Veronica Production Limited: Annual Report 2023-24 Analysis: Annual Report 2023-24 Analysis

Executive Summary #

3-Year Trend Analysis of Key Financial Metrics #

• Revenue: Experienced a significant shift in revenue, from zero in 2022-23 to 12.91 Lakhs in 2023-24, indicating a new revenue stream.
• Profitability: Transitioned from a loss of (508.48) Lakhs in 2022-23 to a profit of 0.58 Lakhs in 2023-24. Exceptional Items led to reduction in the loss for the previous year.
• Expenses: Total expenses decreased substantially from 459.48 Lakhs in 2022-23 to 12.13 Lakhs in 2023-24.
• Earnings Per Share (EPS): EPS improved from (0.71) in 2022-23 to 0.00 in 2023-24, reflecting the shift to profitability.
• Current Ratio: Increased from 0.04 (2023) to 0.22 (2024) signifying that the payables are fully paid off with respect to the previous years.
• Return on Equity Ratio: Variance is -858.04% from 857.06% (2023) to -0.98%(2024).
• Trade Payables Turnover Ratio: Decreased by -98.34% which signifies that the payables are fully paid off.
• Return on Capital Employed: Variance is -854.22% signifying huge amount of losses incurred in the previous year.

Business Segment Performance #

• The company operates in a single segment (Agri Trading Business). A segment-wise analysis within the Agri Trading Business is not applicable.

Major Strategic Initiatives and Their Progress #

• Change in company name from Shrey Chemicals Limited to Jagran Production Limited, and subsequently to Veronica Production Limited, suggest a strategic shift.
• Appointment of new Directors and Key Managerial Personnel, including a Managing Director, CFO, and Independent Directors.
• Resignation and appointment of statutory auditors occurred during the reviewed period.
• Company obtained ISIN from CDSL and NSDL for Dematerialization of shares.

Risk Landscape Changes #

• The company highlights credit risk as a primary concern.
• The Disclosure shows that there is no material uncertainty exists as on the date of the Audit Report, for meeting its liabilities.

ESG Initiatives and Metrics #

• The company has a ‘Policy for Prevention of Sexual Harassment’ at the workplace, indicating a commitment to social aspects of ESG.
• CSR Initiatives are not undertaken as it is not applicable on the Company.

Management Outlook #

• The directors did not declare a dividend to conserve resources, suggesting a focus on financial stability and growth.
• The focus is on conserving resources for business activities.

Detailed Analysis #

Financial Position Analysis of Veronica Production Limited #

3-Year Comparative Analysis of Assets, Liabilities, and Equity #

(Rs. in Lakhs)

Significant Changes in Major Line Items (>10% YoY) #

• Non-Current Assets: Decreased by 94.52%, primarily due to a reduction of 391.00 Lakhs in Non-Current Loans.
• Current Assets: Increased by 29.12%, mostly due to an increase of 12.91 Lakh in Trade Receivable.
• Total Assets: Decreased by 89.41%.
• Current Liabilities: Decreased by 78.67%, primarily due to a 387.39 Lakhs decrease in Trade Payables.
• **Other Equity:**Increased by .58 Lakhs, primarly due to a decrease in loss.

Working Capital Trends #

(Rs. in Lakhs)

• Working Capital has improved but remains negative.

Asset Quality Metrics #

Trade receivables increased from 0 to 12.91 Lakhs.

Debt Structure and Maturity Profile #

(Rs. in Lakhs)

• The company has no long term or short-term borrowings reported in the provided financials for both years.

Off-Balance Sheet Items #

Disclosed contingent liabilities related to disputed income tax are 8094.69 Lakhs in 2024, and 6836.28 Lakhs in 2023.

Operating Performance: Income Statement Analysis #

Revenue #

• Total revenue for FY 2023-24 is Rs. 12.91 Lakhs, representing a growth (previous year revenue was 0).

Cost Structure #

• The primary cost component is the purchase of goods, accounting for Rs. 8.87 Lakhs in FY 2023-24.
• Employee benefit expenses are Rs. 0.65 Lakhs.
• Finance costs are minimal at Rs. 0.18 Lakhs.
• Other expenses, including audit fees and professional fees, amount to Rs. 2.42 Lakhs.

Margin Analysis #

• Net Profit Margin: 4.49% (Net Profit of Rs. 0.58 Lakhs / Revenue of Rs. 12.91 Lakhs) for FY 2023-24.

Non-Recurring Items #

• There were no exceptional items reported in FY 2023-24.
• In the previous year (FY 2022-23), exceptional items of Rs. 49.00 Lakhs (loss) were reported.

