Clinitech Laboratory Ltd Management Discussions

You should read the following discussion of our financial condition and results of operations together with our restated financial statements included in the Prospectus. You should also read the section entitled "Risk Factors" on page 17, which discusses a number of factors, risks and contingencies that could affect our financial condition and results of operations. The following discussion relates to our Company and is based on our restated financial statements, which have been prepared in accordance with Indian GAAP, the Companies Act and the SEBI Regulations. Portions of the following discussion are also based on internally prepared statistical information and on other sources.

Our financial statements have been prepared in accordance with Indian GAAP, the Companies Act and the ICDR Regulations and restated as described in the report of our auditor dated July 05, 2024 which is included in this 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.

Significant Developments Subsequent to the Last Financial Period

In the opinion of the Board of Directors of our Company, since the date of the last financial statements disclosed in this Prospectus, there have not arisen any circumstance that materially or adversely affect or are likely to affect the business or profitability of our Company or the value of its assets or its ability to pay its material liabilities within the next twelve months.

COVID 19 Pandemic:

Since the onset of the COVID-19 pandemic in March 2020, our Company has responded swiftly by implementing various processes to ensure our operations continue seamlessly. As we are engaged in diagnostic laboratory services, the same were categorized under the essential goods and our operations were not shut down during this pandemic. However, due to limited availability of logistics and other constraints, we were impacted during the initial period of the lockdown. We continued our operation after making arrangements to meet the government‘s requirements on sanitization, people movement and social distancing.

We have experienced sustained growth in our business in recent years, including currently during the ongoing outbreak of COVID-19. We consider that our swift response and proactive steps taken have mitigated the impact of COVID- 19 pandemic on our business and personnel thus far. The future impact of COVID-19 or any other severe communicable disease on our business and results of operations depends on several factors including those discussed in "Risk Factors" on page 17 of this Prospectus. For more details, see "Managements Discussion and Analysis of Financial Condition and Results of Operations" Factors Affecting Results of Operations listed below:

Key factors affecting the results of operation:

Our Companys future results of operations could be affected potentially by the following factors:

Economic conditions in the markets in which we operate

Our results of operations are dependent on the overall economic conditions in the markets in which we operate, including India. Any change in macro-economic conditions in these markets, including changes in interest rates, government policies or taxation and political, economic or other developments could affect our business and results of operations. The iron and steel market in India may perform differently and be subject to market and regulatory developments that are dissimilar to the markets in other parts of the world. While stronger macro-economic conditions tend to result into higher demand for our products, weaker macro-economic conditions tend to result into lower demand. Change in demand in the market segments we currently supply or improvement/deterioration in the market or a change in regulations, customs, taxes or other trade barriers or restrictions could affect our operations and financial condition.

Regulatory developments

Our Company is regulated by the Companies Act and some of its activities are subject to supervision and regulation by statutory and regulatory authorities. It is therefore subject to changes in Indian law, as well as to changes in regulation and government policies and accounting principles.

Dependence on third party for our services

Our Company is engaged in providing diagnostic services in healthcare sector. Our Company has no formal supply agreement or contract with our vendors/suppliers for the uninterrupted supply of reagents and other materials required in our business. There can be no assurance that such parties shall continuously provide their products to us and as per our requirements of quantity as well as quality. In the event of any disruption in the supply of products or the non-availability of products, the purchase and distribution schedule may be adversely affected impacting the sales and profitability of the Company.

Our investments in new Diagnostic Centres may not be profitable and may be loss-making

In order to maintain a competitive position, we continue to invest in opening of new Diagnostic Centres. Our investments in new Diagnostic Centres, may be less profitable than what we have experienced historically, may be loss-making, may consume substantial financial resources and/or may divert managements attention from existing operations, all of which could materially and adversely affect our business, results of operations and financial condition.

Changes in Technology

Modernization and technology upgradation is essential for the services that we sell to our customers. Being technology enabled, helps us to gain an understanding of the market trends in the healthcare industry. The landscape of the healthcare industry continues to change in response to technological innovation and evolving consumer trends. New technology is changing the very definition of healthcare service industry. However, if we are unable to respond to changes in technology and evolving industry trends, our businesses may not be able to compete effectively.

RESULTS OF OPERATIONS

Description of the major components of revenue and expense items: -

Our total revenue consists of revenue from sale of products and sale of services and other income.

