Shlokka Dyes Ltd Management Discussions

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS

The following discussion is intended to convey managements perspective on our financial condition and results of operations for the year ended on March 31, 2025, March 31, 2024 and March 31, 2023. You should read the following discussion of our financial condition and results of operations together with our restated financial statements included in the Red Herring Prospectus. You should also read the section entitled "Risk Factors" beginning on page no. 22 of this Red Herring Prospectus, which discusses a number of factors, risks and contingencies that could affect our financial condition and results of operations. The following discussion relates to our Company and, is based on our restated financial statements, which have been prepared in accordance with Indian GAAP, the Companies Act and the SEBI Regulations. Portions of the following discussion are also based on internally prepared statistical information and on other sources. Our fiscal year ends on March 31 of each year, so all references to a particular fiscal year ("Fiscal Year") are to the twelve-month period ended March 31 of that year.

In this section, unless the context otherwise requires, any reference to "we", "us" or "our" refers to Shlokka Dyes Limited, our Company. Unless otherwise indicated, financial information included herein are based on our "Restated Financial Statements for the Financial Year 2024-25, 2023-24 and 2022-23 included in this Red Herring Prospectus beginning on page no. 148 of this Red Herring Prospectus.

BUSINESS OVERVIEW

Our Company was originally incorporated on July 09, 2021 as a Private Limited Company as "Shlokka Dyes Private Limited" under the provisions of the Companies Act, 2013 with the Registrar of Companies, Ahmedabad. Subsequently, pursuant to a Special Resolution of our Shareholders passed in the Extra-Ordinary General Meeting held on October 08, 2024 our Company was converted from a Private Limited Company to Public Limited Company and consequently, the name of our Company was changed to ‘Shlokka Dyes Limited and a Fresh Certificate of Incorporation consequent to Conversion was issued on November 11, 2024 by the Registrar of Companies, Central Registration Centre. The Corporate Identification Number of our Company is U24299GJ2021PLC124004.

Our Company is engaged in the business of manufacturing of "Reactive Dyes", a category of Synthetic Organic Dyes extensively utilized in the textile industry. We pride ourselves on offering a diverse portfolio of dyes, including Direct Dyes, Basic Dyes, Vat Dyes, Digital Printing Dyes, and Paper Dyes etc., catering to wide range of industries such as textiles, leather, paper, and paints. Our Reactive Dyes are available in primary colors such as black, blue, red, orange, and yellow, along with numerous variants of these shades, each identified by an internationally recognized Color Index Number. These dyes are suitable for a broad spectrum of textile applications, including cotton fabrics, garments, dress materials, bed sheets, and carpets. With their versatile applications and superior quality, our dyes provide reliable solutions to meet the diverse needs of our clients across various industries.

Our manufacturing facility, situated in the state of Gujarat, holds ISO 9001:2015 (Quality Management), ISO 14001:2015 (Environmental Management) and ISO 45001:2018 (Occupational Health & Safety) certification in the manufacturing of Dyes and Intermediates. Our manufacturing facility situated at C/54, GIDC, Saykha, Dist. Bharuch - 392140 which is admeasuring land spread across approximately 5000 sq. meter. together with construction of factory shed/building of about 5731.81 sq. metre. It boasts a robust installed capacity of 9000 MT per annum, enabling us to meet diverse client demands effectively. Further, Our Manufacturing Facilities are equipped with requisite machineries and in-house testing Laboratory to keep a constant check on quality of our product.

For more details, please refer chapter titled "Business Overview" on page no. 98 of this Red Herring Prospectus.

SIGNIFICANT DEVELOPMENTS SUBSEQUENT TO THE LAST FINANCIAL YEAR:

After the date of last financial Year March 31, 2025 there is no significant development occurred in the Company.

KEY FACTORS AFFECTING THE RESULTS OF OPERATION:

Our Companys future results of operations could be affected potentially by the following factors:

1. Changes in Laws and Regulations that apply to our Industry.

2. Changes in Fiscal, Economic or Political conditions in India

3. Failure to adapt the changing technology in our industry of operation may adversely affect our business

4. Failure to comply with regulations prescribed by authorities of the jurisdiction in which we operate

5. Competition with existing and new entrants.

6. Any slowdown or shutdown in our manufacturing operations or strikes, work stoppages or increased wage demands by our employees that could interfere with our operations.