EPS Analysis #

• Basic EPS for FY 2023-24 is Rs. 0.00.
• Diluted EPS for FY 2023-24 is Rs. 0.00.

Cash Flow and Liquidity Analysis #

Detailed OCF, ICF, FCF Components #

• Operating Cash Flow (OCF): OCF was negative Rs. 398.54 lakhs in FY 2023-24, a significant decline from negative Rs. 17.37 lakhs in FY 2022-23. The primary driver of negative OCF was a substantial decrease in trade payables by 387.39L.
• Investing Cash Flow (ICF): ICF was positive Rs. 391.00 lakhs in FY 2023-24, stemming solely from loans received back during the year.
• Financing Cash Flow (FCF): FCF was negative Rs. 0.18 lakhs in FY 2023-24, attributed to interest expense and finance costs. In comparison, FCF in FY 2022-2023 was 9.94L.

Working Capital Management Efficiency #

• Working capital management deteriorated significantly. The substantial decrease in trade payables (Rs. 387.39 lakhs) indicates a rapid payment of outstanding dues, negatively impacting the operating cash flow.

Liquidity Position and Cash Conversion Cycle #

• Liquidity Position: The company’s liquidity position weakened. Cash and cash equivalents decreased from Rs. 17.69 lakhs at the end of FY 2022-23 to Rs. 9.96 lakhs at the end of FY 2023-24.
• Current Ratio: The Current Ratio has increased from .04 to .22, that is mainly because of huge decrease of Current Liabilities.

Key Performance Indicators #

Profitability Ratios (3-Year Trend) #

• ROE (Return on Equity): 2023-24: -0.98%. 2022-23: 857.06%. 2021-2022: Not applicable as ROE could not be calculated due to no opening Equity. The extreme volatility and negative values indicate severe financial instability and likely erosion of shareholder value.
• ROA (Return on Assets): Not directly calculable without total assets for prior years.
• ROIC (Return on Invested Capital): Not calculable with the available information as previous year’s figures are missing.
• Profit Margins:
  • Net Profit Margin: 2023-24: 4.49% (Profit of 0.58 Lakhs on revenue of 12.91 Lakhs). Not meaningful, The company had 0 revenue during 2022-2023, and Loss in 2022-2023.

Liquidity Metrics #

• Current Ratio: 2023-24: 0.22 (Current Assets of 45.68 Lakhs / Current Liabilities of 104.71 Lakhs). Indicates very poor short-term liquidity; the company has significantly fewer current assets than current liabilities.
• Quick Ratio: Not calculable, as inventory values are consistently zero, but is effectively the same as the current ratio.
• Cash Ratio: 2023-24: 0.095 (Cash and Cash Equivalents of 9.96 Lakhs / Current Liabilities of 104.71 Lakhs). Shows extremely limited immediate liquidity.

Efficiency Ratios #

• Asset Turnover: Not calculable with available information.
• Inventory Turnover: Not applicable, as the company reports no inventory for all periods presented.
• Receivables Turnover: 2023-24: Approximately 2.00 (Revenue of 12.91 Lakhs / Average Trade Receivables of 6.45Lakhs, assuming starting receivables of zero ).

Leverage Metrics #

• Debt-to-Equity Ratio: Not applicable, as the company has no reported debt for FY 2023-24. Equity is negative.
• Interest Coverage Ratio: Not applicable, as there is no reported interest expense due to a lack of debt.

Segment-wise ROIC #

• The company operates in a single segment (“Agri Trading Business”), so segment-wise ROIC is the same as overall company ROIC, which is not calculable.

Working Capital Ratios #

• Net Working Capital Turnover Ratio 0.16

Industry Comparison and Deviations #

The provided data prevents specific industry comparisons. However, several significant deviations from any reasonable industry standard are clear:

• Extremely Low Liquidity: The current and cash ratios are far below acceptable levels for virtually any industry. A healthy business should generally have a current ratio above 1.
• Negative Equity: The company has negative equity, meaning its liabilities exceed its assets. This is a critical warning sign.
• No Inventory: Operating without any reported inventory is highly unusual for a trading business.
• No Debt.
• Volatile ROE.

Important Considerations #

• The financial position is extremely poor with negative equity and very weak profitability.
• Operating with no inventory is highly unusual.
• A comprehensive assessment requires more historical data and industry-specific benchmarks.

Veronica Production Limited (2023-24) Financial Analysis #

Revenue and Profitability #

The company operates in a single segment: Agri Trading Business.

