CLN Energy Ltd Management Discussions

You should read the following discussion and analysis of financial condition and results of operations together with our financial statements included in this Draft Red Herring Prospectus. The following discussion relates to our Company and is based on our restatedfinancial statements. Our financial statements have been prepared in accordance with GAAP and other applicable provisions of the Companies Act. Note: Statement in the Management Discussion and Analysis Report describing our objectives, outlook, estimates, expectations or prediction may be "Forward looking statement" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to our operations include, among others, economic conditions affecting demand/supply and price conditions in domestic and overseas market in which we operate, changes in Government Regulations, Tax Laws and other Statutes and incidental factors.

OVERVIEW

Industry Overview

The global lithium-ion battery market size was estimated at USD 54.4 billion in 2023 and is projected to register a compound annual growth rate (CAGR) of 20.3% from 2024 to 2030. Automotive sector is expected to witness significant growth owing to the low cost of lithium-ion batteries. Global registration of electric vehicles (EVs) is anticipated to increase significantly over the forecast period. The U.S. emerged as the largest market in North America in 2023. Increasing EV sales in the country owing to supportive federal policies coupled with the presence of several players in the U.S. market are expected to drive product demand. Federal policies include the American Recovery and Reinvestment Act of 2009, which established tax credits for purchasing electric vehicles.

Energy storage technologies are predicted to play a major part in the decarbonization of the electricity and transport sectors, which accounted for 49% of Indias total greenhouse gas emissions (CO2 equivalent) in 2016. Among the several energy storage technologies available, lithium-ion batteries are anticipated to dominate the market during the upcoming decade (2021 onwards). Peak electricity demand would rise to 334 gigawatts (GW) by fiscal year 2030, with a total electricity generating need of 2,229 Billing units (BU). Thus, decarbonization of the electricity and transport industries is crucial to combating climate change. India unveiled its ambitious national goals for 2030 at the COP 26 UN Climate Change Conference, which include increasing its non-fossil energy capacity to 500 GW by 2030, obtaining 50% of its electricity needs from renewable sources by 2030, limiting projected carbon emissions by one billion tonnes, and lowering its economys carbon intensity of its economy by less than 45% by 2030. In India, the lithium-ion battery business is anticipated to experience exponential growth over the next five years (2022 onwards), and the recycling market of these batteries is estimated to be nearly 22-23 GWh in 2030. The lithium-ion battery industry in India is predicted to grow from 2.9-gigawatt hour (GWh) in 2018 to abouRs 132 GWh by 2030 (at a CAGR of 35.5%).

Our Business

Our Company, CLN Energy Limited has been incorporated on October 01, 2019 with a vision to manufacture products that reduces the carbon emission and commits to sustainability. Our company is engaged in the manufacturing of customized Lithium-ion Batteries, motors and deals in powertrain components of electric vehicles such as controllers, throttles, DC-DC converters, display, differential etc. Our company offers B2B solutions for both mobility applications such as electric two, three and four wheelers, including traction application as well as stationary applications such as solar, ESS, and telecommunications, Our Company also offers unique and customised solutions for various applications wherein lithium-ion battery packs are used.

Presently, our company operates two manufacturing facilities, one located in Noida, Uttar Pradesh, and the other in Pune, Maharashtra. Our facilities in Noida and Pune span 42,000 sq. ft and 21,000 sq. ft, respectively, and are equipped with the latest technology. We manufacture lithium-ion battery packs for both mobility and stationary applications. Our current installed manufacturing setup has a Cell Grading Capacity of 168 MWH per annum, Cell Sorting capacity of 358 MWH per annum, manufacturing capacity of 130 MWH per annum, and Battery testing capacity of 72 MWH per annum for two-wheeler batteries, which is the combined capacity of both Noida and Pune facilities. For batteries other than two- wheelers, our facility has a Cell Grading Capacity of 41 MWH per annum, Cell Sorting capacity of 110 MWH per annum, manufacturing capacity of 115 MWH per annum, and Battery testing capacity of 41 MWH per annum. Additionally, our Noida facility has an installed capacity of 60,000 motors per annum.

Significant Developments after March 31, 2024 that may affect our Future Results of Operations

Our Company has been sanctioned cash credit limit of 1000.00 lakhs and disbursement of 350.00 lakhs as on June 26, 2024. Except as mentioned above and in Risk Factors, there are no significant developments.

FACTORS AFFECTING OUR RESULT OF OPERATIONS

Except as otherwise stated in this Draft Red Herring Prospectus and the Risk Factors given in Draft Red Herring Prospectus, the following important factors could cause actual results to differ materially from the expectations include, among others:

Volatility in the prices of raw materials

Volatility in the prices of raw materials and availability of the raw materials can have significant implications for our business. For the financial year ended March 31, 2024, March 31, 2023 and March 31, 2022, cost of raw material consumed were Rs 8,460.72, 4,706.30 lakhs and 2,682.74 lakhs respectively and purchases of stock in trade were 839.13 lakhs, 4,748.12 lakhs, 8,336.36 lakhs comprising of 70.00%, 73.36% and 90.54% respectively. Fluctuations in these costs can impact our profitability, operational efficiency, and overall financial stability. When raw material prices experience volatility, it directly affects our production costs. If prices increase, it can lead to higher expenses for sourcing and acquiring the necessary materials. This can squeeze profit margins and potentially result in increased product prices for our customers. On the other hand, if prices decrease, it may create opportunities for cost savings and improved profitability. Import duties and charges is a critical component in our production cost, and any significant fluctuations can directly affect our operational costs. Higher import duties can increase our expenses, while lower prices can provide cost-saving opportunities. To manage the impact of price volatility, we employ various strategies. These include closely monitoring market trends, engaging in strategic sourcing practices, and implementing hedging or forward contracting strategies where applicable. While we cannot control or predict market fluctuations, we strive to proactively manage the risks associated with raw material pricing and availability to ensure the long-term sustainability and profitability of our business.

