ISGEC Heavy Engineering Ltd Management Discussions

1. 00 STATE OF COMPANYS AFFAIRS AND OPERATIONS, INCLUDING MANAGEMENT DISCUSSIONS & ANALYSIS:

1.01 It was a good year for the Company.

1.02 The total income was 4686.90 crores against 4470.50 crores in the previous year.

1.03 Profitability was much better with profit before tax being 234.40 crores compared to 147.06 crores last year.

1.04 The profitability was better due to higher margins in the Project business as share of orders booked in the last year with higher margins was higher. We have also higher sales in the Manufacturing business, which has typically better margins than EPC business.

1.05 Further details are given under the section Management Discussion and Analysis.

2.00 MANAGEMENT DISCUSSION AND ANALYSIS:

In this section, the Management discusses the performance of the Company on the following matters, with the limits set by the Companys competitive market position:

(a) Economic Overview

Global Economy:

The global economy is performing better than anticipated and showing signs of resilience in Calendar Year 2023 after the sharp economic slowdown in Calendar Year 2022. Geopolitical tensions caused by the prolonged Russia-Ukraine war, supply chain disruptions, higher inflation, and tighter monetary conditions impacted the economic recovery in 2022. International trade was impacted due to global economic slowdown, persistently high inflation, and supply chain disruptions, among others. Inflationary pressures are eroding real incomes, triggering a global cost-of-living crisis, and weakening investment growth. Further, the unexpected collapse of two specialized regional banks in the United States in mid-March 2023 have roiled financial markets and triggered concerns over macroeconomic stability and talks of possible recession in the world economy.

However, global economic conditions started showing signs of stabilization in early 2023, aided by the reopening of the Chinese economy. A key factor in the

improvement in economic activity and sentiment in 2023 is the recent decline in energy and food prices. With the central banks efforts to curb inflation by tightening monetary policy, global inflation is projected to decline from 8.7% in 2022 to 7.0% in 2023 and 4.9% in 2024.

International Monetary Fund (IMF) has projected decline in global growth rates from 3.4% in 2022 to 2.8% in 2023 and rise to 3.0% in 2024.

(Source: International Monetary Fund (IMF) World Economic Outlook, April 2023)

Indian Economy:

India remains a bright spot in the world economy and continues to be the fastest-growing major economy. The Indian economy continues to show resilience to exogenous shocks caused by the prolonged war between Russia and Ukraine. Accelerated pace of economic reforms has led to higher and sustainable growth and strengthened its position in the world.

Indias IIP growth of 5.6% Y-o-Y and 5.3% growth in the manufacturing sector in February 2023 present signs of optimism for the economy. Further, the impetus for the core industries, which registered a combined ICI (Index of Eight Core Industries) increase of 7.6% (provisional) during FY 2022-23 compared to the corresponding period of last year will propel the demand for our Boilers, Castings, Contract Manufacturing, Boiler Manufacturing and Piping, and Civil Construction segments.

IMF projects the Indian economy to grow at 6.3% in FY 2024-25. Growth will be supported by a conducive

domestic policy environment, various dynamic reforms undertaken by the government such as higher capital expenditure, thrust on domestic manufacturing and infrastructure development, rebound in domestic consumption, technology-enabled development, revival in credit growth, and transition towards cleaner energy among others.

In the Union Budget 2022-23, the government has allocated ? 10 lakh crore towards development of the infrastructure sector, which will accelerate economic growth. In addition, growth-enhancing policies such as the production-linked incentives (PLI) scheme, Atmanirbhar Bharat and PM Gati Shakti should augur well for India in the coming years. With multiple growth levers in place, the Indian economy remains attractively positioned to navigate global headwinds in FY 2023-24.

(b) Industry Structure and Developments:

• Overview of the Engineering Industry

The engineering industry is diversified and is broadly categorized into two major segments - heavy engineering and light engineering. Most of the leading players are engaged in the production of heavy engineering goods. The expected expansion of heavy engineering industry can be attributed to increased demand and capacity expansion in the end-user industries such as infrastructure, power, mining, oil & gas, refinery, steel, automobiles, and consumer durables.

The heavy engineering industry is one of the largest and key sectors in the world. It produces machinery, capital goods as well as components and parts for various industries. The global machinery market grew from USD 3,542.77 billion in 2022 to USD 3,810.37 billion in 2023 and is expected to reach USD 4,928.07 billion in 2027.

(c) Opportunities and Threats

Opportunities:

? The governments strong push towards infrastructure development with an allocation of ? 10 lakh crores in the Union Budget 2023-24 will create lucrative opportunities for the heavy engineering industry.

? The emission control equipment segment is poised to grow due to stringent emission regulations in Power, Oil & Gas, Chemical and Fertilizer industries. Union Environment Ministrys instructions to the thermal power plants to install pollution control technologies and comply with new emission

norms by December 31, 2026, is likely to lead to an increased demand for emission control equipment. Further, Indias green energy focus with the G20 Presidency and an outlay of ? 19,700 crores for the recently launched National Green Hydrogen Mission will increase focus on given hydrogen projects.

? Governments announcement for new thermal power plants, which are likely to come up by 2030, will provide opportunities in the Ash Handling business due to the scarcity of contractors and technology providers. Isgec has entered into a technical collaboration with a US Company for this product.

? The expansion of the Oil & Gas sector with an estimated CAPEX of ? 1.11 lakh crore in FY 202223 will lead to the expansion and upgradation of facilities and open new markets for Boilers, Process Plant Equipment, Boiler Manufacturing and Piping, and EPC Process Plants segments. To cater to the increasing energy demand of India, the Oil & Gas industry is expected to attract investments close to $250 billion in the next 10 years.

? The Ethanol Blending Programme (EBP) targets to achieve 20% blending by FY 2025-26. This demands an additional 700 crores liters of ethanol production every year which will create huge opportunities for Boilers, Sugar Plants and Distilleries businesses and Boilers.

? 100 Transport Infrastructure projects are identified for end-to-end connection for ports, coal, steel, and fertilizer sectors. Further, a capital outlay of ? 2.4 lakh crores for the Indian Railways in the Union Budget 2023-24, announcement of several Metro projects is announced for B cities and expansion of a dedicated freight corridors network will create opportunities for setting up factories and workshops for Railways.

