Voltas Ltd Management Discussions

GLOBAL ECONOMY

2023 saw a robust global economy with GDP growing at 2.8% and inflation down to around 4.2%. The IMF has forecasted growth of 3.2% in 2024 with inflation declining to 2.8% by the end of 2024. As inflation comes under control, rate cuts by the US Federal Reserve are expected.

OUTLOOK ON INDIA

The World Bank estimates Indias economy to grow 7.5% in 2024, driven by resilient activity in the services and industrial sectors. High-frequency indicators are pointing towards strong economic activity — a trend that has been evidenced in record car sales, services sector growth, credit growth, equities reaching all-time highs, and a turnaround in real estate. Home sales and new launches have reached levels not seen since 2013. Evidence of this can be found in the growth of cement and steel sectors. These factors are expected to drive the sales of consumer durables and appliances further.

INTERNATIONAL GROWTH MARKETS OF VOLTAS

Disclaimer: This map is a generalised illustration only for the ease of the reader to understand the locations and is not intended to be used for reference purposes. The representation of political boundaries and the names of geographical features/States do not necessarily reflect the actual position. The Company or any of its Directors, officers or employees cannot be held responsible for any misuse or misinterpretation of any information or design thereof.

Outlook on GCC -

Economic growth in GCC countries showed fragmented performance in 2023, with the average rate of growth registering only 0.6% for the year, down from 6% in 2022. This softer headline growth rate in 2023 was largely driven by several GCC countries oil GDP rates of growth slowing or receding into the negative territory, averaging a decline of 3.1%. This data contrasts with GCC countries non-oil GDP growth rates, which have increased on average by 3.1%.

In 2024, the GDP growth in GCC countries is expected to strengthen, with growth forecasted to reach 2.9%. While oil GDP is expected to recover with GDP growth at about 2.2%, the non-oil sector is expected to grow at a stronger rate of 2.9% over the same period.

The rate of inflation in GCC countries fell from 3.7% in 2022 to 2.2% in 2023. In 2024, the headline rate of inflation across the 6 GCC countries is expected to increase marginally.

Although there are economic headwinds at both global and national levels, the latter mostly about oil-related activities, the activity in the non-oil and particularly in the real estate sector remains buoyant across GCC countries.

Outlook on UAE •

In 2024, the United Arab Emirates (UAE) is expected to show strong growth in non-oil sectors with a projected increase of 4%, one of the fastest growth amongst its peers, leading to continued activity for MEP and infrastructure projects.

Outlook on Saudi Arabia

Oil prices are not expected to rise significantly this year and Saudi Arabias economy could grow at a slower pace than previously predicted. A growth rate of only about 1.9% is expected in 2024.

However, non-energy sectors are expected to thrive because of strategic investments. There are growing prospects for MEP projects, Solar Energy, Facilities Management, and Water Treatment in the Middle East. Akin to the expectations, Saudi Arabia leads the table with several ongoing Giga Projects across the country.

CONSUMER DURABLES INDUSTRY

The consumer durables industry in India has seen remarkable growth, positioning the country as a promising manufacturing hub on the global forefront. The substantial expansion in the industry has been brought forth by the production of a varied range of electronic home equipment such as air conditioners, refrigerators, washing machines, dishwashers, LED lights, personal care appliances and kitchen gadgets. Though, air conditioners (28%), refrigerators (28%) and LED (26%) products have secured the largest share within the industry.

Market Projections

The Indian consumer durables industry is poised for significant expansion, with the white goods market estimated to surpass USD 21 billion by 2025, projecting a robust CAGR of 11% per annum. Domestic manufacturing is a key contributor to this growth, contributing nearly USD 4.6 billion on an average to this industry.

In 2024, the consumer durables and electronics industry is expected to demonstrate a double-digit revenue surge. Brands are expecting growth from diverse markets, with a focus on premium, value-added, and feature-led products as key drivers for this anticipated expansion.

Key Trends in the Consumer Durables Industry

Premiumisation: Consumers are increasingly opting for high-end, feature-rich products over basic models. This is driven by rising disposable incomes and a desire for better quality and functionality.

Localisation: The industry is striving to increase local production of components and finished units, aiming for greater cost efficiency and potentially more affordable products for the Indian market.

Channel Shift: The industry is witnessing a shift from traditional channels to Modern Trade and E-commerce platforms for convenience, wider selection, and potentially better deals.

Technological Transformation: AI and IoT are being integrated into consumer durables, creating smart appliances, connected devices, and personalised experiences, offering greater convenience, efficiency, and control to the consumer.

Climate Change: Frequent and intense heat waves, with record-breaking temperatures, are becoming increasingly common. Indias rising temperatures fuel demand for cooling solutions like ACs, Air Coolers, Air Purifiers and other cooling products.

Energy Efficiency: The focus on reducing energy consumption is leading to the development and adoption of more energy-efficient appliances and electronics.

Focus on Health and Wellness: Indians are increasingly seeking products that promote health and well-being, such as Air Purifiers, water filters, fitness trackers, and smart home devices.

Availability of options for financing: The easy availability of multiple financing options continues to boost demand and thereby contribute to the industrys growth.

Better availability and quality of power supply: This facilitates the growing demand for consumer durables and appliances.

Overall Growth Trends

Increasing Urbanisation: As the population shifts to cities, demand for modern consumer durables like Washing Machines, Refrigerators, Air Conditioners, and electronics is also increasing.

Growing Penetration: The industry is focusing on enhancing reach and penetration as it is witnessing growth in the hinterland.

Entertainment: Growing desire for immersive experiences has fuelled demand for home entertainment systems.

Diverse Consumer Needs: Consumers have varying needs and preferences, leading to a wider range of products with specialised features and functionalities catering to specific demographics and lifestyles.

Key Government Incentives and Schemes

Several Government initiatives have bolstered the growth trajectory of the consumer durables sector. These include Production-Linked Incentives (PLI) for components and White Goods that focus on air conditioners and LED products to promote domestic manufacturing and Make in India efforts.

Challenges and Opportunities

Despite the promising prospects, the consumer durables industry faces competition from Chinese manufacturers. However, Indias China plus One strategy and its favourable demographics offer ample growth opportunities. The Governments support through schemes like PLI and the provision for 100% FDI for electronics hardware manufacturing aims to further propel the sectors expansion.

