DRS Dilip Roadlines Ltd Management Discussions

Annexure - III

DRS Dilip Roadlines Limited is engaged in the business of providing high quality logistics services including transportation, packing & moving of goods.

1. COMPETITIVE POSITION OF THE COMPANY

a) Industry Structure and Developments

Industry Structure:

GLOBAL LOGISTICS INDUSTRY

Market Overview

The global logistics market is driven by the significant growth in development of international trade flow and the current economic environment. The advancements in technology constituting automated material handling equipment, packaging, and biometrics are helping organisations and businesses to work competently, thereby stimulating the growth of the logistics market in the region, also the major drivers of the industry, such as the growing retail sector, particularly e- commerce, rising disposable incomes, rapid urbanization, and growing technological advancements are expected to aid the market growth.

Market segmentation

The transportation and logistics industry are undergoing significant transformations due to factors such as digital innovation, the entry of new competitors, evolving customer expectations, and emerging business models. For this study, the global logistics market is categorized into three main segments: transportation type, logistic type, and end-user industry.

Market Breakdowns:

1. By Transportation Type:

• Airways

• Waterways

• Railways

• Roadway

2. By Logistic Type:

• First Party Logistics (1PL)

• Second Party Logistics (2PL): This segment holds the largest market share.

• Third Party Logistics (3PL)

3. By End-User Industry:

• Industrial and Manufacturing

• Retail

• Healthcare

• Oil & Gas

• Others: The manufacturing segment holds the largest market share.

The global logistics market size was estimated to be in the range of USD 8 to 10 trillion in 2024. It is projected to grow to approximately USD 21.91 trillion by 2033, reflecting a notable compound annual growth rate (CAGR) of 9.35% over the forecast period. This significant growth is driven by advancements in technology, increasing globalization, and rising e-commerce activities.

Growth Drivers

Increased adoption of outsourced logistics services in the region is driving the growth of the market. Increasing importsand exports along with a huge demand for logistics services due to the economic growth and urbanization are driving the manufacturers to trade across the globe. China, Japan, India, Australia, and Indonesia are the major markets in Asia Pacific region. China is the largest logistics market in the region due to a huge population in the country and the presence of a large manufacturing base.

North America is the second largest region in the market. Increasing trade activities between the Americas and Europe are driving the growth of the market in this region. Rising demand for foreign goods in Indonesia, Thailand, and India has strengthened the trade relations with the U.S. Europe is another major region in the market. Germany, the U.K., and France are the major logistics markets.

Government Initiatives

Transportation and logistics infrastructure is a constantly recurring priority in every new government policies. Economic reforms and government initiatives in terms of strengthening the manufacturing sector are expected to attract private investment. The development of transportation and logistics-related infrastructures, such as dedicated freight corridors, logistics parks, free trade warehousing zones, and container freight stations will help to improve efficiency. The governments plan is likely to make the economy competitive by reducing logistics costs, bring down pollution levels by reducing congestion on roads, give a boost to the industry and create employment.

(Source: https://www.marketresearchfuture.com/reports/logistics-market-5076)

LOGISTICS SECTOR IN INDIA

The Indian logistics industry is one of the fastest-growing markets globally, valued at over $200 billion and expected to reach $320 billion by 2025. This growth is driven by the expansion of e- commerce, increased manufacturing activity, and government initiatives to improve infrastructure and ease of doing business, As India continues to strengthen its position as a global manufacturing and export hub, the logistics industry is poised for substantial growth.

Opportunities lie in areas such as cold chain logistics, specialized transportation for hazardous and perishable goods, and the integration of advanced analytics and predictive modeling to optimize supply chain operations. By embracing these emerging trends and opportunities, the Indian logistics sector can enhance its competitiveness, drive economic growth, and meet the evolving needs of businesses and consumers.

The industry is crucial for the efficient movement of products and services across the nation and in the global markets. The logistics business is highly fragmented and has over 1,000 active participants, including major local players, worldwide industry leaders, the express division of the government postal service, and rising start-ups that focus on e-commerce delivery. The industry includes transportation, warehousing, and value-added services like packaging, labelling, and inventory management. With the advent of technology-driven solutions such as transportation management systems (TMS) and warehouse management systems, Indias logistics industry has witnessed tremendous development in recent years (WMS). These solutions have assisted logistics firms in increasing operational efficiency, lowering costs, and improving customer service.

As depicted in the below pie chart (left), representing the segment-wise breakup of the logistics sector in FY24. Roads have the largest percentage share of 73% followed by rail (18%), water (5%) and air (5%).

The below pie chart (right) represents the fragmented structure of the Indian logistics industry.

Development:

• The outsourced logistics services is driving the growth of the market. Imbalance between the available resources and the consumption pattern is leading to increasing imports and exports along with a huge demand for logistics services.

