Orient Electric Ltd Management Discussions.

Economy Overview

In the financial year under review, while many indicators pointed to green shoots of recovery after leaving the worst of the COVID-19 pandemic behind, the geopolitical instability originated due to Ukraine-Russia war towards the end of the financial year has further increased the ongoing volatility in crude oil and gas prices, and uncertainty to the integrated supply chain affecting most of the commodities, especially metals, plastics, and paper for the Company. The COVID-19 pandemic and the resultant national restrictions had already impacted two crucial business periods during the fiscal period. However, the largely vaccinated population reinforced with booster doses is expected to substantially contain any future impact of the pandemic risks.

According to the IMF?s World Economic Outlook, April 2022, the economic damage from the Eastern European conflict will significantly slowdown the global growth in 2022 and add to fuel and food inflation. Global growth is projected to slowdown from an estimated 6.1% in 2021 to 3.6% in 2022. As with all emerging economies, India, too, has been affected by these external shocks. The Consumer Electricals sector is continuously faced with challenges in sourcing raw materials and components due to global supply chain constraints and volatility in commodity costs. However, the sector leaders seem to have emerged stronger from these disruptions compared to the regional players?/ unorganised trade due to their superior and deeper distribution reach, ability to manage the supply chain through alternate sourcing, and structural cost-saving measures.

While India?s pathway to sustain high single-digit growth has become challenging, its underlying sturdy economic fundamentals, dovetailed with governmental push on self-sustaining development, are expected to insulate its long-term outlook from the current short-term turbulence.

Industry Overview & Opportunities

Industry reports suggest that consumer durables spending has grown by a high-single-digit in FY 2022, on account of vaccine penetration, recovery of the labour market, hybrid working environment, and opening up of all end consumer services. According to the report, future demand is expected to focus on smarter products that offer better value propositions and connected IoT-enabled and energy-efficient experiences. The Indian consumer electrical sector is likely to grow consistently over the next decade. These products cater to the essential needs of households, having resilient demand and less dependency on discretionary spending trends of the economy.

a. Fundamental Drivers impacting Consumer Durables

Several fundamental and long-term macro drivers and opportunities influence the industry?s growth and evolution. To begin with, consumer appliances segment is comparatively under-penetrated in India vis-a-vis developed nations. Overall, poverty alleviation and prosperity permeating India?s urban and rural economies bode well for consumer demand and the industry. Organised players? channel expansion into rural geographies will drive growth and penetration in the coming years. Even though the pandemic disruption slowed down the pace somewhat over the last two years, higher disposable income and thrust on affordable housing & construction are driving urbanisation and home occupancy, triggering the demand for various consumer durable products.

The higher spending capability of the younger generation and its aspirations for aesthetically appealing products have led to a rise in the premiumisation trend in the Consumer Electricals sector. With premiumisation and price gaps narrowing, a marked shift towards organised brands is taking shape. The top market leaders are key beneficiaries of this shift and have seen their market share rising over the past five years. Another reason for the demand for high-end products surging is the fact that retailers and consumer credit companies are more readily providing financing options to pay in Easy Monthly Instalments (EMIs). With low-interest rates, the universal Indian Stack and availability of instant digital credit, consumers are preferring to spend to satiate their aspirations.

Consumers are increasingly conscious of inflation and environment. They are countering rising utility bills for electricity by gravitating more towards energy-efficient and environment friendly electrical appliances. Industry peers are responding to this by inculcating greater energy efficiency features into their various products, promising significant payback periods as purchase justification in some cases.

Industry players are focussing more on consumers? needs and are increasingly manufacturing country centric products with affordable price tags attracting new consumer segments. Technology advancements have paved the way for many innovative product options, providing different features and advantages. With a greater variety of options and faster adoption of newer technologies and variants, the electrical consumer industry is experiencing shorter and more frequent replacement cycles by consumers. This consumer behaviour is conducive to innovation led agile players in responding to consumer tastes and technology adoption.