• Gross income: Rs. 0 lakhs in 2023-24 (no growth).
• Net Profit margin: Not calculable due to Revenue from Operations being Rs. 12.91 Lakhs, Other Income Rs. 0.00, and profit after tax Rs. 0.58 Lakhs.
• Profit before tax: Rs. 0.78 Lakhs, improving from a loss of Rs. (508.48) Lakhs in the previous year.

Key Products/Services Performance #

• The company is engaged in Agri Trading Business. Specific product-wise breakdown is not available.

Segment-wise CAPEX and ROIC #

• No Capital Work-in-Progress or fixed asset additions during the year.
• ROIC is negative, because EBIT is 0.96.

Growth Initiatives and Challenges #

• The company had incurred losses in the preceding financial year, demonstrating a key financial challenge, which is offset by profitability in the current year.
• Material Weakness: The audit report mentions that the internal financial controls over financial reporting are not adequate.

Risk Assessment: Veronica Production Limited (2023-24) #

Veronica Production Limited operates in a single segment (Agri Trading Business). This risk assessment covers the entire company.

Strategic Risks #

• Severity: High. Vulnerable strategic positioning due to reliance on singular business.
• Likelihood: Moderate. Changes in market demand, competition, and agricultural policies are moderately likely.
• Trend: Stable. Limited Business operations and huge debts.
• Mitigation Strategies: Not present.
• Control Effectiveness: Weak. Lack of diversification and absence of other business activities.
• Potential Financial Impact: High.

Operational Risks #

• Severity: High. Minimal operational activity reported.
• Likelihood: High. Disruption from previous minimal operational activities and lack of skilled labours.
• Trend: Improving. Revenue from operations reported against Nil of previous years.
• Mitigation Strategies: Not evident from the provided financial data.
• Control Effectiveness: Weak. Based on financial performance and absence of robust reporting on operational controls.
• Potential Financial Impact: Loss of 0.58 Lakhs for year end 2024 against Loss of 508.48 Lakhs for year ended 2023.

Financial Risks #

• Severity: High. Negative equity of (59.04) Lakhs in 2024 and (59.62) lakhs in 2023, indicating weak financial health.
• Likelihood: High. Significant credit risk.
• Trend: Debt-Equity Ratio and Debt Service Coverage Ratio are not applicable due to negative equity and the absence of debt.
• Mitigation Strategies: Not clear.
• Control Effectiveness: Weak.
• Potential Financial Impact: High risk of insolvency given the negative equity position. Current ratio has improved to 0.22 (2024) from 0.04 (2023).

Compliance/Regulatory Risks #

• Severity: High. Subject to changing agricultural policies and trade regulations.
• Likelihood: Moderate. Regulatory changes impacting the agri-trading sector are moderately likely.
• Trend: Stable, with ongoing requirements for compliance with SEBI and Companies Act regulations.
• Mitigation Strategies: Not Evident.
• Control Effectiveness: Moderate. Secretarial audit report indicates compliance, but some areas need improvement.
• Potential Financial Impact: Moderate. Potential for fines and penalties associated with non-compliance.

Strategic and Management Analysis of Veronica Production Limited #

Long-Term Strategic Goals and Progress #

The company operates in a single segment (Agri Trading Business) and its nature of business has not changed. No material changes affecting the financial position occurred after March 31, 2024.

Competitive Advantages and Market Positioning #

Veronica Production has not provided disclosures regarding elements that differentiate it from other players in the agricultural trading market.

M&A Strategy and Execution #

The company reports no subsidiary, merger, acquisition, or disposal of significant assets during the reported period.

Management’s Track Record in Execution #

• A change in management and the Board occurred after the end of the fiscal year.
• The company incurred cash losses in the immediately preceding financial year.

Capital Allocation Strategy #

• No dividends were recommended or paid.
• No amount was transferred to reserves.
• No shares were issued.

Organizational Changes and Their Impact #

• Several changes in the Board of Directors and Key Managerial Personnel occurred during and after the financial year, including appointments, resignations, and changes in designation.
• Resignation of Statutory auditors created a casual vacancy in the office of Statutory Auditors.

ESG Framework #

Environmental Metrics and Targets #

• The company is not engaged in manufacturing activities, resulting in no technology absorption.
• No foreign exchange earnings or outgo were reported, implying no direct environmental impact related to international operations.
• There is no Conservation of energy disclosure.

Social Responsibility Programs #

• Provisions of Section 135 of the Companies Act, 2013, regarding Corporate Social Responsibility (CSR) are not applicable to the company due to its financial profile, meaning that no CSR policy has been made.
• The company has a ‘Policy for Prevention of Sexual Harassment’ and reported no cases of sexual harassment during the review period.

