Orient Electric Ltd Management Discussions.

Overview: Rising beyond…

The year 2020-21 would be marked as the year of a historic pandemic spread. While the start of the year was lacklustre with the lockdown effect, Indian economy & consumer electricals industry had adapted to the challenges with some large players gradually returning to normal activity levels in the remainder of the three quarters. Robust rural demand and increased adoption of ecommerce has resulted in a visible movement of channel mix and deeper retail penetration.

OEL responded to the lockdown with agility and adaptability. The new normal encouraged the team to re-imagine OELs workstyle, processes and organisation structure. Digital and social media were used to stay actively connected with retailers, vendors and channel partners. To enable consumers to connect with nearest retailer, information regularly updated on our website and this was supported by strong communication on social media platforms. Service engineers remotely provided troubleshooting services over video calls & emergency service calls. OEL leveraged the tailwinds of accelerated technological adoption induced by pandemic, to rollout multiple large digitization initiatives under the entity-wide e-Wings program. While business remained challenging, OEL continued investing on strategic focus areas of Talent, Culture, Innovation, Brand, Manufacturing, Service & Supply chain with special focus on cost rationalization & efficiency build-up. A validation of the strategic direction and strategic choices made over the years, Orient Electric has offcially entered the Fortune India 500 club in the year under review. Further, OEL has also been featured in Economic Times ET 500 list for the first time. Despite a challenging year of transitions, OEL retained its Great Place to Workcertification for the second consecutive year in March 2021, with an improved score.

Segment-wise Business Analysis

1. Economy overview

Global economy: The pandemic disruption severely impacted supply chains across the world. While distorted material movement led to an acute shipping container shortage, increased demand for electronic products has resulted in non-electronic products industries (automobiles, consumer electricals etc.) experiencing a heavy shortage of electronic components like semiconductor chips/ PCBs. Commodity availability became a cause of concern & commodity prices have hardened. The rapid development and speedy administration of vaccine program in USA, UK and other countries is set to propel the world to normalcy in the coming days. Increased liquidity, household savings and policy support for low interest rates are expected to lead to consumer spending-led economic recovery globally. A sign of times to come, USA has posted one of the strongest GDP growths in recent years of 6.4% in Q4 FY 2020-21 signalling the start of the recovery .

Indian Economy: As economic activity resumed post-lockdown, the Indian economy got impacted by the global developments on commodity availability and prices. This was further accentuated with Indo-China border stando_ and farm bill protests in some parts of the country. The long term Indian economic growth story remains optimistic on account of lag impact of structural reforms, pro-growth monetary policy and favourable demographics. In the short term, the Indian economy is poised to grow between 10-12.5% in the coming year with vaccine-led recovery of economic activity and low base of the year under review, subject to speed of containment of the second wave that has stealthily seeped into the next year.

2. Industry overview

All stakeholders of the Consumer Electricals industry were caught unawares by the speed and firmness of the Governments execution of the sudden lockdown. As the announcement of lockdown came in short notice at the onset of the summer season, Fans & Coolers – seasonal products with huge dependence on summer months had been impacted. The Coolers industry was particularly affected with huge channel stock which is likely to impact industry growth for the next year. Kitchen appliances and Water Heaters have posted impressive growth numbers on the back of increased work-from-home and improved access to products facilitated by ecommerce channels. Lighting & Switchgear industries experienced significant contractions on account of muted institutional demand. While demand in FY 2020-21 remained at FY 2019-20 levels for consumer lighting, consumer switchgear experienced minor contraction on account of intensified price-led competition. The short-term outlook of Lighting & Switchgear industries looks favourable on account of modest rebound in the real estate segment, renewed focus of government on infrastructure spending & resurgence of private institutional demand.

The emphasis of the industrys innovation agenda on energy efficiency will continue well into the future apart from the incorporation of convenience-enhancing connected, wi-fi, IoT features. Governments mandated star-rating regulations for ceiling fans from 1January2022 are expected to give further momentum to the industry with increased average selling price realizations and likely triggering of replacement demand. The mid-term outlook for the consumer electricals industry continues to be optimistic with increased adoption and shorter replacement cycles, driven by increased work-from-home and shift to energy-efficient products.

