Bhatia Communications & Retail (India) Ltd Management Discussions

Annexure - III

This Report contains forward-looking statements that involve risks and uncertainties. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements. This report should be read in conjunction with the included financial statements and the notes.

ECONOMIC OVERVIEW, INDUSTRY STRUCTURE AND DEVELOPMENTS:

MACRO ECONOMY:

The demand for a wide range of consumer durable goods is growing as a result of the ongoing increase in disposable income and technological innovation in India. This in turn is fueling fierce competition among the various consumer durable brands that are available across the country. India is viewed by multinational organizations as one of the primary markets from which future growth is likely to originate.

In F.Y. 2023 (April-November), electronics exports grew by 13.8%, the highest in the last 6 years. With robust growth, India aims to achieve electronics manufacturing worth US$ 300 billion in electronics exports of US$ 120 billion by F.Y. 2026. By 2025, Indias Consumer Electronics and Appliances Industry is predicted to be the fifth-largest in the world. The Indian Appliances and Consumer Electronics (ACE) market is predicted to nearly double in the next 3 years, reaching approximately US$ 17.93 billion (Rs. 1.48 lakh crore) by 2025. The Indian appliances and consumer electronics industry stood at US$ 9.84 billion in 2021 and is expected to more than double to reach Rs. 1.48 lakh crore (US$ 21.18 billion) by 2025.

Electronics hardware production in the country stood at US$ 87 billion in 2022. Indias consumer electronics and home appliances market is set to grow by US$ 2.3 billion between 2022 and 2027, registering a CAGR of 1.31%.

INDIAN ECONOMY:

The Indian electronics industry is one of the most rapidly growing industries worldwide. Electronic products have continuously impacted and shaped our lifestyles in the current digital era. The advent of technology has led to seamless activities and accelerated the digital revolution to the next level. Furthermore, demand for electronic devices is anticipated to rise steadily and continue to be a key economic driver worldwide. India has been one of the pioneers of the Local Goes Global movement. The country is focusing on developing its share in the global value chain, establishing export hubs in different states, constructing a high-quality and seamless supply chain, and increasing its overall market share in the electronics export market.

The Indian economy accounts for nearly 3.2% of the global economy, and its population is almost 3.2% of the total global population. The Government of India aspires to make the country a substantial manufacturing and design hub for electronics as part of its Aatmanirbhar Bharat scheme. The Digital India Programme has led to a paradigm transition towards digitization and egovernance in India. Indias market share in the global electronics manufacturing industry increased to 3.6% in 2020 from 1.3% in 2012.

The Production Linked Incentive (PLI) scheme has effectively enticed international champions while giving an impetus to domestic manufacturers and creating national champions with global ambitions. Indias electronic manufacturing industry has witnessed a sharp transition in the last few years with various initiatives to market electronics manufacturing. The governments lucrative plans and initiatives have led the electronic manufacturing industry to a high growth trajectory.

Additionally, the availability of skilled labour, large domestic market and low-cost labour have contributed to its sharp rise. Technology has been a crucial driver across industries, influencing all spheres of life. The electronics market share in India is on the rise. In the past few years, India has captured a sizeable market share of the electronics manufacturing ecosystem that drives the technology sector. For the country to be the global electronics production unit of the future and become a US$ 5 trillion economy by 2025-26, it shall aim to be a US$ 1 trillion digital economy. Furthermore, special focus will be given to exports in order to accomplish the objectives.

The government aims to make electronics one of the top three export categories by 2025-26. A US$ 1 trillion digital economy target is projected to boost demand for electronics, which may stand at around US$ 180 billion by 2025-26. If India can accomplish the manufacturing goal of US$ 300 billion for electronics, the local market requirement may be fully met by such manufacturing. The US$ 300 billion target also requires US$ 120 billion of exports in the global market. Global competitiveness with optimum scale would be pivotal in achieving the aforesaid targets. Adequate fiscal measures, along with policy measures, would help in meeting the objectives of NPE 2019.

INDIAN MOBILE & CONSUMER DURABLE INDUSTRY MARKET TRENDS IN 2025

Rise of Smart Devices: Smart TVs, voice-controlled washing machines, IoT-enabled refrigerators, and AI-integrated air conditioners are becoming mainstream.

Green Consumerism: Consumers increasingly opt for energy-efficient and eco-friendly appliances, encouraged by BEE ratings and sustainability awareness.

Affordable Premiumization: Mid-range smartphones with high-end specs and affordable yet feature-rich appliances dominate consumer preferences.

Rural Penetration: With growing incomes and access, Tier III & rural India is becoming the new frontier for industry growth.

Fintech-Driven EMI Purchases: BNPL (Buy Now, Pay Later), zero-interest EMIs, and easy financing options make it easier for consumers to upgrade.

