Palred Technologies Ltd Management Discussions

FOR THE YEAR 23-24

The Company has three subsidiaries, Paired Electronics Private limited (formerly known as Paired Online Technologies Private Limited} (PEP), Palred Technology Services Private Limited (PTS) and Palred Retail Private limited (PRP). Palred together with its subsidiaries, is hereinafter referred to as “the Group."

The Company is a Public Limited Company incorporated and domiciled in India having its registered office in Hyderabad, Telangana. The Company is listed on Bombay Stock Exchange and National Stock Exchange of India Limited.

1. SUBSIDIARIES:

Paired Electronics Private Limited (PEP)

Palred Electronics Pvt Ltd (PEP) owns Consumer Electronics brand, pTron. Bridging the gap between technology & people, pTron is a prominent brand in the Indian consumer electronics market. The company offers a wide range of affordable and innovative products, including Headphones, Speakers, Smart Wearables, Power Banks, and Cables & Chargers. With a strong commitment to quality and customer satisfaction, pTron has established itself as a key player in the value-driven segment of the market.

Economic and Industry Overview: The Indian consumer electronics industry faced significant headwinds in FY 2023-24 due to macroeconomic challenges. High inflation, rising input costs, and a slowdown in consumer spending, particularly on non-essential goods, were prevalent throughout the year. The audio segment, which includes headphones and speakers, saw mixed trends. According to a report by Research and Markets, the Indian audio device market is projected to grow at a CAGR of 9.4% between 2023 and 2028, driven by increasing adoption of wireless audio devices. However, the market was constrained in the short term by economic uncertainty and reduced consumer spending power.

Performance Overview: FY 2023-24 was a transformative year for pTron as the company expanded its manufacturing capabilities. During the year, pTron transitioned into full-fledged manufacturing processes, with 75% of the products sold being assembled at its own manufacturing facility in Nacharam, Hyderabad. This strategic move enabled the company to improve quality control, reduce costs, and better manage supply chain dynamics. Products assembled in-house include Headphones, Smart Watches, Speakers, Chargers, and Power Banks. Despite these advancements, pTron experienced a decline in overall revenue due to reduced market demand and intensified competition. However, the company saw growth in the Power Banks segment, reflecting a shift in consumer priorities towards essential and utility-driven electronics. The Speaker category also performed well, particularly in the budget segment, though overall growth was tempered by market conditions.

Key Financial Highlights:

• Revenue: The company experienced a decline in revenue by 21.05%, primarily due to subdued demand in key segments like Headphones and Smart Wearables, and intensified competition across product lines.

• Profitability: Consolidated net loss of Rs. 713.50 Lakhs, up from the previous year. The increased losses were largely due to lower sales volumes in key segments, high marketing costs, and ongoing price pressures.

• Margins: Operating margins were significantly compressed, although the growth in the Power Banks and Speaker segments provided some relief.

Business Strategy: pTrons strategy during FY 2023-24 focused on leveraging its new manufacturing capabilities to improve product quality and cost efficiencies. The decision to assemble 75% of its products in-house at the Nacharam facility marked a significant step forward in the companys growth strategy. This vertical integration is expected to enhance pTrons ability to respond to market demands and improve overall profitability. The company also prioritized maintaining its market presence through aggressive marketing, innovation, and selective investment in growth areas, particularly in categories showing resilience, such as Power Banks and Speakers.

Segment-wise Performance:

• Headphones and Speakers: The audio segment, traditionally a strong revenue contributor, faced a downturn due to decreased discretionary spending. A report by TechSci Research indicated that while the demand for premium audio devices remains robust, the entry and mid-level segments, where pTron primarily operates, experienced heightened price competition and slower growth. The Speaker category, however, showed resilience, contributing positively to the overall performance.

• Smart Wearables: This segment saw slower growth compared to previous years, as consumers became more price-sensitive and prioritized essential purchases.

• Power Banks: The Power Banks segment recorded growth, driven by increased demand for reliable and high-capacity charging solutions as consumers continue to rely heavily on mobile devices. The segments growth aligns with broader industry trends noted by GMI Research, which forecasts sustained demand for portable power solutions in India.

• Cables & Chargers: The Cables & Chargers segment showed stable performance, largely supported by ongoing replacement demand and the increasing adoption of fastcharging technologies.

Marketing and Promotional Activities: pTron maintained substantial investments in marketing throughout FY 202324, with a focus on digital campaigns, influencer partnerships, and strategic brand collaborations. While these efforts helped sustain brand visibility, they also added significant costs, further impacting profitability. The competitive landscape, especially in the audio segment, necessitated aggressive promotional strategies to defend market share.

