Shiva Cement Ltd Management Discussions

Company Overview

Incorporated in 1985, Shiva Cement Limited is a part of the renowned JSW Group. The Company is engaged in the manufacturing of clinker and trading of allied products. With a clinker production capacity of 1.36 MTPA, the Company intends to further augment its capacities to cater to the emerging opportunities in the eastern India markets, striving to establish itself as the regional market leader.

The Company?s manufacturing facility is strategically located in Odisha, providing it a competitive advantage due to its proximity to abundant raw material reserves and key markets. The strategic location enables the Company to serve as a clinker feeder to JSW Group?s eastern plants at Salboni in West Bengal and Jajpur in Odisha. The Company has captive limestone mines in Khatkurbahal, Odisha with adequate reserves, ensuring long-term availability of quality raw materials. The state-of-the-art infrastructure and surplus core equipment capacity provide the Company with the potential for expansion.

Economic Overview Global Economy

The global economy surpassed expectations in 2023 after a turbulent year. The International Monetary Fund (IMF) has revised its projection for global economic growth in 2023 from 3.0% in its October 2023 outlook to 3.1%. Despite several major economies demonstrating remarkable resilience, underlying risks and vulnerabilities persist due to simmering geopolitical tensions, the growing intensity and frequency of extreme weather events, volatility in energy and food markets and higher-for-longer interest rates.

Global inflation, a key concern over the past two years, continues to recede faster than expected. It declined from 8.7% in 2022 to 6.8% in 2023 and is expected to decrease to 5.8% in 2024 and to 4.4% in 2025. Core inflation is also on a downward trend.

Economic expansion in several emerging markets and developing economies (EMDEs) has outperformed initial projections in 2023. The US economy has experienced the strongest recovery among major economies. Its GDP is estimated to grow from 1.9% in 2022 to 2.5% in 2023. The European Union (EU) has demonstrated resilience in navigating through unprecedented shocks from the prolonged Russia-Ukraine war and higher interest rates. Although its GDP growth contracted from 3.6% in 2022 to 0.6% in 2023, the EU managed to avoid the recession in 2023.

Outlook

The global economy is expected to sustain its resilience in 2024. The IMF forecasts a global growth of 3.1% in 2024, with a slight uptick to 3.2% in 2025. Asia is expected to again contribute significantly to global growth in 2024, echoing its impact in 2023. The IMF estimates a growth rate of 4.7% for Asia in 2023, with China and India playing a major role. In China, higher spending on disaster recovery and resilience initiatives supported growth, while in India, robust domestic demand led to an upward revision in the growth estimate.

The global economic outlook for 2024 will be impacted by higher interest rates, carrying the risk of a resurgence in inflation due to persistent core inflation and shifts in the anticipated monetary stance. Furthermore, the ongoing Russia-Ukraine conflict has the potential to dampen the overall economic outlook of the EU. The escalation of geopolitical conflict in the Middle East and the Red Sea route could elevate logistics costs, energy and commodity prices, raise the risks of supply disruptions and pose downside risks to the global economy. However, with faster disinflation and steady growth, the possibility of a severe economic downturn has diminished. Positive factors, such as stronger-than-expected economic performance of the US and several large emerging market and developing economies, economic stimulus in China, the resilience of Europe and the easing of supply chain bottlenecks will bolster the outlook of the global economy.

Indian Economy

Amid the volatile global economic environment, India remains a bright spot, radiating optimism. It is the fifth-largest economy in the world and is expected to retain its position as the fastest-growing major economy in the world. As per the Second Advance Estimates of National Income, 2023-24, India?s GDP growth remained strong at 7.6% in FY 2023- 24 as against 7% in FY 2022-23, supported by buoyant domestic demand, moderate inflation, a stable interest rate environment, and strong foreign exchange reserves. Furthermore, a double-digit growth rate of 10.7% in the Construction sector and an 8.5% growth rate in the Manufacturing sector have contributed to the GDP growth in FY 2023-24. The Index of Industrial Production (IIP) shows that the output of Indias industry grew by 6.1% in the first three quarters of FY 2023-24 compared to 5.5% in the corresponding period of last year.

