velox industries ltd share price Management discussions

4 Indonesia, Malaysia, Philippines, Singapore, Thailand.

5 Simple average of prices of UK Brent, Dubai Fateh, and West Texas Intermediate crude oil. The average price of oil in US dollars a barrel was $96.36 in 2022; the assumed price, based on futures markets, is $73.13 in 2023 and $68.90 in 2024.

Commodity Market Developments:

Energy prices waver. Crude oil prices retreated by 15.7 percent between August 2022 and February 2023 as the slowing global economy weakened demand. China experienced its first annual decline in oil consumption this century amid repeated shutdowns in response to COVID-19 outbreaks and a faltering real estate market. Recession fears due to higher-than-expected inflation and tighter monetary policy in many major economies and banking woes sparked concerns about flagging demand.

On the supply side, uncertainty over the effects of Western sanctions on Russian crude oil exports whip- sawed expectations about global market balances. As of March, Russian crude oil exports had held steady since implementation of the Group of Seven (G7) price cap and ban on crude oil imports on December 5. Russia rerouted its oil, reportedly sold at a major discount to Brent oil prices, to non-sanctioning countries, primarily India and China. Downside supply risks did not materialize until Russias recent announcement of a modest production reduction. A sizable release of strategic petroleum reserves by Organisation for Economic Co-operation and Development member countries also helped keep oil markets well supplied, in part offset- ting underproduction and reduced targets by OPEC+ (Organization of the Petroleum Exporting Countries plus selected non-member countries).

Agricultural prices continue on a downward trend.

Drawdowns of stocks of staple foods in major exporting countries, due to major shocks in the past two years from the pandemic and the war in Ukraine, have stopped as supply and demand have reacted to higher prices. Food and beverage prices peaked in May 2022 and are up 1.3 percent from last August. They remain 22.3 percent above the past-five-year average and 39.1 percent above pre-pandemic levels. The supply outlook improved as Ukrainian wheat and other products entered the global market after the Black Sea corridor initiative was renewed last November. High prices also provided incentives to other regions, such as the

European Union and India, to step up wheat production. However, some of the correction has likely come from demand destruction of price-elastic components such as meat and biofuels. Risks remain balanced as spillovers from gas to fertilizer prices and a possible abrupt ending of the Black Sea corridor deal offset possibly reduced consumption and a potentially stronger supply reaction. Prices of raw agricultural materials declined by 9.1 percent from last August amid slowing global demand but, like base metal prices, have partly rebounded in recent months.

Metal prices recover after steep drop. The base metal price index dropped below levels preceding Russias invasion of Ukraine. It surged after the invasion but experienced a broad-based retreat amid slowing Chinese metal demand (accounting for roughly half of global consumption of major metals) and monetary policy tightening. With Chinas reopening and increased infrastructure spending, as well as an expected slower pace of interest rate hikes from the Federal Reserve, base metal prices partially rebounded, increasing by 19.7 percent from August 2022 to February 2023. Recent banking distress presents significant downside risks to prices. The IMFs energy transition metal index increased 14.3 percent. Gold prices rose by 5.1 percent, and central banks net purchases broke a 55-year record. The base metal price index is projected to increase 3.5 percent in 2023 and then decrease 2.6 percent in 2024. Traders seem to price in a potential rebound in demand from China.

A Challenging Outlook

A return of the world economy to the pace of economic growth that prevailed before the bevy of shocks in 2022 and the recent financial sector turmoil is increasingly elusive. More than a year after Russias invasion of Ukraine and the outbreak of more contagious COVID-19 variants, many economies are still absorbing the shocks. The recent tightening in global financial conditions is also hampering the recovery. As a result, many economies are likely to experience slower growth in incomes in 2023, amid rising joblessness. Moreover, even with central banks having driven up interest rates to reduce inflation, the road back to price stability could be long. Over the medium term, the prospects for growth now seem dimmer than in decades. (Source - IMF )

Indian Economy Overview

After reaching 7.2% in FY 2022-23, real GDP growth is expected to slow to 6% in FY 2023-24, before rising to 7% in FY 2024-25. While indicators suggest that Indias growth is stable for now, headwinds from the impact of rapid monetary policy tightening in the advanced economies, heightened global uncertainty and the lagged impact of domestic policy tightening will progressively take effect. With slower growth, inflation expectations, housing prices and wages will progressively moderate, helping headline inflation converge towards 4.5%. This will allow interest rates to be lowered from mid-2024. The trade restrictions (including export bans on various rice varieties) imposed in 2022 to fight inflation are assumed to be withdrawn. The current account deficit will narrow, reflecting abating import price pressures.

