Nanavati Venture Management Discussions


This chapter on Managements Discussion and Analysis ("MD&A") is to provide the stakeholders with a greater understanding of the Companys business, the Companys business strategy and performance, as well as how it manages risk and capital.

The following management discussion and analysis is intended to help the reader to understand the results of operation, financial conditions of Nanavati Ventures Limited.

(1) ECONOMIC OVERVIEW, INDUSTRY STRUCTURE AND DEVELOPMENTS:

GLOBAL ECONOMIC REVIEW

The global economy is showing signs of resilience in 2023 after the high market volatility in 2022. Economic growth remains slow in 2023 owing to the negative implications of the ongoing Russia-Ukraine war, persistent inflationary pressures and tighter monetary conditions. Further, the banking crisis in March 2023 and a debt-ceiling crisis in the United States have raised concerns over macroeconomic stability across the markets and lingering recession fears. Key factors in the improvement in economic activity and sentiment in 2023 are the rebounding of Chinas economy, the gradual unwinding of supply chains and the recent decline in energy and food prices. Further, with the central banks efforts to curb inflation by tightening monetary policy, global inflation is projected to decrease from 8.7% in 2022 to 7.0% in 2023 and 4.9% in 2024.

Notwithstanding the headwinds, the real Gross Domestic Product (GDP) grew in the United States, the European Union and major emerging and developing economies. The real GDP of the United States grew at 2.1% in 2022 on the back of increased private investment and consumer spending. It is projected to grow at 1.6% in 2023 and 1.1% in 2024. The European economy recorded 2.7% growth in 2022 and is projected to grow at 0.8% in 2023 before rising to 1.4% in 2024. The Emerging Market and Developing Economies (EMDE) also grew at an estimated annual rate of 4% in 2022.

(Source: IMF Report - World Economic Outlook April 2023)

INDIAN ECONOMY REVIEW:

India continues to be among the fastest growing economies in the world and emerged as the shining beacon in a grim global scenario. The Indian economy exhibited robust resilience in FY 2022-23 amidst global turmoil. Indias real GDP growth is estimated at 7.2% in FY 2022-23 as against 9.1% in FY 2021-22 and reflects relatively robust domestic consumption and lesser dependence on global demand. Domestic economic growth is gaining strength and further traction in 2023. However, higher inflation remains a challenge and headline inflation increased to 6.7% in FY 2022-23 from 5.5% in FY 2021-22. Following the gradual normalization of global supply chains, softening of global commodity prices, and successive hikes in the policy repo rate by 250 basis points in FY 2022-23 by the Reserve Bank of India (RBI), the wholesale price index (WPI) inflation subsided to -3.48% (provisional) in May 2023 against -0.92% recorded in April 2023.

INDUSTRY REVIEW:

Indian Gems & Jewellery Industry

The gems and jewellery sector plays a significant role in the Indian economy, contributing around 7% of the countrys GDP and 10% of Indias total merchandise exports. The sector has shown remarkable resilience and perseverance in the face of global challenges. Despite higher inflation and supply chain disruptions, the industry has demonstrated a commendable performance in FY 2022-23. The sector contributes around 29% to global jewellery consumption.

India is the worlds second-largest gold consumer and the worlds largest diamond cutting and polishing centre. It is the hub of the global jewellery market because of its low costs and availability of cheap labour. The gems and jewellery sector is home to more than 3,00,000 gems and jewellery players in India. To keep up with global market trends, India has been deploying modern techniques to its traditional know-how and processes.

The industry is seeing increased penetration of branded and organized players due to rising brand consciousness, adoption of Western lifestyles by consumers and rising urbanization. Further, the growing trend of work-from home has led to significant growth in digital channels and online sales of gems and jewellery.

(Source: Ministry of Commerce & Industry; FDI India)

COMPANY OVERVIEW:

The Company is engaged in Business of Trading of Precious Metals, Stones & Jewellery. We procure the rough and unpolished diamonds in several categories, colours, cuts, sizes and shapes from the suppliers and then the processing and polishing of rough gemstone is done by skilled workers on job-work basis.

