Digidrive Distributors Ltd Management Discussions

Economic overview*

In Current Year (CY) 2023, the global economy exhibited remarkable resilience amidst the various headwinds, achieving a growth rate of 3.2%. While the advanced economies grew by 1.6%, the emerging markets and developing economies (EMDEs) grew by 4.3% in Current Year - 2023.

The year under review also witnessed elevated levels of inflation negatively impacting the consumption of goods, dampening external trade in the process. However, owing to debottlenecking of supply chains, declining commodity prices and monetary tightening policies across major economies, global inflation level reduced from 8.7 % in 2022 to 6.8 % in Current Year 2023. While the monetary policies did anchor inflation, it also had an effect on the global growth.

*Source: World Economic Outlook April 2024, IMF

In FY (Financial Year) 2024, India maintained its position as one of the fastest-growing economies in the world. Amid the global uncertainties, the domestic economy remained resilient, achieving a growth rate of 8.2%¹. The level of inflation was also recorded at 5.4%², driven by timely intervention by the Indian Government and the Reserve Bank of India (RBI). These positive changes further contributed to increased private consumption in the economy.

Fuelled by the Government of India (GoI) initiatives, India transformed into a business-friendly country, attracting Foreign direct investment (FDI) amounting to USD70.9 billion³ in FY 2024. The initiatives also played a crucial role in bolstering the growth of domestic businesses.

The Government also significantly contributed towards digitalising India. With the GoI making digital services accessible to every individual, people living in hinterlands can also reap the benefits of the internet. Additionally, the Indian rupee also emerged as the third most stable Asian currency in FY 2024.

The domestic economy is expected to sustain its positive growth momentum in the upcoming fiscal year as well. With inflation expected to decrease in FY 2025, it will bolster economic activities, especially in production and manufacturing sectors. Moreover, the Indian Government is targeting holistic development across all the sectors, drafting strategic policies and programmes. It is anticipated that governmental strategies will play an instrumental role in making the Indian economy a 5 trillion-dollar economy by 2026. The Indian economy is also projected to become the third largest economy in the world by 2027⁴, surpassing Japan and Germany.

Industry Overview

Global E-commerce Industry

The global e-commerce industry grew rapidly over the years. In Current Year 2023, it expanded and attained a market size of USD 21.1 trillion⁵. The growth in this industry was supported by increased use of the internet and smartphones and a shift in the consumers preference towards online shopping. The heightened use of digital payments has also contributed to this growth. The convenience provided to digital payment users provided them with faster, secured payment methods that have further increased the consumers reliability on the e-commerce platforms.

An increase in the number of smartphone and internet users in Current Year 2023

6 Source: Global E-commerce industry report-2023

The increased use of digital payments has facilitated faster, more secure and convenient transactions, reducing friction for consumers and merchants and significantly driving the growth of the global e-commerce market. Advanced payment technologies have broadened market access and enabled seamless cross-border transactions. In the reported year, the Asia Pacific region experienced significant growth in the e-commerce industry. Additionally, India and Chinas increased disposable income and internet penetration influenced the consumers buying patterns from brick-and-mortar retail to online purchases.

The industry is expected to grow to a market size of USD 4,223.44 billion in Current Year 2024, with a Compound Annual Growth Rate (CAGR) of 11.9% from 2023-2024⁷. The industry is expected to reach a market size of USD 5.29 billion.

Projected growth in the revenue generated by the global E-commerce industry

E-Commerce Revenue

Indias E-commerce Industry

Indias e-commerce industry experienced significant growth over the years driven by rapid digital transformation, increased smartphone usage, enhanced internet penetration, affordable data and strong connectivity and network infrastructure. In FY 2024, the total number of internet subscribers surpassed 820 million. Rapid growth was seen in the rural internet subscribers base with the total number of subscribers being approximately 442 million⁸. This provides businesses with an opportunity to operate at a minimum operational cost by not having physical stores. It further provides them with a platform to meet a larger consumer base across diversified regions, use cost-effective marketing channels and therefore, maintain their profitability. On the other hand, the e-commerce industry provides customers with a convenient shopping experience. Along with this, e-commerce also offers competitive pricing and discounts that further encourage customers to make purchases from the e-commerce platforms.

The e-commerce industry is expected to experience positive growth in the coming years. The industry is expected to attain a market size of USD 325 billion by 2030⁹. This growth is expected to be driven by the rising internet penetration which is projected to reach USD 1 trillion by 2030. Moreover, it is expected that India will contribute to the growth in the soundbar segment of e-commerce.

