Penta Gold Ltd Management Discussions.

A. INDUSTRY STRUCTURE AND DEVELOPMENTS:

The gems and jewellery market in India is home to more than 500,000 players, with the majority being small players. India is one of the largest exporters of gems and jewellery and the industry is considered to play a vital role in the Indian economy as it contributes a major chunk to the total foreign reserves of the country. UAE, US, Russia, Singapore, HongKong, Latin America and China are the biggest importers of Indian jewellery. Indias gems and jewellery exports to the US rose 7.81 per cent year-on-year during October-December 2016 due to a revival in the overall economic activity in the US. The overall net exports of Gems & Jewellery during April-December 2016 stood at Rs 175,879.24 crore (US$ 26.28billion), whereas exports of cut and polished diamonds stood at Rs 113,171.17 crore (US$ 16.91 billion). Exports of gold coins and medallions stood at Rs 25,819.48 crore (US$ 3.86 billion) and silver jewellery export stood at Rs 18,010.72 crore (US$ 2.69 billion) during April-December 2016. According to GJEPC, gems and jewellery exports are likely to witness a growth of about 10 per cent this fiscal due to increasing demand in the US and Europe. According to a report by Research and Markets, the jewellery market in India is expected to grow at a Compound Annual Growth Rate (CAGR) of 15.95 per cent over the period 2014-2019.

B. OPPORTUNITIES , CHALLENGES AND THREATS:

Some of the opportunities for the retail jewellery industry are as follows:

1. Increasing demand for diamond jewellery, which is a high margin product as compared tothe gold jewellery. 2. Limited penetration of organized jewellery in the country. 3. Growing consciousness amongst customers for branded jewellery. 4. Favourable demographics leading to increasing demand for jewellery in the country. 5. Increase in purchasing power of the customers in the Tier I & II locations. 6. Some of the key challenges facing the retail jewellery industry are as follows: 7. Limited availability of high end retail space. 8. Adapting to fast changing consumer preferences and buying patterns. 9. Volatility in the market prices of gold and diamonds.

C. RISKS AND CONCERNS:

As the Company is dealing in very high value goods / items, it is always exposed to operational risks. The Company therefore always ensures that its entire inventory, from raw material to finished goods is insured at all times, whether under transit, at showrooms or at the manufacturing facilities. Entire inventory is computerized and is available for tracking at all times. The Company has cash pick up arrangements with leading banks, with transit insurance. All of its showrooms have strong rooms for overnight safe custody of the inventory. In addition all the showrooms have CCTV vigilance and armed guards. The Company is exposed to price risk movements both in gold as well as its forex exposure. However, it has put rigorous systems and procedures in place to take care of these concerns. The Company has in place a comprehensive risk management framework that helps anticipate, identify and evaluate business risks and challenges across the Company and finding ways to mitigate the same. The Company has also put in place a strong team to take care of all the required compliances and hence mitigate any compliance risk.

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D. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

The Company has adequate internal control procedures commensurate with its size and nature of the business. These business control procedures ensure efficient use and protection of the resources and compliance with the policies, procedures and statutes.

E. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL

PERFORMANCE:

The salient parameters of the financial performance of the Company during the year under review are as under:

Financial Results ( in 000s)
Particulars 01-04-2017 To 01-04-2016 To
31-03-2018 31-03-2017
1. Total Sales/Income 2410106.50 2286767.55
2. Net profit before depreciation & tax 30543.63 28090.50
3. Depreciation 1257.74 1444.07
4. Net Profit before Taxation 29285.89 26646.43
5. Provision for tax (incl. deferred taxes) 12621.98 9792.89
6. Net Profit after tax 16663.92 16853.54
7. Balance brought forward 67605.35 54501.82
8. Appropriations - (3750.00)
9. Balance carried forward 84269.27 67605.35

F. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS

FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED:

The Company believes in establishing and building a strong performance and competency driven culture amongst its employees with greater sense of accountability and responsibility. The Company has taken various steps for strengthening organizational competency through the involvement and development of employees as well as installing effective systems for improving their productivity and accountability at functional levels. The Company acknowledges that its principal asset is its employees. Ongoing in-house and external training is provided to the employees at all levels to update their knowledge and upgrade their skills and abilities. As on March 31, 2018, the Company had total 08 full time employees. The industrial relations have remained harmonious throughout the year.

G. DISCLOSURE OF ACCOUNTING TREATMENT:

The Company has followed all the treatments in the Financial Statements as per the prescribed Accounting Standards.

On behalf of the board PENTA GOLD LIMITED

(Ketan M. Shroff)

Chairman & Managing Director

(DIN: 00332988)

Mumbai, 29th August, 2018