dcm shriram Management discussions

Performance Review

In the current financial year, the company witnessed an overall strong operating and financial performance, despite the challenges arising from high energy prices, inflationary pressures and supply chain disruptions. Russia-Ukraine conflict added to uncertainties. Despite these challenges our Chlor-Alkali, Shriram Farm Solutions and Fenesta Building Systems did well however Vinyl and Sugar businesses had lower earnings.

The Chlor-Alkali Business performed better supported by higher realizations despite high energy costs. Vinyl business reported a decline in earnings driven by higher energy prices and sharp reduction in PVC and Calcium Carbide prices from their historic highs last year. Shriram farm solutions & Fenesta building systems witnessed significant growth led by higher volumes and margins. Sugar business earning were lower since the increase in sugarcane prices last year were not fully compensated by increase in sugar prices.

Our balance sheet continues to be strong driven by operating cash flows which enable us to invest in continuous growth as well as manage business uncertainties. Our investment projects in sugar business were commissioned in the current financial year and the ones in chemicals business are under implementation and will be completed over next two quarters. These will add to our operating and financial strength going forward.

Total Revenue from operations (excluding excise duty) stood at Rs. 11547 crore vs Rs. 9627 crore last year.

• Chloro-Vinyl: Chemicals revenue was higher by 27% at Rs. 3184 crore vs. Rs. 2498 crore in FY 22 driven mainly by historic higher realizations especially in first nine months led by global supply chain disruptions, higher energy prices and stable demand. Vinyl business revenue was lower by 31% at Rs. 769 crore driven by decline in realisations from their all-time highs led by lower global demand and improvement in supply chain. Overall revenue for Chloro-Vinyl was 9% higher at Rs. 3954 crore.

• Sugar business revenue increased by 21% to Rs. 2994 crore vs. Rs. 2474 crore in FY 22. The increase was attributable mainly to higher domestic and export sugar sales and better realisation.

• Agri Input businesses - Shriram Farm Solutions: revenue was higher by ~9% led by better realisations in all verticals. Fertilizer business revenue was higher by ~50% due to higher gas prices which is a pass through. Revenue for Bioseed business was higher by ~19% driven by volumes. Overall, Agri inputs business revenues were up 31% at Rs. 3504 crore.

• Fenesta building systems business is our B2C business wherein, revenues were higher by 32% to Rs. 696 crore led by higher volumes and prices.

Profit before depreciation, interest and tax (PBDIT) decreased by ~9% to Rs. 1726 crore vs Rs. 1888 crore last year:

• Chemicals business PBDIT stood at Rs. 1010 crore, an increase of ~15% from last year, being driven mainly by a substantial improvement in margins due to higher average realizations that outpaced the increase in input rates especially the energy and salt

• Vinyl business PBDIT stood at Rs. 81 crore, a decrease of ~84% from last year, driven primarily by realizations which came off their all-time highs, although the costs continued to remain firm led by energy and carbon costs

• Sugar business PBDIT stood at Rs. 322 crore, a decline of ~20% from last year led by higher cost of production due to increase in sugarcane cost in the last season that was not fully compensated by increase in sugar prices. Volumes were better than last year

• Fenesta building systems business PBDIT was higher at Rs. 143 crore vs. Rs. 84 crore last year led by higher volumes and better margins

• Agri Input businesses performance was better than last year. Shriram Farm Solutions PBDIT improved to Rs. 186 crore vs Rs. 136 crore last year led by better product prices. Fertiliser business PBDIT was higher at Rs. 141 crore vs. Rs. 87 crore last year mainly due to upward revision in energy norms and higher gas prices. Bioseed business witnessed a significant improvement in earnings led by higher volumes as well as lower provisions and write offs with respect to Seed Inventory

• Cement business PBDIT declined by Rs. 25 crore led by higher energy prices

Overall PBDIT margins declined to 14.9% from 19.6% last year PAT stood at Rs. 911 crore, down 15% from Rs. 1067 crore in FY 22.

• Finance Costs - Finance costs during FY 23 decreased by 38% to Rs 53 crore

• Tax out go was Rs. 247 crore on account of MAT credit available.

• EPS for the year at Rs 58.4 versus Rs 68.4 in FY 22.

Net Debt as on March 31,2023 stood at Rs. 681 crore vs. Rs. 4 crore last year.

