Inox Wind Ltd Management Discussions

Global Economy Overview

FY 2020-21 has been a year like no other in recent memory. With the COVID-19 pandemic wreaking havoc across the globe, its impact on global economies have been devastating. The slowdown across economies in 2019 exacerbated further in 2020, owing to the pandemic. As a result, the global GDP contracted by over 3.5% in 2020, with all major economies moving into negative territory¹. While industrial production suffered from a prolonged halt, contact intensive sectors were disproportionately hit hard.

REAL GDP

(Precentage change from previous year)

The economic upheaval could have been much more severe had it not been for the quick and synchronised response from central banks and governments globally. While central banks introduced supportive monetary policies, governments undertook efforts to ensure easy availability of funding and assistance for both private and public consumption to keep the economy afloat. This has been instrumental in the progressive recovery seen in the last two quarters of the calendar year, as compared to the significant contractions observed in the first two quarters. The sequential recovery in global trade coupled with comfortable liquidity conditions have also led to a sharp rise in commodity prices, especially in the last quarter of FY 2019-20. This has been further aggravated by large-scale disruptions in the global supply chain, with shipping line capacities and container availability posing a major challenge.

Outlook

Economic recovery in 2021 and beyond will be heavily dependent on the course of the pandemic. Successful vaccination drives across the country is likely to improve sentiments. As per the

World Bank, the global economy is set to expand by 5.6% in 2021, which is the strongest post-recession pace in the last 80 years. Economic recovery continues to be uneven worldwide and largely reflects sharp rebounds in some of the major economies like the United States, mostly on account of the substantial fiscal support. In many Emerging Market and Developing Economies (EMDEs), large number of active Covid-19 cases, inadequate vaccination, and lack of macroeconomic support are offsetting some of the benefits of strong external demand and elevated commodity prices. Despite these challenges, many economies have registered a recovery in FY2022-21, and have efficiently tackled difficulties related to Covid-19. Going forward, successful vaccination drives and additional policy support is anticipated to ensure net positive growth and economic recovery.

Indian Economy Overview

The Indian Economy was witnessing a slowdown even before the COVID-19 pandemic. With the onset of the pandemic, the economy was further pushed over the edge and an estimated 7.3% contraction is expected in FY2020-21². By the end of March 2020, a countrywide lockdown was imposed to control the spread of the virus. With restrictions on movement, income and consumption patterns were significantly impacted. Thereafter, a slew of fiscal measures were announced to keep the economy afloat. It mostly aimed to ease supply constraints and inject liquidity into the economy. The Indian Economy is showing signs of revival on the back of targeted fiscal measures, effective monetary policy and a successful vaccination drive.

INDIAS REAL GDP

(Percentage change from previous year)

An accommodative monetary policy from the Reserve Bank of India (RBI), policy interventions by the central government, along with resumption of economic activity from June 2020, have led to a sequential recovery in economic output. Moreover, vaccination in June, 2021 has doubled to 41.3 lakh doses, crossing the 36 crore mark in cumulative vaccination coverage³. High frequency indicators such as power consumption, E-way bills and foreign portfolio investment (FPI) have also witnessed upticks, after a decline during the second wave.

Outlook

Progressive vaccination drives and strict adherence to Covid-appropriate behaviour will be a critical safeguard for economic recovery. Growth has recovered steadily over the course of the year under review, on the back of government expenditure, revival of private consumption and investments. Despite lockdowns in various states, its effect is likely to be softer on manufacturing and construction activities, even if new variants of Covid-19 emerge in subsequent waves of the pandemic. The Central government has announced relief packages which are expected to boost the Capex cycle through implementation of the PLI scheme and by streamlining processes for PPP Projects and Asset Monetization. Consumption growth is also projected to improve with employment support from the Aatmanirbhar Bharat Rozgar Yojana (ANBRY) and the Bharat-Net digitisation drive. The healthcare infrastructure of the country is also a critical component of economic revival. Therefore, improvement of the healthcare system in urban and rural areas, would emerge as the most sustainable impetus for sustained recovery of the Indian Economy.

Industry Overview

Energy Sector

Economies worldwide have experienced profound effects of the global health crisis, triggered by widespread public-health responses aimed at controlling Covid-19 infections. Energy markets have reflected uncertainty and shown exceptional movement. At the beginning of the crisis, plunging fuel demand in many key markets was reflected by lower prices. By the end of March 2020, the price of gas hit a 30-year low, whereas the price of oil, also affected by supply shocks, showed the largest single-day decline in the past 22 years. As economies reopened, energy commodities have shown a partial rebound. By the end of Q3FY20, oil demand in China was back to pre-Covid-19 levels, and 50 percent of the decline recovered in Europe and North America.

