Olectra Greentech Ltd Management Discussions.

A) Electric Bus

Industry Structure and development:

The Indian economy witnessed a slowdown during FY 2019-20 and the GDP is estimated at 4.2% as compared to 6.1% in FY 2018-19. (Source: Press note by National Statistical Office dated May 29, 2020).

The automobile industry was hit hard in FY 2019-20 as sales fell across vehicle segments. According to data released by SIAM, in FY 2019-20, the Indian automotive industry recorded a 20.3% decline in domestic sales as compared to a 5.9% growth in FY 2018-19. The Passenger Vehicle segment decline 17.3% in FY 201920 (as compared to 2.8% growth in FY 2018-19) due to weak consumer sentiment, rising cost of vehicle ownership, liquidity stress and general economic slowdown.

The proposal of NITI Aayog that only electric vehicles should be sold in India after 2030 would result in a reduction of 156 Million tons in Diesel and Petrol consumption for that year and net saving of roughly Rs. 3.9 Lakh Crore by 2030 at present oil prices. While the plan to electrify every vehicle by 2030 may seem ambitious, it reflects Governments intent towards electric mobility. The department of Heavy Industry has approved the sanction of 5595 electric buses to 64 Cities / State Govt. Entities / STUs for intra-city and intercity operation under FAME India scheme phase II in the FY 2019-2020. Under this FAME -II scheme various STUs have floated the tenders for procurement of 5595 Electrical Buses out of which more than 2,500 electrical buses have been awarded to various Electrical Bus manufactures across various STUs.

Electric vehicle policies have also been introduced or under consideration at states level with subsidies for electric vehicle and

also exemption of MV tax, registration fees, permit fees and rebates in power tariff for charging.

Outlook

The electric bus market expansion across India is started and further it may register growth over the coming years owing to consistently growing affordability of electric buses and incentives/subsidies provided by the Government as a counter to mitigate the pollution levels. Under Phase- II of FAME India Scheme [Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India] many more tenders for electrical buses are expected to come in FY 2020-21.

The main focus of this phase of the scheme is the electrification of public & shared transportation. After this scheme, the thrust showed by the Government is to allow the electric vehicles to become the first choice for the purchasers so that these vehicles can replace the conventional vehicles and thus reduce conventional fuel consumption and thereby pollution in the country from the automobile sector.

The electrical bus market across India is also expecting a robust growth in future in the private market as well. Introduction of electrical buses in Private segment will not only help in providing a pollution & environment free experience to the customer but also helps increasing the visibility in market. Electrical buses will also help in providing a comfortable and a safe journey to the passengers by the means of use of advance technology, noise free components with safety and hassle-free transportation

Opportunities:

Electric Vehicles are found to be most effective in combating air pollution with zero tail pipe emissions. Disruptive technology

advancements in Automotive Battery technology that give prolonged life and storage capacities has made this dream of Electric Vehicles a reality today.

Currently majority of the procurement are done from State transport undertakings (STU) for Midi 9m and Standard 12m buses. However, there is opportunity to cater to needs of Last mile connectivity, Private segment, intercity operations, tourism industry, staff transport and airport tarmac services.

Many private customers are also started showing their interest and trust towards electrical buses and are willing to invest and therefore contributing to the Government initiative.

In order to encourage the use of electric vehicles GST Council has brought down the GST rate on electric vehicles (EVs) and Charging Stations to 5 per cent.

Segment wise Performance

In FAME-II, Olectra has bagged order for 775 Electric buses for various STUs across in India. The presence of Olectra Electric Buses in India will be increasing with the on-hand orders available. With this the number of Vehicles in India will cross more than 1000 numbers, first for any OEM in India. Olectra EVs have crossed more than 2.5 Crores Kilometers in India roads.

During the year under review the Company recorded a net turnover of Rs. 27,872.01 Lakhs against Rs.14,480.39 Lakhs in previous FY 2018-2019 for electric bus division.

Risks, Concerns and Threats

GOI has introduced Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME-II) policy in India which aims to boost electric mobility and increase the number of EVs in commercial fleet by providing subsidy/ incentives on Electric Vehicles. Any delay in availing of funds by STUs under the scheme may adversely impact the growth of electric buses. Also, it is important for state Governments to firm

up their EV policy. Some of the states have already introduced their state EV policy which helps in a smooth transition from internal combustion (IC) to EVs, but other states are yet to introduce their EV policy. There is also a requirement of subsidy or relaxations to be introduced by the Government for the private market, so as to encourage them to move forward from traditional buses and to invest in more technologically advanced & Pollution free electrical buses. This will ensure & help in contributing towards the vision of the Government to transform public transportation sector to go completely electric.

Another risk is the battery cost and other component costs of EVs not decreasing as rapidly which in turn does not reduce the cost of the electric vehicle. The number of global players interested in entering the Electric vehicle space is also increasing since the Government is planning for providing incentives which would mean an increase in competition as well. The increase in players in EV space will be good for building the EV ecosystem in India.

B) insulators industry

industry Outlook

The FY20 started on a slow note due to the applicable Code of Conduct7 related to the general elections in May 2019. The re-elected Government announced several policy initiatives, such as Rs. 102 lakh crore of Infra projects for the next five years. Eleven Letters of Intent (LoIs) were issued in FY20 for TBCB transmission projects. 11,664 ckms of AC transmission lines was added in FY20 (22,437 ckms in FY19). 68,230 MVA of substation transformation capacity was added against targeted 81,716MVA in the previous year. However, progress on continuation of power sector reforms like UDAY 2.0 was slow, coupled with persistent and severe credit challenges in the domestic market. ICRA estimates the discom losses in FY20 to be Rs. 30,000 crore, up from Rs.27,000 crore in FY19.