7. Our ability to retain our key managements persons and other employees;

8. Companys ability to successfully implement its growth strategy and expansion plans;

9. Failure to comply with the quality standards and requirements of our customers

10. Our inability to get the raw material at competitive price and transfer the upward revision in the price of raw material to the customers.

11. Exchange rate Fluctuation may affect the cost of Raw Material.

OUR SIGNIFICANT ACCOUNTING POLICIES

For Significant accounting policies please refer Significant Accounting Policies, "Annexure 4" beginning under Chapter titled "Restated Financial Information" beginning on page no. 148 of the Red Herring Prospectus.

RESULTS OF KEY OPERATIONS

			(Rs. in lakhs)
	For the year ended on
Particulars	31.03.2025	31.03.2024	31.03.2023
Income from continuing operations
Revenue from operations	10,321.49	6,127.53	876.80
Total Revenue	10,321.49	6,127.53	876.80
% of growth	68.44	598.85	-
Other Income	23.97	41.32	2.84
% total Revenue	0.23	0.67	0.32
Total Revenue	10,345.46	6,168.85	879.64
% Increase/(Decrease)	67.70	601.29	-
Expenses
Cost of Purchase	8310.51	4809.16	713.66
% of Revenue from operations	80.52	78.48	81.39
Employee benefits expense	83.25	17.25	4.12
% Increase/(Decrease)	382.61	318.69	-
Finance Costs	280.43	242.18	18.84
% Increase/(Decrease)	15.79	1,185.46	-
Other expenses	84.08	61.54	1.32
% Increase/(Decrease)	36.63	4,562.12	-
Depreciation and amortisation expenses	386.00	433.86	58.68
% Increase/(Decrease)	(11.03)	639.37	-
Total Expenses	9,144.27	5,563.99	796.62
% to total revenue	88.39	90.19	90.56
EBDITA	1,867.62	1,280.90	160.54
% to total revenue	18.05	20.76	18.25
Restated profit before tax from continuing operations	1,201.19	604.86	83.02
Exceptional Item	-
Total tax expense	(200.04)	153.39	(22.97)
Restated profit after tax from continuing operations (A)	1001.15	451.47	105.99
% to total revenue	9.68	7.32	12.05
% Increase/(Decrease)	21.39	(39.26)	-

COMPARISON OF F.Y. 2024-25 WITH F.Y. 2023-24:

Income from Operations

In the Financial Year 2024-25, the Company recorded a significant increase in its revenue from operations, reaching Rs.10,321.49 lakhs, which marks a substantial growth of 68.44% compared to Rs.6,127.53 lakhs in FY 2023 -24. This notable rise in revenue was primarily driven by a surge in overall business activity. During FY 2024-25, the revenue comprised manufacturing turnover of Rs.10133.14 lakhs and trading turnover of Rs.188.35 lakhs, In contrast, the previous financial year, FY 2023-24, had reflected a manufacturing turnover of Rs.5984.58 lakhs and trading turnover of Rs.142.95 lakhs. The substantial increase across all revenue streams, particularly in manufacturing, indicates the Companys enhanced operational capacity and improved market presence during the year.

Other Income

In the Financial Year 2024-25, the Company reported other income of Rs.23.97 lakhs, showing a decrease compared to Rs.41.32 lakhs in FY 2023-24. This category of income primarily comprises interest earnings and other miscellaneous receipts.

Expenditure:

Cost of Material Consumed

In the Financial Year 2024-25, the Company incurred a cost of ^8310.51 lakhs towards material consumption, reflecting a substantial increase from Rs.4809.16 lakhs in FY 2023-24. The cost of material consumed has increased both in absolute terms and as a percentage of total revenue from operations i.e. 80.52% in FY 2024-25, compared to 78.48% in the previous year. The Growth of 68.44 % in revenue from operations required the company to spent more on the raw material relative to revenue. The increased consumption is directly related to the scale of production and the surge in business volumes during the year under review.

Employee Benefits Expenses:

In the Financial Year 2024-25, the Companys employee expenses stood at Rs.83.25 lakhs, marking a significant increase of 382.61% compared to Rs.17.25 lakhs in FY 2022-23. This rise in employee costs was primarily due to an increase in the workforce to support the growing scale of operations, along with the impact of annual salary increments. The expansion in business activities necessitated a larger team, contributing to the higher employee expenditure during the year.