3. Segment-wise Review and Analysis for the company

3.a. Electrical Consumer Durables

In the face of adversity, OEL has remained agile to market developments, strengthened its position in Fans and bolstered its market shares in Appliances in FY 2020-21. While the peak pandemic impact in the summer season affected Air Coolers sales, OEL capitalized on the return of pent-up demand and its supply-chain strength, to post growths in the remainder of the year. For the year ended 31st March 2021, OELs Electrical Consumer Durables segment posted revenues of Rs 1514 Cr at 101.5% of FY 2020 sales & PBIT of Rs 205 Cr at 112.9% of FY 2020 numbers.

While innovation & premiumization continue to drive the Companys portfolio expansion and margin improvement journey, OEL has also remained aligned to market requirements by introducing and doubling down on rural-focused and entry-level models in line with ensuing demand growth from semi-urban and rural markets. Concurrently, rapid digitization of sales operations, logistics and cost-optimization ideation (Sanchay) have been undertaken to provide further impetus to OELs journey of widening footprint, manufacturing excellence and enhanced quality.

Some major strategic initiatives carried out during this year are listed below.

Energy efficiency range: With growing need for energy-efficient fans, OEL expanded the i-Series range with i-Float IOT, Hector range with new colours and sweep variants and launched ecommerce-exclusive Atomiser fan.

Rural-focused products: Powered by insights from rural markets, OEL introduced high-speed fans Rapid Air and Summer Breeze Pro to the market in the year under review. Also, an entry level table fan, Desk 21, launched with superior aesthetics and performance features has received enthusiastic reception from channel partners and consumers.8 Innovation in business: As a consumer centric company, actively listening to emerging need for chemical-free, safe and effective sanitisation during the onslaught of pandemic, OEL moved with speed to launch UV Sanitech, completing the entire journey from conceptualisation to commercialisation within 90 days. UV Sanitech, a UV-C light-based sanitization chamber for inanimate and daily use objects, has remained the best seller on the major Ecommerce platforms for most part of the year.

Indigenization of sourcing: To ensure continuity of supply chain & reduce susceptibility to external supply chain shocks, OEL has undertaken an extensive exercise to identify alternative vendor partners in domestic markets and develop these partners to the required quality standards in the year under review. Significant progress has been achieved in improving indigenous content in numerous products.

SFA & DMS implementation: As part of OELs digitization journey, a large effort has been undertaken to commission SFA (Sales Force Automation) and drive accelerated adoption across the entire sales team. Further to SFA, DMS (Distributor Management System) has also been launched with implementation at major distributors. DMSs pace of implementation and adoption are expected to accelerate in the coming year.

Distribution Expansion: The Company continued to penetrate deeper into its established geographies as a part of its growth strategy. Further, a concerted effort to expand distribution & footprint in sub-urban & non-metro markets had been undertaken in the year under review, towards direct-distribution model from the erstwhile wholesaling approach.

3.b. Lighting & Switchgear

For the year ended 31st March 2021, OELs Lighting & Switchgear segment posted revenues of Rs 519 Cr at 91.0% of FY 2020 sales & PBIT of Rs 69 Cr at 116.0% of FY 2020 numbers on account of muted B2B/ institutional spending throughout the year. However, OEL has outperformed the industry in the consumer lighting segment by ensuring product availability and optimizing the product mix. Smart planning & strategic stocking have further enabled OEL to emerge as a major challenger to market leaders in this segment. Further, focus on digitization-aided network expansion, cost optimization and quality enhancement continued through the year.

Some major strategic initiatives carried out during this year are listed below.

Expansion of consumer product portfolio: In line with changing consumer needs & aspirations, OEL has expanded consumer product portfolio with introduction of new models of recess panels, downlighters, battens, lamps with differentiated aesthetics and smart features.

Emergency lighting range: OEL continued its streak of pioneering product launches with the launch of emergency lighting range across Lamps and Battens. Engineered with inbuilt Lithium-ion battery, these emergency lighting products can work for 4-hours on battery backup in case of any power outage and automatically charge the inbuilt battery once power supply is available. The launch of emergency lighting range has been supported with expansive advertising campaign across digital and conventional media.

B2B Switches & Switchgear range: A dedicated range for B2B customers with premium aesthetics, highest level of safety and endurance has been launched in the year under review.

SFA & DMS implementation: A concerted effort has been put in to implement SFA & drive its adoption across the entire sales team. Owing to social distancing in practice and the dispersed nature of distributor network in Lighting & Switchgear business, DMS implementation has been slow and is expected to gather momentum once normalcy returns in market.

