HLE Glascoat Ltd Management Discussions

Forming part of the Board Report

ECONOMIC OVERVIEW

The baseline forecast for the world economy is expected to remain stable by growing at 3.2% in 2024 and 3.3% in 2025, at the same pace as in 2023. A slight acceleration for advanced economies where growth is expected to rise from 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8 percent in 2025 will be offset by a modest slowdown in emerging market and developing economies from 4.3 percent in 2023 to 4.2 percent in both 2024 and 2025. The forecast for global growth five years from now is at its lowest in decades. Global inflation is forecast to decline steadily, from 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025, with advanced economies returning to their inflation targets sooner than emerging market and developing economies. Core inflation is generally projected to decline more gradually.

The global economy is expected to witness a synchronous rebound in 2025 as major election uncertainties are out of the way and central banks in the West likely announce a couple of rate cuts later in 2024. India will likely see improved capital flows boosting private investment and a rebound in exports.

The risk of elevated inflation has raised the prospects of higher for even longer interest rates, which in turn increases external, fiscal, and financial risks in the context of escalating trade tensions and increased policy uncertainty. In advanced economies, the revised forecast is for the pace of disinflation to slow in 2024 and 2025. That is because inflation in prices for services is now expected to be more persistent and commodity prices higher. However, the gradual cooling of labor markets, together with an expected decline in energy prices, should bring headline inflation back to target by the end of 2025. Prolonged dollar appreciation arising from rate disparities could disrupt capital flows and impede planned monetary policy easing, which could adversely impact growth. Persistently high interest rates could raise borrowing costs further and affect financial stability if fiscal improvements do not offset higher real rates amid lower potential growth. The potential for significant swings in economic policy as a result of elections this year, with negative spillovers to the rest of the world, has increased the uncertainty around the baseline. These potential shifts entail fiscal profligacy risks that will worsen debt dynamics, adversely affecting long term yields and ratcheting up protectionism. Trade tariffs, alongside a scaling up of industrial policies worldwide, can generate damaging cross border spillovers, as well as trigger retaliation, resulting in a costly race to the bottom. By contrast, policies that promote multilateralism

and a faster implementation of macro structural reforms could boost supply gains, productivity, and growth, with positive spillovers worldwide.

In response to the pandemic, India has responded in three components: first, by focusing on public spending on infrastructure; second, by a natural response of business enterprise and public administration amidst adversities, i.e., digitalisation of service delivery; and third, by ‘Atmanirbhar Bharat Abhiyan? in terms of targeted relief to different sectors of the economy and sections of the population, and structural reforms that assisted a firm recovery and increased the medium term growth potential.

(Source: Internationa! Monetary Fund, World Economic Outlook.)

ECONOMIC OUTLOOK

The global economy is expected to grow at 3.1% in CY2024 and slightly accelerate to 3.2% in both CY2025 and CY2026 before moderating to 3.1% in both CY2027 and CY2028. However, this outlook faces headwinds in the form of higher interest rates implemented by central banks to combat inflation and reduced government spending due to accumulated debt.

India?s real GDP grew by surpassing all market estimates of GDP, with 8.15% year-over-year (YoY) growth. For three consecutive years, India?s economy has exceeded growth expectations (averaging 8.3%annual growth over this period) despite global uncertainties, driven by strong domestic demand and continuous government efforts toward reforms and capital expenditure.

India is projected to grow by 7.2% in FY2025, a bright spot in an otherwise subdued global economic environment. The focus on infrastructural development, expanding manufacturing and services sectors, resilient credit growth, robust private consumption, and a growing export potential will propel economic momentum during the year. This economic momentum is projected to continue, with India expected to remain the fastest- growing large economy over the next five years with India?s growth expected to be supported by stable domestic demand and private investments. GDP growth is expected to thereafter normalize to 6.5% by FY 2027-28. The government?s sustainability-driven growth agenda, greater manufacturing sector boost, ongoing structural reforms, and large middle-income and young population size are the notable medium-term growth drivers.

During the FY 2025-2029 period, the Indian economy is expected to grow at an average rate of 6.7%, supported by a demographic dividend, increasing urban household income levels, technological advancements, and climate change mitigation policies. With the country?s robust growth outlook, India is poised to overtake Germany and Japan to become the 3^rd largest economy globally before 2030.

The increase in indirect taxes in FY24 was mainly driven by a 12.7% growth in GST collection. With the commitment of the Reserve Bank of India (RBI) to the goal of price stability and policy actions by the Central Government, India successfully managed to keep retail inflation at 5.4% in FY24, the lowest level since the Covid-19 pandemic period. The inflation rate was less than 6% in 29 out of the 36 States and Union Territories. The RBI and the IMF have projected that India?s consumer price inflation will progressively align towards the inflation target in FY26.

A synchronous global recovery next year will likely help improve exports while improved capital flows will drive higher investment and consumption. This may lead the Indian government to recalibrate its spending, leading to a faster decline in the fiscal deficit and an increase in private investments. In this edition of India economic outlook, the focus is on the emerging consumer spending patterns in India, highlighting the rise of the middle- income class. In the coming years, as India races to clinch the third spot in terms of GDP, the consumer market is also set to become the world?s third largest by 2027. India is seeing a prominent shift in consumer behavior toward aspirational spending, which is inevitable in any nation that experiences growing economic prosperity.

(Source: India National Statistical Office, RBI, International Monetary Fund, World Economic Outlook.)

INDUSTRY OVERVIEW

Engineering Sector - Glass lining, Filtration & Drying, Heat Exchanger Equipments

The engineering sector is the largest of the industrial sectors in India, as it accounts for 27% of the total factories in the industrial sector and represents 63% of the overall foreign collaborations. Demand for engineering sector services is being driven by capacity expansion in industries like infrastructure, electricity, mining, oil and gas, refinery, steel, automobiles, and consumer durables. India has a competitive advantage in terms of manufacturing costs, market knowledge, technology, and innovation in various engineering sub-sectors. India?s engineering sector has witnessed remarkable growth over the last few years, driven by increased investment in infrastructure and industrial production. The engineering sector, being closely associated with the manufacturing and infrastructure sectors, is of huge strategic importance to India?s economy.

The development of the engineering sector of the economy is also significantly aided by the policies and initiatives of the Indian government. The engineering industry has been de-licensed and allows 100% foreign direct investment (FDI). Additionally, it has grown to be the biggest contributor to the nation?s overall merchandise exports. Engineering accounts for about 25% of India?s total global exports in the goods sector and is one of the largest foreign exchange earners. In FY24, exports of engineering goods stood at US$ 109.32 billion, reflecting a marginal growth of 2.1% of YoY growth. The Indian engineering sector is of strategic importance to the economy owing to its intense integration with other industry segments. The sector has been de-licensed and enjoys 100% FDI. To increase the employability of engineering graduates in the country, AICTE (All India council of technical education) leadership is taking a lot of efforts and recommends model curriculum for engineering programs like AI, IoT, Robotics, Block chain, Machine learning, Data Science and Cyber security.

The Glass Lined Equipment industry is poised for significant growth, driven by multiple factors. Glass Lined Equipment protects the contained media from exposure to water, other chemicals, alkalis, and corrosion, providing a desirable environment for storing the media. Glass Lined Equipment is resistant to contamination and capable of operating in a variety of environments. Glass lining technology is extensively used in various industries for its corrosion resistance and durability.

Glass Lined Equipment are of various types, each designed for specific applications and industries. The Glass Lined Equipment segment is divided into reactors, agitators, heat exchangers, storage tanks and accessories. Some common types of Glass Lined equipment are Reactors, Agitators, Storage Tanks, Columns, Pumps, Dryers and Filters, and Pipes, Valves and Fittings. Each type of equipment has its own unique features and advantages, making them suitable for different applications. The Glass Lined Equipment market in the pharmaceutical sector was valued at US$700.0 Mn in 2023 and is expected to reach US$1,000.0 Mn by 2027. Glass Lined Equipment is a vital component of the chemical industry?s manufacturing line, hence expansion in the sector will fuel growth in Glass Lined Equipment. The Glass Lined Equipment market for the chemical industry is now valued at INR 4.9 Bn in FY2024 and is expected to rise to INR 7.8 Bn by FY2028.

