Deccan Transcon Leasing Ltd Management Discussions

The following discussion is intended to convey managements perspective on our financial condition and results of operations for the financial year ended on March 31, 2024, March 31, 2023 and March 31, 2022. You should read the following discussion of our financial condition and results of operations together with our restated financial statements included in the Red Herring Prospectus. You should also read the section entitled "Risk Factors " beginning on page 32 of this Red Herring Prospectus, which discusses several 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 fiscal year ends on March 31 of each year, so all references to a particular fiscal year ("Fiscal Year") are to the twelve-month period ended March 31 of that year.

In this section, unless the context otherwise requires, any reference to "we", "us" or "our" refers to Deccan Transcon Leasing Limited, our Company. Unless otherwise indicated, financial information included herein are based on our "Restated Financial Statements " for Financial Year ended on March 31, 2024, March 31, 2023 and March 31, 2022 included in this Red Herring Prospectus beginning on page 183.

BUSINESS OVERVIEW

We provide end-to-end solutions for freight & shipping services which include domestic logistic of ISO tanks, Gas & special tanks, Tank fleet management solution, custom clearance and transportation, Box Container / Non-Vessel Operating Common Carriers ("NVOCC") services. We are primarily engaged in providing ISO tanks on lease and logistic & supply chain solutions to clients in various sectors. Our company specializes in the transportation of bulk liquids and hazardous chemicals, primarily utilizing ISO tanks as a mode of transport. One of our key strengths lies in our extensive agency network, built over years of experience in the industry. This network provides us with access to shippers worldwide, enabling us to cater to the logistics needs of clients across the globe. Additionally, we have established a strong network of partners with global coverage, apart from our own Subsidiaries and Associate companies, allowing us to provide complete, end-to-end logistics solutions. Having all ISO tank container services under one roof enables us to offer services tailored to meet specific customer needs. As of March 31, 2024, our Company served a total of more than 875 customers in the last one year.

Our Company was incorporated on February 05, 2007, at Andhra Pradesh, India as ‘Libenil Logistics Private Limited, a private limited company under the Companies Act, 1956 and was granted a certificate of incorporation by the Registrar of Companies, Andhra Pradesh. The name of our Company was changed to ‘Deccan Transcon Leasing Private Limited, and a fresh certificate of incorporation dated July 12, 2013, was issued by the Registrar of Companies, Andhra Pradesh. Our Company was then converted into a public limited company under the Companies Act, 2013, and consequently, the name of our Company was changed to ‘Deccan Transcon Leasing Limited, and a fresh certificate of incorporation dated March 27, 2024, was issued by the Registrar of Companies, Central Processing Centre. The Corporate Identification Number of our Company is U63090TG2007PLC052599.

Our Promoters Karthika Menon, Jaidev Menon, Shekar Miriyala, Pranav Jaidev & Navaneeth Jaidev have wide experience in shipping and logistics industry. Our company specializes in the transportation of bulk liquids and hazardous chemicals, primarily utilizing ISO tanks as a mode of transport. As on March 31, 2024, our fleet size is more than 2500 ISO tanks and 750 TEUs of box containers. In recent years, we have diversified our operations to include Box Containers and Flexi bags. We are a team of more than 84 skilled professionals. Our team of technical experts ensures that we adhere to the highest safety standards and cargo compatibility regulations in the industry. They guide us on the specific modifications required for the safe transportation of dangerous goods in ISO tanks, whether it be by sea, rail, or road. We are certified for Quality Management Systems (ISO 9001:2015), Environment Management System (ISO 14001:2015) and Occupational Health and Safety Management System (ISO 45001:2015).

