marine electricals india ltd share price Management discussions

A. Overview of the Companys Business:

Marine Electricals business sustenance and growth prospects are closely linked to the growth of Electrical, Navigation & Communication and Automation solution needs of India and neighbouring countries where MEIL has a footprint. In addition, the growth of Marine / Shipping industry also brings significant opportunities and value proposition to our services business concentrated in India and middle-east. Strong electrical, electronics and NAVCOM back-bone clubbed with the growing services portfolio helps to leverage MEIL as a turn-key package solution provider to the shipyards as a credible integrator. This also enables us to attempt larger repair and service contracts.

The Management Discussion and Analysis of MEIL therefore focuses on the eco-system and the trends of business opportunities emerging from these sectors and analyses our competitive positioning in these businesses. Company has taken timely steps for horizontal and vertical expansions into related business and technology segments with measured low-risk manageable steps.

Our agility and performance during the COVID-19 Pandemic has given us con dence that we can adapt to worse situations very quickly and align to the new unknown challenges relatively well. We have come out of the COVID crisis more successfully than our competitors in the eco-system.

B. Performance of the Company:

The Key Financials Parameters as on 31st March, 2023 on Standalone and Consolidated Basis are as follows: Standalone:

Particular	As on 31st March 2023	As on 31st March 2022
Debt/Equity Ratio	0.30	0.19
Debt Service Ratio	3.14	2.82
Interest Coverage Ratio	7.72	4.91
Current Ratio	1.60	1.69
Net ProfitRatio	5.00%	3.87%
Operating ProfitRatio:	8.94%	7.46%

Consolidated:

Particular	As on 31st March 2023	As on 31st March 2022
Debt/Equity Ratio	0.30	0.19
Debt Service Ratio	2.68	2.90
Interest Coverage Ratio	6.17	4.95
Current Ratio	1.60	1.65
Net ProfitRatio	3.79%	3.53%
Operating ProfitRatio:	8.71%	7.10%

Revenue from operations: Standalone: 39,127.13 Lakhs Consolidated: 44,285.44 Lakhs.

Performance of each Segments

Our Company is mainly dealing into two segments viz Electricals & Electronics and Solar. The Company has been receiving orders from customers for Electricals & Electronics segment on regular basis. The Company achieved revenues of Rs. 39,088.54 lakhs for Electricals & Electronics segment and Rs.38.94 lakhs for Solar segment during FY 2022-23 as against Rs. 32,058.48 Lakhs for Electricals & Electronics segment and Rs. 230.08 Lakhs for Solar segment during FY 2021-22. The Company achieved PBIT of Rs. 3,148.53 lakhs for Electricals & Electronics segment and Rs. (223.25) lakhs for Solar segment during FY 2022-23 as against Rs. 2,459.11 Lakhs for Electricals & Electronics segment and Rs. (393.38) Lakhs for Solar segment during FY 2021-22.

The core business of Marine Electricals is directly or indirectly impacted by the demands & opportunities, developments & investments, Govt policies & Initiatives and visibility in the foreseeable future. As evident from the above GDP growth and ‘Advantage India Factors and also from the detailed analysis summary in the trail; we have reasons to believe that all these in our favour and therefore we should look forward to a positive business growth impact.

C. DEMANDS & OPPORTUNITIES

Developments & Investments

Total FDI in flows in the power sector reached US$ 16.57 billion between April 2000-December 2022.

Some major investments and developments in the Indian power sector are as follows:

[Source: India Brand Equity Foundation https://www.ibef.org/industry/power-sector-india (Update May 2023)]

In January 2023, the Union Cabinet (CCEA) approved investment of US$ 315 million (Rs. 2,614 crores) for SJVNs 382 MW Sunni Dam Hydro Project.

In January 2023, President of India laid foundation stone of SJVNs 1000 MW Bikaner Solar Power Project in Rajasthan

In January 2023, the President of India dedicated transmission system built by Powergrid for 8.9 GW of solar power in Rajasthan.

Mumbai headquartered Essar Group has formed the Essar Energy Transition (EET) with the objective to invest a total of US$ 3.6 billion in developing a range of low carbon energy transition projects over the next ve years.

In November 2022, the Maharashtra State Electricity Distribution Corporation Limited (MSEDCL) granted the "Letter of Award" (LoA) to Tata Power Renewable Energy Limited (TPREL), a Tata Power subsidiary, to build a 150 MW solar project in Solapur, Maharashtra.

