Navkar Corporation Ltd Management Discussions

The logistics industry plays a vital role in the dynamic economic landscape of India by enabling the efficient movement of goods and services throughout the countrys large territory. As

India strives to realise its ambitious economic goals, efficient management of its logistics sector emerges as a pressing imperative. Given its pivotal role in supporting various industries, from manufacturing to agriculture and e-commerce, the logistics sector faces a myriad of challenges, and offers a number of opportunities.

The Indian logistics sector is one of the largest in the world and presents a huge addressable opportunity. The sector is critical for the countrys economic growth as it connects various elements of the economy and consists of transportation, warehousing and other supply chain solutions ranging from suppliers to end customers.

OVERVIEW

Navkar Corporation Limited (hereinafter referred to as ‘the Company, ‘Navkar) is one of largest Integrated Logistics Services Providers having capabilities across Container

Freight Stations (CFS) & Inland Container Depots (ICD),

Rail Terminals (PFT), Container Train Operations (CTO), Warehousing and other supporting Logistics Solutions. The Company provides comprehensive, customised, technology-enabled logistics solutions at a transactional or strategic level to meet customer specific requirements. Our in our wide bouquet of offerings enabled by our extensive network of strategically located facilities and our transportation network integrating as a vast hub and spoke model designed to empower customers in enhancing the productivity of their supply chain. Our solutions seamlessly integrate multiple modes of logistics deploying industry-leading technology, infrastructure, processes, and human resources.

We operate in three distinct yet interwoven business streams, viz. Container Freight Station Operations, Inland Container Depot Operations, Container Train Operator Operations and Private Freight terminal Operations.

Our network consists of 3 CFSs in the vicinity of Nhava Sheva Port, 1 ICD in the hinterland of Saurashtra at Morbi served through Mundra and Kandla Ports, 2 PFTs, one adjacent to our CFS at Somathane and one adjacent to our ICD at Morbi, assorted bonded warehousing, general warehousing and transportation assets at all our facilities, and 8 owned container rakes.

We serve Indian and Multinational companies across a multitude of sectors, including Manufacturing, Automotive, Chemicals and Fertilizers, Consumer Goods, Retail, Commodities,

Paper, Iron & Steel, Non Ferrous Metals, Petrochemicals,

Agri-commodities amongst other industries.

BUSINESS STREAMS

Navkar operates in four distinct business streams, each with dedicated operations supported by business functions, viz. sales & marketing, operations, human resources, information technology and finance. Our marketing strategy focusses on offeringcustomerstheflexibilityto choose between standalone and integrated solutions across the business streams to meet the exact demands of their business.

1. Container Freight Stations: Navkar Corporation Ltd. owns three Container Freight Stations (CFSs) serving the gateway port of Nhava-Sheva. Our CFSs handle import and export containers, offering customs clearance services and also offer a variety of value additions for our customers. We own contemporary cargo and container handling, dedicated warehouses to meet customer needs, and container stacking yards. We provide end-to-end cargo and container services, including parking and repair facilities.

2. Inland Container Depot & Multi Modal Logistics Parks: Navkar Corporation Ltd. owns one Inland Container strength lies

Depot (ICD) at Vadharva near Morbi. The ICD is part of the Multimodal Logistics Park offering Warehousing (Domestic and Bonded), Multi Modal Transportation, Storage yard for empty and laden containers and storage and handling of various types of cargo ranging from bulk, block, palletized, liquid, Hazardous and Reefer cargos.

3. Private Freight Terminals: Navkar Corporation Ltd. operates two Private Freight Terminals (PFTs) i.e. private railway terminals for handling Freight Trains. These terminals are to serve MMR (Mumbai Metropolitan Region) located at Somathane (Panvel) and to serve

Saurashtra & Kutch regions of Gujarat with focus on

Morbi located at Vadharva (Morbi). Our Rail Terminals are capable to handle all types of cargo trains ranging from trains for Steel cargo, Bulk cargo, Bagged cargo, Containerized cargo and Automobiles.