Table set forth below is bifurcation of our revenue from operations:

(I in lakhs)

Segments	For the year ended
	March 31, 2024		March 31, 2023		March 31, 2022
	Amount	% of Revenue of operations	Amount	% of Revenue of operation	Amount	% of Revenue of operations
Leasing revenue	873.69	5.73%	382.24	2.13%	168.73	1.10%
Freight and Shipping services	14,382.02	94.27%	17,577.41	97.87%	15,121.52	98.90%
Total revenue of operation	15,255.71	100%	17,959.66	100%	15,290.25	100.00%

The companys revenue segments showed growth from fiscal year 2022 to fiscal year 2024. In March 2022, leasing revenue was Rs 168.73 lakhs (1.10%) and freight and shipping services revenue was Rs 15,121.52 lakhs (98.90%). By March 2023, leasing revenue increased to Rs 382.24 lakhs (2.13%), and freight and shipping services revenue reached Rs 17,577.41 lakhs (97.87%). This growth continued into March 2024, for leasing revenue rising to Rs 873.69 lakhs (5.73%) and declined for freight and shipping services revenue to Rs 14,382.02 lakhs (94.27%). Total revenue of operations also increased from Rs 15,290.25 lakhs in March 2022 to Rs 17,959.66 lakhs in March 2023 and eventually reached Rs 15,255.71 lakhs in March 2024.

SIGNIFICANT DEVELOPMENTS SUBSEQUENT TO THE LAST FINANCIAL YEAR:

In the opinion of the Board of Directors of our Company, there have not arisen, since the date of March 31, 2024 as disclosed in this Red Herring Prospectus, any significant developments or any circumstance that materially or adversely affect or are likely to affect the profitability of our Company or the value of its assets or its ability to pay its material liabilities within the next twelve months.

KEY FACTORS AFFECTING THE RESULTS OF OPERATION:

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

1. General economic conditions in India, changes in laws and regulations.

2. Changes in revenue mix, including geographic mix of our revenues.

3. Changes in Fiscal, Economic or Political conditions in India.

4. Increased market fragmentation.

5. Competition with existing and new entrants

6. Technology System and Infrastructure Risks

OUR SIGNIFICANT ACCOUNTING POLICIES

For Significant accounting policies please refer Significant Accounting Policies, "Annexure IV beginning under Chapter titled "Financial Information of our Company" beginning on page 183 of the Red Herring Prospectus.

RESULTS OF KEY OPERATIONS

The following table sets forth select financial data from our restated financial statement of profit and loss for the financial years ended March 31, 2024, 2023 and 2022 the components of which are also expressed as a percentage of total revenue for such period and financial years:

(Rs in lakhs)

Particulars	For the year ended on
	March 31, 2024	% of Total Income	March 31, 2023	% of Total Income	March 31, 2022	% of Total Income
Revenue from operation	15,255.71	99.30%	17,959.66	99.43%	15,290.25	99.81%
Other income	108.06	0.70%	102.11	0.57%	29.15	0.19%
Total Revenue	15,363.76	100.00%	18,061.76	100.00%	15,319.40	100.00%
Operating Expenses	12,220.88	79.54%	15,729.35	87.09%	13,721.48	89.57%
Employee Benefits Expenses	776.18	5.05%	580.19	3.21%	430.05	2.81%
Finance Cost	307.40	2.00%	186.32	1.03%	133.81	0.87%
Depreciation and Amortisation Cost	184.43	1.20%	136.36	0.75%	119.93	0.78%
Other Expenses	462.58	3.01%	487.08	2.70%	264.13	1.72%
Total Expenses	13,951.46	90.81%	17,119.29	94.78%	14,669.40	95.76%
Profit Before Tax	1,412.30	9.19%	942.47	5.22%	650.00	4.24%
Share in Associate Profit	128.32	0.84%	143.41	0.79%	27.57	0.18%
Total tax	358.72	2.33%	230.19	1.27%	158.47	1.03%
Profit for the Year(A)	1,181.89	7.69%	855.70	4.74%	519.10	3.39%

Review of Restated Financials

Revenue from Operations: Revenue from operations mainly consists of sale of services or goods by way of 1) Freight Charges & Shipping Service Charges; 2) Leasing or Rental Income from letting out Tank Containers.