With deeper pockets to invest in brands, industry leaders are benefitting from a deeper and well-entrenched nationwide distribution network; higher R&D capabilities, which enable them to churn out premium and technologically superior products; and a faster adherence to change in government norms, such as the BEE ratings change. The rising consumer aspirations are also leading to a preference for branded, better quality, feature-rich and aesthetically appealing products. The unbranded and smaller regional players are facing a long-term existential threat, which has intensified even further during the pandemic due to the rise in commodity prices and supply chain challenges. They are steadily relinquishing market share given the continued supply chain and working capital constraints, further exacerbated by the ensuing Eastern Europe conflict.

b. Key Government Initiatives impacting Consumer Durables

The Government?s push for the BEE Star Rating system is expected to impact the consumer electrical industry, positively. The BEE norms, anticipated to be introduced during FY2022-23, will encourage greater energy efficiency in electrical appliances and are likely to favour leaders backed by strong brands and mature product development capabilities. Organised players are expected to comply faster with upgraded standards than unorganised regional players and are likely to increase market share and profitability.

The Government?s most ambitious project, ‘Make in India?, is expected to lead the growth and investment opportunities within consumer durables and electronics sectors. Covering many other industries, including consumer electricals, the PLI scheme is encouraging a new cycle of investments in the industry, which is likely to have a multiplier effect on job creation, income growth, and the propensity for consumers to spend on electrical home appliances. Furthermore, steady progress in the 100 cities and towns chosen under the Government?s Smart Cities Mission is creating new demand for consumer electricals.

Finally, the Government?s ambitious plans on doubling farm incomes, strengthening the manufacturing sector, and other structural reforms aimed at revitalising the economy are set to increase rural demand further and improve disposable incomes across the economy. In addition to this, the Government?s target to build over 20+ million homes under its ‘Housing for All? via affordable housing schemes, is expected to boost the consumer durable sector.

Company Overview

Orient Electric Limited operates in two segments:

Electrical Consumer Durables (ECD), and Lighting and Switchgear (L&S)

The OEL Strategies in Play

OEL continued to reinforce its consumer centricity ethos and focused on the key strategic areas to hold up the Company?s vision and deliver sustainable growth.

The areas of action and execution that are differentiating the Company from its peers and driving value creation for its stakeholders are:

a. Building on Consumer Insights

Understanding our consumer needs and wants is intrinsic to our business? success. Consumer insights allow our business teams to understand how they think and feel about our products and services. The Company is increasingly relying on its Consumer Insights as the epicentre of all its business decisions and actions and embeds this on a continued sustainable basis. This approach got accelerated by introducing a dedicated consumer insights think-tank within the management team. OEL rolled out several research and analysis initiatives that included digging into demographic trends; getting insights on how consumers use existing products; conducting market research for new products; uncovering creative use cases; getting competitive insights; evaluating after-sales feedback from consumers and influencers; tracking retailer feedback and using market intelligence data and analytics. The business outcome of these initiatives have translated into new product development, formulation of marketing strategies, enhancing consumer servicing, brand positioning and product launches that resonate well with the marketplace.

b. Leveraging in-house Design Capabilities

The entire business draws its differentiated strength from the high level of in-house designing capabilities and its ability to maintain agility in quickly turning around new innovative products and embracing the latest technology, either to stand out as a differentiated value proposition to consumers or to mitigate the pressures of cost increases. The entire R&D team is staffed with a deep talent pool on its rolls. A new state-of-the-art R&D Centre was opened at Faridabad in April 2021 to consolidate the Company?s entire R&D activities under one roof. This has strengthened the Company?s overall design capabilities and harnessed new efficiencies and synergies in new product development processes. This R&D Centre is equipped with a variety of modern testing equipment, allowing the Company to be self-sufficient as an independent design centre and a custodian of the high brand value that OEL stands for.

