arshiya ltd share price Management discussions

GLOBAL ECONOMY REVIEW:

The global economy in 2021 bounced back strongly after the COVID-19 related declines in 2020. However, it was impacted by new variants of virus which impacted the demand and supply equation, worldwide. In 2021, the global economy expanded by 5.5% (contraction of 3.3% in 2020), triggered by rise in demand, strong consumer spending, and surge in investment due to fiscal and monetary stimulus.

The year 2022 has also been equally challenging because the momentum of growth has been impacted by monetary tightening, reglobalization, and adverse implications of geo-political issues. The recovery which started in 2021 is facing headwinds in 2022, with the World Bank now pegging the global economy to grow at sub-3% levels over 2022 and 2023.

The recent lockdowns in different parts of the world have snarled operations at some of the worlds major ports, affecting the supply chains. Considering that the manufacturer to the world faces disruptions and challenges, as do various other countries, these circumstances are weighing on the global economy and adding another risk to the inflation picture. The ongoing war, lockdowns, and rising inflation are further exacerbating the recovery of the global economy. Basis the above headwinds, global trade volumes are expected to grow by 4% in 2022 and 4.3% in 2023.

INDIAN ECONOMY OVERVIEW:

Indian economy is leaping towards its best-ever performance and is expected to be one of the top three economy in the world over the next few decades, backed by its robust demand and higher consumer base. Indias economy is the fastest-growing economy of the emerging nations post-pandemic. Indias real GDP growth was 8.7% in 2021-22 against a contraction of 7.3% in 2020-21.

The current growth in the economy is a result of various initiatives taken by the Government of India. In 2020, the Government of India announced an INR 2.65 lakh crore (USD 36 billion) stimulus package to generate job opportunities and provide liquidity support to various sectors. Indias cabinet approved the production-linked incentives (PLI) scheme to provide approximately INR 2 trillion (USD 27 billion) over five years, to create jobs and boost production in the country.

Combination of high Foreign Exchange Reserves, sustained Foreign Direct Investment, and rising export earnings will provide an adequate base for future growth to Indian economy. Further, the production-linked incentive (PLI) schemes in 14 sectors, will further encourage private investment to boost export growth and allow for feasible import substitution in the country.

Indias GDP in 2022-23 is likely to be impacted by various factors like restraints on energy access and prices, food inflation, reflexes from trade sanctions, tightening policies and financial instability. Amid this scenario, the GDP is likely to be around 8.2% for 2022-23. The 2022-23 budget is a balanced response by the Government to support economic recovery and enable the projected 8%-8.2% GDP growth rate for 2022-23. The announcements for record setting outlay on infrastructure projects and push for the rural economy in the budget will support and revive the industry in general, recovering from the pandemic-induced shocks.

GLOBAL LOGISTICS INDUSTRY OVERVIEW:

The Global Logistics market attained a value of USD 4.92 trillion in 2021. Going forward, the market is expected to achieve USD 6.55 trillion by 2027, translating into a CAGR of 4.7% from 2022-2027. The logistics sector is vital for the global economic growth. On an average, logistics sector accounts for circa 8-10% in the GDP of various countries across the world. However, lockdowns caused by pandemic have disrupted the supply chains and exposed the vulnerabilities of the sector. While addressing these vulnerabilities, the sector, as a whole, is bouncing back stronger.

Execution capabilities of logistics sector was already undergoing a change due to gradual adoption of technology. This process was accelerated due to challenges raised by the pandemic such as social distancing, public health measures etc. Accordingly, Artificial Intelligence(AI), Robotics, Data Analytics, Warehouse Automation etc. are changing the competitive landscape. Increase in adoption of these technologies have led to higher supply chain efficiency by reducing costs and minimizing errors.

Additionally, the e-commerce sector has been driving demand for logistics and warehousing across global markets and has emerged as the most prominent driver of the warehousing market volumes.

INDIAN LOGISTICS INDUSTRY OVERVIEW:

The logistics industry in India, considered to be the major growth driver and holds unprecedented importance as it connects various markets, suppliers and customers dotted across the country, and has now been firmly embedded as an integral part of the national GDP value chain. In FY 2021, the size of the Indian logistics market was around USD 250 billion and estimated that this market would grow to USD 380 billion by 2025, at a CAGR of approximately 11%.