Capital Expenditure: In line with our strategic direction of strengthening our businesses through scale, integration and cost efficiency, we are implementing various growth projects. Projects in sugar business were completed in FY 23. The progress of Chemicals and other projects is as below:

Projects under implementation

• The 850 TPD caustic soda plant along with 600 TPD flaker expected to be commissioned by Q2 FY24

• Hydrogen Peroxide facility with a capacity of 56100 TPA is progressing as per schedule, expected to be completed by Q2 FY24

• Epichlorohydrine (ECH) facility with a capacity of 52000 TPA along with Glycerin purification facility is progressing as per schedule, expected to be completed by Q3 FY24

• 120 MW coal based new power plant is underway and is expected to be commissioned in Q1/Q2 FY24

• 50 MW Renewable (Solar+wind) power via SPV route (group captive) is underway and is expected to be commissioned by Q1 /Q2FY24

• Hydrogen Compressors with total capacity of 0.8 Lacs NM3 per day, implementation progressing as per schedule, to be completed by Q1FY 24

• Anhydrous Sodium Sulphate System (AnSS) is progressing as per schedule, to be completed by Q1 FY24

• Projects under implementation in other business:

• Sugar : Manufacture of Sulphate of Potash (in a 100% subsidiary) with a capacity of 4600 TPA is progressing as per schedule, expected to be completed by Q1 FY24

• Fenesta building systems : Extrusion plant expansion at Kota is progressing as per schedule, expected to be completed by Q2 FY24 and Fagade fabrication plant will get commissioned by Q3 FY24

• SFS : Manufacturing of Water Soluble Fertiliser and Bio products (in a 100% subsidiary) is progressing as per schedule, expected to be completed by Q3 FY24

Projects Implemented at an investment of Rs 591 crores:

• 120 KLD multi-feed distillery with 260 KLD grain attachment at Ajbapur

• 3000 TCD expansion at Ajbapur complex with full capacity conversion to refined sugar (13500 TCD)

• 8000 TCD capacity conversion to refinery at Hariawan Sugar unit

• Expansion of Anhydrous Aluminum Chloride capacity by 32850 TPA

We believe these steps will significantly strengthen our businesses.

Key Financial Ratios Standalone

Ratios	Mar23	Mar22	Remarks
Operating Profit Margin (%)	13.6%	18.3%	Lower profits due to higher input costs and lower realisation of vinyl products
Net profit Margin (%)	8.2%	10.9%	Lower net profits due to lower operating profits
Interest Coverage Ratio	61.0	41.7	Due to lower finance cost in FY23 on account of, higher capitalisation of interest and higher income from liquid investments
Current Ratio	1.8	2.2	Due to lower cash equivalent and bank balance and higher liabilities
Debt Equity Ratio	0.12	0.01	Due to higher closing Debt as a result of ongoing capital expenditure program
Inventory Turnover	6.2	5.8	Due to Higher revenue
Debtors Turnover	12.1	13.7	Due to higher average FICC subsidy on account of higher gas prices
Return on Net Worth (%)	16.3%	20.5%	Due to owing to lower profits

BUSINESS-WISE PERFORMANCE REVIEW AND OUTLOOK CHLORO-VINYL

The Business is energy intensive and integrated and is supported by 225 MW coal based captive power facilities. There are multiple revenue streams in Chlor-Alkali (Caustic soda lye/ flakes, Chlorine, Aluminium chloride, Hydrogen, Stable bleaching powder) and in Vinyl (PVC resins and Calcium carbide). These multiple revenue streams lend stability to Chloro-Vinyl operations. Additional revenue streams of Epichlorohydrine (ECH) and Hydrogen Peroxide are being added.

The Revenue, PBDIT and Capital employed for this business for FY 23 is

as follows:

Chloro-Vinyl segments revenue stood at Rs. 3954 crore vs. Rs. 3616 crore in FY 22. The increase was primarily a result of higher prices for Chlor- alkali and was supported further by higher Chlor-alkali volumes, a result of better operating rates. PBDIT was lower by 20% mainly on account of higher energy prices and lower realisations of vinyl products.

Chlor-Alkali business produces core chemicals viz. Caustic Soda, Chlorine, Hydrogen, Hydrochloric acid and Stable Bleaching Powder, which are widely used in manufacturing processes of other industries. The growth of this business is largely correlated to the GDP growth in the country. Caustic Soda and Chlorine are produced as co-products in the ratio of 1:0.88. Caustic Soda is used in Alumina, Paper, Textiles, Detergents, Pharmaceuticals industries etc. and Chlorine is used in Polymers, Dyes & inks, Agro-chemicals, Water treatment etc.

The Chloro- Alkali industry in India has 21 companies with a combined installed capacity of ~6 million tons per annum of Caustic Soda, increased by 20% in the last FY The top four players comprise about 50% of the total installed capacity. The domestic demand for Caustic Soda in 2023-24 is estimated to be about 4.2 million tons per annum. In long run the demand is expected to grow in line with long term normal levels of ~5%. While demand of caustic has registered slightly better growth however demand for chlorine has not increased in same proportion due to lower growth in downstream industries. Both caustic and chlorine are considered as the building blocks of various industries and the demand of both the products are linked to the Indian GDP growth. As GDP is expected to register good growth, the demand of these products is also expected to increase.

The company operates manufacturing facilities at Bharuch (Gujarat) and Kota (Rajasthan). The aggregate production capacity at both the locations combined is 1869 TPD. DCM Shriram is the second largest manufacturer in the domestic Chlor-Alkali Industry and the Bharuch facility is the largest single location Chlor-alkali manufacturing unit in India. Both the manufacturing units have access to captive power. With the size of chemicals business operations growing, we are in the process of sourcing renewable power for our additional requirements.

