Exide Industries Ltd Management Discussions

Economic Environment

Global Economic Overview

The global economy is expected to have grown by 3.2% in calendar year (CY) 2023, compared with 3.5% in CY 2022, according to the International Monetary Fund (IMF). High geopolitical tensions, supply-chain disruptions, persistent inflationary pressures, and lower demand in advanced economies slowed the growth rate in CY 2023, especially in the first half of the year.

The emerging and developing economies sustained their strong growth trajectory, with a growth rate of 4.3% in CY 2023, compared with 4.1% growth rate in CY 2022. However, advanced economies were impacted more by tightening of monetary policies, withdrawal of fiscal support, and a high debt scenario. Therefore, according to the IMF, advanced economies are expected to report a slower growth of 1.6% in CY 2023 compared with 2.6% in CY 2022.

There was a silver lining in the second half of the year, as global economy showed great resilience with steady growth in employment and income, and inflation descending to the target levels. An uptick in government and private spending coupled with an increase in disposable income supported the demand in most economies.

Supply-side constraints also eased with more labour force participation and economies trying to streamline supply chain problems, caused by the COVID-19 pandemic or geo-political situations. The Chinese economy expanded after receiving fiscal support from its government, which improved the demand scenario. Therefore, the IMF raised its estimate for the worlds economic growth rate for the CY 2023 in its January 2024 report compared to its earlier estimates (January 2023).

Outlook for the global economy: The global economy is gradually recovering from the after-effects of the pandemic and the Russia-Ukraine war. Inflationary pressures are easing, and central governments in most countries have moderated their policies, resulting in stable demand and lower risks to global growth. Stronger reforms and investments by economies can accelerate productivity and growth across geographies. The IMF has projected global economy to continue to grow at 3.2% during CY 2024 and CY 2025.

To achieve this growth, policymakers must aim to keep inflation closer to target levels and calibrate their monetary policies to balance inflation and growth. Projections indicate that global headline inflation will decrease from an estimated 6.8% in CY 2023 (annual average) to 5.9% in CY 2024 and 4.5% in CY 2025. Around 80% of the worlds economies are expected to experience lower inflation rates in CY 2024. Growth is expected to rebound both in the advanced economies and emerging markets.

Various global agencies and economic experts have also raised their global economic growth targets for CY 2024. Stronger-than-expected economic activity across geographies at the start of the year has led to upward growth revisions. Although the global prospects are promising for the next two years, the risk to growth forecasts persists. Central banks of most economies have kept interest rates high to combat inflation, and governments have withdrawn the fiscal support they extended during the pandemic. This, coupled with rising commodity prices and stray situations such as the ongoing Israel-Hamas war, may cause supply disruptions, leading to lower productivity and higher prices.

Indian Economic Overview

India has been the fastest-growing economy for three years in a row and is expected to remain so in the near term. The Central Statistical Organisation (CSO) estimates the real gross domestic product (GDP) to grow by 7.6% in the FY 2023-24, up from 7.0% in FY 2022-23. The World Bank also estimates Indias growth rate to be 7.5% in FY 2023-24.

Factors such as a favourable policy environment, faster government investments, rebound in the private capex, and easing inflationary pressures have contributed to growth. Considering the demand components of GDP, investments have grown rapidly at 10.2%, while government and private consumption have grown by 3.0% each. The increase in investment is supported by factors like healthy bank and corporate balance sheets, rising capacity utilisation levels, and higher public investments, which also suggest a positive environment for sustained private sector investments.

All economic indicators such as credit growth, vehicle sales, and domestic air-passenger traffic, have grown robustly during the FY 2023-24. The HSBC India Manufacturing Purchasing Managers Index (PMI) was 59.1 at the end of March 2024, a 16-year high. This was due to a strong increase in output, new orders, input stocks, and renewed job creation.

As the fifth largest economy, India is also gaining prominence in global markets. The country successfully hosted the G-20 summit of the worlds largest economies and was a guest participant in the G-7 summit held in the US during the year. Political stability, infrastructure development, strong defence capabilities, and technological innovation are increasing global confidence in India. Indian equity markets are also attracting large amounts of investment from global investors.

Indias outlook: The Indian economy is expected to be the fastest-growing economy in FY 2024-25 as well. After the monetary policy committee meeting held in June 2024, the Reserve Bank of India (RBI) has projected Indias growth rate at 7.2% and inflation at around 4.5% for the next financial year.