OPPORTUNITIES & THREATS

Digital India & BharatNet Initiatives: Government efforts have expanded internet and electricity access to Tier II/III towns and rural areas, fueling demand for mobile phones and household appliances.

5G Rollout: As 5G services expand across major cities, high-speed connectivity boosts demand for 5G-enabled smartphones and smart home devices.

Changing Consumer Behavior: Aspirational middle-class consumers prefer smart, energy-efficient appliances, often opting for premium or feature-rich models.

E-commerce & Omnichannel Retail: Platforms like Amazon, Flipkart, and Reliance Digital drive online sales of mobiles and appliances, especially during festive periods.

Local Manufacturing: PLI (Production Linked Incentive) schemes have accelerated domestic manufacturing of mobiles and electronic goods, reducing import dependency and creating jobs.

THREATS

Price Volatility & Supply Chain Pressures: Global chip shortages and logistics disruptions have occasionally impacted pricing and availability.

Intense Competition: Brands face shrinking margins due to fierce competition from both Indian and Chinese players, especially in mobile phones.

E-waste Management: With rising consumption, proper disposal and recycling of electronic waste is a growing environmental concern.

Regulatory Compliance: BIS standards, import duties, and labeling regulations require manufacturers to stay agile and compliant.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

Over the last few years, as a growth oriented company we have focused on diversifying into other consumer electronics products as we see a long run way for growth in sales of these products. This has helped us to only emerge as a multi-product brand but has also grow our profitability margins.

	Number of Stores	Mobiles	Quantity sales Other electronics
Owned Retail Stores	233	22419	86607
Franchised Stores	4	5123	7412
Total Stores	237	27542	94019

The total revenue of the company stood at INR 444 Crores which was INR 415 Crores in previous year. The company now owns a total of 237 stores, out of which 233 are owned stores and 4 are franchised.

OUTLOOK

The Indian mobile and consumer durable industry is poised for robust expansion over the next decade. The convergence of affordability, innovation, and government support positions India as not just a consumer hub but also a global manufacturing and export center for electronics.

Investments in R&D, backward integration, and sustainable practices will be critical to future-proofing the sector. As the rural market matures and smart technologies become ubiquitous, the next wave of growth will be inclusive, digital-first, and environmentally conscious.

The stores of our company have been spread over the Gujarat covering almost every area even the rural and the remote areas. Also, the company has set its footing in Maharashtra. Our decision to invest in this growth spree roots from the fact that we are bullish on the demand of various consumer electronic items as the work from home culture spreads.

The company strives to build a stronger brand image by offering attractive prices and loyalty programmes for its customers. It plans to expand its business in the country and enter into business agreements with various leading brands to upgrade customer experience.

RISKS AND CONCERNS

Despite strong growth prospects, the Indian mobile and consumer durable industry in 2025 faces several challenges and risk factors that could impact its momentum. These include both external macroeconomic risks and internal operational concerns.

Supply Chain Vulnerabilities

Global Component Dependency: A significant portion of semiconductors, display panels, lithium batteries, and electronic components are imported from China, South Korea, and Taiwan. Any geopolitical tension or logistical disruption can severely affect production timelines and costs. Freight & Input Cost Volatility: Fluctuations in freight charges, customs duties, and raw material prices (e.g., metals, plastics) continue to pressure margins.

Geopolitical and Policy Risks

Import Restrictions & Tariff Changes: Sudden changes in trade policies, anti-dumping duties, or import restrictions can impact supply chains and pricing strategies. PLI Scheme Uncertainty: Delays in incentives, complex compliance norms, or changes in the scope of the Production Linked Incentive (PLI) schemes may discourage long-term investment.

Technological Obsolescence

Fast-Changing Tech Cycles: Rapid innovation in smartphones, smart TVs, and home automation leads to shorter product life cycles and higher inventory risk.

Lag in Upgradation: Domestic players may struggle to keep up with global innovation, leading to a competitive disadvantage.

Cybersecurity and Data Privacy

Increasing digitization and integration of smart features expose devices and customers to cyber threats, data breaches, and unauthorized surveillance, especially in IoT-enabled appliances and mobile devices. Non-compliance with Indias Data Protection Laws (like the Digital Personal Data Protection Act, 2023) can lead to penalties and reputational damage.

Environmental and E-Waste Concerns

The surge in device consumption leads to a massive rise in electronic waste (e-waste). Inadequate recycling infrastructure and poor consumer awareness pose sustainability and regulatory risks. Non-compliance with E-Waste Management Rules, 2022 can attract regulatory action and reputational harm.

Consumer Finance Risk

The growing reliance on BNPL schemes, EMIs, and credit raises the risk of consumer loan defaults, especially in rural or low-income segments. An economic downturn or interest rate hike may dampen financing-led demand.

Competitive Pressure and Margin Erosion

The industry is highly competitive with price wars among Indian, Chinese, and Korean brands.