c. Consumer-Centric Innovation

The Company is using consumer-centricity to gradually shift from ‘box selling? to ‘value selling?. With more robust product training and sales building capability, OEL is paving the way towards a better sales quality in which channel partner satisfaction is given more significant weightage. This will enable OEL to enhance its sales realisation and margins overtime going forward. Granular insights from deep consumer research have helped develop consumer-centric products with a superior price-value proposition. Important examples representing this approach that were launched during FY2022 include the Falcon 425, the fastest fan in the 1200 mm sweep size; the i-Tome energy-saving BLDC fan; the Jazz Art decorative fan; a range of metal-bodied air coolers; the Thermo Swift tankless water heater; and the mass premium range of Stella modular switches. Based on deep consumer insights, all these products have resonated well with the consumers. Steering through the megatrend of energy-saving electricals, Orient electric bagged the prestigious National Energy & Conservation Award 2021 under the category "Most Energy Efficient Appliance of the Year - LED Bulb" for its 9W Self Ballasted LED Bulb.

d. Accelerating Digital Adoption

As part of the fast-paced transformation journey, Orient Electric Limited has built a digital ecosystem to fill consumers? insatiable demand for exceptional experiences and convenience. At OEL, the flagship programme of the entity for the last three years, titled "e-Wings", has successfully seen all its Phase-I digital initiatives rolled out. These programmes have been a welcome catalyst to accelerate the ever-growing digital adoption within the Company, including its various business partners. OEL will be entering Phase II of the digitisation programme "e-wings" in FY2023, building newer capabilities in digital manufacturing and deeper business analytical insights.

High emphasis was given across all management levels to sharpening the utilisation of all digital capabilities like Dealer Management System, Sales Force Automation, Transport Management System, Orient Connect, Traceability, Employee engagement systems and Business Intelligence through training and awareness programmes, thereby embedding the e-Wings programme into the routine day-to-day workings of the organisation.

With Consumers on top of mind, OEL also ramped up its after-sales Services, offering improved service experiences through digitisation and enriching the capability of the service network. The Orient Connect Programme was also established to engage with last mile selling points directly and capture market insights from the performance of retail counters. To leverage this further, our capability for product traceability is now being extended to all our product lines, including coolers, water heaters, LED lights and switches & switchgears. This traceability will also enable the Company to track its products in the market, which is particularly useful in enhancing after-sales servicing.

e. Channel Proliferation

Orient Electric Limited has strengthened its position by expanding its distribution landscape. During FY2022, OEL redesigned its fans distribution framework in Odisha and Bihar to extract the full market potential of these territories. These alterations to OEL?s distribution system were designed to gain a higher aggregate market share within these regions. The Company also initiated the expansion of its fan?s distribution network within South India to capture and reinforce this underpenetrated market. Revenue growth from the OEL?s digital channels is also on the Company?s strategic road map for fuelling growth. It is pursuing the expansion of its E-comm channel and increasing the Company?s brand presence through immersive online marketing programmes on the platform. To scale up the sales of OEL?s line of professional luminaires, the Company is also foraying into emerging channels of business such as the B2B and Government e-Marketplace. The Fa?ade lighting line, in particular, gained healthy traction during the financial year, thanks to larger Government allocations for illuminating various heritage and historical buildings. Some notable projects include the Dwarkadhish Highway, the Bhakra Nangal Dam, and the Aligarh Smart City.