Revenue

Revenue from Operations

Our revenue from operations primarily accrues from sale of pathology and related healthcare services.

Expenses

Cost of Materials consumed comprised of purchases of reagents and changes in inventories, the same is the major expense head for our Company.

Employee Benefit expense includes, salaries, bonus, Wages, Employee benefits viz. PF/ESIC/Gratuity, Director remuneration and staff welfare expenses.

Other expenses mainly include expenses towards Rent, Rates and Taxes for lease premises, Electricity charges, Professional fees and commission expenses, Selling & Distribution expenses and travelling and vehicle charges etc.

Depreciation and Amortization Expenses

Depreciation and Amortisation Expenses comprised depreciation on fixed assets both tangible and intangible.

Tax Expense

Our tax expense or credit for the period represents the tax payable on the current periods taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

DISCUSSION ON RESULTS OF OPERATIONS:

The following discussion on results of operations should be read in conjunction with the audited financial results of our Company for the financial years ended March 31, 2024, 2023 and 2022.

OUR SIGNIFICANT ACCOUNTING POLICIES

For Significant accounting policies please refer Significant Accounting Policies, "Annexure IV" beginning under "Auditors Report and Financial Information of our Company" on page 101.

RESULTS OF OUR OPERATION

The following discussion on results of operations should be read in conjunction with the audited financial results of our Company for the financial years ended March 31, 2024, 2023 and 2022.

Comparison of Financial Years ended March 31, 2024, 2023 and 2022

Particulars	31.03.24	31.03.23	31.03.22
Income
Revenue from Operations	640.3	634.75	638.43
Increase/Decrease (%)	0.87%	-0.58%
Other Income	3.62	1.59	7.27
Total Income	643.92	636.34	645.70
Increase/Decrease (%)	1.19%	-1.45%
Expenditure
Cost of Material Consumed	110.35	116.61	144.76
Increase/Decrease (%)	-5.37%	-19.45%
% to Total Income	17.14%	18.33%	22.42%
Employee Benefit Expenses	228.81	203.19	177.89
Increase/Decrease (%)	12.61%	14.22%
% to Total Income	35.53%	31.93%	27.55%
Laboratory Testing Charges	23.2	22.3	34.83
Increase/Decrease (%)	-4.04%	35.97%
% to Total Income	3.60%	3.50%	5.39%
Other Expenses	179.9	157.55	174.3
Increase/Decrease (%)	14.19%	-9.61%
% to Total Income	27.94%	24.76%	26.99%
Particulars	31.03.24	31.03.23	31.03.22
Total Operating Expenditure	542.26	499.65	531.78
Increase/Decrease (%)	8.53%	-6.04%
% to Total Income	84.21%	78.52%	82.36%
PBIDT	101.66	136.69	113.92
Increase/Decrease (%)	-25.63%	19.99%
% to Total Income	15.79%	21.48%	17.64%
Depreciation and Amortization Expenses	43.9	44.58	38.08
Increase/Decrease (%)	-1.53%	17.07%
% to Total Income	6.82%	7.01%	5.90%
Profit Before Interest and Tax	57.76	92.11	75.84
Increase/Decrease (%)	-37.29%	21.45%
% to Total Income	8.97%	14.47%	11.75%
Financial Charges	7.24	5.74	5.62
Increase/Decrease (%)	26.13%	2.14%
% to Total Income	1.12%	0.90%	0.87%
Profit before Taxation	50.52	86.37	70.22
Increase/Decrease (%)	41.51%	-23.00%
% to Total Income	7.85%	13.57%	10.88%
Tax Effect	13.4	25.06	18.96
Increase/Decrease (%)	46.53%	32.17%
% to Total Income	2.08%	3.94%	2.94%
Profit After Tax but Before Extra ordinary Items	37.12	61.31	51.26
Increase/Decrease (%)	39.46%	-19.61%
% to Total Income	5.76%	9.63%	7.94%
Total Adjustments for Extraordinary Items	0.00	0.00	0.00
Increase/Decrease (%)	NA	NA
% to Total Income	0.00%	0.00%	0.00%
Profit After Tax after Extra ordinary Items	37.12	61.31	51.26
Increase/Decrease (%)	39.46%	-19.61%
% to Total Income	5.76%	9.63%	7.94%

Comparison of FY 2024 with FY 2023:

Revenue from operations

The Revenue from operations for the FY 2024 was 640.30 lakhs as compared to 634.75 lakhs during the FY 2023 showing a increase of 0.87%. This was mainly due to increase in our B2C business and increase in revenue from our two tests- Haematology and Serology. For details on the same, please refer to our customer wise and test wise revenue break up on page no. 82 and 83 of the Prospectus. Besides our company had also set up 2 new (1 for Blood collection centre and 1 for Blood sample processing centre) diagnostic cum collection centres in the month of Sep-2023 & Nov-23 which started generating revenues for our company from 3^rd quarter of FY 2023-24.

Other Income for the FY 2024 and FY 2023 was 3.62 Lakhs and 1.59 Lakhs respectively which mainly includes Interest on FD, Rent received, write backs of Rent & Vendor Payments, profit on sale of a plot.

Accordingly, the Total Income for the FY 2024 and FY 2023 was 643.92 Lakhs and 636.34 Lakhs respectively.

Expenditure: Total Operating Expenses

Total Operating Expenses increase in an absolute term to 542.27 lakhs for FY 2024 from 499.65 lakhs for FY 2023. This increase was mainly due to increase in Salary, Wages and PF/ESIC/Gratuity payable to the employees, professional fees, Audit Fees - NABL (Government fees), Travelling and Vehicle charges, Director Sitting fees, Electricity charges, Annual Maintenance Charges etc.

Cost of Material Consumed

Cost of Material consumed was 110.35 lakhs for FY 2024 and 116.61 lakhs for FY 2023. This decrease was mainly due to reduction in cost of raw materials such as reagents due to change in machine (haematology) during the year.

Laboratory Testing Charges

Laboratory Testing charges was 23.20 lakhs for FY 2024 and 22.30 lakhs for FY 2023. This minor increase was mainly due to adding of new test of our third party testing charges during FY 2024.

Employee Benefit Expenses

Employee Benefit Expenses increased in absolute term from 203.19 lakhs for the year ended March 31, 2023 to 228.81 lakhs for FY 2024 showing an increase of 12.61%. This increase was mainly due to expansion of centers with manpower Salary & Wages of employees of the Company and consequential increase in PF/ ESIC/ Gratuity expenses during FY 2024. In % term also there was an increase in Employee Benefit Expenses and the same stood at 35.53% and 31.93% of Total income for FY 2024 and FY 2023, respectively.

Other Expenses

Other Expenses increased to 179.91 lakhs for FY 2024 from 157.55 lakhs for FY 2023 showing an increase of 14.19% mainly due to increase in professional fees, Doctor Fees, Audit Fees - NABL (Government fees) Travelling and Vehicle charges, Director Sitting fees, Electricity charges, Annual Maintenance Charges etc. Other Expenses was 27.94% of Total income during FY 2024 as against 24.76% during FY 2023.

EBIDTA

EBIDTA decreased from 136.69 lakhs for FY 2023 to 101.66 lakhs for FY 2024 mainly due to increase in Employee benefit expenses and Other expenses as explained above. During FY 2024, our Company recorded EBIDTA margin of 15.79% of the Total income as against 21.48 % during FY 2023.

Depreciation and Amortization Expenses

Depreciation on fixed assets was 6.82% of Total income during FY 2024 as compared to 7.01% during FY 2023. The total depreciation during FY 2024 was 43.90 lakhs and during FY 2023 it was 44.58 lakhs. This decrease was majorly due to addition of assets during second half of the year at the new processing / diagnostic centre started in September 2023 and November 2023 and accordingly depreciation is charged for the proportionate period during FY 2024.

Financial Charges

Financial Charges was 1.12% of Total income during FY 2024 as compared to 0.90% during FY 2023. The Financial Charges included Interest expenses and other borrowing costs. The total Financial Charges during FY 2024 was 7.24 lakhs and during FY 2023 it was 5.74 lakhs, this increase is mainly due to increase in Interest as well as other borrowing cost.

Profit after Tax and restatement adjustment but before Extra-ordinary item (PAT before Extra-ordinary item)

PAT before Extra-ordinary item reduced from 61.31 lakhs for the FY 2023 to 37.12 lakhs in FY 2024. This decrease in profits was mainly on account of increase in Employee Benefit Expenses, Financial charges and Other expenses. due to reasons mentioned above. During FY 2023, our Company recorded PAT before Extra-ordinary item margin of 9.63% as against margin of 5.76% for FY 2024.

