aplab ltd share price Directors report

2022-2023

To the Members,

Your Directors present their 58^th Annual Report of the Company together with the Audited Statements of Assets & Liabilities and Profit & Loss Account for the year ended 31^st March 2023.

FINANCIAL RESULTS

The Companys financial performance for the year under the review, along with previous year figures are given hereunder:

Rs. in Lakhs

Particulars	Year ended 31.03.2023	Year ended 31.03.2022
Net Sales /Income from Business Operations	5148.94	5135.98
Other Income	121.23	48.81
Total Income	5270.17	5184.79
Interest	301.53	478.78
Profit / (Loss) before Depreciation	139.87	69.96
Less Depreciation	44.94	37.62
Profit / (Loss)after depreciation and Interest	94.93	32.34
Less Current Income Tax	-	-
Less Deferred Tax	-	-
Net Profit (Loss) after Tax	94.93	32.34
Dividend (including Interim if any and final)	-	-
Net Profit / (Loss) after dividend and Tax	94.93	32.34
Amount transferred to General Reserve	-	-
Balance carried to Balance Sheet	94.93	32.34
Earning in Rupee per share (Basic)	0.20	0.19
Earning in Rupee per Share (Diluted)	0.20	0.19

1. REVIEW OF BUSINESS OPERATIONS AND FUTURE PROSPECTS

Stabilizing impact to Aplabs supply chain

Although supply chain conditions have improved substantially, digital signal processors and microcontrollers in general are still struggling to catch up with post-Covid demand. We expect this to continue for a while. Aplab has been able to acquire sufficient supplies for short-term demands.

Commodity prices have stabilized but are still elevated, and company margins, especially on the longer-term contracts that your company has with defense contractors are still impacted until 2024.

Defense spending continues to be healthy and consequently your company continues to see a healthy inflow of orders, and inflow is expected to remain at levels like prior years.

The companys order book is very promising and reflects the trust of the market in the company. Aplab is one of the only players in this market that can provide pan-India inhouse support network. We are everywhere our customers are - from Leh Ladakh to the Andamans. Pending orders have increased over the previous year, however, the unavailability of microcontrollers and other semiconductor devices has added to this backlog. The company expects supplies to normalize by Q4 of FY22-23, and the backlog remains a concern until then. The company continues to closely monitor its semiconductor inventories and are constantly pushing OEMs for additional supplies, even at higher costs.

Working capital liquidity continues to be a challenge for Aplab, and this prevents Aplab from actively seeking additional business, especially international business where supply commitments are critical to success. Aplab is looking at ways to raise short-term working capital, via traditional banking mechanisms and non-traditional means.

2. MANAGEMENT DISCUSSION AND ANALYSIS:

a) Industry Structure and Developments

Aplab competes in the Industrial Power electronics market. Most of Aplabs larger competitors are now owned by multinationals. The renewed focus on "Make in India increases the number of opportunities available to your company. As mentioned earlier, Aplabs strong support network makes Aplab an easy choice for Industrial customers, who usually operate in rural areas.

Aplab hopes to launch AI and machine vision based self-service passbook kiosks by Q4. Aplab has great hopes for these products in the Banking sector. Updating bank passbooks takes an inordinate amount of time and resources of banks. Aplab is looking to launch a product that reduces this to zero, with the use of AI.

b) Opportunities and Threats.

International distributors and resellers looking at alternatives to China remains a big opportunity. However, the local supply chain continues to be modest in size, and local companies continue to rely on manufacturing input imports for quality components. Zero-tolerance policies, lockdowns and the Ukraine war are the immediate threats to a steady supply-chain for manufacturing.

The domestic industrial power controls market is primarily dominated by the process industry and the defense sector. Your company continues to be one of the few Indian power electronics manufacturers with a pan-India presence. Unfortunately, this means that Aplabs cost of operations is higher than newer entrants, and there are instances of order losses on price for smaller defense project requirements where a large support network is not critical. This continues to be a threat to the defense segment business.

New ‘Make-in-India localized public procurement requirements provide a potentially exponential growth opportunity to your company, especially in a few product segments that have zero local manufacturer competition.

An emerging threat is increasing interest in local manufacturing. India is one of the few countries that IMF projects will escape a recession, making it an attractive destination for marketing and sales budgets. This will lead to increased competition.

c) Segment-wise or product-wise performance.

Aplab s Power Controls division, which comprises UPS systems, inverters, frequency converters and continues to show sales growth and increased interest in Aplabs products.

The Test and Measurement division, which includes programmable power, and electrical test equipment showed marginal improvements in sales growth. However, performance was muted and below expectations for both divisions as Aplab continues to focus on reducing debt and working capital. Additionally, semiconductor unavailability delayed product shipments.

Banking automation is seeing new investments, and with our new product launches as mentioned above, Aplab is hopeful of acquiring sizeable chunks of this business.

d) Outlook

Demand outlook continues to be healthy. Banking and the education sector should see a sharp revival and some of Aplabs underperforming banking and retail automation product lines should see an uptick in demand in the coming year.

e) Risks and concerns

Semiconductor shortages continue to be a big risk to Aplabs ability to be able to deliver product and execute orders. A faster-paced jump in business and profitability will require short-term borrowing of working capital, and sourcing this is still a large concern.

f) Internal control systems and their adequacy

Company has adequate internal control system to optimize the use and protection of assets, facilitate accurate and timely compilation of financial statements and management reports and ensure compliance with statutory laws, regulations, and Company policies. The management regularly reviews actual performance with reference to budgets and forecasts. The Company has implemented internal control system at all levels and is confident that Internal control systems implemented are adequate. But continuous efforts are being made to improve further, wherever possible.

g) Discussion on financial performance with respect to operational performance.

The Company continues to gradually move towards increasing cash flows. However, exceptional settlements with labour unions, etc. continue to pressure funds availability.

h) Material developments in Human Resources / Industrial Relations front, including number of people employed.

Your Company continued its activities during the year in a cordial atmosphere with utmost co-operation amongst employees. The management is committed to promoting safety, occupational health and proper environment in design, planning, training, and execution of all tasks. The company continues to reduce total head count.

3. Details of changes in key financial ratios are furnished below.

Ratio	Year Ended 31st March, 2023	Year Ended 31st March, 2022
Debtors Turnover	1.94	2.93
Inventory Turnover	1.28	1.21
Interest coverage	1.81	1.20
Current ratio	0.52	0.49
Debt Equity Ratio	(2.54)	(2.29)
Operating Profit Margin (%)	7.70	9.95
Net Profit Margin (%)	1.84	0.63
Return on net worth (%)	(4.79)	(156)

4. DIVIDEND

Dividend is not recommended during the year since entire accumulated losses are not wiped yet. (Previous Year - Nil)

5. TRANSFER OF DIVIDEND TO INVESTOR EDUCTION AND PROTECTION FUND

In terms of Section 125 of the Companies Act, 2013, no unclaimed or unpaid Dividend due for remittance to the Investor Education and Protection Fund established by the Central Government.

6. MATERIAL CHANGES AND COMMITMENT IF ANY AFFECTING THE FINANCIAL POSITION OF THE COMPANY OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THESE FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT

On 2^nd June 2023 Bombay Stock Exchange has given formal approval for conversion of Loans from Promoters into Equity and Preference share capital and accordingly allotment to promoters is made. Promoters cant sale any of their shareholding for six months from the date of allotment as per the terms of conversion. With this conversion Net worth has become positive.

7. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The information pertaining to conservation of energy, technology absorption, foreign exchange Earnings and outgo as required under Section 134 (3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is furnished in Annexure to the Directors Report and is attached to this report.

8. STATEMENT CONCERNING DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY OF THE COMPANY

The Risk Management Committee operates throughout the year to identify and evaluate elements of business risks.

9. DETAILS OF POLICY DEVELOPEDAND IMPLEMENTED BY THE COMPANY ON ITS CORPORATE SOCIAL RESPONSIBILITY INITIATIVE

Though there is no legal compulsion in view of the accumulated losses of the last many years, during the year under review Corporate Social Responsibility could not be implemented. However, with improved performance, the same will be implemented.

10. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013

The particulars of Loans, Guarantees or Investments made under Section 186 are furnished in Notes to Financial Statement attached to this report.

11. RELATED PARTY TRANSACTIONS

All transactions entered into with Related Parties were on an arms length basis and in the ordinary course of business. There were no material significant related party transactions made by the company during the year under review with Promoter/Directors or Key Managerial Personnel. All related party transactions are placed before the Audit Committee and also been placed at the Board Meeting for approval and omnibus approval was obtained on a yearly basis for transactions which are of repetitive nature. The policy on related party transactions as approved by the Board has been uploaded on the website of the company. Form AOC-2 is not attached to the Directors Report for the current year since the related party transactions are mentioned in the Notes to Accounts attached to this report.

12. EXPLANATION OR COMMENTS ON QUALIFICATIONS, RESERVATIONS OR ADVERSE REMARKS OR DISCLAIMERS MADE BY THE STATUTORY AUDITORS AND THE PRACTICING COMPANY SECRETARY IN THEIR REPORTS

Statutory Auditors and Secretarial Auditors have qualified their reports for Impairment Loss of receivables not provided, negative net worth and backlog of statutory liabilities.

The liability of past employees dues has been substantially reduced during the current year. The Board felt that provision for impairment will be made in the years ahead. Management does an estimation of recoverability, however the impact is not quantified and hence not ascertainable and the second qualification, the agreed terms of payment is above 45 days. With the conversion of unsecured loans of Promoters into equity and preference share capital, net worth has become positive on 12^th June, 2023. With orders on hand, better profits will be made in the current year which will enable further improvement in net worth along with payment of statutory liabilities.

13. COMPANYS POLICY RELATING TO DIRECTORS APPOINTMENT, PAYMENT OF REMUNERATION AND DISCHARGE OF THEIR DUTIES

The Company is following Policy relating to appointment of Directors, Payment of Managerial Remuneration, Directors qualifications, positive attributes, independence of Directors and other related matters as provided under Section 178(3) of the Companies Act, 2013, due to inadequate profit, the present Executive Director is not drawing any remuneration.

14. ANNUAL RETURN

The extracts of Annual Return pursuant to provisions of section 92 read with rule 12 of the companies (Management and Administration) Rules, 2014 is furnished in Annexure - B and attached to this report.

15. NUMBER OF BOARD MEETINGS CONDUCTED DURING THE YEAR UNDER REVIEW

The Board met 4 (Four) times during the financial year 2021-22 i.e., on 27^th May 2022, 10^th August 2022, 14^th November 2022 and 9^th February 2023. In respect of such meetings proper notices were given in time and the proceedings were properly recorded and signed in the Minutes Book maintained for the purpose. No Circular Resolutions were passed by the company during the financial year under review.

The Board confirms compliance of Secretarial Standards issued by Institute of Company Secretaries of India (ICSI).

16. CORPORATE GOVERNANCE REPORT

In terms of SEBI CIRCULAR CIR/CFD/ POLICYCELL/7/2014 dated September 15, 2014, which was effective October 1, 2014, the Clause 49 of the Listing Agreement shall be applicable to all companies whose equity shares are listed on a recognized stock exchange. However, compliance with the provisions of erstwhile Clause 49 shall not be mandatory, for the time being, in respect of the following class of companies:

Companies having paid up equity share capital not exceeding Rs.10 Crore and Net Worth not exceeding Rs.25 Crore, as on the last day of the previous financial year; provided that where the provisions of Clause 49 becomes applicable to a company at a later date, such company shall comply with the requirements of Clause 49 within six months from the date on which the provisions became applicable to the company.

In view of the above your company is not required to annex the Corporate Governance Report to the Directors Report for the year ended March 31,2023.

17. DIRECTORS RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 134(5) of the Companies Act, 2013 the Board hereby submits its responsibility Statement:

(a) In the preparation of the annual accounts, the applicable accounting standards were followed along with proper explanation relating to material departures.

(b) The directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period.

(c) The directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.

(d) The directors had prepared the annual accounts on a going concern basis; and

(e) The directors, in the case of a listed company, have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively. Internal financial control means the policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business including adherence to Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information.

(f) The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

18. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES

The Company has no subsidiary company and no joint ventures during the year under review.

19. DEPOSITS

The Company has neither accepted nor renewed any deposits during the year under review.

20. DIRECTORS

No shares are held by the Independent Directors. The details of Promoter Shareholding are available in MGT-9 annexed to this report.

During the year Mr. Dinesh Kotecha, Independent Director expired on 18^th March 2023.

Mr. Sanjay N. Mehta was appointed as Additional Director for the year.

In accordance with the provisions of the Companies Act, 2013, Mrs. Amrita P. Deodhar (DIN: 00538573) is liable to retire by rotation at the forthcoming Annual General Meeting and, being eligible, has offered herself for reappointment.

21. DECLARATION OF INDEPENDENT DIRECTORS

The Independent Directors have submitted their disclosures to the Board that they fulfill all the requirements as stipulated in Section 149(6) of the Companies Act, 2013 to qualify themselves to be appointed as Independent Directors under the provisions of the Companies Act, 2013 and the relevant rules.

22. STATUTORY AUDITORS

At the 55^th Annual General Meeting held on 30^th September 2020 M/s Puranik Kane & Co., Chartered Accountants (Registration no. 120215W) are appointed as the Statutory Auditors of the Company a period of five years to carry out the audit from financial year 2020-2021 to 2024-2025 and shall hold office as such till conclusion of the Annual General Meeting that will be held for adoption of financial statements for the year 2024-2025. However M/s. Puranik Kane & Co., Chartered Accountants have expressed their inability to continue as Statutory Auditors. The New Statutory Auditors M/s. R Bhargava & Associates, Chartered Accountants have been appointed who will carry out the audit from financial year 2023-2024 to 2027-2028 and shall hold office as such till conclusion of the Annual General Meeting that will be held for adoption of financial statements for the year 2027-2028. The remuneration payable to the Auditor is commensurate with the audit work assigned to them.

23. DISCLOSURE OF COMPOSITION OF AUDIT COMMITTEE AND PROVIDING VIGIL MECHANISM

The Audit Committee consists of the following members.

i Dr. S.K. Hajela (DIN: 01001987)

ii Mrs. Amrita P. Deodhar (DIN: 00538573)

iii Mr. Dinesh Kotecha (DIN:02115860) (Expired)

The above composition of the Audit Committee consists of independent Directors viz., Mr. Dinesh A. Kotecha (DIN: 02115860) and Dr. S.K. Hajela (DIN: 01001987) who form the majority.

The Company has established a vigil mechanism overseas through the committee, the genuine concerns expressed by the employees and other Directors. The Company has also provided adequate safeguards against victimization of employees and Directors who express their concerns. The Company has also provided direct access to the chairman of the Audit Committee on reporting issues concerning the interests of co employees and the Company.

24. SHARES

a. BUY BACK OF SECURITIES

The Company has not bought back any of its securities during the year under review.

b. SWEAT EQUITY

The Company has not issued any Sweat Equity Shares during the year under review.

c. BONUS SHARES

No Bonus Shares were issued during the year under review.

d. RIGHT ISSUE OF EQUITY SHARES

The Company has not issued any Rights Shares during the year under review.

e. EMPLOYEES STOCK OPTION PLAN

The Company has not provided any Stock Option Scheme to the employees.

f. PREFERNTIAL ISSUE TO PROMOTERS OF THE COMPANY

The Company has issued Equity Shares and Compulsorily Convertible Preference Shares on Preferential basis to the Persons belonging to ‘Promoter & Promoter Group by conversion of major portion of their unsecured loan.

25. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL ACT, 2013)

The Company has in place an Anti Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the workplace (Prevention, Prohibition and Redressal) Act, 2013. All employees (permanent, contractual, temporary, trainees) are covered under this policy. No sexual harassment complaints were received during the year 2022-23.

26. PERSONNEL

Industrial relations during the year remained cordial. The Board appreciates the willing co-operation and team spirit in the organization at all levels.

Statement under section 134(3) of the Companies Act, 2013 read with rule 5(2) of the Companies (appointment and remuneration of managerial personnel) rules, 2014 giving details of employees who were employed throughout the year and were in receipt of remuneration not less than Rs. 1,02,00,000/- p.a. or Rs. 8,50,000/- p.m. if employed for part of the year is not attached to this report as there are no employees in this category.

27. ACKNOWLEDGEMENTS

Your Directors place on record their sincere thanks to Bankers, Business Associates, Consultants, Employees and various Government Authorities for their continued support extended to your Companys activities during the year under review. Your Directors also gratefully acknowledge the shareholders for their support and confidence reposed on your Company.

For and on behalf of the Board of Directors

P.S. Deodhar

Chairman & Managing Director

DIN: 00393117

Date: 11^th August 2023

Place: Navi Mumbai