Jainik Power & Cables Ltd Management Discussions

OF FINANCIAL CONDITION AND

RESULTS OF OPERATION

The following discussion is intended to convey managements perspective on our financial condition and results of operations for the financial year ended March 31, 2024, March 31, 2023 and March 31, 2022. One should read the following discussion and analysis of our financial condition and results of operations in conjunction with our section titled "Financial Statements" and the chapter titled "Financial Information" on page 169 of the Draft Red Herring Prospectus. This discussion contains forward-looking statements and reflects our current views with respect to future events and our financial performance and involves numerous risks and uncertainties, including, but not limited to, those described in the section entitled "Risk Factors " on page 25 of this Draft Red Herring Prospectus. Actual results could differ materially from those contained in any forward-looking statements and for further details regarding forward-looking statements, kindly refer the chapter titled "Forward-Looking Statements" on page 18 of this Draft Red Herring Prospectus. Unless otherwise stated, the financial information of our Company used in this section has been derived from the Restated Financial Information. Our financial year ends on March 31 of each year. Accordingly, unless otherwise stated, all references to a particular financial year are to the 12-month period ended March 31 of that year.

In this section, unless the context otherwise requires, any reference to "we", "us" or "our" refers to Jainik Power and Cables Limited, our Company. Unless otherwise indicated, financial information included herein are based on our Restated Financial Statements for Financial Years 2024, 2023 & 2022 included in this Draft Red Herring Prospectus beginning on page 169 of this Prospectus.

BUSINESS OVERVIEW

Our Company was originally incorporated as a private limited Company under the Companies Act, 1956, in the name and style of "Jainik Enterprises Private Limited" bearing corporate identification number U27205DL2011PTC218425, dated May 02, 2011 issued by the Registrar of Companies, Delhi. Subsequently, the name of our company was changed to "Jainik Power and Cables Private Limited" pursuant to a shareholders resolution passed at Extra-Ordinary General Meeting held on February 15, 2024 and a fresh certificate of incorporation dated May 08, 2024, was issued by Registrar of Companies, Delhi bearing corporate identification number U27205DL2011PLC218425. For further details of change in name and change in registered office of our Company, please refer to section titled ‘Our History and Certain Other Corporate Matters beginning on page 135 of this Draft Red Herring Prospectus.

Jainik is engaged in manufacturing aluminum wire rods from the year 2023, and its been more than a decade since the company has worked in the metal industry, before the manufacturing the company deals in the trading of aluminum rods. Our Company is a manufacturer and supplier of aluminum wire rods with quality practices and compliant with the Environmental, Health, and Safety (EHS) in the manufacturing industry as certified with the ISO Certificates held by the Company. The company has a Quality Assurance Department which ensures testing through spectrometers for purity checks and detects even hidden impurities.

Our manufacturing facility located in Sonipat, Haryana, has been certified with ISO 9001:2015 from Innovative Systemcert Pvt. Ltd. and ISO 14001:2015 from United Accreditation Foundation, a member of International Accreditation forum to maintain highest quality, environmental and safety practices. Our company has obtained certificate of authorization from Haryana State Pollution Control Board for generation, collection, storage, disposal of certain Hazardous Substance. The authorization allows the Company to use mineral/synthetic oil as lubricant in hydraulic systems or other applications.

Presently our company manufactures aluminium wire rods of 9.5 mm for our customer base.

SIGNIFICANT DEVELOPMENTS AFTER THE LAST FINANCIAL YEAR

As per mutual discussion between the Board of the Company and Lead Manager, in the opinion of the Board of the Company there have not arisen any circumstances since the date of the last financial statements as disclosed in the Prospectus and which materially and adversely affect or is likely to affect within the next twelve months except as follows:

• Appointment of Mr. Shashank Jain as Managing Director of the Company w.e.f March 01, 2024

• Appointment of Ms. Priyal Agrawal as Company Secretary of the Company w.e.f. May 09, 2024.

• Appointment of Mr. Manish Wahi as the Independent Director of the Company w.e.f. May 11, 2024.

• Appointment of Mr. Sachin Goyal as the Independent Director of the Company w.e.f. May 11, 2024.

