Hindusthan Urban Infrastructure Ltd Management Discussions

Annual Overview

The Global Economy has witnessed an unprecedented set-back with ongoing geopolitical tensions, supply chain disruptions and persistent inflationary pressure after derailing post-pandemic recovery. Due to geopolitical conflicts, crude oil prices soared, global trade was impacted and inflationary pressures worsened. To control in inflation, interest rate hike by the Central Banks across the world, including the US Federal Reserve.

During the FY 2022-23, Indian economy continues to be one of the fastest growing major economies in the world, outpacing major emerging and developing economies, including China. And also expected to become the fastest growing economy in the world in FY 2023-24. Indian GDP growth is estimated at 6.9% in FY 2022-23 and 6.3% in FY 2023-24 by the World Bank. According to the first advance estimates by the National Statistical Office (NSO), Indias economic growth estimated to grow 7% for FY 2022-23 lower than the 7.8-8.7% witnessed in FY 2021-2022 wherein growing demand led to a boost in growth.

The Indian macro-economic environment has become increasingly challenging post pandemic and during war conditions. The impact of the lockdowns and war is disproportionately felt across the industrial sectors. This also had adverse effect in all the segments of our Company.

1. Industry Structure and Developments

The Indian Power sector is one of the most diversified in the world which is anticipated to register sound revenue in coming years on the back of rising Government commitment towards providing electricity access in the rural areas. The Ukraine Russia war as global challenges involving simultaneous disruptions of both supply and demand in world economy led to significant revenue reductions. Increase in transportation, landed fuel cost and manufacturing cost have been adversely impacted in the wake of the Ukraine Russia war. Global growth has slump from 2.9% in 2022 to 2.7% in 2023, the deepest global recession in decades, despite the extraordinary efforts of governments to counter the down turn with fiscal and monetary policy support.

According to Govt. of India-Ministry of Power, the electricity generation target (Including RE) for the year 202324 has been fixed as 1750 Billion Unit (BU). i.e., growth of around 7.2% over actual generation of 1624.158 BU for the previous year (2022-23). The generation during 2022-23 was 1624.158 BU as compared to 1491.859 BU generated during 2021-22, representing a growth of about 8.87%.

During the year, electricity consumption continued to rise as the pandemic recovery progressed. The costs also increased, largely due to natural gas prices more than doubling due to global shortages, exacerbated by rising geopolitical tensions. Coal prices also rose as demand surged for alternatives to gas. Renewable energy prices followed suit due to supply chain disruptions, inflation and rising interest rates. Despite these challenges, company had used Clean Energy of 37.59% of total power consumed due to that company had saved Rs 63.48 Lakhs as new opportunities to achieve its goals.

2. Opportunities & Threats

Indias electricity sector is likely to register an increase in power demand by 7-8% and retain plant load factor (PLF) to 57-62% for the whole year in financial year 2023-24. The Government of Indias focus on attaining ‘Power for all has accelerated capacity addition in the country. At the same time, the competitive intensity is increasing at both the market and supply sides.

There are opportunities for more Porcelain Insulators sales due to increasing investment toward the modernization of aging grid infrastructure along with rapid urbanization which will drive the India electric insulators market. We are also roping in new buyers. India transmission electric insulators market is anticipated to grow over 7% by 2024.

3. Segment-wise or Product-wise Performance

During the year revenue from operations of Insulator division has increased by 3.96% from Rs. 202.96 Crore in FY 2021-22 to Rs.211.00 Crores in FY 2022-23 whereas profit before interest and tax has fallen by 62.46% from Rs. 4.01 Crores in FY 2021-22 to Rs 1.50 Crores in FY 2022-23.

During the year revenue from operations of conductor division has decreased by 95.08% from Rs. 78.15 Crores to Rs 3.84 Crores in F Y 2022-23 as a result Company has earned a profit before interest and tax of 0.81 Crores as Compared to loss to Rs.(7.47) Crores in previous financial year.

During the year revenue from segment of "Real Estate" has increased by 7.38% from Rs. 6.59 Crore in F Y 202122 to Rs.7.08 Crore in FY 2022-23. However, profit before interest and tax has decreased to Rs.4.63 Crores as compared to Rs.5.18 Crores in previous year.

