Jyoti Resins and Adhesives Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Economic overview Global economy

Geopolitical uncertainty pushed inflation to an unprecedented level at the beginning of the year. In the last few quarters, inflation has been perceived to be stabilising, indicating a positive outlook.

The global economy appears poised for a gradual recovery from the powerful blows of the pandemic and Russia-Ukraine war. The global economic output is expected to witness steady growth, driven by stabilising inflationary pressures, reviving consumer sentiment and investor confidence. The employment scenario in the US and other advanced economies has recovered from pandemic levels and rising disposable income is also likely to support growth in the coming years.

Emerging and developing countries are also witnessing growth across multiple sectors, powered by government focus on infrastructure and manufacturing sectors. China has also recovered from the COVID impact on its economy and industries and is on the mend.

Central banks monetary policies are expected to bear fruit, leading to a decline in global inflation from *8.7% in CY22 to 7.0% in CY23 to 4.9% in CY24. It is anticipated that the pent- up demand in numerous economies, along with a significant reduction in inflation, will contribute to accelerated economic growth in CY23.

[*Source: IMF World Economic Outlook, April 2023].

Outlook

The landscape of the global economy continues to evolve, characterised by recovery, resilience, and an increasing focus on sustainable development.

Despite inflationary pressures, the global economy is supported by a robust labour market, increased domestic spending, an influx of foreign capital and a prudent response to the energy crisis in Europe.

The International Monetary Fund (IMF) in its World Economic Outlook report of April 2023, projects a global growth rate of 49% for 2023, signalling a continuation of the recovery trend.¹

Many emerging markets and economies (EMDEs) have already recovered, which has bolstered real incomes. An optimistic global outlook would also be determined by the speed and effectiveness of fiscal and monetary policy actions implemented to boost economic expansion. Trade is also expected to remain a crucial engine of growth. Despite challenges like supply chain disruptions, the World Trade Organisation anticipates a 4% growth in the volume of world merchandise trade in 2023, reflecting the robust demand and supply adaptions.² The central banks have been tightening monetary policy, which is expected to curb sticky inflation and foster long-term growth.

A stronger boost from pent-up demand in numerous economies or a faster fall in inflation is likely in the course of 2023. The governments and central banks of the world are expected to play a major role in accelerating economic growth through targeted, need-based measures. Advanced economies are expected to maintain their recovery momentum, thanks to the successful vaccination campaigns and strong fiscal and monetary support.

However, the effectiveness and timing of fiscal and monetary policies will be crucial in determining the accuracy of the IMFs forecast. While central banks around the world are tightening monetary policy, it remains uncertain whether these actions will successfully reduce inflation and promote sustainable growth. Fiscal measures will also be critical, particularly in aiding those affected by the pandemic in their businesses and personal lives.

Indian Economy

As stated by the Reserve Bank of India, the Indian economy has experienced a robust GDP growth of 72% for the fiscal year 2023.³ This resurgence in growth comes after the challenging period of economic contraction faced in 2020 due to the COVID-19 pandemic and the associated lockdown measures. This recovery has been largely fuelled by strong domestic demand, a resurgence in manufacturing and services sectors, and increased export activity owing to the revival of global trade. Infrastructure development has also been a key driver of growth, with government initiatives spurring construction activities across the country.

The Indian government has managed to maintain a favourable domestic policy environment and prioritise structural reforms, allowing the countrys economy to remain resilient amid global challenges.

Various high-frequency indicators, such as GST collections, railway and air traffic, electronic toll collections and E- Way bill volume, suggest a robust economic recovery in India. This persistent growth momentum has positioned India as an attractive investment destination. Moreover, India is expected to retain its status as the fastest-growing G-20 nation in the coming years. Indias presidency of the G20 Summit in 2023 has also bolstered its international stature. It is anticipated that this event will boost Indias image as a hub for business and innovation, attracting more foreign investments and opening up new avenues for trade and collaboration.