CPI inflation is on a downward trajectory and eased to 5.10% in January 2024 from 5.69% in December 2023. Headline inflation is expected to gradually decline to the target although it remains volatile due to repetitive food price shocks. The RBI keeps the policy repo rate unchanged at 6.50% and retains the CPI inflation forecast at 5.4% in FY 2023-24.

Gelevated at an estimated 225.9 MT in 2024. Cement demand is^{lobal trade volumes of cement and clinker are expected to remain} anticipated to rise in the coming years, fueled by government initiatives supporting infrastructure and construction activities in developing countries.

Outlook

According to the IMF, the Indian economy is anticipated to progress steadily at 6.7% in FY 2024 and 6.5% in FY 2025. However, the RBI?s forecast is more optimistic, projecting a higher GDP growth of 7.6% for FY 2024 and 7.0% for FY 2025. India?s economic outlook remains positive, supported by stronger consumer demand, increased capital expenditure and enhancements in both physical and digital infrastructure. Private and government investments are expected to be the primary drivers of economic growth in 2024, backed by improving prospects of rural consumption due to the easing of inflation, increased spending in an election year and proactive government policy measures.

Industry Overview Global Cement Industry

The global cement market size was valued at US$ 383.02 billion in 2023. The market is expected to reach US$ 614.88 billion in 2032, growing at a CAGR of 5.4% between 2024 and 2032. Global cement consumption has been tepid in recent years, impacted by the pandemic and further compounded by the ongoing Russia-Ukraine conflict, fluctuating energy prices and high inflation, resulting in increased logistics and production costs. Cement demand is expected to drop slightly in 2023 with only India and the Middle East demonstrating notable growth. According to The Global Cement Report, global cement demand decreased by 1.2% in 2023 to 4,025 MT, following a 5.1% decline in 2022. China continues to dominate, accounting for 52% of cement demand. However, demand in China has now diminished to 4.1% in 2023, followed by a further decline to 1.5% in 2024, primarily due to the ongoing real estate crisis in the country. Despite these challenges, global trade volumes of cement and clinker are expected to remain elevated at an estimated 225.9 MT in 2024. Cement demand is anticipated to rise in the coming years, fueled by government initiatives supporting infrastructure and construction activities in developing countries.

Indian Cement Industry

India is the second largest cement consumer and producer in the world, accounting for more than 7% of the global installed capacity. The cumulative index of the cement sector increased by 9% during April to January 2023-24 compared to the corresponding period in the previous year.

Domestic cement demand grew at a healthy 5.5-6.5% CAGR over fiscals 2019 to 2023, despite pandemic-induced slowdown. Cement demand is estimated to grow by 9-11% to ~438-443 MT in FY 2023-24. This growth is attributed to the government?s emphasis on infrastructure and affordable housing, along with pre-election spending. Cement demand is expected to grow at a CAGR of 6-7% over the next five years, driven by extensive infrastructure investments and healthy momentum from the industrial and commercial segments.

In the Asia Pacific region, the cement market in India has been experiencing a positive trend due to the growth of cement production capacities. As per Crisil MI&A Research, the total cement manufacturing capacity in India is ~595 MT in FY 2022-23, with an additional 133 MTPA being added in the last six years. The cement capacity is expected to be ~638-643 MT in FY 2023-24. The industry anticipates the installed capacity to reach ~ 805-815 MT by FY 2027-28. An additional capacity of 210-220 MTPA is expected to be commissioned in the next fiscal year, to meet the rising demand from infrastructure and housing sectors and capture market share in a highly fragmented and competitive industry. During the fiscal years 2024-2028, capacity additions are expected to be driven by the east and south regions, followed by the central region, and the north and west.

The cement market in India is expected to experience robust growth in the coming years, propelled by urbanisation and industrialisation trends, infrastructure development, favourable government initiatives and policies, rising disposable incomes and increasing construction activities across the country. These factors are expected to support both consumption and a high pace of capacity expansion in the foreseeable future.

