Sonalis Consumer Products Ltd Management Discussions

You should read the following discussion of our financial condition and results of operations together with our restated financial statements included in the Draft Prospectus. You should also read the section entitled "Risk Factors" beginning on page 23 and "Forward Looking Statements" beginning on page 17, which discusses a number of factors, risks and contingencies that could affect our financial condition and results of operations.

The following discussion of our financial condition and results of operations should be read in conjunction with our restated financial statements for the Period ended September 30, 2022 and year ended March 31, 2022 including the schedules and notes thereto and the reports thereto, which appear in the section titled "Financial Information of our Company" on Page No. 131 of the Draft Prospectus. The financial statements presented and discussed herein have been prepared to comply in all material respects with the notified accounting standards by Companies (Accounting Standards) Rules, 2006 (as amended), the relevant provisions of the Companies Act and SEBI (Issue of Capital and Disclosure Requirements) Regulations. Our fiscal year ends on March 31 of each year. Accordingly, all references to a particular fiscal year/financial year are to the twelve-month period ended on March 31 of that year. The forward-looking statements contained in this discussion and analysis is subject to a variety of factors that could cause actual results to differ materially from those contemplated by such statements

Overview

Our Company is engaged in the manufacturing of nutria-bars and other healthy snacks Items. Our diversified product portfolio enables us to cater to a wide range of taste preferences and consumer segments, including children, youth and adults. Our products in the Nutri-Bars and Laddu (Indian Snacks), are primarily targeted at the youth and Adults while our other products are for all consumer segments.

Our Company was incorporated as ‘Sonalis Consumer Products Limited pursuant to a certificate of incorporation dated March 15, 2022 issued by the Registrar of Companies, Central Registration Centre, Ministry of Corporate Affairs, as a public limited company under the Companies Act, 2013 having Corporate Identity Number U15490MH2022PLC378461. Our Company acquired the running business of partnership firm M/s Appetite Foods, which was taken over by our Company vide Business Transfer Agreement dated May 15, 2022

Our history and lineage traces back to Mrs. Sonali Nilesh Kocharekar and Mrs. Smita Shashikant Shah, both avid health aware foodies, who savored nutritious snacks in the compact form of Nutri -Bars and healthy Indian trail mixes. They created a line of nutritious bars and snacks that are made out of various Nuts, Seeds, Flours, Healthy oil and various spices under the brand name of "Appetite Food".

Our diversified product portfolio enables us to cater to a wide range of taste preferences and consumer segments, including children, youth and adults. Our products in the Nutri-Bars and Laddu (Indian Snacks), are primarily targeted at the youth and Adults while our other products are for all consumer segments. Our diversified product portfolio is therefore, relatively less susceptible to shifts in consumer preferences, market trends and risks of operating in a particular product segment.

We manufacture our nutraceutical range of products under the private labeling arrangement and contract manufacturing arrangements with our customers.

We are producing quality snacks with the following objectives:

Supply of quality snacks at an affordable price;

Providing healthy and nutrition snacks with vide range of option; and

Combining the rich Indian food culture with advance method of making of snacks in more healthy way.

We are one of the snack production and processing company in Mumbai. We have also established marketing network with wholesalers and retailers spread over in Maharashtra, Gujarat, and Goa. All the Products are manufactured under highly supervised environment.

Our diversified product portfolio includes five categories:

Granola Bar: These products are made out of 100% fruits and nuts cooked in honey in bar form. Our products under this category include C-Bars, IMU-Bars, O-Bars, Pro-Bars and Ragi Bars. We sell these products under our brand "Appetite Food".

Laddu: A product made out of grains, pulses, nuts, dry fruits and healthy oils in to spherical form. Our products under this category include Methi Laddu, Multigrain Laddu, Mung Laddu, Oats Laddu, Ragi Laddu and Spirulina Laddu. These laddus are made from various whole-grain flours, Ghee, Jaggery, Dry fruits, Nuts etc. without adding any preservatives or flavors and colors.

