Value Industries Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Pursuant to an application filed before the Honble National Company Law Tribunal, Mumbai (“NCLT” / “Adjudicating Authority”) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC” / “the Code”) against Value Industries Limited (“Corporate Debtor”) / “the Company”), the Adjudicating Authority had admitted the application for the initiation of the corporate insolvency resolution process (“CIRP”) of the Corporate Debtor vide an order dated September 5, 2018 and appointed Mr. Dushyant Dave as the insolvency resolution professional.

Thereafter, separate applications were filed by State Bank of India (on behalf of all the financial creditors) and Mr. Venugopal Dhoot (one of the promoters of the Videocon group) for the consolidation of the Corporate Debtor along with other group companies. The Adjudicating Authority, vide its order dated August 8, 2019, allowed State Bank of Indias application by, inter alia,

(i) allowing the consolidation of the CIRP of the Corporate Debtor with that of 12 other Videocon group companies (collectively referred to as the “Corporate Debtors”, “Videocon Group Entities”); and

(ii) appointing Mr. Mahender Khandelwal as the insolvency resolution professional for the Videocon Group Entities.

Subsequently, the first meeting of the consolidated committee of creditors of the Corporate Debtors (“CoC”) was held on September 16,2019. At the first meeting of the CoC, the CoC approved the name of Mr. Abhijit Guhathakurta as the resolution professional for the Videocon Group Entities, including the Corporate Debtor in place of Mr. Mahender Khandelwal. Mr. Abhijit Guhathakurtas appointment as the resolution professional of the Videocon Group Entities (“Resolution Professional”, “RP”) was approved by the Adjudicating Authority vide its order dated September 25, 2019. A copy of the said order of the Adjudicating Authority was made available to ihe Resolution Professional on September 27, 2019 when the same was uploaded on the website of the Ad judicating Authority.

On and from the date of publication of the aforesaid order, the powers of the board of directors of the Corporate Debtor stood vested in the Resolution Professional.

Thereafter, CoC had approved the resolution plan submitted by Twin Star Technologies Limited (the “Resolution Plan”), by passing the requisite resolution with 95.09% majority/voting share in accordance with the provisions of Section 30(4) of the Code. The said Resolution Plan, as approved by the CoC, had been filed with the NCLT in accordance with the Section 30(6) of the Code for its approval on December 15, 2020. Further, NCLT vide order dated June 08, 2021 (“Approval Order”), approved the resolution plan submitted by Twin Star Technologies Limited (“Approved Plan”).

In terms of the Approved Plan, a steering committee had been constituted (“Steering Committee”). The Steering Committee in its meeting held on June 18,2021 had appointed the Resolution Professional, Mr. Abhijit Guhathakurta, as the interim manager of the Corporate Debtors (“Interim Manager”), for undertaking the management and control the Company, from the date of Approval Order till the completion of the implementation process on the Closing Date (as provided under the Approved Plan),

However, pursuant to the appeals filed by three‘dissenting financial creditors (among others) before the Honble National Company Law Appellate Tribunal, New Delhi (the “NCLAT”), the Honble NCLAT, vide its order dated July 19, 2021 in the said Appeals (the “Stay Order”), inter-alia stayed the operation of the NCLT Approval Order till the next date of hearing and ordered the maintenance of status quo ante as before passing of the NCLT Approval Order. Further, as per the Stay Order, the Resolution Professional was directed to continue to manage the 13 Videocon Group Entities as per the provisions of the Code till the next date of hearing.

Later on, the NCLAT vide its final order dated January 05,2022 set aside the Approval Order and remitted back the matter to the COC for completion of the process relating to CIRP in accordance with the provisions of the Code (the, “NCLAT Final Order”). Subsequently, pursuant to the NCLAT Final Order, the COC in their meeting held on January 12, 2022, decided to invite afresh expressions of interest for submission of a consolidated resolution plan for Corporate Debtors in accordance with IBC and CIRP Regulations.

