Quest Laboratories Ltd Management Discussions

The following discussion and analysis of our financial condition and results of operations for the period ended on September 30, 2023 and for the Fiscal Years 2023, 2022, and 2021 is based on, and should be read in conjunction with, our Restated Financial Statements, including the schedules, notes and significant accounting policies thereto, included in the chapter titled "Restated Financial Statements" beginning on page 187 of this Draft Red Herring Prospectus. Our Restated Financial Statements have been derived from our audited financial statements and restated in accordance with the SEBIICDR Regulations and the ICAI Guidance Note. Our financial statements are prepared in accordance with AS.

You should read the following discussion of our financial condition and results of operations together with our restated financial statements included in this Draft Red Herring Prospectus. You should also read the section titled "Risk Factors " beginning on page 29 of this Draft Red Herring Prospectus, which discusses a number offactors, risks and contingencies that could affect our financial condition and results of operations. Our fiscal year ends on March 31 of each year, so all references to a particular fiscal year are to the twelve-month period ended March 31 of that year.

In this section, unless the context otherwise requires, any reference to "we", "us" or "our" refers to Quest Laboratories Limited, our Company. Unless otherwise indicated, financial information included herein are based on our "Restated Financial Statements" for the period ended on September 30, 2023 and for the Financial Years 2023, 2022, and 2021 included in this Draft Red Herring Prospectus beginning on page 187 of this Draft Red Herring Prospectus.

Note: Statement in the Management Discussion and Analysis Report describing our objectives, outlook, estimates, expectations or prediction may be "Forward Looking Statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to our operations include, among others, economic conditions affecting demand/supply and price conditions in domestic and overseas market in which we operate, changes in Government Regulations, Tax Laws and other Statutes and incidental factors.

BUSINESS OVERVIEW

Our Company, Quest Laboratories Limited is engaged in the business of manufacturing of pharmaceutical formulations across a broad spectrum, including antibiotics, antimalarials, antispasmodics, anti-inflammatories, antiemetics, respiratory medications, diabetes treatments, antidepressants, and more. These formulations fall under the trademark "Quest Laboratories Limited". The company produces a variety of products, comprising ethical drugs, generic drugs, and over- the-counter drugs (OTC). These products are available in various forms such as tablets, liquid orals, oral dry powders, oral powders (ORS), ointments, and external liquids. This comprehensive approach allows our Company to address a wide range of medical needs and preferences among patients.

Our Company holds WHO Schedule M GMP, and GLP certifications, adhering to the stringent guidelines set by the World Health Organization. Our commitment to quality is further demonstrated by our ISO 9001:2015 certification and ISO/IEC 17025:2017 accreditation. With manufacturing under one roof, our company maintains stringent quality control standards throughout the entire manufacturing process. By doing so, we ensure that our products meet the relevant quality standards before they reach the market.

Our Company also possesses Good Laboratory Practice (GLP) certificate issued by Food & Drug Administration, Bhopal, Madhya Pradesh, indicating its commitment to maintaining high standards of quality and compliance in laboratory operations, particularly within the pharmaceutical sector. Our in-house laboratory is equipped with various equipment such as HPLC (High-Performance Liquid Chromatography), GC (Gas Chromatography), FTIR (Fourier Transform Infrared Spectroscopy), UV (Ultraviolet-Visible Spectroscopy), Dissolution apparatus, and other advanced instruments. This comprehensive suite of tools enables us to conduct a wide array of tests and analyses efficiently and accurately.

Furthermore, our professional staff ensures the reliability and credibility of our laboratory results and services. With their expertise, we maintain precision, adhere to protocols, and deliver results in a timely manner, all of which are paramount in pharmaceutical and related industries. Having these resources and capabilities in-house allows our Company to support various aspects of product development, quality control, and regulatory compliance. As a result, we have earned a reputation as a reliable and efficient laboratory service provider.

We currently have our manufacturing facility located at Plot No. 45, Sector III, Pithampur Industrial Area, Pithampur, Dhar - 454775, Madhya Pradesh, India. The total area of the facility is approximately 4,065 square meters. Our manufacturing facilities are well equipped with the required facilities including machinery, other handling equipments to facilitate smooth manufacturing process and easy logistics. We endeavour to maintain safety in our premises by adhering to key safety norms, established through our internal health and safety manual, accompanied by regular safety meetings.

Our Company have been receiving sales orders from the private sector & government institutions on regular basis. This collaborative approach offers benefits to the purchasers, including cost efficiency through bulk production, capacity scaling, regulatory compliance, reduced lead times, risk mitigation, access to specialized technologies, geographical expansion, cost effective compliance, and resource optimization.

Our company has successfully bid for government tender contracts over the past few years, collaborating with major state and central government institutions and corporations.

The key raw materials utilized in our manufacturing operations encompass Active Pharmaceutical Ingredients (APIs) for our formulations, key starting materials, and intermediaries for our internally manufactured APIs. We also acquire other materials such as excipients, manufacturing consumables, lab chemicals, and packaging materials. Furthermore, our procurement extends to packaging materials sourced from vendors situated across different geographical locations. In the domestic market, our company procures raw materials primarily from Madhya Pradesh, Maharashtra, Himachal Pradesh, Telangana, Uttarakhand, and Gujarat. We strive to maintain strong relationships with suppliers across these regions to ensure a steady supply chain and the quality of our products.

Our company operates in the domestic market across twelve (12) states and two (2) union territories namely Uttar Pradesh, Madhya Pradesh, Maharashtra, Delhi, Jharkhand, Assam, Karnataka, Jammu & Kashmir, Rajasthan, West Bengal Gujarat, Telangana, Haryana and Bihar based on sales made for the period ended September 30, 2023 and for the financial year ended March 31, 2023, 2022 and 2021.

