Sarthak Industries Ltd Management Discussions.

Your Company is primarily engaged in manufacturing of LPG Cylinders. The LPG Cylinders are supplied to Oil Companies like Indian Oil Corporation Ltd., Hindustan Petroleum Corporation Ltd., Bharat Petroleum Corporation Ltd. etc. and also to Private Companies. Apart from this, Company is also engaged in trading of agri-commodities, non agri-commodities and other businesses on opportunity basis. As a major of diversification, the Company has also decided to engage in Mining and Mineral Based Industry.

During the year 2019-20, the Companys performance showing decreasing trend in turnover but increasing in profitability as compared to last year. Looking at global economic slowdown and other factors, the performance of Company is satisfactory. The Management is hopeful that Companys future is bright in the coming years.

In the last month of FY 2020, the COVID-19 pandemic developed rapidly into a global crisis, forcing governments to enforce lock-downs of all economic activity. Protecting lives and allowing health care systems to cope have required isolation, lockdowns, and widespread closures to slow the spread of the virus. The health crisis is therefore having a severe impact on economic activity. As a result of the pandemic, the global economy is projected to contract by 3 percent in 2020, according to the International Monetary Fund (IMF) World Economic Report of April 2020.

Opportunities and Threats

This COVID-19 pandemic has surely impacted the operations of the Company in many ways. Accordingly as of 31 March 2020, based on the facts and circumstances existing as of that date, the Company does not anticipate any material uncertainties which affects its liquidity position and also ability to continue as a going concern. However, the impact assessment of Covid-19 is a continuing process given the uncertainties associated with its nature and duration. The management will continue to closely monitor the evolving situation and assess its impact on the business of the Company.

Depending on market opportunities the Company is undertaking Merchant Trading activities of various commodities.

The future performance of your Company would depend to a large extent on its ability to successful diversification, market of commodities. We are hopeful that through the combination of market developments and expansion activity, there will be healthy growth over the next few years. Due to COVID-19 pandemic, the situation is uncertain and it is difficult to predict when economies will fully normalise. Hence, FY21 is likely to be a challenging year.

Segment-wise or product-wise performance

Your Company has identified two business segments in line with the Accounting Standard on Segment Reporting. These are:

Cylinders - Manufacturing and repairing of LPG cylinders
Merchant Trading - Trading of various commodities, materials etc.

The segment wise performance in detail is given in Note 43 to the audited accounts of the Company as available in this Annual Report. Outlook

Due to COVID-19 pandemic, the financial year 2020-21 will be a challenging year for the global economy as well as Indian economy. The Management is hopeful that in future, the Company will grow its manufacturing and trading activities and will get good orders for the manufacturing of cylinders as well as repairing of old cylinders.

Risk and concerns

Profitability may be affected on account of competition from existing and prospective manufacturers of the Companys products. The Company is exposed to risks from Change in policy of similar companies which are major buyers for the Companys product, further increase in input costs, higher levies, and changes in Govt. Policies/laws of land, etc. may affect profitability of the Company.

Internal control system and their adequacy

The Company maintains adequate internal control systems, which provide reasonable assurance of recording the transactions of its operations in all material respects and of providing protection against significant misuse or loss of Company assets and compliance with applicable laws and regulations, etc.

The adequacy of the same has been reported by the statutory auditors of your Company in their report.

Financial Performance

The performance of the Company for the financial year 2019-20 is summarized below:

Balance Sheet As at March 31,2020 As at March 31,2019
a. Property, Plant and Equipment 335.75 880.93
b. Right of use assets 2.04 -
c. Capital Work-in-progress 172.85 504.34
d. Intangible assets 0.76 1.40
e. Financial assets 270.79 496.42
f. Deferred tax assets (net) 17.28 31.48
g. Other Non-current assets 196.45 50.00
h. Current assets 5,143.71 4,570.50
i. Non current assets held for sale - 1,457.32
j. Total Equity 3,455.10 3,252.30
k. Non- current liabilities 32.30 17.00
l. Current liabilities 2,652.23 3,686.97
m. Liabilities directly associated with assets classified as held for sale - 1,036.13

Summarized Profit and Loss Account

Particulars 2019-20 2018-19
Revenue from operations 9556.04 11,195.67
Other Income 618.71 144.56
Profit/ (Loss) before Depreciation, Finance Cost, Exceptional items & Tax Expenses 673.00 350.24
Less: Depreciation 44.94 71.32
Profit/ (Loss) before Finance Cost, Exceptional Items and Tax Expenses 628.06 278.92
Less: Finance Cost 119.02 160.42
Profit/ (Loss) before Exceptional Items and Tax Expenses 509.04 118.50
Add/ (Less): Exceptional items (108.09) --
Profit/ (Loss) before Tax Expenses 400.95 118.50
Less: Tax Expenses 129.96 73.60
Profit/ (Loss) after Taxation 270.99 44.90
Add: Other Comprehensive Income (68.19) (6.56)
Total Comprehensive Income 202.80 38.34
Balance brought forward from previous year 2555.41 2517.07
Amount available for appropriation 2758.21 2555.41
APPROPRIATION -- --
Amount Carried to Balance sheet 2758.21 2555.41
Paid Up Equity Share Capital 696.89 696.89
Earnings Per share (Rs.10/- each) Basic & Diluted (in Rs.) 3.89 0.64

Material development in Human Resources / Industrial Relations front

Your Company considers the quality of its human resources to be the most important asset and constantly endeavors to attract and recruit best possible talent. Our training programs emphasize on general management perspective to business. The Company continues to empower its people and provide a stimulating professional environment to its officers to excel in their respective functional disciplines.

The industrial relations of the Company continue to remain harmonious and cordial with focus on improving productivity and quality.

The number of permanent employees on the rolls of Company as on 31.03.2020 is 36.

KEY FINANCIAL RATIOS ANALYSIS

Details of key financial ratios are as follows:

S. No. Particulars FY 2020 FY 2019 Remarks
1 DEBTORS TURNOVER RATIO 4.63 6.35 Debtors turnover ratio decreased due to lower sales
2 INVENTORY TURNOVER RATIO 12.86 19.61 Inventory turnover ratio also decreased due to lower sales
3 INTEREST COVERAGE RATIO 8.80 3.30 Ratio increased during the year due to higher profitability.
4 CURRENT RATIO 1.94 1.24 Current ratio improved during the year due to improve in liquidity.
5 DEBT EQUITY RATIO 0.01 0.01 Improved during the year due to lower long tem debts.
6 OPERATING PROFIT MARGIN (%) 5.44% 2.49% Increased due to higher profitability during the year
7 NET PROFIT MARGIN (%) 2.84% 0.40% Increased due to higher profitability during the year
8 RETURN ON NET WORTH 7.84% 1.38% Increased due to higher profitability during the year

Cautionary Statement

Statements in this Management Discussion and Analysis Report describing the Companys objectives, projections, estimates and expectations may constitute “forward looking statements” within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied.