Shanti Gold International Ltd Management Discussions

Retaining our existing customer base is one of the primary factors that is vital in ensuring revenue growth and driving long-term financial stability.

(iii) Attracting new customers: Given that during the Fiscals 2025, 2024 and s 2023, we had significant presence in the state of Punjab, which contributed to 363.29 million 324.94 million and 481.54 million, respectively, representing 3.28%, 4.57% and 7.09%, respectively, of our revenue from operations, as part of our strategy, we are focused on expanding our footprint in North India, in states such as Haryana and Rajasthan. We believe we have the knowledge and understanding of the demand trends and customer preferences in Punjab, provides us with a foundation to increase our market share in the adjacent states. Further, we intend to expand our presence in global markets, including, the USA and the UAE. By participating in trade exhibitions in the USA and the UAE, we aim to significantly increase our brand visibility and recognition among international jewellery businesses, distributors, and consumers. For further details in relation to our strategies, see "Our Business Our Strategies" on page 186.

By implementing these strategies, we aim to reach new customers and expand our presence.

The cost of procuring raw materials, along with the manufacturing of our products, is a significant factor that directly impacts our results of operations and financial condition. Our jewellery production is primarily dependent on raw materials, including gold bar, stones, alloy, diamond, and wax. These raw materials represent a substantial portion of our overall cost structure and have a direct impact on our profitability and cost management strategies.

Set forth below is a break-up of raw materials obtained from our suppliers in the corresponding periods:

Our business is significantly dependent on timely procurement, quality and price of our raw material, especially gold, for jewellery production. As a result, we are exposed to fluctuations in the price and availability of gold, both of which are influenced by regulatory factors such as import duties, global economic conditions, geopolitical factors, and fluctuations in demand and supply in the international markets. Please see, "Risk Factors 4. Our dependence on gold may expose us to market and demand fluctuations. Further, the non-availability or high cost of quality gold, may have an adverse effect on our business, results of operations, financial condition and prospects" on page 32.

In addition to the raw material costs, the manufacturing process is also dependent on our manufacturing capabilities. Our manufacturing and processing operations are carried out using machines such as casting machines, steamers, induction melter, air compressors, etc., and a significant portion of our production process relies on outsourced labour, particularly for the manual setting of stones. For information on risks associated with our manufacturing capabilities, please see,

"Risk Factors 7. Our business is dependent on our manufacturing capabilities at our Andheri Manufacturing Facility. Unplanned slowdowns, unscheduled shutdowns or prolonged disruptions in our manufacturing operations and an inability to effectively utilize our production capacity could have an adverse effect on our business, results of operations, cash flows and financial condition." on page 35.

Our business requires a substantial amount of working capital. For details of our existing working capital as at March 31, 2025, March 31, 2024 and March 31, 2023, see "Objects of the Issue - Funding incremental working capital requirements of our Company - Basis of estimation of incremental working capital requirement" on page 107. The working capital is primarily required to finance the purchase of raw materials to keep optimum level of finished products and to support trade receivables. Further, in order to scale operations and support the growing demand for products, our Company recognizes the need to augment the working capital. As of May 31, 2025, our fund based working capital facilities and non-fund based working capital facilities was 2,034.64 and 101.68 million, respectively. As we scale our business, additional working capital is required to support our growth and expand our market presence. As part of our strategy, we are planning to raise [?] through the proceeds of the Issue out of which 2,000.00 million will be utilised towards our working capital requirements. Further, we are planning to expand our operations by construction of and setting up of the Proposed Jaipur Facility, which will require significant working capital. For risks associated with our working capital requirements, see "Risk Factors 13. Our Company requires significant amounts of working capital for continued growth and we intend to utilise 2,000.00 million from the total Net Proceeds towards funding our working capital requirements. Our inability to meet our working capital requirements, on commercially acceptable terms, may have an adverse impact on our business, financial condition and results of operations." on page 39.

Domestic demand is fuelled by rising disposable incomes, urbanization, and a growing preference for lightweight, modern designs, especially among younger consumers. On the export front, markets like the U.S., UAE, and Hong Kong continue to drive growth. Trade agreements and government support for export-oriented policies further strengthen

Indias position in the global market. (Source: CARE Report)

While the sector holds immense potential, it faces challenges such as gold price volatility, dependency on imports, and increasing competition from synthetic diamonds. Fluctuations in international demand and compliance with stringent regulatory norms also pose risks. However, these hurdles are being addressed through policy interventions, innovation, and diversification. (Source: CARE Report)

Our business is significantly influenced by consumer spending patterns, general economic conditions, and broader market dynamics. Domestic and international demand for our products is driven by various factors, including rising disposable incomes, urbanization, and changing consumer preferences. For risks associated with market and demand fluctuations, see "Risk Factors 4. Our dependence on gold may expose us to market and demand fluctuations. Further, the non-availability or high cost of quality gold, may have an adverse effect on our business, results of operations, financial condition and prospects." on page 32.