Chakli: Chakli is a deep-fried snack made from rice flour, gram flour, wheat flour or a mixture of lentil flours. In this category we sell Chakli under our brand "Appetite Food".

Chivda: Under this category our product Chivda is a delicious savory snack made with flattened rice (rice flakes/poha), peanuts, daliya dal, cashew nuts, raisins and spices. It is a healthy alternative to high cholesterol and sugar concentrated products.

Sev: We manufacture Sev is a noodle type crispy snack made from gram flour.

We seek to differentiate ourselves from our competitors through introduction of new products, including launching innovative flavours targeted at addressing diversified consumer tastes, market trends and providing superior value and products to consumers. Our diversified product portfolio enables us to cater to a wide range of taste preferences and consumer segments, including adults, young and children. Our products in the granola Bars, Diet Bhel and Healthy Pop-ups are primarily targeted at the youth while our other products are for all consumer segments. Our diversified product portfolio is therefore, relatively less susceptible to shifts in consumer preferences, market trends and risks of operating in a particular product segment. For further information, see "Our Business" on page 84.

Over the years, we have developed a large pan-India distribution network in the general trade and through our distributors, we also supply in the modern trade segment. During the period ended September 30, 2022, we distributed our products across 3 states i.e. Maharashtra, Gujarat, and Goa through our network of distributors. Our network has enabled us to effectively cost efficiently penetrate the market.

Our Promoters Ms. Sonali Nilesh Kocharekar and Ms. Smita Shashikant Shah who has been instrumental in the growth of our business and actively advise us on finance, corporate strategy and planning. We have a strong management team with significant industry experience. Our Chairman and Managing Director, Ms. Sonali Nilesh Kocharekar has more than 12 years of experience being a dietician/nutritionist. The vast experience of the Promoters has beeninstrumental in determining the vision and growth strategies for our Company. We further believe that our market position has beenachieved by adherence to the vision of our Promoter and senior management team and their experience in the industry in which our Company operates.

Our Company operates from its registered office situated at Unit No. 16, Ground Level, Loft & Basement Sethia Industrial Estate, Tungareshwar Phata, Vasai East, Palghar, Thane, Maharashtra- 410208, India,along with the factories at Unit No. 17, Ground Level, Loft & Basement Sethia Industrial Estate, Tungareshwar Phata Vasai East Palghar Thane, Maharashtra- 410208, India and Survey No. 83, Village - Khairpada (Kaner), Virar Phata, Virar East, Maharashtra 401303, India.

Our management team is backed by a technical team that has experience in the business of our Company and also has the required technical know-how to manufacture and sell the products of our Company.

Material Development Subsequent to the last financial year

In the opinion of the Board of Directors of our Company, there have not arisen, since the date of the last financial statements disclosed in this Draft Prospectus, any significant developments or any circumstance that materially oradversely affect or are likely to affect the profitability of our Company or the value of its assets or its ability to payits material liabilities within the next twelve months except disclosed in this Draft Prospectus:

Increasing people cost in the industry

Increasing oil prices and transportation costs

Key Financial Information and Key Performance Indicators (KPIs)

		(Rs in Lakhs)
Particulars	For the six-months period ended September 30, 2022	For the Financial Year ended March 31, 2022
Revenue from operations	295.19
EBITDA	50.87
EBITDA margin	17.23%
Profit After Tax	37.95
Profit after tax margin	12.86%
Gross Profit	84.65
Gross Profit margin	28.68%
Return on Equity	11.77%

FACTORS AFFECTING OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Our business, results of operations and financial condition are affected by a number of factors, some of which are beyond our control. This section sets out certain key factors that we believe have affected our business, results of operations and financial condition in the past or which we expect will affect our business, results of operations or financial condition in the future. For a detailed discussion of certain factors that may adversely affect our business, results of operations and financial condition, see "Risk Factors" beginning on page 23.