In October 2022, SJVN started commissioning its 75 MW Solar Power Project in Parasan Solar Park which is located at Tehsil Kalpi, District Jalaun near Kanpur, Uttar Pradesh.

In August 2022, NHPC Limited and the Government of Himachal Pradesh inked an implementation agreement for the 500 MW Dugar Hydroelectric Project in the Chamba District of Himachal Pradesh.

In August 2022, Norfund, who manage the Norwegian Climate Investment Fund, and KLP, Norways biggest pension company, signed an agreement to buy a 49% share of a 420 MW solar power plant in Rajasthan for Rs. 2.8 billion (US$ 35.05 million).

In August 2022, Tata Power Green Energy Limited (TPGEL), a wholly-owned subsidiary of Tata Power, commissioned a 225MW hybrid power project in Rajasthan.

In August 2022, NHPC signed a MoU with the Investment Board Nepal (IBN) to develop 750 MW West Seti and 450 MW SR-6 Hydroelectric Projects in Nepal.

In July 2022, NTPC signed a MoU with MASEN (Moroccan Agency for Sustainable Energy) for cooperation in the renewable energy sector.

In June 2022, SJVN announced a collaboration with the Assam government for the development of hydro and renewable energy projects in the state.

In June 2022, SJVN signed investment agreements worth Rs. 80,000 crore (US$ 10.24 billion) with the Uttar Pradesh government for implementing three solar power projects in the state.

In May 2022, SJVN signed a pact with Tata Power Solar Systems to build a 1,000 MW solar project worth Rs. 5,500 crore (US$ 704.38 million) in Bikaner, Rajasthan.

In June 2022, NTPC declared commercial operation of second part capacity of 15 MW out of 56 MW Kawas Solar PV project in Gujarat.

SJVN Limited is looking to develop 10,000 MW solar power projects inviting investment of Rs. 50,000 crore (US$ 6.56 billion) in the next ve years in Rajasthan.

In June 2022, NHPC signed an engineering, procurement, and construction (EPC) contract with Adani Infra Limited to develop a 600 MW solar project under the Central Public Sector Undertaking program (Phase-II).

Investment in Indias renewable energy sector grew more than 125% YoY to touch a record US$ 14.5 billion in FY22.

In March 2022, NTPC announced that it was ready to start partial power generation of 10 GW from a 92 MW floating solar energy plant being set up at NTPCs unit at Kayamkulam in Kerala.

In March 2022, NTPC announced that it will start commercial operations of 74.88 MW capacity of its 296 MW Fatehgarh solar project in Rajasthan.

In March 2022, Adani Solar and Smart Power India (SPI), a subsidiary of Rockefeller Foundation, signed a non- financial and non-commercial MoU promote the usage of solar rooftop panels in rural India.

In February 2022, Kolkata-based Eminent Electricity Distribution Ltd., a subsidiary of CESC Limited, bid Rs. 871 crore (US$ 113.24 million) to take over Chandigarhs power supply department, which was approved and the transition will happen by the end of March.

In November 2021, NTPC announced that its 80 MW solar power-generation capacity in Jetsar (Rajasthan) has started commercial operations from October 22, 2021. The total capacity of the project is 160 MW.

In November 2021, SJVN began the second unit work of the 1,320 MW Buxar thermal power plant in Bihar.

Government Policies & Initiatives

The Government of India has identified the power sector as a key sector of focus to promote sustained industrial growth. Some initiatives by the Government to boost the Indian power sector are as below:

Source: India Brand Equity Foundation https://www.ibef.org/industry/power-sector-india (Update May 2023)

In the Union Budget 2022-23, the government allocated US$ 885 million (Rs. 7,327 crore) for the solar power sector including grid, off-grid, and PM-KUSUM projects.

Under the Union Budget 2022-23, the government announced the issuance of sovereign green bonds, as well as conferring infrastructure status to energy storage systems, including grid-scale battery systems.

The Green Energy Corridor projects have been initiated to facilitate renewable power evacuation and reshaping the grid for future requirements. As on October 2022, 8651 ckm of intra-state transmission lines have been constructed and 19,558 MVA intra-state substations have been charged.

Production Linked Incentive Scheme (Tranche II) on ‘National Programme on High Ef ciency Solar PV Modules, with an outlay of US$ 2.35 billion (Rs. 19,500 crore) was approved and launched.

