Madhusudan Masala Ltd Management Discussions

You should read the following discussion in conjunction with our restated financial statements attached in the chapter titled "Financial Information of the Company" beginning on page 152 You should also read the section titled "Risk Factors" on page 26 and the section titled "Forward Looking Statements" on page 18 of this Draft Red Herring Prospectus, which discusses a number of factors and contingencies that could affect our financial condition and results of operations. The following discussion relates to us, and, unless otherwise stated or the context requires otherwise, is based on our Restated Financial Statements.

Our financial statements have been prepared in accordance with Indian GAAP, the Companies Act and the SEBI (ICDR) Regulations and restated as described in the report of our auditor dated July 15, 2023 which is included in this Draft Red Herring Prospectus under "Financial Statements". The Restated Financial Information has been prepared on a basis that differs in certain material respects from generally accepted accounting principles in other jurisdictions, including US GAAP and IFRS. Our financial year ends on March 31 of each year, and all references to a particular financial year are to the twelve-month period ended March 31 of that year.

BUSINESS OVERVIEW

We are engaged in the business of manufacturing and processing of more than 32 types of Spices under the brand names of "DOUBLE HATHI" and "MAHARAJA". We also sell products like: Tea and Other Grocery Products like: Rajgira flour, Papad, Soya Products, Asafoetida (Hing), Achar masala (Ready to make pickle powder), Sanchar (Black salt powder), Sindhalu (Rock salt powder), Katlu powder (Food supplement), Kasuri Methi (Dry fenugreek) etc under the brand name of "DOUBLE HATHI"

Operating in the industry since last four decades, our promoters, Dayalji Vanravan Kotecha and Vijaykumar Vanravan Kotecha laid the foundation of the business and formed a partnership firm M/s Madhusudan & Co registered with Registrar of firms, Gujarat in the year 1982 with the objective to manufacture spices and other food products. With the focus on providing quality food products, cost effectiveness and improved accessibility we have been selling our products under the brand name of "DOUBLE HATHI" since 1977 and under the brand name of "MAHARAJA" since

2003. Their next generation, Rishit Dayalji Kotecha and Hiren Vijaykumar Kotecha continued the legacy and developed extensive experience in the industry. We believe that we have established our brand as the preferred home consumption brand for Indian families.

Our range of spices includes

(i) Ground spices which comprises of various varieties of Chilli Powder, Turmeric Powder, Coriander Powder and Cumin Powder and

(ii) Blend spices which comprises of Garam Masala, Tea Masala, Chhole Masala, Sambhar Masala, Pav Bhaji Masala, Pani Puri Masala, Sabji Masala, Kitchen King Masala, Chicken Masala, Meat Masala, Chatpata Chat Masala, Butter Milk Masala, Chewda Masala, Dry Ginger Powder (Sunth), Black Pepper Powder (Mari), Dry Mango Powder (Aamchur) etc. Our company also deals in whole spices in retail and bulk quantity. During the Fiscals 2023, 2022 and 2021 our revenue from sale of spices contributed to 75.07%, 69.94% and 83.08% of our overall sales. The Double Hathi portfolio of ground spices comprises of premium quality spices whereas value for money segment of ground spices are offered under the Maharaja portfolio. Over the years our company has evolved as manufacturer of 13 types of chilli powder available in 78 SKUs catering to almost every customer segment in the industry.

Key Performance Indicators of our Company

Key Financial Performance	FY 2022-23	FY 2021-22	FY 2020-21
Revenue from operations(1)	12,721.60	6,540.81	6,868.03
EBITDA(2)	1,101.23	214.62	277.03
EBITDA Margin(3)	8.66%	3.28%	4.03%
PAT	575.89	81.29	44.98
PAT Margin(4)	4.53%	1.24%	0.65%

Notes:

(1)Revenue from Operations means the Revenue from Operations as appearing in the Restated Financial Statements ⁽²⁾EBITDA is calculated as Profit before tax + Depreciation + Interest Expenses - Other Income

(3)EBITDA Margin is calculated as EBITDA divided by Revenue from Operations

(4)PAT Margin is calculated as PAT for the period/year divided by revenue from operations.

