Rane Holdings Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

1. Company Overview

Founded in 1929, Rane Holdings Limited, through its Group Companies is engaged in the manufacturing and marketing of automotive components for the transportation industry. The Group is a preferred supplier to major OEMs in India and abroad. The group Companies, manufacture Steering and Suspension systems, Friction materials, Valve train components, Occupant safety systems, Light metal casting products and Connected mobility solutions. The products serve a variety of industry segments including Passenger Vehicles, Commercial Vehicles, Farm Tractors, Two-wheelers, Railways and Stationary Engines. With modern manufacturing facilities across 25 locations in India and one in the USA, Rane Groups products are sold across 30+ countries.

2. Economic Review

2.1. Global Economy

The global economy is estimated to have grown by 3.4% in 2022 on the back of slowdown in the US and European economy and lockdowns in China due to zero Covid policy adopted by the government. Global manufacturing and trade activity weakened amidst slowing demand due to aggressive global rate hiking cycle adopted by central banks to curb inflation. US manufacturing activity grew at a slow pace as new orders contracted amid increase in interest rate by the Federal Reserve to tam e inflation. Europe grappled with high energy prices resulting in slowdown in economic activity and led to decline in business and consumer confidence. Covid-19 outbreaks and subsequent lockdowns hurt consumer spending in China and disrupted global supply chains.

The global economic activity is witnessing downturn amidst high inflation and resulting tighter monetary policy, geopolitical tensions which has disrupted supply chain and led to unprecedented rise in prices. The global growth is estimated to slow to 2.8% in 2023. The growth in the US economy is expected to decelerate to 1.6% in 2023 on the back of declining real disposable income and subdued demand amid tighter policy environment. Growth in China is expected to revive to 5.2% in 2023 due to the easing of stringent pandemic related restrictions, favourable policy support from the government and benefit of a low base in 2022. While the historic global tightening could rein in inflation, it could also restrict economic growth in the US and Europe.

2.2. Indian Economy

Indian economy continued to be one of the fastest- growing major economies despite growing at an estimated 7.2% in FY23 and has shown higher resilience to global shocks on the back of strong government capital spending and private demand. The growth momentum was supported by recovery in the labour market and increasing credit to the private sector. However, the growth was slightly impacted due to ongoing policy tightening to curb high inflation. Weakening of the rupee and high oil prices continued to exert upward pressures on inflation and along with geopolitical uncertainty, dampened growth momentum in the manufacturing and mining sectors. However, agriculture, electricity, construction, and services sector witnessed robust growth amid persistent global headwinds and business sentiment and consumer demand remained relatively strong.

According to International Monetary Fund (IMF), Indias GDP growth is expected to moderate to 5.9% in FY24 on the back of weaker external demand and tighter financial conditions. The RBI is likely to shift its stance from policy tightening to growth considerations once inflation cools off. The growth dynamics remain strong and economic growth momentum is likely to be boosted by growth in services activity, uptick in government capital expenditure and pick up in manufacturing activity. India continues to remain a bright spot amidst global uncertainties and the domestic demand-led economy is less likely to be impacted by the global slowdown. Moreover, increased infrastructure spending along with various supportive measures by the government is likely to support private investment and increase in manufacturing activities. However, sharp global growth slowdown along with supply chain disruptions due to intensifying war in Ukraine could disrupt global food and energy prices and weigh on export and investment growth thereby impacting Indian economy.

3. Industry Review

3.1. Global Automobile Industry

The U.S. auto industry posted its lowest sales in more than a decade with new-light vehicle sales declining by 8.2% YoY to 13.7 million units due to semiconductor shortage and other supply chain related issues which impacted production volumes. Electric-vehicle sales accounted for nearly 6% of the retail market in the U.S. in 2022, up from about 3% in the prior year. The National Automobile

Dealers Association (NADA) expects the U.S. new- vehicle sales to increase by 6.6% to 14.6 million units in 2023 despite higher borrowing costs on the back of resolution of supply chain constraints and considerable pent-up demand in the market.

According to European Automobile Manufacturers Association (ACEA), the European Union passenger car market contracted by 4.6% to 9.3 million units in 2022 on the back of ongoing supply chain pressures amidst geopolitical conflicts between Russia and Ukraine. Production constraint due to semiconductor shortage impacted supply side during the first half of the year while slowdown in the economy and rising interest rates impacted consumer confidence thereby slowing down demand. The auto volume is expected to pick up in 2023 on the back of easing of supply bottlenecks. However, the demand side could face headwinds in the form of slowdown in economic activity, high interest rate and fuel cost leading to decline in consumer confidence.