Our company is promoted by Mr. Anil Kumar Sabarwal and Ms. Tejaswini Sabarwal, possessing around 22 and 5 years of experience, respectively, in the pharmaceutical industry. Our promoters have played pivotal roles in guiding, developing, growing, managing, and controlling the major aspects of our business operations, drawing upon their considerable expertise in the pharma sector. For more details, please see the chapter titled, "Our Management" and "Our Promoter and Promoter Group" on page 166 and 181 of this Draft Red Herring Prospectus. We attribute our success to sustained efforts over the years in key areas of our business, including product portfolio management, process improvements, and the expansion of our operational scale.

Moreover, our company is managed by a team of industry veterans comprising individuals with technical, operational, and business development experience in the chemical and pharmaceutical sectors. We believe that the collective experience of our management team, coupled with their deep understanding of industry dynamics, regulatory affairs, manufacturing, quality control, sales, marketing, and finance, positions us to capitalize on current and future market opportunities both in India and internationally.

Our product mix has evolved over the past several years as we entered new product categories. We are consistently expanding our product portfolio through research and development of new pharmaceutical formulations. Our company maintains an in-house Department of Formulation Development, Quality Control, and Product Stability Studies. This department takes existing products and their dosages, then formulates different variations. Subsequently, they study these formulations, conducting Process Validations, Analytical Method Validations, and Cleaning Validation according to Standard Operating Procedures. This process ensures that we create and maintain quality pharmaceutical products, meeting regulatory standards and satisfying customer expectations.

Further, our company continues to benefit from the various initiatives extended by the government to support the MSME segment. Under the Madhya Pradesh MSME Yojna, specifically the MSME Promotion Scheme of 2016 and 2019, our company has received subsidies totalling t 15.00 Lakhs and t 26.79 Lakhs respectively, as Industrial Development Grants, for investments made in machinery. Additionally, under the Madhya Pradesh Interest Subsidy Scheme of 2023, we have been granted t 20.00 Lakhs.

These subsidies serve as invaluable support, alleviating financial burdens associated with capital investments and interest payments. They enable our company to allocate resources more efficiently towards enhancing productivity, expanding operations, and contributing to economic growth and employment generation within the region. We remain committed to adhering to all terms and conditions associated with these subsidies to ensure continued benefit. Leveraging such government schemes not only underscores our dedication to innovation and sustainability but also reinforces our contribution to the local economy.

For period ended September 30, 2023 and for the Financial Years ended on March 31, 2023, 2022 and 2021, our revenue from operations was t 4,101.71 Lakhs, t 6,164.06 Lakhs, t 5,948.39 Lakhs and t 3,036.35 Lakhs, respectively. Our EBITDA (earnings before interest, depreciation and tax) for the Period ended September 30, 2023 and financial year ended March 31, 2023, 2022 and 2021 was t 936.47 Lakhs, t 782.24 Lakhs, t 646.55 Lakhs and t 141.84 Lakhs, respectively, while our profit after tax for the Period ended September 30, 2023 and financial year ended March 31, 2023, 2022 and 2021 was ? 625.44 Lakhs, ? 502.85 Lakhs, ? 410.50 Lakhs and ? 65.50 Lakhs, respectively.

Key Performance Indicators of our Company.

As per Restated Financial Statements

(Z in Lakhs, otherwise mentioned)

Key Financial Performance	September 30, 2023	March 31, 2023	March 31, 2022	March 31, 2021
Revenue from Operations (1)	4,101.71	6,164.06	5,948.39	3,036.35
EBITDA (2)	936.47	782.24	646.55	141.84
EBITDA Margin (%) (3)	22.83%	12.69%	10.87%	4.67%
PAT	625.44	502.85	410.50	65.50
PAT Margin (%) (4)	15.25%	8.16%	6.90%	2.16%
Return on equity (%) (5)	29.40%	40.20%	51.69%	11.78%
Debt-Equity Ratio (times) (6)	0.29	0.27	0.31	0.52
Current Ratio (times) (7)	1.31	1.25	1.17	1.10

*As certified by M/s Shyam S. Gupta & Associates, Chartered Accountants, by way of their certificate dated February 24, 2024.

Notes:

1) Revenue from operation means revenue from sale of our products

2) EBITDA is calculated as Profit before tax + Depreciation + Finance Costs - 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

5) Return on Equity is calculated by comparing the proportion of net income against the amount of average shareholder equity

6) Debt to Equity ratio is calculated as Total Debt divided by equity

7) Current Ratio is calculated by dividing Current Assets to Current Liabilities

SIGNIFICANT DEVELOPMENTS AFTER SEPTEMBER 30, 2023

In the opinion of the Board of Directors of our Company, since the date of the stub period as disclosed in this Draft Red Herring Prospectus, there have not arisen any circumstance that materially or adversely affect or are likely to affect the profitability of our Company or the value of its assets or its ability to pay its material liabilities within the next twelve months.

1. The Board of our Company has approved to increase the authorised share capital in the board meeting held on January 11, 2024.

2. The Board of our Company has approved to raise funds through right issue in the board meeting held on January 01, 2024.

3. The members of our Company approved proposal of Board of Directors to raise funds through initial public offering in the EOGM held on February 09, 2024.

4. The status of the Company was changed to public limited and the name of our Company was changed to " Quest Laboratories Limited vide Special Resolution passed by the Shareholders at the Extra Ordinary General Meeting of our Company held on January 11, 2024. The fresh certificate of incorporation consequent to conversion was issued on January 23, 2024 by Assistant Registrar of Companies/ Deputy Registrar of Companies/ Registrar of Companies, Centralised Processing Centre.