Operations of Company include sourcing of polished and uncut diamonds from primary and secondary source suppliers in the domestic market and sale of diamond to the retail and wholesale operations in Gujarat. We primarily sell diamonds to a customer base spread across domestic markets that includes various jewellery manufacturers, large department store chains, retail stores and wholesalers.

The Company expects that these businesses will persist in the coming years. The Company is a part of an Industry, which largely operates through unorganized constituents. However, unlike the industry, the Company has attempted to operate through as systematic and organized manner as possible. Since, Diamond and Jewellery is one industry, in which India holds commendable position in the world, one can look forward to more international involvement coming up in this industry.

(2) OPPORTUNITY AND THREATS:

OPPORTUNITIES

Diamond and Jewellery volumes in India have remained resilient over the years aided by strong cultural affinity for the yellow metal and stable returns from the asset class. The major growth drivers for the industry are:

Stable asset class

Diamond and Jewellery has historically been one of the most stable assets providing investors best returns over a long-term horizon, compared to other assets.

Increasing affordability

Rapidly expanding economy, increasing urban per capita income and governments focus to double farmers income by 2023, huge opportunities will open up with increasing affordability of this segment.

E-commerce

With the rising internet penetration in the country, e-commerce is gaining significant boost with rising consumer confidence along with the advantage of ease in shopping, lucrative discounts, access to wider variety, free shipping, and quality assurance. Though, an online sale through online channel is currently miniscule, it is gaining importance facilitating jewellers in reaching out to more customers.

An essential part of Indian culture

Diamond and Jewellery in India has traditionally been an integral part of weddings and festivals. Indian customers often purchase contemporary jewellery as a form of self-expression and this has led to evolution of distinct targeted collections including wedding wear, work wear, regular or daily wear and fashion wear as well as very premium limited edition signature collections.

Changes in lifestyle

Diamond and Jewellery sector is witnessing changes in consumer preferences due to adoption of western lifestyle.

Government support

Realizing the sectors potential, the Government has identified it to be a focused area for export promotion. Adopting policies of ‘Make in India and ‘Design in India there is a strong intent to push growth. The

Government has also undertaken various measures to promote investments and upgrade technology & skills to promote ‘Brand India in the international market.

THREATS

Fast-changing fashion trends

Diamond and Jewellery being a vital fashion and lifestyle statement, demands the players to be more agile, and responsive to the constantly evolving trends and consumer preferences.

Regulatory framework

Changes in regulations and stringent compliances may cause temporary blip in sales during the transition period.

Liquidity crisis

The industry is highly capital intensive in nature with long working capital cycles, since the jewellery conversion from gold typically requires 15 days. Strength of the balance sheet and access to easy credit is often required to facilitate and sustain ease in operations.

(3) OUTLOOK ON RISK AND CONCERNS:

Your Company is of the view that most of the regulatory un-certainties have already played out and with a stable GST, things would only improve in the long term. Further the organized/branded market may see better gains because of indirect tax reforms however there are certain concerns that may impact the Company-

1. The Companys ability to execute its strategy.

2. Consumer sentiments and economic stability in the Country.

Further, Your Company is exposed to a number of risks such as economic, regulatory, taxation and environmental risks. Following can be some of the risk and concern the Company needs to be keeping in mind:

- The largely unorganized structure of the market can affect the systematic functioning of the Company.

- Likely opening up of the economy, which can be a double-edged sword. The Diamond market in India is heavily influenced by the US Markets and other Countrys Market.

- Increasing competition among the Indian Exporters in this industry.

Some of the risks that may arise in its normal course of its business and impact its ability for future developments include inter-alia, credit risk, liquidity risk, counter party risk, regulatory risk, commodity inflation risk, currency fluctuation risk and market risk. Your Company has chosen business strategy of focusing on certain key products and geographical segments are also exposed to the overall economic and market conditions. Accordingly, your Company has established a framework and process to monitor the exposures to implement appropriate measures in a timely and effective manner.

