Global Surfaces Ltd Management Discussions

Management Discussion and Analysis Report popularly known as MD&A is the communication straight from the management to their valued shareholders giving them insights into the present business conditions of the company and its future potential. It gives a birds eye view about the Companys objective, predictions and forward-looking statements. This report is an integral part of the Boards Report. Aspects on industry structure and developments, opportunities and threats, outlook, risks, internal control systems and their adequacy, material developments in human resources and industrial relations have been covered in this Report.

Companys financial statements are prepared in accordance with the Indian Accounting Standards (Ind AS) under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values, the provisions of the Companies Act, 2013 ("the Act") and guidelines issued by the Securities and Exchange Board of India (SEBI). The Ind AS are prescribed under section 133 of the Act, read with Rule 3 of the Companies (Indian Accounting Standards) Rules 2015, and relevant amendments, rules issued thereafter.

Globally, the natural and engineered stone (combined) market accounted for $65,746 million in 2022 and is expected to reach of $114,504 million by 2032. In the year 2022, the natural stone segment accounted for a major 59% of market share with $38,829 million while the contribution of engineered stone segment stood at $26,917 million. However, in projected years between 2022 and 2027, the engineered stone is expected to grow at a higher CAGR of 6-7% as compared to natural stone which is expected to grow at a CAGR of 5-6%. This is mainly because the engineered stones are non-porous, strong, durable and stain resistant.

While the usages of natural stones like granite, marble, soapstone for countertops were dominant in the past, there has been a visible shift in favor of quartz over the past decade. The migration has resulted in the product becoming the fastest growing material to be used in the countertop industry, gradually eating into the share of other materials, such as granite, manufactured solid surfaces and laminate.

Our values and guiding principle have been woven around seven major aspects which are evidently visible in all the activities performed by the Company i.e., Customer Satisfaction, Innovation, Quality Product and Service,

Employee Growth, Culture, Being Sensitive towards Society and Environment Protection. This guiding principle is now the culture of the organization and ensures that both internal and external customers are satisfied.

World

As per the International Monetary Fund (IMF)s World Economic Outlook growth projections released in October 2022, the world economy grew by 6 % in CY211 majorly due to economic recovery and the lower base. For CY22, projection for global economic growth slashed to 3.2% citing disruptions due to the Russia-Ukraine conflict and higher-than-expected inflation worldwide. The CY23 is projected to slow down further to 2.7% mainly due to tightening global financial conditions, expectations of steeper interest rate hikes by major central banks to fight inflation, a sharper slowdown in China and spillover e?ects from the war in Ukraine with gas supplies from Russia to Europe tightening. The IMF projects world economy growth between 2.6%-3.3% on year on year (Y-o-Y) basis for next 5 years.

Indian

In Q1FY23, India recorded 13.5% growth in GDP which can largely be attributed better performance by agriculture and services sectors. Prospectively for the FY23, the announcements in the Union Budget 2022-23 on boosting public infrastructure through enhanced capital expenditure are expected to augment growth and crowd in private

investment through large multiplier e?ects. However, heightened inflationary pressures and resultant policy tightening may pose risk to the growth potential.

INDUSTRY STRUCTURE AND DEVELOPMENT

The market for natural stones in India is expected to grow considerably in the coming few years. India has rich reserves of stones due to its diverse geographical location. India holds 3rd place in the global production of natural stones, and holds nearly 11% share of the global natural stone market. Rajasthan is the most important and a major contributor to countrys mining business and holds nearly 90% share in Indias sandstone sector. Natural stone deposits in Rajasthan can be widely observed in Kota, Bharatpur, Tonk, and Sawai Madhopur, among others.

India has rich mineral deposits and has one of the largest granite reserves in the world. It accounts for over 20% of the global granite reserves. The granite production mainly takes place in and around the states of Andhra Pradesh, Telangana, Rajasthan, Karnataka, Tamil Nadu, Uttar Pradesh, Odisha, Madhya Pradesh and Gujarat among others.

Engineered Quartz Stone

Engineered quartz stone is man-made stone, manufactured from mix of quartz crystal aggregates, resin binder, pigments and additives. Quartz is natural stone and found in abundance around the globe. It occurs naturally in clusters and does not form huge stone blocks like granite, marble or other rocks which makes it unsuitable for direct use. Quartz is processed further and converted into engineered stone for application in building material. Engineered quartz stone is alternative to granite and other natural stones. Quartz stones have similar qualities of granite like its durability, beauty, elegance and scratch & heat resistance. But unlike granite it is non-porous and not subject to tone variation as it has added chemicals and binders to control its properties. It can be produced in same colors, texture and designs and can be used in large areas. Demand for engineered quartz stone is rapidly rising. Engineered stone quartz is preferred over other stones due to its higher durability and weight bearing capacity.

The global engineered stones market is expected to reach $ 48,104 million by 2032. The industry is expected to grow at a CAGR of 5-6% between 2027 and 2032.

As the global economy is recovered from the pandemic, the industry has started to witness a gradual uptrend. Rising per-capita income, rapid expansion of building sectors, and existence of a high number of engineered stones in regions such Asia-Pacific would further boost demand. Increase in residential renovations, as well as surging need for redeveloping old building constructions will further contribute towards growth of the industry. Engineered stones are environmentally friendly as they contain 93% crushed leftover stone from quarries or natural stone beds and their demand would be benefitted with increasing need for environmentally friendly and sustainable building products for various applications such as kitchen worktops, flooring, raised flooring, internal cladding, vanity tops, and bathroom furnishings for residential and commercial construction projects.