• Strained trade relations of our country with few of its neighbours is compelling the manufacturers and traders to shift their manufacturing / trade hubs and thus leading to huge relocations.

• The recent shift of huge chunk of population from urbans to rurals has created new demands in the logistic industry.

• Rising demand for foreign goods in Indonesia, Thailand, and India has strengthened the trade relations with the U.S. Europe is another major region in the market. Germany, the U.K., and France are the major logistics markets.

• Transportation and logistics infrastructure is a constantly recurring priority in every new government policies. Economic reforms and government initiatives in terms of strengthening the manufacturing sector are expected to attract private investment.

• Work-from-home culture is giving new dimensions to the logistics industry

b) Opportunities and Threats

Opportunities:

• Emphasis on development of highways connecting various states is one such step. The GST regime is certain to expedite faster conversion of informal logistics setups to formal ones and speed up freight movement at interstate borders due to dismantling of check posts. There is a target to reduce the logistics cost in India from the present 13% -14 % of GDP to less than 0.08% - 0.09% by 2030.

• A new Logistics Division in the Department of Commerce has been established to coordinate integrated development of the sector by way of policy changes, improvement in existing procedures, identification of bottlenecks and gaps, and introduction of technology-based interventions. A concerted effort in collaboration with central line ministries and state governments is on to simplify the regulatory processes in domestic and export-import logistics.

• The Logistic market is likely to witness good market growth rising at a 9.35 % CAGR during the global forecast period (2024 - 2030).

• Launching of M-Parivahan mobile App and Pariwahan Sewa Portal.

Threats

• Availability of goods on-line and that too cheaper variants will reduce the need to relocate goods from one to another.

• Increased work-from home and ease of work from anywhere will reduce movement of work force from one place to another.

• Increased e-commerce leads to increased packaging requirements and eventually huge consumption of packaging materials such as paper and plastic. There would be huge pressure on our forests and other natural resources. Environmentalists would definitely not support it. Further, it may be nature-detrimental and irreparable damages in store for our next generations.

• The writing is clear on the wall. The production of packaging materials consumes both natural and human resources. The application of those materials further uses more valuable resources. Finally, the disposal of packaging materials into landfills, incinerators, and, inappropriately, on the sides of countless highways and roads, waterways, seas and forests as litter, also requires the utilization of more valuable resources, most of which could have been used again, or differently. Unfortunately, Water bodies have turned into waste bins of our planet.

c) Segment- wise or Product-wise performance Company Performance Highlights:

• ISO 9001:2015 certified - for providing Quality Management System in the field of Packers, Movers and Logistics.

• Company became Indian Banks Association approved transport operator in the year 2010.

• Company became a Core Member of the International Association of Movers (IAM) in September 2013.

• Company entered the World Book of Records for Conceptualizing Innovative Van Design for Household Shifting in 2018.

Segment- wise performance:

Revenue	2023-24	2022-23
Transport - Household	15225.70	15,220.89
Transport - Commercial	2948.80	3674.84
TOTAL	18,174.50	18,895.74

Our established relationships with customers lead to stability of demand. Some of our top customers include MRF Limited, Express Roadways Limited, NU Vista Ltd, GSM Logistics, Indian Oil Corporation Limited, ITC Limited, JK Tyres & Industries Limited, KVSV Engineering Industries, Micro Labs India Private Limited, Paragon Polymers Products Private Limited, Tata Power Company Limited, Power tech electro infra private limited, ACC Limited, Ultra Tech Cement Limited, Ushayarn Limited, SBI, Avon Meters Private limited, Jindal Fibers Private Limited, Vinishma Technologies Private limited, ONGC, TVS Supply chain Solutions limited.

d) Outlook

The warehousing and logistics industry in India is a dynamic and rapidly growing sector that is expected to play an increasingly important role in the countrys economy. Despite some challenges, the sector is well positioned for long-term growth and presents exciting opportunities for investors and businesses. With the governments focus on improving infrastructure and the rise of e- commerce, the sector is expected to be a key driver of economic growth in the country. Moreover, with the increasing adoption of technology and the governments push for a digital economy, there is also significant potential for logistics players to leverage data analytics, artificial intelligence, and machine learning to improve operational efficiency and enhance customer experience. There are also opportunities for foreign investment as international companies look to tap into Indias growing logistics market. All this has helped us report buoyant performance during the FY 2023-24.

e) Risks and concerns

The balance of risks to global growth remains tilted downward, but adverse risks have receded since the publication of the April 2023 WEO. The resolution of US debt ceiling tensions has reduced the risk of disruptive rises in interest rates for sovereign debt, which would have increased pressure on countries already struggling with increased borrowing costs. The quick and strong action authorities took to contain banking sector turbulence in the United States and Switzerland succeeded in reducing the risk of an immediate and broader crisis.

