virtuoso optoelectronics ltd share price Management discussions

Unless the context so requires, you should read the following discussion of our financial position and results of operations together with our Restated Financial Statements which have been included in this Prospectus. The following discussion and analysis of our financial position and results of operations is based on our Restated Financial Statements for the period ended June 30, 2022 and for financial years ended March 31, 2022, 2021 and 2020 including the related notes and reports, included in this Prospectus prepared in accordance with requirements of the Companies Act and restated in accordance with the SEBI Regulations, which differ in certain material respects from IFRS, U.S. GAAP and GAAP in other countries. Our Company has not attempted to explain those differences or quantify their impact on the financial data included in this Prospectus and it is urged that you consult your own advisors regarding such differences and their impact on our Companys financial information.

Our Financial Statements, as restated have been derived from our audited financial statements for the respective period and years. Accordingly, the degree to which our Restated Financial Statements will provide meaningful information to a prospective investor in countries other than India is entirely dependent on the readers level of familiarity with GAAP, Companies Act, SEBI Regulations and other relevant accounting practices in India. Our fiscal year ends on March 31 of each year, so all references to a particular fiscal year ("Fiscal Year") are to the twelve-month period ended March 31 of that year.

This discussion contains forward-looking statements and reflects our current views with respect to future events and financial performance. Actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors such as those described under "Risk Factors" and "Forward Looking Statements" beginning on pages 26 and 16, respectively, and elsewhere in this Prospectus.

In this section, unless the context otherwise requires, any reference to "we", "us" or "our" refers to Virtuoso Optoelectronics Limited, our Company. Unless otherwise indicated, financial information included herein are based on our "Restated Financial Statements" for the period ended June 30, 2022 and for the Financial Years 2022, 2021 and 2020 beginning on page no. 183 of this Prospectus.

BUSINESS OVERVIEW

We manufacture consumer durable goods and assemble a wide array of products and provide end-to-end product solutions. We serve under both original equipment manufacturer ("OEM") and original design manufacturer ("ODM") business models. Under the ODM model, in addition to manufacturing, we conceptualize and design the products which are then marketed to our customers prospective customers under their brands. We have developed ODM capabilities with respect to lighting products and small appliances

Our current product portfolio of consumer goods includes (I) Split Air Conditioners; (ii) Water Heaters; (iii) LED Lighting products; and (iv) other miscellaneous products such as injection molding components for air conditioners.

For further details, please refer section titled "Business Overview" beginning on page 129 of this Prospectus

SIGNIFICANT DEVELOPMENTS SUBSEQUENT TO THE LAST FINANCIAL PERIOD No material events have occurred after the last audited period.

SIGNIFICANT FACTORS AFFECTING OUR RESULTS OF OPERATIONS

Our business is subjected to various risks and uncertainties, including those discussed in the section titled "Risk Factors" beginning on page 26 of this Prospectus. Our business, financial condition and results of operations have been, and are expected to be, influenced by numerous factors. A summary of the most important factors that have had, and that we expect will continue to have, a significant impact on our business, results of operations and financial condition follows below:

> Volatility in supply and pricing of raw material;

> Labour intensive Industry

> Substantial capital expenditure & working capital requirements

> Outbreak of Covid-19;

> Default or delay in payment from customers;

> Changes in laws, rules & regulations and legal uncertainties;

> Pricing pressures from the competitive business environment;

> Market conditions affecting the industry

> Maintaining our customer relationships

> Revenue from key customers

> Change in Technology

> Economic and Demographic condition.

SIGNIFICANT ACCOUNTING POLICIES

For more details kindly refer to section titled - Restated Financial Statements - Annexure 4 beginning on page 187 of this Prospectus.

The impact of COVID-19 on our results of operations and financial condition

In late 2019, COVID-19 emerged and by March 11, 2020 it was declared as a global pandemic by The World Health Organization. The Government of India declared COVID-19 as a "notified disaster" on March 14, 2020.Governments and municipalities around the world instituted measures in an effort to control the spread of COVID-19, including quarantines, shelter-in-place orders, school closings, travel restrictions, and closure of non-essential businesses. By the end of March 2020, the macroeconomic impacts became significant, exhibited by, among other things, a rise in unemployment and market volatility. The Government of India announced a 21-day lockdown on March 24, 2020, which was followed by successive extensions. The COVID-19 pandemic has caused substantial disruption to the global economy and supply chains, created significant volatility and disruption in financial markets, including in India, with the Governor of the Reserve Bank of India stating on May 22, 2020, that the GDP growth in Fiscal 2021 is estimated to remain negative.