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

For details in respect of Statement of Significant Accounting Policies, please refer to Annexure D of Restated Financial Statements beginning on page 152 of this Draft Red Herring Prospectus.

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 Draft Red Herring Prospectus. Our results of operations and financial conditions are affected by numerous factors including the following:

1. General economic and business conditions in the markets in which we operate and in the local, regional, national and international economies;

2. Changes in laws and regulations that apply to the industries in which we operate.

3. Changes in consumer demand and preferences;

4. Failure to successfully upgrade our product portfolio, from time to time;

5. Any change in government policies resulting in increases in taxes payable by us;

6. Increased competition in the industry in which we operate;

7. Our ability to retain our key managements persons and other employees;

8. Our ability to maintain or enhance the popularity, reputation and consumer goodwill associated with our brand

" Double Hathi" & "Maharaja";

9. Our ability to anticipate and adapt to evolving consumer tastes, preferences and demand for particular products, or ensure product quality or any reduction in the demand of our Spices and other food products; 10. Inflation, deflation, unanticipated turbulence in interest rates, equity prices or other rates or prices; 11. Companys ability to successfully implement its growth strategy and expansion plans; 12. Failure to comply with regulations prescribed by authorities of the jurisdictions in which we operate;

13. Inability to successfully obtain registrations in a timely manner or at all; 14. Occurrence of Environmental Problems & Uninsured Losses;

15. Conflicts of interest with affiliated companies, the promoter group and other related parties; 16. Any adverse outcome in the legal proceedings in which we are involved; 17. Concentration of ownership among our Promoters.

18. The performance of the financial markets in India and globally; 19. Global distress due to pandemic, war or by any other reason.

20. Our ability to maintain our relationships with vendors and their inability to meet our products specifications and supply our products in timely manner; 21. Our ability to grow our business; 22. Any slowdown or interruption to our manufacturing operations or under-utilization of our existing or future manufacturing facilities; 23. We do not have long term agreements with suppliers for our raw materials and an increase in the cost of or a shortfall in the availability of such raw materials could have an adverse effect on our business, results of operations and financial condition.

24. Inflation, deflation, unanticipated turbulence in interest rates, equity prices or other rates or prices;

25. Our ability to make interest and principal payments on our existing debt obligations and satisfy the other covenants contained in our existing debt agreements;

Discussion on Result of Operations

The following discussion on results of operations should be read in conjunction with the Restated Financial Statements.

Particulars	FY 2022-23	% of Total Income	FY 2021-22	% of Total Income	FY 2020-21	% of Total Income
Revenue From Operations	12,721.60	99.77%	6,540.81	98.33%	6,868.03	99.90%
Other Income	28.97	0.23%	111.00	1.67%	7.15	0.10%
Total Revenue	12,750.57	100%	6,651.81	100%	6,875.18	100%
Expenses:
Cost of Material Consumed	12,060.64	94.59%	6,316.04	94.95%	6,087.40	88.54%
Changes in Inventories of Finished Goods	(934.51)	(7.33%)	(353.62)	(5.32%)	101.95	1.48%
Employee benefits expense	109.91	0.86%	95.48	1.44%	123.67	1.80%
Finance costs	326.77	2.56%	163.90	2.46%	179.35	2.61%
Depreciation and amortization expense	62.64	0.49%	66.72	1.00%	55.96	0.81%
Operating and Other expenses	351.89	2.76%	266.26	4.00%	265.10	3.86%
Total Expenses	11977.35	93.94%	6554.78	98.54%	6813.43	99.10%
Profit before exceptional ,extraordinary items and tax	773.23	6.06%	97.03	1.46%	61.75	0.90%
Less: Exceptional Items	-	-	-	-	-	-
Profit before extraordinary items and tax (A-B)	773.23	6.06%	97.03	1.46%	61.75	0.90%
Prior Period Items	-	-	-	-	-	-
Extra ordinary items	-	-	-	-	-	-
Profit before tax	773.23	6.06%	97.03	1.46%	61.75	0.90%
Tax expense:
Current tax	199.17	1.56%	19.68	0.30%	19.22	0.28%
Tax Related to Earlier year	-	-	-	-	-	-
Deferred Tax	(1.84)	(0.01%)	(3.95)	(0.06%)	(2.46)	(0.04%)
Profit/(Loss) for the period After Tax	575.90	4.52%	81.30	1.22%	44.99	0.65%

Main Components of our Profit and Loss Account

Revenue from operations:

Revenue from operations mainly consists of revenue from sale of spices, other grocery products and food grains.