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

1. Disruption in our manufacturing process.

2. Our ability to successfully implement our strategy, our growth and expansion, technological changes.

3. Fail to attract, retain and manage the transition of our management team and other skilled & unskilled employees;

4. Our ability to protect our intellectual property rights and not infringing intellectual property rights of other parties;

5. Ability to respond to technological changes;

6. Failure to comply with regulations prescribed by authorities of the jurisdictions in which we operate;

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

8. Our ability to effectively manage a variety of business, legal, regulatory, economic, social and political risks associated with our operations;

9. Changes in laws and regulations relating to the industries in which we operate;

Our ability to meet our capital expenditure requirements;

10. Failure to adapt to the changing technology in our industry of operation may adversely affect our business and financial condition;

11. Failure to obtain any approvals, licenses, registrations and permits in a timely manner;

12. Changes in political and social conditions in India or in countries that we may enter, the monetary and interest rate policies of India and other countries, inflation, deflation, unanticipated turbulence in interest rates, equity prices or other rates or prices;

13. Occurrence of natural disasters or calamities affecting the areas in which we have operations;

14. Conflicts of interest with affiliated companies, the promoter group and other related parties;

15. The performance of the financial markets in India and globally;

16. Any adverse outcome in the legal proceedings in which we are involved;

17. Our ability to expand our geographical area of operation;

SIGNIFICANT ACCOUNTING POLICIES

1. COMPANY INFORMATION

Quest Laboratories Limited (Formerly Known as Quest Laboratories Private Limited) was incorporated on June 01, 1998 and having its registered office at Plot No. 45, Sector III, Pithampur, Dhar, Madhya Pradesh- 454775. The Company is primarily engaged in the manufacturing of pharmaceutical formulations across a broad spectrum, including antibiotics, antimalarials, antispasmodics, anti-inflammatories, antiemetics, respiratory medications, diabetes treatments, antidepressants, and more. The Company also produce variety of products, comprising ethical drugs, generic drugs, and over-the-counter drugs (OTC). The Company has been converted from Private Limited Company to Public Limited Company vide necessary resolution passed by shareholders and the name of company is this day changed to Quest Laboratories Limited pursuant to issuance of Fresh Certificate of Incorporation on January 23, 2024. The Corporate Identification Number is U24232MP1998PLC012850.

2. SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Preparation

The Restated Summary Statement of Assets and Liabilities of the Company as at September 30, 2023, March 31, 2023, March 31, 2022 and March 31, 2021 and the related Restated Summary Statement of Profit and Losses and Cash Flows Statement for the period ended on September 30, 2023, March 31, 2023, March 31, 2022 and March 31, 2021 have been complied by management from the financial statements of the company for the period ended on September 30, 2023, March 31, 2023, March 31, 2022 and March 31, 2021.

These financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting and comply with the Accounting Standards specified to in section 133 of the Companies Act 2013, read with rule 7 of the Companies (Account) Rules, 2014, the relevant provisions of the Companies Act, 2013, pronouncements of the Institute of Chartered Accountants of India and other accounting principles generally accepted in India, to the extent applicable. The financial statements are presented as per schedule III to Companies Act, 2013

(b) Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements and the results of operations during the reporting periods. Although these estimates are based upon managements knowledge of current events and actions, actual results could differ from those estimates and revisions, if any, are recognised in the current and future periods.

(c) Revenue Recognition

The Company follows the accrual method of accounting and all claims, receivable and liabilities are provided on that basis. All revenue is recognised on accrual basis except non-recruiting income is accounted otherwise.

Sale of goods

Sales are recognised, net of returns and trade discounts, on transfer of significant risks and rewards of ownership to the buyer. Sales excludes Goods & Service Tax.

Revenue from sale of services is recognized net of goods and service tax and as and when the services are rendered. Interest incomes/expenses are recognised using the time proportion method based on the rates implicit in the transaction.

(d) Property, Plant and Equipment

Property, plant and equipment are carried at cost less accumulated depreciation / amortisation and impairment losses, if any. The cost of Property, Plant and Equipment comprises its purchase price net of any trade discounts and rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities), any directly attributable expenditure on making the asset ready for its intended use, other incidental expenses.

(e) Depreciation

i. Property, Plant & Equipment

Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Depreciation on tangible fixed assets has been provided on the written down value method as per the useful lives as prescribed in Schedule II to the Companies Act, 2013.

Assets	Estimated Value
Plant & Machinrey	15 Years
Furniture & Mixture	10 Years
Factory Premises (Owned)	30 Years
Office Equipment	5 Years
Computers
End User Eq. (Laptop, PC)	3 Years
Server & Network	6 Years
Motor Vehicle	8 Years

ii. Intangible Assets

Intangible Assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. Intangible Assets are amortized on straight line basis over a period of five years being the estimated useful life.

Intangible asset is recognised as per Accounting Standard 26 Intangible Asset.

An intangible asset is recognised if and only if:

(a) it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise; and,

(b) the cost of the asset can be measured reliably.

(f) Inventories

Inventories are valued at the lower of cost and the net realisable value after providing for obsolescence and other losses, where considered necessary. Cost is generally determined on weighted average basis except for inventory segregated for a specific order / project, in which case it is valued at their specific costs of purchase. Cost includes all charges in bringing the goods to the point of sale, including octroi and other levies, transit insurance and receiving charges.

(g) Foreign currency transactions

Initial recognition

Transactions in foreign currencies entered into by the Company are accounted at the exchange rates prevailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction.

Measurement at the balance sheet date

Foreign currency monetary items (other than derivative contracts) of the Company, outstanding at the balance sheet date are restated at the year-end rates. Non-monetary items of the Company are carried at historical cost.