Finance Cost:

In the Financial Year 2024-25, the Companys finance cost increased substantially to Rs.280.43 lakhs from Rs.242.18 lakhs in FY 2023-24, reflecting a sharp rise of 15.79%. This significant increase was primarily due to interest expenses on borrowing and consistent borrowings outstanding to support the Companys expanding operations and working capital requirements. As of March 31, 2025, the total outstanding borrowings stood at Rs.2792.04, compared to Rs.2,879.07 lakhs as of March 31, 2024. The Consistency in debt levels directly contributed to the higher interest expenses incurred during the year.

Other Expenses

In the Financial Year 2024-25, the Company reported other expenses of Rs.84.08 lakhs, a significant increase from Rs.61.54 lakhs in FY 2023-24, representing a sharp rise of 36.63%. This escalation in other expenses was primarily driven by a substantial growth in business activity, which increased by 67.70% during the year. As a result, there was a corresponding rise in operational expenditures, including higher spending on Consulting charges, exhibition participation, GIDC expenses, GPCB expenses and transportation expenses. These costs were essential to support and sustain the expanded scale of operations and market presence.

Depreciation and Amortisation Expenses:

In the Financial Year 2024-25, the Company recorded a depreciation expense of Rs.386.00 lakhs, marking a substantial decrease of 11.03% compared to Rs.433.86 lakhs in FY 2023-24. This decline in depreciation was due to sale of fixed assets on which depreciation for FY 2023-24 was calculated only for a part of the year which was not there in the FY 2024-25 on the same fixed asset.

EBIDTA

In the Financial Year 2024-25, the Company reported an EBIDTA of Rs.1867.72 lakhs, a significant rise from Rs.1280.90 lakhs in FY 2023-24. The EBIDTA has improved in absolute values in FY 2024-25. This improvement was primarily driven by a substantial increase of 67.70% in business operations during the year. EBITDA margin has declined to 18.05% of total revenue in FY 2024-25, compared to 20.76% in the previous year.

Profit after Tax (PAT)

In the Financial Year 2024-25, the Company achieved a Profit After Tax (PAT) of Rs.1001.15 lakhs, an increase from Rs.491.79 lakhs in FY 2023-24. The PAT margin has increased to 9.68% of total revenue in FY 2024-25, compared to 7.97% in the previous year. This Rise in PAT margin was due to showing substantial growth in business of 67.70%. which has impacted the profitability ratio for the year.

COMPARISON OF F.Y. 2023-24 WITH F.Y. 2022-23:

Income from Operations

In the Financial Year 2023-24, the Company recorded a significant increase in its revenue from operations, reaching Rs.6,127.53 lakhs, which marks a substantial growth of 598.85% compared to Rs.876.80 lakhs in FY 2022-23. This notable rise in revenue was primarily driven by a surge in overall business activity. During FY 2023 -24, the revenue comprised manufacturing turnover of Rs.5,984.58 lakhs, and trading turnover of Rs.142.95 lakhs,. In contrast, the previous financial year, FY 2022-23, had reflected a manufacturing turnover of Rs.490.74 lakhs and trading turnover of Rs.386.06 lakhs. The substantial increase across all revenue streams, particularly in manufacturing, indicates the Companys enhanced operational capacity and improved market presence during the year.

Other Income

In the Financial Year 2023-24, the Company reported other income of Rs.41.32 lakhs, showing a significant increase compared to Rs.2.84 lakhs in FY 2022-23. This category of income primarily comprises interest earnings and other miscellaneous receipts. The sharp rise in other income reflects improved cash flow management and utilization of surplus funds, as well as a possible increase in non-operational activities contributing to the overall financial performance of the Company during the year.

Expenditure:

Cost of Material Consumed

In the Financial Year 2023-24, the Company incurred a cost of Rs.4,809.16 lakhs towards material consumption, reflecting a substantial increase from Rs.713.66 lakhs in FY 2022-23. Despite the significant rise in absolute terms, the cost of material consumed as a percentage of total revenue from operations decreased to 78.48% in FY 2023-24, compared to 81.39% in the previous year. This indicates an improvement in cost efficiency and better utilization of raw materials relative to revenue, suggesting enhanced operational effectiveness and possibly improved procurement strategies or economies of scale achieved during the year.

