Salzer Electronics Ltd Management Discussions

Forward looking statement -

Statements in this Management Discussion and Analysis of Financial Condition and Results of Operations of the Company describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable securities laws and regulations. Forward looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Company assumes no responsibility to publicly amend, modify or revise forward looking statements, on the basis of any subsequent developments, information or events. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Companys operations include changes in government regulations, tax laws, economic developments within the country and such other factors globally.

The financial statements are prepared under historical cost convention, on accrual basis of accounting, and in accordance with the provisions of the Companies Act, 2013 (the Act) and comply with the IND AS Accounting standards. The Management of Salzer Electronics has used estimates and Judgments relating to the financial statements on a prudent and reasonable basis, in order that the financial statements, reflect in a true and fair manner, the state of affairs and profit for the year.

The following discussions on ourfinancial condition and result of operations should be read together with our audited standalone and consolidated financial statements and the notes to these statements included in the annual report. Unless otherwise specified or the context otherwise requires, all references herein to "we", "us", "our", "the Company", "Salzer" are to Salzer Electronics Limited and its subsidiaries and associates.

Growth of the Indian Economy and its outlook

The Financial Year 2023-24 remained a mixed bag of opportunities and challenges. On one hand, domestic activity exhibited resilience on the back of strong domestic demand, whilst on the other, global geopolitical uncertainty continued to impact inflation, interest rates, and the supply chain.

Amidst global headwinds, the Indian economy has displayed strength and has grown by 8.2% for FY 2023-24, mainly driven by sustained investment through an infrastructure-driven policy by the government. Better capacity utilization in the manufacturing sector, buoyancy in auto and real estate, healthy corporate balance sheets, strong credit momentum, higher tax collections, and acceptable levels of inflation are aptly aiding the growth prospects of the Indian economy.

Indias growth story momentum is likely to continue in the next fiscal year with sustained strength in domestic demand, easing of inflationary pressures, focused fiscal outlay by the government, and a strong manufacturing revival.

While private industrial capital spending has been measured in FY 2023-24, it is expected to pick up in the next fiscal year with the ongoing global supply chain diversification trends and investors response to the governments Production Linked Incentive (PLI) scheme to boost key targeted manufacturing industries.

However, headwinds from geopolitical tensions, volatility in international financial markets, geoeconomics fragmentation, continuing sea route trade disruptions, and extreme weather events pose risks to the otherwise optimistic outlook. India, given its structural reforms, strengthening physical and digital infrastructure, as well as upbeat business and consumer confidence, is in a better position to overcome these multiple challenges and emerge stronger

Global Economy overview

The global economy has been in better shape than anticipated at the start of the year, having demonstrated some signs of growth, as reflected in the various high-frequency indicators. However, elevated debt levels and continuing geopolitical hostilities aggravate risks to global growth and inflation outlook in the medium-term.

The US economy has shown elasticity so far, but inflation being higher than expected has postponed rate cuts by the Fed. The US Presidential election in November is expected to contribute to the economic volatility. Further, the UK and Europe economies are still fragile. Also, concerns about the real estate bubble in China could further dampen economic revitalization.

The medium-term outlook has worsened for many developing economies amid slowing growth, sluggish global trade, and tighter financial conditions. Additionally, the volatility in crude oil prices and the ongoing shipping disruptions through the Red Sea may further pose challenges to global supply chains and aid inflation.

The Middle East region is also feeling the pressure on account of the Israel conflict. An escalation or spread of the conflict beyond Gaza and Israel, as well as an intensification of the disruptions in the Red Sea, could have an economic impact on the region.

Structural reforms remain critical to boosting growth in the Middle East region by way of diversification into clean energy and other industrial sectors besides oil.

Despite all the turmoil, India is on track to become the third-largest economy by 2027, overtaking Japan and Germany It is also the fastest-growing large economy with the tailwinds of young demographics, improving institutional strength and strong governance.

