GKW Ltd Management Discussions

4. MANAGEMENT DISCUSSION AND ANALYSIS

4.1 Industry Structure and Developments & Segment- wise Performance

(a) Warehousing business:

During the year under review, the Companys principal business activity, viz. warehousing business, continued to experience steady growth. Lease rentals increased by 23% to Rs.1204.86 lakhs as compared to Rs.979.41 lakhs in the previous year as additional warehousing space was leased out to various parties. The Company incurred capital expenditure of Rs.195.16 lakhs for refurbishing/re-construction of covered sheds for creating additional warehousing facilities. In order to cater to the increasing demand for warehousing space, the Company is actively pursuing further expansion of the warehousing area and related infrastructure such as internal roads, lighting etc. in order to develop a comprehensive warehousing/logistics hub at Howrah.

(b) Investment and Treasury :

Investment and treasury segment generated income of Rs.1833.66 lakhs during the year under review. As stated above, there was an increase in dividend income from investments in equity shares amounting to Rs.1000 lakhs and in income from mutual funds Rs. 211.97 lakhs. There was a gain of Rs.119.85 lakhs on remeasurement of mutual funds/bonds at fair value in accordance with Ind AS which was offset by lower interest income of Rs. 114.34 lakhs on account of maturity of fixed deposits/ bonds. Profit on sale of current investments decreased by Rs. 173.69 lakhs during the period under review.

(c) Other Comprehensive Income :

The substantial fluctuation in Other Comprehensive Income represents mainly unrealized notional gain/loss on non current equity investment. In the year under review, the OCI notional loss includes Rs. 11168.00 lakhs due to adverse fluctuation in market price of equity shares as compared to notional gain of Rs.24560.00 lakhs in the previous year. Cumulatively, the notional unrealized gain on this account amounted to Rs.15053.20 lakhs as on balance sheet date. Market fluctuations in equity investments is beyond the control of the Company.

4.2 Discussions on Financial Performance with respect to Operational Performance

Total income was higher by Rs.1225.57 lakhs compared to the previous year mainly due to increase in dividend income.

It is proposed to transfer a sum of Rs.1050 lakhs (201718 - Rs.500 lakhs) to General Reserve.

As in the previous year, The Company had no borrowings as on 31st March, 2019.

During the year under review, your Company invested a sum of Rs.3329.63 lakhs in mutual funds and Rs.202.15 lakhs in bonds mainly by redeploying Rs.1527.81 lakhs from fixed deposits maturing and Rs.2003.97 lakhs from operating cash flows.

Capital Expenditure for the year amounted to Rs.256.33 lakhs (2017-18 - Rs.290.45 lakhs) and value of assets put into use during the year amounted to Rs.233.65 lakhs (2017-18 - Rs.292.28 lakhs).

4.3 Opportunities and Threats

The successful implementation of GST and emphasis on infrastructure development, particularly the road and rail network augurs well for growth opportunities in the warehousing and logistics areas. Reforms in the banking and financial sectors should lead to improvement in liquidity, private sector profitability/ investment and resultant opportunities to your Company in the Investment & Treasury segment. This would help in further consolidating the financial health of the Company and enable it to pursue growth in these and related fields.

4.4 Outlook

With the introduction of Goods & Services Tax (GST) w.e.f. 1⁵¹ July, 2017 the company is expecting significant expansion in the warehousing logistics segment.

4.5 Risks and Concerns

Your Directors recognize that there are uncertainties and risks attached to any business. The risks could be external, internal, or a combination of both. External risks can be intensification of competition, technological obsolescence, changes in Government policy with regard to taxes and levies or economic slowdown adversely impacting demand and profitability. In an increasingly globalised economy, world economic trends would also impact business of the Company. Such risks will be continuously monitored and appropriate action will be taken by the Company to minimize the same. Internal risks comprise operating risks, financial risks and business risk including major equipment breakdowns, labour unrest or product substitution. The Company will take effective steps to deal with such risks.

Each business segment has been informed to identify and report quarterly to the next higher reporting level, on any major risks as perceived by them, whether they be internal or external risks and simultaneously take immediate steps to minimize the impact thereof.

All aspects of the warehousing and treasury operations are being closely monitored to identify potential risks at an early stage, in order to ensure that appropriate risk mitigation measures are put in place.

4.6 Internal Control Systems and Their Adequacy The Company has adequate internal control system to ensure protection of assets against loss from unauthorised use or disposal, proper maintenance of accounting records and adherence to Companys policies and procedures. The Company has appointed an Internal Auditor to conduct independent audits and submit periodical reports. An Audit Committee of the Board of Directors reviews the Internal Audit reports, annual financial statements and internal control systems to ensure their effectiveness and adequacy. The Committee also interacts with the Internal/ Statutory Auditors from time to time. Apart from this, audit reports and follow-up actions are periodically reviewed by the top management and remedial actions taken.

4.7 Material Developments in Human Resources/Industrial Relation Front, including Number of People Employed

During the year under review industrial relations within the Company, continued to be stable.

The total number of permanent employees was 15 as on 31st March, 2019.