financial year 2020-21. Consequently, our PAT Margin decrease to 65.41% in financial year 2021-22.

Information required as per Item (II)(C)(iv) of Part A of Schedule VI to the SEBI Regulations:

An analysis of reasons for the changes in significant items of income and expenditure is given hereunder:

1. Multiple new customer acquisition.

Acquiring new customers provide additional avenues for selling products or services, leading to increased revenue.

2. Increase in total turnover and other incomes.

If theres an increase in the total turnover, it means that the business is selling more products or services, leading to higher sales revenue.

3. Application of new Cost control tools.

Cost control tools help identify and eliminate unnecessary expenses, leading to improved profit margins.

4. Updated production process and product quality

An updated production process often results in increased efficiency and reduced production costs. Streamlining operations, minimizing waste, and optimizing resource utilization contribute to lower expenses, thereby increasing profit margins.

5. Well qualified team leaders and Management to provide better service

A well-qualified team and management by providing better service, addressing customer needs promptly, and creating positive experiences, businesses can retain existing customers and attract new ones, leading to increased revenue through repeat business and referrals.

6. More raw material and consumables purchased due to increase in production increased the expenditure

With a higher volume of raw materials coming in, there may be additional quality control measures implemented to ensure that the materials meet the required standards. This can lead to increased expenditures on quality assurance processes.

7. Higher employee and labour cost due to increase in production increase the expenditure.

Increased production often requires hiring additional employees to handle the higher workload. The recruitment process, onboarding, and salaries for new hires contribute to higher labor costs.

8. Decrease in finance cost due to change in working capital structure.

A reduction in finance costs often implies lower interest expenses on loans or other forms of financing. This directly contributes to increased net income as a lower interest burden leads to higher profits.

9. General overhead expenses reduced due to cost controls increases the income of business.

Lowering general overhead expenses directly improves the companys profit margins. When operating costs are reduced, a larger percentage of revenue contributes to net income, enhancing overall profitability.