The global energy demand in 2020 fell by over 4%, which was the largest decline since World War II and the largest ever absolute decline. Due to the Covid-19 pandemic, there was a significant impact on global energy usage. As a result, uncertainties loomed large and the success of vaccination drives along with the size and effectiveness of stimulus packages are likely to influence the economic outlook in the near future. It is assumed, global GDP will surpass 2019 levels, increasing demand for goods, services and energy. However, movement restrictions and curbs on international travel may affect global energy demand.

Evolution of global GDP, total primary energy demand, and

 ^{energy-related CO}2 ^{emissions, relative to 2019}

The drop in energy demand affected oil prices the most due to restrictions on mobility, resulting in a reduction of demand for transport fuel by 14%, from 2019 levels. At the peak of the lockdowns, the global oil demand was more than 20% below pre-crisis levels. Overall, oil demand was down by almost 9% over the year. The demand for Coal also declined by 220 million tonnes of coal equivalent (Mtce) or 4%. The largest decline in coal usage, around 15%, for electricity generation was witnessed in advanced economies. Lower demand for coal was mainly triggered by lower electricity demand, increasing output from renewables, and reduced gas prices. However, in 2021, the demand for coal has rebounded strongly, reversing the declines of 2020. Gas has

 ²http://mospi.nic.in/sites/default/files/press_release/Press%20Note_31-05-2021.pdf ³https://dea.gov.in/sites/default/files/June%202021.pdf managed to be more resilient than coal in 2020, with demand falling by 2%. Renewables, however, remained insulated from external pressures and due to capacity improvement its usage grew by 3% in 2020. This was largely due to an increase in electricity generation from Solar PV and wind, accounting for 330 (Terawatt-hour) TWh of energy.⁴

Demand Trends in 3 Major Economies:

United States of America (USA)

In the United States, Coal demand is rebounding and is still set to remain well below pre-crisis levels. It is also known as the worlds largest natural gas market, with the annual increase in demand set to be less than 20% of the 20 bcm decline in 2020, squeezed by the continued growth of renewables and rising natural gas prices. Oil demand is expected to remain around 0.8 mb/d, mainly on account of the lockdowns and mobility restrictions in early 2021. In the United States, despite the recently announced USD 2.3 trillion stimulus-spending, energy demand is projected to increase only 4% in 2021, with demand remaining 3% below 2019 levels.⁴

China

Peoples Republic of China (China) is projected to account for close to half of the global growth in energy generation, with almost 80% of the estimated increase in demand in 2021 expected from emerging market & developing economies (EMDEs). China is expected to generate over 900 TWh of Solar and Wind energy in 2021. China is the only major economy to experience an increase in economic output and energy demand in 2020. After the initial round of restrictions, energy demand grew by 6%, on average, from pre-Covid-19 levels. Despite the impressive growth of renewables, increasing electricity demand led to an all-time high coal burn in December 2020. Economic activity in China is set to further accelerate in 2021, and energy demand is expected to grow by 6%, with demand in 2021 almost 8% higher than in 2019, making China one of the few countries in the world that has been least impacted by Covid-19.⁴

India

Most EMDEs experienced a drop in energy demand in 2020, albeit less than in advanced economies, with India witnessing a 5% decline in demand. While the devastating decline in Indias economy had pushed oil demand down by more than 8%, coal demand for power generation and from industries fell by 5% and 11%, respectively. But, over the course of the year, due to effective government policies, backed by a calibrated re-opening of the economy and aggressive vaccination programmes, the Indian economy is expected to bounce back in 2021. Energy demand is set to rebound by 7%, pushing demand 2% above 2019 levels. Coal demand is also expected to increase by almost 9%, due to a recovery in electricity demand across sectors.⁴

Outlook

Covid-19 continues to impact global energy demand, despite favourable government policies, stimulus packages and steady inoculation drives. Global economic output is expected to rebound by 6% in 2021, pushing the global GDP more than 2% higher than 2019 levels. Global energy demand is set to increase by 4.6% in 2021, offsetting the 4% contraction in 2020 and pushing demand 0.5% above 2019 levels. Almost 70% of the projected increase in global energy demand is from emerging markets and developing economies, where demand is set to rise to 3.4% above 2019 levels. Energy use in advanced economies is estimated to remain 3% below pre-Covid levels.

Electricity demand is also expected to increase by 4.5% in 2021, or over 1,000 TWh, heading for its fastest growth in more than 10 years. This is almost five times greater than the decline in 2020, taking the share of electricity in final energy demand above 20%. Global energy use in 2021 is set to increase 0.5% above pre-Covid-19 levels. Although uncertainty still prevails, the current estimation for 2021 takes into account a healthy GDP growth globally, mainly on account of increased demand for goods, services and energy. However, mobility and international travel remain supressed. If demand for transport returns to pre-Covid levels, global energy demand will rise even higher in 2021, to almost 2% above 2019 levels, an increase that would be broadly in line with positive economic revival.

