Sunrest Lifescience Ltd Management Discussions

Factors affecting our Future results of operations:

Government Regulations & Policies;

Competition from exiting players;

Failure to adapt to the changing technology in our industry of operation may adversely affect our business and financial conditions;

Occurrence of Environmental problems & uninsured losses;

Conflicts of interest with affiliated companies, the Promoters group and other related parities;

Our ability to expand our geographical areas of operations;

Concentration of ownership among our Promoters;

Failure to comply with regulations prescribed by authorities of the jurisdictions in which we operate;

Our ability to retain our key management persons and other employee

For Significant accounting policies please refer Significant Accounting Policies beginning under the Section titled

" Financial Information" beginning on page number 135 of this Prospectus.

Income

Our total income comprises of revenue from operations and Other Income.

Revenue from operations:

Our revenue from operations as percentages of our total income was 100% for December 31, 2022 and 99.92%, 100% and 100% for the financial year ended March 31, 2022, March 31, 2021, March 31, 2020 respectively.

Other Income:

It is the income earned from sources like Profit on sale of fixed assets. Our other income as percentages of our total income was 0.08% for the financial year ended March 31, 2022 only. For the Financial year ended March 31, 2021, March 31, 2020 and the for December 31, 2022 there were no other income earned by the Company.

Expenditure:

Our total expenditure primarily consists of purchase of stock-in-trade, change in inventories, employee benefit expenses, finance cost, depreciation and other expenses. Our expenditure as percentages of our total income was 82.57% for the December 31, 2022 and 96.10%, 98.68% and 98.75% for the financial year ended March 31, 2022, March 31, 2021and March 31, 2020 respectively.

Employee benefits expense

Our employee benefits expense primarily comprise of salaries and wages, Director?s remuneration, other retirement benefits and staff welfare expenses. Our employee benefit expenses as percentages of our total income were 13.01% for the December 31, 2022 and 9.45%, 13.98% and 19.62% for the financial year ended March 31, 2022, March 31, 2021and March 31, 2020 respectively.

Finance Cost

It includes interest on car loan. Our finance cost as percentages of our total income was 0.12% for the December 31, 2022 and 0.04% and 0.04% for the financial year ended March 31, 2022 and March 31, 2021 respectively.

Depreciation & Amortization

Depreciation and amortization include depreciation on tangible assets. Our depreciation and amortization as percentages of our total income was 0.53% for the December 31, 2022 and 0.22%, 0.25% and 0.14% for the financial year ended March 31, 2022, March 31, 2021and March 31, 2020 respectively.

Other Expenses

Other expenses include audit fees, freight charges, advertising expenses, electricity expenses, insurance expenses, legal & professional expenses, travelling expenses, repairs & maintenance, rent paid etc. Our other expenses as percentages of our total income were 13.00% for the December 31, 2022 & 21.50%, 17.41% and 11.57% for the financial year ended March 31, 2022, March 31, 2021and March 31, 2020 respectively.

Provision for Tax

The provision for current taxation is computed in accordance with relevant tax regulation. Deferred tax is recognized on timing differences between the accounting and the taxable income for the year and quantified using the tax rates and laws enacted or subsequently enacted as on balance sheet date. Deferred tax assets are recognized and carried forward to the extent that there is a virtual certainly that sufficient future taxable income will be available against which such deferred tax assets can be realized in future.

Total Income

Our Company is majorly engaged in the pharmaceutical business involving marketing, trading of wide range of pharmaceutical finished products, manufactured under contract manufacturing. The total revenue from operations for the period from April 01, 2022 to December 31, 2022 was 1779.78 Lakh.

Purchases of Stock-in-trade

The Purchases of Stock-in-trade was 1045.96 Lakh from April 01, 2022 to December 31, 2022 which is 58.77 % of the Total Income.

Change in the Inventories

The Change in the Inventories was ( 51.06) Lakh from April 01, 2022 to December 31, 2022 which is (2.87%) of the Total Income.

Employee Benefit Expense

Employee Benefit expenses was 231.54 Lakhs from April 01, 2022 to December 31, 2022. The Employee Benefit expense was 13.01% of Total Income.

Finance Cost

Finance Costs from April 01, 2022 to December 31, 2022 was 2.11 Lakh which is 0.12 % of Total Income.

Depreciation and amortization expense

Depreciation and amortization expense from April 01, 2022 to December 31, 2022 was 9.52 Lakhs which is 0.53

% of Total Income.

Other Expenses

Other Expenses were 231.59 Lakh from April 01, 2022 to December 31, 2022. The Other expense was 13.01 % of Total Income.

