Salora International Ltd Management Discussions

INDUSTRY OUTLOOK

Currently Consumer Electronics Market is growing rapidly in the Asia-Pacific region, accounting approximately for more than 31.9% of the total market share worldwide. The existence of multiple manufacturers, an expanding population, and rising earnings available to consumers are the primary factors contributing to the regions market growth.

Furthermore, the emergence of semiconductor technology due to technological advancement is the other major factor driving the growth of the Consumer Electronics Market. Additionally, the increasing adoption of consumer goods like automated home appliances, and the rising trend of Smartphones is projected to boost the Consumer Electronics Market growth in the upcoming years.

The market is extremely competitive, with many different producers and brands vying for a part of the consumer base. Apple, Samsung, LG, Sony, and Microsoft are among the major participants in this sector. Other major companies include Xiomi, Oppo, Vivo and OnePlus. These businesses put a significant amount of money into research & development in order to produce new items and enhance their existing offerings. This helps businesses stay one step ahead of their rivals.

ECONOMY

GLOBAL ECONOMY OUTLOOK

The global economy faces a mixed outlook as it navigates a complex landscape of opportunities and challenges. On the one hand, advanced economies are showing signs of resilience, with growth driven by technological advancements, robust consumer spending, and investments in green energy. Emerging markets, particularly in Asia, continue to experience strong growth, fueled by urbanization and increasing middle-class consumption. However, global economic recovery remains uneven due to persistent inflationary pressures, geopolitical tensions, and supply chain disruptions. Central banks are tightening monetary policies to combat inflation, which could slow growth in the short term. Additionally, the ongoing energy transition and climate-related risks are reshaping industries, creating both uncertainties and avenues for sustainable growth. Overall, the global economy is expected to grow at a moderate pace, but risks to stability and growth remain high.

Considering the global scenario, the economic outlook remains cautiously optimistic but fraught with significant challenges. The continued recovery from the COVID-19 pandemic has been uneven across regions, with advanced economies rebounding faster due to strong fiscal and monetary support. However, emerging markets and developing countries are still grappling with slower vaccination rates, economic scarring, and external vulnerabilities.

Global inflationary pressures are a major concern, driven by supply chain disruptions, rising commodity prices, and labor market tightness. Central banks in key economies are raising interest rates to combat inflation, which could dampen economic growth and increase the cost of borrowing, particularly in developing countries.

Geopolitical tensions, such as the Russia-Ukraine conflict, have exacerbated energy and food security concerns, leading to higher costs and market volatility. This, coupled with ongoing trade disputes and protectionist policies, could further strain global economic integration.

On the positive side, technological advancements, digitalization, and the green transition present opportunities for growth and innovation. However, the global economys path forward will depend on how well nations manage these risks while fostering sustainable and inclusive growth.

INDIAN ECONOMY OUTLOOK

The Indian economy is poised for steady growth despite global headwinds. India is projected to remain one of the fastest- growing major economies, driven by robust domestic demand, a strong services sector, and continued government reforms. The nations focus on infrastructure development, digital transformation, and manufacturing through initiatives like "Make in India" and "Digital India" is expected to support long-term growth.

However, India faces challenges such as inflationary pressures, particularly in food and energy prices, and the impact of global economic uncertainties on trade and investment. The Reserve Bank of India (RBI) has been managing inflation through monetary tightening, which could slow growth in the near term.

The agricultural sector remains crucial, and good monsoon seasons are vital for rural income and consumption. Additionally, the governments fiscal policies, including subsidies and welfare programs, aim to support lower-income households and boost economic resilience.

Despite these challenges, Indias young and growing population, rising middle class, and increasing digital connectivity present significant opportunities. Foreign direct investment (FDI) inflows are strong, and the country is emerging as a key player in global supply chains.

Overall, Indias economic outlook is positive, but maintaining momentum will require careful management of inflation, global risks, and structural reforms to ensure sustainable and inclusive growth.

CONSUMER ELECTRONICS

The consumer electronics industry is experiencing robust growth, driven by innovations in AI, loT, and 5G technologies. Consumers increasingly demand smart devices that enhance convenience, from smartphones and wearables to smart home systems. Sustainability is becoming a key focus, with companies prioritizing eco-friendly practices and energy- efficient products. The rise of gaming and entertainment has also fueled demand for high-performance devices like gaming consoles and streaming-ready TVs. However, the industry faces challenges such as semiconductor shortages and supply chain disruptions, which have impacted production. Despite these hurdles, the market remains strong, with emerging markets, especially in Asia, contributing significantly to its expansion.