Other Income:

Our other income primarily comprises of rental income, quality claim income, discount and other incomes.

Expenses:

Companys expenses consist of Cost of material consumed, Changes in inventories of finished goods, Employee benefits expense, Finance costs, Depreciation and amortization expenses and other expenses.

Cost of material Consumed

Cost of materials consumed is the aggregate of cost of raw materials consumed which includes additional Purchases and change in inventory of raw materials.

Changes in inventories of finished goods:

Changes in inventories of finished goods comprises of increase/decrease in Finished Goods.

Employee benefits expense:

Employee benefits expense primarily comprises of Salaries and wages, Contribution to PF and Gratuity.

Finance Costs:

Our finance cost includes Interest expense on borrowings and other borrowing cost.

Depreciation and Amortization Expenses:

Depreciation includes depreciation on Factory Building, Plant & Machinery, Furniture & Fixtures, Vehicles, Office Equipment and Computers.

Other Expenses:

Other expenses consists of Cold storage rent, Power & Fuel, Freight expenses, Machinery repairing and cleaning expenses, Commission and Brokerage, Advertisement expenses, Packing charges, Settlement of Commodities, Travelling expenses, Legal & Professional Expenses, Printing & Stationary, Rates & Taxes Insurance expenses etc.

Financial Year 2023 Compared to Financial Year 2022 (Based on Restated Financial Statements)

Total Income:

Total income for the financial year 22-23 stood at Rs. 12,750.57 lakhs whereas in Financial Year 21-22 the same stood at Rs. 6,651.81 lakhs representing significant increase of 91.69%. The main reason of increase was increase in the volume of business operations of the company.

Revenue from Operations:

During the financial year 22-23 the net revenue from operation of our Company was Rs.12,721.60 Lakhs from sales of manufactured and traded goods. The sales from Ground spices increased by 44.84% from Rs.2170.48lakhs in FY 21-22 to Rs. Rs.3143.63lakhs in FY 22-23, Blend spices decreased by 40.89% from 160.18lakhs in FY21-22 to Rs.94.69Lakhs in FY

22-23, other grocery product increased by 11.60% from 149.01Lakhs to Rs.166.29Lakhs in FY 22-23, Tea decreased by 39.38% from Rs.125.46Lakhs to Rs.76.06Lakhs and whole spices increased by 56.05% from 1616.89Lakhs in FY 21-22 to Rs.2523.15lakhs in FY 22-23. Sales from trading of whole spices increased by 504.59% from Rs.627.03 lakhs in FY 21-22 to Rs.3790.99lakhs in FY 22-23 and trading of food grains increased by 73.17% from 1691.75lakhs in FY 21-22 to Rs.2929.59lakhs in FY 22-23. Overall Revenue from operations in FY 22-23 increased by 94.50% from 6540.81lakhs in FY21-22 to Rs.12,721.60 Lakhs in FY 22-23. The main reason of increase was increase in the volume of business operations of the company.

Other Income:

During the financial year 22-23 the other income of our Company decreased to Rs.28.97 Lakhs as against Rs.111 Lakhs in the Financial Year 21-22 representing a decrease of 73.90% majorly due to income from Long Term Capital Gain, Profit on Sale of Vehicles, Settlement of Commodities in previous year etc.

Total Expenses:

The total expense for the financial year 22-23 increased to Rs.11,977.35 Lakhs from Rs .6554.78 Lakhs in the Financial Year 21-22 representing an increase of 82.73%. Such increase was due to increase in the volume of business operations of the Company.

Cost of Materials Consumed:

The Cost of Materials Consumed for the financial year 22-23 increased to Rs.12,060.64 Lakhs from Rs.6,316.04 Lakhs for the financial year 21-22, representing an increase of 90.95%s from the previous year due to increase in the volume of business operations of the company. Our Cost of materials consumed is primarily comprises of Purchases of raw material and change in inventory of raw materials.

