Mehta Housing Finance Ltd Management Discussions

Global economic overview:

The global economy displayed a surprisingly resilient performance in 2023, marked by a steady but slow recovery with regional variations. According to the International Monetary Fund (IMF), global growth maintained stability, holding at a modest rate of 3.2%. Despite escalating geopolitical conflicts, higher inflation, prolonged higher interest rates, and volatility in food markets, global economic growth has decelerated but not halted. Furthermore, the Red Sea crisis has resulted in the largest rerouting of global trade in decades, causing delays and heightened expenses for shipping companies avoiding a route that traditionally handles 12% of the worlds maritime trade. With the crisis unfolding, its widespread impact on global supply chains is becoming increasingly apparent.

On the other side, there was strong resilience seen, especially in the second half of 2023, led by major economies with increase in consumption driven by government and private spending, easing of labor markets and supply side pressures and support from fiscal policies in advanced economies like the US. Global inflation levels also declined favorably during the year.

Indian economic overview:

Amid a challenging global economic landscape and deteriorating geopolitical conditions, India has been a bright spot. It is the fifth-largest economy in the world and is poised to retain its position as the worlds fastest-growing major economy. Its GDP growth remained buoyant at 7.6% in FY 2023-24 as against 7% in FY 2022-23, supported by robust domestic demand, moderate inflation, a stable interest rate environment, and strong investment activity. Furthermore, an accelerated pace of economic reforms and increased capital expenditure facilitated construction activities and created extensive employment opportunities across the country. The IMF commended Indias economic resilience, robust growth, and notable progress in formalization and digital infrastructure. Moreover, Indias G20 presidency in 2023 has demonstrated its capability to cater to global needs and provided a platform to address global concerns. India positioned itself as an attractive destination for investments in energy transition initiatives.

Growth of the Indian economy:

(E- Estimates) (Source: Ministry of Statistics & Programme Implementation)

Food Industry in India:

The Indian food industry is poised for huge growth, increasing its contribution to world food trade every year. In India, the food sector has emerged as a high-growth and high-profit sector due to its immense potential for value addition, particularly within the food processing industry. Accounting for about 32 percent of the countrys total food market, The Government of India has been instrumental in the growth and development of the food processing industry. The government through the Ministry of Food Processing Industries (MoFPI) is making all efforts to encourage investments in the business. It has approved proposals for joint ventures (JV), foreign collaborations, industrial licenses, and 100 per cent export-oriented units. The Confederation of Indian Industry (CII) estimates that the food processing sectors have the potential to attract as much as US$ 33 billion of investment over the next 10 years and also to generate employment of nine million person-days.

Outlook:

India is expected to grow 6-7% in next two to three years and move ahead with its global position in terms of nominal GDP. The growth is expected to be driven by increase in consumption and investment, decline in inflation levels, improving rural demand. Risks to the outlook remain with weakness in the global economy impacting exports, volatility in food and crude oil prices, recent red sea crises impacting overall shipping costs and policy uncertainty post national general elections.

Industry drivers

• Growing demand for healthier lifestyle and eating habits are driving the demand for nutritious and quality food.

• Packaging standards: Improvement in the packaging quality has extended the shelf life of products, enhancing convenience.

• Ready to eat food: Millennials and Gen Z now account for approximately 1.8 billion people, or more than 23% of the global population. The ready-to-eat meals market is expanding as a result of busier lifestyles, rising incomes, an increase in nuclear families and an absence of cooking skills. (Source: punemirror.com)

• Food safety: Increasing health awareness among consumers and a rising adoption of vegetarian and vegan lifestyles, particularly in developed regions, have led to a growing demand for organic foods and non-GMO ingredients (grains, seeds and fruit).

• Healthy diet: Consumers increasingly seeking foods that are driving traction for clean and sustainable food products.

Company overview

During the year under review, the Company has initiated discussions with various vendors to commence its trading activities and has procured some sample products for distribution. The Company has also identified the reservation of vendors in extending trading activities in the current structure of the Company and thus, the management is discussing and exploring the usage of brand name Ruparel which belongs to the Promoters so as to cater easily with the vendors and customers in Indian as well as foreign markets.

Discussion on financial performance with respect to operational performance

The Company has incurred the total expenditure of Rs. 20.30 lacs towards purchase of inventory and other administrative expense with no revenues in the current year. Hence, the Company has incurred the total loss of Rs. 20.30 lacs.

Opportunities and Threats

Opportunities:

Since the Company is yet to commence business operations in a full-fledged manner, it is looking out for various opportunities where it can explore and take the benefits of consumer base, vendors and suppliers and ensure low costing of the products to be manufactured without compromising over the quality of the products.