Risks and Concerns: The key risks for pTron include ongoing market saturation in the audio segment, intensified competition, and fluctuating raw material prices. Additionally, the overall decline in consumer demand, exacerbated by economic uncertainty, poses a significant challenge. The company is also closely monitoring potential regulatory changes that could impact manufacturing costs and import duties, which could further strain margins.

Outlook: Looking forward, pTron anticipates a challenging but potentially rewarding path to recovery. The company aims to leverage its strengths in product innovation, enhanced manufacturing capabilities, and cost management to navigate the current market environment. The success in the Power Banks and Speaker segments provides a positive outlook, and pTron intends to replicate this success across other product categories. While the near-term outlook remains cautious, the company is committed to optimizing operations and strategically positioning itself for future growth.

Conclusion: FY 2023-24 was a year of significant transformation for pTron, marked by the expansion of its manufacturing capabilities and the transition to in-house assembly of key products. Despite revenue degrowth and increased losses due to market challenges, the companys investments in manufacturing, coupled with strong performance in the Power Banks and Speaker segments, provide a solid foundation for future growth. pTron remains focused on adapting to changing market dynamics, enhancing profitability, and exploring new opportunities in an increasingly competitive landscape.

Paired Technology Services Private Limited (PTS)

PTS offers a bouquet of Products through its brand “Xmate” that is exclusively available on Amazon.in. Xmate Sells products like Bluetooth headsets, Bluetooth speakers, wired headsets, chargers and cables, Computer Accessories, Cameras & Camera Accessories etc. The brand faced many challenges since inception because of high advertisement costs and competition from other big brands. The Company was not able to achieve desired growth and it continues to make losses. Hence, the Company has decided to exit “Xmate” brand business.

Paired Retail Private Limited (PRP)

Palred Retail Private Limited owns ecommerce website, ptron. in and www.LatestOne.com that specialize in selling of tech and mobile accessories such as Bluetooth speakers and headsets, cables, power banks, headsets, smart watches, fashion accessories etc.

FINANCIAL PERFORMANCE:

A. Sources of Funds

1. Equity Share Capital

As on 31st March 2024, the Company has only one class of issued shares - Equity Shares of Par value of Rs. 10/- per share. The Authorised Capital of the Company is Rs. 35,00,00,000/- (Thirty Five Crores) divided into (a) 2,80,38,800 (Two Crore Eighty Lacs Thirty Eight Thousand Eight Hundred Only) shares of Rs. 10/- (Rupees Ten Only) each and (b) 6,96,120 (Six Lakhs Ninety Six Thousand One Hundred and Twenty) Preference Shares of Rs.100/- each. The Paid up Equity Share Capital of the Company as on date of this report is Rs. 12,23,25,660 (Twelve Crores Twenty Three Lakhs Twenty Five Thousand Six Hundred and Sixty) divided into 1,22,32,566 Equity Share of Rs. 10/- per share.

2. Other Equity:

2.1. Securities Premium Account:

The balance in Securities Premium Account as on March 31, 2024 was Rs. 9670.30 Lakhs as compared to the balance in Securities Premium Account as on March 31, 2023 was Rs. 9670.30Lakhs.

2.2. Capital reserve:

On a Standalone and Consolidated Basis, the Balance as at March 31, 2024, amounted to Rs. 142.80 Lakhs which was the same as previous year.

2.3. General Reserve:

On a Standalone and Consolidated Basis, the balance as at March 31, 2024 stood at Rs. 1325.24 Lakhs which is the same as previous year.

2.4. Retained Earnings:

On a Standalone Basis, the balance as at March 31, 2023 stood at Rs. (5800.52) as compared to Rs. (5890.83) Lakhs in previous year, and Consolidated Basis, the balance as at March 31, 2024 stood at Rs. (6732.91) as compared to Rs. (6385.12) as Lakhs in previous year.

3. Liabilities:

3.1. Non-current Liabilities:

Particulars	Standalone		Consolidated
	2024	2023	2024	2023
Other Financial liabilities	0	0	0	0
Employee benefit obligations	9.63	8.10	58.50	45.24
Total	9.63	8.10	58.50	45.24

The Company provides for gratuity for employees in India as per the Payment of the Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/ termination is the employees last drawn basic salary per month computed proportionally for 15 days salary multiplied for the number of the years of service. The gratuity plan is unfunded.

