Sat Industries Ltd Management Discussions.

Management Discussion and Analysis Report

Disclaimer:

This section of the Annual Report has been included in adherence to the spirit enunciated in the Code of Corporate Governance approved by the Securities and Exchange Board of India. Shareholders and Readers are cautioned that in the case of data and information external to the Company, though the same are based on sources believed to be reliable, no representation is made on its accuracy or comprehensiveness. Further, utmost care has been taken to ensure that the opinion expressed therein contain its perceptions on most of the important trends having a material impact on the Companys operations.

The opinions expressed by the management may contain certain forward-looking statements in the current scenario, which is extremely dynamic and increasingly fraught with risk and uncertainties. The Company undertakes no obligation to publicly update or revise any of the opinions or forward-looking statements expressed in this report, consequent to new information, future events, or otherwise. Estimation and expectation made in the Report may differ from actual performance due to various Economic conditions, Government Policies and other related factors.

1. Industrial Structure and Development

Your Company is engaged in the business of import, export and domestic trading of a wide variety of goods which includes fabrics, steel, GI sheets, leather, polymers, plastic in primary form and articles thereof, building materials, paper, metal scrap and textile material & products.

At present your company embraces varied business groups which includes- trading, manufacturing, education technology, leasing and startup investments, global business and financial services through its various subsidiaries and associates. It has presence in various international markets such as the Middle East, Europe, Asia, Africa and America.

? Manufacturing of PP/HDPE Woven Bags and Fabric

Sah Polymers Limited (a subsidiary of Sat Industries Limited) has diversified into the manufacturing of FIBCs (Jumbo Bags). During the Financial year 2019-20, the Companys manufacturing division witnessed a growth of 13% in volume terms while 8% in value terms as compared to financial year 2018-19. The Companys trading division achieved 41% growth in volume terms in the FY 2019-20 as compared to FY 2018-19.

? Manufacturing of Stainless-Steel Flexible Hoses and Assemblies

Aeroflex Industries Limited (a subsidiary of Sat Industries Limited) is one of the worlds Leading Manufacturer of Stainless-Steel Flexible Hoses and Assemblies having one of the largest integrated plant situated at Taloja (Mumbai, India). Aeroflex witnessed a growth of 3% in Sales in value terms in FY 2019-20 as compared to FY 2018-19. It is now exporting its products to more than 80 countries. During the year, it has incorporated a wholly owned subsidiary Company based in London, UK.

? Ed-Tech (Education Technology)

Genext Students Private Limited (an Associate Company of Sat Industries Limited) is Indias first hybrid tutoring platform that enables effective after school learning to school students with the use of advanced technology along with personalized tutoring. During the year Company has launched its virtual classes (Live Interactive Online Classes) in English and Hindi. It has also launched online classes in hindi medium for the state board of Rajasthan.

? Leasing & Startup Investments

Sat is engaged in the business of leasing of machines and moulds which are used in the manufacturing of plastic products. Sat also invests in startups which have disruptive and innovative business models. Your Company aims to foster the spirit of entrepreneurship and provide fuel for the growth of young innovative Companies through our investments. Your company carries out these businesses on its own and through its wholly owned subsidiary, Italica Furniture Private Limited.

? Global Business

Sat is engaged in the global business of import, export and services of metal, plastics and textile products through its subsidiary Italica Global FZC, UAE.

? Financial Services

Sat is also engaged in the business of financing activities through its subsidiary Aeroflex Finance Private Limited (formerly known as ‘Italica Ventures Private Limited). The financing activities include providing loans and advances to individuals, firms, companies, co-operative societies, educational institutions etc., acquiring shares/stocks/bonds/debentures/securities issued by Government or local authorities or other marketable securities. Aeroflex Finance Private Limited is a registered NBFC with the RBI.

2. Opportunities and Threats

Your company is now more focused on value added business activity through subsidiaries and associates rather than low margin trading activity on stand alone basis. Your Company has strong opportunities in the international and Domestic market.

Following are the two Significant threats to your Companys business:

i. Competitive Business:

Since your company operates in world markets, competitive business can develop from any corner of the globe.

Your Company must be on the lookout for tracking the competition and maintaining its competitive edge in terms of quality and value proportion.

ii. Talent retention: Your Company must ensure that the people working for it who constitute its major competitive advantage continue to contribute productivity to its business.

Segment–wise or product-wise performance

(Rupees in Lakhs)

Particulars 2019-20 2018-19
Trading Segment 1595.29 2,784.84
Finance and Investment Segment 487.91 651.05

4. Outlook

The outlook of your Company like that of all other in international marketing is dependent on Government policy. Government policy needs to be clearly spelt out more particularly in respect of importing and exporting products about Benefits at par with other countries and bilateral trade agreements with the countries in the world. It may lead to opening of new export markets. Barring unforeseen circumstances, the prospects are more than satisfactory.

5. Risk and Concerns

The growth of your Companys portfolio is linked to the overall economic growth. Primary risk to the business will be on account of adverse changes to the economy. Further, the changes in consumer behavior, buying patterns and working environment arising due to COVID-19 pandemic may pose some challenges for the businesses.

6. Financial and Operational Performance

(Rupees in Lakhs)

Particulars 2019-20 2018-19
Revenue from Operation 2,174.01 3,435.89
Profit before tax 103.55 446.63
Net Profit 62.48 333.26

7. Material developments in Human Resources/Industrial Relations front, including number of people employed

Management relation with the employees remains cordial. Your Companys Human Resources philosophy is to establish and build a strong performance and competency drive culture with greater senses of accountability and responsibility. The industrial relations scenario remained peaceful and harmonious. Number of employees during the financial year were 12.

8. Significant Financial Ratios

As per provisions of SEBI Listing Regulations, 2015, the Significant financial ratios are given below

Particulars %/times 2019-20 2018-19
Net Profit margin % 2.87 9.70
Operating Profit margin % 9.70 2.87
Debtors turnover times 4.69 5.93
Debt equity ratio % 0.005 0.005
Current ratio times 5.26 6.14
Interest service coverage ratio times 19.01 17.09
Return on Net worth % 0.58 3.62

9. Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof:

Due to decline in net Profit from Rs. 333.26 Lakhs to Rs. 62.48 Lakhs, your Companys return on net worth has also been declined from 3.62% to 0.58%.