• The Board of Directors and the members of the Company approved the allotment of equity shares by way of Bonus Issue w.e.f. June 24, 2024.

• The Board of Directors and the members of the Company approved the allotment of equity shares by way of Private Placement w.e.f. July 27, 2024.

SIGNIFICANT FACTORS AFFECTING OUR RESULTS OF OPERATIONS

Our business is subjected to various risks and uncertainties, including those discussed in the section titled "Risk Factor" beginning on page 25 of this Draft Red Herring Prospectus. Our results of operations and financial conditions are affected by numerous factors including the following:

• Changes, if any, in the regulations / regulatory framework / economic policies in India and / or in foreign countries, which affect national & international finance.

• Companys results of operations and financial performance;

• Fluctuation in London Metal exchange data, which impacts the price for our company.

• Performance of Companys competitors;

• Significant developments in Indias economic and fiscal policies;

• Volatility in the Indian and global capital market;

• Changes in political and social conditions in India

• Inflation, deflation, unanticipated turbulence in interest rates,

• Fluctuations in operating costs may results volatility in Companys results of operations and financial performance;

• Our ability to meet our capital expenditure requirements and/or our failure to keep pace with rapid changes in technology;

• Our dependence on our key personnel, including our directors and senior management;

• Our ability to successfully implement our business strategy and plans;

• The occurrence of natural disasters or calamities;

• Other factors beyond our control.

DISCUSSION ON RESULT OF OPERATION

(Amount in Lakhs)

Particulars	For the year ended 31 March, 2024	%age of Total Income	For the year ended 31 March, 2023	%age of Total Income	For the year ended 31 March, 2022	%age of Total Income
Income
Revenue from	33,862.12	99.82	6,738.40	99.85	6,413.01	99.87
Operations
Other Income	61.05	0.18	10.32	0.15	8.31	0.13
Total Income	33923.17	100	6748.73	100	6421.33	100
Expenditure
Cost of material consumed	32,388.28	95.48	7,264.69	107.65	6,294.07	98.02
Purchases of Stock in Trade	-	-	-	-	-	-
Changes in inventories	328.99	0.97	(671.95)	(9.96)	(28.96)	(0.45)
Employee benefits expenses	121.96	0.36	0.57	0.01	7.53	0.12
Other expenses	211.47	0.62	9.43	0.14	12.26	0.19
Total expenses	33050.70	97.43	6602.75	97.84	6284.90	97.88
Profit Before Interest, Depreciation and Tax	872.47	2.57	145.98	2.16	136.43	2.12
Depreciation & Amortization Expenses	73.11	0.22	16.68	0.25	22.64	0.35
Profit Before Interest and Tax	799.36	2.36	129.30	1.92	113.79	1.77
Financial Charges (Finance cost)	125.19	0.37	109.69	1.63	99.83	1.55
Profit before Taxation & Exceptional Item	674.17	1.99	19.60	0.29	13.96	0.22
Exceptional Item	0	0.00	0	0.00	4.78	0.07
Profit before Taxation	674.17	1.99	19.60	0.29	9.17	0.14
Current Tax	171.34	0.51	4.62	0.07	5.35	0.08
Deferred Tax	0.97	0.00	0.32	0.00	(2.59)	(0.04)
Earlier Years Tax Expense	0	0.00	0	0.00	0	0.00
Profit After Tax but Before Extra-ordinary Items	501.86	1.48	14.65	0.22	6.41	0.10
Extraordinary Items

The Product wise revenue breakup of the Company are as follows:

(Amount in Lakhs)

Product	For the period ended 31st March, 2024		For the period ended 31st March, 2023		For the period ended 31st March, 2022
		%		%		%
Aluminium Ingot	0.00	0.00	0.00	0.00	923.62	14.40
Aluminium Throb	0.00	0.00	2288.87	33.97	1898.42	29.60
Aluminium Wire Ingot	0.00	0.00	820.02	12.17	205.16	3.20
Aluminium Wire Rod	0.00	0.00	1175.33	17.44	1853.91	28.91
All type of Metal at MCX	103.04	0.30	793.40	11.77	305.03	4.76
Others	0.00	0.00	45.81	0.68	0.00	0.00
Aluminium Metal Wire	33632.61	99.32	0.00	0.00	0.00	0.00
Iron & Steel Scrap	23.21	0.07	0.00	0.00	0.00	0.00
Exim Script	103.26	0.31	1615.09	23.97	1226.87	19.13
Total	33862.12	100.00	6738.52	100.00	6413.01	100.00

Our Significant Accounting Policies

For Significant accounting policies please refer Significant Accounting Policies, under Chapter titled "Financial Statements" beginning on page 169 of the Draft Red Herring Prospectus.

