DRS Dilip Roadlines Ltd Management Discussions.

Your Company is engaged in the business of providing high quality logistics services including transportation, packing & moving and renting of warehouses.

1. Competitive Position of the Company

a) Industry Structure and Developments Industry Structure:

• The global supply chain is growing and changing continuously, and advances in technology are helping to streamline operations in the long run. The growth of the global logistics market is directly related to the development of international trade flow and the current economic environment.

• It involves the integration of information, transportation, inventory, warehousing, material handling, packaging, and security. Favorable government trade policies have resulted in an increased demand for logistics services which also provides an opportunity for expansion to the existing vendors.

The transportation and logistics industry is confronting immense changes such as digital transformation, new market entrants, changing customer expectations, and new evolving business models.

For the purpose of this study, the global logistics market has been divided into three segments: transportation type, logistic type, and end-user industry.

On the basis of the transportation type, the market is segmented into airways, waterways, railways, and roadways.

On the basis of logistic type, the market has been segmented into first party, second party and third party. The second-party logistics segment accounted for the largest market share.

By End-user, the market has been segmented into industrial and manufacturing, retail, healthcare, oil & gas, and others.

The Manufacturing segment accounted for the largest market share. Factors such as the policy reforms that have improved the ease of doing business along with the easy availability of cheap labor contribute to the growth of the market.

Moreover, globalization coupled with population growth and consumption behaviour has seen ever-increasing demand for products from all corners of the world. The rise of e-commerce has added to the transport boom, and over the past decade, a considerable growth has been seen across the industrys value chain as a whole.

• In terms of growth of the wider industry, logistics infrastructure will see almost across the board real growth in the years between 2017 and 2023. Global Logistics market is expected to grow at a CAGR of 7.2% during the forecast period.

Development:

• Increased adoption of outsourced logistics services in the region is driving the growth of the market. Increasing imports and 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.

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.

b) Opportunities and Threats

Opportunities:

o To alter the countrys logistics landscape, Government of India (GOI) has taken a number of decisions. 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 14% of GDP to less than 10% of it, by 2022. A national committee headed by Cabinet Secretary is in place to develop the pan-India roadmap for trade facilitation.

o 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.

o The Ministry of Commerce and Industry (MoCI) is developing an integrated logistics portal which would serve as a transactional e-marketplace by connecting buyers, logistics service providers and the relevant government agencies such as customs, port community systems, port terminals, shipping lines, railways, etc. Once functional, it would reduce delays and facilitate a transparent, informative and convenient trading system. Recently the Ministry also launched a new Logistics Ease Across Different States Index to rank states for the support they provide to improve logistics infrastructure within their respective jurisdictions.

Threats:

• The dilemma is that as world population increases and world-wide distribution chains become more sophisticated, the corresponding increase in the use of packaging has the potential of becoming as much a problem as a solution. In some parts of the world, some poorly informed people would prefer a significant reduction, and in some cases, elimination of packaging. This regression is based on a lack of understanding of the overall impact that packaging has upon Society.

• Actually, packaging has tremendous resource-saving potential. Clearly, over-packaging consumes too many resources. Under-packaging allows for damage and spoilage of contents, also wasting resources. The goal is “right size” and “right strength” packaging. It is the result of a holistic view that balances the proper use of resources against the environmental, social, and financial needs of packaging users and Society.

• The facts are clear. 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.

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 2018-19 2017-18
Transport - Household 115,17,74,684 50,09,57,127
Transport - Commercial 29,98,16,338 88,71,80,306
Warehousing services 5,08,16,434 3,67,28,018
Total Revenue 150,24,07,456 142,48,65,451

Moreover, the Company has strong customer base. Our established relationships with customers lead to stability of demand. Some of our top customers include MRF Limited, Paragon Polymer Products Private Limited, ITC Limited, Canon India Private Limited, Jindal Fibres Private Limited, Avon Meters Private Limited, J.K. Tyres & Industries Limited, ITC Limited, Ultra Tech Cement Limited, Manav energy Private Limited.

d) Outlook

By recognizing the importance of the sector, a new logistics division has been created in the Department of Commerce to develop and coordinate integrated development of the industry,

improvement in existing procedures, identification of bottlenecks and gaps, and introduction of technology-based interventions in this sector, the survey said. Improving logistics sector has huge implication on exports and it is estimated that a 10 per cent decrease in indirect logistics cost can increase 5-8 per cent of exports. Apart from increasing trade, better performance in logistics will augment programmes like Make in India, and also enable India to become an important part of the global supply chain.

e) Risks and concerns

• Increase of prices of the fuel

• Any disruptions/ delays in road transport could negatively affect reputation / profitability.

• Cargo, personal injury claims may adversely affect the business

• 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 weather, traffic conditions etc.

• Protecting Intellectual property rights is a challenge.

• Potential conflicts of interest with its Group Companies engaged in similar line of business.

• Highly competitive industry

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

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

• Disruptions or failures in information technology systems may affect operations.

• Employee misconduct or errors could adversely affect our business prospects

• Increase in the costs of labour

Demand for services may decrease during an economic recession.