Indias Renewable Energy Market Overview

India has the 5th largest installed capacity of renewable energy in the world and ranks 3rd in the renewable energy country attractive index of 2021. Indias installed renewable energy capacity has increased by over two and a half times and stands at more than 141 Giga Watts (including large Hydro), which is about 37 per cent of the countrys total capacity (as on 16th June 2021). During the same period, the installed solar energy capacity has increased by over 15 times, and stands at 41.09 GW.⁵

India has low conventional energy supply in comparison to its energy needs, mainly driven by a huge population and a rapidly accelerating economy. But, India receives sunshine throughout the year, a natural resource that can be harnessed to produce a potentially large amount of solar energy. It also has vast potential in the hydro power sector, which is being continuously explored across the north-eastern states. India is the only country, among the three G20 countries, which is on track to achieve its targets under the Paris Agreement. The renewable energy space in India has become highly attractive for investors and received FDI inflows of US$ 9.83 billion between April 2000 and December 2020.

Summary of All India Renewable Energy Generation

Source	Installed Capacity (MW) (As on 31.05.2021)	RE Generation (MU) May 2020	RE Generation (MU) May 2021	% of same period Last Year	RE Generation (MU) April 2020- May ‘2020	RE Generation (MU) April 2021- May ‘2021	% of same period Last Year
Wind	39442.25	6237.89	7083.52	113.56	9711.75	10817.9	111.39
Solar	41087.63	5618.29	5994.66	106.7	10971.74	12116.84	110.44
Biomass	10170.92	313.23	301.7	96.32	583.2	590.62	101.27
Bagasse		611.55	404.37	66.12	1499.72	1288.45	85.91
Small Hydro	4786.81	767.19	554.67	72.30	1460.79	994.69	68.09
Others	168.64	36.47	176.69	484.47	69.74	356.04	510.55
Total	95656.25	13584.62	14515.61	106.85	24296.95	26164.54	107.69

Greening of Islands

The government intends to fully utilise renewable sources of energy to power Andaman and Nicobar and Lakshadweep islands. It aims to deploy 52 MW of distributed grid-connected solar PV power projects by March 2021. The Ministry will provide 40% capital subsidy for projects under the scheme. Projects of 20 MW SPV with

16 MW/8MWH BESS in Port Blair, South Andaman; and a project of 1.95 MW with 2.15 MWH BESS in 4 Islands of Lakshadweep, are expected to be commissioned by January 2022.

Outlook

The country has set an exemplary goal of achieving a renewable energy capacity of 175 GW by the end of 2022, which is expected to increase to 450 GW by 2030. India plans to add 30 GW of renewable energy capacity along the desert, on its western borders of Gujarat and Rajasthan. By 2028, India expects investments worth US$ 500 billion in the renewable energy space. The International Energy Agencys World Energy Outlook projects renewable energy supply of 4,550 GW in 2040, globally.

Also, it is worth noting that renewables have been estimated to comprise 49% of Indias power generation by 2040.⁷

Pradhan Mantri Kisan Urja Suraksha Evam Utthan Mahabhiyan (PM-KUSUM) scheme is one of the largest initiatives in the world to provide clean energy to more than 3.5 million farmers by solarising their agriculture pumps. PM-KUSUM scheme aims to install grid connected ground mounted solar power plants (up to 2 MW) aggregating to a total capacity of 10 GW under Component A; install 20 Lakh standalone solar pumps under Component B; and solarize 15 Lakh grid connected agricultural pumps under Component C. All components combined would support installation of additional solar capacity of 30.80 GW.⁸

Wind Energy

Indias wind energy sector is led by the indigenous wind power industry and has shown consistent progress. The total installed wind power capacity of India stands at 39.247 Giga Watt (GW)⁹, securing 41.5% of the countrys total RE capacity (94434 MW). It is also the largest supplier of clean energy.¹⁰ Wind Energy has proved to be the most effective solution to the problem of depleting fossil fuel reserves, coal imports, greenhouse gas emission, environmental pollution etc. Wind energy as a renewable, non-polluting and affordable source directly avoids dependence on fossil fuel and can lead to green and clean electricity generation.

The government aims to streamline compensation guidelines for local communities with an offshore wind collaboration plan, released in July 2020. The plan sets out specific measures to speed up large-scale offshore wind project development and clarifies its benefits to local stakeholders:

1. Government-led siting and streamlined permitting: Mapping ‘offshore wind consideration zones and providing a one-stop-shop for granting required permits.

2. Encouraging stakeholder acceptance: Government-led demonstration projects, public consultations and stakeholder participation/ profit-sharing models.

3. Enhancing industrial competitiveness: Bolstering economic feasibility with low-interest loans, revising the REC scheme, expediting construction and grid connection.¹¹

Indian Wind Turbine Manufacturers Association

Wind installations from April 2020 to March 2021

S. No. State	Total during FY 19- 20	Total Operational in FY 19-20	April, 20	May, 20	June, 20	July, 20	August 20	Sept 20	Oct 20	Nov 20	Dec 20	Jan 21	Feb 21	Mar 21	Total during FY20-21	Total Operational In FY20-21
1 Andhra Pradesh	2.00	4092.5	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	4.20	0.00	0.00	4.20	4096.70
2 Gujarat	1468.45	7541.51	2.11	6.30	73.19	98.40	50.60	72.60	80.80	116.50	150.50	52.00	61.90	255.40	1020.30	8561.81
3 Karnataka	95.7	4790.6	0.00	4.20	0.00	0.00	0.00	0.00	0.00	36.00	38.00	3.30	40.50	26	148.00	4938.60
4 Kerala	10.00	62.90	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	62.90
5 Madhya Pradesh	0.00	2519.90	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2519.90
6 Maharashtra	206.20	5000.38	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	5000.38
7 Rajasthan	0.00	4299.65	0.00	0.00	0.00	0.00	0.00	0.00	27.10	0.00	0.00	0.00	0.00	0.00	27.10	4326.75
8 Tamilnadu	335.44	9304.33	0.00	0.00	13.00	0.00	8.00	52.00	31.00	18.00	2.10	0.00	3.10	176.50	303.70	9608.03
9 Telangana	0.00	128.10	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	128.10
10 Other	0.00	4.30	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	4.30
Total	2117.79	37744.16	2.11	10.50	86.19	98.40	58.60	124.60	138.90	170.50	190.60	59.50	105.50	457.90	1503.30	39247.46

Outlook

India is expected to install up to 13.1 GW of wind energy projects in the next three years. Net installation of 13.1 GW is expected between 2020 and 2022 if investments continue at the current pace. If the pace of auctions and investments increase, 16.7 GW of installation can be achieved. As market activity and installations were slower in 2020, it is again expected to pick up by 2022. Issues pertaining to non-availability of grid and land as well as lesser number of state auctions impacted installations considerably in 2020. Nonetheless, the market it expected to scale up in 2021 volumes are anticipated to peak in 2022.

FIGURE 9 WIND INSTALLATION FORECAST & SCENARIOS

Opportunities in the Wind Energy Sector

Huge Untapped Potential

India has the potential to harness 302 GW of power above 100 meter sea level. With proper infrastructure and investment, it opens up a huge market for both private and public players, to cater to Indias rising energy demand20.

Power Plant Developer

Wind farm developers are responsible for developing the wind project from concept to commissioning, and undertake planning, design and project development. They also arrange capital for investment, construction of roads and related infrastructure that can accommodate the transport of heavy industrial equipment and components. Depending on the nature of the contract, the developer sometimes has a managing interest in the project when it is completed. But, in most cases, the real ownership lies with the wind farm owner.

Advanced Technology deployment

The wind power sector in India has undergone a major transformation, from tax-credit driven investments to mainstream IPPs. This has led to the setting up of large wind farms that deploy latest technology and practices including larger MW class wind turbines, inclusive O&M practices for plant life, use of logistics tools for construction and maintenance, and seamless grid integration.

Raw Material Production

A wide range of materials are used for wind turbine construction. A diverse list of raw materials are required to produce the vast number of components that make up a wind farm. India is aiming for indigenous wind turbine component production and this could create significant opportunities for raw material suppliers.

Original Equipment Manufacturing

In the wind energy sector, OEMs usually manufacture critical components such as the nacelle. Hubs and blades, on the other hand, are produced by fabricators as per the OEMs specifications. While opportunities do exist for new OEMs in India, with the projected growth of the wind industry, there is immense competition from large global companies, and entering the OEM domain will require significant capital and marketing investments. To encourage indigenous manufacturing of wind turbines and to facilitate transfer of new technology, Ministry of New and Renewable Energy (MNRE) is expected to introduce local content requirements for wind turbines.

Component Manufacturing

Componentmanufacturersproduceawiderangeofmechanicaland electrical components including generators, hydraulics, sensors, hardware, drives, power distribution equipment, composites, cables, big steel castings, forgings, bearings, gearboxes etc. The primary components in a wind energy generating system are: Rotors, Blades, Nacelle Controls, Hub, Generator, Tower Components and Power Electronics components. A modern wind turbine consists of about 8000 unique components.

Offshore Wind Energy Projects

With more than 25 years of experience in wind farm installations, India is quite competent in managing the supply chain. Offshore wind projects pose excellent alternatives for onshore wind energy projects, as paperwork and clearance issues often raise questions about the viability of onshore projects

Electricity (Amendment) Bill

The Ministry of Power introduced the Electricity (Amendment) Bill, 2020 to address recurring issues and to encourage private players to enter the electricity generation, distribution and transmission market. It seeks to promote a legal and administrative ecosystem which harbours special attention for renewable energy. It also focuses on cross border trade of electricity, which presents growth opportunities for the Indian renewable energy sector.

