Hercules Hoists Ltd Management Discussions

Industry Structure & Developments

Hercules Hoists Limited ("HHL") was engaged in the business of manufacturing, sales, distribution, and marketing of mechanical hoists, electric chain hoists, wire rope hoists, and other material handling equipment. In addition, the Company has also made investments in various mutual fund schemes and equity instruments.

Pursuant to a strategic restructuring initiative, the Honble National Company Law Tribunal (NCLT), vide its order dated August 2, 2024, approved the Scheme of Demerger between HHL and its wholly owned subsidiary Indef Manufacturing Limited ("IML"), along with their respective shareholders. Under this Scheme, the manufacturing business of HHL was transferred to IML.

This restructuring aims to:

Unlock value and enhance the scope of work for both HHL and IML, enabling them to attract new investors, joint ventures, technology partners, and potential merger or acquisition opportunities;

Increase operational flexibility and strengthen the ability of both companies to focus on their respective business activities, thereby enhancing their future growth potential;

Allow the respective management teams to independently pursue growth strategies and collaborations;

Transfer and vest the manufacturing undertaking, along with related assets and liabilities, from HHL to IML;

Cancel shares held by HHL in IML and allot equity shares of IML to HHLs shareholders on a 1:1 basis; and

Facilitate the listing of IML on The Bombay Stock Exchange Limited and National Stock Exchange of India Limited.

Following the demerger, HHL continues to focus on its investment activities. The Companys investments, both listed and unlisted, are held primarily for long-term appreciation and are considered strategic in nature rather than for trading purposes. The Directors expect these investments to generate value over the medium to long term, supporting operating income and dividend distribution.

HHLs investment strategy is driven by a structured process that includes internal analysis, market research, and alignment with both global and domestic macroeconomic conditions.

This restructuring is a significant development that positions HHL and IML to independently pursue focused growth strategies aligned with their core activities.

The World Economic Outlook Report of April 2024 from IMF describes the Global Economic situation as "Steady but Slow". It says as global inflation has descended from its mid-2022 peak, economic activity has grown steadily. Growth in employment and incomes have held steady, resulting in increased consumption demand. The unexpected growth in consumption is a residual effect of the substantial savings accumulated by households during the pandemic.

The IMF projects Indias economy to grow by 6.2% in 2025 and 6.3% in 2026, according to its April 2025 World Economic Outlook. This growth projection makes India the fastest-growing major economy, outpacing global and regional peers, including China and the United States.Global growth, estimated to continue at the same pace in 2024 and 2025. Global headline inflation is expected to fall to 5.9 percent in 2024 and 4.5 percent in 2025. Indian economy remains resilient with elevated inflation.

The IMFs forecast for Indias growth is supported by factors like macroeconomic stability, financial stability, strong digital infrastructure, and a robust government infrastructure program. While the 2025 forecast saw a slight downward revision due to global trade tensions and uncertainty, the overall outlook remains positive, highlighting Indias economic resilience.

Oil prices fell to a four year low due to United States and China Trade War, it could depress economic growth and oil demand. Further he Organization of the Petroleum Exporting Countries (OPEC) decided to boost oil output by more than previously expected.

On May 7, 2025, India launches attack on Pakistan after pahalgam terrorist attack. Clashes between two countries were continued till ceasefire was announced between them. The estimated cost of the war ranged from $180 million to $600 million per day.

A summarized position of the Companys portfolio of investments if given below:

Note: The values of the investments held by the company are derived solely based on prevailing market prices as on the reporting date. These valuations reflect fluctuations in the stock market and are subject to change based on market dynamics. No revaluation or adjustment has been made other than those arising from observable market movements.

Note: The mutual fund investment is maintained primarily to manage the companys short-term liquidity requirements and to meet day-to day- operational expenses. The fund is readily encashable and is monitored regularly to ensure optimal cash flow management.

Following the approval and implementation of the Scheme of Demerger, Hercules Hoists Limited ("HHL") has become a non-registered Core Investment Company. Going forward, the managements focus will be on strengthening the Companys investment portfolio.

HHL aims to enhance its earnings primarily through income generated from dividends, interest, and capital appreciation on its investment holdings. The Company will continue to adopt a prudent and strategic approach in managing its investments, with the objective of creating sustainable long-term value for its shareholders.

The management remains optimistic about leveraging market opportunities and navigating economic conditions to optimize returns from its portfolio, thereby supporting steady growth in operating income and dividend distributions, but strictly through compliances of CIC norms

In todays dynamic and often volatile global business environment, unforeseen risks can significantly impact companies across sectors. Recognizing this, Hercules Hoists Limited has adopted a proactive risk management and mitigation framework to effectively identify, assess, and manage potential risks.

The Risk Management Committee plays a vital role in assisting the Board of Directors by continuously reviewing and analyzing the Companys risk exposures. This committee ensures that appropriate risk mitigation measures are in place and monitors their effectiveness.

Regular periodic diligence is conducted to evaluate emerging risks and vulnerabilities. Based on these assessments, the Committee recommends corrective actions and process improvements, which are then implemented with oversight from the Board.