FY 2022-23 ended on a positive note, due to higher-than-expected agriculture output and strong government spending. However, high inflation, in particular for energy and food, and the ensuing monetary tightening to anchor expectations are weighing on purchasing power and household consumption, particularly in urban areas. Tighter financial market conditions are reflected in weakening credit-supported demand for capital goods, a good proxy for business investment. Although services export growth remains brisk and the sectoral surplus rose by 35%, it is insufficient to offset the imbalance in goods trade. Low labour productivity is affecting the competitiveness of “Made in India” goods and participation in global value chains. The current account deficit narrowed in the October-December quarter to 2.2% of GDP, from 2.7% in the same period in FY 2021-22. Headline inflation has fallen below 6% (the central banks upper bound of the tolerance band) since March 2023, due to lower food prices, as well as base effects. Employment and wage estimates suggest improving labour market conditions in rural areas, while export-oriented service firms report increasing difficulties filling vacancies.

Domestic growth prospects are strongly influenced by global developments. India has seized the opportunity of discounted Urals oil, which has increased Russias share in its energy imports. The sourcing of fertilisers from Russia has also increased considerably, more than doubling in volume in case of urea. Overall, Indian imports from Russia rose from USD 9.9 billion (1.6% of total imports) in FY 2021-22 to USD 46.2 billion (6.5%) in FY 2022-23. Exports fared remarkably well during the pandemic and aided recovery when all other growth engines were losing steam in terms of their contribution to GDP. Going forward, the contribution of merchandise exports may waver as several of Indias trade partners witness an economic slowdown. Indias current account deficit (CAD) decreased to US$ 1.3 billion (0.2 per cent of GDP) in Q4:2022-23 from US$ 16.8 billion (2.0 per cent of GDP) in Q3:2022-23¹, and US$ 13.4 billion (1.6 per cent of GDP) a year ago [i.e., Q4:2021-22].

The government is also focusing on renewable sources to generate energy and is planning to achieve 40% of its energy from non-fossil sources by 2030. In the Union Budget of 2022-23, the government announced funding for the production linked incentive (PLI) scheme for domestic solar cells and module manufacturing of Rs. 24,000 crore (US$ 3.21 billion). (Source - IBEF )

The economy will not escape the global slowdown

While banks solvency ratios and financial results have improved and the authorities have enhanced loan-loss provisioning and established a ‘bad bank, any deterioration of banks asset quality could threaten macro-financial stability. In the run-up to the 2024 elections, fiscal consolidation may be delayed, and the conclusion of trade agreements may become more difficult. A potentially below-normal monsoon season could also impact growth. Declining geopolitical uncertainty, on the other hand, would boost confidence and benefit all sectors, as would a faster-than-expected conclusion of free-trade agreements with key partners and the incorporation thereinof services. (Source OECD )

Industry Outlook:

India is one of the major players in the agriculture sector worldwide and it is the primary source of livelihood for ~55% of Indias population. India has the worlds largest cattle herd (buffaloes), the largest area planted for wheat, rice, and cotton, and is the largest producer of milk, pulses, and spices in the world. It is the second-largest producer of fruit, vegetables, tea, farmed fish, cotton, sugarcane, wheat, rice, cotton, and sugar. The agriculture sector in India holds the record for second-largest agricultural land in the world generating employment for about half of the countrys population. Thus, farmers become an integral part of the sector to provide us with a means of sustenance. India has great potential to become a global processed food export powerhouse as it includes a rich agricultural resource base, strategic geographic location and proximity to food-importing nations, and an extensive network of food processing training, academic, and research facilities. The Indian food processing industry has grown rapidly with an average annual growth rate of 8.3% in the past 5 years. With a market size of US$ 866 billion in 2022, the food industry will play a vital role in the economys growth. The domestic food market is projected to grow by over 47% between 2022 and 2027, reaching US$ 1,274 billion. In 2023, the food market will generate US$ 963 billion in revenue and the market is anticipated to expand at a CAGR of 7.23% between 2023-27. Innovation in the food industry combines technical innovation with social and cultural innovation. It occurs throughout the food system, from harvesting to production, primary and secondary processing, manufacturing and distribution. Source: https://www.ibef.org/industry/agriculture-india, https://www.ibef.org/blogs/an-overview-of-the-indian-food-processing-sector

