Shree Vasu Logistics Ltd Management Discussions.

The Management of Shree Vasu Logistics Limited Presenting "Management Discussion and Analysis Report" covering the operational and financial performance of the company for the year 2019-2020.

OVERVIEW

Shree Vasu Logistics Limited (the Company) is a publicly held Company engaged in the logistics business lines. The Company deals in providing C&FA services covering areas like Chhattisgarh, Orissa, West Bengal, Assam and some part of Madhya Pradesh. We offer customized and end-to-end logistics solutions and services including transportation and distribution, warehousing, in-factory logistics and value-added services to our clients.The company is primarily engaged in providing Third-Party Logistics ("3PL") Solution services. The Company provides integrated logistics, warehousing and transportation services with presence of its strategically located warehouses and extensive pan-India network.

Services offered by the Company include end-to-end logistics solution, warehouse, transportation and distribution and value-added services to our clients. Currently, we have more than 42 clients to whom we are providing our services from more than 10 cities within our pan-India network.

INDUSTRY OVERVIEW AND TRENDS

Overview of the Global and Indian economy:

During the year 2019-2020, the manufacturing and trading sector has been affected by unfavorable environment due to reduction in demand and uncertainties caused by geographical and political tensions. Outbreak of pandemic COVID-19, globally, has also slammed any hope to recover during second half of the financial year 2019-2020. International Monetary Fund in its report on World Economic Outlook published on July 2019 has projected global growth (GDP) of 3.2%, improving to 3.5% in 2020 which was projected before outbreak of COVID-19 pandemic. However, post outbreak of COVID-19 pandemic, IMF has reduced the estimated GDP to negative 3% for 2020.

The Global economic slowdown has also affected growth of Indian economy. The National Statistical Office (NSO), Ministry of Statistics and Program Implementation have released the First Advance Estimates of National Income for 2019-20 forecasting real GDP growth at 5.0% for 2019-20 as compared to the growth rate of 6.8% in 2018-19.The April, 2019 Report of the World Economic Outlook (WEO) of International Monetary Fund (IMF) has projected Indias GDP to grow higher at 7.3 percent in 2019. However, outbreak of the COVID-19 pandemic has significantly impacted world growth and growth of Indian economy as well. In India, lockdown imposed by the government has affected economic activity to great extent. The Government of India has taken various measures to control economic fallout including but not limited to ease of credit facilities, reduced corporate tax.

Salient trends in the Indian logistics industry

CRISIL report suggests that the Indian logistics industry that was estimated at Rs 6.4 trillion in FY17 is forecasted to reach Rs. 9.2 trillion by FY20 representing a CAGR of 13%. With a growth rate of 12-13% CAGR, it is expected that Indian Logistic Sector can reach a value of Rs. 34,50,000 crores by 2025. However, growth rate for short term has been declined due to COVID-19 .According to an India Brand Equity Foundation (IBEF) study; the logistics sector might attract investments worth $500 billion by 2025.

As per ratings agency ICRA, the domestic logistics sector is set to grow at 8-10 per cent over the medium term with the outlook remaining largely stable. The logistics sector was given the international trade and infrastructure status in the year 2017. This status will positively affect the performance of the sector in 2020. The status will help the sector to avail credit at cheaper and competitive rates to ensure uninterrupted growth and increased market presence as compared to other business sectors.

The Indian Governments increased focus to reform Logistics Sector

Logistics sector is identified as the fastest growing sector and also contribute a large percentage in countrys GDP. The logistic cost is approximately 14 % of GDP in India which is significantly higher compared to those in developed countries. Therefore, Government of India has taken several initiatives to reform and defragment the Logistic Sector.

Following are the ongoing reforms in logistic sector: -

- GST- GST has eliminated the need to have a warehouse in every state, thus saving cost significantly. So, businesses can set up few warehouses and have efficient transportation for connectivity. GST has brought in efficiency in logistics and transportation sector. It has reduced turnaround time of trucks by over 20%.

- National Logistics Portal- A National Logistics Portal is being developed by the Ministry of Commerce and Industry to ensure ease of trading in the international and domestic markets. The portal will link all the stakeholders of EXIM, domestic trade and movement and all trade activities on a single platform. The portal is a single window online market place for trade and will connect business, create opportunities and bring together various ministries, departments and the private sector. Stakeholders like traders, manufacturers, logistics service providers, infrastructure providers, financial services, Government departments and groups and associations will all be on one platform.

- The Government of India is organizing various workshops to discuss with logistics stakeholders the challenges and opportunities of this sector in India.

- Infrastructure Development- Government understands the requirement and importance of infrastructure in conducting business and logistics operations. It has developed networks such as Logistics Parks, Sagarmala Projects etc.

