Bhatia Communications & Retail (India) Ltd Management Discussions

This section shall include discussion on the following matters within the limits set by the listed entitys competitive position:

1. Industry structure and developments.

2. Opportunities and Threats.

3. Segment–wise or product-wise performance.

4. Outlook

5. Risks and Concerns

6. Internal control systems and their adequacy

7. Discussion on financial performance with respect to operational performance.

8. Material developments in Human Resources / Industrial Relations front, including number of people employed.

9. Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor, including: i. Debtors Turnover

ii. Inventory Turnover

iii. Interest Coverage Ratio

iv. Current Ratio v. Debt Equity Ratio

vi. Operating Profit Margin (%)

vii. Net Profit Margin (%) or sector-specific equivalent ratios, as applicable.

10. Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof.

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.

Industry Structure and Developments

Global Economic Overview

In 2023, the global economy continued to navigate persistent challenges and evolving dynamics. Recovery from the Covid-19 pandemic, Russias invasion of Ukraine, and the cost-of-living crisis is proving surprisingly resilient. With substantial stabilisation witnessed in 2023, global GDP growth stood at 2.9%, supported by a mix of monetary and fiscal policies. Early forecasts for growth in 2024 are around 3.1%. Factors contributing to this moderated growth include the tightening of central bank rates to combat inflationary pressures, ongoing geopolitical tensions, and lingering uncertainties from various global events. Recent turbulence in the banking sectors of the US and Europe has highlighted vulnerabilities in the financial system, complicating the decision-making processes of central banks as they balance inflation management with financial stability. Additionally, elevated levels of debt persist, constraining the flexibility of fiscal policymakers in addressing emerging challenges.

Inflation is falling faster than expected from its 2022 peak, with a smaller-than-expected toll on employment and activity. This reflects favourable supply side developments and central banks tightening, which has kept inflation expectations anchored. However, high interest rates aimed at fighting inflation and the withdrawal of fiscal support amid high debt levels are expected to weigh on growth in 2024.

The global recovery is slowing amid widening divergences among economic sectors and regions. Global inflation is expected to fall from 8.7% in 2022 to 6.8% in 2023 and 5.2% in 2024. Major economies are projected to experience lower inflation, with advanced economies benefitting from stronger monetary policies and lower exposure to commodity prices and exchange rates. In contrast, inflation in low-income developing countries, is expected to be in double digits but is projected to decrease in 2024.

As disinflation trends continue, monetary policy tightening is tapering. However, there is a moderate risk of inflation re-accelerating in 2024. Firm global demand, driven by tight labour markets and strong worker bargaining power, alongside an upswing in key commodity prices due to supply shortages, may push central banks to tighten monetary policies further. This could lead to a significant slump in consumer and investment demand.

Indian Economic Overview

India was one of the fastest-growing economies globally in FY24. The key growth drivers were Government spending on infrastructure & robust domestic demand for goods and services. Despite headwinds of persistent inflation and high interest rates, Indias GDP growth rate for the financial year 2023-2024 is estimated to be ~7.6% vs 7.0% last year. Looking ahead, the Indian economy is expected to grow ~7% in the financial year 2024-2025 driven by moderating inflationary pressures, normal monsoon, and sustained momentum in manufacturing and service sectors.

Indias Atmanirbhar Bharat initiative aims to transform the nation into a global leader in telecom equipment development and manufacturing. The Department of Telecommunications ("DoT") is actively supporting this vision by:

• Fostering a research and development (R&D) ecosystem: This includes encouraging research in areas like core transmission equipment, next generation 4G/5G infrastructure, and various types of user equipment (wireless, access, CPE, IoT devices, etc.).

• Establishing 100 engineering institution labs dedicated to 5G application development: This initiative seeks to unlock the potential of 5G technology by fostering innovation and creating new business models and employment opportunities within the Indian telecommunications sector.

In recent times, various technological developments in digital communication sector have resulted in the convergence of devices, services, and networks, and play an important role in society from the economic, social, and development perspective. There has been a massive increase in the storing, processing, and functional capabilities of network systems and consumer devices due to explosion of data sets. Digital transformation has drastically increased the computing and information delivery capabilities of communication networks resulting in the development of global-scale digital platforms which can deliver virtually any service to any person and at any place through the internet.

Indian Mobile & Consumer Durable Industry

India championing the way forward to become a global consumer durables manufacturing hub

The consumer durables industry consists of air conditioners, refrigerators, washing machines dryers, dishwashers, LED Lights, personal care, kitchen appliances etc. Out of this, the largest market share comprises of Air Conditioners, Refrigerators and LED products.