The global automotive industry faced headwinds in the form of weakening macroeconomic environment, supply chain disruptions, tighter monetary policy and diminishing consumer demand. Pressures due to elevated energy prices, high cost of production and slowing demand impacted the industry. Amidst these challenges, adoption of electric vehicles accelerated during the year on the back of various stimulus measures by policymakers globally to meet decarbonisation targets. The industry is at a crossroad and is witnessing disruptions across technology, vehicle connectivity and consumer preferences. Aggressive EU policy to cut emissions from cars and vans is likely to lead to quick transition to electric vehicles. Shift towards greener transportation medium and increasing adoption of technology such as integration of autonomous features across safety, driving and parking will play an increasingly important role in paving the path to the future for the industry.

3.2. Indian Automobile Industry

The Indian automobile industry witnessed robust growth during the financial year after having faced slight hiccups in the previous year due to pandemic induced supply chain disruption and higher commodity cost.

The Passenger Vehicles (PV) segment achieved a new peak volume due to the launch of new models, continuous supply improvement, and robust demand for UVs, resulting in healthy bookings. The PV segment registered a volume increase of 25%. Utility vehicles (UV) segment continued to witness strong demand led by new launches and better technologies resulting in volume growth of 33% whereas the Passenger Cars (PC) segment volume increased by 18%. Rising cost of ownership for entry segment cars has been a major deterrent for pick-up in demand despite higher discount levels.

Pick-up in economic activities and infra push by the government led to improved demand in the infrastructure and construction sectors resulting in improved freight availability, better fleet utilization, pick up in replacement demand and increasing demand for e-commerce and last-mile delivery. As a result, Commercial Vehicles (CV) segment witnessed volume growth of 28%. In addition, opening of school and offices also supported the demand in the bus segment. The Medium and Heavy Commercial Vehicles (M&HCV) segment continued to experience positive momentum and registered an increase of 37% due to improving fleet operators profitability and better fleet utilization levels on the back of pick up in infrastructure activities. Demand for M&HCVs also benefitted from the rise in construction activity, especially in the residential housing segment. The Light Commercial Vehicles (LCV) segment reported volume growth of 29% on the back of surge in e-commerce and better last mile connectivity. The Small Commercial Vehicles (SCV) segment reported volume growth of 11%.

Despite price hikes taken by OEMs and increase in interest rates, Tractors experienced 11% growth on the back of better crop realization and reached alltime high volumes. Although weak exports along with elevated cost of ownership impacted off-take in volumes, the two-wheelers segment witnessed 10% growth on the low base supported by a good festive season and increasing consumer interest in EVs.

Industry Segment (Production figures)	Growth in % (YoY change)
Vehicles J	FY23	FY22
Passenger Cars (PC)	18	4
Utility Vehicles (UV)	33	43
Multi-Purpose Vans (MPV)	23	7
Passenger Vehicles (PV)	25	19
Small Commercial Vehicles (SCV)	11	24
Light Commercial Vehicles (LCV)	29	18
Medium & Heavy Commercial Vehicles (M&HCV)	37	50
Commercial Vehicles (CV)	28	29
Farm Tractors (FT)	11	(3)
Two Wheelers (2W)	10	(0)

Source: Society of Indian Automobile Manufacturers (SIAM)

3.3. Indian Automotive Aftermarket Industry

The Indian automotive aftermarket witnessed steady growth with easing of supply chain challenges. Despite the headwinds faced on account of commodity challenges, the demand continued to be robust due to increased investment in infrastructure and agricultural sector. The recovery of expansion of STU with enhanced running of buses helped in further demand improvement in CV segment. For the majority period of the year, cash flow issues were not there in the market which is one of the critical factors for this business segment.

The Indian garages have embraced digitalization to obtain the maintenance/spares information and technical support with higher quality and efficiency. The digital touchpoints provide differentiated opportunities for the highly competitive auto aftermarket. The automotive aftermarket has rapidly adapted to digitalization and e-commerce post the pandemic and is catering to the needs of the new- age customers who prefer to book a repair online as opposed to going to the workshop. As such, the future prospects for the industry looks promising as the sector continues to adapt to innovative technologies and improved logistics. Changing demographics of the end user, emergence of new sales channel such as online retailers and multi-brand outlets, higher use of technology and penetration of service markets to smaller towns bodes well for the growth of the industry.

