HPL Electric & Power Ltd Management Discussions

Global Economy

During the year, the global economy exhibited a degree of stability despite navigating a series of challenges related to economics, international relations, and governmental strategies. Information sourced from the World Economic Outlook report by the International Monetary Fund (IMF) showed steadiness in the rate of global Gross Domestic Product (GDP) growth, reaching 3.3%. The rate at which economies expanded differed considerably across the globe. Expansion in more established nations experienced a downturn, whereas developing economies, especially those within Asia, generally sustained a stable pattern of growth.

The global economic landscape in 2024 was characterised by persistent difficulties. Key among these were ongoing geopolitical tensions, including the conflict in Ukraine and disruptions impacting shipping in the Red Sea. Additionally, complications in international supply chains and trade disputes between major economies presented continued challenges. Policy shifts concerning climate change also influenced investment patterns across many sectors.

Global inflation is showing a positive trend, with the rate of 5.7% in 2024, down from 6.7% in the previous year. Developed economies are expected to reach their inflation targets sooner, averaging 2.6% in 2024, while emerging markets will experience a slower decline in price increases.

In response to these economic pressures, leading central banks made significant cuts to interest rates to stimulate economic activity. December 2024 saw the most substantial coordinated series of interest rate reductions among G10 central banks since the pandemic, with total cuts amounting to 825 basis points for the year, marking a significant easing period not seen since 2009.

Outlook

The global economy is predicted to maintain a steady expansion path, with anticipated growth rates of 2.8% for 2025 and 3.0% for 2026. This favourable outlook is supported by solid economic performance in the United States and notable progress within key emerging markets.

In the United States, growth is forecast to be 1.8% in 2025 and 1.7% in 2026. This projection takes into account expected changes in the labour market and a potential decrease in consumer expenditure. A recovery is predicted for the Eurozone, with growth projected to reach 0.8% in 2025 and improve to 1.2% in 2026. This expected improvement is linked to increased consumer spending and a reduction in inflation rates.

While global price increases are generally slowing, some areas are facing stagnant conditions due to inflation levels remaining high. Global inflation is projected to decline to 4.3% in 2025 and then to 3.6% in 2026. Developed economies are anticipated to achieve their inflation targets sooner than others. Monetary policies are expected to differ across regions, reflecting the varying economic circumstances in each.

(Source: World Economic Outlook, IMF)

Indian Economy

Indias economy demonstrated a consistent pattern of expansion and stability throughout the financial year 2024-25, confirming its position as a major global economy showing strong growth. According to the Second Advanced Estimate (SAE) from the National Statistical Office (NSO), the real Gross Domestic Product (GDP) was projected to grow by 6.5% in FY 2024-25. This follows the significant growth rate of 9.2% reported in the First Revised Estimates for the preceding financial year. This sustained upward trend highlights the nations solid economic foundation, effective government policies, a dynamic services sector, and considerable domestic spending, all contributing to a favourable view of Indias potential for long-term economic progress.

Real GDP Growth (in %)

Indias economic stature continues its upward climb, with the nation now holding the position of the worlds fifth-largest economy by nominal Gross Domestic Product (GDP) and the third-largest when assessed by purchasing power parity (PPP). Ambitious national targets have been set to achieve a $5 trillion economy by FY 2027-28 and a $30 trillion economy by 2047. These aims are to be accomplished through substantial infrastructure investments, ongoing governmental reforms, and the widespread adoption of technological advancements. Reflecting this commitment, the capital investment budget for the upcoming financial year (2025-26) has increased to 11.21 lakh crore, representing 3.1% of GDP.

Integral to this accelerated growth trajectory and increasing economic self-sufficiency have been significant governmental reforms and considerable capital allocated towards both physical and digital infrastructure. Government initiatives such as Make in India and the Production-Linked Incentive (PLI) scheme have also played a crucial role.

Launched in 2014, the Make in India initiative has been pivotal in establishing India as a global textile manufacturing and export hub. The textile and apparel industry is a major contributor to the economy, creating millions of jobs and generating significant foreign exchange earnings. With strong policy support, infrastructure development, and a skilled workforce, India has

solidified its position as a preferred investment destination in the global textile sector.

