Forcas Studio Ltd Management Discussions

Our total expenditure primarily consists of cost of materials consumed, other direct expenses, changes in inventories of finish goods & work-in-progress, employee benefits expenses, finance cost, depreciation and amortisation and other expenses.

Cost of materials consumed

This represents purchase of fabrics.

Other Direct Expenses

This represents job work charges paid to contract manufacturers.

Changes in Inventories of finish goods & work-in-progress

This relates to the cost of purchase of finish goods and work-in-progress.

Employment Benefit Expenses

It includes salaries, wages, bonus and allowances, directors remuneration, contributions to welfare funds, provision for gratuity and other expenses.

Other Expenses

It includes Auditors Remuneration, Computer Maintenance, Consultancy Charges, Conveyance Expenses, Courier Charges, Discounts & Shortage, Electricity Charges, Freight Charges, General Expenses, Inspection / Q.C. Charges, Internet Charges, Insurance, GST Late Fine, Late Fees, Label Change, Logistic Charges, Misc Expenses, Motor Car Expenses, Office Expenses, Office Maintenance, Online B-C Expenses, Photoshoot, Postage & Courier Charges, Printing & Stationery, Printing Cylinder, Profession Tax - Expenses, Profession Fees, Rent, Repair & Maintenance, ROC Fees, Rounding Off, Sales Commission, Sales Promotion Expenses, Sampling Expenses, Security Guard Charges, Service Charges on Generator, Short & Excess Payment W/off, Software Maintenance, Sundry Balances W/off, TDS Filing Charges, Technical Service Charges, Telephone Expenses, Tea & Tiffin, Trade Licence, Trade Mark Charges, Transportation Charge Paid, Travelling Expenses, Interest on GST, Interest on Professional Tax, Interest Paid on TDS, Interest Paid on TCS and Bank Charges,.

Finance Costs

Our finance costs mainly include processing charges and interest.

Depreciation

Depreciation includes depreciation and amortization.

RESULTS OF OUR OPERATION

Our revenue from operations for the period ended February 29, 2024 was 9,607.24 Lakhs which was about 99.57% of the total revenue and which comprises of revenue generated from sale of menswear.

Our other income for the period ended February 29, 2024 was 41.53 Lakhs which was about 0.43% of the total revenue and which includes interest income, discount received and other income.

The cost of materials consumed for the period ended February 29, 2024 were 6,003.13 Lakhs which was about 62.22% of the total revenue.

The amount of other direct expenses for the period ended February 29, 2024 were 1,096.71 Lakhs which was about 11.37% of the total revenue.

The changes in inventories of finish goods & work-in-progress for the period ended February 29, 2024 were (68.15) Lakhs which was about (0.71)% of the total revenue.

The employee benefits expenses for the period ended February 29, 2024 were 151.38 Lakhs which was about 1.57% of the total revenue and which includes salaries, wages, bonus and allowances, directors remuneration, contributions to welfare funds, provision for gratuity and other expenses.

Other Expenses for the period ended February 29, 2024 were 1,538.10 Lakhs which was about 15.94% of the total revenue and which includes Auditors Remuneration, Computer Maintenance, Consultancy Charges, Conveyance Expenses, Courier Charges, Discounts & Shortage, Electricity Charges, General Expenses, Inspection / Q.C. Charges, Internet Charges, Insurance, Logistic Charges, Misc Expenses, Motor Car Expenses, Office Expenses, Office Maintenance, Online B-C Expenses, Photoshoot, Postage & Courier Charges, Printing & Stationery, Profession Tax - Expenses, Profession Fees, Rent, Repair & Maintenance, ROC Fees, Sales Commission, Sales Promotion Expenses, Sampling Expenses, Security Guard Charges, Software Maintenance, Telephone Expenses, Tea & Tiffin, Trade Licence, Transportation Charge Paid, Travelling Expenses, and Bank Charges.

Our EBITDA for the period ended February 29, 2024 were 927.59 Lakhs.

Financial costs for the period ended February 29, 2024 were 341.42 Lakhs which was about 3.54% of the total revenue and which consists of interest and other finance charges.

Depreciation for the period ended February 29, 2024 were 32.85 Lakhs which was about 0.34% of the total revenue and which consists of depreciation and amortization expenses.

PAT for the period ended February 29, 2024 was 514.75 Lakhs.

Our revenue from operations for the fiscal year ended March 31, 2023 was 6,960.46 Lakhs which was about 97.18% of the total revenue and which comprises of revenue from sale of menswear.

