Naksh Precious Metals Ltd Management Discussions

Naksh Precious Metals Ltd. stands at the forefront of both the jewelry and base metals industries, renowned for its exceptional craftsmanship and comprehensive product range. As a prominent manufacturer and distributor, Naksh Precious Metals Ltd. excels in creating and supplying exquisite jewelry products crafted from gold, silver, and diamonds. Our extensive jewelry collection includes necklaces, bangles, rings, chains, earrings, and more, each meticulously designed to embody elegance and luxury.

In addition to our prowess in jewelry manufacturing, Naksh Precious Metals Ltd. is actively involved in the production and trading of base metals and steel products. Our offerings encompass a wide spectrum, ranging from roofing sheets, nails, nut bolts, squares and rounded pipes, springs, CRC and SRC coils, billets, angles, ball bearings, to essential metals like zinc and nickel. This diversified portfolio ensures that we cater comprehensively to the needs of diverse industries and markets.

INDUSTRY OVERVIEW

The Gems and Jewellery (“G&J”) industry is a broad spectrum industry consisting of varied activities, like processing of rough diamonds to create cut & polished diamonds, manufacture of jewellery consisting of gold jewellery (with varied purities of 22 kt, 18kt & 14 kt), diamond & gem stones studded jewellery. In India certain varieties of traditional jewellery like Polki, Kundan etc. continue to be worn at special occasions mainly weddings. In addition, silver jewellery, lias gained much popularity in recent times due to its variety of designs as well as affordability.

The G&J industry plays a vital role in the Indian economy as it is one of the largest exporters of the country and also provides employment to a very large number of artisans.

As per rough estimates there are almost half a million jewellery retail outlets across the country. Retail jewellery shops are present in every nook and comer of the country. However, majority of these outlets are in the unorganized segment though the share of branded jewellers is increasing steadily. Many organized jewellers are now expanding their operations from a single store to become a multi store chain. As in many other sectors in jewellery also the concept of becoming a franchisee of an established brand is also catching up. This provides the brands an opportunity to expand in an asset light manner.

The strong domestic chains are also opening stores overseas, especially in the Middle East, which lias a sizeable Indian diaspora as well as sizeable demand (especially of gold jewellery) from local population as well. In addition there is a demand for traditional jewellery from NRIs all across the world, which is met through exports.

THE GLOBAL ECONOMY

The global economy is showing signs of resilience in 2023 after the high market volatility in 2022. Economic growth remains slow in 2023 owing to the negative implications of the ongoing Russia-Ukraine war, persistent inflationary pressures and tighter monetary conditions. Further, the banking crisis in March 2023 and a debt-ceiling crisis in the United States have raised concerns over macroeconomic stability across the markets and lingering recession fears. Key factors in the improvement in economic activity and sentiment in 2023 are the rebounding of Chinas economy, the gradual unwinding of supply chains and the recent decline in energy and food prices. Further, with the central banks efforts to curb inflation by tightening monetary policy, global inflation is projected to decrease from 8.7% in 2022 to 7.0% in 2023 and 4.9% in 2024.

INDIAN ECONOMY

According to the IMF, the Indian economy is expected to advance steadily at 5.9% in FY 2023-24 before rising to 6.3% in FY 2024-25. The economic growth will be supported by a conducive domestic policy environment, driven by higher capital expenditure, the governments thrust on domestic manufacturing and infrastructure development, growth enhancing policies such as production-linked incentives (PLI) scheme, ‘Make in India and ‘Atmanirbhar Bharat, strong domestic consumption, technology-enabled development, revival in credit growth, and energy transition among others. In the Union Budget 2023 -24, the government lias envisaged ? 10 lakh crore for the development of the infrastructure sector, which will significantly boost industrial competitiveness and provide a fillip to the growth momentum. Further, the government is focussed on the core and emerging sectors by promoting ease of doing business to make India a global manufacturing hub. With its strong fundamentals, massive demographic strengths and multiple growth levers in place, the Indian economy is poised to reach USD 5 trillion mark by FY 2026-27.