Natural Stone

Natural stone is a mountain-acquired mineral, which includes quartzite, slate, limestone, sandstone, marble, granite, and others. It majorly finds its application in residential and commercial flooring and wall cladding, owing to its durability, hardness, and aesthetic appearance. It finds applications in furniture, statuary, and monuments. The global natural stone market size was valued at $33,375.3 million in 2020, and is projected to reach $50,465.1 million by 2030, registering a CAGR of 4.0%.

The outlook for the natural stone segment is stable with a positive upside in the medium term. The natural stone industry is linked to the commercial and residential real estate industries. The residential and

commercial real estate industries are expected to return to normalcy recovering from the e?ects of the pandemic.

The real estate industry made a quick turnaround post the first wave of the pandemic. The residential real estate segment remains poised for growth in the future on account of relatively better economic momentum and better preparedness to deal with newer variants of the virus or any lockdowns.

The resumption in sales and launches indicates that consumer sentiment around investing in a property is picking up. With the reopening of the economy, the rate of absorption of office spaces is expected to increase as offices have started to open up again and employees are returning back. This augurs well for the natural stone industry as construction of new real estate would also lead to demand growth for natural stones such as marble and granite.

Countertop Market Overview

The global countertops market size is expected to reach USD 217.79 billion by 2030, registering a CAGR of 6.5% over the forecast period. On account of the increasing demand for engineered and natural stone in the construction of new buildings, major countertop manufacturers are concentrating on producing a variety of materials. Work platforms are in greater demand due to the investments by construction companies worldwide in renovating existing structures.

• Engineered stone demand is growing much faster globally. Dumping duty imposed on stone exports out of China by USA and European Union makes Indian processed granite more competitive in those markets.
• Natural stone processing is environment friendly. So, it fits into the sustainable living movement that is gaining traction.
• India has one of the largest range of colors in natural stones. As the stone mining business organizes there is a big opportunity for the industry to grow.

• Unfavorable foreign exchange rate fluctuations.
• Rising costs of transportation makes the landed costs of goods high in the importing countries, which in turn impacts overall demand.

SEGMENT-WISE PERFORMANCE

The Company deals only in one segment i.e., processing natural stones and manufacturing engineered quartz, accordingly there is only single reportable segment.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The overview of financial performance with respect to operational performance of the Company can be obtained from the various following ratio analysis.

• Debtors Turnover is 86 days
• Inventory Turnover Ratio is 94 days
• Interest Coverage Ratio is 10.85 times
• Current Ratio is 3.87 times
• Debt to Equity Ratio is 0.17 times
• Operating profit Margin 33.36%
• EBITDA margin 16.68%
• Net Profit Margin 14.18%
• Return on Net Worth 9.63%

RISKS AND CONCERNS

We believe that great things never come from comfort zones and so, we are constantly working on way to do things better every single moment. In the current scenario of competitive business environment and open economy across the world, no Company can imagine risk free business environment. Your Company is proactively taking steps to identify and monitor the risk and make e?orts to mitigate significant risks that may

carefully monitoring the risks and concerns related to the business for example: macro-economic factors, foreign exchange fluctuation, geographical concentration, change in the Government policies and legislation, increase in the raw material prices etc. The Company has also taken several insurance policies to mitigate other risks and concerns of the Company.

RESEARCH AND DEVELOPMENT (R&D)

Research and Development activities have played a pivotal role in di?erentiating the overall attributes. In this direction, your Company has increased its R&D e?orts in scope and scale for comprehensive and integrated research works in the identified Thrust areas.

We continuously strive towards in-house product development

/innovation to remain in tune with evolving industry trends.

With experienced and qualified human resources our R&D capabilities are the driving forces of our current momentum and future growth of the organization. With innovation instilled into culture of the company at various levels, R&D is a crucial attribute in fostering our vision to become a global leader in the industry.

We are augmenting our research capabilities and expanding our product portfolio to address the prospective demand across global markets.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

Commensurate with the size and nature of operations, the Company has adequate systems of internal control comprising authorization levels, supervision, checks and balances and procedures through documented guidelines which provide that all transactions are authorized, recorded and reported correctly and compliance with policies and statutes are ensured.

The Company has an independent internal audit system to monitor the entire operations and services. The top management and Audit Committee of the Board review the findings of the Internal Auditor and takes remedial actions accordingly.

The division also assesses opportunities for improvement in business processes, systems & controls; provides recommendations, designed to add value to the organization and follows up on the implementation of corrective actions and improvements in business processes after review by the audit committee and senior management.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/ INDUSTRIAL RELATION

The Company always believes that its growth is closely linked with the growth and overall development of its employees. The Company is committed to upgrade the skill of its employees and to create an environment where excellence is recognized and rewarded. The target is to place right people at right position and to enhance the efficiency, working speed, competency and time management skill of its employees. The Companys endeavor is to create an environment where people can use all of their capabilities in promoting the business of the Company. Number of people employed, as at March 31, 2023 are 305.

CAUTIONARY STATEMENT

Statement in the Management Discussion and Analysis and Directors Report describing the Companies strengths, objectives, strategies, projection and estimate are forward looking and progressive within the meaning of all applicable laws and regulation. Actual results may vary depending upon the various aspects of the economic such as government policies, rules and regulations, economic conditions and other incidental factors. Important factors that could make a di?erence to our Companys operations include raw material availability and prices, cyclical demand and pricing in our principal markets, changes in government regulations, tax regimes, economic developments within India and outside the countries in which we conduct business and other incidental factors. Management will not be in any way responsible for the actions taken based on such statements

Mayank Shah

(Chairman and Managing Director)

a?ected.

The Board of Directors and Senior Management are continuously and

Place:Jaipur

Date: August 14, 2023

DIN: 01850199