Coastal Roadways Ltd Management Discussions

INDIAN ECONOMY

According to various sources, the projected growth in Indian economy is penned to be around 6.7% to 7.25% for FY 25. One of the main drivers of this engine would be the pickup of manufacturing activity which is aided by lot of MNCs setting up their facilities in India seeing the low cost high quality opportunities which India possesses

Rural spendings still continued to be sluggish and with an optimistic view of normal monsoons by IMD, it would fair to hope that this trend would reverse.

Global disruptions like tension brewing in the Middle East needs to be constantly monitored as it could have an effect on the oil prices which is a vital commodity for any importing country

BUSINESS STRATEGY & OPPORTUNITIES

Since your company caters to the FMCG sector which remained slow due to weak rural demand, challenges by way of pricing were observed for the year gone by. The traditional division of surface transportation continued to perform on the back foot. Over supply of trucks and weak growth in FMCG has resulted in pricing pressure which would only revert once the FMCG industry picks up growth.

In contrast to the above, our Warehousing division clocked a robust performance and we continue to focus our energy and resources on the same. We added one more unit in the state of Jharkhand which post stabilization has shown good performance. Our existing units have also performed well giving us the confidence to pursue this area of opportunity further.

Going ahead we shall continue to deploy further capital, time and effort by way of increasing our team, skill sets and assets required to scale up this division. Discussions with various prospective clients have continued to happen over the year and with time, we hope some to materialize.

OUTLOOK

With India rising and manufacturing activities on the uptick, we feel the Indian Logistic industry would continue to thrive and grow over a long period of time. Sunrise areas like Warehouse management, Tech based Logistic solutions and express parcel delivery is forecasted to grow at a higher pace. Surface transport as a segment is here to stay. Even though it faces tough competition from rail transportation sector, certain advantages which it inherits makes it a stable low profit margin business. Over the medium term we hope to expand our warehousing division further while maintaining and running our traditional vertical as per past years. However in case of any opportunity which may come our way, we shall not hesitate to invest more in the same.

RISKS AND CONCERNS

In todays highly unpredictable business environment, it is vital to take a holistic view of risk and compliance. Like any other Company having national business interests, your company is also exposed to business risks, which may be internal as well as external. To ensure our long-term corporate success, it is essential that risks are identified, analyzed and then mitigated by means of appropriate control measures. A strong and independent Internal Audit function at the corporate level carries out risk focused audits enabling identification of areas where risk management processes may need to be improved.

Here are some of the key risks faced by the Company and actions deployed for mitigation.

Covid19 Pandemic Risks

• Uncertainty over Covid19 pandemic and resurgence of subsequent waves which may lead to further lockdown restrictions.

• Shrinkage in demand due to restraint in spending powers of the consumers

• Safety and availability of work force

• Continued Demand - Supply imbalance due to differential restrictions in different geographies leading to unprecedented and sharp fluctuations in freight rate and drop in owned vehicle utilization ratio.

Your company continues to closely monitor the global, Indian and State wise developments and maintain a balanced sales profile across regions. We ensure our teams are Covid-19 safe and vaccinated. In order to limit the risk of underutilization, your company is also focusing on contracts for dedicated operations especially for carriage of essential cargo.

Industry Risks

• Economic Slowdown may affect Companys performance.

• Over dependence on one line of business can threaten viability in the event of a sectoral downturn.

• Efficiency in Internal Systems and Procedures.

Your company offers logistic and road transportation services to a diverse range of industries. It keeps a close watch on the economic environment and timely actions are accordingly taken. These measures help us mitigate the cyclical risks. Also, our internal systems and processes are constantly reviewed and revamped as per industry best practices.

Underutilization of Assets and Infrastructure

• The underutilization of assets and resources, resulting in an adverse impact on profitability in competitive or recessionary market and poor economic conditions.

The systems are being streamlined and integrated across all the branches for effective matching of availability of any underutilized asset/ resources, primarily vehicles at one branch with corresponding requirements for the same by another branch.

Legal Risks

• Threat of damage and loss of cargo due to accidents and hijacking of trucks.

• Risk of pilferage leading to shortages in delivery of cargo.

All the vehicles of the company are comprehensively insured for damages arising out of accidents. The entire fleet of Companys owned vehicles is fitted with modern technology tracking tools like GPS in vehicles to ensure safety of vehicle and cargo. Locks and seals secure trucks before dispatch that can only be broken at the point of unloading. Verification of truck drivers is a necessary compliance and trucks are engaged from reliable market sources.

HR Risks