Opal Luxury Time Products Ltd Management Discussions.

Indian Economy

The year 2017, for India was marked by a number of key structural initiatives to build strength across macroeconomic parameters for sustainable growth in the future. The growth in the first half of the year suffered despite global tailwinds. However, the weakness seen at the beginning of 2017 seems to have bottomed out as 2018 set in. Currently, the economy seems to be on the path to recovery.

2017-18 was a year of uncertainties. The second half, however, saw a much better consumer sentiment despite demonetisation. Businesses are still taking time to adjust in the new tax regime.

The overall retail inflation tapered down to 3.8% in March 2018, from 5.6% in April 2017.

Call it disruption or structural reform, demonetisation (or note ban) did have dampening effects on the economy. However, even as its negative impact was fading by the time 2017-18 began, the announcement of another reforms or "disruption" — the goods and services tax, which was to be implemented by July 1, 2017, shock the economy and businesses.

The result of these two reforms was evident as the gross domestic product ("GDP") growth came crashing down to a three-year low of 5.7 per cent in the first quarter of 2017-18. It was largely because of pre-GST jitters and lingering effects of demonetisation.

The economy did recover thereafter to 6.5 per cent in the second quarter and to 7.2 per cent in the third quarter.

Major external risks include oil price shocks, tax rate competitiveness, and growing barriers to trade. However, the Indian economy remains predominantly a domestically-driven one, so the major downside risks will be domestic in nature, such as continuing disruptions from the implementation of the GST.

It is expected to further strengthen the GDP in FY 2018-19, helping India retain its status as the worlds fastest growing large economy. The revival of consumer interest, hopes of a good monsoon, and Indias underlying economic strength are factors supporting growth prospects.

World Economy

2017 is the year which saw global economy accelerating although UK economy is evidently slowing, while the US economy continues to grow at a modest pace. The Chinese economy continues to grow strong. However, the Euro zone and Japan shows sign of acceleration, as do many of the major emerging economies such as Turkey and Russia. The US economy grew at 2.7% in Fiscal 2018, supported by broad based strength in domestic demand, especially investment. The economy may be near its productive potential, as both capacity utilisation and the employment rate are moving toward peaks attained prior to the financial crisis.

About Us

Opal is a premium home dcor products manufacturing and marketing company. Opal is focusing on creating a line of high-end products that moved with high-quality, precision movements and incorporated stunning designs that were works of art all by themselves. By refocusing Opal Clocks, this once-floundering division is now recognized for its cutting-edge designs and state-of-the-art manufacturing processes. The end result is a lifestyle-focused brand that delivers highly desirable timepieces for any style across the globe.

Our brand ‘Opal has a wide presence with the products marketed by a network of distributors, dealers and organized retailers which includes popular brands such as Shoppers Stop, Home Town etc. We have also ventured into online sales by way of tie up with popular online shopping portals and also have our own shopping portal at www.opalclocks.com.

We look forward to being the most desired brand in lifestyle products through undeviating up gradation in technology and creativity - through leadership, team education and enhancing facilities.

Key Consumer and Market Trends

Goods and Services Tax: - The Goods and Services Tax is a seminal tax reform that is expected to drive more transparency and compliance. The tax reform is also expected to impact GDP growth positively in the long-term.

Formalisation: Governments focus on black money, very stringent tax rules, increased curbs on cash purchases, and a push on digital payments will attract more consumers.

Premiumisation: A rising level of disposable income has resulted in a wave of premiumisation of products. While this has attracted several foreign brands to the Indian market, domestic brands too are adapting to capture market share.

Overview

The watches category has witnessed a tepid, single-digit compounded Annual Growth Rate in sales in the past four years. Our Vision is to build globally –respected organisation manufacturing and delivering best wall clocks. We are guided by our value system which motivates our attitudes and actions.

Your Company has a favourable work environment that motivates performance, customer focus and innovation while adhering to the highest degree of quality and integrity.

Our Core Values are:-

i. Client value; ii. Transparency; iii. Fairness; iv. Integrity; and v. Excellence

Our strategic objective is to build a sustainable organisation that remains relevant in changing environment.

Design Differentiation

Watches under the Opal have always been guided by great design. This year too, the division engaged with several design experts to take design and functionality offerings to new levels of consumer delight.

Talent Acquisition, Talent Development and Retention

To cope with the demands of a Business world, characterized by profound and rapid technology change, Opals HR strategy is focused on reskilling and transforming its workforce while providing a stimulating environment which is flexible, nurtures social contract, fosters innovation, builds a result-oriented, high performance culture. Nurturing of talent and best human resource practices will continue to differentiate and provide strength to company. Benchmarks:-

1 Diverse Workforce;

2 Talent Development; and

3 Talent Retention

SWOT ANALYSIS

Competitive Strengths

The following are our principal competitive strengths:

Established Brand

We have established ‘Opal as a brand which reflects quality, service and a distinctive design in a largely unorganized market. With ‘Opal, we aim to majorly incorporate an elegant design element and a premium appeal to our products matched with technology and brand attachment. Our established brand has enabled us to tap additional selling platforms like organized retail, e-commerce, gift shops, crockery stores, etc.