Distribution Industry

The global logistics market grew by USD 9.66 trillion in 2023¹⁰. The growth in this industry was driven by several factors including the growth in e-commerce. Along with this, the industry benefited from various factors including technological advancements and globalisation. The Asia Pacific region was the largest market for logistics.

The Indian logistics industry experienced significant growth in the reported year. The industrys ability to adapt to modern technologies has further helped the industry to meet consumer satisfaction.

The master distribution industry has also grown at a steady rate. Various factors such as growth in the consumers disposable income and preference among individuals for online shopping, have contributed to the growth of the industry in the reported year.

Moreover, the industry is expected to grow further in the coming years. This expansion in the domestic distribution market is expected to be supported by growth in the revenue generated by the industry.

Company Overview

The company is a Group Company of RP Sanjiv Goenka Group. It was established in 2022 in accordance with the Companies Act, 2013. The Company is a major distributor for retail products across digital marketplaces including the Carvaan being supplied by Saregama India Limited, another group company of RP- Sanjiv Goenka Group.

Consequent to the approval of the De-Merger Scheme by National Company Law Tribunal (NCLT) and filing of the NCLT order with the Registrar of Companies, West Bengal, the shareholders of the Demerged Company had received equity shares in the ratio of 1 (One) fully paid-up equity shares of INR 10 (Rupees Ten) each of the Company for every 5 (Five) equity shares of INR 1/- (Indian Rupees One only) each held in the Demerged Company, pursuant to the provisions of Sections 230 to 232 and other applicable provisions of the Companies Act, 2013, in the manner envisaged under the said Scheme.

Subsequently the shares were listed in NSE and BSE and the Company obtained the Trading approval from both the Stock Exchanges on January 10, 2024.

Digidrive Distributors Limited places significant emphasis on Carvaan, a product supplied by Saregama India Limited among the array of products that are targeted for online marketplace distribution. Launched in 2017, Carvaan is a portable digital music player equipped with built-in stereo speakers, offering a diverse selection of 250 to 5,000 pre-loaded evergreen songs of all languages and genres. The Company aims to market a range of products through various online channels with its business-to-business (B2B) strategy. Leveraging its expertise and skill set, the Company also plans to extend its sales and marketing services to other industry players.

E-commerce Marketplace

The e-commerce marketplace offers a customisable online storefront solution on a scalable platform, encompassing mobile applications, digital product catalogues, content management, promotions handling, access to payment gateways and fulfillment services. It empowers merchants to reach customers across multiple channels and provides cost effective marketing and distribution solutions.

Open Media Network Private Limited is a subsidiary of the Company where they publish their own weekly current affairs and feature magazine, ‘OPEN.

The Company is also affiliated with the RP Sanjiv Goenka Group, a prominent conglomerate with interests spanning over power and

28 Digidrive Distributors Limited

* Not ascertainable

Notes:

i.) There was a decrease in Debtors Turnover Ratio on account of better realisation of receivables. ii.) Current Ratio for the FY 23 could not be ascertained due to nil Current Liabilities as on March 31, 2024. iii.) There was a decrease in Return on Net Worth on account of lower profit generated during the year ended March 31, 2024 coupled with increase in deferred tax liability arising on Other Comprehensive income for the year ended March 31, 2024. iv.) There was a decrease in Net Profit Ratio on account of lower profit generated during the year ended March 31, 2024.

Strengths

The company focuses on profit margins of its product portfolio and operates on a low cost model. It has a good distribution network for the product segment it currently operates in India.

Strategy

The Company is well poised to ride on the strong ecosystem of consumer being digital savvy coupled with companys reach to its consumers through the online market places

Operational Review

Economic and Financial Services Industry Conditions in India:

The Company primarily engages in trading products at the digital marketplace and the publication of magazines, with the majority of its customer base located in the Indian market itself. The operational performance of the Company is tied to Indias economic landscape which includes the countrys GDP growth rate, inflation rate, demographic shifts, wealth levels, economic

Ratios	FY23	FY24	Variance
Debtors Turnover Ratio	12.53	11.53	-7.98%
Current Ratio	*	7.36	*
Return on Net Worth	5.21%	2.46%	-52.78%
Net Profit Ratio	26.18%	18.75%	-28.38%

natural resources, retail and fast moving consumer goods (FMCG), media and entertainment, infrastructure, information technology, education and sports. Companies under the RP-Sanjiv Goenka Group include Chamundeshwari electricity supply corporation (CESC) Limited, phillips carbon black (PCBL) Limited, Saregama India Limited, Firstsource Solutions Limited, Spencers Retail Limited, RP Sanjiv Goenka group (RPSG) Ventures Limited, Harrisons Malayalam Limited and Woodlands Multispecialty Hospital Limited, among others. Furthermore, they believe that their association with the RP-Sanjiv Goenka Group facilitates acquiring of new businesses and exploring various opportunities.