Indian Engineering & Electrical Sector

The Indian electrical industry (at Rs.1.80 Trillion in FY23) likely to post 10% CAGR. The industry offers huge growth potential and is estimated to report 10% CAGR over the next few years, led by increased traction in the infrastructure and real estate sectors. The cables & wires industry constitutes 39% of the electrical industry and forms a crucial part of construction and infrastructure activities.

By 2025, India is projected to become the worlds fifth-largest consumer of electronic products. The country boasts robust design and research capabilities, particularly in auto electronics and industrial economics. In the fiscal year 2023, exports of electronic goods surged to US$ 23.57 billion, marking a significant 50.52% growth from the previous fiscal year. Forecasts suggest that Indias electronics manufacturing industry will soar to US$ 520 billion by 2025. Since April 2000, cumulative foreign direct investment (FDI) equity inflow into the electronics sector has totalled US$ 4.42 billion, underlining investor confidence.

The Indian switchgear market is forecasted to grow at a CAGR of over 15% through 2023, fuelled by development across residential, commercial, and industrial sectors. From April to October 2023, engineering goods exports totalled US$ 61.63 billion, with FY23 witnessing exports worth US$ 107.04 billion. Notably, during March 2023, exports to Italy, Singapore, Mexico, Saudi Arabia, and Turkey showed positive growth. In FY22, Indias engineering goods exports soared to US$ 111.63 billion, marking a remarkable 45.51% year-on-year growth.

Global Switchgear Industry

?The switchgear market size has grown strongly in recent years. It will grow from $85.71 billion in 2023 to $92.02 billion in 2024 at a compound annual growth rate (CAGR) of 7.4%. The growth in the historic period can be attributed to rise in power consumption, favorable government initiatives, and economic growth in emerging markets.

The switchgear market size is expected to see strong growth in the next few years. It will grow to $117.86 billion in 2028 at a compound annual growth rate (CAGR) of 6.4%. The growth in the forecast period can be attributed to increasing demand for electricity, growing use of electricity in transportation, investments in renewable energy, increasing demand for electricity from manufacturing, interest rates, replacement of old switchgears, and load management and balance. Major trends in the forecast period include focusing on digital technologies, focusing on developing innovative products to meet the changing requirements of the power generation industry, investing in eco-efficient solutions for minimizing the impact on the environment, deploying internet of things enabled switchgears for automated operations and energy management, promoting automated switchgear within power generation and transmission industries to adopt smart grid operations, and developing and promoting specialized switchgear for critical industries.

The demand for electricity generation is projected to drive the switchgear market. The availability of electricity has become essential for economic development and poverty alleviation. Development of industrialization, urbanization requires continuous electricity supply, and the reliability of the electrical supply depends heavily on the performance of the switchgear. Therefore, the demand for electricity generation is driving the demand for switchgear in the forecast period. For instance, global demand for electricity rises at 2.1% per year to 2040 in the Specified Policies Scenario, double the rate of primary energy growth by 2040.

Expanding Construction Industry Driving Growth in the Switchgear Market:

The increasing construction industry is expected to drive the growth of the switchgear market forward. The construction industry refers to a wide range of activities related to the planning, design, development, construction, renovation, and maintenance of physical structures and infrastructure. Switchgear in the construction industry provides electrical distribution, control, and protection for various construction sites and projects. It also helps to ensure that construction projects can operate smoothly and without interruption. For instance, in September 2023, according to reports shared by the United States Census Bureau, a US-based government agency, the overall value of residential and non-residential construction in the US increased by over 8% between 2020 and 2021. Furthermore, in September 2021, according to reports published by Oxford Economics, a UK-based economic information services company, global construction output in 2020 stood at US$10.7 trillion. It is projected to experience substantial growth of approximately 42%, adding US$4.5 trillion and reaching a total of US$15.2 trillion by the year 2030.

Unstable prices of raw materials are restraining the growth of the switchgear market. Price fluctuation is due to the availability of low-quality materials at cheaper prices. The use of low-quality products increases the risk of breakdown of insulation layers or short circuit conditions and other failures. Thereby inconsistent pricing in raw materials of the switchgear is expected to hinder the market growth. For instance, in January 2022, according to the U.S. Geological Survey Publications Warehouse, a US- based publication company, the price of COMEX copper was predicted to rise by 50% from 2020 to around $4.20 per pound in 2021.