To strengthen Orient Electric?s relationship with the fan?s distributors, an ‘All India Sales Excellence Awards? was conducted virtually, with nearly 200 winning dealers? participating pan India. Reputed actress Vidya Balan was invited to be the keynote speaker and engage with dealers over a live session.

f. Talent Strengthening

It is a matter of pride for Orient Electric to have been awarded the certification of "Great Places to Work" for the third time in a row. This is testimony to the ever-increasing trust and confidence of the large employee pool in the Company?s strong and committed management practices and its transparency in being a people-centric organisation. OEL has been hiring diligently across all levels to strengthen its talent pool. Key leadership positions are being filled up with seasoned leaders with cross-function capabilities. The marketing force is also increasing its cohort of ‘feet on the ground? associates for ramping up distribution penetration and brand reach. Rewards and recognition are a key part of OEL?s culture, with recognition such as the ‘Hi-Flyer Awards? arranged every quarter to celebrate star performers. These initiatives were maintained even during the COVID disrupted periods.

OEL has expanded into new talent verticals and strengthened its organisational structure with the addition of the Consumer Insights and Manufacturing Excellence functions. The Company is poised to substantially reinforce its e-commerce capabilities to support the entire digital ecosystem in the forthcoming year. As a result, the Company is re-orienting itself with new talent and embracing unique and innovative ways of working. Despite multiple lockdowns, the Company administered two specialised training programmes in the year under review. These included the Potential Assessment of Sales Executives (PASE) and the Future Leaders of Orient Electric (FLOE). These programmes were tailored to a select talent pool and were created to serve as complete development journeys with predetermined ends. Apart from these specialized pieces of training, other development programmes were also conducted virtually. Some of these included the digital awareness and training sessions, sessions on six sigma; product training and awareness sessions; and regulatory consciousness sessions on multiple aspects such as Insider Trading, Compliance, POSH and Codes of Conduct.

g. Enriching consumer experience

OEL believes in delivering end-to-end consumer experience, leaving no stones unturned to earn consumer loyalty. From pleasant buying experiences across channels and installation, to product performance and aftersales service. Providing excellent after-sales service is an essential pillar of our consumer-centricity philosophy for the Company. Right from onboarding guide and product training, to listening to consumer feedback and returns and exchanges, OEL tries to be meticulous in its sales service to create consumers for life. Not only do they buy from Orient again, but they also become strong word-of-mouth referrals, projecting a positive brand image to their friends and families. The Company believes in investing in ongoing consumer happiness to sustain continuous growth. During the fiscal period under review, OEL centralised its service network across businesses in specific geographies. This improved the speed of service delivery, further enriching the consumer experience.

h. Manufacturing Excellence

To improve competitive advantage and ensure operational excellence, OEL undertook multiple measures and strategic projects. To maintain quality and productivity, the Company continues to introduce automation as an important tool of manufacturing strategy. OEL is also placing a high priority on establishing a state-of-the-art greenfield manufacturing facility in Hyderabad, for which the Company has commenced the design phase, with construction planned to start in Q1 of FY23. Furthermore, during the year FY2022, other major projects completed were the re-layout of the Faridabad plant for unlocking higher productivity and installation of automated assembly lines of the LED driver in manufacturing plant at Noida, to improve the productivity and quality consistency.

Apart from delivering efficiency, improved space utilisation and cost-of-quality advantages, the implemented measures are intended to enhance the present installed capacity and open new monetisation channels.

Segment-wise business Analysis

a. Electrical Consumer Durables (ECD)

Deeper consumer insights through targeted consumer research activities in specific product categories and geographies, have enabled the Company to sharpen its sales execution strategies. As part of its ongoing distribution outreach, steady progress is being made in penetrating India?s Southern and Eastern regions while maintaining the strengths in the North. To strengthen the distribution channel and digital capabilities, various initiatives at grass root levels were adopted with a sharper focus on secondaries and market share expansion.

Coolers and Water Heaters were deeply affected by the disruption caused by multiple pandemic waves. The overall Coolers category suffered a setback once again later in the period with the multiple COVID Waves impairing business. The anxiety emanating from the threat of the 3rd COVID wave led to the postponement of inventory filling decisions by channel partners, particularly for Coolers. The channel partners were also straddled with high inventory levels of slow-moving coolers, causing poor working capital utilisation. Water Heaters picked up at a high pace in the recovery after the 2nd COVID wave during the 2nd and 3rd quarters of FY2022. Despite the ensuing delayed winter and the arrival of the 3rd COVID wave, the Company was able to achieve high double-digit growth YoY in Water Heaters. The introduction of new products such as the Glassline Water Heaters, the Modular Metal Coolers, and the range expansion in Desert Coolers enabled the Company to sustain moderate sales growth in Appliances.