Growth will be supported by increased consumption and high public/private sector investments. Consumption will likely rise due to stronger rural and steady urban demand, leading to higher discretionary spending. Private sector investments will be more broad-based, with capital inflows in many sectors. India is also expected to benefit as the developed economies look up, which can increase exports and attract foreign investments. The rupee was one of the most stable currencies in the previous year, and this stability will enable foreign portfolio investors to increase their investments in India. Also, the decision to include Indian government bonds in two prominent global indices in the calendar year 2024 highlights Indias increasing global acceptance and can drive more inflows in the country.

However, rising commodity prices and geopolitical tensions pose risks to growth. Further, high food inflation can limit the central banks ability to lower interest rates to support investments and discretionary consumption. These factors can adversely impact the growth rate estimates to some extent.

Industry Structure & Development

In India, the lead-acid battery manufacturing landscape comprises diverse players, including large entities with nationwide operations (such as your Company), regional manufacturers, and unorganised participants. As the demand for eco-friendly and efficient batteries and energy storage solutions rises, theres a noticeable emphasis on technological advancement within the industry. This trend tends to favour larger, organised players with the resources to invest in cutting-edge research and development. Additionally, organised players benefit from economies of scale, widespread product availability through national distribution networks, and superior service coverage, even in remote areas.

The Indian lead-acid battery industry is further categorised based onvariousapplications:automotivebatteries(forcars,commercial vehicles, motorcycles, tractors, etc.), industrial batteries and storage solutions (for backup power, telecommunications, UPS systems, etc.), and batteries for renewable energy storage (for solar and wind power systems). While larger players typically manufacture batteries across multiple application areas, some mid-sized and regional manufacturers focus on specific segments. Over the past decade, your Company has played a pioneering role in shaping the Indian battery industry. It offers diverse products spanning all application areas, including specialised cases such as submarine batteries.

In the battery manufacturing industry, the availability and pricing of raw materials are critical, as production costs form nearly 65%-70% of sales. Within raw materials, lead plays a critical role in the composition of lead-acid batteries. Movement in lead prices is closely monitored as it impacts the Companys overall business. Lead price movement can be monitored on the London Metal Exchange (LME), and global demand and supply dynamics determine the prices. The increase or decrease in lead prices is usually passed on, although with a time lag, thereby maintaining stability in the profitability levels over the medium term. Ensuring the safe and proper handling of used batteries is another crucial factor that has become a key differentiator. Over the last decade, your Company has invested significantly in ensuring a reliable reverse supply chain to collect used batteries and safely recycle them through its wholly-owned subsidiary, Chloride Metals Limited.

Company Performance

Exide embarked on its remarkable journey almost eight decades ago, in the year that India gained Independence. It has been a trusted partner in the countrys automotive, industrial, and infrastructural development. We take immense pride in the consistent profitability your Company has reported since its inception, a testament to its resilience in overcoming numerous challenges encountered along the way. This remarkable feat owes much to the steadfast support of our valued customers. In fiscal year 2023-24, your Company registered strong growth both in the top-line and in the bottom-line. As in previous years, your Company also implemented several proactive measures to mitigate risks and strategically invested in driving future growth. This makes us confident in our continuous endeavour to deliver value to all stakeholders.

Automotive Division

Indian Automotive Industry

The automotive industry has significantly contributed to Indias growth story, accounting for nearly half of Indias manufacturing GDP and nearly 7% of its overall GDP. According to a press release by the Ministry of Heavy Industries, over 19 million people are employed by the Indian automotive sector, directly and indirectly. India is the worlds third-largest auto market, and automotive exports account for nearly 5% of Indias overall exports. Product innovations, low-cost manufacturing, world-class technology, and strong R&D capabilities have helped the Indian auto industry to grow at strong pace and gain prominence in global markets.

According to the Society of Indian Automobile Manufacturers (SIAM), overall automotive production grew by 8.8% and domestic sales grew by 11.4% in the FY 2023-24. Passenger vehicle production was closer to the 5 million units for the first time. Two-wheeler sales in the domestic market have also picked up and increased by 13.3% year-on-year. However, exports declined compared to the previous year due to lower demand from developed markets and high channel inventory.

Positive consumer sentiments, rising aspirational middle class, and launch of new vehicles drove passenger vehicle sales, especially compact SUVs. Similarly, increased business activity and infrastructure development supported commercial vehicle sales, while an increase in rural income levels powered sales of two and three-wheelers. These evolving industry dynamics created a positive demand environment for our products with the OEMs and in the replacement market.

Performance of the Automotive Division

The Company has always focused on providing products with the latest technologies, increasing its distribution reach and maintaining a strong market position. The highlights of the performance of its automotive division are as follows:

OEMs: Your Company maintained a robust partnership with all OEMs by consistently delivering high-quality products and offering superior service support. Our goal for the OEM accounts is to maintain our strong position, which drives significant business volume and ensures that customers start their journey with our products, paving the way to secure future business in the replacement market.

OEM customers demand more advanced batteries with higher efficiencies, lower emissions, and longer life. Over the years, your Company, in collaboration with international partners, has introduced a comprehensive range of high-performance idle-start-stop (ISS) batteries and enhanced flooded batteries (EFB) to address the demanding requirements of OEMs. A few OEMs are now moving to more technologically advanced absorbent glass mat (AGM) batteries, so your Company is in the advanced stages of launching SLI AGM batteries for domestic and international markets. This product class is expected to become a dominant percentage of all 4W battery requirements, particularly passenger cars.

During the year, Exide won the prestigious Bajaj Gold Consistent Quality Award. This accomplishment underscores our unwavering commitment to excellence and quality across our operations.

Replacement market: With our three powerful brands (viz., Exide, SF and Dynex) offering unique value propositions and gaining traction among customers, your Company is strategically positioned to serve the domestic replacement market effectively. While our presence is established nationwide, we remain committed to extending our reach to underserved customer segments by meticulously identifying white spaces and opportunity areas using the power of data analytics.

This year, we focused on the activation of our upcountry networks. We conducted surveys and captured data to ensure that optimum efforts were diverted to cover demand pockets that have grown in different areas of the country. With urbanisation and automobile penetration, we have recorded an increased prevalence of passenger and commercial vehicles, which require regular battery upkeep, and we are targeting these markets. On the product front, we constantly assess our portfolio and have launched a few products to cater to the rising demand. Additionally, during the year under review, we have effectively improved the value propositions of our inverter and home UPS products through internal value-engineering initiatives.

After-sales service in the replacement market: We strongly believe that empowering and enabling our channel partners is crucial for driving growth, as they play a vital role in our business. We have partnered with various banks and financial institutions to provide financing options for our primary and secondary channel partners. In terms of operations, we empower our dealers by deploying sales representatives, offering extensive training, and facilitating the digital transformation of their business.

Our digital marketing initiatives continue to gain momentum. We have capitalised on social media platforms and the rising power of influencers to connect with end consumers. Our recent digital campaigns have proven effective in engaging audiences and generating customer interest. We are also reaping the rewards of hyperlocal marketing initiatives, resulting in a notable uptick in leads generated for our channel partners.

Exports: Across the globe, major automotive markets were affected by many intricate and interrelated challenges, such as geopolitical issues, disruptions in the supply chain, attacks on shipping vessels in the Red Sea, fluctuations in exchange rates, and non-tariff barriers imposed by countries with protectionist inclinations. All these factors have contributed to the situations complexity in global markets.

Nevertheless, we remain resolute in our commitment to drive export growth and have introduced new technologically superior products to address the obstacles. Furthermore, strategic interventions taken in the past have resulted in consistent growth in Southeast Asia, which will continue to be a key focus region for us in the upcoming year.

To drive exports, the Company focuses on increasing its footprints in Europe and America. Exide expects to start commercial production of the new AGM technology and EFB M2-compliant batteries, which will soon be introduced in American and European markets.

During the year under review, we have invested more in fortifying our team by deploying additional manpower and independent commercial representatives in key geographies. Despite the challenges and uncertainties prevalent in global markets, our team has demonstrated resilience by adeptly managing the expectations of international channel partners. Our personnel in foreign markets keep in touch with customers and swiftly deliver on-site solutions, when needed.

Outlook and Opportunities

The outlook for your Companys operations is promising in the medium-to-long term. In addition to expected growth in the automobile sector, new opportunities are also arising. Key growth drivers and opportunities for the lead-acid batteries in the automotive market are as follows:

Automotive vehicle production and sales likely to grow at a healthy pace in the near term: Despite being the third-largest vehicle market in the world, vehicle penetration in India is much lower than other advanced and emerging economies. According to industry experts, automotive demand in India will grow across vehicle categories supported by multiple factors:

Passenger vehicles: Urbanisation, increasing aspirational income, large youth population, and accessible financing options can drive car sales. Commercial vehicles: Increased business activity and infrastructure development will increase intra-state and inter-state connectivity, supporting commercial vehicle growth. Two-wheelers: Increased rural demand and middle-class income to support two-wheeler demand.

The robust growth in automobile production and sales bodes well for your Companys OEM business. Additionally, higher domestic sales coupled with a large existing vehicle fleet creates opportunities for the replacement market.

Demand for more efficient batteries to increase the share of organised players: ISS batteries, EFB batteries, and AGM batteries are gaining prominence with OEMs. These batteries require more technologically advanced solutions, which will help shift the market from unorganised players to organised players.

Auxiliary battery requirement for electric vehicles: A lead-acid battery is required to take the auxiliary load in electric vehicles, and your Company is supplying a 12-volt lead-acid battery for this purpose.