Profit before Tax (PBT)

The Profit before Tax was 310.12 from April 01, 2022 to December 31, 2022. During this period, our Company recorded Profit before Tax margin of 17.42 % of Total Income.

Profit after Tax (PAT)

Profit after Tax was 236.31 Lakh from April 01, 2022 to December 31, 2022. During this period, our Company recorded Profit after Tax margin of 13.28% of Total Income.

Revenue from Operations

The revenue from operations for the FY 2021-22 was 2690.99 Lakh as compared to 1694.91 Lakh during the

FY 2020-21 showing an increase of 58.77%. The increase was due to Company had initiated the expansion, improved its products and also launched new products which helped in a sales improvement. The company has recruited the new employees whose effective contribution has helped in boosting the sales of the company.

Other income

The other income for the FY 2021-22 was 2.24 Lakh on account of sale of fixed assets.

Purchase of Stock-in-trade

Purchase of Stock-in-trade for the FY 2021-22 was 1823.57 Lakh as compared to 1239.96 Lakh during the FY

2020-21 showing an increase of 47.07%. The increase was due to the increase was due to an increase in the demand of the various products of the company and to ensure steady supply of the products, the company had to the increase purchase of stock in Trade.

Employee Benefit Expense

Employee Benefit expenses for the FY 2021-22 254.23 Lakh as compared to 236.99 Lakh for FY 2020-21 showing an increase of 7.27%. The increase was due to as company has planned for the expansion and in view of the same company had recruited new employees in marketing and because of that employee benefit expense has gone up.

Finance Cost

Finance cost for the FY 2021-22 1.08 Lakh as compared to 0.76 Lakh in FY 2020-21 showing increase of 42.11%. Finance cost is related to interest on car loan.

Depreciation & Amortization

The Depreciation and amortization expense for FY 2021-22 was 5.99 Lakh as compared to 4.30 Lakh for FY 2020-21 showing an increase of 39.30%. The increase was due to purchase of Vehicle.

Other Expense

Other Expenses for the FY 2021-22 was 578.44 Lakh as compared to 295.16 Lakh for FY 2020-21 showing an increase of 95.98%. The increase was due to as overall increase in sales and employee expenses which resulted into increase in overall expenses of the company.

Profit before Tax

The Profit before Tax was 105.03 Lakh in FY 2021-22 as compared to 22.38 Lakh in FY 2020-21 by showing an increase of 369.30%. The increase was due to increase in sales.

Profit after Tax (PAT)

Profit After Tax 77.71 Lakh in the FY 2021-22 as compared to 16.56 Lakh in FY 2021-22 showing increase of 369.26%. The increase was due to increase in sales.

Revenue from operations

The revenue from operations for the FY 2020-21 was 1694.91 Lakh as compared to 1095.21 Lakh during the

FY 2019-20 showing an increase of 54.76%. The increase was due to COVID-19 Pandemic, which resulted in the demands of the pharma products and that demand has helped company to increase in their revenue from operations.

Purchase of Stock-in-trade

Purchase of Stock-in-trade for the FY 2020-21 was 1239.96 Lakh as compared to 736.65 Lakh during the FY

2019-20 showing an increase of 68.32%. The increase was due to Increase in sales which has resulted into the requirement of more product and hence in the purchase of stock.

Employee Benefit Expense

Employee Benefit expenses for the FY 2020-21 was 236.99 Lakhs as compared to 214.83 Lakh for FY 2019-20 showing an increase of 10.32 %. The increase was due to hiring of trained and experienced employees, resulting in increase in employees? costs.

Finance Cost

Finance cost for the from FY 2020-21 0.76 Lakh. The Company has availed car loan in the FY 2020-21. Finance cost is related to interest on car loan.

Depreciation & Amortization

The Depreciation and amortization expense for FY 2020-21 was 4.30 Lakh as compared to 1.57 Lakh for FY 2019-20 showing increase of 173.89%. The increase was due to purchase of Vehicle.

Other Expense

Other Expenses for FY 2020-21 was 295.16 Lakh as compared to 126.62 Lakh for FY 2019-20 showing an increase of 133.11%. The increase was due to as overall increase in sales and employee expenses which resulted into increase in overall expenses of the company.

Profit before Tax (PBT)

The Profit before Tax was 22.38 Lakh in FY 2020-21 as compared to 13.69 Lakh in FY 2019-20 by showing an increase of 63.48%. The increase was due to increase in sales.

