Confidence Futuristic Energetech Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENT Global Economy :

The global economy in 2023-2024 is set to experience moderate growth, with global GDP projected to increase by approximately 3.5% to 4%. Advanced economies, such as the United States and the Eurozone, are leading this growth, with the U.S. economy expected to expand by around 2.5% and the Eurozone by about 1.8%. Emerging markets are also contributing significantly, with China anticipated to grow by approximately 5.5% and India by around 6.5%.

Inflation continues to be a major concern, with global inflation rates averaging around 5% in 2023, driven by high energy prices and ongoing supply chain disruptions. In response, central banks, including the Federal Reserve and the European Central Bank, have raised interest rates. The Federal Reserves benchmark rate is projected to be around 5.25%, while the European Central Banks key rate is expected to be approximately 4.0%. These adjustments aim to manage inflation but also impact borrowing costs and economic activity.

Energy markets have shown significant volatility, with oil prices fluctuating between $85 and $100 per barrel due to geopolitical tensions and production decisions by OPEC+. Natural gas prices have also varied, averaging around $6 to $8 per MMBtu. A notable trend is the increased investment in renewable energy, with global spending on clean energy technologies projected to reach $1.8 trillion in 2024.

Geopolitical factors and evolving trade policies continue to influence the global economic landscape. Ongoing trade disputes and regional conflicts introduce uncertainties into global supply chains. The World Trade Organization (WTO) estimates global trade growth at around 3% in 2024, reflecting a slower pace compared to previous years.

Technological advancements are driving growth, with global spending on digital transformation expected to exceed $3 trillion in 2024. Innovations in automation, artificial intelligence, and sustainability technologies are leading to increased efficiencies and new business opportunities.

Labor markets are showing signs of recovery, with global unemployment rates projected to decrease to around 5.5% in 2024. However, challenges persist in specific sectors. The rise of remote work and a focus on upskilling are shaping employment trends and future workforce dynamics.

The global economy faces several risks, including potential recessions in major economies, persistent inflationary pressures, and geopolitical uncertainties. Effective monetary and fiscal policies will be crucial in managing these risks and ensuring economic stability.

Overall, while the global economy presents positive growth prospects, it must navigate a complex array of challenges, including inflation, geopolitical tensions, and technological changes.

Indian Economy :

In 2023-2024, the Indian economy is projected to continue its robust growth trajectory, with GDP expected to expand by approximately 6.5% to 7%. This growth is driven by strong domestic consumption, increased public investment, and a recovery in key sectors such as manufacturing and services.

Inflation has been a concern, though it has moderated from previous highs. Consumer Price Index (CPI) inflation is projected to average around 5% in 2023-2024. This moderation is due to easing supply chain disruptions and stable food and energy prices. The Reserve Bank of India (RBI) has adopted a cautious approach, with monetary policy adjustments aimed at balancing inflation control with supporting economic growth. The repo rate is expected to remain in the range of 6% to 6.5%.

The Indian government has continued its focus on infrastructure development and investment as key drivers of economic growth. Initiatives such as the National Infrastructure Pipeline and various public sector projects are expected to stimulate economic activity and create job opportunities. Additionally, the governments emphasis on digital transformation and technology adoption is likely to enhance efficiency and drive long-term growth.

The energy sector in India is experiencing a significant transition, with increasing investments in renewable energy sources. The government has set ambitious targets for expanding the renewable energy capacity, aiming to achieve 500 GW of non-fossil fuel capacity by 2030. This shift is expected to support sustainable growth and reduce dependence on imported energy sources.

Trade dynamics have shown resilience, with exports and imports both contributing to economic growth. The governments focus on diversifying trade partnerships and improving trade logistics is expected to bolster Indias position in global markets. The Indian trade deficit is projected to be manageable, with efforts to enhance export competitiveness and address trade imbalances.

The labor market is recovering with improvements in employment rates. The unemployment rate is expected to decrease to around 5% in 2024. The rise of digital technologies and the focus on skill development are shaping the labor market, with increasing opportunities in technology-driven sectors and the gig economy.

Economic risks include potential global economic slowdowns, fluctuations in commodity prices, and geopolitical uncertainties. However, the Indian economys strong domestic demand and structural reforms are expected to provide resilience and support continued growth.

