siddhika coatings ltd share price Management discussions


1. Industry structure and developments - Paint market is consolidating with bigger brands launches & increased activity for acquisitions of smaller players. It is evident that market is moving from unorganised to organised at least on the manufacturing front. With better products coming in, the awareness on quality at the wall / floor will also increase and clients will start looking for more organised service providers.

2. Opportunities and Threats - With bigger brands gearing up for their launches, product portfolios will also expand catering to the demand of high-end customer where Siddhika is an important player to provide high end services with proper compliances. Our geographical presence is an advantage as there is rarely a paint contractor with pan india presence like ours. Threats to the business are mainly due to delay in execution of projects which can affect targets for a particular year. Increasing cost of manpower cannot be passed on to clients immediately and this may have some impact for a shorter period.

3. Financial Performance of the Year -

Revenue: Net revenue from operations for the year under review amounted to Rs.3221.07 lacs compared to Rs.2038.91 lacs in 2021-22 registering an increase of 57.98%. The company expects to improve the revenue in the coming year due to recovery & pick-up in the construction market.

Financial Expenses: For the year under review amounted to Rs.2.64 lacs as against Rs.0.69 lac in Financial Year 2021-22 translating to 0.08% and 0.03% of the total revenue, respectively. This increase was on account of increase in BG charges as current year BGs issued by Bank are mostly against fully secured by FDR.

Depreciation & Amortization Expenses: - At Rs.19.05 lacs for the year under review was increased compared to 14.24 lacs in the previous year. The increase was mainly on account of increase in additions of assets.

Earnings: - Earnings before Interest, Depreciation and Tax (excluding other income) increased to Rs.429.53 lacs in FY 2022-23 as compared to Rs.179.55 lacs in FY 2021-22. EBITA as a percentage of net revenue (excluding other income) increased to 139.23% in FY 2022-23 as against a increase of 50.31% in FY 2021-22. Increase in EBITA was primarily due to Increase in Revenue.

Return on Capital Employed: - for the current year at 16.33% as compared to 7.63% in the previous year. The increase in return on capital employed is due to increase in sales & better utilisation of resources.

Value Creation: -

Net worth of the company increased by Rs.278.32 lacs to Rs.2568.23 lacs as of March 31, 2023, from Rs.2,289.91 Lacs as of March 31, 2022.The Increase is due to increase in Reserve & Surplus on account of profit as compared to last year.

Book Value per share increased to Rs.83.13 in FY 2022-23 as compared to Rs.74.12 in the previous year. The increase is due to increase of Reserves & Surplus on account of profit during the year.

4. Segment-wise performance - Company operates in single segment. Repeated clients are our major strength. In FY 2022-23 increase in revenue was mainly due to faster recovery in operations from all over India. The order book seems to be healthy & we continue to focus on our core segment of repeat client business.

5. Outlook - Demand for SKK paints & our services are still good. We look forward to business moving back to normal in construction industry. Recent optimism in real estate sector adds to our confidence on growth. We also expect demand to pick up in our segments of fafade renovation once 100% work from office is back on track.

6. Risks and concerns - Any change in tax regime, import tax can affect business margins. Also, inflation may add cost on front of workforce & material.

7. Internal control systems and their adequacy - The internal control system is an integral part of the general organizational structure of the Company. The system is highly structured and totally coordinated with the size and nature of its business. This process is aimed at pursuing the values of both procedural and substantial fairness, transparency, and accountability. External audit firms are appointed at various locations of the Company to conduct regular audits. The internal HR control system is a set of rules, regulations, policies, and procedures which run on software with in-built authorizations for enhanced control. The organisation is appropriately staffed with qualified and experienced personnel for

implementing and monitoring the internal control environment. During last year we received ISO 9001:2015 certification for quality management services.

8. Discussion on financial performance with respect to operational performance - Statements in the management discussion and analysis describing the Companys objectives, projections, estimates, expectations may be "forward-looking statement" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Key factors that could make a difference to the Companys operations include among others, economic conditions affecting demand/supply and price conditions in the domestic markets in which the Company operates, changes in the Government Regulations, tax laws and other statutes and incidental factors.

9. Entry/Exit of Key Managerial Personnel and overall employment status of the company - The organisation continued its endeavour of attracting & retaining best-in-class talent through multiple talent engagement initiatives. We have launched applicator recognition & incentivisation plan to address the most important manpower of our business. "INVEST IN HUMAN" is expanding to the last possible lane within Siddhika family. Company also conducted half yearly reviews with all employees to assess their opinions & take them on board for future policy framework. During the year special recognition was given to employees who have completed 10 + years with Siddhika. Mr. Abhijeet Banerjee who served as Director for many years, retired during the year and that was the only exit amongst KMP for the period.

10. Details of significant changes (i.e., change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor, including - (Consolidated Basis)

Particulars

Period Ended 31.03.2023

Period Ended 31.03.2022

% Change

Remarks

Stability Ratios

Debt Equity Ratio (Total Loans)

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0.01

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Debt Service Coverage Ratio (DSCR)

Interest Coverage Ratio

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Liquidity Ratios

Current Ratio

3.73

5.65

51.47%

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Debtors Turnover Ratio

8.84

5.19

70.33%

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Inventory Turnover Ratio (no. of days)

3.35

2.10

59.52%

Profitability

Ratios

Operating Profit Margin

14.83%

10.55%

40.56%

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Net Profit Margin

11.24%

8.37%

34.29%

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Change in Return on Net Worth in comparison to the previous year - During the financial year ended 31st March 2023, the return on net worth of the Company was 13.95% as compared to the previous financial year ended 31st March 2022 which was at 7.05%.

11. Disclosure of Accounting Treatment - The Company has followed the same accounting treatment as prescribed in the relevant Accounting Standards while preparing the Financial Statements.