QVC Exports Ltd Management Discussions

The following discussion is intended to convey managements perspective on our financial condition and results of operations for the period ended September 30, 2023 and for the financial years ended March 31, 2023, 2022 and 2021. One should read the following discussion and analysis of our financial condition and results of operations in conjunction with our section titled "Financial Statements " and the chapter titled "Restated Financial Statements " on page 163 of the Draft Prospectus. This discussion contains forward-looking statements and reflects our current views with respect to future events and our financial performance and involves numerous risks and uncertainties, including, but not limited to, those described in the section entitled "Risk Factors " on page 22 of this Draft Prospectus. Actual results could differ materially from those contained in any forward-looking statements and for further details regarding forward-looking statements, kindly refer the chapter titled "Forward-Looking Statements" on page 15 of this Draft Prospectus. Unless otherwise stated, the financial information of our Company used in this section has been derived from the Restated Financial Information. Our financial year ends on March 31 of each year. Accordingly, unless otherwise stated, all references to a particular financial year are to the 12-month period ended March 31 of that year.

In this section, unless the context otherwise requires, any reference to "we", "us" or "our" refers to QVC Exports Limited, our Company. Unless otherwise indicated, financial information included herein are based on our Restated Financial Statements the period ended September 30, 2023 and for the financial years ended March 31, 2023, 2022 and 2021 included in this Draft Prospectus beginning on page 163 of this Draft Prospectus

BUSINESS OVERVIEW

Our Company is engaged in the business of dealing in ferro alloys, including but not limited to high carbon silico manganese, low carbon silico manganese, high carbon ferro manganese, high carbon ferro chrome and ferro silicon. We also engaged in the dealing in raw materials for manufacturing of steel. We have devised a unique business model, wherein we procure raw materials required for manufacturers of ferro alloys, such as, manganese ore, chrome ore, coke, and purchase their finished products, being varied categories of ferro alloys and further sell it to domestic and international steel manufacturers. We have created a unique inward and outward model, wherein we procure raw materials for a manufacturer and further sell the finished products of the same manufacturer, thereby creating a wide and reliable customer and supplier base and ability of serving manufacturers at different points of the steel supply chain.

A majority of our revenue from operations is earned from exporting our products to reputed steel manufacturers in various countries. We are also a supplier of ferro alloys for a lot of reputed Indian manufacturers and therefore in order to maintain such clientele, we are bound to ensure that the products procured by us are of utmost quality and are compliant with the quality requirements of our customers. We deploy independent inspection agencies such as Bureau Veritas, IRA, SGS etc. We also follow up with our customers to ensure that the products supplied to them is of utmost quality. If the event our products face quality issues, we ensure that corrective and preventive steps, wherein we investigate the root cause of the issue, update our customers about our analysis and change suppliers or quality inspection agencies, to ensure that such issues are not repeated. Furthermore, our Company has devised an extensive supplier selection process in order to identify and evaluate the effectiveness and quality of the products manufactured by the suppliers, reduce purchase risk, maximize overall value to the purchaser, and develop closeness and long-term relationships between buyers and suppliers. Owing to our supplier selection process, we engage with quality manufacturers of our products, in order to stand by our commitments to our customers. We also visit the mines and manufacturing units of our suppliers to ensure that the products are manufactured by following the quality practices. Owing to our commitment to quality, our Company has received a certificate of registration dated April 8, 2023 from Bureau Veritas (India) Private Limited certifying that the management system of our Company has been found to be compliant with management system standards prescribed under ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018.

Our revenues from operations for the six month period ended September 30, 2023 and the Fiscals 2023, 2022 and 2021 were 128,813.14 lakhs, t 20,724.19 lakhs, 112,310.14 lakhs and 17,183.13 lakhs, respectively. Our EBITDA for the six month period ended September 30, 2023 and the Fiscals 2023, 2022 and 2021 were ? 714.85 lakhs and ? 441.19 lakhs, ? 234.02 lakhs and ? 244.11 lakhs, respectively. Our profit after tax for the six month period ended September 30, 2023 and the Fiscals 2023, 2022 and 2021 was ? 511.12 lakhs and ? 230.32 lakhs, ? 123.39 lakhs and ? 83.21 lakhs, respectively.

SIGNIFICANT DEVELOPMENTS SUBSEQUENT TO THE LAST AUDITED FINANCIALS

After the date of last Audited accounts i.e. September 30, 2023, the Directors of our Company confirm that, there have not been any significant material developments.

