Source Natural Foods & Herbal Supplements Ltd Management Discussions.

Industry Structure and Development- Indian Economy

The unprecedented onset of Covid-19 pandemic has heavily impacted the global economy. The pandemic is raging high across the world with rising human casualties. Protecting lives and allowing health care systems to cope have required isolation, lockdowns, and widespread closures to slow the spread of the virus. The health crisis is therefore having a severe impact on economic activity

• The Economic Survey 2020-21 was tabled in the Parliament on January 29th 2021, by the Government of India.

• Indian Economy contracted by 7.7% ( negative growth) in FY 2020-21 due to covid

• Indias real GDP to record a 11.0% growth in FY 2021-22 and nominal GDP to grow by 15.4%. If one considers the contraction of 2020-21, the GDP growth will be 2.5% in FY 2021-22 when compared to GDP of FY 2019-20.

• India expected to have a Current Account Surplus of 2% of GDP in FY21, a historic high after 17 years.

• India remained a preferred investment destination in FY 2020-21 with FDI pouring in amidst global asset shifts towards equities and prospects of quicker recovery in emerging economies:

COVID-19 pandemic emphasized the importance of healthcare sector and its interlinkages with other sectors - showcased how a health crisis transformed into an economic and social crisis.

Compared with the global economies, the Indian economy has responded very well and made a strong rebound from one of the steepest falls witnessed in its GDP during the second quarter of the financial year 2020-21. According to latest IMF report India Economy is expected to grow by 12.5 percent in the financial year 2021-22 and then moderate to 6.5 percent by the financial year 2022-23

Ayurveda and herbal supplements sector

The Ayurveda market in India is segmented on the basis of Ayurveda products and Ayurveda services. Personal care products, food and beverages, household products and healthcare products fall under the Ayurveda products category. The Ayurveda services segment comprises healthcare services, and spa and rejuvenation services, it is expected to reach INR 710.87 billion by 2024

In recent years, as a holistic healing system, Ayurveda has witnessed evolution in the form of Ayurvedic products and services. Rising awareness about the importance of a healthy lifestyle, increasing preference in favour of chemical-free natural products, as well as favourable government initiatives have led to the expansion of the Ayurveda market in India. Your Company operates in the Ayurveda and herbal sphere which has been identified as one of the key sectors of growth in the pandemic time

OUTLOOK

The continue COVID-19 pandemic is likely to have a major negative impact across the world. It has led to quarantines, regional lockdowns and social distancing—which are essential to contain the virus —with particularly acute effects on sectors that rely on social interactions such as travel, hospitality, entertainment, and tourism.

The performance of the Company has been continuously increasing in the recent years. Moving forward, the Company expects and has plans to increase sales of its products helped by improvements in GDP growth, increase in disposable income.

In the financial year under review, your Company continued to promote its products. The Company is establishing a strong marketing and sales team and is appointing distributors and dealers across the country to develop a strong market base. The Company has plans and is taking required measures to strengthen its sales force as well as its distribution network.

Risks and opportunities

We recognise that ensuring the stability of our financial base is key to realising our growth ambitions and creating value for all our stakeholders. To this end, we have always remained disciplined in cost management and driven efficiencies at all levels. We ensure that we have the appropriate level of capital and liquidity to support and protect our operations while continuing to invest in our business to harness the emerging opportunities

Risk management is integral to your Companys strategy and to the achievement of its long-term goals. Our success as an organisation depends on our ability to identify and exploit the opportunities generated by our business and the markets we operate in. In doing this we take an embedded approach to risk management which puts risk and opportunity assessment at the core of the Boards agenda, which is where we believe it should be.Your company appetite for risk is driven by the following:

• Our growth should be consistent, competitive, profitable, and responsible.

• Our behaviors must be in line with our Code of Business Principles and Code Policies.

• Our ambition to continuously improve our operational efficiency and effectiveness.

• Our approach to risk management is designed to provide reasonable, but not absolute, assurance that our assets re safeguarded.

Your company is able to able to critically identify and assess strategic opportunities and threats and develop effective strategies in the context of long term objectives and the organizations relevant policies and priorities.

Internal control system and its adequacy

The Company has robust systems for Internal Audit and Corporate Risk assessment and mitigation. The Company has an independent Internal Audit Department primarily assisted by outsourced audit teams. The Internal Audit plan is approved by Audit Committee at the beginning of every year. The conduct of Internal Audit is oriented towards the review of internal controls and risks in the Companys operations and covers factories, sales. Audit Committee is presented with a summary of significant audit observation and follow-up actions thereon.

The auditors evaluate the effectiveness of the internal control structure of a business organization and determine whether the business policies and activities are followed properly. The communication network helps an effective internal control structure in execution. And all officers and employees are part of this communication network.

The internal control structure of a company consists of the policies and procedures established to provide reasonable assurance that specific entity objectives will be achieved. The Company is carrying out internal audits at regular intervals so as to ensure that irregularities and operational inefficiencies are identified and addressed.

The Audit Committee comprises of the members from the Board so as to ensure total transparency and consists of three Independent non-executive Directors. The Committee performs the task of review of internal audit reports, internal control systems from time to time and reviews the financial Statements every quarter before recommending the same to the Board of Directors.

Share capital

During the year under review, there was no further issue of shares. The paid-up capital of the Company is Rs.6, 43,69,310 /- as on 31.03.2021.

Secured loans

Secured loans of the Company as on 31.03.2020 were Rs. 1,01,87,628 /-and as on 31.03.2021, they are Rs.90,71,335/-

Fixed assets

New assets worth Rs. 94,73,234/- have been acquired during the Year and added to the block of assets. As a result, the net block of fixed assets stands at Rs. 3,87,62,947 for the year ended 31.03.2021, after providing an accumulated depreciation of Rs.4,47,80,323/-

Human resources and industrial relations

Human resources management and industrial relations often represent adversarial positions in a union workplace. HR is the employers advocate. Industrial relations a term synonymous with labour relations refers to matters that affect union employees. However, HR management and industrial relations must coexist within the workplace. Cooperative coexistence can ensure that your organization doesnt have to deal with strikes or becoming embroiled in lengthy arbitration over collective bargaining impasses or unresolved grievances.

Your Company has in place structured HR policies and programs in the areas of resourcing, performance and compensation management system. This system supports the current and future human resource needs of the Company.

The number of permanent employees of the Company as on 31stMarch, 2021 were 57.

Cautionary statement

Statements in this Integrated Annual Report, particularly those that relate to the Management Discussion and Analysis, describing the Companys objectives, projections, estimates and expectations, may constitute forward looking statements within the meaning of applicable laws and regulations. Although the expectations are based on reasonable assumptions, the actual results might differ.