Also, as stated above the Company is evaluating the possibilities of restructuring the business and corporate structure involving the Company with the Companies operating in the similar segment. This exercise is being contemplated in order to enable better management focus and control of the business, reduce the number of operating companies, achieve a reduction in overheads, administrative, and other expenditures.

Threats:

The Company oversees the threats in the operations, which can arise due to excessive increase in shipping freight rates, shortage of shipping containers, lack of liquidity, since overall cashflows are affected aftermath of the pandemic COVID-19, the Russia-Ukraine conflict, recent red sea crisis which also led to global upheaval etc.

Risks and Concern

The Company is taking all such steps to generate revenues and is in the process to commence its operations shortly. The Company has in place its Risk Management Policy to avoid events, situations and circumstances which may lead to negative consequences on the Companys business. Currently, there are no elements of risk, which in the opinion of the Board may at present threaten the existence of the Company.

The Company is having a systems-based approach to Business Risk Management, and it has identified process of risk management which includes prioritization of risks, selection of appropriate mitigation strategies and periodic reviews of the process of management of risks.

Risk Management framework of the Company shall primarily focus on following elements:

A) Risk to Company Assets and Property - It will be ensured that there is proper security and maintenance of assets and adequate coverage of insurance to facilitate replacement of assets with minimal disruption to operations. The roles and responsibilities of the departments will be identified to ensure adequate physical security and maintenance of their assets.

B) Employees Related Risks - Employees constitute the most important assets of the Company. The Human Resources Policies will be evolved over the years with the object of mitigating employee related risks including reducing attrition rate. Adequate legal safeguards shall be provided to protect confidential information and protect the Company from any probable contractual liability on account of misconduct/errors/omissions of employees.

C) Foreign Currency Risks - The Company may have revenues and expenditure of the Company once it is fully operational which include earnings and expenditure in foreign exchange. Foreign currency risk management ensures that the treasury department continuously tracks movement of foreign currencies, avails of services of experts, and hedges the risk through appropriate mechanisms.

D) Risks associated with Noncompliance of Statutory enactments - The Company is a legal entity incorporated under the provisions of the Companies Act, 1956. Its shares are listed on the BSE Limited. The Company is required to ensure compliance of provisions of various applicable statutory enactments. The Company ensures that qualified professionals shall be employed to comply with various applicable laws. In addition to the statutory audits, the Company also undertakes internal audit/s at different levels periodically to ensure timely check on the statutory compliances.

E) Competition Risks - Risk of competition is inherent to all business activities. The sector in which the Company will carry its business operations; there will always have an inherent risk of changes in the industry. To remain competitive, the Companys strategy in this regard is to continuously keep upgrading its quality of raw material used, designs, size and shapes of the products, and technology, innovating and building up a sustainable team of skilled professionals. This would ensure that the Company has an edge over competition in the market.

F) Operational Risks - The Company shall constantly work to limit the operational risks that run through all facets of operations. This requires the combined efforts of all business and support units, and the tools required continue to be developed. Apparent trends shall analyse, and various operating groups combine into task forces to address these. The use of technology shall be harnessed for more control. The company also ensures that contracts shall properly drafted and adequate indemnity clauses are incorporated in the contracts entered into with one or more parties.

Internal control systems & adequacy

The Company is in the process of designing the internal control system in order to provide the Board of Directors a reasonable assurance that the companys assets are safeguarded, the transactions are authorized and properly recorded, and that material errors and irregularities are either prevented or would be detected within a specified period of time.

Currently, the Internal Audits are periodically conducted by a firm of Chartered Accountant who monitors and evaluate the efficiency and adequacy of internal control systems in the Company and accordingly the management will ensure that adequate systems for internal control commensurate with the Companys size and are in place.

Material developments in Human Resources / Industrial Relations front, including number of people employed.

At present there is only one employee looking after accounting related work in the Company apart from Directors and Key Managerial Personnel. Once the operations are commenced, the Company will appoint more employees and will provide conducive workplace, marked by knowledge accretion, teamwork and career growth.

Segment wise or product wise performance and outlook

As stated above, the Company is yet to initiate operations and hence the said clauses are not applicable for the year under review.

Cautionary statement

Statements in this Management Discussion and Analysis describing the Companys objectives, expectations or predictions maybe forward looking within the meaning of applicable laws and regulations.

This report contains forward-looking statements, identified by words like, will, expectedand so on. AH statements that address expectations orprojections about the future, but not limited to the Companys strategy for growth, product development, market position, expenditures and financial results, are forward-looking statements. Since these are based on certain assumptions and expectations offuture events, we do not guarantee that these are accurate or will be realised.

Our actual results, performance or achievements could thus differ from those projected in any forwardlooking statements. We assume no responsibility to publicly amend, modify or revise any such statements on the basis ofsubsequent developments, information or events.