Hitachi Energy India Ltd Management Discussions

Industry structure and developments

Economic & market overview

This year, India?s economy outpaced the United Kingdom?s, making it the fifth-largest economy in the world. After two disruptive years due to the pandemic, the financial period 202223 was set to be one of global recovery and renewal. Projections estimated global economic growth in 2022 would be around 5 percent. However, various segments of the economy continued to face the long-tail impact of this unprecedented adversity with sustained high-ranging and volatile commodities and semiconductor prices.

The war in Ukraine was a "massive and historic energy shock" to the markets, and was one of the main factors that had slowed global economic growth, according to a November 2022 report by the Organisation for Economic Co-operation and Development (OECD). In addition to the tragic human toll, the conflict has crunched supplies of grain, fertilizer and energy along the value chain, resulting in sharp hike in inflation. The pandemic-induced contraction of the global output, various supply chain and logistical bottlenecks from Ukraine, followed by China?s zero COVID policy exacerbated the situation, and caused governments to reevaluate their dependency on just-intime globalized supply chains, in some cases giving impetus the rise of near-shoring and friend-shoring.

Also as a result of high inflation, the central banks across economies, led by the US Federal Reserve Bank, responded with synchronized policy rate hikes to curb inflation. The rate hike by the US Fed drove capital into the US markets, causing the US Dollar to appreciate against most currencies, which for the country led to the widening of the Current Account Deficits (CAD) and increasing inflationary pressures in net importing economies like India.

The rate hike and persistent inflation also led to a lowering of the global growth forecasts for 2022 and 2023 by the International Monetary Fund (IMF) in its October 2022 update of the World Economic Outlook. This accompanied with geopolitical challenges further contributed to weakening the growth forecasts.

In FY 2022-23, India faced multiple roadblocks of economic challenges, with recessionary tendencies in major advanced economies triggering monetary tightening, central banks responding with synchronized policy rate hikes to curb inflation. While supply-side issues threw a spanner in the works the domestic demand remained robust, providing the much-needed backing to the Indian economy.

As a result, despite these headwinds, India remained one of the fastest-growing major economies in FY 2022-23, outpacing some advanced economies like China. Working in tandem government and regulators leveraged the twin levers of macroeconomic policy - fiscal and monetary - to rein in inflation. The central bank of India focused on reducing food inflation while continued Capital Expenditure by the central government - which increased by 63.4 percent in the first eight months of FY 2022-23 - was a significant growth driver of the Indian economy in the year.

The optimistic growth was bolstered by several positives like the rebound of private consumption, higher capital expenditure, near-universal vaccination coverage and the return of market confidence. India?s economic growth in FY 2022-23 has been primarily led by domestic consumption and capital formation. Furthermore, India?s second-largest vaccination drive, involving more than 2 billion doses, had also lifted consumer sentiments prolonging the rebound in consumption.

In its budget for FY 2022-23, the government increased capital expenditure by 25 percent. Roads, railways, airports, ports, mass transport, waterways, and logistics infrastructure were identified as crucial engines to drive PM Gati Shakti (National Master Plan). To facilitate domestic manufacturing for the goal of 280 GW of installed solar capacity by 2030, the government expanded its Production-Linked Incentive scheme (PLI) to include additional allocation for manufacturing of high efficiency solar power modules.

This initiative, while encouraging the local capacity buildup as a part of the Atmanirbhar Bharat Campaign, helped India step up in the global map as a manufacturing destination. Furthermore, the PLI scheme proved a critical component, to the ongoing energy transition.

The energy sector continued to garner interest as the country aims to build sustainable and green future. Following its 2030 target of meeting half of the energy needs through renewable sources, the country focused on capacity augmentation, adding more than 15 GW of Renewable Energy(RE) Capacity in FY 2022-23.

Power sector overview

India continued to take concrete steps toward a green future and a sustainable environment, with ambitious energy transition goals aligned with the Paris Agreement. The year 2022-23 marked as an important milestone in India?s energy journey as the government continued to pursue decarbonization and power reforms. This year was marked by some historic reforms toward capacity building for renewable energy sources, renewable manufacturing boost, electric mobility, coal gasification, and the also the National Green Hydrogen Mission demonstrating strong government will to help the country achieve its energy transition goals.

Some of the major announcements in the journey toward decarbonization, included the National Green Hydrogen Mission with an initial outlay of Rs 19,744 crores. This ambitious mission aimed at positioning India as a global leader in green hydrogen production and export, with a target of 1 GW hydrogen production capacity by 2024-25 and 10 GW by 2030. The incentive focused on producing green hydrogen and producing electrolyzers and, research and development.

India has been exploring renewable energy sources like wind, solar, and biomass to achieve its energy transition goals. As of the close of 2022, a total of 172.72 GW of capacity from non-fossil fuel sources was installed in the country accounting for more than 42 percent of total installed generation capacity in the country by December 2022. Furthermore, the government announced developed a Rooftop Solar Scheme and launched a national portal (solarrooftop.gov.in) for higher participation of residential consumers for rooftop solar initiative.

India took a big step toward achieving non-fossil fuel-based electricity installed capacity by announcing a comprehensive plan to evacuate power from the planned renewable capacity by 2030. As of March 2023, the installed electricity generating capacity in the country is 412.2 GW comprising of 168.9 GW renewable energy generating capacity (including large hydro), which is about 40 percent of the total installed electricity generating capacity. India has envisaged to increase the non-fossil fuel based installed electricity generation capacity to 500 GW. However, the gestation period of wind and solar based electricity generation projects is much less than that of transmission system and hence work on the evacuation infrastructure needs to commence well in advance. The government announced Inter-State Transmission System (ISTS), for more than 500 GW of renewable energy capacity and transmit the clean energy to the load centers. This plan includes setting several HVDC transmission corridors for the evacuation of renewable energy from large potential zones.

Electric vehicle (EV) has been another area of focus - with a vision of increasing the share of EV sales to 30 percent in private cars, 70 percent in commercial vehicles, 40 percent in buses, and 80 percent in two-wheelers and three-wheelers by 2030. In absolute numbers this would translate to 80 million EVs on Indian roads by 2030, enabled through initiatives like FAME and National Electric Bus program. Furthermore, Mission 100 percent rail electrification continued to bring energy efficient and ecofriendly mobility reducing dependence on imported crude oil.

Datacenters has been another significant demand driver for electricity. ICRA expects the data center sector to witness a sixfold capacity increase in the next six years. Data center capacity is set to touch 4,900-5,000 MW from the current <1,000 MW. The growth in data centers will require a reliable and sustainable source of electricity.

Such rising electrification, growing industrialization and consequent urbanization have had its bearing of the power consumption with the demand growing steadily year on year. India has been amongst the highest consumer of power. Last year, the country reached 211GW of power demand, an all-time high.

In 2022, the rate of power consumption increased by over eight percent, nearly at the double pace of the Asia Pacific region. In response to the peaking energy demand, the country supplied a record high of 4,700 million units. Given the rising appetite for electrification is likely to continue to outpace addition of generation capacity this year.

Business overview & strategy

Hitachi Energy is focused on advancing the world?s energy system, making it more sustainable, flexible and secure. Your Company?s role is critical as the industry urgency to move away from fossil fuels is greater than ever. Our society needs an evolved power system with electricity as the backbone. By 2050 India will need to transfer three times more electrical energy than today, 80 percent of which is expected to be from fossil free sources.

The power system needs to be transformed at unprecedented speed, and to achieve this, we collaborate with our customers and other partners to deliver and support a sustainable energy future, through continuous innovation of technologies, systems, and equipment. The Company serves customers in the utility, industry and infrastructure sectors with innovative solutions and services across the value chain, through four businesses - Grid Automation, Grid Integration, Transformers and High Voltage Products.

An extensive portfolio of smart solutions ranging from renewable integration and energy storage, through enterprise asset management and e-bus Charging, to energy service, IT, OT and core traditional products are manufactured across 19 factories in eight manufacturing locations. Over 2323 employees spread across manufacturing and 18 sales touch points are committed to serving over 1,000 customers across the power value chain. Your Company?s deep footprint, with largest installed base, and competent local capabilities comprising of researchers, scientists, production engineers, field engineers and software developers, and functional talent, are at the center of India?s clean energy transition.