Growing export opportunities for Indian vehicle manufacturers: Indias share in the global automotive trade is continuously increasing. Currently, 14% of passenger vehicles manufactured in India are exported. However, given our skilled manpower pool and labour cost arbitrage, the industry aims to export nearly 25% of passenger vehicles produced in India. Similarly, about 30% of the two-wheelers manufactured in India are expected to be exported by 2030.

Over the past year, we have continued to invest in our manufacturing facilities, sales and service network, warehouses and transportation infrastructure, enhancing the capacity of our entire supply chain to accommodate higher volumes in anticipation of future business growth.

Threats, Risks and Risk Mitigation

In the natural course of business, we evaluate emerging threats and risks and take mitigation measures to counter them. In the last few years, we have strategically invested in digitalising all business processes. Real-time data availability helps streamlines processes, ensures accurate decision-making, and reduces costs. It has also helped generate automated alerts, ensuring business risks were identified early and acted upon swiftly.

We observe a growing adoption of electric vehicles, particularly in the two-wheeler and three-wheeler segments. However, sales of internal combustion engine (ICE) versions in these segments have shown signs of recovery recently. Furthermore, four-wheeler electric vehicles depend on a lead-acid auxiliary battery, and we supply this battery to EV manufacturers, ensuring the sustainability of our lead-acid battery business without an immediate threat.

We foresaw intensifying competition in the inverter business segment with the emergence of some competitors who had made significant investments in brand establishment and distribution networks to gain market share. Exide has effectively countered competition by improving the value propositions of the inverter and home UPS products through internal value-engineering initiatives.

Geopolitical and commercial risks can affect export opportunities in specific locations. Hence, we are proactively diversifying our customer base by expanding into new markets in Europe and North America to reduce geographical concentration risk. As part of our go-to-market strategy, we are introducing technologically advanced product variants tailored to meet the demands of these established markets in developed nations.

Within supply chain management, our strategy involves reducing dependence and mitigating associated risks by collaborating with multiple logistics service providers. Over the years, we have cultivated robust business relationships with the transporters and warehouse operators to ensure uninterrupted operations. We have bolstered infrastructure at our warehouses, which has increased efficiency and throughput capacity. This enhancement ensures seamless business operations from the same location as volume grows.

These initiatives are helping your Company minimise the impact of uncertainties and achieve its planned business objectives.

Industrial Division

Key Growth Drivers for Industrial Batteries and Storage Solutions

The fiscal year 2023-24 was another milestone for the business led by the twin pillars of sustained domestic demand and the governments thrust on infrastructure building. Government and private sector capex across industrial sectors where your Company operates saw an upturn during the year. All macro indicators, such as the IIP Index, manufacturing growth rate, banks credit growth, and private capex, point towards an upbeat demand scenario. This, coupled with government investments, was reflected in the years strong order flow and business inquiries.

Macro Indicators highlighting higher investments and upbeat demand scenario in FY 2023-24

Performance of the Industrial Division

Your Company registered robust double-digit growth in the industrial businesses and remains one of the most preferred brands across multiple industrial verticals such as IUPS, power & projects, traction, and major OEMs in India. Despite minor headwinds, including rising input costs and global pressures such as geopolitical instability, profits grew healthily, with solid performance across all businesses. Growth was supported by agile and efficient operations with sound strategic planning and implementation.

The performance update of each industrial business is as follows: Industrial UPS: The UPS business, the largest business of the Industrial division, registered double-digit growth over last year on the back of the trade businesses, reflecting the requirement for critical power backup in the country. The OEM business growth also significantly contributed toward this number, which was held steady by the rising demand as we remain the preferred brand for OEMs. The UPS business continues to be our nucleus of strength, driven by a diverse portfolio and continuous product/process innovation and is backed by a strong sales and service network across India. The Indian Data Center industry is witnessing meteoric growth. A large and still growing internet user base, the explosion of data and the creation of a conducive atmosphere via the governments Digital India mission has transformed India into a fast-growing Data Center hub. Furthermore, many progressive policies encourage domestic and global data centre operations to invest in the country. Even conservative estimates see growth in the mid-teens for this segment. Exides top-tier offering in 2V and 12V segments is gaining ground among domestic and international Data Center Operators.

Solar: The Indian government is on track to achieve its target of 500 GW of installed non-fossil fuel capacity by 2030. In the year under review, the renewable energy industry thrived as India led the energy transition efforts enabled by supportive policies and a dramatic decrease in solar technology costs. The reflection of this superlative growth in the market can be seen in the strong sales momentum for our solar end market vertical. This was achieved using a combination of new products and the expansion of the trade network.