4. Major Opportunities/ Drivers

Energy-e_ciency focus:

Increasing awareness on energy efficiency and government push is set to further result in profitability improvement & revenue expansion. With the expected onset of BEE star-rating in Fans from January2022, the organized sector is likely to grow in both volume and value terms. Street Lighting transition to LED technologies continues to be a major growth driver in the institutional segment.

Under-penetration of consumer appliances: Consumer appliances are under-penetrated in India vis--vis developed nations. Channel expansion will continue to drive growth and penetration in the coming years aided by improving consumer aspirations.

Increased work-from-home: With the advancement in remote-work technologies, an increasing preference of employees towards a flexible and remote work schedule is being noticed. Increased work-from-home of urban professionals is expected to provide a fillip to electrical consumer appliances category on account of increased adoption and shortened replacement cycles from increased use.

Government Rural housing projects: Towards its stated aim of ‘Housing for All, the Governments target to build over 2+ crore houses via its affordable housing schemes, is expected to widen the headroom for the consumer durable sector.

Urbanization: Indias urban population is envisaged to grow to 40% of its total population by 2030 from the current 34% levels, which will catalyse ofitake for ECD, Lighting & Switchgear products.

Rural demand & increase in disposable incomes: While the disposable income component of GDP will remain stressed in the short term, previous levels of spending power will return in the medium term, stimulating the consumption demand of consumer electrical products. Further, Governments ambitious plans on doubling farm incomes, strengthening manufacturing sector and other structural reforms aimed at revitalizing economy are set to further increase rural demand and improve disposable incomes.

Rising smartphone usage & adoption of ecommerce: Increasing data consumption and smartphone usage is resulting in increasing adoption of ecommerce channel and improving industrys access to remote geographies. Further, increasing awareness will drive up the adoption of smart & connected products hastening portfolio premiumization and improving replacement demand across product segments.

5. Major Threats

Lockdowns & containments: Market closures such as those experienced in the year under review will adversely impact the revenue-generation capability, growth and profitability of the business.

Material costs: Elevated raw material or resource costs could adversely impact the overall product cost structure resulting in diminished margins.

Geopolitical risks: Changing political sentiments, trade impasses, increased duty structures and foreign policy constructs can directly impact global supply chains (shipping container shortages from an imbalance in trade patterns, customs clearance delays, global shortage of printed circuit boards etc.) significantly straining business-as-usual operations.

Climate change: Erratic weather conditions like delayed summers or winters, shrinkage in season durations, irregular rains and milder winters could impact the ofitake of fans, air coolers and water heaters.

Increasing competition: With reduced barriers of entry from the increasing pervasiveness of digital commerce channels and the emergence of large Original Equipment Manufacturers (OEMs) & Original Design Manufacturers (ODMs), many companies are venturing into the Consumer Electricals space. Increased competition might result in irrational price behaviour by some market participants and can negatively impact the industry.

Currency fluctuations:

Unprecedented swings in foreign exchange rates driven by global macroeconomic factors/ political considerations may create short term margin pressures from elevated material costs or depressed revenue realizations.

Strategic Focus Areas

Towards its stated vision of

‘Spreading Happiness through Smart Application of Technology, OEL had architected its strategic journey towards ‘Consumer Centricity at its core supported by 6 pillars: Footprint expansion, Innovation, Talent Development, Digitization, Automation & Unification.

1. Footprint Expansion: Nurturing Channel partnerships

Trade connect: Through the pandemic, OEL maintained continuous engagement with Trade & channel partners and provided support through extended credit and payment incentives. MD & CEO personally sent video messages to the dealer community with vernacular language subtitles to express OELs concern for their safety and wellbeing and to assure them of OELs support. OELs partners-in-progress received covid advisories making them aware of the safety measures in form of posters in English, Hindi and vernacular languages. On the announcement of relaxation of lockdown restrictions, trade partners were provided with safety shields for their shops with demonstration videos for maintaining social distancing during customer interaction.

Virtual retailer meets: In Q3 FY 2021, a 60-day program was executed with 100+ virtual meetings engaging more than 5,000 channel partners from across the country. These meetings were organized around geographical clusters with Leadership attendance, discussing product & service challenges at retail counters and to glean the pulse of the market, consumer sentiments and market opportunities.