Despite India?s status as an emerging market for renewable energy, it is expected that even in 2050, coal will command around a quarter of India?s electricity generation, while wind and solar will account for two-thirds. As a technology and innovation leader, your Company is well positioned to help accelerate these fundamental changes with the purpose- driven growth encompassed in our ‘2030 plan?*. Starting with recognizing and reiterating Safety, Integrity, Quality as our license to operate, the plan rests on three clear pillars:

• Firstly, the focus will be on the Company?s core business - strengthen our leadership position and continue to deliver the record high order backlog in line with customer and partner commitments, hence securing and accelerating earnings and cash growth.

• Secondly, your Company will focus on growing its Digital and Service; expanding at the edge of the energy system. The agenda is to tap into the largest installed base in the country and leverage the market growth momentum to accelerate continued profitable growth and scaling of identified synergies. Your Company aims to deliver greater value across the entire value chain of our customers, from strategic planning to performance partner through the lifecycle of plan-build-operate & maintain.

• Last but not least, your Company will continue to drive innovation, synergies with customers and Hitachi Group companies, and find new partnerships to accelerate growth.

• https://www.hitachienergv.com/in/en/news/press-releases/2022/09/ hitachi-energy-is-ahead-of-schedule-with-its-purpose-driven- growth-plan

While continuing to deliver to traditional customers i.e. utilities, growth in orders and revenues will be attributable to high growth segments outlined in our strategy - solar, wind, HVDC, data centers and rail - along with using the levers of service and exports.

The renewable market, with present installed capacity of solar at 60.8 GW and wind energy at 41GW, is poised for 5x and 3x growth respectively. Your Company have offering for the renewable market such as Electrical Balance of System Optimization, Evacuation S/S, energy & grid management automation, Dry Type Transformers and more. To efficiently transfer clean energy across the vast geography of the country, government is discussing projects to make the national grid more flexible and secure. Over the next 8-10 years the Company anticipates HVDC lines connecting utility scale solar generated at Leh, Kargil, Bhadla, etc.

The data center market in India is expected to add 45 data centers spanning about 13 Million square feet and 1,015 MW of IT capacity over the next three years. The Company provides S/S, GIS, Automation, Dry transformers solutions for datacenters.

Indian Railways, world?s fourth-largest railway network, is undergoing a massive upgradation and expansion led by electrification of rail and adoption of energy efficient system. They have already announced various sizeable tenders for high density corridors or Mission Raftaar. Your Company has been a long-term partner of Indian Railways and we see significant opportunity here for our products and services.

Hitachi Energy India has a large installed base in the country. And this gives us a good market for leveraging services portfolio - across digitalized Classic Services, advanced Services and Servitized Solutions. Similarly for exports, with our manufacturing muscle, a quarter of our orders this year are exports-led and we will focus on building on this trend.

The Company believes that it is also growing electrification of transportation, industry, and building sectors with our purpose- driven growth plan.

Segment and product-wise performance

Operational overview

The climate and energy crises demands urgent action. To achieve a carbon neutral energy future, electricity will become the backbone of the future energy system. And as society decarbonizes and digitalizes, few companies have a more compelling role to play in advancing a sustainable energy future for all.

Hitachi Energy India started its standalone operations in 2019, after the demerger. At this juncture your Company had set itself a steep target of reaching Rs 87,000 Crores in the next three years. Your Company takes great pride in reporting that at the close of FY 2022-23, total orders stood at Rs 6,817 Crores. At the time of formulating the goal, it was impossible to foresee a once in a generation pandemic that would bring lives, supply chains and the global economy to a screeching halt. Your Company demonstrated leadership and resilience in the face

of adversity - got itself listed in the first week of lockdown and then proceeded to march towards its goal, whilst placing the highest priority in the health and well being of its employees and communities.

Health, safety and sustainability

Through the long-tail of the pandemic the Company continued to grow its operations, while holding steadfast to the crisis team governance encompassing country and local levels which ensured safety protocols were respected despite a record low number of reported COVID-19 cases by the close of the year. Vaccination drives for booster dose were conducted across all locations for employees and their families. Employees were encouraged to find a balance between in person customer engagements and essential travel - this helped execute swift track, trace & isolation of the sporadic cases that were encountered during the second half of the year.

All employees testing COVID-19 positive were provided aide and assistance in treatment and home isolation; in case of aggravated cases they were admitted in hospitals and their progress and health status was monitored by Company doctors.

The new norm of remote working that helped circumvent the pandemic brought with it its own set of challenges and health implications. Regular webinars and virtual awareness sessions were conducted for families by Company doctors and external experts on wellbeing, desk yoga and ergonomics sessions and resilience trainings were organized.

Your Company?s work is underpinned by Safety, Integrity and Quality. And it continues to resonate with its customers through our high service ethics. The Company continued organizing regular training sessions for its employees, contract staffs, and partners to reduce hazard and avert potential safety incidents. Through the year, targeting all types of on rolls and contract employees, your Company reiterated its licenses to operate. Your Company has conducted special sessions to spread awareness regarding Risk Management and Life Saving Rules, summer readiness at sites, and so on, to ensure our people and adapt to new norm measures and bring Safety & well-being into routine practice. Road Safety programs were organized in association with Hero MotoCorp - 23 Road Safety Program Sessions with more than 3,000 participants across locations. Agility and ownership at project sites was also recognized by several customers.

Health Safety and Environment is a key enabler of sustainable operations. Your Company?s commitment to lowering the carbon footprint of our operations, product localization, and digitalization of the grid are the key focus areas defining success.

Last year, your Company announced its 2030 carbon neutral goals. The Company has set milestone defining its journey for operations in India. We modeled our strategies to implement this both ground up and top down, to meet the urgency and pace of change required to reach a carbon-neutral future. In pursuit of our targets, we achieved 100 percent fossil- free electricity consumption in our factories and offices in December 2021. And through the period under discussion transformed how we source our green electricity - from a mix that included renewable energy certificates to one that has evolved to a mix that is led by state utilities and independent clean power generators. In some locations, rooftop solar generation has also gained steam along with off-grid solar power for our project site offices, cutting down on polluting diesel consumption.

Energy assessments were conducted across our manufacturing locations and qualified volunteers are undergoing Bureau of Energy Efficiency Certified Energy (BEE) Manager, who will then lead their respective locations on an energy efficiency transformation journey. With faith in the adage - what gets measured, gets done - your Company has implemented Green House Gas Standard and is in the process to adopting Smart Metering across all locations. Steering Committees (STECOs) with location ownership and management buy-ins helped ensure cadence and continuity in our sustainability plans. Environment-friendly Piped Natural Gas (PNG) replaced diesel for certain energy-intensive processes in three transformer factories. The Environmental, Society and Governance Committee (ESG) of Board of Directors continued to provide oversight and course correction to ensure the Company meets its goals.

New technologies; New capabilities

Innovation-based R&D is key to your Company?s differentiation in the market. The activities are carried out in the global R&D and technology centers as well as R&D embedded in the local businesses, leveraging local competence for creating social, environmental, and economic value, globally.

Keeping pace with the rapidly evolving energy landscape, your Company launched several fresh solutions that apply the intelligence of digitalization to help customers to plan ahead, make better informed decisions and create more value. Foundational blocks such as bringing 5G connectivity to mission- critical industrial and utility operations will be made possible by TRO600 series wireless routers with 5G capability, which are purpose-built to help industrial and utility customers achieve high reliability and resiliency in mission-critical operations.

Hitachi Energy India?s hybrid connectivity solutions can provide a combination of interoperable technologies on a single communication network, enabling applications for edge devices, mobile devices, and field networks, spanning environments from dense urban to ultra-rural. A hybrid system can ensure seamless industrial communications even when specific connectivity options may be unavailable or hampered.

Such networks will be critical in harnessing the power of digital transformers, like the next-generation TXpert™ Hub launched in February 2023. This advanced digital technology is the heart of the TXpert™ Ecosystem for transformer?s digitalization and has been rebuilt from the ground incorporating the latest advances in communications technology and cybersecurity. It is conceived to connect all the digital transformer sensors to aggregate and analyze the data, providing digital connectivity and enabling local and remote monitoring to reduce cost, optimize operation, extend life expectancy, and enhance performance.

While increased digitalization and automation will be central to greater integration of renewable energy sources into the power system, hardware too has to be reengineered for demanding environs on tomorrow. Offshore wind has the potential to generate more than 4,20,000 TWh per year worldwide. This is more than 18 times global electricity demand today. To harness such energy, your Company has launched its OceaniQ™ portfolio - a step-change in delivering the energy needs of tomorrow through a ruggedized, proven technology that addresses the unique challenges of the offshore energy environment. Combining cross-industry competence from the power and marine sectors, the portfolio addresses applications for fixed platforms, floating structures and sub-sea power systems for wind, marine and other offshore operators.