As of August 24, 2022, over 36.86 crore LED bulbs, 72.18 lakh LED tube lights and 23.59 lakh energy-ef cient fans have been distributed across the country, saving around 48,411 million kWh per year and around Rs. 19,332 crore (US$ 2.47 billion) in cost savings.

As of November 2022, over 51.62 lakh smart metres have been deployed under the National Smart Grid Mission (NSGM), with a further 61.13 lakh to be deployed.

Electri cation in the country is increasing with support from schemes like DeenDayal Upadhyay Gram Jyoti Yojana (DDUGJY), Ujwal DISCOM Assurance Yojana (UDAY), and Integrated Power Development Scheme (IPDS).

In order to meet Indias 500 GW renewable energy target and tackle the annual issue of coal demand supply mismatch, the Ministry of Power has identified 81 thermal units which will replace coal with renewable energy generation by 2026.

In February 2022, a parliamentary standing committee recommended the government to take steps to increase the loan limit for renewable energy sector under priority sector lending. The current limit stands at Rs. 30 crore (U$ 3.93 million).

In November 2021, the government announced future plans to increase the funding under the PLI scheme for domestic solar cells and module manufacturing to RS. 24,000 crore (US$ 3.17 billion) from the existing Rs. 4,500 crore (US$ 594.68 million) to make India an exporting nation.

In September 2021, the Government of the United Kingdom announced that it will invest US$ 1.2 billion through public and private investments in green projects and renewable energy in India to support the latters target of 500 GW of renewable energy by 2030.

The Government of India is preparing a rent a roof policy for supporting its target of generating 40 GW of power through solar rooftop projects by 2022. It also plans to set up 21 new nuclear power reactors with a total installed capacity of 15,700 MW by 2031.

The Central Electricity Authority (CEA) estimates Indias power requirement to grow to reach 817 GW by 2030. Also, by 2029-30, CEA estimates that the share of renewable energy generation would increase from 18% to 44%, while that of thermal energy is expected to reduce from 78% to 52%.

The government plans to establish renewable energy capacity of 500 GW by 2030.

Naval Shipbuilding

1. The Indian Navy is one of our premier clients for both defence and marine businesses. The Make In India movement of the Government has also catalyzed the shipyards and DPSUs to enhance the degree of indigenization in shipbuilding. More and more equipment are being brought into the indigenization umbrella. Enhanced percentage of indigenous content is also being encouraged. The vision of a 200 strong combat eet by 2027 is also a catalyzer. In wake of the naval vision, warship construction has witnessed an unprecedented growth. This has been one of the significant growth impetus for Marine Electricals as well.

I. The various projects of Indian Navy, at different stages of execution in shipyards are tabulated below (excluding smaller ships/ crafts). This is the current business concentration of the Naval division of our Company:

Ser Project	Type	No of Ships	Shipyard	Notes
(a) IAC	Aircraft Carrier	01	Cochin Shipyard Ltd.	Services continues
(b) P15B	Destroyers	04	Mazagon Shipbuilders Ltd.	IBS Retro t
(c) P17A	Frigates	07	Mazagon Dock Shipbuilders Ltd. & Garden Reach Shipbuilders Ltd.	Deliveries in full Swing
(d) Follow on 1135.6	Frigates	02	Goa Shipyard Ltd.	Order received for delivery
(e) Survey Vessel (L)	Survey Vessel	04	Garden Reach Shipbuilders Ltd.
(f) Anti-Submarine Warfare Shallow Water Craft	Warship	16	Cochin Shipyard Ltd. Garden Reach Shipbuilders Ltd.	Deliveries commenced, shall peak in FY 2023-24
(g) DSV	Diving Support Vessel	02	Hindustan Shipyard Ltd.	Deliveries in progress
(h) FSS	Fleet Support Ship (Tanker)	05	Hindustan Shipyard Ltd.	Ordering stage
(i) NG OPV	Next Gen Offshore Patrol Vessels	11	Goa Shipyard Limited (07), Garden Reach Shipbuilders & Engineers (04)	Tendering Stage
(j) NG MV	Next Gen Missile Vessels	06	Cochin Shipyard Ltd.	Tendering Stage
(k) MPVs	Multi-Purpose Vessels	02	L&T Shipbuilding	Tendering Stage
(l) CTS	Cadet Training Ships	03	L&T Shipbuilding	Tendering Stage
(m) P75 (1)	AIP Submarines	06	Strategic Partnership Model	Indigenization drive for Equipment is in progress
(n) SSP/FDN - 3	Floating Dock (Navy)-3	01	Hindustan Shipyard Ltd.	Tendering Stage
(o) DSC	Diving Support Craft	05	Titagarh Wagons	Under Construction