FACTORS AFFECTING OUR RESULTS OF OPERATIONS

Our business is subjected to various risks and uncertainties, including those discussed in the section titled "Risk Factof beginning on page 22 of this Draft Prospectus. Our results of operations and financial conditions are affected by numerous factors including the following:

1. The Commissioner, the Central Goods and Services Tax, Kolkata had undertaken a search at our Registered Office. Subsequent to the search, the Commissioner, the Central Goods and Services Tax, Kolkata, issued summons to our Directors under the Central Goods and Services Tax Act, 2017. In the event any adverse orders are passed against our Company or our Directors, it would have a significant impact on our business, results of operations and financial condition.

2. We generally do business with our customers on purchase order basis and do not enter into long term contracts with them. Our inability to maintain relationships with our customers could have an adverse effect on our business, prospects, results of operations and financial condition.

3. Our Company is reliant on the demand from the steel industry for a significant portion of our revenue. Any downturn in the steel industry or an inability to increase or effectively manage our sales could have an adverse impact on our Companys business and results of operations.

4. There have been instances of incorrect filings of certain forms with the RoC, in the past.

5. We depend on few customers for our products, for a significant portion of our revenue, and any decrease in revenues or sales from any one of our key customers may adversely affect our business and results of operations.

6. The prices we are able to obtain for our products that we trade depend largely on prevailing market prices.

7. The commercial success of our services depends to a large extent on the success of the success of the end use customers. If there is any downturn in the industries in which the customers operate, it could have a material adverse effect on our business, financial condition and results of operations.

8. The business orders which we undertake may be delayed, modified, cancelled, or not fully paid for by our clients and therefore, could materially affect our business, results of operations and financial condition.

9. We are yet to obtain consents/ no objection certificate from Union Bank of India Limited, ICICI Bank Limited and State Bank of India Limited for the Offer.

10. We are dependent upon few suppliers for the material requirements of our trading business.

DISCUSSION ON RESULT OF OPERATION

Our Significant Accounting Policies

For Significant accounting policies please refer Significant Accounting Policies, under Chapter titled "Restated Financial Statements" beginning on page 163 of the Draft Prospectus.

Overview of Revenue & Expenditure

Our revenue and expenses are reported in the following manner:

Revenues

Revenue of operations

Our Companys revenue is primarily generated from trading of ferro alloys, including but not limited to high carbon silico manganese, low carbon silico manganese, high carbon ferro manganese, high carbon ferro chrome and ferro silicon

Other Income

Our other income mainly consists of Foreign exchange fluctuation gains. Settlement accounts receipt, interest on Fixed Deposit, rental income etc.

(? In Lakhs)

	For the period ended
Particulars	September 30,2023	March 31, 2023	March 31, 2022	March 31, 2021
Income
Revenue from operations	28,813.14	20,724.19	12,310.14	7,183.13
As a % of total Income	98.58%	96.52%	96.30%	78.35%
Other Income	414.55	746.95	472.36	1,984.90
As a % of Total Income	1.42%	3.48%	3.70%	21.65%
Total Revenue	29,227.69	21,471.14	12,782.50	9,168.03

Expenditure

Our total expenditure primarily consists of Purchases of traded goods. Employee Benefit Expenses, Finance Costs, Depreciation and amortization expenses and Other Expenses.

Purchases of stock in trade

It includes purchases of ferro alloys, including but not limited to high carbon silico manganese, low carbon silico manganese, high carbon ferro manganese, high carbon ferro chrome and ferro silicon which form part of the stock in trade.

Employment Benefit Expenses

It includes wages, salaries and bonus, directors remuneration, contributions to welfare funds, provision for gratuity and other expenses.

Finance Costs

Our finance costs mainly include finance charges and interest.

Depreciation

Depreciation includes depreciation and amortization.

Other Expenses

It includes Freight, Dumurrage & Discharge Port Charges, Consultancy Fees, Audit Fees, Bank Charges, Business Promotion, Bad Debts, Commission, Conveyance Charges, Custom Duty, Claims Paid, Duties and Taxes, Discount Allowed, ECGC Premium, PF and ESIC, Entertainment expenses. Filing fees. Travelling expenses. Handling and storage charges. Inspection Charges, Insurance expenses. Motor car expenses. Legal Charges, Labour Charges, Muncipal Taxes, Membership and Subscription, Meeting and Conference, Port Rent, Postage and Telegram, Power and Fuel, Professional Charges, Printing and Stationery, Repairs and Maintenance, Shipping and Clearing, Telephone and Internet Charges, Transportation Charges, Weightment Charges etc.

