Lykis Ltd Management Discussions

This discussion covers the financial results and other developments for the year ended March 31,2024. Statements in this Management Discussion and Analysis, describing the Companys objectives, projections, estimates and expectations, may constitute forward-looking statements within the meaning of applicable laws and regulations. Although the expectations are based on reasonable assumptions, the actual results might differ on account of various factors such as changes in Government regulations, tax regimes, economic development, exchange rate and interest rate movements, competitive environment, product demand and supply.

Management Discussion & Analysis is structured to comprise:

> Economic Review

> Segment Wise Report

> Outlook

> Internal Control System and Adequacy

> Strengths

> Risk and Concern

> Threats

> Opportunities

> Human Resource

ECONOMIC REVIEW:

Your Company is strongly focussed in the FMCG, cosmetics and pharma products resulting in the sales turnover of Rs. 40774.05/- Lakhs. We are deeply committed to advancing technology that can address changing consumer needs. On an ongoing basis, management focuses on a variety of key indicators to monitor business health and performance. These indicators include market share, net sales, gross profit margin, operating profit, net income and earnings per share. The monitoring of these indicators and the Companys Code of Conduct and Corporate Governance practices help to maintain business health and strong internal controls. The financial highlights of the Company are mentioned under the Directors Report which forms an integral part of this Annual Report.

The operating environment this year continued to remain volatile and challenging. Your Company believes that the Companys business will continue to grow strongly in the next several years with a strong management team, wide distribution network, innovation and technology capabilities, cost efficiency programs, your Company is well placed to sustain growth and is confident of addressing the evolving situation. There is a significant shift in consumer preferences and behaviours, growth of online business channels and higher demand for FMCG and value products are some of the changes brought about by the pandemic. These trends are likely to strengthen and present new opportunities for FMCG business in near future.

> Fast Moving Consumer Goods (FMCG):

The fast-moving consumer goods (FMCG) industry or consumer packaged goods (CPG) industry is mainly responsible for producing, distributing and marketing fast-moving consumer goods. The FMCG industry is the fourth largest sector in the Indian economy.

The fast-moving consumer goods (FMCG) market in India is doubling in size between 2020 and 2025, as per a report. The market size of Indias FMCG sector was $ 110 billion in 2020 and is now expected to touch $ 220 billion by 2025 - riding on the demand for premium goods and boosted by rapid inflation, apart from consumer demand. Employing 3 million people, the sector is one of the largest among organized corporate sectors in the country, while 8.4% of them are employed in factories. Around 80 per cent of consumers will see the world as all digital in the years to come, with no divide. Increasing smartphone and internet penetration will further help people in rural areas easily access online shopping on various e-commerce websites.

Changing Dynamics of the FMCG Sector:

The FMCG landscape is undergoing a drastic change, which is impacting consumer behaviour across the global markets. It is expected that following consumer trend to pick up globally:

a. Boost consumer focus particularly on preventive healthcare products, with a preference for Ayurveda based solutions that increase immunity power of human body.

b. Importance to Personal Hygiene with increase in demand for personal cleanliness products such as hand and home sanitizers, soaps etc. expected to grow exponentially.

c. Spending on luxurious things would be curtailed due to change in priorities from discretionary towards essentials and movement towards financial security.

d. Advancement of technology would act as a catalyst for convenient, safe and enhanced consumer experiences.

SEGMENT WISE REPORT

During the year ended 31st March, 2024, Operational Revenue including other income on Standalone basis was Rs. 37,465.95 Lakhs and Profit / (Loss) Before Tax was Rs. 49.70 Lakhs v/s Rs. 1,366.99 Lakhs in previous year while Net Profit / (Loss) for the financial year ended March 31,2024 was Rs. 68.20 Lakhs v/s Rs. 987.09 Lakhs in previous year. There was a fall in revenue of the Company as compared to last financial year because the Company has major business form Angola and the currency of Angola "Kwanza" depreciated drastically against US Dollars which had a direct impact on the turnover of Lykis Ltd. Kwanza depreciated approximately 60% as against US Dollars, being major reason for reduction in turnover of the Company

On a consolidated basis the operational revenue including other income was Rs. 40,774.05 Lakhs and Profit/ (Loss) Before Tax was Rs. 369.69 Lakhs v/s Rs. 1,953.43 Lakhs last year. The Net Profit / (Loss) for the financial year ended March 31,2024 was Rs. 388.04 Lakhs v/s Rs. 1,573.28 Lakhs in previous year.