India produces 205 million tons of fruits & vegetables annually

India is the 2^nd largest country in farm production in the world

Government Initiative

Pradhan Mantri Kisan Sampada Yojana (PMKSY). PM Formalisation of Micro Food Processing Enterprises Scheme Production Linked Incentive Scheme for Food Processing Industry (PLISFPI)

Opportunity & Threat

A lot of food is wasted after the harvesting stage due to a lack of technology. Tourism is directly linked with the food industry since an increase in tourism results in the growth of the food industry. The recent rise of the Ecommerce industry has helped many industries increase their sales and revenue. Falling Growth Rate of Population Global Recession

Overview of Food Industry

Nearly three-quarters of Indias families depend on rural income. The majority of Indias poor (some 770 million people or about 70%) are found in rural areas. Indias food security depends on producing cereal crops, as well as increasing its production on fruits, vegetables and milk to meet the demands of a growing population with rising income. https://www.worldbank.org/en/news/feature/2012/05/17/india-agriculture-issues-priorities

Food Processing Industry in India

Indias food processing sector is one of the largest in the world and it is expected to reach US$ 535 billion by 2025-26. The rise in the preference for processed food is driven by two worldwide consumer megatrends

1. The increasing demand for convenience

2. A growing emphasis on health and wellness.

Exports in the Indian Food Processing Industry

The export goal for agricultural and processed food products for the fiscal years 2022 23 was set at US$ 23.6 billion, of which US$ 19.694 billion i.e., 84%, had been accomplished by December 2022.

Company Overview

Velox Industries Limited (Target Company) was originally incorporated as Nirbhoy Exports Limited on February 21, 1983 under the Companies Act, 1956 vide certificate of incorporation issued by the Registrar of Companies, Mumbai. Subsequently, the name of the company was changed to Khatau Exim Limited and has obtained a fresh certificate of incorporation dated January 23, 1985. Further, pursuant to the Shareholders resolution passed through Postal Ballot, the name of the company was changed to ‘Velox Industries Limited and had obtained a fresh certificate of incorporation dated May 15, 2012 as issued by the Registrar of Companies, Mumbai. The CIN of the Target Company is L15122MH1983PLC029364 and the PAN AAACK2128C, under the Income Tax Act, 1961. VIL is currently involved in the business of manufacturing, preserving, reigning, packing, bottling, prepare, manipulate, treat, market, import, export, Improve, produce, process, prepare, buy, sell, deal in and carry on the manufacturing and trading in foods and beverages like jams, jellys, pickles, cider, chutney, marmalades, mayonnaise, mustard, desserts, coffee, tea, flavours, condiments, pancakes, doughnuts, vinegars ketchup, saucer, juices, squashes, syrups, soups, powder (eatable), drinks, alcoholic and non-alcoholic, carbonated and noncarbonated, gelatines, essences, ice- creams, dairy products, meat,. sausages, pottend product table delicacies, fast food, frozen foods and other eatables, bakery products and confectionery items such as breads, biscuits, sweets, roti, pizza, papad, cakes, pastries, cookies, wafers, candoles, lemon drops, chocolates, chewing gums, toffee, lozeoges, tinned, canned, bottled products, milk cream, butter, butter scotch, sauce, ghee, cheese. Condensed milk, milk powder, Skimmed milk food, baby good, infant foods, milk products end milk preparation, soya milk products and preparations, soyabean based foods, protein foods, dietic products, health foods, cereal products, wheat cafes, poultry products. farm products, milk shakes, water ice products, yoghurt, mouth freshener, carbon dioxide for beverages, menthol and menthol products and other related products and items.

Financial Performance and Analysis

The Financial statements of the company have been prepared in accordance with Indian Accounting Standard (Ind AS) notified under the Companies (Indian Accounting Standards) Rules 2015 as amended from time to time by the Ministry of Corporate Affairs (MCA), the provisions of Companies Act, 2013, and guidelines issued by the Securities and Exchange Board of India (SEBI). Financial statements of the company are prepared under the historical cost convention except for the certain financial assets and liabilities measured at fair value as mentioned in applicable accounting policies.