Filtration and drying market is driven by strict quality standards, efficient manufacturing techniques, and the emphasis on product purity. ANFD filtration is a very popular type of filtration and drying technique and is very popular among the end user segments. It shares about 50% market share of filtration and drying equipment globally. Geographically, the demand for filtration and drying equipment is surging in the U.S. due to factors such as stringent quality requirements for pharmaceutical products, the need for more efficient manufacturing processes, and the emphasis on maintaining product purity. The Filters & Dryers Market is expected to increase from US$ 1.4 Bn in 2023 to US$ 2.12 Bn by 2028, with a CAGR of 8.7% over the forecast period (20242028). The market is expected to grow at a 119% CAGR and generate INR 15.8 Bn in sales during the forecast period (20242028). India is a major producer of F&D globally. It is also one of the market?s largest users as the pharmaceutical and chemical industries grow. The Indian chemical industry is made up of many small and medium-sized businesses as a result of increased local demand and high chemical realizations due to high costs. The industry contributes to the production of consumer goods, building materials, fuels, cosmetics, and so on. F&D equipment are critical to this industry and are expected to expand alongside the burgeoning chemical industry.

The Heat Exchangers industry is poised for significant growth, driven by multiple factors Such as Rapid industrialisation and growth of manufacturing activity, Growth of end-user industries viz chemicals, pharmaceuticals, oil & gas, power etc. and Energy efficiency. The key growth drivers for Heat Exchangers industry are Need for More Renewable Sources of Energy is on the Rise, Investments in the Power Generation Industry are Increasing and Demand from the chemical industry. The heat exchanger market is segmented based on the end-use industry, including Chemical and Petrochemical, Oil and Gas, HVAC and Refrigeration, Power Generation, Food and Beverage, Pulp and Paper, Other End- Users. The heat exchanger market is also segmented based on the material of construction, including Stainless Steel, Copper, Aluminum, and other materials used in heat exchangers, such as titanium alloys, nickel alloys, and other specialized materials. The global heat exchanger market has reached maturity, with Asia- Pacific (APAC) accounting for most of its growth. The emerging markets, where growth is high, are populated by significant market participants. Energy conservation, ease of maintenance, corrosion reduction, and improved heat transfer are essential end-user requirements. Original Equipment Manufacturers (OEMs) who have previously gained a competitive edge by developing unique goods and want to maintain this level of exclusivity are attempting to develop novel heat exchangers. The market is expected to grow at a CAGR of 5.8% to US$16.8 Bn over the forecast period. Increasing energy demand, an emphasis on energy conservation, more stringent industry regulations, and strong growth in the power generation and chemical production industries contribute to a positive outlook for the heat exchanger market during the next few years. The India heat exchanger market was estimated to be worth INR 54.0 Bn in FY2024. The market is expected to grow at a CAGR of 9.0% and generate INR 83.0 Bn in revenue during the forecast period.

(Source: Engineering Industry in India, Engineering Goods Manufacturers - IBEF, Frost & Sullivan Analysis)

Pharmaceutical Sector

India is the largest provider of generic drugs globally and is known for its affordable vaccines and generic medications. The

Indian Pharmaceutical industry is currently ranked third in pharmaceutical production by volume after evolving over time into a thriving industry growing at a CAGR of 9.43% since the past nine years. Generic drugs, over-the-counter medications, bulk drugs, vaccines, contract research & manufacturing, biosimilars, and biologics are some of the major segments of the Indian pharma industry. India has highest number of pharmaceutical manufacturing facilities that comply with the US Food and Drug Administration (USFDA) and has 500 API producers that make for around 8% of the worldwide API market.

