RIR Power Electronics Ltd Management Discussions

INDUSTRY OVERVIEW

RIR Power Electronics Limited (Formerly known as Ruttonsha International Rectifier Ltd.,) operating since last five decades has identified its core strength in niche Power Electronics Industry with focus on two segments i.e. manufacturing low and high power semiconductor devices like diodes, thyristors modules and bridge rectifiers by processing chips from 28mm to 125 mm diameter in the state of the art facility and also manufacturing of Power Equipments like Rectifiers, Battery Chargers, High Power Stacks, Rectifier Panels used in diverse industrial sectors.

With global demand shift from conventional fuels to alternative energy such as EVs and other ecofriendly electric applications, has resulted in new demand for semiconductors which forms a core for all electric run applications. Your company continues to monitor these positive shifts in demand and technology and is constantly working towards exploring new business avenues in this sector. Various government policies such as Atma Nirbhar Bharat, launching of Semiconductor policy, PLI schemes and curb on imports; are all positive developments would benefit the small businesses in the organized sector to grow & show better performance in the near future

BUSINESS REVIEW

(a) Company Outlook: During the year 2022-23, your Company experienced improved demand in all the three segments i.e. Semiconductor Devices, High Power Equipments and Exports, all of which grew at a steady pace thereby contributing to overall growth of the Company.

The Company continues to focus on High Power Semiconductor devices business and foresees ample opportunities for growth in Export Markets. Our vision of creating worldwide recognition for our products would be achieved by our thrust on exports in coming years. During the year 2022-23, our exports grew by 74% to 1123 Lakhs. The Company has further expanded its reach abroad and hopes to maintain the same momentum in the near furture

(b) Opportunities and Threats: Our focus lies in developing new product range viz. Modules and Capsule Devices to expand our market share thereby achieving higher margins. The Companys development of IGBT based rectifiers, Battery Chargers, AC/DC damping panels, thyristor controlled transformer rectifiers has started showing steady flow of orders.

The Company also purchased on 1 Jan 2022, 100% share capital of Visicon Power Electronics Pvt. Ltd with the intention of making a foray into Silicon Carbide devices. The Company has so far invested 210.38 lakhs as equity capital & further 568.10 Lakhs by way of loans & advances to this 100% Subsidiary Company. The Subsidiarys Epitaxy Reactor has been installed and Commercial Production is expected from Q4 of FY 2023-24.

The existence of geopolitical instability arising due to Russian invasion of Ukraine, China-Taiwan tensions, have created adverse impact on global economy. The unprecedented shortage of raw materials, rising energy prices, supply and logistic issues impact our import costs. However, the Company was successful in passing on such costs to its customers, thereby securing a better performance. The Company has also adopted tigther cost controls and also made changes in products mix in order to improve its EBIDTA margins. The weakening of Indian Rupee coupled with increase in export sales have both contributed to better operational and financial performance of the company. As a combine result of the above, our EBIDTA margins has improved from 12.76% in F.Y. 2021-22 to 18.98% in F.Y. 2022-23. The Company is confident on improving its margins in the years to come.

SEGMENTWISE PERFORMANCE

The Company continues to operate in one segment i.e. Power Electronics thus segment-wise reporting as per the requirements of Ind AS 108 is not applicable to the Company.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has an adequate system of internal controls to ensure that the transactions are properly authorised, recorded and reported, apart from safeguarding its assets. The internal control system is supplemented by well-documented policies, guidelines and procedures and reviews carried out by the Companys internal audit function. The Company continues to obtain the services of M/s. Bhandarkar & Kale, Chartered Accountants, to oversee and carry out internal audit of the companys activities and submit their reports periodically to the Management and the Audit Committee of the Board.

The Audit Committee, Statutory Auditors and the business heads are periodically apprised of the Internal audit findings and corrective actions taken.

FINANCIAL PERFORMANCE

(i) Profits and Earnings: During the year, the Companys Total Revenue increased by 36.53% to 6001.74 Lakhs as compared to

4395.90 Lakhs in 2021-22. Earnings before Interest, Tax and Depreciation and Amortisation (EBITDA) for the year increased by 101.45 % to 1088.15 Lakhs as compared to 540.18 Lakhs in the previous year. Net Profits of the Company increased by 2.37 times during the year to 668.15 Lakhs as against 281.51 Lakhs last year.

(ii) Capital Expenditure: During the year under review, the Company has not spent any substantial amount on Capital Expenditure.

(iii) Finance Costs: Due to rise in borrowing cost, on account of increase in Repo rates by RBI and higher utilization of working capital on account of increase in turnover, the finance costs has increased by 64.44% to 104.47 Lakhs during the year as against 63.53 Lakhs last year.

HUMAN RESOURCES

During the year, there has been no material development in Human Resources / Industrial relations. Your Company has a favourable work environment that motivates performance, customer focus and innovation while adhering to the highest degree of quality and integrity.

Your Company takes pride in the commitment, competence and dedication shown by its employees in all areas of business. Various HR initiatives are taken to align the HR policies to the growing requirements of the business.

CAUTIONARY NOTE

The statement in the Management Discussion and Analysis describing the Companys objectives, projections and estimates may be forward looking within the meaning of applicable laws and regulations. Actual results may differ from those expressed. Important factors affecting the Companys operation include global and domestic supply and demand conditions, input availability and production costs, currency fluctuations, changes in Government regulations, tax laws, economic developments within the country and other factors such as litigation and industrial relations.