Sacheerome Ltd Management Discussions

You should read the following discussion and analysis of financial condition and results of operations together with our financial statements included in this Red Herring Prospectus. The following discussion relates to our Company and is based on our restated financial statements. Our financial statements have been prepared in accordance with Indian GAAP, the accounting standards and other applicable provisions of the Companies Act.

Note: Statement in the Management Discussion and Analysis Report describing our objectives, outlook, estimates, expectations or prediction may be "Forward looking statement" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to our operations include, among others, economic conditions affecting demand/supply and price conditions in domestic and overseas market in which we operate, changes in Government Regulations, Tax Laws and other Statutes and incidental factors.

BUSINESS OVERVIEW

Our Company was originally incorporated as “Sachee Fragrances Limited” under the provisions of Companies Act, 1956 with Registrar of Companies, Delhi & Haryana and received a certificate of incorporation from the Registrar of Companies, Delhi & Haryana on June 19, 1992. Later, the name of the company changed from “Sachee Fragrances Limited” to “Sachee Cosmetics Limited” vide Extra Ordinary General Meeting dated December 26, 1994 and fresh certificate of Incorporation issued by Registrar of Companies Delhi & Haryana on February 13, 1995. Later the name of the company changed from “Sachee Cosmetics Limited to Sachee Aromatics Limited” vide Extra Ordinary General Meeting dated March 19, 1997 and fresh certificate of incorporation issued by Registrar of Companies Delhi & Haryana on April 3, 1997. Further the company has converted from “Sachee Aromatics Limited” to “Sachee Aromatics Private Limited” vide Extra Ordinary General Meeting dated February 24, 2012 and fresh certificate of incorporation issued by Registrar of Companies Delhi & Haryana on March 14, 2012. Further the name of the company changed from “Sachee Aromatics Private Limited” to “Sacheerome Private Limited” vide Extra Ordinary General Meeting dated April 04, 2012 and fresh certificate of Incorporation issued by the Registrar of Companies Delhi & Haryana on April 17, 2012. Further the name of the company changed from “Sacheerome Private Limited” to “Sacheerome Limited” vide Extra Ordinary General Meeting dated May 01, 2024 and fresh certificate of Incorporation issued by Registrar of Companies Delhi & Haryana on August 8th, 2024. The corporate identification number of our Company is U74899DL1992PLC049258.

We have consistently grown in terms of our revenues over the past years. In the past years our revenues from operation were Rs. Rs.7,04,919 Thousands in F.Y.2022-23, Rs.8,50,953 Thousands in the FY 2023-24, and Rs. 10,75,359 Thousands in the FY 202425. Our Net Profit after tax for the above-mentioned periods are Rs. Rs.59,941 Thousands, Rs.1,06,730 Thousands and Rs. 1,59,821 Thousands respectively.

Factors contributing to the growth of our Revenue:

1. For FY 2022-23 the following were the factors that contributed to growth of our revenue:

• Significant Surge in Revenue from Operations:

Our revenue from operations surged from ? 638779 Thousands in FY 2021-22 to ?704,919 Thousands in FY 202223, reflecting an impressive growth of 10.35%. This substantial increase was primarily attributed to a 7% rise in sales volume to our existing customers, along with a 7% of the total sales volume for FY 2023 coming from new customers.

2. For FY 2023-24 the following were the factors that contributed to growth of our revenue:

• Significant Surge in Revenue from Operations:

Our revenue from operations experienced a positive trajectory, escalating from ? 704,919 Thousands in FY 202223 to ?850,953 Thousands in FY 2023-24, marking a substantial growth of 20.72% %. This noteworthy increase was primarily due to strategic expansions in our business operations, including a 3% increase in sales volume to existing customers and 16% of total sales volume for FY 2024 attributable to new customers.

3. For FY 2024-25 the following were the factors that contributed to growth of our revenue:

• Significant Surge in Revenue from Operations:

Our revenue from operations increased from ? 850953 thousand in FY 2023-24 to ? 1073359 thousand in FY 2024-25, marking a substantial growth of ? 224406 thousand (26.37%), driven by significant increases in both export and domestic sales. Of the total increase of ?224406 thousand (26.37%), ?184930 thousand (21%) came from increase in domestic sales, and ?39476 thousand (5%) came from increase in export sales. Domestic sales accounted for 92.37% of total revenue from operations in FY 2024-25, while export sales accounted for 7.63%.

FINANCIAL KPIs OF THE COMPANY:

(Rs. In thousands)

Key Performance Indicator	For the year ended March 31, 2025	For the year ended March 31, 2024	For the year ended March 31, 2023
Revenue from Operations	10,75,359	8,50,953	7,04,919
Growth in Revenue from Operations (%)	26.37%	20.72%	10.35%
Total Income	10,81,341	8,63,978	7,09,281
EBITDA	2,34,627	1,64,537	1,03,640
EBITDA Margin (%)	21.70%	19.04%	14.61%
Net Profit for the Year/Period	1,59,821	1,06,730	59,941
PAT Margin (%)	14.86%	12.54%	8.50%
Return on Net Worth (%)	25.78%	23.20%	16.97%
Return on Capital Employed (in times)	0.33	0.31	0.25
Debt-Equity Ratio (in times)	0.06	0.03	-

* EBITDA margin is calculated as EBITDA as a percentage of total income and PAT Margin (%) is calculated as Profit for the year/period as a percentage of Revenue from Operations.