Indian Switchgear Industry

The India switchgear market size is forecast to increase by USD 4.14 billion, at a CAGR of 7.42% between 2023 and 2028. The market growth analysis depends on several factors such as the growing renewable energy generation in India the rise in a number of residential and commercial building projects in India, and the expanding transmission and distribution (T&D) networks in India. Our market report examines historical data from 2018-2022, besides analyzing the current and forecasted market scenario.

At present, the rising demand for switchgears due to the rapid development in the power distribution sector represents one of the key factors supporting the growth of the market in India. The increase in the demand for renewable energy in India provides significant growth opportunities for market players. As concerns regarding environmental pollution and global warming increase, the Indian government is expected to increase its investments in renewable power sources. Switchgear is widely used to reduce power due to overloads. The addition of renewable energy capacity is expected to expand power grids during the forecast period.

Additionally, the consumption of renewable energy capacity in the country is expected to grow, owing to the regulations on controlling emissions and the use of renewable energy in some of the biggest energygenerating and consuming cities in India. Another significant factor supporting the increased adoption of renewable energy is its decreasing cost. Thus, such factors will drive the market during the forecast period.

RE is good for reducing carbon. However, it does pose a critical challenge to grid stability due to unpredictability of sunlight and wind. This problem would increase demand for energy -storage solutions, digitalisation of the grid, and grid -stability and protection devices such as FACTS, transformers, Circuit breakers, Shunt reactors, etc. Companies such as ABB, Siemens, Hitachi Energy, GET &Dare at the forefront of “smart” grid solutions

To achieve the governments vision of 24x7 power for all, transmission is a crucial link between power generators and consumers. The need to upgrade power infrastructure thus rose due to higher projected electricity demand ahead. This time, the focus is not just on capacity expansion of the grid but also to make it reliable and efficient as almost 321 GW of renewable energy would be added to the grid by 2030

Per the draft NEP report, published by the Ministry of Power, transmission lines of 123,577 ckm (27%additional) and sub-stations of 722,940 MVA capacity (65%additonal) are required by FY27. This translates to Rs 4.7 trn to be invested over FY22-FY27. Of this, Rs 334 bn transmission-system projects have been awarded with Rs 1.4 trn projects at the bidding stage, leaving Rs 1.4 trn projects pipeline. To make transmission reliable and efficient, smart and secure new technologies are being incorporated in construction: digital sub-stations for protection, control and monitoring; HTLS conductors to increase of power flow per metre of Right-of-Way; VSC-based HVDC to efficiently utilise the transmission network etc. Much of the investment is in the 220-400 kV segment; however, growth is highest in the 765 kV segment

Smart switchgear plays an important part in the distribution of energy to residential areas. The adoption of intelligent power distribution equipment is critical to ensure better performance, energy continuity, and resource optimization while reducing transmission, operation and maintenance costs. The new switchboard apparatus are flexible, energy- efficient, and future-proof. Such gear has grown increasingly common as the smart grid has evolved.

Further, as the cyber and physical worlds continue to merge and as digital technology becomes more ubiquitous and cost-efficient, intelligent power management brings new opportunities to light. This new digital future, the fusion of connected devices, data models, insights, and analytics, more efficiently solves critical energy management challenges and has inspired US to ensure safer, more sustainable, and more efficient energy management practices across industries in India. Thus, such technologies are expected to drive the market during the forecast period.

Global Wires & Cables Industry

The wires and cables market size has grown strongly in recent years. It will grow from $243.37 billion in 2023 to $258.42 billion in 2024 at a compound annual growth rate (CAGR) of 6.2%. The growth in the historic period can be attributed to the automotive industry growth, telecommunications boom, power transmission networks, consumer electronics demand, and growth of the manufacturing sector.