3.4. Indian Auto Component Industry

The Indian auto component industry continued on the growth trajectory backed by strong performance in exports and resurgence in the domestic OE and aftermarket segments. Easing of supply chain issues and commodity inflation coupled with premiumization of vehicles supported growth. Moreover, gradual shift towards electric and hybrid cars has opened up newer opportunities for auto component industry which augurs well for the industrys growth prospects. The industry continues to focus on deep-localisation and leverage policy initiatives such as PLI schemes announced by the Government to enable the creation of world class automotive value chain and leapfrog the country into a global manufacturing hub for auto components.

The Indian auto component industry continues to benefit due to realignment of supply chain outside of China. India is well-positioned to capitalise on this trend on the back of lower labour cost, development of local supply chain ecosystem and technical knowhow gained over the years in manufacturing complex products.

The industry has left behind headwinds such as chip shortage and higher commodity cost. New regulations around vehicle safety related and transition to Bharat Stage VI Phase 2 emission standards will increase the content per vehicle thus benefiting the Indian auto component manufacturers.

4. Business Review

4.1. Rane Holdings Limited (RHL)

Operational Highlights

• The Group Companies registered a sale of 6,690 Crores.

• Continued to engage in various lean measures to improve productivity.

• I mplemented strategic savings initiatives on power, sourcing etc., at the group level.

• RHL increased its shareholding in Rane Engine Valve Limited (REVL).

Financial Highlights

Standalone Financial Highlights

• Total Revenue was 118.19 Crores for FY23 as compared to 109.24 Crores for FY22, an increase of 8.19%.

• Operating revenue increased to 117.66 Crores in FY23 from 88.80 Crores in FY22 due to higher dividend income, Service fee and trademark fee from Group Companies.

• Other income decreased to 0.53 Crores in FY23 from 20.44 Crores in FY22. There was a one-off income of 19.70 Crores during previous year FY22 on account of transfer of 1% shareholding in ZF Rane Automotive India Private Limited.

• EBITDA stood at 71.93 Crores as compared to 74.46 Crores during FY22, a decrease of 3.40%.

• EBITDA (after exceptional item) stood at 69.01 Crores as compared to 56.65 Crores during FY22, an increase of 21.82%.

• Net profit stood at 48.30 Crores for FY23 as compared to 33.88 Crores for FY22.

An impairment provision of 2.92 Crores has been made on account of investment in a subsidiary, Rane t4u.

Consolidated Financial Highlights

• Total revenue was 3,537.46 Crores for FY23 as compared to 2,714.66 Crores for FY22, an increase of 30.31%.

• EBITDA stood at 348.61 Crores for FY23 as compared to 203.07 Crores for FY22, recording an increase of 71.67%.

• Net profit stood at 87.31 Crores for FY23 as compared to a profit of 35.06 Crores for FY22.

Standalone

Sl. No.	Ratios	March 31, 1 2023	March 31, 2022	Reason for change in FY 23
1	Debtors Turnover (turns)	12.29	8.81	Improved collection process as on March 31, 2022.
2	Current Ratio	1.02	0.37	Increased investment in mutual fund and increase in trade receivables as on March 31, 2023.
3	Operating Profit Margin (%)	57%	80%	The profitability margins increased on account of increased Dividend income, Trademark fee & service fee income.
4	Return on Networth (%)	9%	7%

Consolidated

Sl. No.	Ratios	March 31, 1 2023	March 31, 1 2022:	Reason for change in FY 23
1	Interest Coverage ratio (turns)			The improvement is on account of increase in consolidated sales volume which in turn resulted in higher profitability through better absorption of overheads.
2	Operating Profit Margin (%)	5.9%	2.50 %
3	Net Profit Margin (%)	2.49%	1.31%
4	Return on Networth (%)	11.02%	4.55%

4.2. Subsidiary Companies

4.2.1.Rane (Madras) Limited (RML)

Operational Highlights

• The demand for the Steering and Linkages business was strong throughout the year across all the segments / product lines.

• All plants achieved their best ever performance with Sales, Cost, Delivery and Quality across customers and geographies.

• New plant at Maraimalai Nagar acquired from M/s. Yagachi Technologies Private Limited completed its first full year of operation. This plant was integrated with Varanavasi Plant to bring in operational and cost efficiencies.

• RML has won the following awards from customers:

o Overall best performance award from Maruti Suzuki

o Best Kaizen award from Ashok Leyland

o And several National / Regional awards from ACMA / Quality forums

o "Great place to work" for the 5th consecutive year.