Outlook

Indias economy is expected to grow at a rate of 6.2% in FY 2025-26. Projections indicate that by 2030, India will likely become the worlds third-largest economy, driven by investment in infrastructure, greater private sector capital expenditure, and the expansion of financial services. Ongoing reforms are anticipated to support this long-term economic advancement.

Several factors underpin this positive outlook, including Indias favourable demographics, increasing capital investment, proactive government schemes, and strong consumer demand. Improved spending in rural areas, helped by moderating inflation, further reinforces this growth trajectory. The governments focus on capital expenditure, prudent fiscal management, and measures to boost business and consumer confidence are creating a supportive environment for both investment and consumption.

Programmes such as Make in India 2.0, reforms designed to improve the ease of doing business, and the Production-Linked Incentive (PLI) scheme are intended to strengthen infrastructure, manufacturing, and exports, positioning India as a significant player in global manufacturing. With inflation expected to be on target by the end of this year (2025), a more accommodating monetary policy is likely. Infrastructure development and supportive government policies will facilitate capital formation, while rural demand will receive a boost from initiatives like the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY).

The Union Budget 2025-26 presents a growth-oriented financial strategy that addresses immediate and long-term economic needs. By increasing disposable income, prioritising infrastructure, and promoting domestic manufacturing, the budget aims to foster sustained economic growth while ensuring fiscal responsibility.

A key feature is the increased income tax exemption limit of 12.75 lakh per annum, which will enhance disposable income for middle-class households, stimulating consumer spending.

India holds the position of the worlds third-largest producer and consumer of electricity. In FY 2024-25 (as of November 30,

2024), the countrys installed power generation capacity reached 466.26 GW.

Significant investments in infrastructure, including roads and railways, will improve connectivity and create jobs. Additionally, the budget strengthens the Production Linked Incentive (PLI) scheme for sectors like electronics and textiles, while supporting the "Make in India" initiative to establish India as a global manufacturing hub. The transformation of India Post into a catalyst for the rural economy will further enhance logistics and financial inclusion.

(Source: Press Information Bureau , World Economic Outlook, IMF )

Industrial Overview Indian Power Sector

India holds the position of the worlds third-largest producer and consumer of electricity. In FY 2024-25 (as of November 30, 2024), the countrys installed power generation capacity reached 466.26 GW. The power sector is a critical part of the national infrastructure, significantly contributing to economic expansion and enhancing living standards nationwide.

A major achievement has been attaining universal household electrification, leading to a substantial improvement in the quality of life for citizens. Per capita electricity consumption increased to 1,395 kWh in FY 2023-24, marking a 45.8% rise from 957 kWh recorded in FY 2013-14.

Electricity demand in India grew by 4.7% YoY during the initial seven months of FY 2024-25. This represented a slower pace compared to the 9.9% growth seen in the first four months, influenced by heavy rainfall and a higher statistical base from the previous year. However, demand is anticipated to pick up in the latter part of the year, with projected overall growth for FY 2024-25 expected to finish between 5.5% and 6.0%. This expected rebound is linked to an anticipated economic recovery and increased capital expenditure by the government.

Government funding reflects a strong commitment to advancing the power sector. The Ministry of Power was allocated 21,847 crore in the Union Budget FY 2025-26, an increase from 20,502 crore in FY 2024-25. Similarly, the Ministry of New and Renewable Energy saw its allocation rise to 26,549 crore from 19,100 crore, underscoring the focus on cleaner energy sources.

Thermal Energy

Regarding thermal generation, the National Electricity Plan projects the average Plant Load Factor for the total installed coal capacity of 235.1 GW to be around 58.4% in 2026-27.

Renewable Energy

Renewable energy sources have demonstrated significant expansion. Installed renewable capacity, including large hydropower, reached 203.192 GW by January 2025, making up 45.5% of the total power capacity. Within the renewable segment,

solar energy leads with 100.33 GW, followed by wind power at 48.37 GW, biomass at 10.74 GW, small hydropower at 5.10 GW, and waste-to-energy contributing 0.66 GW.

Outlook

Significant additions to the generation capacity are anticipated, with approximately 210.1 GW expected to be added between 2022 and 2027. According to the National Electricity Plan (Generation), this expansion is projected to increase the total installed electricity generation capacity to approximately 609.346 GW by the close of March 2027, further rising to 900.42 GW by FY 2031-32.