The Revenue, PBDIT and Capital Employed for this business for FY23

are as follows:

Year	Sales (MT)	Realizations (Rs./MT)
FY 23	596769	43,629
FY 22	581558	34,703
% Change	2.6	25.7

Chlor-alkali revenue increased by 27% YoY supported by higher ECU realization in first nine months of the year, due to global supply chain disruptions, higher energy prices and stable demand. Better product prices more than offset the increase in costs led by energy and salt prices, leading to higher PBDIT Fourth quarter of the year has seen decline is prices given the global softness in Caustic Soda prices led by lower demand and new capacities that have come up in the domestic market, more capacities are being added in FY24.

Our Strategy: Company remains committed to capitalize on the medium term trend of growing demand in the chemicals sector supported by the strong fundamentals of the economy, by constantly enhancing the production capacities and building downstream capabilities. The Company is making significant investments in this business with the objective of diversifying the product portfolio, adding value to products such as Chlorine and Hydrogen through forward integration in terms of Epichlorohydrine and Hydrogen peroxide and optimising energy costs through 50 MW green power and new 120 MW coal efficient power plant. The company is also taking measures to improve energy efficiency, increase percentage of green energy, thereby reducing the carbon footprint. We believe that the above investments demonstrate our firm belief in future of Indian economy and the chemicals business as a whole. Going forward we will continue exploring the possibilities to increase the portfolio of downstream and allied products to strengthen the chemicals business with sustainability.

Vinyl business is involved in the manufacturing of PVC Resins and Calcium Carbide. These two products form an integral part of the Chloro-Vinyl manufacturing facility at Kota with integration in terms of captive power, chlorine and cement. DCM Shriram Ltd. is the only company in the country which manufactures PVC resin through the Calcium Carbide route as against the ethylene route which is being followed by most of the Companies worldwide with the exception of Companies in China.

PVC Resin is a synthetic resin made from the polymerization of vinyl chloride with 57% chlorine and 43% carbon content. In India, more than 70% of PVC Resin gets consumed for producing PVC pipes & fittings for use in agriculture & construction as against ~45% for the world. The other

key driver for PVC resin is the growth coming from applications such as packaging, profiles, mouldings, pharma etc. Indias per capita PVC consumption is merely ~2.6 kg which is very low compared to other developed economies like 14.5 kg for China and 15.2 kg for US. Calcium Carbide is used in the production of dissolved acetylene gas and Desulphurizing (DS) compound besides production of PVC resin.

The PVC Resin installed capacity in India currently stands at ~1.5 million metric tons per annum. Indian PVC market logged a CAGR of 6% from FY 2015-20 led by growth in the pipes and fittings segment, which accounts for ~70% of the overall PVC demand. The domestic demand for PVC in India at 3.7 mmt, which typically tracks GDP is expected to log a V-shaped recovery @ CAGR of ~15% from FY21 to FY23, clocking 31% growth in FY23 and surpassing pre-covid demand of FY20 by 7%. Driven by growing investments in construction, irrigation & infrastructure sectors, PVC demand in India is projected at 6.3 mmt by 2030.

The Calcium Carbide demand in India is also expected to log a V-shaped recovery and post a growth of ~17% in FY23 on back of economic recovery and demand boost in line with GDP The domestic demand for Calcium Carbide is estimated to register a CAGR of 10.6% from FY21 to FY23, however, it will probably take one more year for the demand to surpass pre-covid levels seen during FY20. Local demand for Carbide in India is likely to improve with expectation of higher spending by Govt. on infrastructure in FY24 & economy posting healthy GDP growth.

The imports bridge the gap between demand & domestic supply in case of both PVC resin and Calcium Carbide. Despite rapid growth in demand & likely increase in domestic PVC capacity in India, the wide gap in demand- supply in India is likely to persist & be met by imports. While imports account for more than 50% of domestic consumption in case of PVC resin, their share is approximately one-third of the total demand in case of Calcium Carbide owing to higher availability from local manufacturers. With DCM Shriram accounting for more than 30% share of the domestic Calcium Carbide market, the Calcium Carbide market in India is seen to be primarily driven by the Acetylene segment given the decline in the DS compound segment over the years.

The Revenue, PBDIT and Capital employed for FY 23 is as follows:

	PVC Resins		Carbide
Year	Sales (MT)	Realizations (Rs./MT)	Sales (MT)	Realizations (Rs./MT)
FY 23	55,980	97,688	22,366	85,291
FY 22	67,193	1,34,404	17,309	1,03,655
% Change	-16.7	-27.3	29.2	-17.7

The business revenue was lower by ~ 31% y-o-y, while PBDIT decreased by ~84% y-o-y. Revenue was lower primarily on account of lower realizations for both PVC resin as well as calcium carbide which are off their historic peaks. Volumes are lower for PVC Resins and higher for carbide, a result of flexibility of production between the two products.

PBDIT lower primarily led by lower realizations for both PVC and Packed Carbide, and higher energy cost.

Our Strategy: The business has swing capability to sell more of PVC Resin or Calcium Carbide depending upon the return per unit of power consumed by these products. The company is focused on maximizing margins by implementing cost reduction initiatives and continuously evaluating new models that enhance process efficiency and support business profitability and sustainability.

SUGAR

India is the second largest producer and largest consumer of sugar in the world. Indian Sugar Industry is highly fragmented with private sector, Government undertakings, Co-operatives, and unorganized players. Unorganized players are mainly involved in production of Gur and Khandsari, the less refined form of sugar. The crushing period varies from region to region beginning in October/ November and goes on till April/ May in all states except in southern states like Tamil Nadu, Andhra Pradesh where it continues till July/ August. In domestic context, sugar is the second largest Agro based industry supporting over 50 million farmers along with indirect employment to rural population. It is estimated that about 7.5% of the rural population in India is involved with the sugar industry.

There have been no significant investments in global sugar capacities over the last few years and the variations in sugar production have been largely attributable to the Sugarcane production and the flexibility in Brazil between sugar and ethanol production. World sugar balance sheet is expected to be marginally surplus than the earlier estimates on account of reduction of production in India and Thailand. Also Brazil Sugar vs Ethanol mix is expected to remain around 46% in SS 2022-23 vs 43% last season. Mills in Brazil are focusing on max sugar output because of a 2-3 c/lb sugar premium over ethanol.

India is structurally a sugar surplus nation and in the current season it is expected to witness a decline in overall sugar production to about 32.4 mmt after considering the diversion of sugar of about 4.5 mmt to ethanol. The consumption is close to 27.5 mmt and 6 mmt is expected to be exported. Indian sugar stocks are expected to end lower at ~ 4.5 mmt. Recently, Co0238 sugarcane variety in Uttar Pradesh has seen increased incidences of red rot disease, thereby impacting sugar production by almost 10% in the State, the industry has already started taking measures to promote new varieties.

Government of India continues to be aggressive in the ethanol blending mandate and intends to achieve the target of 20% blend by 2025. For the current Ethanol season the blending rate is expected to be ~12%. The ethanol prices have been increased across categories. Government intervention will be required to promote more sugarcane juice & grain based ethanol.

DCM Shriram is a major player in the domestic sugar industry based out of the State of Uttar Pradesh. The company has four integrated sugar complexes located in central U.P at Ajbapur (13,500 TCD), Hariawan (13,000 TCD), Loni (8,000 TCD) and Rupapur (6,500 TCD) with a total crushing capacity of 41,000 TCD with total refined sugar capacity of 3180 TPD supported by power cogeneration capacity of 152 MW of which 93 MW of power can be exported. These four units are fully integrated with three distilleries - two on molasses feedstock located at Ajbapur (250 KLD) & Hariawan (190 KLD) and one on multi-feedstock at Ajbapur (120 KLD) with power cogeneration capacity of 14 MW, of which 1.5 MW is exportable and a country liquor bottling line of 10200 cases per day.

The Revenue, PBDIT and Capital Employed for this business for FY 23 are as follows:

	Sugar		Ethanol
Particulars	Sales	Realisation	Sales	Realisation
	(Lac Qtl)	(Rs/Qtl)	(Lac ltr)	(Rs/Qtl)
FY23	49.1	3554	1187.4	56.7
FY22	43.8	3475	1195.1	54.1
% Change	12.2	2.3	-0.7	4.8

Operational Data (Financial Year Basis)

Particulars	Unit of Measurement	FY 23	FY 22
Financial Year
Cane Crushed	Lac Quintals	581.4	554.8
Recovery Rate	%	9.7	10.0
Sugar Produced	Lac Quintals	54.7	52.0

The decline in PBDIT is attributable mainly to:

• Increase in sugarcane price in the last season has not been fully compensated by the increase in sugar prices. However the volumes have been higher.

• Non-availability of market molasses in the current year. This should be addressed in the coming year with the commissioning of grain attachment.

• The imposition of regulatory fees on captive consumption of molasses and revision in molasses obligation for country liquor also impacted margins.

Our Strategy: Sugar business has over the last couple of year, built a fully integrated sugar complex having a capability of capturing full downstream value for all its four sugar factories. Now our key focus areas are:

1. Focus on improving productivity and quality of sugarcane through dedicated cane development efforts, thereby benefiting both farmers in terms of higher yields and mills in terms of better recoveries & volumes

2. Focus on sweating existing assets and drive operational efficiencies across all business lines

3. Further evaluate options of value addition on by-products SHRIRAM FARM SOLUTIONS

With climate change and extreme weather posing new challenges for agriculture and global food production, the need for a new generation of Agri-inputs, which can help the crop deal with both biotic and abiotic stresses, is more pertinent than ever before. Shriram Farm Solutions (SFS) focus on new & advanced technology solutions, be it more efficient nutrition, specific trait seeds or biological solutions through own research and global collaborations is proving to be timely and a future ready strategy. The product portfolio includes Seeds, Specialty Plant Nutrition and Crop Protection.