• In the Light Metal Casting business, the initiatives taken to improve the availability of the machines helped to improve the Overall Equipment Effectiveness (OEE) enhancement of die casting machines and thereby improving the capacity.

• Light Metal Casting business in India is in the process of launching several new programs to SOP in the FY 23-24 which will further improve its capacity utilization and revenue growth.

Rane Light Metal Castings Inc., USA (LMCA)

The management has been focusing in the last couple of years on business development for future and operational improvements. The former initiative has had reasonable success. The latter has helped in improvement of Q, C and D metrics. However, the recovery post Covid in the US market has not happened. While the semiconductor shortage has somewhat eased, the US auto industry has entered into a phase of slowdown. This has resulted in poor offtake in the new business developed and even existing products. The turnaround planned in the subsidiary has had a major setback. RML board is closely monitoring the situation and has decided to restrict future investments and also review the best decision regarding the future of this business in the long term interests of RML.

Financial Highlights Standalone Financial Highlights

• Total revenue was 2,135.50 Crores for FY23 as compared to 1,561.79 Crores for FY22, an increase of 36.73%.

o 39% growth in the Indian market - Experienced volume increase across segments.

o 17% growth in the Aftermarket business.

o 41% growth in the exports market due to increase in sales in steering and linkage products.

• EBITDA stood at 228.42 Crores as compared to 133.63 Crores during FY22, an increase of 70.94%.

• Net loss stood at 126.54 Crores for FY23 as compared to a profit of 36.61 Crores for FY22.

Consolidated Financial Highlights

• Total revenue was 2,372.30 Crores for FY23 as compared to 1,747.64 Crores for FY22, an increase of 35.74%.

• EBITDA stood at 200.36 Crores as compared to 79.47 Crores during FY22, an increase of 152.12%.

• Net profit stood at 30.02 Crores for FY23 as compared to Net profit of 10.66 Crores for FY22.

4.2.2. Rane Engine Valve Limited (REVL)

Operational Highlights

• To mitigate EV related risk, sales to nonautomotive customers grew by 52%.

• R&D proactively engages with customers to focus on EV-insulated segment.

• Working on various projects with major OEMs on Hydrogen as fuel for IC engines.

• New products approvals from prestigious customers were received by the Company for series production in 2023-24.

• REVL received Customer Awards from Volvo Eicher Power Train, Hyundai Motor India Limited and Honda Motorcycle and Scooter India.

Financial Highlights

• Total revenue was 499.63 Crores for FY23 as compared to 384.95 Crores for FY22, recording an increase of 29.79%.

• Sales to Domestic OE customers grew by 29% due to improved demand across all segments despite industry head winds.

• Sales to Domestic Aftermarket segment grew by 7%.

• In the Exports market, OEM sales grew by 42% due to increase in off take by OEM customers. Export aftermarket sales grew by 33% due to increase in demand from major customers in Europe & USA.

• EBITDA stood at 36.22 Crores as compared to 16.43 Crores during FY22, an increase of 120.45%.

• Net loss stood at 0.06 Crores for FY23 as compared to 11.86 Crores for FY22.

4.2.3. Rane Brake Lining Limited (RBL)

Operational Highlights

• Capacity enhancement through various automation projects across all manufacturing locations.

• Implementation of various productivity improvement projects resulting in cost optimization.

• Installed 1 MW Solar Plant at Hyderabad Plant. RBL created own generation of overall renewable energy of 4.2 MW.

• Received Customer Awards from Brakes India and Endurance Technologies.

Financial Highlights

• Total revenue was 607.07 Crores for FY23 as compared 518.19 Crores for FY22 recording an increase of 17.15%.

• Domestic OE sales registered a 19% increase. The market drop was partially mitigated through volume enhancement in Two Wheeler segment.

• The Aftermarket business increased by 20%.

• EBITDA stood at 64.63 Crores as compared to at 56.77 Crores during FY22, an increase of 13.84%.

• Net profit stood at 33.46 Crores for FY23 as compared to 27.07 Crores for FY22.

4.2.4.Rane t4u Private Limited (Rt4u)

Industry performance FY 2022-23

Logistics / Transportation is the lifeline of modern economy. India is taking huge steps in streamlining this sector. The road sector in India which is a critical part of Logistics / Transportation is attracting huge investments apart from EV eco-system being promoted by all state & central governments. The emphasis on efficient and cost-effective mobility solutions for people both in urban and semi urban areas is increasing.