The renewable energy sector is set for considerable expansion. The government plans to issue tenders for 50 GW of renewable capacity each year up to FY 2027-28. To manage the variable nature of renewable power, state governments and utilities have proposed the development of Pumped Storage Plants, and battery energy storage projects have seen tariffs reach record low levels. In solar manufacturing, the Production Linked Incentive (PLI) scheme is progressing towards meeting its targets for cell and module production capacity by the end of 2024.

Aiming to establish India as a prominent player in hydrogen-based energy, funding for the National Green Hydrogen Mission has been increased to 600 crore, doubling the allocation from the previous years 300 crore. This Mission, approved in January 2023 with an overall outlay of 19,744 crore, sets a target of achieving 5 million metric tonnes of annual green hydrogen production by 2030. The Ministry of New and Renewable Energy has also raised the allocation for green ammonia production, highlighting its commitment to meeting domestic requirements.

Energy demand is steadily increasing, driven by Indias expanding population, growing electrification rates, and rising per capita electricity consumption. The country maintains a strong commitment to sustainability, with a target to exceed 500 GW of installed capacity from non-fossil fuel sources by 2030. This goal represents a significant stride towards developing a power system ready for the future.

(Source: Indiabudget.gov.in , Mondaq)

Indian Electrical Equipment Market

Indias electrical equipment market is witnessing robust growth across multiple segments, driven by infrastructure investment, renewable energy integration, and electrification initiatives. The sector is projected to grow by approximately $72 billion by 2025, at a CAGR of 12%, supported by rising residential and commercial demand, smart grid expansion, EV infrastructure and industrial automation.

(Source: Economic Times )

In 2024, IMARC estimated the electrical materials market at $19.63 billion, with forecasts indicating growth to $28.32 billion by 2033 (CAGR 4.16%), supported by urbanisation, power

Energy demand is steadily increasing, driven by Indias expanding population, growing electrification rates, and rising per capita electricity consumption.

The country maintains a strong commitment to sustainability, with a target to exceed 500 GW of installed capacity from non-fossil fuel sources by 2030. This goal represents a significant stride towards developing a power system ready for the future.

grid upgrades under schemes like RDSS and smart cities, and expansion in switchgear and wiring.

(Source: IMARC)

Within the broader power sector, the power plant equipment segment was valued at $5.84 billion in 2024, projected to grow to $10.62 billion by 2033 (CAGR 6.4%), fuelled by renewable energy targets, modernisation of thermal plants, stricter emissions standards and PLI-driven localisation.

(Source: IMARC)

India remains a major global importer and exporter of electrical equipment. Export revenues were around $12.8 billion in 2023, expected to reach $14.6 billion by 2028 (CAGR 2.1%), while import demand stood at $62.4 billion in 2023, with projections of $74.6 billion by 2028 (CAGR 2.8%).

(Source: Report Linker )

Key growth drivers include government incentives and schemes, such as smart grid rollouts, electrification programmes (e.g., UDAY, DDUGJY), EV charging infrastructure development, and updated residential and commercial building codes. Additionally, the integration of renewable energy sources is stimulating demand for inverters, transformers, energy storage solutions, and advanced grid technologies. Technological evolution is also playing a pivotal role, with the adoption of IoT, automation, digital metering, and AI-enabled equipment enhancing operational efficiencies across the sector. However, manufacturers and utilities continue to face notable risks, including raw material price sensitivity and growing cybersecurity concerns.

Smart Meter Solutions

In 2024, Indias smart energy meter market was valued at $223 million and is forecast to surge to around $3 billion by 2033, at a compound annual growth rate (CAGR) of 33.6%. This dramatic growth is underpinned by aggressive government programmes aimed at full smart meter rollout, grid modernisation, theft reduction, and dynamic pricing. Despite the current modest base, the rate of deployment signals a major shift in the meter-to- cash paradigm, with utilities poised to benefit from improved billing accuracy and operational efficiencies. The challenge ahead lies in scaling nationwide infrastructure and managing vendor consolidation as demand multiplies.