BUSINESS OVERVIEW

Voltas (The Company), a prominent member of the Tata Group, holds a leadership position in Indias cooling products market, particularly as the countrys leading Room Air Conditioner brand. Moreover, the Company also has a strong presence in Engineering Products and Electromechanical Projects and Services in India (through Universal MEP Projects & Engineering Services Limited) and in the Middle East Region.

Voltas has a joint venture named Voltbek Home Appliances Private Limited (Voltbek) with Ar^elik, a major European household appliance manufacturer. Voltas has leveraged Ar^eliks R&D prowess and combined it with the Companys robust distribution network. This collaboration has propelled Voltas Beko to become one of Indias fastest-growing brands in India. Notably, it has sold over 5 million units of home appliances, such as refrigerators, washing machines, microwaves, and dishwashers.

Voltas has, through its wholly-owned subsidiary - UMPESL, excelled in engineering with its sustainable solutions for turnkey projects in diverse industries, including Mechanical, Electrical, and Plumbing (MEP) projects in Metros, Data Centres, Hospitals, Commercial Buildings, Rural Electrification projects, Solar EPC projects, Drinking Water projects, and Water Treatment EPC projects. In the international market, Voltas undertakes MEP projects directly and through its subsidiaries/joint venture companies, but has challenges with collections and delays in project completion.

UNITARY COOLING PRODUCTS

Room Air •

Conditioners (RAC)

Voltas experienced robust sales for air conditioners (ACs), with a notable increase in sales volume for inverter-category ACs. This achievement was facilitated by the Companys expanded range of products, featuring enhanced attributes and an entry into Key Regional Retailers and Modern Trade Partners. With a YTD market share of 18.7% (as of March 2024), the Company maintains its position as the leading player in the AC market. Moving ahead, Voltas aims to reinforce its market leadership through the expansion of Exclusive Brand Outlets (EBOs) and other channels.

In addition to selling over 2 million AC units in 2023-24, which was the highest number of ACs ever sold by any brand in a single year within India, Voltas also sold 1 million AC units in an incredibly short time frame of just 110 days from 1 January, 2024 till 20 April, 2024.

Challenges and Opportunities

The competition in the Indian RAC market has intensified with presence of both homegrown and leading foreign players. Moreover, the competitive intensity is going to increase further in the near future. The industry is seasonal in nature and any erratic weather changes in the summer season may adversely impact the sales. The recent implementation of QCO (Quality Control Orders) norms affects the imports of components which pose challenges for the industry.

The Indian RAC market is expected to grow at a healthy CAGR of 12% to reach a figure of ? 50,000 crores by 2028-29. The Company is poised to lead this growth due to its superior product range, pan India extensive channel network and excellent service delivery to its customers. Further, several other factors such as increasingly hot summers, rising disposable incomes, the quest for a better lifestyle with easy access to consumer finance are expected to drive growth for this segment.

Air -Coolers

The Air Cooler segment has emerged as an extension of Voltas product line, providing an impetus to the Companys position in the cooling products industry. During the year, the Company launched high-capacity tall coolers in 85 Lts. and 110 Lts. addressing needs for bigger homes and outdoors. Its user-friendly features like powerful air throw with low noise, and detachable and easy-to-clean Honey-Comb pads have received good response from the customers and enabled Voltas to consolidate its position to be one of the top 3 players in the Indian market within 5 years of the launch of its Air Coolers.

With higher disposable incomes and aspiring consumers, Air Coolers is a lower cost alternative to Air Conditioners, and Voltas with its reputed Brand, reach and superior products has positioned itself competitively to tap into this high-growth market segment. The Companys investments in the Air Cooler business, coupled with incentive schemes aimed at boosting primary sales and expanding channel footprints, have resulted in an impressive 40% growth for this business during the year under review.

Further, as an extension, Voltas has launched a smart, safe, and sturdy range of Water Heaters with Quartzline Technology in the capacity range of 3 Lts. to 25 Lts. pan India. These heaters with Advance Micro Technology offer better corrosion resistance capability compared to competitors and have received a good response from the market.

Challenges and Opportunities

The Indian Air cooler segment is an intensively competitive market due to the presence of local unorganised players that have a significant market share. In addition, Domestic OEM manufacturers are also directly supplying to markets under their own brand, thereby creating additional challenges to the market share of the organised players.

Indias Air Cooler market is projected to grow at a CAGR of 7.4% from 2022 to 2027, as forecasted by the IMARC Group. This growth is likely to be propelled by higher disposable incomes and an increasing share of organised distribution channels. Air Coolers offer benefits like improved air quality and energy efficiency, making them ideal cooling solutions in dry environments. Additionally, Air Coolers remain a vital household appliance in regions with limited power supply, which further solidifies their relevance. With the impending energy efficiency norms for Air Cooler to be implemented by BEE (Bureau of Energy Efficiency), it is expected that the market will shift rapidly from unorganised to organised players in the near future. The added extension of water heaters provides a year-round opportunity for sales even during winter months, thereby providing better ROI for channel partners as well.

Commercial Refrigeration •

(CR) Products

To maintain market leadership in the Commercial Refrigeration business, Voltas has introduced new energy efficient best-in-class star-rated (3-star to 5-star) freezers/convertible models and a new 5-star rated glass top range with green refrigerant (Hydrocarbon). With the increased market demand and shift in consumer preferences for larger capacity Visi coolers, Voltas has launched large single and double-door models. With a complete water cooler range (20 Lts. to 300 Lts.), and specialised options, Voltas continues to dominate this category. The introduction of premium-coloured options (black & grey) in the water dispenser category, helped Voltas to maintain market leadership. Voltas continued to make good inroads in the modular cold-room category by offering smart controller-based solutions across hospitality, pharma, agri & food processing industries, supported with pan India after-sales support. Many of the Tata group companies have shifted to Voltas cold room solutions for their operations. A technical collaboration with Vestfrost, Denmark has helped Voltas to localise Ice-lined refrigerators (ILR) with best-in-class holdover time to support Indias vaccine storage requirements. Voltas has also introduced pharmacy /laboratory refrigerators with specialised shelving solutions and medical freezers for -25?C and -86?C applications.

With a strategic focus on maintaining market leadership, Voltas has set up a new manufacturing facility for CR Products at Waghodia in Vadodara, Gujarat. With this new facility, Voltas shall have the largest manufacturing capacity in the horizontal product category in India, supporting the increased demand.