The positive response toward the newly launched Solar AGM VRLA product range and its successful installations have reiterated the markets need for a maintenance-free solar battery. Realising the unmet need for a maintenance-free battery in this space, we have designed and introduced two ranges—2V and

12V—of specially optimised AGM VRLA products tailored for storing photovoltaic energy. Immediately upon introduction, the market responded strongly, reinforcing the need for such a product and a testament to its performance.

A significant trend in Indias solar energy landscape is decentralising power generation, particularly through rooftop solar installations. Rooftop solar enhances energy security and empowers individuals and businesses to contribute actively to cleaner energy production. Our entry into the rooftop solar segment broke new ground. EXIDE Sunday Rooftop Solar Solutions delivered a profitable revenue stream from the first year, with 1.4 MW of residential, Commercial and Industrial (C&I) establishment having our Rooftop Solar Solutions.

Telecom: The financial year 2023-24 will be remembered as the year of 5G in India. The launch of 5G telecom services witnessed the worlds fastest 5G rollouts by Indian telecom players, which deployed almost 400,000 base stations across the country. Indias top two telcos are taking aggressive steps to cover the entire country, and we have supported them with our solutions. We also partnered with BSNL, which extended its 4G coverage to more than 30,000 uncovered villages under the GOIs USO Saturation Project. The growth across this sector translated into our telecom business growth of more than 30% over the last financial year.

Traction: In Traction, your Company has posted strong double-digit growth over the last financial year, on a large base. Materialhandlingequipment(MHE)iswitnessingunprecedented growth on the back of a boom in modern warehousing driven by rapid growth in e-commerce, the manufacturing sector, and increased spending on logistics networks. With the lions share of business in all major OEMs, we have been able to fully ride the growth wave that the MHE market is experiencing.

The launch of our new product line, Mega Charge and THORR batteries, in various industrial cities across India has received an overwhelming response. Your Company plans to build on this positive sentiment and steadily increase the sales of Mega Charge batteries.

Infrastructure: Exide remains the undisputed market leader with unparalleled market dominance. Your Company has achieved its best-ever results on the back of robust public spending in power and infrastructure development. Your Company has secured a market leadership position in the signalling & telecommunication market of Indian Railway within just one year of obtaining the requisite approvals. We have become market leaders in the infrastructure projects business on the back of significant large-order wins, especially in the Metro segment. The enquiry pipeline remains heartening, and we are confident we can sustain this position in the upcoming year.

Battery Energy Storage Solutions: Significant progress has been made in developing the Battery Energy Storage System (BESS), mostly employed for renewable energy storage and time-shift applications in grid-enabled locations. The tubular gel solution promoted by your Company occupies a premium position in this regard. This year, a more cost-effective AGM solution was developed and offered for this businesses. The first order comprising a 100 KWh package has been executed this financial year and is currently undergoing commissioning trials.

Exports: Your Company has maintained momentum and registered substantial growth despite bumps in the road due to escalating freight costs, an increase in transit times and the general slowdown in Europe caused by the Russia-Ukraine war. We have achieved this growth by mining into existing accounts in Austria and Canada while onboarding new accounts in Europe and South America. We have also entered the Russian market and ramped up supplies through our distribution network, implemented in the last few months.

Your Company is implementing a detailed outreach plan for European customers in the traction segment, taking their relationship a notch higher. To this end, we have hired a local resource to connect and address customer queries instantly. Significant efforts toward portfolio diversification have been made to enrich the product range and customer experience, offering JIS range and complete battery solutions along with ORC batteries.

In the Standby businesses, your Company displayed resilience in the face of geopolitical volatility in Nigeria and West Asia (Israel-Palestine war). The focused outreach to West Asia UPS players has helped open a new business avenue. The year ended with a credible and resilient performance that stands out despite an unfavourable macro environment, laying the foundation for our future success and growth.

Outlook and Opportunities

The governments consistent efforts in structural, fiscal and infrastructural reforms and the demand revival augur well for industrial growth. The PLI scheme will aid in keeping investments flowing to scale up industries and provide a major boost to infrastructure. Moreover, the growth is expected to accelerate with improvements in the overall business sentiment on the back of continued measures to reduce transaction costs and improve ease of doing business. The governments emphasis on sustainability, infrastructure development, digitalisation, and promotion of AatmaNirbhar Bharat (self-reliant India) closely aligns with our vision and strategies. We are confident that these measures will stimulate the growth of the Indian economy and create numerous opportunities for the Industrial side of our business.

As the government is expected to maintain its capex momentum through FY 2024-25, leading to a multiplier effect and attracting private investments, we expect to continue our growth trajectory in the IUPS business in the coming year. In the future, UPS will double down on its array of products, offering a comprehensive range aimed toward delivering exceptional customer experience.