(Source: IMARC)

Wires & Cables

The wires and cables segment reached approximately $6.6 billion in 2024 and is expected to grow to $10.9 billion by 2033, at a steady 5.8% CAGR. This reflects a shift towards high-margin low-voltage and copper-rich products driven by mega-infrastructure pushes, notably transmission upgrades, renewable energy farms, metro rail extensions and data centre buildouts. While volume expansion remains strong, margin pressures are emerging from raw material cost variability and pricing competitiveness. Companies that succeed will be those that optimise the trade-off between cost pass-through and margin protection, and differentiate through product innovation like flame-retardant and smart cables.

(Source: IMARC)

Switchgear & Modular Switches

Switchgear market size stood at $2.23 billion in 2024, with projections to reach $3.75 billion by 2033 (CAGR 5.5%). Growth is driven by demand for safer, more reliable load distribution in urban and industrial settings, coupled with the rising popularity of modular and IoT-enabled systems. However, deployment remains bottlenecked by project delays, skills shortages and certification backlogs. The market is at an inflection point: future winners will balance regulatory compliance (e.g., BIS standards), digital value-adds, and cost efficiency to penetrate Tier 2/3 markets and retrofit ageing infrastructure.

(Source: IMARC)

Lighting Equipment

Indias lighting market totalled $4.14 billion in 2024 and is forecast to reach $7.67 billion by 2032, growing at a 7.1% CAGR. LED lighting accounts for the majority of sales, fuelled by government schemes (UJALA, SLNP), energy-efficiency mandates and growing smart-city rollouts. While LED adoption is nearing saturation in urban areas, digital-enabled lighting for commercial and industrial applications, like sensor-based fixtures and networked controls, represents the next growth frontier. Competition will centre on value-added service offerings, financing models, and integration with building management systems rather than pure pricing.

Key Government Initiatives

?€? Smart Meter National Programme (SMNP): Led by

Energy Efficiency Services Limited (EESL), this programme is working towards the large-scale deployment of smart meters across India by 2025, aiming to enable real-time energy management. It also aims to improve billing efficiency, with a national target of installing 250 million smart meters.

(Source: Economictimes)

?€? Integrated Power Development Scheme (IPDS):

Launched in December 3, 2014, IPDS focussed on strengthening urban sub-transmission and distribution networks, metering, and IT enablement to reduce Aggregate Technical and Commercial (AT&C) losses. This scheme was later subsumed under the Revamped Distribution Sector Scheme.

(Source: ClearTax , Power Finance Corporation)

?€? Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY):

Introduced in 2015, this scheme aimed to strengthen rural infrastructure, including feeder separation and metering, with the goal of providing around-the-clock power supply to rural households and adequate power for agriculture. It replaced the earlier rural electrification scheme, Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY).

(Source: Vikaspedia , NITI for States)

?€? Revamped Distribution Sector Scheme (RDSS):

Commenced in July 2021 with a significant outlay of over 3 lakh crore. RDSS is a major reforms-based and results-linked scheme with primary objectives to reduce Aggregate Technical and Commercial (AT&C) losses to a pan-India level of 12-15% and eliminate the Average Cost of Supply (ACS) - Average Revenue Realised (ARR) gap by FY 2024-25. It incorporates the installation of 250 million smart meters and necessary infrastructure upgrades, linking funding to performance improvements.

(Source: Ministry of Power , MOP)

?€? Ujwal DISCOM Assurance Yojana (UDAY): Launched in November 2015, UDAY aimed at the financial and operational turnaround of state-owned distribution companies (DISCOMs) through measures like state governments taking over a portion of DISCOM debt and implementing operational improvements.

(Source: Press Information Bureau)

?€? National Infrastructure Pipeline (NIP): This national initiative allocates $200 billion for power infrastructure, covering grid expansions and clean energy projects. The National Infrastructure Pipeline is a large programme launched for FY 2020-25, initially projecting a total infrastructure investment of over 100 lakh crore. The energy sector, which includes power infrastructure, is a major component of the NIP, accounting for a significant percentage of the planned investments across various sectors.

(Source: Wikipedia , InvestIndia , ICRA )

The Company continues to invest in research and development, particularly evident in its dedicated R&D centre for Smart Meters, established in November 2020.

This ongoing investment aligns with emerging industry trends and reinforces HPLs position within the evolving electrical landscape.