FACTORS AFFECTING OUR RESULT OF OPERATIONS

Except as otherwise stated in this Red Herring Prospectus and the Risk Factors given in the Red Herring Prospectus, the following important factors could cause actual results to differ materially from the expectations include, among others:

Regulatory Framework

We have obtained all regulatory permissions which are necessary to run our business, Further, some of the approvals are granted for fixed periods of time and need renewals, which are obtained in the course of business, however, there may be change in statutory regulations at any time which cannot be predicted by us. There can be no assurance that the change in regulations will not impact our operations in the future.

Ability of Management

Our success depends on the continued services and performance of the members of our management team and other key employees. Competition for senior management in the industry is intense, and we may not be able to retain our existing senior management or attract and retain new senior management in the future. The loss of any member of our senior management or other key personnel may adversely affect our business, results of operations and financial condition.

Market & Economic conditions

India is one of the largest economies and is growing at a rapid pace. But in this globalised economy, all the businesses face an uncertain level of volatility from unexpected global events which ranges from global pandemics to wars, to weather changes to supply chain disruption, which may change the economic dynamics and the purchasing capability of the end customers. At the time of market slowdown, the demand falls which has adverse impact on our business.

Competition

We operate in a competitive atmosphere. Our competition varies by market, geographic areas and type of products. Our Company may face stiff competition from domestic as well as global market as the dynamic changes. Some of our competitors may have greater resources than those available to us. While service quality, technical ability, performance records, etc. are key factors in client decisions among competitors, however, price& quality are the deciding factor in most cases. Further, this industry is fragmented with many small and medium sized companies and entities, which manufactures some of these products at various levels, which may adversely affect our business operation and financial condition. Further, there are no entry barriers in this industry and any expansion in capacity of existing market players would further intensify competition. Moreover, as we seek to diversify into new geographical areas, new territories, new emerging markets, we may face competition from competitors that have a pan-India presence and also from competitors that have a strong presence in regional markets. The markets in which we compete and intend to compete are undergoing, and are expected to continue to undergo, rapid and significant change. We expect competition to intensify as technological advances and consolidations continue. These competitive factors may force us to reduce rates, and to pursue new market opportunities. Increased competition could result in reduced demand for our products, increased expenses, reduced margins and loss of market share. Failure to compete successfully against current or future competitors could harm our business, operating cash flows and financial condition.

Significant Developments after September 30^th, 2024 that may affect our Future Results of Operations

The Directors confirm that there have been no other events or circumstances since the date of the last financial statements as disclosed in the Red Herring Prospectus which materially or adversely affect or is likely to affect the business or profitability of our Company or the value of our assets, or our ability to pay liabilities within next twelve months.

SIGNIFICANT ACCOUNTING POLICY

The Restated financial information of the Company comprise the Restated Statement of Assets and Liabilities as at March 31, 2025, March 31, 2024 and March 31, 2023, the Restated Statement of Profit & Loss account and the Restated Statement of Cash Flows for years ended March 31, 2025, March 31, 2024 and March 31, 2023 and significant accounting policies and other explanatory information to the Restated financial information, has been specifically prepared by the management for inclusion in the document to be filed by the Company with the Securities and Exchange Board of India ("SEBI”) and National Stock Exchange of India Limited , where the Equity Shares are proposed to be listed (the ""Stock Exchanges"") in connection with the proposed Initial Public Offer (""IPO) of equity shares of the Company (referred to as the ""Issue""), in accordance with the requirements of:

a. Section 26 of Part I of Chapter III of the Companies Act 2013 (the ""Act"") and

b. Relevant provisions of The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended (""the SEBI ICDR Regulations"") issued by the Securities and Exchange Board of India (SEBI) on September 11, 2018 as amended from time to time in pursuance of the Securities and Exchange Board of India Act, 1992.

c. The Guidance Note on Report in Company Prospectuses (Revised 2019) issued by the Institute of Chartered Accountants of India.

a) Basis of preparation of restated financial information:

The restated financial information of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013 i.e. as notified under the Companies (Accounting Standards) Rules, 2021 and the relevant provisions of the Companies Act, 2013 ("the 2013 Act"). The restated financial information have been prepared on accrual basis under the historical cost convention. The accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

b) Use of estimates:

The preparation of restated financial information in conformity with GAAP in India requires the management to make estimates and assumptions to be made that affect the reported amount of assets and liabilities at the date of financial information and the reported amount of revenues and expenses during the reporting period. Difference between the actual result and estimates are recognized in the period in which the results are known/ materialized.