All these developments are pushing up the digitalization of transportation services and hence IOT / Telematics based services are witnessing growth.

Operational Highlights

Rt4u business was negatively impacted in FY22-23 particularly in Karnataka Sand mining and EV Battery OEM space as compared to previous year. Sand mining activities in Karnataka were stopped in coastal areas due to hold by environmental agencies. EV Battery IOT business could not be achieved as EV industry is going through revised AIS156 norms. Logistics segment & International business have done well and new customer locations were added. The board of the Company is closely monitoring the situation and decided to restrict future investments and also review the best decision regarding the future of this business in the long term interests of the Company.

Operational and Financial Performance

• Services Revenue decreased to 7.69 Crores in FY 23 from 8.91 Crores in FY 22.

• EBITDA stood at (0.38) Crores as compared to (3.12) Crores during FY22.

• Net Loss decreased to 1.35 Crores in FY 23 from 10.91 Crores in FY 22.

• Rt4u has rolled out new Mobile & Web applications and promoting Fuel sensors & ADAS / DMS solutions.

Industry Outlook for FY 2023-24

With Sales focusing on Medium & Large Fleet owners, enterprise segments and adding new location & assets base with enterprise customer, we expect revenue growth in business in FY23-24.

4.3. Joint Ventures / Associate Companies

4.3.1. ZF Rane Automotive India Private Limited (ZRAI)

Operational Highlights

• Steering Gear Division (SGD) has achieved highest ever dispatch and sales of RCB gears and peripherals in Mar23 through various productivity measures and flexibility improvement projects.

• Bagged award from Daimler for being the reliable partner and achieving 100% delivery.

• Companywide customer line quality was maintained well below the plan through various quality initiatives. PR&P plant was able to maintain zero PPM throughout the year.

• Division realized highest ever material cost realization for the year through rigorous VA / VE initiatives to stay competitive under volatile material cost situation throughout the year

• In Occupant Safety Division (OSD), several Industry 4.0 initiatives were launched namely goggle detection in safety, human intrusion in laser cutting and use of AI in folding operations to reduce investment on automatic equipment.

• ZF Rane Occupant Safety Systems Private Limited. (ZROS) was incorporated as a wholly owned subsidiary of ZRAI. Inflator, webbing and cushion plant infrastructure was made ready during the year in this subsidiary under the PLI scheme.

• Various localization, alternative sourcing and material cost reduction measures successfully implemented.

Financial Highlights

• Total revenue was 1,857.12 Crores for FY23 as compared to 1,344.94 Crores for FY22, recording an increase of 38.08%.

• EBITDA stood at 195.01 Crores as compared to 121.00 Crores during FY22, an increase of 61.16%.

• Net profit (PAT) stood at 97.23 Crores for FY23 as compared to 49.39 Crores for FY22.

4.3.2.Rane NSK Steering Systems Private Limited (RNSS)

Operational Highlights

• The Electric Power Steering (EPS) business faced slower demand on served models due to semiconductor shortage.

• Manual Steering Column (MSC) business registered 37% increase in sales on the backdrop of the growth in the Commercial Vehicle segment.

• RNSS was able to sustain the operations in spite of the volume fluctuations arising out shortage of Semi-Conductor which affected the OEMs.

• Awarded the Daimler Commercial Vehicles - Best Technology Support; VECV - Quality Excellence Category.

Financial Highlights

• Total revenue was 1,520.39 Crores for FY23 as compared to 1,435.52 Crores for FY22, recording an increase of 5.91%.

• EBITDA stood at 99.28 Crores as compared to 125.16 Crores during FY22, a decrease of 20.67%.

• Profit before exceptional items stood at 23.12 Crores as compared to 61.91 Crores during FY22.

• Net Loss stood at 99.11 Crores for FY23 as compared to 65.04 Crores for FY22. This includes an Exceptional expense towards estimated warranty provision of 74 Crores in FY23 as against 161.60 Crores in FY22 and write down of Deferred Tax assets amounting to 36.65 Crores.

Warranty Provision

RNSS had implemented countermeasures in discussion with its technical collaborator and customer and there has been a significant reduction on the number parts being reported from the market, however customer has asked for extension of period as warranty has not become ZERO which is being contested and under discussion and as matter of prudence and cautionary measure RNSS has provided an incremental provision of 74 Crores in FY 2022-23 (161.6 Crores in FY 21-22) The provisions are made based on technical estimates, considering the production periods and the timing of the various countermeasures implemented.