Treatment of exchange differences

Exchange differences arising on settlement / restatement of foreign currency monetary assets and liabilities of the Company are recognised as income or expense in the Statement of Profit and Loss.

(h) Employee benefits

Short-term employee benefits

All employee benefits payable within twelve months of rendering the service are classified as short-term benefits. Such benefits include salaries, wages, leave encashment, incentives etc. and the same are recognised in the period in which the employee renders the related service.

Defined contribution plans

The Companys contribution to provident fund is considered as defined contribution plans and are charged as an expense based on the amount of contribution required to be made and when services are rendered by the employees.

Defined benefit plans

For defined benefit plans in the form of gratuity (unfunded), the cost of providing benefits is determined using the Projected Unit Credit method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognised in the Statement of Profit and Loss in the period in which they occur. Past service cost is recognised immediately to the extent that the benefits are already vested and otherwise is amortised on a straight-line basis over the average period until the benefits become vested. The retirement benefit obligation recognised in the Balance Sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost.

(i) Taxation

Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961 and other applicable tax laws.

Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognised as an asset in the Balance Sheet when it is highly probable that future economic benefit associated with it will flow to the Company.

Deferred tax is recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted as at the reporting date. Deferred tax liabilities are recognised for all timing differences. Deferred tax assets are recognised for timing differences of items other than unabsorbed depreciation and carry forward losses only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised. However, if there are unabsorbed depreciation and carry forward of losses and items relating to capital losses, deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that there will be sufficient future taxable income available to realise the assets. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each balance sheet date for their realisability.

(j) Provisions and contingencies

A provision is recognised when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Contingent liabilities are disclosed in the Notes. Contingent assets are not recognised in the financial statements.

(k) Borrowing costs

Costs in connection with the borrowing of funds to the extent not directly related to the acquisition of qualifying assets are charged to the Statement of Profit and Loss over the tenure of the loan.

(l) Earnings per Share

Basic earnings per share is computed by dividing the profit/(loss) after tax (including the post tax effect of extra ordinary items, if any) by the weighted average number of equity shares outstanding during the year.

Diluted earnings per share is computed using the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares, if any.

(m) Impairment of assets

The carrying values of assets/ cash generating units at each balance sheet date are reviewed for impairment. If any indicatio n of impairment exists, the recoverable amount of such assets is estimated and impairment is recognised, if the carrying amount of these assets exceeds their recoverable amount. The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor.

(n) Operating Cycle

All assets and liabilities have been classified as current or non-current as per the Companys normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of products / activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current. As a result, current assets comprise elements that are expected to be realised within 12 months after the reporting date and current liabilities comprise elements that are due for settlement within 12 months after the reporting date.

(o) Changes in Accounting Policies in the Periods/ Years Covered in the Restated Financials

There is only change in Significant Accounting Policies which needs to be adjusted in the Restated Summary Statements includes the impact of provision of gratuity made on actuarial valuation basis report.

RESULTS OF OUR OPERATION

The following discussion on results of operations should be read in conjunction with the Restated Financial Statements of our Company for the period ended September 30, 2023 and financial years ended on 2023, 2022 and 2021:

(in lakhs)

	For the Period ended/ For the Year Ended 31st March
Particulars	September 30, 2023	% of Total Revenue	2023	% of Total Revenue	2022	% of Total Revenue	2021	% of Total Revenue
Revenue:
Revenue from Operations	4,101.71	99.85%	6,164.06	99.64%	5,948.39	99.90%	3,036.35	99.76%
Other income	6.17	0.15%	22.54	0.36%	5.81	0.10%	7.20	0.24%
Total revenue	4,107.88	100.00%	6,186.60	100.00%	5,954.20	100.00%	3,043.55	100.00%
Expenses:
Cost of Material Consumed	2,586.31	62.96%	4,173.79	67.47%	4,427.41	74.36%	2,443.19	80.27%
Purchase of Stock in Trade	-	-	-	-	-	-	-	-
Increase/ Decrease in Stock in Trade	(3.21)	(0.08%)	7.77	0.13%	21.97	0.37%	3.28	0.11%
Employees Benefit Expenses	233.21	5.68%	356.79	5.77%	346.44	5.82%	253.08	8.32%
Finance costs	32.36	0.79%	53.84	0.87%	29.65	0.50%	30.71	1.01%
Depreciation and Amortization	30.76	0.75%	54.98	0.89%	46.03	0.77%	39.38	1.29%
Other expenses	348.91	8.49%	843.47	13.63%	506.02	8.50%	194.95	6.41%
Total Expenses	3,228.34	78.59%	5,490.64	88.75%	5,377.52	90.31%	2,964.59	97.41%
Profit before exceptional and extraordinary items and tax	879.52	21.41%	695.96	11.25%	576.68	9.69%	78.95	2.59%
Exceptional Items	-	-	-	-	-	-	-	-
Profit before extraordinary items and tax	879.52	21.41%	695.96	11.25%	576.68	9.69%	78.95	2.59%
Extraordinary items	-	-	-	-	-	-	-	-
Profit before tax	879.52	21.41%	695.96	11.25%	576.68	9.69%	78.95	2.59%
Tax expense:
Current tax	245.18	5.97%	179.16	2.90%	155.39	2.61%	14.74	0.48%
Earlier year Tax	-	-	-	-	-	-	-	-
Deferred Tax	8.90	0.22%	13.95	0.23%	10.79	0.18%	(1.29)	(0.04%)
Net Total Tax Expenses	254.08	6.19%	193.11	3.12%	166.18	2.79%	13.45	0.44%
Profit /(Loss) for the period from continuing operations	625.44	15.23%	502.85	8.13%	410.50	6.89%	65.50	2.15%

KEY COMPONENTS OF COMPANYS PROFIT AND LOSS STATEMENT Revenue from operations: Revenue from operations mainly consists from Sales of products.