? Investment in downstream products such as Petrochemicals are also expected to be substantial.

? Interest rates are expected to peak in 2024 and thereafter be reduced gradually by the central banks over the next couple of years.

? Advanced economics are expected to recover from recessionary pressure due to excessive interest rate hikes by the Central Banks across the countries.

? The developing economies like South-East Asia and Latin America are poised to do well and benefit from strong job markets, commodity price boom and ambitious investment plans by governments in many countries.

? As a leading company providing products and solutions for multiple industries, Isgec Heavy Engineering Limited (Isgec) is in a favourable position to participate in Indias growth story.

Threats:

? Volatility in commodity and crude oil prices on account of global turmoil, Russia-Ukraine War and high inflation can increase input costs, impact profitability and dampen the export market.

? The rising cost of logistics may increase freight costs and may impact profitability.

? Many companies are shifting from the use of fossil fuels (coal, lignite) towards Biomass. This may affect the sale of Boilers firing fossil fuel, at the same time creating opportunities for Biomass fired boilers and for waste heat recovery boilers.

(d) Segment-wise or Product-wise Performance:

A. Engineering, Procurement and Construction Segment:

A.01 Isgecs EPC segment executes projects on turnkey basis for Boilers, Air Pollution Control Equipment, Sugar Plants & Machinery and Distilleries, Power Plant Solutions, Bulk Material Handling Systems, Process Plants, Projects for installation of Factories & Workshops for Railways and other Projects.

A.02 The total revenue from the EPC segment was at 3,368 crores (around 69% of total revenue) against 3,361 crores last year. The profit was, however, better due to the following reasons:

? During the previous year, fixed price longer duration orders were under execution and were adversely hit by increase in commodity prices, leading to lower profitability in the previous year. The proportion of these earlier orders has reduced during the current year and the new orders, taken at better margins, are under execution.

? The share of international revenue during the year increased to 13.7% as against 9.2% in the previous year. The margins are better in international revenue as compared to domestic revenue.

? Besides, the prices of commodities which peaked in the previous year, also reduced.

Industrial & Green Energy Boilers:

A.03 Isgec offers Boilers for various applications such as Captive Power Plants, Process Steam and Cogeneration requirements. These boilers are based on various technologies to suit different fuels.

These include:

• Circulating Fluidized Bed Combustion (CFBC) Boilers firing coal, pet coke, co-firing of biomass, oil & gas.

• Atmospheric Fluidized Bed Combustion (AFBC) Boilers firing coal, pet coke, rice husk, and other clean biomass.

• Oil & Gas fired Boilers firing natural gas, refinery gas and light diesel oil.

• Heat Recovery Steam Generator (HRSG) Boilers

using heat from waste gases from Gas Turbines.

• Grate fired Boilers for firing various types of biomasses like bagasse, rice husk, rice straw, wheat straw and wood chips, etc.

• Waste Heat Recovery Boilers using heat from waste gases in Cement Industry, Steel Industry and Oil Refineries.

• Waste to Energy Boilers burning Slop (waste from distillery) or Municipal Solid Waste (MSW).

A.04 Recognizing the expanding opportunities in Green Energy, Isgec has:

? Developed and established cutting edge technologies for Waste Heat Recovery Boilers for Cement, Steel & other metallurgical plants.

? Developed and established Slop (Distillery waste) Fired Technology to enable distilleries comply with government directive of zero liquid discharge.

? Acquired technology for Straw (agri waste) fired Boilers.

Boiler Business Highlights for FY 2023:

A.05 We booked highest ever Boiler orders from the domestic market, significant ones being:

i) Largest single value order from a Public Sector Refinery project.

ii) Single order with 7 Nos. Waste Heat Recovery Boilers (WHRB) for a Cement plant.

iii) Biggest Biomass AFBC Boiler of 100 TPH from a North Indian Paper company.

iv) Repeat orders for AFBC Boilers from many customers.

v) Boilers on new technologies:

• Re-Heating Furnace Waste Heat Recovery Boiler from a Steel company,

• Calcinated Pet Coke Waste Heat Recovery Boiler from a Chemical company.

Boiler Technology:

i) During the year, we also renewed our existing License Agreements with:

a. Sumitomo SHI FW Energia Oy, Finland for Circulating Fluidized Bed Combustion (CFBC) Boilers up to 150 MW.

b. Wood PLC, for Shop assembled Oil & Gas Fired Boilers.

Allied Business:

i) Isgec Boiler group has established itself as a leading partner for Operation and Maintenance (O&M) Services of Power Plants supplied by Isgec as also by others.

ii) We also offer Renovation & Maintenance services for all industrial boilers regardless of the OEM.

iii) We also provide value added services such as Residual Life Assessment (RLA) Study, Technical Feasibility Study, Troubleshooting, on the job training, classroom training including training on a simulator for power plant, etc.

Sugar Machinery & Distillery:

A.06 Isgecs Sugar Plant & Machinery and Distillery (SMD) business is a market leader in Sugar industry in India.

A.07 We provide extensive end-to-end engineering solutions for setting up Greenfield sugar plants with captive cogen power plant, Ethanol Plants, Retrofitting/Expansion/ Modernization/Complete Efficiency Improvement in Ethanol Plants, ENA plants, Captive Power Plants integrated with sugar plants, Zero Liquid Discharge Solutions and Effluent Treatment Plants, etc.

A.08 Services:

? Spares and Retrofit - Isgec provides spares and retrofit services for all equipment used in Sugar and Ethanol plants.

? Operation and Maintenance Services for Sugar plants, Ethanol Plants, Power Plants, Effluent

Treatment plants, Condensate polishing units and Sugar refineries.

Highlights of Sugar Machinery and Distillery business for FY 2023:

A.09 During the year we completed 20 projects including Greenfield and Brownfield projects.

A.10 Order booking for the year is very good.

A.11 Major Orders include:

? A big Bio Ethanol Project for a Private Sector customer in Maharashtra which includes:

• 6500 TCD Milling Plant with 1500 TCD sugar refinery.

