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The Directors of Olympia Industries Limited ("the Company") pleased to present the Management Discussion Analysis Report for the year ended 31st March, 2019.
The Company is engaged in E-commerce Retailing, Brand Store Management, Open Box Brick-and-mortar Retailing, Open Box e-retailing, B2B Ecommerce and have expanded its business in various categories like Baby Care, Domestic Appliances, Electronic, Gourmet, Health Care, Home & Kitchen Appliances, Luggage and Personal care appliances, pet products etc. The Company has established its identity in rapidly growing ecommerce industrial era and is will continue to work with the excellence in future for betterment of Company and society.
During the year, the Company has been providing quality-controlled products to online customers at the best prices with the closest and fastest delivery times, maintaining in-stock availability to meet customer demands at the time that he needs it, lower the cost by benefiting from economies of scale, Innovate by way of creating e-commerce specific bundles/combos leading to lower cost of execution, Season/festival specific customized/personalized offerings which has created positive impact on the Companys vision.
INDUSTRY STRUCTURE AND DEVELOPMENTS:
The concept and launching of e-commerce are not new. It has started its journey from few decades immediately after launching information highway i.e. internet. Both the customers and traders are now using the benefit of e- commerce it is getting popular day by day with increasing its trust among general people. It takes its position to peoples mind due to increasing the use of various social networking sites. People can easily know about the product description, quality, and price by their mobile phone, laptop or other devices. Then they can take purchase decision quickly due to its availability of information and convenience. Like other developed and developing countries, Indian e-commerce market is being popular day by day. It bears a positive trend of development which is contributing to the national economy. It creates a lot of job opportunity to educated jobseeker which helps to reduce unemployment rate.
E-commerce has revolutionized the way business is done in India. Propelled by rising smartphone penetration, the launch of 5G networks and increasing consumer wealth, the Indian E-commerce market is expected to grow to US$ 200 billion by 2027 from US$ 38.5 billion in 2017. E-commerce is increasingly attracting customers from Tier 2 and 3 cities, where people have limited access to brands but have high aspirations. Urban India with an estimated population of 444 million as per 2011 census, already had 365.94 million people using the internet as of September 2018. Number of active internet users in the country is the second highest globally and data usage of 8 GB/subscriber/month is comparable to developed countries.
The Indian e-commerce industry is all set to become a regulated industry with the first e-commerce policy being introduced this year. The recent Foreign Direct Investment (FDI) policy on e-commerce as notified by Ministry of Commerce & Industry attempts to provide a level playing field to all players in the ecosystem, including domestic sellers and smaller traders. The clause which restricts the sale of products by a particular entity having stakes by e- commerce marketplace entity would likely disrupt the existing practices of some big e-commerce companies and
Olympia Industries Limited force them to adjust accordingly. This review of policy on FDI in e-commerce has cleared the confusion on what is an Inventory based model of e-commerce and what defines a Marketplace based model of e-commerce.
Social commerce is likely to influence more purchase decisions in 2019 and drive the next phase of growth for e- commerce companies. New-age e-commerce companies who have placed their bet on resellers would benefit the most with this trend. As per new guidelines on FDI in Ecommerce, 100 per cent FDI under automatic route is permitted in marketplace model of E-commerce. The heavy investment of Government of India in rolling out the fiber network for 5G will help boost ecommerce in India.
Flipkart, after getting acquired by Walmart for US$ 16 billion, is expected to launch more offline retail stores in India to promote private labels in segments such as fashion and electronics.
In September 2018, Flipkart acquired Israel based analytics start-up Upstream Commerce that will help the firm to price and position its products in an efficient way.
Amazon is rapidly expanding in its video streaming (Prime video), Voice assistants (Alexa), and food retail (Prime now) services in India.
Guaranteed one day deliveries, exclusive deals and video streaming for a subscription fee, as in the case of Amazon Prime. India is currently the fastest growing market for Amazon Prime.
Flipkart introduced its own payment gateway Payzippy and also, its own logistics and supply chain firm Ekart. E-commerce websites are also introducing e-Wallet services; for example - Amazons Pay Balance.
As on January 2019, PhonePe, a payment services company of Flipkart is set to enter the financial services market by providing mutual funds through its app.
As of March 2019, Flipkart launched its internal fund of about US$ 60-100 million to invest from early stage to seed innovations related to e-commerce industry.
To expand their reach, brands are tying up with assisted E-commerce organisations which provide local merchants with a platform to place their orders.
Under this, the consumers do not place online orders on their own. Instead, the order is placed on the merchant shops with their help and the product is either delivered to the shop or customers address.
This model can become an enabler for online retailers to expand their outreach in areas where internet penetration is low.
Site visitors demand one-of-a-kind experiences that cater to their needs and interests. Technology is available, even to smaller players, to capture individual shoppers interests and preferences and generate a product selection and shopping experience led by individualised promotions tailored to them.
Many E-commerce websites provide personalised experience to customers to cater to their needs and interests depending upon their location, choices, products they like or buy, websites they visit etc.
This strategy has helped companies to know customers demands better and serve them accordingly.
The scope of E-commerce business is turning out to be more famous day-after-day according to the market demand. And this requirement is generating innovations worldwide focused on delivery time, ease of transactions and several features served by E-commerce businesses, for example, drone delivery or artificial intelligence.
B2B Ecommerce Is Exploding: B2B companies are leveraging upcoming ecommerce trends, too. Its even been projected that B2B ecommerce sales will increase worldwide to $6.6 trillion by 2020. From an increase in technological advancements, to improvements in delivery processes and omnichannel experience, e-commerce retailers are learning how to create strong interactions between brand and consumers.
Strategies for growth: The growth rate of e-commerce in India is mentionable and higher than other countries. In terms of e-commerce it places the third position in the world but due to lack of proper IT infrastructure, logistic support and financial infrastructure it faces challenges for its development. The smartphone user and internet subscriber in India are growing rapidly which stimulates the e-commerce growth in India. Now e- commerce traders provide a wide range of services from daily necessities to logistics which help them to spread the e-commerce business all over in India.
Quick marketing of products: Since e-commerce is mainly based on internet and connected with the virtual arena, so it is a big opportunity for e-commerce trader to do marketing to a large number of people through various social networking site and websites. It is a platform to explain all details about the product to its consumers. E-commerce is providing a complete solution for purchasing the products from online and pay online by avoiding so many types of hassle and risk. It provides an opportunity to reach the product information to people of the domestic country as well as abroad within a short time.
Private label will grow online: Over the last several years, retailers have doubled down on private label lines. Its a strategy that has helped mass merchandisers, especially, to differentiate in a new retail landscape where customers are inundated with an unprecedented number of places and ways to buy the same goods. Sales growth of private-label products is now three times higher than branded products. Last year, Target launched eight new private label brands, and Amazon added a whopping 66 between the beginning of 2017 and April of 2018.
Globalizing Business: E-commerce is a business platform which can provide the same kind of services to its customer crossing the countrys boundary. The people can easily buy products from an online shop which is situated within the country or from abroad by online payment through debit or credit card, m-cash and other related methods. It also helps to market the products easily to mass people over the world within a short time. India is a country which is favorable for globalizing the e-commerce business as well as crores of Indian people.
Customers consider online transactions or turnover and safety to be the second biggest challenge faced by e-commerce companies in India. Present days news about online fraud, tricky coupons, and fake ads, spam e-mail and scam of credit card information being stolen has dynamic customer confidence in this system. As per presentation scenario most of the customers in India prefer to buying stuff on (COD) Cash on Delivery basis. Due to lack of confidence security system, most of the customer using COD services.
Lack of Privacy and Security: The privacy and information of buyer and trader should be secure for maintaining a trustworthy business relation. Because sometimes data may be used by the criminal groups for hacking customer and traders money which decrease the trust of e-commerce business. Lack of privacy and security is a big challenge for e-commerce business in India. Privacy has been and continues to be a significant issue of concern for both current and prospective electronic commerce customers.
Customers Perceptions: Consumers perception is an important element for e- commerce business. E-service replacements may seem unfamiliar, artificial and non-authentic in comparison to traditional service processing methods. Consumers may believe that new Internet-based processing methods expose them to new potential risks the dangers of online fraud, identity theft, and phishing swindles means schemes to steal confidential information using spoofed websites, have become commonplace, and are likely to cause alarm and fear within consumers.
Localization in terms of place and Language: India is a big country in terms of population and area. So, e- commerce business in one province is not enough to deliver their product to other areas because of carrying cost, time and other related risks So, localization is necessary to deliver the product timely which can stimulate the e-commerce business easily. But unfortunately, it is not up to the mark in India. Internet- Based e-commerce has besides, great advantages, posed many threats because of its being what is popularly called faceless and borderless.
SEGMENT WISE PERFORMANCE:
The Company is operating in only one reportable segment viz. trading.
E-commerce is an Industry that is ever changing. Its an industry that is constantly shifting in an attempt to shape the way that people in every corner of the globe purchase products. The Company expects to have a lot of opportunities available for new e-commerce brands to pop up within emerging markets and tailor their services towards local audiences. The future outlook of the Company is undoubtedly going to be full of exciting changes and innovation for both business and buyers.5
The Company is expanding in different area to exploit business opportunities such as GT/MT, Import, Export, exclusive tie-ups in B2B business models. During the year, Company has expanded its business portals for further expansion of business. As we approach this year, with intensifying purchasing power of global consumers, the proliferation of social media users, and the continuously progressing infrastructure and technology, the future of e- commerce in 2019 and beyond is still more vibrant as ever
The worldwide spread of internet accessibility via desktops and smartphones is driving an expansion of e commerce that is continuously evolving the retailing landscape. However, digitalization has transformed the way e-commerce operates. Now an e-commerce transaction can be processed across multiple touch points. With the ease of shopping convenience, digitalization has also brought some challenges and problem for e-commerce companies. Running an ecommerce store might be much simpler than opening a brick-and-mortar store. However, it also comes with a whole new set of risks that is evaluated, monitored and mitigate by the Company.
In the new Internet economy, risk management plays a critical role to protect the organization and its ability to perform their business mission, not just its IT assets. Risk management is the process of identifying risk, assessing risk, and taking steps to reduce risk to an acceptable level. The risk management is an important component of IT security program. Information and communications technology management and IT security are responsible for ensuring that technology risks are managed appropriately.
Managing internal communication: Retail has complex operations and managing its internal communication is not an easy task. This challenge is mainly faced by large-scale retail companies with multiple divisions. Inefficient communication between divisions can disrupt the business processes.
Keeping up with ever-changing customer expectations: Customer preferences will always change, sometimes even faster than one can imagine. As a retailer, Company should be able to keep up with the seasonal trends as well as its customer shopping behavior. Company dont need to totally change products in every season, but it just need to add some different elements to products in accordance with what is trending.
Government regulations: With new and changing of laws and trade agreements, economic recessions, and political up rest, theres a lot up in the air right now around government regulation which impacts ecommerce retailers. The E-commerce policy of 2018 and DIPP (The Department of Industrial Policy and Promotion) Press Note on the Consolidated FDI Policy for E-Commerce under the Ministry of Commerce is one such policy which has impacted the online retailers themselves, the small brick and mortar retailers which compete with the online retailers and finally, the end consumers which has forced them to revamp their trade practices. Businesses will need to keep a close eye on legislative impacts including data protection, taxation, online payment services and restrictions and laws around energy consumption.
Implementation and Maintenance of IT Systems: Technology is more important than ever to Companys competitiveness. Although selecting, implementing and getting up to speed on new technologies may seem intimidating, its a must to stay in the game. Invest the time and money necessary to equip your store with the technology needed to serve your customers quickly and conveniently.
The struggle of competing on price: Online merchants frequently compete on price. Plenty of sellers may list equal products on their sites. The product can be the same but the only difference here is the price. They are trying to sell the product to increase its market share. The price competition affects the small e-commerce business badly. Because the mid-sized or large competitors often offer products for less price and free shipping on nearly every order, while they couldnt afford to offer the same with competitive price.
Scope of the Risk: Process for the establishment of global parameters for the performance of risk management within an organization. Within the definition of scope for risk management, both internal and external factors have to be taken into account. In order to define an efficient framework for the management of risks it is important to understand the background of the organization and its risks
Risk Treatment: Risk treatment measures can include avoiding, optimizing, transferring or retaining risk. Retailers should opt for a system that can streamline their internal communication. An ERP system can be the perfect solution for managing internal communication within retail companies. The software is able to centralize all of the business operations, generate real-time and comprehensive reports from each division, automate the task distribution across divisions, and ensure the entire processes run properly.
Good customer experience is a key factor in creating brand loyalty. While promotions and special offers are still the mainstay of the retailers to retain their customers, the real key to an amazing customer experience is personalization. In order to keep customers loyal, The Company has been trying to adopt a personal approach, for example by sending them mails that have been adjusted to their preferences and needs.
Training to team on e-commerce risks: Train your team in risk management policies and procedures, and the fraud and security risks involved in an e-commerce transaction. The more informed your organization is, the easier it will be to combat online threats and to carry out risk mitigating measures. Although there are many technologies used for surveillance, the technologies for forming agreements (contracting) about the release of private data, the technologies for labelling and trust, and privacy-enhancing technologies (PETs) should be much stronger.
INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY
An internal control system of the Company encompasses the policies, processes, tasks, behaviors and other aspects that taken together facilitate its effective and efficient operation by enabling it to respond appropriately to significant business, operational, financial, compliance and other risks to achieving the companys objectives This includes the safeguarding of assets from inappropriate use or from loss and fraud, and ensuring that liabilities are identified and managed, help ensure the quality of internal and external reporting. This requires the maintenance of proper records and processes that generate a flow of timely, relevant and reliable information from within and outside the organization. It helps to ensure compliance with applicable laws and regulations, and also internal policies with respect to the conduct of business.
A companys system of internal control commonly comprises:
Control environment: The control environment sets the tone of an organization, influencing the control consciousness of its people. It is the foundation for all other components of internal control, providing discipline and structure. Control environment factors include the integrity, ethical values and competence of the entitys people; managements philosophy and operating style; the way management assigns authority and responsibility, and organizes and develops its people; and the attention and direction provided by the Board of directors.
Entitys risk assessment process: For financial reporting purposes, the entitys risk assessment process includes how management identifies business risks relevant to the preparation of financial statements in accordance with the entitys applicable financial reporting framework, estimates their significance, assesses the likelihood of their occurrence, and decides upon actions to respond to and manage them and the results thereof. For example, the entitys risk assessment process may address how the entity considers the possibility of unrecorded transactions or identifies and analyses significant estimates recorded in the financial statements.
Control activities: Control activities are the policies and procedures that help ensure that management directives are carried out. They help ensure that necessary actions are taken to address risks to achievement of the entitys objectives. Control activities occur throughout the organization, at all levels and in all functions. They include a range of activities as diverse as approvals, authorizations, verifications, reconciliations, reviews of operating performance, security of assets and segregation of duties.
Information system, including the related business processes, relevant to financial reporting, and communication: The information system relevant to financial reporting objectives, which includes the financial reporting system, encompasses methods and records that Identify and record all valid transactions, Describe on a timely basis the transactions in sufficient detail to permit proper classification of transactions for financial reporting, Measure the value of transactions in a manner that permits recording their proper monetary value in the financial statements, Determine the time period in which transactions occurred to permit recording of transactions in the proper accounting period and Present properly the transactions and related disclosures in the financial statements.