Other Income: Other Income Consist of Discount and Rebates, Subsidy, Interest Income, Refund of Duty Drawback, Profit on Sale of Fixed Assets, Interest on Electricity S.D and Rate difference.

Expenses: Companys expenses consist of, Cost of Material Consumed, Increase/Decrease in Stock in trade, Employee Benefit Expenses, Finance Cost, Depreciation and amortisation expense & Other Expenses.

Cost of Material Consumed: Cost of Material Consumed consist of Opening Stock, Purchase of Raw Material, Direct Expenses & Closing Stock.

Increase/Decrease in inventories: Changes in inventories of Finished Goods, Semi Finished Goods & Stock in Trade consist of difference between opening & closing Value of Stock.

Employee Benefits Expense: Employee benefit expenses includes Salaries and Wages, Contribution to provident and other funds, Bonus, Managerial Remuneration, Gratuity Expenses and Staff welfare expenses.

Finance Cost: Finance Cost includes Interest paid on borrowings, delayed payment of statutory dues& Bank Charges.

Depreciation and Amortization Expense: We recognize Depreciation and Amortization expense on a SLM Basis as per the rates set forth in the Companies Act, 2013/ Companies Act, 1956, as applicable.

Other Expenses: Other expenses include Factory Expenses, Power & Fuel, Repair and Maintenance Expenses, Freight Outward, etc.

REVIEW OF OPERATIONS FOR THE PERIOD ENDED ON SEPTEMBER 30, 2023:

Revenue from Operation

Revenue from operations for the period ended on September 30, 2023 amounting to ^4101.71 lakhs represents 99.85% of Total Revenue.

Other Income

Other Income consisting of Interest on Deposits and rate differences amounting to ?6.17 lakhs represents 0.15% of Total Revenue.

Cost of Material Consumed

Cost of Material Consumed for the period ended on September 30, 2023 amounting to ?2,586.31 lakhs represents 62.96% of Total Revenue.

Increase/Decrease in Stock in trade

(Increase)/ Decrease in Stock in trade amounting to (^3.21) lakhs represent (0.08%) of Total Revenue.

Employee Benefit Cost

Employee benefit expenses includes Salaries and Wages, Managerial Remuneration, Contribution to PF and other funds, Gratuity Expenses etc amounting to ?233.21 Lakhs represents 5.68% of Total Revenue.

Finance Cost

Finance Cost includes Interest on Borrowings, Bank Charges and interest on delay in statutory dues payment amounting to ?32.36 Lakhs represents 0.79% of Total Revenue.

Depreciation and Amortization

Depreciation is charged on WDV method amounting to ?30.76 Lakhs represents 0.75% of Total Revenue

Other Expenses

Other expenses include factory expenses, insurance expenses, power and fuel, repairs and maintenance, legal, professional and consultancy fees, printing and stationery, travelling expenses, freight outward etc. amounting to ?348.91 lakhs represents 8.49% of Total Revenue.

Profit Before Tax

The Profit before tax for the period ended on September 30, 2023 was ?879.52 lakhs representing 21.41% of Total Revenue.

Tax Expenses

Tax Expenses consisting of Current Tax & Deferred Tax for the period ended on September 30, 2023 was ?245.18 lakhs and ?8.90 lakhs respectively, representing 5.97% and 0.22% respectively of Total Revenue.

Profit After Tax

The Profit after tax for the period ended on September 30, 2023 was ?625.44 lakhs representing 15.23% of Total Revenue.

FISCAL 2023 COMPARED WITH FISCAL 2022

Revenue from Operation

Revenue from operations increased by 3.63% from ?5,948.39 lakhs in Fiscal 2022 to ?6,164.06 lakhs in Fiscal 2023. This increase was primarily due to the rise in sales of products during the year, notably driven by increased orders from government departments in Madhya Pradesh. Revenue generated from these departments rose from ?1,906.14 lakhs in fiscal 2022 to ?3119.75 lakhs in fiscal 2023.

Other Income

Other income had increased from ?5.81 lakhs in Fiscal 2022 to ?22.54 lakhs in Fiscal 2023 due to increase in interest on deposits, discount and rebates received and subsidy received. The companys interest on deposits in the year 2022 was ?3.70 lakhs which increased in the year 2023 to ?9.75 lakhs. Further in the year 2023 the company has received subsidy amounting to ?12.28 lakhs which was NIL in the fiscal year 2022.

Cost of Material Consumed

Cost of Material Consumed had decreased by 5.73% from ?4,427.41 lakhs in Fiscal 2022 to ?4,173.79 lakhs in Fiscal 2023. This decrease was primarily due to making bulk orders and thus received quantity discounts during the year.

Increase/Decrease in stock in trade

Changes in Inventories of Finished Goods had decreased by 64.63% from ?21.97 lakhs in Fiscal 2022 to ?7.77 lakhs in Fiscal 2023.

Employee Benefit Expenses

Employee benefit expenses had increased by 2.99% from ?346.44 lakhs in Fiscal 2022 to ?356.79 lakhs in Fiscal 2023. This increase was primarily due to increase in contribution to provident and other funds from ?4.82 lakhs in year 2022 to ?6.46 lakhs in year 2023, increase in managerial remuneration from ?42.00 lakhs in year 2022 to ?75.00 lakhs in year 2023 & increase in gratuity expenses from ?1.84 lakhs in year 2022 to ?2.20 lakhs in year 2023.

Finance Cost

Finance Cost had increased by 81.59% from ?29.65 lakhs in Fiscal 2022 to ?53.84 lakhs in Fiscal 2023. This increase was primarily due to increase in Interest on borrowings from ?26.38 lakhs in Fiscal 2022 to ?34.27 lakhs in Fiscal 2023 and increase in the interest on delay payment of statutory dues from ?0.92 lakhs in Fiscal 2022 to ?17.70 lakhs in Fiscal 2023.