Unexpected loss, shutdown or slowdown of operations at any of our manufacturing facilities

An unexpected loss, shutdown, or slowdown of operations at any of our facilities can have significant implications for our business. It can disrupt our production processes, impact our ability to meet customer demand, and potentially result in financial losses. Our Company had faced such event in past on June 01, 2022 when a fire accident broke out in our manufacturing unit at Noida. Firstly, such an event can lead to a decrease in our overall production capacity, which may result in delays in fulfilling customer orders. This can lead to dissatisfied customers, potential loss of business, and damage to our reputation. Additionally, the interruption of operations can cause a disruption in our supply chain, affecting the availability of raw materials or components needed for production. This can further exacerbate delays and impact our ability to meet customer demands in a timely manner. Furthermore, a loss, shutdown, or slowdown of operations can have financial implications. It may result in increased costs associated with repairs, maintenance, or finding alternative facilities to continue operations. It can also lead to a decrease in revenue due to the inability to generate sales during the downtime. To mitigate the impact of such events, it is important for us to have contingency plans in place. Our Company has taken various measures for protection against such accidents in future. This includes implementing robust risk management strategies, regularly assessing the condition of our facilities, and having backup plans for alternative production sites if necessary. By taking proactive measures, we aim to minimize the potential disruptions and financial impact caused by unexpected loss, shutdown, or slowdown of operations at any of our facilities.

Dependence on third parties for our suppliers, logistics and transportation needs

Our dependence on stable and reliable logistics and transportation infrastructure is crucial for the smooth operation of our business. Any disruptions or failures in this infrastructure can have significant impacts on our operations, supply chain, and overall business performance. Firstly, a reliable logistics and transportation infrastructure ensures the timely and efficient movement of goods and materials throughout our supply chain. It allows us to receive raw materials on time, transport finished products to customers, and manage inventory effectively. Any disruptions in this process can lead to delays in production, increased costs, and potential customer dissatisfaction. Moreover, a stable logistics and transportation infrastructure enables us to meet customer expectations in terms of delivery times and service levels. It helps us maintain a competitive edge in the market by ensuring that our products reach customers in a timely manner. Any interruptions or failures in this infrastructure can result in missed delivery deadlines, loss of customer trust, and potential loss of business. Additionally, a reliable transportation network is essential for expanding our market reach and entering new markets. Dependence on unstable or unreliable infrastructure can limit our ability to expand and tap into

new customer bases. To mitigate the risks associated with dependence on logistics and transportation infrastructure, we actively monitor and assess the reliability of our logistics partners and transportation providers. We establish contingency plans to address potential disruptions, such as identifying alternative routes or modes of transportation. By prioritizing stable and reliable infrastructure, we aim to minimize the potential impact on our business operations and ensure smooth supply chain management.

Our ability to successfully implement its strategy and its growth and business expansion plans

Our inability to successfully implement the strategies may have several consequences for our Company. Firstly, it could hinder our growth and limit our ability to reach new markets or serve a larger customer base. This could result in missed opportunities for revenue generation and potential loss of market share to competitors who are able to expand successfully. Additionally, the failure to implement the strategies may impact our reputation and credibility in the industry. Stakeholders, including investors, partners, and customers, may question our ability to execute strategic initiatives effectively, which could lead to a loss of trust and potential negative impact on future business relationships. Furthermore, the inability to successfully implement the strategies may have financial implications. It is important to address the challenges and obstacles that are preventing the successful implementation of the strategies. By identifying and addressing these issues, we can mitigate the potential negative impacts and work towards finding alternative solutions or strategies to achieve our expansion goals.

Developments in the competitive environment in the energy industry

Developments in the competitive environment and increase in our competitors in the energy industry, can have both direct and indirect effects on our organization. Here are a few potential impacts:

1. Increased competition: Consolidation among competitors may result in larger and more powerful players in the market. This could intensify competition as they may have greater resources, economies of scale, and market influence. We may need to adapt our strategies to effectively compete in this changing landscape.

2. Pricing pressure: Increase in competition can lead to decreased pricing power for larger competitors, potentially putting downward pressure on prices in the industry. This may impact our profitability and require us to find ways to maintain competitiveness while managing costs.

3. Market share dynamics: If our competitors gain a larger market share, it could impact our position and market presence. We may need to reassess our market positioning and explore ways to differentiate ourselves to maintain or grow our market share.