This structured and ongoing approach to risk management enables the Company to remain resilient and agile, safeguarding stakeholder interests and supporting sustainable business continuity.

The Company upholds robust internal control systems tailored to its scale and business operations. In reinforcement of these endeavors, we have engaged a reputable internal audit firm. Oversight of the audit process is diligently conducted by both the audit committee and the Board, ensuring the effectiveness of internal control systems and adherence to regulatory standards.

Our management takes a proactive approach in rectifying any identified gaps or areas for improvement, swiftly implementing corrective measures based on recommendations from both the internal auditor and the audit committee.

Through a steadfast commitment to transparency and accountability, we uphold the highest standards of corporate governance, safeguarding the integrity of our operations.

The Company is an Unregistered Core Investment Company (CIC) and, as such, does not engage in any operational or manufacturing activities. Its primary business activity involves holding investments in group companies and providing strategic support, including financial assistance strictly within the Group, as and when required.

As a result, there is no direct correlation between financial performance and operational metrics, since the Company does not generate revenue from operations in the conventional sense. The financial performance during the year is primarily influenced by:

Dividend income received from investments,

Interest income from loans and advances extended to group companies,

Interest income from Fixed Deposits in Bank(s) or Debt Instruments invested in Sovereign Government Securities

Fair valuation of investments in Group Companies, and

Any impairment or provisioning in respect of investments or loans.

For the financial year under review, the Companys financial results reflect the performance of its investment portfolio and treasury operations. Given the passive nature of its business model, operational performance indicators such as production volume, capacity utilization, or cost of goods sold are not applicable.

Material Development in Human Resources / Industrial Relations front:

The HHL after sanction of scheme has become a Unregistered Core Investment Company (CIC) and has transferred its significant human resource to Indef Manufacturing Limited (IML). However, the HHL places significant importance on the welfare of its employees, reflecting the strength and stability of the Company. The Company continuously strives to enhance HR processes, including recruitment, performance management, learning and development, workforce planning, and employee welfare. Hercules Hoist Limited fosters a work environment that champions performance, role clarity, cooperation, and mutual respect, backed by significant investments aimed at enriching the lives of its employees. Through this culture, the Company nurtures a sense of unity, valuing each employee for their skills and expertise.

Over the years, Hercules Hoist Limited has built a dedicated team by fostering a nurturing environment, providing comprehensive training, implementing robust talent management practices, and acknowledging performance. Furthermore, Hercules Hoist Limited is committed to empowering its team to achieve their personal goals and contribute their best towards organisational objectives. As of 31st March, 2025, the Companys team comprises of 2 employees.

As the Company is an Unregistered Core Investment Company (CIC) and does not have any operational business, the conventional financial ratios are not applicable to the Company.

The Company does not have revenue from operations, trade receivables, inventories, or borrowings that would require computation of these ratios. Hence, there have been no significant changes in such ratios as compared to the previous financial year, and no such ratios are disclosed.

The financial performance of the Company is largely dependent on dividend and interest income from fixed deposits and fair valuation of investments in liquid mutual funds, which do not lend themselves to conventional ratio analysis.

The Companys investments are held under the Fair Value through Other Comprehensive Income (FVOCI) category in accordance with applicable accounting standards.

During the year under review, there has been no material change in the Return on Net Worth as compared to the immediately preceding financial year. The marginal fluctuations observed are attributable to changes in the market value of the Companys investments, which are primarily in listed Bajaj Group companies.

These changes are purely market-driven and reflect movements in the share prices of the underlying investee companies. As the Company follows a conservative investment strategy, with a minor portion (less than 2%) of the total portfolio held in liquid mutual funds and fixed deposits for meeting day-to-day operational expenses, the overall impact on Return on Net Worth due to such short-term investments is negligible.

Given the nature of the Company as a Core Investment Company, and in the absence of any operational revenue or leverage, the Return on Net Worth does not reflect operational performance but rather the market performance of its strategic investment portfolio.

Disclosure of Accounting Treatment

During the year ended 31st March 2025, the Company implemented the Scheme of Arrangement involving the demerger of the Demerged Undertaking of Hercules Hoists Limited (HHL) ("Demerged Entity") into Indef Manufacturing Limited (IML) ("Resulting Entity"), pursuant to the necessary regulatory and shareholder approvals.

In accordance with the Scheme, the accounting for the demerger has been carried out using the Pooling of Interest method, as prescribed under Appendix C to Ind AS 103 – Business Combinations, applicable to combinations of entities under common control.

As required by the accounting standards, this treatment has been applied retrospectively, and the corresponding figures for the previous financial year have been restated to reflect the impact of the demerger in a consistent manner. The financial statements, therefore, present a comparable view of the Companys financial position and performance.

The Company confirms that the accounting treatment followed for the Scheme of Arrangement is in compliance with the applicable Indian Accounting Standards (Ind AS) notified under the Companies Act, 2013 and other relevant accounting principles generally accepted in India.

Statements in the Management Discussion and Analysis, describing the Companys growth prospects, are forward-looking statements. The actual results may vary, depending upon economic conditions, raw-material prices, government policies, regulations, tax laws and other incidental factors since such factors may influence markets and in turn the investments portfolio of HHL.