Aplab Ltd Management Discussions

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.