• 400 KLPD capacity Syrup based Ethanol Plant designed on zero liquid discharge.

• 100 KLPD multi-feed (Syrup / B Heavy / Grain) Ethanol / ENA plant, designed on zero liquid discharge.

? 200 KLPD capacity syrup-based ethanol plant with 60 TPH incineration boiler for a customer in Karnataka on turnkey basis.

? Sugar plant expansion and steam economy from 7500 TCD to 12000 TCD for a sugar plant in Maharashtra on turnkey basis.

? 300 KLPD Ethanol Plant on Cane Syrup feedstock from a Private Sector company in Karnataka.

? Expansion in Milling Tandem for a sugar plant in Nigeria.

? Operation and Maintenance of a 2G Ethanol plant for a Public Sector company in Haryana.

A.12 Sugar Technology:

? During the year we developed Artificial Intelligence (A.I.) system for sugar plant equipment (Milling Plant, Falling Film Evaporator, and Vertical Continuous Pan) to improve efficiency and reduce manpower.

? We received a Patent for our Calandria of a Sugarcane Juice Vacuum Pan.

We have very good enquiries in hand for both Sugar Plants and Ethanol Plants.

Ethanol:

A.13 Isgec offers Distillery Plants based on molasses, cane juice, as well as grains as feedstock.

A.14 The market for Ethanol Plants is good for next many years as the Government has advanced the target for 20% blending of ethanol with petrol to 2025. This will require raising the ethanol production capacity in India by 700 crore litres per annum, which will require many new plants.

Bio CNG:

A.15 We are working to develop offerings for Bio-CNG plants.

Air Pollution Control Equipment (APCE):

A.16 Market Outlook:

DeSoX Technologies:

Majority of orders for DeSoX have been awarded by Central Utilities like NTPC & DVC. However, State and Private Utilities comprising of almost 80,000 MW are likely to place the orders in next one to two years.

Many Private Sector Utilities are still doing feasibility studies and seeking financial approvals for implementation of the DeSoX technology.

DeNOx Technologies:

Relaxation of NOx emission norms from 300 mg/Nm3 to 450 mg/Nm3 has resulted into reduced requirement for SNCR System from Thermal Power Plants. However, many Thermal Power Plant Units still require combustion modifications in order to meet the NOx emission norm of 450 mg/Nm3.

NTPC and a few State Electricity Boards have already placed orders for combustion modifications and future enquiries are expected mainly from the Private Sector Utilities.

Particulate Emissions:

NTPC and other Central and State Utilities have majorly completed Renovation & Modernization (R&M) of Electrostatic Precipitators to comply with the Particulate emission norms. We expect enquiries from the balance Utilities in future.

A.17 Isgecs Air Pollution Control Equipment solutions include:

(a) DeSOx Technologies (reducing Sulphur Di-oxide emissions):

? Wet Flue Gas Desulfurization projects for Thermal Power Plant units of >100 MW Capacity.

? Semi Dry Flue Gas Desulfurization projects for Thermal Power Plant units of >50 MW capacity.

? Dry Sorbent Injection system for Thermal Power Plant units.

(b) DeNOx Technologies (reducing Nitrogen Oxide

emissions):

? Low NOx Combustion Modification for Tangentially Fired Pulverized Coal Boilers and Wall fired Boilers.

? Selective Non-Catalytic Reduction (SNCR) Systems for various applications including Power, Cement, and other Industries.

? Flue Gas Conditioning for efficiency improvement of Electrostatic Precipitators (ESP).

(c) Particulate Matter Control Technologies:

? Electrostatic Precipitators (ESP) for Fossil Fuel fired Boilers and other Industrial Applications i.e., Steel, Cement, Metallurgy, etc.

? Renovation & Modernization (R&M) of ESPs for Thermal Power Plants.

? Spares for ESPs.

? Process & Nuisance Bag Filters.

A.18 Highlights of APCE Business for FY 2023:

We booked following major orders:

? Our largest single order for Renovation &

Modernization (R&M) for Electrostatic Precipitator for a State Utility in Maharashtra.

? Combustion modification for DeNOx for 6

Tangentially fired Pulverized Coal Boilers State Utility in North India at multiple locations, which included a large capacity Thermal Power Plant of 2x600 MW.

? Dry Sorbent Injection System for 2x210 MW

Thermal Power Plant Units for a State Utility and 4x210 MW Thermal Power Plant Units for another State Utility.

? Dry Sorbent Injection System for 4x210 MW

Thermal Power Plant for a State Utility in West Bengal.

Orders booked with technical support from overseas

companies: -

? Hot Electrostatic Precipitator for Copper Smelter Application.

? Wet Electrostatic Precipitator for Copper Smelter Application.

Bulk Material Handling:

A.19 For bulk material handling Isgec has developed various products including Pipe Conveyors, Stacker-reclaimers, Ship loaders, Ship Unloaders, Gantry Cranes and Ship to Shore Cranes for container handling.

A.20 We offer Bulk Material Handling Solutions for Ports, Mines, and for Power Plants handling of coal, iron, bauxite, and other materials. During the year we successfully completed a Bulk Material Handling System involving Stacker and Reclaimer, Ship unloading, and wagon loading, etc., for a Port in Eastern India.

A.21 We are executing a Bauxite Handling Facility for an Aluminium Plant and a 16 KM long Piped Conveyor System connecting three coal mines to a power plant.

A.22 We expect good market for Bulk Material Handling Systems considering expected investments in Infrastructure as well as Mining sectors.

Factories and Workshops for Railways:

A.23 We build workshops for Indian Railways on turnkey basis including all equipment, machinery, civil work, tracks, and signals. During the year we completed two coach manufacturing facilities for the Indian Railways.

Process Plants:

A. 24 We provide turnkey solutions to Oil & Gas, Refineries,

Fertilizers and Chemical sectors for their process units. Presently we are executing a Sulphur Recovery Unit for a major Refinery in India. During the year we booked an order from a Public Sector company for setting up a Sulphuric Acid plant.