Rising customer expectations for better features at lower prices squeeze manufacturer and retailer profit margins.

Regulatory & Compliance Risk

Stringent BIS certifications, energy rating norms, and environmental clearances add to compliance burden. Any non-compliance may lead to fines, import delays, or product recalls.

Infrastructure Gaps in Rural Areas

While demand is rising in Tier 2–4 cities and rural regions, inadequate service infrastructure, power supply issues, and poor after-sales support continue to hinder market penetration.

Inflation and Consumer Sentiment

Persistently high inflation or economic slowdown can reduce discretionary spending, especially on high-ticket durable items. A weak rupee could raise import costs, making products costlier for end consumers.

Conclusion

Managing these risks requires proactive planning, diversification of supply chains, investment in R&D, strict regulatory compliance, and a sustainable business model. Companies that focus on resilience, innovation, and responsible growth will be better positioned to thrive in the dynamic Indian market of 2025.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has established a robust internal control system that is commensurate with the nature, size, and complexity of its business operations.

These controls are designed to ensure the orderly and efficient conduct of business, safeguarding of assets, prevention and detection of fraud and errors, accuracy and completeness of accounting records, and timely preparation of reliable financial information.

Key features of the internal control system

Financial Controls

The Company follows a structured financial reporting system with defined policies and procedures.

All accounting entries are reviewed and approved by authorized personnel.

Adequate checks and balances are in place to ensure compliance with applicable accounting standards and statutory regulations.

Operational Controls

Standard Operating Procedures (SOPs) are established across departments to streamline activities and reduce operational risk.

Periodic reviews and monitoring mechanisms are in place to assess performance against key performance indicators (KPIs).

IT and System Controls

The Company has implemented secured and integrated ERP systems to automate key business processes. Access controls, data encryption, user rights management, and cybersecurity protocols ensure the integrity and confidentiality of data.

Compliance Controls

The internal compliance team ensures adherence to applicable laws, rules, and regulations, including Companies Act, 2013, SEBI LODR Regulations, GST, etc.

Updates on regulatory changes are monitored regularly and incorporated into internal systems and procedures.

Inventory and Asset Controls

Regular physical verification of inventories and fixed assets is conducted. Reconciliations and variances, if any, are reviewed and addressed promptly.

Internal Audit Function

An independent internal audit team, assisted by external professionals where necessary, conducts periodic audits of business operations, financial records, and internal controls.

The audit findings and recommendations are reported directly to the Audit Committee and are acted upon by the management.

Review and Oversight

The adequacy and effectiveness of the internal control systems are periodically reviewed by the Audit Committee of the Board. The Committee evaluates the internal audit reports, monitors the implementation of audit recommendations, and ensures continuous improvement in the control environment.

Managements Assurance

Based on the reviews conducted by the internal audit team and feedback from external auditors, the management believes that the internal control systems in place are adequate and operating effectively. However, the Company remains committed to continuously strengthening its internal control framework in response to evolving business needs and emerging risks.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

In FY2025, the companys income from operations grew to INR 442 Crores, an increase of 7% from FY 2024.

The company managed to maintain its strong profitability due to a strong foundation and loyal consumer base. The company with better inventory management, diversified product portfolio, improving conversion rate and new multi-product outlets, realized economies of scale i.e., the company was able to increase its sales without much increase in input costs.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES FONT INCLUDING NUMBER OF PEOPLE EMPLOYED

During the financial year 2024–25, the Company continued to focus on building a robust and future-ready human resources (HR) framework to support its strategic goals and business expansion. Recognizing that people are its most valuable asset, the Company undertook several initiatives to enhance employee engagement, productivity, and retention.

Key Human Resource Developments

Workforce Strength

As on March 31, 2025, the Company employed 153 permanent employees across various departments including sales, marketing, supply chain, customer service, IT, finance, and administration.

Talent Acquisition and Retention

The Company implemented structured recruitment processes to attract skilled professionals, particularly in digital commerce, technical services, and operations. Retention strategies, such as employee recognition programs, career path planning, and competitive compensation packages, were strengthened to reduce attrition.

Diversity and Inclusion

Efforts were made to increase diversity in hiring, particularly in customer service and technology teams. The Company maintains a gender-inclusive workplace and adheres to all anti-discrimination and equal opportunity norms.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS NET PROFIT MARGIN AND OPERATING PROFIT MARGIN

The company has been able to maintain a positive net profit margin and operating profit margin with an increasing trend.

Date: 04th July, 2025	By order of the Board of Directors
Place: Surat	For Bhatia Communications & Retail (India) Limited
	Sd/-	Sd/-
	Sanjeev Harbanslal Bhatia	Nikhil Harbanslal Bhatia
	Managing Director	Whole Time Director
	DIN: 02063671	DIN: 02063706