nitesh estates ltd agm board meetings Management discussions


Economic Environment

Global growth slowed in 2022 to 3.2%, more than 1 percentage point weaker than expected at the end of 2021, mainly weighed down by Russias war of aggression in Ukraine and the associated cost-of-living crisis in many countries. Growth is projected to remain at below-trend rates in 2023 and 2024

A key factor in the improvement in activity and sentiment in early 2023 was the recent decline in energy and food prices. While levels are still relatively high compared to pre-war, this is boosting purchasing power for most firms and households and is helping to lower headline inflation. The earlier-than-expected re-opening in China is also expected to have a positive impact on global activity, reducing supply chain pressures and giving a boost to international tourism.

Goods price inflation has started declining in most countries, due to the gradual return of normal demand for goods post-pandemic and the easing of global supply chain bottlenecks. Core inflation (excluding food and energy) continues to be driven by strong service price increases and cost pressures from tight labour markets.

Persistent inflation pressures in services and cost pressures from tight labour markets will require many central banks to maintain high policy rates until well into 2024.

Short-term economic prospects have improved, helped by lower commodity prices and the reopening of China, with global growth set to pick up moderately and inflation declining gradually. However, downside risks predominate.

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 three projects in last year and is in process of exiting balance projects as part of exiting stressed / stuck projects with aim to also addressing debt challenges and settling banks. At the same time, focus is also to complete around 1-2 balance ongoing projects by finishing the pending works and handing over the remaining apartments to the customers.

Financial Performance in IND-AS (Figures)

SATCHMO generated revenue of Rs. 20,800 lakhs (including other income), compared with FY 2022 revenue of Rs 28,190 lakhs (including other income). The Earnings before interest, tax, depreciation and amortization (EBITDA) was Rs (690) lakhs as compared to Rs 2,990 lakhs in the previous year. The Profit / (Loss) after taxes during the year was Rs. (7,471) lakhs.

During the year, Company has exited three projects and corresponding revenue has been recognized.

Revenue Breakup: - IND-AS (Figures)

(Rs. in Lakhs)

Rupees in lakhs FY2023 % share FY2022 % share
Property Development 8,374 84.00 5,469 58.00
Contractual Activities / Other Operating Income 0 0 0 0
Income from Sale of Projects 1,500 15.00 3,760 39.87
Maintenance Income 106 1.00 201 2.13
Income from Sale of Shares 4 0 0 0
Misc. - Other Income 0 0 0 0
Total 9,984 9,430

Financial Condition IND- AS (Figures)

(Rs. in Lakhs)

Particulars March 31, 2023 March 31, 2022
Sources of funds
a. Shareholders funds (110,049) (1,02,578)
b. Minority Interest
c. Loan funds 50,712 61,696
Total (59,337) (40,882)
Application of funds
a. Fixed assets (net) 10,395 8,910
b. Investments 0 0
c. Net current assets (69,732) (49,792)
d. Deferred tax/ miscellaneous expense, among others - -
Total (59,337) (40,882)

 

Particulars 12 months ended March 31, 2023 12 months ended March 31, 2022
Profit before tax (6,950) (6,192)
Add: Adjustments (2290) 4544
Add: Net working capital 11391 1297
Less: Income Tax paid 359 103
Net cash flow from operating activities 2,510 (247)
Net cash flow from investing activities - (35))
Cash flow from financing activities (2,287) 250
Net cash inflow / (outflow) 222 (33)

Liquidity

As of March 31, 2023, the Company had cash and cash equivalents of Rs. 304 Lakh. On a standalone basis, the Company had a total debt of Rs. 3,00,20 Lakh and the net worth was at (Rs. 9,66,04 Lakh). The Company is closely monitoring the debt levels and plans to reduce the debt by exiting non-core assets in the portfolio in the financial year 2023-24.

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 year and have reported small income on equity trading.

Further, Company is also strategizing on its foray into other businesses like facilities, catering and restaurants in line with its amended objects.

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 : Having gathered experience of Property Management by way of operation of its subsidiary LOB Facilities Management Private Limited, which was/is catering to the Facility Management services and requirements of completed projects of Satchmo Holdings Ltd and its other subsidiaries, we see great potential in the business of Property 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 booming sector wherein there is great demand in several residential and commercial spaces for branded maintenance services / companies. While the margins are modest, increased scale would provide economies in terms of cost efficiency and improved margin apart from helping the top line. SATCHMO intends to develop this vertical / arm in future by bidding for and managing more projects across Bengaluru, not just limiting to SATCHMOs portfolio of completed projects. This would help in related diversification by utilizing existing resources and capacities.

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.

Investment in systems and technologies

Information Technology continues to support all aspects of business and operations at SATCHMO through investment in enterprise-wide SAP platform including data analytics. The Company continues to explore and implement new emerging technologies for furthering business objectives. IT forms the core of all communication and information exchange for ongoing monitoring and effective decision-making.

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.

In order to ensure compliance with the Companys Act related with Internal Financial Control (IFC), the Company earlier appointed KPMG to carry out a study on the processes of the Company and suggest remedial measures if any. Certain process changes were instituted and KPMG reported that the Company is compliant with the requirements of IFC. For the subsequent periods, internal audit has been mandated to specifically carry out audits with respect to the compliance with IFC requirements.

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

In recent years, Indian industry has witnessed the biggest policy changes like GST and RERA. The long term outlook remains attractive due to economic growth, increasing urbanization, employment opportunities, affordability, favourable demographics, urbanization, and preferred location by NRIs, expats and IT/ITES professionals. Further, income tax benefits, lower interest rates and availability of financing options support the growing demand. Management would adopt a cautious approach and observe the developments closely while making decisions. 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. 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 subcontractors.

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, macroeconomic, 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.

For and on behalf of the Board of Directors

Place: Bengaluru Nitesh Shetty
Date: April 28, 2023 Chairman & Managing Director
DIN:00304555