Electrotherm (India) Ltd Management Discussions

OVERVIEW OF ECONOMY / OUTLOOK

The Indian economy remains on a transformative growth path, demonstrating its inherent strength and resilience. India appears to be well on track to become the third largest economy over the next three years. According to the National Statistical Office, the Indian economy is projected to grow 7.6% in 2023-24 compared with 7.0% last year. The GDP grew at 8.2% in Apr-Dec compared with 7.3% in the same period a year ago, with GDP growing above 8.0% in all first three quarters of 2023-24, the first such instance since 2016-17.

The focus of the Interim Budget for 2024-25 has been on fiscal consolidation. In Interim Budget 2024-25, Government announced Rs. 11 lakh, 11 thousand and 111 Crore towards capital expenditure. This would account for 3.4% of the GDP. Reckoning it as among the policy prerogatives, this is major boost towards investment in infrastructure by central government. Ministry of Road Transport & Highways aims for 13,814 km of national highway construction in FY 2024 and a network to two lakh km by 2025.

The Budget has promised the next generation reforms to make India a developed nation by 2047, the 100 th anniversary of Indias Independence. As a first step, the Budget has allocated Rs. 75,000 crore as 50-year interest-free loans for milestone linked reforms in states. The steel sector got a major boost with the government including specialty steel under the Production outlay of Rs. 6,322 crore.

The IMF and World Bank, have upgraded Indias growth forecasts for 2024 and 2025, amid caution surrounding geopolitical tensions. The RBI pegs Indias economic growth at 7.2% for FY 2024-25 while expecting inflation to average 4.5%, down from 5.4% in FY 2023-24.

INDUSTRY STRUCTURE & DEVELOPMENTS

The Managements perspective on performance of the Company for financial year 2023-24 is given in this report, should be read in conjunction with the Companys financial statements, the schedules and notes thereto and other information included elsewhere in the Annual Report. The Companys financial statements have been prepared in accordance with Indian Accounting Standards (‘Ind complying with the requirements of the Companies Act, 2013, as amended and regulations issued by the Securities and Exchange Board of India (‘SEBI) from time to time.

Electrotherm (India) Limited a leading engineering company, having expertise in metal and induction technology is reputed brand for steel melting solutionglobally. Commitment to quality and customer centric approach has helped the company in achieving ever best performance in financial year 2023-24. Electrotherm is the strongest brand across diverse sectors of technology and metal. In the last biennium ENT division of the company has reached to a new milestone and the companys special steel division had complete turnaround saga from negative bottom-line to highest ever profit in financialyear 2023-24.

Building on the strong foundations, the robust growth momentum of Electrotherm will continue in upcoming years as the Ministry of Steel has embarked on several initiatives aimed at decarbonizing steel sector in line with Indias commitment to achieving net-zero emissions, as outlined in COP-26. The steel sector in India has been embracing the adoption of best available technologies from around the world in its modernization and expansion projects, underscoring the industrys commitment to reduce its carbon footprint and transition to sustainable practices.

A. ENGINEERING & TECHNOLOGIES DIVISION:

Electrotherm ENT division is the most valuable and reputed name for providing effective steel melting solution to India and other countries. The company has always been ahead of timeedge technology products for the toitscustomerswiththecutting-metal melting as well as handling. In financial year 2023-24 the company has unveiled a landmark achievement with the launch 26MW/50Ton DiFOC with an innovative 48 Pulse DTi series. This monumental project is a testament to unwavering commitment to redefining the standards of steel manufacturing. As pioneers in the industry, the company has focused onintroducing edge technology that revolutionarycutting- sets new benchmarks in both capacity and efficiency.Incorporating edge technologies elevates Electrotherms capacity to set new standards AIandcutting-and embrace a greener, more efficient future for steel production. The companys products are designed and developed with the view of sustainable growth and preservation of the environment. Entire product range of the company equipment are the least energy consumers while the company manufactured most effective Air pollution Control Equipment. We help customers in increasing performance and reducing conversion costs to support the quick and proper selection of feasible improvement measures. Capital Goods sector contributes to 12% of Indias manufacturing output and 1.8% to GDP. Indian Electrical equipment is one of the prime sub sectors and is expected to increase at a robust CAGR of 11.68%. The company has again crossed the mark of highest ever sales in FY 2023-24 and has dispatched large capacity steel melting equipment and transformers. The trend is continuing and we see and DRI based steel melting route in India. goodcapacityaddition

B. SPECIAL STEEL DIVISION:

The financial year 2023-24 has registered significant increase in production, sales and profitability in its special steel division as to previous financial years. The divisions turnaround is contributed to improved Ductile Iron pipe market, operations restructuring and inventory management. The steel unit of the company was established in 2005 and since then the journey of efforts continued to provide better products with operational excellence with its versatility and infinite recyclability of internal products to make our processes more environment friendly.