In compliance with the lockdown orders announced by the Indian Government on March 24, 2020, we temporarily closed our offices and manufacturing operations. Additionally, many of our customers and raw material suppliers temporarily ceased operating their respective enterprises. Basis the government relaxations to the priority sector, our Company resumed its manufacturing operations during the one week of September 2020. Pursuant to second wave our manufacturing process was stopped in April months 2021. During this period, our Company did not book any revenue but continued to incur expenditure in the form of salaries of its employees and other fixed overheads.

As a result, we experienced a decline in sales and reduced revenues due to the impact of COVID-19 and various regulatory measures in response to COVID-19 for Financial 2021. For further details, see, "Risk Factors - The impact of the COVID-19 pandemic and the resulting deterioration of general economic conditions has in the past financial years affected our business and may continue to materially affect our business, results of operations, financial condition, and / or our cash flows in future periods." However, during the second lockdown and for the three month period ended June 30, 2022, there was no impact of COVID-19 pandemic on the operations and the business of our Company. Our future revenues may be impacted if the COVID-19 pandemic persists.

Key Components of our Statement of Profit and Loss Based on our Restated Financial Statement

The following descriptions set forth information with respect to the key components of our profit and loss statements.

Revenue

Revenue consists of revenue from operations and other income.

Revenue from operations. Revenue from operations comprises revenue from sale of products, revenue from sale of services like job work charges and services income.

Other income.

Other income primarily comprises interest income on bank deposits, discounts, warranty claim received and other miscellaneous income.

Expenditure

Expenditure consists of cost of materials consumed, changes in inventories of finished goods, employee benefits expenses, depreciation and amortization expense, finance cost and other expenses

Cost of materials consumed:

Cost of materials consumed represents the cost of the raw materials consumed in our manufacturing operations

Changes in inventories of finished goods and work-in-progress.

Changes in inventories of finished goods and work in progress represent the difference between the opening and closing stock of finished goods and work in progress relating to our manufacturing business

Employee benefits expenses.

Employee benefits expenses comprise of salaries and wages, contribution to provident fund and other funds, gratuity and staff welfare expenses.

Finance costs.

Finance cost primarily comprises of interest expense on terms loans, interest expense on cash credit facilities, bank charges & commission, bank interest and other borrowing costs.

Depreciation expense.

Depreciation relates to depreciation on property, plant and equipment.

Other expenses.

Other expenses primarily comprise of utility expenses, contract labour charges, loading and unloading charges and inward and outward freight charges.

Tax Expense

Tax expense consists of current tax and deferred tax.

DISCUSSION ON RESULTS OF OPERATIONS

The following table sets forth financial data from our Restated Financial Statements of profit & loss for the period ended June 30, 2022 and for the financial years ended March 31, 2022, 2021 and 2020, the components of which are also expressed as a percentage of total revenue for such periods:

(in Lakhs except data)

Sr No	Particulars	For the three months period ended as on	For the year ended as on
		June 30, 2022	March 31, 2022	March 31, 2021	March 31, 2020
1	Revenue from Operations	7,381.87	20017.24	11525.66	6820.24
	% of total revenue	99.76	99.95	99.78	99.72
	Variance	-	73.68	68.99	-
2	Other Income	17.73	10.96	25.64	19.10
	% of total revenue	0.24	0.05	0.22	0.28
	Variance	-	(57.25)	34.24	-
3	Total Revenue	7399.60	20028.20	11551.30	6839.34
4	Expenditure
a	Cost of Raw Materials Consumed	6192.20	17194.53	10214.40	5691.76
	% of total revenue	83.68	85.85	88.43	83.22
	Variance	-	68.34	79.46	-
b	Changes in Inventories of Finished Goods	(81.83)	44.11	(327.06)	64.72
	% of total revenue	(1.11)	0.22	(2.83)	0.95
	Variance	-	(113.49)	(605.35)	-
c	Employee Benefit Expenses	132.81	361.85	271.33	103.09
	% of total revenue	1.79	1.81	2.35	1.51
	Variance	-	33.36	163.20	-
d	Finance Cost	262.41	905.50	740.96	478.95
	% of total revenue	3.55	4.52	6.41	7.00
	Variance	-	22.21	54.71	-
e	Depreciation and Amortisation	169.56	234.97	143.17	32.94
	% of total revenue	2.29	2.03	2.10	0.60
	Variance	-	64.12	334.58	-
F	Other Expenses	352.41	769.01	558.45	171.51
	% of total revenue	4.76	6.66	8.18	3.10
	variance	-	37.71	225.61	-
	Total Expenditure	7271.46	11276.01	6633.44	5436.40
	% of total revenue	98.28	97.62	97.19	98.38
	Profit and Loss Before Tax	127.09	275.29	192.05	89.54
	Tax Expense:	39.87	78.84	51.16	35.67
	MAT Provision for the year
	Less Current Tax	22.797	45.95	32.06	17.23
	Deferred Tax charge credit	17.08	32.88	19.10	18.44
	Less Mat Credit entitlement		0.00	0.00	-2.18
	PROFIT AND LOSS FOR THE YEAR	87.21	196.45	140.89	53.87
	% of total revenue	1.18	1.70	2.06	0.97
	variance		39.44	161.55