Trading Opportunities

Should a market for micro-wind turbines emerge in future, opportunities could arise for traders and small system integrators, similar to what is happening in the solar PV industry in India, where rooftop solar systems are set to gain prominence in the near term. Opportunities to trade the power produced are however, likely to expand significantly.¹²

Currently, wind power producers can sell electricity to the grid, use it for captive consumption or sell it to third parties. With the emergence of independent power exchanges and with the liberalization and streamlining of power distribution across states, the opportunities for trading power are likely to increase and become more lucrative. With the advent of the RPO/REC mechanism in India, there has been a significant demand for non-solar (wind, small hydro, biomass etc.) RECs over the past few months. The high demand for non-solar RECs is mostly met through wind energy based REC. In light of this, REC accreditation, advisory and trading services present a significant opportunity.¹³

Government Policies

The new policies announced in line with the governments ‘Make in India initiative aims at improving the scope of operations in this sector. To boost export, the government is planning to introduce large scale production of wind energy equipment in Indian facilities and it is likely to reduce the cost of equipment, thereby making it lucrative for customers from around the world. Besides, the governments wind energy policy also entails installation of wind farms with high capacity, within a limited budget, to create large scale employment opportunities in private and government firms.

Hybrid Tenders

The concept of hybrid tenders has been recently introduced in the wind energy sector. These hybrid tenders are expected to lead to benefit in terms of overall cost optimization of the project as well as ensure consistent generation of energy round the clock. SECI has so far tendered ~2.6 GW of solar wind hybrid projects under the ISTS program. These tenders are likely to lead to wider use of wind energy, given its benefits, providing opportunities to wind sector players to further expand their operations while ensuring profitable growth.

Challenges in the Wind Energy Sector

• With the announcement of several mega tenders for solar and wind power projects, intense competition for suitable land with high wind speeds and grid connectivity has been noticed, making land acquisition within stipulated timeframes an arduous task for developers. Most of the land in regions with high wind speed and access to transmission grids have been used up. Hence, it has become imperative to boost the capacity of existing substations or set up new plants, which is likely to further delay the commissioning of plants.

• Lack of an effective mechanism to ensure regional cooperation for enabling seamless exchange of power leads to the simultaneous creation of power surplus and power-deficit regions. In the absence of an effective framework to facilitate interregional and inter-state exchange of electricity, it is difficult to transmit energy to power-deficit regions. As a result, wind energy is often harnessed in certain regions and without access to robust markets or regulatory mechanisms, it can lead to surplus wind power in some regions and hamper demand from distribution companies (discoms) in the region.

• The poor financial condition of discoms has resulted in delayed payments for wind power producers. However, this is mitigated to a large extent through central auction (SECI tenders) where PPAs are signed with SECI instead of State Discoms.

• Local substructure manufacturers, installations vessels and trained workers are lacking in India. Offshore wind turbines require stronger structures and foundations than onshore wind farms. This can result in higher installation costs.

• Offshore wind tariffs in India are expected to range between Rs 7-9 per unit, compared to Rs 2.8-2.9 per unit for onshore wind.

• Many Indian ministries and departments are likely to grant clearances for offshore wind power projects. Any delays may lead to cost overruns.

Segment wise and Product wise Performance

Company Overview

Inox Wind Limited (IWL) is the leading wind energy solutions provider in India, providing services to IPPs, Utilities, PSUs, Corporates and Retail Investors. Inox Wind is a fully integrated player in the wind energy market with four state-of-the-art manufacturing plants in Gujarat, Himachal Pradesh and Madhya Pradesh, with a cumulative manufacturing capacity of 1,600 MW. During the year FY21, manufacturing operations begun in the newly established plant at Bhuj, Gujarat. IWL manufactures key components of WTGs in-house, ensuring the highest standards of quality and the use of advanced technology to produce reliable and cost competitive products. Inox WTGs are designed for low wind speed sites such as those in India. IWL is graced by a robust, energetic and experienced team of experts who have established Inox Wind as a dynamic and enterprising corporate entity.

Key differentiating factors

Cost Competitive: IWL manufactures best-in-class and superior quality products along with providing fully integrated services, thereby enabling company to manufacture cost effective products.

Diversified and dedicated Human Capital: The company has dedicated and experienced employees who consistently work towards the goals and objectives of the company.

Geographical presence – The Companys manufacturing facilities are situated near to the market with high wind potential such as in Gujarat, Himachal Pradesh, Rajasthan, Karnataka and Madhya Pradesh. The company recently witnessed manufacturing operations at its Bhuj plant which is the second in the state and fourth in India.