Digitalization and service are key enablers for sustainable and profitable growth. Your Company strengthened its portfolio with the launch of Lumada Inspection Insights that uses via intuitive visuals of your assets and infrastructures? health and risk profiles via Al-driven analyses of images collected from satellites, still or video images to provide insights for better asset management and service planning.

Your Company is making timely progress with its portfolio that is strengthening, expanding, and evolving the power system. The business is focusing on continued localization of its global product portfolio, building indigenous capabilities and products, as well as creating new jobs. The Company is also continuously evaluating the energy and demand landscape and the necessary steps we must take to keep ourselves relevant to deliver cutting-edge solutions to our customers in India and around the world.

In May 2022, your Company inaugurated the first manufacturing facility in India producing Resin Impregnated Paper bushings up to 400kV voltage level. Strengthening India?s power grid - one of the largest operational synchronous grids in the world - is vital for the country as it aims to integrate a greater share of renewables in a step towards its carbon neutral ambitions. Resin Impregnated Paper bushings offer an improvement over traditional oil-based alternatives by preventing moisture ingress, oil leakage and reducing risks of fire in case of failure. This technology enables operators to make the grid safer while reducing downtime and maintenance costs.

In August 2022, your Company?s greenfield manufacturing facility for High Voltage Power Quality products was inaugurated by the Sri Basavaraj Bommai, then Chief Minister of Karnataka. This facility doubles the existing production capacity of advanced capacitor units, banks and other products. These products find application in power utilities, industries, renewables and transportation segments to improve efficiency and reduce energy waste. As a part of Hitachi Energy?s global manufacturing network, this facility will offer direct and indirect employment and nurture an ecosystem of local suppliers across the manufacturing value chain. It closely aligns with Prime Minister?s Mission Innovation to accelerate public and private clean energy innovation to address climate change, make clean energy affordable to consumers, and create jobs and commercial opportunities. Manufacturing of electrical equipment is an energy intensive process keeping sustainability goals in mind, we have adopted some innovative processes for the factory that reduce electrical energy consumption per process step by almost 40 percent.

Also in August 2022, your Company added capacity in terms of a new factory for production of Operating Mechanism of circuit breaker. As part of our operations in Maneja, Vadodara, this production facility is dedicated for catering increasing demand from global and local customers for operating mechanism like FSA and BLG (industry standards of drives), which have a wide range of applications in various circuit brakers all over the world. Factory is equipped with state of art assembly stations by using latest technology of equipment. Lean principles in practice, like single prices flow, optimized material flow, supermarket for sub-assemblies and finished goods etc. It is also equipped with testing facility required for routing testing of FSA, as a part of end of line control.

The exponential rise in capex focused initiatives around integration and transmission of 500GW+ renewable energy to bring clean energy to every household eventually reaching net zero is an opportunity that your Company must harness to the fullest. The comprehensive renewable integration plan focuses on strengthening the country?s transmission system - including an estimates of Rs 2.4 Lakh Crores expansion of the Inter State Transmission System (ISTS), with an additional Rs 2.16 Lakh Crores to develop 268 GW on-shore renewable energy capacity, and Rs 28,100 Crores for 10 GW offshore wind energy capacity.

In anticipation of such demand, Your Company during FY 2022-23 launched the advanced power system factory in Chennai. The new factory will manufacture advanced power electronics for HVDC Light?, HVDC Classic, and STATCOM, together with MACH™ control and protection system, the brain behind our advanced transmission and power quality solutions. This factory will serve both the fast growing Indian market as well as the large global demand for clean energy solutions to integrate renewables at scale and at speed that it is needed. It is the latest HVDC factory built and the world?s second testing lab of power quality control solutions. It will cater to the rising number of high-voltage transmission projects in India and export to support global HVDC installations.

Your Company is proud to be contributing to the country?s growth story by bringing industry-leading experience, deep domain knowledge and pioneering technologies that support our stakeholders with accelerating the global energy transition.

Hitachi announced acquisition of remaining shares from ABB

Global parent Company Hitachi Ltd. announced acquisition of remaining shares from ABB by close of December 2022 - well ahead of schedule, further supporting Hitachi Energy?s 2030 Plan. This acquisition will provide opportunities for accelerating the synergies between businesses and functions e.g. R&D, IT transition , common shared services. It has helped us move forward and continue with trusted partnerships and collaboration with customers, partners which is essential to finding the solutions our world needs.

Discussion on financial performance with respect to operational performance

Performance during the reporting period

Your Company?s success is a result of its focused strategy, diversified portfolio, and its relentless pursuit of improving the bottom-line. Through the year, the supply side constraints evolved - while pressure from commodities and freight prices eased in the second half, semi-conductor crunch persisted; especially with the deferred opening of the Chinese market. Energy transition, electrification of industries and rail, pick up datacenter investments and continued focus on renewables drove orders. The Company closed the year with the highest- ever order backlog annually at Rs 87,070.9 Crores, which provided healthy revenue visibility. Through the year, your Company had some significant order wins including, but not limited to:

Renewable evacuation & integration

• 10 Nos. 315MVA, 400kV class Transformers from NTPC for Solar Power evacuation. Your Company would be first in India to conduct short circuit test on this rating of transformer & would contribute towards reliable green energy evacuation

• Renew: 400kV & 220kV AIS S/S order

• Sembcorp: AIS S/S orders for Wind & Solar

Green Corridors & state networks

• PGCIL: 500MVA 400kV transformers

• PGCIL: 2x 500 MVA 400 kV Transformers

• PGCIL: 4X110 MVAr,13X80 MVAr, 765kV Reactor

• Adani Transmission: 19 X 500 MVA 765kV Transformers & 3 X 110 MVAr 765kV Reactors

• Adani Transmission: 13x500MVA 765 - 400kV Transformers

• Adani Transmission: 20 x 110MVAr 765kV Shunt Reactor

Transport

• 12 Nos. 100MVA Scott connected transformers for Western Railway through BNC Power & 15Nos V Connected Transformers through Chetak ent. The Company would be among the first suppliers to complete all RDSO qualifications to supply these transformers in Indian Railways, strengthening electrification and readying for higher load

• 190 Nos. Loco Transformers from Indian Railway entities, contributing towards increased mobility on electricity

• Dry Transformers for Agra Metro, Pune Metro, Bhopal Metro, Indore Metro and Chennai Metro from various OEM/EPC maintaining our leading market position in Metro segment

Datacenters

• CTRLS: 220/33kV GIS at Chennai

• Multiple orders for Dry Type Transformers for leading Datacenters

• Yondr Datacenter: CRP-SAS and FOTE Industries

• Aditya Aluminium - 400 kV AIS Bay Extension at Lapanga

• Aditya Aluminum: 400/220kV AIS S/S

• Reliance Jamnagar: 174 MVA 220 / 33kV and 500 MVA 400/22kV digital transformers

• SMIORE: 220/11kV GIS SS-MRSS & LILO HVDC

• Adani: 1000MW Mumbai Infeed HVDC

Your Company booked a major order from Adani Electricity Mumbai Infra Limited to provide a High Voltage Direct Current (HVDC) transmission system which will link Kudus to Mumbai. Mumbai is experiencing a rapid increase in electricity consumption, seeing peak demand increasing to 3,850 megawatts (MW) in 2022, of which around 2,100 MW was supplied from outside sources. The game-changing 1,000 MW HVDC link will increase the supply of power to the city by almost 50 percent, paving the way for utilities in the country to adapt to the grid of the future. It will be a key enabler in Mumbai?s Climate Action Plan, aiming to become the first city to become carbon neutral in South Asia. Your Company has an impressive HVDC track record in India, where it introduced the technology over 30 years ago with the Vindhyachal project in 1989. Raigarh-Pugalur is Hitachi Energy?s sixth HVDC project in India and the second UHVDC installation, following the multi-terminal North-East Agra link.

Your Company?s expertise is also being leveraged by several state and national utilities in setting up studies and simulations of greater renewable integration. Your Company?s technologists in the Power Consulting Services Businesses collaborate closely with generators to regulators in determining the most effective standards and technologies for a cleaner energy network.

Your Company also booked orders to supply power transformers for part of India?s largest solar park, NTPC?s upcoming 4.75 GW renewable energy park in Gujarat. Spread over 72,600 hectares in Kutch. As part of this project, Hitachi Energy India will provide ten 315 MVA 400/33/33 kV transformers manufactured at the Transformers factory in Vadodara. This will be the largest rating of transformer, used by solar power evacuation so far. The made-in-India power transformers are critical components in power systems. They pool the generated power from the renewable source and step it up at the pooling station to synchronize and feed into inter-state/intra-state transmission system. Their availability and longevity have a major impact on grid reliability and better voltage control even with intermittent supply while the Company?s eco-design transformers enable sustainability requirements.