Employee Benefits Expenses:

In the Financial Year 2023-24, the Companys employee expenses stood at Rs.17.25 lakhs, marking a significant increase of 318.69% compared to Rs.4.12 lakhs in FY 2022-23. This rise in employee costs was primarily due to an increase in the workforce to support the growing scale of operations, along with the impact of annual salary increments. The expansion in business activities necessitated a larger team, contributing to the higher employee expenditure during the year.

Finance Cost:

In the Financial Year 2023-24, the Companys finance cost increased substantially to Rs.242.18 lakhs from Rs.18.84 lakhs in FY 2022-23, reflecting a sharp rise of 1185.46%. This significant increase was primarily due to a rise in overall borrowings to support the Companys expanding operations and working capital requirements. As of March 31, 2024, the total outstanding borrowings stood at Rs.2,879.07 lakhs, compared to Rs.1,978.72 lakhs as of March 31, 2023. The increase in debt levels directly contributed to the higher interest expenses incurred during the year.

Other Expenses

In the Financial Year 2023-24, the Company reported other expenses of Rs.61.54 lakhs, a significant increase from Rs.1.32 lakhs in FY 2022-23, representing a sharp rise of 4562.12%. This escalation in other expenses was primarily driven by a substantial growth in business activity, which increased by 601.29% during the year. As a result, there was a corresponding rise in operational and promotional expenditures, including higher spending on exhibition participation, GIDC-related expenses, and other business development activities. These costs were essential to support and sustain the expanded scale of operations and market presence.

Depreciation and Amortisation Expenses:

In the Financial Year 2023-24, the Company recorded a depreciation expense of Rs.433.86 lakhs, marking a substantial increase of 639.37% compared to Rs.58.68 lakhs in FY 2022-23. This significant rise was primarily due to the fact that depreciation for FY 2023-24 was charged for the entire year, whereas in FY 2022-23, depreciation was calculated only for a part of the year despite an increase in fixed assets by Rs.2,919.34 lakhs. As a result, the full-year impact of the enhanced asset base was reflected in the depreciation expense for FY 2023 -24.

EBIDTA

In the Financial Year 2023-24, the Company reported an EBIDTA of Rs.1,280.90 lakhs, a significant rise from Rs.160.54 lakhs in FY 2022-23. The EBIDTA margin also improved to 20.76% of total revenue in FY 2023-24, compared to 18.20% in the previous year. This improvement was primarily driven by a substantial increase of 601.29% in business operations during the year. Additionally, higher capacity utilization in FY 2023 -24 as compared to FY 2022-23 further contributed to the increase in EBIDTA, reflecting better operational efficiency and cost absorption.

Profit after Tax (PAT)

In the Financial Year 2023-24, the Company achieved a Profit After Tax (PAT) of Rs.491.79 lakhs, an increase from Rs.60.05 lakhs in FY 2022-23. However, the PAT margin declined to 7.97% of total revenue in FY 2023-24, compared to 6.83% in the previous year. This Rise in PAT margin was due to showing substantial growth in business of601.29%. which has impacted the profitability ratio for the year.

COMPARISON OF F.Y. 2022-23 WITH F.Y. 2021-22:

The Company had started the production in the FY 2022-23 and no activity was started in the FY 2021-22. Hence no comparison was given.

CASH FLOW

			(Rs. in lakhs)
Particulars	As at 31st March, 2025	As at 31st March, 2024	As at 31st March, 2023
Net cash from Operating Activities	510.40	(1051.91)	166.28
Net cash flow from Investing Activities	(103.89)	(2.98)	(2571.44)
Net Cash Flow Financing Activities	(409.19)	1058.48	2405.61

Cash flow March 31, 2025

The Company has Positive Cash flow from operating on account of net increase of operating profit which is more than the negative working capital. The company had invested in the fixed assets resulting into negative cash flow from investing activities. The Company had made repayment of the Long-term borrowings and spent on Pre-IPO expenditure and interest resulting in the negative cash flow from financing activities.

Cash flow March 31, 2024

The Company has Negative Cash flow from operating on account of Increase of inventory, Increase of Trade Receivables more than the profit earned by the Company. The Company had invested in the fixed assets resulting into negative cash flow from investing activities. The Company had enhanced the long-term borrowings, short term borrowings and raised the funds through issue of share capital resulting in to Positive cash flow from financing activities.