Company Overview

HPL Electric & Power Limited (referred to as HPL or the Company) stands as a prominent Indian electrical equipment manufacturer, boasting a proven track record spanning over five decades. Established in 1992, the company has grown to become a diversified entity with a formidable presence across several key verticals, including Metering Solutions, Switchgears, LED Lighting, Wires & Cables, Solar Solutions, and Modular Switches.

HPL distinguishes itself through its backward-integrated manufacturing facilities, which encompass product design, development, component engineering, tool manufacturing, and commercial production. This comprehensive capability underpins the companys commitment to quality and innovation, with its products consistently certified to conform to both Indian (ISI) and international standards such as CE and KEMA.

Strategically, HPL caters to a broad spectrum of customer segments. This includes original equipment manufacturers (OEMs), developers of residential and commercial projects, institutional and industrial clients, and, importantly, various power utilities and electricity boards through direct contractual arrangements. The companys extensive reach is supported by a robust network of over 900+ dealers and distributors, 85,000+ retailers, and more than 90 branch and representative offices across India. Furthermore, HPLs global footprint extends to over 42 countries, signifying its growing international presence.

The Company continues to invest in research and development, particularly evident in its dedicated R&D centre for Smart Meters, established in November 2020. This ongoing investment aligns with emerging industry trends and reinforces HPLs position within the evolving electrical landscape.

With its broad product portfolio, established market presence, robust manufacturing capabilities, and a strategic focus on R&D and market expansion, HPL Electric & Power Limited is well-positioned to capitalise on the growing demand for electrical equipment in both domestic and international markets.

Financial Overview

The Companys total consolidated revenue for FY 2024-25 increased by 16.39% to 1,700.24 crore, from 1,460.86 crore in FY 2023-24.

Particulars	FY 2024-25	FY 2023-24	YoY Change
Revenue from Operations	1,700.24	1,460.86	16.39%
COGS	1,104.64	960.76	14.97%
Gross Profit	595.61	500.09	19.10%
Gross Margin %	35.03%	34.23%	80 bps
Employee Expenses	199.37	178.83	11.48%
Other Expenses	141.58	129.11	9.66%
EBITDA	254.65	192.15	32.53%
EBITDA Margin %	14.98%	13.15%	182 bps
Finance Cost	89.72	89.64	0.10%
Depreciation	42.16	38.65	9.09%
Other Income	4.88	4.23	15.26%
Profit Before Tax	127.64	68.10	87.44%
PBT Margin	7.5%	4.7%	285 bps
Taxes	33.66	24.47	37.52%
Profit after Tax	93.99	43.63	115.44%
PAT Margin %	5.53%	2.99%	254 bps
Earnings Per Share (EPS) in	14.58	6.78	115.04%

Key Ratios

S No	Particulars	Numerator	Denomiator	31.03.2025	31.03.2024 Variance		Explanation for change in the ratio by more than 25% as compared to previous year
1	Current ratio	Current assets	Current liabilities	1.39	1.51	-7.95%	NA
2	Debt-Equity ratio	Total Debt (Including lease liabilities)	Shareholders equity	0.69	0.75	-8.00%	NA
3	Debt service coverage ratio	Earnings available for debt service	Interest exp on long term and short term borrowing during the period +Scheduled principal repayement of long term borrowing	1.64	1.22	34.43%	improved due to growth in profitability of company
4	Return on equity ratio	Net profits after taxes	Average shareholders equity	10.89%	5.48%	98.72%	improved due to growth in revenue with stable margins
5	Inventory Turnover Ratio	Revenue from operations	Average Inventory	2.68	2.76	-2.90%	NA
6	Trade receivables turnover ratio	Revenue from operations	Average trade receivables	2.41	2.25	7.11%	NA
7	Trade payable turnover ratio	Net credit pruchases	Average trade payables	3.34	3.92	-14.80%	NA
8	Net capital turnover ratio	Revenue from operations	Average working capital	3.72	3.43	8.45%	NA
9	Net profit ratio	Net profits for the year	Revenue from operations	5.53%	2.99%	84.95%	improved due to growth in revenue with stable margins
10	Return on capital employed	Profit before interest and taxes	Average Capital employed	14.49%	11.20%	29.38%	improved due to growth in revenue with stable margins
11	Return on Investments	Profit before interest and taxes	Average total Assets	10.95%	8.82%	24.15%	NA