The Indian consumer durables market is broadly segregated into urban and rural markets and is attracting marketers from across the world. The sector comprises a huge middle class, a relatively large affluent class, and a small poor class. The sector includes consumer electricals such as fans, kitchen and cooking appliances, lighting devices, as well as white goods such as washing machines, televisions, refrigerators, and air conditioners.

The market share in the consumer durables industry is moving from the unorganised to the organised sector. According to estimates, 30% of the total market is still unorganised, which provides listed Indian players with a significant opportunity to further increase their market share going forward. Artificial intelligence and manufacturing automation will be important future trends as consumer awareness increases regarding technology advancements and their applications across multiple sectors. In order to increase the production efficiency of various consumer durables, Industry 4.0 will stimulate investments in R&D, technology infrastructure, and manufacturing processes.

For telecom, currently, India is the worlds second-largest telecommunications market with a total telephone subscriber base stood at 1,199.28 million in March 2024 and has registered strong growth in the last decade. The Indian mobile economy is growing rapidly and will contribute to Indias Gross Domestic Product (GDP) according to a report prepared by GSM Association (GSMA) in collaboration with Boston Consulting Group (BCG). In 2019, India surpassed the US to become the second-largest market in terms of the number of app downloads.

The liberal and reformist policies of the Government of India have been instrumental along with strong consumer demand in the rapid growth of the Indian telecom sector. The Government has enabled easy market access to telecom equipment and a fair and proactive regulatory framework, which has ensured the availability of telecom services to consumers at affordable prices. The deregulation of Foreign Direct Investment (FDI) norms has made the sector one of the fastest growing and the top five employment opportunity generator in the country.

Opportunities & Threats

The telecom industry excels in providing global connectivity and fostering innovation, contributing significantly to overall industry growth. The telecom industry has ample opportunities for growth due to the increasing demand for connectivity and communication services. Additionally, there is the emergence of transformative technologies like 5G and IoT which further contribute to its growth potential.

The industry faces challenges such as high infrastructure costs, regulatory hurdles, and cybersecurity threats. The telecom sector has strengths and opportunities, but it also faces threats. Increasing competition challenges market share and profitability. Consumer preferences change rapidly, requiring adaptability. Geopolitical risks and uncertainty and risk to the industrys stability.

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.

With an ambitious growth spree, the companys revenue from multi product stores stands at INR 23 Crores. 28 stores sell electronic appliances such as Television, Refrigerator, Air Conditioners, Air Coolers, Washing

Machines, and Microwaves, though our prime business still remains retail and wholesale distribution of mobile handsets, tablets, data cards and mobile accessories. Besides this, the conversion rate is at a whopping 98%.

Segment/ Product	Number of Stores
Total Stores	203
Owned Retail Stores	193
Franchised Stores	10

The total revenue of the company stood at INR 415 Crores which was INR 344 Crores in previous year. The company now owns a total of 203 stores, out of which 193 are owned stores and 10 are franchised.

Outlook

The stores of our company has 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 this year. 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

Supply chain disruptions, mobilizing workforce and keeping up with demand poses a risk, as we expect a dramatic increase in demand when various companies release their 5G phones in India.

Many phone manufacturers offering lucrative offers and early-access deals directly to the consumer through its B2C channels can become difficult to compete with.

Rapidly increasing in the technology trends, less life line of the products, outdated ratio increases rapidly.

The continued maintenance and improvement of BHATIAs brand recognition and reputation are crucial to its future success. Failure to do so may impede the ability to maintain and expand its consumer base, leading to negative impacts on business operations, financial condition, cash flows, and results of operations.

Internal Control Systems and Their Adequacy

The Company has in place an adequate system of internal control commensurate with its size and nature of its business. These have been designed to provide reasonable assurance that all assets are safeguarded and protected against loss from unauthorized use or disposition and that all transactions are authorized, recorded and reported correctly and the business operations are conducted as per the described policies and procedures of the Company. The Audit Committee and the Management have reviewed the adequacy of the internal control systems and suitable steps are taken to improve the same

Discussion on Financial Performance with respect to Operational Performance

In FY2024, the companys income from operations grew to INR 413 Crores, an increase of 21% from FY 2023.

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 year, the company has increased the manpower of the company and has accelerated employment generation. The number of permanent employees in the previous year were 92 whereas in current year the number has increased to 156.

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: 13/08/2024	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