Overview of Revenue & Expenditure

The following discussion on results of operations should be read in conjunction with the Restated Financial statements for the Financial Year 2024, 2023 & 2022. Our revenue and expenses are reported in the following manner:

Revenues

? Revenue of operations

Our Companys revenue is primarily generated from the business of selling of Aluminum wire rods mainly to cable conductor manufacturers.

? Other Income

Other Income includes Interest Income from Bank and others, dividend income, capital gain on sale of investment and Profit on Sale of Fixed Assets.

(Amount in Lakhs)

Particulars	For the period ended March 31,
	2024	2023	2022
Income
Revenue from Operations	33,862.12	6,738.40	6,413.01
As a % of Total Income	99.82%	99.85%	99.87%
Other Income	61.05	10.32	8.31
As a % of Total Income	0.18%	0.15%	0.13%
Total Income	33,923.17	6,748.72	6,421.32

Expenditure

Our total expenditure primarily includes cost of material consumed, Employee benefit expenses, and Other Expenses. We also have incurred financial charges and depreciation as expenditure, which we have shown separately from total expenditure.

? Cost of material consumed

Our cost of material includes purchasing of Aluminium Scrap and Aluminium Ingots, factory costs such as rent, electricity and factory expenses along with Freight and cartage and custom and clearance charges as these all are direct cost.

? Change in Inventory

Our change in inventory includes difference between opening balance and closing balance of stock in trade and finished stocks.

? Employment Benefit Expenses

Our employee benefits expense primarily comprises of Salaries, Wages & Bonus expenses, Contribution to Provident and Other Fund and Staff welfare expenses.

? Finance Cost

Our finance costs mainly include Bank interest, and interest on term and car loan.

? Depreciation and Amortization Expenses

Depreciation includes depreciation on Buildings, Plant & Machinery, Furniture & Fixtures, Computers, etc.

? Other Expenses

Other Expenses includes majorly Freight outward, Electricity, Insurance, Rates & Taxes, Audit Fee, Business Promotion Expenses, Commission, Security Expenses, Vehicle Running and Maintenance, Legal and professional expenses, Repair and maintenance of building and others, etc.

DETAILS OF FINANCIAL YEAR 2024 COMPARED TO FINANCIAL YEAR 2023 (BASED ON RESTATED FINANCIAL STATEMENTS)

Revenues

? Total Income

Total Income for the Financial Year 2023-24, stood at Rs. 33,923.17 Lakhs whereas in Financial Year 2022- 23 it stood at Rs.6,748.73 Lakhs representing an increase of 402.66%. There is increase in income as compare to the last financial year mainly because of shift from trade centric business to manufacture centric business. They did forward integration with their product which changed their customer base from Aluminium manufacturers to cable conductor manufacturers as their stock in trade has now been converted to raw material.

? Revenue of operations

Net revenue from operations For the Financial Year 2023-24 stood at Rs.33,862.12 Lakhs. Whereas for the Financial Year 2022-23, it stood at Rs. 6,738.40 Lakhs representing an increase of 402.52%. Company has increased its revenue due to its venturing in manufacturing sector. This shifted its customer base. Sales from the top two customers which are J D enterprises and Deshraj Cable industries in total is Rs. 19714.73 Lakhs which is 58.22% of the total revenue from operations. This indicates that change in customer base because of sale of different product has major impact in increase in revenue from operations.