SFS displayed a resilient performance during FY23 & registered an overall growth of 9%, despite challenges posed by poor monsoon in eastern India and lower consumption in some segments like vegetables and specialty nutrition. SFS launched 14 new products during the year & out of which 4 products were developed through in-house R&D. The new products have received encouraging response from farmers. A 100% subsidiary of the company is also investing in setting up manufacturing facilities at Kota for specialty plant nutrition products.

During the year, Agri Input business environment was impacted by the geopolitical uncertainty, supply chain disruptions and rising commodity prices. Despite such disruptions, due to new generation portfolio, business was able to improve its margin by 400 basis points over last year. SFS has also been at the forefront in adopting technology like enhancing digital reach to farmers through digital mega crop shows, chat facility to farmers through WhatsApp, automation in logistics for timely delivery & bringing cost efficiency. The business has expanded geographically to high potential South India markets. SFSs vast network of field workforce and its digital presence has been instrumental in building awareness amongst farmers about new products. The business is supported by a strong distribution network spread across 18 states, reaching out to ~ 2 million farmers through ~ 35,000 retailers. The Company sells these AgriInputs under the brand ‘Shriram which stands for trust and quality for the last 5 decades and has strong brand equity amongst the farming community.

With fast shifting preferences of farmers due to climate change, global commodity price fluctuations and supply chain disruptions in many import dependant product segments the agriculture sector is expected to witness dynamic changes. Many industry players along with our Company are also

strengthening Biologicals (Bio-Control and Bio-stimulants) & new-gen products in their portfolio.

The Revenue, PBDIT and Capital employed for this business for FY23 are as follows:

• Revenue for FY 23 was ~ 9% higher at Rs. 1034 crore vs Rs. 949 crore last year. Revenue growth was driven mainly by higher prices for research wheat seed, other seeds and speciality plant nutrition products.

• PBDIT for FY ‘23 was higher by ~37% at Rs. 186 crore vs. Rs. 136 crore last year, led by higher margins due to better product prices.

Our Strategy: SFSs consistent focus on agile response, investment in future technologies and creating a healthy pipeline of products is expected to hold it in high stead in the fast developing situation in agriculture. The company plans to be the leader in farm solutions business in the geography of choice and consistently deliver superior value to stakeholders with a strong commitment towards sustainability and our values. The company has active collaborations with International Research Organizations to co-create new generation products or source technology, wherever required. We believe that these steps will enable the business to achieve healthy growth in the medium to long term.

BIOSEED

Bioseed is a Research oriented organization and believes in serving the farmers by providing high quality hybrid seeds with desired traits. It is a business with end to end integration which involves research, production, processing and sales.

The key crops that we deal in India comprise of Corn, Paddy, Bt Cotton, Mustard, Vegetables among others. In Philippines we deal primarily in Corn and Paddy. Our distribution network is wide spread across regions and continues to grow.

We have our research stations in all major agro-climatic regions in Asia pacific region. We spend about 8-10% of our revenue on research activities. This has led to a healthy product pipeline. The product development is not only focused on providing high yielding hybrids, but also meeting other challenges, such as pest resistance, disease tolerance, salinity and drought tolerance. The Company has got into research alliances to further strengthen its capabilities in new technologies.

The Revenue, PBDIT and Capital employed for this business for FY23 are as follows:

Bioseed Revenues in FY 23 stood at Rs. 483 crore vs. Rs. 406 crore last year.

Indian operations witnessed an increase in revenue to Rs. 351 crore from Rs. 284 crore last year, as a result of higher cotton, corn and paddy seed sales. The Philippines revenue in FY23 is marginally declined to Rs. 92 crore vs. Rs. 104 crore in the previous year.

PBDIT for India operations improved primarily due to higher volumes and lower seed discards and provision made on account of slow moving Cotton seed inventory. PBDIT for Philippines operations was lower from last year primarily due to drop in Margins.

Our Strategy: Research and development are the foundation of this business and we continue to invest in it. The business has realigned its business model to make it more efficient. We expect to witness a turnaround in this business in the near term. The business is strengthening its product portfolio and intensifying marketing efforts to enhance trust and create a demand pull by organizing the field activities especially on newly launched hybrids in all the major crops. The trade channel is also being strengthened.

FERTILIZER (UREA)

The companys Urea plant located at its integrated manufacturing complex at Kota, Rajasthan, is one of the oldest plants in the country with a reassessed capacity of 3,79,500 TPA Urea. The company markets its product under "Shriram Urea" brand, a trusted name and enjoys high brand equity amongst the farmers. The Company has an extensive distribution network over the entire Northern and Central India.