Changes in the Inventory:

Change in inventory of finished goods was (934.51) Lakhs during the financial year 22-23 as compared to (353.62) Lakhs in the financial year 21-22. The change of 164.27% was due to increase in closing stock of Finished Goods.

Employee benefits expense:

Our Company has incurred Rs.109.91 Lakhs as Employee benefits expense during the financial year 22-23 as compared to Rs. 95.48 Lakhs in the financial year 21-22. The increase of 15.11 % was due to increase in salaries and wages. Employee benefit expenses in FY 22-23 comprises of salary and wages amounted for Rs.102.71Lakhs, provident fund amounted for Rs.1.95Lakhs and gratuity amounted for Rs.5.25Lakhs.

Finance costs:

These costs for the financial Year 22-23 increased to Rs.326.77 Lakhs as against Rs.163.90 Lakhs during the financial year 21-22. The increase of 99.37 % was due to increase in interest expenses and borrowing cost.

Depreciation and Amortization Expenses:

Depreciation for the financial year 22-23 stood at Rs.62.64 Lakhs as against Rs.66.72 Lakhs during the financial year 21-22. The decrease in depreciation was around 6.12% in comparison to the previous year.

Other Expenses:

Our Company has incurred Rs.351.89 Lakhs during the Financial Year 22-23 on other expenses as against Rs.266.26 Lakhs during the financial year 21-22. The increase of 32.16% was mainly due to (i) increase in Cold Storage rent by 39.17% from Rs.60.15Lakhs in FY 21-22 to Rs.83.70Lakhs in FY 22-23, (ii) increase in Commission and Brokerage Charges by 28.21% from Rs.36.39Lakhs in FY 21-22 to Rs.46.66Lakhs in FY 22-23, (iii) increase in Travelling expenses by 47.62% from Rs.11.13Lakhs in FY 21-22 to Rs.16.43Lakhs in FY 22-23 and (iv) increase in Legal & Professional Expenses etc.

Restated profit before tax:

Net profit before tax for the financial year 22-23 increased to Rs. 773.23 Lakhs as compared to Rs.97.03 Lakhs in financial year 2021-22 representing an increase of 696.91%

Restated profit after tax:

The Company reported Restated profit after tax for the financial year 22-23 was Rs.575.90 Lakhs in comparison to Rs. 81.30 lakhs in the financial year 21-22 majorly due to factors mentioned above.

Financial Year 2022 Compared to Financial Year 2021 (Based on Restated Financial Statements)

Total Income:

Total income for the financial year 21-22 stood at Rs. 6651.81 Lakhs whereas in Financial Year 20-21 the same stood at Rs. 6,875.18 Lakhs representing decrease of 3.25%. The main reason of increase was decrease in the volume of business operations of the company.

Revenue from Operations:

During the financial year 21-22 the net revenue from operation of our Company was Rs.6540.81 Lakhs from sales of manufactured and traded goods. The sales from Ground spices decreased by 4.22% from 2266.02 Lakhs in FY 20-21 to Rs.2170.48lakhs in FY 21-22, Blend spices decreased by 32.51% from 237.34lakhs in FY 20-21 to Rs.160.18Lakhs in FY 21-22, other grocery product increased by 22.54% from Rs.121.60Lakhs in FY 20-21 to Rs.149.01Lakhs in FY 21-22, Tea decreased by 47.13% from Rs.237.31 lakhs in FY20-21 to Rs.125.46Lakhs in FY 21-22 and whole spices decreased by 17.44% from Rs.1958.45Lakhs in FY 20-21 to Rs.1616.89Lakhs in FY21-22. Sales from trading of whole spices increased by 49.57% from 1243.29 Lakhs in FY 20-21 to Rs.627.03lakhs in FY 21-22 and trading of food grains increased by 110.59% from Rs.803.32Lakhs to Rs.1691.75lakhs in FY 21-22. Overall Revenue from operations in FY 21-22 increased by 4.76% to Rs.6540.81 Lakhs as against Rs.6868.03 lakhs in the Financial Year 20-21. The main reason of increase was increase in the volume of business operations of the company.