The wires and cables market size is expected to see strong growth in the next few years. It will grow to $321.58 billion in 2028 at a compound annual growth rate (CAGR) of 5.6%. The growth in the forecast period can be attributed to demand for high-speed data transmission, fiber optic expansion, renewable energy projects, smart cities development, and e- commerce growth. Major trends in the forecast period include 5g network expansion, the internet of Things (IoT), digitalization in industries, flexible and lightweight materials, e-mobility infrastructure, recyclability, and sustainability.

Wire and Cable Industry in India - Industry 4.0 and the Widening Scope

Todays wire and cable industry seems quite ready to engage in the fourth industrial revolution. The industry is changing rapidly. Both consumer and market needs have evolved, and policy pressure and global competition have increased. So, to remain competitive, the industry has to innovate. Innovation can address not only processes, services and products, but also business models, workforce training and education.

The buoyant demand for power, light, and communication (data and voice) has provided a fillip to Indias wire and cable industry and electrical equipment business. Industry estimates point at an exciting increase in the share of the organized sector. The Indian wire and cable industry is transitioning away from the unorganized space with small players towards the organized sector consisting of Pan-India branded players. The rapid growth of the organized sector has led to the expansion of the size of the market.

The steady rise in consumer spending augurs well for the growth of the wire and cable industry in India. Indias population is estimated to rise to 1.5 bn by 2030 (UN Population Division estimate). The countrys private final consumption expenditure (PFCE), which is a measure of consumption demand, is also rising. The increasing propensity to spend, a steady rise in per capita income and growing urbanization as population rises betoken a bright future for the industry.

The wire and cable market in India, which comprises nearly 40 per cent of the electrical industry, is growing at a CAGR of 15 per cent - thanks to the growth of the power and infrastructure sectors. The recent policy and regulatory initiatives and government schemes like Ujwal Discom Assurance Yojana (UDAY), Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY), Integrated Power Development Scheme (IPDS) and Pradhan Mantri Sahaj Bijli Har Ghar Yojana have given the market a major boost. It may be mentioned that under DDUGJY, the government has envisaged the electrification of all villages. Besides, the Indian Railways action plan to electrify 38,000 km route in five years from 2017-18 will further whip up demand for wires and cables.

In addition, the governments Smart City project is expected to promote large-scale growth in infrastructure, telecom, power generation, T&D, engineering and automotive sectors. This is good news for the wire and cable industry because growth of the industry is directly linked to the growth and development taking place in other sectors.

In addition, electric vehicles (EV) are expected to drive growth for cables and wires firms in a big way. There will be an increased demand for wires and cables when the acceptability of EV picks up. Some amount of wire will also be required to set up EV charging infrastructure.

The wire and cable industry expects a spurt in manufacturing activity and capacity expansion in sectors like steel, cement, pharma, etc. Also, in line with Supreme Courts directive to reduce emissions as per BS-VI norms, petrochemical companies are expected to invest in plant modernization and expansion. This move will further stimulate the demand for cables.

Smart Meter Business In India

The smart meter business in India is at a transformative stage, driven by ambitious government initiatives, technological advancements, and the need for efficient energy management.

Government Initiatives and Policies

1. Revamped Distribution Sector Scheme (RDSS)

The Revamped Distribution Sector Scheme (RDSS) is an ambitious initiative by the Indian government aimed at improving the operational efficiencies and financial health of state-owned power distribution companies (DISCOMs). Launched in 2021, the RDSS is designed to reduce losses, enhance the quality of power supply, and ensure the reliable and affordable delivery of electricity to consumers. A significant focus under the Scheme is to install Smart Meters for all consumers except agricultural connections. The target is to install around 250 million smart meters by 2025.

The implementation of smart meters under the Revamped Distribution Sector Scheme (RDSS) offers numerous benefits for consumers, utilities, and the overall power distribution sector. Heres a comprehensive overview of these benefits:

For Consumers

1. Accurate Billing

> Elimination of Errors: Smart meters ensure accurate and transparent billing by eliminating human errors associated with manual meter readings.

> Real-Time Usage Data: Consumers can monitor their real-time electricity usage through mobile apps or web portals, allowing for better management of consumption and costs.