Virtual Sales conference for Fans Trade partners: OELs annual sales excellence conference to reward excellence by trade partners and announce product roadmap was conducted virtually under the theme ‘Reboot & Rebound to connect with 300+ partners and families.

Continuous retail engagement with Orient Connect: OELs four-year-old retailer loyalty & engagement platform, Orient Connect, made significant inroads in the year under review. The program has ensured continuous engagement of all retailer partners with OEL and provided strategic insights into the natural distribution flows, price parity and counter-level stock movement. With ‘Orient Payday & ‘Choose your gift campaigns, Orient Connect deepened its channel-connect in FY 2021.

Ecommerce: OEL has continued prioritizing ecommerce to provide a ubiquitous presence of the brand across all consumer-purchase points. In line with emerging trends and accelerated adoption of ecommerce as a preferred purchase channel by consumers, OELs ecommerce channel has been strengthened in the year under review by the creation of a dedicated team driving operations with direct Leadership oversight. OEL also strengthened partner relationships with online-exclusive products, online-first product launches and increased visibility-enhancing spends.

Institutional relationships: Despite pandemic-induced muted institutional spending in the year under review, OELs sales teams strengthened institutional relationships by providing technical trainings, securing product approvals & showcasing product portfolio. The Key Account Management (KAM) approach coupled with channel strengthening is expected to yield significant business in years to come for Orient Electric.

2. Innovation

Innovation in business: The pandemic presented an opportunity for leveraging OELs innovation capability, demonstrate the Companys ability to stay agile to changing circumstances and ensure brand relevance in consumer minds. OELs innovation & product design muscle came into a full-blown display with the launch of UV Sanitech, a UV-C light-based sanitization chamber with a one-touch sanitization process that can sanitize all inanimate and daily use objects in 4 minutes from viruses and bacteria including coronavirus. A testimony to our design & manufacturing capability, UV Sanitech completed the entire conceptualisation to commercialization journey within 90 days. The design work started in mid-May as Covid19 impact started getting bigger despite extended lockdowns. The product development was determined imperative for the Company to address emergent consumer needs to stay safe and to prove its relevance in a testing time as a purpose-led brand. A true demonstration of one of OELs core values – Collaboration, the product brought development teams across the 4 businesses together working on designing the product.

Product-centric innovation: OELs emphasis on energy efficiency and smart connected products continued this year. Multiple energy-efficient fans powered by inverter technology were launched and work on improving energy efficiency of existing range of fans to make them compliant with upcoming star-rating norms pursued. Emergency lighting range that can work for 4-hours on battery backup in case of any power outage and automatically charge the inbuilt battery once grid power is available have been introduced in the year under review. Also, work on identification of vendor partners for lowering import dependence and increasing domestic content in the Companys products has been undertaken.

Innovation centre: To further synergize the ways of working of Research & Development (R&D) teams across the organization, OEL had undertaken the building of a state-of-the-art dedicated Innovation centre for centralizing all R&D teams and their work. In the year under review, the construction & commissioning of the R&D centre has been completed. The integrated functioning of R&D teams is expected to accelerate OELs journey of organizing R&D work around competencies & centres of excellence vis--vis a product-based organization currently in practice.

3. Talent Development: Creating High-performance culture

In line with OELs stated objective of creating & sustaining a High-Performance culture, OEL has prioritized continuous employee engagement, employee communication and training through the pandemic to ensure a seamless transition to remote work and gradual restart of normal operations across manufacturing facilities, warehouses, branches & corporate office. To ensure the holistic wellbeing of all employees, OEL has facilitated the enrolment of all employees on YourDost (www.yourdost.com), one of Indias leading online counselling and emotional wellness platforms. This facility continued to be live for all 888 employees at the end of FY 2020-21 and will be continued into the foreseeable future.

Employee engagement was amplified through the lockdown period to ensure continuity of communication through regular mailers, Townhalls with Leadership, women connect sessions, Co_ee with CEO, Open House sessions, virtual engagement activities (get-togethers, entertainment competitions) and virtual Hi-Flyer ceremonies for recognizing and rewarding exceptional performances. A testament to the inclusive workplace and People-First culture, OEL has been re-certified as Great Place to Work for the period, March 2021 to February 2022 by Great Place to Work institute. Despite a challenging year where remote work took a dominance, it is heartening to note that the Culture score of Orient Electric on Great Place to Work assessment exercise improved from 2.5 to 3 on a scale of 5.