Other Income:

During the financial year 21-22 the other income of our Company increased to Rs.111.00 Lakhs as against Rs.7.15 Lakhs in the Financial Year 20-21 representing a increase of 1452.38%. The main reason of increase was due to income from Long term capital gain and income from settlement of commodities in FY 21-22.

Total Expenses:

The total expense for the financial year 21-22 decreased to Rs.6554.78 Lakhs from Rs .6813.43 Lakhs in the Financial Year 20-21 representing a decrease of 3.80%. Such decrease was due to decrease the volume of business operations of the Company.

Cost of Materials Consumed:

The Cost of Materials Consumed for the financial year 21-22 increased to Rs.6316.04 Lakhs from Rs.6087.40 Lakhs for the financial year 20-21, representing an increase of 3.76%s from the previous year due to increase in the cost of raw material. Our Cost of materials consumed is primarily comprises of Purchases of raw material and change in inventory of raw materials.

Changes in the Inventory:

Change in inventory of finished goods was (353.62) Lakhs during the financial year 21-22 as compared to 101.95 Lakhs in the financial year 20-21. The change of 446.85 % was due to increase in closing stock of Finished Goods.

Employee benefits expense:

Our Company has incurred Rs.95.48 Lakhs as Employee benefits expense during the financial year 21-22 as compared to Rs. 123.67 Lakhs in the financial year 20-21. The decrease of 22.79 % was due to decrease in salaries and wages. Employee benefit expenses in FY 21-22 comprises of salary and wages amounted for Rs.67.30 Lakhs, remuneration to partners amounted for Rs.21.25Lakhs, provident fund amounted for Rs.2.72Lakhs and gratuity amounted for Rs.4.21Lakhs.

Finance costs:

These costs for the financial Year 21-22 decreased to Rs.163.90 Lakhs as against Rs.179.35 Lakhs during the financial year 20-21. The decrease of 8.61% was due to decrease in interest expenses and borrowing cost.

Depreciation and Amortization Expenses:

Depreciation for the financial year 21-22 stood at Rs.66.72 Lakhs as against Rs.55.96 Lakhs during the financial year 20-21. The increase in depreciation was around 19.24% in comparison to the previous year.

Other Expenses:

Our Company has incurred Rs.266.26 Lakhs during the Financial Year 21-22 on other expenses as against Rs.265.10 Lakhs during the financial year 20-21. The increase of 0.44% was mainly due to

(i) increase in Cold Storage rent by 10.14% from Rs.54.61Lakhs in FY 20-21 to Rs.60.15Lakhs in FY 21-22,

(ii) increase in Commission and Brokerage Charges by 122.41% from Rs.16.36Lakhs to Rs.36.39Lakhs in FY 21-22,

(iii) increase in Travelling expenses by 40.41% from Rs.7.93Lakhs in FY 20-21 to Rs.11.13Lakhs in FY 21-22 and

(iv) increase in Rates & Taxes by 518.98Lakhs from Rs.3.24Lakhs in FY 20-21 to Rs.20.05Lakhs in FY 21-22.

Restated profit before tax:

Net profit before tax for the financial year 21-22 increased to Rs. 97.03 Lakhs as compared to Rs.61.75 Lakhs in financial year 2020-21 representing an increase of 57.14%

Restated profit after tax:

The Company reported Restated profit after tax for the financial year 21-22 was Rs.81.30 Lakhs in comparison to Rs. 44.99 lakhs in the financial year 20-21 majorly due to factors mentioned above.

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

An analysis of reasons for the changes in significant items of income and expenditure is given hereunder:

1. Unusual or infrequent events or transactions

There has not been any unusual trend on account of our business activity. Except as disclosed in this Draft Red Herring Prospectus, there are no unusual or infrequent events or transactions in our Company.

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

There are no significant economic changes that may materially affect or likely to affect income from continuing operations.

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

Apart from the risks as disclosed under Section "Risk Factors" beginning on page 26 of the Draft Red Herring Prospectus, in our opinion there are no other known trends or uncertainties that have had or are expected to have a material adverse impact on revenue or income from continuing operations.