In Solar, the governments ambitious plan for solarisation of homes, PM Suryodaya Yojana, is the breakout moment for the rooftop solar market in India. The scheme seeks to outfit 10 million households with rooftop solar panels to reduce the consumption of grid-connected electricity and help consumers save on electricity bills. We aim to capitalise on this opportunity with our rooftop solar offering - Exide Sunday Rooftop Solar Solutions. A high-decibel ad campaign on print and social media is being used to strengthen our brand salience in this market segment. We expect significant upsides to this market in the forthcoming years. Key demand drivers such as the rapidly falling system costs, increasing electricity rates, incentives for residential installations and attractive RoI for the C&I segment are all expected to accelerate in FY 2024-25.

In the infrastructure business, your Company intends to scale new heights next year. For the power business, this will come on the back of large orders from nuclear and thermal power plants. The governments ‘Make in India policy has given a fillip to this demand. Another growth driver will be the flooded batteries that Indian Railways needs for signalling and telecommunication. We have re-entered this market successfully after a five-year hiatus.

Your Company is doubling down on the emerging market segments in infrastructure, viz., railway electrification, data centres, and battery energy storage systems, providing ample growth headroom.

Advances in technology and market dynamics are expected to transform Indias telecom sector in 2024. The expansion of 5G networks across its hinterlands will bolster Indias 5G leadership, improving communication and connectivity and playing a crucial role in achieving the vision of a Digital India. However, telecom operators could shift towards lithium-ion cells.

The Traction business is poised to witness significant growth in demand for material-handling equipment used in industries such as retail, e-commerce, manufacturing, modern warehousing, and logistics. With the help of increased capacity, your Company is now ready to enter the market segments of warehousing and logistics, e-commerce, and aviation. Therefore, we expect the double-digit growth trend to continue.

In Exports, your Company expects a huge opportunity in the 2V standby business in Europe, West Asia, Africa, and Southeast Asia. In Europe, the major distributors are looking at your Company as a potential partner. We will continue our extensive reach-out programme for Traction in Europe. We expect the export market to grow. The Standby business will continue to grow as we get new customers and match rising demand in West Asia.

Risks and Mitigation Plans

Economic growth is expected to remain robust as India has been the bright spot in a global economy marred by gloom and doom. Even though India is better off than most other economies, it is not immune to fears of global recession, and a limited impact could lead to weaker consumer sentiment and muted demand. While crude oil and commodity prices have been stabilised in recent months, their future trajectories remain uncertain, given the lingering geopolitical hostilities such as the conflict in Gaza and Israel, continued attacks in the Red Sea, and the Russia-Ukraine war could further constrain the margin growth of the business.

In telecom, there has been a rapid shift towards lithium-ion because of the drop in lithium battery prices, its fast recharge characteristics, and flexible sizing (addition/removal of modules). While Indias largest telecom operator has already adopted 100% lithium, Indias largest telco tower provider had deployed a substantial number of lithium sets in 2023 to gauge comparative performance between VRLA and lithium and used it to decide the future technology roadmap. The detailed field data is expected sometime in the second quarter of FY 2024-25 and will determine the degree of shift from VRLA to lithium. ATC, acquired by Brookfield, continues to purchase VRLA technology, but scepticism prevails on the future of this decision, considering the post-merger integration and other regulatory approvals.

In railways, with conventional coaches getting replaced by LHB coaches, we are pitching our MET70 batteries. We are progressing well on the developmental front and shall start series supplies once we are through as an approved vendor. However, we foresee the overall market size of conventional batteries shrinking gradually as newer trains, such as the Vande Bharat Express, move toward lithium-ion batteries.

As in telecom and the railways, the traction segment is also switching to lithium-ion batteries. The shifts are in a few segments, such as golf carts, battery-operated pallet trucks, and small warehousing equipment.

We are accelerating as we continue our journey into the next year while keeping a close watch on possible headwinds from geopolitical developments, interest rates, limited technology disruption and input cost inflation. We remain optimistic about the overall demand and iterate our commitment to be one of the leading players in the industry and are ideally placed to capitalise on the opportunities ahead.

Submarine Division

During FY 2023-24, your Company secured two separate orders from the Indian Navy for two sets of submarine batteries for nuclear submarines. Both battery sets were manufactured and delivered during the fiscal year.

Your Company has also secured an order against stiff competition to supply submarine batteries, accessories, and spares for export to a foreign Navy. The first battery is being manufactured, and the Factory Acceptance Tests (FATs) are scheduled to be conducted in the presence of the foreign Navy delegation. The first battery set will be dispatched after the customer clears it and with the permission of the Government of India. The second battery set will be manufactured and exported during FY 2024-25.