Operational Highlights of 2024-25

Market Leadership and Presence	The Company maintained its strong market positions as the leading manufacturer of Energy Meters, in Wire & Cables, and among the top five players in Switchgear and Lighting across India.
Extensive Distribution Network Expansion	HPL operated a pan-India distribution network with over 90 branch offices and 900+ authorised dealers. A significant operational achievement was the expansion of retailer touchpoints, targeting 85,000+ retailers by March 2025, representing a 66% increase from 45,000 retailers over two years.
Robust Manufacturing and R&D Capabilities	The Company leveraged its four manufacturing facilities and strong R&D capabilities, supported by three R&D Centres recognised by DSIR, to develop and support a diverse portfolio of over 200 products across five verticals.
Strategic Focus on Smart Meters	A key operational thrust was on Smart Meters, which now constitute approximately 99% of the current meter order book. The Company significantly enhanced its manufacturing capacity for smart meters, including the production of key components.
Continuous New Product Development	HPL demonstrated ongoing innovation through the launch of several new products across its segments. Notable introductions included the 800A MDB TTA Panel, ATS with CME 310 DC MCCB, Techno RCBO 6A-63A, ACCL, Smart MCCB Panel, Smart Starter Panel, HPL LUMIVO TRICO LED DOWNLIGHT, and BRIGHT LED PC STREET LIGHT.
Strong and Visible Order Book	The Company successfully maintained a robust and stable order book exceeding 3,500 crore as of May 20, 2025, with the Metering, Systems & Services segment contributing approximately 99% of this total, ensuring future revenue visibility.
Proactive Channel Engagement and Brand Building	Operational efforts included actively engaging with its extensive network through regular dealer and retailer meetings, as well as technical seminars. These activities were complemented by strategic brand-building initiatives aimed at driving growth, particularly within the consumer business segment.
Enhanced Credit Ratings	The Companys financial health and operational stability were recognised through credit rating upgrades. Crisil upgraded HPL\u2019s rating to A/Stable from A-/ Positive and India Ratings and Research (Ind-Ra) an another rating agency assigned an \u2018IND A+ / Stable rating with a stable outlook.

Strategical Outlook

HPL Electric & Power Ltd. is well-positioned for sustained growth, supported by a strong order book exceeding 3,500 crore as of May 2025. The companys immediate focus is on the swift execution of these high-value projects to ensure steady revenue visibility and maintain a strong pipeline for the near and medium term.

A key growth driver will be the Metering Systems & Service segment, which is gaining significant momentum. Notably, 99% of the current meter order book consists of Smart Meters, reflecting the markets shift towards advanced metering solutions. To capitalise on this trend, HPL has strategically expanded its manufacturing capacity for smart meters, including in-house production of critical components, thereby strengthening its foothold in this high-growth area.

Complementing this, HPL is committed to sustainable growth through continuous innovation, driven by its competitive research and development capabilities. The Company actively develops new products across its diverse portfolio to align with evolving market demands. While the Consumer, Industrial & Services segment shows positive performance, especially in switchgear and wires & cables, the company remains vigilant in managing challenges in segments such as lighting through a diversified product and market strategy.

Within the Consumer segment, HPL pursues a focussed three-pronged strategy to drive growth: expanding distribution reach and strengthening retailer relationships, with plans to increase retailer touchpoints to 1,00,000 by March 2026. Further, the Company is implementing brand-building initiatives, and lastly, HPL is continuously innovating its product offerings. This approach is expected to shorten the working capital cycle to approximately three months, enhance Return on Capital Employed (ROCE), and improve free cash flow.

HPL Electric & Power Ltd. is well-positioned for sustained growth, supported by a strong order book exceeding 3,500 crore as of May 2025. The companys immediate focus is on the swift execution of these high-value projects to ensure steady revenue visibility and maintain a strong pipeline for the near and medium term.

Additionally, HPL benefits from a healthy enquiry pipeline for metering tenders, indicating ongoing opportunities in the sector. The company is also adapting to Indias advancing digital and connectivity infrastructure, including exploring prospects in the emerging 5G space, to unlock new avenues for business expansion.