In FY2022, the ECD segment demonstrated commendable performance despite facing many headwinds, including raw material inflationary pressures, muted festivals and consumption slowdowns caused by the 2nd and 3rd COVID waves. For the year ended 31st March 2022, OEL?s Electrical Consumer Durables segment posted revenues of Rs. 1,799 Cr. up by 18.9% YoY and EBIT of Rs. 201 Cr., down by 2% YoY.

The ECD division is a heavy user of metals and plastics as inputs. Margins in this segment got were impacted due to a sharp surge in prices of these commodities during the year. The continuous commodity cost increases nudged the industry to invoke price increases towards the end of FY2022. In addition to this, a general shift from the unorganised to the organised sector fuelled the demand for the entry-level segment, where OEL saw volumes surge and market share gains. The e-Commerce channel, however, was impacted due to the lacklustre response in sell-out and in-festive season sales, including important shopping days. Further, restructuring of e-commerce partners also led to a relative slowdown in the Company?s e-commerce business compared to FY2021.

b. Lighting & Switchgear

Heightened focus and growth of Consumer Luminaries, enabled by distribution expansion, new product introductions, product mix improvements, digital adoption, and optimised brand campaigns, led to high double-digit growth for OEL in the lighting business, despite the headwinds in LED Lamps and pricing. Close coordination between sales, planning and the factory ensured uninterrupted supplies despite a market shortage of components. OEL modified specifications and used alternative ICs and components from new suppliers to circumvent the availability risks and high costs for hard to source electronic components.

New projects, and the appointment of new dealers for these projects, make the prospects for the tender segment of the business look promising. Furthermore, the B2G segment witnessed significant momentum through the GeM Platform. In Professional Luminaries, the Company received strong interest from a continuously growing enquiry bank. OEL achieved planned collections within the Lighting tender business during the year, reducing the overall receivables considerably. The EESL business, however, experienced marginal growth with the aftereffects of the pandemic hurting many projects, coupled with a scarcity of large new tenders in this segment. In contrast, the smart street lighting on the highways has started gaining traction.

The Company?s new range of switches catering to the mass-premium segment is being well received by channels and consumers alike, and volumes continue to pick up the pace. The launch of the "Stella" series of switches earlier in the quarter showed encouraging response, with repeat orders flowing in.

Being a high advocacy product category, the pandemic disruption during certain parts of the year caused hindrance to the retail-connect and influencer programmes. Yet, the sales team was able to elevate market interest by engaging with the electrician community through electrician meets, and through compelling advocacy and influencer programmes with its retail channel partners. During the year, around 10,700 electricians were engaged with through these meets.

For FY2022, OEL?s Lighting & Switchgear segment posted revenues of Rs. 649 Cr., up by 25.1% YoY and EBIT of Rs. 95 Cr., up by 37.0% YoY.

c. Exports

OEL continues to maintain its status as the largest exporter of Fans from India. The political disturbances in Sudan and economic stress in Sri Lanka during FY2022, cast roadblocks to strong Pre-COVID momentum in the export business. Despite these challenges, the Exports business was able to garner a high teens growth for the fiscal year. The pandemic induced global response to find alternative sourcing away from China introduced new opportunities for the Indian consumer electrical industry players. OEL successfully developed market-specific products and established relationships with new partners to enter newer geographies in Africa and the Middle East. Timely response from prospective partners in the USA aided prompt product development and regulatory clearances. Apart from Fans, which historically spearheaded the Company?s export business, OEL also made encouraging inroads for its Switchgears. The Company continues to expand its Export footprint with its Lighting and Air Coolers.

a. FY2022 in Review:

FY2022 started on a very challenging note due to the resurgence of the COVID-19 second wave, with increased fatality and infection rates which heightened the health risks and substantially overshadowed business sentiment. As a result, the summer season significantly impacted industries dependent on the summer season sales. As conditions started to look up again as soon as the second COVID wave subsided, business conditions were once again adversely affected by the arrival of the third COVID wave.