India is the second-largest producer of crude steel in the world. Domestic crude steel production rose 13.2% y-o-y to 144.04 MnT in financial year 2023-24, while finished steel consumption increased 13.6% y-o-y to 136.25 MnT, driven by robust domestic demand as Government continued spend on infra and housing. According to market intelligence firm BigMint, Indias steel demand is expected to grow at a compounded annual growth rate of 7% to touch 190 million tonnes by 2030. In the interim budget, the Central Government has raised funds for capital expenditure to Rs. 11.11 lakhs Crores, which is up 17% from the preceding year and 3.4% of GDP and has also proposed two crore houses to be built under government schemes.

PM Gati Shakti initiative focuses on normalizing logistics cost from 14% of GDP to 8-9% in the next few years will also likely to steel demand, however margins of domestic steelmakers were under pressure due to volatile commodity and energy costs, and the surge in low-cost imports putting more pressure on steel prices.

The pipes market is primarily driven by various factors such as rise in the number of new residential and commercial buildings, development of water supply pipelines, increase in the number of wastewater treatment facilities,public agriculture irrigation systems, and other infrastructure in developing economies. In addition, rise in the number of industrial facilities including food and beverages, chemical and petrochemicals, pharmaceuticals, and other industrial facilities globally, also positively According to a NITI Aayog report India is at 120th position amongst 122 countries in the water quality index, while five of the worlds 20 largest cities under water stress are in India. India will need investments of Rs. 20 lakh crore to bridge the expected water supply gap by 2030, as per NITI Aayog. The Department of DrinkingWaterandSanitation,under the Ministry of Jal Shakti, has been working towards the mission of creating a ‘Swachh Sujal nation. In the Interim Budget allocationsfor the Department of Drinking Water and Sanitationhave been increased to Rs.2024-25, 77,390.68 crore for 2024-25. Of the total allocation, 90% or Rs. 69,926.65 crore is for Jal Jeevan Mission and National Rural Drinking Water Program. This will pump-up sales of DI Pipe in upcoming years. Driven by strong domestic consumer demand, the company is expected to continue its growth trajectory.

C. ELECTRIC VEHICLE DIVISION:

India Electric Two-Wheeler Market is forecast to grow at a CAGR of 40.34% during the forecast period between FY2024-FY2031. The electric two-wheeler (E2W) market in India saw a significantsurge registrationsduring 2024, indicating a robust year-on-year growth in high-speed scooters. According to data sourced from Vahan, this surge reflects the growing traction of electric vehicles in the country, with key players making strides in this evolving sector. In the upcoming years, electric scooters, especially the 40 80 km/h medium-speed models will rule the market. This market is developing at an incredible rate since there is a shift towards eco-friendly commuting. The increasing number of EV scooters throughout the city indicates an encouraging change towards a more environmentally friendly future.

By providing subsidies for the purchase of electric vehicles, the government of India is helping the industry grow at a faster pace. In line with this, these incentives have increased the consumer acceptability of battery-powered scooters and motorbikes. Tax deductions, purchase reimbursements, and financial incentives are some supportive initiatives for EV buyers. As a result, the government is offering subsidies through the FAME II (Faster Adoption and Manufacture of EVs) scheme and separate state EV policies to encourage the adoption of electric vehicles more quickly. On March 31, 2024 the FAME-II subsidy programme ended, giving way to the Rs 500-crore Electric Mobility Promotion Scheme (EMPS) by the ministry of heavy industries. Under EMPS 2024, a support of up to Rs 10,000 per two-wheeler will be provided for over 3 lakh vehicles.