Profit after Tax (PAT)

Profit After Tax was 16.56 Lakh in the FY 2020-21 as compared to 3.67 Lakh in FY 2019-20 by showing increase of 351.23%. The increase was due to increase in sales.

Cash Flows from Operating Activities

Net cash used in operating activities was ( 30.02 Lakhs) from April 01, 2022 to December 31,2022.

Cash Flows from Investment Activities

Cash flow used in Investment activities was ( 0.95 Lakhs) from April 01, 2022 to December 31,2022.

Cash Flows from Financing Activities

Cash flow from Financing activities was 41.21 Lakh from April 01, 2022 to December 31,2022.

Financial year 2021-2022

In the F.Y 2021-22 net cash flow used in operating activities was ( 44.87 Lakhs). Net Profit before tax and extraordinary items stood at 105.04 Lakhs. Primary adjustments were on account of Depreciation and Interest paid of 5.99 Lakhs and 1.08 Lakhs respectively.

The operating cash flows before working capital changes was 109.87 Lakhs.

The changes in working capital were due to: a) Increase in Trade Receivables of ( 194.47 Lakhs); b) Increase in Trade payables of 152.18 Lakhs; c) Increase in Inventories of ( 77.35 Lakhs); d) Decrease in Current Liabilities of ( 1.26 Lakhs); e) Increase in Loans & advances of ( 25.83 Lakhs); f) Income tax paid was 8.00 Lakhs for F.Y 2022.

Financial year 2020-2021

In the F.Y 2020-21 net cash flow generation in operating activities was 15.35 Lakh. Net Profit before tax and extraordinary items stood at 22.36 Lakhs. Primary adjustments were on account of Depreciation and Interest paid of 4.30 Lakhs and 0.76 Lakhs respectively.

The operating cash flows before working capital changes was 27.42 Lakhs.

The changes in working capital were due to: a) Increase in Trade Receivables of ( 202.79 Lakhs); b) Increase in Trade Payables of 286.92 Lakhs; c) Increase in Inventories of ( 104.64 Lakhs); d) Increase in Loans & advances of ( 0.29 Lakhs); e) Increase in Current Liabilities of 15.60 Lakhs; f) Income tax paid was 6.87 Lakhs for F.Y 2021

Financial year 2019-2020

In the F.Y 2019-20 net cash flow used in operating activities was ( 89.52 Lakhs). Net Profit before tax and extraordinary items stood at 13.64 Lakhs. Primary adjustments were on account of depreciation of 1.57 Lakhs and Assets write off of 1.40 Lakhs.

The operating cash flows before working capital changes was 16.67 Lakhs.

The changes in working capital were due to: a) Increase in Trade Receivables of ( 145.52) Lakhs; b) Increase in Trade Payables of 34.83 Lakhs; c) Decrease in Inventories of 1.85 Lakhs; g) Increase in Loans & advances of ( 2.55 Lakhs); d) Increase in Current Liabilities of 1.77 Lakhs; e) Increase in Provisions of 9.78 Lakhs; f) Income tax paid was 6.35 Lakhs for F.Y 2020

Cash Flows from Investing Activities

Financial year 2022

Net cash used in investing activities was ( 35.64 Lakhs) in the F.Y 2021-22, primarily on account of purchases of tangible assets of ( 45.65 Lakhs).

Financial year 2021

Net cash used in investing activities was ( 16.20 Lakhs) in the F.Y 2020-21, primarily on account of purchases of tangible assets.

Financial year 2020

Net cash used in investing activities was ( 0.82 Lakhs) in the F.Y 2019-20, primarily on account of purchases of tangible assets.

Financial year 2021-22

Net cash generated from financing activities was 91.20 Lakhs in the F.Y 2021-22, primarily on account of proceeds from borrowings of 92.28 Lakhs and Interest paid of ( 1.08 Lakhs).

Financial year 2020-21

Net cash generated from financing activities was 3.81 Lakhs in the F.Y 2020-21, primarily on account of proceeds from borrowings of 4.56 Lakhs and Interest paid of ( 0.76 Lakhs).

Financial year 2019-20

Net cash generated from financing activities was of 110.56 Lakhs in the F.Y 2019-20, on account of proceeds from borrowings.

Related Party Transactions

Related party transactions with certain of our promoters, directors and their entities and relatives primarily relate to remuneration payable, consultancy received, interest paid, purchase & sale of goods, loans & deposits taken & paid, advance to suppliers and Issue of Equity Shares. For further details of such related parties, refer Section titled "Financial Information" on page 135 of this Draft Prospectus.

Contingent Liabilities

For further details of such related parties, refer chapter titled "Financial Information" on page 135 of this Draft Prospectus.