FOR THE PERIOD ENDED AS ON JUNE 30, 2022 Income:

Total Revenue

Our total revenue amounted to ^ 7,399.61 lakhs for the period ended June 30, 2022 which is on account of revenue from operations and other income as described below:

Revenue from Operations

Our revenue from operations for the period ended June 30, 2022 was ^ 7,381.87 Lakhs which is about 99.76% of the total revenue out of which ^ 7381.21 Lakhs comes from sale of our products and ^ 0.66 Lakhs from sale of services.

Other Income

Our other income for the period ended June 30, 2022 was ^ 17.73 Lakhs for the period ended June 30, 2022.

Expenditure:

Cost of Production

Our cost of production was ^ 6192.20 Lakhs which was 83.68% of our total revenue for the period ended June 30, 2022.

Change in inventories of Finished Good

Our changes in inventories of stock in trade was ^ (81.83) Lakhs which was (1.11)% of our total revenue for the period ended June 30, 2022

Employee Benefits Expenses

The employee benefits expenses for the period ended June 30, 2022 is ^ 132.81 Lakhs which is about 1.79 % of the total revenue.

Finance Cost

Financial costs for the period ended June 30, 2022 is ^ 262.41 Lakhs which is about 3.55% of the total revenue.

Other Expenses

Other Expenses for the period ended June 30, 2022 is ^ 80.27 Lakhs which is about 1.08% of the total revenue.

Depreciation and Amortization Expenses

Depreciation for the period ended June 30, 2022 is ^ 241.25 Lakhs which is about 3.26% of the total revenue.

Tax Expenses

Tax expenses for the period ended June 30, 2022 is ^ 184.40 Lakhs.

Profit after Tax

Profit after tax for the period ended June 30, 2022 is ^ 412.35 Lakhs which is about 5.57% of the total revenue.

COMPARISON OF FINANCIAL YEAR ENDED MARCH 31, 2022 TO FINANCIAL YEAR ENDED MARCH 31, 20201

Total Revenue

Our total revenue increased by 73.38% to 20028.20 Lakhs for the financial year March 31, 2022 from ^ 11551.30 Lakhs for the financial year March 31, 2021.

Revenue from Operations

The total income from operations for the financial year March 31, 2022 was ^ 20017.24 Lakhs and it was ^ 11525.66 lakhs for the financial year March 31, 2021. The revenue of the Company has increased in the year FY 2021 by 73.68 %.

Other Income

For the financial year March 31, 2022 it was ^ 10.96 Lakhs as compared to ^ 25.64 Lakhs for the financial year March 31, 2021 which shows a decrease by 57.25%.

Expenditure

Cost of Material Consumed

The cost of production for the financial year March 31, 2022 was increased by 85.85% to ^ 17194.53 Lakhs from ^ 10214.40 Lakhs for the financial year March 31, 2021 owing to increase in the purchase of raw materials and sales.

Changes in Inventories of Finished Goods

Our changes in inventories of work in progress and finished goods changed by (-113.49) % from (327.06) Lakhs for the financial year March 31, 2021 to ^ 44.11 lakhs for the financial year March 31, 2022.

Employee Benefits Expenses

The Employee expenses was increased by 33.36% from ^ 271.33 Lakhs for the financial year March 31, 2021 to ^ 361.85 Lakhs for the financial year March 31, 2021.

Finance Cost

The Finance Cost expenses was increased by 22.21% from ^ 740.96 Lakhs for the financial year March 31, 2021 to ^ 905.50 Lakhs for the financial year March 31, 2022.

Other Expenses

The other expenses was ^ 127.16 Lakhs as compared to ^ 435.45 Lakhs for the financial year March 31, 2022 which shows an increase of 242.44% in other expenses.

Depreciation and Amortization Expenses

The Depreciation and Amortization Expenses increased by 118.62% from ^143.17 Lakhs for the financial year March 31, 2021 to ^ 513.70 Lakhs for the financial year March 31, 2022.

Profit after Tax (PAT)

PAT was increased from ^ 208.33 lakhs for the financial year March 31, 2021 to ^ 394.02 Lakhs for the financial year March 31, 2022. The profit after tax increased by 89.13% as compared to Financial 2021 on account of increase in revenue from operations.