However, Twin Star Technologies Limited challenged the NCLAT Final Order in Civil Appeals bearing numbers 509, 512 and 894 of 2022 before the Honble Supreme Court (“SC Appeals”). The SC Appeals were listed on February 14, 2022, on which date, the Honble Supreme Court made oral remark to the Resolution Professional and COC to not proceed further with the CIRP of the Corporate Debtors till any further orders in subsequent hearings. Pursuant to these oral remarks of the Honble Supreme Court, the status quo is being preserved in the current CIRP of Consolidated Corporate Debtors till further orders/directions of the Honble Supreme Court. Therefore, the Resolution Professional continues to manage the Videocon Group Entities (including the Company), as per the provisions of the Code. As a result, the powers of board of directors of the Corporate Debtor are being exercised by the Resolution Professional in terms of provisions of Section 25 of the Code.

As elaborated in the Directors Report, there are no Erstwhile Directors or Key Managerial Personnel who was part of the erstwhile management, available with the Company as on date.

Further, pursuant to Consolidation of CIRP of Videocon Group Entities, including the Company and due to limited availability of resources and various other operational constraints involved, the accounting and secretarial compliances of Videocon Group Entities (including the Corporate Debtor) are being collectively managed by employees, officials and consultants of Videocon Group Entities (hereinafter referred to as “Group Resources”).

Therefore, in compliance with the requirements of the SEBI (LODR), this Management Discussion and Analysis report is being presented in reliance with the information furnished by the Group Resources.

I. Industry, Structure and Developments, Opportunities, Threats, Outlook, Risk and concerns:

The Company is engaged in the business of consumer electronics and home appliances with washing machines and refrigerators as its primary products.

The Resolution Professional continues to manage the Company on going concern basis with the available limited resources, endeavoring to operate the business of the Company in most beneficial manner for the Companys long-term sustainability and growth.

Since the Company is under CIRP, no forward-looking remarks / statements have been presented. The future developments, opportunities, threats, outlook of the Company as well as risk and concerns are subject to the outcome of SC Appeals and/or any other course of action around resolution of Videocon Group Entities.

II. Segment wise or product-wise performance:

The Company operates under one reportable business segment “consumer electronics and components/parts thereof.

III. Internal Control Systems and adequacy:

The Resolution Professional continues to manage the Company on going concern basis with the available limited resources, endeavoring to operate the business of the Company in most beneficial manner for the Companys long-term sustainability and growth.

Pursuant to Consolidation of CIRP of Videocon Group Entities, due to limited availability of resources, the accounting and secretarial compliances of Videocon Group Entities (including the Corporate Debtor) are being collectively managed the Group Resources. Further, all payments are being approved only by the Resolution Professional. The Company has established effective controls for monitoring CIRP period transactions undertaken post assumption of office of the Resolution Professional.

IV. Discussion on financial performance with respect to operational performance:

Income:

Revenue from Operations

During the year under review, the Company achieved Revenue from Operations of Rs. 6,16 Million as against Rs. 0.24 Million for the year ended on March 31,2023.

Other Income

Other Income amounted to Rs. 5.01 Million for the year ended March 31,2024 as against Rs. 5.06 Million for the year ended on March 31,2023. Other income comprises of interest income and other non-operating income.

Expenditure:

Cost of Goods Consumed

During the year under review. Cost of Material Consumed stood at Rs. 7.36 Million as against Rs. 0.20 Million for the year ended on March 31,2023.

Employee Benefits Expenses

During the year under review, employee benefit expenses were Rs. 23.24 Million as against Rs. 08.18 Million for the year ended on March 31,2023.

Finance Cost

Since the commencement of CIRP, there is a Moratorium in terms of section 14 of the Code towards repayment of debts subsisting as on CIRP Commencement and interest thereon. However, pending resolution process, the Company has provided interest for full financial year including moratorium period. Payment towards such interest expenses are subject to the provisions of the Code and outcome of CIRP.