Our other income for the fiscal year ended March 31, 2023 was 201.96 Lakhs which was about 2.82% of the total revenue and which includes discount received, interest income and other miscellaneous income.

The Cost of materials consumed for the period ended March 31, 2023 were 3,816.52 Lakhs which was about 53.29% of the total revenue.

The amount of other direct expenses for the period ended March 31, 2023 were 1,011.77 Lakhs which was about 14.13% of the total revenue.

The changes in inventories of finish goods & work-in-progress for the period ended March 31, 2023 were 424.48 Lakhs which was about 5.93% of the total revenue.

The employee benefits expenses for the fiscal year ended March 31, 2023 were 147.12 Lakhs which was about 2.05% of the total revenue and which includes salaries, wages, bonus and allowances, directors remuneration, contributions to welfare funds, provision for gratuity and other expenses.

Other Expenses for the fiscal year ended March 31, 2023 were 1,312.38 Lakhs which was about 18.32% of the total revenue and which includes Auditors Remuneration, Computer Maintenance, Consultancy Charges, Conveyance Expenses, Courier Charges, Discounts & Shortage, Electricity Charges, Freight Charges, General Expenses, Inspection / Q.C. Charges, Internet Charges, Insurance, GST Late Fine, Late Fees, Logistic Charges, Misc Expenses, Motor Car Expenses, Office Expenses, Office Maintenance, Online B-C Expenses, Photoshoot, Postage & Courier Charges, Printing

& Stationery, Printing Cylinder, Profession Tax - Expenses, Profession Fees, Rent, Repair & Maintenance, Sales Commission, Sales Promotion Expenses, Sampling Expenses, Security Guard Charges, Short & Excess Payment W/off, Software Maintenance, TDS Filing Charges, Telephone Expenses, Tea & Tiffin, Trade Licence, Trade Mark Charges, Transportation Charge Paid, Travelling Expenses, Interest on GST, Interest on Professional Tax, Interest Paid on TDS, Interest Paid on TCS and Bank Charges.

Our EBITDA for the fiscal year ended March 31, 2023 were 450.15 Lakhs.

Financial costs for the period ended March 31, 2023 were 298.59 Lakhs which was about 4.17% of the total revenue and which consists of interest and other finance charges.

Depreciation for the fiscal year ended March 31, 2023 were 37.01 Lakhs which was about 0.52% of the total revenue and which consists of depreciation and amortization expenses.

PAT for the fiscal year ended March 31, 2023 was 111.91 Lakhs.

Total revenue has increased by 1,640.44 Lakhs and 30.84%, from 5,320.02 Lakhs in the fiscal year ended March 31, 2022 to 6,960.46 Lakhs in the fiscal year ended March 31, 2023. The increase in revenue was on account of increase in sale volume of product i.e. menswear, and higher price realisation on sale through online marketplaces.

Total Expenditure increased by 1,745.87 Lakhs and 32.93%, from 5,302.00 Lakhs in the fiscal year ended March

31, 2022 to 7,047.87 Lakhs in the fiscal year ended March 31, 2023. Overall expenditure was increased mainly due to increase in volume of operation and sale of products i.e. menswear.

Cost of materials consumed decreased by (725.89) Lakhs and 15.98%, from 4,542.41 Lakhs in the fiscal year ended

March 31, 2022 to 3,816.52 Lakhs in the fiscal year ended March 31, 2023. Cost of materials consumed is decreased mainly due to higher procurement of finish goods from manufacturers.

Other Direct Expenses increased by 216.74 Lakhs, and 27.26% from 795.04 Lakhs in the fiscal year ended March 31, 2022 to 1,011.77 Lakhs the fiscal year ended March 31, 2023. Other Direct Expenses was increased mainly due to increase in volume of our operation and higher production and procurement through job work arrangement.

Changes in inventories of finish goods & work-in-progress increased by 1,205.44 Lakhs, and 154.35% from (780.96)

Lakhs in the fiscal year ended March 31, 2022 to 424.48 Lakhs the fiscal year ended March 31, 2023. Changes in

Inventories of finish goods & work-in-progress was increased mainly due to increase in volume of our operation and higher production and procurement through job work arrangement.

Employee Benefit Expenses in terms of value and percentage increased by 4.39 Lakhs and 3.08% from 142.73 Lakhs in the fiscal year ended March 31, 2022 to 147.12 Lakhs in the fiscal year ended March 31, 2023. Overall employee cost was increased due to increase in staff strength and general increment in salary and incentives to employees.