4. Container Train Operator: Navkar Corporation Ltd. Owns Category 1 License issued by Indian Railway for operation of Container train on Indian Railway Network on PAN INDIA Basis. We own 8 container trains of heavy duty payload on ownership basis in addition to operations of rake on lease basis time to time. Our rakes are deployed on EXIM and domestic circuit and giving regular service across Ports and Industrial centers.

INDUSTRY OVERVIEW & TRENDS OVERVIEW OF THE GLOBAL ECONOMY

The global economy has demonstrated unprecedented resilience in meeting supply economic upheaval in 2023-24 caused by cataclysmic geopolitical events in the form of the continuing Russian invasion of Ukraine and the Israel

Palestinian was culminating in the Red Sea Crisis. Global growth is projected by the World Bank to hold steady at 2.6% in 2024 before edging up to an average of 2.7% in 2025-26. That is well below the 3.1% average in the decade before COVID-19. The forecast implies that over the course of 2024-26, countries that collectively account for more than 80% of the worlds population and global GDP would still be growing more slowly than they did in the decade before COVID-19. Several factors contribute to this tepid forecast, high central bank policy rates, withdrawal of fiscal support, high debt levels, slowing down economic activity, low productivity growth. Conversely many parts of the world are On the other hand, most of the regions are seeing a better than expected response to tight monetary policy manifested by reduction in inflation, also supported by resolution of supply side issues. Global inflation is expected to moderate to 3.5% in 2024 and

2.9% in 2025, however many central banks are expected to remain cautious in lowering policy interest rates.

IMF predicts slow global recovery on account of regional divergences. The Red Sea crisis has complicated and destabilized global supply chains which will get manifested in the 2024-25 period. Increased shipping and insurance costs coupled with longer lead times will contribute to this disruption and squeeze earnings further.

Ongoing trade disturbances, geo-economic disruptions, escalating geopolitical tensions, extreme climate change, and uncertain financial scenarios continue to pose risks affecting growth in trade and commerce.

This disruption and realignment provides a strategic opportunity for challengers like India to increase their share of the pie thereby boosting economic growth.

OVERVIEW OF THE INDIAN ECONOMY

The Indian economy is a bright spot in this generally dismal scenario caused by the global disruptions. The economy has a positive outlook for coming years and is poised to be the fastest growing amongst the major economies globally. Various sources place the growth rate of Indian economy between 6.5% and 8% with the IMF indicating that Indias economic growth forecast for the current year has been raised to 7.0 percent. The improvement in the growth estimate is attributed to the robust economic performance of the country, domestic demand and investment, is expected to continue driving growth of the economy. Indian economy has been strong in 2023, with substantially higher levels of capital formation enabling growth. However, private sector investment has been inadequate in spite of sustained implicit and explicit incentives from the government. Aggregate decline in participation of Foreign Direct Investment has also impacted the overall capital investments. The economy however is poised to grow backed by the services and financial sectors.

Going forward, Government should prioritise reforms in the areas of learning and development, skilling of workforce, energy security, health and wellness, womens participation in the workforce and promotion of small businesses especially in the manufacturing industries to improve our growth prospects. The phenomenal increase in the National Highways and Indian Railways networks is a key driver of growth in the economy. This phenomenal development enhances accessibility to the remote parts of the country thereby improving national connectivity. The investment in infrastructure entailed by this development has created numerous employment opportunities thereby propelling economic growth.

OVERVIEW OF THE INDIAN LOGISTICS INDUSTRY

The Indian logistics industry is on the cusp of a giant leap forward, annual growth is expected to be in the range of 8.5% to 9.0% in the next decade. This growth will be propelled by new age businesses, drawing heavily on contemporary technology. Government intervention by way of industry friendly policies, support to advancement of requisite technologies and rapid infrastructure creation will be an enabler in this growth journey. We can already see evidence of this rapid growth with the advent of the physical and technological infrastructure to sustain road, rail, sea and air transportation, contemporary warehousing and peripheral services like freight forwarding, new age solutions and technological support forming the entire spectrum of activities. The industry has transformed to encompass hitherto unexplored activities like predictive planning, analytics, value-added services; comprehensive, customized and complex multimodal supply chain solutions, amongst others.