Other Income: Other income includes Interest income on loans and advances, Gains on sale of investments or Assets, Receipts of Dividends, Currency exchange gain on sale of services etc.

Total Income: Our total income comprises of revenue from operations and other income.

Total Expenses: Companys total expenses consist of Operating related expenses, Employee benefit expenses, Finance costs, Depreciation and Amortization expenses and Other expenses.

Operating Expenses. Operating Expenses comprises of Ocean Freight and Shipping services charges as well as Lease Rental charges etc.

Employee Benefits Expense: Employee benefit expense includes Salary & Wages, Provision for Gratuity, Staff welfare expenses.

Finance Cost: Finance cost includes interest expenses as well as other finance charges.

Other expenses: Other expenses mainly consist of Travelling expenses, Business promotion expenses, Insurance expenses, Rent and office expenses, Professional charges, Loss on Foreign Currency exchange.

COMPARISON OF F.Y. 2024 WITH F.Y. 2023:

Revenue from Operations

The Companys revenue from operations in the Financial year 2023-24 is Rs 15,255.71 lakhs, which represents ^2,703.95.40 lakhs or 15.06% decrease compared to the previous financial years revenue of ^17,959.66

lakhs. The major driver for the decrease in revenue from operations was due to decline in Sea Freights rates during FY 2023-2024 even though there was increase in fleet volume.

Other Income

Other Income in the Financial Year 2023-24 increased by 5.83%, reaching Rs 108.06 lakhs in comparison to the Rs 102.11 lakhs incurred in the Financial Year 2022-23. This increase was primarily due to dividend received from our associate company for Rs 57 lakhs and also due to increase in interest income of Rs 1.71 lakhs.

Cost of Service/ Operating Expenses

Our cost of materials consumed for the Fiscal 2024 was Rs 12,220.88 lakhs as compared to Rs 15,729.35 lakhs for Fiscal 2023, representing a decrease of 22.31%. This was primarily due to decrease in Ocean Freight and Shipping services charges.

Employee Benefits Expenses

Employee benefit expenses in the Financial Year 2023-24 increased by 33.78%, reaching Rs 776.18 lakhs in comparison to the Rs 580.19 lakhs incurred in the Financial Year 2022-23. This increase in employee expenses primarily due to increase in salaries and wages as well as directors remuneration, and gratuity expenses.

Finance Cost

Finance cost in the Financial Year 2023-24 increased by 64.98%, reaching Rs 307.40 lakhs in comparison to the Rs 186.32 lakhs incurred in the Financial Year 2022-23. The increase of the Finance Charges is on account increase in Interest expense by Rs 121.08 lakhs in the FY 2022-23.

Depreciation and Amortisation Expenses

Depreciation and amortization in the Financial Year 2023-24 increased by 35.25%, reaching Rs 184.43 lakhs in comparison to the Rs 136.36 lakhs incurred in the Financial Year 2022-23. This increase in depreciation was a result of purchase of fixed assets.

Other Expenses

Other expenses in the Financial Year 2023-24 decreased by 3.01%, reaching Rs 462.58 lakhs in comparison to the Rs 487.08 lakhs incurred in the Financial Year 2022-23. This decrease in other expenses was primarily attributed to several factors, including Rs 8.63 lakhs decrease in Travelling and Conveyance expense, Rs 33.52 lakhs decrease in Professional charges, Rs 19.32 lakhs decrease in Office Expenses.

Tax Expenses

Tax expenses increased by 55.84%, reaching a total of Rs 358.72 lakhs in the financial year 2023-24, in contrast to the Rs 230.19 lakhs in the financial year 2022-23. This notable increase in tax expenses can be primarily attributed to Rs 121.70 lakhs rise in current tax payments.

Profit After Tax (PAT)

Due to the aforementioned factors, the profit experienced an upswing, primarily driven by the decrease in total income as well as in total expenses as a percentage of total income but also due to share of profit in associate companies. The Profit After Tax (PAT) for the financial year 2023-24 reached Rs 1,181.89 lakhs, marking a notable increase from Rs 855.70 lakhs in the financial year 2022-23. In the financial year 2023-24, PAT constituted 7.69% of the total revenue, in contrast to 4.74% in the fiscal year 2022-23.