Overall, the Indian economy in 2023-2024 is poised for robust growth, driven by domestic consumption, infrastructure investment, and technological advancements. While challenges remain, the economys underlying strengths and strategic initiatives are likely to sustain positive momentum.

CNG INDUSTRY

The Compressed Natural Gas (CNG) industry in India is undergoing a transformative phase, driven by a significant expansion in the City Gas Distribution (CGD) network and increasing environmental consciousness. As of 2023, the CGD network, comprising over 80 companies, covers more than 100 cities across the country. This expansive network is supported by substantial government investment, with over INR 25,000 crore allocated for infrastructure development in the 2024-2025 period. This investment aims to enhance pipeline connectivity and establish additional CNG refueling stations, thereby facilitating greater accessibility to CNG. Such initiatives are instrumental in promoting the use of CNG as a cleaner alternative to conventional fuels, significantly impacting the transportation and industrial sectors.

In line with this expansion, the demand for CNG cylinders has surged, reflecting the growing adoption of CNG vehicles. In FY 2023-2024, approximately 3.5 million CNG cylinders were sold, marking a robust 12% increase from the previous year. This rise in demand is closely linked to the broader adoption of CNG vehicles, supported by favorable government policies and incentives. Among the various types of cylinders, Type 4 cylinders, which are made from advanced composite materials, are increasingly preferred due to their lightweight nature and enhanced safety features. These cylinders now represent about 25% of the total market, offering a significant advantage over traditional steel cylinders in terms of weight and durability.

The high-pressure cylinder market, essential for both CNG and emerging hydrogen fuel technologies, was valued at approximately INR 3,000 crore in FY 2023-2024. This market is poised for considerable growth, with a projected compound annual growth rate (CAGR) of 15% over the next five years. This growth trajectory is driven by the rising number of CNG vehicles and advancements in cylinder technology. High-pressure cylinders are critical for storing and transporting compressed gases safely, and their role is expected to expand as the adoption of both CNG and hydrogen fuel technologies increases. Government initiatives have been pivotal in supporting this sector, including the introduction of stricter safety regulations and standards by the Bureau of Indian Standards (BIS), which ensure that high-pressure cylinders meet rigorous safety and quality benchmarks. Additionally, the government has provided subsidies and incentives for research and development in high-pressure gas technologies, fostering innovation and advancing manufacturing capabilities.

A significant boost to the industry has come from the implementation of the "Kirit Parekh Committees recommendations" Established to address issues in the oil and gas sector, the committee proposed a comprehensive framework to enhance the efficiency and expansion of the CGD network and optimize gas pricing and distribution. Its recommendations have led to policy reforms that promote greater investment in infrastructure and streamline regulatory processes, thus accelerating the growth of the CNG sector. The committees emphasis on market liberalization and competitive pricing has facilitated increased participation from private players and enhanced the overall competitiveness of the sector.

The hydrogen cylinder market is also gaining momentum, reflecting Indias strategic push towards hydrogen as a viable alternative fuel. Valued at around INR 500 crore in FY 2023-2024, this market is set to grow at a remarkable CAGR of 20%, bolstered by the National Hydrogen Energy Mission and increased investments in hydrogen infrastructure. The mission includes provisions for developing high-pressure hydrogen storage technologies and creating a comprehensive infrastructure for hydrogen production, storage, and distribution. Hydrogen cylinders are pivotal for fuel cell vehicles, industrial applications, and energy storage solutions. The governments commitment to scaling up hydrogen production and technology underscores its importance in Indias future energy landscape.

Overall, the CNG industry in India is on a robust growth path, supported by technological advancements, government initiatives, including the Kirit Parekh Committees reforms, and a shift towards cleaner energy solutions. This positions the industry as a key player in the countrys sustainable development strategy, contributing significantly to energy efficiency and environmental sustainability.

INDUSTRIAL AND MEDICAL OXYGEN GASES CYLINDERS

The industrial and medical oxygen gas cylinders industry plays a vital role in Indias industrial and healthcare sectors. In 2023-2024, the market for industrial oxygen cylinders in India is estimated to be valued at approximately Rs.2,500 crore, driven by increased industrial activities and technological advancements. These cylinders are crucial for processes such as welding, metal cutting, and chemical production, where they enhance efficiency and support high-temperature operations.

In the medical sector, the demand for oxygen cylinders has surged, reflecting the expansion of healthcare infrastructure and rising cases of respiratory conditions. The medical oxygen cylinder market in India is projected to reach around Rs.1,200 crore in the same period. These cylinders are essential for providing supplemental oxygen in hospitals, clinics, and emergency settings, and must adhere to stringent purity and safety standards.

The industry is actively contributing to the Atmanirbhar Bharat initiative, which aims to boost domestic manufacturing and reduce import reliance. This push towards self-reliance is fostering local production and innovation, aligning with national objectives for economic growth and technological advancement. Despite facing challenges such as regulatory compliance and fluctuations in raw material prices, the industry is evolving to meet the growing demands of both industrial and healthcare applications, ensuring enhanced safety and efficiency while supporting Indias self-reliance goals.

COMPANY REVIEW

Confidence Futuristic Energetech Limited has firmly established its presence in the CNG and high- pressure cylinder manufacturing sector through its robust network of s ubsidiaries. The company holds a 75% stake in M/s. Sarju Impex Limited, a prominent manufacturer of high-pressure seamless steel gas cylinders, including industrial gas cylinders, CNG cylinders, medical gas cylinders, and cascades, all produced at its advanced facility in Dahej, Gujarat.

Further strengthening its manufacturing capabilities, Confidence Futuristic Energetech operates a wholly- owned subsidiary, Confidence Enterprises Private Ltd., which runs a state-of-the-art plant in the Umred Industrial Area near Nagpur, Maharashtra. This facility, which began operations in June 2022, significantly enhances the companys production capacity.

Additionally, the company maintains a 49% stake in Maruti Koatsu Cylinders Limited, a well- established producer of high-pressure seamless cylinders for gases, CNG, and cascades, based in Halol, Gujarat. This partnership helps the company address robust market demand across India.

In its latest strategic initiative, Confidence Futuristic Energetech is developing a cutting-edge Type 4 high-pressure cylinder manufacturing unit through its subsidiary, Silversky Exim Private Limited, in Butibori, Nagpur. This new venture underscores the companys commitment to industry leadership and expanding its product portfolio in the high-pressure cylinder segment.

Financially, Confidence Futuristic Energetech has demonstrated a solid performance, with consolidated revenue reaching Rs.181 crores in FY 2023-24, reflecting a consistent growth trajectory. Despite facing challenges related to higher operating expenses and interest costs, the company remains optimistic about its future prospects, supported by a strong balance sheet, strategic investments, and ongoing expansion initiatives.

OUTLOOK & OPPORTUNITIES

Confidence Futuristic Energetech Limited (CFEL) is strategically positioned to capitalize on a range of emerging opportunities in the high-pressure cylinder manufacturing sector, driven by several key market dynamics and government initiatives. With its robust infrastructure, including three advanced manufacturing units through its subsidiary, CFEL is well-equipped to meet the growing demand for high-pressure cylinders used in various industrial and energy applications.

A major catalyst for growth is the Indian governments ambitious mission to establish 10,000 CNG stations across the country. This initiative is expected to significantly boost the demand for CNG cascades and cylinders, as CNG infrastructure expands to meet rising consumer and industrial needs. CFEL is poised to benefit from this surge, given its established expertise in the production of high- pressure cylinders and its strategic focus on this sector.

Moreover, the governments focus on hydrogen as a pivotal element of its energy transition strategy represents a significant opportunity for CFEL. As hydrogen technology becomes more widely adopted, the demand for advanced storage solutions, especially Type 4 high-pressure cylinders, is expected to rise. CFELs forthcoming Type 4 cylinder manufacturing unit is strategically designed to meet this increasing demand. This new facility will enable CFEL to produce lightweight, high-strength cylinders suitable for the storage of high-pressure gases, including hydrogen and CNG, positioning the company as a prominent player in this growing market.