3.2. Current Liabilities:

Particulars	Standalone		Consolidated
	2024	2023	2024	2023
Financial Liabilities
Borrowings	0	0	6,340.30	5491.52
Lease Liabilities	4.65	4.29	68.70	54.98
Trade payables	0	0	01.51	22.05
Other Financial liabilities	67.95	53.52	541.58	691.99
Other Current liabilities	2.64	2.77	26.66	26.15
Employee benefit obligations	0.32	0.26	1.33	1.07
Total Current Liabilities	85.78	76.06	6,980.08	628776

On standalone basis, the Company has increased its total current liabilities to Rs. 85.78 Lakhs stood as on 31st March, 2024 as compared to Rs. 76.06 Lakhs in the previous year.

On consolidated basis, the Company has increased its total current liabilities to Rs. 6980.08 Lakhs stood as on 31st March, 2024 as compared to Rs. 6287.78 Lakhs in the previous year.

B. Application of Funds: 1. Non- Current Assets:

Particulars	Standalone		Consolidated
	2024	2023	2024	2023
Property plant & Equipment	2.60	4.03	145.32	170.75
Right of use of Assets	17.74	22.47	259.20	516.35
Goodwill (Consolidation)	0	0	0	0
Intangible Assets	0	0	3.25	4.71
Financial Assets Investments Deposits	1100.00	1300.65	60.70	65.70
Other non- current assets	359.60	310.90	434.32	386.73
Total Non-Current Assets	1479.94	1638.05	902.79	1144.24

Investments in Subsidiaries/ associates

Paired Electronics Private Limited (formerly known as Paired Online Technologies Private Limited):

During the period under report, the Company has not invested in Palred Electronics Private Limited.

The Company holds 78.17% stake in the said subsidiary.

Palred Technology Services Private Limited:

During the period under report, the Company has not invested in Palred Technology Services Private Limited.

The Company holds 100% stake in the said subsidiary.

Palred Retail Private Limited:

During the period under report, the Company has not invested in Palred Retail Private Limited.

The Company holds 83.71% stake in the said subsidiary.

2. Current Investments, Cash and Cash Equivalents:

On a standalone basis, balance in current investments is Rs. NIL Lakhs as at March 31, 2024 and March 31, 2023. The cash and bank balance stand at Rs. 5174.26 Lakhs as at March 31, 2024 as compared to Rs. 4801.44 Lakhs as at March 31, 2023.

On a consolidated basis, balance in current investments is Rs. NIL Lakhs as at March 31, 2024 and March 31, 2023. The cash and bank balance stand at Rs. 5249.52 Lakhs as at March 31, 2024 as compared to Rs. 4842.22 Lakhs as at March 31, 2023.

III. RESULTS OF OUR OPERATIONS:

1. Income:

On standalone basis, the Company has earned Rs. 150.00 Lakhs as Income from Operations & Rs. 299.62 Lakhs as Other Income from Dividend and interest from non-trade investments.

On a Consolidated basis, the Company has earned revenues of Rs. 11,598.70 Lakhs from operations and Rs. 14802.01 Lakhs from other income sources.

As on date of this report, the Company did not invest anything in Palred Electronics Private Limited, Palred Retail Private Limited & Palred Technology Services Private Limited. The Investment in Subsidiaries has Net carrying Value Rs. 1100.00 Lakhs as on date.

Palred Electronics Private Limited (formerly known as Palred Online Technologies Private Limited) has earned a total revenue of Rs. 11,736.41 Lakhs in FY 2023-24 as compared to Rs. 14864.95

Lakhs in FY 2022-23 resulting in 21.05% decrease in net revenue year on year basis.

Palred Technology Services Private Limited has earned a total Revenue of Rs. 6.76 as compared to Rs. 6.76 Lakhs in FY 202324 resulting in 6.36% increase in net revenue year on year basis.

Palred Retail Private Limited has earned a total Revenue of Rs. 2.71 Lakhs in F.Y. 2023-24 as compared to Rs. 10.08 Lakhs in FY 2022-23 resulting in to reduction of 73.12% in Net Revenue.

Thus on a consolidated basis, the total revenue of the Company is Rs. 12,044.33 Lakhs compared to Rs. 15,069.03 Lakhs in previous year.

2. Expenditure:

On a Standalone Basis, the expenditure incurred towards employee benefit expenses is Rs. 79.67 Lakhs as against Rs. 101.44 Lakhs of previous year and Other Expenses are Rs. 81.03 Lakhs as against Rs. 100.07 Lakhs of previous year.

On a Consolidated Basis, the Total Expenditure is Rs. 12,554.03 Lakhs as against Rs. 15,113.88 Lakhs of previous year.