Iaccounting for more than 7% of the global installed capacity. The cumulative^{ndia is the second largest cement consumer and producer in the world,} index of the cement sector increased by 9% during April to January 2023-24 compared to the corresponding period in the previous year.

NOTICE

TTPD (1.36 MTPA). It has also installed a waste heat recovery system (WHRS)^{he Company has commissioned a clinker facility with a capacity of 4,000} with a capacity of 8.9 MW and a dedicated incoming power line of 132 KV in Sundargarh, Odisha.

Opportunities

• Favourable policy environment for infrastructure development: The government continues to focus on infrastructure development through various initiatives such as the National Infrastructure Pipeline (NIP), Urban Infrastructure Development Fund (UIDF), Pradhan Mantri Awas Yojana (PMAY), Smart Cities Mission, PM Gati Shakti, etc. The implementation of these initiatives led to rapid infrastructure development and a surge in construction activities nationwide, contributing to increased cement demand and driving the expansion of the cement industry.

• Expanding real estate sector: The economic growth of the country, population surge, urbanisation and a burgeoning middle class with higher disposable income have led to increased demand for residential and commercial spaces, as well as other real estate properties. This surge in demand is a significant factor fueling the increased consumption of cement.

• Budgetary support: The government?s thrust for large infrastructure projects and increased capital outlay by 11.1% to Rs 11.1 lakh crore for FY 2024-25 in the Interim Budget 2024-25 will catapult the infrastructure sector and spur domestic cement demand. The budget outlay of Rs 80,671 crore for the PM Awas Yojana and Rs 2.78 lakh crore for road, transport and highways along with proposals for the development of 50 new airports and 3 major economic railway corridors are expected to drive substantial domestic demand for cement.

Operational & Financial Overview Operational Highlights FY 2023-24

The Company has commissioned a clinker facility with a capacity of 4,000 TPD (1.36 MTPA). It has also installed a waste heat recovery system (WHRS) with a capacity of 8.9 MW and a dedicated incoming power line of 132 KV in Sundargarh, Odisha. This clinker manufacturing facility is serving as a feeder to meet the requirements of the eastern grinding units of JSW Cement Limited (JCL). The operations at the Company?s manufacturing facility were under stabilisation/trial run phase for three months period till June 30, 2023. During the trial run for the Expansion Project in the previous fiscal and the three months period ending June 30, 2023, the Company supplied 90,770 MT and 196,676 MT of clinker, respectively, to JCL. The Company plans to install a new overland belt conveyor of ~ 8 km in length to transport crushed limestone from the mines to the cement plant. Additionally, a railway siding with a 12.5 km long railway track will be established to ensure seamless transportation of finished goods to the market. The Company commissioned 4 MTPA limestone crushing plant at its mines at Khatkurbahal, Odisha. It has also acquired a new limestone mine with a mineral resource volume of 53.36 MT. The Company?s mines have a total mineral resource volume of 116.29 MT of limestone as of March 31, 2024. The newly established mine, classified as a merchant mine, allows the Company to engage in the commercial sale of the extracted limestone. Furthermore, the new mine possesses approximately 73.04 MT of dolomite reserves, which, pending regulatory clearance, would be marketed to steel plants in the Eastern region.

Financial Performance

( Rs in lakh)

Particulars	FY 2023-24	FY 2022-23	Change
Gross Turnover	34,681.23	0.55	100%
Operating EBITDA	3,899.27	(1,309.75)	398%
Depreciation & amortisation	3,148.92	5898.63	(-) 47%
Finance cost	10,149.21	1,285.30	690%
Loss before exceptional items	(9,162.64)	(10,864.20)	(-) 15.67%
Loss for the year	(6,832.49)	(8,047.03)	(-) 15.09%

Trial Run Operation Summary

Particulars	FY 2023-24	FY 2022-23
Revenue from trial run operation	10,811.65	4,763.94
Total trial run expenses	11,354.68	6,002.00
Net Trial run expense transfer to CWIP	534.89	1,238.06

The Company?s operating EBITDA is Rs 3,899.27 lakhs as against

Rs (-) 1,309.75 lakhs in FY 2022-23, reporting positive operating EBITDA increase by 398% on Y-o-Y basis.