Strong Parent Company: Inox Group is a diversified conglomerate with presence in various industries including flurochemicals, multiplexes, industrial gases, cryogenic engineering, wind energy products etc. Leveraging the strong brand value, Inox Wind has established a distinct identity in the market.

Quality Control: IWL is an ISO 9001:2015 certified company and adopts the highest standards of quality across all its business units. The Company has received various awards for its quality standards including ISO: 9001: 2015 certification.

Strong order Book Value: IWL has a strong order book of 1324.7 MW. Riding on its strong order book, the Company is expected to fetch high revenues in the next few years.

Site inventory: The company has one of the largest project site inventories spread across the states of Gujarat, Rajasthan and Madhya Pradesh amongst others.

Robust Annuity Model: The Companys O&M business is based on strong annuity model. IWL has multi-year O&M agreements with customers. Starting from FY 2020-21, a significant part of wind turbine generators will cross the free O&M warranty period. Moreover, with the increase in the fleet size and strong auction order inflow, the company expects its revenue stream to pick up in the coming years. O&M revenues are non-cyclical in nature and ensure steady cash flow generation and higher margins. The companys O&M business provides significant opportunity for monetization and has the potential for significant organic and inorganic growth.

Technology: The company provides turnkey solutions to the customers whereby the company engages across the value chain from concept to commissioning of the projects, including operation and maintenance.

Turnkey Solutions

IWL is Indias dominant energy solutions provider, servicing IPPs, Utilities, PSUs, corporates and retail investors. It is engaged from the conceptualisation to commissioning, operation and maintenance of wind power projects. Its solutions encompass a wider area of operation and includes energy assessment, power evacuation, wind studies, statutory approvals, land acquisition, maintenance of wind farms, and supply of WTG, erection and commissioning, long-term operation and site infrastructure development.

Manufacturing Facilities

The company is a fully integrated player in the wind energy market with state-of-the-art manufacturing facilities for blades and tubular towers at Rohika (Gujarat), hubs and nacelles at Una (Himachal Pradesh) and an integrated manufacturing unit at Barwani (Madhya Pradesh) for developing nacelles, hubs, blades and towers. It has also leased a manufacturing facility for manufacturing nacelles and hubs at Bhuj, Gujarat and during the year FY21 the Bhuj based facility began its operations. This facility will incur significant savings in terms of inward and outward logistic costs and is expected to improve the working capital cycle.

Capacity Mix

Particulars	Una, Himachal Pradesh	Rohika, Gujarat	Barwani, Madhya Pradesh	Total
Nacelles & Hubs	1,100	-	-	1,100
Blades	-	800	800	1,600
Towers	-	300	300	600

Discussion on financial performance with respect to operational performance

Operational Highlights

To improve its operational performance, the Company relies on the expansion plans, growing order book, strategic tie ups, product launches and larger service platforms.

During the fiscal 2020-21, the Company has commissioned

80 MW, which includes commissioning for Continuum, Renew Power and certain retail customers. The company also added a significant volume of 314 MW to the paid O&M services, during the year, which catapulted the revenue earning fleet to 1514 MW. The O&M fleet is now a solid annuity business for the company which is expected to generate steady revenues over the next couple of years as the company has established multi-year O&M agreements with customers.

The foundation work of the 3.3 MW turbine has been completed and supply chain framework put in place. The company is now ready for rapid, serial production of the turbine, drawing up on its experience in managing such platforms pan India, for over a decade. The first turbine is expected to be operational in the ongoing wind season and commercial production to commence immediately thereafter. The consolidated order book of the Company now stands at 1324.7 MW.

The company has also achieved financial closure for 100 MW of the Solar Energy Corporation of India - Special Purpose Vehicles (SECI - SPVs) with Power Finance Corporation (PFC). This is expected to completely liquidate all the capital blocked in the 50 MW un-commissioned SPV in the short term.

Financial Performance

The company recorded an overall sale of Rs. 847 crores during FY21 (including Rs. 136 crores towards supply to step down subsidiary which got eliminated in the process of consolidation), thereby recording an increase of nearly 12% as compared to Rs. 760 crores in FY20. The company continued to remain EBITDA positive at Rs 14 crore in Q4FY21 and Rs. 13 crore in Q3FY21 [excluding the exceptional provision of Expected Credit Loss (ECL)], due to ramp up in new supplies.

During the year, the company raised Rs 400 crores by issuing non-convertible debentures at 9.5% for working capital requirement and retiring off high-cost debt. IWISL, a subsidiary of the company, has begun allocating equity against multiple expression of interest received by the company, to further strengthen the balance sheet and leverage the embedded value of the O&M business.

The company is also actively considering other initiatives which will lead to significant reduction in the financial costs.