India is the second largest producer and consumer of Urea in the world. Urea is most preferred fertilizer and constitutes about 81% of entire ‘N fertilizer consumption in the country. Low farm gate price (fixed by government) and high nitrogen content has made it a preferred choice of the farmers. The gap between demand and supply of Urea has been met through imports. During 2022-23, the Indian urea production capacity has increased to 28.3 million MT, which is approx 15 % over previous year after commencement of new plants. The imports have therefore reduced to 7.4 million MT (till Feb23) against ~ 9 million MT during 2021-22.

Higher energy prices and the Russia-Ukraine conflict have kept the global NPK prices very firm over last one year. Going forward, they are expected to remain soft in the near term.

The subsidy allocation for FY24 by Government of India is Rs 1.04 lac crore which is sufficient for full pay-outs of subsidy bills at current gas prices. Government is encouraging Nano urea which is expected to increase crop yield and reduce the subsidy burden of the government. This transition will take some time.

The Revenue, PBDIT and Capital employed for this business for FY23 is as follows:

Year	Sales (MT)	Realizations (Rs./MT)
FY 23	3,97,933	47,368
FY 22	3,88,223	32,085
%Change	2.5	47.6

Revenue for the business was higher because of higher realizations mainly due to increased gas prices which averaged US$ 21.1/MBT vs US$ 14.3/MBT last year, which is a pass through. The gas prices for the Q4 were at US$ 17.6/MBT. PBDIT was higher mainly due to upward revision in energy norms and higher gas prices. IN our drive towards sustainability we have undertaken reduction of CO2 emission, low grade heat recovery initiatives through Vapour absorption machine which is first of its kind initiative in the Fertilizer industry. Capital employed decreased due to lower urea subsidy outstanding.

Our Strategy: The Company has been making continuous efforts towards improvement in energy consumption, maximising urea production as well as control on fixed expenses.

FENESTA BUILDING SYSTEMS

Fenesta building systems is Indias largest and most preferred Windows brand. Fenesta building systems provides complete solutions in terms of design, manufacture, fabrication, installation and service of precision- engineered, made-to-order window and door systems. The company operates in two segments, i.e. ‘Retail and ‘Projects (Institutional). It provides solutions for uPVC / System Aluminium windows and WPC / Engineered wooden Doors. The competition in this business is increasing with new players entering the market.

The Revenue, PBDIT and Capital employed for this business for FY23 is as follows:

Year	Sales (Windows)	Realizations (Rs./Windows)
FY 23	3,33,211	20,626
FY 22	2,68,694	19,451
%Change	24.0	6.0

Revenue for the business was higher led by volumes especially in projects segment. PBDIT for the business improved to Rs. 143 crore vs Rs. 84 crore in FY22 mainly due to higher volumes and better margins Our Strategy: Strategic focus area of the business is to provide exceptional customer experience and offer comprehensive product portfolio including new product lines, resulting in sustained volume growth. Fenesta building systems will be entering into a new vertical of building materials by launching Glass Fagades in FY 24.

Fenesta building systems continues to focus on enhancing product portfolio, customer experience, improved service, capacity expansion and channel expansion. Business is targeting to further improve channel productivity and sales effectiveness, which is expected to result in better conversion rates and increase in overall sales.

OTHER BUSINESSES CEMENT

The company operates a Cement plant with a capacity of 400,000 TPA located at its integrated manufacturing facility at Kota. Calcium hydroxide sludge is generated in the process of manufacturing PVC resins through calcium carbide route, which is then converted to cement in an environmentally friendly manner using wet process.

The Company produces high quality, premium grade Pozzolana Portland Cement (PPC) and Ordinary Portland Cement (OPC). The Cement is characterized by light colour, superior strength and early setting properties. These characteristics have made "Shriram Cement" to be considered as a premium brand especially in markets like Delhi/NCR and Rajasthan.

Business Performance: Revenue of the Cement business stood at Rs. 173 crore vs. Rs. 175 crore last year. The decrease in revenue of ~1 % was mainly on the account of lower production due to high costs. Fuel price has significantly increased in 2022-23 leading to severe impact on margins.

In our efforts towards sustainability we have commissioned the state of art carbonation system to capture CO2 from flue gas and react with calcium hydroxide sludge for conversion to calcium carbonate. This reduces carbon footprint of the company and improves resource utilisation. After this process, the by-product Sludge shall be fully utilised in Cement manufacturing. To reduce the energy conservation, various energy saving initiatives have been implemented in FY23.

HARIYALI KISAAN BAZAAR

The Retail operations were rationalised in 2013. The Company has limited its current operations to fuel retailing, which is also being rationalized.

PVC COMPOUNDS - SHRIRAM POLYTECH

Shriram PolyTech limited is a wholly owned subsidiary of DCM Shriram Limited. Shriram PolyTech is one of the largest organized players for PVC compounds in India and has world class manufacturing facility that started in 1964. It is certified for ISO 9001, ISO 14001 and OHSAS 18001.