RESULTS OF OUR OPERATION

(In Lakhs)

Particulars	30-Sep-23	31-Mar-23	31-Mar-22	31-Mar-21
Incomes:
Revenue from Operations	28,813.14	20,724.19	12,310.14	7,183.13
% of total revenue	98.58%	96.52%	96.30%	78.35%
% Increase/(Decrease)	-	68.35%	71.38%	-
Other income	414.55	746.95	472.36	1,985
% of total revenue	1.42%	3.48%	3.70%	21.65%
% Increase/(Decrease)	-	58.13%	-76.20%	-
Total Revenue	29,227.69	21,471.14	12,782.50	9,168.04
% Increase/(Decrease)	36.13%	67.97%	39.42%	-
Expenses:
Changes in inventories of finished goods	-844.00	421.31	-166.58	-
% of total revenue	-2.89%	1.96%	-1.30%	0.00%
% Increase/(Decrease)	-	-352.92%	-	-
Cost of Services consumed	27,564.00	18,610.49	10,667.09	6,762.00
% of total revenue	94.31%	86.68%	83.45%	73.76%
% Increase/(Decrease)	-	74.47%	57.75%	-
Emplovee Benefit expenses	37.60	69.84	93.84	76.69
% of total revenue	0.13%	0.33%	0.73%	0.84%
% Increase/(Decrease)	-	-25.58%	22.36%	-
Other Expenses	1,755.24	1,928.31	1,954.13	2,085.23
% of total revenue	6.01%	8.98%	15.29%	22.74%
% Increase/(Decrease)	-	-1.32%	-6.29%	-
Total Expense	28,512.84	21,029.95	12,548.48	8,923.92
% of total revenue	97.55%	97.95%	98.17%	97.34%
% Increase/(Decrease)	-	67.59%	40.62%	-
Profit before Interest, Depreciation and Tax	714.85	441.19	234.02	244.12
% of total revenue	2.45%	2.05%	1.83%	2.66%
Depreciation and amortization Expenses	10.47	11.16	9.86	11.69
% of total revenue	0.04%	0.05%	0.08%	0.13%
% Increase/(Decrease)	-	13.18%	-15.65%	-
Profit before Interest and Tax	704.38	430.03	224.16	232.43
% of total revenue	2.41%	2.00%	1.75%	2.54%
Financial Charges	242.02	207	99.28	127.88
% of total revenue	0.83%	0.96%	0.78%	1.39%
% Increase/(Decrease)	-	108.05x	-0.22	-
Profit before Tax and Extraordinary Expenses	462.36	223.48	124.88	104.55
% of total revenue	1.58%	1.04%	0.98%	1.14%
Extraordinary Expenses	-	-	-	-
% of total revenue	-	-	-	-
% Increase/(Decrease)	-	-	-	-
Restated Profit/(Loss) before tax	462.36	223.48	124.88	104.55
% of total revenue	1.58%	1.04%	0.98%	1.14%
% Increase/(Decrease)	-	78.96%	19.45%	-
Tax expenses/(income)
Current Tax	130.00	47.70	41.68	23.85
Provisions for Deferred Tax	2.58	4.30	-7.34	0.92
Total tax expenses	132.58	52.00	34	24.77
% of total revenue	0.45%	0.24%	0.27%	0.27%

 

Particulars	30-Sep-23	31-Mar-23	31-Mar-22	31-Mar-21
Restated profit/(loss) after Tax	329.78	171.48	90.54	79.78
% of total revenue	7.25%	0.48%	1.09%	2.06%
% Increase/(Decrease)	-	-35.47%	-67.87%	-
Income from Minority and Associate	181.34	58.84	32.85	3.44
Profit/(Loss) attributable to owners of the company	511.12	230.32	123.39	83.22

FISCAL YEAR ENDED MARCH 31, 2023 COMPARED WITH THE FISCAL YEAR ENDED MARCH 31, 2022

Income

Total revenue lias increased by ?8.688.64 Lakhs and 67.97%, from ?12.782.50 Lakhs in the fiscal year ended March 31, 2022 to ?21,471.14 Lakhs in the fiscal year ended March 31, 2023. The increase in revenue was on account of increase in sale and trading of ferro alloys and allied items.

Expenditure

Total Expenditure increased by ?8.481.47 Lakhs and 67.59%, from ? 12.548.48 Lakhs in the fiscal year ended March 31, 2022 to ? 21,029.95 Lakhs in the fiscal year ended March 31, 2023. Overall expenditure was increased mainly due to increase cost of material consumed or purchases of stock in trade.

