Fedders Electric & Engineering Ltd Management Discussions

This Management Discussion & Analysis Report presents the key performance highlights of the year 2021-22 pertaining to the Companys business. This review should be read in conjunction with the Integrated Report presented in the earlier sections of this Annual Report, the Companys financial statements, the schedules and notes thereto and the other information included elsewhere in this Annual Report. The Companys financial statements have been prepared in accordance with Indian Accounting Standards (IndAS), complying with the requirements of the Companys Act 2013 and the guidelines issued by Securities and Exchange Board of India (SEBI).

INDIAN ECONOMY

The domestic market had its fair share of upheavals in the financial year under review. A combination of deferral of award decisions and the implementation of long term reforms causing short term economic turbulence have led to a muted environment for project execution.

GLOBAL ECONOMIC OVERVIEW

International markets have witnessed noticeable volatility, triggered by geo-political events, significant movements in currency and commodities, protectionist policies including tariff barriers, a prolonged bout of low oil prices, and constrained fiscal positions of oil producing nations. The recent hardening of oil prices is likely to now give better way to policy makers in GCC countries to allocate increased outlay on essential.

INDUSTRY STRUCTURE AND DEVELOPMENTS

Global business environment continued to remain challenging during fiscal 2019 led by weak global growth, slowdown in China, divergent monetary policies and volatile currencies.

A strong infrastructure sector is vital to the development of a countrys economy. However, since last four years, the Indian economy has witnessed particularly an infrastructure sector a severe downturn. Further, a year-on-year basis, the infrastructure sector in India has been affected primarily due to high interest rates, rising inflation, depreciating rupee, sluggish pace of orders and the absence of viable big-ticket projects. Your Company continued to perform with stability and maintained its momentum in the highly volatile market. The Company focused on cost control measures and product mix enrichment to sustain growth and profitability in the challenging year.

Infrastructure sector is a key driver for the Indian economy. The sector is highly responsible for propelling Indias overall development and enjoys intense focus from Government for initiating policies that would ensure time-bound creation of world class infrastructure in the country. Infrastructure sector includes power, bridges, dams, roads and urban infrastructure development. In

2019, India ranked 44th out of 167 countries in World Banks Logistics Performance Index (LPI) 2018. Favorable valuations make the sector an attractive opportunity. Also, increasing impetus to develop infrastructure in the Country is attracting major global players making this sector as one of the largest receivers of FDI Inflows in India.

Electricity demand in the country has increased rapidly and is expected to rise further in the years to come. In order to meet the increasing demand for electricity in the country, massive addition to the installed generating capacity is required. HVAC systems are becoming one of the key building blocks in modern infrastructure. Rise in infrastructure, rapid urbanization and growth in commercial properties are some of the key factors fuelling the market for HVAC systems in India. With healthy growth anticipated in the real estate sector, the country is expected to witness strong infrastructure development, which would boost the market for HVAC systems over the next five years.

SEGMENT-WISE PERFORMANCE AND BUSINESS OUTLOOK

The Companys strategy for longer term growth has been to continually expand its addressable market by investing in newer geographies and newer industry verticals. Accordingly, the Companys business is broadly classified into following three segments.

STEEL STRUCTURES & ENGINEERING

The Steel Structures & Engineering business of the Company is equipped with highly experienced engineers and "State of the Art" manufacturing facilities with ultramodern plants and machineries for designing any prefabricated structure with latest design and technology. The Company provides onsite fabrication of steel structures, erection, installation, supply, prefabrication of structural steel components at the fabrication facilities for large industrial projects such as Power, Refineries, Steel, Fertilizer, Railways, Petrochemical projects, Pre-engineered structure for metro stations, structural sheds, Metro Depots and Special Spans in Steel Structure. The Company undertakes Turnkey Projects for designing, engineering, supplying and commissioning of complete Pre-Engineered Building Solutions.

ENVIRONMENTAL CONTROL SYSTEMS

The key trends in the Heating, Ventilation and Air Conditioning ("HVAC") industry are energy savings and precision system control which has led to the use of adjustable frequency drives in HVAC systems today. The HVAC system is designed to reduce energy consumption while maintaining the interior conditions at a comfortable level to keep occupants healthy & productive.

One of the Companys key objectives is to become a leading organization for manufacturing of World Class HVAC Equipments like Air Handling Units, Fan Coil Units, Air Distribution Products etc. and ensuring healthy environment. The Company pursues energy efficiency aggressively and implements more environmental friendly solutions in the HVAC sector. The Companys environmental control systems division primarily provides the HVAC Equipment to Defence, Railways, Telecom and other specialized application segments, which includes designing , manufacture and supply of Air Handling Units, Fan Coil Units, Air Distribution products, Ventilation Units, etc. used mainly in Commercial

Space, Shopping Malls, Buildings, Theaters , Auditoriums , Schools, Universities, Libraries, Temples , Hospitals, IT Industry, Airport , Hotels, etc. Fedders Electric is the only Indian Company which has provided Air Conditioning solution for Main Battle Tank.