4. Future changes in relationship between costs and revenues

Other than as described in the sections "Risk Factors", "Our Business" and "Managements Discussion and Analysis of Financial Condition and Results of Operations" on pages 26, 99 and 190 respectively, to our knowledge, no future relationship between expenditure and income is expected to have a material adverse impact on our operations and finances.

5. Total turnover of each major industry segment in which our Company operates

The Company operates in a single industry segment. Relevant industry data, as available, has been included in the chapter titled "Industry Overview" beginning on page 86 of this Draft Red Herring Prospectus.

6. Status of any publicly announced New Products or Business Segment

Except as disclosed in the Chapter "Our Business", our Company has not announced any new product.

7. Seasonality of business

We are largely dependent on the agricultural industry for almost all of our raw materials including, whole spices, rajgira etc. Agricultural industry is largely dependent on various factors including monsoon and weather conditions. We purchase the raw materials in the harvest season and store them in our leased cold storage for manufacturing consumption and sales throughout the year during off season. For further information, see "Risk Factors - Certain aspects of our business including procurement of raw materials are seasonal in nature" on page 26 of this Draft Red Herring Prospectus.

8. Dependence on single or few customers or suppliers

For the FY 22-23, FY 21-22 and 20-21 our top 10 customers contributed to approximately 31.68%, 26.07% and 23.78% respectively of our revenue from operations. Our top 10 suppliers contributed to approximately 32.03%, 50.42%, and 49.82% respectively of our total suppliers. For further information, see "Risk Factors" on page 26 of this Draft Red Herring Prospectus.

9. Competitive conditions

Competitive conditions are as described under the Chapters "Industry Overview" and "Our Business" beginning on pages 86 and 99 respectively of this Draft Red Herring Prospectus.

10. Details of material developments after the date of last balance sheet i.e., March 31, 2023.

After the date of last Balance sheet i.e., March 31, 2023, the following material events have occurred:

1. Our company was converted from private limited company to public limited company vide fresh Certificate of Incorporation dated April 29, 2023 issued by the Registrar of Companies, Ahmedabad.

2. The authorized share capital of the company was increased from 5.00 Crore to 14.00 Crore vide Extra Ordinary General Meeting dated May 01, 2023.

3. Our company has allotted 40,00,000 equity shares pursuant to bonus issue in the ratio of 4:5 on July 3, 2023.

4. Our company has allotted 5,00,000 equity shares pursuant to right issue at the issue price of Rs 100/- each in the ratio of 1:18 on July 15, 2023.

5. Our company has approved the audited financial statements for the financial year ending March 31, 2023 in the Board meeting dated June 15, 2023

6. Our Company has approved the Restated Financial Statements for the financial year ending March 31, 2023, March 31, 2022 and March 31, 2021 in the Board meeting dated July 15, 2023.

7. Our Company has approved the Draft Red Herring Prospectus vide resolution in the Board Meeting dated July 28, 2023.

CAPITALISATION STATEMENT

Particulars	Pre Issue	Post Issue
Borrowings
Short term debt (A)	2,801.72	2,801.72
Long Term Debt (B)	1,415.48	1,415.48
Total debts (C)	4,217.20	4,217.20
Shareholders funds
Equity share capital	500.00	[?]
Reserve and surplus - as restated	599.10	[?]
Total shareholders funds	1,099.10	[?]
Long term debt / shareholders funds	1.29	[?]
Total debt / shareholders funds	3.84	[?]

Notes:

1. The company was earlier a partnership firm i.e M/s Madhusudan & Co. The same was converted to a company as on December 14, 2021. The equity shares outstanding as on March 31, 2022 were issued to partners of the erstwhile firm i.e M/s Madhusudan & Co pursuant to its conversion to private limited company. Thereafter the company issued 49,90,000 equity shares pursuant to right issue on May 25, 2022. The company has allotted 40,00,000 equity shares as fully paid-up bonus shares in the ratio of 4:5 on July 03, 2023. Consequently the Weighted Average Number of Equity Shares as on March 31, 2023 and March 31, 2022 has been calculated after giving effect to shares issued pursuant to right issue and bonus issue. Weighted Average Number of Equity Shares as on March 31, 2021 (in the erstwhile partnership firm) has been considered constant as on March 31, 2022.

2. The amounts are considered outstanding as on March 31, 2023.