Focus Lighting & Fixtures Ltd Management Discussions

A. INDIAN LIGHTING & FIXTURES INDUSTRY STRUCTURE AND DEVELOPMENT:

The lighting and fixtures structure in India has witnessed significant growth and transformation over the years. With a vast population and a rapidly expanding economy, India has emerged as one of the largest markets for lighting products and fixtures in the world. This overview will provide an insight into the various aspects of the Indian lighting and fixtures industry.

Further, this Industry has continued its upward trajectory, driven by factors such as urbanization, infrastructure development, and technological advancements. The market size reached approx. INR 281.57 billion as on March, 2023, representing huge growth compared to the previous year. The industry witnessed robust demand across various segments, including residential, commercial, industrial, and outdoor lighting.

The Companys contribution to the lighting market is uplifting recently to the large extent. However, if we take a look at the statistics, various report conducted by researchers suggests that the Indian LED Lighting market is estimated to grow at a CAGR of approx..11.9% each year.

The key drivers of Market Growth:

• Urbanization: Indias rapid urbanization has led to a surge in demand for lighting products, particularly in the residential and commercial sectors. As cities expand, the need for efficient and well-designed lighting solutions increases, creating opportunities for market growth.

• Infrastructure Development: Infrastructure projects, such as airports, metro systems, highways, and commercial complexes, require comprehensive lighting and fixtures solutions. The governments focus on developing smart cities and upgrading existing infrastructure further drives the demand for advanced lighting technologies.

• Energy Efficiency: With rising environmental concerns and the need to reduce energy consumption, there is a growing emphasis on energy-efficient lighting solutions. LED lighting has gained significant popularity due to its energy efficiency, longer lifespan, and lower operating costs, thereby driving market growth.

• Technological Advancements: The lighting industry has witnessed rapid technological advancements, leading to the development of smart lighting solutions. Integration with IoT, wireless connectivity, and automation capabilities has transformed lighting systems, providing enhanced functionality, convenience, and control to users.

DEVELOPMENTS

Lighting and fixtures developments in India have witnessed significant advancements and transformations in recent years. With a focus on energy efficiency, sustainability, and technological innovations, the Indian market has embraced various developments in lighting and fixtures. Here are some noteworthy developments in the industry:

• Shift to LED Lighting: LED (Light Emitting Diode) lighting has emerged as a game-changer in the Indian market. LED technology offers numerous advantages over traditional lighting sources, including energy efficiency, longer lifespan, and reduced maintenance costs. In recent years, there has been a massive shift from conventional lighting to LED lighting across residential, commercial, and industrial sectors in India.

• Smart Lighting Solutions: The rise of smart technologies and the Internet of Things (IoT) has led to the development of smart lighting solutions in India. These solutions allow remote control, automation, and customization of lighting settings through smartphone apps or voice commands. Smart lighting provides enhanced convenience, energy efficiency, and flexibility to users, leading to its growing popularity across residential and commercial applications.

• Outdoor and Architectural Lighting: The Indian market has witnessed significant developments in outdoor and architectural lighting. With the rapid growth of urban infrastructure and public spaces, there is a rising demand for well-designed and energy-efficient lighting solutions. Outdoor lighting encompasses streetlights, landscape lighting, and fagade lighting, while architectural lighting focuses on enhancing the aesthetics and functionality of buildings.

B. OPPORTUNITIES AND CHALLENGES/THREATS:

The Indian lighting and fixtures market offers immense opportunities for growth and innovation. The increasing focus on energy efficiency, the rise of smart lighting solutions, and the need for outdoor and architectural lighting present favourable prospects for companies operating in this industry. Additionally, the ongoing infrastructure development and urbanization create a steady demand for lighting products.

However, the market also faces certain challenges. Intense competition, price sensitivity, and the presence of unorganized local manufacturers can impact profitability. Moreover, evolving customer preferences, the need for continuous product innovation, and adapting to emerging technologies require companies to stay agile and proactive.

C. SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

The following is the Income mix in terms of value of total income of our Company for sale of products and Profit After Tax:

(Rs. in Lacs)

Sr. No.	Financial Year	Trading	Manufacturing	Profit After Tax
1	2022-23	4084.50	6454.62	472.56
2	2021-22	3369.36	2626.45	(232.85)
3	2020-21	4625.78	5306.51	229.54
4	2019-20	6,565.14	5,536.79	975.57
5	2018-19	6,460.33	2,762.27	596.12
6	2017-18	7,138.16	-	401.60

D. OUTLOOK

Looking ahead, the Indian Lighting & Fixtures Industry is poised for significant growth and transformation. Factors such as increasing urbanization, government initiatives promoting energy efficiency, and the adoption of smart lighting solutions will continue to drive market expansion. Moreover, the industry is witnessing advancements in technology, including connected lighting, Internet of Things (IoT) integration, and sustainable lighting solutions.