From utilities and industries to transportation and infra, customers are understanding the urgency of the pace of change needed to reach Net Zero.

The increase in speed and frequency of trains to support the fast urbanization and the growing demand for mobility in the region requires an efficient and reliable rail transportation system. India launched commercial operations of the Vande Bharat Express - the world?s first semi-high-speed passenger train on high-rise overhead electric big case for Over Head Electric (OHE) territory. It is India?s first indigenously designed and manufactured semi-high speed and self-propelled train set that your Company has locally designed, developed and engineered. The unique Scott Transformers, addresses different challenges while meeting the project schedule with the highest quality standards and robustness while minimizing the throughput time.

Post COVID-19 capex spends of industries is witnessing an increasing share of investment in digitalization of their asset base. Your Company has expanded its installed base of its TXpert™ Ecosystem in India?s largest steel manufacturer?s operations. Being open, scalable, secure, and vendor- agnostic, TXpert™ brings the knowledge and intelligence of a thousand transformers - delivering actionable data- driven insights from field to the boardroom, with real impact on reducing costs, optimizing operations, extending life expectancy, and enhancing environmental performance.

In another example of field to boardroom, Hitachi Energy India collaborated with India?s largest private transmission Company to develop their Energy Network Operations Center (ENOC), which serves as the operations and control center for all their transmission and distribution substations. The Company has deployed 18,000 circuit kilometers of transmission lines with 3 Million power connections at 99.87 percent network availability. The center uses a cloud-based platform and adopts machine learning and data analytics- driven decision-making. It will leverage your Company?s state-of-the-art MicroSCADA X automation platform to offer 24x7 real-time monitoring, control, and protection of mission- critical power assets to maximize grid efficiency and prevent costly disruptions and outages. Hitachi Energy?s solution enables minimal manual intervention, reduces maintenance costs, and supports increasingly complex operations. Its realtime intervention input to site O&M teams for corrections will help the customer meet the need for affordable, reliable, and sustainable energy. In the long run, our system will help ENOC manage the planned transition of its asset portfolio to a low- carbon future in a safe, organized, and sustainable manner.

Your Company?s booked orders for the financial period under review - April 2022 to March 2023 - totaled Rs 6,817.2 Crores, and revenue was Rs 4,483.7 Crores. Profit-before-tax after exceptional items was Rs 130.8 Crores and profit-after- tax Rs 93.9 Crores.

Service

Your Company recognizes that the energy transition begins with existing infrastructure and installed base and no two customers are at the same position in their journey to net zero. Leveraging our century of experience and expertise, our dedicated teams deliver exceptional service solutions that cover the entire lifecycle of your assets, ensuring resilient operations. The Company works collaboratively with its

customers to ensure their energy assets perform as expected and meet their business needs.

Through the period under review, the service portfolio continued to deliver with 10 percent growth year-on-year, covering a mix of retrofits, spares and digitalization. From providing first factory repairs of traction transformers to making successful Generator Circuit Breaker HEC7 overhauling, replacing third party SCADA and controls to rendering life cycle services orders for grid automation from heavy industry and utility customers - we have effectively provided comprehensive services in various segments. The Company also booked some breakthrough orders for GIS bay extension and Substation Automation Systems (SAS). As a partner across customers? plan-build-operate lifecycle, Hitachi Energy in India continued to provide technical expertise services such as renewable studies for utilities and engineering advisory for mining behemoths.

The Rihand-Dadri HVDC system evacuating power out of the 3000MW generated at the Rihand generating station is an essential link in the northern region. Your Company has maintained the project with technical support for 30 years to keep this critical HVDC link robust. In the digital era, the Company has made it possible to operate the HVDC stations remotely for the first time in India. In the period under review, your Company established remote operation of the +/- 500 kV 1500 MW HVDC Rihand Dadri Bi-Pole Terminals from National Transmission Asset Management Center, Manesar. By allowing the control of HVDC stations from a central location, operators no longer need to be physically present in the station control room, thereby enhancing efficiency and reducing costs. This innovation presents a promising future for the industry as it opens possibilities for monitoring, controlling, and operating all HVDC stations from a single location. The project includes the supply of engineered solutions and on-site services to achieve remote operation functionality. The recently upgraded Control & Protection system at Rihand Dadri HVDC link features the latest version of Hitachi Energy?s most advanced digital MACH™ control and protection system. The MACH™ system monitors, controls, and protects the sophisticated hardware in the station, ensuring the highest possible reliability and efficiency. It incorporates advanced fault registration and remote-control functions and has been designed to run around the clock for decades.

Your Company also added new customer names to its portfolio with service orders from PSTCL, Vardhman, ST Telemedia. Leveraging synergies with the Hitachi Group, your Company booked its first order for Modular Switchgear Monitoring from Hitachi Japan and for servicing the group Company?s GIS switchgear as well. Heavy industry customers from auto, steel, cement and ceramics, entrusted your Company with lifecycle service management of their assets. Other steel, O&G and power majors were first movers this year in adopting our RelScan solution. This digital solution uses a reliability algorithm based on the Failure Modes & Effects Analysis (FMEA) method to assign a level of importance to each asset in the system. Expert assessment and advanced algorithms are the foundation of informed decision-making.

Further renewable power generators and datacenter clients leveraged digital lifecycle partnerships under our RelCare solutions. RelCare is an open and transparent digital partnership agreement that combines asset management software with the expertise of Hitachi Energy. It enables asset and O&M managers to reliably and cost-effectively optimize system performance and protect crucial power assets. Your Company shares the responsibility with its customers through joint access to a user-friendly digital platform that can remotely monitor the maintenance of their assets. Hitachi Energy India believes in working collaboratively with its customers to achieve shared goals. The Company partners with its customers to find solutions that meet their unique needs and share our expertise and knowledge to help deliver a sustainable energy future.

Exports

Your Company had set its sights on a mid-term target for exports, contributing 20-25 percent of orders and revenue and has consistently breached this corridor through the period in review.

Orders flowed in from established export markets of Nepal, Bhutan, Middle East, Africa and the Americas. On-going global supply chain constraints and the geo-political issues are compelling global customers to look at alternative supply chain routes and partners. India has the potential to make its mark as a resilient partner offering high-quality products.

Specifically the Company secured its first direct supply order from Bhutan Power Corporation for circuit breakers of multiple ratings. As the nation readies to be a regional forerunner in hydropower and strengthen its own power network, your Company built on its installed base with several orders for capacitor banks, Bay Equipment, GIS switchgear and other substation components, from utilities and EPCs.

Across energy intensive heavy industries in the African continent - from copper mines in Congo and oil and gas refiners in Uganda - orders for core technologies such as 245 kV AIS products and power transformers continued to flow in. Your Company is also delivering technologies for power utilities in the region, including in Tanzania and Malawai, and across the European continent and western Asia, including Switzerland, Sweden, Denmark and Iraq, to support reliable, quality power in the farthest corners.

Understanding the shifting market dynamics and the reshaping supply chains, your Company has been proactively augmenting its manufacturing muscle to meet potential new demand. Today, 80 percent of Hitachi Energy?s portfolio is locally manufactured in India and the manufacturing base in India also caters to the global requirements of five products supply from your comapny global feeder factories have been gaining ground around the world, helping us gradually expand our export markets. Doubling the capacity of Power Quality manufacturing with the greenfield establishment in Doddaballapur, and the new HVDC factory in Chennai are geared towards such requirement.

Also, earlier in the year, the high-voltage feeder factory in Savli commenced production of Dead Tank Breaker poles for US markets, with the introduction of 550 kV poles to the unit?s current product portfolio. The new production facility is a dedicated lean production line, which can adjust its manufacturing requirements quickly when needed. It is equipped with a testing facility qualified for ASME standards to validate the design and construction of tank for pressure withstand ability. Despite the ongoing logistics challenges worldwide, the team completed construction, assembly-line setup, and installation of critical equipment, including the ASME test machine, EOT Crane installation, and production layout readiness within the targeted timeline.

Operational excellence

Your Company?s strategic and structured investments in product lines and capabilities helped navigate it through the challenges of the pandemic. However, the twin challenges of COVID-19 and the conflict in Ukraine severely disrupted supply chains and negatively impacted commodity and freight prices for most of the period under review.

With this as the backdrop, your Company accelerated capex and strengthened talent to benefit from the shifting trade routes. However, the semi-conductor crunch and consequent adverse impact down the value chain was hard to shake off in the short term. Multiple factors were at play - starting off with a spiraling growth in the demand for semiconductors with the increasing digitalization and consumption of electronics and automotives. This, coupled with lagging impact of Covid disruptions and geo-political tensions have reduced semi-conductor supply to a trickle.

Leveraging deeply embedded expertise and agility, your Company attacked the problem by reassessing certain strategies that will help it steer through the turbulent times in the medium term, including - reducing dependency on the chips by redesigning products and increasing focus on product lines that do not depend heavily on semi-conductors, such as COMBILFEX, RTU, enterprise software and network control. Secondly, leveraging our global heft on stock-sharing and material allocation. The Company is proactively stocking some of the fast-moving electronic items to provide temporary hedging from the sky-rocketing product prices. While the global semiconductor manufacturers and the global supply chain organizations are continuously working towards striking the balance of demand and supply, it will take some time to reach ideal scenarios.

Continuing to strive for best-in-class operations your Company achieved IEC 62443 cybersecurity certification covering practices such as security management.

In other fronts, your Company?s operational excellence was recognized by multiple stakeholders - from group Company to national industry bodies. The SCM Cost Engineering from High Voltage Products won the President Value Engineering Award 2022 for Cost Engineering, and Cross-Functional Team. As part of localization and cost optimization, the team formed a cross-functional team with finance function and engineering center to work on design optimization and develop local suppliers to reduce cost and lead time for dead tank breakers.

Since November 21, 2021 ever since becoming Hitachi Energy we have unwavering commitment to quality, customer-centricity and innovation which has helped us build relationships with our customers and stakeholders. The Company?s focus on transparency and accountability has further cemented our reputation as a reliable partner and helped us earn the recognition of Most Trusted Brands of India by Marksmen group and the Golden Peacock Award for Corporate Governance.

Safety, Integrity & Quality

Safety, Integrity and Quality form the tenets of the Company?s license to operate. A strong and constant focus is ensured throughout your Company?s operations to drive the culture around these three tenets, for employees to internalize and feel empowered to champion them in any situation.

Safety is a vital element in our ‘license to operate? and, as set out in your Company?s Sustainability 2030* commitments, the aim is zero harm. Safety rules and procedures create ‘barriers? that prevent potential incidents from happening. When fully applied they should prevent incidents. Sometimes there are gaps because one or more of our safety rules and procedures are not properly applied. That means the protection is not as solid as it could or should be and the consequences can be devasting.

A key role of the life-saving rules is to help keep our safety ‘barriers? solid and everyone safe from harm. The Life Saving Rules (LSRs) apply to all employees and contractors regardless of work location or their role. LSR - eLearning is now mandatory for Hitachi Energy employees; helping them review their knowledge of safety practices, understand the decisions many colleagues need to make in safety-critical situations, and check what might happen if no timely and correct action is taken.

Hitachi Energy India activities lie in the electrical developmental ecosystem. You Company protects its employees from the risks derived from the manufacture, assembly, and maintenance of facilities or equipment where there is a likelihood of exposure to electrical risk. On job sites, working around electricity can be very safe when workers properly identify and control hazards. Inadequate training, lack of experience, and failure to recognize potential hazards could result in electric shock or death. This year nine electrical safety awareness (PICW) programs were organized for employees and contractors who perform an electrical work. Each program was for two days where total 230 employees were trained, assessed and certified.

Your Company passionately believes that to advance a sustainable energy future, it must put people at the heart of what it does. The Company wants to ensure that health, safety, and personal resilience of employees are developed and safeguarded. To ensure that our employees are equally safe outside on the road, Hitachi Energy organizes programs on safe driving at our workplaces in collaboration with Hero Motorcorp Limited.

Quality Circle Forum of India honored a team from Savli, Vadodara with the silver award at their annual Safety

* Refer page no 32 (BRSR report)

Convention, where the shared projects on Electrical Safety, aligning with QCFI?s theme, "Life & Limbs are precious." This recognition highlights the team?s commitment to maintaining a safe working environment and reinforces the Company?s dedication to promoting safety initiatives.

Hitachi Energy India, during FY 2022-23 adapted the newly launched updated Hitachi Group Code of Ethics and Business Conduct. Your Company?s integrity team actively contributed and provided input with our learnings to this single, universal Hitachi Group Code of Ethics and Business Conduct. The Code outlines the rules and principles designed to assist leaders and employees in making decisions and taking actions consistent with the Hitachi Group Identity and Values. Your Company is strongly invested in the process and holds sacred that it is not about box ticking, but about living with an integrity mindset. The ambition is for everyone in the organization to feel comfortable, empowered and free to speak up should they encounter an integrity issue, and the Code provides details on the speak-up channels available. All the concerns reported are subjected to appropriate investigation, follow up, and brought to full closure, adhering to the zero-tolerance policy for any violations. The outcome of all the concerns are reported to the Audit Committee.

Your Company?s commitment to quality is integral to its core values as a responsible organization. The Company aims to exceed the expectations of our customers, employees, partners, suppliers, and shareholders and strive to deliver timely and quality products, systems, and services that meet or exceed customer expectations. To achieve this, the Company understand its customer needs, measure their perceptions, and continuously improve sour operations to enhance customer satisfaction. The Company believes in developing the skills and motivation of its people to add value to our customers through continuous training and development.

Initiatives & Collaboration

Through the year under review, your Company has been taking measures to maximize the value from its existing installed base, co-create value for customers and develop talent that will continue to bring social, economic and environmental value for the next generation.

Digital upgrades across installed base continued, while Hitachi Energy?s own factories expanded the digital passport system to strengthen quality and operational transparency. Continuous process improvement approach helped identify areas of efficiency in operations, and accrue cost savings across its manufacturing locations, with employees across the value chain showing ownership and expertise. Your Company also continued efforts towards its carbon neutral agenda. By achieving 100 percent fossil-free electricity in operations, the Company reduced its C0₂ equivalent emissions by more than 45 percent since the start of the journey. In the period under discussion, the Company introduced rooftop solar for the electrification of four project site offices, added 938kW of permanent solar panel installations at its largest manufacturing location and is adopting Green House Gas Standard and Smart Metering across all locations.

Your Company believes that green infrastructure plays a key role in the development to support the growing urban population. To this end, we conducted renewable impact studies for over a dozen industry players, along with national load dispatch centers, for regulating usage patterns across different geographies. Such initiatives provide further encouragement for industries to use green energy for their power generation needs.

In addition, the cross fertilization of ideas and opportunities with Hitachi Group companies continued through the year, with a focus in areas of digitalization, smart cities, metro rail systems and railways.

Hitachi Energy India collaborates with customers, partners and policymakers to enable a sustainable energy future and has been progressing towards the commitment. As the pace of industry and government events picked up, your Company returned to traditional rendezvous such as Innorail, Elecrama, India Smart Utilities Week and were active contributors to policy discussions at forums such as Indian Electrical & Electronics Manufacturers? Association (IEEMA), Confederation of Indian Industry (CII), Central Board of Irrigation and Power (CBIP), International Council on Large Electric Systems (CIGRE), Invest Karnataka and India-Sweden Green Transition Partnership for creating a safer, greener and inclusive future. The Company also re-initiated its flagship Energy and Digital World on-ground, with technology conferences at Lucknow, Bhubaneshwar, Chennai, etc.

As part of strategic CSR initiatives, your Company built on the existing partnership with NIT-Warangal, inaugurating the smart electric grid lab for the students. Also it, provided electric vehicle infrastructure at NIT-Warangal and IIT-Roorkee, where the Hitachi Energy India sponsored Central Monitoring and Analytics Center that will launched soon for students to understand, explore and improve the smart city pilot running at the institute.

Research and Development (R&D)

Your business has consistently innovated and displayed a pioneering attitude throughout its existence. Since the Company?s inception, this desire for innovation has been ingrained in its DNA. It has continually been acknowledged as a leader in the field of technological development. Your business has maintained its leadership position in the sector by delivering customer value using a solution-oriented strategy. The ability of your Company?s brilliant professionals to consistently come up with innovative methods to meet consumer demands have been made possible by this philosophy of anticipating future customer wants, which has been fostered throughout the years. This has in turn assisted in addressing critical concerns.