It is noteworthy that despite advancements, logistics costs in India remain high at 14% of GDP as compared to middle and low single digits in developed countries. Initiatives like Gati-Shakti programme, coupled with the major activity in infrastructure development and technology adoption is improving the efficiencies and economies in this sector

Customized and integrated solutions encompassing multimodal transportation and warehousing services along with other peripheral services are essential offerings in this evolving landscape.

KEY GOVERNMENT INITIATIVES

Higher cost of logistics in India is driven by inefficiencies inherent to the industry in India. For example road transportation accounts for nearly 70% of goods moved, while rail, ocean, and air account for the balance 30%. In the last few years the Indian Government has taken cognizance of these factors and launched several initiatives to foster industry wide efficiencies.

1. National Logistics Policy: The National Logistics Policy seeks to bring about a paradigm shift across the logistics landscape and enable reduction of logistics costs by half to benchmark levels by 2030. The policy envisions a Digital Integration System, ULIP, Comprehensive Logistics Action Plan, and Ease of Logistics Services, among other initiatives to achieve this task. The policy is supported by 13 State Logistics Policies diversifying and customizing policy frameworks to suit their specific needs.

2. Logistics Efficiency (LEEP): LEEP is designed to improve freight transport efficiency. Associated cost, transportation time, and logistics practices like goods transferring and tracking through infrastructure technology and process interventions.

3. PM Gati Shakti Scheme: The PM Gati Shakti Scheme was launched by the Government of India in 2021 with the purpose of creating a world-class, seamless multimodal transport network in India. It will incorporate the infrastructure schemes of various Ministries and State

Governments, Economic Zones to improve connectivity & make Indian businesses more competitive. It will also leverage technology extensively including spatial planning tools with ISRO and imagery developed by Bhaskaracharya National Institute for Space Applications and Geoinformatics.

4. Dedicated Freight Corridors: This project involves the construction of the Eastern and Western Dedicated

Railway Freight Corridors (DFCs), having a cumulative length of over 3,000 km. Dedicated Freight Corridor (DFC) project was conceived in 2005 and two DFCs, namely Eastern DFC (EDFC) and Western DFC (WDFC) were approved by Cabinet in 2008. The aim is to reduce overall logistics cost by increasing speed, optimizing capacity, and providing seamless connectivity with ports for expediting movement with efficiency. The end objective is to decongest high density rail routes and facilitate shift from road to rail and coastal shipping

5. Sagarmala Programme: Sagarmala seeks to enhance the performance of the logistics sector by reducing logistics costs for both domestic and international trade. By leveraging coastal and waterway transportation, the program aims to minimize the need for extensive infrastructure investments, thus making logistics more efficient and improving the competitiveness of Indian exports. 839 projects, calling for investment of nearly Rs. 5.8 lakh crores, are aimed to be undertaken for implementation under the Sagarmala Programme, out of which, 241 projects worth Rs.1.22 lakh crores have been completed.

6. Bharat Mala Pariyojana: The Bharatmala Pariyojana envisages development of about 26,000 km length of Economic Corridors, which along with Golden Quadrilateral (GQ) and North-South and East-West (NS-EW) Corridors are expected to carry majority of the Freight Traffic on roads. Further, about 8,000 km of Inter

Corridors and about 7,500 km of Feeder Routes have been identified for improving effectiveness of Economic Corridors, GQ and NS-EW Corridors. The programme envisages development of Ring Roads / bypasses and elevated corridors to decongest the traffic passing through cities and enhance logistic efficiency. As of December 2023, 76% of the planned length, equivalent to 26,418 Programme km, was awarded for construction, and approximately 15,549 km was completed. Completion of the project is expected by 2026.

About Navkar

1. CFS: As on March 31, 2024 the company has three Container Freight Stations, two at Ajivali and one at Somathane in Panvel with aggregate installed capacity of over 5,35,000 TEUs per annum.