India?s domestic healthcare market is growing rapidly and is projected to grow at a CAGR of 8% to 10% from FY2022- 23 to FY2025-26. In addition to improving private insurance coverage and a greater willingness to spend on healthcare, government policies provide catalytic stimuli. These policies include the Ayushman Bharat Program, the Ayushman Bharat Health Infrastructure Mission, and the Pradhan Mantri Bhartiya Janaushadhi Pariyojana. Challenges facing India?s API and KSM (Key Starting Materials) / Drug Intermediates sector include high dependence on China for raw materials, inadequate infrastructure in select areas such as fermentation, and delays in land acquisition and environmental clearance. However, several factors, such as regulatory policies, provide stimulus to the API segment in India. The pharmaceutical sector in India is expanding rapidly. Many MNCs are willing to invest in India due to the availability of highly skilled workforce, high returns on investment, cost-effective production, niche specialty domains, and the presence of quality infrastructure. This has made India an excellent site for manufacturing. The Glass Lined Equipment market in the pharmaceutical sector is now valued at INR 3.7 Bn in FY2024 and is expected to increase to INR 6.0 Bn by FY2028. The pharmaceutical sector in India is seeing major inflows from international investors due to its ability to drive the global pharmaceuticals market

Indian pharmaceutical sector supplies over 50% of global demand for various vaccines, 40% of generic demand in the US and 25% of all medicine in the UK. The domestic pharmaceutical industry includes a network of 3,000 drug companies and 10,500 manufacturing units. India enjoys an important position in the global pharmaceuticals sector. The country also has a large pool of scientists and engineers with a potential to steer the industry ahead to greater heights. Presently, over 80% of the antiretroviral drugs used globally to combat AIDS (Acquired Immune Deficiency Syndrome) are supplied by Indian pharmaceutical firms. India is rightfully known as the "pharmacy of the world" due to the low cost and high quality of its medicines.

Indian pharmaceutical industry is known for its generic medicines and low-cost vaccines globally. Transformed over the years as a vibrant sector, presently Indian Pharma ranks third in pharmaceutical production by volume. The Pharmaceutical industry in India is the third largest in the world in terms of volume and 14^th largest in terms of value. The Pharma sector currently contributes to around 1.72% of the country?s GDP. According to a recent EY FICCI report, there has been a growing consensus over providing new innovative therapies to patients. Indian pharmaceutical market is estimated to touch US$ 130 billion in value by the end of 2030.

(Source: Pharmaceutical Companies in India, Indian Pharma Industry- IBEF, Frost & Sullivan Analysis)

Chemical Industry

Covering more than 80,000 commercial products, India?s chemical industry is extremely diversified and can be broadly classified into bulk chemicals, specialty chemicals, agrochemicals, petrochemicals, polymers, and fertilizers. India is the 6^th largest producer of chemicals in the world and 3^rd in Asia, contributing 7% to India?s GDP. India?s chemical sector is anticipated to grow to US$ 300 billion by 2025 and US$ 1 trillion by 2040. The demand for chemicals is expected to expand by 9% per annum by 2025. The chemical industry is expected to contribute US$ 383 billion to India?s GDP by 2030.

As per IBEF, the sector is expected to grow to INR 82,000 Bn by 2040. Indian chemical industry contributes approximately 6.6% of the country?s GDP and accounts for 15-17% of value of the India?s manufacturing sector.

In particular, the Government announced a PLI scheme for the promotion and manufacturing of pharmaceutical raw materials in India. The Government?s move is aimed to boost domestic manufacturing and cut dependence on imports of critical APIs. The Government is also in the process of launching a PLI scheme for the chemical sector to increase self-reliance in the country. This move is to reduce country?s dependency on imports of basic chemicals. The PLI scheme will help the sector to identify import- dependent chemicals and work towards producing them within the country. The demand for chemicals manufactured in India in the worldwide market is likely to grow in the coming years, as key markets move their demand away from China to avoid potential disruptions. This will incentivize industry players to increase their capacity to meet future demand. As a result, it is predicted that the players? capex will increase by 7% to 9% CAGR until FY2025-26, to reach INR 70 Bn per year in FY2025-26.