B. MANUFACTURING OF MACHINERY & EQUIPMENT SEGMENT:

B.01 This Segment consists of manufacture of Presses, Contract Manufacturing (built-to-print and built-to- specifications), Process Plant Equipment, Liquified Gas Containers, Boiler Pressure Parts & Piping Spools, and Iron & Steel Castings. Each of these products are discussed in the following paragraphs.

B.02 Our products involve significant level of intellectual property in terms of design, particularly, Mechanical design, Thermal design, Pneumatics, Electrical, design, instrumentation and tribology. In addition, our products involve elaborate fabrications, welding, machining and assembly skill and skills related to foundry products.

B.03 The total revenue from this segment was 1,534 crores as against 1,298 crores in the preceding year. The profit was also higher during the financial year.

PRESSES AND CONTRACT MANUFACTURING

B.04 Our Mechanical and Hydraulic Presses find applications across many industry sectors. While Automobiles is the main industry sector for Presses, they also find applications in white goods, Defence, Railways and Refractory sectors.

B.05 The automobile sector reported growth in FY-23 as compared with FY-22. It was, however, remain relatively subdued as compared with the pre-pandemic time.

B.06 Total order booking was good which included 35% export orders.

B.07 The business unit booked following significant orders from South-East Asia, as well as Europe during the year for:

• Automated Tandem Press Line from an auto major in South-East Asia.

• 2x1000T mechanical transfer press from an auto component manufacturing company in Spain for their Indian project.

• 1500T mechanical transfer press from a customer in Europe.

• 800T progressive die mechanical press from an automotive customer in Mexico.

B.08 The business achieved significantly higher sales during the year, as compared to the preceding financial year.

B.09 We successfully commissioned a 1250T press hardening line in India manufactured in technical collaboration with AP&T of Sweden, as well as 2 nos. 1250T robotic tandem press line for our customer in South-East Asia which will create important footprint for our press business in South-East Asia and we expect to receive more serious enquiries from the region.

B.10 We expect growth in the market for presses both in India and overseas markets such as Central and Eastern Europe, South-East Asia, Mexico, Egypt, and South Africa.

B.11 We also expect growth in the non-automotive market for presses from sectors such as space, railways, and white goods.

B.12 The order booking prospects for this year appear to be better and we expect major requirements to be generated from tier-1 and tier-2 suppliers of OEMs in the automotive market.

B.13 We are working towards strengthening our after sales support in Europe through tie-up with local companies, in order to further strengthen our engagement with the customer, as well as to expand our footprint in the region.

B.14 We are developing more models of Standard Presses to expand our product portfolio.

CONTRACT MANUFACTURING:

B.15 With Isgecs processing skills in fabrication and assembly and having very large machine shop, our Contract Manufacturing business has diversified into sectors such as steel, nuclear, hydro power, space, and mining. Major orders booked include: -

• Penstock Protection Valve for a Hydro Power project from a major multinational company.

• Calendria Vault from Nuclear Power Corporation of India Limited.

• Repeat order for Driving & Tipping Station from a multinational company for a steel plant.

• Considering the good prospects in all these sectors, order booking is expected to be good during the next year as well.

PROCESS PLANT EQUIPMENT:

B.16 Our Process Equipment Division manufactures static process plant equipment which is critical to various chemical processes such as fertilizer, crude oil refinery, petrochemical, chemicals, pharma and agro-chemicals. Our knowledge of metallurgy, welding skill, as well as our manufacturing infrastructure has been recognized and acclaimed by almost all major process licensors, owners, engineering consultants and EPC companies for their requirement of following equipment: -

• Reactors

• Shell & tube heat exchangers

• Breech lock type (special closure) high pressure exchanger Pressure vessels

• Distillation and other process columns

• Liquified Gas Containers

B.17 This business closed the financial year with record order booking, major among them include:

• Lummus design proprietary SS Heat Exchanger for oil & gas project.

• Single largest order for Breech Lock Exchangers for an oil company.

• PP Reactor & Purge Bin including site fabrication for an oil company.

• High Pressure Ammonia Synthesis Loop Shell & tube Heat Exchangers from a US company.

B.18 During the year, market offered good opportunity as some major Indian refinery and petrochemical projects reached the stage of procurement resulting into very good order booking. In addition to the domestic market, we were also able to book good orders from a major customer in the US.

B.19 In future we expect steady change in the energy landscape. Given the preference for green energy and biofuel, the production of fossil fuel is expected to taper off over a period of time. This is expected to result in investment in green and blue ammonia projects and biofuels such as bio-aviation fuel, bioethanol, and biodiesel. Investment in new petrochemical projects is expected to continue, however, configuration of oil refinery is expected to get truncated substantially mainly to provide feedstock for respective integrated petrochemical units.

B.20 Government of India has also announced a plan to set up more coal to methane plants. This strategic decision has been taken keeping in view the requirement of energy security.

B.21 We are well positioned to service the equipment requirements emanating out of the expected investment in ammonia, petrochemicals, chemicals and biofuels.

B.22 We continue to be a global leader in the manufacturing and supply of liquefied chlorine containers and were successful in booking record orders for the same during the year. We are pleased to share that we added seven new customers in the international market.

B.23 In view of the very good order booking as well as expected business in coming years, we have expanded production capacity of Containers and this business is expected to perform well over the next few years.

Boiler Manufacturing & Piping (BMP):

B.24 Our BMP business unit manufactures the following:

i. Pressure parts for various boilers for our own Industrial & Green Energy boiler group as well as for external customers. Typically, the pressure parts include boiler drums, riser & downcomers, water wall panels, headers, evaporators, and superheaters.

ii. Cooling stacks for steel plants.

iii. Prefabricated piping spools.

iv. Skids & Modules.

B.25 During the financial year, this business recorded its highest production and sales thus far. In addition, some important orders were booked from new Indian and overseas customers including that of first process skid for a major Indian petrochemical project. This is a significant step towards diversification as it will help in establishing our credentials as a large skids & modules manufacturer.

B.26 Petrochemical projects, refinery expansions as well as a greenfield oil refinery offered good business opportunities and the order booking was good. Considering the future opportunities in petrochemicals, green energy, steel and cement sectors, business prospects appear good.