Exide is also looking for new opportunities to export submarine batteries and is engaged in active discussions with potential customers to supply them in FY 2024-25. The outlook for FY 2024-25 is very positive, and we expect the production capacity to be fully utilised.

Research & Development

In the rapidly evolving scenario of Indias energy security plan, energy storage is turning out to be a key factor. The countrys drive towards green energy brings specific demands on energy and energy storage solutions, mobility, and industrial applications. Your Companys R&D centre has taken multiple initiatives during the year, which are as follows:

In automotive division, reducing fuel consumption and minimising emissions are two basic parameters for any new vehicle. Many four-wheeler manufacturers now want high-performance enhanced flooded battery (EFB) and idle stop-start (ISS) batteries. Your Companys R&D team has worked closely with international collaborators to create a comprehensive product range that fully addresses OEM requirements.

OEM expectations are now reaching a point where only advanced sealed AGM products meet their requirements. Your Company is in the process of launching the SLI-AGM products for domestic and international markets.

We have introduced the revolutionary ‘punched plate products across the two-wheeler range. We are completely converting the entire production into a continuous automated mode to achieve the highest quality and operational efficiency.

In the industrial division, significant progress has been made in developing the Battery Energy Storage System (BESS), mostly employed for renewable energy storage and time-shift applications in grid-enabled locations. Your Companys tubular gel solution occupies a premium position in this regard. This year, a more cost-effective AGM solution was also developed and offered for this segment.

In another industrial application, solar photovoltaic generation and storage is seeing vigorous growth, thanks to some extremely positive policies of the national government. During the current financial year, your R&D has designed and introduced two ranges, 2V & 12V, of specially optimised AGM VRLA products tailored for storing photovoltaic energy.

During the year, your Company initiated a drive to review and improve our overall operational efficiency. Your Companys R&D and plant engineers have scrutinised all operational cycle times, losses, and rejects, and strategies have been made to reduce them in a phased manner. This has resulted in significantly lower energy costs, higher asset turnarounds, and reduced expenses across manufacturing.

So, summing up, during the year, your Company introduced many products to meet market demand and took multiple initiatives across processes to optimise costs.

For more details on our R&D collaborations and initiatives, please refer to page 60.

Digitalisation initiatives

At Exide, we have always been an early adopter of digital tools to strengthen our operations. With the rapid digitalisation of all the core functions, we are adopting digital & analytics like never before. We now leverage technology in every aspect of our business to foster innovation & efficiency. Last year, we identified below three key areas that are critical to our business and can significantly impact our differentiation in the market:

Customer engagement: A strong focus was on increasing online customer registrations and acquiring the consumer data. Our customer sales registrations increased by 2.5X during the year. Our Hyperlocal Marketing initiative to target location-specific consumers helped generate 500,000 leads. Your Company has also launched special engagement programmes for our fleet and E-Rickshaw customers. Similarly, programmes were launched for institutional customers, with digital campaigns to generate an opportunity pipeline.

Enhancing channel partner experience: In the automotive division, your Company significantly matured its "Connected Dealer" journey and completely transitioned to 100% online secondary billing by the dealers. This has helped increase transparency and enables us to redeploy our trade schemes towards direct benefit transfer to the sub-dealers (on secondary sales). Similarly, we have automated primary order billing for all our dealers, empowering them to place orders in self-service mode anytime.

Achieving operational cost efficiencies: Your Company has transformed business processes such as supply chain management, planning, procurement, etc., with the intervention of digital initiatives. We have modernised the factories and warehouses using digital technology to derive better efficiency, reliability and smart decision-making. We have implemented an integrated business planning platform enabling end-to-end supply chain planning for demand, production, distribution, and procurement, optimising costs and maximising margins.

Exide is now a truly tech-enabled organisation, and we are already realising the benefits of this digital transformation journey. Employees are empowered through platforms for enhanced collaboration, co-creation, and simplified processes. Channel partners connect directly to Exide, from placing orders to channel finance to on-spot warranty decisions. The entire secondary sales system is digitalised. After-sales service is a key differentiator for the Company, along with digital offerings like at-home battery service. Exide is firmly expanding its capabilities to further solidify its market leadership with the power of digital technology.

