lotus chocolate company ltd Management discussions

FORWARD-LOOKING STATEMENTS

Statements in the Management Discussion and Analysis Report, which describe the Companys objectives, projections, estimates and expectations, may be Rs.forward-looking statementsRs. within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could influence the Companys operations include economic developments within the country, demand and supply conditions in the industry, commodity prices, changes in government regulations, tax laws and other factors such as litigation.

COMPANY OVERVIEW

Lotus Chocolate Company Limited takes great pride in being one of IndiaRs.s select manufacturers of the finest chocolates, cocoa products and cocoa derivatives. Its products are supplied to chocolate makers and chocolate users across the world, from local bakeries to multi - national companies.

VALUE CHAIN

Lotus Chocolate Company Limited is well known as a reliable business partner for the supply of cocoa and chocolate products. Starting from the cocoa bean processing to delivering fine chocolates, the Companys fully integrated manufacturing facility is built with the best in technologies and expertise from across the globe. It is the one stop chocolate hub for its valued customers.

INDUSTRY OVERVIEW

As the economy was trying to look ahead post the initial pandemic period, the subsequent waves were destabilizing, not allowing normalcy to restore. The pandemic has definitely added to the hues and uncertainty prevailed. Your company meandered through the rough times and produced following results for the year 2022-23.

FINANCIAL AND OPERATIONAL PERFORMANCE

The Companys financial performance for the year ended March 31, 2023 is summarised below:

(Rs. in crore)

Particulars	2022-23	2021-22
Revenue from Operations	62.72	86.98
Profit Before Depreciation, Amortisation, Interest and Taxes	(6.53)	6.41
Less: Interest	0.23	0.18
Less: Depreciation and Amortisation Expense	0.17	0.22
Profit/(Loss) Before Tax	(6.93)	6.01
Less: Tax Expense*	0.02	0.00
*(includes current tax, deferred tax, short /excess provision of tax relating to earlier years)
Profit/(Loss) for the Year	(6.95)	6.01
Add: Other comprehensive Income	-	-
Total Comprehensive Income for the Year	(6.95)	6.01
Less: Total Comprehensive Income attributable to Non-Controlling Interest	-	-
Total Comprehensive Income Attributable to Owners of the Company	(6.95)	6.01
Less: Appropriation (Transfer to General Reserve)	(6.95)	6.01
Earnings Per Share (Basic) (in Rs.)	(5.42)	4.68

• Financials:

The Financial Statements of the Company for the financial year ended March 31, 2023, have been prepared in accordance with the applicable Indian Accounting Standards (Ind AS) and the provisions of Companies Act, 2013.

During the year under review, the operating turnover of the Company decreased by 27.88% to Rs. 62.72 crore as compared to Rs. 86.97 crore in the previous year.

The Company incurred a loss for the year amounting to Rs. 6.95 crore as compared to profit of Rs. 6.01 crore in the previous year.

• Ratios

Key financial parameters as on March 31, 2023 on the basis of Standalone Financials for the years ending March 31, 2023 & March 31, 2022 respectively are as follows:

Particulars	FY 2022-23	FY 2021-22
Debtors Turnover	40.37	39.68
Inventory Turnover	6.36	7.95
Interest Coverage Ratio	NA	NA
Current Ratio	1.30	1.84
Debt Equity Ratio	0.28	0.67
Operating Profit Margin	-11%	7%
Net Profit Margin	-11%	7%

GROWTH AND INNOVATION

The Company with its efforts and commitment has for the first time in a long period brought out a clean sheet. If the situation were to be conducive, the performance of the Company would have been better. Alongside IndiaRs.s growth story, your Company is poised to improvise every year. The turmoil in the commodity prices, climatic changes adversely affected agricultural output and reduced consumption in both urban and rural areas.

OUTLOOK

As we move along, we expect the situation to only improve and with our robust internal economy, lower dependence on exports, the future looks bright. We cannot wish the domestic competition, which is bound to be fierce, each one trying to protect his share of the market will do all in its might doing so. The leaders will never let go anything. The lower end will try to nibble. We intend to protect our own facility or infra and effectively and strategically so for long term survival and perpetuation. Your company is on a good wicket to do this, given its standing in the market.

OPERATIONAL OVERVIEW

The Indian confectionery industry has a long runway for growth driven by the secular trends of increasing demand for quality content and higher time spent across demographics on content consumption.

The Company continues to hold ISO 9001-2008 Certification by meeting all the requirements of Certification from time to time. The Companys manufacturing factory located at Nastipur Village, Hathnoora Mandal, Sangareddy District, has been certified to the version of FSSC 22000:2010 (Food Safety Standard Certification by TUV NORD). This Certification indicates the Companys commitment, in a sustainable manner, in meeting global quality, environment, health and safety standards. This is a milestone in our quest for quality.

BUSINESS STEWARDSHIP

The Companys community initiatives help elevate the quality of life for people, especially the disadvantaged sections of society. Corporate Social Responsibility (CSR) is embedded into the groupRs.s long-term business strategy. The Company undertook some socially relevant works during the year i.e. preventive healthcare initiatives (Contribution to LV Prasad Eye institutes).

HUMAN RESOURCE DEVELOPMENT

Many initiatives have been taken to support business through organizational efficiency, process change support and various employee engagement programmes which has helped the organization achieve higher productivity levels. A significant effort has also been undertaken to develop leadership as well as technical/ functional capabilities in order to meet future talent requirement.

The Company recognizes the contribution of every employee in the growth and development of the organization. In turn, the Company is committed to train and develop its people and motivates them to enhance their skills and tap their potential to the fullest. The industrial relations have been cordial and mutually beneficial. Manpower figure of the Company as on March 31, 2023 was 62.

RISK MANAGEMENT

Your Company maintains a robust system of internal controls, commensurate with the size and complexity of its business operations. The system provides, inter alia, a reasonable assurance of protection against any probable loss of the Companys assets announcements and actions while the Companys Rs.code of conductRs. policy provides detailed guidance on disclosures and situations depicting conflict of interest. The organization has a zero tolerance policy towards unfair conduct or fraud.

• Financing Risks

Most of the Companys debt is in the form of short-term debt from capital markets. This exposes the Company to the risk of nonavailability of external capital due to macro factors such as liquidity, volatility in interest rates, and general economic environment. The Company continually monitors funding requirements, evaluates market conditions, and engages with multiple financial institutions to mitigate the risk of capital inadequacy.

• Human Resource Risks

Talented human resource is the backbone of any industry. The Companys ability to operate its business and implement its strategies depends, in part, on the continued contributions of its executive officers and other key employees, who may be difficult to replace, retain or recruit amidst intense competition or due to scarcity of skilled individuals.

To attract and retain top talent, the Company has built an agile and integrated organizational design, supported by streamlined work processes and people policies that support growth, learning and development.

INTERNAL CONTROL SYSTEMS

The Company has an adequate system of internal controls to ensure that transactions are properly authorised, recorded, and reported, apart from safeguarding its assets. The internal control system is supplemented by well-documented policies, guidelines and procedures and reviews carried out by the Companys internal audit function, which submits reports periodically to the Management and the Audit Committee of the Board. In order to foster an improved internal control culture in the Company, wherein every employee is fully aware of all the major risk/ controls faced in his / her work sphere and assumes responsibility for the controls performed therein. The Self-Assessments by process /control owner are also used as the basis of CEO/CFO certification as required under Regulation 17(8) of the Listing Regulations. Our Company has a favourable work environment that motivates performance, customer focus and innovation while adhering to the highest degree of quality and integrity.