(4) INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

The Company has a proper and adequate system of internal controls. This ensures that all transactions are authorized, recorded and reported correctly, and assets are safeguarded and protected against loss from unauthorized use or disposition. In addition, there are operational controls and fraud risk controls, covering the entire spectrum of internal financial controls. An extensive programme of internal audits and management reviews supplements the process of internal financial control framework. Properly documented policies, guidelines and procedures are laid down for this purpose. The internal financial control framework has been designed to ensure that the financial and other records are reliable for preparing financial and other statements and for maintaining accountability of assets.

In addition, the Company has identified and documented the risks and controls for each process that has a relationship to the financial operations and reporting. The Company also has an Audit Committee to interact with the Statutory Auditors, Internal Auditors and Management in dealing with matters within its terms of reference. This Committee mainly deals with accounting matters, financial reporting and internal controls.

(5) DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

During the year, Total Income of your Company was decrease to Rs. 1,60,457.00 Thousand as against Net Income of Rs. 1,88,138.00 Thousand of the previous year. However, the Companys Net Profit after tax has been Increase to Rs. 856.00 Thousand for the current year as against the Net Profit after tax of Rs. 134.00 Thousand of the previous year due to decrease in profit margin against higher expenditure incurred.

(6) HUMAN RESOURCES & INDUSTRIAL RELATIONS:

The Companys human resources philosophy is to establish and build a strong performance and competency driven culture with greater sense of accountability and responsibility. The Company acknowledges that its principal asset is its employees. The expertise of the management team, the professional training provided to the staff, their personal commitment and their spirit of teamwork together enhance the Companys net worth. The Company has taken various steps for strengthening organizational competency through the involvement and development of employees as well as installing effective systems for improving their productivity and accountability at functional levels. Ongoing in-house and external training is provided to employees at all levels to update their knowledge and upgrade their skills and abilities. The effort to rationalize and streamline the workforce is a continuous process. The industrial relations scenario has remained harmonious throughout the year.

The total numbers of employees as on 31st March, 2023 were 8 (Eight).

(7) DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIO:

Pursuant to provisions of Regulation 34(3) of SEBI (LODR) Regulation, 2015 read with Schedule V part B (1) details of changes in Key Financial Ratios is given hereunder:

Ratios

F.Y. 2022-23 F.Y. 2021-22 Change in Ratio
Debtors Turnover Ratio 2.28 1.37 66.81
Inventory Turnover Ratio 3.15 6.72 -53.14
Interest Coverage Ratio 0.00 0.00 N.A.
Current Ratio 73.68 1.53 4704.11
Debt Equity Ratio 0.00 0.00 N.A.
Net Profit Margin 0.54 % 0.07 % 651.48
Return on Net Worth 5.19 % 1.10 % 370.75

NOTES FOR CHANGE IN RATIOS:

Debtors Turnover Ratio is increased by 66.81 times due to high collection of Receipt. Inventory Turnover Ratio is decreased by 53.14 times due to more Stock in hand. Current Ratio is increased by 4704.11 times due to decrease in Current liability. Net Profit Margin is increased by 651.48 % due to increase in profit margin.

Return on Net Worth is increased by 370.75 % due to higher profit in as well as increase in capital.

(8) CAUTIONARY STATEMENT:

This document contains forward-looking statements about expected future events, financial and operating results of the Company. These forward-looking statements are based on assumptions and the Company does not guarantee the fulfillment of the same. These statements may be subject to risks and uncertainties. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause assumptions, actual future results and events to differ materially from those expressed in the forward-looking statements. Accordingly, this document is subject to the disclaimer and qualified in its entirety by the assumptions, qualifications and risk factors referred to in the managements discussion and analysis of Nanavati Ventures Limiteds Annual Report, 2022-23.

By Order of the Board of Directors
NANAVATI VENTURES LIMITED
Place: Navsari SHREYKUMAR SHETH
Date: 04/09/2023 Chairman and Managing Director
DIN: 08734002