NEL Holdings Management Discussions


Economic Environment

During the period of 2023-24, India grappled with persistent inflationary pressures, particularly in essential goods and services, remained elevated, driven by a combination of domestic and global factors. Erratic weather patterns and disruptions in agricultural activities also affected crop yields, leading to fluctuations in food prices. Indias GDP growth however is estimated to be between 7% and 8% which is considered to be good after the Covid pandemic period.

The Reserve Bank of India (RBI) adopted a cautious monetary policy stance, aiming to contain inflation while supporting growth through accommodative measures such as interest rate adjustments and liquidity injections.

One of the key drivers of economic growth was the capacity to withstand by Indias service sector, particularly in areas such as information technology, e-commerce, and financial services. Additionally, infrastructure projects and investments in sectors like construction and transportation contributed to overall economic expansion. With a growing working age population, a large domestic market, boost to infrastructure development and advent of digitisation, India is well positioned to be the fastest growing large economy in the world. Nevertheless, the countrys resilient entrepreneurial spirit continue to fuel optimism for sustained economic progress in the years ahead.

The Company

Company Overview and Market Positioning

SATCHMO Holdings Limited ("SATCHMO" or "Company") formerly known as NEL Holdings South Limited is an investment and Holding Company in the sectors of Facilities management, Catering, Restaurants, Food and Equity Trading. The Company has a very strong brand equity, business processes and partnerships to attain the next stage of growth.

SATCHMO has a comprehensive corporate governance framework with an eminent Board and strong management team with significant experience across industries. In line with best in class corporate governance practices, the Company has a required proportion of Independent Directors.

Operational Performance

The Company is currently focussing on deleveraging its Balance Sheet and exiting from various stressed assets and working to become zero debt in the parent company as well as its subsidiaries. The Company has exited four projects in previous years and the efforts are on-going for exiting remaining stressed real estate projects which will aim to also addressing debt challenges and settling banks by the end of second quarter of the current year FY 2024-25 so as to become debt-free. At the same time, focus is also to complete balance two ongoing projects by finishing the pending works and handing over the remaining apartments to the customers.

Financial Performance in IND-AS (Figures)

SATCHMO at consolidated level including the two subsidiaries generated revenue of Rs. 13,348 lakhs (including other income), compared with FY 2023 revenue of Rs 20,800 lakhs (including other income). The Earnings before interest, tax, depreciation and amortization (EBITDA) was Rs 1,593 lakhs as compared to Rs (690) lakhs in the previous year. The Profit / (Loss) after taxes during the year was Rs. 1,580 lakhs.

During the year, Company has exited one project and corresponding revenue has been recognized.

Revenue Breakup: - IND-AS (Figures)

FY2024 % share FY2023 % share
Property Development 3,199 72.69% 8,374 83.87%
Contractual Activities / Other Operating Income - - - -
Income from Sale of Projects 984 22.36% 1,500 15.02%
Maintenance Income 171 3.90% 106 1.06%
Income from Sale of Shares 47 1.06% 4 0.04%
Misc. - Other Income - - -
Total 4,401 9,984

Financial Condition IND- AS (Figures)

Particulars March 31, 2024 March 31, 2023
Sources of funds
a. Shareholders funds (107,474) (110,048)
b. Minority Interest - -
c. Loan funds 13,386 50,712
Total (94,088) (59,336)
Application of funds
a. Fixed assets (net) 10,390 10,390
b. Investments -
c. Net current assets (104,478) (69,726)
d. Deferred tax/ miscellaneous expense, among others - -
Total (94,088) (59,336)

 

Particulars 12 months ended March 31, 2024 12 months ended March 31, 2023
Profit before tax 1,470 (6,949)
Add: Adjustments (4,779) (2,291)
Add: Net working capital 6,533 11,391
Less: Income Tax paid 129 359
Net cash flow from operating activities 3,353 2,510
Net cash flow from investing activities (26) -
Cash flow from financing activities (3,550) (2,287)
Net cash inflow / (outflow) (223) 223

Liquidity

As of March 31, 2024, the Company had cash and cash equivalents of Rs. 81 Lakhs. On a standalone basis, the Company had a total debt of Rs. 8,507 Lakhs and the Net worth was at (Rs. 96,252 Lakhs) as at March 31, 2024. The Company is closely monitoring the debt levels and has put in place plans to close all the debts in the current financial year 2024-25.

Business Strategy

New Businesses

SATCHMO has been focussing on new businesses in line with the amended objects, and is working towards turnaround of its financial position.

SATCHMO has already commenced business of trading in equities in last quarter of the previous year and have reported small income on equity trading. During the current year trading in equities continued for three quarters except for the last quarter of the financial year.

Further, the Company in continuation of its aim from the previous year will focus into other businesses like facilities management, catering and restaurants in line with its amended objects. Significant improvements have been made in this aspect and its hopeful that this new business will be kick-started shortly and will start brining revenue from the third quarter of the current financial year.

Company is hopeful of value generation in these new areas of business and working towards substantial improvement in its financial position.

Exploring new opportunities

Facility Management: The Company sees good potential in Facility Management services where there is need for quality professional players to provide integrated management solutions including security, housekeeping, MEP maintenance, landscaping and external development management, capex improvement, etc. It is a competitive but growing sector wherein there is great demand in several residential and commercial spaces. While the margins are modest, increased scale would provide economies in terms of cost efficiency and improved margin apart from helping the top line. This would help in related diversification by utilizing existing resources and capacities.

Food and catering:

Key Drivers of Packaged Food Industry in India

• Continuous urban population growth and increased employment rates have caused consumers to live a hectic lifestyle. Due to the lack of time available for culinary and meal preparation, processed foods such as ready-to-eat products and snacks have gained popularity in urban areas.

