Lakshmi Electrical Control Systems Ltd Management Discussions

Economy Overview Global:

As per the International Monetary Fund (IMF) Global growth, estimated at 3.2 percent in 2023, is projected to continue at the same pace in 2024 and 2025. The pace of expansion is low by historical standards, owing to both near-term factors, such as high borrowing costs and withdrawal of fiscal support, and longer-term effects from the COVID-19 pandemic and geopolitical tension, weak growth in productivity and increasing geoeconomic fragmentation, globally.

Global inflation is expected to fall from an annual average of 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025, with advanced economies expected to return to their inflation targets sooner than emerging market and developing economies.

A divergence in disinflation among major economies could also cause currency movements that put financial sectors under pressure. High interest rates could have greater cooling effects than envisaged as fixed-rate mortgages reset and households contend with high debt, causing financial stress.

Amid high government debt in many economies, a disruptive turn to tax hikes and spending cuts could weaken economic activity. Geoeconomic fragmentation could intensify, with higher barriers to the flow of goods, capital, and people implying a supply-side slowdown.

Inflation could fall faster than expected amid further gains in labor force participation, allowing central banks of countries to bring easing plans forward. Artificial intelligence and stronger structural reforms than anticipated could spur productivity.

As the global economy approaches a soft landing, the near-term priority for central banks is to ensure that inflation touches down smoothly, by neither easing policies prematurely nor delaying too long reforms would facilitate inflation and debt reduction, allow economies to increase growth toward the higher pre-pandemic era average, and accelerate convergence toward higher income levels. Multilateral cooperation is needed to limit the costs and risks of geoeconomic fragmentation and climate change, speed the transition to green energy, and facilitate debt restructuring.

India Scenario:

As per the International Monetary Fund (IMF), India is likely to become the third-largest economy in 2027 and it also estimated that Indias contribution to global growth will rise by 200 basis points in 5 years.

IMF has projected at 6.80 per cent in 2024-25. Consumer spending in India has been low after the pandemic, and the rebound has been inconsistent as well. One of the biggest reasons has been the prolonged impact of the pandemic across consumer segments, worsened by subsequent global uncertainties. According to a survey by the Reserve Bank of India, consumer confidence has barely reached pre-pandemic levels, and the improvement has been in gradual pace, despite a strong pickup in economic activities.

Opportunities and Threats

The Company is putting its sincere efforts to expand its customer base in main segments i.e. Electricals and Plastics. Electric Grid modernization initiative by government(s) is expected to be a good prospect for smart meter. However, delay on the deployment of smart meter due to policy changes of governments and elections delays the business. Medical component/ accessories industrial growth can be an opportunity for the plastics business segment. Advance of new technology other than Electric Vehicle (EV) like Hydrogen cell vehicles, ultra-fast charging technology, etc., seems to be a threat to EV charger sector.

Segment wise performance

The Company has generated revenue from operations in the financial year 2023-2024 of Rs. 33,796.50 Lakhs (previous financial year 2022-2023 is Rs. 36,081.78 Lakhs) and drop of revenue by Rs.2,285.28 Lakhs over the previous financial year. The profit before interest and depreciation is Rs. 2,271.05 Lakhs as against Rs. 3,019.26 Lakhs for the previous financial year. The profit after tax is Rs. 1,396.01 Lakhs as against Rs. 1,992.70 Lakhs for the previous financial year.

The main revenue segment of the Company, Electricals achieved turnover of Rs. 29,828.59 Lakhs (previous financial year Rs. 31,180.85 Lakhs). The Plastics segment recorded a turnover of Rs. 4,030.64 Lakhs (previous financial year Rs. 4,908.69 Lakhs). Both in Electricals and Plastics segments, the Company continues to put its efforts in increasing the productivity levels, reduction of cost and adding new customers. The revenue from Wind Power Generation was Rs. 222.50 Lakhs for the financial year ended 31st March 2024.

Outlook and Risks & Concerns

Increase in raw material prices due to inflation and global instability in supply chain mechanism, geo-political crisis, employment and retention of skilled technical persons, increase in manpower cost are concern for business operations. Electric grid infrastructure for Electric Vehicle charger poses a risk. However, the Company is committed to meticulous planning for the timely procurement of raw materials and is in positive frame of mind to retain good workforce and grab the business opportunities for growth of its business.

Internal Control System and Adequacy

The Company has adequate internal control system, commensurate with its size and nature of its business. The management has the overall responsibility for the Companys internal control system to safeguard the assets and to ensure reliability of the financial records. The Company has a budgetary control system and periodically the actual performance is reviewed and the deviations, if any, are addressed accordingly. The audit committee reviews all financial statements and ensures adequacy of internal control systems.

Financial Performance

Particulars	Financial Year	Financial Year
	2023-2024	2022-2023
	(Rs in Lakhs)	(Rs in Lakhs)
Revenue from operations	33,796.50	36,081.78
Other Income	681.51	306.26
Profit before Interest and Depreciation and amortization expense	2,271.05	3,019.26
Less: Interest	52.77	54.00
Profit before Depreciation & amortization expense	2,218.28	2,965.26
Less: Depreciation & amortization expense	312.60	245.89
Profit before Tax	1,905.68	2,719.37
Less: Exceptional item	14.00	--
Less: Provision for Taxes	495.67	726.67
Profit after Tax	1,396.01	1,992.70

Human Resources

The organisation aims to achieve sustained growth through developing a skilled, motivated, and committed workforce.

Risk Management

The Company adopts a comprehensive and integrated risk appraisal, mitigation and management process. The risk appraisal and risk mitigation measures of the Company are being placed before the Board periodically for review and for improvement.

Details of key financial ratios

S.No Name of the Ratio	Financial Year	Financial Year	% of Change
	2023 - 2024	2022-2023
1 Debtors Turnover Ratio	4.54	4.65	-2.36
2 Inventory Turnover Ratio	10.82	11.65	-7.12
3 Interest Coverage Ratio	36.85	51.36	-28.25
4 Current Ratio	2.51	1.84	36.41
5 Debt Equity Ratio	0.02	0.03	-33.33
6 Operating Margin (%)	4.34	6.85	-36.64
7 Net Profit Margin (%)	4.13	5.52	-25.18

• Decrease in Interest Coverage Ratio, Operating Margin and Net Profit Margin is due to decrease in Profit earned for the financial year 2023-24.

• Decrease in Debt Equity Ratio is due to decrease in Bank borrowings and increase in Other Equity of the Company.

• Increase in Current Ratio is due to decrease in Current Liabilities.

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

For the financial year 2023-2024: 4.96%. For the financial year 2022-2023: 8.59%

The reason for decrease in Return on Net Worth is due to decrease in profit for the financial year 2023-2024 and increase in the Networth of the Company.

Cautionary Statement

The Management Discussion and Analysis Report contains forward looking statements based upon assumptions regarding global and countrys economic conditions and expectation of future events, etc., The factors that might influence the operations of the Company are demand-supply conditions, prices of the finished goods, material costs & availability, change in the government rules & regulations and natural calamities / any force majure events over which the Company has no control. The Company assumes no responsibility on the accuracy of assumptions and perceived performance of the Company in future.

Place : Coimbatore	For and on behalf of the board
Date : May 23, 2024	Nethra. J.S. Kumar
	Chairperson and Managing Director
	DIN : 00217906