Divyashakti Granites Ltd Management Discussions.

Granite Industry Overview

Granite is one of the most sought after material among all building stone. In the past, granite pillars and beams were used to support huge structures of temples and palaces and were used for making protective walls. Now with the invention of modern tools of better hardness and polishing ability, use of granite has increased on account of its aesthetic value. Granite is in demand due to its amenability for taking mirror like polish, high compressive strength, longevity and aesthetics. Granite finds application in many areas; accordingly market is segmented among four product categories, namely - Natural stone processing industry - Building Industry - Funerary Industry and - Consumer market.

Economy

Your company has identified USA and a few other countries as its market areas for its export market, which has been growing steadily in the last few years. Your Company is one of the leading exporters of Granite Products and it expects to improve its position in future also.

Our Business

Your company is a 100% Export Oriented Unit (EOU), located at Hyderabad, Telangana. Your company exports to more than (2) Two countries. Our business is classified across a Single (One) segments: - Polished Granite Slabs & Tiles

Financial Performance of the Company / Operations

The financial performance for the company during the financial year 2017-18:

- Net sales during the year Rs. 68.58 crores as against Rs.108.36 crores in last year.

- Net Profits during year Rs.4.82 crores as against Rs.9.48 crores in last year.

- Basic and diluted earnings per share stood at 4.69 in 2017-18 as against 9.23 in last year.

Profitability

Your Companys profitability decreased due to increase in Currency Fluctuation losses in the financial year 2017-18. Your company had made a gross profit of Rs. 7.45 crores during the year as against the gross profit of Rs. 14.69 crores of the last year 2016-17.

Results of operations

Your Company generated an after tax profits of Rs. 4.82 crores in 2017-18 which was lower as compared to Rs.9.48 crores generated last year.

Profit before tax and exceptional items stood at Rs. 7.45 crore as against a profit of Rs. 14.69 crore last year. After reckoning a current and deferred tax liability of Rs. 2.63 crores, Profit after tax for the current year stood at Rs. 4.82 crores. The earnings per share decreased from Rs.9.23 in 2016-17 to Rs.4.69 in the current year under review.

Your Company has continued to publish its accounts in line with last year.

Opportunities and Threats to the Industry

Your Company functions in a business environment which is subject to increasing globalization and competition. As such, controlling risk is critical to the businesses performance and your Company by virtue of undertaking diligent monitoring manages the same. The management cautions that the risks outlined hereunder are not exhaustive and are indicative only:

- Inability to source quality granite blocks for processing continues to remain one of the major difficulties for the granite industry and is expected to continue in the future as well.

- Despite being present in multiple markets, the Company derives major proportion of its revenues from United States of America. Any shift in the consumption pattern on account of political or economic events in that market could have a material impact on our business as well.

- Our clients are spread across a large geographical area and despite examining their financial health at the time of order acceptance, there is a chance some of them may not be able to honor their commitment on time

- Heightened volatility in currency exchange rate following changing economic environment can have a bearing on the Companys financial condition, besides impacting its performance and may affect the comparability of results between the Companys financial periods.

Risk Management

The Company has the mechanism to combat the risks of exposure to Business, Assets and Financial Risks in the form of competition, accidents, natural calamities, obsolescence, and fluctuations in foreign currency etc.

Internal Control Systems and Adequacy

The Company has an adequate system of internal control implemented by the management towards achieving efficiency in operations, optimum utilization of resources and effective monitoring thereof and compliance with all applicable laws.

Human Resources

Your Company recognizes the value addition of its employees and their contribution to the growth and development of the Company. In turn, the Company is committed to train and develop its people and motivate them. Industrial relations have been cordial and mutually beneficial.