During the year under review, the Finance Cost (booked on provisional basis) was Rs. 2,343.52 Million as against Rs. 1,981.91 Million for the year ended on March 31,2023.

Other Expenses

During the year under review, the Other Expenses were Rs. 18.33 Million as against Rs. 21.94 Million for the year ended on March 31, 2023.

Depreciation & Amortization

Depreciation & Amortization amounted to Rs. 174.20 Million as against Rs. 219.88 Million for the year on March 31, 2023.

Loss before Tax

The Loss before Tax for the current year amounted to Rs. 2,555.47 Million as against a loss of Rs. 2,316.80 Million for the year on March 31,2023.

Net Profit /Loss

Net Loss of tile Company for the current year amounted to Rs. 2,548.70 Million as against a loss of Rs. 2,321.65 Million for the year ended on March 31,2023.

Earnings per Share

Earnings per Share for the current year amounted to Rs. (65.21) as against Rs. (59.12) for the year on March 31,2023.

Significant changes in Key Financial Ratios

Post commencement of CIRP, no additional financing (except for the fund transfers from VIL, as stated under the related party section) has been availed by the Company. Further, there is a Moratorium in terms of section 14 of the Code towards repayment of debts subsisting as on CIRP Commencement and interest thereon. Also, as clarified before, reliance has been placed on the opening balances of various accounts / ledgers, including loans and advances and debtor balances, without going into the recoverability aspects of such balances.

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 explanation thereof:

There were following changes in the below-mentioned ratios which may or may not be 25% or more as compared to the immediately previous financial year:

S. No Nature of Ratio	Percent change in ratio	Reason
1 Debtor Turnover	28.86%	The Company had a negative Net Worth of INR (14,277.16) at the start of the year and is undergoing CIRP. Further, the company has incurred additional losses during the year. The operations of the Company have also reduced during CIRP (viz-a-viz pre-CIRP period) with non-availability of additional credit facilities and other practical and operational constraints. As explained in the financial statements, revaluation / impairment assessment of assets / provision for outstanding receivables has not been conducted/created. Considering these factors, the standard analytical ratios may not present a true picture.
2 Inventory Turnover	24.67%
3 Interest Coverage Ratio	-0.70%
4 Current Ratio	-0.09%
5 Debt Equity Ratio	-0.07%
6 Operating Profit Margin (%)	-46.58%
7 Net Profit Margin (%)	-95.64%

The change in Return on Net Worth (“RoNW”) as compared to the immediately previous financial year is as hereunder:

The Company had a negative Net-Worth of INR (14,277.16) million at the start of the year. Further, the Company has incurred additional losses during the year. Considering the same, RoNW figures have not been computed during the year.

V. Material Development in Human Resources/Industrial Front including number of people employed.

The total staff strength of the Company for the financial year ended March 31,2023 was around 277, which has further come down to 9 as on March 31,2024.

The qualifications, disclaimers and observations raised by the Statutory Auditors for the period ended on March 31,2024:

For the paragraphs mentioned below (a-r), we are unable to comment on the elements of Financial Statements which may require necessary disclosures/ documentation/ explanation/and or adjustments and impact of the same on the Financial Statements. We were unable to obtain sufficient and appropriate audit evidence on the matters mentioned below, which may have a material and pervasive impact on the financial position of the Company for year ended on March 31, 2024.

a) Vide Note No-56 of financial statements, the RP has disclaimed his liability on account of signing the Financial Statements and further stated that RP is not making any representations regarding the accuracy, veracity or completeness of the data or information in the financial statements. Further, the Group Resources and the RP (including his team) have relied on the balances reflected in available accounts / ledgers/ trial balance as on 31st March, 2019, without going into the merits of such balances outstanding, and without making any adjustments to such accounts / balances except for giving effect to the transactions entered subsequently after 1^st April, 2019. Further, most of the requisite pre-CIRP records are not available with the Company at present. In view of the same, the company has not adequately followed Provision of section 128 of Companies Act, 2013. Thus, consequential cumulative effects on the Financial Statement are unascertainable.