Off-Balance Sheet Items

We do not have any other off-balance sheet arrangements, derivative instruments or other relationships with any entity that have been established for the purposes of facilitating off-balance sheet arrangements.

Qualitative Disclosure about Market Risk

Financial Market Risk

Market risk is the risk of loss related to adverse changes in market prices, including interest rate risk. We are exposed to interest rate risk, inflation and credit risk in the normal course of our business.

Interest Rate Risk

Our financial results are subject to changes in interest rates, which may affect our debt service obligations and our access to funds.

Liquidity Risk

Liquidity risk is the risk that we will encounter difficulties in meeting the obligations associated with our financial liabilities that are settled by delivering cash or another financial asset. Our approach to managing liquidity is to ensure, to the extent possible, that we will have sufficient liquidity to meet our liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to our reputation. We manage liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

Effect of Inflation

We are affected by inflation as it has an impact on the raw material cost, wages, etc. In line with changing inflation rates, we rework our margins so as to absorb the inflationary impact.

Credit Risk

We are exposed to credit risk on monies owed to us by our customers. If our customers do not pay us promptly, or at all, we may have to make provisions for or write-off such amounts.

Material Frauds

There are no material frauds committed against our Company during Financial Year March 31, 2022,2021,2020 and in nine-month year ended as on December 31, 2022.

Reservation, Qualification, Adverse Remarks and Emphasis of Matter

There are no reservation, qualifications and adverse remarks by our Statutory Auditors in Audited Financial statements for the financial year ended March 31, 2022, 2021, 2020 and in nine-month year ended as on December 31, 2022.

1. Unusual or infrequent events or transactions.

There have been no unusual or infrequent events or transactions that have taken place during the last three years to the best of our knowledge.

2. Significant economic changes that materially affected or are likely to affect income from continuing operations.

Our business has been subject, and we expect it to continue to be subject, to significant economic changes arising from the trends identified above in "Factors Affecting our Results of Operations" and the uncertainties described in the section entitled "Risk Factors" beginning on page number 23 of this Prospectus. There are no known factors which we expect to bring about significant economic changes to the best of our knowledge .

3. Known trends or uncertainties that have had or are expected to have a material adverse impact on sales, revenue or income from continuing operations.

Apart from the risks as disclosed under Section titled "Risk Factors" beginning on page number 23 in this Prospectus, in our opinion there are no other known trends or uncertainties that have had or are expected to have a material adverse impact on revenue or income from continuing operations.

4. Future changes in relationship between costs and revenues, in case of events such as future increase in labour or material costs or prices that will cause a material change are known.

To the best of our knowledge, there are no future relationship between cost and income that would be expected to have a material adverse impact on our operations and revenues. However, increase in the cost of the products in which the Company deals, will affect the profitability of the Company. Further, the Company may not be able to pass on the increase in prices of the products to the customers in full and this can be offset through cost reduction.

5. Extent to which material increases in net sales or revenue are due to increased sales volume, introduction of new products or increased sales prices.

Increases in revenues are by and large linked to increases in volume of business.

6. Total turnover of each major industry segment in which the issuer company operated.

Our Company is engaged in the marketing of OTC generic pharmaceutical products in the domestic market. Our company offer range of pharmaceutical products manufactured by third party manufacturers. Relevant Industry data has been included in the Chapter titled "Industry Overview" beginning on page Number 84 of this Draft Prospectus.

7. Status of any publicly announced new products or business segment.

Our Company has not announced any new projects or business segments, other than disclosed in this Prospectus.

8. The extent to which business is seasonal.

Our Company?s Business is not seasonal in nature.

9. Any significant dependence on a single or few suppliers or customers.

We are not under threat of dependence from any single supplier or customer.

The market is highly competitive and fragmented, and we face competition from various local / domestic companies. Some of our competitors have greater financial, marketing, sales and other resources than we do. Moreover, as we seek to diversify into new geographical areas, we face competition from competitors that have a pan-India presence and also from competitors that have a strong presence in regional markets. Competition in certain markets may have a material adverse effect on our operations in that market. We believe that we compete favorably with our principal competitors in each of these areas. We also believe that our impeccable track record provides us with a competitive advantage that enables us to compete effectively.

10. Competition Conditions

The industry in we are operating faces competition from organized as well as unorganized players in the domestic market. We have a number of competitors who market the products, which are similar to us. Even with a diversified product portfolio, quality approach and modern technology we may have to face competitive pressures. We believe the principal elements of competition in our industry are price, quality, timely delivery and reliability.