RNSS along with its JV partner is in continuous discussions with the customer to mitigate the risk arising out of such residual returns.

4.4. Opportunities and Threats

The Indian automotive industry remains well placed to ride strong growth momentum as the industry focuses on reducing reliance on imported products and working towards developing a strong domestic supplier ecosystem. In order to remain relevant and stay ahead of the curve and establish the country as a global auto component manufacturing hub, it is equally important to make investments in technology and work towards fully digitalising manufacturing and non-manufacturing operations.

Although, there are positive factors driving the demand environment, supply chain constraints leading to shortage of chips, high cost of raw material, increase in logistics cost and rising fuel prices could impact growth for the industry. Moreover, implementation of new regulations to meet the stringent second phase of BS VI emission norms has resulted in increase in the cost of the vehicles, and this coupled with global recessionary trend and elevated geopolitical tensions could impact growth of the industry.

4.5. Outlook

The Indian automotive industry is likely to witness sustained growth momentum going forward despite minor headwinds in the form of rising interest rates and cost increases due to new emission and safety norms. Introduction of vehicle scrapping policy for scrapping and replacing old vehicle is likely to aid growth of the industry. Adoption of Electric Vehicles (EVs) is expected to accelerate in the coming years as EV becomes more cost competitive backed by supportive government policies, enhanced charging infrastructure and consumer willingness to move towards clean and sustainable mobility solution.

5. Risk Management

The Company has laid down well-structured procedures for monitoring the risk management plan and implementing risk mitigation measures. The risks are broadly classified into strategic risks, operational risks, financial risks and statutory compliance risks.

These risks are rated based on factors such as past year experience, probability of occurrence, probability of non-detection and their impact on the business. The top management reviews the strategic risks, and the risks with high probability and high impact every quarter and presents its report along with a risk mitigation plan to the Board of Directors on a half-yearly basis. The strategic risks are taken into consideration in the annual planning process with their mitigation plan. Other risks are covered as part of the internal audit process and presented to the Audit Committee every quarter.

The business process risks, and the related controls are subjected to internal audit and reviewed on a quarterly basis. The risk ratings are revalidated with the top management as part of the internal audit process every quarter. The overall reassessment of risks at the Company level is carried out and presented to the Board of Directors once in two years for their review.

	Risk	Nature of Risk	Risk Mitigation Strategies
	Industry / Market Risk	76% of revenue is derived from the Indian automotive sector. Hence, any drop in vehicle production will have a significant impact on the Companys business.	The Company constantly strives to:
			a) Increase revenue from international markets (outside of India).
			b) Add new products to increase organic revenue and diversify customers across vehicle segments.
			c) Improve presence in the Aftermarket segment, which presents an opportunity to compensate for any drop in the OE segment.
trategic	Technology Obsolescence Risk	Auto industry and customer preference undergo changes, resulting in technology obsolescence.	The Company has consistently delivered cutting-edge technology products with enhanced R&D capabilities, localisation of testing and validation capabilities.
<			Proactive engagement with customers at an early stage helps the Company to capture and work on the new technology development.
	Competition	Maintaining market share in the competitive market and availability of unorganised players pose further challenges.	The Companys long-standing relationship with OEMs, state-of-the-art facilities and best-in-class processes help deliver superior value to the customers. The Company periodically conducts customer surveys to understand customer feedback and work in furthering its relationship with the customers.
al	Quality / Processes	Quality and delivery are sacrosanct for the safety-critical products supplied by the Group	Skilled workforce, imparting job skill enhancement training, enhancing supplier capabilities and robust manufacturing processes help the Company mitigate quality and delivery risks.
	People Risk	Attrition of key personnel could impact business operations and growth.	The Companys HR processes are constantly upgraded to attract, retain and develop talent. The policies are people-centric and industry accolades on HR practices help attract talent. The dedicated training centre supports in building functional capabilities and developing a strong leadership pipeline.
Operation			The performance management system and other employee engagement initiatives help develop and retain talent.
	Raw Material (Input) Price Risk	Material cost is a significant part of the cost and volatility in the price of raw material costs will erode margin.	The Company constantly strives to mitigate the input cost increases by:
			a) Implementing a procurement function that will work on cost-reduction initiatives through alternate sourcing, localisation, etc.
			b) Negotiating and passing through input cost, which increases suitably to the customers.
			c) Working on process improvements, yield improvements, etc.
	Currency Risk	The Company is exposed to foreign currency exchange risk as it exports our products to various countries and import raw materials.	The Company uses a multi-pronged approach as suitable to the scenarios. This approach includes:
			a) Optimally balancing the import and export to create natural hedge.
l			b) Working with customer-to-index prices to mitigate currency fluctuations.
Financia			c) Taking simple forwards on a rolling basis to protect its export realisation.
	Interest Rate Risk	Use of borrowings to fund expansion exposes the Company to interest rate risk.	The Company manages interest rate risk on the following basis:
			a) Maintaining optimal debt-equity levels.
			b) Using internal accruals to fund expansion.
			c) Constantly optimizing working capital to reduce interest costs.