In Electrotherm, the low-speed and high-speed electric two-wheelers to contribute positively in net earnings of the Company. However, our focus shall continue to grow in High-speed models of two wheelers segment with hundreds of thousands happy customers towards Governments mission Electric Vehicles 2025 onwards.

FINANCIAL LIABILITY STATUS:

Originally the Company had 19 lenders and ten of them have assigned their debts to Edelweiss Asset Reconstruction Company Limited ("EARC"), Invent Assets Securitisation & Reconstruction Pvt. Ltd. ("Invent") and Rare Asset Reconstruction Limited ("Rare ARC"). As a part of debt resolution with lenders, the Company has One Time Settlement arrangement, wherein entire settlement amount had been paid to ICICI Bank, UCO Bank, Vijaya Bank, Syndicate Bank, International Finance Corporation, Standard Chartered Bank, Union Bank of India (including debt of Corporation Bank) and while the company had ongoing OTS with Central Bank of India. Except pending settlement with Rare ARC (assignee of Indian Overseas Bank), the Company has entered into revised settlement / restructuring with all three ARCs.

Segment-Wise Performance:

The Business segment of the Company comprises of Engineering & Technologies Division, Special Steel Division and Electric Vehicle Division. The Segment wise performance of the Company for all the three divisions for the year ended on 31^st March, 2024 is as under: (Rs. In Crores)

Particulars	Engineering & Technologies Division	Special Steel Division	Electric Vehicle Division
Revenue from operations	1328.23	2931.87	32.12
Segment Profit / (Loss) Before Finance Cost & Tax	162.28	223.25	(6.28)
Capital Employed	12.55	(125.34)	21.66

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE: Revenue from operations:

The revenue from operations of the Company for the financial year ended on 31 st March, 2024 was Rs. 4271.50 Crores as compared to Rs. 3074.05 Crores of previous financial year.

Cost of Materials consumed including purchase of traded goods:

The cost of materials consumed including purchase of traded goods for the financial year ended on 31st March, 2024 was Rs. 2988.63 Crores as compared to Rs. 2285.26 Crores of previous financial year.

Depreciation and on 31 Depreciation st March, 2024 is Rs. 45.23 Crores as compared to Rs. 47.08 Crores of the previous financial year.

Finance Costs:

Finance costs for the financial year ended on 31st March, 2024 is of Rs. 59.82 Crores as compared to Rs. 66.07 Crores of previous financial year. Indian Overseas Bank had classifiedthe loan account of the Company as non-performing assets during August 2011, which was subsequently assigned to Rare Assets ReconstructionLimited ("Rare ARC"), but with whom the settlement terms have not been entered into. Further, the Honble Debt Recovery Tribunal (DRT), Ahmedabad has passed judgment against Company for recovery along with future interest on the amount due @12.75% p.a. with monthly rests. As per the details available with the company, the amount of unprovided interest, on approximate basis, on the said loan is Rs. 116.10 Crore for the year under consideration and the total amount of such unprovided interest till 31st March 2024 is Rs. 784.72 Crore.

Profit/(Loss) Analysis:

The Profit before Finance Costs, Depreciation and Amortisation was Rs. 424.28 Crores as compared to Rs. 141.24 Crores of previous financial year. The net profit for the current financial year was Rs. 319.43 Crores as compared to net loss of Rs. 76.66 Crores of previous financial year.

Key Ratios:

Pursuant to Regulation 34 of the Listing Regulations, the details of the key financial ratios of the Company and comparison to previous year has been provided in Note No. 50 to standalone financial statements of the Company.

RISK AND CONCERNS:

The Company has established a well-defined process of risk management, wherein the identification, analysis and assessment of the various risks, measuring of the probable impact of such risks, formulation of risk mitigation strategy and implementation of the same takes place in a structured manner. Though the various risks associated with the business cannot be eliminated completely, all efforts are made to minimize the impact of such risks in the operations of the Company. At present, there are elements of risks in the nature of various legal cases including for recovery of dues and attachment of certain properties which may threaten the existence of the Company.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

The Internal Control System is designed to prevent operational risks through a framework of internal controls and processes. The Company has in place adequate system of internal control and internal audit commensurate with its size and the nature of its operations. Our internal control system ensures that all business transactions are recorded in a timely manner, resources are utilized effectively and our assets are safeguarded. Internal Audit is conducted by experienced Chartered Accountants in close coordination with companys Finance, Accounts and other departments of the Company. The findings of the Internal Audit team are discussed internally with the Executive Directors as well as in Audit Committee Meetings and their suggestion for improvement & strengthening is reviewed by the Audit Committee / Board. The Company is in process to strengthen its internal control system by implementing Standard Operating Procedures (SOP) for all its major areas under the guidance of Audit Committee / Board.