Experience of buying and using an Opal product is unique because of the distinctive service provided from the time of purchase of the product and continuing thereafter, thereby reinforcing the essence of the brand.

We believe that, having an established brand provides us an opportunity to enter into new product categories.

Multiple sales-channels

Our growth over the years is largely owing to our ability to leverage multiple sales-channel viz. distributors & dealers, organized retail, e-commerce, etc. In addition, we believe that we have been one of the pioneers in extending our distribution network beyond the traditional modes of watch & clock trade. These channels include departmental stores, hypermarkets, gifts shops, home dcor stores, furniture stores, crockery dealers, etc. Presently, we market our product line through over 333 counters and 11 online shopping portals.

Lean Business Model

Our business model is focused on product designing, marketing and brand building. Hence, our investments are limited to that in moulds, in-house assembling facilities and working capital. We believe that our focus on product designing has helped us to roll-out new products on a regular basis. Certain manufacturing processes are delivered by third-party vendors who form an integral part of the entire process. We have an in-house 4-member product-design-team whose expertise is key to our designing process and who is also supported by free-lance designers to design products based on current trends. Strong product development with contemporary designs and a regular roll-out of new products has helped us to grow rapidly in a short span of time.

Diverse products

We offer a diverse product mix which varies with the following parameters: -

1. Price Range;

2. Mould-component-make (wood, metal, acrylic, glass, etc.), and;

3. Styles (statue, table, digital, contemporary, etc.);

Such diverse product mix helps us in catering to diverse customer segments. We believe that our ability to translate latest fashion trends into actual clock designs differentiates us over our competitors. We believe that with our diverse product mix, we have transformed the clock from a mere timepiece to a piece of art.

Experienced Management Team

Our Company is managed by a team of professionals who have been successful in bringing in a right blend of youth and experience. We believe we have a strong and experienced management including our key managerial personnel some of whom have been working with us since incorporation. We believe that our management team has played a vital role in the growth of our business and in the development of consistent procedures and internal controls. Our management, supported by capable employees, will continue to be an important driver for growth and success in our business activities.

Prowess to introduce and redesign consumer trends.

Opportunities

Virgin rural markets which are proven to have high per capital disposable income;

New and innovative retail formats. For e.g.: sudden emergence of electronic retail chains makes it easy for OPAL to market its ‘CYBER range of digital clocks; Rising penetration of internet and e-commerce websites which may allow reach to interiors of the country.

Threats/Challenges

Slow-down of economy, construction, and consumer spend, etc.;

Cost issues associated with accessing the bulk of (65% ) rural population in India; Infrastructure challenges to reach interiors of the country; Threats from local / unbranded substitutes at throw-away prices.

Weaknesses

High dependence on state of economy, disposable income and overall growth of the economy;

Lack of avenues to do a research driven marketing as lots of products have ‘emotional appeal which cannot be documents; Increasingly changing taste of consumers when it comes to ‘visual appeal driven products; Rural India does not form a substantial part of customer base; Kids are fascinated with mobile phones & watches and incidentally, they show the time.

Looking Ahead

The Opals team is excited and looking forward to the future. Opal intends to build on this momentum while stepping into 2018-19, armed with a new set of initiatives designed to take the recrafting journey forward.

CERTIFICATION BY MANAGING DIRECTOR ON THE FINANCIAL STATEMENTS OF THE COMPANY

I, Sameer Gujar, Managing Director of Opal Luxury Time Products Limited, to the best of my knowledge and belief herby certify that: -

1. I have reviewed the Financial Statements and Cash Flow Statement for the year ended on 31st March, 2018 and that to the best of my knowledge and belief: -

These statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading; These statements together present a true and fair view of the Companys affairs and are in compliance with existing Accounting Standards, applicable laws and regulations.

2. To the best my knowledge and belief that, no transactions have been entered into by the Company during the year which is fraudulent, illegal or violating the Code of Conduct of the Company.

3. I accept the responsibilities for establishing and maintaining internal controls for financial reporting and that I have evaluated the effectiveness of the internal control systems of the Company pertaining to financial reporting and I have disclosed to the Auditors and the Audit Committee regarding, deficiencies in the design or operation of internal controls, if any, of which I am aware and the steps have been taken or proposed to be taken to rectify these deficiencies.

4. I have indicated to the Auditors and the Audit Committee of the following matters: -

Significant changes in internal control over financial reporting during the year;

Significant changes in accounting policies during the year and that the same have been disclosed in the notes to the Financial Statements; and Instances of significant fraud of which I have become aware and the involvement therein, if any, of the management or an employee having a significant role in the Companys internal control system over financial reporting.

For Opal Luxury Time Products Limited

SAMEER GUJAR Managing Director

Place: Pune Date: 29th May, 2018

DECLARATION AFFIRMING COMPLIANCE OF CODE OF CONDUCT

To,

The Members,

I, Sameer Gujar, Chairman & Managing Director of the Company, do hereby declare that all Board Members and Senior Management Personnel have affirmed compliance with the Code of Conduct for Board of Directors and Senior Management of Opal Luxury Time Products Limited for the financial year 2017-18.

SAMEER GUJAR Managing Director

Date: 20th April, 2018

Place: Pune