B.27 Consequently, we expanded its fabrication capacity for piping spools by adding production facility.

Iron Casting:

B.28 Our Iron Casting division manufactures custom-built large castings of grey & ductile iron serving a cross section of industry sectors, the major ones being chemical, steel, automotive, machine tool and paper.

B.29 The capability, skilled talent pool and infrastructure of producing intricate as well as large iron castings have been acclaimed both by Indian as well as overseas customers.

B.30 During the year, the business unit successfully delivered Checker Support Assembly for the Steel sector as a major new product. With this we expect to receive more orders for this challenging product.

B.31 In order to reduce cycle time and cost, Iron Foundry Division is working to automate the manufacturing process in the areas of pattern making, inspection of patterns and castings. We are also adopting some state-of-the art mould preparation processes.

B.32 Order booking during the year was close to the target & considering good future prospects in all the above sectors, as well as because many end users are preferring to diversify the sources away from, or in addition to China, the order book is expected to be good during the next year as well.

B.33 Although increased competition was witnessed during the year, we have not lost any major order due to the same.

Steel Castings:

B.34 Production and sales of Steel Castings increased substantially over the previous year.

B.35 Order booking for Steel Castings were the highest ever.

B.36 Due to increase in energy costs in Europe and antidumping duty by Europe on Chinese products, we booked good orders from European market for Hydro Turbine Castings, Barrel Casings for Steam Turbines, and Castings for Gate Valves.

B.37 We booked orders for Chocks for Steel Plants in the USA and Compressor Castings for Gas Turbines from Asian customers.

B.38 Market for Castings, both in India and Europe is expected to be good in the coming year.

B.39 In view of the increased demand for Machined Castings, we will be investing in some additional machines to augment our machining capabilities for Castings.

(e) Internal Control & their Adequacy:

The Internal Control Systems are adequate. The systems and processes are being continuously reviewed to improve working efficiency thereby reducing costs and timelines.

(f) Discussion on financial performance with respect to operational performance:

Financial performance and operational performance have been discussed segment-wise as well as product- wise under paragraph 3.00. Financial summary and key financial ratios have been given in paragraph 2 (h) of this report.

(g) Material Developments in Human Resources/ Industrial Relations front, including number of people employed:

The Company is proud of its talented and motivated workforce and has taken many initiatives for their development as also steps to improve productivity and enhance collaborative working.

The Company is committed to provide a conducive and protective environment to its employees, focusing on inclusive growth for employees.

(a) We are committed to treat all employees equally, regardless of race, religion, colour, sex, age, social status, etc.

(b) We also aim for protecting its employees against any harassment like bullying, intimidation, degradation, sexual harassment etc. at workplace, and have structured complaint redressal process in place.

We launched various initiatives to improve employee capabilities and collaborative working:

(a) Several behavioural and technical trainings were conducted by the Company across the Offices and Manufacturing Plants for employees including workers. The behavioural training covered topics like Personal Leadership for excellence, SelfDiscipline, Stress Management, Time Management, Conflict Management, Transforming through Positive Mindset.

(b) Training programs on "Coaching and Mentoring teams" and on "Managing for Results".

(c) Technical Trainings covered various topics such as Review of Design Calculations/Drawings, Planning & Execution, Welding, Crane & Lifting Safety, Selection of Centrifugal and EHS training etc.

We launched various initiatives to improve employee engagement. Several health camps, training sessions through Webinars on wellness, stress management and workplace ergonomics through renowned doctors and psychologists, periodic Yoga classes by experts for a healthier workforce in the Company. This included fitness challenge program as well.

We celebrated major festivals and events like Holi, Diwali, Independence Day, Republic Day, New year eve, Womens Day etc. and engaging larger work force through various cultural programs. We also organised a webinar on "Woman hood" on the eve of womens day.

To enhance team spirit, the Company took employee engagement initiatives such as webinars on "Teamwork".

The Company organised various sports events/team games and other cultural events to promote bonding and team spirit.

Employee attrition has been high during the year (approximately 16%). It is more at the junior levels. Senior level staff has been selectively stable and is much higher for junior management/executives levels.

Substantial capacity expansion/investments in capital goods sector have resulted in creation of additional jobs and demand for experienced engineers and managers in the market. Oil & Gas market is booming, and many employees have been poached by MNCs.

Some of the HR interventions taken by the Company including employee engagement programmes, skill upgradation training, nominating managers to

Management Development Programmes at premier business schools and specific training to Head of Departments on Coaching and Mentoring to engage and guide their team members, are giving positive results.

Compensations at selected levels have been increased, and additional one-time bonus compensation for high performance employees and high potential employees have been introduced.

We are also undertaking "Compensation Benchmarking" and "Employee Experience Survey" through specialised consultants to identify steps to be undertaken for improving employee retention, considering that the job market for employees with our skills set and experience is going to be good for the next couple of years.

The above initiatives ultimately help to boost the employee morale and employee bonding and help improving retention of employees.

(h) 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 thereof enclosed as Schedule - I.

(i) Details of any change in Return on Net Worth as compared to the immediately previous financial year along with as detailed explanation thereof enclosed as Schedule - I.

3.00 REPORT ON THE PERFORMANCE AND FINANCIAL POSITION OF SUBSIDIARY AND JOINT VENTURE COMPANIES:

(A) Saraswati Sugar Mills Limited (Wholly Owned Subsidiary Company):

(1) It was an excellent year for the company.

(2) The total revenue increased by 49% to 986 crores against 662 crores in the previous year. Revenue for sugar segment was 768 crores versus 608 crores last year. Revenue from Ethanol segment was 218 crores versus 54 crores last year. This was the first full year of operation for the Ethanol Distillery unit.

(3) Profit before tax increased by about 65% to 89.82 crores against 54.43 crores in the previous year.

(4) The revenue and profit have been higher due to:

(i) Higher domestic and export sale of sugar;

(ii) Slightly better sugar price realization; and

(iii) The ethanol distillery unit contributed significantly (22%) to the revenue.

Sugar Scenario:

(5) The current seasons sugar production is estimated to be 328 lakh tonnes for the sugar season 2022-23 (October - September), after diversion of about 40 lakh tonnes of sugar to ethanol.

