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 2018-19.

INDUSTRY OVERVIEW AND TRENDS

Overview of the Indian economy

India continues to remain the fastest growing major economy in the world in 2018-19, despite a slight moderation in its GDP growth from 7.2 per cent in 2017-18 to 6.8 per cent in 2018-19 as per the Report titled "State of the Economy in 2018-19 - A Macro View" published in Press Information Bureau (PIB). The report further states that the world output growth declined from 3.8 per cent in 2017 to 3.6 per cent in 2018. The slowdown in the world economy and Emerging Market and Developing Economies (EMDEs) in 2018 followed the escalation of US China trade tensions, tighter credit policies in China, and financial tightening alongside the normalization of monetary policy in the larger advanced economies. The Indian economy started the fiscal year 2018–19 with a healthy growth in the first quarter on the back of domestic resilience. Growth eased in the subsequent quarter due to rising global volatility, largely from financial volatility & normalized monetary policy in advanced economies. Despite softer growth, the Indian economy remains one of the fastest growing and possibly the least affected by global turmoil. In fact, the effects of the aforementioned external factors were contained in part by Indias strong macroeconomic fundamentals and policy changes.

The April, 2019 Report of the World Economic Outlook (WEO) of International Monetary Fund (IMF) has projected Indias GDP to grow even higher at 7.3 percent in 2019.

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% driven by growth across all segments and the 3PL market in India stood at Rs. 32,500-33,500 crore in FY17 and is expected to grow at a CAGR of 19-21% to reach Rs. 57,000-58,000 crore by FY20.

According to Press Information Bureau ("PIB"), as at August 2018, Indias logistics cost as a percentage of GDP is 13-14% and the aim is to reduce the logistics cost to 10% by 2022.According to the CRISIL Report, the Indian logistics industry comprising segments such as road freight, rail freight, coastal freight, warehousing, cold chain and container freight stations and inland container depots ("CFS/ICD") is estimated at 6,40,000 crores in Fiscal 2017. The industry is dominated by transportation, which accounts for approximately 88%, and its share is expected to remain high over the next 3-4 years.

The Indian Governments increased focus to reform Logistic Sector

Logistics sector is identified as the fastest growing sector and also contribute a large percentage in countrys GDP. 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.
- 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 also 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.
- A National Logistics Policy has been drafted to enable integrated development of the logistics sector in the country and to identify key thrust areas to reduce logistics cost, promote logistics efficiency, optimize modal mix and improve first and last mile connectivity

BUSINESS STRATEGY

From past two years we have been exploring ways to find ways to replicate our services at newer locations with same service levels and we are happy to share that finally we have got a break through and soon we will be starting a big drive to start operations out of Chhattisgarh in newer locations wherein professionals will be managing the business. We are laying foundation for becoming a major player in logistics field in India. Your management has taken immense efforts and explored these growth areas and we have invested heavily in manpower and resources to attain the goal of organisation driven by professionals.

After GST implementation we have been persuading companies to add up Mahakaushal Belt and Western Orissa to our CFA operations and we have been successful to the great extent in adding few big clients. We are looking forward to add more and more business in the coming years which will grow your Company manifolds.

We have got good response in respect to the new warehouse build by us at a new warehousing complex and business seems to multiply with more warehouses coming up.

We intend to continue to focus on the strategies set out below:

Continue to grow share of our business from external clients:

Over the years, we have capitalized on our expertise and have expanded our operations to add external clients. We plan to continue to focus on increasing 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

We intend to continue to acquire large revenue clients and provide them with integrated, end-to-end solutions to address all their logistics requirements. This gives our clients flexibility and scalability in their operations along with cost efficiencies. We expect that focusing on a few clients will allow us to manage and allocate our resources efficiently and enhance our ability to provide customized solutions. We also believe that this approach will result in increased revenues and a higher rate of renewal of contracts and will allow us to continue to grow our business. However, this approach may result in certain dependence on a limited number of clients in certain industry verticals.

Additionally, we will also continue to expand our relationships with our existing clients by offering additional logistics services to them. We have launched initiatives to strengthen customer relationships, and to help us become a trusted logistic partner for our clients.

Focus on establishment of multi-user warehouse

We have established a multi-user warehouse at "Tendua" (near companys registered office) to serve our clients world class warehouse facility within Chhattisgarh state and vision is to establish or to contract these type of multi-user warehouse at various business locations including certain strategic locations.

Continue to focus on digitization and enhancements in technology

We have made consistent investments in digitization and technology over the past several years and intend to continue making these investments. We will continue digitizing existing processes to improve transparency, data availability, and efficiency. Planned investments in technology systems include upgrade of our ERP (financial accounting and controlling module), enhancements to our Transport Management System, Development of our Warehouse Management System. Your Company has also introduced a Turnaround Time application for its transports.

BUSINESS OVERVIEW

Shree Vasu Logistics Limited is a publicly held Company engaged in the logistics business lines. The Company deals in providing C&FA services covering areas of the service are Chhattisgarh, Orissa, West Bengal, Assam and some part of Madhya Pradesh. The company have own fleet of trucks and network of the third party transportation gives us an access of more than 30 transport vehicles.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.

FINANCIAL PERFORMANCE

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

(Rs.in Lakh)

Particulars March 31 2019 March 31 2018 % Change
Net Sales/Income from Business operations 3589.34 3126.80 14.79
Other Income 22.15 15.92 39.13
Total income 3611.49 3142.71 14.92
Profit before Tax 226.64 310.27 (26.95)
Net Profit/ (Loss) after Tax 167.66 225.40 (25.62)

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 2017-18 2018-19 % Change Reason for Change
1 Debt Equity Ratio 2.80 1.03 63.21 Debt-Equity Ratio is reduced mainly for infusion of capital by public issue and repayment of loans and reduction in this ratio is in favor of the Company
2 Operating Profit Margin (%) 16.02% 10.19% 36.39 Increase in operating expenses occurred for expansion of business activity
3 Net Profit Margin (%) 7.21% 4.67% 35.22 Increase in expenses occurred for expansion of business activity

OPPORTUNITIES

The Company has carved a niche for itself in the industrial shoe/uppers segment in the domestic market. The quality of the Companys services is well recognized. Embarking on this strength we are constantly working towards expanding the market to other states apart from our present work areas.

We are working hard on developing sales team and we look forward to add up lot of new businesses in 2019-20. Our primary focus was to start your Companys full fledge business operation in State of West Bengal and we succeeded to some extent which will be seen in first half of the financial year 2019-20 as increased turnovers and profits will grow considerably. To create better value for our customers, Company plans to start the own warehousing complex in Kolkata in 2020.

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 India market. Competition from these segments is likely to increase. 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.

As post GST impact few of our clients have shifted their work to other territory which resulted into loss of our clientele to some extent. However, we are working to develop our business operation in Orissa Belt and Jabalpur Belt and hopeful that lost clients will find their way towards your Company in need of high level of services offered by your Company.

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 448 permanent employees on the rolls of Company as on March 31, 2019. 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 100 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.

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.

ATUL GARG SHREE BHUSHAN GARG
Managing Director Wholetime Director
DIN: 01349747 DIN: 01349775
Place: Raipur
Date: August 10, 2019