Sarthak Industries Ltd Management Discussions.

Industrial Structure and Developments

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 and other businesses on opportunity basis. As a major of diversification, the Company has also decided to engage in Mining and Mineral Based Industry and Real estate activity in India.

During the year 2018-19, the Companys performance showing decreasing trend in turnover and profitability as compared to last year. But 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.

Opportunities and Threats

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.

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 42 to the audited accounts of the Company as available in this Annual Report.

Outlook

The Financial year 2018-19 was an eventful year after adoption of Goods and Service Tax (GST). It continues to 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. The Company is also starting a commercial real estate mall project in Indore (MP).

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 2018-19 is summarized below:

Rs. in Lacs
Balance Sheet As at March 31, 2019 As at March 31, 2018
a. Property, Plant and Equipment 880.93 1,504.07
b. Capital Work-in-progress 504.34 154.69
c. Intangible assets 1.40 0.49
d. Financial assets 494.76 502.17
e. Deferred tax assets (net) 31.48 5.15
f. Other Non-current assets 50.00 109.94
g. Current assets 4,572.16 3,816.34
h. Non current assets held for sale 1,457.32 1,397.00
i. Total Equity 3,252.30 3,213.96
j. Non- current liabilities 17.00 1,155.91
k. Current liabilities 3,686.97 3,119.98
l. Liabilities directly associated with assets classified as held for sale 1,036.13 0.00

Summarized Profit and Loss Account

(Rs. In Lacs)
Particulars 2018-19 2017-18
Revenue from operations 11,195.67 12,109.59
Other Income 144.56 376.37
Profit/ (Loss) before Depreciation, Finance Cost, Exceptional items & Tax Expenses 350.24 454.41
Less: Depreciation 71.32 65.10
Profit/ (Loss) before Finance Cost, Exceptional Items and Tax Expenses 278.92 389.31
Less: Finance Cost 160.42 173.79
Profit/ (Loss) before Exceptional Items and Tax Expenses 118.50 215.52
Add/ (Less): Exceptional items -- --
Profit/ (Loss) before Tax Expenses 118.50 215.52
Less: Tax Expenses 73.60 39.93
Profit/ (Loss) after Taxation 44.90 175.59
Add: Other Comprehensive Income (6.56) (5.34)
Total Comprehensive Income 38.34 170.25
Balance brought forward from previous year 2517.07 2346.82
Amount available for appropriation 2555.41 2517.07
APPROPRIATION -- --
Amount Carried to Balance sheet 2555.41 2517.07
Paid Up Equity Share Capital 696.89 696.89
Earnings Per share (Rs.10/- each)
Basic & Diluted (in Rs.) 0.64 2.52

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 31.03.2019 is 47.

KEY FINANCIAL RATIOS ANALYSIS

Details of key financial ratios are as follows:

S. No. Particulars FY 2019 FY 2018 Remarks
1 Debtors Turnover 6.35 10.33 Debtors turnover ratio decreased due to increase in average trade receivables
2 Inventory Turnover 19.61 32.91 Inventory turnover ratio also decreased due to increase in inventory
3 Interest Coverage Ratio 3.30 4.38 Ratio declined during the year due to lower profitability.
4 Current Ratio 1.24 1.22 Current ratio slightly improved during the year due to improve in liquidity.
5 Debt Equity Ratio 0.00 0.25 Improved during the year due to repayment of long term debts.
6 Operation Profit Margin (%) 2.49% 3.21% Declined due to lower profitability in overall business segments
7 Net Profit Margin (%) 0.40% 1.45% Declined due to lower profitability in overall business segments
8 Return on Net Worth 1.38% 5.46% Declined due to lower profitability in overall business segments

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.