2. ICD: In addition the company has one Inland Container Depot at Morbi in Gujarat with an installed capacity of

2,00,000 TEUs.

3. Railway terminals: Company operates two Railway Terminals referred to as Private Freight Terminals (PFTs). These terminals are at our Somathane (Panvel) facility and at ICD Morbi. While the PFT at Somathane is served with three rail sidings, the one at ICD Morbi has five rail sidings. The railway terminals are used for handling export rakes carrying agro products, rakes carrying other commodities as part of domestic logistics solutions and rakes catering to the Exim business The PFTs handle all types of railway rakes (Exim and domestic) at Somathane and Morbi.

4. Container Train Operator: The Company possesses a Category 1 CTO license allowing us unencumbered access to Indian Railways Network across India for

Domestic and Exim trade. In addition the Company owns

8 container rakes (also known as BLCs) which are used to fulfil requirements of our Exim and Domestic Businesses.

SEGMENT-WISE PERFORMANCE

The Company is engaged in the business of providing services of CFS, ICD, Rail Operations and other related services. There is no other reportable segment.

OUTLOOK

Indias GDP growth in FY 2024-25 is likely to be impacted by various factors like food inflation, reduced participation from

Private Sector and Foreign Direct Investors in the India growth story, tight monitory policy and a continuing unstable financial outlook. Amid this scenario, the GDP growth is likely to be around 7% for this fiscal The Annual budget is a balanced response by the Government to the projected 7%GDP growth rate for FY2024-25 The continuation in robust investments in the infrastructure sector by Government of India and the push for agricultural productivity, skilling and employment generation and Research & Development in the budget will support the onward growth of the economy.

RISK AND CONCERNS

The Company is dedicated to identifying and managing the risks it is exposed to, both internal and external, and has put in place mechanisms to handle the same proactively and competently. The Company also recognizes that these risks potentially have an adverse impact on its ability to create sustainable value for its stakeholders. A comprehensive and robust mitigation plan has been put in place to address such risks. The major risks faced are as below

1. We operate in a highly competitive industry populated by a large number of unorganized players. Many segments within the industry are highly commoditized and have low barriers to entry, creating a highly fragmented market where achieving substantial market share is difficult.

2. The high level of fragmentation and consequent competition may impact revenue and profitability adversely. To mitigate this, the Company creates value through integrated technology-based solutions, transport network-based solutions, and skill development of its employees.

3. The ICD / CFS business of the Company is subject to the performance of the Indian EXIM Trade which, is in turn dependent on global economic conditions. A plethora of factors with potential impact on global economic conditions in turn have a cascading effect on the business. Given the projected growth in the Indian economy and expected recovery in global trade, rising spending in the infrastructure and manufacturing space, it is estimated that imports will continue to rise steadily.

4. Policy changes of the Government pertaining to Monitory

& Fiscal Policies, political changes, microeconomic and macroeconomic changes, tax rates, infrastructure development and regulatory environment changes have potential impact on all business lines -

Risk Mitigation

1. The Company has built a strong relationship with major industry participants viz. Shipping Lines, Custom Handling Agents, Freight Forwarders etc. This strong relationship shores up our existing market share in the business and also gives us an advantage in obtaining favorable and competitive commercial terms to protect our revenues and margins.

2. Our services to the customers are marked by the best in class infrastructure we have positioned, customer centric approach in all our interactions with the customers and the ability to provide innovative and customized solutions to meet specific business needs

3. Our focus on pricing products competitively and with an understanding of the customer expectation, enabled by sound operational, financial and human resources management helps us differentiate against our unorganized competitors

4. Completion of projects timely and within budget helps in keeping our costs in check contributing to the overall cost competitiveness and profitability objectives while simultaneously helping us be in the forefront of new development within the industry

5. The company has recognized the vagaries of the exim trade especially in the wake of the ongoing conflicts between Israel and Palestine on the one hand and

Russia and Ukraine on the other, manifested as instability and uncertainty in ocean freight and further impacting international trade and cargo movements. Anticipating our such disturbances in the past we have diversified services to increase the contribution of businesses not dependent on ocean freight. Such businesses have contributed a major portion of our annual revenues in FY 2024. We continue to explore new avenues to channelize and harness any further opportunities in this segment.

6. The business strategy team in the Company is monitoring changes in relevant policies and other events and continually assessing the impact on our businesses with countermeasures being planned and executed expeditiously to minimize impact on revenue, profitability, customer service objectives

STRENGTHS

Our capabilities and resources that enable us to grow and sustain in the competitive Logistic Sector

? All three CFSs are strategically located close to NH4 (Old Mumbai-Pune Highway) and NH17 (Mumbai-

Pune Express highway) and in close proximity to Nhava Sheva Port, providing good connectivity to interior parts of the country.

? ICD Morbi is well located in the vicinity of NH 27 and off Gujrat SH 7. Well connected to all major locations in Saurashtra and North Gujarat.??Warehousing Capabilities to

Service Varying Requirements of

Customers.

??CFSs are approved for handling hazardous cargoes, DPD Cargoes and cargoes for closed bond and open bond storage. adequate firefighting systems/ equipmen are installedt, which allows storage and handling of IMO (hazardous) cargoes (chemicals, liquid, etc.).

There is Plant and Quarantine

Unit for inspection and approval of agricultural cargo.

WEAKNESSES

Aspects of the business that can be improved to minimise risks in our business

? Dependence on global geopolitical scenario.

? Large number of unorganized players in the market.

? Increase of competition from other organised and unorganised third-party logistics and transportation service providers.

? Major dependency on performance of

Indian EXIM Trade at a national and localized level.

OPPORTUNITY

We are consistently identifying potential areas where we can grow and enhance market and brand prominence

??Leveraging technology, along with Third Party logistics Services. ? For the Indian economy, the logistics sector plays an important role. The large Indian populace is a sector for consumption of goods that are procured locally or imported. This consumption partly drives the economy and the logistics services. ? Outstanding Logistics Infrastructure. ? Indian logistics sectors key focus on infrastructure development. With a view to improving supply chain efficiencies and enhancing connectivity to help logistics players tap the underleveraged markets in the countrys hinterlands, key infrastructure development projects have been rolled out.

? Leveraging presence of our own and leased railway assets to provide integrated logistics solutions to some of the most prominent industries in India.

THREATS

We are identifying potential threats to our business, owing to evolving macroeconomic factors and consumer perceptions

??Growing competition from other Logistics Sectors. Government Initiative share of DPD containers is increasing every month. Amongst these DPD containers, there are many that head straight for factories and some that head for CFSs for interim storage or for completing the customs processes prior clearance.

INTERNAL CONTROL SYSTEMS AND ADEQUACY

The Company has robust Internal Control Systems and processes in place for smooth and efficient conduct of business and it complies with relevant laws and regulations. It has well documented system of internal financial controls in place, in the form of delegation of powers, policies and procedures that cover critical as well as important activities of financial and other operating functions. The procedure are in the form of manuals, guidelines, delegation of powers and IT system and controls which are effected through people operating in various departments within the Company at different levels at each stage of the processes. These are designed to ensure compliance to the internal financial controls as detailed in the

Companies Act, 2013.

The Company uses Tracker Software that connects all parts of the organization, to record data for accounting, consolidation and management information purposes. The organization continuously assess the effectiveness of its internal controls through extensive internal audits, which are being conducted on regular basis by experienced independent firms of

Chartered Accountants in close co-ordination with Companys own internal audit Department.

A well-defined internal control framework has been developed identifying key controls and independent external auditors verifies the adequacy and effectiveness of the internal financial control system through regular periodic audit and system review, provides assurance on the compliance of internal polices & procedures of the Company and certify the appropriateness of internal controls. Internal audit firmsdirectly report to the management at higher level. The functioning of the internal audit as well as internal financial control systems are periodically reviewed by the Audit committee to ensure comprehensive coverage of the areas and necessary directions are issued whenever required to further strengthen the internal financial control system & procedures keeping in view the dynamic business environment in which the Company operates.