3.a. Building a Learning organization

The strategic priority of ‘Building a learning organization received a massive impetus during the lockdown period with all employees taking self-development & learning on a priority basis. Facilitated by remote work tools, employees across the hierarchies enthusiastically participated in creating a continuous learning culture by way of creating learning collateral, training & learning from peers, and enhancement of selling skills. Over 20000+ person-hours of learning were recorded in FY 2021. OEL will aim to further this momentum in years to come to strengthen this foundation towards building a learning organization. Further to the continuous learning exercises, two focused programs on training, Future Leaders of Orient Electric (FLOE) & Potential Assessment of Sales Executives (PASE) were undertaken by the Company in year under review. These programs focused on a narrower talent base and were custom designed to act as comprehensive development journeys and to achieve specific pre-defined outcomes.

The first cohort of the FLOE program, initiated in FY 2020 as a comprehensive development journey for critical talent for creating a succession pipeline and enhancing career progression, have completed their development journeys (comprising of in-class trainings, virtual trainings, mentoring & coaching sessions) in FY 2021. The 3600 assessments of participants post-conclusion of the program showed marked improvement of scores from those before the program. With learnings from the first iteration, the second iteration of FLOE is now ready to be kicked off in the coming financial year.

PASE program is aimed at spotting talent early at the frontline sales executive level and ringfencing them through focused individualized development plans, job rotations and faster career progression. A potential assessment format was developed internally to assess product knowledge, selling skills, business acumen, digital savviness, team management skills etc, to map all participants on a 9-box high-potential high-performance classification grid. PASE initiative was launched in June 2020 for all 4 business units covering over 100 sales executives. The assessment exercise now stands complete with clear identification of critical sales talent in the high potential – high performance category. The customized development journeys for all the identified talent including career progression plans have been developed and activated in year under review.

4. Digitization @ e-Wings

Envisaged to enhance deeper insights on market visibility, improve speed-of-doing business, unlock process efficiencies, enable data-driven decision making and sales effectiveness, e-Wings, OELs digitization journey kicked off in FY 2019 with SAP S/4 HANA migration followed by functional module upgradation in FY 2021 and accelerated further in the year under review with multiple initiatives getting commissioned. A select few of the rollouts are captured below.

Sales Force Automation (SFA):

Digital enablement for the entire sales force team for attendance, better productivity, beat planning, retailer tracking, retailer stock availability, market mapping & monitoring, market feedback, order placement and contactless selling

Distributor Management System (DMS): Enhanced visibility and tracking of the secondary sales, pipeline inventory at primary points of sale, efficient scheme management, territory-wise sales insights. As DMS involves significant on-ground engagement at each distributor, the adoption and scaleup have been slow on account of ongoing social distancing practices and lockdowns.

Transport Management System (TMS): Improved visibility on dispatch management, order fulfilment, shipment tracking and costs of logistics up to delivery Human Resource Management System (HRMS) - revamp: Employee lifecycle management system encompassing modules across the hire-to-retire cycle (employee onboarding, attendance & leave, performance management, promotions/ appraisal, rewards & recognition, retirement etc.)

Sanchay: Automated workflow movement through idea, proof-of-concept, implementation & savings realization stages Travel & Expense management system: Digital posting, approvals and settlement of all employee claims on travel and expense reimbursements – Integrated with SFA, HRMS

E-Way Bill & E-Invoicing:

Automated e-way bill & e-invoicing systems to ensure compliance with Government directives

Digitized Workflow systems: Multiple workflow systems have been commissioned in the year under review including Customer & Vendor Onboarding portals, Management Workflows and Collection Management Systems

5. Automation: Harnessing Quality & Manufacturing efficiencies

The journey of improving product quality, uncovering process efficiencies and improving cost-competitiveness received stimulus with multiple initiatives aimed at shop-floor automation, infrastructure re-layouting being undertaken in FY 2021.