Despite the challenges, the Indian governments prudent initiatives, such as the PM Gati Shakti - National Master Plan, the National Monetisation Plan (NMP) and the Production- Linked Incentive (PLI), have been instrumental in fostering economic growth. The Reserve Bank of India (RBI) has also taken prudent and proactive measures to ensure financial stability and address liquidity constraints. These factors have contributed to the Indian economys resilience and stimulated substantial investments.

In response to monetary policy actions by the RBI, together with other supply side measures, headline CPI inflation has gradually declined from its peak of 7.8% in April 2022 to 5.7% in March 2023 and is projected to moderate further to 5.2% in Q4, 2023-24.

Outlook

Despite global challenges, Indias economic activity has remained robust due to a favourable domestic policy environment and the Governments continued emphasis on structural reforms.

India is expected to be among the fastest growing major economies of the world in 2023-24, accounting for 15% of global growth—the second largest contribution, and higher than that of the US and EU put together. A crucial component of this growth story is the expected surge in domestic consumption. As the vaccination drive expands and pandemic-induced restrictions ease, consumer confidence is likely to rebound, leading to increased spending

A combination of rising disposable income, easy access to credit and lowering interest rates in the wake of a stabilising inflation trajectory will bode well for economic growth of the country, going forward.

Looking ahead, the Indian economy presents a landscape of promising opportunities mixed with significant challenges. It is on a trajectory of steady recovery and poised for growth, reflecting the resilience and dynamism of the Indian market.

Industry overview

Global adhesive and resin industry

The global Adhesive Resin Market, is predicted to experience significant growth in the upcoming years, driven by the rising demand for adhesive resins in automotive, packaging, industrial, and other sectors. The global adhesive resins market is projected to attain a valuation of US$ 31 billion by the year 2033, with a steady expansion at a compound annual growth rate (CAGR) of 5.1% during the period from 2023 to 2033.⁴ Notably, the Asia- Pacific region is expected to have high demand for adhesive resins due to technological advancements in end-use industries and the increase in surgical procedures.

In recent times, there has been a noteworthy surge in the demand for adhesive resins in various consumer applications and other sectors, consequently contributing to the expansion of the global market. Additionally, the rising construction and infrastructure developments in the building industry have further fuelled the demand for these adhesive products.

The adoption of synthetic and environmentally friendly adhesive resins is anticipated to create favourable prospects for participants in the industry. Increasing consciousness regarding sustainable materials is projected to drive the demand for bio-based adhesives, thereby assisting end-use industries in addressing environmental concerns. Moreover, there is a discernible shift towards the utilization of hot-melt adhesives within these end-use sectors.

However, the growth of the global market is likely to be influenced by certain challenges and constraints. Among these factors are time-consuming and stringent regulatory policies, as well as fluctuations in raw material prices. Moreover, difficulties in separating objects during the testing process and reduced stability of these solutions at high temperatures further limit growth opportunities for industry participants. Nonetheless, it is worth noting that these adhesives exhibit relative weakness in bonding larger objects with smaller surface areas. Nevertheless, the automotive industrys increasing demand for low carbon- emitting and lightweight vehicles will drive the need for adhesives and their resins.

Wood adhesives industry

In a world increasingly driven by innovation and sustainability, the wood adhesive industry holds an essential role. The wood adhesives sector has witnessed considerable growth in recent years due to several factors. Some of them include higher real estate demand, an increasing number of individual houses in Tier II and Tier III cities and rural housing, as well as greater demand for furniture and building materials. It is projected that the global wood adhesives industry will grow at a CAGR of 4.8% and reach USD 22.8 billion by 2030.⁵

The wood adhesives markets growth is also propelled by high demand for furniture, wooden flooring, cabinets, and other wood items in the Asia-Pacific (APAC) countries, including India and China. Other factors contributing to this sectors expansion are lower labour and manufacturing costs in the APAC region. Likewise, this region has less stringent regulations and data requirements, leading to adaptive and business- friendly regulatory policies that promote the growth of the wood adhesive industry.