Governance Structure and Effectiveness #

• The Board of Directors comprises a mix of Executive, Non-Executive, and Independent Directors, including a woman director.
• Nine Board meetings, Nine Audit committee, Nomination committee meetings and stakeholders relationship committee were held during FY 2023-24, with high attendance rates.
• The Company had complied with requirements of the corporate governance and there is a dedicated email address for investor complaints.
• There was resignation of the statutory auditors during the year.

Regulatory Compliance and Future Preparations #

• The company has complied with requirements from Stock Exchanges, SEBI, and statutory authorities.
• Company has complied with the secretarial standard.
• No penalties or strictures have been imposed on the company.
• The company faces outstanding disputed Income Tax liabilities.
• There is a charge created but not satisfied.

Forward Outlook #

Segment-Wise Financial Analysis: Veronica Production Limited (2023-24) #

Management Guidance and Assumptions: #

• Financial statements are prepared under the historical cost convention, with certain financial assets and liabilities measured at fair value.
• The Company’s operating cycle is assumed to be 12 months for asset and liability classification.
• Estimates and assumptions are based on parameters available during financial statement preparation, with acknowledgment that future circumstances may change.
• The Company has adopted Indian Accounting Standards (Ind AS).
• Related party transactions are determined to be on arm’s length basis and in ordinary course of business.

Planned Strategic Initiatives: #

• The company has changed the nature of business to Agri Trading Business.
• The Board is evaluating appointment of key management and independent directors.
• The company is seeking shareholder approval for the re-appointment and regularization of directors.
• The company is providing remote e-voting facility for AGM to the shareholders.
• Company has obtained ISIN to facilitate shareholders to dematerialize their physical shares into DEMAT mode.

Efficiency Improvement Targets: #

• The company has improved its net profit after tax to a profit.

Potential Challenges and Opportunities: #

Challenges: #

• The company has incurred losses in the preceding financial year of Rs. 508.48 Lakhs.
• Material weakness has been identified in the operating effectiveness of the Company’s internal financial controls.
• The company faces pending litigation regarding income tax liabilities.
• The Company has not established an internal audit system, although it is required under section 138 of the Companies Act.
• The Company’s trade payables outstanding for more than one year have to be addressed.

Opportunities: #

• The company has demonstrated the ability to generate profit in the current financial year.

Audit & Compliance Analysis of Veronica Production Limited #

Auditor’s Opinion and Qualifications #

• The auditor, S K Bhavsar & Co., provided a qualified opinion on the financial statements.
• The qualification relates to a material weakness in internal financial controls over financial reporting, specifically citing inadequate documentation of policies, procedures, and IT controls.
• Previous auditors (M/s V S S B & Associates) resigned effective 3rd January, 2024. M/s S K Bhavsar & Co were then appointed.

Key Accounting Policies #

• The company adheres to Indian Accounting Standards (Ind AS) as notified by the Ministry of Corporate Affairs.
• Financial statements are prepared under the historical cost convention, with certain financial assets and liabilities measured at fair value.
• Revenue recognition is based on the probability of economic benefits and reliable measurement.

Internal Control Effectiveness #

• A material weakness exists in the internal financial controls over financial reporting, as identified in the auditor’s report.
• The weakness pertains to inadequacy in the specific policies and procedures of documentation, as well as IT Controls.

Regulatory Compliance Status #

• The company complied with the provisions of the Companies Act, 2013, SEBI regulations, and other applicable statutory provisions, according to the Secretarial Audit Report, with some exceptions.
• The Company is under a delisting process from the stock exchange but has received a stay order by SAT.
• The Company has not traded or invested in cryptocurrency or virtual currency during the year.

Legal Proceedings and Potential Impact #

• There are disputed income tax liabilities amounting to Rs. 8094.69 lakhs.
• Details on pending litigations are disclosed, impacting the company’s financial position, in particular assessment years under the Income Tax Act, 1961.
• There are charges that were created but not satisfied with Gujrat State Financial Corporation.

Subsequent Events #

• No material changes or commitments affecting the financial position occurred between the end of the financial year (March 31, 2024) and the date of the report (August 31, 2024).

Analysis of Accounting Quality and Regulatory Risk Assessment #

Accounting Quality #

• The historical cost convention is used as basis for the financial statement.
• There is a material weakness in Internal Control.

Regulatory Risk Assessment #

• The Company is under a delisting process, which is a major risk.
• Outstanding statutory dues exist, which could lead to penalties.
• The Company is subject to close scrutiny of the SEBI and stock exchanges.