The year also witnessed unprecedented commodity price inflation in high double digits, putting pressure on margins throughout the year. This forced Consumer Electrical industry players to frequently consider raising prices to offset rising raw material costs. Because of competitive pressures, most industry peer groups hesitated to follow through with their declared price revisions. In case of OEL, the Company took several strategic steps to insulate itself from margin erosion, allowing it to focus on revenue and market share growth. The most important area OEL paid attention to was the flagship "Sanchay" programme, which was a successful initiative to mitigate the high cost and availability challenges for metal and plastic materials. This included having negotiations and structured deals with sourcing and business partners; drawing up alternative specifications; alternate sourcing; regulating inventory levels for bulk discounts and locking prices; and new product development. OEL also implemented value engineering without compromising product quality and performance, coupled with close monitoring of the Procurement Forum. The Company also focused on optimising its advertising and promotion spends, in line with the market restrictions and disruptions during significant parts of the year, and on the phasing out of non-priority spends. All these measures helped to protect OEL?s operating margins to some extent.

OEL sustained a confident Revenue momentum for FY2022, growing by 20.5% YoY. The Company?s diversified product mix and its new product interventions offered across multiple channels continued to strike a chord with evolving consumer demand. Despite the looming concern of a third wave led by the Omicron variant, the Company?s preparedness to counter supply challenges helped deliver overall Revenue growth during the financial year. While the delayed winter season and moderate festival demand impacted the Appliances business, such Revenue loss was recouped by growth across other segments, and the high double-digit growth in the Lighting and Switchgear segment. Historically, going into a typical winter season, the Company?s distribution channels should have started making commitments for the next sales cycle. However, the delay in the arrival of winter, and the nervousness around the severity of the third wave, caused some postponement in buying and inventorying decisions.

b. Gross Margins:

The relentless increase in commodity prices during FY2022 impacted all players within the industry. With a YoY growth in Cost of Goods by 24.3% in FY2022, OEL was no exception. Higher commodity prices have been keeping margins under pressure since Q1 FY2022 and persisted through the rest of the financial year. The ECD division (Appliances & Fans) product categories is a consumer of such commodities and were, therefore, more adversely affected. In the Lighting & Switchgear division, the availability of integrated circuits (ICs) and PP was more of a challenge rather than costs, due to the ongoing global supply chain issues in semiconductors. Efforts and agility of the R&D team?s agility in switching to alternative specifications, and thus through smart component substitution, vendor selection, prebuying, inventory management and the favourable product mix, the Company was largely able to protect the Lighting and Switchgear division?s margins.

c. Expenses:

Besides raw material costs, other operating costs also saw an upward trend during FY2022. As operations resumed to normal (Pre-COVID) levels towards the latter half of the fiscal period, ancillary costs such as Distribution, Marketing and Travel, which were essential to drive business growth, came back into the system compared to the previous year. The Discretionary and Brand Building related expenses grew by 23.9% YoY, while the normal operating expenses grew by 21.7% YoY.

d. Working Capital:

Working Capital as of 31st March 2022 has increased by 17 days from the previous fiscal year levels. This was due to a planned build-up of Inventory for the upcoming summer season of June 2022, coupled with the slow-moving Cooler inventory.

The Company?s overall inventory levels rose towards the end of the fiscal period due to lower sentiments from trade and channel partners induced by the third COVID Wave and geo-political concerns. The arrival of heatwaves across the country towards the end of the year enabled the clearance of the channel partners? inventories, with a nominal impact on the Company?s inventory.

