South Asian Enterprises Ltd Management Discussions

Financial Review

Your Company recorded a total income of Rs.257.25 lacs during the year under review compared to previous year’s figure of Rs. 157.28 lacs. The Company has earned a net profit of Rs. 2.35 lacs in the year under review. The Company incurred a net loss of Rs. 8.33 lacs in the previous year. The marketing of earthing products and execution of contracts for earthing and lightning protection systems continued to make a significant contribution to the total revenue of the Company keeping in view significant increase in revenue generation in this segment compared to previous year. The Company expects good progress in this segment during the year and in the coming years will witness better results.

The revenue from amusement parks showed a marginal decrease compared to previous year. The rising inflation and relatively low per capita income in the regions where amusement parks are located have significant bearing on revenue from this segment. Notwithstanding the odds, the Company is continuing its efforts to sustain and improve its performance in this area.

Industry Structure and Development

Your Company intends to make the best out of opportunities available vis--vis the means at its disposal and the available options are being explored. In the electrical engineering segment i.e. earthing and lightning protection system, the Company has been able to develop inroads in Government agencies and has successfully executed contracts awarded to it albeit at small scale.

Outlook, Risks and Concerns

Following the keyword "Something new" for survival in amusement industry, the Company took measures to renovate the park at Kanpur during the year under review. In the process apart from beautification of park as a whole, the outer side of boundary wall of the park has been decorated by mural painting in which school children from local school were encouraged to participate with support from Kanpur Nagar Mahapalika. To retain the attraction of amusement park and increase the footfalls, both disposable income per person and constant innovation whether by inducting new rides or promotional programs etc. are equally important. However, the increased cost of improvement/new rides, the maintenance expenditure and stiff competition from other sources of entertainment have put profit margins of this segment under pressure. Your Company already operates on thin margins and infusion of funds on improvement/ new rides is a constant challenge. The entry costs have to be kept low to keep the parks within the reach of masses that have further stressed the cash flows. The entertainment tax of 30% continues to be additional burden and a challenge for boosting revenue. The recurrent loss in this segment is being monitored closely to keep it to the minimum. The electrical engineering segment viz. earthing and lightning protection systems business has responded well as the Company has executed orders to the customers’ satisfaction including for some government departments. The power plants, electronics and other hi-tech centers where earthing is significantly important are target customers of Company apart from high rise buildings, hotels and residential units etc. The Company is exploring all possible areas in order to establish strong foothold in this arena. Additionally, some of the new areas where Company can have possibilities of revenue generation are being examined.

Opportunities and Threats

The Company is exposed to normal industry risks attributable to respective segments. In order to meet the challenge of sustaining itself despite of thinning of margins in amusement segment, the strategy is to focus on increasing the number of visitors, exploring avenues for diversification and accordingly measures are being initiated/implemented. In electrical engineering segment, the Company uses the latest technology for earthing and lightning protection installations which are proven to give better results as compared to traditional techniques. However, due to relatively higher cost and lack of awareness about said technology amongst target clients, there is tough competition. To meet the challenge, the Company aims not only to educate or spread awareness about its products but also secure credentials from its clients about the superiority of its products.

Adequacy of Internal Control Systems

The Company has in place a proper and adequate system of internal control to monitor proper recording of transactions authorized according to policies and procedures laid down by the Company. The Company ensures that all regulatory guidelines are being complied with at all levels.

The Audit Committee reviews the internal control mechanisms periodically.

Segment wise Performance

The Company’s venture of dealing in earthing materials and lightning protection systems in the electrical engineering segment has been catagorised under the head "Trading" for the purpose of segment reporting in the Annual Accounts for the year under review. Similarly, other income has been catagorised under the head "Others". Segment wise, the entertainment sector generated revenue of Rs. 45.52 lacs and the Trading segment’s revenue amounted to Rs.189.82 lacs during the year under review.

The other income accounted for Rs. 21.90 lacs. The segment of entertainment incurred a loss of Rs. 34.17 lacs. However, the profit from trading segment of Rs. 24.00 lacs coupled with ‘other’ segment’s profit of Rs. 21.90 lacs culminated into profit of Rs. 2.35 lacs after adjusting for unallocables and taxes. Your Board is hopeful of better performance in future.

Human Resource

The relationship with employees continued to be cordial during the year. The Directors place on record their sincere appreciation to the employees at all levels. In terms of the provisions of Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, there was no employee during the year drawing remuneration more than the stipulated amount in the said rules. The Company has a team of able and experienced industry professionals. The number of employees on the Company’s rolls stood at 33.

Cautionary Statement

Statement in the "Management Discussion and Analysis" describing the Company’s projections, estimates, expectations or predictions may be ‘forward looking statements’ within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that would make a difference to the Company’s operations include changes in government regulations, tax regimes, economic developments within the country and abroad and such other factors.