2. Prepaid Billing Options

> Flexibility: Prepaid smart meters enable consumers to pay for electricity in advance, similar to a prepaid mobile phone plan. This helps in budgeting and avoiding unexpected high bills.

> Consumption Control: Prepaid meters encourage consumers to use electricity more efficiently, as they can see the immediate impact of their usage on their remaining balance.

3. Enhanced Customer Service

> Quick Issue Resolution: With real-time data, utilities can quickly identify and resolve issues such as outages or abnormal consumption patterns, leading to improved customer service.

> Remote Services: Many services, including meter readings and disconnections/ reconnections, can be performed remotely, reducing the need for field visits.

4. Energy Efficiency and Conservation

> Usage Insights: Access to detailed consumption data helps consumers identify high-usage appliances and adopt energy-saving practices.

> Demand Response Programs: Smart meters enable participation in demand response programs, where consumers can reduce usage during peak hours in exchange for incentives.

For Utilities

1. Reduction in AT&C Losses

> Theft Detection: Smart meters can detect and alert utilities to instances of energy theft, reducing non-technical losses.

> Accurate Data: Improved data accuracy leads to better energy accounting and reduced commercial losses.

2. Operational Efficiency

> Automated Meter Reading: Automated readings reduce the need for manual meter reading, lowering operational costs and human error.

> Remote Management: Utilities can perform remote diagnostics, firmware updates, and service connections/disconnections, enhancing operational efficiency.

3. Enhanced Load Management

> Demand Forecasting: Real-time data from smart meters allows for more accurate demand forecasting and load management.

> Grid Stability: Better load management contributes to grid stability and reduces the likelihood of outages.

4. Improved Revenue Collection

> Timely Billing: Automated and accurate billing ensures timely revenue collection.

> Prepaid Meters: Prepaid meters reduce the risk of non-payment and bad debt, improving the financial health of utilities.

For the Power Distribution Sector

1. Infrastructure Modernization

> Upgraded Systems: The deployment of smart meters is part of a broader effort to modernize the power distribution infrastructure, including substations and communication networks.

> Smart Grids: Smart meters are a foundational component of smart grids, which integrate advanced technologies for better energy management.

2. Data Analytics and Insights

> Consumer Behavior: Detailed consumption data provides insights into consumer behavior, helping utilities design better tariffs and demand response programs.

> Operational Insights: Data analytics can identify inefficiencies and areas for improvement in the distribution network.

3. Environmental Benefits

> Energy Conservation: Enhanced consumer awareness and efficient energy usage contribute to overall energy conservation.

> Integration of Renewables: Smart meters facilitate the integration of renewable energy sources into the grid, supporting sustainability goals.

Overall Societal Benefits

1. Economic Growth

> Efficiency Gains: Improved efficiency in the power sector can lead to cost savings and reduced electricity tariffs, contributing to economic growth.

> Job Creation: The implementation and maintenance of smart metering infrastructure create jobs and spur innovation in the energy sector.

2. Enhanced Quality of Life

> Reliable Power Supply: Improved grid management and reduced outages ensure a more reliable power supply, enhancing the quality of life for consumers.

> Energy Access: Smart metering can support the expansion of electricity access to underserved areas, promoting inclusive growth.

Conclusion

The deployment of smart meters under the RDSS is poised to bring transformative benefits across various dimensions of the power sector. For consumers, it means accurate billing, greater control over energy usage, and improved service quality. For utilities, it enhances operational efficiency, reduces losses, and improves revenue collection. At the sectoral level, it contributes to infrastructure modernization, data-driven decisionmaking, and environmental sustainability. Collectively, these benefits align with the broader goals of the RDSS, driving a more efficient, reliable, and consumer-centric power distribution system in India.

The smart meter business in India is poised for exponential growth, offering substantial opportunities for companies involved in manufacturing, technology, and energy management solutions. The convergence of government policies, technological advancements, and market dynamics will shape the future of this industry

ABOUT SALZER ELECTRONICS LIMITED

Salzer Electronics Limited is among leading players offering Total and Customized Electrical Solutions in Switchgears, Wires & Cables and Energy Management business in India. The Company is the largest manufacturer of CAM Operated Rotary switches & Wire Ducts in India, with a market share of 25% & 20% respectively The Company caters to a wide range of products with five In-house manufacturing facilities located in Coimbatore.