India has traditionally been a world leader in generics and biosimilars and major Indian vaccine manufacturers, contributing more than 50% of the global vaccine supply. Chemicals and petrochemicals demand in India is expected to nearly triple and reach US$ 1 trillion by 2040. An investment of Rs. 8 lakh crore (US$ 107.38 billion) is estimated in the Indian chemicals and petrochemicals sector by 2025. Specialty chemicals account for 20% of the global chemicals industry?s US$ 4 trillion, with

India?s market expected to increase at a CAGR of 12% to US$ 64 billion by 2025.

The country?s chemicals industry is de-licensed, except for a few hazardous chemicals. India has traditionally been a world leader in generics and biosimilars and a major Indian vaccine manufacturer, contributing more than 50% of the global vaccine supply. India holds a strong position in exports and imports of chemicals at a global level and ranks 14^th in exports and 8^th in imports at the global level (excluding pharmaceuticals). The Department of Chemicals & Petrochemicals intends to bring PLI in the chemical & petrochemical sector and will redraft the Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR) guidelines. The Indian chemical industry is expected to further grow with a CAGR of 11-12% by 2027, increasing India?s share in the global specialty chemicals market to 4% from 3%. India?s per capita chemical consumption is about 1/10^th of the World average, indicating the growth potential of the industry. In the subsequent years, India is anticipated to emerge as a consumer-driven economy and as a hub for the manufacturing of value-added goods. The business is anticipated to gain from the improved investment climate, projects being approved more quickly, and the proposed reform initiatives, all of which would increase industrial activity and, consequently, the need for chemicals.

The chemical segment dominates the market for F&D equipment, followed by pharmaceuticals. Both sectors together account for 74.3% of the entire market share. With increased penetration of these equipment in other sectors, the F&D market is expected to develop, with sectors such as water and wastewater treatment and food and beverage growing their market share in the future years. The pharmaceutical industry is also likely to incorporate more of this equipment into its production lines. The chemical industry market for filtration and drying is expected to rise to US$700 Mn by 2026, owing to increased usage of F&D equipment.

(Source: Chemical Industry, Chemicals Manufacturers and Exporters in India - IBEF, Frost & Sullivan Analysis)

COMPANY OVERVIEW

HLE Glascoat Limited (hereafter referred to as ‘the Company? or ‘HGL?) is a renowned manufacturer of specialized process equipment for the chemical and pharmaceutical industries. Established in 1981 as HLE Engineers Private Limited, the Company acquired Swiss Glascoat Equipments Limited in 2017 to emerge as HLE Glascoat by way of a scheme of arrangement in 2019. The Company stands as the leading manufacturer of Filtration and Drying Equipment and Glass Lined Equipment.

The Company is engaged in two main product segment, namely manufacturing of specialized Filtration and Drying equipment and other process engineering equipment and manufacturing of Glass- lined reactors and equipment. The Company?s products in the Engineering business (Filtration and Drying equipment and Glass-lined equipment) are predominantly used by the manufacturers of Active Pharma Ingredients (API) and Chemicals (agrochemical, specialty/ fine chemicals and dyes and pigment industries).

The Company caters to both the Indian and the international markets, providing them with superior quality engineering products. Over the years, HGL has emerged as a leader in the domestic market by catering to diverse downstream industries and applications ranging from pharmaceuticals/API, specialty chemicals, agrochemicals/ pesticides, dyes and pigments, to intermediates and other conceivable corrosion-prone areas in the chemical processing industry.

The Company benchmarks its products to international standards and is compliant with stringent quality norms, striving to service its customers with superior quality products. The Company name is synonymous with trust and faith, which has enabled HGL to reinforce its brand recall amongst its customers over the years.

HGL has an excellent track record of growth and profitability and its penetration in the export markets has been gaining good traction over the years. With the help of the Thaletec GmbH and Thaletec Inc. acquisition, the Company is further strengthening its position in the international markets.