Challenges and Opportunities

With the sustained growth experienced by this category over the last few years, the CR industry has attracted a lot of competition. Under the Make in India initiative, many brands have set up new facilities and expanded local manufacturing. With this large local manufacturing base in key categories, competition has become intensive, leading to market share and profitability challenges. However, Voltas strong brand image, market leadership, and customer-centric approach have enabled the Company to withstand the competition and maintain market share over the years.

According to Mordor Intelligence, the Indian Commercial Refrigeration market will continue to grow 10% + per annum till 2028-29, with many of the product categories likely to register high double-digit growth. Voltas aims to leverage its established network and expanded manufacturing capacities to foster growth, particularly in light of the regulations focused on environmentally sustainable refrigerants.

Commercial Air •

Conditioning (CAC)

As a significant player in the Commercial Air Conditioning business, Voltas caters to diverse air conditioning needs, spanning human comfort to industrial applications. Voltas CAC business encompasses various cooling systems such as VRF systems, Chillers, Ducted and Packaged Units, and more, serving larger domestic and diverse commercial needs like offices, shops, hospitals, airports, metro railway stations, schools, and leisure centres.

To address the sustainable and specific needs of customers, CAC has launched IoT-enabled, new Inverter Scroll Chillers with cooling capacities ranging between 12TR to 72TR with eco-friendly refrigerants. The product is BMS compatible, silent in operation and convenient for the user, as it can be operated through a mobile app. Through this new line of Inverter Scroll Chillers, Voltas is educating customers to use energy- efficient solutions for their commercial premises.

CAC also launched upgraded 1.5-ton and 2-ton fixed- speed 3-star Cassette ACs. The Company extended its product portfolio in the Ducted and Packaged AC segment including the introduction of water-cooled series with eco-friendly R410a refrigerant.

To increase customer engagement and operational efficiency, Voltas has emerged as the largest service provider in the Indian CAC market and is strategically leveraging digitalisation to educate customers about its products and services. At the same time, it is striving to deliver enhanced value and reduced carbon emissions. This digital transformation includes improved channel partner engagement and the implementation of digital tools for a more robust network and sustainable operations.

Challenges and Opportunities

With the growth of the Indian CAC market, leading foreign players have started focusing in this sector, thereby increasing the competitive intensity in the industry. The recent implementation of QCO norms will also pose a challenge for the industry to source components from the Chinese suppliers.

The demand for commercial air conditioning is increasing across industries and commercial establishments, and is driven by a focus on comfort and sustainability. Voltas aims to set new standards of efficiency with the launch of new and sustainable products, while expanding its market presence across the country.

Electro-Mechanical •

Projects and Services (International Projects)

With a rich history spanning over four decades, Voltas has built a formidable reputation in executing complex, large-scale projects in overseas markets. Moreover, Voltas has garnered accolades for its engineering prowess, safety practices, and superior execution skills, as a leading Mechanical, Electrical, and Plumbing (MEP) contractor in the GCC countries, especially in UAE and the Kingdom of Saudi Arabia. Notably, the Company has once again been recognised as one of the top MEP contractors in the Middle East. Specialising in MEP and electro- mechanical works, including HVAC, electrical systems, plumbing, firefighting, and more, Voltas has expanded its offerings to include pre-fabrication solutions through its Modular Solutions Factory in Jebel Ali, Dubai.

There have been challenges in collections and rising costs. However, the Company has adopted a very cautious and selective approach to bidding for new projects.

Challenges and Opportunities

In the GCC region, Voltas continues to face risks from solvency issues of Main Contractors, which could disrupt project execution and expose the Company to credit risks. Challenges related to the availability of skilled labour and disruptions in the global supply chain may impact productivity and profitability. Additionally, Government policies targeted towards promoting local manufacturing could adversely affect business operations.

The GCC region is expected to see improved growth, presenting opportunities in infrastructure projects like roads, and water and power distribution. Voltas is well-positioned to leverage these opportunities, having secured prestigious projects like the Qiddiya Water Theme Park in the Kingdom of Saudi Arabia during the year under review. The Companys focus on MEP, district cooling plants, and water treatment solutions aligns with the regions infrastructure needs.

Voltbek Home Appliances Private Limited (Voltbek)

The Home Appliances industry in India is witnessing rapid growth, fuelled by a surge in demand for both large and small appliances. Voltbek, leveraging Arpeliks technical expertise and Voltas strong brand presence, is expanding its footprint in Indian households by manufacturing Made in India products in Sanand and focusing on enhancing its distribution network, particularly in South and West India.

Voltbeks commitment to offering innovative and energy-efficient products aligns with evolving consumer preferences. During the year under review, Voltas Beko has achieved significant milestones, becoming the Fastest Growing Indian Consumer Durables brand in just five years, selling over 5 million appliances, despite challenges including the pandemic. Additionally, Voltas Beko has solidified its position among the top three brands in Semi-Automatic Washing Machines for 2023-24. Voltbek has also seen growth in the market share of Refrigerators, Washing Machines, and Semi-Automatic Table-Top Dishwashers. E-commerce sales contributed 12% to the overall sales, supported by a strong Distribution Network ensuring nationwide availability.

With a production capacity at 85%, Voltbek has scaled up its business by approximately 50% in revenue and quantity compared to last year, largely due to new product development and expansion in selling points.

To penetrate further into existing markets, Voltbek has implemented various strategies including channel-specific approaches, establishing a robust presence in Modern Trade and emphasising retail expansion and customer outreach in the Southern market. New product launches, including larger capacity refrigerators with enhanced features, aim to attract more consumers.

Opportunities and Outlook

Voltbeks consumer spending and input costs, and in turn, its margins may be affected due to monetary policy measures and supply chain disruptions. The availability of reliable power supply to households is crucial for the continued demand growth of the electrical goods industry, and any disruptions in this area could affect demand. Intense competition, economic uncertainties, and added complexities due to rapid technological changes and regulatory requirements may pose other possible threats to the home appliances business.

Indias growing home appliances market supported by Government initiatives like the Production-Linked Incentive (PLl) scheme presents growth opportunities for Voltbek driven by changing lifestyles and technological advancements. With a focus on local manufacturing, distribution expansion, and upcoming product launches, Voltbek is poised for continued success in meeting evolving consumer demands and preferences. The Companys emphasis on energy efficiency aligns with consumer preferences and policy objectives, positioning it for continued growth.