As a testament to your Company?s commitment to innovation, it has received numerous R&D and innovation awards, including the prestigious India Smart Grids Forum 2023 awards. Your Company?s ability to consistently innovate and push the boundaries of what is possible has enabled it to remain a leader in the industry.

Your Company?s R&D activities are conducted globally in R&D and technology centers and are locally embedded in businesses. This approach leverages local competence to create social, environmental, and economic value on a global scale. By

developing new products, features, localized products, and solutions, your Company is able to secure existing revenue streams while also creating additional revenue by increasing customer engagement and installed bases.

In conclusion, your Company?s innovative spirit and dedication have been crucial to its success throughout the years. Your Company has continually provided consumer value and remained at the forefront of the market by taking a solution-oriented strategy and anticipating future customer demands. Your Company capacity for innovation and investment in the creation of modern technologies have allowed it to maintain its position as a leader in the sector. It will do so in the years to come. To keep the world running smoothly and sustainably, we remain committed to identifying and developing the essential power grid technologies that will enable a future that is more dependent on renewable energy sources.

Talent

The Company?s investment in training and upskilling employees continues to sets it apart in the market. Your Company?s success rests on attracting, developing and retaining the right talent, who is highly engaged. Your Company?s constant focus is also to ensure a working environment of inclusive leadership, transparency and belonging.

Coping with the demands of the new ways of working, building resilience and helping customers & employees cope with the COVID-19 outbreak required an intense focus on new skills and a vigilant watch on people and their welfare. While the Company?s learning and development (L&D) function continued to focus on leadership and professional development programs, self-paced learning was incorporated to encourage life-long learning.

While Leadership Development and most other L&D initiatives are in-house, the L&D team also works closely with external training partners to meet certain demands which require customization. This year, there was increased focus on developing cross-cultural awareness and preparing managers to deal with a workforce which is increasingly diverse and technology friendly. To navigate the environment, various programs not limited to change management, resilience and others were introduced to help employees redefine business problems in a way that makes new, innovative responses possible. The Company?s L&D team also saw the transformation of the global training programs such as PG4U, Middle Managers Program, Leadership Essentials Program and Female Talent development Program. L&D Partners are aligned to enable effective partnering with the business and provide customized learning solutions.

In addition, efforts were made to provide an inclusive environment that promotes diversity in gender, age and culture, including opportunities for global mobility. The Company?s competency has been aligned with the business strategy. The Company recognized exceptional performance and behavior in line with organizational values through its rewards and recognition program. There was continuous focus on improving the diversity in the workforce throughout the year. A diversity outreach program was also launched to encourage rehiring of performers who may have left their career for several reasons. The entire approach to well-being was based on increasing diversity, promoting inclusion and recognizing performance.

Such initiatives have proved instrumental in penetrating and expanding the market presence and in introducing key technologies. As our Company continues to grow, its focus to invest in talent in the segments that are vital for its business growth also sharpens. Continuing to the cause of advancing education in the areas of Smart Grid, our Company entered into an MOU with National Institute of Technology, Warangal (NITW) to set up a laboratory for Smart Electric Grid in the institute.

Corporate Social Responsibility

Your Company took the opportunity of its new standalone identity to leverage a cogent and comprehensive CSR program that amplified the values of the Company. The Company is advancing the world?s energy system to be more sustainable, flexible and secure. As the pioneering technology leader, your Company collaborates with customers and partners to enable a sustainable energy future - for today?s generations and those to come.

Your Company is committed to sustainable and inclusive development of the community?s social capital through active engagement. Social surveys are organized through NGO partners to receive the grievances of community, if any. CSR projects are identified and implemented in the following focus areas:

• Promote gender equality and empowering of women in engineering workforce

• Endorse education, employability & healthcare

• Social impact projects to collaborate with communities to provide innovative off-grid solutions to improve access to electricity in the country, especially in rural areas for its development.

• Aid in sustainable development goals Some highlights from the year under review

Empowering diversity: Your Company began by supporting 80 girl students pursuing engineering studies by providing laptops, soft skill training and scholarship through their academics. All the students have successfully completed their fourth semester with good academic performance. The project is now being replicated by supporting another batch of 120 girl students pursuing engineering studies by providing laptops, soft skill training and scholarship through their academics.

Nutrition, primary healthcare, and education: Your Company provided 500 food kits to underprivileged government school children. It also contributed to developing and deploying additional medical facilities at Government hospitals at Bengaluru, Mysore, Vadodara, Savli and Halol. This included providing medical equipment, ~100 ICU beds, more than 400 monitoring - diagnostic equipment and two ambulances. At Mysore it contributed towards development

of 10 new pediatric beds ICU ward with fully equipped medical facilities at District Government Hospital. Further the Company has undertaken to provide training to healthcare staff and maintain the medical equipment for a period of three years.

Access to water, urban afforestation: Urban afforestation drives were conducted at Maneja, Vadodara, where your Company is developing green cover in dry area of 10,000 sq ft by planting 3,000 saplings using Miyawaki technique and will continue to maintain it for three years. Children from local government schools were involved in sapling planting as part of a larger drive towards a climate conscious mindset, before handing the land over to Vadodara Municipal Corporation. Your Company is also working with Bangalore Metro Rail Corporation (BMRCL) for development and maintenance of green cover along metro line medians at Whitefield Road, Bengaluru.

Material developments in Human Resources / Industrial Relations front

Human resources

Your Company strongly believes that its employees are the key pillar of our success in the market. Hitachi Energy India continues to attract the best of talent, thanks to its diverse yet inclusive culture and ability to provide opportunities for their career growth. The Company?s people strategy is aligned with its overall vision to be the pioneer in shaping the future of sustainable energy and we are committed to nurturing a cordial and diversified work environment in a growing market and in maximizing the potential of its workforce.

As of March 31, 2023, the employee base stood at 2,323. To ensure that your Company continues to attract top talent, it launched innovative employer branding initiatives and consistently created avenues for learning, thereby embracing the culture of life-long learning. Hitachi Energy India is invested in the development of employees and devoted to helping them adapt and perform better in this VUCA (volatile, uncertain, complex, and ambiguous) market environment. With an enhanced performance management and talent strategy, the Company is focused on attracting, assessing and developing human capital for today and for the future. Your Company pays immense attention to inculcating a learning environment within teams and providing opportunities for global mobility, to manage talent in key function areas.

Hitachi Energy India?s competency model has been aligned with the business strategy. The same language is spoken throughout employee?s performance, learning and development cycles. To ensure continuous engagement of employees, we have launched several retention strategies including rewards and recognition programs to create a nurturing and performance-oriented workplace and shape employee behaviors in line with organizational values.

Our organization believes in creating a diverse & inclusive work culture that cares for employees? well-being. Health and safety are our number-one priority and throughout the period under review, the Company has striven to ensure a safe working environment in all our premises, undertaking several wellness initiatives. The Company also paid attention to the governance of various processes and initiatives across the organization and ensured industrial relations remained cordial and harmonious across all manufacturing locations.

People well-being

The Company continues to attract top talent due to its inclusive culture and the immense opportunities available for nurturing their talent. The people strategy is aligned with the Company?s overall ambition to be a pioneering technology leader. This requires a stable work environment in a growing market by maximizing the potential of the Company?s workforce. To ensure that the Company continues to attract top talent, multiple employer branding initiatives were launched not limiting to career fairs, recruitment drives, university connect programs and internship opportunities. During the year, the Company has consistently set a clear path to learn and adapt to perform better in the changing market situation with its enhanced performance management and talent strategy, focusing on building a healthy pipeline by attracting, assessing and developing talent.

In addition, persistent attention to provide an inclusive environment to promote diversity in gender, age and culture, including opportunities for global mobility, also form a part of the proactive plan to manage talent in key function areas. The Company?s competency has been aligned with the business strategy. The Company recognized exceptional performance and behavior in line with organizational values through its rewards and recognition program. There was continuous focus on improving the diversity in the workforce throughout the year. A diversity outreach program was also launched to encourage rehiring of performers who may have left their career for several reasons. The entire approach to wellbeing was based on increasing diversity, promoting inclusion and recognizing performance. Multiple awareness sessions on health and wellbeing were organized in different office locations and factories to create awareness. Annual medical check-ups and camps were set up through the year to promote physical wellbeing.

Learning and development

Never have we been so severely tested before on the resilience front than recently when we were ourselves coping and helping our customers and employees cope with the COVID-19 outbreak. While the Company?s learning and development (L&D) function continued our focus on leadership and professional development programs, we also shifted gears in incorporating self-paced learning and steered away from the status quo through various programs not limited to change management, resilience & others to help employees redefine business problems in a way that makes new, innovative responses possible.

