Shervani Industrial Syndicate Ltd Management Discussions

A. Business Overview, Industry Structure and Development

The downturn caused by the pandemic is witnessing an upswing, primarily driven by robust government policies. The consequential migration and pent-up demand post-pandemic are driving growth in our sector.

All are aware that real estate sector is the biggest employer of unskilled labour and growth in this sector has a positive cascading effect on other sectors like steel, cement, sanitary ware, ceramics etc. Consequent to the lifting of the Corona pandemic curbs the migration of the public in search of jobs has increased leading to better life and aspirations for stability, roof and a place of their dreams they may call home. Thus on account of said factors the demand exists and remains unfulfilled, is in growth mode and is expected to remain so for some time in future. Your company backed by quality construction, pricing of its products and most importantly strict adherence to delivery schedule has given a distinct advantage in sale of its products. We expect that the rising trend in demand shall continue for more time because the supply in real estate sector takes time to match the demand.

The factors having positive impact on the real estate industry are several. The second factor being de-monetisation is pushing the speculators out of market resulting in fall in prices and the genuine buyers getting a better deal. The Banks emphasis on housing loan facility have eased availability but the marginal increase in interest rate is having negative impact on customers The foregoing overview and status of the real estate industry may not be so for the Metros, where income, costs, inventory have important role, but is true for the Tier-1 and Tier-2 cities where the majority of middle-income group resides and your company operates.

B. Outlook on Opportunities, Threats Risks and Concern

The real estate industry is no exception to risks and threats of business. However the macro economic factors like opportunity, threat and risks are not in control of a individual unit but its effect leaves a deep adverse impact on any unit. The effect of factors like the Union and State Govt actions and initiatives, the RBI / banks policy, statutory enactments etc. may reduce or increase the risk and concern for any business unit to flourish. As already explained the opportunity are aplenty since the trends of changes in society like migration, increase in disposable income, support and enhance the demand side of this sector. The statutory enactment like RERA have boosted the confidence in customers. They are now assured of putting their savings in the hands of developers. Among the major areas of risk before the real estate industry is supply of raw materials and inflationary trends in pricing. While the first risk delays/defers the delivery schedule the second risk enhances the costs and the quality of work.

At the micro level the supply of raw material is a matter of concern. Although the basic material like cement and steel are in organized sector and affected by Govt. policies the other material like brick and sand are in unorganized sector. Any mismatch can jeopardise the whole project by way of costs, and quality of work or delay / defer the project. Your Company has worked hard on both these factors, its methodology of working has been tried and tested in previous projects and the trust and goodwill earned in our previous projects go long way in overcoming these adverse factors. We are continuously working to employ the most efficient systems for procurement and testing of raw material as well as to optimize the operating efficiency and consequently quality of work.

C. Subsidiary Company

M/s Farco Foods Private Limited, the wholly owned subsidiary of your company is engaged in manufacture of biscuits on job work basis for M/s Surya Foods and Agro Limited for their "Priya Gold" brand. During the year under review the Company produced 6016 MT of biscuits and earned a profit of Rs 20.65 lakh after tax. During the year under review the profit has increased due to optimal use of the resources. In the previous report we had informed that in the goat farming project the company was facing problems in rearing of animals because the climatic conditions, at site, are not conducive to growth of animals. To overcome the situation requires extensive investment but due to uncertainty about returns/recovery on investment the Company is re-thinking about same.

D. Internal Financial Controls

The Company has an adequate system of internal control to ensure compliance with policies and procedures commensurate with the size and scale of operations. The internal audit work has been assigned to an independent firm of Chartered Accountant which evaluates the efficiency and adequacy of internal control systems. The internal audit reports and recommendations are reviewed by the Audit Committee of the Board.

E. Development in Human Resource and Industrial Relations

The Company maintains a very cordial relationship with its employees. They whole-heartedly support the management in all its activities and endeavors.

F. Research and Development

In view of the nature of business activities of the Company there is little scope for research and development work. The company is making all efforts to reduce costs by maintaining standards that benefit the consumers.