DEVELOPMENT IN HUMAN RESOURCES / INDUSTRIAL RELATIONS:

The employees are the most valuable assets of Electrotherm. The Company on regular basis takes initiatives to provide training to its employees on environment, health and safety and also provide training on soft skill up-gradation to improve their skills as may be relevant to the respective functions. We are sincerely grateful to all employees for their close and constructive cooperation in the year 2023-2024. We were able to achieve progress against many strategic challenges and continuing that partnership will be a key to implementing the significant changes announced under Human Resource Development Strategy. The Company also hire contract labour on time-to-time basis for success and growth of the Company. As on 31st March, 2024, there were 2,431 Permanent employees employed by the company. Further, Human Resource Development organizes an outing for all on-roll a refreshing break from the usual work environment which creates a memorable experience that enhances employee engagement and fosters a positive work environment. During the year 2023-2024, we could (i) achieve 6.56 training man-days per employee covering 79% employees, (ii) trained 37 customer service engineers on product knowledge & automation (iv) achieve overall skill % of plant @ 73% (v) contractual manpower pipeline is more skilled with 27 Level-3 & 157 Level-2 operators under various skill sets.

The Company develops the training programs by assessing required skills and imparting such skills to fulfil the skill gaps which make directly contribute to the human & machine efficiency & to our overall business performance. On TEI front, employee participation is 100% & our Kaizen team Maestro won Par Excellence at QCFIs NCQC 2023 held at Nagpur.

The Human Resources Development Strategy provides transparency on the companys employee metrics and how we are translating our strategic priorities into action. It helped to achieve the goals in organizational culture; diversity and inclusion; talent and development; talent acquisition; compensation and benefits; managing change; and collaboration with our social partners.

For Electrotherm, investing in our employees remains of paramount importance. The success of Human Resource Development Strategy attr with the skills and experience to help the willdependinpartonourabilitytoretain,motivate,develop,andcontinueto challenges and make the most of opportunities.

HEALTH & SAFETY

We value the human life and believe, all injuries are preventable. Our aim is zero accident. We are committed to conduct all our operations in a manner, so as to avoid harm to employees, contractors, workmen, visitors, local public and the environment. This responsibility starts with each one of us.

The Company has made necessary arrangement to ensure that the employees and stakeholders are safe and comfortable at work place. We provide safe machines and need based Personal Protective Equipments to employees to reduce risk at work place. We create awareness among employees / vendors / contractors through training and partner to demonstrate our commitment and involvement, responsibility and accountability to achieve HSE performance and provide a safe and healthy work environment for all employees. During the year 2023-2024, we conducted 31 safety related training programs.

CORPORATE SOCIAL RESPONSBILITY

The Company strives to be a socially responsible company and strongly believes in development which is beneficial for the society at large. We also wish to keep the environment clean and safe for the society by adhering to the best industrial practices, adopting best technologies and investing in greener initiatives, and so on. It is our intent to make a positive contribution to the society in which the Company lives and operates. CSR is an evolving business practice at Electrotherm that incorporates sustainable development into a companys business model and leaving a positive impact on social, economic and environmental factors.

At Electrotherm our purpose is to improve the quality of life of the communities, we serve and we also believe what we earn. We also focus majorily on rural development and environment friendly initiatives, providing healthcare facilities to nearby much more. Our CSR approach stands for eradicating extreme poverty & hunger, health & sanitation, villagers,focusingoneducation, basic needs fulfillment (sharing & caring), ensure environment sustainability, animalwelfareactivities nearby villages etc. in

CAUTIONARY STATEMENT:

Statements in this Management Discussion and Analysis detailing Companys objectives, projections, estimates, expectations or predictions may be "forward looking statements" with 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 the Companys operations include global and Indian demand supply conditions, finished goods prices, raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in government tax regimes, economic developments within India and the countries within which the company