Kerala Ayurveda Ltd Management Discussions.

1. ECONOMIC OVERVIEW

The fiscal year 2020 was headlined by COVID-19. Periodic lockdowns, limited travel and curtailed economic activities led to a slump of 3.5%, according to the International Monetary Fund (IMF). However, policy response, economic stimulus measures, relief packages, and roll-out of COVID- 19 vaccinations have led to a gradual economic recovery, and a revised global growth at 6% in 2021, moderating to an anticipated 4.4% in 2022

Hit hard by the pandemic, the Indian economy has contracted by 8% in the financial year 2020-21. COVID related lockdowns stressed many companies production, exacerbated by supply chain disruptions and migration of labour

Food, pharma and chemicals were the first sectors to witness a recovery. Some measure of overall economic normalcy was attained in the September-December quarter. However, the resurgence of COVID-19, towards the end of FY2021, bodes uncertainty for the future.

2. INDUSTRY STRUCTURE AND DEVELOPMENTS

Ayurvedic products are increasing in popularity. Many Indians are turning to Ayurveda and other alternative medicine systems and treatments, such as unani, siddha, naturopathy, and homoeopathy. The industry is anticipated to almost triple in size in the coming years. By 2022, the market will reach US$ 9.7 billion in size.

Kerala Ayurveda Limited has a long heritage of over 74 years and pioneer in bringing efficacious Proprietary Range of Ayurveda products and first to setup treatment centers outside Kerala. It is a full spectrum Ayurveda company which manufactures Ayurveda Medicines both Classical and Proprietary, operates treatment centers, Hospital and Ayurveda Resorts all over India, has Ayurveda Academy in India & US and does Ayurveda Research. KAL is Powered by various Pioneering Entities like Katra Phytochem (India) Private, Renovel Discoveries, USA and Asthagiri Herbal Research Foundation, India, that ensure that all batches of its Products meet the Highest Standards of Safety, Purity and Efficacy. KAL is the first Public Limited Company in Ayurvedic domain, Kerala Ayurveda Limited is truly on a mission to be the number one choice in Ayurveda Globally.

3. OPPORTUNITIES

We believe the following are our competitive opportunities:

• Strong R & D capability, many new products under development. Develop medicines which can provide relief to medical conditions for which allopathy medicines do not provide much relief.

• Have fully integrated GMP manufacturing facility to manufacture both classical and proprietary ayurvedic formulations in the most hygienic condition and strict adherence to prescribed norms.

• Have Competent and experienced team of experts for the standardization of treatments. Growing the well-established network of clinics and treatment centre and distribution centres.

4. RISK, CONCERNS AND THREATS

The market has both organized and unorganized players and the capability and the strengths differ. But both are classified under Ayurveda industry. So, the organized sector has to work hard to maintain the parameters so that the high standards are maintained, and customers should not lose faith in the practice. Major threats for Ayurveda industry are regulatory concerns, consumer perceptions and competition. The regulatory agencies all over the world are focusing on the Quality, efficacy, safety and standardization of herbal medicines. Your company has been working in this area. We have demonstrated excellence in quality of our medicines and KAL is well positioned in the market for quality products. We rely on repeat business based on the strength of our client relationship and a major portion of our revenue comes from key clients. Initiatives are focused on improving client relationship.

5. SEGMENT-WISE OR PRODUCT WISE PERFORMANCE

The primary business segment of your Company is Ayurveda and hence no segment wise reporting is required.

6. FUTURE OUTLOOK

While the government is on a major drive to Promote Yoga and Ayurveda Globally as Key Wellness Initiative, inadequate scientific scrutiny and concerns regarding standards and quality is of major concern. This has prompted the Department of Ayush to enforce a stricter regime under National Ayush Mission. The National Rural Health Mission has a declared policy of promoting Pluralistic Healthcare by involving, alongside the allopathic system, the AYUSH systems, including local health traditions in its operational mission. Insurance companies have started accepting Ayurveda Treatments under insurance claims.

7. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The company has strong internal controls systems commensurate with the nature of its business, the size and complexity of its operations. In order to ensure orderly and efficient conduct of business the company has put in place systems which include policies and procedures, IT systems, delegation of authority, segregation of duties, internal audit and review framework etc. The team is cognizant of applicable laws and regulations particularly those related to protection of resources and assets, and the accurate reporting of financial transactions. The audit findings are reviewed by the audit committee.

8. FINANCIAL PERFORMANCE AND OPERATIONAL PERFORMANCE

The company has a turnover of Rs.4320.28 Lakhs in 2020-21 as compared to previous years sales of Rs. 5368.47 Lakhs.

The company has optimized cost structures aggressively. We have re-engineered our cost structures in quick time. India Overall costs reduced by 28% vs 19-20. The Health service division costs reduced by 54% vs 19-20. Despite a reduction of overall business by 26%, the Costs as % Revenue have come down by about 2+%, from 63% 19-20 to 61% 20-21. We have also optimized our inventory, improved customer collections, creditor payables to manage cash flow.

9. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS FRONT AND NUMBER OF PEOPLE EMPLOYED

The company places great emphasis on its employees and believes that they are the core of the Corporate Purpose. The HR mission is to empower employees to make continuous improvements and enhance their professional skills. The company believes in respecting the individual rights and dignity of the people. The company believes that human resources are the most valuable assets and a major driver for achieving its goals.

Your company continues to invest in human resources to build new businesses while simultaneously improving the individual & organisational preparedness for future challenges.

The manpower strength of the Company as on 31st March 2021 was 463 permanent employees including Management Staff across different locations.

10. DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

In accordance with SEBI (Listing Obligations &Disclosure Requirements) (Amendment) Regulations,2018, the Company is required to give details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year. Profit After Tax (PAT) has dropped by 664.56%, similarly interest coverage ratio by 104.38%, operating profit by 126.93%, net profit margin by 800.8% and Debt equity ratio increased by 65% due to prevailing pandemic.

11. DETAILS OF ANY CHANGE IN RETURN ON NET WORTH AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR

Return on Net Worth has dropped to -49.3% compared previous financial year +5.98% due to the prevailing pandemic.