• India has one of the worlds largest working populations. With rising discretionary incomes, this demographic can be considered the largest consumer of processed foods. This population is further anticipated to increase steadily over the next five years.

• Increasing penetration levels of organised food retail outlets provide consumers with a variety of products at attractive discounts.

The Company sees good potential in the food and catering business and accordingly has made all efforts to enter into food and catering business in the current year. Food and beverages market in India has evolved from unorganized home grown, standalone, family run business ventures into organized structure with priorities on transparency, corporatisation with formation of chain of restaurants, international partnerships with multipolar and integrated business models and cloud kitchens.

Necessary recruitment of senior staff who have adequate expertise in this field have already been completed and all strategies to kick-start the business have reached quite considerable level. Necessary infrastructure for the same will be completed in the first of the current year so that by the end of the current financial year the Company starts generating revenue from this line of business.

Managing and promoting talent

SATCHMOs culture is focused on customer-centricity, collaborative teamwork, result orientation, entrepreneurial mind set and developing people. One of the key growth strategies at SATCHMO is to manage and promote talent by providing growth opportunities, rewards, respect, learning and fun. The Companys employees are both an important stakeholder group and key players in its business. With their skills and achievements, the Company is driving a culture of innovation and sustained growth for SATCHMO.

Opportunities and Threats

Demand for Catering has increased with rapid rise in urbanization. Millions of people migrate to cities every year, not only driving demand for homes but also giving rise to avenues in Food Chain supply. The disposable income has been steadily increasing and there is increased demand for multiple restaurants. Going forward, with the e-commerce market in India making itself look attractive, can pose a good opportunities in area of timely execution of orders from customers The key threats to businesses of catering arises from change in customer preference for newer places.

• Sales market risks - Economic and market conditions might influence customers to defer or cancel preference for outside food

• increase in cost of raw materials

• regulatory and policy changes results in higher costs .

Risk management

The Company has an established enterprise risk management framework to optimally identify and manage risks, as well as to address operational, strategic and regulatory risks. The ability to anticipate risks and respond effectively is critical for achieving the Companys objectives and provides value to stakeholders. The risk management process also addresses long term strategic and operational planning, talent acquisition and retention, treasury management, financial reporting and controls, information technology and security, environment health and safety compliance, legal, taxation, communication, regulatory compliance and code of conduct for employees. The Company believes that risk is an integral part of every business and promotes a culture of building ability to anticipate and manage the risks effectively and converting them into opportunities. Risk assessment is conducted by the risk management committee and the program is reviewed periodically by the Audit Committee.

There are several areas of risk related with:

• the macroeconomic environment

• the information technology systems and disaster recovery

• Liquidity risks

• the availability of finance and the cost of financing

• the human resources - their availability, costs and compliance with the code of ethics of the Company

• the vendors and business partners

• the assets of the Company

• Competitors and Customer risks

Internal Control Systems

SATCHMO has an elaborate internal control system which monitors compliance to internal processes. It ensures that all transactions are authorized, recorded and reported correctly. Well established and robust internal audit processes, both at business and corporate levels, continuously monitor the adequacy and effectiveness of the internal control environment across the Company and the status of compliance with operating systems, internal policies and regulatory requirements. In the networked IT environment of the Company, validation of IT security continues to receive focused attention of the internal audit. The Internal Audit team of the Company independently evaluate the adequacy of internal controls and concurrently audit the majority of the transactions in value terms. Independence of the audit and compliance is ensured by direct reporting to the Audit Committee of the Board.

The Company strives to continuously strengthen the internal control systems by adopting standard operating procedures and by delegating roles and responsibilities to various Department heads for effective implementation of the same. This is to ensure that the Company conducts its business with highest standards of statutory, legal and regulatory compliance.

Outlook

The key focus for us in the following year would be:

• Design and Innovation: The Company has always focused on building a strong brand recall and differentiating itself from the competitors by continuous investments in new design and innovation.

• Quality: Delivery highest quality to the customers to their utmost satisfaction.

• Cash-flow Management - Tight control on accounts receivables and accounts payables with the objective of reducing the interest burden.

• Customer Relationship - Enhance customer experience at each of their touch points starting with at the stage at which we interact with them to assist in selection of a home till the time it is handed over.

Human Resources Development

• SATCHMO employs people across all functions. The Company continues to foster a high performance culture by recognizing good performers and providing them with career enhancing opportunities. Several HR initiatives have been taken for the strategic alignment of the HR function with the business objectives. These initiatives encompass employee

engagement, learning & development besides improved internal communication mechanism with employees. With current slowdown, we have consolidated and optimised our resources for effective and productive growth with minimal required resources.

• Our registered and corporate office is located in Bengaluru. This houses employees who oversee our financial, administrative, design and planning and other reporting functions. We have not experienced any material strikes, work stoppages, labour disputes etc.

• Our work-force consists of our permanent employees, consultants and labour work force that work at projects through sub-contractors.

Cautionary Statement

Statements in this Management Discussion and Analysis contain "forward looking statements" including, but without limitation, statements relating to the implementation of strategic initiatives, and other statements relating to Companys future business developments and economic performance. While these forward looking statements indicate our assessment and future expectations concerning the development of our business, a number of risks, uncertainties and other unknown factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to, general market, macro-economic, governmental and regulatory trends, movements in currency exchange and interest rates, competitive pressures, technological developments, changes in the financial conditions of third parties dealing with us, legislative developments, and other key factors that could affect our business and financial performance. The Company undertakes no obligation to publicly revise any forward looking statements to reflect future / likely events or circumstances.