Profit after Tax and restatement adjustment and Extra-ordinary item (PAT after Extra-ordinary item)

Since there are no extra ordinary items, PAT after Extra-ordinary remained same as before extra-ordinary item.

Comparison of FY 2023 with FY 2022:

Revenue from operations

The Revenue from operations for the FY 2023 was 634.75 lakhs as compared to 638.43 lakhs during the FY 2022 showing a minor dip of 0.58%. This dip is mainly due to decrease in volume of business due to reduction of Covid 19 business in FY 2023 compared to FY 2022.

Other Income for the FY 2023 and FY 2022 was 1.59 Lakhs and 7.27 Lakhs respectively includes Interest on FD, share of profit/ remuneration from partnership firm, interest on IT refund and other miscellaneous income.

The Total Income for the FY 2023 and FY 2022 was 636.34 Lakhs and 645.70 Lakhs respectively.

Expenditure: Total Operating Expenses

Total Operating Expenses decreased in an absolute term to 499.65 lakhs for FY 2023 from 531.78 lakhs for FY 2022. This decrease was mainly due to reduction in laboratory testing charges for outsourced testings.

Cost of Material Consumed

Cost of Material consumed was 116.61 lakhs for FY 2023 and 144.76 lakhs for FY 2022. This decrease was mainly due to decrease in overall business as well as reduction in covid related sanitization costs during FY 2023.

Laboratory Testing Charges

Laboratory Testing charges was 22.30 lakhs for FY 2023 and 34.83 lakhs for FY 2022. This decrease was mainly due to decrease in outsourcing of specialised laboratory testing during FY 2023.

Employee Benefit Expenses

Employee Benefit Expenses increased in absolute term from 177.89 lakhs for the year ended March 31, 2022 to 203.19 lakhs for FY 2023 showing an increase of 14.22%. This increase was mainly due to increase in Salary & Wages of employees of the Company and Directors remuneration during FY 2023. In % term also there was increase in Employee Benefit Expenses and the same stood at 27.55% and 31.93% of Total income for FY 2022 and FY 2023, respectively.

Other Expenses

Other Expenses decreased to 157.55 lakhs for FY 2023 from 174.30 lakhs for FY 2022 showing a decrease of 9.61% mainly due to decrease in Rent Rates & Taxes, Selling & Distribution expenses, Legal & Professional fees, travelling & conveyance etc. Other Expenses was 24.76% of Total income during FY 2023 as against 26.99% during FY 2022.

EBIDTA

EBIDTA increased from 113.92 lakhs for FY 2022 to 136.69 lakhs for FY 2023 due to the reasons listed above. During FY 2023, our Company recorded EBIDTA margin of 21.48% of the Total income as against 17.64% during FY 2022.

Depreciation and Amortization Expenses

Depreciation on fixed assets was 7.01% of Total income during FY 2023 as compared to 5.90% during FY 2022. The total depreciation during FY 2022 was 38.08 lakhs and during FY 2023 it was 44.58 lakhs.

Financial Charges

Financial Charges was 0.90% of Total income during FY 2023 as compared to 0.87% during FY 2022. The Financial Charges included Interest expenses and other borrowing costs. The total Financial Charges during FY 2022 was 5.62 lakhs and during FY 2023 it was 5.74 lakhs, this decrease is mainly due to decrease in other borrowing cost.

Profit after Tax and restatement adjustment but before Extra-ordinary item (PAT before Extra-ordinary item)

PAT before Extra-ordinary item increased from 51.26 lakhs for the FY 2022 to 61.31 lakhs in FY 2023. This absolute increase in profits was mainly on account of increase in business volume and other reasons as detailed above. During FY 2023, our Company recorded PAT before Extra-ordinary item margin of 9.63% for FY 2023 as against margin of 7.94% for FY 2022.

Profit after Tax and restatement adjustment and Extra-ordinary item (PAT after Extra-ordinary item)

Since there are no extra ordinary items, PAT after Extra-ordinary remained same as before extra-ordinary item.

Comparison of FY 2022 with FY 2021:

Revenue from operations

The Revenue from operations for the FY 2021 was 455.50 lakhs as compared to 638.43 lakhs during the FY 2022 showing a jump of 40.19%. This huge increase is due to increased health awareness post covid 19 and due to starting of new centres in FY 2022.