SWOT Analysis Strengths

?€? Entrenched Market Position: The Company commands a formidable presence in key segments such as electric meters and on-load changeover switches, benefiting from substantial barriers to entry that naturally limit new market participants.

?€? Established Brand Equity: With a legacy spanning over four and a half decades, HPL has cultivated considerable brand recognition and trust across its diverse product categories, underpinning its credibility within the industry.

?€? Profound Technical Acumen and Innovation Drive:

HPLs extensive experience in the electrical domain is reinforced by robust research and development capabilities and sophisticated manufacturing processes, fostering continuous product innovation and quality enhancements.

?€? Seasoned Leadership Cadre: The senior management team possesses deep industry experience, often exceeding 25 years, coupled with strong pre-qualification credentials, enabling them to set industry benchmarks and provide clear strategic direction.

?€? Widespread National Footprint and Institutional Ties:

The Companys extensive pan-India operational presence and enduring relationships with critical institutional clients, power utilities, and government bodies bolster its market penetration and operational stability.

?€? Advanced Technological Integration: HPLs established engagement in cutting-edge technological areas, particularly within the smart metering and advanced switchgear domains, strategically positions it for future expansion and competitive advantage.

?€? Strong Financial Foundation: The Company demonstrates a healthy financial standing, characterised by a strong net worth and a sound capital structure, which provides a stable platform for sustained growth and future investment initiatives.

Weaknesses

?€? Intensive Working Capital Requirements: The nature of the Companys operations necessitates substantial working capital.

?€? Modest Marketing Investment: A comparatively lower expenditure on advertising and promotional activities might limit brand visibility and hinder market share expansion when juxtaposed with competitors employing more aggressive marketing strategies.

?€? Vulnerability to Tender Cycles: A significant reliance on tender-based projects introduces an element of unpredictability into revenue streams and profitability, stemming from the inherently competitive and fluctuating nature of public and private tenders.

Opportunities

?€? Government-Led Infrastructure Development: National initiatives focussed on infrastructure enhancement, including programmes like the Revamped Distribution Sector Scheme (RDSS), Power for All, and Smart Cities, present substantial avenues for increased demand for electrical equipment and related services.

?€? Accelerated Urbanisation and Energy Access Initiatives: The ongoing trend of rapid urbanisation, coupled with governmental efforts to broaden energy access across the nation, creates extensive growth prospects within the domestic market.

?€? Surge in Smart Technology Adoption: The accelerating transition towards smart metering solutions and the development of intelligent grid infrastructure aligns seamlessly with HPLs technological proficiencies, opening up new and lucrative business segments.

?€? Transformative Power Sector Reforms: Comprehensive reforms currently underway within the power sector are anticipated to stimulate heightened demand for HPLs advanced products and innovative solutions.

?€? Expanding Global Market Reach: There is a discernible and growing potential for HPL in international markets, evidenced by an increasing trend in export orders, signalling opportunities for geographical diversification.

?€? Favourable Consumer Demographics: Indias expanding consumer base, characterised by a large and youthful population, is expected to fuel a sustained increase in demand for electrical products and integrated solutions.

Threats

?€? Macroeconomic Downturns: A deceleration in overall economic growth could lead to a contraction in demand for electrical equipment, directly impacting the Companys revenue generation.

?€? Geopolitical Instability: Elevated geopolitical tensions in global markets pose a risk, potentially disrupting export operations and broader international market expansion strategies.

?€? Inflationary Pressures: Persistent inflationary trends can exert upward pressure on operational costs, particularly raw material prices, thereby compressing profit margins.

?€? Raw Material Price Volatility: Fluctuations in the cost of essential raw materials represent an ongoing challenge, directly influencing cost structures and requiring dynamic pricing strategies.

?€? Intensifying Market Competition: The electrical equipment sector is experiencing heightened competition, which could challenge HPLs established market position and impact overall profitability.

?€? Adverse Financial Market Conditions: A tightening of conditions within financial markets could potentially restrict the availability of capital necessary for strategic expansion initiatives and critical research and development investments.