A.Financial performance vis-a-vis Operational performance Financial Highlights

Particulars	Consolidated	Standalone
	FY 2023-24#	FY 2022-23*	FY 2023-24#	FY 2022-23*
Total Income	97,673.64	94,005.03	60,585.19	66,139.49
Profit Before Finance costs, Tax, Depreciation and Amortization (after adjusting Other Comprehensive Income)	12,126.10	15,525.37	7,695.58	10,633.93
Profit Before Tax (after adjusting Other Comprehensive Income)	5,906.10	10,950.88	3,103.52	7,222.04
Profit After Tax (after adjusting Other Comprehensive Income)	4,127.25	7,998.72	2,631.41	5,443.04
Total Assets	1,20,195.69	89,447.50	85,319.33	77,749.82
Equity Share Capital	1,365.31	1,365.31	1,365.31	1,365.31
Other Equity	40,314.83	31,304.32	33,407.68	31,527.19
Non-controlling interest	7,990.21	13.26	-	-
Total Equity	49,670.35	32,682.89	34,772.99	32,892.50
Bank Borrowings	34,488.97	23,296.31	33,160.93	22,680.45
Debt: Equity Ratio (including long term and short term borrowings)	0.73	0.76	0.98	0.73
Book Value per Equity Share of Rs. 2 each - In Rs.	72.76	47.88	50.94	48.18
Earnings per Equity Share - Basic and Diluted - In Rs.
Earnings per Share - From Continuing operations	6.52	10.37	4.43	8.12
Earnings per Share - From Discontinuing operations	(0.53)	(0.15)	(0.53)	(0.15)
Dividend Per Share - In Rs. (FY 2023-24 - proposed)	1.10	1.10	1.10	1.10

*Previous years figures are restated, regrouped, rearranged and recast, wherever considered necessary.

#The financial information includes the performance of 1) Thaletec GmbH and its wholly owned subsidiary Thaletec Inc., USA, 2) Kinam Group of companies, viz. Kinam Engineering Industries (a partnership firm), succeeded to Kinam Engineering Industries Private Limited (KEIPL) w.e.f. 01/01/2024 - Subsidiary, Kinam Enterprise Private Limited (KEPL) - Subsidiary and Kinam Process Equipments Private Limited (KPEPL)- step-down subsidiary (subsidiary of KEPL) and 3) Thaletec (formerly known as H L Equipments), Partnership Firm, Subsidiary.

The Companys standalone revenue from operations for the year 2023-24 was Rs. 59,070.85 lakhs compared to Rs. 64,944.35 lakhs during 2022-23. Similarly, the Companys consolidated revenue from operations for the year 2023-24 was Rs. 96,792.02 lakhs compared to Rs. 93,202.3 lakhs during 2022-23.

> Consolidated Segment-wise Performance

The Company has three segments of operations (i) Filtration, Drying and Other Equipment (ii) Glass Lined Equipment and (iii) Heat Transfer Equipment

(Rs. in Lakhs)

Particulars	FY 2023-24	FY 2022-23*
Revenue
a) Filtration, Drying and Other Equipment	37,366.66	34,418.83
b) Glass Lined Equipment	49,675.65	57,907.86
c) Heat Transfer Equipment#	8,869.59	-
d) Others	880.12	875.61
EBIT
a) Filtration, Drying and Other Equipment	5,135.21	4,442.90
b) Glass Lined Equipment	2,900.08	8,063.98
c) Heat transfer equipment#	2,160.27	-

*Previous years figures are restated, regrouped, rearranged and recast, wherever considered necessary.

#The Company completed the acquisition of 35.56% ownership interest in Kinam Engineering Industries on 26^th September, 2023 and the financial information includes the performance of Kinam Engineering Industries/ Kinam Engineering Industries Private Limited for the period commencing from that date.

>Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefore

Key Financial Ratios	FY 2023-24	FY 2022-23	Detailed explanation for change of 25% or more, if any
Debtors Turnover (times)	3.88	5.11	Mainly due to delay in payment by some customers and also higher sales in the last month (March 2024)
Inventory Turnover (times)	3.04	3.45
Interest Coverage Ratio (times)	2.18	4.35	Due to higher utilization of working capital borrowings and new term loan availed to part finance the Kinam Engineering Industries acquisition
Current Ratio	1.10	1.25
Debt Equity Ratio (considering long term and short term debt)	0.98	0.73	On account of fresh borrowings during the year, new term loan availed to part finance the Kinam Engineering Industries acquisition and to meet the higher working capital requirements.
Operating Profit Margin (%)	9.82%	14.44%	On account of lower sales of Glass Lined Equipment (largely India market), higher raw material costs, relatively higher interest (due to reasons indicated above) and depreciation (as a result of capitalization of the Capital Work in Progress.
Net Profit Margin (%)	4.51%	8.38%	On account of lower sales of Glass Lined Equipment (largely India market), higher raw material costs, relatively higher interest (due to reasons indicated above) and depreciation (as a result of capitalization of the Capital Work in Progress.

> Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof

Return on Net Worth	FY 2023-24	FY 2022-23	Detailed explanation for change of 25% or more, if any
Return on Net Worth (PAT/ Net Worth) - Standalone	7.87%	17.84%	Maily due to lower PAT as a result of lower sales of Glass Lined Equipment (largely India market), higher raw material costs, relatively higher interest (due to reasons indicated above) and depreciation (as a result of capitalization of the Capital Work in Progress.

B.Opportunities and Threats

The Company is constantly endeavouring to service its customers with superior quality products at reasonable prices, backed by continuous innovation of processes, use of latest technology and product diversification. The Company has been proactively investing to improve its product development capabilities, technology advancement, infrastructure and supply chain management, enabling HGL to not only scale its capacities and improve operational and cost efficiencies but also to expand its reach across domestic and export markets. These factors hold the Company in good stead to grow sustainably in the foreseeable future, with constant demand coming from the downstream engineering service, pharmaceutical and chemical sector. The position of HGL as one of the front runners in the sector positions the Company to make the most of the sectoral tailwinds.

There is a strong brand recall associated with the Company. Further, the Company has been reinforcing its brand recall by intensifying its marketing efforts and service network, which is validated by the strong presence of the Company in both domestic and international markets. The management is confident of overcoming the internal threats and ensuring the Company growth sustenance in the current year.

The threats to your Company is traditionally associated with the cyclical industry trend, rising inflation, increasing material costs due to the global geopolitical scenario, nonavailability of adequate skilled manpower, continuous increase in electricity/ fuel costs, cost of wages and salaries and increase in financing costs. On the upside, a stronger boost from pent-up demand in numerous economies or a faster fall in inflation is plausible. Financial markets could also suddenly reprice in response to adverse inflation news, while further geopolitical fragmentation could hamper economic progress.

C.Risks and Concerns

The overall risk landscape of the past few years has proven complex for the Company. However, the resilience shown by the Company against the backdrop of such challenges is remarkable. The plans developed, implemented and executed during the pandemic and in its wake are now far

more resilient. However, the fiscal 2023-24 was marked by several other risks requiring plenty of preparation and proactive and reactive threat management. Also geopolitical instability caused by ongoing war between Russia and Ukraine and Israel and Palestine. This has led to supply chain issue as a result of crisis in red-sea.

ESG (Environmental, Social, and Governance) reporting is in its infancy but the requirements will be broader and all-encompassing. Therefore, a lack of preparedness could be a threat. Organizations should ensure governance structures to provide reliable information on ESG risks and opportunities. The Company has focused on defined ESG disclosures and metrics and identifying the data to be captured and curated to comply with local ESG regulations on time.

Identifying risks is only one part of the scenario. Mitigating them is more crucial to ensure business continuity and sustenance. The Company focuses on systemic risks that create vulnerabilities and ensure that its risk management provides oversight of such risks. Systemic risk is a type of risk which at a company or industry level could trigger a huge collapse. Systemic risk is hard to quantify and harder to predict. Management?s risk appetite should be updated to provide clarity in decision-making. The Company is also focused on understanding ESG risks and supporting the design and development of robust governance frameworks and control environments.