Cash flow March 31, 2023

The Company has Positive Cash flow from operating profit and the increase in current assets is funded through increase of current liabilities resulting in to Positive Net Working Capital. The Company had invested in the fixed assets resulting into negative cash flow from investing activities. The Company had enhanced the long-term borrowings, short term borrowings and raised the funds through issue of share capital resulting in to Positive cash flow from financing activities.

Information required as per Item 11 (II) (C) (iv) of Part A of Schedule VI to the SEBI Regulations:

1. Unusual or infrequent events or transactions

To our knowledge there have been no unusual or infrequent events or transactions that have taken place during the last three years

2. Significant economic changes that materially affected or are likely to affect income from continuing operations.

Our business has been subject, and we expect it to continue to be subject to significant economic changes arising from the trends identified above in ‘Factors Affecting our Results of Operations and the uncertainties described in the section entitled "Risk Factors" beginning on page no. 22 of this Red Herring Prospectus. To our knowledge, except as we have described in this Red Herring Prospectus, there are no known factors which we expect to bring about significant economic changes.

3. Income and Sales on account of major product/main activities

Income and sales of our Company on account of major activities derives from manufacturing of "Reactive Dyes", a category of Synthetic Organic Dyes extensively utilized in the textile industry.

4. Whether the company has followed any unorthodox procedure for recording sales and revenues

Our Company has not followed any unorthodox procedure for recording sales and revenues.

5. Known trends or uncertainties that have had or are expected to have a material adverse impact on sales, revenue or income from continuing operations.

Apart from the risks as disclosed under Section titled "Risk Factors beginning on page no. 22 in this Red Herring Prospectus, in our opinion there are no other known trends or uncertainties that have had or are expected to have a material adverse impact on revenue or income from continuing operations.

6. Extent to which material increases in net sales or revenue are due to increased sales volume, introduction of new products or services or increased sales prices.

Increases in revenues are by and large linked to increases in volume of business.

7. Total turnover of each major industry segment in which the issuer company operated.

The Company is in the business of manufacturing, the relevant industry data, as available, has been included in the chapter titled "Industry Overview" beginning on page no. 91 of this Red Herring Prospectus.

8. Status of any publicly announced new products or business segment.

Our Company has not announced any new products or business segment.

9. The extent to which business is seasonal.

Our business is not seasonal.

10. Any significant dependence on a single or few suppliers or customers.

Our top 10 buyers and suppliers constitute majority of our business which is reproduce in Chapter title "Business Overview" on page no. 98 of Red Herring Prospectus.

						(Rs. in lakhs)
Particulars		Purchases/Sales
	2024-25	%	2023-24	%	2022-23	%
Top 10 Buyers	10,250.67	99.31	6116.61	99.82	876.80	100.00
Top 10 Suppliers	7603.39	82.25	3099.14	62.08	919.31	85.40

The Company is selling goods to equinox Impex, proprietary concern and the details of the same is as below.

			(Rs. in lakhs)
Particulars	2024-25	2023-24	2022-23
Equinox Impex	5175.88	4039.96	849.69
Total Revenue	10,321.49	6127.53	876.80
% of the Revenue	50.15	65.93%	96.91%

Equinox Impex is the proprietary concern of the promoter and started in the year 2010. The Proprietary firm had established the name in export market and exporting in major countries like Argentina, Bangladesh, Brazil, Egypt, Indonesia, Lebanon, Malaysia, Mexico, Portugal, Singapore, Spain, Taiwan, Turkey and USA. It has also got the status of the two -star export house. The company had been established in the year 2021-22 and hence the proprietary concern was used to export the goods. The dependency has been reduced year by year once the name of the Company is established in the market. In the near future the proprietorship unit will be merged in the Company. In that direction the part of the machineries of the Proprietary unit have been sold to the Company.

Our production has been started from the Fiscal 2022-23 hence, there is no Revenue in the fiscal 2021-22 i.e. First Financial year.

11. Competitive conditions.

Competitive conditions are as described under the Chapters titled "Industry Overview " and "Business Overview " beginning on pages no. 91 and 98, respectively of this Red Herring Prospectus.