Costs and availability of raw materials

Prices of our products

Competition from existing and new entrants

Changes, if any, in the regulations / regulatory framework / economic policies in India and / or in foreign countries, which affect national & international finance.

Government spending on Food Sector

Significant developments in Indias economic and fiscal policies;

Failure to adapt to the changing needs of industry and in particular food Sector may adversely affect our business and financial condition;

Volatility in the Indian and global capital market;

SIGNIFICANT ACCOUNTING POLICIES

For Significant accounting policies please refer "Significant Accounting Policies to the Restated FinancialStatements", under Chapter titled "Financial Information" beginning on page 131 of the Prospectus.

PRINCIPAL COMPONENTS OF INCOME AND EXPENDITURE

Income

Our Income comprises of revenue from operations. Revenue of operations includes sale of products such as granola bar, laddu, chakli, chivda, and sev. The companys total income which includes Revenue from operations during the period ended on September 30, 2022 was . 297.19 Lakhs.

Expenses

Our expenses primarily comprises of cost of material consumed, changes in inventories of finished goods, work-in progress and stock-in-trade, manufacturing, and operating costs, employee benefits expense, finance costs, depreciation and amortisation and other expenses.

Our other expenses, inter alia, comprises of production expenses, packing expenses, commission and brokerage expenses, conveyance expenses, delivery charges, shipping charges, software development charges, rate and taxes, fees and consultation, commission, legal expenses, repairs and maintenance of plant and machinery, advertisement, rent, insurance, travelling expenses, power and fuel, license fees, remuneration to auditors, FSSAI charges, and director sitting fees. The total expenditure aggregatinig to 856.25 Lakhs representing of 82.62% of the total revenue

Profit/ (Loss) after tax:

The restated net profit during the period ended on September 30, 2022 was 37.44 Lakhs representing 12.68% of the total revenue of the Company.

RESULTS OF OPERATIONS

The following table sets forth certain information with respect to our consolidated results of operations for the periods indicated:

				(Rs in Lakhs)
Sr. No Particulars	For the period ended September 30, 2022	% of Total Income	For the period ended March 31, 2022	% of Total Income
A. Revenue:
Revenue from Operations	295.19	100.00
Other income
Total revenue	295.19	100.00

 

Sr. No Particulars	For the period ended September 30, 2022	% of Total Income	For the period ended March 31, 2022	% of Total Income
B. Expenses:
Cost of Material Consumed	490.10	166.03
Purchase of Stock in Trade
Change in Inventories of Finished Goods, WIP & Stock in Trade	(282.58)	(95.73)
Employees Benefit Expenses	3.02	1.02
Finance costs	0.10	0.00
Depreciation and Amortization	0.18	0.06
Other expenses	33.78	11.44
Total Expenses	244.60	82.86
Profit before tax	50.60	17.14
Tax expense:
Current tax	12.65	4.28
Deferred Tax
Profit (Loss) for the period from continuing operations	37.95	12.86

Review of Restated Financials

Since our Company was incorporated on March 15, 2022. Therefore, there are no financial statements prepared for the FY 2022 and period started from April 01, 2022 to September 30, 2022 no comparison with earlier years is applicable.

Financial Performance Highlights for the period ended September 30, 2022

Income

Our Income comprises of revenue from operations. Revenue of operations includes sale of products such as granola bar, laddu, chakli, chivda, and sev. The companys total income which includes Revenue from operations during the period ended on September 30, 2022 was . 297.19 Lakhs.

Expenses

Our expenses primarily comprises of cost of material consumed, changes in inventories of finished goods, work-in progress and stock-in-trade, manufacturing, and operating costs, employee benefits expense, finance costs, depreciation and amortisation and other expenses.

Our other expenses, inter alia, comprises of production expenses, packing expenses, commission and brokerage expenses, conveyance expenses, delivery charges, shipping charges, software development charges, rate and taxes, fees and consultation, commission, legal expenses, repairs and maintenance of plant and machinery, advertisement, rent, insurance, travelling expenses, power and fuel, license fees, remuneration to auditors, FSSAI charges, and director sitting fees.