b) The Company has not provided Fixed Assets Register and other relevant documents/ records as prescribed in accordance with Ind AS 16 “Property Plant & Equipment”. We have been provided certain available records/details however, we are unable to confirm the completeness and exhaustiveness of the said records/ details shared, including status of title/ possession of all Property Plant & Equipment. It may however be noted that, the RP has already filed applications before NCLT under section 19 of 1BC for the handing over of complete and accurate details/ records with regards to the fixed assets of the Company. Also, as mentioned in Note No-52 of the Financial Statements, no revaluation or impairment assessment has been carried out on such assets. Neither any report pertaining to physical verification of such assets was made available to us. Accordingly, we are unable to confirm the valuation (including impact of any impairment, obsoleteness, damage, etc.) and ownership of such assets along with the depreciation charged in statement of profit and loss account. Due to insufficiency of data/ records, we are unable to obtain sufficient appropriate audit evidence whether any adjustments are necessary in respect of property, plant and equipment as at March 31, 2024.

c) As mentioned, to Note No-4 along with Note No-52 to the Financial Statements. We have been provided certain available records/details however, we are unable to confirm the completeness and exhaustiveness of the said records/details shared, including status of holding/ ownership of all Investments. Further, The Company has neither revalued nor measured investments according to Ind AS- 13 “Fair value measurements" nor has the Company complied with the requirements of Ind AiS-36 "Impairment of assets”. As such, we are unable to determine whether any additional adjustments / disclosures are required on investments reported as at March 31, 2024.

d) We have not been provided with any physical verification reports along with valuation of inventories at the beginning and end of the year. Hence, we are unable to comment / confirm on the quantity and valuation of Inventories held as at March 31, 2024 which are stated in the Balance Sheets at INR 236.64 Million (2023: INR 243.98 Million) under note no. 8. As such, we are unable to determine whether any adjustments in accordance with Ind AS-2 “Inventories” are necessary to the Financial Statements in respect of recorded (or unrecorded) inventories and further cannot comment on the items which are obsolete, damaged and their proper reflection in the Financials Statements.

Further, in the absence of physical verification, revaluation and fair valuation of inventories, we are unable to comment or confirm on the correctness of the amount charged towards Cost of material Consumed during the year as mentioned under Note No. 25.

e) The company has not produced any documents/ information/ relating to Grant form Ozone Project (as set out in Note No-17 to the Financial Statements with a carrying value of INR 0.69 million as at 31^st March, 2024). /Is such, we are unable to ascertain impact of the same in Financial Statements at this stage.

f) As mentioned in Note No-31 the company has not made any adjustment to Deferred Tax Asset/Liability for the year under consideration. Accordingly, Ind AS-12 “Income Tax” has not been followed by the Company. Resultant impact, if any, on the Financials Statements is not ascertainable at this stage.

g) With respect to Note No-33 to the Financial Statements regarding Financial Instruments, read with Note 52 to the financial statements, the company has not complied with the requirements of Ind AS-109- Financial Instruments. As such, its impact on the Financial Statements is not ascertainable at this stage.

h) As referred in Note no-35, valuation towards employee benefit expenses is based on actuarial valuation report. Since the company is into CIRP, the assumptions considered and the resultant outcomes may change basis the outcome of CIRP. As such, we are unable to comment on impact, if any, on the Financial Statements.

i) As mentioned in Note No- 36, in the absence of breakup/details pertaining to contingent liability as at 31^st Mar 2019, the company has relied on the opening balances without evaluating if any changes are required to such opening balances during the year. As such, the company has not disclosed contingent liability in accordance with Ind AS-37 “Provisions, Contingent Liabilities and Contingent Assets”. Further, we are unable to comment on the completeness / exhaustiveness of the contingent liabilities covered and any impact that may be necessary on the Financial Statements at this stage.

j) With respect to Note Nos-39 (on SCN received from DRI) and 40 (on disclosures pertaining to MSMEs), we have not been provided any documents/ records. We are therefore unable to comment upon these.