Strengths:

PAN India presence

• Diversed business model and host of services offered Large fleet of owned vehicles

Experienced senior management Strong customer base

f) Internal Control System and their adequacy

The Company has effective and adequate internal audit and control systems, commensurate with the business size to safeguard assets and protect against loss from any un-authorized use or disposition. Regular internal audit visits to the operations are undertaken to ensure that high standards of internal controls are maintained at each level of the organization. The Companys internal controls are supplemented by an extensive programme of internal audits, review by management and documented policies, guidelines and procedures.

g) Discussion on financial performance with respect to operational performance

Particulars 2018-19 2017-18
Revenue from operations 150,24,07,456 142,48,65,451
Other Income 5,88,934 13,05,935
Finance Costs 2,62,69,704 2,50,71,619
Depreciation 5,05,88,673 5,89,62,193
PAT 2,62,90,830 2,50,47,331

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

The Company believes that its employees are key contributors to its business success. To achieve this, the Company focuses on attracting and retaining the best possible talent. 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 labourers and temporary labourers on daily wages as drivers and other for loading / unloading of the goods according to our requirements.

Category Number of employees as on 31.03.2019
1 Executive Director 2
2 Key Managerial Personnel (KMP) 3
3 Other employees 234
Total 239

*Dayanand Agarwal is the Chairman & Managing Director of the Company and also designated as KMP but 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 financial year) in key financial ratios, along with detailed explanations therefor, including:

Ratios 2018-19 2017-18 Explanation
i Debtors Turnover 3.09 4.37 Debtors realization got delayed due to liquidity crisis at macro level.
ii Inventory Turnover 0.18 0.12 Inventory comprises basically of the “ tyres & tubes and packing material”. Changes in Inventory turnover does not have any impact on the financial health of the Company.
iii Interest Coverage Ratio 2.54 2.37 Change being less than 25%, explanation is not warranted.
iv Current Ratio 0.85 0.76 Change being less than 25%, explanation is not warranted.
v Debt Equity Ratio 0.39 4.83 During the Year, company has issued 80,54,403 equity shares
amounting to Rs.80,544,030 and equity has gone up accordingly.
vi Operating Profit Margin (%) 3.46 3.75 Change being less than 25%, explanation is not warranted.
vii Net Profit Margin (%) or sector- specific equivalent ratios, as applicable 1.75 1.76 Negligible Change, hence explanation is not warranted.

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

2018-19 2017-18 Explanation
Net worth ( In Lakhs) 4292.88 879.77 During the year 2018-19 company has issued 80,54,403 equity shares amounting Rs.80,544,030. This in turn has changed the net worth of the company. Hence the return on net worth has a huge difference compared to last years.
Return on net worth (%) 6.12 28.46

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.

Information pursuant to Section 197 read with Rule 5 (1) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and as amended in respect of our

employees

A. The ratio of the remuneration of each director to the median employees remuneration and other details in terms of sub section 12 of Section 197 of the Companies Act, 2013 read with Rule 5(1) of the the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and amendments thereto.

(Rs. in Lakhs)

. Name of Director / KMP and Designation

Financial Year 2018-19

Remuneration of Director / KMP % increase in Remuneration Ratio of Remuneration of each Director to median remuneration of employees
1 Mr. Dayanand Agarwal (Chairman & Managing Director) 15,00,000 66.66 8.06
2 Mr. Sugan Chand Sharma (Whole Time Director) 4,27,332 Nil 2.30
3. Mrs. Shamantha Dodla (Non Executive Director) Nil Nil Nil
3. Mr. Ajai Kumar Agarwal (Independent Director) Nil Nil Nil
4. Mr. M B Suneel (Independent Director) Nil Nil Nil
5. Mr. Anjani Kumar Agarwal (CEO) 18,00,000 Nil 9.68
6. Mr. Sethumadhavarao Chikkaballapur Raghunandan (CFO) 7,50,000 Nil 4.03
7. Ms. Pooja Bang (Company Secretary) 3,60,000 Nil 1.94

B. Percentage Increase in the median remuneration of all employees in the Financial Year 2018-19:

The median annual remuneration of employees of the Company during the financial year was Rs.1,86,000. In the financial year, there was increase of 3.33 % in the median remuneration of employees.

C. Number of permanent employees on the rolls of Company as on 31st March 2019

There were 239 permanent employees on rolls of the Company as on March 31, 2019

D. Average percentile increase already made in the salaries of the employees other than the

managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in managerial remuneration.

Average percentile increase already made in the salaries of the employees other than the managerial personnel in this financial year i.e., 2018-19 is 27.20%. whereas there is an increase of 164% in the managerial remuneration for the said financial year because of appointment of CFO , Company Secretary and CEO.

E. The key parameters for any variable component of remuneration availed by the directors

Not Applicable

F. Affirmation that the remuneration is as per the Remuneration Policy of the Company:

Yes, it is hereby affirmed that the remuneration is as per the Remuneration Policy of the Company:

For and on behalf of the Board of DRS DILIP ROADLINES LIMITED
Sd/-
Dayanand Agarwal
Place: Hyderabad Chairman & Managing Director
Date: 24/08/2019 DIN: 00006668