Evolving along with its consumers and their needs over time, what started 50 years ago with footwear and wire & cable segments, has steadily graduated to value added segments like Flame Retardant Low Smoke & Heat Resistant Cable Compounds, Automotive, Food & Medical, Colours, and now, Specialty Compounds.

Business Performance: The business total revenues for the FY23 were at Rs. 195 crore vs Rs. 190 crore last year. The PBDIT stood at Rs. 8.0 crore vs Rs. 8.5 crore last year.

The company is exploring new avenues of market segments which would be mainly Automotive and Engineered vinyl products through its R & D facility known as iPAC (Innovative Plastic Application Centre).

Our strategy: The company is working on expanding its product basket with introduction of new compounds and also evaluating addition of product lines at an appropriate time. The manufacturing facility is equipped with modern compounding technologies and state of the art testing equipments in order to provide a vast range of high quality PVC Compounds to customers in different industries.

As per recent market trends, REACH compliant compound demand is increasing. Therefore, Opportunity to establish the facility for producing these products in Shriram PolyTech is being explored.

OPPORTUNITIES, THREATS, RISKS AND MITIGANTS

The Company being a conglomerate has a natural business hedge, however individual businesses are exposed to various opportunities and risks.

Opportunities:

• Chlor-Alkali business is seeing opportunities in capacity expansion to meet the medium-term demand growth as well as in downstream products that will help Chlorine evacuation and other value added downstream / adjacent products.

• Sugar business segment of the company provides multiple opportunities for growth in multi-feed ethanol distilleries, 2G ethanol, in circular economy by adding value to by-products.

• Agri-inputs business of Shriram Farm solution and Bioseed will have opportunities over medium to long term in the form of rising demand for quality seeds and other farm inputs with desired traits. Demand is going up for food in the country as well as globally leading to a need for higher productivity and resistance to climate, disease and pests for crops.

Approval to GM technology in India for crops such as corn, vegetables as and when it happens, will further foster growth of hybrid seeds.

• The companys Fenesta Building Systems business provides opportunities in existing uPVC windows and System aluminium windows through product innovation as well as in related building products. It is seeing opportunities in WPC / Engineered wooden Doors segment. It is also entering into Glass Fagade Business.

• Strong brand in all businesses, which enjoy high level of trust and credibility with customers including farmers.

• Strong financials with healthy cash flows and good project implementation track record provides ability to continuously invest in growth.

Risk, threats and mitigants:

• Businesses like Chloro-Vinyl are energy intensive. Rising energy costs as a result of rising international and domestic coal prices, freight, duties and levies, is increasing the cost of production. We continuously work and invest in improving our technology, efficiencies, fuel mix and sourcing, to ensure that overall cost of production is competitive. We are also in the process of sourcing renewable power upto 50 MW that will help reduce carbon footprint as well as reduce costs.

• Sugarcane output, yield and recovery are exposed to climate risks. We work extensively with farmers to improve their farming techniques and farm inputs. We also work to provide them high quality seeds.

• Climate Change - We work proactively to increase the percentage of green power in our portfolio including Renewable power, Bagasse based co-gen power plants at Sugar business as well as use of Biomass in our coal based power plants for Chloro-Vinyl Business. 42% of our energy is green. We are over 11x water positive in our businesses. Further we continuously work to improve our efficiencies hence reduce our energy consumption and the carbon foot print.

• Capital intensive nature of our Sugar, Chloro-Vinyl and Fertiliser Business. The Company manages its working capital and tries to keep overall debt at low levels and return on Capital employed at reasonable levels, to enable handling any risks arising therefrom.

• Businesses such as Sugar, Fertiliser and parts of Agri-inputs business segments are exposed to risk of regulatory intervention. Exposure to these businesses is kept at reasonable level. Further, we alongside with other industry participants and associates work with regulatory agencies on continuous basis to ensure a policy framework which benefits farmers (key stakeholder in all these businesses), consumers and industry. We have diversified the product portfolio in Sugar and Bioseed to limit the risks.

• Compliance - Increasing regulatory enactments has brought in the need for additional compliances. With various statutes and regulations, noncompliance may not only lead to monetary penalties but also have an impact on the reputation of the organisation and the goodwill it enjoys. The risk is mitigated through regular monitoring using IT tools and review of changes in the regulatory framework to ensure compliance with all the applicable statutes and regulations.

Internal Control Systems and their Adequacy

The procedures and controls are documented for all the key business processes and adhered to. Risk and Control Matrices (RCM) are documented for all key business cycles and processes and are reviewed by the Business Accounts and Internal Audit teams at periodical intervals. The Internal Audit team along with co-sourced internal audit teams carries out independent testing of effective functioning of key controls for all major business cycles either as part of the internal audits or through yearly testing plan which is duly approved by the Audit Committee at the start of the year. Further, these processes and controls are supported by SAP S4 HANA ERP and making them further robust. The Internal Audit team uses GRC Process Controls module of SAP to periodically review effective functioning of designed controls and GRC Access Controls module of SAP for ensuring adequate access rights to SAP The key observations noted in internal audit reviews are presented to the Management and Audit Committee along with the remediation plans and action taken report. Human Resources and Industrial/ Employee Relations Our HR strategy is closely linked with the overall strategy of the organization, it enables us to attract, retain, and develop the right talent. It also ensures that we are investing our resources in the right areas, making decisions that are in line with the organizations strategic objectives.