The Company?s L&D team also saw the transformation of the Global Training Programs such as PG4U, Middle Managers Program, Leadership Essentials Program and Female Talent development Program. L&D Partners are aligned to enable effective partnering with the business and provide customized learning solutions. While Leadership Development and most other L&D initiatives are in-house, the L&D team also works closely with external training partners to meet certain demands which require customization. This year, there was increased focus on developing cross-cultural awareness and preparing managers to deal with a workforce which is increasingly diverse and technology friendly. At Hitachi Energy India Ltd, a self-paced lifelong learning integrated effectively into our workday, is our instrument of choice to empower our employees.

Your Company believes in empowering employees through lifelong learning. The Company?s workforce leverages Percipio - the digital learning platform houses 500,000+ multi-modal courses, videos, books and micro-learning modules averaging 148 minutes of learning per person per day. Through Percipio, our employees have access to a library of over various learning assets including 15,000+ books and 1,200+ audio books created and curated by subject matter experts. The employees? learning journeys are tailored to suit individual personas.

In addition to Percipio, employees also have access to other learning platforms like Hitachi Energy India Limited‘s internal LMS, EF (for mastering English language), Rosetta Stone (for gaining other language skills) and Culture Wizard (to get acclimatized with various cultures across the world). The Company webinars loaded with adaptive course curriculum, challenge our employees to expand the scope of their capabilities on their own terms. These are in addition to the technical and functional learning opportunities provided to our employees to upskill themselves. To top it all, we have introduced mentoring programs and coaching sessions to support employees amass better knowledge retention and even propose adjacent development opportunities.

Diversity and inclusion

As a young organization, Hitachi Energy India Limited optimizes our global vision of Diversity 360 - A new mindset, stronger culture, and new way of working. The Company?s vision is to position Diversity & Inclusion at the core of our long-term business success. Your Company believes Diversity + Collaboration = Innovation. With Diversity 360 in place, the organization continues its promise to deliver brilliant employee experiences as a new Company, where our extraordinary talents are given the right environment and are empowered to thrive. Diversity 360 works across four workstreams

• A new leadership model which focuses on D&I strategy being embedded into our everyday behaviors, policies, and leadership decisions. Your Company is focused on developing a new leadership model through a people partnership approach engaging employees to define future leader needs and

expectations, utilized appreciative inquiry methodology for collecting information, validated and co-created a unique leadership model with International Institute for Management Development (IMD).

• Female Acceleration with a commitment to increase gender diversity to 10 percent and progress female representation in middle management and top leadership roles. This year, the organization focused to strengthen early talent pipeline through university hiring programs and strengthen our female talent attraction strategy to improve diverse experienced professionals? hires. Key talent identification and dedicated development programs to ensure female talent enablement & exposure (Female Talent Development Program) also has been on top of the list.

• Live Diversity & Inclusion to create the cultural basis for collaboration and inclusiveness. To foster the D&I culture in the Comapny, Hitachi Energy India focused on incorporating D&I as each business unit?s accountability through SPECTRUM - India?s diversity & inclusion forum. SPECTRUM provides a platform for employees? networking and engagement and also works with diversity councils to execute D&I initiatives across business units and also measure the effectiveness of all such initiatives. Different awareness programs including Unconscious bias programs which helps the people managers deep dive into understanding unconscious bias and actions and behaviors that interrupt or mitigate biases were imparted.

• Attract and grow talent to spotlight the Company values = purpose and social innovation. Attract and retain current and future talent. Hitachi Energy India is focused on amending talent attraction policies like Employee Referral Program with improved incentive schemes, Early talent attraction policy for university hires with retention schemes etc to accelerate diversity hiring in India. The Company has created an Employee Value Proposition built on the foundation of our greater purpose, the scale and impact of our work, and how we develop and power careers. Your Company continues to create opportunities to grow and develop internal talent- solving the challenges of today and the demands of the future. The organization through various efforts and initiatives sustained and reached diversity to 7 percent in FY 2022-23.

Finance

With sharp focus on high growth segments, building regional capabilities and close customer connect, your Company continued its credible performance in April 2022-March 2023. Your Company generated total income of Rs 4,4837 Crores against Rs 4,950.9 Crores in January 2021- March 2022, 15 month period, clocking steady growth despite challenges of price increases and trade bottlenecks. Your Company?s net profit stood at Rs 93.9 Crores against Rs 203.4 Crores in January 2021- March 2022, 15 month period, as margins were compressed with pressures of chips and

electronics crunch, commodity price fluctuations and volatility in foreign exchange.

Your Company?s current ratio was at 1.2 and interest coverage ratio at 4.4, showing strength in its balance sheet and its ability to maximize capital. Your Company?s debtor turnover ratio was 3.0, indicating its robust collection processes. However, your Company is also discussing potential repayment mechanisms to clear historical overdue.

Inventory turnover stood at 3.8. Your Company?s operating EBITA was 3.9 percent, while the net profit margin was at 2.1 percent.

In FY 2022-23, the interest cost borne by your Company was Rs 40.1 Crores. As on March 31,2023, your Company had a net debt of Rs 111.8 Crores. In terms of foreign currency exposure - for imports and exports - your Company continued to conservatively hedge at the point of commitment to protect the contract margins.

Details of significant changes (i.e. change of 25 percent or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations thereof:

Key financial ratios

Ratios	FY 2022-23 April 1, 2022 to March 31, 2023	FP 2021-22 Jan 1, 2021 to March 31,2022
Debtors Turnover	3.0	3.2
Inventory Turnover	3.8	5.1
Interest Coverage Ratio	4.4	7.2
Current Ratio	1.2	1.1
Debt Equity Ratio*	0.2	0.1
Operating Profit Margin (%)	5.6	7.6
Net Profit Margin (%)	2.1	4.1

Return on net-worth is 8.0 percent in FY 2022-23 vs 19.7 percent in FY 2021-22. The current period returns are for the period of 12 months (April 2022 to March 2023) whereas the comparatives are for the period of 15 months (Jan 2021 to Mar 2022) and accordingly not comparable. However, current year margins were compressed with pressures of chips and electronics crunch, commodity price fluctuations and volatility in foreign exchange.

Disclosure of accounting treatment: Your Company followed IND_ AS and has detailed its accounting policy in Note 2 of the financial statements.

*Debt Equity Ratio = Short term borrowing / total equity

Risk and concerns

The threat of risk never goes away in the corporate world. However, successful businesses, like Hitachi Energy India, manage risk via strong governance frameworks and risk management procedures. The risk management charter and policy of Hitachi Energy India provide a framework for recognizing, prioritizing, mitigating, and overseeing significant risk events and action plans. The method was examined, the risks were determined, and mitigation measures were decided upon during the financial time.

Key risk areas were identified as supply chain interruptions, people, market and competition, cyber security, local content

and competences, transformation project, quality, strategy, technology, finance, operations and systems, legal and regulatory, and human resources.

There are suitable assurance and monitoring procedures, such as crisis management training, yearly updating of crisis management plans, security plan risk, and business continuity plan, to assure the efficacy of the risk management framework. As seen by their successful preservation of business continuity throughout the COVID-19 pandemic, Hitachi Energy India continues to recognize possible threats in a changing market and address them successfully.

At various levels, periodic evaluations of risks and their possible effects on business development, profitability, talent engagement, and market position are carried out based on the organizational structure matrix. Responses to significant operational risks are frequently carried out using information from internal and external assessments, internal performance reviews, and other sources.

Hitachi Energy India?s risk management strategy aims to reduce negative effects, effectively take advantage of market possibilities and boost corporate competitiveness. Hitachi Energy India is well-equipped to handle possible risks and guarantee long-term success because it prioritizes risk management and governance.

Internal control systems and their adequacy

Internal Controls (IC) in your Company have been designed to withstand and further the interest of all stakeholders by providing an environment which is conducive to conduct its operations. Your Company?s IC environment is in place to take care of, inter alia, financial and operational risks.

Your Company maintains a holistic framework of internal control to that effect with elements like a Country Management Committee, Group Directives and Instructions, Local Management Instructions, Entity-Level Controls, Process Level Controls and Management Testing Programs.

The same provides a platform for adequate control processes commensurate with the size of the Company.

A strong emphasis on integrity and ethics forms a part of your Company?s work culture. An independent management testing team having expertise in the field, performs Internal Financial Control effectiveness testing.