Highlights of Performance

Standalone Financial Results

(Rs in Crores)

Particulars	2023-24	2022-23
Revenue from operations	16,029.19	14,591.93
Other income	84.54	132.39
Total Income	16,113.73	14,724.32
Earnings before depreciation,	1,871.38	1,568.01
finance cost, tax expenses &
exceptional item
Profit Before Tax	1,409.88	1,215.09
Profit After Tax	1,052.96	903.63
EPS (H per share)	12.39	10.63

Key Financial Ratios

The key financial ratios for standalone financials are as per the below table:

Particulars	FY 2023-24	FY 2022-23
Debtors Turnover Ratio	12.59	11.79
Inventory Turnover Ratio	4.20	4.44
Interest Coverage Ratio	26.63	38.48
Current Ratio	1.63	2.03
Debt Equity Ratio	0.03	0.02
Operating Profit Margin (%)	11.67%	10.75%
Net Profit Margin (%)	6.57%	6.19%
Return on Net worth (%)	8.65%	8.29%

The formulae used for the computation of key financial ratios are as follows:

Debtors Turnover Ratio	Net Sales / Average Trade
	Receivable
Inventory Turnover Ratio	Cost of Goods Sold / Average
	Inventory
Interest Coverage Ratio	Profit Before Interest and Taxes
	/ Finance Costs (including
	interest on lease liabilities)
Current Ratio	Current Assets / Current
	Liabilities
Debt Equity Ratio	Total Debt (representing lease
	liabilities) / Shareholders
	Equity
Operating Profit Margin (%)	EBITDA / Revenue from
	Operations
Net Profit Margin (%)	Profit After Tax / Revenue from
	Operations
Return on Net worth (%)	Profit After Tax / Average of
	Total Equity

Under the SEBI (Listing Obligations & Disclosure Requirements) (Amendment) Regulations, 2018, the Company has to give details of significant changes (i.e. change of 25% or more as compared with the immediately previous financial year) in key sector-specific financial ratios, including debtors turnover, inventory turnover, interest coverage ratio, current ratio, debt-equity ratio, operating profit margin and net profit margin and details of any change in Return on Net Worth as compared with the immediately previous financial year along with a detailed explanation thereof.

Internal control systems

A robust internal control framework is imperative for fostering sustainable growth. At Exide, we have an independent internal audit department, assisted by a reputable external firm, tasked with conducting internal audit reviews.

Audit reviews are consistently conducted following a comprehensive, risk-based audit plan approved by the Audit Committee. Regular updates are provided to the Audit Committee, outlining significant audit observations and subsequent follow-up actions. The scope and authority of the Internal Audit is derived from the Audit Committees approved Internal Audit Charter. The Internal Audit controls synergise effectively with our robust risk management framework, bolstering organisational resilience.

The Company follows the three lines of defence model for its internal financial controls framework to fortify its internal financial controls framework. In compliance with Section 134(5)(e) of the Companies Act 2013, Exide has ensured the implementation of a strong system and framework for internal financial controls. This robust framework encompasses entity-level policies such as a Code of Conduct, a Whistle-Blower policy, an Insider Trading policy, a delegation of authority, an HR policy, standard operating procedures (SOPs) and an IT security policy. Senior management and internal auditors periodically review these internal controls to ensure their effectiveness.

Human Resources

As a Company, we focus on fostering a culture of transparency and meritocracy for our employees. We also emphasise driving excellence through optimal organisational structures, HR systems, processes, and policies. Our commitment to our human resources drives all our developmental initiatives. We also empower our employees and workers to reach their full potential, challenging them to exceed their expectations. We aim to create a work environment and experience where individual skills and contributions are valued.

In the current financial year, the senior leadership teams prime focus was connecting with employees. Various town halls were conducted. The employees gained insight into the Companys vision and future growth plans through these town halls. They also had an opportunity to share their suggestions and feedback directly.

We strongly emphasise the employees career growth within the organisation. To this end, we strengthened the Grow with Exide (GWE) internal job posting process. The employees wholeheartedly participated in this endeavour and utilised it to fulfil their career aspirations. The process has strengthened our culture of meritocracy and enhanced cross-functional collaboration.

Motivation and retention of frontline sales and manufacturing teams is paramount to the Company. Various employee groups have conducted multiple dipstick surveys and focus group discussions. Multiple engagement initiatives have been undertaken based on these discussions and market benchmarking. The Company continues to promote a strong performance-driven culture through continual evaluation and an aggressive reward policy for performance differentiation. Top performers are rewarded under programmes such as "You Did It" and "ELB Champ", motivating and encouraging them to excel.

During the year under review, industrial relations at all plant locations remained harmonious, with successful wage settlements. Sustained efforts were made to build a transformational work culture by adopting industry best practices of flexible manufacturing, productivity enhancements, total quality management (TQM), workmen engagement, plant trainee schemes, quality circles, etc.

The total number of employees of the Company as of 31 March 2024 was 5,151. We thank all our employees for their sincere contributions to the Companys performance and growth.