Risk Management

The Company is cognizant of the pivotal role played by risk management to ensure long-term business growth and sustenance. Pursuant to provisions of Regulation 17 and 21 of the SEBI Regulations (‘the SEBI Listing Regulations?) and Sections 134 and 177 of the Companies Act, 2013 (‘the Act?) and other applicable provisions, if any, of the SEBI Listing Regulations and the Act, the Board of Directors of the Company has approved and framed the ‘Risk Management Policy? of the Company, which is available on the website of the Company i.e. https://hleglascoat.com/wp-content/ uploads/2021/09/HGL_RISK-MANAGEMENT-POLICY.pdf

The Risk Management Policy of the Company has a detailed risk identification, assessment and mitigation procedure for all risks faced by HGL. The Risk Management Policy adopted by the Company establishes a structured and disciplined approach to Risk Management, in order to guide the Board on decisions on risk-related issues and to mitigate various risks such as economic risk, geopolitical risk, production risk, price risk, inventory management risk, technology risk, competition risk, financial risk, raw material price fluctuation risk, pandemic risk, human resource risk, reputation risk, legal risk, regulatory risk, cyber risk, among others. The main objective of this Policy is to ensure sustainable business growth with stability and to promote a proactive approach in reporting, evaluating and resolving risks associated with the Company?s business and processes. The Company has also formed the Risk Management Committee comprising certain Directors. The Risk Management Committee is tasked with identification and mitigation of risks, which is further supervised by the Board of Directors.

D.Internal Control Systems and their adequacy

The Company is committed to ensuring an effective internal control environment that provides reasonable assurance regarding the effectiveness and efficiency of operations, adequacy of safeguarding of assets, reliability of financial controls and compliance with applicable laws and regulations. Towards this end, HGL has laid down standard operating procedures and policies to guide the various business operations. To further strengthen the internal control systems, independent external professional agencies have been appointed to conduct internal audit of the systems and processes of its manufacturing locations (Maroli, Anand and Silvassa). The internal auditors ensure that internal controls are reviewed through the periodical internal audit process in consultation with the Audit Committee. Internal auditors cover every operational unit and all major corporate functions under the guidance of the Audit Committee of the Board.

The Board?s Audit Committee oversees the adequacy of the internal control environment through periodic reviews of audit findings and monitoring implementations of internal audit recommendations through compliance reports. The statutory auditors have opined in their report that there are adequate internal controls over financial reporting at the Company. The Certification by the Managing Director and the Chief Financial Officer of the Company has been provided elsewhere in this Annual Report and discusses the adequacy of the internal control systems and procedures.

E.Human Resources

Operating in the manufacturing sector, the Company understands the importance of human capital and knows that employees form the backbone of the Company?s success. The Company has robust HR policies in place, promoting transparency, ethics and inclusive growth of the employees. The Company is constantly endeavouring to strengthen its HR processes to stay ahead of the curve at all times. The strength of the HR processes of the Company are validated by its ability to attract and recruit the best talent in the industry, ensure strong learning and development with equal emphasis on safety trainings, proactive employee engagement and strong employee retention.

Such processes have not only increased efficiencies of the employees but also helped them grow alongside the Company. The Company believes in focusing on development of its existing staff and workers and provides constant training to them to equip them to take on better and senior positions. The training is provided internally and training programs are also organized by inviting external faculty. Our continuous training programs lay emphasis not only on increasing productivity but also on imbibing qualities of commitment and integrity in the attitude and behavior of the employees.

The Company has well-documented and updated policies in place to prevent any kind of discrimination and harassment including sexual harassment. The Whistle Blower Policy plays an important role as a watchdog. The total employee strength of the Company as on March 31, 2024 stands at 590.

CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis describing the Company?s objectives, projections, estimates and expectations, if any, may be "forward looking statements" within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company?s operations include among others, raw material pricing, climatic conditions, economic conditions affecting demand/ supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws and other statutes and other incidental factors.

By the Order of the Board of
	HLE Glascoat Limited
	Sd/-
	Himanshu Patel
	Managing Director
	(DIN: 00202312)
	Sd/-
	Aalap Patel
Date: May 27, 2024	Executive Director
Place : Silvassa, Dadra & Nagar Haveli	(DIN: 06858672)