3. Operating Profit:

On a standalone basis, the company has earned operating profit of Rs.90.30 Lakhs as against profit of Rs. 275.53 lakhs in previous year.

On a Consolidated Basis, the company has incurred operating loss of Rs. (509.70) Lakhs as compared to Loss of Rs. (44.85) Lakhs of previous Year.

4. Depreciation and Amortisation:

On a standalone basis, we provided Rs. 6.16 Lakhs and Rs. 6.02 Lakhs for the years ended March 31, 2024 and March 31, 2023 respectively.

On a consolidated basis, we provided Rs. 165.63 Lakhs and Rs. 106.26 Lakhs for the years ended March 31, 2024 and March 31, 2023 respectively.

5. Net Profit/Loss after tax:

On a standalone basis, the company has earned net profit of Rs. 89.68 Lakhs as against Profit of 275.68 lakhs in previous year. On a Consolidated Basis, the company has incurred net loss of Rs. (513.36) Lakhs as compared to loss of Rs. (36.58) Lakhs of previous Year.

6. Liquidity:

On a standalone basis, the company has operations in F.Y. 2023

24. The Company has utilized Rs. (66.41) Lakhs from investing activities during 2023-2024 compared to generation of Rs. (2235.69) Lakhs during 2022-2023. The Company has also gained Rs79.20 Lakhs from operating activities during 20232024 compared to Rs. (154.18) Lakhs utilized during 2022-2023.

On a Consolidated Basis, the net cash used in operations is Rs. (242.86) Lakhs as against (1832.28) Lakhs net cash used in previous Year.

7. Related Party Transactions:

These have been discussed in detail in notes to the standalone Financial Statements in Annual report.

8. Events occurring after Balance Sheet Date- NIL

IV. STRATERGY, OUTLOOK, OPPORTUNITIES AND THREATS:

A. Objective and Strategy:

Paired Group aims to become a market leader in various products of Consumer Electronics business in India. The Company aims to achieve this unique position by combination of following factors:

i. Creation of Innovative Products that are geared towards customer needs and that can be produced economically

ii. Focus on enhancing customer benefit in terms of products and services as well as on close consumer contact

iii. Proactive identification of future needs and technical applications

iv. High value addition through combination of technology, systems & processes

v. Simplification of a complex business involving continuously changing products and thousands of stock keeping units (SKU)/items.

vi. End-to-end integration and implementation of Systems, Processes and Automation for efficient and scalable operations.

vii. High quality Products backed by warranty

viii. Steady and continuous development of brand (PTron)

b. Outlook, Risks and Concerns:

The Consumer Products Industry has been experiencing very intense competition for many years and we are operating in a market that is changing very quickly. The Customers have many options to choose from large and established brands and this may result in loss of our market share affecting the profitability. We are dependent on number of contract manufacturers and component suppliers. There may be a situation where these manufacturers and component suppliers may fail to supply the required products / parts which may adversely impact our cash flows and profitability. We are also subject to risks associated with geographical tensions & foreign exchange fluctuations. The Company is taking all appropriate measures to mitigate and safeguard the Company from above risks.

B. Intellectual Property Infringement:

As product development depends on the intellectual property created by its employees, we need to ensure that the same do not infringe any other proprietary technology rights. We have intellectual property rights to take care of trade secrets, copyright and trademark laws and confidentiality agreements for our employees, third parties offering only limited protection. The steps taken by us as well as laws of most advanced countries do not offer effective protection of intellectual property rights. Third parties could claim infringement of property rights against the Company or also assert the same against our customers, which would require protracted defence and costly litigations on behalf of our customers.

C. Risks and risk management and their implementation:

The systematic analysis, evaluation and management of potential risks are decentralized within the Palred Group. Every organizational unit is responsible for detailing its own risk register, which it must then use to establish countermeasures for managing risks. The purpose is to identify and avert potential damage to the company at an early stage. All registers are centrally coordinated and aggregated so the Management Team has an overview at all times of the most significant risks and the measures being taken to manage them. Within the scope of independent audits, the

Audit Department monitors the individual corporate entities with regard to early risk identification and compliance management by performing random inspections. The Management Team is informed directly and immediately of the findings.

The risks of procuring certain parts and components, product compliance and IT security are among the most important issues for which the Palred Group is taking countermeasures. IT security risks are addressed through technical and organizational measures. Effective customer management minimize the impact of potential defaults on receivables.

Financial Performance

Prudent Financial Planning, effective resource allocation and tight financial control have ensured that the cash flows of the Company remain healthy. The ability of the Company to raise credit remains unimpaired.

