Sonam Ltd Management Discussions

REPORT

• OVERVIEW:

We are a clock manufacturing Company situated in Morbi, Gujarat. We offer a wide range of table and wall clocks at various price points across budget, mid-level and premium styles. As on March 2024, we are offering clocks from a price range of Rs. 100 to Rs. 3000 which includes LED digital clocks, LCD clocks, light sensor clocks, pendulum clocks, musical clocks, rotating pendulum musical clocks, sweep clocks, office clocks, designer clocks, alarm clocks, table clocks and regular clocks. We also offer customized corporate clocks in bulk quantities for corporate gifting purpose.

COMPANY OVERVIEW:

• Sonam Limited is one of the largest and leading clocks manufacturing Company in India. Company is well equipped with the world class technology and state-of-the-arts equipment which is strategically utilized by highly professional management team & the workforce from surrounding villages (Most of them are female workers) with the values of dedication, commitment and hard work the company as a team is climbing the ladder of success. At present, the company has a wide range of Clocks, LED digital clocks, LCD clocks, light sensor clocks, pendulum clocks, musical clocks, rotating pendulum musical clocks, sweep clocks, office clocks, designer clocks, alarm clocks, table clocks and regular clocks. We also offer customized corporate clocks in bulk quantities for corporate gifting purpose.

• We are ISO 9001:2015 accredited Company and we have grown many folds during the past decade under the leadership and guidance of our Promoter, Chairman and Managing Director, Mr. Jayeshbhai Chhabildas Shah, who has an experience of over 35 years in the field of clock industry. His expertise and experience has been instrumental in the growth of our business.

• The Company is listed in 2018 on NSE Emerge platform and after that company migrated to Main Board of NSE w.e.f. 07^th April, 2022. Companys use of latest technology, machinery & efficient manpower i.e. highly professional management team & the workforce from surrounding villages with the values of dedication enables it to perform with immense degree of consistency in quality performance at various stages that contributes towards the making of final output. At present, the company has a wide range of Clocks, LED Clocks & Timepieces.

• Since last Twenty Three years "SONAM" has never looked back, and now become Indias one of the largest customized clock producing company. In the field of Indian Clock Manufacturing industry "SONAM" is running "NECK to NECK" a winning track with its production capacity and strong marketing network.

• Sonam Limiteds head office and production units are located in Lajai (Morbi), India.

• Industry structure and development: When looking at the modern-day clock and trying to understand the way we value time, it is important to examine the root of our modern timepieces. From the olden days, royal maharajas using the pocket watches to the current next-gen using smart watches and techno wearable devices, some Indian brands are attempting to take over international look & feel while retaining the age-old charm. Lets look at who is keeping time in the country.

Time and tide wait for none, goes the proverb. The adage fits well for the wall clock manufacturing industry. In an era dominated by fancy gadgets such as mobile phones and computing devices that also tell time, clock makers have turned to offer customized designer products amidst dwindling sales.

With an abundance of time-telling devices available, wall clocks have been able to retain their popularity by maintaining the utility value and basic efficiency. Traditional wall clock manufacturers have been forced to tweak the products and offer the same as the designer and attractive pieces with aesthetic value in homes, offices and other premises. The move says industry sources, is also a result of a shift in consumer preferences for such products. Modified products in the form of wooden and metal-built designer wall clocks, at times encrusted with gems and jewellery, are in demand from customers. Customers consider such kind of wall clocks as adornments or d?cor pieces for their homes and offices and not just time telling machines.

Demand for usual design wall clocks has fallen significantly by 65 per cent in the last couple of years. In order to maintain the clock business, all major players are now focusing on designer clocks even as demand for decorative wall clocks has gradually improved worldwide. The consumer perception of designer clocks is that people prefer to buy expensive looking clocks but at affordable prices. So, companies must design such decorative pieces consequently. When you look at your treasured timepiece or perhaps its price tag its easy to recognize that it must have taken quite a bit of effort to produce. Below is the process which makes your timepieces more valuable and precious.

• Concept and Design: Before a company can start producing a watch, they need to come up with an idea; a concept that can be transformed into an actual design. Today, most watch manufacturers use advanced CAD (Computer Aided Design) systems to design watches and all their components. A couple of brands use 3D printing techniques to look at patterns based on these computer designs. Others use real stainless steel for prototypes, sometimes with dummy movements or just basic calibers that fit. Do not underrate the role of research and development at this stage either. In some companies, it is all under one roof to make sure that a watch or movement design is achievable. Everything must perfectly correspond together, especially since the room for error in watch manufacturing is tiny.

• Production: Once a company is certain about how a watch should look and which designs it should have, the production can begin. The production process consists of several parallel processes. The case making department or third party, for example, does not have to wait until the movement is finished or the dial receives its final colour or finish.