Key Ratios

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations 2018, the Company is required to provide details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations. The key financial ratios are given below:

Ratios	UoM	FY21	FY20	Change
Return on Net Worth	%	-23.3%	-17.0%	37%
Debt Equity	Times	1.19	0.66	80%

The change in Net worth and Debt equity ratio was due to issue of non-convertible debentures at 9.5% for working capital requirement and retiring off high-cost debt.

Opportunities and Road Ahead

There has been significant traction in the wind energy market in the global community as the voice for Environmental, Social and Governance (ESG) investing is becoming louder and dominant. The European Commission has recently announced raising the share of renewable energy to 40% of final consumption by 2030, to meet the 2050 goal of eliminating net EU emissions compared to its 1990 levels. The United States has already committed to reducing its economy-wide greenhouse gas emissions in 2030 by 50-52 percent from 2005 levels. A growing optimism for legally bounded mandate of having 80% of clean electricity across US grids by 2030, will further provide fillip to the market. In Asia, China has announced an ambitious target of 1200 GW of wind and solar capacity by 2030 while India has been making progress in its target of 175 GW by 2022 and reaching up to 450 GW by 2030.

In the India market, there has been a major spur in the renewable energy market as some of the largest corporate houses announced their entry into this sector. A mega hybrid park in India the first of which is scheduled to be completed in the coastal region of Kutch in Gujarat has also generated significant momentum in the industry. PSUs such as NTPC announced doubling of their renewable energy goals to 60 GW by 2030 while the Government is likely to roll out a Green Tariff policy to encourage ESG compliance. The Government also extended the interest rate transmission charges waiver for renewables up to 2025, which gives a longer viability and visibility for some of the projects up to SECI IX and X to be implemented.

The massive development in the global and domestic renewables market, including the national policies and private sector investment provides significant opportunities in the market.

The company is well placed to capitalize these growing opportunities as well as under the auction regime with the 3.3 MW Wind Turbine Platform. Margins are expected to be sustainable, comparable with the erstwhile feed-in tariff (FIT) regime while significant opportunity exists by virtue of being the lowest cost producer of wind turbines, globally.

The company also expects a major thrust in the retail, captive and C&I segment of the market. A sustainable and resilient recovery is being witnessed in the PSU segment which has bounced back in recent times and is quite promising for growth. The company is well positioned to cater both these segments besides IPPs.

The company expects an increase in proportion of equipment supply as the market strengthens further, which will reduce the EPC work and associated risks significantly. The company continues to take certain key balance sheet actions including retiring high-cost debts, reducing financial costs and leveraging IWISL equity, amongst others.

Leveraging the equity of the wind business is also being worked out to prepare for the inevitable ramp up in operations as the sector is expected to register an exponential growth in the near term. The company has already made some progress in this regard and in the days to come it is expected to announce key decisions in this regard.

The sector enjoys massive support from the incumbent Government as public institutions iron out the hurdles in the holistic development of the sector, in consultation with relevant stakeholders. Recently, the honorable Prime Minister of India, Shri Narendra Modi inaugurated the 30 GW Hybrid Renewable Energy Park in the coastal district of Kutch in Gujarat which is currently the worlds largest of its kind. Following the momentum, more such parks are expected to be announced across the country on the lines of solar parks. The land and power evacuation facilities for these hybrid parks are planned to be provided by the state or development agencies and once completed they will be available on a plug and play model.

Hybrid Tenders are increasingly gaining traction wherein the minimum wind capacity has been set at 33% of the contracted capacity. While the first two tenders were released by the Solar Energy Corporation of India (SECI) following the 2018 policy announcement, the third tranche released in April 2021 further reduced the capacity utilization factor (CUF) requirement to 30% of the last tender. While the first two tenders were met with a lukewarm response due to aggressive tariff caps, the third (tranche 3) wind solar hybrid tender was fully subscribed.

Material Development in Human Resources/ Industrial Relations

IWL considers its employees strategic assets for the growth and development of the Company. To motivate employees, the Company has adopted favourable policies and practices that help to attract and retain talent in an increasingly competitive market. The Company aims to provide a conducive working environment to foster professional and personal growth. It also initiates employee engagement programmes that boost employee morale. The Company had a permanent staff strength of 1,070 as on 31st March, 2021.