Following are the important ratios for FY2023:

* Negative Ratios have not been calculated

Revenue from Operations: The Company has not recorded any revenues as it could not start its operations throughout the year due to financial constraints and gloomy global scenario. EBITDA: The EBITDA continued to remain negative for the financial year ending FY23 with EBITDA standing at ( 15.36) Lakhs with the increase in losses by 261.41%. This was mainly due to increase in other expenses and employee benefits expense of FY22-23. Profit after Tax (PAT) at ( 15.36) Lakhs for the financial year 2022-23 with the losses increased by 261.41% as compared to ( 4.25) lakhs in the previous year majorly due to increase in other expenses and employee benefits expense of FY22-23. Growth Ratios: The EBITDA, operating profit and Net profit margins have shown negative growth of 261.41% in FY 2023 as company incurred higher losses during the year. Liquidity Ratio: We observe an increasing trend in the current ratio over the three fiscal years. The current ratio has increased from 0.23x in FY21 to 2.10 in FY22 and further to 3.03 in FY23. This trend indicates that the companys ability to cover its short-term obligations with its current assets has strengthened over time. A current ratio closer to 1 means the company has a smaller buffer to handle unexpected short-term obligations. Return Ratios: The Return on Equity (ROE) ratio stood at (2.09%) for FY23, due to higher losses incurred during the year. The Return on Capital Employed (ROCE) stood at (2.01%), reflecting enhanced capital inefficiency. These negative trends suggest an unfavorable overall financial performance. Leverage Ratios: The Debt Equity Ratio stood at 0.04x in FY23. The Debt Asset ratio has decreased over the years, from 0.5 in FY22 to 0.4 in FY23. The Debt Asset ratio suggests that the companys capital structure has become more balanced, with a lower proportion of debt funding in relation to its total assets. This may lead to improved financial stability and resilience.

SEGMENT WISE OR PRODUCT WISE PERFORMANCE

The Company has not undertaken any major operational activities during the year. Outlook

During the period under review, due to some financial constraints and gloomy global economy scenario your Company could not start its operations throughout the year.

Risk & Concern

Generic competition, less margins is a concern. Regulatory constraints pose a threat. The Management is fully acquainted with these risks and concerns associated with the industry and continue to address them from time to time as required.

Financial Performance and Analysis

During the year company has suffered a loss of Rs. 15.36 lakhs, the Company has not undertaken any major activities during the year.

* Ratio have not been calculated as the company has not conducted any business activity and there is no sales income. ** Not calculated due to negative net worth. *** Ratio have not been calculated as the Profits are negative.

Human Resource Development/ Industrial Relations

The Company encourages the employees to upgrade their knowledge and skills. The training sessions on various working parameters are conducted in routine apart from allowing employees for outside specialized training, wherever required. There were 4 employees employed during the year. Internal Control System and their adequacy

The Company considers that internal control is one of the key support of governance which provides freedom to the management within an outline of appropriate checks and balances. Our Company has a strong internal control framework, which was instituted considering the size, nature and risk in the business. The Companys internal control environment provides assurance on efficient conduct of operations, security of Assets, prevention and detection of frauds/errors, accuracy and completeness of accounting records, timely preparation of authentic financial information and compliance with applicable laws and regulation. The Internal Auditor is responsible to conduct regular Internal Audit and report to the management on the lapses, if any and submit Report on periodic basis to the Board of Directors for their review and comments. Fully professional and experienced boards, as mentioned in the corporate overview section in itself ensures efficient internal control. To ensure efficient internal control system, the Company has a well constituted Audit committee who at its periodical meeting, review the competence of internal control system and Procedures thereby suggesting improvement in the system and process as per the changes of Business dynamics. The system and process are continuously improved by adopting best in class processes, automation and implementing latest IT tools.

Key Risks

Business Operational Risk- Our business is seasonal in nature and as a result, our operating results may fluctuate. Since our business is influenced by the availability of our basic raw material, i.e. sugarcane, our production schedules are operational only according to such availability. Other operational risks, includes commodity price volatility, variable input costs, regulatory uncertainties, and the need to adopt modern technologies for competitiveness. Environmental impacts, logistics challenges, currency and trade risks, changing consumer preferences, health and safety concerns for workers, and market demand dynamics further add to the complexities. We are Proactive in risk management to ensure sustainable growth and profitability amidst a dynamic and challenging business environment.