II. Shipbuilding Projects of Indian Navy on the Anvil / Planning Phase. This forms longer term business target for Marine Electricals spanning over next few years:

Ser Project	No. of Ships
(a) LPD, Landing Platform Dock	04
(b) ASV-MCM, Autonomous Surface Vessels for Mine Counter Measure Operations	10
(c) Survey Training Vessel	01
(d) NGC, Next generation Corvettes	07
(e) NGF, Next Generation Frigates	07
(f) NGD, Next Generation Destroyers	08
(g) IAC 2, Indian Aircraft Carrier - 2	01
(h) Fast Interceptor Craft	20
(I) Semi-submersible Autonomous Vessel for Intelligence, Operations & Reconnaissance (SAVIOR) - ASW	40
(j) FDN - MDL	01
(k) National Hospital Ship	01
(l) Midget Submarine (HSL)	02
(m) Landing Crafts	06
(n) Next Generation Fast Attack Crafts (NG FACs)	07
Total	115

III. In addition to the Indian Navy, the Indian Coast Guard is also engaged in a massive expansion plan and is in the process of acquiring various craft to strengthen the maritime boundaries of the country.

IV. However, the performance of private shipbuilding industry has been much better in terms of project completion mainly attributable to less complex weapons and sensors, leading to timely completion of the project. The various shipbuilding projects of Indian Coast Guard in progress / planning phase are as below.

Ser Project	Quantity	Shipyard
(a) Fast Patrol Vessel	05	Goa Shipyard Ltd (Awarded in Mar 22)
(e) Training Ship	01	RDEL NCLT, Retender in progress
(g) Interceptor Boats	15	BDIL
(h) FSB	05	BDIL
(I) Pollution Control Vessel	02	Goa Shipyard Limited
Total	28

V. Shipbuilding Projects of Coast Guard in Planning Phase: Which would add to the business target over coming decade:

Ser Project	No. of Ships
(a) New Generation Fast Patrol Vessels (RFI 08 Jun 21)	18
(b) OPVs (RFI 28 Feb 2022)	06
(c) Air Cushion Vessel	06
Total	30

Marine Electricals Prime Equipment such as Integrated Bridge System, NAVCOM systems including navigation radars, Main Switchboard, assorted control panels, alarm monitoring systems and a host of data aggregation control systems for re, ood and auxiliary machinery control systems are needed by all above ships. This forms a significant established business segment for the naval division of Marine Electricals. We have reached maturity of series production for some equipment like ruggedized UPS and solid-state Auto Transfer Switch. Our portfolio of Integrated Platform Management System (IPMS) is also expected to expand after empanelment of IHQ MoD(Navy) for warships.

VI. Inland Water Transport (IWT): Our Commercial Marine division has a great opportunity unfolding in IWT in the foreseeable future. Commencing from power & NAVCOM package to equipment supplies, and supply of complete small electrical propulsion boats; we can look forward to a big business landscape. The summary of IWT business panorama is depicted below:

To create a country wide waterways network and to promote inland water transport in the country as an economical, environment friendly supplementary mode of transport to rail and road, 111 inland waterways have been planned and many are under execution stage. The Inland Water Transport (IWT) mode is widely recognized as a fuel efficient, environment friendly and cost effective mode, especially for bulk goods, over dimensional cargo and hazardous goods. The primary requirement of making this mode commercially viable is development of IWT infrastructure (fairway, terminals and NAV COM) and at the same time creating and enabling environment for augmentation of IWT eet, primarily by the private sector. Keeping in view that India has a coastline of 7,500km, and In Land Waterways (ILW) potential of over 20,000 kms; ship building and ship repair have been recognised as key sectors under Make In India (MII) initiative. We have started receiving orders from the projects under IWT.

Repair and Maintenance Services

With the growing ship repair and technical services sector, our services business of marine and defence sector also continues to be healthy and expected to grow along with the buoyant business scenario. Our navigation and Communication services business also grows in sync with the growth of ship repair and technical services opportunity.