5. Collaboration opportunities: Consolidation can also create opportunities for collaboration or partnerships. It may be beneficial to explore potential alliances or strategic partnerships with other players in the industry to leverage synergies and strengthen our competitive position.

It is crucial for us to closely monitor and analyze the developments in the competitive environment, including consolidation among our competitors. By staying informed and proactive, we can adapt our strategies, identify new opportunities, and mitigate any potential risks or challenges that may arise.

Further, below mentioned factors can also affect our revenue:

• Regulatory Environment: Government regulations on battery recycling, disposal, and environmental standards impact manufacturing practices and product design. Policies promoting clean energy and electric vehicle adoption also shape market demand.

• Economic Factors: Economic conditions, including global demand for electric vehicles (EVs), energy storage systems, and consumer electronics, influence market growth and investment in battery manufacturing capacity.

• Consumer Trends: Growing demand for electric vehicles, portable electronics, and renewable energy storage solutions drives market expansion. Consumer preferences for longer battery life, faster charging, and safer products shape research and development priorities.

• Infrastructure Development: Expansion of charging infrastructure for electric vehicles and grid-scale energy storage systems influences demand for lithium-ion batteries, driving investment and market growth.

• Technological Advancements: Advances in battery chemistry, manufacturing processes, and energy density significantly affect product performance, cost-efficiency, and competitiveness in the market. Innovations in materials science, electrode design, and cell architecture drive improvements.

SIGNIFICANT ACCOUNTING POLICIES

a) Basis of Preparation of Restated Financial Statements:

"These financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) in India under the historical cost convention on the accrual basis of accounting. These financial statements have been prepared to comply in all material aspects with the accounting standards specified under section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 and other relevant provisions of the Companies Act, 2013 (hereinafter together referred to as the Act) and Schedule III of the Act.

The restated financial information has been prepared for inclusion in the Draft Red Hearing Prospectus ("DRHP" or "offer document") to be filed by the Company with the Securities and Exchange Board of India (‘SEBI) in connection with proposed Initial Public Offering of its equity shares of face value of Rs 10 each of the Company comprising a fresh issue of equity shares and offer for sale of equity shares held by the certain existing shareholders (the "Offei"), in accordance with the requirements of:

a) Section 26 of part I of Chapter III of the Act

b) relevant provisions of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements Regulations, 2018, issued by the Securities and Exchange Board of India (SEBI) as amended in pursuance of the Securities and Exchange Board of India Act, 1992; and

c) Guidance Note on Reports in Company Prospectuses (Revised 2019) issued by the Institute of Chartered Accountants of India ("ICAI").

The Restated financial information have been compiled from:

a) the audited financial statement of the Company as at March 31, 2024 which have been approved by the Board of Directors at their meeting held on June 03, 2024

b) the audited financial statement of the Company as at March 31, 2023 which have been approved by the Board of Directors at their meeting held on October 31, 2023.

c) the audited financial statement of the Company as at March 31, 2022 which have been approved by the Board of Directors at their meeting held on September 20, 2022.

There were no qualifications in the Audit Reports issued by Statutory Auditor(s) for the period ended on March 31, 2024, March 31, 2023, and March 31, 2022

The accounting policies adopted in the preparation of financial statements are consistent with those of previous year."

b) Use of estimates and judgements

The preparation of financial statements in conformity with Indian GAAP (Generally accepted accounting principles) requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and disclosure of contingent liabilities at the end of the reporting period. Although these estimates are based upon Managements best knowledge of current events and actions, uncertainty about these assumption and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.

c) Going Concern

The financial accounts of the Company are prepared on the assumption of going concern concept.

d) Current versus non-current classification

"The Company presents assets and liabilities in the Balance Sheet based on current/ non-current classification.

An asset is classified as current when it satisfies any of the following criteria:

• It is expected to be realized or intended to be sold or consumed in normal operating cycle

• It is held primarily for the purpose of trading

• It is expected to be realized within twelve months after the reporting period, or

• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period

Current assets include the current portion of non-current financial assets.

All other assets are classified as non-current.

A liability is current when it satisfies any of the following criteria:

• It is expected to be settled in normal operating cycle

• It is held primarily for the purpose of trading

• It is due to be settled within twelve months after the reporting period, or

• There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period

Current liabilities includes the current portion of long term financial liabilities. The Company classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities. The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle."

e) Inventories

"Inventories are carried at the lower of cost or net realisable value. Cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In determining the cost, FIFO method is used. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. The proportionate amount of additional duty of customs paid on finished goods imported for trading and lying unsold as at the year end has been included in the value of the finished goods stock. The comparison of cost and net realisable value is made on an item-by-item basis"

f) Property, Plant and Equipment

Fixed Assets are stated at cost less accumulated depreciation and impairment losses, if any. The cost of an item of property, plant and equipment comprises its acquisition price, including import duties and other non-refundable taxes or levies, any directly attributable cost of bringing the asset to its working condition for its intended use, pre-operative expenses including financial charges and adjustments on account of foreign exchange fluctuations, wherever applicable; any trade discounts and rebates are deducted in arriving at the purchase price. Subsequent expenditures related to an item of fixed asset should be capitalised only if they increase the future benefits from the existing asset beyond its previously assessed standard of performance otherwise expenditure should be written off.

g) Depreciation and Amortisation

"Depreciation on property, plant and equipment is provided on written down value method over the useful lives of assets estimated by the management which are equal to the useful lives prescribed under Schedule II of the Companies Act, 2013. The useful lives estimated by the management are mentioned below:

Furniture and fixtures	: 10 years
Electrical fitting and fixing	: 5 years
Computer and related equipment	: 3 years

Plant & Machineries have been depreciated over a period of 10 years which is the economic useful life of those machineries as per management.