Upside risks. More favorable outcomes for global growth than in the baseline forecast have become increasingly plausible. Core inflation could fall faster than expected—from greater-than-expected pass-through of lower energy prices and a compression of profit margins to absorb cost increases, among other possible causes—and declining job vacancies could play a strong role in easing labor markets, which would reduce the likelihood of unemployment having to rise to curb inflation.

Developments along these lines would then reduce the need for monetary policy tightening and allow a softer landing. Scope exists for more favorable surprises to domestic demand around the world, as in the first quarter of 2024. In numerous economies, consumers have not yet drained the stock of excess savings they accumulated during the pandemic; this could further sustain the recent strength in consumption. Stronger policy support in China than currently envisaged—particularly through means-tested transfers to households—could further sustain recovery and generate positive global spillovers. Such developments, however, would increase inflation pressure and necessitate a tighter monetary policy stance.

Downside risks. Despite the recent positive growth surprises, plausible risks continue to be skewed to the downside:

Inflation persists: Tight labor markets and pass-through from past exchange rate depreciation could push up inflation and risk de-anchoring longer-term inflation expectations in a number of economies. The institutional setup of wage setting in some countries could amplify inflation pressures on wages. Moreover, El Nino could bring more extreme temperature increases than expected, exacerbate drought conditions, and raise commodity prices. The war in Ukraine could intensify, further raising food, fuel, and fertilizer prices. The recent suspension of the Black Sea Grain Initiative is a concern in this regard. Such adverse supply shocks might affect countries asymmetrically, implying different dynamics for core inflation and inflation expectations, a divergence in policy responses, and further currency movements.

Financial markets reprice: Financial markets have adjusted their expectations of monetary policy tightening upward since April but still expect less tightening than policymakers have signaled, raising the risk that unfavorable inflation data releases could—as in the first quarter of 2023—trigger a sudden rise in expectations regarding interest rates and falling asset prices. Such movements could further tighten financial conditions and put stress on banks and nonbank financial institutions whose balance sheets remain vulnerable to interest rate risk, especially those highly exposed to commercial real estate. Contagion effects are possible, and a flight to safety, with an attendant appreciation of reserve currencies, would trigger negative ripple effects for global trade and growth.

Chinas recovery underperforms: Recent developments shift to the downside the distribution of risks surrounding Chinas growth forecast, with negative potential implications for trading partners in the region and beyond. The principal risks include a deeper-than-expected contraction in the real estate sector in the absence of swift action to restructure property developers, weaker-than- expected consumption in the context of subdued confidence, and unintended fiscal tightening in response to lower tax revenues for local governments.

Debt distress increases: Global financial conditions have generally eased since the March 2023 episode of banking stress (Box 1), but borrowing costs for emerging market and developing economies remain high, constraining room for priority spending and raising the risk of debt distress. The share of emerging market and developing economies with sovereign credit spreads above 1,000 basis points remained at 25 percent as of June (compared with only 6.8 percent two years ago).

Geo-economics fragmentation deepens: The ongoing risk that the world economy will separate into blocs amid the war in Ukraine and other geopolitical tensions could intensify, with more restrictions on trade (in particular that in strategic goods, such as critical minerals); cross-border movements of capital, technology, and workers; and international payments. Such developments could contribute to additional volatility in commodity prices and hamper multilateral cooperation on providing global public goods.

• Large scale and prolonged agitations, such as the recent Farmers agitation near Delhi Haryana borders.

• Cargo damages, personal injury claims may adversely affect the business.

• Constant Increase of fuel prices.

• Lack of experienced drivers.

• Increase in taxes, significantly affect profits.

• The increase in the age of vehicles and an increase in the prices of new vehicles.

• Fog conditions, unpredictable rains and other weather-related issues.

• Natural calamities, such as cyclone, floods etc.,

• Traffic disruptions etc.

• Highly competitive industry

• Competition to attract and retain labour

• Dependency on third parties for supply of equipment and maintenance of vehicles.

• The branches (including transshipment hubs) are located at leased premises.

• Employee misconduct or errors could adversely affect our business prospects

• Increase in costs of labour

• Demand for services may decrease during an economic recession.

• Increased tensions with neighbour countries.

