Siddhika Coatings Ltd Management Discussions

1. Industry structure and developments - Paint market is consolidating with big ticket launches from renowned business groups with increased activity for acquisitions of smaller local players. Market is continuing the movement from unorganised to organised at least on the manufacturing front. With better products coming in, the awareness on quality at the building 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.

Revenue: Net revenue from operations for the year under review amounted to Rs. 3681.98 lacs compared to Rs.3221.07 lacs in 2022-2023 registering an increase of 14.31%. The company expects to improve the revenue in the coming year due to expansion in service portfolio.

Financial Expenses: For the year under review amounted to Rs 2.03 lacs as against Rs.2.64 lac in Financial Year 2022-23 translating to 0.06% and 0.08 % of the total revenue, respectively. This decrease was on account of decrease in BG charges as current year BGs issued by Bank are mostly against fully secured by FDR.

Depreciation & Amortization Expenses: - At Rs.19.32. lacs for the year under review was increased as compared to 19.05 lacs in the previous year. The increase was mainly on account of increase in additions of assets in current year.

Earnings: - Earnings before Interest, Depreciation and Tax (excluding other income) increased to Rs. 580.96 lacs in FY 2023-24 as compared to Rs.429.53 lacs in FY 2022-23. EBITA as a percentage of net revenue (excluding other income) increased to 35.25% in FY 2023-24. Increase in EBITA was primarily due to an Increase in Revenue in 2023-24 as compared to 2022-23.

Return on Capital Employed: - for the current year at 19.43% as compared to 16.33% in the previous year. The increase in return on capital employed is due to increase in sales & better utilisation of resources.

Net worth of the company increased by Rs.351.45 lacs to Rs. 2919.68 lacs as of March 31, 2024, from Rs.2568.23 Lacs as of March 31, 2023.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 94.50 in FY 2023-24 as compared to Rs 83.13 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 2023-24 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 growing 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 & business of our subsidiaries in immediate to medium future.

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 14001: 2015 & ISO 45001: 2018 certification for quality management services. We were also recognized as Most Innovative Company for Construction & Renovation Services 2023 & Service Excellence in Texture Paints by different business forums.

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.

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)

Change in Return on Net Worth in comparison to the previous year - During the financial year ended 31^st March 2024, the return on net worth of the Company was 16.17% as compared to the previous financial year ended 31^st March 2023 which was at 13.95%.

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.

Note on Investment in Mutual Funds:

All investments in Mutual Funds are for cash management only with money parked in Liquid / Debt / Arbitrage Mutual Funds. Small exposure of less than Rs. 5 lakh is towards Equity Mutual fund by our subsidiary AB Coatings Pvt. Ltd.