The Company has a wide distribution network locally and globally, exporting to more than 50 countries. In India, Salzer markets its products through its own distributors and more than 350 local distributors of L&T. The Company has a strong R&D team that focuses on developing and commercializing the technologies of the products, and as a result, can offer total customized electrical solutions to its customers.

FINANCIAL OVERVIEW

The consolidated financial performance of the Company for the financial year ended March 31^st, 2024, is as follows:

Total revenue from operations at Rs. 1166.31 crore for the year ended March 31^st, 2024, as against Rs. 1,037.17 crore for the corresponding previous period, an increase of 12.45%, driven by business of Industrial switchgear and wire & cable businesses. The Contribution from Export Sales was 26.93%, mainly on account of higher sales in North & South America and Europe

The Breakup of revenue for the Electrical Installation Products:

• Industrial Switchgear - 54.66% of net revenues

• Wires & Cables - 39.48% of net revenues, YoY increase of 15%

• Buildings Products - 5.86% of net revenues

The raw materials consumed for the financial year ended March 31^st, 2024 were Rs. 881.00 crore as against Rs. 807.16 crore for the corresponding previous period, an increase of 9.15%.

The staff expenses for the financial year ended March 31^st, 2024 were Rs. 46.64 crore as against Rs. 39.37 crore for the corresponding previous period, an increase of 18.49%.

The other expenses for the financial year ended March 31^st, 2024 were Rs. 121.70 crore as against Rs. 94.75 crore for the corresponding previous period, an increase of 28.45%.

The EBIDTA (earnings before interest, depreciation, and tax) was Rs. 116.98 crore for the year ended March 31^st, 2024, as against Rs. 95.90 crore for the corresponding previous period, an increase of 21.98%

The depreciation for the financial year ended March 31^st, 2024 was Rs. 20.11 crore, as against Rs. 16.60 crore for the corresponding previous period, an increase of 21.13%.

The EBIT (earnings before interest and tax) were Rs. 98.82 crore for the year ended March 31^st, 2024, as against Rs. 81.00 crore for the corresponding previous period, an increase of 22.00%

The interest for the financial year ended March 31^st, 2024 was Rs. 34.09 crore as against Rs. 26.12 crore for the corresponding previous period, increase of 30.50%

The profit after tax for the financial year ended March 31^st, 2024 was at Rs. 47.07 crore as against Rs. 39.62 crores for the corresponding previous period, an increase of 18.80%.

The EPS (Earning per Share) for the financial year ended March 31^st, 2024 was Rs. 27.38 for a face value of Rs 10 per share, as against Rs. 24.21 for the corresponding previous period.

RESOURCES AND LIQUIDITY

As on March 31^st, 2024, the total net worth stood at Rs. 473.46 crore and total debt was at Rs. 307.87 crore.

The net debt to equity ratio of the Company stood at

0.63 as on March 31^st, 2024.

BUSINESS PERFORMANCE

Salzer primarily operates in four divisions, viz. Industrial Switchgears, Copper Business, Building division and Energy Savers.

Industrial Switchgear

This business division occupies the first place in contribution to the total business of the Company. This division includes transformers, terminal blocks, rotary switches, isolators, general purpose relays, wiring ducts, MPCBs, contactors, control panels, and overload relays etc. The products are mainly targeted for the Original Equipment Manufacturers (OEMs) like Engineering Conglomerates Larsen & Toubro Limited etc., Panel Builders, special Machine Manufacturers etc. The Company commenced its operation in 1985 with this division which now has both domestic and export markets considerably. These products have all the necessary international certifications like UL (Underwriters Laboratories Inc), CSA (Canadian Standards Association), Intertek Semko certification and CE (Conformite Europeanee).

During the year, this division posted revenue of Rs. 619.90 cr against Rs. 550.40 cr in FY23 and contributed 54.66% to the top-line.