OPPURTUNITIES

The traditional demand for jewellery for special occasions like weddings and festivals continues to remain strong. India not only lias a large population in absolute numbers but has a high percentage of population in the younger age group which ensures that a large number of marriages continue to happen every year. As per a rough estimate approximately 10 million marriages take place every year in India, which ensures a substantial expenditure on jewellery and related items.

In addition to the conventional purchases at the time of weddings and festivals, jewellery has also become a life style and fashion accessory, especially among the urban working class women. The demand for jewellery is seen to be increasing amongst the younger generations also. Now even the conventional men accessories like cuff links, tie pins etc. are also becoming bejewelled. Further, rising quality awareness of customers lias also provided a fillip to the organized retail segment, which is banking on its ‘reliability and ‘quality to compete against the highly fragmented unorganized jewellers.

THREATS

Raw materials play a major role in the Indian gems and jewellery industry. India imports nearly 90% of the raw materials, especially rough diamonds and gold bars. Therefore, the industry is vulnerable to any adverse regulations that may limit the raw material supply of diamond and gold jewellery. Excess imports can also cause worry for India when exports make fewer earnings in the foreign exchange.

Record high inflation, tightening of monetary policies and fear of recession are major concerns for the gems and jewellery sector. Persistent inflationary pressure and the rising cost of living have impacted consumer sentiment and reduced spending on luxury and jewellery products.

Indian gems and jewellery industry is highly fragmented and unorganised and is majorly dominated by small jewellery shops that are run by families for years. More customers prefer these shops as the price of jewellery is usually higher in the organised market.

SEGMENT-WISE/PRODUCT-WISE PERFORMANCE

• Indian exports of gems & jewellery comprises various items such as cut and polished diamonds, silver and gold jewellery, gold medallions and coins, rough diamonds, coloured gemstones and others.

• In FY24, cut and polished diamonds accounted for the highest share of exports (51.60%), followed by gold jewellery (36%) and silver jewellery (5.22%).

• In April 2024, cut and polished diamonds accounted for the highest share of exports (60.25%), followed by gold jewellery (37.48%) and silver jewellery (2.28%).

OUTLOOK

India lias achieved the highest growth among major advanced and emerging market economies in FY2023- 24. According to the IMF, India is projected to become the third-largest economy by 2027 in USD tenns at market exchange rates The combination of a sustained anti-inflationary monetary policy stance and proactive supply management measures has kept headline inflation largely within the tolerance band. The Reserve Bank of India lias revised its real GDP growth forecast for FY25 to 7.2% from the previous 7% due to improved rural and urban demand, bolstered by monsoon predictions. The growth outlook remains positive, bolstered by the governments ongoing focus on capital expenditure and fiscal consolidation.

RISKS MANAGEMENT:

The Company, like any other enterprise, is exposed to business risk which can be internal risks as well as external risks. Any unexpected changes in regulatory framework pertaining to fiscal benefits and other related issues can affect our operations and profitability. A key factor in determining a Companys capacity to the Company to take risks and manage them effectively and efficiently. However, the Company is well aware of the above risks and as part of business strategy lias put in a mechanism to ensure that they are mitigated with timely action.

The Company has an elaborate Risk Management Framework, which is designed to enable risks to be identified, assessed and mitigated appropriately. The Board of Directors of the Company lias entrusted to oversee implementation/ monitoring of Risk Management Plan and Policy; and continually obtaining reasonable assurance from management that all known and emerging risks have been identified and mitigated or managed. In the opinion of the Board of Directors, none of these risks affect and/or threaten the existence of the Company.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company lias an Internal Control System, commensurate with the size, scale and complexity of operations. The comprehensive system enables efficient operations, optimal resource utilization, safeguard of assets and compliance with applicable laws and regulations. These control measures strengthen the Company and protect it from loss or unauthorized use of assets by way of adequate checks and balances. The Company authorizes records and reports all transactions.