Other Income for the FY 2021 and FY 2022 was 4.23 Lakhs and 7.27 Lakhs respectively mainly includes Bank Interest and Interest on IT refunds.

The Total Income for the FY 2021 and FY 2022 was 459.63 Lakhs and 645.70 Lakhs respectively.

Expenditure: Total Operating Expenses

Total Operating Expenses increased in an absolute term from 372.99 lakhs for FY 2021 to 531.78 lakhs for FY 2022. This increase was mainly in line with increase in value of sales, however in % term there is fall in operating expenses due to reduction in laboratory testing charges during FY 2022 as compared to FY 2021.

Cost of Material Consumed

Cost of Material consumed was 101.80 lakhs for FY 2021 and 144.76 lakhs for FY 2022. This increase was mainly due to increase in overall business as well as extra spend on covid related sanitization costs.

Laboratory Testing Charges

Laboratory Testing charges was 27.23 lakhs for FY 2021 and 34.83 lakhs for FY 2022. This increase was mainly due to increase in outsourcing of specialised laboratory testing during FY 2022, however in % term there is fall in laboratory testing charges during FY 2022 as compared to FY 2021.

Employee Benefit Expenses

Employee Benefit Expenses increased in absolute term to 177.89 lakhs for the year ended March 31, 2022 from 116.36 lakhs for FY 2021 showing an increase of 52.88%. This increase was mainly due to increase in Salary & Wages of employees of the Company during Covid 19 period and directors remuneration. Employee Benefit Expenses stood at 27.55% and 25.32% of Total income for FY 2022 and FY 2021, respectively.

Other Expenses

Other Expenses increased from 127.60 lakhs for FY 2021 to 174.30 lakhs for FY 2022 showing a decrease of 36.60% mainly due to decrease in Rent Rates & Taxes, Selling & Distribution expenses, Legal & Professional fees, travelling & conveyance etc. Other Expenses was 27.76% of Total income during FY 2021 as against 26.99% during FY 2022 showing slight reduction in costs.

EBIDTA

EBIDTA increased to 113.92 lakhs for FY 2022 from 86.64 lakhs for FY 2021 due to the reasons listed above. During FY 2021, our Company recorded EBIDTA margin of 18.85% of the Total income as against 17.64% during FY 2022..

Depreciation and Amortization Expenses

Depreciation on fixed assets was 5.34% of Total income during FY 2021 as compared to 5.90% during FY 2022. The total depreciation during FY 2022 was 38.08 lakhs and during FY 2021 it was 24.53 lakhs.

Financial Charges

Financial Charges was 1.64% of Total income during FY 2021 as compared to 0.87% during FY 2022. The Financial Charges included Interest expenses and others. The total Financial Charges during FY 2022 was 5.62 lakhs and during FY 2021 it was 7.54 lakhs, this decrease is mainly due to lower interest for borrowings due to lower utilisation of credit facilities.

Profit after Tax and restatement adjustment but before Extra-ordinary item (PAT before Extra-ordinary item)

PAT before Extra-ordinary item increased to 51.26 lakhs for the FY 2022 from 40.24 lakhs in FY 2021. This increase was mainly on account of reduction in expenditure and other reasons as detailed above. During FY 2021, our Company recorded PAT before Extra-ordinary item margin of 8.75% for FY 2021 as against margin of 7.94% for FY 2022.

Profit after Tax and restatement adjustment and Extra-ordinary item (PAT after Extra-ordinary item)

Since there is no extra ordinary items, PAT after Extra-ordinary remained same as before extra-ordinary item.

Cash Flows

The following table sets forth certain information concerning our cash flows for the periods indicated:

Particulars	Fiscal 2024	Fiscal 2023	Fiscal 2022
Net cash flow from operating activities	11.25	124.72	95.60
Net cash flow from investing activities	-63.99	(65.32)	(146.56)
Net cash flow from financing activities	44.56	8.56	29.32
Net increase in cash and cash equivalents	-8.19	67.96	(21.64)
Add: Balance at the beginning of the year	78.32	10.36	32.03
Particulars	Fiscal 2024	Fiscal 2023	Fiscal 2022
Cash and cash equivalents at the end of the year	70.13	78.32	10.39