Copper business

The copper division comes second in contribution to the business. In this division, Larsen and Toubro plays a major role in the off take. This vertical commenced some 17 years back and focusing more on domestic market. After few years of flat performance, the division witnessed robust recovery and during the year, the division reported business revenue of Rs. 447.78 cr as against Rs. 389.50 cr in FY23 with year on year rise of 15%.

The copper division includes wires and cables, flexible bus bars, enameled wires, bunched conductors and tinned wires.

Building Division

Salzer has a wide range of products under this division including modular switches, wires and cables, changeovers and MCBs. Modular Switches drives this division in a major way.

Some of the features are:

• Contemporary and aesthetically sleek switches - 10, 20 and 32 Amps AC

• Silver nickel contacts for enhanced electrical life

• Manufactured using high-grade engineering plastics

• Safety features: anti-spark shield and finger- protected switch terminals

• Specialty products viz. movement sensors, shock protectors, shaver sockets, key tag switch, programmable timers, remote switches and touch switches etc.

During the year, the Buildings Products business contributed 5.86% to total revenue.

Energy Savers

The energy saving division is a new business vertical and expects to further boost growth by focusing on the manufacturing and installation of energy saving and efficient products like street light controllers and energy saving panels.

Developments in Businesses during the Year:

> Salzer building "one-of-its-kind Fully Integrated” Smart Meter manufacturing facility in India to meet soaring demand

> We receive Patent Certificate for high precision product - Heavy Duty Energy Efficient Automatic Source Changeover for 20 years

> Completed development of DC Fast Chargers for electric vehicles.

RISKS AND CONCERNS -

The Company faces the following Risks and Concerns: Commodity risk

A part of the business is substantially dependent on copper. Factors that could affect the copper business include rising copper prices. However, this increase in prices is passed on to the customer, and as the Company operates on a monthly average pricing mechanism, it does not expect to be significantly affected by this risk.

Competition Risk

This risk arising from more players wanting to be a part of this business. Like in most other industries, opportunity brings with itself competition. In each individual business division the Company faces different kinds of competition riskfrom both domestic manufacturers and bigger international companies. However, Salzers strong reputation, its brand goodwill and ability to customize orders as per its customers has differentiated the Company from its competition. Over the years, the Company has expanded its presence geographically and added more customers. It also offers total and customized electrical solutions to its customers. As a result, the Company has achieved a Preferred Supplier status with GE and Schneider who source their products from Salzer on a global basis. The Company also has a substantial advantage over others due to the superior quality of infrastructure, customer-centric approach and highly innovative approach. Thus, the Company does not expect to be significantly affected by this risk.

Regulatory Risk

If the Company is unable to obtain the required certifications and approvals for existing and new products, growth will be affected. However, the Company has all the necessary international certifications for existing products. Moreover, with the previous experience of obtaining the necessary certifications for new products, the Company does not expect this risk to affect it in the coming years.

Execution risk

The Company is planning to expand its product range as well as add technologically-advanced new products. The execution of the project is dependent on land purchase and project management skills. However, land acquisition is not a concern as the Company has a sufficient land-bank to increase capacity and support the addition of new products.

Concerns like unprecedented natural calamities, political/ social turmoil may remain. However, these threats are faced by the whole industry. With improved and efficient processes in place, the Company is well-positioned for sustainable growth.

Forex risk

Given the volatile global economy and fluctuations in the foreign exchange market, the Company does face forex risk. In order to mitigate this, hedging tools have been adopted to arrest the negative impact. Importantly, Salzer has a natural hedge having both import and export at appropriate value and as the result, any volatility in the forex market does not have a significant material impact on the business.

OPPORTUNITIES

Ongoing investments across commercial and residential sector will complement the industry statistics - Rising space constraints along with ongoing investments in R&D sector for the enhancement of smart and compact control equipment will further complement the industry scenario. Continuous investments across commercial and residential establishments including public and private apartments, offices, and restaurants will further fuel the product demand. Moreover, ease-of-operation, longer product life cycle and enhanced equipment safety are the essential features which will accelerate the product adoption.

Growing inclination toward energy efficient systems will complement the industry outlook - Increasing demand for safe & reliable systems coupled with the increasing demand for HVDC systems across the T&D network will complement the demand DC switchgears. Expansion of extra high-tension transmission networks to cater to the growing energy demand across the manufacturing and industrial sector will further stimulate the product demand. In addition, rising fund allocation toward solar and offshore wind farms across developed and developing countries will further complement the switchgear market growth.

Ageing Equipment in many countries - The installed base of switchgear in many countries either has exceeded or is nearing their recommended operational life. Such conditions provide good prospects for the replacement market. There are possibilities for switchgears to explode if at all they fail, causing potential damages to other equipment, facility and environment. This may involve liabilities such as compensation, environmental cleanup and legal action. Presently the nature of the load has changed to a large extent, mainly due to growth of electronic equipment that is being used. Therefore, in order to ensure high power quality, improved efficiency and to meet the load demand the existing aged switchgear should be replacedthe new ones.

Increase in Electricity Generation - The world electricity capacity is expected to grow over a period of time. There has been a trend of increasing relocation of industrial activity from developed economies to emerging economies such as China, India, Eastern Europe and Latin America. Such a trend arises because of two reasons. Firstly, the low- cost advantage that the companies can derive out of shifting some of their operations in these countries. Secondly there has been a growing domestic demand in these emerging economies for increased industrial and commercial production. To meet the growing demand for more power, countries will require increased investments in electricity infrastructure. Such growth in the installed capacity would require additional infrastructure investments in switchgears. Additionally, the upgradation of transmission and distribution infrastructure to meet the federal and state level energy efficiency mandate is likely to boost the demand for switchgears. The impact of this driver is expected to be medium in the short term and high in the medium and long term over a period oftime.

THREATS

• Competition from local and multinational players

• Execution risk

• Regulatory changes

• Raw Material Cost HUMAN RESOURCES

The company has proper human resource and industry relations policies, which are reviewed periodically. The human resource team conducts various training sessions for employee development on an ongoing basis. These development programs are aimed at augmenting employee potential and represent an integral part of the overall business goals. Besides, employees profile represents a well balanced mix of experience and youth.

As on March 31^st, 2024, the Company had a workforce of 749 people on rolls.

Way Ahead

1. Focus on Growth and Margin Improvement: Were still committed to keeping the company on its current growth track and trying to increase EBITDA margins by 100 to 150 basis points. Operational optimisation and effective cost management can help achieve this.

2. Entry into Smart Metering Segment: Evaluating entry into the smart metering segment aligns with the companys strategy of developing new products and expanding into new geographies, particularly in the renewable energy sector. Smart metering presents a significant growth opportunity in the evolving energy landscape.

3. Targeted Growth Objectives: With an aim to achieve a 20-25% growth rate for the financial year and targeting a doubling of turnover in the next 4 years, Salzer Electronics should pursue strategic initiatives to accelerate revenue growth and market expansion.

4. Leveraging Global Market Trends: Given the projected growth of the global switchgear market and the increasing demand for clean energy solutions, we should capitalize on these trends to drive business growth. Expanding product offerings and exploring new markets like Australia, New Zealand, and the Middle East align with this objective.

5. Optimizing Operations and Market Response: The companys strategic focus on improving return on capital employed, optimizing receivables and inventory, and responding to changing market conditions demonstrates a proactive approach to expansion and growth. This includes adapting to geopolitical tensions and economic slowdowns in key markets like the US, Europe & middle east.

6. Expansion into EV Charger Manufacturing: Were taking advantage of this opportunity by meeting the growing demand for electric vehicles and charging infrastructure, as the EV charger manufacturing industry is predicted to rise. The business can improve its standing in this market by looking into becoming a charge point operator in the future.

7. Positive Market Outlook: The positive market outlook for us, driven by growing demand in India and investments in infrastructure and digitalization, provides a favourable environment for pursuing expansion plans and achieving targeted growth objectives.