• Movements: A good manufacturer start their journey with raw pieces of brass, stainless steel, and other alloys used for the movement. CNC (Computerized Numerical Control) machines do the initial cutting, drilling, and milling of all the parts. Once this is finished, the parts pass through a chain of small steps, to either (hand-) finish certain parts or to add gears and trains until there is a working movement. Step-by-step, the movement gets finished and assembled by watchmakers. When the movement is finished and ready to be the case, it is often checked for accuracy.

• Dial and Hands: The dial and hands, or face of the watch, are very essential. This is what you will look at many times each day. These features need to be magnificent and flawless. Beauty is in the eye of the beholder, but perfectionism puts little room for understanding. Like (hand-) finishing movements, finishing is important for the dial and hands of a watch.

• Assembly: Before the movement is cased and the dials and hands are added to it, a lot of visual checks take place. Sometimes, pieces must go all the way back to the production process to be fixed. Hands are sometimes automatically applied to the dial, but in many cases, this is still done by hand. More visual checks take place to see whether the hands are perfectly aligned. The crown is of course also added and tested to see if all the hands move correctly and whether the winding system works. Once the movement is cased, the dial is added, and everything is fully functional. When this is complete and a watch has passed all tests, it goes into the final stage of the assembly and production process. Some watches (case backs) are (laser) engraved in this stage, while other manufacturers do this a bit earlier during case production. If so, the strap or bracelet is added, and the watch is ready.

If we go by the olden times, earlier the watches were only needed to track time, but with the growing demand, today consumers want more than just a normal watch. Technology is playing a bigger role in the watch industry. Traditionally, the smart watches were a fad with fitness enthusiasts and athletes who focused on keeping a track of their health and workouts. Gradually, the acceptance among the Indian audience has stepped up with a category of consumers who demand more than just functionality. Catering to this category means infusing a sense of desirability into the products. The aim is to offer a product that is complete and makes a strong statement when worn. Acceptability of these can be further pushed with advancements in product features. The consumer demands the usability of a fitness tracker to go beyond his gym or yoga class. The need of the hour is to offer appealing timepieces that become an ingrained piece of ones lifestyle.

• To promote the brand development strategy: Further enhance the degree of attention to independent wall clock brand we are building, brand development strategy. One is to strengthen brand awareness, the formation of internal personnel and all processes, promote all-round good atmosphere brand building, and implemented in capital investment, human resources and so on. The second is the development of independent brand development strategy, according to their own characteristics and operational objectives, a clear market positioning, choice of personalized, differentiated brand development model. The third is to enhance brand management capabilities, encourage enterprises to establish brand management, the establishment of practical brand management mechanism, the implementation of brand management, foster cultural brand, and brand value. Fourth, explore the establishment of the whole process of intellectual property management system, scientific layout and effective use of intellectual property. Fifth, improve the brand evaluation method, the establishment of the wall clock brand value measurement index system, to enhance the brand value and provide guidance support. Sixth, actively carry out the work of brand promotion, integrated use of various types of brand communication channels publications, networks, mobile terminals, effectively increasing the wall clock brand.

OPPORTUNITIES:

The government is introducing several reforms to create possibilities for getting Foreign Direct Investment (FDI) and foster business partnerships, in this regards our company trying to focus on "MAKE IN INDIA" for all type of Raw material and other material used for wall clock and time piece. Moreover, our centre of attention is to increase the export of all type of clock and clock parts. In present time Sonam Clock Limited has covered 70% of market in sale of Movements in domestic and foreign market. By this way our company is generating employment and using internal resource via purchasing power.

OUR MAJOR PRODUCTS:

The clocks manufactured by us are marketed and sold under our brand names of "Sonam", "Lotus", "LEXY" and "ampm". Our range of clocks can be broadly classified into following categories: -