? Other Income

Other Income for the Financial Year 2023-24 stood at Rs. 61.05 Lakhs. Whereas for the Financial Year 2022- 23, it stood at Rs. 10.32 Lakhs representing an increase of 491.42%. This is mainly due to gain from sale of investment and availing cash discounts from our vendors.

Expenditure

? Total Expenses

Total Expenses for the Financial Year 2023-24 stood at Rs.33,249.00 Lakhs. Whereas for the Financial Year 2022-23, it stood at Rs.6729.11 Lakhs representing increase of 394.11% generally in line with the increase in total turnover and other incomes.

? Cost of Material Consumed

Cost of material consumed for the Financial Year 2023-24 stood at Rs. 32,388.27 Lakhs. Whereas for the Financial year 2022-23, it stood at Rs. 7,264.69 Lakhs representing increase of 345.83% which is in line with increase in volume of goods purchased for manufacturing facility, along with rent and electricity of factory building which is a direct cost.

? Change in Inventory

Change in Inventory for the Financial Year 2023-24 stood at Rs. 328.99 Lakhs. Whereas for the Financial Year 2022-23, it stood at Rs. (671.95) lakhs representing an increase for 148.96%. As company started manufacturing aluminum wire rods, its inventory changed from stock in trade to stock of finished goods. Hence, change in business dynamics leads to the change in inventory.

? Employment Benefit Expenses

Employee benefit expenses for the Financial Year 2023-24 stood at Rs.121.96 Lakhs. Whereas for the Financial Year 2022-23, it stood at Rs. 0.57 Lakhs representing an increase of H21.39 This was due to increase in number of employees and labour. Company has 65 full-time employees as on March 31,2024 which were 9 previously.

? Other Expenses

The Other Expenses for the Financial Year 2023-24 stood at Rs. 211.47 Lakhs. Whereas for the Financial Year 2022-23, it stood at Rs. 9.43 Lakhs representing an increase of 2143.56%, which is primarily due to enhanced rates and taxes, freight outwards, commission cost and other allied expenses. This is because of the shift in their revenue model which changed their customer base. This made them incur freight outwards of ^83.63 Lakhs which was not incurred in previous year. Similarly increase in revenue consecutively led to increase in tax and rates from Rs0.02 Lakhs to ^43.97 Lakhs. Along with repairs and maintenance and commission expenses, other expenses faced an increase of ^202.04 Lakhs.

? Depreciation and Amortization Expenses

The Depreciation and Amortization Expenses for the Financial Year 2023-24, stood at Rs.73.11 Lakhs whereas in Financial Year 2022-23 it stood at Rs. 16.68 Lakhs, which is calculated for the period and values, as per the utilization of assets for the Companys business. Also increase of 338.38% is due to purchase of plant and machinery used in manufacturing.

? Finance Cost

Finance Cost for the Financial Year 2023-24, stood at Rs. 125.19 Lakhs whereas in Financial Year 2022-23 it stood at Rs. 109.69 Lakhs representing an increase of 14.13%, due to increase in interest to banks taken for short period of Rs. 500 Lakhs. Also, such change was not major as one would expect seeing the transition of the company because the business integration is majorly funded internally and from loans from directors and related corporates.

? Restated Profit before Tax

The restated profit before tax For the Financial Year 2023-24 stood at Rs. 674.17 Lakhs. Whereas for the Financial Year 2022-23, it stood at Rs. 19.60 Lakhs, representing an increase of 3340.47%, It is primarily because of the increase in scale of operations, increase in revenue.

? Restated Profit after Tax

The restated profit before tax For the Financial Year 2023-24 stood at Rs. 501.86 Lakhs. Whereas for the Financial Year 2022-23, it stood at Rs. 14.65 Lakhs, representing an increase of 3325.64%, in line with the increase in scale of operations, increase in revenue.

Rationale for increase in income and expenses:

CONCLUSION

1. Growth in Top Line: The companys revenue from operations increased due to expansion and vertical integration of the business line. From being trader of Aluminum scrap, now Company melt it and convert it into aluminium wire rods.

2. Increase in Customer base: Since the company has vertically integrated, its customer base shifted from the user of scrap material to the user of aluminium wire rods. This increased their customer base which led to increase in top line.