To achieve above there has been a lot of focus on driving effectiveness through decisions based on data insights. We further strengthened the outcomes under the three pillars of our HR strategy (Drive Growth, Capability Build Up and Culture) by setting clear objectives and targets. Drive Growth

• To build a sustainable and future ready Organization in line with the Growth strategy, there have been interventions designed around revisiting Organization structures to make them forward looking, building a strong Leadership bench strength through Succession planning and inducting talents through Lateral hiring, creating a focus on diversity and building the right capabilities.

• We believe that diversity is a source of strength and innovation, and we are committed to fostering a workplace that celebrates and values differences. Creating a gender balanced workforce has been one of our core focus areas in all the Businesses.

• To enhance efficiency and bring agility in our decision-making process, we have implemented the RACI matrix.

• Few Businesses experienced a slightly higher attrition rate compared to the previous year. This was attributed to increased competition in the job market and a shortage of skilled talent in certain specialized areas, however there were effective measures undertaken to proactively arrest attrition basis the data insights being tracked on a regular basis.

• We expanded the scope of our Potential assessment framework in line with our talent strategy, to strengthen functional and leadership bench strength.

• There is gamut of channels under the ‘Early in Career program to infuse fresh young talent in the Organization. Leveraging such programs has enabled us to build strong talent pipelines and develop a more diverse and knowledgeable workforce.

Capability Build Up: We view capability building as a strategic priority that is essential for organizations long-term success.

• Key focus area of our Learning and Development Strategy has been to enable the business growth agenda by Capability Development for Future, Accelerated Talent Development, and Creating an Agile Learning Culture by leveraging High Impact Learning Content from marketplace and amalgamating it with an internal learning input to provide a holistic development experience to our employees.

• There has been significant Investment in digitization by on boarding new e-learning platforms to develop and introduce a systematic and sustainable approach to learning and development that allows people to access a range of quality learning opportunities on the go.

• Focused interventions have been designed as part of senior leader development program, young professional development program and Role Transition programs from individual contributors to first time managers.

• To ensure enhanced integration of Senior Leaders within the Organization, a structured orientation program has been curated around Cultural assimilation, Relationship Building and Business understanding as the key focus areas.

• Mentoring and coaching programs have continued along with rotations of employees into new and different roles to give them a developmental exposure and learning for better career.

Culture: The commitment of the Organisation towards people is strongly enshrined in the core values and beliefs of the Organisation. Values and Culture impact employees right through the entire Employee Life cycle hence it needs to be integrated at all stages through DCM Shriram way which is:

• Regular reinforcement through Communication by Leaders to enable Employees to understand the significance of values in their daily lives and how will they demonstrate

• Linking it with the outcomes of Performance Management and Potential Assessment through Values framework

• Senior Leadership hiring based on Value Framework

• Recognition- through "living the values" at work

• Learning- To curate programs based on the Values and Behavior framework

Employee Touch Points

• Employee surveys are a powerful tool for building a great place to work. We regularly conduct surveys such as the On- boarding Survey, Employee Engagement Survey to understand the pulse of the organization. Action plans are focused on enhancing employee engagement and retention through various programs such as recognition and rewards, and initiatives to promote work-life balance. The company also conducted regular town halls and open forums to facilitate communication and feedback.

• As part of our digitization initiatives, an HR Chat Bot has been introduced to provide employees with easy access to HR policies and information, automating the HR helpdesk system. Success Factors, HRMS has been optimally leveraged to enhance data accuracy and reduce manual interventions enabling a better employee experience

• We have increased our focus on employee safety and well-being, including partnering with external organizations for Employee Wellbeing and Assistance Programs, providing access to counselling sessions and mental well-being programs, as well as safety support in case of emergencies.

Employee / Industrial Relations

• The organization continues to foster cordial and harmonious relationships with employees, based on mutual trust, understanding, and respect, in line with our progressive philosophy. As on 31^s,Mar 2023, number of people employed were 5871.

• HR has played a key role in implementing the wage agreement and enforcing the organizations policies, procedures, and guidelines related to industrial relations, and are committed to upholding legal compliance, effective communication, and fair resolution of grievances and disputes.

• Our core values of fairness, transparency, and engagement are well institutionalized, creating a positive and enabling work environment

• The organization places a strong emphasis on employee health, safety, responsible care, process safety, and a cleaner work environment.

• Unique initiatives and an authentic people philosophy have led to an engaging and facilitating ecosystem, aligning employees with the business and organizational goals to create a brighter future for all stakeholders.