Key Financial Highlights

The key financial metrics are highlighted on Page number 20 of the Annual report

Key Financial Ratios

The key financial ratios of the Company were as follows: cycles and technology adoption. Indias economy has experienced rapid growth in the recent years and is expected to continue a similar trajectory, fuelling demand for various goods and services. However, any adverse changes in Indias economic conditions, including alterations in procurement costs could significantly impact the Companys revenue and operational outcomes.

Technological Developments and Adapting New Trends:

The Companys financial success depends on its adaptability to technological advancements and emerging trends in the digital marketplace and publishing sector. The dynamic shift in consumer preferences from time-to-time requires continuous monitoring of the recent social media trends and evolving lifestyle of the people. Failure to predict and respond to such changes can hinder the Companys growth and affect its revenue.

Competition

The magazine industry of India faces intense competition from the national and international media companies particularly in the fields of circulation, readership and advertising. Competitors expand their reach from publishing houses to television, digital news platforms, social media sites, radio, etc. to stay relevant in the market and attract consumers. Managing this competition is important to mitigate adverse impacts on their business operations, revenue and operational performance.

Result of Operations

A detailed report on the Financial Performance of the Company has been enumerated in the Boards Report on Page number 20.

Risk Management Framework

The Company faces market, credit and liquidity risks from its business operations, investments and financing activities. The Board of Directors holds overall responsibility for establishing and overseeing the risk management framework.

Credit Risk

Credit risk refers to the obligations by counterparties which results in financial losses. The Company encounters credit risk primarily through operational activities such as trade receivables. These receivables are typically unsecured and they arise from revenue earned from customers. The Company manages customer credit risk adhering to established policies and procedures which include credit approval, setting credit limits and monitoring customer creditworthiness. They assess overdue customer balances based on certain factors which include age of the dues, specific credit circumstances and counterparty track record.

Liquidity Risk

Liquidity risk refers to the Companys inability to meet financial obligations as per the contract terms. Liquidity risk can be efficiently managed by maintaining adequate cash reserves, marketable securities and access to funds through trusted credit facilities. The Company closely monitors forecasts of the liquidity position and cash equivalents based on expected cash flows. The Companys liquidity management policy includes projecting cash flows, determining the requisite level of liquid assets to meet the contract obligations, monitoring the balance sheet liquidity ratios against internal and external regulatory standards and adhering to debt financing plans.

Human Resources

Human resources forms a significant component of the Company as it helps the organisation to attain its predetermined goals. In FY 2024, the total strength of the Companys workforce was 10 in FY 2024. In addition to this, the Company additionally provides employee engagement programmes to promote a healthy working environment within the organisation.

Prevention of sexual harassment

The Company has set up an Internal Complaints Committee to address sexual harassment complaints at the workplace. This was set up under The Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013. During the year under review, the Company has not received complaints under the said Committee and no complaints were pending from the year before.

Adequacy of internal financial controls with reference to financial statements

The Company has adequate internal financial control systems in all areas of operation. The Board of Directors has adopted policies and procedures for ensuring the orderly and efficient conduct of business, including adherence to the Companys policies, safeguarding of its assets, prevention and detection of frauds and errors, ensuring accuracy and completeness of the accounting records and timely preparation of reliable financial information. The services of internal and external auditors are utilised from time to time, in addition to the in-house expertise and resources. The Company continuously upgrades these systems in line with the best practices in the industry.

Cautionary Statement

The Management Discussion and Analysis (MDA) section often includes statements about future prospects. These statements, which address both known and unknown risks and uncertainties, can lead to significant differences between actual outcomes and the predictions made. The reports estimates rely on the Companys assumptions, which consider the most recent internal and external data. However, keep in mind that the underlying factors behind these assumptions can change over time, potentially affecting the estimates. Its essential to recognise that forward-looking statements apply only to the date they are made and reflect the Companys current intentions, beliefs, or assumptions. The Company is not obligated to revise or update these statements based on new information or future events.

On behalf of the Board of Directors

	Alok Kalani
Place : Kolkata	Chairman
Date : May 28, 2024	DIN:03082801