1.1. 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 and loss (including other comprehensive income), the restated statement of changes in equity, the restated statement of cash flow for the Fiscals ended March 31, 2025, March 31, 2024 and March 31, 2023 and the summary of significant accounting policies and other explanatory information prepared, in terms of the requirements of Section 26 of Part I of Chapter

III of the Companies Act, 2013, SEBI ICDR Regulations and the Guidance Note on "Reports in Company Prospectuses (Revised 2019)" issued by ICAI, as amended from time to time ("Restated Financial Information"), has been prepared by the management of the Company as required under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended issued by the Securities and Exchange Board of India, in pursuance of the Securities and Exchange Board of India Act, 1992, solely for the purpose of inclusion in this Red Herring Prospectus, in connection the Issue. and have been prepared in accordance.

The Restated Financial Information of the Company have been prepared to comply in all material respects with the

Indian Accounting Standards ("Ind AS") as prescribed under Section 133 of the Act read with the Companies

(Indian Accounting Standards) Rules, 2015 (as amended from time to time), presentation requirements of Division II of Schedule III to the Act, as applicable to the financial statements and other relevant provisions of the Act.

Pursuant to the Companies (Indian Accounting Standard) Second Amendment Rules, 2015, the Company prepared its first set of statutory financial statements as per Indian Accounting Standards (Ind-AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) for the period ended March 31, 2025 and consequently, April 1, 2021 is the transition date for preparation of such statutory financial statements. Up to the Fiscal March 31, 2022, the Company prepared its financial statements in accordance with accounting standards prescribed under Section 133 of the Companies Act, 2013 ("Indian GAAP").

In accordance with Ind AS 101 First-time Adoption of Indian Accounting Standards, the Company has presented an explanation of how the transition to Ind AS has affected the previously reported financial position, financial performance and cash flows (Refer to Note 27 forming part of financial statements)

This restated financial information were approved for the Issue by the Companys Board of Directors on June 18, 2025.

1.2. Process of preparation of Restated Financial Information:

The Restated Financial Information of the Company for the Period has been complied by the Company from:

1.2.1. Restated Financial Information as at and for the periods ended March 31,2025, March 31, 2024 and March

31, 2023.

1.2.2. The Restated Financial Information has been prepared have been prepared in accordance with the Guidance

Note on Combined and Carve Out Financial Statements and Guide to Reporting on Restated Financial

Statements issued by the Institute of Chartered Accountants of India (ICAI) (Guidance Note) using the recognition and measurement principles of Indian Accounting Standards (‘Ind AS).

The accounting policies set out below have been applied consistently to the years presented in the Restated Financial Information. This Restated Financial Information has been prepared on a going concern basis.

The Restated Financial Information have been prepared on a historical cost basis, except for certain financial assets and liabilities measured at fair value or amortized cost method (refer accounting policy regarding financial instruments) or revalued amount.

(iii) Current and non-current classification: All assets and liabilities have been classified as current or non-current as per the Companys normal operating cycle and other criteria set out in Schedule III to the Act. Based on the above criteria, the Company has ascertained its accounting cycle as twelve months for the purpose of current/non-current classification of assets and liabilities.

(iv) Functional and presentation currency: The financial statements are presented in Indian Rupees ( ), which is also the Companys functional currency. All amounts have been rounded off to the nearest Million, unless otherwise indicated.

(v) Basis of measurement: The financial statements have been prepared on the historical cost basis except for the following items:

The preparation of these restated financial statements in conformity with the recognition and measurement principles of Ind AS requires, management to make judgements, estimates and assumptions that affect the reported balances of assets and liabilities, disclosures relating to contingent liabilities as at the date of the financial statements and the reported amounts of income and expenses for the years presented.

Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the amounts recognized in the Restated Financial Information is included in the following notes:

Impairment test of non-financial assets and financials assets

Measurement of defined benefit obligations: key actuarial assumptions

Recognition of deferred tax assets: availability of future taxable profit against which tax losses carried forward can be used.

Recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources.

The estimates and judgements used in the preparation of the financial statements are based on historical experience and various other assumptions and factors (including expectations of future events), that the Company believes to be reasonable under the existing circumstances. The said estimates and judgements are based on the facts and events, which existed as at the reporting date, or that occurred after that date but provide additional evidence about conditions existing as at the reporting date.