Recently, the sector has been witnessing transformation, with the use of technology by both new age start-ups and established players to enhance cargo visibility, reducing errors by digitising documentation processes and by bringing transparency in pricing. The sector is expected to witness steady growth in the medium to long-term timeline, on account of growing imports and exports, supported by various infrastructure development measures taken by the government. The Government has undertaken various initiatives to develop the logistics infrastructure in the country. Some key initiatives are listed below:

1. Logistics sector has been granted infrastructure status allowing the sector to have access to funds at easier terms with enhanced limits.

2. National Logistics Policy has been drafted to focus on the development of a fully integrated logistics network with best-in-class technology and automation. The National Logistics Policy will enable the creation of a single point of reference for all logistics and trade facilitation matters in the country, which will also function as a knowledge and information-sharing platform.

3. Announcement of 25,000 km of new highways, Gati Shakti Masterplan for expressways 100, new cargo terminals with multi modal logistic park and initiatives to connect urban transport to railways.

4. Planning for commencement of Western Dedicated Freight Corridor (DFC) and Eastern DFC by 2022.

5. Fitment of FASTag has been mandated by the Ministry of Road Transport and highways with effect from 2021 to ensure 100% e-tolling at toll booths. FASTag will ensure ease of payments, and reduction of waiting time at tolls.

The warehousing industry in India is largely unorganized, however with all the policy reforms that are being undertaken there is a paradigm shift in the industry structure where it is becoming favourable for organised players.

Further, despite COVID-induced burdens and delays, these initiatives are steps in the right direction, and it has resulted in increase in the interest of foreign investors to enhance their footprint in the country by way of investments in the warehousing and logistics sectors.

ABOUT ARSHIYA BUSNIESS

Arshiya Limited together with its subsidiaries is a flagship Company of Arshiya Group. It is pioneering Unified Supply Chain and integrated logistics infrastructure solution provider with Group headquartered in India. The group businesses comprises of Logistics, Free Trade and Warehousing Zone (FTWZ), 3 Party Logistics (3PL), Supply Chain Management solutions and Data Centre.

MULTI-PURPOSE SEZ:

The Companys free trade warehousing zone at Khurja (UP) and Panvel have been declared as a multi-Purpose SEZ.

This will increase the suite of services in Arshiya Group to include manufacturing (E.g. manufacturing of mobile, telephone, other electronics devices and defence sector for availing off-set benefits) services along with FTWZ services already offered. Given the Governments push toward an Atmanirbhar India (PLI scheme) as well as a global push of multinationals to have a China - Plus One strategy, the Company sees this as a strategic foray into offering manufacturing services to Global Marquee Clients in multiple sectors.

FREE TRADE WAREHOUSING ZONE (FTWZ) BUSINESS

The company has presence in two major warehouse clusters, viz., Panvel - JNPT & NCR.

Arshiya FTWZ facility at Panvel - JNPT warehousing cluster caters to the EXIM demand as also to the consumption led demand. The Panvel warehouse cluster on account of its proximity to JNPT has emerged as a suitable warehouse hub for EXIM cargo for SAARC countries. The emerging new Infrastructure, the quick access to JNPT, its strategic location and seamless operation capabilities helping many organizations to increase and optimize their business via Just In Time Model (JIT Model) and it will drive in more consumption- based demand in South Asian region in near future. Developers having land in this location are open to develop warehouses for prospective clients.

The National Capital Region (NCR) being the countrys largest urban agglomeration is one of the most important warehousing markets of the country. Also called the gateway to the north, warehousing in NCR is spread across major road networks. The market not only caters to the intrinsic warehousing demand of the National Capital region, but also acts as a key storage and warehousing hub for the neighbouring states. Over the years, warehousing in NCR has shifted from areas that had godown-type structures to newer areas that are well connected to major infrastructure roads and have the luxuries of contiguous land availability for the organized warehousing players to build good quality warehouses. These newer locations are just off the main national highways and have witnessed phenomenal growth in terms of quality warehousing clusters and facilities.

Arshiya FTWZ facility at Khurja continues to offer a great value proposition to customers operating out of North India, either importers or exporters across different sectors including Telecom, Electronics, Chemicals, aircraft engines etc. The upcoming eastern dedicated freight corridor is having Khurja as an integral part of corridor is a proposed junction for western dedicated freight corridor and eastern dedicated freight corridor. It will result in Khurja becoming a strategic location in the supply chain of many organizations which shows the promising growth for FTWZ Khurja in near future.