Strengths:

• Strong network scattered throughout the country

• Diversified business portfolio

• Negligible dependence on external debt

• Large fleet of owned vehicles,

• Experienced senior management

• Strong customer base

• Labour friendly policies

f) Internal Control systems and their adequacy

The Company has pan India presence, having branch offices, warehouses and hubs spread in different cities and towns. Keeping the said in view, we have adopted policies and procedures which enables implementation of appropriate internal financial controls across the organization. It ensures orderly and efficient conduct of business, including adherence to the Companys policies, safeguarding of its assets, prevention and detection of fraud, error reporting mechanism, accuracy and completeness of accounting records, and timely preparation of reliable financial disclosures. Internal Financial Controls are an integral part of the Risk Management Process, addressing financial and financial reporting risks. The Internal Financial Controls have been documented, digitized and embedded in the business process.

g) Discussion on financial performance with respect to operational performance

Particulars	2023-24	2022-23
Revenue from operations	18,174.50	18,895.74
Other Income	268.23	182.78
Finance Costs	49.94	89.51
Depreciation	325.11	232.12
PAT	299.79	485.91

As observed in the table laid above, though the performance during the FY 2023-24 increased at topline level, its bottom line suffered a decline. In absolute terms, the Companys performance declined when compared to that of previous year, nevertheless, our management deserves to be appreciated for their efforts in the backdrop of horrific conditions that have arisen on account of global logistics issues.

For the Financial year 2023-24, your company recorded a turnover of Rs. 18174.50 Lacs and earned a net profit of Rs.299.79 Lacs as compared to the previous years (2022-23) turnover of Rs. 18895.74 Lacs and net profit of Rs. 485.91 Lakhs. As a result, the Earning per share (EPS) for the FY 2023-24, stood at Rs. 1.99 per share as compared to the previous years EPS of Rs. 3.23 per share.

h) Material developments in Human Resources / Industrial Relations front, including number of people employed

As far as logistics industry is concerned, wherein your Company operates, It has reinforced the fact that a dedicated fleet of employees are the backbone of any organization. To supplement the said, the Company focuses on retaining the trusted and experienced staff. The Company looks for specific skill-sets, interests and background that would be an asset for its kind of business. Manpower is a prudent mix of the experienced and young people which gives us the dual advantage of stability and growth, whereas execution of services within time and quality. The skilled resources together with our strong management team have enabled the company to successfully implement the growth plans.

The senior management is diversified and have different operational heads to support operations such as accounting, booking orders, marketing, human resource management, and field work for packing and moving, finance related activities.

Additionally, the Company employs, casual laborers and temporary laborers on daily wages as drivers and other for loading / unloading of the goods according to our requirements.

Sr. No	Category	Number of employees as on 31.03.2024
1	Executive Director	02
2	Key Managerial Personnel (KMP)	02
3	Other employees	239
4	Total	243

*Anjani Kumar Agarwal is the CEO & Managing Director, and Sugan Chand Sharma, is the Whole Time Director, KMPs of the Company and considered under the category of "Executive Director" only.

i) Details of significant changes (i.e. change of 25% or more as compared to the immediately previous FY) in key financial ratios, along with detailed explanations:

Sl. No.	Ratios	2023-24	2022-23	Explanation
1	Debtors Turnover	2.70	3.20	Change being less than 25%. Explanation is not warranted
2	Inventory Turnover	0.02	0.02	Inventory Comprises basically packing Material, Tyres and Tubes, Changes in inventory does not have any impact on financial health of the company.
3	Interest Coverage Ratio	9.10	8.03	Change being less than 25%. Explanation is not warranted
4	Current Ratio	0.43	0.74	Due to reduction in Current assets.
5	Debt Equity Ratio	0.23	0.26	Change being less than 25%. Explanation is not warranted
6	Operating Profit Margin (%)	2.23	3.33	Due to decrease in Operational revenue.
7	Net Profit Margin (%) or sector specific equivalent ratios, as applicable	1.63	2.55	Due to Reduction In net profit.

j) Details of changes in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof

Particular	2023-24	2022-23	Explanation
Net worth (In Lakhs)	2791.01	2491.22	Due to Change in Reserves & Surplus as compared to last year
Return on net worth (%)	0.11	0.20	Due to reduction in earnings.

2. DISCLOSURE OF ACCOUNTING TREATMENT:

In the preparation of financial statements, a treatment different from that prescribed in an Accounting Standard has not been followed. The financial statements represent a true and fair view of the underlying business transactions.

3. CAUTIONARY STATEMENT

This report contains forward-looking statements extracted from reports of Government Authorities / Bodies, Industry Associations etc. available on the public domain which may involve risks and uncertainties including, but not limited to, economic conditions, government policies, dependence on certain businesses and other factors. Actual results, performance or achievements could differ materially from those expressed or implied in such forward-looking statements. This report should be read in conjunction with the financial statements included herein and the notes thereto.

	For and on behalf of the Board
	For DRS DILIP ROADLINES LIMITED
	Sd/-	Sd/-
	Anjani Kumar Agarwal	Sugan Chand Sharma
	CEO & Managing Director	Whole Time Director
	DIN:00006982	DIN:07064674
	Address: Plot No. 25/a,	Address:4-2-202,4th
	Janakpuri Colony Gunrock,	Floor,Old Bhoiguda,
	Karkhana, Hyderabad-	Near Mahankali Temple-
	500009	500003
Place: Hyderabad
Date: 30.08.2024