Rationale for increase in Profit After Tax (PAT) compared to total income.

During the current financial year, we increased our customer base and added more tank containers to our business due to our strategy and experienced team. Although sea freight rates dropped during this period, we maintained sufficient fleet capacity and achieved sufficient volume, which helped us increase our margin through operational efficiency. The increase was primarily due to a rise in associate profit, which grew from

0.79% of revenue in FY 2023 to 0.84% of revenue in the current period, and an increase in lease rental revenue, which rose from Rs 382.24 lakhs (2.13% of revenue) in FY 2023 to Rs 873.69 lakhs (5.73% of revenue) in the current financial year, contributing to higher PAT margin. Further, the company has also received dividends from associates company amounting to Rs 57 lakhs.

COMPARISON OF F.Y. 2023 WITH F.Y. 2022:

Revenue from Operations

The Companys revenue from operations in the financial year 2022-23 is ^17,959.66 lakhs, which represents ^2,669.40 lakhs or 17.46% increase compared to the previous financial years revenue of ^15,290.25 lakhs. The major driver for the increase in revenue from operations was due to an increase in business operations after the recovery of demand post pandemic and Russia and Ukraine conflict. This increase was tamed down to some extent due to fall in container shipping costs which returned back to pre-covid levels in FY 2023.

Other Income

Other Income in the Financial Year 2022-23 increased by 250.32%, reaching Rs 102.11 lakhs in comparison to the Rs 29.15 lakhs incurred in the Financial Year 2021-22. This increase was primarily due to writing back bad debts of Rs51.79, which has been written off in earlier year, along with an increase in interest income of Rs 2.90 lakhs.

Cost of Service/ Operating Expenses

Our cost of services/operating expenses for the Fiscal 2023 was Rs 15,729.35 lakhs as compared to Rs 13,721.48 lakhs for Fiscal 2022, representing an increase of 14.63%. This was primarily due to increase in Freight and Shipping services charges as well as lease rental charges.

Employee Benefits Expenses

Employee benefit expenses in the Financial Year 2022-23 increased by 34.91%, reaching Rs 580.19 lakhs in comparison to the Rs 430.05 lakhs incurred in the Financial Year 2021-22. This increase in employee expenses primarily due to increase in salaries and wages as well as directors remuneration, staff welfare expenses and gratuity expenses

Finance Cost

Finance cost in the Financial Year 2022-23 increased by 39.24%, reaching Rs 186.32 lakhs in comparison to the Rs 133.81 lakhs incurred in the Financial Year 2021-22. The increase of the Finance Charges is on account increase in Interest expense by Rs 47.53 lakhs in the FY 2022-23.

Depreciation and Amortisation Expenses

Depreciation and amortization in the Financial Year 2022-23 increased by 13.70%, reaching Rs 136.36 lakhs in comparison to the Rs 119.93 lakhs incurred in the Financial Year 2021-22. This increase in depreciation was a result of purchase of fixed assets.

Other Expenses

Other expenses in the Financial Year 2022-23 increased by 82.03%, reaching Rs 487.08 lakhs in comparison to the Rs 267.58 lakhs incurred in the Financial Year 2021-22. This rise in other expenses was primarily attributed to several factors, including Rs 114.54 lakhs increase in writing off Bad debts, Rs 60.35 lakhs increase

in Travelling and Conveyance expense, Rs 29.42 lakhs increase in Professional charges, Rs 27.76 lakhs increase in Insurance charges.

Tax Expenses

Tax expenses increased by 45.26%, reaching a total of Rs 230.19 lakhs in the financial year 2022-23, in contrast to the Rs 158.47 lakhs in the financial year 2021-22. This notable increase in tax expenses can be primarily attributed to Rs 71.72 lakhs rise in current tax payments.