In the year under review, a diagnostic study was undertaken and a Detailed Project Report prepared to incorporate best-in-class automation & manufacturing practices in Fans and Lighting. Initiatives spanning electronics manufacturing automation, packaging, paint shop, motor winding assembly and material movement were evaluated among other proposals for immediate investments. The first leg of the implementation is already underway and is expected to be fully commissioned and utilized at peak capacity in the next 2 years. The undertaken initiatives are expected to augment current installed capacities, open-up new avenues of monetization apart from delivering productivity, space utilization and cost-of-quality improvements. Further to large scale investments, Sanchay has been a source of much of the small-scale, rapid deployment & quick payback initiatives. A potent employee engagement instrument initially envisaged as a localized cost-innovation program running independently at all manufacturing locations, the program received renewed vigour with the launch of a digital platform that democratized ideation across organization and enabled cross-deployment of successful ideas. A system with delegation of authority for investments towards these rapid payback projects with detailed guidelines and tracking of the hurdle payback periods is now integrated with the digital Sanchay tool further hastening the deepening of automation culture at Orient Electric. Automation will remain a focal point of manufacturing strategy to continuously improve quality & productivity.

6. Unification for unlocking efficiencies and synergies

To improve speed of service and strengthen operations, OEL has undertaken multiple initiatives in the year under review spanning across R&D, Marketing, Supply Chain and Service functions. The work towards unlocking synergies through unification will continue to be prioritized for years to come.

6.a. Innovation centre to unlock R&D synergies

The commissioning of Innovation centre is a major milestone in the consumer-centric strategic journey undertaken with Innovation as a key enabling pillar. It is also symbolic of the new ways of working with R&D teams across businesses now integrated under one-roof as a One-Orient team. Moving forward, the R&D function will be organized around competencies & centres of excellence vis--vis the existing product-based organizational structure. This re-design is expected to yield significant synergies with consolidation of resources enabling availability to all businesses unlike a siloed architecture which restricted availability and necessitated redundancy.

6.b. Strengthening Brand Orient Electric

Despite pandemic disrupting the normal revenue flows of the Company, OELs branding spends were in line with yesteryears to ensure continuity of visibility and maintenance of brand salience. OELs emphasis on digital advertising continued in the year under review with a significant increase of on-platform spending (Amazon, Flipkart). Major product innovations of the year

UV Sanitech, i-Series, Emergency Lighting – were launched with a digital-first narrative and on digital platforms.

For the first time, Orient Electric marketed the umbrella brand on the India-England cricket series in February 2021 with on-ground visibility and aired tv commercials of all 4 businesses (Fans, Appliances, Lighting, Switchgear) to present OEL as a complete Consumer Electricals brand.

An endorsement to our product innovation and brand salience, OEL was adjudged ‘The Economic Times Best Brand 2020. A demonstration of our commitment to product quality and consumer trust, OEL retained its Superbrand status for Fans (fourth time in a row), Coolers (second time in a row) in the year under review. Further, OEL has now been awarded Superbrand status for its Lighting products revalidating OELs innovation-driven portfolio and strategic choices in building the Lighting business.

6.c. Improving service delivery

Service and post-purchase engagement remain central to OELs philosophy of customer-centricity. Service function plays a strategic role as a brand custodian and first port-of-call for end-consumers at Orient Electric. Despite operational challenges during lockdown months, OEL remained the only company in the Consumer Electricals industry to have the call centre operational throughout the lockdown period without any downtime. Service technicians provided remote troubleshooting services to end-consumers via video calls in the lockdown period and for consumers in containment zones through the year.

Further to improve the speed of service delivery, OEL had unified service network across our businesses in identified geographies improving service delivery for over 113 districts in the year under review.

6.d. Optimizing supply chain

OELs commitment to providing best-in-class market service is predicated on a robust supply chain & logistics capability. As part of the e-Wings program, Transport Management System (TMS) has been implemented across all warehouses/ dispatch locations in the year under review to improve our servicing capability and unlock efficiencies. TMS is expected to provide us with significant savings and improve the speed of operations (via digitized contract maintenance, automated dispatch scheduling, integrated tracking etc.). To further improve visibility and enhance real-time revenue recognition capability, e-PoD (electronic proof-of-delivery) has been enabled at majority Distributor locations.

Risk Mitigation

The Company firmly believes that the core of enduring companies is built on sturdy risk management frameworks. OELs comprehensive risk management framework architected in line with prevailing best practices in risk management, enabled the Company to shield itself from the impact of the Covid-19 pandemic, ensure business continuity and emerge stronger. OELs Enterprise Risk Management process that assessed risks arising out of routine business operations and recommended mitigation strategies, was periodically reviewed by the Risk Management Committee and Board of Directors to ensure the effectiveness of the process is preserved.