Internationally, we have exported our products in more than 40 countries as on date. The Company is striving hard to expand its geographical base by exporting too many more countries in future.

OUTLOOK

There are some trends which are emerging in the markets. Especially in the developed markets, due to the continuing recessionary trends, the consumer spending is cautious with higher value demands which are giving rise to high competitive intensity in those markets. There is also a continual shift of consumers towards health, wellness and convenience segments. There is also a growing trend for more premium products in some markets. We expect these challenges and trends to remain for some time to come also. We expect the retail environment to be very competitive with aggressive promotions to sustain growth. We also expect the significance of modern trade to increase over traditional trade in the developing markets exacerbating the competitive environment. The Company continues to constantly strive to meet these challenges with a continuous support to brands, category expansion, innovation and cost rationalization.

INTERNAL CONTROL SYSTEM AND ADEQUACY

The Companys internal control systems are commensurate with the nature of its business and the size and complexity of its operations. These are routinely tested and certified by Internal Auditors and cover all offices, factories and key business areas. Significant audit observations and follow up actions thereon are reported to the Audit Committee. The Audit Committee reviews adequacy and effectiveness of the Companys internal controls environment and monitors the implementation of audit recommendations, including those relating to strengthening of the Companys risk management policies and systems.

STRENGTHS

Lykis is an existing brand, experienced in operations and management of FMCG products. Operations are handled by a strong experienced management and professional team and also there is a strong technical and development team for support.

RISK AND CONCERN

Risk management is an integral to your Companys strategy and to the achievement of Lykiss long-term goals. Our success as an organisation depends on our ability to identify and leverage the opportunities generated by our business and the markets we operate in. In doing this we take an embedded approach to risk management which puts risk assessment at the core of the Boards agenda, which is where we believe it should be.

These risks can be broadly classified into following categories:

> Strategic Risk

> Compliance and Governance Risk

> Financial Risk

> Operational Risk

For each of our principal risks we have a risk management framework detailing the internal controls we have in place and who is responsible for managing both the overall risk and the individual controls mitigating that risk. Our assessment of risk considers short and long term as well as internal and external risks including financial, operational, sectoral, sustainability (particularly Environment, Social and Governance related risks), information, cyber security, legal & compliance and any other risks as may be determined by the Company Leadership teams. How the identified risks are changing as well as emerging risk areas are reviewed on an ongoing basis, and formally by the Board. We integrate risk management with strategy formulation and business planning processes.

THREATS

Since it is a growing industry, there is a threat of competition from the other players who might try to create an unhealthy practice of competition by compromising on the quality and pricing. We have an established team of professionals to handle the operations and are in the process of hiring more such kinds of professionals.

OPPORTUNITIES

Growing awareness, easier access, and changing lifestyles are the key growth drivers for the consumer market. The focus on agriculture, MSME, education, healthcare, infrastructure and employment under the Union Budget is expected to directly impact the FMCG sector. These initiatives are expected to increase the disposable income in the hands of the common people, which will be beneficial for the sector.

KEY FINANCIAL RATIOS

MATERIAL DEVELOPMENT IN HUMAN RESOURCE

Employees are the valuable assets and the strength of an organisation in its growth, prosperity and development. Your Company has a team of qualified and dedicated personnel who have contributed to the growth and progress of the Company. Necessary training is being imparted to the employees and various seminars and workshops are being conducted to continuously hone their skills.