Other Income

Other Income for the year is Rs 236.22 lakhs as compared to Rs 346.83 lakhs in FY 2022-23.

Material Cost

The Company?s expenditure on raw material consumption for FY 2023-24 has been increased to Rs 7,705.32 lakhs from Rs 31.57 lakhs in FY 2022-23.

Employee Benefits Expense

Employee benefits expense increased by 502% to Rs 1,649.80 lakhs from Rs 273.86 lakhs in FY 2022-23.

Power and Fuel Cost

Power and fuel cost has been increased to Rs 13,687.44 lakhs from 212.54 lakhs in FY 2022-23.

Loss on Asset Write-off

There has been profit derived on sale of asset for Rs 4.62 lakhs during the financial year. In the previous year we have incurred loss on asset write off amounting Rs 2,717.35 lakhs which was mainly on account of dismantling of civil and mechanical structures in the plant in order to utilise the space for project expansion.

Other Expenses

Other expenses have increased by 249% to Rs 2707.64 lakhs from Rs 776.73 lakhs in FY 2022-23.

Finance Cost

The Company?s finance cost increased by 690% to Rs 10,149.21 lakhs from Rs 1285.30 lakhs in FY 2022-23.

Depreciation and Amortization Expenses

The Depreciation and amortisation cost has been reduced by 47% to Rs 3,148.92 lakhs from Rs 5,898.63 lakhs.

Non-Current Assets

( Rs in lakh)

Particulars	31.03.2024	31.03.2023	Change
Other non-current assets	9,540.24	14,220.30	(-) 33%

Inventories

(Rs in lakh)

Particulars	31.03.2024	31.03.2023	Change
Raw materials	27.08	83.16	(-) 67%
Semi-finished goods	647.70	907.27	(-) 29%
Finished goods incl stock in transit	2,082.07	1,006.15	107%
Stores and spares	453.34	195.71	132%
Fuel	1,250.35	1,035.66	21%
	4,460.54	3,227.92	38%

Trade Receivables

( Rs in lakh)

Particulars	31.03.2024	31.03.2023	Change
Trade receivables	-	799.24	(-) 100%

Non-Current Liabilities

Rs ( in lakh)

Particulars	31.03.2024	31.03.2023	Change
Borrowings	1,39,650.72	1,14,756.03	22%

Current Liabilities

( Rs in lakh)

Particulars	31.03.2024	31.03.2023	Change
Borrowings	2,664.10	14,175.09	(-) 81%

( Rs in lakh)

Particulars	31.03.2024	31.03.2023	Change
Other financial liabilities	5,353.96	11,371.72	(-) 53%

Trade Payable

( Rs in lakh)

Particulars	31.03.2024	31.03.2023	Change
Trade Payables	6,048.71	5,073.93	19%

Rs ( in lakh)

Particulars	31.03.2024	31.03.2023	Change
Other current liabilities	13,794.01	485.72	2740%

Capital Employed

Total capital employed has been increased to Rs 1,27,638.04 lakhs from Rs 1,21,098.52 lakhs in FY 2022-23. Average return on capital employed is 0.77 % vis-?-vis (-ve) 7.91 % in FY 2022-23.

Own Funds

Total equity has been reduced to (-ve) Rs 14.676.78 lakhs vis-?-vis (-ve) Rs 7,832.59 lakhs in 2022-23.