UNIVERSAL MEP PROJECTS & ENGINEERING SERVICES LIMITED (UMPESL) - 100% WHOLLY OWNED SUBSIDIARY OF VOLTAS LIMITED

Infrastructure •

Solutions

UMPESL contributes to Indias infrastructure development through end-to-end project solutions in the MEP space for infrastructure solutions and construction segment. This includes MEP projects for the metro, airports, hospitals, data centres, and commercial buildings.

The Company also participates in electrical and solar projects aimed at reducing losses in power distribution and generating green energy. UMPESL also undertakes water projects under the Jal Jeevan Mission, Rural Water Supply and Sanitisation (RWSS) drinking water supply projects, and water treatment plants for industrial and domestic segments.

MEP

UMPESL has exhibited robust growth and strategic development in the MEP business and has prioritised projects aligned with its key business terms, ensuring sustainable profit margins and positive cash flows.

Key achievements in the business included an order inflow of ? 828 crores during the year under review. Significantly, there has also been a substantial increase in the average contract size and a pivotal shift from general contractors to direct clients. This transition has led to securing orders directly from end-users with equitable contract conditions and sustainable gross margins. These strategic manoeuvres underscore UMPESLs commitment to sustainable growth and operational excellence in the MEP sector.

Water

The Water business predominantly caters to the municipal and Government clients, constituting 95% of its customer base. UMPESL offers EPC contracting and operation and maintenance services for water treatment projects, including the supply of water treatment equipment. During the year, the Water business secured orders amounting to ? 215 crores and operated with a stringent focus on efficient working capital management, underscoring its commitment to efficient service delivery in this vital sector.

Solar

UMPESLs Solar business has successfully commissioned some major projects in Rajasthan and Karnataka.

These projects underscore the Companys expertise in large-scale solar installations. With new orders totalling 189 MWp and entry into the Rooftop Solar segment through the PM-Surya Ghar scheme, UMPESL is poised for substantial growth in Indias burgeoning solar industry.

Electrical

The Electrical business vertical has secured orders worth ? 930 crores under the Revamped Distribution Sector Scheme (RDSS) in West Bengal and Jharkhand. Additionally, the Company has ventured into the substation segment, commissioning 15 substations in Madhya Pradesh, including the milestone of inaugurating the first Gas Insulated Substation (GIS) in Kolkata.

Opportunities and Outlook

UMPESL faces increased competition from both new entrants and existing competitors. The resource availability, securing timely Right of Way approvals and volatile commodity prices present significant risks, which impact project timelines and profitability for the Infra Solutions business vertical. Moreover, delays or failures in collecting payments from customers or EPC contractors could hinder the Companys ability to meet its financial goals. The business team proactively engages with all the stakeholders to address these risks efficiently, to sustain growth in a competitive market environment.

UMPESL recognises significant opportunities in MEP infrastructure projects i.e. Metro rails, commercial buildings, data centres, water & sanitation facilities, and solar and electrical infrastructure projects. Driven by initiatives like Jal Jeevan Mission and AMRUT, particularly in projects involving the State Water and Sanitation Mission, RWSS, Sewage Treatment Plants, desalination, and Water Treatment Plants, UMPESL anticipates substantial opportunities in the water and sanitation sector. The Governments target of achieving 280 GW of solar capacity by 2030, coupled with initiatives like the One Crore Rooftop Solar Project, presents significant opportunities for the Company. UMPESL is poised to leverage the upcoming opportunities in the Electrical business under the Revamped Distribution Sector Scheme (RDSS). Leveraging the Government support for infrastructure and commitments from the private sector, UMPESL anticipates sustainable growth over the next 3-5 years.

Textile Machinery •

Division (TMD)

The textile industry experienced volatility characterised by fluctuations in cotton and yarn prices and remainec sluggish due to highly subdued export demand for yarn. As a result, Capex within the industry decreased across the sector which led to reduced utilisation levels of spinners. The apparel industry was similarly impacted, experiencing reduced demand, which led garment manufacturers to operate at 60% of their capacity. Despite the aforementioned factors, the business performance of TMD reached all-time high levels due to its healthy order book and through continued focus on the "After-sales" business.

TMDs sustained efforts contributed to maximising revenue in each product line, as well as fostering growth in market share. The year was exceptionally successful for TMD in terms of EBIT performance. The market share for Spinning Machinery has achieved a level of 65%.

Challenges and Opportunities

The textile machinery industry encounters challenges stemming from its cyclical nature, lack of innovation, and declining spending in this sector globally. However, TMD aims to mitigate these challenges by focusing on technological solutions and enhancing its after-sales service.

The growth potential of the textile industry continues to be positive, owing to various factors such as the availability of raw materials, skilled manpower, increasing per capita income, increasing consumption of textiles, etc. Moreover, the Government is actively providing support through various interventions such as Production Linked Incentive (PLI), and PM MITRA Integrated Textile Parks, among others. There have been several State Government policies, particularly in Madhya Pradesh, Rajasthan, Jammu & Kashmir,

Uttar Pradesh, and Maharashtra, which are aimed at stimulating investment in the textile sector.

TMD is fully prepared to cater to the diverse needs of the textile industry, positioning itself as a comprehensive one-stop solution provider with a wide-ranging portfolio of products and solutions. TMD places significant emphasis on the After Sales market, supported by a network of sales and service engineers, strategically located near textile clusters nationwide. TMD is currently on a growth trajectory and is poised to sustain this upward momentum in the coming years.

Mining and Construction Equipment (M&CE)

The Mining and Construction Equipment (M&CE) business of UMPESL, operates as an engineering solutions provider to the mining and construction sector in India and Africa. The global mining sector benefits from UMPESLs ability to maintain earthmoving equipment at competitive costs, adding significant value. Given the pivotal role of heavy mining equipment in the global opencast mining sector, UMPESL ensures high availability and reliability, ultimately reducing the overall output cost per tonne.

Africa Business

M&CE has achieved its targeted numbers despite facing pressure for cost reductions. The primary focus in Mozambique is to extend the MARC contract for Letourneau loaders and the CAT 6090 contract, for a further period. M&CE is also exploring business opportunities in Zambia for expanding the mining services.