Depreciation and Amortization Expenses

Depreciation had increased by 19.44% from ?46.03 lakhs in Fiscal 2022 to ?54.98 lakhs in Fiscal 2023. This was primarily due to capital expenditure of ? 306.72 Lakhs during Fiscal 2023.

Other Expenses

In Fiscal 2023, other expenses experienced a substantial increase of 66.69%, surging from ?506.02 lakhs in Fiscal 2022 to ?843.47 lakhs. This escalation stemmed from several contributing factors. Firstly, factory expenses rose by ?1.44 lakhs, while analytical expenses saw a notable uptick of ?12.41 lakhs. Similarly, insurance expenses surged by ?14.81 lakhs, and power and fuel expenses increased by ?2.89 lakhs. Moreover, business promotion expenses climbed by ?8.47 lakhs, and testing charges escalated by ?10.87 lakhs. Additionally, freight outward expenses rose significantly, amounting to ?146.32 lakhs. Alongside these operational cost increases, the company also incurred fines and penalties totalling ?214.85 lakhs due to delays in scheduled delivery of goods to customers. This detailed breakdown underscores the diverse range of factors contributing to the rise in other expenses during Fiscal 2023, offering valuable insight into the companys expenditure dynamics and areas of focus.

Tax Expenses

The Companys tax expenses had increased by ?26.93 lakhs from ?166.18 lakhs in the Fiscal 2022 to ?193.11 lakhs in Fiscal 2023. This was primarily due to increase in current tax expenses during the year which got increased from ?155.39 Lakhs in the year 2022 to ?179.16 lakhs in the year 2023 & increase in Deferred Tax Expenses from ?10.79 lakhs in the year 2022 to ?13.95 lakhs in the year 2023.

Profit after Tax

After accounting for taxes at applicable rates, our Company reported a net profit of ?502.85 lakhs in Fiscal 2023 as compared to a net profit of ?410.50 lakhs in Fiscal 2022 which got increased due to higher revenue from operation and reduction in expenses during the year.

FISCAL 2022 COMPARED WITH FISCAL 2021

Revenue from Operation

In Fiscal 2021, revenue from operations amounted to ?3,036.35 lakhs. In Fiscal 2022, this figure increased by 95.91% to ? 5,948.39 lakhs. The increase was primarily due to higher sales of products during the year, driven by increased orders from government departments in Uttar Pradesh and Madhya Pradesh. In Fiscal 2021, revenue generated from Uttar Pradesh and Madhya Pradesh was ?250.83 lakhs and ^1,315.68 lakhs respectively. These figures increased in Fiscal 2022 to ?2,596.77 lakhs and ?1,906.14 lakhs respectively.

Therefore, the increase in revenue from operations in Fiscal 2022 compared to Fiscal 2021 was significant in both Uttar Pradesh and Madhya Pradesh. Specifically, revenue from Uttar Pradesh increased by ?2,345.94 lakhs, while revenue from Madhya Pradesh increased by ?590.46 lakhs

Other Income

Other income had decreased by 19.31% from ?7.20 lakhs in Fiscal 2021 to ?5.81 lakhs in Fiscal 2022. This was primarily due to decrease in Duty Drawback by ?1.60 Lakhs and in rate differences by ?2.28 Lakhs.

Cost of Material Consumed

Cost of Material Consumed in the Fiscal 2022 was increased by 81.21% from ?2443.19 lakhs in Fiscal 2021 to ?4427.41 lakhs in Fiscal 2022. This decrease was primarily due to making bulk orders, thus received quantity discounts during the year.

Increase/Decrease in stock in trade

Changes in Inventories of Finished Goods was 569.82% from ?3.28 lakhs in Fiscal 2021 to ?21.97 lakhs in Fiscal 2022.

Employee Benefit Expenses

Employee benefit expenses had increased by 36.89% from ?253.08 lakhs in Fiscal 2021 to ?346.44 lakhs in Fiscal 2022. This increase was primarily due to increase in salary & wages from ?192.02 lakhs in year 2021 to ?272.71 lakhs in year 2022 and increase in bonus from ?6.50 lakhs in year 2021 to ?20.00 lakhs in year 2022.

Finance Cost

Finance Cost had decreased by 3.45% from ?30.71 lakhs in Fiscal 2021 to ?29.65 lakhs in Fiscal 2022. This decrease was primarily due to decrease in interest on borrowings by ?2.09 lakhs in Fiscal 2022.

Depreciation and Amortization Expenses

Depreciation had increased by 16.89% from ?39.38 lakhs in Fiscal 2021 to ?46.03 lakhs in Fiscal 2022. This was primarily due to capital expenditure of ? 193.07 Lakhs during Fiscal 2022.

Other Expenses

Other expenses had increased by 159.56% from ?194.95 lakhs in Fiscal 2021 to ?506.02 lakhs in Fiscal 2022. The increase was primarily due to increase in factory expenses by ?10.07 lakhs, power and fuel by ?17.94 lakhs, auditor fees by ?1.55 lakhs, professional and consultancy fees by ?18.47 lakhs, testing charges by ?7.80 lakhs, legal fees by ?2.60 lakhs, fines and penalties by ?9.33 lakhs, bad debts by ?90.08, commission by ?102.52 lakhs, freight outward by ?48.11 lakhs etc. in Fiscal 2022.

Tax Expenses

The Companys tax expenses had increased by ?152.73 lakhs from ?13.45 lakhs in the Fiscal 2021 to ?166.18 lakhs in Fiscal 2022. This was primarily due to increase in Current Tax Expenses from ?14.74 Lakhs in Fiscal 2021 to ^155.39 Lakhs in Fiscal 2022. The Current Tax Expenses has been increased due to higher profit during the year.