We have over 30 types of electrical / electronic equipment approved by Govt of India (DGQA) and is growing further. We offer Annual Maintenance Contracts (AMC) and Rate Repair Contracts (RRC) for all our equipment. MEIL has branch of ces in 12 locations, mostly around the coast, for providing water front support to our customers. These AMC/ RRC provide a parallel sustained derivative business stream for us.

Business Domain Expansion: Marine Electricals has taken timely steps for horizontal and vertical expansions into related elds for better benefits at lower risk such as:

Broadened Industrial Customer Base: Datacenters, Steel, Cement, Chemical, Pharma and Automobile industries, High rise buildings using own patented solutions for LV (MEcubE3), MV (MEpoweR3), Busduct solution etc.

Geographical Expansion in Industrials

Entering South India with acquisition of Eltech Engineers

Exploring acquisition opportunities to enter North & Eastern India Metro Rails: Electrical Products and Sensors Indian Railways: Electrical Equipment and Lights

Ports: Vessel Traf c Management System, Port management systems for port operations Electric Vehicles: Charging Stations for Fast Charging Expanding Solution Offerings in Marine Exploring new businesses such as Small autonomous vessels and E-Ferries Providing IPMS for commercial ships, working on expanding it to Naval Ships Focusing on complete installation package for Naval Ships Targeting to receive Service Contract for Degaussing System and Weapon Systems

Achieved Business Parameters: The Y-O-Y growth parameters of MEIL are outlined as below. As can be observed the growth trends of MEIL are following/ exceeding the growth trends of the sector.

Year	Order Book*	Revenue/ Sales*	PBIT*
2022-23	48,630.00	39,127.13	2,636.54
2021-22	35,620.00	32,288.56	1,763.71
2020-21	44,100.00	19,987.37	1,085.82
2019-20	40,170.19	20,771.13	1,572.78
2018-19	18,786.00	32,323.03	1,728.33
2017-18	16,087.40	28,766.39	2,266.86
2016-17	4,361.24	20,944.17	1,875.94

Competitive Scenario : MEIL has the first movers advantage. It has been able to resist and sustain the aggressive moves and postures of the new incomers in this business domain. The International players do pose a challenge but, MEIL product quality and market reputation are also at par with International brands. We make all endeavors to maintain and sustain international quality and maturity in our products, processes and product life cycle support.

D. OVERALL BUSINESS AND GROWTH STRATEGY

Marine Electrical intends to be one of the top ten players in the global marine market. We will realise this by becoming a true life cycle management partner, combining two key roles as system integration partner and maintenance partner to all our customers and constantly focus on exceeding their expectations. And last but not least, we are dedicated to create smart and green solutions at a competitive cost of ownership.

Marine Electricals will provide high quality Industrial solutions for LV, MV & Automation addressing requirements of diverse customers through superior technology & manufacturing standards. We aspire to take leadership position in Western region of India.

A focus on power plants, the automotive industry, pharmaceuticals, chemicals and petrochemicals, the energy and environment market, pharmaceuticals, machine building, oil & gas, and the aircraft industry.

E. SAFETY AND ENVIRONMENT CLEARANCES OUTLOOK

We continuously seek to improve safety and reliability at all our production facilities. Our production facilities have been awarded the ISO Certification for maintaining quality and environment management standards.

F. STATUTORY COMPLIANCE

The Company Secretary Cum Compliance Of cer ensures compliance with SEBI Regulations and Listing Agreement , Guidelines of Insider Trading and Companies Act 2013.

G. INTERNAL CONTROL SYSTEMS

The Companys Internal Control System has been continuously monitored and updated to ensure that assets are safeguarded, established regulations are complied with and pending issues are addressed promptly. The audit committee reviews reports presented by the internal auditors. The committee makes note of the audit observations and takes corrective actions, if necessary. It maintains constant dialogue with statutory and internal auditors to ensure that internal control systems are operating effectively

H. RETURN ON NETWORTH (CONSOLIDATED)

The return on networth for the financial year 2022-23 is 10.83 % as compared to 8.65% for the financial year 2021-22.

I. CAUTIONARY STATEMENT

The management discussion and analysis report containing your companys objectives, projections, estimates and expectation may constitute certain statements, which are forward looking within the meaning of applicable laws and regulations. The statements in this management discussion and analysis report could differ materially from those expressed or implied. Important factors that could make a difference to the companys operation include raw material availability and prices, cyclical demand and pricing in the companys principal markets, changes in the governmental regulations, tax regimes, forex markets, economic developments within India and the countries with which the company conducts business and other incidental factors.