COMPARISON OF FINANCIAL YEAR ENDED MARCH 31, 2021 TO FINANCIAL YAER ENDED MARCH 31, 2020

Total Revenue

Our total revenue increased by 68.89% to 11551.30 lakhs for the financial year March 31, 2021 from ^ 6839.34 Lakhs for the financial year March 31, 2020.

Revenue from Operations

The total income from operations for the financial year March 31, 2021 was ^ 11525.66 lakhs and it was ^ 6820.24 lakhs for the financial year March 31, 2020. The revenue of the Company has increased in the year FY 2021 by 68.99 %.

Other Income

For the financial year March 31, 2021, it was ^ 25.64 Lakhs as compared to ^ 19.10 Lakhs for the financial year March 31, 2020 which shows an increase by 34.24%.

Expenditure

Cost of Production

The cost of production for the financial year March 31, 2021 was increased by 79.46% to ^ 5691.76 Lakhs for the financial year March 31, 2020 compared from ^ 10214.40 Lakhs for the financial year March 31, 2021 owing to increase in the purchase of raw materials.

Changes in Inventories of Finished Goods

Our changes in inventories of work in progress and finished goods changed by (-405.34) % from 64.72 Lakhs for the financial year March 31, 2020 to ^ (327.06) lakhs for the financial year March 31, 2021. This was primarily due to lower level of closing inventories of finished goods at end of financial year 2020-21 as compared to financial year 2019-20.

Employee Benefits Expenses

The Employee expenses for the financial year March 31, 2021 was increased by 163.20% from ^ 103.09 Lakhs for the financial year March 31, 2020 to ^ 271.33 Lakhs for the financial year March 31, 2021.

Finance Cost

The Finance Cost expenses for the financial year March 31, 2021 was increased by 54.71% from ^ 478.95 Lakhs for the financial year March 31, 2020 to ^ 740.96 Lakhs for the financial year March 31, 2021.

Other Expenses

The other expenses for the financial year March 31, 2021 it was ^ 127.16 Lakhs as compared to ^ 165.60 Lakhs for the financial year March 31, 2020 which shows a decrease of 13.54% in other expenses

Depreciation and Amortization Expenses

The Depreciation for the financial year March 31, 2021 was increased by 64.12% from ^143.17 Lakhs for the financial year March 31, 2020 to ^234.97 Lakhs for the financial year March 31, 2021.

Profit after Tax (PAT)

PAT was increased from ^ 140.89 lakhs for the financial year March 31, 2020 to ^ 208.33 Lakhs for the financial year March 31, 2021. The profit after tax increased by 47.87% as compared to Financial 2020 on account of increase in revenue from operations.

Information required as per Item 11 (II) (C) (iv) of Part A of Schedule VI to the SEBI Regulations:

1. Unusual or infrequent events or transactions

To our knowledge there have been no unusual or infrequent events or transactions that have taken place during the last three (3) years.

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 26 of this Prospectus. To our knowledge, except as we have described in this Prospectus, there are no known factors which we expect to bring about significant economic changes.

3. Income and Sales on account of major product/main activities

Income and sales of our Company on account of main activities derives from sale of products and sale of services.

4. Whether the company has followed any unorthodox procedure for recording sales and revenues

Our Company has not followed any unorthodox procedure for recording sales and revenues.

5. 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 2 of 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.

6. Extent to which material increases in net sales or revenue are due to increase in services

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

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

The Company is engaged in the manufacturing business of consumer durable goods as OEM, the relevant industry data, as available, has been included in the section titled "Industry Overview" beginning on page 111 of this Prospectus.

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

Our Company has not announced any new services or business segment.

9. The extent to which business is seasonal.

Our Companys business is not seasonal.

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

Significant proportion of our revenues have historically been derived from a limited number of customers. The Contribution of our Companys customers and suppliers vis a vis the revenue from operations and raw materials purchase respectively for the three months period ended on June 30, 2022 and for the financial year ended as on March 31,2022 based on Restated Financial Statements are as follows:

Particular			Customers
	For the three months period on June 30, 2022	As on March 31, 2022	As on June 30, 2022	As on March 31, 2022
% of Top 5 suppliers/ customers	3.78%	12.23%	80.48%	79.60%
Total purchase/sales (in Rs Lakhs)	6897.93	19017.16	7381.21	19979.09

11. Competitive conditions.

Competitive conditions are as described under the Sections titled "Industry Overview" and "Business Overview" beginning on pages 111 and 129, respectively of this Prospectus.

Material developments subsequent to June 30, 2022.

Except as disclosed in this Prospectus, there are no significant developments or circumstances that have arisen since June 30, 2022, the date of the last financial statements included in this Prospectus, which materially and adversely affect or is likely to affect our operations or profitability, or the value of our assets or our ability to pay our material liabilities within the next twelve months.