In summary, CFELs strategic investments in expanding its manufacturing capabilities and its alignment with government-led energy initiatives provide a solid foundation for future growth. The companys focus on responding to the increasing needs of the CNG and hydrogen sectors, combined with its commitment to innovation and quality, ensures that CFEL is well-positioned to seize these significant market opportunities and deliver sustained value to its stakeholders.

The objective of Government making CNG more economical and the green fuel available to a large section of population, offers us two major opportunities - the CNG cascades for the CNG stations and the CNG cylinders. So also the petrol and diesel prices rocketing high, in the foreseeable future, there is a large market for retrofit kits.

With Governments focus in decreasing reliance on fossil fuels- petrol and diesel for mobility, the alternatives auto fuel - Compressed Natural Gas (CNG) will be widely promoted. The management anticipates the new auto fuel will open new opportunities for the Company in the near future and good margins based on the demand availability as well as suitable commercial arrangements.

RISKS, THREATS & CONCERNS

Confidence Futuristic Energetech Limited recognizes several risks and challenges that could impact its operational and financial stability. Significant risks include fluctuations in raw material prices, which may affect production costs and profit margins. The company also faces market volatility and competitive pressures within the high-pressure cylinder manufacturing industry, which could influence its market position and financial performance. Changes in regulations, particularly those related to environmental and safety standards, could pose compliance challenges and lead to increased operational costs. Furthermore, the companys reliance on a limited number of major customers and suppliers introduces risks related to dependency and potential supply chain disruptions.

Additionally, the growing adoption of electric vehicles (EVs) is anticipated to impact the CNG market in India. While this shift could potentially affect demand for CNG-related products, Confidence Futuristic Energetech does not foresee any major threats over the next decade. This is due to the current challenges associated with EV infrastructure development, limited vehicle range, high battery costs, and the ongoing need for an extensive charging network. The company remains confident in its ability to navigate these industry dynamics by continuously monitoring market trends, strengthening supplier relationships, and investing in operational efficiencies.

INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY

Confidence Futuristic Energetech Limited has established a robust internal control system designed to ensure the accuracy and reliability of financial reporting, compliance with regulations, and efficient operations. The internal control framework includes comprehensive policies and procedures that address key operational, financial, and compliance risks. Regular audits and reviews are conducted to evaluate the effectiveness of these controls and to identify areas for improvement. The companys internal audit function plays a crucial role in assessing control mechanisms, ensuring adherence to established protocols, and providing recommendations for enhancements. Management is committed to maintaining and enhancing these controls to safeguard the companys assets and ensure the integrity of its financial reporting.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/ INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

In the fiscal year 2023-2024, Confidence Futuristic Energetech Limited has made significant strides in its human resources and industrial relations practices. The company continues to focus on creating a conducive work environment that promotes employee engagement, development, and retention. As of the end of the fiscal year, the company employed a diverse workforce of approximately [insert number] employees across its various facilities. Key developments include the implementation of advanced training programs aimed at enhancing skillsets and improving operational efficiency. Additionally, the company has strengthened its employee relations framework to ensure effective communication and resolution of issues. This proactive approach supports the companys commitment to fostering a positive workplace culture and achieving its strategic objectives.

COMPLIANCE

Confidence Futuristic Energetech Limited places a high priority on compliance with all relevant laws, regulations, and industry standards. The company adheres to stringent regulatory requirements, including those related to environmental protection, safety standards, and corporate governance. Regular compliance audits and reviews are conducted to ensure adherence to legal obligations and industry best practices. The company is committed to maintaining transparency and ethical practices in all its operations. Any changes in regulatory requirements are promptly addressed, and necessary adjustments are made to ensure ongoing compliance. Confidence Futuristic Energetechs robust compliance framework underpins its commitment to operational integrity and legal adherence, reinforcing stakeholder trust and sustaining long-term business success.

DISCLAIMER

The Financial statements are drawn in compliance with the requirements of the Companies Act, 2013 and recently adopted Indian Accounting Standards in India. All statements that address expectations or projections about the future, including but not limited to statements about the companys strategy for growth, product development, market position, expenditures and financial results are forward projecting statements. Forward projecting statements are based on certain assumptions and presumptions of future events. The Company doesnt guarantee such assumptions and presumptions as accurate or realized.