Outlook

The growth of the market is driven by the increasing demand for adhesive resins in consumer applications and transportation, as well as the surge in construction and building activities due to infrastructure development. Technological advancements and the trend towards sustainable construction and smart cities are expected to further boost market demand. The global Adhesive Resin market report provides a comprehensive evaluation of the market, including analysis of key segments, trends, drivers, restraints, competitive landscape, and factors impacting market growth.

The future of the Indian wood adhesive industry, particularly white glue, appears to be vibrant, underscored by various macroeconomic trends and industry-specific drivers. The Indian wood adhesive market is showing promising growth, reflecting the countrys accelerating economic recovery. According to a report by Research and Markets, the Indian wood adhesive market was valued at USD 880 million in 2022 and is anticipated to grow at a CAGR of 7.5% during 2022-2027

Indian Adhesive and Resin industry

The adhesive market in India was worth USD 930.464 million in 2021. However, it is projected to expand at a compound annual growth rate (CAGR) of 10.26% during the forecast period of FY2023-28, reaching a value of USD 1842.936 million by 2028. The wood adhesive industry plays a crucial role in a rapidly evolving world that emphasises innovation and sustainability. On top of that, the industry holds immense importance in Indias manufacturing and construction sectors, finding widespread usage in furniture manufacturing, interior design, flooring, panelling, and construction. Over recent years, the Indian wood adhesive market has experienced remarkable growth due to factors such as rapid urbanisation, infrastructure development,

and a thriving furniture industry. Rising disposable incomes, evolving lifestyles, and a growing inclination towards superior wood products also contribute to the increasing demand for wood adhesives in the market. In addition to this, the wood adhesive market in India is witnessing significant growth, driven by the countrys large population and the substantial demand for furniture, wooden flooring, and cabinets.

Indias Adhesives market can be classified into water-based, solvent-based, hot-melt, reactive and other adhesives, determined by the technology employed. Water-based adhesives, such as Polyvinyl Acetate (PVA) adhesives, are anticipated to grow in the foreseeable future. Additionally, the market is expected to be driven by ongoing innovation and the introduction of new adhesive products in the country⁶.

Outlook

Indias adhesive market has received an enhanced impetus from both government and private initiatives aimed at its expansion.

The outlook for the Indian wood adhesive industry, specifically in the realm of white glue, appears to be characterised by a multitude of macroeconomic trends and drivers that are unique to the industry. The Indian wood adhesive market is poised for promising growth, reflecting the countrys robust economic recovery. As stated in a report by Research and Markets, the market for wood adhesive in India attained a value of USD 880 million in 2022 and is projected to register a compound annual growth rate (CAGR) of 7.5% from 2022 to 2027.

The Indian wood adhesive industrys expansion has been propelled by the revival of the construction and furniture sectors. Furthermore, the industry gains momentum from the increasing urbanisation and the expanding middle class with higher disposable incomes. A noteworthy factor driving this growth is the anticipated surge in Indias real estate and construction sectors. On top of that, Government initiatives focused on infrastructure development and housing have also stimulated the demand for wood adhesives, specifically white glue.

Company overview

Jyoti Resins & Adhesives, is Indias second-largest white glue adhesive manufacturer in the retail segment. The Company offers a wide range of synthetic wood adhesives (white glue) under their flagship brand, Euro 7000. It is a consumer-centric company committed to quality and innovation. The Companys success in this business is a result of its strategic vision, which focuses on delivering world-class products and services to its customers.

Jyoti Resins and Adhesives Limited launched its brand, Euro 7000, in 2006. The Company is currently operating the plant with an installed capacity of 2,000 Tonnes Per Month (TPM) at Santej in Gandhinagar to meet the growing demand for its products. As a result, Euro 7000 has grown exponentially and is now the second largest selling wood adhesive brand in Indias retail segment. The Company services 13 states in India through 25 branches and 50 distributors, catering to 10,000 retailers and 3,00,000 carpenters across India.