Leasehold improvements is amortised on a straight line basis over the remaining period of the lease or the economic useful life, whichever is lower.

The useful lives are reviewed by the management periodically and revised, if appropriate. In case of a revision, the unamortized depreciable amount is charged over the revised remaining useful life. Depreciation is provided on a pro-rata basis i.e. from the date on which asset is ready for use. Property, Plant and Equipment is eliminated from the financial statements on disposal or when no further benefit is expected from its use and disposal."

h) Intangible assets

"Intangible assets that are acquired by the company are measured initially at cost. After initial recognition, an intangible asset is carried at its cost less any accumulated amortisation and accumulated impairment loss (if any).

Subsequent expenditure is capitalised only when it increases the future economic benefits to the specific assets to which it relates.

Intangible assets are amortised in Statement of Profit and Loss over their estimated useful lives, from the date that they are available for use based on the expected pattern of consumption of economic benefits of the assets. Accordingly, at present these are being amortised on written down value method over a period of three years based on the useful economic life.

Amortisation method and useful lives are reviewed at each reporting date. If the useful life of an asset is estimated to be significantly different from previous estimates, the amortisation period is changed accordingly. If there has been a significant change in the expected pattern of economic benefits from the asset, the amortisation method is changed to reflect the changed pattern. An intangible asset is derecognized on disposal or when no future economic benefit is expected from its use and disposal.

Losses arising from retirement and gains or losses arising from disposal of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the assets, and are recognised in the Statement of Profit and Loss."

i) Impairment of assets

The carrying values of assets are reviewed at each reporting date to determine if there is indication of any impairment. If any indication exists, the recoverable amount of asset is estimated. For assets that are not yet available for use, the recoverable amount is estimated at each reporting date. An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognised in the Statement of Profit and Loss. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortisation, if no impairment loss had been recognised.

j) Recognition of Revenue and Expenses

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must be also met before revenue is recognized:

k) Sale of goods:

Revenue in respect of service income is recognised on an accrual basis in accordance with the terms of specific contracts, provided the consideration is reliably determinable and no significant uncertainty exists regarding the collection. The amount recognised as revenue is net of applicable taxes.

l) Income from services:

Revenue in respect of service income is recognised on an accrual basis in accordance with the terms of specific contracts, provided the consideration is reliably determinable and no significant uncertainty exists regarding the collection. The amount recognised as revenue is net of applicable taxes.

m) Expenses:

Expenses are accounted for on accrual basis and provision is made for all known losses and expenses.

n) Transactions in foreign currency

Foreign exchange transactions are recorded at the exchange rates prevailing on the date of such transactions. Realized gains and losses on foreign exchange transactions during the year are recognized in the statement of profit and loss. Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the closing exchange rates on that date. The resultant exchange differences are recognized in the statement of profit and loss.

o) Lease Accounting

Assets acquired under leases other than finance leases are classified as operating leases. The total lease rentals (including scheduled rental increases) in respect of an asset taken on operating lease are charged to the Statement of Profit and Loss on a straight line basis over the lease term unless another systematic basis is more representative of the time pattern of the benefit.

p) Employee benefits

"Short term employee benefits

It includes salaries, short term compensated absences (such as paid annual leave) where the absences are expected to occur within twelve months after the end of the period in which the employees render the related employee service, profit sharing and bonuses payable within twelve months after the end of the period in which the employees render the related services and nonmonetary benefits (such as medical care) for current employees are estimated and measured on an undiscounted basis.

Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays specified contributions to a separate entity and has no obligation to pay any further amounts. The Company makes specified monthly contributions towards Employee Provident Fund to Government administered Provident Fund scheme which is a defined contribution plan. The Companys contribution is recognised as an expense in the Statement of Profit and Loss during the period in which the employee renders the related service."

"Gratuity

Gratuity liability is defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit (PUC) method made at the end of each financial year.

Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.

Past service costs are recognised in profit or loss on the earlier of:

• The date of the plan amendment or curtailment, and

• The date that the Company recognises related restructuring costs

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:

• Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and

• Net interest expense or income

Compensated Absences

Employees can carry-forward a portion of the unutilised accrued compensated absences and utilise it in future service periods or receive cash compensation on termination of employment. The Company records an obligation for such compensated absences in the period in which the employee renders the services that increase this entitlement. The obligation is measured on the basis of independent actuarial valuation using the projected unit credit method.

Gratuity

Gratuity liability is defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit (PUC) method made at the end of each financial year.

Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.

Past service costs are recognised in profit or loss on the earlier of:

• The date of the plan amendment or curtailment, and

• The date that the Company recognises related restructuring costs

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:

• Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and

• Net interest expense or income

Compensated Absences

Employees can carry-forward a portion of the unutilised accrued compensated absences and utilise it in future service periods or receive cash compensation on termination of employment. The Company records an obligation for such compensated absences in the period in which the employee renders the services that increase this entitlement. The obligation is measured on the basis of independent actuarial valuation using the projected unit credit method."

"Other long term benefits

The employees can carry-forward a portion of the unutilised accrued compensated absences and utilise it in future service periods or receive cash compensation on termination of employment. Since the compensated absences do not fall due wholly within twelve months after the end of the period in which the employees render the related service and are also not expected to be utilised wholly within twelve months after the end of such period, the benefit is classified as a longterm employee benefit. The Company records an obligation for such compensated absences in the period in which the employee renders the services that increase this entitlement. The obligation is measured on the basis of independent actuarial valuation using the projected unit credit method."

q) Segment Reporting

The Company operates in a single primary business segment. Hence, there are no reportable segment as per AS 17 Segment Reporting.

r) Earnings per share

Basic Earnings per Share (EPS) is computed by dividing the net profit after tax for the year attributable to the equity shareholders by the weighted average number of shares outstanding during the year. The Company does not have any potentially dilutive securities in any of the years presented to calculate diluted EPS and hence the diluted EPS is the same as basic EPS.

j) Provisions, contingent liabilities and contingent assets

Provision is recognised when the Company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which reliable estimate can be made. Provisions

are not discounted to present value and are determined based on best estimate required to settle the obligation on the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. A disclosure for a contingent liability is made when there is a present obligation that may, but probably will not, require an outflow of resources. Disclosure is also made in respect of a present obligation as a result of past event that probably requires an outflow of resource, where it is not possible to make a reliable estimate of the outflow. Possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company are also included in the disclosure of the contingent liability. Where there is a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.

k) Cash and Cash equivalents

Cash and cash equivalents comprise cash on hand and balance with banks on current accounts. The Company considers all highly liquid investments, including bank deposits with an original maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents. Further, bank deposits having maturity of more than 12 months have also been disclosed separately by the company under this head. Moreover, the cash flow statement is prepared using indirect method.

u) General

Accounting policies not specifically referred to, are consistent with the Indian Generally Accepted Accounting Principles and are followed consistently.

RESULTS OF OUR OPERATIONS

Particulars	Year ended March 31, 2024	% of Total Income	Year ended March 31, 2023	% of Total Income	Year ended March 31, 2022	% of Total Income
Income
Revenue from Operations	13,270.87	99.89%	12,881.94	99.95%	12,168.96	99.99%
Other Income	15.07	0.11%	6.45	0.05%	1.04	0.01%
Total Income (I+II)	13,285.94	100.00%	12,888.39	100%	12,170.00	100.00%
Expenses
Purchase of Stock-inTrade	839.13	6.32%	4748.12	36.84%	8336.36	68.50%
Raw material consumed	8,460.72	63.68%	4,706.30	36.52%	2,682.74	22.04%
Changes in inventories of finished goods, WIP and Stock in trade	(335.27)	(2.52) %	(173.26)	(1.34) %	(373.40)	(3.07)%
Employee Benefits Expense	1289.13	9.70%	916.42	7.11%	401.92	3.30%
Depreciation & Amortisation expenses	642.58	4.84%	577.32	4.48%	134.45	1.10%
Other Expenses	1165.36	8.77%	1,353.51	10.50%	486.77	4.00%
Total Expenses	12,061.66	90.79%	12,128.40	94.10%	11,668.83	95.88%
Profit/(loss) before Exceptional Items and Tax (III-IV+V)	1,224.28	9.21%	759.99	5.90%	501.17	4.12%
Exceptional Items			669.61	5.20%	-	-
Profit/(loss) before Tax (VI-VII)	1,224.28	9.21%	90.38	0.70%	501.17	4.12%
Tax Expense
Current Tax	389.56	2.93%	113.23	0.88%	34.87	0.29%
Deferred Tax	(144.12)	-1.08%	(95.73)	-0.74%	102.17	0.84%
Total Tax Expense	245.44	1.85%	17.50	0.14%	137.04	1.13%
Profit/(loss) after Tax (VIII-IX)	978.85	7.37%	72.87	0.57%	364.13	2.99%

FOR THE PERIOD ENDED

Total Revenue

Revenue from operations

Our revenue from operations for the period ended March 31, 2024, March 31, 2023 and March 31, 2022 was Rs 13,270.87 lakhs, t12,881.94 lakhs, t12,168.96 lakhs which was 99.89%, 99.95%, 99.99% of our total income. Sale of manufactured goods and by products was Rs 10,029.14 lakhs constituting 75.57%, traded goods was t937.58 lakhs constituting 7.06% and service income was Rs 2,270.36 lakhs constituting 17.11% of revenue from operations during the year ended March 31, 2024.

Other income

Our other income for the period ended March 31, 2024, March 31, 2023 and March 31, 2022 was Rs 15.07 lakhs, Rs 6.45 lakhs, t1.04 lakhs which was 0.11%, 0.05% and 0.01% of our total income for the same period. The component of our other income was Interest income, foreign exchange gain, profit on sale of fixed assets.

Total Expenses

Raw materials consumed

Our cost of materials consumed for the period ended March 31, 2024, March 31, 2023 and March 31, 2022 was t8,460.72 lakhs, Rs 4,706.30 lakhs, Rs 2,682.74 lakhs which was 63.68%, 36.52%, 22.04% respectively of our total income for the same period.

Purchase of stock

Our purchase of stock in trade for the year ended March 31, 2024, March 31, 2023 and March 31, 2022 was t839.13 lakhs, t4748.12 lakhs, t 8336.36 lakhs which was 6.32%, 36.84%, 68.50% of our total income for the same period.

Changes in inventories of finished goods, work-in-progress and stock in trade.

The changes in inventories of finished goods, work-in-progress and stock in trade for the period ended March 31, 2024, March 31, 2023 and March 31, 2022 was Rs 333.27 lakhs, Rs 173.26 lakhs, Rs 373.40 lakhs which was (2.52)%, (1.34)%, (3.07)% respectively of our total income for the same period.

Employee benefit expenses

Our employee benefit expenses for the period ended March 31, 2024 and March 31, 2023 and March31, 2022 was Rs 1,289.13 lakhs, t 916.42 lakhs, Rs 401.92 lakhs which was 9.70%, 7.11%, 3.30% respectively of our total income for the same period.

Depreciation and amortization

Our depreciation and amortization for the period ended 31 March 2024, 31 March 2023 and 31 March 2022 was Rs 642.58 lakhs, Rs 577.32 lakhs, Rs 134.45 lakhs which was 4.84%, 4.48%, 1.10% of our total income for the same period.

Other expenses

Our other expenses for the period ended March 31, 2024, March 31, 2023 and March 31, 2022 was which was t1,165.36 lakhs, t1353.51 lakhs, t486.77 lakhs of our total income for the same period. Our other expenses primarily are rent, contractual manpower and job work, freight, exchange fluctuation loss, warrant and insurance.

Tax expenses

Our current tax expenses for the period ended March 31, 2024, March 31, 2023, March 31, 2022 was t389.56 lakhs, t113.23 lakhs and t34.87 lakhs respectively which was 2.93%, 0.88%, 0.29% of our total income for the same period.

Profit for the ended

Our profit for the ended March 31, 2024, March 31, 2023 and March 31, 2022 was Rs978.85lakhs, Rs72.87lakhs, Rs364.13 lakhs which was 7.37%, 0.57%, 2.99% of our total income for the same period.

FISCAL 2024 COMPARED TO FISCAL 2023

Total revenue

Revenue from operations

Revenue from operation has increased by 3.02% to Rs13,270.87 lakhs in Fiscal 2024 from Rs12,881.94 lakhs in Fiscal 2023. Such increase was primarily attributable to an increase in sale of our manufactured products.

Other income

Other income increased by 133.51% to Rs15.07 lakhs in Fiscal 2024 from Rs6.45 lakhs in Fiscal 2023. Such increase was primarily attributable to an increase in interest income and profit on sale of fixed assets.

Total expenses

Raw materials consumed

Cost of materials consumed increased by 79.77% to Rs 8,460.72 lakhs in Fiscal 2024 from Rs 4,706.30 lakhs in Fiscal 2023. Such increase was predominantly due to decrease in inventory of raw material due to fire accident during the financial year 2022-23.

Purchases of stock in trade

Purchases of stock in trade decreased by 82.33% to Rs839.13 lakhs in Fiscal 2024 from Rs 4748.12 in Fiscal 2023 as the Company has generated significant revenue from sale of manufactured products during 23-24 and there was decrease in revenue from traded goods.

Changes in inventories of finished goods, stock in trade and work-in-progress

Changes in inventories of finished goods and work-in-progress was Rs335.27 lakhs in Fiscal 2024 and Rs173.26 lakhs in Fiscal 2023.

Employee benefit expenses

Employee benefits expenses increased by 40.67% to Rs1,289.13 lakhs in Fiscal 2024 from Rs916.42 in Fiscal 2023. This was predominantly due to increase in workforce along with increase in salaries, wages, director remuneration, contribution to provident and other funds and staff welfare expenses. This was consequent to an increase in our number of employees, growth in annual salaries as well as an incremental rise in minimum wages.

Depreciation and amortization expense

Depreciation and amortization expense increased by 11.30% to Rs642.58 lakhs in Fiscal 2024 from Rs577.32lakhs in Fiscal 2023.

Other Expenses

Other expenses decreased by 13.89% to Rs1,165.38 lakhs in Fiscal 2024 from Rs1,353.51lakhs in Fiscal 2023. Our other expenses primarily decreased due to change in dollar rate from Rs75.8071 on March 31, 2022 to Rs82.2169 on March 31, 2023. Other expenses also include rent expenses, contractual labour expenses, provision for doubtful debts, freight, legal and professional fees and repairs and maintenance expenses.

Tax expenses

Our current tax expenses increased to t389.56 lakhs in 2024 from t113.23 lakhs in 2023. This was predominantly due to an increase in profit for the year. Provision for Deferred tax was t (144.12) lakhs in Fiscal 2024 as compared to t (95.73) lakhs in Fiscal 2023.

Profit for the year

Our profit for the year increased to t978.85lakhs in Fiscal 2024 from t72.87 lakhs in Fiscal 2023. The profit for these two years are not comparable because the Company had faced a major fire accident in its manufacturing unit at Noida and has booked an exceptional loss of 669.61 lakhs during the year 2022-23.

FISCAL 2023 COMPARED TO FISCAL 2022

Total revenue

Revenue from operations

Our revenue from operations increased by 5.86% to t12881.94 lakhs in Fiscal 2023 from t12168.96lakhs in Fiscal 2022, predominantly due to an increase in the sale of our products due to partial relaxation of COVID-19 induced lockdown, resulting in the gradual opening up of domestic markets.

Other income

Other income increased by 518.49% to t6.45 lakhs in Fiscal 2023 from t1.04 lakhs in Fiscal 2022. This increase was predominantly due in interest income.

Raw materials consumed

Cost of materials consumed increased by 75.43% to t4,706.30 lakhs in Fiscal 2023 from t2,682.74 lakhs in Fiscal 2022. Such increase was predominantly due to increase in purchase of raw materials, electricity and power expenses and higher opening stock of raw material in financial year 2022-23 as compared to 21-22.

Purchases of stock in trade

Purchases of stock in trade decreased by 43.04% was t4,748.12 lakhs in Fiscal 2023 as compared to 8336.6 lakhs in Fiscal 2022. Our Company has been focusing of manufactured goods, thereby there is increase in revenue from manufactured good and simultaneous increase in cost of material consumed. Further leading to decrease in traded revenue and purchase of traded goods.

Changes in inventories of finished goods, stock in trade and work-in-progress

Changes in inventories of finished goods, stock in trade and work-in-progress were Rs 173.26 lakhs in Fiscal 2023from t373.40 lakhs in Fiscal 2022.

Employee benefit expenses

Employee benefits expenses increased by 128.01% to t916.42lakhs in Fiscal 2023 from t401.92 lakhs in Fiscal 2022.This was predominantly due to an increase in business, thereby increase in workforce and team along with increase in salary and wages, director remuneration, increase in contribution to provident and other funds, gratuity expenses and staff welfare expenses.

Depreciation and amortization expense

Depreciation and amortization expense increased by 329.40% to t577.32.65 lakhs in Fiscal 2023 from t134.45 lakhs in Fiscal 2022. This was predominantly due to addition in tangible and intangible assets from capital work in progress during the year 2022-23 and the resultant depreciation of plant and machinery, furniture and fixtures, computer equipment, electrical fitting & fixtures and intangible assets during the year.

Other Expenses

Other expenses increased by 178.06% to Rs1,353.51lakhs in Fiscal 2023 from Rs486.77 lakhs in Fiscal 2022. Our other expenses significantly increased in rent expenses, legal and profession fees, exchange fluctuation expenses, warranty expenses and freight expenses. Such increase was in-line with an increase in the revenue as described above, which required an increase in other expenses.

Tax expenses

Our current tax expenses increased to Rs113.23lakhs in 2023 from Rs34.87lakhs in 2022. This was predominantly due to an increase in profit for the year. Deferred tax decreased to Rs95.73 lakhs in Fiscal 2023 as compared to Rs102.17 lakhs in Fiscal 2022.

Profit for the year

The profit after tax was Rs72.87 lakhs in Fiscal 2023 and Rs 364.13 lakhs in Fiscals 2022.

DISCUSSION ON THE STATEMENT OF CASH FLOWS

The following table sets forth certain information relating to our Companys statement of cash flows for the periods indicated:

Particulars	Fiscal
	2024	2023	2022
Net cash flows generated from operating activities	677.13	1502.48	792.85
Net cash flows (used in) investing activities	(464.05)	(1535.66)	(928.28)
Net cash flows (used in)/generated from financing activities	-	-	202.50
Net increase/(decrease) in cash and cash equivalents	213.08	(33.18)	67.08

Operating activities

In Fiscal 2024, net cash generated from operating activities was Rs677.13 lakhs. This comprised of the profit before tax of Rs1224.28 lakhs, which was primarily adjusted for depreciation and amortization expenses of Rs642.58lakhs, interest income of Rs13.91 lakhs, provision for warranty claims of Rs45.92 lakhs, profit on sale of property, plant & equipment of Rs1.16 lakhs and unrealized foreign exchange gain/loss Rs197.52 lakhs. The resultant operating profit before working capital changes was Rs2095.23lakhs, which was further adjusted for working capital changes.

In Fiscal 2023, net cash generated from operating activities was Rs1502.48 lakhs. This comprised of the profit before tax of Rs90.38 lakhs, which was primarily adjusted for depreciation and amortization expenses of Rs577.32lakhs, interest income of Rs6.45lakhs, unrealized foreign exchange gain/loss U273.61 lakhs, provision for warranty claims of U24.42 lakhs. The resultant operating profit before working capital changes was Rs959.27 lakhs, which was further adjusted for working capital changes.

In Fiscal 2022, net cash generated from operating activities was Rs792.85lakhs. This comprised of the profit before tax of Rs501.17lakhs, which was primarily adjusted for depreciation and amortization expenses of Rs134.45lakhs, interest income of Rs0.45lakhs, unrealized foreign exchange gain/loss Rs19.81 lakhs, provision for warranty claims of Rs10.77 lakhs. The resultant operating profit before working capital changes was Rs626.12 lakhs, which was further adjusted for working capital changes.

Investing activities

In Fiscal 2024, net cash used in investing activities was Rs 464.05 lakhs, which primarily comprised of addition property, plant, and equipment (including capital work in progress) of Rs494.75lakhs, sale of fixed asset of Rs7.26 lakhs, interest income of Rs13.91 lakhs and proceeds from fixed deposits of Rs9.53 lakhs.

In Fiscal 2023, net cash used in investing activities was Rs1535.66 lakhs, which primarily comprised of the addition of property, plant, and equipment and intangible assets (including capital work in progress) of Rs 1,432.62 lakhs, interest income of Rs6.45 lakhs and investment in fixed deposit of Rs109.05 lakhs.

In Fiscal 2022, net cash used in investing activities was Rs928.28lakhs, which primarily comprised of addition of property, plant, and equipment (including capital work in progress) of Rs928.73lakhs and interest income of Rs0.45 lakhs.

Financing activities

In Fiscal 2022, net cash generated from financing activities was Rs202.50lakhs from the preferential issue of Rs1.35 lakh shares done during the year 21-22 at the premium of 140/- which predominantly comprised of security premium of Rs189 lakhs.

Contingent Liabilities

As on March 31, 2024, March 31, 2023 and March 31, 2022, the Company does not have any contingent liabilities.

OTHER MATTERS

1. Unusual or infrequent events or transactions

On June 01, 2022, the manufacturing plant of the Company located at Plot No.18, Sector 140, Phase-II, Noida caught major fire. Except for the amount of inventory, fixed assets and certain tools, all other assets were lost in the fire. The Company has adequately covered its assets by a fire policy and the Company has filed insurance claim of 1,820.72 and insurance company has accepted claim amounting to Rs. 1,781.71 Lacs for the loss incurred. The total amount of loss claimed by the Company is Rs2,457.32 lacs which includes carrying value of inventories of Rs2,388.16 lacs (including expenses) and carrying value of property, plant and equipment of Rs69.16 lakhs.

Except as described in this Draft Red Herring Prospectus, during the periods under review there have been no transactions or events, which in our best judgment, would be considered unusual or infrequent.

2. Significant economic changes that materially affected or are likely to affect income from continuing operations

Other than as described in the Section titled "Financial Information" and chapter titled "Managements Discussion and Analysis of Financial Conditions and Results of Operations", beginning on pages. 154 and 182 respectively of Draft Red Herring Prospectus respectively, to our knowledge there are no significant economic changes that materially affected or are likely to affect income from continuing Operations.

3. Known trends or uncertainties that have had or are expected to have a material adverse impact on revenue or income from continuing operations

Other than as described in the chapter titled "Risk Factors" and "Managements Discussion and Analysis of Financial Conditions and Result of Operations", beginning on page 23 and 182 respectively of Draft Red Herring Prospectus, best to our knowledge there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on revenues or income of our Company from continuing operations.

4. Future relationship between Costs and Income

Other than as described in the chapter titled "Risk Factors" beginning on page 23 of Draft Red Herring Prospectus, best to our knowledge there are no factors, which will affect the future relationship between costs and income or which are expected to have a material adverse impact on our operations and finances.

5. The extent to which material increases in revenue or income from operations are due to increased volume, introduction of new products or services or increased prices.

6. New Products and Business Segment

Except as disclosed in Draft Red Herring Prospectus, we have not publicly announced any new products or business segments. For details of new products, please refer to "Our Business" on page 97 of Draft Red Herring Prospectus.

7. The extent to which the business is seasonal.

Our business is not seasonal in nature.

8. Any significant dependence on single or few suppliers or customers

The income from top ten customers comprises of 73.56%, 52.78% and 43.91% of our Revenue from Operation for the Fiscal 2024, Fiscal 2023 and Fiscals 2022 respectively. The purchases from top ten supplier comprises of 78.92%, 88.09% and 96.56% of our total purchases for the Fiscal 2024, Fiscal 2023 and Fiscals 2022 respectively For further details, please refer chapter "Risk Factors" beginning on page 23 of Draft Red Herring Prospectus.

9. Competition Conditions

We operate in a competitive atmosphere. Our competition varies by market, geographic areas and type of product. Our Company faces stiff competition from domestic market. Some of our competitors may have greater resources than those available to us. See chapters, "Our Business", "Industry Overview", "Risk Factors" on pages 97, 83 and 23 respectively of Draft Red Herring Prospectus

10. Significant Developments after March 31, 2024 that may affect our future results of operations

Except as mentioned in "Risk Factors" and "Managements Discussion and Analysis of Financial Conditions and Result of Operations "on page 23 and 182 of Draft Red Herring Prospectus, there have been no events or circumstances since the date of the last financial statements as disclosed in the Draft Red Herring Prospectus which materially or adversely affect or is likely to affect the profitability of our Company, or the value of our assets, or our ability to pay liabilities within next twelve months.