Other key financial indicators

Particulars	Ratios For the year ended		Variance (%)	Change in ratio in excess of 25% compared to preceding year
	31.03.2024	31.03.2023
Current Ratio (times)	0.50	0.63	- 21.83%
Net Debt Equity Ratio (times)	-9.70	-16.46	-41.09%	Debt has been increased due to availment of fresh term loan for project activity
Debt Service Coverage Ratio (times)	1.60	0.12	-1213.40%	Increased due to increase in operational profit.
Return on Equity (%)	0.61	1.33	-54.34%	Ratio is not comparable as the plant was under trial operation in the previous year.
Inventory Turnover Ratio (Days)	0.15	0.34	-0.58	Ratio is not comparable as the plant was under trial operation in the previous year.
Trade Receivable Turnover Ratio (Days)	-	-	-	There is no trade receivable as all sales are done against advance.
Trade Payable turnover Ratio (Days)	0.22	2.13	-89.66%	Ratio is not comparable as the plant was under trial operation in the previous year.
Net Capital Turnover Ratio (times)	-2.46	-	-	Ratio is not comparable as the plant was under trial operation in the previous year.
Net Profit Ratio (%)	-0.20	0 (nil)	0 (nil)	Ratio is not comparable as the plant was under trial operation in the previous year.
Return on capital Employed (% age)	0.79	-8.64	110%	Increased Due to increase in borrowings after compensating increased EBIDTA.

Way Forward

The outlook for the Indian cement industry is promising, driven by strong demand from the infrastructure and housing sectors. The governments unwavering commitment to the development of public infrastructure, smart cities and affordable housing under the PMAY initiative with increased budgetary allocation, is poised to stimulate construction activity and bolster cement demand in the country. In alignment with market opportunities, the Company is increasing its capacities, expanding its reach, optimising efficiencies and enhancing the sustainability aspect of its operations.

The Company is focused on leveraging its key strengths, including captive limestone mines with a mining life of more than 40 years and abundant reserves to meet existing and future expansion requirements. The recent expansion of the clinkerisation unit with 1.32 MTPA capacity and its role as a supplier to JCL?s eastern grinding units, enable the Company to extend clinker sales to third-party entities. With its manufacturing facility strategically located in proximity to raw materials and fuel sources, coupled with efficient connectivity to local transportation infrastructure, the Company is confident to improve its performance, capitalising on the growth potential of the Indian cement industry. The strategic focus of the Company revolves around delivering quality products, ensuring cost efficiency and implementing well-formulated expansion strategies to drive sustainable growth and further solidify its position as the market leader in Eastern India.

Risk and Concerns Risk Management

The Company has a robust Risk Management Policy, designed to effectively evaluate the Companys business risks and is responsible for the timely and effective identification, assessment, mitigation and reporting of business risks, while also capitalising on business opportunities.

The Company recognizes the importance of managing and mitigating emerging and identified risks to safeguard the interests of its shareholders and other stakeholders, achieve business objectives and foster sustainable growth. The Company employs a comprehensive approach, integrating bottom-up and top-down strategies to drive Enterprise Risk Management (ERM).

The Board monitors the Enterprise Risk Management framework to ensure:

• Anticipated risks are approached prudently to strategically plan for the best outcomes and be prepared for adverse scenarios

• Execution of determined strategies and plans, prioritising decisive actions

• Unintended risks, including performance, incident, process and transaction risks, are prevented, mitigated, transferred (as in insurance) or shared (through subcontracting). The probability or impact of these risks is diminished through strategic and executive management, policies, processes, inbuilt system controls, MIS and internal audit reviews, among other measures.

The Company has identified significant risks and deployed mitigation processes/measures across various domains, including business, production, raw materials, infrastructure and logistics, operations, finance, environment, safety and statutory compliance. These processes and measures are reviewed and updated periodically.