Other Expenses in terms of value and percentage increased by 985.72 Lakhs and 301.76% from 326.66 Lakhs in the fiscal year ended March 31, 2022 to 1,312.38 Lakhs in the fiscal year ended March 31, 2023. The increase was mainly on account of Online B2C expenses and also due to increase in Discounts & Shortage, Rent, Sales Commission, Sales Promotion Expenses, Sampling Expenses, Security Guard Charges, Transportation Charge Paid, Travelling Expenses, Interest on GST, Interest on Professional Tax, Interest Paid on TDS, Interest Paid on TCS and Bank Charges.

Profit before Interest, Depreciation and Tax has increased by 95.58 Lakhs and 26.96% from 354.57 Lakhs in the fiscal year ended March 31, 2022 to 450.15 Lakhs in the fiscal year ended March 31, 2023. Profit before Interest, Depreciation and Tax was increased due to increase volume of our business operations and higher volume of sales.

Finance Costs in terms of value and percentage increased by 49.01 Lakhs and 19.64% from 249.58 Lakhs in the fiscal year ended March 31, 2022 to 298.59 Lakhs in the fiscal year ended March 31, 2023. Finance Costs was increased mainly due to higher interest outgo and increased borrowings.

Depreciation in terms of value increased by 10.46 Lakhs and 39.38% from 26.55 Lakhs in the fiscal year ended March 31, 2022 to 37.01 Lakhs in the fiscal year ended March 31, 2023. Increase in depreciation is due to increase in assets and is general in nature.

Net Profit has increased by 35.73 Lakhs and 46.91% from 76.17 Lakhs in the fiscal year ended March 31, 2022 to

111.91 Lakhs in the fiscal year ended March 31, 2023. Net profit was increased due to increase in revenue from operations and volume of our business through online marketplace.

Total revenue has increased by 268.97 Lakhs and 5.33%, from 5,051.04 Lakhs in the fiscal year ended March 31, 2021 to 5,320.02 Lakhs in the fiscal year ended March 31, 2022. The increase in our sale volume.

Total Expenditure increased by 244.41 Lakhs and 4.83%, from 5,057.59 Lakhs in the fiscal year ended March 31,

2021 to 5,302.00 Lakhs in the fiscal year ended March 31, 2022. Overall expenditure was increase mainly due to increase in volume of our operations i.e. sale of menswear and higher consumption of raw material in production through job work.

Cost of materials consumed increased by 1,230.68 Lakhs and 37.16%, from 3,311.73 Lakhs in the fiscal year ended March 31, 2021 to 4,542.41 Lakhs in the fiscal year ended March 31, 2022. Cost of materials consumed was increased mainly due to increase in consumption of raw material and higher production of products through job work.

Other Direct Expenses increased by 147.16 Lakhs and 22.71%, from 647.88 Lakhs in the fiscal year ended March 31, 2021 to 795.04 Lakhs in the fiscal year ended March 31, 2022. Other Direct Expenses increased mainly due to increase in production of our products through job work.

Changes in Inventories of finish goods & work-in-progress decreased by 1,178.24 Lakhs and 296.58%, from 397.28

Lakhs in the fiscal year ended March 31, 2021 to (780.96) Lakhs in the fiscal year ended March 31, 2022. Changes in inventories of finish goods & work-in-progress decreased mainly due to higher closing stock of finish products at the end of the year.

Employee Benefit Expenses in terms of value and percentage increase by 16.87 Lakhs and 13.40% from 125.86 Lakhs in the fiscal year ended March 31, 2021 to 142.73 Lakhs in the fiscal year ended March 31, 2022. Overall employee cost was increased due to increase in staff strength and general increment in salary and incentives to employees.

Other Expenses in terms of value and percentage increase by 38.11 Lakhs and 13.21% from 288.55 Lakhs in the fiscal year ended March 31, 2021 to 326.66 Lakhs in the fiscal year ended March 31, 2022. Other Expenses was increased mainly due to increase Auditors Remuneration, Computer Maintenance, Conveyance Expenses, Courier Charges, Discounts & Shortage, Electricity Charges, General Expenses, Inspection / Q.C. Charges, Internet Charges, Insurance, GST Late Fine, Late Fees, Logistic Charges, Misc Expenses, Motor Car Expenses, Office Expenses, Office Maintenance, Online B-C Expenses, Postage & Courier Charges, Printing & Stationery, Profession Tax - Expenses, Profession Fees, Rent, Repair

& Maintenance, Rounding Off, Sales Commission, Sales Promotion Expenses, Sampling Expenses, Software Maintenance, TDS Filing Charges, Technical Service Charges, Telephone Expenses, Trade Licence, Trade Mark Charges, Transportation Charge Paid, Travelling Expenses, Interest on GST, Interest on Professional Tax, Interest Paid on TDS, Interest Paid on TCS and Bank Charges.