k) With respect to related party disclosures made under Note No.48 of the financial statements, we are unable to confirm or comment whether the details provided are complete and in compliance with the requirements of section 188 of the Companies Act, 2013 and Ind AS-24 “Related Party Disclosures”.

l) As mentioned in Note No. 53 to the financial statements, pursuant to commencement of CIRP of the Company under Insolvency and Bankruptcy Code, 2016, there are various claims submitted by the financial creditors, operational creditors, employees and other creditors to the RP. The overall obligations and liabilities including interest on loans and the principal amount of loans shall be determined during the CIRP. However, we have not been provided any document/records regarding total claim submitted, accepted and rejected.

Outcome of the CIRP process is still pending thus no accounting impact in the books of accounts has been made in respect of excess, short, or non-receipts of claims for financial creditors, operational creditors, employees and other creditor Hence, consequential impact, if any, is currently not ascertainable and we are unable to comment on possible financial impacts of the same.

Further, as mentioned in Note No-38 of financial Statement, the Company is under a co-obligor arrangement and its contingently liable in respect of the borrowings of other Obligors/ Borrowers to the extent of outstanding principal balance of Rupee Term Loans as on Match 31, 2024 of INR 210,123.87 Million (As at March 31, 2023 INR 210,123.87 Million). As such, consequential impact, if any, is currently not ascertainable and we are unable to comment on possible financial impacts of the same.

Further as mentioned in Note No-19, the company has shown INR 30.30 million trade payable in financial statements to Trend Electronics Ltd ("TREND”) and the entity under CIRP, the liquidation process is undergoing as per the order of NCLT on dated 10.02.2021. However, no consequential effect has been taken in the financial statements. So we are unable to comment upon the cumulative impact on the financial statement.

Further, as mentioned under Note No. 18 and 29 since the commencement of CIRP, there is a Moratorium in terms of section 14 of the Code towards repayment of existing debts and interest thereon. However, pending the completion/ final outcome of CIRP, the Company has continued to provide for the interest for full financial year, including the moratorium period. Payment towards such interest expenses are subject to the provisions of the Code and outcome of CIRP. We have not received supporting documents for such borrowings, including relevant sanction letters and other relevant documents. As such, we are also unable to confirm whether the Borrowings of INR 16,412.38 Million and INR 4,400 million (unsecured) (2023: INR 14,654.52 Million and INR 4,400 million (unsecured) as reported under Note No-18 and 29 provide an accurate status and whether the basis for interest charged in statement of profit and loss account is in accordance with Ind AS-23 “Borrowing Cost”.

m) During the conduct of audit, we have also been informed that the balance confirmations and relevant documents are not available in respect of the balances of loans and advances, receivables, trade payables, and other receivables and payables. As such, we are unable to ascertain impact on Financial Statements. However, in case of balance with banks (INR 4.88 million), we have been provided most of copies of bank statements (subject to their reconciliations). Further as per Note No-11, the company has shown INR 32.30 million loan given to KAIL Ltd and the entity under CIRP, the resolution plan of said company has been approved by COC and has been taken over by Successful Resolution Applicant *SRA” however, no consequential effect has been taken in the financial statements. So we are unable to comment upon the cumulative impact on the financial statement.

n) As per the information and explanations given to us, the Company had carrying value of investments of INR 60.72 Million, has given advances of INR 35.16 Million and has trade receivables of INR 200.27 Million aggregating to INR 296.15 Million in group/ affiliate companies which have been referred to National Company Law Tribunal and consequently admitted to CIRP under the Insolvency and Bankruptcy Code, 2016. As such, we are unable to express an opinion on the extent of realisability of aforesaid investments, advances and trade receivables from group / affiliate companies till the completion of resolution process of group/ affiliate entities. The consequential cumulative effects thereof on loss including other comprehensive income for the year, assets and other equity is unascertainable. Further, we are also unable to assess the genuineness and recoverability of other loans and advances which were issued prior to 1st April, 2019.