Finance

1. Operating results

Despite a subdued Quarter 1 on account of pandemic-induced market lockdown, OEL has posted comparable revenues with respect to last year figures across the remainder of the quarters, to attain 99% of FY 2020 topline in FY 2021. Despite a shortfall in revenue numbers, through prudent planning & improvement in cost efficiencies, the Company posted YoY growths on EBITDA, EBITDA%, PAT and recorded a healthy cash flow in FY 2021. These actions have helped us improve the Operating Profit Margin (8.5% to 10.8%) & Net Profit Margin (3.8% to 5.8%) by over 200 basis points in the year under review. The strong financial performance is a clear validation of OELs brand strength, distribution footprint, product portfolio, and superior price-value proposition. Leading financial performance indicators & their trajectories are given in the next page.

2. A stronger Balance Sheet enabled by focussed Working capital management

OELs robust cash-planning and cash-management systems ensured its financial float, allowed it to stay agile and convert a Rs 91 Cr net debt end-Mar2020 to cash-surplus position end-Mar2021, thus improving the Debt-Equity ratio from 0.27 to 0.03. Also, the strong cash generation and net-surplus cash improved interest coverage ratio from 15.9 to 14.5 indicating robust financial position. Further, the cash-planning policies allowed for the Company to be sympathetic to market realities, support channel partners and vendor partners while also ensuring organizational continuity through the months of April-June 2020 when large-scale uncertainty prevailed in the market.

Proactive digitization & finance initiatives undertaken in earlier years have further helped OEL to maintain healthy working capital through the year. The user-friendly cash management portal introduced in FY 2020 has allowed OEL to maintain a healthy collections trend through the year without any physical intermediation (branches, cheques etc.) and with instantaneous settlement with host-to-host integration with banking partners. The pandemic window also provided us with an opportunity to renegotiate credit terms with our vendors and increase adoption of Channel Financing & Vendor Financing enablements, first initiated by the Company in FY 2018-19. A fully digitized Travel & Expense Management System enabled electronic logging and settlement of all travel and expense reimbursements of employees through the year ensuring the ability of the companys Finance & Commercial team to remotely support operations without any impediments.

Integrated Cash Management System introduced early part of the year was awarded Integrated Cash Flow Management Project of the Year award in Consumer Goods category at the 13th Inflection Innovation Webinar & Awards organized by Alden Market in association with NASSCOM.

Corporate Social Responsibility (CSR)

The Company contributed Rs 3 crores to the Prime Ministers Citizen Assistance and Relief in Emergency Situations (PM CARES) fund as a responsible corporate citizen & to support Government initiatives in light of the Covid19 pandemic. In addition to the PM CARES contribution, OEL also contributed Rs 25 lacs to West Bengal State Disaster Management Authority to support the relief & reconstruction programs being undertaken by the Government of West Bengal in wake of large-scale destruction caused by cyclone Amphan.

Internal controls systems

The Companys governance framework was designed to enhance performance predictability, business continuity and ensure organization-wide compliance with all relevant laws of the land. The internal control system provides efficiency, reliability and completeness of accounting records thus helping the Company in compiling timely, true and fair representation of financial and management information. These internal controls also facilitate optimum utilization of resources, protect Companys assets and stakeholder interests. The clearly defined organization structure, delegation of authority, code of conduct, and standard operating procedures enable all OELs employees to conduct business in an orderly and efficient manner. With the business processes having undergone changes, the Internal Financial Controls (IFC) has been further strengthened with inbuilt digital controls backed by process controls, segregation of duties, centralisation and automation.

OEL has IFC (Internal Financial Control), Whistle Blower Policy and Fraud Risk Framework Policy to address different risks. The Internal Audit function monitors the effectiveness and adequacy of all control systems and provides recommendations for improvements. A comprehensive Internal Audit Programme is worked out every year in alignment with business priorities and developments, duly approved by the Audit Committee of the Board of Directors. The Audit Committee of the Board reviews every quarter, significant audit findings of the Internal Audit Function, covering operational, financial and other areas and provides guidance on strengthening internal controls.

Cautionary Statement

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimations and expectations may be ‘forward-looking statements within the meaning of applicable law and regulations. Management has based these forward-looking statements on its current expectations and projections about future events. Such statements involve known and unknown risks, significant changes in the political and economic environment in India or key markets abroad, tax laws, litigation, labour relations, exchange rate fluctuations, interest and other costs and may cause actual results to differ materially.