India Business

M&CE facilitates equipment support across India through a widespread network of sales and service offices and warehouses, further complemented by conveniently located heavy engineering shops at job sites.

The Government of India has sustained its infrastructure drive, notably allocating ? 2.7 lakh crores for Roads and Highways in the Union budget of 2023-24, as announced by the Ministry of Road Transport and Highways. The recent permission for commercial mining of coal and the relaxation of FDI norms in the mining sector by the Government are positive developments. These initiatives are expected to boost business for M&CE in the coming years.

M&CE has entered into long-term contracts for the supply of parts including maintenance contracts. M&CE has also secured significant orders for Powerscreen equipment. Looking forward to 2024-25, M&CEs top priority will be to further expand its Powerscreen market share beyond 60% and explore new applications in sectors such as Coal, Bauxite and MSW.

Challenges and Opportunities

Export duty on iron ore fines and challenges in bringing modern technology to the construction equipment industry are threats to M&CE business. However, a customer-centric approach and skilled workforce equip the business to overcome these hurdles and uphold its leadership in the sector.

Indias infrastructure projects and the revival of the mining sector present growth opportunities for the business. The Company aims to expand its service agreements in Mozambique and increase customer reach in India through strategic partnerships.

FINANCIAL OVERVIEW: CONSOLIDATED

(a) GROSS SALES/INCOME FROM OPERATIONS (SEGMENT REVENUES)

(Rs In Crores)

	2023-24	2022-23	Change	Change (%)
Segment-A (Unitary Cooling Products)	8,160	6,475	1,685	26
Segment-B (Engineering Projects)	3,683	2,402	1,281	53
Segment-C (Engineering Products)	588	522	66	13
Total	12,431	9,399	3,032	32

Unitary Cooling Products business reported sales of 2 million Air Conditioners during the year 2023-24, i.e. a volume growth of over 35%.

Healthy opening order backlog and efficient execution of the orders resulted in revenue growth for the Project business, as well.

(b) EMPLOYEE BENEFITS EXPENSE

(Rs In Crores)

	2023-24	2022-23	Change	Change (%)
Employee Benefits Expense	779	667	112	17

Employee benefits expenses comprise salary, wages, and commission to the Directors and Companys contribution to Provident Fund and other funds, gratuity, and staff welfare expenses. The employee benefits expense was higher by 17% on account of the increase in manpower, especially for Product business and the annual increments.

(C) FINANCE COST

(Rs In Crores)

	2023-24	2022-23	Change	Change (%)
Interest	56	30	26	87

Finance costs are interest paid on bank credit facilities availed for the execution of overseas projects and certain working capital demand loans taken during the year.

(d) PROFITABILITY

(Rs In Crores)

	2023-24	2022-23	Change	Change (%)
Profit before Exceptional Items and Tax	486	551	(65)	(12)
Exceptional Items	-	(244)	244	100
Profit before Tax	486	307	179	58
Profit after Tax	248	136	112	82

Despite competition and aggressive pricing adopted by competitors, the Company managed to maintain RAC margins. Further, due to delays in certifications and release of payments in Projects businesses, the Company has in line with its prudent policy, made provisions on the receivables, thereby impacting the profitability.

During the previous year, due to the unilateral encashment of bank guarantees by the Main Contractors, including the termination of a contract as a sequel to the termination of the Main Contract by the Client, the Company had made

a provision of 244 crores in respect of receivables and bank guarantees encashed for two overseas contracts of the Project business. The same has been reflected under Exceptional items. The Company has initiated legal proceedings against the Main Contractors for recovery of the proceeds of bank guarantees encashed and other amounts due from these Main Contractors.

FINANCIAL POSITION: CONSOLIDATED

(A) BORROWINGS (NON-CURRENT and CURRENT)

(Rs In Crores)

	2023-24	2022-23	Change	Change (%)
Borrowings	713	616	97	16
Lease Liabilities	30	35	(5)	(14)
Total	743	651	92	14

Borrowings represent working capital and term loan facilities availed for overseas Projects business and term loans taken for capital expansion projects for a Room Air Conditioner Plant in Chennai and a Commercial Refrigeration manufacturing facility in Waghodia.

(B) INVESTMENTS

(Rs In Crores)

	2023-24	2022-23	Change	Change (%)
Non-Current Investments	3,007	2,801	206	7
Current Investments	501	307	194	63
Total	3,508	3,108	400	13

Investments include debt mutual funds, investment in bonds, preference shares and strategic equity instruments in Tata Group companies and joint ventures and associates. The increase in value of investments is on account of higher investments in mutual funds and also the reinstatement of investments at fair market value as of the year-end.

(C) INVENTORIES

(Rs In Crores)

	2023-24	2022-23	Change	Change (%)
Raw Materials, Components, Stores and Spares	924	772	152	20
Work-in-Progress (Net)	14	9	5	56
Finished Goods	682	492	190	39
Stock-in-Trade of Goods (for Trading)	516	320	196	61
Total	2,136	1,593	543	34

Movement in inventory reflects the seasonal stock-up to meet the expected high demand for the seasonal sale.

(D) TRADE RECEIVABLES

(Rs In Crores)

	2023-24	2022-23	Change	Change (%)
Trade Receivables	2,533	2,192	341	16

Trade Receivables have increased due to delays in receipt of due receivables in the Projects businesses.

(E) OTHER ASSETS

(Rs In Crores)

	2023-24	2022-23	Change	Change (%)
Other Current Financial Assets	643	353	290	82
Other Non-Current Financial Assets	237	272	(35)	(13)
Contract Assets	744	978	(234)	(24)
Other Current Assets	315	316	(1)	-
Other Non-Current Assets	96	86	10	12

Other financial assets (current and non-current) comprise security deposits, deposits with customers and fixed deposits. Other assets (current and non-current) primarily include balance with Government authorities and capital advances. Contract assets represent contract revenues recognised in the project business, in excess of the certified bills. In the Projects business, revenues are recognised based on the percentage of completion method, in line with the accounting standards.

(F) LIABILITIES and PROVISIONS

(Rs In Crores)

	2023-24	2022-23	Change	Change (%)
Current Liabilities	5,756	4,620	1,136	25
Non-Current Liabilities	425	166	259	156

Current liabilities include contract liabilities, borrowings, trade payables, short-term provisions, income tax liabilities and other current liabilities. Non-current liabilities consist of long-term provisions, trade payables and deferred tax liabilities. Provisions (long-term and short-term) are towards employee benefits - gratuity, pension, medical benefits and compensated absences, trade guarantees and contingencies, among others.

FINANCIAL PERFORMANCE: STANDALONE

(a) GROSS SALES/INCOME FROM OPERATIONS (SEGMENT REVENUES)

(Rs In Crores)

	2023-24	2022-23	Change	Change (%)
Segment-A (Unitary Cooling Products)	8,160	6,475	1,685	26
Segment-B (Engineering Projects)	423	914	(491)	(54)
Segment-C (Engineering Products)	-	182	(182)	(100)
Total	8,583	7,571	1,012	13

Revenue of Segment A for 2023-24 was higher by 26% at 8,160 crores as compared to 6,475 crores last year. In view of the transfer of domestic B2B businesses relating to Projects business comprising Mechanical, Electrical and Plumbing (MEP)/ Heating, Ventilation and Air Conditioning (HVAC) and Water projects; Mining and Construction Equipment (M&CE) business and Textile Machinery Division (TMD) by Voltas to its wholly owned subsidiary, Universal MEP Projects & Engineering Services Limited (UMPESL) effective 1 August, 2022, total revenue of the Company (standalone) includes revenue of transferred businesses for part of the year 2022-23 and therefore, the revenue of current year is not comparable.

(B) OTHER INCOME

(Rs In Crores)

	2023-24	2022-23	Change	Change (%)
Other Income	300	175	125	71

Other income comprises rental income, dividends from investments, interest income and profit from the sale of investments.

(C) EMPLOYEE BENEFITS EXPENSE

(Rs In Crores)

	2023-24	2022-23	Change	Change (%)
Employee Benefits Expense	458	437	21	5

Employee benefits expense comprise salary, wages, and commission to the Directors and Companys contribution to Provident Fund and other funds, gratuity and staff welfare expenses.

(D) FINANCE COSTS

(Rs In Crores)

	2023-24	2022-23	Change	Change (%)
Interest	21	12	9	75

Finance costs are interest paid on borrowings from banks for the execution of overseas projects.

(E) DEPRECIATION and AMORTISATION EXPENSES

(Rs In Crores)

	2023-24	2022-23	Change	Change (%)
Depreciation and Amortisation Expenses	43	36	7	19

The depreciation charge for 2023-24 has increased due to the capitalisation of assets at the Manufacturing Plants.

(F) OTHER EXPENSES

(Rs In Crores)

	2023-24	2022-23	Change	Change (%)
Other Expenses	815	699	116	17

Other expenses include repairs and maintenance, travel and communication costs, service maintenance charges, other selling expenses, external services/contract labour charges, subscriptions, e-auction charges, C&F charges, moving and shifting expenses, staff selection expenses, brand equity expenses and commission paid to Non-Executive Directors. The increase in other expenses is on account of the higher sales volume of the Unitary Cooling Products business.

(G) PROFITABILITY

(Rs In Crores)

	2023-24	2022-23	Change	Change (%)
Profit before Exceptional Items and Tax	758	553	205	37
Exceptional Items (Net)	-	975	(975)	(100)
Profit before Tax	758	1,528	(770)	(50)

Profit before exceptional items was higher in line with revenue growth in the Unitary Cooling Products business. Exceptional Items (net) in 2022-23 comprise gains on transfer of businesses to UMPESL; reversal of provision earlier made for diminution in value of investments in UMPESL and provisions made on account of termination of contract and encashment of bank guarantees.

FINANCIAL POSITION: STANDALONE

(A) BORROWINGS (NON-CURRENT and CURRENT)

(Rs In Crores)

	2023-24	2022-23	Change	Change (%)
Borrowings	405	285	120	42
Lease Liabilities	26	30	(4)	(13)
Total	431	315	116	37

Borrowings were primarily towards term loans taken for capital expansion projects for Room Air Conditioners in Chennai and Commercial Refrigeration Products in Waghodia and includes fund-based credit facilities availed for new overseas projects in the Middle East.

(B) INVESTMENTS

(Rs In Crores)

	2023-24	2022-23	Change	Change (%)
Non-Current Investments	5,049	4,655	394	8
Current Investments	321	307	14	5
Total	5,370	4,962	408	8

Non-current investments comprise investments in subsidiaries, joint ventures, associates and investment in Mutual Funds, Bonds and Preference Shares. Current investment comprise investment in Mutual Funds and Bonds/Debentures. The increase in non-current investments was primarily on account of additional capital infusion in Voltbek Home Appliances Private Limited and also on account of higher investments in Mutual Funds. Further, the investments are re-stated at fair market value as of the year-end.

(C) INVENTORIES

(Rs In Crores)

	2023-24	2022-23	Change	Change (%)
Raw Materials, Components, Stores and Spares	918	762	156	20
Work-in-Progress (Net)	5	8	(3)	(38)
Finished Goods	682	491	191	39
Stock-in-Trade of Goods (for Trading)	473	286	187	65
Total	2,078	1,547	531	34

Movement in inventory reflects the seasonal stock-up to meet the anticipated high demand for the seasonal sale.

(D) TRADE RECEIVABLES

(Rs In Crores)

	2023-24	2022-23	Change	Change (%)
Trade Receivables	1,716	1,289	427	33

Trade Receivables have increased due to delays in receipt of due receivables in the Projects businesses.

(E) OTHER ASSETS

(Rs In Crores)

	2023-24	2022-23	Change	Change (%)
Other Current Financial Assets	586	381	205	54
Other Non-Current Financial Assets	227	261	(34)	(13)
Contract Assets	205	373	(168)	(45)
Other Current Assets	171	222	(51)	(23)
Other Non-Current Assets	79	71	8	11

Other financial assets (current and non-current) comprise security deposits, deposits with customers and fixed deposits. Other assets (current and non-current) primarily include balance with Government authorities and capital advances. Contract assets represent contract revenues recognised in the project business, in excess of the certified bills. In the Projects business, revenues are recognised based on the percentage of completion method, in line with the accounting standards.

(F) LIABILITIES AND PROVISIONS

(Rs In Crores)

	2023-24	2022-23	Change	Change (%)
Current Liabilities	3,873	3,130	743	24
Non-Current Liabilities	398	139	259	186

Current liabilities comprise contract liabilities, short-term borrowings, trade payables, short-term provisions, income tax liabilities and other current liabilities. Non-current liabilities consist of long-term provisions and trade payables.

RISK AND CONCERNS

The VUCA concept has long been used to describe the volatility that has become the norm in the business world. With the current evolving business landscape becoming more dynamic, risk has become an integral part of the business.

Voltas has implemented a robust Enterprise Risk Management (ERM) Framework, benchmarking with leading international risk management standards such as ISO 31000 and the Committee of Sponsoring Organisation of the Treadway Commission (COSO).

The ERM Standard sets out the objectives and elements of the Risk Management process within the organisation and helps to promote a company-wide Risk-aware corporate culture.

RISK MONITORING AND REPORTING

Voltas conducts a rigorous risk identification exercise in linkage with the strategic business plans and emerging risks.

Once identified, the risks are evaluated to ascertain their risk exposure levels i.e., potential impact, likelihood of occurrence and risk velocity using the standard risk assessment scale. Risks are further classified into Critical, High, Medium, and Low based on their overall assessment score. All identified Risks are assessed periodically, by respective Risk Owners and Mitigation Plan Owners to update the Impact and Likelihood of the identified Risks.

Based on the outcomes of Risk Assessment and risk rating scores, Risk Prioritisation in the form of a Risk Matrix is done considering the potential consequences for the Company. Risk Prioritisation enables optimised deployment of the Companys resources and response mechanism for effectively managing the risks that matter.

Risks and defined response action plans are regularly assessed, updated, and reported at appropriate levels within the organisation to maintain ongoing oversight.

In addition to establishing an effective ERM framework, Voltas has been actively exploring technology tools for enhanced implementation of risk management processes.

Some of the key business risks are in relation to:

Supply Chain, Commodity Prices, BG encashments, Cybersecurity, Macroeconomic factors, Competition, Environmental, Social and Governance and Brand Reputation. Voltas has put in place adequate measures to mitigate these risks.

Voltas is committed to proactively managing existing and emerging Risks impacting its strategic business objectives and performance.

HUMAN RESOURCES

Voltas has implemented strategic initiatives, including hiring industry experts, investing in capabilities, digitalisation, and employee engagement, to build a future-ready organisation.

Voltas long-term and short-term strategic plans drive talent planning and management decisions, influencing choices between talent acquisition and development for leadership and critical roles.

Key talent is strategically aligned with important roles, guiding internal talent movement and development plans, which undergo annual reviews and adjustments as necessary. Voltas identifies organisational training needs and conducts various programmes encompassing technical, functional, leadership development, and culture-building initiatives. The Company engages in nationwide campus recruitment to bring fresh talent on board and upholds an Equal Opportunity Policy to promote diversity and inclusivity. Moreover, the Company collaborates with an inclusive platform like Atypical Advantage to integrate individuals with disabilities into the workforce.

Voltas learning and development programmes are closely aligned with its long-term and short-term strategic plans, catering to both individual and organisational development requirements. The Company offers a diverse range of initiatives, including role-specific leadership

development, and technical, functional, and culture-building programmes. Leveraging digital platforms like Disprz, Voltas extends learning opportunities to over 20,000 contractual and flexible employees.

Voltas believes that an engaged workforce provides a competitive edge to an organisation. The Company runs digital initiatives in the areas of emotional, financial, and physical well-being, and maintains comprehensive Reward and Recognition (r&r) schemes and a robust Employee Engagement calendar across all its branches. The Company continues to maintain a harmonious and engaging relationship with the Voltas Employees Union/ Federation.

Committed to providing a safe, harassment-free workplace, Voltas conducts programmes and training sessions on gender equality, workplace sensitivity, and grievance redressal mechanisms across all its locations. Utilising in-person meetings and e-learning modules and resources like the Manual on Sexual Harassment of Women at Workplace released by the Ministry of Women and Child Development, Government of India; POSH Classroom training; and e-learning portals for employees, the Company strives to maintain a harassment-free environment for all its employees.

As of 31 March, 2024, Voltas had a standalone workforce of 5,191 employees, with 3,485 being contract staff. On a consolidated basis, the total workforce during the year stood at 10,669 employees, with 7,553 being contract staff.

INTERNAL CONTROL SYSTEMS

The Company has established an internal financial control framework commensurate with the size and complexity of its business operations and in line with the IFC framework prescribed under Section 134(5) of the Companies Act, 2013. The Internal Financial Controls (IFC) system operates at the entity and process levels and is aligned with the requirements of the Companies Act, 2013 and the globally accepted framework issued by COSO. The Companys internal controls framework ensures integrity in conducting its business, safeguarding its assets, timely preparation of reliable financial information, accuracy, and completeness in maintaining accounting records and prevention and detection of frauds and errors monitored through a set of detailed policies and procedures.

The Company has an independent internal audit function headed by the Chief Internal Auditor supported by co-sourced audit teams from leading Chartered Accountant firms. The Chief Internal Auditor reports to the Board Audit Committee. Internal audit (IA) carries out a focused and risk-based annual internal audit plan approved by the Board Audit Committee. The scope and coverage of audits include review and reporting on key process risks, adherence to operating guidelines and statutory compliances.

IA also provides recommendations for control improvements and enhancement in the efficiency of operations. The Audit Committee regularly reviews and oversees the adequacy of the internal control environment through periodic reviews of key audit findings and the adequacy and reliability of financial reporting.

The operating effectiveness of Internal Financial Controls is carried out by the Internal Audit team and the Internal Controls over Financial Reporting (ICoFR) by the Statutory Auditors, and no reportable material weaknesses, either in their design or operations, were observed. The evaluation included documentation review, enquiries, testing, and other procedures considered to be appropriate in the circumstances. Based on the evaluation of the results of the assessment, the Board, with the concurrence of the Audit Committee, was of the opinion that the Companys Internal Financial Controls were adequate and operating effectively as of 31 March, 2024.

Cautionary Statement

Statements in this report on Management Discussion and Analysis, describing the Companys objectives, projections, estimates, expectations, or predictions may be forward-looking statements within the meaning of applicable laws and regulations. These statements are based on certain assumptions and expectations of future events. Actual results could differ materially from those expressed or implied since the Companys operations are influenced by many external and internal factors beyond its control. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements, based on any subsequent developments, information, or events. Readers are cautioned that the risks outlined here are not exhaustive. Readers are requested to exercise their judgement in assessing the risks associated with the Company.

HIGHLIGHTS

	2023-24	2022-23	2021-22	2020-21	2019-20
1. SALES AND SERVICES	12,407	9,399	7,841	7,457	7,627
2. OTHER INCOME (INCLUDING OTHER OPERATING INCOME)	327	268	283	288	262
3. COST OF SALES AND SERVICES (incl. Excise Duty)	9,814	7,378	5,897	5,555	5,555
4. OPERATING, ADMINISTRATION AND OTHER EXPENSES	2,296	1,617	1,419	1,396	1,470
5. Slall Ixpenses (included in i & 4)	(7 79)	(667)	(618)	(602)	(67 2)
Number of Imployees (including C ontiac 1 Staff)	10,669	9,614	8,343	8,617	8,821
6. OPERATING PROFIT	486	551	697	709	795
7. EXCEPTIONAL INCOME/(EXPENSES)	—	(244)	—	—	(51)
8. PROFIT BEFORE TAXATION	486	307	697	709	744
Percentage to Sales and Services	i.9	i.i	8.9	9.5	9.8
Percentage to lotal Net Assets	7.4	5.0	11.9	13.5	16.5
9. TAXATION	238	171	191	180	223
10. PROFIT AFTER TAXATION	248	136	506	529	521
Percentage to Sales and Services	2.0	1.4	6.5	7.1	6.8
Percentage to Shareholders Funds	4.i	2.5	9.2	10.6	12.2
11. PROFIT FOR THE YEAR ATTRIBUTABLE TO OWNERS OF THE COMPANY	252	135	504	525	517
12. RETAINED PROFIT	97	10	322	397	372
13. DIVIDEND ON EQUITY CAPITAL	182	141	182	165	132
Percentage	550	425	550	500	400
14. PROPERTY, PLANT AND EQUIPMENT INCLUDING OTHER INTANGIBLE ASSETS (AT COST)	759	707	560	564	550
15. DEPRECIATION	363	340	322	317	300
16. INVESTMENTS	3,508	3,109	3,615	3,046	2,343
17. NET CURRENT AND NON-CURRENT ASSETS	2,678	2,597	1,975	1,905	1,234
18. DEFERRED TAX ASSET (NET)	(18)	30	32	56	71
19. TOTAL NET ASSETS	6,564	6,103	5,860	5,254	4,498
20. SHARE CAPITAL	33	33	33	33	33
21. OTHER EQUITY	5,787	5,419	5,467	4,960	4,247
22. EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY	5,820	5,452	5,500	4,993	4,280
Equity per Share (Book Value)	*176.44	*16 3.86	*165.25	*149.22	*127.20
earnings per Share	*7.62	*4.08	*15.23	*15.8 7	*15.63
Number of Shareholders	2,46,708	2,79,240	1,75,827	1,50,995	1,25,527
Share Prices on Stock Exchange High	*1,139	*1,348	*1,357	*1,131	*741
Low	745	738	918	*428	*449
23. BORROWINGS	713	616	343	251	218
Debt/Equity Ratio	12	11	6	5
(Percentage to Shareholders Funds)

Notes : 1. All amounts are Rupees in crores except those marked t

2. Figures from 2014-15 onwards are based on Consolidated Financial Statements.

3. Previous years figures have been regrouped / reclassified, wherever necessary.

4. Figures for 2015-16 onwards are as per Ind AS. The figures for preceding years are as per old IGAAP

5. Operating profit from 2015-16 onwards includes share of profit / (loss) of joint ventures and associates.

6. *Face Value of 1 each. (Shares of 100 each split into Shares of 10 each in 1990 and thereafter, into Shares of 1 each in 2006).

7. ** denotes value below 50 lakhs

2018-19	2017-18	2016-17	2015-16	2014-15	1994-95	1984-85	1974-75	1964-65	1954-55
7,085	6,380	6,033	5,720	5,166	811	266	159	42	10	1
226	222	274	164	148	8	2	**	**	**	2
5,262	4,591	4,298	4,114	3,619	604	211	138	35	8	3
1,307	1,210	1,271	1,242	1,227	192	56	19	5	2	4
(642)	(587)	(618)	(635)	(590)	(100)	(32)	(10)	(4)	(1)	5
8,261	8,118	8,429	8,741	8,424	10,667	8,147	7,252	5,082	2,324
689	804	719	534	468	23	1	2	2	**	6
(12)	1	1	29	46	(1)	—	—	—	—	7
677	805	720	563	514	22	1	2	2	**	8
9.6	12.6	11.9	9.8	9.9	2.7	0.5	1.0	5.9	2.5
15.3	19.9	20.7	18.3	23.1	5.0	1.1	4.6	18.3	6.5
163	227	200	170	128	**	—	1	1	**	9
514	578	520	393	386	22	1	1	1	**	10
7.3	9.1	8.6	6.9	7.5	2.7	0.5	0.5	2.3	1.4
12.5	14.8	15.7	14.0	18.4	13.2	4.1	6.7	17.6	9.1
508	572	517	387	384	—	—	—	—	—	11
353	437	414	309	286	10	**	**	1	**	12
132	132	116	86	74	12	1	1	**	**	13
400	400	350	260	225	35	10	12	15	6
518	470	460	484	459	307	50	12	4	1	14
294	290	278	280	266	107	16	6	1	**	15
2,386	2,754	2,268	1,946	1,094	82	5	1	1	—	16
1,716	1,108	1,008	901	902	149	66	29	9	3	17
99	5	20	31	35	—	—	—	—	—	18
4,425	4,047	3,478	3,082	2,224	431	105	36	13	4	19
33	33	33	33	33	34	10	6	3	2	20
4,077	3,872	3,274	2,778	2,069	131	20	6	3	**	21
4,110	3,905	3,307	2,811	2,102	165	30	12	6	2	22
*121.21	*117.88	*99.93	*84.96	*55.59	50	305	191	216	1,027
*15.35	*17.30	*15.64	*11.70	*11.62	7	12	13	38	93
1,19,915	1,07,457	1,08,646	1,05,465	99,973	84,180	45,237	14,395	7,356	150
*665	*675	*425	*360	*301	176	470	211	276
*471	*401	*267	*211	*149	92	356	125	183
315	142	171	271	122	266	75	24	7	2	23
8	4	5	10	6	162	253	200	136	151