(6) Indian Sugar Balance (Lakh Tonnes):

(October-September)	2021-22	2022-23 (estimated)
Opening Stock	82	55
Sugar production	358	328
Sugar Consumption	273	275
Sugar Export	111	62
Closing Stock of Sugar	55	47
Closing Stock as % of Sugar Consumption	20%	17%

(Source: Indian Sugar Mills Association)

(7) The Central Government continued with the policy of Monthly Release Mechanism under which Mills are not allowed to sell more than the released quantity for that month.

(8) The Central Government also continued with the policy of Minimum Sale Price (MSP), below which the Sugar Mills are not allowed to sell. MSP applicable during the year under report was 3,100/- per quintal. There has been no increase in MSP since February 2019 in spite of repeated representations by the industry.

(9) The domestic sugar prices are, however, prevailing at a reasonable level due to exports and decline in the closing stock of sugar, as explained above.

Fair and Remunerative Price (FRP) of Sugarcane and State

Advised Price (SAP):

(10) The Fair and Remunerative Price (FRP) for procurement of sugarcane was increased by the Government of India from 290/- per quintal linked to basic recovery of 10% for season 2021-22 to 305/- per quintal for sugar season 2022-23 linked to a basic recovery of 10.25%. In addition, a premium of 3.05 per quintal is payable for every 0.1% increase in recovery over 10.25%.

(11) Initially, the Haryana Government had announced the SAP of 362/- per quintal for 2022-23 season (same as SAP for season 2021-2022).

(12) A protest against the cane price fixed by the state government led to a strike by farmers. The dispute was not with us and our relations with agriculturists remained cordial. The mill was simply a convenient venue to register their resentment.

(13) In response to the cane farmers strike, which lasted for about one week, the Haryana Government increased the SAP by 10/- per quintal and the applicable SAP for Haryana for this season is 372/- per quintal of sugarcane for Early Variety and 365/- per quintal of sugarcane for Other Varieties.

OPERATIONS:

Sugar Factory:

(14) The sugar factory commenced crushing earlier than usual this year on November 08, 2022.

(15) The working of the Plant and Machinery was very good. Factory efficiency was highly satisfactory.

(16) This was the second year when we are producing B-Heavy Molasses for the Ethanol Plant.

(17) The crushing for the year is higher than the last year at 16.62 lakh tonnes compared to 16.22 lakh tonnes in the previous year.

(18) Sugar recovery is also higher at 9.74% compared to 9.51% for the previous year. Sugar recovery, in both the current season and the previous season, was lower by an estimated 1.60% due to production of B-Heavy Molasses for the Ethanol Plant.

(19) The quantity of sugarcane crush was lower than expected, in spite of earlier start and in spite of cane area being higher by 7%, because the cane yield was 9% lower than previous year. The cane yield was lower due to higher incidence of diseases mainly Top Borer and Pokkah Boeng in some of the cane varieties. Cane crushing was also stopped for about a week when the farmers were on strike seeking higher State Advised Price for sugarcane.

(20) The Statistical position with respect to our factory is given below: -

Particulars	Sugar Season (October to September)
Saraswati Sugar Mills (SSM)	2022-23	2021-22
Date of Start of crushing operations by SSM	08.11.2022	26.11.2021
Date of Close of crushing operations by SSM	08.05.2023	10.05.2022
Cane Crush by SSM (Lakh Tonnes)	16.62	16.22
Sugar Recovery (%)	9.74%	9.51%
Sugar Production of SSM (Lakh Tonnes)	1.61	1.54

Sugar Export:

(21) Sugar export from India in the previous year was at all time high at 11.2 million tonnes. For the current season, the Government only permitted sugar exports of 6 million tonnes keeping in view the demand-supply situation in the country.

(22) We were also allocated export quantity of 32447 tonnes. We exported 15900 tonnes of raw sugar through a Merchant Exporter and exchanged the balance export quantity of 16547 tonnes with domestic quantity of another mill in exchange for a premium.

Ethanol Plant:

(23) This was the first full year of operations for the Ethanol Plant.

(24) The working of the Plant has been good, and it is operating at 100% capacity.

(25) All the parameters, viz. energy consumption efficiencies, etc., are being achieved as per the norms. The effluent generated from the plant is being utilized in the incineration Boiler with the support fuel, to generate steam and power in the Turbine. A complete scheme of Water Treatment is being operated to successfully achieve Zero Liquid Discharge (ZLD).

Next Season:

(26) We expect to have a comparatively higher quantity of cane crush in the next season and hope to start the plant even earlier than this year.

(27) Domestic sugar prices are likely to be at a reasonable level in the next year, considering the factors given below:

(a) Decline in closing stock of sugar.

(b) Increased focus on Ethanol production resulting in diversion of more sugarcane to Ethanol.

(c) Increase in International prices which are now the highest in last 10 years.

(28) In order to improve efficiencies in the Ethanol Plant, its capacity has been expanded from 100 KLPD to 160 KLPD. We are awaiting permission from the Excise Department to start operating at the higher capacity.

(B) Isgec Hitachi Zosen Limited (Subsidiary and Joint Venture Company):

(1) The total revenue for the year was 596 crores as against 324 crores in the preceding year.

(2) The profit before tax was 10.95 crores as against 5.61 crores in the previous year.

(3) As mentioned in the last years report, the profitability was adversely impacted due to steel prices and the material cost of items ordered after March 2022 on account of the war between Russia & Ukraine.

(4) Also, we had an adverse impact on the profit due to the increase in freight cost of the Vacuum Gas Oil Reactor and Coke Drums for Rajasthan Refinery.

(5) Important supplies during the year were: -

(a) An LC Fining Reactor for the Residue Upgradation facility of an oil refinery project in India.

(b) Two Duplex Stainless Steel-Clad Columns for a 2G Ethanol Project in India.

(c) Nine Reactors & Five Columns to JGC, Japan for an oil refinery projects in middle east.

(d) A Tube Bundle for a Reformer Exchanger with Refractory Lining on the Tube Sheet for a renowned Ammonia Process Licensor and received a repeat order for the same.