3 PL SERVICES

The Companys subsidiary Company is in the business of providing 3PL and other value optimisation services such as handling and transportation, packaging, consolidation, palletisation, labelling, kitting, bagging, bottling, cutting-slitting, survey, quality assurance, refurbishment, repairs and maintenance, washing, etc., to its various clientele.

SUPPLY CHAIN MANAGEMENT

Your Company offers customised and end-to-end logistics solutions and services, including transportation and distribution, warehousing, in-factory logistics and value-added services to our customers. The Company aim is to make the journey of all inputs and finished products from origin to end customer, more efficient and reliable, with shortened delivery times and better customer satisfaction

DATA CENTRE

The Company had outlaid plan to setup an additional segment, i.e., Electronic hardware and software (including information technology enabled services) in the notified area for FTWZ at its Panvel facility wherein company planned to develop IT/ITES Park on an area of approximately 25 acres of land. The Company had obtained the requisite approvals to setup the IT / ITES Park from the concerned authorities.

The requisite 25 acres of land situated at Panvel FTWZ had been notified as IT / ITES Park and on the said land of the Company plans to build "Hyperscale Data centre Park" with a constructible area of approximately 2 to 3 million square feet.

OPPORTUNITIES:

The manufacturing sector is going to contribute nearly 25% of Gross Domestic Product (GDP) and play a pivotal role in the growth of the Indian economy. In particular, the Make in India reform has been instrumental in supporting the manufacturing sector.

Further, the implementation of GST has led to a significant increase in profitability for developers in the warehousing sector. Companies are now able to maintain pre-GST service levels with lower levels of inventory and are leapfrogging the multiple barriers to entry. Post GST, companies are consolidating their supply chains for market/ supply chain efficiency, and leasing large format warehouses.

Consumer, retail and e-commerce companies are driving the demand for grade A modern warehouses. These sectors are also increasing their market reach and depth and hence have a greater requirement for fulfilment and distribution services. Express and cross-border logistics services offer attractive growth, higher profitability and increased customer stickiness and are natural extensions to our portfolio of offerings.

The setting up of warehouse platforms is also a highly enticing venture for customers with PAN - India businesses operations. Businesses no longer need to spend resources making multiple deals with numerous local players, instead they can optimize their operations by partnering with larger players with presence in multiple locations.

Additionally, the approval for Multisector SEZ, there would be new business opportunity. Further government reforms ensure that warehousing and logistics facilities now fall under the "Infrastructure Category", resulting in players gaining access to funds at lower costs. As a result, companies can now borrow funds over a longer repayment tenure, allowing for a sustainable growth model - something that wasnt previously possible. Other key growth drivers are as under:

1) Favourable policy changes;

2) Robust demand for organized warehousing;

3) Ease of doing business;

4) Higher consumption base; and

5) Increasing interest of foreign investors

THREATS:

The Logistics & Supply Chain industry faces several threats and challenges, such as higher energy prices impacting the competitiveness in the domestic market. Competitiveness of various industry players is determined by several factors, such as availability of anchor customers, levels of automation and technology deployed in day-to-day operations, reliability of the supply chain, adherence to compliance standards and multi-sector domain expertise for a third party logistics player.

Further, the trend towards larger-scale logistics service providers in India continues several logistics sub-segments—such as road transportation, freight forwarding, customs handling and CFSs—have multiple players operating in the same region or targeting the same sets of customers with me-too offerings. Several logistics sub-segments are significantly impacted by regulations.

SEGMENT-WISE / PRODUCT-WISE PERFORMANCE

Your Companys entire business is from inter-modal logistics. There are no other primary / secondary segments in your Companys business.

Segment Reporting:

Disclosure of segment reporting as per the requirements of Ind AS 108 "Operating Segment" is reported in the consolidated financial statements of the Company. Therefore, the same has not been separately disclosed in the standalone financial statements in line with the requirement of Ind AS 108.

RISKS, CONCERNS, AND ITS REQUISITE MITIGATION:

Arshiya operates in a regulated environment with various of laws and regulations applicable to it. In case the Company, does not obtain the required approvals and licenses in timely manner, the business and operations may be adversely affected. The Company has well established structure, policies, and procedures to assist in the compliance with law and regulations.