3. Commodity Rates (LME): Sale price and cost price of the Aluminium is derived from London Metal exchange, which fluctuates from the market forces such as demand and supply and other factors such as boom in automobile sector, fluctuation in energy prices such as coal and continuation of the Russo-Ukrainian war also exacerbated the fluctuation of LME aluminium prices.

FISCAL YEAR ENDED MARCH 31, 2023 COMPARED WITH THE FISCAL YEAR ENDED MARCH 31, 2022 (BASED ON RESTATED FINANCIAL STATEMENTS)

Revenues

? Total Income

Total Income for the Financial Year 2022-23 stood at Rs. 6,748.73 Lakhs. Whereas for the Financial Year

2021-22, it stood at 6421.33 Lakhs, representing increase of 5.10%. This is due to fluctuating Sales price based on the LME data.

? Revenue from operations

Revenue from Operations for the Financial Year 2022-23 stood at Rs. 6,738.40 Lakhs. Whereas for the Financial Year 2021-22, it stood at 6,413.01 Lakhs representing increase of 5.07% in line with the increase in total revenue.

? Other Income

Other Income for the Financial Year 2022-23 stood at Rs.10.32 Lakhs. Whereas for the Financial Year 2021- 22, it stood at Rs. 8.31 Lakhs representing increase of 25.15% due to profit in sale of old machine and fixed interest.

Expenditure

? Total Expenses

Total Expenses for the Financial Year 2022-23 stood at Rs. 6729.11 Lakhs. Whereas for the Financial Year 2021-22, it stood at Rs. 6,407.38 Lakhs representing an increase of 5.02%, generally in line with the increase in costs due to hike in LME prices.

? Cost of Material Consumed

Cost of material consumed for the Financial Year 2022-23 stood at Rs. 7,264.69 Lakhs. Whereas for the Financial year 2021-22, it stood at Rs. 6,294.07 Lakhs representing increase of 15.42% as LME prices increases, price of raw material increased resulting in increase in material consumed.

? Change in Inventory

Change in inventory for the Financial Year 2022-23 stood at Rs. (671. 95) Lakhs. Whereas for the Financial Year 2021-2022, it stood at Rs. (28.96) representing decrease of 2220.17%. As company planned the manufacturing of aluminum wire rods starting from April, 2023, it procured more goods towards the end of March. This led to an increased closing inventory of stock in trade from ^225.38 in FY 2021-22 to ^897.33 in FY 2022-23.

? Employment Benefit Expenses

The Employee Benefit Expenses for the Financial Year 2022-23 stood at Rs. 0.57 Lakhs. Whereas for the Financial Year 2021-22, it stood at Rs.7.53 Lakhs representing a decrease of 92.38%. This is due to reversal of gratuity provisions as one of the key employees left the organization.

? Other Expenses

The Other Expenses for the Financial Year 2022-23 stood at Rs. 9.43 Lakhs. Whereas for the Financial Year 2021-22, it stood at Rs. 12.26 Lakhs representing a decrease of 23.09%. this is due to lower bank charges and decrease in travelling and conveyance expense.

? Depreciation and Amortization Expenses

The Depreciation and Amortization Expenses for the Financial Year 2022-23 stood at Rs. 16.68 Lakhs. Whereas for the Financial Year 2021-22, it stood at Rs. 22.64 Lakhs representing a decrease of 26.34% as the old machinery was sold which in turn reduced the depreciation.

? Finance Cost

The finance costs for the Financial Year 2022-23 stood at Rs. 109.69 Lakhs. Whereas for the Financial Year 2021-22, it stood at Rs. 99.83 Lakhs representing increase of 9.87%, this is primarily due to maximum utilization of the cash credit limit in the year.

? Restated Profit before Tax

The restated profit before tax For the Financial Year 2022-23 stood at Rs. 19.60 Lakhs. Whereas for the Financial Year 2021-22, it stood at 9.17 Lakhs. This is in line with increase and decrease in revenue and expenses as mentioned in separate line items.

? Restated Profit after Tax

The restated profit before tax For the Financial Year 2022-23 stood at Rs.14.65 Lakhs. Whereas for the Financial Year 2022-23, it stood at Rs. 6.41 Lakhs majorly due to factors mentioned above.