Risk Management

IWL has a vigorous risk mitigation strategy that monitors internal and external threats and proactively addresses challenges to ensure business continuity. The Companys risk-management framework is simple, consistent and clear, enabling an efficient mechanism for managing and reporting risks. Some of the business risks that the company may face is given below:

Risk	Definition	Mitigation
Macroeconomic Risk	The companys external environment is marked by multiple challenges such as policy uncertainty, access to funds, currency volatility, rising interest rates, social unrest and increased inflationary e_ects might have adverse impact on its growth plans. Further, the outbreak of covid-19 pandemic has caused temporary halt in economic activities imposing multiple restriction on how businesses operate.	The Company constantly monitor the changes in the external environment and take necessary actions to safeguard of operations from any adverse impact. The Company has also developed an e_ective business continuity plan in order to successfully navigate through challenging times.
Technology Risk	With the rapid development in the technological landscape, it is pivotal for the company to monitor the changes and update its system and processes in order to stay ahead of the industry curve.	The Company leverages it long term relationship and contracts with AMSC - a leading wind energy technology company to source state-of-the-art technology for manufacturing of 2 MW and 3.3 MW wind turbines as well as 2 MW WTGs. Moreover, its has a non-exclusive license from WIND Novation Engineering Solutions GmbH, Germany, to manufacture rotor blade sets of various sizes. These long- standing contracts enables the company to manufacture cost e_ective and superior quality products.
Project execution risk	The Companys inability to obtaining various permissions such as land clearance certificate and building construction permit within the stipulated time may result in project delays. Moreover, its inability to obtain timely clearances for project execution can hamper the profitability of the company. Extreme climatic and environmental conditions, non- availability of grid capacity for evacuation, non-availability of suitable land resources and failure to timely execute project by subcontractors might have adverse impact on the Companys operation.	The Company undertakes regular monitoring of project progress in light of the agreed plan to ensure timely completion of the project. Further, the Company also carries out various assessments and studies to study the patterns for power execution options at the site. Such studies and analysis reduces the risk of project failure.
Human Resource Risk	The Companys inability to attract, retain and grow key managerial personals and committed employees, might have an adverse impact on the companys operations.	The Company undertakes various initiatives to better define and understand its talent supply and demand requirements. It also undertake various initiative to promote an open, inclusive and diverse workplace. To retain and attract skilled employees, it o_ers competitive remuneration packages, commensurate to their expertise and experience.
Regulatory Risk	The regulatory environment has been constantly changing and any unfavourable changes in import policy, wind policy, or other policy amendments related to power evacuation facilities might have an adverse impact on the Company.	The Company proactively monitors the changes in the regulatory environment and takes necessary actions. It also obtained required approvals for turbine manufacturing and power evacuation. This secures the Company against any unfavourable policy changes in future to a great extent.
Competition Risk	The Company operates in a highly competitive and innovative industry. It is vital for the Company to design, develop and market its new, innovative and cost e_cient wind turbine systems, to maintain a competitive edge.	A detailed market research analysis is undertaken by the Company on a regular interval to understand the changing preference of its customers. It also has in-house manufacturing facilities for key components of WTGs, ensuring production of high quality products at competitive rates. Further, it constantly invests in designing and development of new wind turbines that enables it to stay ahead of the industry curve.
Product Development Risk	Challenges could arise during product development cycle if lack of supervision on factors such as time, financial resources, regulatory and legal licences, certificates increase the cost of project.	The company carries out market analysis on product under development and ensures use of proven technology. The company undertakes in-house manufacturing of key components of the WTGs through its high quality technology and cost competitiveness.
Financial Risk	The company is exposed to financial risks such as foreign exchange risks, interest risks, credit risk and liquidity risk.	The company seeks to minimise the e_ects of these risks by using derivative instruments to hedge risks. Moreover, the compliance with policies and exposure limits is reviewed by the company on a continuous basis.

Internal Control System and their Adequacy

The company is equipped with strong and improved internal control systems and processes. The enhanced control systems ensure compliance with all applicable laws and regulations in the sector in which the Company operates and ensures optimum utilisation of resources. The Company has implemented a comprehensive internal audit system and has appointed Independent firms of Chartered Accountants as Auditors to conduct the Internal Audit function.

The Audit committee regularly monitors and reviews the internal audit process. The observations and recommendations made by the Internal Auditors are also reviewed by the Audit Committee. The Company has additionally developed robust financial and management reporting systems. It constantly works on improving the systems and processes.

Disclaimer

Certain statements in the MDA section concerning future prospects may be forward-looking statements which involve a number of underlying identified / non identified risks and uncertainties that could cause actual results to differ materially. In addition to the foregoing changes in the macro-environment, global pandemic like COVID-19 may pose an unforeseen, unprecedented, unascertainable and constantly evolving risk(s), inter-alia, to the Company and the environment in which it operates. The results of these assumptions made, relying on available internal and external information, are the basis for determining certain facts and figures stated in the report. Since the factors underlying these assumptions are subject to change over time, the estimates on which they are based, are also subject to change accordingly. These forward-looking statements represent only the Companys current intentions, beliefs or expectations, and any forward-looking statement speaks only as of the date on which it was made. The Company assumes no obligation to revise or update any forward-looking statements, whether as a result of new information, future events, or otherwise.