Reports of the auditors are reviewed, compliances are ensured and the reports along with the compliances are apprised to Audit committee periodically. Proactive steps have been taken to ensure compliance with various upcoming regulations through deployment of cross functional teams. The Company at all times encourages the employees to adopt fair, compliant and ethical practices. In addition, implementation and effectiveness of internal financial controls during 2023-24 was also reported by the internal and statutory Auditors of the Company.

FINANCIAL PERFORMANCE

A summary of the financial performance of the Company for the financial year 2023-24 as compared to the previous financial year is given below:

Particular	FY 2023-24	FY 2022-23
Total Revenue	44084.17	44967.58
Total Expenses	42883.09	40051.49
Profit Before Tax from continuing Operations Before exceptional items	1201.08	4916.09
Exceptional Item	-	1906.42
Tax Expenses
Current Tax	194.01	1859.12
Earlier Year Tax	226.70	38.08
Deferred Tax Expenses	220.50	(2374.21)
Total Tax Expenses	641.21	(477.01)
Profit for the period from Continuing Operations	559.87	7299.52
Discontinued Operations
(a) Profit from discontinued operations before tax	(730.97)	4151.51
(b) Tax expenses of discontinued operations	-	2201.92
Profit/(Loss) for the Period/Year from discontinued operations (a - b)	(730.97)	1949.59
Profit/(Loss) for the Period/Year (A)	(171.10)	9249.11
Other Comprehensive Income, net of tax (B)
Items that will not to be reclassified to Profit and Loss
Re-measurement of net defined benefit obligations
From Continuing Operations	(30.66)	11.80
From Discontinued Operations	-	10.17
Total Comprehensive Income for the year (A+B)	(201.76)	9271.08
Earning per equity shares (Face Value INR 10/- per share)
Basic and Diluted (INR)
From Continuing Operations	0.37	4.85
From Discontinued Operations	(0.49)	1.30

RATIO ANALYSIS: Details of significant financial ratios along with explanation under: thereofare as

Particulars	Unit of measurement	March 31,2024 Audited	March 31.2023 Audited	Variance in % term	Reasons
Current Ratio	In multiple	2.18	5.79	-62.3%	The significant change occurred due to reclassification of preference share capital & addition of working capital loan and current maturity of new long term loans.
Debt - Equity Ratio	In multiple	0.11	0.02	385.9%	The significant change belongs to addition of new loans.
Debt Service Coverage Ratio (DSCR)	In multiple	2.04	1.10	84.6%	The significant change belongs to reduction in EBITDA.
Debtors Turnover Ratio	In multiple	8.22	10.94	-24.9%	NA
Net Profit Margin (%)	In %	-0.39%	14.02%	-102.8%	The significant change belongs to decrease in Net profit.
Return on Equity (ROE)(%)	In %	-0.09%	4.79%	-101.8%	The significant change belongs to decrease in Net profit.
Trade Payables Turnover Ratio	In multiple	14.58	19.27	-24.4%	NA
Return on Capital Employed (%)	In %	0.88%	7.06%	-87.5%	The significant change belongs to reduction in EBIT.
Return on Investments (%)	In %	-0.10%	4.00%	-102.38%	The significant change belongs to decrease in Net profit.
Net Capital Turnover Ratio	In multiple	3.57	3.65	-2.22%	NA
Inventory Turnover Ratio	In multiple	159.69	127.20	25.5%	The significant change belongs to decrease in Turnover.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/ INDUSTRIAL RELATIONS FRONT INCLUDING NUMBER

OF PEOPLE EMPLOYED

Your Company endeavors to provide a conducive workplace with best standards and believes that employees are the most important assets. To ensure that an effective and the right resource is acquired, your company continuously strengthens and updates its hiring mechanism.

Being a Service Provider of essential services employees are the key assets. The Company has adopted people practices that enable it to attract and retain talent in an increasingly competitive market; and to foster a work culture that is always committed to providing the best opportunities to employees to realise their potential.

As on March 31, 2024, the Company had a workforce of 461 people on rolls.