The Companys business is affected by the rise and fall in the levels of EXIM Business in the country. The Company is focusing on high margin segment which is essentially dependent on imports and exports of containerized cargo in India. With expected EXIM trade increase along with the growth in containerization, FTWZ business is expected to be enlarge in coming year and hence, the Company believes it has adequate mitigation is in place.

The Companys foreign currency revenue earnings are significant and any appreciation or depreciation in the rupee can have an impact on its revenue and profitability. The Company has in place a well-defined policy and processes designed to minimize the impact of volatility in foreign exchange fluctuations on its earnings. Appropriate internal controls are in place for monitoring the foreign exchange earning risk.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Internal Control Systems of the Company perfectly correspond with the nature of its business and the size and complexity of its operations.

The Risks are regularly tested and certified by the Statutory and Internal Auditors. Also, the Company has a well-established framework of internal controls in place, supported by policies, guidelines and procedures, including suitable monitoring procedures. The Audit Committee reviews adequacy and effectiveness of the internal control process and systems. It also monitors the implementation of audit recommendations, with the perspective of strengthening the Companys risk management systems. A management team additionally conducts quarterly reviews. It assesses the internal control environment, checks the adequacy concerning the business and make relevant recommendations.

The financial and operating controls of the Company are reviewed regularly by the Internal Controls and Audit as per the annual plan approved by the Audit Committee.

The Company has a proper and adequate system of internal controls to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and that the transactions are authorized, recorded and reported correctly. Such internal controls are supplemented by an extensive program of internal audits, review by management and documented policies, guidelines and procedures.

The CEO and CFO certification provided in the CEO and CFO certification section of the Annual Report considers the adequacy of our internal control systems and procedures.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE OF THE COMPANY: STANDALONE FINANCIAL PERFORMANCE OF THE COMPANY:

Rs In Lakhs

Particulars	Year Ended 31st March, 2022	Year Ended 31st March, 2021	Variance	Variance in %
INCOME
Revenue from operations	6,193.34	6,632.39	(439.05)	-6.62%
Other income	818.96	1,094.85	(275.89)	-25.20%
Total Income	7,012.30	7,727.24	(714.94)
EXPENSES
Employee benefits expenses	1,299.13	961.13	338.00	35.17%
Finance costs	8,646.77	14,812.38	(6,165.61)	-41.62%
Depreciation and amortization expenses	1,032.54	1,289.67	(257.13)	-19.94%
Other expenses	3,121.09	1,520.17	1,600.92	105.31%
Total Expenses	14,099.53	18,583.35	(4,483.82)
Profit/(loss) before exceptional items and tax	(7,087.23)	(10,856.11)	3,768.88	-34.72%
Exceptional Items (net)	(47,244.27)	-	(47,244.27)	100.00%
Profit/(loss) before tax	40,157.04	(10,856.11)	51,013.15	-469.90%
Tax expense	-	-	-
Profit/(loss) for the year	40,157.04	(10,856.11)	51,013.15	-469.90%

NOTE:

The financial statements of the Company for the period from 1^st April, 2019 upto 31^st March 2021 have been restated pursuant the Scheme of Arrangement (Scheme) approved by National Company Law Tribunal, Mumbai Bench (NCLT) vide its order dated 21^st January, 2022. The Scheme became effective from 2^nd February, 2022 with the Appointed date of the scheme is 1^st April, 2019.

REMARKS FOR MAJOR VARIANCES:

1. Other income is lower due to certain receipt against provision in FY 20-21.

2. Employee benefits expenses increased due to increase in manpower.

3. Finance cost lower due to impact of settlement of debts in current year.

4. Other expenses are higher due to loss on sale of investment in a subsidiary and less valuation of monetisation of land.

5. The exceptional items during the year ended 31^st March 2022 represent settlement of debts (net).

CONSOLIDATED FINANCIAL PERFORMANCE OF THE COMPANY:

Rs In Lakhs

Particulars	Year Ended 31st March, 2022	Year Ended 31st March, 2021	Variance	Variance in %
Income
Revenue from operations	15,014.12	14,278.42	735.70	5.15%
Other income	9,674.09	1,727.62	7,946.47	459.97%
Total Income	24,688.21	16,006.04	8,682.17
Expenses
Warehousing, transportation and handling costs	1,775.45	1,419.74	355.71	25.05%
Employee benefits expense	1,996.63	1,380.51	616.12	44.63%
Finance costs	16,217.40	23,193.87	(6,976.47)	-30.08%
Depreciation and amortization expense	7,181.47	7,297.95	(116.48)	-1.60%
Other expenses	3,356.37	3,026.59	329.78	10.90%
Total Expenses	30,527.32	36,318.66	(5,791.34)
Profit/(loss) before exceptional items and tax	(5,839.11)	(20,312.62)	14,473.51	-71.25%
Exceptional Items (net)	48,988.99	-	48,988.99	100.00%
Profit/(loss) before tax	43,149.88	(20,312.62)	63,462.50	-312.43%
Tax expense	28.82	8.64	20.18	233.56%
Profit/(loss) for the year from Continuing Operations	43,121.06	(20,321.26)	63,442.32	-312.20%
Profit/(loss) for the year from Discontinuing Operations	(730.29)	(224.44)	(505.85)	225.38%
Net Profit/(loss) for the year	42,390.77	(20,545.70)	62,936.47	-306.32%

NOTE:

The Consolidated financial statements for the period from 1^st April, 2019 to 31^st March 2021 have been restated pursuant the Scheme of Arrangement (Scheme) approved by National Company Law Tribunal, Mumbai Bench (NCLT) vide its order dated 21^st January, 2022. The Scheme became effective from 2^nd February, 2022 with the Appointed date of the scheme is 1^st April, 2019.

Remarks for major variances:

1. Other income is increased due to gain on sale of investment in a subsidiary.

2. Employee benefits expenses increased due to increase in manpower.

3. Finance cost lower due to impact of settlement of debts in current year.

4. The exceptional items during the year ended 31^st March 2022 represent settlement of debts (net).

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS:

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) (amendment) Regulations, 2018, the Company is required to give details of significant changes (changes of 25% or more as compared to the corresponding previous year) in key sector specified financial ratio:

S. Particulars No.	Standalone			Consolidated
	Mar-22	Mar-21	Variation	Mar-22	Mar-21	Variation
1 Debtors Turnover Ratio (Days)	1,125.26	1,308.52	-14.01%	80.02	53.87	48.55%
2 Inventories Turnover Ratio	-	-	-	-	-	-
3 Interest Coverage Ratio	5.86	0.27	2064.31%	0.72	0.14	428.06%
4 Current Ratio	0.88	0.73	19.62%	0.29	0.31	-6.86%
5 Debt Equity Ratio	0.78	2.41	-67.44%	4.10	-15.15	-127.07%
6 Net Debt/EBIDTA	27.59	23.28	18.52%	16.24	20.63	-21.28%
7 Operating Profit Margin	28.63%	62.59%	-33.96%	88.17%	90.06%	-1.88%
8 Net Profit Margin	648.39%	-163.68%	812.07%	282.34%	-143.89%	426.23%

DETAILS OF ANY CHANGE IN RETURN ON NET WORTH AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR ALONG WITH A DETAILED EXPLANATION THEREOF:

The financial performance of the company has been provided in the financial Section of report.

HUMAN RESOURCE DEVELOPMENT:

Arshiya Group has ~ 200 employees. As the Company is growing, it focuses on development of all the employees by providing them training. Strong emphasis is placed on building a healthy and rewarding work environment while constantly improving employee engagement.

The Company provides an open and dynamic work environment where the organization believes in its people and recognizes that its success and growth are driven by people.

In the Company, people are our competitive advantage. It is our employees who create extraordinary results for our customers on continuous basis. We respect our people and value the strength of each employee.

FORWARD-LOOKING AND CAUTIONARY STATEMENTS:

Statements in this Management Discussion and Analysis of Financial Condition and Results of Operations of the Company, describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable securities laws and regulations.

Forward looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Company assumes no responsibility to publicly amend, modify or revise forward looking statements, on the basis of any subsequent developments, information or events. Actual results may differ materially from those expressed in the statement.

Important factors that could influence the Companys operations include changes in government regulations, tax laws, economic developments and climatic conditions affecting demand and supply within the country, natural calamities and so on and such other factors globally, which the company does not have any direct control.

The management of your Company has used estimates and judgments relating to the financial statements on a prudent and reasonable basis, in order that the financial statements, reflect in a true and fair manner, the state of affairs and profit for the year.

The following discussions on the financial condition and result of operations should be read together with our audited consolidated financial statements and the notes to these statements included in the annual report. Unless otherwise specified or the context otherwise requires, all references herein to "we", "us", "our", "the Company", Arshiya" are to Arshiya Limited and its subsidiaries and associates.