The key risks and their corresponding mitigation measures are mentioned below:

Risk Domain	Potential Impact	Mitigation Strategies
Industry risk	The cement industry is prone to the inherent risk of demand-supply imbalances. Additionally, the industry is exposed to cyclicality in end-user industries.	• Demand and supply conditions are currently favourable due to the government?s emphasis on infrastructure, industrial, and housing sectors, serving as key drivers for the cement industry.
		• The Company is focused on expanding its market presence and strengthening customer relationships by offering quality products.
		• It consistently focuses on cost optimisation and enhances market intelligence through insights provided by the marketing team.
Raw material risk	The inability to source adequate raw materials like limestone, coupled with the rising costs of raw materials, energy, coal and pet coke could escalate input costs, adversely impacting the Company?s operations and profitability.	The Company mitigates risk by:
		• Monitoring commodity markets
		• Exploring options to diversify sourcing
		• Ensuring raw material security through access to captive limestone mines
		• Maintaining adequate inventory to ensure uninterrupted supply of limestone
		• Building long-standing relationships with suppliers for regular supply and timely insights into future trends
		• Keeping track of government policies and developments in sourcing countries
Infrastructure and logistics risk	The industry faces logistics hurdles stemming from increased freight costs and the need for adequate infrastructure and rail freight.	The Company addresses this by:
		• Ensuring optimal logistic costs and adopting the most economical mode of transport
		• Constructing an additional railway siding to accommodate increased volumes
		• Installing an overhead belt conveyor to transport limestone
		• Allocating appropriate budgets and prioritising resources to fulfil the requirements of current and future infrastructure development.
Environment, health & safety (EHS) risk	Increasing environmental concerns and regulatory compliance related to greenhouse gas (GHG) emissions may restrict the operations of the Company. Furthermore, the industry is subject to stringent labour laws and health and safety regulations.	The Company mitigates the risk through:
		• Conducting monthly apex safety meetings to review safety aspects, fatal accidents, or near-miss incidents
		• Vigilantly monitoring and adhering to environmental regulations
		• Regularly tracking technological advancements and future norms
		• Incorporating safety as a mandatory Key Result Area (KRA) for employees
		• Conducting safety training, mock drills, best practices and safety audit
		• Establishing fire prevention and handling processes
		• Implementing strong security measures such as security check- posts, entry passes/identity cards, access control systems and CCTV surveillance at critical locations
		• Providing medical facilities and mediclaim policy for employees and their families
		• Conducting safety walk-downs with all HODs and evaluation of road safety through reward and recognition
		• Conducting pre-qualification assessments and CARES (Contractor Assessment and Rating for Excellence in Safety) validation for contractors
		• Conducting annual health check-ups for all employees
Human resource risk	Key risk factors in human resources include the shortage of skilled labour, higher attrition rate, unionisation, work stoppages or increased labour costs, etc.	The Company mitigates the risk by:
		• Maintaining a good relationship with the workforce
		• Focusing on hiring, training and retaining skilled workers
Financial risk	The Company may face financial risk arising from exposure to interest rates, fluctuations in commodity prices and low cash flow.	The Company mitigates risk by:
		• Linking project loans to the 1-year MCLR rate with an annual reset
		• Monitoring and tracking external events that may impact financial performance
		• Periodically reviewing financing, pricing and procurement policies, considering exposure, emerging scenarios, track record, etc.
		• Actively monitoring internal performance and cash flows through regular internal meetings and adhering to a high level of operational discipline to limit cost escalation

Internal Controls, Audit and Internal Financial Controls Internal Control

The Company has a robust internal control system in place, commensurate with the size and nature of its business. The internal control systems comprising policies and procedures are designed to ensure the efficient management of operations in alignment with the strategic objectives of the Company. They address various aspects of governance, compliance, audit, control, and reporting, forming an integral part of the Companys corporate governance. Some significant features of the internal control systems are:

• Adequate documentation of policies, guidelines, authorities and approval procedures encompassing all crucial functions of the Company.

• Ensuring complete compliance with laws, regulations, standards and internal procedures and systems.

• Safeguarding the Companys assets/resources and mitigating potential losses.

• Securing the integrity of the accounting system and ensuring accurate and authorised recording and reporting of all transactions.

• Preparation and monitoring of annual budgets.

• Ensuring the reliability of financial and operational information. The Audit Committee, a sub-committee of the Board of Directors consisting of Independent Directors, regularly reviews audit plans, significant audit findings, adequacy of internal controls, compliance with Accounting Standards and other relevant aspects.