The scope and authority of the Internal Audit function is well defined, and an independent firm of Chartered Accountants serves as the internal auditor to execute the internal audit function. The management and audit committee of the Board observe and then recoimnend corrective measures, based on such audits to improve operations.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The Companys financial performance for the year ended March 31, 2024 is summarized below.

(Amount in Lakhs)

PARTICULARS	YEAR ENDED	YEAR ENDED
	31.03.2024	31.03.2023
I. Net Sales/Income from Operations	49.34	8.97
II. Other Income	0.91	9.54
III. Total Revenue (I+II)	50.25	18.51
IV. Earnings Before Interest, Taxes, Depreciation and	(1.3)	5.4
Amortization Expense
V. Finance Cost	-	-
VI. Depreciation and Amortization Expense	3.86	4.83
VII. Profit Before Tax (IV-V-VI)	(5.16)	0.57
VIII. Tax Expense:
i. Current Tax Expense	-	-
ii. Deferred	(8.44)	0.41
IX. Profit After Tax (VII-VIII)	3.28	0.16

REVIEW OF OPERATIONS:

The Total Income of the Company stood at Rs. 50.25 Lakhs for the year ended March 31, 2024 as against Rs. 18.51 lakhs in the previous year. The Company made a net loss (after tax) of Rs. 5.16 lakhs for the year ended March 31, 2024 as compared to the Profit of Rs. 0.57 lakhs in the previous year. The Revenue from Operations of the company was increased by 46.16 % over previous year.

HUMAN RESOURCES:

Your Company considers its Human Resources as the key to achieve its objectives. Keeping this in view, your Company takes utmost care to attract and retain quality employees. The employees are sufficiently empowered and such work enviromnent propels them to achieve higher levels of performance. The unflinching commitment of the employees is the driving force behind the Companys vision. Your Company appreciates the spirit of its dedicated employees.

DETAILS ON SIGNIFICANT CHANGES

Sr. No.	Ratio Analysis	Ratio		Difference (in %)	Reasons for Differences, if Difference is More than 25%.
		31-Mar-24	31-Mar-23
1	Debt Service Coverage Ratio	1.24	0.02	8070.59%	Due to company lias repay Debt in current year.
2	Trade Receivables Turnover Ratio	50.25	9.14	449.78%	Due to Jump in sales.
3	Trade Payables Turnover Ratio	1.80	-	-	Due to increase in dues of creditors.
4	Net Capital Turnover Ratio	0.13	0.30	(56.73)%	Due to increase in Revenue from operations and constant in working capital.
5	Net Profit Ratio	0.07	0.01	676.63%	Decreased due to increase in revenue from operation and decrease in net profit after tax.
6	Return on Equity Ratio	0.01	0	2001.89%	Due to proportionate increase in net profit after tax is more than the increase in total equity.
7	Return on Capital employed	(0.01)	0	(992.34)%	Due to decrease in profit before tax and exceptional items.
8	Return on Investment				NA
9	Current Ratio	11.10	1.74	537.19%	Due to decrease in Current Liabilities.
10	Debt Equity Ratio	0.01	0.55	(98.25)%	Due to decrease in borrowings.
11	Inventory Turnover	-

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be ‘forward looking statements within the meaning of applicable laws and regulations and based on the fact that the Resolution Plan for the Company lias been implemented. These statements have been based on current expectations and projections about future events. Wherever possible, all precautions have been taken to identity such statements by using words such as ‘anticipate, ‘estimate, ‘expect, ‘project, ‘intend, ‘plan, ‘believe and words of similar substance in connection with any discussion of future performance. Such statements, however, involve known and unknown risks, significant changes in political and economic enviromnent in India or key markets abroad, tax laws, litigation, labour relations, exchange rate fluctuations, interest and other costs and may cause actual results to differ materially. There is no certainty that these forward-looking statements will be realized, although due care has been taken in making these assumptions. There is no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

21^st ANNUAL REPORT 2023-24