S. No. Category	Products	Specifications
1 Rotating Pendulum Musical Clock		- Price range Rs. 900 to 1530
		- Melodious Tunes
		- 360? Rotating Pendulum
		- Standard Size: 490 x 285 mm
2 Pendulum Musical Clock		- Price range Rs. 855 to 1215
		- Melodious Tunes
		- Swinging Pendulum
		- Standard Size: 500 x 290 mm
3 Rotating Musical Clock		- Price range Rs. 855 to 990
		- Melodious Tunes
		- Standard Size: 430 x 290 mm
4 Pendulum Clock		- Price range Rs. 405 to 785
		- Swinging Pendulum
		- Standard Size: 490 x 310 mm
5 Musical Clock		- Price range Rs. 695
		- Melodious Tunes
		- Standard Size: 338 x 298 mm
6 Light Sensor Clock		- Price range Rs. 630
		- Standard Size: 360 x 360 mm
7 LCD Clock		- Price range Rs. 990 to 1575
		- Standard Size: 445 x 445 mm
8 LED Digital Clock		- Price range Rs. 900 to 4500
		- Standard Size: 370 x 250 mm
9 Sweep Clock		- Price range Rs. 450 to 1485
		- Standard Size: 400 x 400 mm
10 Sweep Office Clock		- Price range Rs. 425 to 2070
		- Standard Size: 610 x 610 mm
11 Office Clock		- Price range Rs. 325 to Rs. 1280
		- Standard Size: 400 x 400 mm
12 Designer Clocks		- Price range Rs. 395 to 810
		- Standard Size: 515 x 330 mm
13 Classy Dial Clock		- Price range Rs. 205 to 520
		- Standard Size: 320 x 320 mm
14 Regular Clock		- Price range Rs. 175 to 990
		- Standard Size: 355 x 355 mm
15 Diamond Series Clock		- Price range Rs. 205 to 315
		- Standard Size:- 290 x 290 mm
16 Picture Dial Clock		- Price range Rs. 175 to 450
		- Standard Size: 320 x 320 mm
17 Economy Clock		- Price range Rs. 135 to 195
		- Standard Size: 260 x 260 mm
18 Alarm Timepiece		- Price range Rs. 135 to 430
		- Standard Size: 95 x 127 mm
19 Corporate Clock		- Price as per order requirement of Customer.
		- Standard Size: 413 x 413 mm

FUTURE OUTLOOK:

The company is looking after diversifying its business into manufacturing of different products related to same line in future with providing various different products with different and attractive features, being different in market one should add uniqueness in product to survive in market. This will reduce the dependency on one product and its overseas market. The group will make optimum utilization of its existing infrastructure facilities which are already designed for many prospects.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

At this point of time, we are pleased to share with you the highlights of the years performance and Outlook for the next Year as mentioned below:

I would urge all our shareholders to look at your companys performance from a wider perspective of resilience and long term growth.

• REVENUE FROM THE OPERATIONS:

Revenue of the Company was Rs. 8763.87 Lakhs in Financial Year 2023-24 as compared to Rs. 8260.73Lakhs in the previous year 2022-23.

• EARNING BEFORE TAX :

Profit before Tax of the Company had reached to Rs. 740.99 Lakhs in Financial Year 2023-24 as compared to Rs. 488.24 Lakhs in the previous year 2022-23.

• NET PROFIT :

Net Profit of the Company had reached to Rs.551.58 Lakhs in Financial Year 2023-24 as compared to Rs. 400.16 Lakhs in the previous year 2022-23.

• EARNING PER SHARE:

EPS for Financial Year 2023-24 has also remarkably up to 1.38 from 1 in Financial Year 2022-23

Note-1: Pursuant to approval given by the shareholders, the Company has during quarter ended September 2022, issued 1, 00, 08,000 equity shares of 10 each as fully paid-up bonus equity shares in the ratio of 1 (One) equity share for every 1 (One) existing equity share.

Note-2: Subsequent to the year end and pursuant to Board and Shareholders approval, the equity shares of the Company were split / sub-divided such that one (1) equity share having face value of 10/- (Rupees Ten only) each fully paid-up, was sub-divided into two (2) equity shares having face value of 5/- (Rupees Five only) each, full paid-up with effect from 10th May, 2024 (Record Date). Accordingly, equity shares and earnings per shares have been adjusted for share split in accordance with Ind AS 33 ‘Earning Per Share read with Ind AS 10 ‘Events After Reporting Period.

For comparison Bonus and subdivision of shares effect excluded for computing the Earning Per Share (EPS).

SEGMENTWISE OR PRODUCTWISE PERFORMANCE:

The major and material activities of the company are restricted to only one geographical segment i.e. India, hence the secondary segment disclosures are also not applicable. There is no separate segment or product. The company has its product in business segment as Manufacturing & sale of Horological items, clocks, clock movements and related items.

RISK AND CONCERN:

The Company is exposed to several Internal & External Risks, potential risks like technological changes, political risks, product distribution both from internal and external sources. To ensure our long- term corporate success, it is essential to identify, analyse and mitigate risk by appropriate control measures.

The Company is also exposes to foreign currency risks. The change in the exchange rate between foreign currency and the Indian Rupee may have negative impact on the Companys result and financial condition. The Company is exposed to the risk of price fluctuation on raw materials as well as finished goods. The Company apart from passing the cost to end user also manages these risks in inventory management and storage etc.