The Companys headquarters as well as manufacturing facilities are based in Ahmedabad. While it has a sales footprint across 13 states, Gujarat, Madhya Pradesh, Rajasthan, Maharashtra, Karnataka and Telangana are the top volume contributing states. The Companys proprietary brand, Euro 7000, commands superior recall and traction for consistency, quality, and service. It is engaged in the manufacture of various types of wood adhesives with different formulations, such as waterproof, antitermite, fast-drying, weather-proof and anti-fungal adhesives.

Business overview

The Companys range of high-quality adhesives cater to all key substrates and woodworking needs. The adhesives are designed to last for years by providing greater strength, durability and protection.

EURO Synthetic Wood Adhesive

It is a perfect combination of strength and transparency. The adhesive film is transparent and glossy, providing a smooth and clear finish. Its anti-termite formula ensures long-lasting durability and protection.

WP 2-in-1 Waterproof Adhesive

When it comes to waterproof adhesive, it is the ultimate option. The transparent and glossy adhesive film is water-resistant, heat-resistant, and fungal-resistant, ensuring strength and durability. Its anti-termite formula protects woodwork from termites, making it the perfect adhesive for outdoor woodwork projects.

EURO Extreme3

It is an adhesive that offers fast-drying, waterproof, and antitermite properties. With a transparent and glossy film, it offers excellent handling strength within 2-3 hours of application.

EURO Ultra 5in1 adhesive

It offers five benefits in one adhesive. The transparent and glossy film provides a smooth and clear finish to the wood, while its fast-drying formula offers 2 hours handling strength. Its waterproof and anti-termite properties make it perfect for outdoor woodwork projects. It is also weather-proof and provides more coverage than other adhesives, making it the ultimate choice for all woodworking needs.

EURO PVC Glue

It is perfect for bonding PVC sheets to wood. It comes with preedge bending taps, making it easy to apply.

EURO Extreme3 Hi Strong adhesive

It is quick-drying, waterproof, and termite-resistant. With a transparent and glossy film, it provides excellent handling strength within 2-3 hours of application.

EURO 2in1 adhesive

It is waterproof, termite-resistant, heat-resistant, and fungal- resistant. The translucent and glossy coating gives the wood a smooth and clear finish, while its high strength assures long- lasting durability.

EURO EWR adhesive

It is suitable for both hot and cold press, providing more coverage and better strength.

EWR D2+ Hot Press Expert

It has a fast-drying composition with high strength that ensures sturdiness in any situation. Its D2+ grade glue is ideal for all woodworking applications, and it comes in a compact 50 Kg drum pack.

Opportunities

Growing demand for eco-friendly products

With increasing environmental consciousness and stricter regulations, there is a rising demand for sustainable and ecofriendly resins and adhesives. The Company can capitalise on this opportunity by developing and marketing environmentally friendly products to attract environmentally conscious customers and gain a competitive edge.

Advancements in technology

The adhesive and resin industry is continuously evolving, with advancements in materials and manufacturing processes. The Company can leverage these technological developments to create innovative and high-performance products, catering to diverse applications across various industries.

Collaboration and partnerships

Partnering with other companies, research institutions, or universities can open up opportunities for the Company to access new technologies, resources, and expertise. Collaborations can lead to joint product development, which may result in a stronger market position and accelerated growth.

Customisation and tailored solutions

Many industries require specialised adhesives and resins to meet specific application needs. Offering customisable products and tailored solutions for individual clients can attract niche markets and foster long-term customer loyalty.

Targeting the OEM market

Ready-made furniture i.e. the OEM business is systematically growing with changing consumer tastes and preferences along with quick ready to use products. Our products are adept to target OEM customers thereby targeting a large opportunity in the market.

Threats

Intense Competition

The adhesive and resin industry is highly competitive, with a large established player, several mid to small existing players and new entrants vying for market share. Intense competition can lead to price wars, reduced profit margins, and increased marketing expenses, making it challenging for the Company to maintain its profitability.