Focus Lighting And Fixtures Limited is well-positioned to capitalize on these opportunities by leveraging our strong brand reputation, expanding product portfolio, and customer-centric approach. We remain committed to delivering innovative, high-quality lighting and fixtures solutions to cater to the evolving needs of our customers.

E. RISKS AND CONCERNS

The Indian lighting and fixtures industry, like any other industry, is exposed to certain risks that can impact its growth and profitability. Understanding these risks is essential for companies operating in the industry to develop effective risk management strategies. Here are some key risks associated with the Indian lighting and fixtures industry:

• Market Competition: The industry is highly competitive, with both domestic and international players vying for market share. Intense competition can lead to pricing pressures, reduced profit margins, and the need for constant innovation to stay ahead. Companies must continuously monitor market dynamics and differentiate themselves through product quality, innovation, and customer service to mitigate the risk of losing market share.

• Economic Factors: The Indian lighting and fixtures industry is susceptible to fluctuations in the overall economy. Economic downturns, inflation, changes in interest rates, and currency volatility can impact consumer spending patterns and overall demand for lighting products. Companies need to be prepared for potential declines in demand during economic downturns and adopt strategies to diversify their customer base and manage costs effectively.

• Technological Disruptions: The lighting and fixtures industry is undergoing rapid technological advancements. While these advancements present opportunities, they also pose risks. Companies that fail to adapt to emerging technologies and industry trends may face obsolescence or lose market relevance. Staying abreast of technological developments, investing in research and development, and fostering a culture of innovation are crucial to mitigate the risk of technological disruptions.

• Supply Chain Disruptions: The industry heavily relies on the availability of raw materials, components, and manufacturing capabilities. Supply chain disruptions, such as shortages, delays, or price fluctuations of key inputs, can adversely impact production schedules and profitability. Building robust supplier relationships, implementing effective inventory management practices, and diversifying supply sources can help mitigate supply chain risks.

• Counterfeit Products: The lighting and fixtures industry is vulnerable to counterfeit products that imitate established brands. Counterfeit products not only harm brand reputation but also pose safety risks for consumers. Companies need to implement robust anti-counterfeiting measures, such as brand protection technologies, supply chain traceability, and public awareness campaigns, to mitigate the risk of counterfeit products.

F. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The lighting and fixtures industry, like any other industry, relies on an effective internal control system to ensure operational efficiency, safeguard assets, mitigate risks, and maintain compliance with applicable laws and regulations. An adequately designed and implemented internal control system is crucial for companies operating in the lighting and fixtures industry.

• Financial Controls: The lighting and fixtures industry deals with financial transactions, including sales, purchases, inventory management, and cash flow. An adequate internal control system includes robust financial controls such as segregation of duties, authorization and approval processes, periodic financial reporting and analysis, and reconciliation of financial records. These controls help prevent fraud, errors, and misstatements in financial statements and ensure accurate financial reporting.

• Inventory Management Controls: Efficient management of inventory is essential in the lighting and fixtures industry, where various products are manufactured, stored, and distributed. An adequate internal control system incorporates controls for inventory management, including accurate tracking of inventory levels, regular stocktaking, proper documentation of inward and outward movements, and reconciliation with financial records. These controls help prevent stockouts, overstocking, and inventory discrepancies.

• Manufacturing and Quality Controls: For companies involved in manufacturing lighting fixtures, an adequate internal control system includes controls related to the manufacturing process and product quality. These controls ensure adherence to quality standards, compliance with design specifications, proper testing and inspection of products, and documentation of manufacturing processes. Effective quality controls help maintain customer satisfaction, minimize product defects, and enhance the companys reputation.

• Procurement and Vendor Management Controls: The lighting and fixtures industry relies on suppliers and vendors for the procurement of raw materials, components, and equipment. An adequate internal control system includes controls for vendor selection, evaluation, and ongoing monitoring. These controls help ensure the integrity of the procurement process, competitive pricing, timely delivery, and adherence to quality standards.

• IT and Data Security Controls: In the digital age, the lighting and fixtures industry relies on information technology systems for various operations, including order processing, inventory management, and financial transactions. An adequate internal control system includes controls for IT security, data protection, access controls, regular backups, and disaster recovery planning. These controls help safeguard sensitive information, prevent unauthorized access, and ensure the integrity and availability of IT systems.

• Compliance and Legal Controls: The lighting and fixtures industry is subject to various legal and regulatory requirements related to product safety, environmental standards, labor laws, taxation, and financial reporting. An adequate internal control system includes controls to monitor compliance with applicable laws and regulations, maintain proper documentation, and ensure timely reporting. Compliance controls help mitigate legal and regulatory risks, prevent penalties and fines, and maintain the companys reputation.

• Internal Audit and Monitoring: An adequate internal control system incorporates an internal audit function or regular monitoring activities to assess the effectiveness of internal controls. Internal audits help identify control weaknesses, evaluate operational efficiency, and recommend improvements. Ongoing monitoring activities, such as management reviews, periodic reconciliations, and exception reporting, help detect and address control deficiencies in a timely manner.

The adequacy of the internal control system in the lighting and fixtures industry depends on several factors, including the companys size, complexity, and risk profile. It is important for companies to regularly assess and update their internal control system to address emerging risks, changes in business operations, and evolving regulatory requirements. Adequate internal controls enhance operational efficiency, promote ethical practices, safeguard assets, and contribute to the overall success and sustainability of the lighting and fixtures industry.

G. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE Overview of Revenue & Expenditure

(Rs. in Lacs)

Particulars	As at 31st March
	2023	2022	2021	2020	2019	2018
Income
Revenue from Operations	10,539.12	5995.80	9932.29	12,101.93	9,222.59	7,138.16
Increase/Decrease in %	75.77	-39.63	-17.93	31.22	29.20	17.35
Other Income	121.07	88.03	61.02	73.25	40.45	56.48
Increase/Decrease in %	37.53	44.26	-13.84%	81.11	(28.39)	504.71
Profit
Profit After Tax	472.56	(232.85)	229.54	975.57	596.12	401.60
Increase/Decrease in %	302.94	231.93	-76.47%	63.65	48.44	37.67

The financial performance of a company is closely linked to its operational performance, as revenue from operations serves as a key indicator of business growth and success. A comparison of the revenue from operations for the financial year 2022-23 is Rs. 1,62,15,90,139 with the previous financial year 2021-22 of Rs. 1,01,54,54,748 provides insights into the companys financial and operational progress.

The significant increase in revenue from operations indicates substantial growth in the companys top line. This growth can be attributed to various factors, including increased sales volume, expansion into new markets or product lines, improved pricing strategies, and enhanced customer acquisition and retention efforts.

The higher revenue from operations suggests that the company has been successful in generating more sales and capturing a larger market share. It reflects the effectiveness of the companys operational activities, such as production, distribution, marketing, and sales. A strong operational performance typically leads to increased customer satisfaction, repeat business, and positive word-of- mouth, which, in turn, contribute to higher revenues.

Moreover, the growth in revenue from operations can be an indication of the companys ability to capitalize on market opportunities and adapt to changing customer demands. It reflects the companys competitive positioning within the lighting and fixtures industry and its effectiveness in meeting customer needs with its products and services.

By analysing these financial performance metrics alongside the revenue from operations, stakeholders can gain a comprehensive understanding of the companys operational efficiency, profitability, liquidity, and overall financial performance. This analysis can guide strategic decision-making, identify areas for improvement, and help ensure the companys long-term sustainability and success in the lighting and fixtures industry.

H. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

Your Company has undertaken employees development initiatives, which have very positive impact on the morale and team spirit of the employees. The Company has continued to give special attention to human resources and overall development. The total number of people employed as on 31^st March, 2023 are 182.

The Company has also recruited highly qualified and skilled professionals, to help in the growth and functioning of the Company. Your management feels proud to state that there were no instances of strikes, lockouts or any other action on part of the employees that affected the functioning of the Company. It is noteworthy that there is no Employee Union within the organization.

I. DETAILS OF SIGNIFICANT CHANGES (I.E. CHANGE OF 25% OR MORE AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR) IN KEY FINANCIAL RATIOS, ALONG WITH DETAILED EXPLANATIONS THEREFOR, INCLUDING

The details in the change of 25% or more for financial year 2022-23 as compared to the Financial Year 2021-22 in key financial ratios along with detailed explanations, wherever required are mentioned in Note No. 1.34 to the Notes of Standalone Financial Statement.