Profit before Interest, Depreciation and Tax has increased by 12.73 Lakhs and 3.72% from 341.84 Lakhs in the fiscal year ended March 31, 2021 to 354.57 Lakhs in the fiscal year ended March 31, 2022. Profit Before Interest, Depreciation and Tax was increased due to increase in consumption of raw material for production through job work.

Finance Costs in terms of value and percentage decreased by 9.19 Lakhs and 3.55% from 258.77 Lakhs in the fiscal year ended March 31, 2021 to 249.58 Lakhs in the fiscal year ended March 31, 2022. Finance Costs was decreased mainly due to lower interest outgo.

Depreciation in terms of value decreased by 0.97 Lakhs and 3.54% from 27.53 Lakhs in the fiscal year ended March 31, 2021 to 26.55 Lakhs in the fiscal year ended March 31, 2022. Decrease in depreciation is general in nature.

Net Profit has increased by 23.45 Lakhs and 44.49% from 52.72 Lakhs in the fiscal year ended March 31, 2021 to

76.17 Lakhs in the fiscal year ended March 31, 2022. Net profit was increased due to increase sale volume and volume of operations.

(Amount in lacs)

Net cash from operating activities for the period ended February 29, 2024 was (736.62) lacs as compared to the EBIDTA at 927.59 lacs. Net cash from operating activities for fiscal 2023 was at 533.90 lacs as compared to the EBIDTA at 450.15 lacs, while for fiscal 2022, net cash from operating activities was at 251.44 lacs as compared to th EBIDTA at 354.57 lacs. For fiscal 2021, the net cash from operating activities was 254.19 lacs compared to EBIDTA of 341.84 lacs.

Net cash from investing activities for the period ended February 29, 2024 was (8.05) lacs. This negative cash outflow is attributed to addition of plant and equipment. Net cash from investing activities was at (74.11) lacs (11.23) lacs and (18.76) lacs in the fiscal 2023, 2022 and 2021 attributed to addition of plant and equipment.

Net cash from financing activities for the period ended February 29, 2024 was 744.11 lacs. Net cash from financing activities for fiscal 2023 was at (481.10) lacs and for fiscal 2022 was (229.30) lacs due to repayment of long term loans and interest on borrowings. For fiscal 2021, the net cash from financing activities was (216.98) lacs on account of repayment of long term loans and interest on borrowings.

1. Unusual or infrequent events or transactions

Except as described in this Draft Red Herring Prospectus, during the periods under review there have been no transactions or events, which in our best judgment, would be considered unusual or infrequent.

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

Other than as described in the Section titled "Financial Information" and chapter titled "Managements Discussion and Analysis of Financial Conditions and Results of Operations", beginning on Page 156 and 193 respectively of this Draft Red Herring Prospectus, to our knowledge there are no significant economic changes that materially affected or are likely to affect income from continuing Operations.

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

Other than as described in the chapter titled "Risk Factors" and "Managements Discussion and Analysis of Financial Conditions and Result of Operations", beginning on Page 26 and 193 respectively of this Draft Red Herring Prospectus, best to our knowledge there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on revenues or income of our company from continuing operations.

4. Future relationship between Costs and Income

Other than as described in the chapter titled "Risk Factors" beginning on Page 26 of this Draft Red Herring Prospectus, best to our knowledge there are no factors, which will affect the future relationship between costs and income or which are expected to have a material adverse impact on our operations and finances.

5. Competition Conditions

Our Industry is fragmented consisting of large established players and small niche players. We compete with organized as well as unorganized sector on the basis of availability of product, price and product range. Further, there are no entry barriers in this industry and any expansion in capacity of existing manufacturers would further intensify competition. Industry is very competitive and we expect competition to continue and likely to increase in the future.

The following table sets forth our capitalisation derived from our Restated Financial Statements for the period ended

February 29, 2024, and as adjusted for the Issue. This table should be read in conjunction with "Managements Discussion and Analysis of Financial Condition and Results of Operations", "Financial Statements" and "Risk Factors" on pages 193, 156 and 26, respectively.

1. As per Restated Financial Statements of the Company.

2. The corresponding post capitalisation data for each of the amounts given in the above table is not determinable at this stage pending the completion of Book building process and hence the same have not been provided in the above statement.