(e) A PTA Reactor to Petrochemical project in Eastern India.

(6) Orders in hand at the end of the year are low as several projects which were to be finalized in the 3rd & 4th quarters of the year have been deferred or put on hold.

(7) However, a substantial number of these projects are expected to finalize their orders early this year.

(8) We expect this year to be better in terms of projects that can provide us business as compared to the year 2022-23.

(C) Isgec Titan Metal Fabricators Private Limited (Subsidiary and Joint Venture Company):

(1) Total revenue of the company during the financial year was 63.5 crores as against 41 crores in the preceding year. Profit was 9.03 crores as against 6.94 crores during the preceding year.

(2) Order booking was good, and company received some breakthrough orders, major among them being as High Thick Inconel Jacketed Reactor, Zirconium Condensers & Ejectors as well as Titanium Agitated Reactors.

(3) The company successfully completed and delivered the following major equipment during the financial year: -

• Large Titanium Clad Colum involving site joint.

• Anodized Titanium Heat Exchanger.

• Titanium Vessels for Malaysia.

• Inconel Tubular Reactors.

• Eight Titanium Exchanger for PTA Plant as per Ineos licensed process.

• Zirconium Internals for falling film evaporator.

(4) Chemical industry comprising of speciality chemical, Active Pharmaceutical Ingredients (API) and agro

chemicals are poised for double digit growth in coming years and consequently the order booking prospects for the company appear good.

(D) Isgec Redecam Enviro Solutions Private Limited (Subsidiary and Joint Venture Company):

(1) Total revenue of the company during the Financial Year was 14.47 crores as against 37.12 crores in the preceding year. Profit was 0.47 crores as against 1.46 crores during the preceding year.

(2) The financial year completed was challenging but the company could overcome many executions related issues and now we are getting recognised as good supplier in Indian Industry.

(3) We are well recognised as key turnkey solution provider for bag filters in steel sector. We have successfully commissioned few projects for a major steel conglomerate and are currently executing a number of projects for their different units.

(4) Based on our success in steel sector, we have received good enquiries for bag filters from many steel plants.

(5) Important Semi Dry FGD (DFGD) projects are under execution. Once commissioned, we shall be able to demonstrate our success in addressing DFGD requirements for smaller capacity power plants.

(6) We have received few enquiries from market for the MSW plants which we are bidding currently.

(7) We have started receiving enquiries from cement plants for process and nuisance bag filters.

(8) We expect to continue to get business from Steel & Cement sectors.

(E) Isgec SFW Boilers Private Limited:

(1) The total income and profits before tax were higher than last year. The total income was 13.88 crores against 10.50 crores in the preceding year and the profit before tax was 4.14 crores against 3.04 crores last year. The capacity utilization was at 85%.

Capability enhancement:

(2) As a result of training received from the Joint Venture Partner SFW over the years, the company in addition to detail engineering, is carrying out in basic design of Steel structure, Piping, Pressure Parts, Non-Pressure Parts and Electrical Instrumentation & Control for multiple projects. Finite element Analysis capability has been established in the company during the year, and work on engineering of complex plated structure was also performed.

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(3) With a view to adopt the latest engineering practice of SFW in 3D plant modelling the company has started working on new projects using Cadmatic plant design modelling software after undergoing training.

(4) Due to anticipated increase in workload, both manpower and hardware/software were added. In the context of emerging market conditions, the company has initiated various measures to improve retention of trained and talented employees. As part of these measures, a satellite office of the Company has started functioning in Chennai.

Next Year:

(5) The Company is expecting new project work assignments from the Joint Venture Partner.

(F) Eagle Press & Equipment Co. Limited (Wholly Owned Subsidiary Company):

(1) Total revenue of the company during the Financial Year was 135.73 crores as against 98.89 crores in the preceding year. Loss was 10.36 crores as against loss of 14.46 crores during the preceding year.

(2) Operations for the first half year at Eagle Press were adversely affected because of Chip shortage which severely affected majority of Companys customers in the Automobile sector resulting in reduced sales and workload.

(3) In the second half of the year, order booking picked up and the Company booked orders worth about Canadian Dollars 25 million.

(4) There are strong pipeline of sale leads and the company is expected to continue to book new orders in the current year.

(5) Steps to take up value engineering, control purchase costs, as well as operational costs have been taken. We expect next year will be much better considering that there are good orders in hand and a good pipeline of sales leads.

(G) Cavite Biofuel Producers Inc. (CBPI):

(1) During the year we started construction to complete the CBPI plant and hope to complete it in the next few months.

(2) To meet the construction cost, a loan of Philippine Pesos 1152 million (about 175 crores) has been sanctioned by Standard Chartered Bank, Philippines.

(3) Apart from the security of assets of CBPI, the loan is secured by Stand-by Letter of Credit issued by Standard Chartered Bank-India, out of our Non-Fund based limits. Half of this loan was drawn in FY 23 and the balance is expected to be drawn in the first quarter of this year.

(4) We are preparing to run the plant once it is commissioned.

(H) Other Wholly Owned Subsidiary Companies:

(i) Free Look Software Private Limited and Isgec Exports Limited:

There was no commercial activity during the year.

(ii) Isgec Engineering & Projects Limited:

There was no commercial activity during the year except letting out of property at Kasauli.

(iii) Isgec Covema Limited:

The Company continued to execute orders for the Erection and Commissioning of Boilers. Financial results were satisfactory. Turnover was 90.95 lakhs against 1214.86 lakhs last year. There was a loss of 1.27 lakhs before tax as compared to profit of 310.59 lakhs last year.

4.00 TECHNOLOGY:

4.01 The Company entered into a technology backup agreement with an overseas company for Hot Electrostatic Precipitator for a Copper Smelter project during the year.

4.02 We have signed a technology backup agreement with another overseas company for Wet Electrostatic Precipitator for a Copper Smelter project during the year.

4.03 We have entered into a strategic collaboration agreement with United Conveyor Corporation, USA for Ash handling Packages for thermal power projects.