• The internal control systems and procedures are designed to aid in identifying and managing risks, conducting verification of all compliances through established procedures and promoting an increased awareness of controls.

Internal Audit

Shiva Cement Limited has an internal audit function that incorporates global best standards and international practices into its Indian operations. The Company boasts a strong internal audit department that reports to the Audit Committee, comprising Independent Directors with expertise in their respective fields. Through extensive delegation of authority within its team, the Company establishes effective checks and balances to address potential gaps. The internal audit team has access to all organisational information and the scope and authority of the Internal Audit function are outlined in the Internal Audit Charter. To ensure objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee.

The Internal Audit Department prepares a risk-based audit plan, which is approved by the Audit Committee. The frequency of the audit is determined by the risk ratings of various areas/functions. The internal team executes the audit plan and conducts periodic reviews to incorporate areas that have gained significant importance in alignment with emerging industry trends and the Companys robust growth. Furthermore, the Audit Committee relies on internal feedback and external events to formulate the audit plan. Based on the internal audit functions report, process owners implement corrective actions in their respective areas to strengthen the controls. Significant audit observations and corrective actions are reported to the Audit Committee. Additionally, the Audit Committee periodically conducts independent sessions with the statutory auditor and the management to evaluate the adequacy and effectiveness of internal financial controls.

Internal Financial Controls

According to Section 134(5)(e) of the Companies Act, 2013, the Directors are entrusted with the overarching responsibility of ensuring the Company has established a robust system and framework of internal financial controls. This provides the Directors with reasonable assurance regarding the adequacy and operational efficiency of controls related to reporting, operational and compliance risks. The Company has established appropriate systems and framework,

Tensure internal controls over financial reporting, encompassing entity-level^{he Company has already developed and implemented a framework to} policies, processes and Standard Operating Procedures (SOP). The entity-level policies include anti-fraud policies (such as a code of conduct, confidentiality and a whistleblower policy) and other policies addressing organisational structure, insider trading, HR policies, including well-defined delegation of authority, policies and procedures, effective IT systems aligned with business needs, risk-based internal audits, risk management framework and a whistleblower mechanism. The Company has already developed and implemented a framework to ensure internal controls over financial reporting, encompassing entity-level policies, processes and Standard Operating Procedures (SOP). The entity-level policies include anti-fraud policies (such as a code of conduct, confidentiality and a whistleblower policy) and other policies addressing organisational structure, insider trading, HR policies, etc. Additionally, the Company has prepared SOP for each of its processes. During the year, controls were tested and no significant weaknesses in design or effectiveness were identified.

Material Developments in Human Resources

With the role of human resources evolving, the Company is focused on optimising efficiency and maintaining minimal staffing levels at its location through strategies like multitasking and automation to achieve continuous reductions in the workforce. The pivotal role of its employees is evident in the execution of all business operations and the Company?s human resource policies are designed to attract, develop and retain talent. Furthermore, the Company collaborates with third-party staffing agencies to source contract labourers, facilitating operations at the manufacturing facility. The Company regularly conducts training sessions for its employees, covering various aspects of manufacturing operations, machine utilisation, operations flow, quality management and workplace safety. As on March 31, 2024, the Company had 228 permanent employees.

Forward Looking and Cautionary Statements

The Management Discussion and Analysis may contain some statements describing the Company?s objectives, expectations or predictions, which involve a number of risks and uncertainties. Actual results may differ materially from those expressed or implied. Key risks and uncertainties that could impact the Company?s operations include domestic demand and supply, conditions affecting selling prices, new capacity additions, availability and costs of critical raw materials, changes in government policies and tax laws, economic development of the country, and other factors which are material to the business operations of the Company. This MD&A should not be considered as a recommendation that any investor should subscribe for or purchase any of the Company?s shares. The Company makes no representation or warranty, express or implied, as to and does not accept any responsibility or liability with respect to the fairness, accuracy, completeness or correctness of any information or opinions contained herein. Investors are advised to exercise due care and caution while interpreting these statements.