Raw Material Price Volatility

The prices of key raw materials used in manufacturing adhesives and resins, , can be subject to fluctuations. Unpredictable price increases can strain profit margins and affect the Companys ability to remain competitive.

Shift in Customer Preferences

Changing customer preferences and buying behaviour may lead to a demand shift towards alternative materials or adhesives and resins from competitors. The Company must adapt to evolving customer needs and preferences to retain its market position effectively.

Supply Chain Disruptions

Disruptions in the supply chain, such as shortages of raw materials or transportation issues, can disrupt production schedules and lead to delayed deliveries, damaging customer relationships.

Competitive advantage

Jyoti Resins adopts a low-cost manufacturing approach and operates with an asset-light strategy, focusing on efficiency and profitability. The Company has successfully limited overall manpower costs to a commendable 15-16% of its revenues, demonstrating prudent cost management.

Carpenter reward model

The Company offers an exceptional and highly rewarding carpenter incentive model, which stands out as one of the finest in the industry. Its reward and loyalty programs are specifically designed on a state-wise basis. Carpenters are provided with a dedicated company app through which they can easily claim and redeem points earned. The reward system is structured into different tiers based on the extent of usage.

Moreover, selling and distribution expenses are meticulously maintained below 13-14%, further optimising operational expenses. The Company achieved an impressive asset turnover rate of 8x, indicating the Companys ability to generate significant revenue relative to its asset base. In addition, the Company stands out in the industry with one of the highest EBITDA per tonne compared to its peers, showcasing its exceptional profitability. The Companys prudent working capital management has enabled it to operate without any debt, and it maintains a positive operating cash flow (OCF) and free cash flow (FCF) position. This financial strength underscores Jyoti Resins and Adhesives prudent financial management and sustainable business practices.

Financial overview

Particulars (Rs. in lakhs)	FY23	FY22	% Change
Net Revenue	26,125	18,196	43.58 %
EBITDA	6,063	2,376	155.18 %
PAT	4,644	1,976	135.02 %
Cash Profit	4,792	2,052	133.53 %
BVPS	88.31	52.11*	69.47 %
BVPS (without revaluation reserve)	74.31	38.11*	94.99 %
Earnings Per Share (H )	38.70	16.47	134.97 %
Promoter Holding (%)	50.82 %	49.97 %	1.70 %
Reserves and Surplus (H Crores)	93.98	58.53	60.57 %

*Diluted book value per share after considering bonus share issue of 80,00,000 shares in FY 23

Key ratios

Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios

Sr. No.	Ratio	Numerator	Denominator	For the year ended 31 March, 2023	For the year ended 31 March, 2022	% Variance	Explanation for significant changes of more than 25% as compared to previous year
1	Debtor Turnover ratio	Net Credit Sales	Average Accounts Receivable	3.35	3.13	7.30%	Not Applicable
2	Inventory turnover ratio	Sales	Average Inventory	59.27	45.21	31.10%	Sales performance of the Company has improved
3	Interest coverage ratio	Earnings available for interest	Interest	2029.18	590.74	243%	The debt was very small and same is paid in full.
4	Current ratio	Current Assets	Current Liabilities	1.31	1.19	10.19%	Not Applicable
5	Debt equity ratio	Total Debt	Shareholders Equity	0.00	0.00		The debt is very small and paid in full, hence Not Applicable
6	Operating Profit Margin	Operating Profit	Sales	24.07%	14.96%	60.96%	Sales performance of the Company has improved
7	Net Profit Margin	Net Profit	Sales	17.78%	10.86%	63.66%	Sales performance of the Company has improved
8	Return on Net Worth	Net Profit	Net Worth	43.82%	31.61%	38.66%	Increased profit during the year

Business Outlook

Due to a significant surge in demand and a significant increase in market share, the Company successfully completed the expansion of its production capacity, raising it to 2000 TPM. Presently, the Company is actively engaged in establishing a warehouse facility to enhance storage capabilities for both raw materials and finished goods. Further, the Company aims to bolster its presence in the existing states by expanding its network of branches and distributors, strategically focusing on improving market share. Additionally, the Company plans to explore opportunities in 1-2 new states while also enhancing operational efficiencies in its established regions. These initiatives reflect the Companys commitment to growth and optimisation as it seeks to reinforce its position in the adhesive industry.