Traditionally, there has seen bulk production of emulsion-based wall clock industry, while customized products tend to be in small quantity. Most of the clock manufacturers being small and medium, bulk production of customized metal and wood based products were not viable. However, recent changes in trend in wall clocks has led to some of the players attempt bulk offering of high-valued designer clocks to corporate it will be change from time to time. People prefer to buy designer clocks that look expensive at affordable prices. So we have to design such decorative pieces accordingly. Sales of designer clocks have grown gradually in the last three years but there are Number of manufacturers has decreased even as the business becomes unviable for smaller players and design may become outmoded within small time span.

HUMAN RESOURCES:

Your Companys Industrial relations continued to be harmonious during the year under review. Employees form the greatest source for any companys success and growth. They are evaluated based on their strengths, potential to achieve and determination to grow head. Learning and being innovative is a very important aspect for every employee and the company recommends employees to continue learning from within the companys framework by contributing and constantly exploring new innovative ideas for the upliftment of the organization. Our company has employed more than 100 women in the department working since long time. Company provides various facilities to all the employees of company.

It is the belief of the management that it is very important to motivate the employees and encourage them to take decisions and initiatives towards the betterment of their work. The Company encourages and provides them a safe and motivating work environment. Furthermore, various training and educational seminars and events are organized with proper emphasis given on health and safety issues. The Company has always followed process of appraisal from time to time, to recognize talents and ensure that employees remain devoted to the organization for a long term.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company implemented suitable controls to ensure its operational, compliance and reporting objectives. The Company has adequate policies and procedures in place for its current size as well as the future growing needs. These policies and procedures play a pivotal role in the deployment of the internal controls. They are regularly reviewed to ensure both relevance and comprehensiveness and compliance is in grained into the management review process.

The Board has adopted policies and procedures for ensuring that all transactions are authorized, recorded and correctly reported, all assets are safeguarded and protected against loss from unauthorized use or disposition, reducing wastage and maintenance of proper accounting records for ensuring accuracy and reliability of its financial information. The Board has constituted an Audit Committee which meets periodically to review the financial performance and the accuracy of financial records and accordingly appropriate actions are taken by the management. The significant findings, along with management response and status of action plans are also periodically shared with and reviewed by the Audit Committee. Adequacy of controls of the key processes is also being reviewed by the Internal Audit team. Suggestions to further strengthen the process are shared with the process owners and changes are suitably made. Significant findings, along with management response and status of action plans are also periodically shared with and reviewed by the Audit Committee. It ensures adequate internal financial control exist in design and operation.

ANALYTICAL RATIOS:

Particulars	FY 2024	FY 2023	% Variance	Reason for variance (In case of change Exceeding 25%)
Return on Equity (%)	10.13%	7.96%	27.19%	On account of Increase in Profitability
Net capital turnover ratio (times)	8.21	9.70	-15.31%	--
Return on capital employed (%)	14.59%	10.72%	36.09%	On account of Increase in Profitability
Current Ratio(times)	1.58	1.37	15.22%
Interest service coverage ratio (times)	4.15	3.30	25.76%	On account of Increase in Profitability
Debt service coverage ratio (times)	1.93	1.66	16.11%
Debt equity ratio (times)	0.13	0.20	-35.83%	On account of Repayment of Long Term Loan
Inventory turnover ratio (times)	4.81	3.69	30.37%	On Account of Increase in Turnover Compare to Average Inventory
Trader receivable turnover ratio (times)	10.92	12.99	-15.97%
Trade payable turnover ratio (times)	59.16	14.38	311.43	On account of make Payment to Suppliers
Net profit ratio (%)	6.29%	4.84%	29.93%	On account of Increase in Profitability
Return on investment (%)	11.95%	8.32%	43.57%	On account of Increase in Profitability

DISCLOSURE OF ACCOUNTING TREATMENT:

The Company adopted Indian accounting standard ("Ind As") prescribed under section 133 of the companies act, 2013 read with relevant rules issued there under and in terms of Regulation 33 of the SEBI (LODR) Regulations, 2015 and the Companies (Indian accounting Standards) (Amendment) Rules, 2016.

CAUTIONARY STATEMENT:

Certain statements in the reports of the Board of Directors and Managements Discussions and Analysis may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results may vary from those expressed or implied depending upon economic conditions, Government policies and other incidental factors. Taxation laws, economic development, cost of raw materials, interest and power cost are the few extraneous variables that influence the Companys operations.

For and on behalf of the Board,	Sd/-	Sd/-
SONAM LIMITED	Jayesh C. Shah	Deepa J. Shah
Registered Office: Survey No. 337/p, Morbi Rajkot Highway, Lajai, Tal. Tankara, Dist. Morbi- 363641	Chairman & Managing Director	Whole-Time Director
Date: 31.08.2024	DIN: 00500814	DIN: 01981533
Place: Lajai, Morbi