- The National Logistics Policy formulated by the Commerce and Industry Ministry will improve Indias trade competitiveness, create more jobs, improve Indias performance in global rankings and pave the way for India to become a logistics hub. Some of the announcements in Finance Ministers Budget Speech 2020 as placed below, shows governments effort to reform logistic sector in India:

o Geo-tagging of all warehousing.

o Warehousing shall be promoted to comply with WDRA norms.

o VGF shall be provided for setting up of warehousing at the block / taluk levels on PPP mode. Food Corporation of India, Central Warehousing Corporation shall also offer their land for this purpose.

o Village Storage Scheme through Women Self-help groups shall provide backward linkages for seeds thereby reducing logistics costs. Financial assistance under MUDRA loans and NABARD shall be o Financing of negotiable warehousing receipts would be encouraged and also its integration with e-NAM.

o Rs.100 lakh crore National Infrastructure pipeline has been launched which includes over 6500 infrastructure projects. National infrastructure pipeline has projects worth Rs.19.6 lakh crore for roads, Rs.13.69 lakh crore for railways, Rs.1.43 lakh crore for airports and Rs.1.01 lakh crore for ports.

o Accelerated development of highways will be undertaken. 2500 kms. of access controlled highways, 9000 kms. of economic corridors, 2000 kms. of coastal and land-port roads and 2000 kms. of strategic highways.

o 12 lots of highway building consisting of over 6000 kms. shall be offered for monetisation by 2024.

o Rs.1.7 lakh crore have been allocated for the transportation sector in 2020-21.

BUSINESS STRATEGY

We have added big business in Kolkatta this year which almost doubled our turnover. We have further plans to add more business in Kolkatta and Siliguri.

We have developed customized technology system to provide innovative and cost-efficient solution to improve transparency and build trust-worthy relationship with our clients. Our Autopilot Project for streamlining the operations has been implemented successfully. We have started monitoring TAT at various business functions by introducing Smart App technology. We have created a unique combination of Mobile App, ERP Software and Google Suite wherein the full commercial and Turnaround time monitoring is done in very efficient way. This will give us a great scalability wherein we will be able to replicate ourselves in other locations. We were continuously experimenting on this front and now the same has evolved fabulously.

We have started working on digital marketing and with the revamping of complete sales procedures in next five to six months our sales will be exploding with more and more new clients. We had pitched serving Mahakaushal Belt and Western Orissa Belt from Raipur and we are pleased to announce that companies like Dabur / Pidilite / Colgate have already taken up the concept and we foresee that other clients will join in soon which will be multiplying our business manifolds with need for more warehousing space and increased transportation with more cases to be shipped.

We are also looking at completing the first rack installed warehouse in the current financial year, which will give us a lead and privilege in respect of racking and MHEs. This will again be another milestone which will add lots of value to our operations.

OUTLOOK

We intend to continue to focus on the strategies set out below with keeping in view post COVID-19 scenario:

- Continue to grow share of our business from external clients

- Focus on large revenue clients by providing integrated, end-to-end solutions and continue to expand our relationship with existing clients

- Focus on establishment of multi-user warehouse

- Continue to focus on digitization and enhancements in technology

The Company is quite confident that the overall productivity and profitability would improve as a result of above strategy

FINANCIAL PERFORMANCE

The summarized financial performance of the Company as compared to last year is shown as under:

(Rs in Lakh)

Particulars March 31 2020 March 31 2019 % Change
Net Sales/Income from Business operations 6227.52 3589.34 73.50
Other Income 10.61 22.15 (52.10)
Total income 6238.13 3611.49 72.73
Profit before Tax 357.70 226.64 57.83
Net Profit/ (Loss) after Tax 266.95 167.66 59.22

The Company has only one segment of business operations i.e. Logistics. Therefore segment wise reporting is not applicable.

The significant changes in the financial ratios of the Company which are more than 25% as compared to the previous year are summarised below:

Particulars of Key Financial Ratio 2018-19 2019-2020 % Change
1 Debtor turnover Ratio1 4.57 5.96 30.42%
2 Debt Equity Ratio2 1.03 1.33 29.05%
3 Return on Net Worth3 8.84% 12.34% 39.59%

1. The debtor turnover ratio improved from 4.57 times in FY 2018-19 to 5.96 times in FY 2019-2020. This is mainly because the Company has a policy of maintaining high proportion of quality customers that pay their debts quickly. The internal controls of the company are efficient which have resulted in efficient and timely collection of Account receivables.

2. Increase in Debt Equity Ratio is due to increase in borrowed funds for expansion plans. However, company is still in strong liquidity position.