4.04 We have begun work on Industry 4.0 solutions for presses.

4.05 We have developed the capability to supply complete solutions consisting of Press, Die and Automation systems for making refractory bricks.

4.06 Isgec has designed a fully Automated Part Handling System for 1500T Hydraulic Press. The system consists of 3 Axis Destacker, 3 Axis Transfer, Magnetic Grippers, Automated Shuttles and Rotary Stacker System.

PARTICULARS REQUIRED UNDER RULE 8 (3) OF THE COMPANIES (ACOUNTS) RULES, 2014:

A. CONSERVATION OF ENERGY:

The steps taken or impact on Conservation of Energy:

Steps taken towards ensuring conversation of energy is a continuing process. The steps taken for meaningful impact on Conservation of Energy during the year are as under:

(a) Steps to save energy:

1. We continued to replace inefficient and high- power consumption equipment with energy efficient equipment using 3R technique (reduce, reuse and recycle).

2. We have been replacing our lower rating air conditioners with five-star air conditioners. During the year 25 air conditioners were replaced. A total of 156 air conditioners have been replaced in the last few years.

3. We replaced rotary high frequency converters with in-house developed static high frequency converters, which will reduce power consumption by about 32000 KWs per year.

4. We replaced the convention DOL with AC Drive panel on some of the machines and equipment, which will save about 10000 KWs per year.

5. We have installed natural draft cooling tower without motors in place of motorized cooling towers in the Foundry shop, which will save about 61000 KWs per year.

6. We replaced old TIG & MIG welding machines with high efficient IGBT controlled machines, which will save about 21000 KWs per year.

7. We have installed HVLS Fans in place of Wall Fans, which will save about 14000 KWs per year.

(b) Steps taken by Company for utilizing alternate sources of energy:

1. We have 1750 KW Solar Power Plants installed in our Yamunanagar and Rattangarh factories. These generated 20.78 lakh units worth 1.56 crores. Solar Power provides clean energy and results in reducing carbon footprint.

(c) Capital investment in Energy Conservation: 37.60 lakhs

B. TECHNOLOGY ABSORPTION:

The efforts made towards technology absorption:

(a) The Company has following Technology Agreements: -

1. Boilers:

(i) With Sumitomo SHI FW Energia Oy, Finland:

• For Circulating Fluidized Bed Combustion (CFBC) Boilers up to 150 Mwe (since renewed in April 2022 and Capacity enhanced from 99.9 Mwe to 150 Mwe).

• For Reheat design for CFBC Boilers up to 100 MW.

(ii) With BHI FW, Korea:

• For Pulverized Coal Fired Sub-Critical Boilers and Super-Critical Boilers (60 Mwe to 1000 Mwe).

(iii) With Amec Foster Wheeler Energia S.L.U, Spain (Woods plc.):

• For Oil & Gas Shop Assembled Water Tube Packaged Boilers up to 260 Tonnes per hour.

(iv) With Siemens Heat Transfer Technology b.v. Netherlands

• For design, fabrication and installation of Drum type Heat Recovery Steam Generators.

2. Air Pollution Control Equipment:

(i) With Fuel Tech Inc., USA, for Selective NonCatalytic Reduction (SNCR) systems for reduction of Nitrogen Oxides for various applications including Power, Cement and other Industries.

(ii) With Babcock Power Environmental Inc., USA, for Wet Flue Gas De-sulphurisation systems for reduction of SO2 produced by steam generators having gas flow equivalent to 100 Mwe.

(iii) With Sumitomo SHI FW Energia Oy, Finland, for Circulating Fluidized Bed Scrubbers for Power Plants and Industrial Purposes for reduction of SO2.

(iv) With United Conveyor Corporation, USA, for Dry Sorbent Injection (DSI) Technology for removal of SOx generated from thermal power plants.

(v) With BHI FW Corporation, USA for Combustion Modifications (TLN Retrofit) for reduction of NOx generated from Tangentially fired Pulverised Coal (PC) Boilers.

3. Presses:

With AP& T., Sweden, for Hot Stamping Presses.

4. Process Equipment:

(i) With TEi, USA, for Screw Plug Heat Exchangers and Process Waste Heat Boilers.

(ii) With CB&I Technology Inc. (formerly, CB&I Lummus) for design and manufacture of Helix Heat Exchangers.

(iii) With Amec Foster Wheeler Energia S.L.U, Spain (Woods plc.), for Feed Water Heaters and Surface Condensers. The technology under these Agreements is being progressively absorbed by transfer of know-how and software, designs, and through deputing our personnel for training at the shops, offices and installation sites of our collaborators. In case of clarifications, the designs are vetted by the collaborators. This process continued during the year.

(b) During the year, the Company entered into the following new technology agreements:

Strategic Collaboration and Licensing Agreement with United Conveyor Corporation, USA for Ash handling Packages for existing and upcoming Thermal Power Plants.

(ii) In case of imported technology (imported during the last three years beginning of the financial year):

The Company did not import or buy any technology as such during the previous three financial years. However, it entered into Technical Collaboration Agreements as per details given below:

(a) Details of technology imported	From BHI FW Corporation, USA for Combustion Modifications of Tangentially Fired PC Boilers.	From UCC Environmental, USA, for Dry Sorbent Injection (DSI) Technology.
(b) Year of Import	Year ended 31st March 2021.	Year ended 31st March 2022.
(c) Whether technology has been fully absorbed.	Not yet.	Not yet.
(d) If not fully absorbed, areas where absorption has not taken place and the reasons thereof.	One Order under this agreement was received during FY 23 for 6 T-fired PC Boiler Units and these are currently being executed with this technology. The technology has been partially absorbed based on training sessions conducted by the Licensor and is being utilised in order booked during FY 23.	The agreement has been entered into recently. Technology will be partially absorbed on successful commissioning of the projects under execution. Orders were booked in FY 23 for 6 Units of 210 MW each.

C. FOREIGN EXCHANGE EARNINGS AND OUTGO: (in terms of actual inflows and actual outflows)

Total foreign exchange earnings and outgo (2022-23) - Cash basis	(Amount in )
- Total foreign exchange earnings	5,73,82,39,468
- Total foreign exchange outgo	2,09,61,75,310