During the year under review, the Company executed orders for Air Conditioning System for Rail Coaches.

OPPORTUNITIES, RISKS AND CONCERNS

The Indian steel sector growth has been driven by the domestic availability of raw materials such as iron ore and easy availability of cost effective labour. Steel sector has thus emerged as a major contributor to Indias manufacturing output. The industry is technologically advanced with state-of- the-art steel mills. There has been continuous modernization and up-gradation of older plants and improvement in energy efficiency levels. Steel demand in emerging and developing economies (excl. China) is expected to increase by 4 .9% in 2018 and 4 .5% in 2019. Large scale Infrastructure expansion plans for 121 five year plan (FY 12-17) and raising per capita steel consumption in India promises unprecedented growth potential on Indian Manufacturing Industry during next 10 years.

As an integral part of Urbanization, more than 550 km of Metro Rail projects and 381 km of regional rapid transport systems are under planning and consideration. The Ministry is also in the process of forming a new Metro Policy to promote construction of Metro lines under different financing and administrative models. Accordingly, the Company has plans to facilitate in execution of such projects for urbanization.

The Indian manufacturing sector, for the last two to three years, has been facing challenges despite the continuous effort of the government to boost manufacturing and generate employment through ‘Make in India‘ and ‘Skill India‘ initiatives, along with reforms for improving the ease of doing business. However, the situation is not only linked to the government policies and is also attributed to increased global uncertainty, impacting the manufacturing sector. Further, the subdued demand scenario has kept the domestic and foreign players from making any fresh investments. Volatility in commodity prices and general uncertainty has impacted business environment across the globe and recovery pace in both mature and emerging markets.

Higher demand for energy has led to increasing capacity additions for power generation that, in turn, boosted demand for power generation & transmission. Indias power demand is expected to rise up to 1,905 TWH by FY 22. To meet the rising electricity demand, the Central Government plans to expedite market opportunity of US$ 14.94 billion for power transmission. Private sector companies are being encouraged to participate in rail projects, which were largely in the public domain. The Cabinet approved ‘participative models for rail-connectivity & capacity augmented projects, which allows private ownership of some railway lines. The Government proposes to complete electrification of 4000 km of track in the next 3 years.

There are enormous investment opportunities for private players across the entire power sector value chain consisting of generation, transmission, and distribution, and in various infrastructure projects. Therefore, the entry of more private players into the power sector has resulted in increased competition.

Risk management at Fedders Electric is an enterprise-wide function and a holistic approach has been adopted based on Enterprise Risk Management (ERM) Framework. The framework encompasses practices relating to identification, assessment, monitoring and mitigation of various risks towards achievement of business objectives. The ERM is aimed at dealing with uncertainty and to minimize adverse risk impact on business objectives and enables the Company to leverage business opportunities effectively. The Company relentlessly endeavors not only to minimize risks but convert them into business opportunities that allow it to maximize returns for shareholders from diverse situations. The Company has aligned risk management process with every part of the critical business processes to ensure that the processes are designed & operated effectively towards the achievement of business objectives.

Risks are identified & assessed across all key business functions in a holistic manner.

INTERNAL CONTROL SYSTEMS AND ADEQUACY

Internal Control system had been evaluated by the Auditor & erstwhile Management before CIRP commenced. Scope of work of Auditors covers review of controls on accounting, statutory and other compliances and operational areas in addition to reviews relating to efficiency and economy in operations.

FINANCIAL PERFORMANCE

The Financial Performance with respect to operational performance of the Company is discussed in the Directors Report which forms part of the Annual Report.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES (HR)

It has been the tradition of the Company to maintain excellent industrial relations at all levels. The Company is hopeful of getting revived upon approval of the Resolution Plan submitted to Honble NCLT, Kanpur Bench for its approval

DISCLOSURE OF ACCOUNTING TREATMENT

The accounts have been prepared in accordance with Indian Accounting Standards (Ind AS) and Disclosures thereon comply with requirements of Ind AS, stipulations contained in Schedule- IIl (revised) as applicable under Section 133 of the Companies Act , 2013 read with Rule 7 of the Companies (Accounts) Rules 2014 , Companies (Indian Accounting Standards) Rules 2015 as amended form time to time , MSMED Act, 2006 , other pronouncement of ICAI, provisions of the Companies Act and Rules and guidelines issued by SEBI as applicable.

CAUTIONARY STATEMENT

The statements forming part of this Report may contain certain forward looking remarks within the meaning of applicable laws and regulations. The actual results, performances or achievements of the Company depend on many factors which may cause material deviation from any future results, performances or achievements.

Significant factors which could make a difference to the Companys operations include domestic and international economic conditions, changes in Government regulations, tax regime and other statutes. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements on the basis of any subsequent developments, information or events.