Monitoring of controls: Monitoring of controls includes activities such as, managements review of whether bank reconciliations are being prepared on a timely basis, internal auditors evaluation of sales Personnels compliance with the entitys policies on terms of sales contracts, and a legal departments oversight of compliance with the entitys ethical or business practice policies. Monitoring is done also to ensure that controls continue to operate effectively over time. For example, if the timeliness and accuracy of bank reconciliations are not monitored, personnel are likely to stop preparing them.
DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE: Financial performance of the Company is as follows:
|Particulars||Year ended 31.03.2019||Year ended 31.03.2018|
|Revenue from Operations and Other income||13275.16||18040.11|
|Profits before interest, depreciation and tax||545.48||626.99|
|Profit before tax||200.68||300.06|
|Net Profit for the year||140.25||187.33|
|Other Comprehensive Income|
|A) i) Items that not will be reclassified to profit & Loss||28.80||33.29|
|B) i) Items that will be reclassified to profit & Loss||-||-|
|ii) Income tax relating to an items that will be reclassified to profit & loss||-||-|
|Total Comprehensive income for the year||169.05||220.62|
|Earnings per share (basic) (in Rs.)||2.33||3.83|
The turnover and other income of the Company has decreased to 13275.16 lakhs as against 18,040.11 lakhs in the previous year. Net profit from operations stood at Rs. 140.25 lakhs as compared to Rs. 187.33 lakhs in the previous year. Increase in platform/marketplace expenses such as commission expenses, shipping expenses, storage expenses etc. led to increase in overall cost of doing business and making many products unviable to sale. Change in policy of market place platforms with respect to the various differential charges being charged to the sellers viz. their preferred sellers has drastically impacted the performances of the Company. This has resulted decrease in revenue from operations during the year.
Key Financial Ratios: The Operating Profit Margin and Net profit of the Company has increased to 21.63 % and 1.15 % in FY 2018-19 as compared to 21.12 % and 1.09% respectively in FY 2017-18. Debt Equity Ratio of the Company has improved to 0.48% in FY 2018-19 from 0.49% in FY 2017-18. Return on Capital Employed of the Company has stood at 9.39 % in FY 2018-19 compared to 10.69% in FY 2017-18. There was an increase in Debtors Turnover ratio and Inventory Turnover Ratio to 68 days and 107 days in current year compared to 48 days and 64 days respectively in previous year. Interest Coverage Ratio of the Company has decreased to 1.18 % in FY 2018-19 from 1.22% in FY 2017-18. Current Ratio of the Company has marginally decreased to 1.94% in FY 2018-19 from 1.99% in FY 2017-18.
MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED:
The success of a business is directly linked to the performance of those who work for that business. Under achievement can be a result of workplace failures and in efficiency. The Management believes in maintaining cordial relations with its employees. The management recognizes the importance of Human Resources and effective steps will be taken to strengthen the same depending on the requirements. The Company provided favorable working environment so that the individual staff can reach their full potential. The Company aims in talent management with particular focus on grooming, learning and development and employee engagement has been the key focus areas in the Companys objectives.
As on 31st March, 2019 the number of permanent employees were 237. The industrial relations were also cordial during the year.
This report describing the companys activities, projections about future estimates, assumptions with regard to global economic conditions, government policies, etc may contain "forward looking statements" based on the information available with the company. Forward-looking statements are based on certain assumptions and expectations of future events. These statements are subject to certain risks and uncertainties. The company cannot guarantee that these assumptions and expectations are accurate or will be realized. The actual results may be different from those expressed or implied since the companys operations are affected by the many external and internal factors, which are beyond the control of the management. Hence the company assumes no responsibility in respect of forward-looking statements that may be amended or modified in future on the basis of subsequent developments, information or events.