Outlook for FY 2023-24

The Indian economy positioned itself better than most economies, with the economic growth in FY2023-24 estimated to be the highest among the advanced economies. The growth momentum is expected to continue despite global headwinds and tight financial conditions supported by solid domestic demand and a pickup in capital investment. The government has continued pushing for capital expenditure, and private consumption demand leading to a healthy and stable performance. This has well reflected in high- frequency indicators, such as Purchasing Manager?s Index for manufacturing and services, GST collections, E-way bills, and industrial production levels.

Risks remain particularly for the global economy, with anticipated slowdown in global growth impacting the pace of private capex and the gradual waning of recovering demand. The International Monetary Fund (IMF) has forecasted a slowdown in global growth from 3.2 percent in 2022 to 2.7 percent in 2023, dampening trade growth.

However, India?s economy is expected to continue its rapid growth trajectory in 2024, driven by several factors, including the transition toward cleaner energy sources. The Indian government has set ambitious goals to increase the share of renewable energy in the country?s energy mix to half by 2030 and achieve net zero carbon emissions by 2070. And this transition is expected to play a vital role in supporting economic growth in the future. India is one of the highest consumers of electricity, which is also the reflection of pent-up economic activity driven by urbanization and industrialization.

India is currently the world?s third-largest market for renewable energy, and the government has set ambitious targets to increase the share of renewable energy in the country?s energy mix. The Indian government?s push towards green growth is visible in its annual budget. The Company sees a strong business potential as capex activity picks up in areas of transportation, data centers, e-mobility, and manufacturing, where it has a diverse product portfolio offering in the form of traction transformers, dry-type transformers, switchgears, SCADA systems, energy management systems, substations, etc.

Investment with leveraging sunrise opportunities while embracing energy transition and climate action have been other focus areas. The government has been focusing on energy transition by earmarking Rs 35,000 Crores for priority capital towards net zero and energy security during the union budget announcement. The Central Electricity Authority is expected to spend Rs 2.44 Crores on transmission systems for renewable grid integration from 2023 to 2030, which presents a significant growth opportunity for the Company.

This shift towards renewable energy power generation will require a strong inter-state transmission system to ensure smooth evacuation to the load centers, and this presents an opportunity for core T&D business. The Ministry of Power has released a comprehensive plan for evacuation of power from planned renewable capacity addition of 335 GW by 2030, entailing transmission capex of Rs 2,40,000 Crores. The Company?s technology is used by more than half of the HVDC links in the country. Given this, the new local HVDC manufacturing footprint and the up coming government tenders to evacuate power from zones with large renewable energy potential, your Company is well positioned for growth in this segment. The Company?s range of products, solutions, and services for reducing costs, increasing safety, and improving efficiency for the offshore segment, including innovative offshore portfolio of transformers that can operate in environments with salinity and hydrocarbon, extreme weather conditions like hurricanes, typhoons, winds, etc.

The government?s initiatives have been complimented with focus on building wider robust energy systems, developing energy storage solutions, and investing in smart grid technologies to manage the variability of renewable energy sources. As a leading player in the high voltage market in India, the Company is expected to benefit from the growth in the energy sector as it continues to provide innovative products to the industry. Country?s focus on renewable grid integration, data centers, transport, e-mobility, HVDC which are also our high growth markets, is expected to support us favorably.

The government provides an impetus for growth along four priorities: PM GatiShakti encompassing economic transformation, seamless multimodal connectivity, and logistics efficiency, riding on roads, railways, mass transport or metros. For instance there is a significant push on the transport sectorwith Rs 87,542 Crores allocated for 100 % electrification of railways. The Company has been a trusting partner for transportation projects in India, with high-technology offerings, and metro projects, high-speed rail, Vande Bharat. Furthermore, E-mobility offers a huge business opportunity for the Company through our innovative flash and fleet charging solutions-Grid-eMotion™ Flash and GrideMotion™ Fleet.

Data centers are also expected to experience significant growth over the next six years, with a sixfold increase in data center capacity expected. This presents robust growth opportunities for the Company, particularly in powering data centers.

India?s large companies have pledged to curb greenhouse emissions to meet the country?s ESG targets, and this provides a strong business opportunity for the Company given our constant pursuit to increase spend on digital solutions to increase efficiency, productivity through system design and power quality solutions.

The Company has a complete range of power and distribution transformers and other power equipment, that supports utilities and industrials to maximize return on assets investment by ensuring high reliability, reducing life cycle costs, and ensuring optimized performance while lowering environmental impact. The Company?s range of new launches the TXpert™ Solution, which enables data processing to save costs, optimize operations, and increase revenue. The digital transformers enhance operational reliability using a condition- based maintenance approach. The Company continues to innovate and customize products such as Scott Transformer and higher rating transformers suiting customer needs, who are embracing clean energy transition.

The government is pursuing to boosting infrastructure investments and incentivize manufacturing to support the Atmanirbhar Bharat campaign while cementing the country?s position on the global map enabling the country to become a crucial link in the worldwide supply chain. This is expected to enable policy-led support for the Company which has a strong manufacturing infrastructure and continues to build the indigenous strength comprising of 19 facilities across eight locations.

Opportunities and threats

in its report for 2023, the intergovernmental Panel on Climate Change (IPCC) has given its ‘final warning?, underscoring that the rising amount of Greenhouse Gas emission has pushed the world to the brink of irrevocable damage climate change. it further outlines that more than 300 Crore people already live in areas that are "highly vulnerable" to climate breakdown and half of the global population now experiences severe water scarcity for at least part of the year.

Around the time of the release of the above report, india became the most populated country in the world; now 17.8 percent of the world?s population rests on 2.1 percent of the world?s landmass. This places extreme stress on the natural resources around us. And the nation has to rigorously follow its net zero ambition and milestones like the one in 2030, to ensure a respectable quality of life for its citizens.

To tackle such demands, the world is increasingly moving to non-polluting technologies; i.e. to say, electric version of cars, heating and cooling systems, and factories that run on clean sources of electricity like wind, solar or nuclear power. By 2050, electricity will constitute half of the world?s energy system as against the current 20 percent. in addition, the current global energy crisis is providing much required impetus for clean energy investment, across various industries, worldwide.

The international Energy Agency highlights that clean energy transitions offer major opportunities for growth and employment in new and expanding industries. New infrastructure - transportation, transmission, distribution or storage of electricity, hydrogen - will form the backbone of the new energy economy in all countries. Building clean energy infrastructure can take 10 years or more. in parallel, technology supply chains and energy supply chains remain interrelated - as witnessed in the past year. Supply chains breakdowns have pushed up clean energy technology prices making countries? clean energy transitions more difficult and costly. Hence, based on its requirements, strengths and weaknesses, countries need to identify how it can benefit from the opportunities of the new energy economy.

india has set itself a long term ambition of net-zero by 2070, with corresponding milestones. 2030 ambitions including halving its energy intensity, quadrupling its renewable energy consumption to 500GW, converting 70 percent of its commercial passenger vehicle fleet to electric, and so on, are targets which must be achieved in letter and spirit for tangible sustainability. There are big dividends for countries that get their clean energy industrial strategies right, with global markets, investors, and developers keenly watching for supporting policies and regulations for growth of environment/clean technologies and infrastructure.

This places your Company, its expertise and pioneering technologies, at the center of action for a sustainable energy future. From core technologies like power transformers, circuit breakers and their path-breaking variants that match eco-efficiency while delivering reliability in the middle of high seas, to consulting services, digitalization and automation - your Company straddles IT & OT with the confidence that is necessary to cater to the urgent need of the environment.

Your Company sees opportunities for inter-regional links and upgrades of maturing HVDC stations. With the increasing digitalization of the power grid, cybersecurity becomes an important aspect relating to critical infrastructure. Additionally, with digital twins, remote monitoring, eco-efficient products and maintenance options, managing power infrastructure to ensure reliability and ease of maintenance is an area of opportunity.

The challenge today is bigger than one Company, one team and one individual. Together with customers and partners, Hitachi Energy india collaborate and co-create innovative solutions, with pioneering technology, leveraging both digital and energy platforms. Your Company has the commitment, passion and knowledge for advancing a sustainable energy future for all.

Cautionary statement

Certain statements made in the Management Discussion and Analysis Report relating to the Company?s objectives, projections, outlook, expectations, estimates and others may constitute ‘forward looking statements? within the meaning of applicable laws and regulations. Actual results may differ from such expectations whether expressed or implied. Several factors could make significant difference to your Company?s operations. These include climatic and economic conditions affecting demand and supply, Government regulations, taxation, and natural calamities over which the Company does not have any direct control.