Supplier Risk- We do not have any long term agreement with these farmers and also the farmers are not obligated to sell their produce to us. In case these farmers decide to sell their produce to other sugar factories or for any other purposes, we may experience shortage of raw material which will not only affect our production operations. Currency fluctuations and trade barriers can further impact procurement costs. Credit Risk - Our business is working capital intensive including fund requirement for payment for raw material purchased during the season. Hence, major portion of our working capital is utilised towards debtors and inventory. This risk can materialize through delayed or defaulted payments from buyers, contractual breaches, price fluctuations, counterparty failures in financial transactions, and uncertainties in international trade. To effectively manage our inventory, we must be able to accurately estimate customer demand and supply requirements and purchase new inventory accordingly. However, if our management misjudges expected customer demand, it could cause either a shortage of products or an accumulation of excess inventory. Further, if we fail to sell the inventory we manufacture or purchase, we may be required to write-down our inventory or pay our suppliers without new purchases, or create additional vendor financing, all of which could have an adverse impact on our income and cash flows.

Liquidity Risk- Our Company has experienced negative cash flow in the past, which could have a material adverse effect on our business, prospects, financial condition, cash flows and results of operations. Our manufacturing unit and all other facilities are based out of a single premise located in Karnataka. Accordingly, we rely exclusively on our facilities at this manufacturing unit to earn revenues, pay our operating expenses and service our debt obligations. Additionally, sudden changes in raw material prices can affect revenue streams, making it essential for us to carefully manage our cash reserves and working capital to mitigate liquidity constraints. Competition Risk- The food processing industry is characterized by intense competition, with numerous small to medium-sized producers vying for market share. Apart from regional competition, potential competitors may emerge locally, and we also face competition from existing manufacturing units based on product offerings, quality, pricing, reputation, and customer service. Large multinational companies with greater resources pose a competitive threat as well. Failing to effectively compete could result in declining market share and adversely impact our financial performance. Continuous market analysis and adaptive business strategies are crucial to stay ahead in this highly competitive industry. Political Risk- Our profitability depends significantly on the cost of raw materials. We are not able to set the cost of raw materials. Political instability, corruption, and changes in government leadership can create uncertainties and disrupt the business environment for sugar companies. Additionally, the industry may face challenges related to land acquisition, labor laws, and environmental regulations, which can be influenced by political decisions. To manage political risk, we closely monitor political developments, engage in effective government relations, diversify our market presence, and maintain agility to adapt to changing political landscapes in different regions of operation. Health & Safety- The products that we manufacture or process are subject to risks such as contamination, adulteration and product tampering during their manufacture, transport or storage. We face inherent business risks of exposure to product liability or recall claims in the event that our products fail to meet the required quality standards or are alleged to result in harm to customers. Our products may be subject to contamination which may affect the health of the final consumer. These contaminations may be human induced or natural, and, as a result, there is a risk that they could affect our processed sugar or other products. There is a potential for deterioration of our products as a result of improper handling at the processing, packing, storing or transportation levels, which may adversely affect our customer image. Such risks may be controlled, but not eliminated, by adherence to good manufacturing practices and finished product testing. We have little, if any, control over proper handling once our products are shipped to our customers. We face the risk of legal proceedings and product liability claims being brought by various entities, including consumers, distributors and government agencies for various reasons including for defective or contaminated products sold or services rendered.

Cautionary Statement

The above Management Discussion and Analysis contains certain forward looking statements within the meaning of applicable security laws and regulations. These pertain to the Companys future business prospects and business profitability, which are subject to a number of risks and uncertainties and the actual results could materially differ from those in such forward looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties, regarding a fluctuations in earnings, our ability to manage growth, competition, economic growth in India, ability to attract and retain highly skilled professionals, time and cost over runs on contracts, government policies and actions with respect to investments, fiscal deficits, regulation etc. In accordance with the Code of Corporate Governance approved by the Securities and Exchange Board of India, shareholders and readers are cautioned that in the case of data and information external to the Company, no representation is made on its accuracy or comprehensiveness though the same are based on sources thought to be reliable. The Company does not undertake to make any announcement in case any of these forward looking statements become materially incorrect in future or update any forward looking statements made from time to time on behalf of the Company.