c) Property Plant and Equipment:

Property, Plant and Equipment are accounted for on historical cost basis less accumulated depreciation and impairment loss, if any. Cost includes freight, duties, taxes and other incidental expenses relating to acquisition. Subsequent expenditures related to an item of fixed asset are added to its book value only if they increase future benefits from the existing asset beyond its previously assessed standard of performance. Leasehold improvements are amortised over the period of lease or 6 year whichever is lower.

d) Intangible Assets:

Intangible assets consist of computer software and is stated at cost of acquisition less accumulated depreciation. It is amortised over the period of three years or license period whichever is lower.

e) Depreciation:

Depreciation on fixed assets is provided on written down value method over the estimated useful life of the assets, in the manner prescribed in Schedule II of the Companies Act, 2013.

f) Taxation:

Tax expense for the year comprising current tax and deferred tax, is included in determining the net profit for the year.

Provision for the current tax is made based on the liability computed in accordance with the tax rules and tax laws.

Deferred tax is recognised for all timing differences arising between taxable income and accounting income based on tax rates and tax laws enacted or substantially enacted at the balance sheet date.

Deferred tax assets are recognised and carried forward to the extent it is reasonably certain that future taxable profit will be available against which such deferred tax assets can be realized. Deferred tax assets are reviewed at each balance sheet date to reassess realization there of.

Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off assets against liabilities representing current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation laws.

g) Provisions and Contingent liabilities:

A provision is recognized when there is a present obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and in respect of which reliable estimate can be made. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosures is made.

h) Impairment:

At each Balance Sheet date, the Company assesses whether there is any indication that assets may be impaired. If any such indication exists, the Company estimates the recoverable amount. If the carrying amount of the assets exceeds its recoverable amount, an impairment loss is recognised in the accounts to the extent the carrying amount exceeds the recoverable amount.

i) Borrowing Cost:

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use. All other borrowing costs are charged to revenue.

j) Revenue Recognition:

Sales Revenue from sale of product is recognised on transfer of the significant risks and rewards of ownership of the goods to the buyer and it is reasonable to expect ultimate collection. Sales revenue are inclusive of excise duty and net of sales tax and trade discount. Export sales are recognised on the date of the Company ships the exported goods as evidenced by their Bill of Lading/ Air-way Bill.

k) Cash and Cash Equivalents:

Cash and cash equivalents include cash in hand, demand deposits with banks and other short-term highly liquid investments with original maturities of three months or less.

l) Inventories:

Items of inventories are measured at lower of cost or net realizable value after providing for obsolescence, if any. Cost of inventories comprises of cost of purchase and other costs incurred in bringing them to their respective present location and condition. Cost is determined on FIFO basis.

m) Earning per Share:

In determining basic earnings per share, the company considers the net profit attributable to equity shareholders. The number of shares used in computing basic earning per share is the weighted average number of shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholder and weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.

n) Foreign Currency Transactions:

Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction. Monetary items denominated in foreign currency and outstanding at the balance sheet date are translated at the exchange rate prevailing on the balance sheet date. Exchange difference on translation of monetary assets and liabilities and realised gain and losses on foreign currency transactions are recognised in the profit and loss account.

o) Retirement Benefits:

Short Term Employee Benefits

All employee benefits payable wholly within twelve months of rendering service are classified as short-term employee benefits. Benefits such as salaries, allowances, short-term compensated absences and the expected cost of other benefits is recognised in the period in which the employee renders the related service.

p) Post Employment Benefits:

Defined Contribution plans

Contributions paid/ payable to defined contribution plans comprising of provident fund and pension fund are charged on accrual basis. The Company makes monthly contributions and has no further obligations under the plan beyond its contributions.

Defined benefit plans

Gratuity is a post employment benefit and is in the nature of a defined benefit plan. The defined benefit/obligation is calculated at or near the balance sheet date by an independent actuary using the projected unit credit method.

The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plan, is based on market yields on Government securities as at the balance sheet date.

Actuarial gains and losses are recognised immediately in the profit and loss account. Gains or losses on the curtailment or settlement of any defined benefit plan are recognised when the curtailment or settlement occurs.

q) Other long term benefits:

The defined benefit obligation in the form of leave encashment has been estimated and charged to the profit and loss account based on actuarial valuation, carried out as at the Balance sheet date.

r) Finance Lease:

Lease in terms of which the company assumes substantially all the risks and rewards of ownership are classified as finance lease. Subsequent to the initial recognition, the assets are accounted for in accordance with the accounting policy applicable to that asset. Assets taken on lease are capitalized at fair value or net present value of the minimum lease payments, whichever is lower. Depreciation on the assets taken on lease is charged at the rate applicable to similar type of fixed assets as per the Accounting Policy.

s) Operating Lease:

Lease of assets under which significant risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Lease payments under an operating lease are recognized as expenses in the Statement of Profit and Loss.