Profit after Tax (PAT)

Due to the aforementioned factors, the profit experienced an upswing, primarily driven by the growth in total income as well as in total expenses as a percentage of total income but also due to share of profit in associate companies. The Profit After Tax (PAT) for the financial year 2022-23 reached Rs 855.70 lakhs, marking a notable increase from Rs 519.10 lakhs in the financial year 2021-22. In the financial year 2022-23, PAT constituted 4.74% of the total revenue, in contrast to 3.39% in the fiscal year 2021-22.

Rationale for increase in Profit After Tax (PAT) compared to total income.

The companys profit after tax (PAT) outpaced operational revenue growth due to a multifaceted approach to profitability. Revenue surged post-pandemic and with resolved conflicts, but declining container shipping costs partially offset this rise. Our PAT% in FY 2023 has increased compared to FY 2022. The increase was primarily due to Increase in Associate Profit - Our share in Associate profit rose from 0.18% of Revenue in FY 2022 to 0.79% of Revenue in FY 2023. And increase in Lease Rental Revenue - Our revenue from lease rental has rose from Rs 168.73 lakhs in FY 2022 to Rs 382.24 Lakhs in FY 2023 due to increase in owned fleet of tank container from 261 tanks in FY 2022 to 272 tanks in FY 2023, which has contributed significantly to increasing the margin.

Cash Flow

The table below summaries our cash flows from our Restated Financial Information for the financial years ended on 2024, 2023, and 2022:

(Rs in lakhs)

Particulars	FY 2024	FY 2023	FY 2022
Net cash (used in)/ Generated from operating activities	353.71	371.71	495.05
Net cash (used in)/ Generated from investing activities	(813.96)	(701.60)	(320.37)
Net cash (used in)/ Generated from finance activities	415.56	573.25	(121.27)
Net increase/ (decrease) in cash and cash equivalents	(44.70)	243.36	(53.42)
Cash and Cash Equivalents at the beginning of the period	350.98	107.62	54.20
Cash and Cash Equivalents at the end of period	306.29	350.98	107.62

Net cash generated from operating activities.

Net cash generated from operating activities in the Fiscal 2024 was Rs 353.71 lakh and our profit before tax that period was Rs 1,540.62 lakh. The difference was primarily attributable to depreciation of Rs 184.43 lakh, Finance costs of Rs 307.40 lakh, and thereafter change in working capital of Rs 690.11 lakh respectively. We have income tax paid of Rs 336.41 lakh.

Net cash generated from operating activities in the Fiscal 2023 was Rs 371.71 lakh and our profit before tax that period was Rs 1,085.88 lakh. The difference was primarily attributable to depreciation of Rs 136.36 lakh,

Finance costs of Rs 186.32 lakh, minority interest of Rs 54.67 lakhs. and thereafter change in working capital of Rs 586.42 lakh respectively. We have income tax paid of Rs 214.71 lakh.

Net cash generated from operating activities in Fiscal 2022 was Rs 495.05 lakh and our profit before tax that period was Rs 677.57 lakh. The difference was primarily attributable to Depreciation of Rs 119.93 lakh, Finance costs of Rs 133.81 lakh, minority interest of Rs 74.49 lakhs and thereafter change in working capital of Rs 638.77 lakh respectively. We have income tax paid of Rs 143.72 lakh.

Net cash used in investing activities

In the Fiscal 2024, our net cash used in investing activities was Rs 813.96 lakh, which was primarily for Purchase of property, plant & equipment (including capital work in progress) of Rs 691.88 lakh. Investment in Associates of Rs 128.32 lakh.

In the Fiscal 2023, our net cash used in investing activities was Rs 701.60 lakh, which was primarily for Purchase of property, plant & equipment (including capital work in progress) of Rs 561.78 lakh. Investment in Associates of Rs 146.01 lakh, Redemption of Mutual Funds of Rs 1.75 lakh.

