Australian Premium Solar (India) Ltd Management Discussions

GLOBAL ECONOMY:

Global growth has slowed to the extent that the global economy is perilously close to falling into recession defined as a contraction in annual global per capita income only three years after emerging from the pandemic-induced recession of 2020. Very high inflation has triggered unexpectedly rapid and synchronous monetary policy tightening around the world to contain it, including across major advanced economies (figure 1.1.A). Although this tightening has been necessary for price stability, it has contributed to a significant worsening of global financial conditions, which is exerting a substantial drag on activity. This drag is set to deepen given the lags between changes in monetary policy and its economic impacts, and the fact that real rates are expected to continue to increase.

Asset prices have been in broad, synchronous decline, investment growth has weakened substantially, and housing markets in many countries are worsening rapidly. Shockwaves continue to emanate from the Russian Federations invasion of Ukraine, especially in energy and other commodity markets. Against this backdrop, confidence has fallen precipitously. The worlds three major engines of growth the United States, the euro area, and China are undergoing a period of pronounced weakness, with adverse spillovers for emerging market and developing economies (EMDEs), many of which are already struggling with weakening domestic conditions.

Global inflation has been pushed higher by demand pressures, including those from the lagged effects of earlier policy support, and supply shocks, including disruptions to both global supply chains and the availability of key commodities. In some countries, inflation has also been spurred by large currency depreciations relative to the U.S. dollar, as well as tight labor market conditions.

GOVERNMENT INITIATIVES:

The Indian economy in FY23, also faced the challenge of reining in inflation that the European strife accentuated. Measures taken by the government and RBI, along with the easing of global commodity prices, have finally managed to bring retail inflation below the RBI upper tolerance target in November 2022. However, the challenge of the depreciating rupee, although better performing than most other currencies, persists with the likelihood of further increases in policy rates by the US Fed. The widening of the CAD may also continue as global commodity prices remain elevated and the growth momentum of the Indian economy remains strong. The loss of export stimulus is further possible as the slowing world growth and trade shrinks the global market size in the second half of the current year.

Despite these, agencies worldwide continue to project India as the fastest-growing major economy at 6.5-7.0 per cent in FY24. These optimistic growth forecasts stem in part from the resilience of the Indian economy seen in the rebound of private consumption seamlessly replacing the export stimuli as the leading driver of growth. The uptick in private consumption has also given a boost to production activity resulting in an increase in capacity utilisation across sectors. The rebound in consumption was engineered by the near-universal vaccination coverage overseen by the government that brought people back to the streets to spend on contact-based services, such as restaurants, hotels, shopping malls, and cinemas, among others. The worlds second-largest vaccination drive involving more than 2 billion doses also served to lift consumer sentiments that may prolong the rebound in consumption. Vaccinations have facilitated the return of migrant workers to cities to work in construction sites as the rebound in consumption spilled over into the housing market.

INDIAS ECONOMIC RESILIENCE AND GROWTH DRIVERS:

Monetary tightening by the RBI, the widening of the CAD, and the plateauing growth of exports have essentially been the outcome of geopolitical strife in Europe. As these developments posed downside risks to the growth of the Indian economy in FY23, many agencies worldwide have been revising their growth forecast of the Indian economy downwards. These forecasts, including the advance estimates released by the NSO, now broadly lie in the range of 6.5-7.0 per cent. Despite the downward revision, the growth estimate for FY23 is higher than for almost all major economies and even slightly above the average growth of the Indian economy in the decade leading up to the pandemic. IMF estimates India to be one of the top two fast-growing significant economies in 2023. Despite strong global headwinds and tighter domestic monetary policy, if India is still expected to grow between 6.5 and 7.0 per cent, and that too without the advantage of a base effect, it is a reflection of Indias underlying economic resilience; of its ability to recoup, renew and re-energise the growth drivers of the economy.

Indias economic resilience can be seen in the domestic stimulus to growth seamlessly replacing the external stimuli. The growth of exports may have moderated in the second half of FY24. However, their surge in FY23 and the first half of FY24 induced a shift in the gears of the production processes from mild acceleration to cruise mode. Manufacturing and investment activities consequently gained traction. By the time the growth of exports moderated, the rebound in domestic consumption had sufficiently matured to take forward the growth of Indias economy. Private Consumption as a percentage of GDP stood at 58.4 per cent in Q2 of FY23, the highest among the second quarters of all the years since

2013-14, supported by a rebound in contact-intensive services such as trade, hotel and transport, which registered sequential growth of 16 per cent in real terms in Q2 of FY23 compared to the previous quarter.

Although domestic consumption rebounded in many economies, the rebound in India was impressive for its scale. It contributed to a rise in domestic capacity utilisation. Domestic private consumption remains buoyant in November 2022, as indicated by Motilal Oswals Economic Activity Index. The index estimates that private consumption grew at a five- month high pace of 5.6 per cent YoY, driven by auto sales and broad-based expansion of services.

MARKET SIZE:

In November 2021, at the Cop-26 Summit in Glasgow, Prime Minister Mr. Narendra Modi made a promise to increase Indias renewable energy generation capacity to 500 GW and meet 50% of Indias energy needs through renewable means by the year 2030.

The non-hydro renewable energy capacity addition stood at 4.2 GW for the first three months of FY24 against 2.6 GW for the first three months of FY23.

The non-conventional energy space in India has become highly attractive for investors and received FDI inflow of US$ 12.57 billion between April 2000- June 2022. More than Rs. 5.2 lakh crore (US$ 70 billion) has been invested in Indias renewable energy sector since 2014. India ranked third on the EY Renewable Energy Country Attractive Index 2021.

In June 2021, Prime Minister Mr. Narendra Modi stated that the renewable energy capacity in India increased by 250% between 2014 and 2021 and the country ranks among the top five globally in terms of installed renewable energy capacity.

The Central Electricity Authority (CEA) estimates Indias power requirement to grow to reach 817 GW by 2030.

As the economy grows, the electricity consumption is projected to reach 15,280 TWh in 2040 from 4,926 TWh in 2012. Most of the demand will come from the real estate and transport sectors.

SUMMARY OF OUR BUSINESS:

Our company is primarily engaged in the manufacturing of Solar Panels and installation of solar panels and solar modules. The industry term for solar panel is PV Module (Photovoltaic Module) which refers to setup for generating electricity from sunlight, using semiconductor materials in devices called photovoltaic cells or solar cells. Currently in the solar panel segment, we manufacture both monocrystalline and polycrystalline solar panels.

Our Core business can be divided in following categories:

a) Manufacturing of Solar Panels

b) Installation Services for Solar Rooftop

c) Installation of solar pump

Our company is also involved in the business of enabling the sustainable development through adoption of renewable energy and with energy transition to renewables.

Through our installation services, we have our footprints across India and currently working with 38 cities to transform them to solar cities and enable the growth of solar in states like Gujarat, Punjab, Uttar Pradesh, Goa, Maharashtra, Telangana, Uttrakhand, Jharkhand, Delhi/NCR, Odisha, Karnataka, Kerala, J&K, etc.

INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has a proper and adequate system of internal financial controls, commensurate with its size and business operation. It ensures timely and accurate financial reporting in accordance with applicable accounting standards, safeguarding of assets against unauthorised use or disposition and compliance with all applicable regulatory laws and Company policies. Internal Auditors of the Company review the internal financial control systems on a regular basis for its effectiveness, and necessary changes and suggestions are duly incorporated into the system. Internal audit reports are also reviewed by the Audit Committee of the Board.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

The key strategy will be focused around:

1. Timely completion of Orders

2. Financial strength & liquidity

3. Professional Management

4. Brand Equity

Financial Highlights:

Particulars	F.Y. 2023-24	F.Y. 2022-23
1. Revenue From Operations	14,967.29	9,455.92
2. Other Income	64.21	39.94
3. Total Income	15,031.51	9,495.86
4. Operating expenditure before Finance cost, depreciation and amortization	14033.02	8869.05
5. Earnings before Finance cost, depreciation and amortization (EBITDA)	998.49	626.81
6. Less: Depreciation	146.91	129.71
7. Less: Finance Cost	26.38	40.68
8. Profit Before Tax	825.20	456.42
9. Less: Current Tax	151.89	113.72
10. Less: Deferred tax Liability (Asset)	58.02	12.24
11. Profit after Tax	615.28	330.47

All activities of the company revolve around the main business and as such there is no separate reportable business segment and all the operations of the company are conducted within India as such there is no separate reportable geographical segment.

OUTLOOK:

We believe, the Company has a great deal of opportunities for future growth. We believe our management team has a long-term vision and has proven its ability to achieve long term growth of the Company. Our strengths lie in our track record of completing our projects efficiently and effectively within the stipulated time. It is critical in the renewable industry that projects are completed as per contracted schedule.

We have a track record of timely execution of the projects which minimizes cost overruns and eliminates any possibilities of penalties and liquidated damages, while earning repeat orders from our clients. We have never been penalized for delayed execution of a project. We intend to take advantage of the growing opportunities in renewable development by strengthening our expertise in software, advisory, development of solar plants and enabling the adoption of distributed solar for new prospects for growth.

The Company also continues to converge on improving business capabilities and enhancing growth levers. Improved R&D capabilities, enhanced retail format expansion, design abilities and better operational management amongst others will help reinforce our competitive advantages.

HEALTH, SAFETY AND ENVIRONMENT:

At our renewable advisory company, we hold a steadfast commitment to upholding all relevant health, safety, and environmental regulations throughout our operational endeavors. Our dedication to effective implementation of safety protocols is paramount. At the outset of each project, we meticulously identify potential material hazards, assess associated risks, and subsequently establish, execute, and oversee appropriate measures to mitigate these risks.

THREATS, WEAKNESS AND CONCERNS:

The industry is highly fragmented in the hands of several organized and unorganized players. Due to the attractiveness of the opportunity and large potential, competition across the industry in India is rising significantly.

The Companys weakness is limited recognition due to its relatively recent founding; the company might have lower brand recognition and while digital innovation is a strength, reliance on technology could pose a risk if there are disruptions in the digital infrastructure. The possible threats are the regulatory changes, competition and the technology shifts happening in the sector. There are no entry barriers in our industry, which puts us to the threat of competition from new entrants.

SWOT:

Strengths:

• Experienced Promoters and Management Team

• Pioneer in the Industry having first mover advantage

• Scalable Business Model

• Modern Manufacturing Facility Weaknesses:

• Dependency on suppliers for raw material

• Geographically concentrated

• Capital Intensive Business Opportunities:

• One of the Emerging Market

• Government Incentives

• Growing Solar Adoption Threats:

• Price Volatility on raw material

• Change in Technology

• Change in government policies OUR BUSINESS MODEL:

We derive our revenue from 2 major business verticals:

1. Manufacturing of Solar Panels:

Under this vertical, we procure solar cells and other raw materials from domestic or international market, depending upon the end use requirement, and process them at our manufacturing facility to make solar modules. This is the core business of the Company, and the majority of our revenue is derived from this segment only. Once manufactured, we sell the solar modules to various customers for residential, commercial and agricultural purposes, as per their requirements.

2. EPC Services

Our Company, beyond manufacturing, provides comprehensive installation services that bring the benefits of solar energy directly to our customers. Our team handles every aspect of the installation process starting from design and planning related concerns to delivery and installation of solar module to residential and commercial users. We tailor each installation to the unique needs and specifications of our clients. Under this segment, we provide installation services for rooftop solar and solar pump:

(i) Installation Services for rooftop solar: We provide installation services for Rooftop solar for residential and commercial usage. Our team provide on-grid rooftop installation services to the customers as per the locational requirement in order to maximize the harvesting of energy.

(ii) Installation Services for solar pump: Under this segment, we provide installation services for solar pump across country. Solar pump consists of submersible pump and Solar modules along with other necessary spare parts. We procure the solar pumps from various manufacturers and install the same along with self-manufactured solar modules, as per client requirements.

BUSINESS STRATEGY:

1. Expanding EPC vertical

Currently we are engaged into two verticals i.e., Manufacturing of Solar modules and EPC Services of rooftop solar and solar pumps. We derive ? 6,403.04 Lakhs from manufacturing of solar modules amounting to 67.71% of total revenue. Though we derive majority of our revenue from manufacturing vertical, we are planning to expand aggressively into EPC services of solar systems and solar pump vertical, as it has higher margins.

2. Improve Domestic Presence

We intend to increase our domestic footprints with introduction of new product range and expansion of our EPC vertical. Further we intend to enter new geographies in India with our solar pumps vertical.

3. Leveraging our market skills and relationship

The business of our Company is customer oriented and always strives to maintain good relationship with the distributors. Leveraging our market skills and relationships is a continuous process in our organization and the skills that we impart in our people give importance to customers. We aim to do this by leveraging our marketing skills and relationships and further enhancing customer satisfaction. Our Company provides effective follow-ups with customers which ensure that the customers are satisfied with the product and do not have any complaints.

4. Optimal Utilization of Resources

Our Company constantly endeavours to improve our process, skill up-gradation of our employees, modernization of infrastructure and methods of processing. We regularly analyse our existing process and to identify the areas of bottlenecks and improve the same. This helps us in improving our services so as to reap the optimum satisfaction of our clients.

5. Customer Satisfaction

The business of our Company is customer oriented and always strives to maintain good relationship with the customers. Our Companys marketing team approaches existing customers for their feedback and based on their feedback any changes in the products if required are carried out. Our Company provides quality products and effective follow-ups with customers who ensure that the customers are satisfied with the product and do not have any complaints.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS:

The Companys relations with the employees continued to be cordial and harmonious with its employees. It considers manpower as its assets and that people had been driving force for growth and expansion of the Company. The Company acknowledge that its principal assets is it employees. The Company has continued its efforts in building a diverse and inclusive workforce.

The total number of employees on roll in the Company as on 31st March, 2024, including factory workmen, was 189. The Company will continue to create opportunity and ensure recruitment of diverse candidates without compromising on meritocracy

In Key Financial Ratios:

Particulars	Numerator/Denominator	31-Mar- 24	31-Mar- 23	Change in %	Reason for Variance
Current Ratio	Current Assets	2.82	1.47	91.20%	Due to increase in current Assets and minor decrease in current liabilities
	Current Liabilities
Debt-Equity Ratio	Total Debts	0.20	0.15	30.28%	Due to higher increase in borrowing as compared to Equity
	Shareholders Equity
Debt Service Coverage Ratio	Earnings available for Debt Service	10.53	6.50	61.89%	Due to increase in profit
	Interest + Installments
Return on Equity Ratio	Net Profit after Tax	0.62	165.23	-99.62%	Due to increase in equity share capital
	Average Shareholders Equity
Inventory turnover ratio	Total Turnover	33.34	16.91	97.22%	Due to increase in revenue from sale of product and decrease in inventory level
	Average Inventories
Trade Receivables turnover ratio	Total Turnover	11.43	15.06	-24.06%	Due to increase in trade receivables as compared to revenue from operations
	Average Account Receivable
Trade payables turnover ratio	Total Purchases	7.11	4.56	56.03%	Due to decrease in trade payables
	Average Account Payable
Net capital turnover ratio	Total Turnover	3.79	9.14	-58.52%	Due to increase in net working captial
	Net Working Capital
Net profit after tax ratio	Net Profit	0.0411	0.0349	17.63%	Due to increase in net profit
	Total Turnover
Return on Capital employed	Earnings before interest and taxes	0.14	0.27	-46.99%	Due to increase in equity share captial and total debts
	Capital Employed
Return on investment	Return on Investment	NA	NA	NA	NA
	Total Investment

CAUTIONARY STATEMENT:

Statement in this report describing the Companys objectives projections estimates and expectation may constitute "forward looking statement" within the meaning of applicable laws and regulations. Forward looking statements are based on certain assumption and expectations of future events. These Statements are subject to certain risk and uncertainties. The Company cannot guarantee that these assumption and expectations are accurate or will be realized. The actual results may different from those expressed or implied since the Companys operations are affected by many external and internal factors which are beyond the control of the management. Hence the Company assumes no responsibility in respect of forward-looking statements that may be amended or modified in future on the basis of subsequent developments information or events.