Cost of material Consumed

Cost of Material Consumed increased by ?7.94.3.40 Lakhs and 74.47% from ? 10.667.09 Lakhs in the fiscal year ended March 31, 2022 to ? 18.610.49 Lakhs in the fiscal year ended March 31, 2023. Cost of Services consumed was increased mainly due to increase volume of operations.

Employee Benefit Expenses

Employee Benefit Expenses in tenns of value and percentage decreased by ?24.00 Lakhs and 25.58% from ?93,84 Lakhs in the fiscal year ended March 31, 2022 to ?69.84 Lakhs in the fiscal year ended March 31, 2023. Overall employee cost was decreased due to reduction in number of employees.

EBIDTA

Profit before exceptional & extraordinary items and Tax has increased by ?207.17 Lakhs and 35.29% from ?111.49 Lakhs in the fiscal year ended March 31, 2022 to ?72.14 Lakhs in the fiscal year ended March 31,2023. Profit before exceptional & extraordinary items and Tax was increased due to increase total revenue as compared to total expenses before finance cost, depreciation and tax.

Finance Costs

Finance Costs in tenns of value and percentage increased by ? 107.27 Lakhs and 108.05% from ? 99.28 Lakhs in the fiscal year ended March 31, 2022 to ? 206.55 Lakhs in the fiscal year ended March 31, 2023. Finance Costs was increased mainly due to sanctioning and disbursement of new loans and credit facility and consequent increase in the interest on such loans.

Depreciation & Amortization Expenses

Depreciation in tenns of value increased by ? 1.30 Lakhs and 13.18% from ? 9.86 Lakhs in the fiscal year ended March 31, 2022 to ? 11.16 Lakhs in the fiscal year ended March 31, 2023. Increase in depreciation is due to increase in assets and is general in nature.

Other Expenses

Other Expenses in terms of value and percentage decreased by ? 25.82 Lakhs and 1.32% from ? 1,954.13 Lakhs in the fiscal year ended March 31, 2022 to ? 1,928.31 Lakhs in the fiscal year ended March 31, 2023. Other Expenses was decreased mainly due to decrease loss incurred on sale of assets, decrease in port rent, professional charges, repairs and maintenance, sundry advance written off etc.

Net Profit on standalone basis after Tax and Extraordinary items

Net Profit on standalone basis after tax and extraordinary items has increased by ?80.94 Lakhs and 89.40% from profit of ? 90.54 Lakhs in the fiscal year ended March 31, 2022 to profit of ? 171.48 Lakhs in the fiscal year ended March 31, 2023. Net profit was increased due to increase in revenue from operations and increase in profit margins.

FISCAL YEAR ENDED MARCH 31, 2022 COMPARED WITH THE FISCAL YEAR ENDED MARCH 31, 2021

Income

Total revenue has increased by ?3.614.46 Lakhs and 39.42%, from ?9.168.04 Lakhs in the fiscal year ended March 31, 2021 to ?12.782.50 Lakhs in the fiscal year ended March 31, 2022. The increase in revenue was on account of increase in sale in sale and trading of ferro alloys and allied items.

Expenditure

Total Expenditure increased by L3.624.56 Lakhs and 40.62%, from ? 8,923.92 Lakhs in the fiscal year ended March 31, 2021 to ? 12.548.48 Lakhs in the fiscal year ended March 31, 2022. Overall expenditure was iincreased mainly due to decrease in purchases of stock in trade.

Cost of material Consumed

Cost of material Consumed increased by L3.905.09 Lakhs and 57.75%, from ?6.762.00 Lakhs in the fiscal year ended March 31, 2021 to ?10.667.09 Lakhs in the fiscal year ended March 31, 2022. Cost of material consumed was increased mainly due to increase volume of operations.

Employee Benefit Expenses

Employee Benefit Expenses in terms of value and percentage increased by ?17.15 Lakhs and 22.36% from ?76.69 Lakhs in the fiscal year ended March 31, 2021 to ?93,84 Lakhs in the fiscal year ended March 31, 2022. Overall employee cost was increased due to increase in salaries and increments offered to the employees.

Other Expenses

Other Expenses in terms of value and percentage decreased by ?131,10 Lakhs and 6.29% from ?2,085.23 Lakhs in the fiscal year ended March 31, 2021 to ?1,954.13 Lakhs in the fiscal year ended March 31, 2022. Other Expenses was decreased mainly due decrease in Bad Debts.