Risk Management
Risk Category	Description Mitigation	Mitigation Strategies
Macro-economic Risk	A global economic slowdown or potential recession could affect demand across various Indian sectors, including the power sector. This may result in demand compression and reduced revenue.	\u2022 Exploring new geographies through brand building, network expansion, and product development initiatives. \u2022 Strong focus on R&D and product innovation to develop products for various segments and maintain resilience during uncertain times
Policy Change Risk	Alterations in policy regulations and government legislation could introduce risks to the Companys operations. Such changes may adversely affect its financial performance.	\u2022 Diversification across various sectors and business segments \u2022 Launching products supported by strong R&D and fair business practices \u2022 Close monitoring of legal and regulatory changes to ensure compliance within stipulated timeframes
Raw Material Risk	Volatility or disruptions in raw material procurement could substantially influence manufacturing costs. This may affect the Companys ability to maintain competitive pricing.	\u2022 Maintaining optimal inventory levels to avoid operational interruptions \u2022 Engaging in long-term contracts and maintaining strong supplier relationships to protect revenue and margins \u2022 Efficient production forecasting to mitigate raw material risks
Exchange Rate Risk	Foreign exchange fluctuations, arising from both raw material imports and product exports, represent a financial exposure. This could potentially impact the Companys margins and overall profitability.	\u2022 Monitoring currency exchange rates and adjusting the order book accordingly \u2022 Implementing a robust hedging policy to minimise shortterm currency fluctuation impacts \u2022 Conducting a sensitivity analysis before making borrowing decisions
Concentration Risk	A concentration of revenue from a limited number of clients, or shifts in their supplier preferences, could introduce business risk.	\u2022 A pan-India network across diverse business segments reduces client concentration risks \u2022 A diversified product portfolio catering to various market segments ensures steady cash flow
Geopolitical Risk	Geopolitical instability across various regions holds the potential to affect the Companys export operations.	\u2022 Regular assessment of geographical risks and operating feasibility in different countries or regions through market research \u2022 Monitoring cash flows and making calculated decisions on capex \u2022 Extensive analysis before investment decisions and adopting lean cost structures

Human Resources

HPL acknowledges its workforce as a paramount asset, central to the Companys ongoing growth and long-term success. We are dedicated to cultivating a safe, inclusive, and dynamic work environment that champions equal opportunities and fosters a competitive spirit. Our commitment extends to aligning employees personal and professional development with strategic objectives, actively attracting new talent, and providing continuous growth avenues through extensive training programmes designed to enhance skills and competencies.

Innovation is deeply embedded in HPLs culture, exemplified by its dedicated in-house team of over 100 R&D professionals who are pivotal to future business expansion. The Company actively engages and motivates its talent through a merit-based culture, reinforced by various leisure activities, as well as robust recognition and reward schemes. HPLs skilled employees consistently strive for excellence, guided by core principles including meritocracy, entrepreneurial spirit, innovation, open communication, transparency, and agility. This strong human resource foundation is reflected in a total employee count of 1,157 as of March 31,2025.

Internal Control Systems and their Adequacy

The Company maintains a comprehensive and effective internal control system. It is tailored to the businesss scale and nature. Rigorous Standard Operating Procedures (SOPs), policies, and guidelines form this system. They are designed to prevent unauthorised asset use and ensure adherence to relevant laws and internal policies.

An established framework oversees these internal controls. Regular self-assessment exercises guarantee compliance with the regulatory environment. The Company also prioritises data protection through an employee Code of Conduct. This promotes a culture of high ethical standards and aligns employee conduct with business objectives. Proactive self-monitoring measures are employed to uphold operational efficiency and deter fraudulent activities.

The internal audit team independently evaluates the effectiveness of internal controls. Their findings lead to enhanced control mechanisms. Management closely examines audit outcomes and implements necessary corrective actions to maintain and improve the control environment.

Cautionary Statement

The narrative within this Management Discussion and Analysis includes forward-looking statements relating to, among other things, the execution of strategic plans, future business developments, and economic performance. While these statements reflect the Companys assessment and expectations for the future direction of its business, numerous risks, uncertainties, and other unforeseen factors could cause actual outcomes to differ significantly from these expectations. These factors include, but are not limited to, general market, macroeconomic, governmental, and regulatory trends, fluctuations in currency exchange and interest rates, competitive pressures, technological advancements, changes in the financial standing of third parties engaged with the Company, legislative changes, and other significant factors that could influence the Companys business and financial results.