Corporate social responsibility

The Company believes in giving back to the society it operates in and social initiatives are integral to its business model. The Companys CSR initiatives focus on education, healthcare, animal welfare, and environmental sustainability.

Under the Ambedkar Hastshilp Vikas Yojana (AHVY), the JBECT Trust has started a cluster at Chotila, under a special project, where 500 women are receiving training for self-employment. The organisation has also established a de-addiction centre at Chotila Tal, which provides treatment for addicts.

The Shri Jagatbharti Education and Charitable Trust has organised several programmes to provide vocational training and income generation opportunities to various sections of society. These programmes include income generation training for youth and women, a handicrafts training centre, and a vocational training programme for disabled persons. The organisation also runs a job placement centre that provides job opportunities and guidance to beneficiaries in government, semi-government, and private sectors. Additionally, the trust operates a computer training centre that helps 200 students gain self-employment after receiving training and also provides placements in government and private sectors. The organisation has successfully benefited over 450 disabled persons and 500 job placement beneficiaries with its ongoing programmes.

Human resources

The workforce of the Company comprises individuals who possess extensive knowledge and demonstrate unwavering dedication across various functional areas, including procurement, manufacturing, marketing, technology, innovation, and finance. Its steadfast commitment and diligent efforts have significantly contributed to the Companys impressive performance in FY23, all while prioritising the health and safety of employees and ensuring the smooth operation of supply chains, deliveries, and customer service.

Recognising the pivotal role of a diverse and engaged talent pipeline in the Companys success, the HR department understands the importance of building, developing, and retaining such a pool of capable individuals. The Company firmly believes in continuous improvement of productivity by empowering teams through delegation of responsibilities and authority. This focus extends to transforming initiatives aimed at enhancing products and services.

To enhance business viability, liquidity, and competitiveness, the Company actively invests in sustainable initiatives and provides relevant training to employees to foster stronger engagement with carpenters, contractors, architects, and other stakeholders. Recognising that investment in the workforce and the establishment of a positive work environment are critical to success, the Company places great emphasis on these areas.

In order to attract seasoned professionals and recruit entry-level talent, the Company collaborates with educational institutions, professional recruiting agencies, and schools. As of March 31^st, 2023, the Company manages a total of 500 full-time employees and retainer-based staff.

The Company places a high priority on incentivising and retaining its workforce through a performance-based compensation and review system that duly rewards and promotes service excellence.

Looking ahead, the Company aims to capitalise on the expertise of its experienced specialists to enhance brand recall, attract a larger customer base, and maintain its position as a leader in the adhesive and resin industry. The Companys commitment to building, developing, and retaining a diverse and engaged talent pool, combined with its investment in sustainable initiatives and provision of relevant training, ensures that it is well-prepared for continued success.

Manufacturing excellence

Jyoti Resins and Adhesives Ltd upholds a strong belief in maximising asset utilisation, adopting cutting-edge technologies, and centralising its manufacturing process to ensure optimal operational efficiency and cost-effectiveness. The Companys manufacturing philosophy revolves around a steadfast commitment to sustainability, in alignment with the principles of responsible manufacturing endorsed by the United Nations. By prioritising Human Rights, Labour, and Environment, Jyoti Resins has attained environmental sustainability and earned the commendation of stakeholders as a responsible corporate entity.

To maintain compliance with industry standards, the Companys manufacturing sites undergo rigorous audits by regulatory authorities, ensuring adherence to Good Manufacturing Practice (GMP) and other regulatory requirements. This has established Jyoti Resins as a recognised and compliant manufacturer in the industry.