V. INTERNAL CONTROL SYSTEMS AND ADEQUACY:

The Company has adopted strong and automated internal business controls and a process framework that is not only adequate for its current size of operations but can effectively support increases in growth and complexity across our business operations. A well established and empowered system of internal financial audits and automated control procedures ensures prudent financial control, flexibility in terms of process changes to enable course correction.

Internal auditors submits reports and updates to the audit committee of the Board, which conducts frequent reviews and provides direction and operational guidance on new processes to be implemented to further enhance efficiencies within the Company.

The Company is in the process of implementing Enterprise Resource Planning along with various business controls which would have automatic internal control systems to identify errors and also provide better MIS.

VI. HUMAN RESOURCES:

A. Objective and Strategy:

Capability building, Talent Management and Employee Engagement remain the key focus of your companys Human Resource Strategy. Your Company has continued to build on its capabilities in getting the right talent to support the different technology areas. They are backed by robust management training schemes, hiring of key management personnel, and sales training.

Human Resources are the most valuable asset for the Company and Palred Technologies continues to seek, retain and enrich the best available talent. The Human Resource plays an important role in the growth and success of the Organization. Your Company has maintained cordial and harmonious relations with all the employees.

The Company provides an environment which encourages initiative, innovative thinking and rewards performance. The Company ensures training and development of its personnel through succession planning, job rotation, on-the-job training and various trainings and workshops.

B. Culture, Values and Leadership

Your Company has a written code of conduct and ethics to make employees aware of ethical requirements and Whistle Blower Policy for reporting violations, if any.

Your Company has internal structured succession planning to take care of loss of any member of senior management or other key management personnel. Since inception your Company is committed to developing next generation leaders and conduct personality development and development work of skills acquired by them over the years. Your Company encourages an “Equal Employment Opportunity Policy” which discourages discrimination for employment on account of sex, race, colour, religion, physical challenge and so on.

As the Company operates in a niche industry that requires high techno functional expertise. The employees constantly need to enhance their technical and functional knowledge and so regular training sessions on specific technical skills and domain knowledge were conducted.

VII. CAUTIONARY STATEMENT:

Statements in the “Management Discussion and Analysis” describing the companys objectives, estimates, expectations or projections may be “forward looking statements” within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations; include Government regulations, patent laws, tax regimes, economic developments within India and countries in which the Company conducts business, litigation and other allied factors.

VIII. DETAILS OF SIGNIFICANT CHANGES (I.E., CHANGE OF 25% OR MORE AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR) IN THE KEY FINANCIAL RATIOS, ALONG WITH DETAILED EXPLANATIONS THEREOF:

Particulars	Standalone basis		Remarks
	2023-24	2022-23
Debtors Turnover Ratio	0	0	There are no trade receivables as at the balance sheet date.
Inventory Turnover Ratio	0	0	There is no Inventory
Interest Coverage Ratio	0	0	There is no Finance Cost.
Current Ratio	68.53	80.84	There is a decrease in Current Ratio due to increase in Current Liabilities as compared to last year.
Debt Equity Ratio	-	0
Operating Profit Margin Ratio	0.65	0.51	There is an increase in Operating Profit Margin Ratio due to increase in Other Income as compared to previous year which leads to increase in Profit.
Net Profit Margin Ratio	0.60	1.83	There is no reversal of impairment of Non-Current Assets in current year which leads to decrease in Net Profit.
Debtors Turnover Ratio	4.10	6.83	There is a decrease in sales during current year
Inventory Turnover Ratio	3.55	5.75	Decrease in Inventory at year end leads to Improvement in the ratio.
Interest Coverage Ratio	0.20	0.90	Difference due to increase in Finance Cost during the year.
Current Ratio	1.72	1.89	There is no much change as compare to previous year.
Debt Equity Ratio	1.13	0.92	There is a change as Debt has increased
Operating Profit Margin Ratio	0.01	(0.03)	Decrease in Ratio due to increase in Loss.
Net Profit Margin Ratio	(0.04)	(0.03)	Decrease in profit and sales as compared to previous year

Return on Net Worth:

Particulars	Standalone basis		Consolidated Basis
	2023-24	2022-23	2023-24	2022-23
Return on Net Worth	1.38	0.04	(0.09)	(0.01)

There is a decrease in Return in Return on Net Worth ratio as the profit has been reduced in F.Y.2023-24

IX. DISCLOSURE OF ACCOUNTING TREATMENT:

During the preparation of Financial Statement of F.Y. 2023-24 the treatment as prescribed in an Accounting Standard has been followed by the Company. There is no discrepancy in Accounting Treatment as followed by the Company in current financial year as compared to previous financial year.