INFORMATION REQUIRED AS PER ITEM (II) (C) (iv) OF PART A OF SCHEDULE VI TO THE SEBI REGULATIONS:

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 Risk Factors beginning on page 25 of this Draft Red Herring Prospectus, to our knowledge there are no known significant economic changes that have or had or are expected to have a material adverse impact on revenues or income of our Company from continuing operations.

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

Other than as described in this Draft Red Herring Prospectus, particularly in the sections Risk Factors and Management ‘s Discussion and Analysis of Financial Condition and Results of Operations on pages 25 and 203, respectively, to our knowledge, there are no known trends or uncertainties that are expected to have a material adverse impact on our revenues or income from continuing operations

4. Income and Sales on account of major product/main activities

Income and sales of our Company on account of major activities derives from the business of selling Aluminum wire rods in FY 2023-24. In previous financial years, income and sale of companies was from trading of scrap aluminium. This was due to change in their business model from trade centric to manufacturing centric.

5. Future changes in relationship between costs and revenues, in case of events such as future increase in labour or material costs or prices that will cause a material change are known.

Our Companys future costs and revenues can be impacted by an increase in labour costs as the company newly started vertical integration, it may incur more labour cost to expand the business. Also, it will lead to setting of new machines and incurring further repair and maintenance of the old ones which may increase the cost to the company.

6. Future relationship between Costs and Income

Our Companys future costs and revenues will be determined by competition, demand/supply situation,Indian Government Policies, London metal exchange rates, foreign exchange rates and interest rates quoted by banks & others.

7. Extent to which material increases in net sales or revenue are due to increased sales volume, introduction of new products or services or increased sales prices.

Increases in net sales is materially because Company has changed the segment from trading to manufacturing. Company has started the manufacturing of new product which impact the increase of net sales.

8. Total turnover of each major industry segment in which the issuer company operates.

The Company is operating in Aluminium Sector. Relevant industry data, as available, has been included in the chapter titled "Our Industry" beginning on page 100 of this Draft Red Herring Prospectus.

9. Status of any publicly announced new products or business segments

Our Company has not announced any new services and product and segment / scheme, other than disclosure in this Draft Red Herring Prospectus.

10. The extent to which the business is seasonal.

Our business is not seasonal in nature.

11. Competitive Conditions

We face competition from existing and potential competitors which is common for any business. We have, over a period of time, developed certain competitive strengths which have been discussed in section titled "Our Business" on page 108 of this Draft Red Herring Prospectus.

FINANCIAL INDEBTEDNESS

Based on the independent examination of Books of Accounts, Audited Financial Statements and other documents of the issuer Company, JAINIK POWER AND CABLES LIMITED and further explanations and information provided by the management of the Companies, which we believe to be true and correct to the best of our information and belief, the financial indebtedness of the company as at 31st March, 2024 are as mentioned below:

(All amounts in Rs lacs, unless otherwise stated)

Nature of Borrowing	Outstanding as on 31/03/2024
Secured Loan (A) (Long term & Short term Borrowings)	972.65
Unsecured Loan (B)	740.11
Total	1,712.76

A. Secured Loans (All amounts in Rs lacs, unless otherwise stated)

Name of Lender	Purpose	Sanctioned Amount (Rs.)	Outstanding As on 31/03/2024
Kotak Mahindra Bank Limited	WCDL (Sublimit of CC)	2,000.00	500.00
Deutsche Bank OD	For meeting the working capital	470.00	472.65
Total		2,470.00	972.65

B. Unsecured Loans (All amounts in Rs lacs, unless otherwise stated)

Name of Lender	Purpose	Date of Sanctioned	Repayment Terms	Sanctioned Amount	Outstanding As on 31/03/2024
Loans from Directors and relatives	Business	NA	On Demand	NA	740.11

OTHER FINANCIAL INFORMATION

For details on other financial information please refer to Annexure VI "Statement of Mandatory Accounting Ratios" as restated on page no. 195 under the Chapter titled "Financial Information" beginning on page 169 of this Draft Red Herring Prospectus.