3. Increase in Return of Net Worth is due to increase in revenue and simultaneously increase in profit compared to previous year.

OPPORTUNITIES

In the current scenario we have huge opportunity in whole of eastern India and we are looking forward to start our own warehousing campus in Kolkatta and Siliguri. This will give us a great edge at both these strategic locations.

We are in process of building more warehouses to fulfill demands raised at E-commerce, Consumer and Retail sectors with keeping in view industry specific requirements. Due to strategic location of our warehouses, various E-Commerce companies have availed our services and we are running with 100% occupancy. On Transportation front we plan to open up our branches all across Central India and start the reverse logistics from all these places. We are currently working on laying the foundation and conceptualizing the plan for this business which also works for us a backward integration.

COVID-19 has led the businesses to follow localized approach for supply chain. Localization of supply chain can create more business opportunities in near future and in long run as most of the E-commerce businesses are focusing on storage of their products at local level for expedite and hassle free delivery at local market.

RISKS, THREATS AND CONCERNS

Our business is significantly influenced by the performance of the automotive industry and also by demand and supply ratio in market. We operate in a highly competitive industry, with many different and unorganized players. Many segments within the logistics industry are highly commoditized and have low barriers to entry, leading to a market with a very high degree of fragmentation. In the recent past, start-ups and international logistics companies have entered the Indian market. Competition from these segments is likely to increase. Digital marketplace platforms and data analysis provided by these start-ups to serve customers directly by removing middlemen from logistics operations are able to reduce the total costs of transportation and improve reliability and operational efficiencies. We will need to stay ahead of our competition through consistent investments in modern technology and focus on service quality and value-added services.

The Company is committed to recognizing and managing the risks it is exposed to, both internal and external, and has put in place mechanisms to handle the same proactively and efficiently. The Company also recognizes that these risks could adversely affect its ability to create value for all stakeholders, and has taken steps to mitigate the same.

INTERNAL CONTROL SYSTEM AND ADEQUACY

The Company has a well-established and comprehensive internal control system. Documents, policies and authorization guidelines comply with the level of responsibility and standard operating procedures specific to the respective businesses. Observation made in internal audit reports on business processes, systems, procedures and internal control and implementation status of recommended remedial measures by Internal Auditors are regularly presented to and reviewed by the Audit Committee of the Board. The system of internal control is being improved to ensure that all assets are safe and protected against loss from unauthorized use or disposition, and that all transactions are authorized, recorded and reported correctly. The Company regularly conducts internal check, using external and internal resources to monitor the effectiveness of internal controlling the organization. It strictly adheres to corporate policy with respect to financial reporting and budgeting functions. The Audit Committee of the Board of Directors deals with significant control issues and instructs further areas to be covered.

HUMAN RESOURCE DEVELOPMENT

The Company recognizes that its employees are its principal assets and that its continued growth is dependent upon the ability to attract and retain quality people. The Company also recognizes the importance of providing training and development opportunities to its people to enhance their skills and experiences, which in turn enables the company to achieve its business objectives. The morale of employees continued to remain high during the year contributing positively to the progress of the Company. However, aspirations of employees in India remain to be high. This is a challenge as only growth can fulfill these aspirations and in todays market scenarios one must perform extraordinarily to achieve growth. There were 841 permanent employees on the rolls of Company as on March 31, 2020. As your Company is on growth path, manpower is the key to handle the operation successfully. During the year, your Company has appointed more than 250 employees.

The Company has always provided a congenial atmosphere for work to all sections of the society. Your Company is committed to respect universal human rights. To that end, the Company practices and seeks to work with business associates who believe and promote these standards. The Company is committed to provide equal opportunities at all levels, safe and healthy workplaces and protecting human health and environment. The Company provides opportunities to all its employees to improve their skills and capabilities. The Industrial relations of the Company with various clients, vendors, financial lenders and employees are cordial.

Your Company is an equal opportunity employer and does not discriminate on the grounds of race, religion, nationality, ethnic origin, color, gender, age, citizenship, sexual orientation, marital status or any disability not affecting the functional requirements of the position held.

CAUTIONARY STATEMENT

Statements in this "Management Discussion and Analysis" describing the Companys objectives, projections, estimates, expectations, plans or predictions or industry conditions or events are "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results, performance or achievements could differ materially from those expressed or implied. Several factors could make a significant difference to the Companys operations. These include economic conditions affecting demand and supply, government regulations and taxation, natural calamities and so on over which Company does not have any direct control.

SD/- SD/-
ATUL GARG SHREE BHUSHAN GARG
Managing Director Wholetime Director
DIN: 01349747 DIN: 01349775
Place: Raipur
Date: August 20, 2020