In their pursuit of effective cost management, the Company negotiates mutually beneficial terms of trade while also making proactive investments in state-of-the-art equipment, capacity expansion, and operational integration. As a result, Jyoti Resins has accomplished the establishment of the second- largest adhesives manufacturing capacity in India, granting the company economies of scale and a competitive edge in the market.

The implementation of bar-coded products and process digitalisation has been a transformative development for the Companys manufacturing capabilities, enhancing operational efficiency, accuracy, and seamlessness. This advancement has significantly contributed to the Companys position as the second-largest manufacturing capacity within the sector.

Risk and mitigation

The Company recognises the significance of effective risk management in ensuring sustainable growth. To this end, it has devised and put into action a comprehensive risk management policy. This policy systematically identifies potential risks that could pose a threat to the Companys existence. These risks encompass credit risk, liquidity risk, market risk, currency risk, and interest risk.

The Board and top management oversee the risk management framework, which is regularly reviewed and revised to reflect changes in market conditions and activities. Through effective risk management policies and procedures, the Company maintains a disciplined and constructive control environment that promotes sustainable growth.

The Board, along with top management, is responsible for developing and monitoring the Companys risk management policies, which are designed to identify and analyse risks, set appropriate limits and controls, and monitor risks and adherence to limits.

The audit committee oversees how management monitors compliance with the Companys risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company.

Credit risk

It arises primarily from trade receivables, certain loans and advances, and other financial assets.

Mitigation: The Company has implemented a well-defined, balanced and comprehensive client policy, which drives all contracts and business dealings. Additionally, the finance team evaluates the financial capabilities of big clients and channel partners to mitigate credit risk.

Liquidity risk

It arises when the Company encounters difficulty in meeting obligations associated with financial liabilities.

Mitigation: The Companys approach to managing liquidity is to ensure sufficient liquidity to meet liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Companys reputation.

Market risk

It arises from potential future losses or changes in the value of financial instruments. This risk is attributable to market risk-sensitive financial instruments such as foreign currency receivables and payables. However, the Company is not exposed to currency risk as it does not have any transactions in foreign currency. The Companys exposure to market risk is primarily related to interest rate risk, which is a function of borrowing activities.

Internal control systems and their adequacy

The Company has implemented a robust internal control system to safeguard its assets, ensure precise financial reporting, and enhance operational efficiency. A clear segregation of duties is enforced, assigning distinct responsibilities to mitigate conflicts of interest and reduce the risk of fraudulent activities. All significant transactions and expenditures undergo appropriate authorisation and approval, adhering strictly to Company policies. Advanced accounting software is utilised to maintain accurate and reliable financial records, which are subject to periodic review and verification. Furthermore, stringent physical controls are enforced to secure assets and limit access to authorised personnel exclusively.

Employee training and awareness initiatives contribute to bolstering the overall control environment. In addition, IT controls are in place to safeguard against cyber threats and potential data breaches. Regular monitoring and internal auditing processes are conducted to assess the effectiveness of the system and identify areas for enhancement. The Company remains steadfast in its commitment to compliance with relevant laws, regulations, and industry standards, placing great importance on ethical business practices.

Cautionary statement

Statements in this report on Management Discussion and Analysis, describing the Companys objectives, projections, estimates, expectations or predictions may be forwardlooking statements within the meaning of applicable laws and regulations. Such statements represent the intention of the Management and the efforts being put into place by them to achieve certain goals. These assertions are predicated on a number of assumptions and future activities. Since the Companys operations are impacted by several internal and external factors outside of its control, actual results could significantly differ from those stated or inferred. Any forwardlooking statement published here only speaks as of the date it was made and only reflects the Companys current intentions, beliefs, or assumptions. The Company disclaims any obligation to update or modify any forward-looking statements, whether as a result of new data, unexpected developments, or other factors. Readers are urged to use their best judgement when determining the risks connected to the Company.