The total expenditure aggregatinig to 856.25 Lakhs representing of 82.62% of the total revenue

Profit/ (Loss) after tax:

The restated net profit during the period ended on September 30, 2022 was 37.44 Lakhs representing 12.68% of the total revenue of the Company.

Cash Flow:

		(Rs in Lakhs)
Particulars	Period ended	FY 2022
	September 30, 2022
Net cash (used in)/ generated from operating activities	(245.27)
Net cash (used in)/ generated from investing activities	(15.95)
Net cash (used in)/ generated from financing activities	281.47
Net increase/ (decrease) in cash and cash equivalents	20.25	5.00
Particulars	Period ended	FY 2022
	September 30, 2022
Cash and Cash Equivalents at the beginning of the period	5.00
Cash and Cash Equivalents at the end of the period	25.25	5.00

FINANCIAL INDEBTNESS

As of six-months period ended September 30, 2022, we had outstanding indebtedness of 182.08 Lakhs. The following table sets forth certain information relating to our outstanding indebtedness as of September 30, 2022:

		(Rs in Lakhs)
Particulars	As on 30.09.2022	As on 31.03.2022
1. Long Term Borrowings	182.08	18.98
Secured Borrowings	5.81
Vehicle loans	5.81
Unsecured Borrowings	176.27	18.98
Loans from Directors	20.52	11.98
Inter Corporate Deposits	--	--
Others	155.75	7.00
2. Short Term Borrowings
TOTAL BORROWINGS	182.08	18.98

For further details, see "Financial Indebtedness" on page 157.

OTHER CONTRACTUAL OBLIGATIONS

As of six-months period ended September 30, 2022, the Company has no contractual obligations.

CAPITAL EXPENDITURE

As of six-months period ended September 30, 2022, the Company has no capital expenditure.

CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS

As on the date of this Draft Prospectus there are no is no contingent liabilities.

OFF-BALANCE SHEET ARRANGEMENTS

As on the date of this Draft Prospectus there are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that we believe are material to investors.

RELATED PARTY TRANSACTIONS

We enter into various transactions with related parties in the ordinary course of business. For further details relating to our related party transactions, see "Financial Statements Restated Financial Statements Disclosure of transactions with Related Parties, as required by Indian Accounting Standard (Ind AS) - 24 Related Party Disclosures" on page 148.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Market Risk

We are exposed to interest rate risk, and other price risk, such as equity price risk. Our risk management approach seeks to minimize the potential material adverse effects from these exposures.

OTHER QUALITATIVE FACTORS

Unusual or Infrequent Events or Transactions

To our knowledge there have been no transactions or events which, in our judgment, would be considered unusual or infrequent.

Significant Dependence on a single or few suppliers or customers

Except as disclosed in this Draft Prospectus, there is no dependence on a single or few customers or suppliers.

Known Trends or Uncertainties

155

Except as disclosed in this Draft Prospectus, there are no known factors that we expect to have a material adverse impact on our revenues or income from operations.

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

Except as disclosed in this Draft Prospectus, there have been no significant economic changes that materially affected or are likely to affect our Companys income from operations.

Future relationship between Cost and Revenue

Except as disclosed in this Draft Prospectus, to our knowledge there are no known factors that may adversely affect our business prospects, results of operations and financial condition.

Competitive Conditions

We operate in a competitive environment. See "Our Business", "Industry Overview" and "Risk Factors" on pages 84, 74, and 23, respectively, for further details n competitive conditions that we face in our business.

SUMMARY OF RESERVATION, QUALIFICATIONS, ADVERSE REMARKS AND EMPHASIS OF MATTERS BY AUDITORS

Our Statutory Auditors have not provided or highlighted any reservations/ qualifications/ adverser emarks/ emphasis of matters in the audited financial statements for the six-months period ended September 30, 2022, and the Financial Years ending on March 31, 2022.