o) According to the details made available to us and on the basis of filings made on the GST portal, the company has defaulted / made delayed filings pertaining to the annual compliances of Goods and Service Tax (GST) along with the compliances of Income Tax Act, as applicable during the year. As such, we are unable to comment upon the future liability and/or any other financial impact that may arise on the Company.

p) The Company has not submitted its financial results for the quarter/period ended March 31, 2018 and subsequent periods within due time as required under regulation 33 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.Consequently, we are unable to comment on the monetary impact that may arise on the company for such or any other non-compliances. Additionally, the equity shares of the Company are also suspended from trading on the BSE Limited and National Stock Exchange of India Limited.

q) We also draw your attention to Note No-49 to the Financial Statements. The Resolution Professional has filed applications with Honble NCLT under section 19 of the Code seeking co-operation from promoters and erstwhile management of the company, for providing various data, primarily pertaining to pre-CIRP period and certain additional data that is required for preparing Financial Statements and data requested by various investigating agencies. In the absence of relevant data, financials have been prepared on the basis of available data on best effort basis.

Further, other deviations from the requirements of Companies Act, 2013 and Indian Accounting Standards have also been highlighted in this report As such, the Company has not followed all of the standard accounting policies as prescribed in Note-1 to tire Financial Statements on various matters and the Financial Statements have not been prepared in strict compliance with the requirements of relevant sections of the Companies Act, 2013 and Ind AS along with other rules and regulations. The overall financial impact, if any, is unascertainable.

We also draw your attention to Note no-50 and 51 of the Financial Statements, wherein it is mentioned that an independent Transaction Review Audit was conducted as required under section 43-66 of IBC for identification of Preferential, Undervalued, Extortionate, and Fraudulent transactions as defined and explained under 1BC. The resultant observations from the Audit had indicated that there may be certain questionable accounting entries and/or transactions entered into before commencement of CIRP. And further, there are ongoing investigations against Videocon Group Entities by different government agencies, including SFIO and Directorate of Enforcement.

In this regard, we have not been provided any copy of notice/ report/information/ documents on such Transaction Review Audit and ongoing investigations. Hence, we are unable to comment on necessary changes that may be required in the Financial Statements at this stage.

r) The Company has mentioned in Note No-54 of the Financial Statements that, considering the Company is required to be run as a going concern under CIRP, the Financial Statements have been prepared on going concern basis. However, we found Material uncertainty relating to Going Concern assumption applied to the Financial Statements. The Company has been referred to National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016, and there is considerable decline in level of operations of the Company, and net worth of the Company reported at INR (16,825.72) Million as on the reporting date is negative and it continues to incur losses. The Company is a co-obligor and has received demand notices in respect of borrowings of other obligors/ borrowers. Thus, there exists a material uncertainty about the ability of the Company to continue as a “Going Concern". The same is dependent upon the outcome of SC Appeals and /or any other developments on the resolution process of Videocon Group Entities. The appropriateness of the preparation of Financial Statements on going concern basis is critically dependent upon CIRP as specified in the Code. Necessary adjustments required on the carrying amount of assets and liabilities are not ascertainable. Further we are unable to comment on the remarks / explanation provided by the Company under Note No. 46 to the Financial Statements in relation to the Analytical Ratios.

For the matters mentioned in para (a) to (r) above, we are unable to determine the adjustments that are necessary in respect of Companys assets, liabilities as on Balance sheet date, income and expenses for the year, cash flow statement and related presentation and disclosures in Financial Statements so we disclaim to form any opinion on the financial statement.

For VALUE INDUSTRIES LIMITED	ABHIJIT G. THAKURTA
(A Company under Corporate Insolvency Resolution Process by NCLT order dated September 5, 2018 read with Orders dated August 8, 2019 and September 25,2019)	Resolution Professional
Place: New Delhi	Reg. No. IBBI/IPA-003/IP/N000103/ 2017-18/11158
Date: 9th September 2024