CONSUMER ELECTRONICS GROWTH DRIVERS

The growth of the consumer electronics industry is driven by several key factors:

1. Technological Advancements: Innovations in artificial intelligence (AI), the Internet of Things (IoT), and 5G technology are enhancing product functionality and connectivity, leading to increased consumer adoption of smart devices and advanced electronics.

2. Rising Consumer Demand: There is growing consumer appetite for smart home devices, wearables, and high- performance gadgets, driven by the desire for convenience, improved lifestyle, and enhanced user experiences.

3. Digital Transformation: The shift towards digitalization and remote work has boosted demand for computing devices, such as laptops, tablets, and video conferencing equipment.

4. Entertainment and Gaming: The booming gaming industry and the expansion of streaming services have driven the demand for high-quality audio-visual equipment, including gaming consoles, VR headsets, and advanced TVs.

5. Economic Growth in Emerging Markets: Rising incomes and increasing urbanization in emerging markets, particularly in Asia, are expanding consumer electronics markets and driving growth.

6. Sustainability Trends: Increasing consumer and regulatory focus on sustainability is prompting companies to develop eco-friendly products and adopt energy-efficient technologies.

These drivers collectively contribute to the dynamic expansion of the consumer electronics sector.

CONSUMER ELECTRONICS MARKET TRENDS

The consumer electronics market is evolving with several prominent trends:

1. Smart Home Integration: The proliferation of smart home devices, including voice assistants, smart thermostats, and security systems, is enhancing home automation and connectivity, making everyday tasks more convenient.

2. Wearable Technology: Wearable devices, such as smartwatches and fitness trackers, are gaining popularity for their health monitoring features, fitness tracking, and seamless integration with other smart devices.

3. 5G Adoption: The rollout of 5G technology is driving demand for compatible devices, offering faster internet speeds and enabling new applications in areas such as augmented reality (AR) and virtual reality (VR).

4. Sustainable Products: There is a growing emphasis on sustainability, with consumers and manufacturers focusing on energy-efficient devices, recyclable materials, and reducing electronic waste.

5. High-Performance Gaming: The gaming sector continues to expand, with increased demand for high-performance gaming consoles, advanced graphics cards, and immersive VR experiences.

6. Smart Displays and AI Integration: AI-powered smart displays and voice-controlled devices are becoming more common, offering enhanced user interaction and personalized experiences.

7. Health and Wellness Technology: The integration of health-focused features in consumer electronics, from smartwatches to connected medical devices, is rising as people prioritize personal health and wellness.

These trends reflect the ongoing advancements and shifts in consumer preferences within the consumer electronics industry.

COMPANY OVERVIEW

The Companys key imperative over the medium term will be to grow the revenue streams and sustain the profitability, as we build a strategic framework and drive the businesses, leveraging macro trends and business opportunities. Over three decades of enriched experience in electronics, company is serving its customers in diverse realms like Consumer Electronics, Telecom, Information Technology and Lifestyle. Key success factors are predicated on the timely execution of its plans and keeping pace with technological and market changes. Companys focuses on continual expansion of its products and customer base, while systematically strengthening its quality, innovation and cost competence.

The Company has emerged as a diversified entity with interests in sourcing and procurement, supply chain management, distribution, marketing, retail and after-sales service. With the legacy of quality, trust and expertise in developing cutting edge technology products and services - Company is on the edge to deliver need-of-the-hour solutions to its customers in B2B and B2C space.

Best technology is playing a key role for businesses to work closer with the customer to create better products, services and value proposition. Indian consumer electronics market is facing fresh challenges every day, Salora continue to meet every challenge with new ideas and solutions.

HUMAN RESOURCES / INDUSTRIAL RELATIONS

The Company recognizes that people are the prime assets of the organization and implements initiatives to train and motivate them. The Company continues to focus on attracting and retaining right talent with right opportunities to its employees. The selected candidates undergo a structured induction programme, which gives them a good exposure and become a good contributor in growth of the Company. 33 employees were associated with Company as at 31st March, 2024. Leadership/team building, communication and negotiation, conflict management, and stress management are examples of behavioral training. It also provides a platform for employees of all levels to communicate and exchange information and ideas, helping to improve the Companys overall workforce competencies. Industrial relations during the year have been cordial and contributed to mutual development.