4. Future Outlook

The post COVID-19 pandemic conditions and Ukraine Russia war significantly affected the Indian economy with the increase in landed fuel cost resulting in high manufacturing cost in the country.

I ndia is the worlds third largest power consumer and producer with installed power capacity of 417668 MW. National Electricity plan target 479 GW of generation capacity, including 243 GW of thermal and 175 GW of renewable capacity.

As per the Central Electricity Authority (CEA) estimates, by 2029-30 the share of renewable energy generation would increase from 18% to 44%, while that of thermal is expected to reduce from 78% to 52%.

I ncreasing investments in smart grid projects and growing demand for HVDC transmission projects can lead to opportunities in the electric insulator market.

As per CEA report on 500 GW, RE capacity by 2030, the length of transmission line & substation capacity planned under ISTS for integration of additional wind & solar capacity by 2030 has been estimated as 50890 ckm & 433575 MVA respectively at an estimated cost of Rs. 2,44,200 Cr.

Growing population along with increasing electrification and per capita uses will provide further impetus. Demand growth for Conductor and Insulator industry is being driven by power generation, transmission and distribution activities.

Power demand is expected to grow at 5.6 % CAGR in FY 2023-24 driven by high latent demand, rapid urbanization and increasing electricity access. The Government has undertaken programs to provide 24x7 power to all villages and households leading to increase in power demand.

For the prospective of the Company have been obtaining approval from the good reputed companies (i.e., RRVPNL, JUSNL, DVC, APTRANSCO and PGCIL) to supply the insulators like Disc, Solid core Post & Hollow insulators which helps to increase market shares in domestic market.

Apart from above company has introduced its newly developed product i.e., Porcelain Long rod Insulator for which company get the approval from prominent utility viz. MSETCL and OPTCL to supply the same. There are some approvals which are under process with good reputed companies which in turn would further add up to the volumes.

5. Risk and Concerns

Increasing competition in the domestic market, may put pressure on the profitability of the Company. Delays in orders from state DISCOMS and power utilities may impact performance for both the segments. Sharp increase in raw material cost and power & fuel cost could lead to increase in cost of finished products.

The cyclical nature of the power business has an obvious impact on our performance. Project delays from customers side may have an impact. Slowdown in the Indian economy due to global developments could adversely impact growth in the short-term.

6. Internal control systems and their adequacy

The company is having adequate internal control systems and procedures commensurate with the size of the company which facilitates orderly and efficient conduct of its business including adherence to Companys policies. The Company continued its focus on enhancing revenue growth. Various actions in terms of cost reduction, value engineering, competitive sourcing and improving credit discipline have been undertaken. There has been a significant progress in the Industry. The internal control system ensures compliance with applicable law & regulations.

The Audit Committee is regularly reviewing the Internal Audit Reports for the audit carried out in all the key areas of the operations. All Internal Audit Reports are regularly placed before the Audit Committee for their approval and appropriate actions are advised, wherever required.

7. Human Resources/Industrial Relations

The Company promotes an open and transparent working environment to enhance teamwork and build business focus. It is the companys belief that the Human Resource is the driving force towards progress and success of a Company.

In order to bring focus in HR Systems, Company has implemented system and procedures in HR system in line with the industry standards. The company seeks to motivate and retain its professional by offering reasonable compensation and opportunity to grow in the organization by systematic training for employees and with career and succession plans in place. The total permanent employees strength of the company was 339 as on 31.03.2023. The industrial relations in all Works remained cordial during the year.

8. Financial/ Operational performance

Covered under the separate head of the Boards Report.

9. Cautionary Statement

This report to the Shareholders is in compliance with the Corporate Governance Standard incorporated in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 with the Stock Exchange and as such cannot be construed as holding out for any forecast, projection, expectation, invitation, offer, etc. within the meaning of applicable Securities Laws and Regulations.

Actual results could differ materially from those expressed or implied. Significant factors that could make a difference to Companys operations include domestic and international economic conditions affecting demand, supply and price conditions, changes in government regulations, tax regimes and other statutes. Readers are cautioned not to place undue reliance on the forward looking statements.

	For and on behalf of the Board of Directors
Place: New Delhi	Sd/- (Raghavendra Anant Mody)
Date: August 10, 2023	Chairman
	DIN: 03158072