The year ended on a worse note with the unprecedented disruption of both global and domestic markets due to the COVID-19 pandemic. The Government imposed a lockdown in March to combat COVID-19, resulting in manufacturing shutdowns.

Opportunities

Power T&D, especially from renewables all over the world and Railways electrification, are strong growth drivers for your Company over the medium term. The Indian Government is committed to "24*7" power for all. India aims to generate 450 GW of renewable energy by 2030 as part of a stronger climate action plan that will create significant evacuation demand. To tide over the current COVID-19 crisis, the Government has announced a Rs. 90,000-crore financial package for stressed discoms . As per the 13th Five Year Plan, addition of 41,185 ckms of AC transmission lines, 37,244 MVA of AC sub-station transformation capacities and 16,000 MW of interregional transmission capacity is expected. Indian Railways plans to electrify all of its Broad Gauge routes by 2024.

Power Ministry has issued a draft proposal for amendment of Electricity Act 2003. This move is aimed at ushering in distribution sector, reforms, financial discipline, and to focus on renewable energy push.

Government plan to establish a total of 100 GW Solar and 60 GW Wind generation capacity by 2022. Power Transmission projects, structured on the Tariff-Based Competitive Bidding (TBCB) mechanism and associated with large-scale evacuation of renewable energy, gained traction in FY20. Eleven Letters of Intent (LoIs) were awarded in the year, and 22 projects were under development under TBCB process as on March 2020.

Furthermore, renewable projects are smaller and more spread out compared to thermal projects and hence have higher requirement for T&D products.

Railway Electrification: Progressed with 16,889 Route Kilometers (rkms) electrified in FY16-FY20, which is 345% increase against the previous five years (FY11 to FY15).

Indian Railways has electrified 39,866 rkms, which account for about 63% of total rkms of the Railways. It is planned to electrify all broad gauge routes by 2024. In FY19-20, 2,606 rkms have been electrified by the Central Organization for Railway Electrification (CORE). In addition, sections of 560 rkms were ready but could not be commissioned due to COVID-19 restrictions.

The domestic T&D equipment market is expected to continue to benefit from various regulatory initiatives.

Risks Concerns and Threats: Company is exposed to volatility in the prices of raw materials and foreign exchange rates and Competition.

Geopolitical uncertainties may impact supply of raw materials, causing volatility in prices and may impact Companys performance.

Segment Wise Performance

The Company is the one of the largest manufacturer of composite insulators in India. Our proactive approach for design, development and manufacturing composite insulators meeting dynamic requirements of customers and marketing expertise had always provided us competitive advantage.

The Company is exporting composite Insulator to the USA. We have developed a new insulator for dedicated freight corridor and supplied more than 62,000 insulators for freight corridor.

Keeping the industry overview, the performance of the Companys product is reasonably good. During the year under review, in spite of entry of new players, dollar fluctuations, increase in imports, reduction in margins due to inflationary trends and slow pace of implementation of

EPC contracts, the Company was able to record during the year under review a net turnover of Rs.11,681 Lakhs.

C) i. Discussion on Financial Performance with respect to operational performance

The Company registered a growth of 36% in Net Sales to Rs 39,553.01 lakhs in FY 201920 as compared to Rs. 29,030.46 lakhs in FY 2018-19. This was due to higher sales volumes in E Bus business. The Company s net profit was Rs 1,070.24 Lakhs for FY 2019-20 as compared to Net Loss of Rs 1,357.51 Lakhs for FY 2018-19.

ii. internal Control systems and their adequacy

The internal audit and other internal checks implemented in the Company are adequate and commensurate with the size and nature of operations providing sufficient assurance and safe guarding all assets, authorizing all transactions and its recording and timely reporting.

iii. Material developments in Human Resource/industry Relations front, including number of people employed

Industrial relations are harmonious. The Company recognized the importance and contribution of the human resources for its growth and development. As on March 31, 2020, the Company has total strength of 419 employees.

Details of significant changes (i.e. changes amounting to 25% or more compared to the previous financial year) in key financial ratios are as follows:

Standalone

Change (%)

Financial ratio FY 2019-20 FY 2018-19 reasons for Change
Interest Coverage Ratio 1.97 (0.33) 702.74 The interest coverage ratio has turned positive in current year mainly due to operational profits.
Debtors Turnover Ratio 1.45 2.62 (44.42) Reduced due to receivables build up mainly in E-Bus division.
Operating Profit Margin (%) 9.10% 0.46% 1862.05

The ratios are positive in Current year mainly due to operational profits.

Net Profit Margin (%) 5.15% -1.26% 508.76
Return on Net worth 1.46% -1.92% 175.95

D) impact of COV^-^ Pandemic

The impact of the COVID-19 pandemic has created significant volatility in the global economy and led to reduced economic activity. There have been extraordinary actions taken by international, federal, state, and local public health and Governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions throughout the world, including travel bans, quarantines, "stay-at-home" orders, and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations. The Company has quickly adapted to the new normal working conditions with employee safety, remote working, digital communication tools and other preventive measures and the Company operations had not materially impacted. However the ultimate impact of the pandemic on our

business, results of operations and financial condition will depend on numerous evolving factors and future developments, including the ultimate duration, spread, severity and repetitiveness of the outbreak and how quickly and to what extent normal economic and operating conditions resume.

Cautionary Statement

The Statement in this section describes the Companys objectives, projections, estimates, expectations and predictions

which may be "forward looking statements" within the meaning of the applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make difference to the Companys operations include 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 incidental factors.