The estimates and underlying assumptions are reviewed on an ongoing basis, Revisions to accounting estimates include useful lives of Property, Plant and Equipment, Intangible Assets allowance for doubtful debts/advances, future obligations in respect of retirement benefit plans, expected cost of completion of contracts, provision for rectification costs, fair value measurement etc. Difference, if any, between the actual results and estimates is recognized in the period in which the results are known.

The areas involving critical estimates and judgements are: a. Amortization of Intangible Assets b. Recognition of deferred tax assets for carried forward tax losses. c. Estimation of Current tax expenses and payable d. Revenue recognition

A number of accounting policies and disclosures require measurement of fair value for both financial and non-financial assets and liabilities.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an ordinary transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either

In the principal market for the asset or liability, or

In the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible to/ by the Company.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole.

Level 1 Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2 Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

Level 3 Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

In recognizing revenue, the Company applies Ind AS 115 which establishes a comprehensive framework for determining whether, how much and when revenue is to be recognized. The Standard require apportioning revenue earned from contracts to individual promises, or performance obligations, on a relative stand-alone selling price basis, using a five-step model.

Revenue is recognized upon transfer of control of promised product or services to customer in an amount that reflect the consideration which the Company expects to receive in exchange for those product or services at the fair value of the consideration received or receivable, which is generally the transaction price, net of any taxes/duties and discounts.

Revenue from sale of products is recognized at the point of time upon transfer of control of promised goods to the customer in an amount that reflects the consideration the Company expects to receive in exchange for those goods i.e. when it is probable that the entity will receive the economic benefits associated with the transaction and the related revenue can be reliably measured.

Revenue is recognized at the fair value of the consideration received or receivable, which is generally the contracted price, net of any taxes/duties and discounts considering the impact of variable consideration.

Revenue is measured based on the transaction price, which is the consideration, adjusted for volume discounts, service level credits, performance bonuses, price concessions and incentives, if any, as specified in the contract with the customer. Revenue also excludes taxes collected from customers.

A receivable represents the Companys right to an amount of consideration that is unconditional (i.e. only the passage of time is required before payment of the consideration is due).

The performance obligation is satisfied upon delivery of the goods.

At the time of entering into the agreement / raising an invoice, performance obligations in the contract are identified. The Company delivers goods as per the terms & conditions of the contract. Contracts are of differing natures and sometimes have one specific performance obligation, and on other occasions have multiple performance obligations. Contract liability has been created towards unsatisfied or partially satisfied performance obligation.

Contract fulfilment costs are expensed as incurred.

Interest income on time deposits and inter-corporate loans is recognized using the effective interest method.

The ‘effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the gross carrying amount of the financial asset.

In respect of other heads of income, the Company follows the practice of recognizing income on accrual basis. b) Property, plant and equipment Recognition and Measurement

Items of property, plant and equipment are measured at cost, net of recoverable taxes (wherever applicable), which includes capitalized borrowing costs less accumulated depreciation and accumulated impairment losses, if any.

Cost of an item of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes, if any, after deducting trade discounts and rebates, any directly attributable cost of bringing the item to its working condition for its intended use and estimated cost of dismantling and removing the item and restoring the site on which it is located.

If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant, and equipment. Any gain or loss from the disposal of an item of property, plant and equipment is recognized in the statement of profit and loss.

Subsequent expenditures are included in the assets carrying amount or recognized as a separate asset, as appropriate, only if it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced.

All other repairs and maintenance are charged to the statement of profit and loss during the reporting year in which they are incurred.

Depreciation is calculated on cost of items of property, plant and equipment less their estimated residual value over their useful life using straight line method and is recognized in the statement of profit and loss.

The estimated useful lives of items of property, plant and equipment for the current and comparative periods are as under and the same are equal to lives specified as per schedule II of the Act.

Based on technical evaluation and consequent advice, the management believes that its estimates of useful lives as given above best represent the period over which management expects to use these assets. Depreciation on addition to property, plant and equipment is provided on pro-rata basis from the date the assets are ready for intended use. Depreciation on sale/discard from property, plant and equipment is provided for up to the date of sale, deduction or discard of property, plant and equipment as the case may be.

Depreciation method, useful lives and residual values are reviewed at each financial year-end, and changes, if any, are accounted for prospectively.

An intangible asset is recognized when it is probable that the future economic benefits attributable to the asset will flow to the Company where its cost can be reliably measured.

Intangible assets are initially measured at cost. Such intangible assets are subsequently measured at cost less accumulated amortization and any accumulated impairment losses. Cost comprises the purchase price and any cost attributable to bringing the assets to its working condition for its intended use.

Amortization is calculated to write off the cost of intangible assets over their estimated useful lives using the straight-line method and is included in depreciation and amortization expense in the statement of profit and loss.

The useful lives of intangible assets are as follows: