GMM Pfaudler Ltd Management Discussions

A. Global Economy

In 2021, the global economy made a strong comeback as it grew by 6.1%¹ , the highest growth rate recorded in more than four decades². The major drivers of this growth were an increase in output, improved consumer spending, higher investments, and an unprecedented increase in trade of goods, exceeding pre-pandemic trade levels.²

The Omicron variant had a short-lived impact on the economy; and the projected global economic recovery was majorly affected by Russia-Ukraine crisis. Due to the heightened geopolitical tensions, there has been a sharp increase in fuel and food prices across the globe.

As per the latest IMF estimates, global economy is expected to grow by 3.6% in 2022 and 2023¹.

The deceleration in 2022 is primarily due to the elevated inflation levels on account of supply chain disruptions and high energy prices.

B. Indian Economy

Like the global economy, the Indian economy witnessed a resurgence in FY21-22. After contracting in FY21 (ending March 31, 2021), the Indian economy grew by 89% in FY22, according to revised estimates, as compared to the contraction of 6.6% in FY21 suggesting that economic activity in India has surpassed pre-pandemic levels. Early in FY22, India was impacted by the "second wave" of the Covid-19 pandemic; however, its economic impact was modest vis-a-vis FY21. This was partly supported by timely interventions and relief measures announced by the government.

Three key sectors that support the Indian economy; agriculture and allied industries, industry and services are estimated to grow by 3.9%, 11.8% and 8.2% respectively in FY22³. Additional factors contributing to the high growth rate in FY22 include an increase in demand for consumption by 7.0% and an increase in exports by 16.5% and imports by 29.4%. This was even witnessed in total GST collections which increased by 30% to H14.8 lakh crore in FY22 from H11.4 lakh crore in FY21.

As recovery efforts continue, India is expected to be one of the fastest-growing major economies in the world in FY23 with a real-GDP growth of 7.2%. Nevertheless, downside risks like the current inflationary environment, elevated commodity prices and likely supply chain disruptions; may warrant policy interventions, the last being 0.4% hike in repo-rate by the Reserve Bank of India.

1. Pharmaceutical Industry

The global pharmaceutical industry is currently valued at $1.4 trillion and is further expected to grow at a CAGR of 3-6% and expand to $1.8 trillion through 2026.⁴ As artificial intelligence and R&D evolve; it will propel the pharmaceutical industry to innovate and explore new revenue streams. With an aging global population, the demand for pharmaceutical products is on the rise which will contribute healthily to the growth of the industry.

Indian Market: The Indian pharmaceutical industry is presently valued $42 billion and expected to grow to $65 billion by 2024 and $120-130 billion by 2030.

Key Growth Driver: Cost-effectiveness: Pharmaceutical companies in India possess the ability to produce high-quality products at an economical rate which are lower than its peers enabling them to be competitive on a global scale. Low-cost manufacturing is expected to help them leverage drug manufacturing opportunity of $5-6 billion emerging from patent expiry across the globe in the next 4-5 years.

Policy Support: PLI scheme has been a market propeller, an initiative by the government that changed the outlook and sentiment of Indian market in the global arena. It surgically reduced Indias import dependency. Setting up of bulk drug parks and PLI scheme would help promote the growth of domestic pharmaceutical industry (mainly APIs and formulations). Currently the PLI scheme has an outlay on H15,000 crore for pharmaceuticals manufacturing and H6,490 crore for bulk drugs. As of March 2022, government has approved 19 applications of H4,623 crore⁶ in committed investment, under PLI scheme. Additionally, ebbing of regulatory risks and "Ease of doing business" policies has accelerated the growth.

Foreign Investment: FDI in the Indian pharmaceutical industry has increased exponentially over the past two years, mostly to combat the increased demand of vaccines and therapeutics due to the Covid-19 pandemic.

2. Specialty Chemical Industry

The global specialty chemical industry is valued at $847 billion, which represents around 17% of the global chemical industry.⁵ The specialty chemical industry is further expected to grow to $1.2 trillion by 2025, expected to be driven the expansion of the Asian market.⁶ North America and Europe were the leading geographies for chemical manufacturing, but over the years there has been a shift towards Asia owing to flexible government regulations and low cost of labour.

China has been the leading player in the global specialty market over the past few decades but has recently shown signs of slowing down. Tightening environmental regulations and rising labour costs have been the key factors for global chemical companies adopting the China+1 strategy.

Indian Market: India has been emerging as a major player in the specialty chemicals industry over the previous years and a major beneficiary of the industry focus shifting to Asia. In FY20, the specialty chemicals market in India was valued at $31.1 billion and expected to grow at a CAGR of 9% between FY20-FY26 as compared to the 5.6% of the global specialty chemicals market. India is expected to grow at the highest CAGR amongst all other countries, specifically in Asia.

India is a key supplier of specialty chemicals across the globe. During FY16-20 more than 50% of total chemical exports from India were specialty chemicals.

The increase in demand, both domestic and exports, has encouraged domestic producers to raise their capital expenditure. Capital expenditure is expected to rise by 50% to ?15,000 crore through the fiscal years FY22 and FY23.⁷

Key Growth Drivers:

Production Capabilities: With the development of green chemicals and sustainable energy, India is progressing towards sustainable manufacturing methods and possesses the infrastructural facilities to expedite specialty chemicals production.

This is underpinned by IP protection rights, improved compliance adherence with strong R&D culture, contract manufacturing opportunity and focus of nations to find the next best alternative to China. This is further supported by labour arbitrage opportunity in India.

Accessibility: Due to the geographic advantage of having access to ports, the distribution of specialty chemical products and raw materials is very convenient. With an increase in domestic production of specialty chemicals, exports are expected to rise too.

3. Agrochemical Industry

The global agrochemical market in 2020 was valued at $231 billion and is expected to grow at a CAGR of 2.9% till 2030 and reach a market size of $315 billion.

Agrochemical industry is expected to thrive globally; with an increasing global population the demand for crop protection agents is rising too in order to increase crop yields. Given the trending organic and green consumption practices, this highly potential and thriving industry has also been incentivized due to its environmentally-friendly appeal. Agrochemicals are playing a crucial role in tackling climate change by reducing potential greenhouse gas emissions.⁸ Currently, the fertilizers segment is the dominant segment in the agrochemical market, while pesticides segment is projected to grow at higher CAGR over the next decade. India, China & Australia are expected to lead the growth further in the Asia-Pacific region due to the increasing number end-users in these countries.⁹

Indian Market: The Indian agrochemical industry was valued at $5 billion in 2020 and expected to grow at a CAGR of 8.6% to $7.4 billion in 2026. On a global scale, India is the fourth-largest producer of agrochemicals and 50% of total agrochemical production in India is exported. Between April 2021 and January 2022, India exported an estimated $4 billion worth of agrochemical products. The agrochemical industry has been driven by the increasing demand in the agricultural segment in India.¹⁰

Key Growth Drivers:

Export Opportunity: Indias agrochemical exports have significantly increased and display a positive and improved outlook as per ICRA. India exports agrochemical products on a competitive pricing basis due to lower manufacturing costs, cheap skilled manpower and sufficient infrastructural capacity to meet demand.

4. Refineries

The global oil refinery industry stood at $1.3 trillion in 2020 and is expected grow at a CAGR of 5.3% till 2030 and reach a market size of $3.7 trillion.¹¹ One-third of the global oil refinery industry comes from the Asia-Pacific region which also contributed the largest share to the market in 2020. The refinery industry in the Asia-Pacific region is expected to grow at a CAGR of 6% from 2021-2030, which is the highest amongst all regions.

The refinery industry is one of the major industries to be affected by the Russia- Ukraine crisis. Russia is the worlds largest exporter of oil and because of the sanctions; oil importers are shifting their focus on purchasing bulk oil from Middle East, Latin America, and Africa.

Indian Market: As of 2021, India, the third biggest oil consumer and importer spent $119.2 billion on oil import in FY21-22, nearly double the amount what they spent last year, about $62.2 billion. According to PPAC, India imported 212.2 million tonne of crude oil FY22, whereas it was 196.5 million tonne in the previous year. India is the second-largest refiner in Asia with a total oil refining capacity of 250 MMTPA (million metric tonnes per annum). India is planning to increase this capacity to 400 million tonnes by 2025.¹²

The Department for Promotion of Industry and Internal Trade (DPIIT) in 2021 approved and enabled an order which allows for 100% foreign direct investments under the automatic route for oil and gas. In 2021, the Indian government announced plans to invest $102.5 billion on oil and gas infrastructure over a course of five years.

In the union budget of 20222023 there was a reduction in custom duty on certain critical chemicals that are essential for petroleum refining.

5. Other Industry Segments

Some of the other industries that the Company caters to such as fertilizer and metals & minerals are witnessing healthy traction in volumes with a capex pipeline of H1,724 crore and H22,000 crore, respectively. It has made meaningful investment to augment its capabilities to serve these industry segments through its Equillloy and Mixion technologies. Revival in economy is expected to lead to significant investment in these sectors which augurs well for the Company.

C. Company Overview

GMM Pfaudler is a leading supplier of engineered equipment and systems for critical applications in the chemical, pharmaceutical, food, and energy sectors to organisations around the globe. Our unique expertise, manufacturing capabilities, innovation, strategic market and business operations help us successfully deliver technologies, systems and services which include - Glass-lined technology, filtration and drying, lab and process glass, sealing technology, mixing technology, alloy process equipment and fluoropolymers.

GMM Pfaudlers expertise and capabilities will help in improving our customers manufacturing processes. Adding to our global growth ambitions, we continue to move forward by making Big Moves that will favourably impact all our stakeholders.

GMM Pfaudler has 14 manufacturing locations with an extensive sales and services network and employs more than 1800 people across 4 continents.

With the growing shift towards conducting business responsibly, GMM Pfaudler has integrated an ESG-led approach to generate holistic value for all its stakeholders. The Company has taken concerted efforts in the areas of environment conservation, social well-being and ensuring sound corporate governance in the organization. To this end, GMM Pfaudler has undertaken various mindful initiatives during the reporting year, the details of which have been covered in the ESG section.

1. Key Strategic Highlights

• Focus on stabilizing the business and developing an integration plan to ensure a smooth transition

• Project Apollo launched with three focus areas - value sourcing, operational excellence, and crossselling, all of which have shown great traction and positively impacted both revenue and profitability

• Operational excellence efforts have resulted in turnaround of Germany and China facilities

• Launched Interseal ace5000^TM, an innovative dry running sealing technology, in India

• New factory in Vatva began operations in May 2021 and is now fully operational

• Launched our new corporate identity and brand architecture which reflects the strengths of the fully integrated group

• Appointed a CEO for the India business with view of professionalising and strengthening the management team

• Launched the first phase of our global ESOP program earmarking 51,161 shares as a long-term incentive for employees across the globe

• Launched the GMM Pfaudler Foundation, a wholly owned subsidiary of GMM Pfaudler that will focus on making an impact on CSR initiatives relating to healthcare, education, and the environment

2. Financial Performance

GMM Pfaudler reported a strong FY22, despite macro uncertainties prevailing in both domestic and global ecosystems, with significant revenue growth across geographies. With input costs continuing to surge, GMM Pfaudler remains focused on maintaining profitability through cost efficiencies, integration synergies and pricing.

The Company continued to remain committed to enhancing shareholder value, reflected in its increasing market capitalisation of over 9 times in the last five years. GMM Pfaudler is one of the top 500 listed companies in terms of market capitalisation (its rank on The BSE Limited (BSE) was 412 while on the

National Stock Exchange of India Limited (NSE) was 406). In FY22, GMM Pfaudler recorded standalone revenue of H815 crore, up 27% from the previous years H641 crore and consolidated revenue of H2,541 crore, up 154% from the previous years H1,001 crore (FY21 consolidated revenue includes two months of Pfaudler Internationals results). Standalone Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) increased 12% to H172 crore as compared to H154 crore in previous year and Consolidated EBITDA increased 105% to H284 crore as compared to H139 crore (before exceptional item) in previous year.

Profit Before Tax (PBT) increased by 1% to H127 crore as compared to H126 crore in previous year on standalone basis and increased by 31% to H133 crore compared to H102 crore (before exceptional item) in previous year on a consolidated basis.

The year FY23 started with a strong order book, which is significantly higher than the previous year. The company will continue to enhance manufacturing capacity across geographies and leverage its global reach, scale, and size to further strengthen its leadership position.

D. Key Financial Ratios

Sr. Particulars	Consolidated
	FY22	FY21	% Change
1 Debtors Turnover (Days)	48	50	-4%
2 Inventory Turnover (Days)	90	94	-5%
3 Interest Coverage Ratio	11.54	13.62	-15%
4 Current Ratio*	1.58	1.63	-3%
5 Debt Equity Ratio	0.95	1.21	-22%
6 Operating Profit Margin (%)	11%	14%	-19%
7 Net Profit Margin (%)	3%	6%	-53%
8 Return on average net worth (%)*	13%	15%	-15%
9 eps (H)*	58.18	50.24	16%

Notes

Net Profit Margin has reduced primarily on account of PPA adjustments (noncash impact) on Pfaudler acquisition.

Definitions

1) Debtor Turnover: Average of trade receivables (current year and previous year) by revenue from operations for the year. In FY21, Revenue from operations include Pfaudler revenue of

2 months annualised to 12 months and closing trade receivables is considered instead of average for a like- to-like comparison.

2) Inventor Turnover: Average inventory (current year and previous year) by revenue from operations for the year. In FY21, Revenue from operations include Pfaudler revenue of

2 months annualised to 12 months and closing inventory is considered instead of average for a like-to-like comparison.

3) Interest Coverage Ratio: Total EBITDA before exceptional item by finance cost for the year.

4) Current Ratio: Current assets by current liabilities including working capital borrowings.

5) Debt Equity Ratio: Total debt including working capital borrowings and lease liabilities by total equity at the end of the year.

6) Operating Profit Margin:

EBITDA before exceptional item by operating revenue for the year.

7) Net Profit Margin: Profit after tax for the year by revenue from operation for the year.

8) Return on average net worth: Profit after tax for the year by average net worth for the year.

9) Profit for the year by number of equity shares.

The calculation of above ratios (including restatement of prior year ratios, wherever necessary) is in accordance with formula prescribed by Guidance note on Schedule III issued by the Institute of Chartered Accountants of India.

*FY21 figures are restated to account for PPA related adjustments. The purchase price was allocated to assets acquired and liabilities assumed based on the provisional fair values as the date of acquisition in accordance with Ind AS 103.

During the current year, the Group has completed the Purchase Price Allocation and realigned the values of assets and liabilities acquired on acquisition.

E. Business Segments & Operational Highlights

1. Business Overview

GMM Pfaudler is present across Americas, Europe and Asia through its offerings in technologies, systems and services. Through its product portfolio, the company has sustained its business relations with marquee customer base and continues to strengthen its position as the market leader. GMM

Pfaudler is at the forefront of innovation, focused on developing new technologies that will become a benchmark for tomorrow.

Technologies:

Since the very beginning, GMM Pfaudler has continually revolutionised the industry to meet its clients highly specific, ever-changing chemical processing needs. Year after year, with proven reliability, we have designed and manufactured the technologies required to create chemicals that are sought after worldwide.

Today, the GMM Pfaudler Group name has become synonymous with chemical processing and corrosion resistance. You will find examples of the results of our advanced know how throughout all typical chemical and pharmaceutical plants, since the Groups portfolio of technologies covers all chemical unit operations.

Our Group boasts over a century-long expertise in the use of many types of corrosion-resistant materials, like glass-lined, borosilicate glass 3.3, fluoropolymers, high nickel alloys, zirconium, and tantalum, just to name a few. By leveraging our vast portfolio and truly global operational footprint, GMM Pfaudler can serve its clients with single source solutions for all of their most complex needs.

The Technologies business accounted for a revenue of H1,471 crore with an order intake of H1,759 crore in FY22. Business highlights

• Cross-selling of multiple products to customers in US, Europe and Asia resulting in increased customer spend

• Breakthrough in new markets such as Spain, South East Asia and Eastern Europe

• Gained market share in US and Europe by offering cost-effective solutions

Systems:

GMM Pfaudlers capabilities are not limited to the individual technologies themselves. Utilizing vast chemical processing expertise, our skilled engineers combine technologies and services into complete, fully integrated and efficiently operating process systems.

GMM Pfaudler supplies turnkey systems from lab through full industrial scale plants, for all chemical processes.

Our expertise allows us to design process systems with Pfaudler technologies meeting the complex requirements of reaction, evaporation, distillation, acid recovery, absorption, filtration, and drying processes. A complete system includes the design of all the unit operations surrounding and supporting the core technology. Systems are designed specifically for each clients process. Each system layout is custom designed to ensure proper system functionality and to ensure all equipment, instruments and valves are arranged for ease of operation and maintenance. Our technicians assist with field installation and our engineers work with our clients team to commission the system.

As a single-source provider, we ensure that the design of every component is perfectly integrated into the system for optimum performance. Our skilled engineering and manufacturing ensure high quality while our project management expertise provides for fast-track schedules and reduced costs. Our focus is to provide our customers with innovative solutions and comprehensive service offerings across the world.

The Systems business accounted for a revenue of H388 crore with an order intake of H424 crore in FY22.

Business highlights

• Acid Recovery business continues to grow with new orders from South Korea, China and India

• Process know-how and green technologies being developed to target new high growth sectors

• Dedicated engineering and process teams to grow systems business

Services:

Not only do the worlds top chemical companies trust on GMM Pfaudlers Technologies and Systems to manufacture their products, but they also rely on our engineering, technical services, and aftermarket parts to keep their plants operating efficiently.

We provide parts and maintenance services for our technologies to our global network of customers throughout their plants, as well as the same services for those of others.

However, our services also extend far beyond that of standard maintenance. Every project is unique, and our highly experienced team of engineers and technicians will work together with you to deliver the most effective and complete process solution, from conception to design and installation.

The Services business accounted for a revenue of H682 crore with an order intake of H773 crore in FY22.

Business highlights

• With the world opening up after the COVID pandemic, our services business has also seen a sharp improvement

• We continue to fine- tune our services model to improve response time and increase customer satisfaction

2. Operational Highlights

• New furnaces commissioned in India, Brazil and US which are expected to further strengthen our positions in those regions

• Commenced manufacturing operations at our Vatva facility which is now fully operational

• Turnaround of Germany and China facilities through operational excellence initiatives

F. Innovation and Technology

• Developed and launched GLASTEEL? Continuous Flow reactor in collaboration with National Chemical Laboratory (NCL)

• Developed and launched new sealing technology in India - Interseal ace5000^TM

• Developed and launched new Mixing technology for fermentation

• Developed and launched new Drying technology for Chemical Industry

• Developing new Glass-lining technologies

• Developing a state-of-the- art Test Centre in India to show case our technologies

G. Opportunities & Threats

Opportunities

• The Government of Indias focused thrust on positioning India as a global sourcing hub (Make in India), a reliable alternative to China, on becoming self-reliant (Atmanirbhar Bharat); coupled with its efforts in moving up the Global Ease of Business ranking is expected to attract investments into India. These efforts should open interesting growth opportunities for GMM Pfaudler Limited

• Strong growth is also expected owing to the increasing market size, investments, and exports in the pharmaceuticals, specialty chemicals, and agrochemical industries in the next 5 years. The pharmaceuticals sector is expected to grow with key drivers being patent expiry, China +1 strategy, rising PE investments, and ebbing of regulatory risk. The Production Linked Incentive ("PLI") scheme will further augment investments in the pharma sector. In the chemicals sector, growth is expected from a robust capex pipeline along with opportunities from a global footprint and value-chain integration

• To neutralize the impact of supply chain disruption post the pandemic, several governments have released packages in sectors like food processing, pharmaceutical, and chemicals. This would result in higher investments in each country globally as they create redundancies or focus on manufacturing goods around their regions will augur demand for glass- lined equipment

• The global acquisition has opened multiple growth levers for GMM Pfaudler Limited in terms of competitive sourcing, widening the customer base, broadening the products and solutions portfolio, and opening considerable cross-selling opportunities

• Tightening of ESG norms has resulted in companies firming up their commitment to improving their ESG standards. The focus is on introducing equipment for manufacturing processes that can help in reducing Indias total carbon footprint. This will open opportunities for GMM Pfaudler Limited, especially for its sustainable product portfolio - Acid Recovery, Interseal, and Reglassing (services business)

Threats:

• Rising input costs like gas prices, fuel costs, and freight charges may impact the profitability of the companys existing backlog. In order to mitigate the impact, the company is undertaking cost reduction measures and also passing on the price increase to the customers

• Commodity price inflation could have a two-fold impact on the companys performance, in terms of margins and potential deferment of capex by customers, impacting the companys order book

• Heightened geopolitical tensions could impact the trade relations between the countries, which could generate the need to service the respective nations with local production. This could defer the companys low- cost sourcing strategy as well as increase input costs, thereby impacting its profitability

• While the pandemic seems to be receding, the threat of variants and potential for lockdowns could impact the Companys ability to meet its financial and operational targets

• Uncertain monsoons, investment deferrals, and volatile industrial output are ongoing concerns for sales in the domestic market

H. Risks and Concerns

All businesses are today exposed to risks from strategic, regulatory, alliance, operational and financial perspectives. The Company has revamped its Risk Management policy to ensure sustainable growth of the organisation and to promote pro-active approach in evaluating, mitigating, and reporting such risks associated with the business. This policy establishes a structured and disciplined approach to Risk Management in order to guide decisions on business risk issues.

Risk Management Framework

The Company has developed a Risk management Framework with an objective to enhance value of the Company and to the stakeholders (internal and external) by ensuring Companys business and growth objectives are protected. This framework facilitates decision making, planning and prioritization threats to business activities, fluctuations and balancing risks and opportunities.

Through this framework, Company plans to inculcate a risk aware culture which will ensure that risk management is consistently practiced across the Company and highlight areas of focus for Management to make informed decisions to reduce the threats to the Companys business and growth objectives.

The Company has adopted a comprehensive Enterprise Risk Management approach to identify and manage risks at an enterprise level. The risk methodology adopted is in line with leading Risk Management standard laid down by the Committee of Sponsoring Organizations (COSO).

The Risk Management Committee (RMC) of the Board facilitates implementation of Risk Management Policy and Framework. RMC also apprises the Board about the evolving changes in the risk universe (landscape) and recommends actions to be taken.

The Executive Risk Management Council (ERMC) consistently monitors and records changes in the business environment, threats and factors impacting the risk profile of the Company. The ERMC tracks and reports the implementation of the risk mitigation plans to the RMC who in turn reports to the Board of Directors.

The ERMC consists of the Managing Director, Chief Executive Officer, Chief Financial Officer, Chief Risk Officer (CRO), Business Heads,Enabling Function Heads (HR, IT, other function heads). The CRO works closely with the ERMC and Risk Owners to identify risks and facilitate development of risk mitigation plans.

Further, the Company has deployed a Risk Management Tool to enhance the monitoring and review of Risk Management.

Risk Identification and Mitigation

Some of the major risks identified by the company, and its mitigation plans, are given below. Risk ranking undergoes periodic change, based on scores of the identified risks and the status of risk mitigation plan implementation.

Category	Mitigation measures
Digitization	The Covid-19 pandemic has reinforced the importance of digitization. The Company is leveraging technology to generate insights for faster and effective decision making and to create technology driven products and value-added services with various initiatives. One such initiative is rolling out a Project Management Software to enable systematic execution of work on the shop floor and near real time visibility of work status. Company also plans for developing QR Codes on all equipment being developed
Synergies of acquisition	Company has acquired controlling stake in Pfaudler International which has various plants across the globe. The Company has launched "Project Apollo" with the scope of realizing synergies between India and International business, with the aim to transform the Group into a best-in-class corrosion resistant technologies, systems, and services provider. The Company is progressing well towards different working streams of Value Sourcing, Operational Excellence, Portfolio expansion and Branding and Communication. Substantial progress has been made through past year in realizing synergies
Sustainability	GMM Pfaudler is committed to the long-term success of all its stakeholders and deliver promised results in a responsible and sustainable manner. The Company has conducted a detailed Landscape Assessment to identify its ESG Mission, Vision and Strategy. The Company has articulated its key sustainability themes which include Environmental protection and Climate Resilience, Responsible Business Conduct, Workplace Symphony, and Social Stewardship
Supply Chain	Significant process changes and digital initiatives were adopted in the supply chain front to reduce process time and to improve price discovery. Detailed vendor analysis is being conducted to identify high-risk vendors. The Company has created multiple supplier sources for all critical items and is closely monitoring those suppliers to assess capabilities
Human capital	The Company believes proper management of human capital is key to achieve the strategic and operational goals of an organisation. Human capital has elements of attraction, retention, and engagement of talent; employee relations which is critical for any business. These areas are being continuously worked upon through initiatives such as introduction of an ESOP scheme. The journey of learning & development continued with the institutionalised training calendar Neev. A mix of Functional & Behavioural Training Programs (aligned to DNA for Success) were conducted online and completed successfully. In addition, Leadership Development also continued to be an important aspect through Coaching Sessions for critical set of employees. To tap the growth opportunity going ahead, it is imperative for the Company to groom its employees and create a talent pool. Accordingly, the Company has put in place a systematic succession planning process to create and strengthen a talent pipeline
Information Technology	The company has a well-institutionalised information security management system based on internationally recognised standards and best practices and is continually improving its cyber security posture to safeguard from emerging cyber threats to its business. Consistent investments in latest IT security systems are being made and adequate firewalls and disaster recovery systems have been set. Further, Company has implemented measures to ensure uninterrupted availability of IT systems
Foreign Exchange	Foreign exchange risk arising from exports and imports of products is managed using the Companys Foreign Exchange Risk Management Policy (the Policy). The Policy clearly lists down guidelines around effective management of foreign exchange risks, factoring natural hedges and hedging through forward contract where required. While managing foreign exchange risks the Company adheres to foreign exchange regulations and ensures its compliance
Regulatory Risk	Company stays abreast of proposed changes in regulations and has adopted a digitally enabled comprehensive compliance management tool. It is updated at regular intervals, and is integrated with business processes, risks and controls. The Company has a well-structured, documented and demonstrable compliance framework that helps the management monitor and report compliance risk and exposure to the Board. The Board periodically reviews compliance reports of all laws applicable to the Company
Commodity Risk	The Companys primary raw material is steel. Any fluctuation in its pricing will impact the profitability of the Company. Certain orders with long manufacturing cycle time may be exposed to the risk of material price volatility. The Company follows a typical rolling forecast process to procure and stock primary raw material largely to cover its backlog. Any significant increase in the price of raw material is passed over to the customer by way of upward revision in the price list

I. Human Resources

As we embarked on a pathbreaking journey where our priorities and plans were focused on navigating through a changing and rapidly growing organisation, HR was at the forefront of initiatives to respond to a wide range of internal and external transformative needs.

In line with the above, focused leadership programs were conducted in partnership with prominent learning partners under the NEEV - Learning & Development banner. The emphasis this year was on ensuring learning effectiveness and implementation on the job, the outcome of which depicted a positive trend in terms of learning application and behavioural change.

FY22 also witnessed Campus Recruitment, where we e-visited six campuses across India, efficiently leveraging the online platform. Along with building up a dedicated team of IT & HR to ensure seamless candidate experience, we equipped our people managers with Competency based interviewing technique to ensure an overall fitment - cultural fit, learning agility, and the right attitude.

The recent addition of Employee Stock Option Plan scheme contributes towards attraction, retention, and engagement of talent. Employee health and wellbeing was also at the forefront - we organized Covid vaccination camps across our India locations and also extended the medical insurance coverage to our employees dependent parents.

A careful consideration on people strategy has enabled us to continuously update our processes and keep abreast with the Company objectives.

J. Internal Control Systems & their Adequacy

The Company has an adequate system of Internal Financial Control, which helps in ensuring orderly and efficient business conduct.

The preparation of Companys Financial Statements is based on the Significant Accounting Policies selected by the Management and approved by the Audit Committee and the Board. These Accounting policies are reviewed and updated from time to time. The Company uses LN ERP System as a business enabler and maintain its Books of Account. The transactional controls built into the LN ERP systems ensure appropriate segregation of duties, an appropriate level of approval mechanisms and maintenance of supporting records.

The Information Management Policy reinforces the control environment.

The Company has a well- institutionalised information security management system and uses robust IT tools for minimising errors and lapses, identifying exceptional trends through data analysis and tracking crucial compliances. The Company has advanced solutions which automate threat detection and response against an ever-growing variety of threats, including ransomware. The Company has introduced XDR (extended detection and response) in place which collects and automatically correlates data across multiple security layers - email, endpoint, server, cloud workload and network. The Company has done various assessments including Vulnerability & Red Team Assessment and Penetration Testing to further strengthen the IT infrastructure. As part of increasing the security posture and security architecture, a complete GAP assessment has been initiated on the Companys cyber security and data privacy practices to identify areas of high risk to the Companys business and determine interventions.

Significant internal audit observations are reported to the Audit Committee on a quarterly basis. The Audit Committee reviews these observations and assesses the adequacy of the actions proposed and monitors their implementation. Internal Auditors conduct a quarterly follow up for implementation/ remediation of all audit recommendations and the status report is presented to the Audit Committee regularly. The Management undertakes a periodic review and ensures appropriate actions.

In accordance with the requirements of Section 143(3) (i) of the Companies Act, 2013, the statutory auditors have confirmed the adequacy and operating effectiveness of the internal financial control systems over financial reporting.