Profit after Tax

After accounting for taxes at applicable rates, our Company reported a net profit of ?410.50 lakhs in Fiscal 2022 as compared to a net profit of ?65.50 lakhs in Fiscal 2021. The company has made higher profit after tax in the fiscal 2022 due to higher revenue from operations during the year.

CASH FLOWS

(Z in lakhs)

Particulars	September 30, 2023	March 31, 2023	March 31, 2022	March 31, 2021
Net Cash from Operating Activities	(189.37)	363.07	345.51	104.72
Net Cash from Investing Activities	43.92	(296.97)	(188.82)	(119.67)
Net Cash from Financing Activities	175.49	26.67	(41.40)	3.83

Cash Flows from Operating Activities

For the period ended September 30, 2023

Our net cash used from operating activities was (?189.37) Lakhs for the period ended September 30, 2023. Our operating profit before working capital changes was ? 938.72 Lakhs for the period ended September 30, 2023 which was primarily adjusted against income tax of (?79.81) Lakhs, decrease in inventories ? 194.49 Lakhs, increase in trade receivables ? (2,549.21) Lakhs, increase in short term loans & advances ? 186.13 Lakhs, increase in other current assets ? 0.96 Lakhs, decrease in trade payables ? 1,103.14 Lakhs, decrease in other current liabilities ? 16.21 Lakhs.

For the financial year ended March 31, 2023

Our net cash used from operating activities was ? 363.07 Lakhs for the financial year ended March 31, 2023. Our operating profit before working capital changes was ? 796.83 Lakhs for the financial year ended March 31, 2023 which was primarily adjusted against income tax of ? (156.26) Lakhs, increase in inventories ? (1,007.00) Lakhs, decrease in trade receivables ? 212.39 Lakhs, increase in short term loans & advances ? (33.68) Lakhs, increase in other current assets ? (0.06) lakhs, decrease in trade payables ? 755.53 Lakhs, increase in other current liabilities ? (204.68) Lakhs.

For the financial year ended March 31, 2022

Our net cash used from operating activities was ? 345.51 Lakhs for the financial year ended March 31, 2022. Our operating profit before working capital changes was ? 650.50 Lakhs for the financial year ended March 31, 2022 which was primarily adjusted against income tax of ? (26.58) Lakhs, increase in inventories ? (25.92) Lakhs, increase in trade receivables ? (1,290.72) Lakhs, increase in short term loans & advances ? (54.69) Lakhs, decrease in other current assets ? 10.55 lakhs, decrease in trade payables ? 908.04 Lakhs, decrease in other current liabilities ? 174.32 Lakhs.

For the financial year ended March 31, 2021

Our net cash used from operating activities was ? 104.72 Lakhs for the financial year ended March 31, 2021. Our operating profit before working capital changes was ? 153.68 Lakhs for the financial year ended March 31, 2021 which was primarily adjusted against income tax of ? (41.02) Lakhs, decrease in inventories ? 341.17 Lakhs, increase in trade receivables ? (181.19) Lakhs, decrease in short term loans & advances ? 5.82 Lakhs, increase in other current assets ? (0.99) lakhs, increase in trade payables ? (153.73) Lakhs, increase in other current liabilities ? (19.02) Lakhs.

Cash Flows from Investment Activities

For the period ended September 2023

Our net cash flow from investing activities was ?43.92 lakhs. This was mainly on account of Purchase of fixed assets & including intangible assets of ? 38.21 lakhs and interest received of ? 5.71lakhs.

For the financial year ended March 31, 2023

Our net cash flow from investing activities was ? (296.97) lakhs. This was mainly on account of Purchase of fixed assets & including intangible assets of ? (306.72) lakhs and interest received of ? 9.75 lakhs.

For the financial year ended March 31, 2022

Our net cash flow from investing activities was ? (188.82) lakhs. This was mainly on account of Purchase of fixed assets & including intangible assets of ? (193.07) lakhs, Sale of fixed assets & including intangible assets of ? 0.55 lakhs and interest received of ? 3.70 lakhs.

For the financial year ended March 31, 2021

Our net cash flow from investing activities was ? (119.67) lakhs. This was mainly on account of Purchase of fixed assets & including intangible assets of ? (120.70) lakhs and interest received of ? 1.03 lakhs.

Cash Flows from Financing Activities

For the period ended September 2023

Our net cash flow from financing activities was ?175.49 lakhs. This was on account of proceeds from Long Term borrowings of ? 8.68 lakhs, & Short-Term Borrowings of ? 209.27 lakhs, security deposits of ? (10.10) lakhs and interest paid of t (32.36) lakhs.

For the financial year ended March 31, 2023

Our net cash flow from financing activities was ? 26.67 lakhs. This was on account of proceeds from Long Term borrowings of ? 79.21 lakhs, & Short-Term Borrowings of ?17.94 lakhs, security deposits of ? (16.64) lakhs and interest paid of ? (53.84) lakhs.

For the financial year ended March 31, 2022

Our net cash flow from financing activities was (?41.40) lakhs. This was on account of proceeds from Long Term borrowings of ? 18.06 lakhs, & Short-Term Borrowings of (?9.55) lakhs, security deposits of ? (20.26) lakhs and interest paid of (?29.65) lakhs.

For the financial year ended March 31, 2021

Our net cash flow from financing activities was ? 3.83 lakhs. This was on account of proceeds from Long Term borrowings of ? 4.77 lakhs, & Short-Term Borrowings of ? 23.98 lakhs, security deposits of ? 5.79 lakhs and interest paid of ? (30.71) lakhs.