FINANCIAL HIGHLIGHTS

A detailed note on the financial part has been recorded in the Directors Report the highlights of the financial performance are given herein below:

Note: The figures have been regrouped / reclassified wherever necessary. DISCLOSURE OF RATIO

SEGMENT WISE / PRODUCT WISE PERFORMANCE

As the consumer electronics market can derive several benefits from strategies like product improvement, cost reduction, product development and import substitution, the Company is committed to stay competitive, enhance their offerings and address consumer demands effectively. Currently the Company is focusing on consumer durable products like Smart LED TV, Washing Machine (Semi-Automatic), Coolers, Audio accessories (Defunc), TWS Ear Buds, Headphones, Smartwatches, Neckband Smart Watch, Chargers, Power Banks, Mobile Phones etc.

The Company has established an extensive distribution network. The Product Engineering and development is the core of our product solutions vertical and through innovative hardware products we have been able to provide solutions to our customers and retain market share.

BUSINESS OPPORTUNITIES

Television is a useful device in the home consumer electronics segment. The kind of television sets available in the market includes a wide variety of LEDs, plasma and so on, offering high resolution and sharp picture quality. Additionally, a decreasing trend in the pricing of televisions is fueling the penetration of such televisions in the market. Electronic products have continuously impacted and shaped our lifestyles in the current digital era. The advent of technology has led to seamless activities and accelerated the digital revolution to the next level. Consumer electronics covers the device that contains an electric circuit board that is handy in everyday use by people for the purpose of recreation, entertainment and communication. Prominent drivers for this markets expansion are easier access, rising awareness, changing lifestyles, dropping unit price and increasing disposable income.

The Smartwatch industry is expansive and has been rapidly evolving in recent years. Smartwatches have moved beyond being simple timekeeping devices and have become multifunctional gadgets that offer a wide range of features and capabilities. The smartwatch industrys scope is broad and dynamic with continuous advancements in technology, health monitoring, connectivity, and design. As the industry evolves, we can expect even more exciting developments and integrations that further enhance the role of Smartwatches in our daily lives. The potential of the Smartwatch market in India is huge as India has become the biggest market for Smartwatches.

The True Wireless Stereo (TWS) market, which refers to wireless earbuds that come in pairs and provide a stereo audio experience without any wires, has seen explosive growth in recent years. The scope of the TWS market is significant and continues to expand due to technological advancements, changing consumer preferences, and the integration of various features. As technology continues to evolve and consumer demand for wireless audio solutions remains strong, the TWS markets scope is expected to further expand with new features, improved performance, and enhanced user experiences.

The mobile accessories market is vast and diverse, driven by the ever-evolving smartphone industry and consumers desire to enhance and personalize their mobile experiences. Mobile accessories encompass a wide range of products that complement, protect, and extend the functionality of mobile devices. The mobile accessories market is highly adaptable and constantly evolving to meet the demands of consumers seeking to enhance, personalize, and extend the capabilities of their mobile devices. As smartphone technology continues to advance, the scope of mobile accessories is expected to expand with innovative solutions catering to a wide range of user preferences and needs.

THREATS

• Increased competition and product option with multi-national participants entering the market, especially as the industry flourishes and may lead to pricing pressure;

• The Consumer Electronics industry is dependent on multiple market factors especially the change in technology in India and which may impact demand;

• Industry volatilities and rising prices remain a threat.

RISK & CONCERNS

The global electronic industry is currently going through a turbulent phase in the supply of various critical components. The shortage of semi-conductors in particular, since 2020 -21, continues to remain a major stumbling block for the electronics industry, restricting the supplies of electronics despite increasing consumer demands. The recent Ukraine-Russia war has put further pressure on the global economy. Shortages and high oil prices, along with the Chinese zero-tolerance policy towards COVID, may dampen business. The company depends on imports for its major raw materials, hence the weakening of the Indian Rupee will also have a direct impact on the overall cost. The unwillingness of its customers to agree to frequent price hikes is a matter of concern.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has put in place a robust internal control framework that addresses a range of governance, compliance, audit, control, and reporting issues. These internal controls are essential for complying with numerous regulatory requirements, avoiding fraud, protecting assets, and preserving the accuracy of financial reporting. The Companys internal auditor checks the internal control systems on a regular basis and reports their findings to the management. The management then takes immediate corrective or mitigating action to keep the internal controls working well and correctly.

CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis, describing the Companys growth prospects, are forward-looking statements. The Companys results, plans, estimates, and expectations may vary, depending upon economic conditions, raw-material prices, government policies, regulations, tax laws and other incidental factors.