6. Human Resource Development and Industrial Relations

6.1. Talent Development Initiatives

In FY 2022-23 the Company focused on the following talent development initiatives:

Leadership Development

6.1.1. Young Leadership Development (YLD)

The objective of YLD is to facilitate the development of leadership competencies of first time managers and to provide young leaders relevant exposures and high quality learning experiences thereby strengthening the leadership bandwidth at middle management. The fifth and sixth batch with 3 participants underwent 5 days of classroom sessions across 3 modules facilitated by Shri Dharmasthala Manjunatheshwara Institute for Management Development (SDMIMD).

6.1.2.High Potential Leadership Development (HPLD)

The objective of HPLD is to build leadership competencies of high potential talent and strengthen the leadership pipeline. Overall 2 employees were engaged in HPLD intervention. Employees from the seventh batch completed their one-year development journey and worked on Action Learning Projects (ALP) in teams to address critical organizational challenges. Participants worked on the projects under the guidance of Prof. Suresh Srinivasan from Great Lakes Institute of Management and made project presentations to business leaders for their inputs.

HiPos from the eighth and ninth batch began their leadership development journey through a Development Center. The developmental inputs focussed on Rane leadership competencies to facilitate career transitions to leadership roles.

6.1.3. Leader as Coach

The objective of "Leader as Coach" is to cultivate appreciation of behavioural change and encourage the culture of development. The leaders were provided with insights on the elements of individual development through the concept of breakdown, skill, practices & reflection and four different dimensions of individual development as part of facilitator led sessions. Participants have periodic one-on-one conversations with coach on using these coaching techniques for team and selfdevelopment. 1 leader underwent the third batch of "Leader as Coach" intervention.

6.1.4. Rane Manufacturing Systems Professionals (RMSP)

RMSP was introduced as a Professional Course in 2017 with the objective of Building Manufacturing Capability". The Gemba based intervention is for junior and middle management employees in Manufacturing, Manufacturing Engineering, Quality Assurance and Plant Engineering functions.

Having seen five years of implementation a need was felt to link the initiative to plant level performance and focus on depth of coverage in addition to breadth of coverage. In August 2022, it was decided to conduct an in-depth study on repurposing RMSP to analyze the impact and make improvements as necessary by taking inputs of all stakeholders. The repurposed version RMSP 4.0 was designed with the objective to "Enhance Manufacturing Capability through Technical proficiency for Significant improvement in Plant Performance". RMSP 4.0 will be rolled out in April 2023 and region wise awareness sessions were organised for highlighting the importance and impact of RMSP 4.0 across the group.

6.2. Performance Assessment & Development System (PADS) Refresh

As a process the Company looks at revamping its performance management system, PADS every 5 years understanding the value the present system brings to the organization. With an intention to discover on how it enables the employees to perform, the Company had multiple rounds of focus group discussions across various locations and assimilated points for its process enhancement. Along with points that came out of focus group discussions, the Company also did a benchmark study of various practices across industry to design a refreshed process, PADS 7.0 with effect from April 2023, for FY 24.

PADS 7.0 is a transformation from an event based performance management to a continuous performance management. The intervals between the manager / employee conversations is shortened by adding of 5 conversations consisting of 2 performance conversations and 3 development conversations between manager and employee in a year which was earlier limited to only one conversation. This will enable frequent conversation on performance and development between manager / employees. Thus, the Company is transforming from managing performance to enabling performance of employee.

This also gave the Company an opportunity to look at how it can simplify its system which enables the performance management process. The Company redesigned the forms and competencies such that it becomes easy and simple for employees to access it and enter details. The system is also designed to track and measure completion of development milestones.