RELATED PARTY TRANSACTIONS

Related party transactions with certain of our promoter, directors and their entities and relatives primarily relate to remuneration, salary, commission and issue of Equity Shares. For further details of related parties kindly refer chapter titled "Restated Financial Statements beginning on page 187 of this Draft Red Herring Prospectus.

OFF-BALANCE SHEET ITEMS

We do not have any other off-balance sheet arrangements, derivative instruments or other relationships with any entity that have been established for the purposes of facilitating off-balance sheet arrangements.

QUALIFICATIONS OF THE STATUTORY AUDITORS WHICH HAVE NOT BEEN GIVEN EFFECT TO IN THE RESTATED FINANCIAL STATEMENTS

There are no qualifications in the audit report that require adjustments in the Restated Financial Statements.

QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Financial Market Risks

Market risk is the risk of loss related to adverse changes in market prices, including interest rate risk. We are exposed to interest rate risk, inflation and credit risk in the normal course of our business.

Interest Rate Risk

Our financial results are subject to changes in interest rates, which may affect our debt service obligations in future and our access to funds.

Effect of Inflation

We are affected by inflation as it has an impact on the salary, wages, etc. In line with changing inflation rates, we rework our margins so as to absorb the inflationary impact.

Credit Risk

We are exposed to credit risk on monies owed to us by our customers. If our customers do not pay us promptly, or at all, we may have to make provisions for or write-off such amounts.

OTHER MATTERS

Details of Default, if any, Including Therein the Amount Involved, Duration of Default and Present Status, in Repayment of Statutory Dues or Repayment of Debentures or Repayment of Deposits or Repayment of Loans from any Bank or Financial Institution

Except as disclosed in chapter titled "Restated Financial Statements" beginning on page 187 of this Draft Red Herring Prospectus, there have been no defaults in payment of statutory dues or repayment of debentures and interest thereon or repayment of deposits and interest thereon or repayment of loans from any bank or financial institution and interest thereon by the Company.

Material Frauds

There are no material frauds, as reported by our statutory auditor, committed against our Company, in the last three Fiscals.

Unusual or infrequent events or transactions

Except as described in this Draft Red Herring Prospectus, during the period/ years under review there have been no transactions or events, which in our best judgment, would be considered "unusual" or "infrequent".

Significant Economic Changes that Materially Affected or are Likely to Affect Income from Continuing Operations

Indian rules and regulations as well as the overall growth of the Indian economy have a significant bearing on our operations. Major changes in these factors can significantly impact income from continuing operations. There are no significant economic changes that materially affected our Companys operations or are likely to affect income from continuing operations except as described in chapter titled "Risk Factors" beginning on page 29 of this Draft Red Herring Prospectus.

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

Other than as described in the section titled "Risk Factors" and chapter titled "Managements Discussion and Analysis of Financial Conditions and Results of Operations", beginning on page 29 and 190 of this Draft Red Herring Prospectus respectively to our knowledge there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on revenues or income of our company from continuing operations.

Future relationship between Costs and Income

Other than as described in the section titled "Risk Factors" beginning on page 29 of this Draft Red Herring Prospectus, to our knowledge there are no factors, which will affect the future relationship between costs and income or which are expected to have a material adverse impact on our operations and finances.

The extent to which material increases in revenue or income from operations are due to increased volume, introduction of new products or services or increased prices

Changes in revenue in the last three financial years are as explained in the part "Financial Year 2022-23 compared with financial year 2021-22 and Financial Year 2021-22 Compared with Financial Year 2020-21" above.

Significant dependence on a single or few Suppliers or Customers

Significant proportion of our purchases have historically been derived from a limited number of suppliers. The % of Contribution of our suppliers vis a vis the total purchases for the period ended September 30, 2023 and for the financial year ended March 31, 2023, 2022 and 2021 are as follows:

(Z in lakhs)

	Suppliers
	September 30, 2023		March 31, 2023		March 31, 2022		March 31, 2021
Particulars	Amount	%	Amount	%	Amount	%	Amount	%
Top 5	788.16	33.61	1,377.77	26.56	1,113.92	24.90	617.82	29.36
Top 10	905.14	38.60	1,700.88	32.79	1,339.98	29.96	707.81	33.64

Significant proportion of our total revenue have historically been derived from a limited number of customers. The % of Contribution of our Customers vis a vis the total revenue for the period ended September 30, 2023 and for the financial year ended March 31, 2023, 2022 and 2021 are as follows:

(Z in lakhs)

	Customer
	September 30, 2023		March 31, 2023		March 31, 2022		March 31, 2021
Particulars	Amount	%	Amount	%	Amount	%	Amount	%
Top 5	3,903.95	95.18	5,339.17	86.62	4,516.88	75.93	1,185.62	39.05
Top 10	4,081.42	99.51	5,863.68	95.13	6,901.22	86.29	1,689.58	55.65

Status of any publicly announced new products or business segments

Please refer to the chapter titled "Our Business" beginning on page 123 of this Draft Red Herring Prospectus for new products or business segments.

The extent to which the business is seasonal

Our business is not seasonal in nature.

Competitive Conditions

We operate in a competitive atmosphere. Some of our competitors may have greater resources than those available to us. While product quality, brand value, distribution network, etc are key factors in client decisions among competitors, however, reliability and competitive pricing is the deciding factor in most cases. We face fair competition from both organized and unorganized players in the market.

We believe that our experience, and reliability record with our customers will be key to overcome competition posed by such organized and unorganized players. Although, a competitive market, there are not enough number of competitors offering services similar to us. We believe that we are able to compete effectively in the market with our quality of services and our reputation. We believe that the principal factors affecting competition in our business include client relationships, reputation, and the relative quality and price of the services.