EBIDTA

Profit Before Exceptional & Extraordinary Items and Tax has decreased by ? 10.10 Lakhs and 4.14% from ?244.12 Lakhs in the fiscal year ended March 31,2021 to ?234.02 Lakhs in the fiscal year ended March 31,2022. Profit Before Exceptional & Extraordinary Items and Tax was decreased due to increase in cost of material consmed

Finance Costs

Finance Costs in tenns of value and percentage decreased by ?28.60 Lakhs and 22.38% from ? 127.88 Lakhs in the fiscal year ended March 31, 2021 to ?99.28 Laklis in the fiscal year ended March 31, 2021. Finance Costs was decreased mainly due to repayment and consequent reduction in outstanding loans and borrowing limits.

Depreciation & Amortization Expenses

Depreciation in tenns of value increased by ? 1.83 Laklis and 15.65% from ? 11.69 Lakhs in the fiscal year ended March 31, 2021 to ? 9.86 Laklis in the fiscal year ended March 31, 2022. Decrease in depreciation is provision of depreciation on assets.

Net Profit on Standalone basis after Tax and Extraordinary items

Net Profit on standalone basis after tax and extraordinary items has increased by ?10.76 Lakhs and 13.49% from profit of ?79.78 Laklis in the fiscal year ended March 31, 2021 to profit of ?90.54 Lakhs in the fiscal year ended March 31, 2022. Net profit was increased due to increase in revenue from operations and decrease in other expenses.

Cash Flows

(Amount ? in lacs)

	For the period ended		For the year ended March 31,
Particulars	September 30, 2023	2023	2022	2021
Net Cash from Operating Activities	981.57	274.10	194.46	126.30
Net Cash from Investing Activities	(1.00)	(353.81)	138.64	267.35
Net Cash used in Financing Activities	(544.02)	144.47	(178.71)	(609.09)

Cash Flows from Operating Activities

Net cash from operating activities for the fiscal 2023 was at ? 274.10 lacs as compared to the Profit Before Interest, Depreciation and Tax at 714.85 and ^441.19 lacs, while for fiscal 2022, net cash from operating activities was at ? 194.46 lacs as compared to the Profit Before Interest Depreciation and Tax at ?234.02 lacs. For fiscal 2021, the net cash from operating activities was ? 126.30 lacs compared to Profit before Interest, Depreciation and Tax of ?244.11 lacs.

Cash Flows from Investment Activities

Net cash from investing activities for the fiscal 2023 was at ? (353.81) lacs due to additions in increase in Fixed Assets, while for fiscal 2022, net cash from investing activities was at t (138.64) lacs and for fiscal 2021, the net cash from investing activities was 1267.35 lacs.

Cash Flows from Financing Activities

Net cash from financing activities for fiscal 2023 was at ? 144.47 lacs due to interest payment, while for fiscal 2022, net cash flow from financing activities was at ? (178.71) lacs due to higher amount of borrowings. For fiscal 2021, the net cash from financing activities was ? (609.09) lacs due to interest payment

OTHER MATTERS

1. Unusual or infrequent events or transactions

Except as described in this Draft Prospectus, during the periods under review there have been no transactions or events, which in our best judgment, would be considered unusual or infrequent.

2. Significant economic changes that materially affected or are likely to affect income from continuing Operations

Other than as described in the Section titled "Financial Information" and chapter titled "Managements Discussion and Analysis of Financial Conditions and Results of Operations", beginning on Page 163 and 200 respectively of this Draft Prospectus, to our knowledge there are no significant economic changes that materially affected or are likely to affect income from continuing Operations.

3. Known trends or uncertainties that have had or are expected to have a material adverse impact on revenue or income from continuing operations

Other than as described in the chapter titled "Risk Factors" and "Managements Discussion and Analysis of Financial Conditions and Result of Operations", beginning on Page 22 and 200 respectively of this Draft Prospectus, best to our knowledge there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on revenues or income of our company from continuing operations.

4. Future relationship between Costs and Income

Other than as described in the chapter titled "Risk Factors" beginning on Page 22 of this Draft Prospectus, best to our knowledge there are no factors, which will affect the future relationship between costs and income or which are expected to have a material adverse impact on our operations and finances.

5. Competition Conditions

Our Industry is fragmented consisting of large established players and small niche players. We compete with organized as well as unorganized sector on the basis of timely delivery and lower cost. Further, there are no entry barriers in this industry and any expansion in capacity of existing service provided would further intensify competition. Industry is very competitive and we expect competition to continue and likely to increase in the future.