6.3. Great Place to Work (GPTW)

The Rane Group believes in continuous improvement in all aspects of its operations. Employee satisfaction and engagement are as key to the Companys growth as business performance. Therefore, to give the employees a platform to express their views in a free and open manner, Rane has been conducting an Employee Opinion Survey for almost a decade. An external consultant would administer the survey, share the findings, and help in identifying the strengths and areas of opportunity. As the organisation grew, there was a need to find other models that accurately and efficiently captured employee views and helped to benchmark against the best in keeping the employees happy. Great Place to Work is a globally recognized body that helps businesses create a sustainable, high trust, high-performance culture. Since 2008-2009, Rane Group has been participating in the survey and using the findings to fine-tune the employee engagement and development programs. Subsequently, individual Rane companies have been participating in the survey. RHL was certified with GPTW for 2 continuous years.

6.4. Wellness at Rane

Rane Group is committed to promoting a healthy and positive work environment for its employees. The Company has partnered with The Wellness Corner which provides holistic wellness solutions to prioritize the health and well-being of the employees. With the launch of its wellness initiative, the Company is taking a proactive approach in improving the employee well-being and creating a supportive work environment. The employees are encouraged to participate in challenge circles to reinforce adoption of healthy habits such as regular exercise, mindful eating etc.

Rane Premier League is one such event to celebrate the togetherness and also craft a workplace wellness. Rane Premier League (RPL), a first of its kind cricket tournament was held among the group entities of Rane. They nominated their best cricketers who were enthusiastic to bring home the trophy. The Company had a total of 9 teams who fought for winner and runner up awards.

Chennai Marathon is yet another event which saw good participation from Rane Group as part of wellness initiative. The Chennai Marathon is the largest sporting event in Chennai. This year, 146 employees from the Rane Group participated in the Chennai Marathon.

7. Corporate Social Responsibility (CSR)

Rane Foundation, a public charitable trust founded in the year 1967, is the lead for implementing Rane Groups CSR initiatives. The Companys CSR vision is to be a socially and environmentally responsible corporate citizen. The Company continues to focus on four thrust areas for its CSR activities - Education, Healthcare, Environment and Community Development. In FY 2022-23, the Group implemented several projects by primarily focusing on Education.

The Company contributed to Rane Foundation (RF), the CSR arm of Rane Group, which primarily focused on Education during the FY 2022-23.

7.1. Education

The Rane Polytechnic, established at Trichy in the year 2011 under the aegis of Rane Foundation has stepped into its twelfth academic year. The institution is accredited by the National Board of Accreditation (NBA) for its Diploma in Mechanical Engineering program. So far 1694 students have completed their diploma program and 167 students have completed the program in the academic year 2022-23. Out of 167 students, 127 opted for placements and 100% placement was achieved for the FY 2022-23 batch.

The Rane Vidyalaya, established at Trichy in the year 2018 under the aegis of Rane Foundation has stepped into its fifth academic year. Rane Vidyalaya was recognized by Directorate of School Education, Tamil Nadu in 2018 and is affiliated to the Central Board of Secondary Education, New Delhi. In 2022-23, it reached a student strength of 634 in its fifth year of operations, operating from LKG to VIII standard proving the need for a quality school in rural area.

Rane Foundation in association with Maithree organized pre-vocational training to 10 special children between the age group of 14 to 18.

Rane Foundation made a contribution to TN Arya Samaj Educational Society towards DAV School project at Pallikaranai.

Rane Foundation extended support to the Gopalapuram Educational Society towards running & maintenance of Boys & Girls Schools.

7.2. Healthcare

In association with Freedom Trust the Company conducted free mobility aids & appliances distribution camp in Trichy where 85 beneficiaries were provided with 115 appliances.

The Company made contributions to TTD towards Vidyadana & Pranadana project.

8. Internal Control Systems

The Company has put in place a robust internal control system to prevent operational risks through a framework of internal controls and processes. These controls ensure that the business transactions are recorded in a timely and complete manner in the financial records, resources are utilised effectively and the assets are safeguarded.

The internal audit function is outsourced to a professional firm of independent assurance service providers. The Audit Committee and the Board in consultation with the internal auditors, statutory auditors and operating management approve the annual internal audit plan. The scope also covers the internal financial controls and internal controls over financial reporting. The internal audit findings are placed before the Audit Committee at each of its quarterly meetings for review. The managements responses and counter measures are discussed in the Audit Committee meetings. This process ensures robustness of the internal control system and compliance with laws and regulations including resource utilization and system efficacy.

9. Cautionary statement

The information and opinion expressed in this Report may contain certain forward-looking statements, which the management believe are true to the best of its knowledge at the time of its preparation. Actual results may differ materially from those either expressed or implied in this report.