In the Fiscal 2022, our net cash used in investing activities was Rs 320.37 lakh, which was primarily for Purchase of property, plant & equipment (including capital work in progress) of Rs 303.45 lakh. Investment in Associates of Rs 27.98 lakh, Redemption of Mutual Funds of Rs 9.51 lakh.

Net cash generated from/ used in financing activities.

In the Fiscal 2024, our net cash used in financing activities was Rs 415.56 lakh. This was primarily due to interest paid Rs 307.40 lakh, increase of Rs 205.30 lakh as short-term borrowing and long-term borrowings of Rs 328.76 lakh.

In the Fiscal 2023, our net cash used in financing activities was Rs 573.25 lakh. This was primarily due to interest paid Rs 186.32 lakh, increase of Rs 686.16 lakh as short-term borrowing and long-term borrowings of Rs 99.50 lakh.

In the Fiscal 2022, our net cash used in financing activities was Rs 121.12 lakh. This was primarily due to interest paid Rs 133.81 lakh, increase of Rs 127.40 lakh as short-term borrowing and repayment of long-term borrowing of Rs 93.15 lakh.

Information required as per Item 11 (II) (C) (iv) of Part A of Schedule VI to the SEBI Regulations:

1. Unusual or infrequent events or transactions

To our knowledge there have been no unusual or infrequent events or transactions that have taken place during the last three years other than shut down of business due to COVID-19.

2. Significant economic changes that materially affected or are likely to affect income from continuing operations.

Our business has been subject, and we expect it to continue to be subject to significant economic changes arising from the trends identified above in ‘Factors Affecting our Results of Operations and the uncertainties described in the section entitled "Risk Factors" beginning on page 32 of this Red Herring Prospectus. To our knowledge, except as we have described in this Red Herring Prospectus, there are no known factors which we expect to bring about significant economic changes.

3. Income and Sales on account of major product/main activities

Income and sales of our Company mainly consists of sale of services by way of 1) Ocean Freight Charges; 2) Shipping Service Charges; 3) Leasing or Rental Income.

4. Whether the company has followed any unorthodox procedure for recording sales and revenues

Our Company has not followed any unorthodox procedure for recording sales and revenues.

5. Known trends or uncertainties that have had or are expected to have a material adverse impact on sales, revenue or income from continuing operations.

Apart from the risks as disclosed under Section titled "Risk Factors" beginning on page 32 in this Red Herring Prospectus, in our opinion there are no other known trends or uncertainties that have had or are expected to have a material adverse impact on revenue or income from continuing operations.

6. Extent to which material increases in net sales or revenue are due to increased sales volume, introduction of new products or services or increased sales prices.

Increases in revenues are by and large linked to increases in volume of business.

7. Total turnover of each major industry service in which the issuer company operated.

The Company is in the business of, the relevant industry data, as available, has been included in the chapter titled "Industry Overview " beginning on page 109 of this Red Herring Prospectus.

8. Status of any publicly announced new products or business services.

Our Company has not announced any new services or business services.

9. The extent to which business is seasonal.

Our Companys business is not seasonal.

10. Any significant dependence on a single or few suppliers or customers.

The % of contribution of our Companys suppliers vis-a-vis the total revenue from operations respectively as of for the Fiscal 2024, 2023 and 2022 is as follows:

Particulars	Top Suppliers as a percentage (%) of total purchases
	Fiscal 2024	Fiscal 2023	Fiscal 2022
Top 5	31.61%	35.95%	36.07%
Top 10	45.89%	50.82%	51.53%

The % of contribution of our Companys customers vis-a-vis the total revenue from operations respectively as of for the Fiscal 2024, 2023 and 2022 is as follows:

Particulars	Top Customers as a percentage (%) of total sales
	Fiscal 2024	Fiscal 2023	Fiscal 2022
Top 5	37.22%	46.38%	42.13%
Top 10	51.06%	59.03%	55.53%

11. Competitive conditions.

Competitive conditions are as described under the Chapters titled "Industry Overview" and "Our Business" beginning on pages 109 and 118, respectively of this Red Herring Prospectus.