Furthermore, the channels were supported through extended credits despite headwinds of resistance to price changes. As a result of lower demand sentiments, the Company decided to reduce procurement volumes, hence reducing payables. All this culminated in increased year-end working capital levels, as against a substantially lower base of COVID induced working capital levels of the previous year.


The financial discipline and high levels of corporate governance enabled by digital intervention have helped uphold the strong Balance Sheet for the Company. The Company has enjoyed a complete debt-free status for the past two consecutive years within its short 4-year journey post demerger. Once again, the Company has clocked a net cash surplus of Rs.136 Cr., braving out the turbulence of severe cost inflation and COVID-affected demand hindrances. As a result, the Company was able to clock a pre-tax ROCE of 34.2% and Current Ratio of 1.56 and a Profit After Tax margin of 5.2% to Revenue.

During FY2022, the Company introduced an array of new Channel Financing and Vendor Financing modules, expanding the existing programmes of the past year. These facilities provided economic funding options to facilitate easier cash flows for OEL?s business partners.

These initiatives are delivering a win-win business outcome for all partners engaged in the process, including OEL?s financial partners.

Capital Expenditure

OEL?s acquisition of the land in Hyderabad for its greenfield project was a key CAPEX made by the Company in FY2022. The project is now ready with the design principles and expected to break ground in Q1 of FY2023 and be commissioned by Q4 of FY2023. During FY2022, the Company also made notable investments in setting up its R&D Centre at Faridabad; expanding its Driver Plant & LED lighting facility at Noida; expanding its LED Lighting facility; in the re-layout of the Faridabad Plant; making moulds for new products, and in the various digital transformation initiatives of the Company.

Corporate Social Responsibility

The Company has worked towards carving out a meaningful, highly effective, and socially impactful CSR program with actions on the ground that included:

Women Empowerment & Education - providing better facilities at Girl?s School Healthcare - mask distribution, vaccination to the community, and undertaking medical treatment for critical illness for weaker sections of society.

Eradicating hunger through meal distribution to under-privileged sections of society.

Tree Plantation for environment protection.

Internal Control

The internal control system provides efficiency, reliability, and completeness of accounting records, thus helping the Company compile timely, true and fair representation of financial and management information. 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 through a comprehensive Internal Audit Programme, performed by an independent internal auditor company. Observations and recommendations for improvements are forthwith acted upon with regular follow-ups on closure. High risk and critical observations are presented and reviewed by the Audit Committee and the Board of Directors on a quarterly basis. There is a continuous effort to strengthen the internal controls in the changing business environment.

Major Threats & Concerns:

1. Material costs: Supply chain challenges and elevated raw material or resource costs could adversely impact the availability and overall product cost structure, resulting in diminished margins.

OEL Mitigation - The Company has deployed alternative specifications and sourcing, regulating inventory levels for bulk discounts, and locking prices to mitigate the commodity risks.

2. Geopolitical risks: Disruption induced by the Eastern European war and COVID led restrictions could impact global supply chains, significantly straining business-as-usual operations.

OEL Mitigation - The Company continuously optimises its sourcing requirements by strengthening planning, deploying bulk buying strategies and robust supply chain planning to ensure smooth business operations.

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

OEL Mitigation - The Company continuously reviews its product portfolio, to make it more resilient against the cyclicity of weather patterns and climate change risk.

4. Increasing competition: With low entry barriers 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. OEL Mitigation - The Company consistently works to counter competition by producing consumer-centric products, leveraging R&D to have a differentiated portfolio, having strong market activation programmes, and ensuring prompt and dependable after-sales service to reinforce its brand.

5. Currency fluctuations: Unprecedented swings in foreign exchange rates driven by the global geopolitical crisis may create short term margin pressures from elevated material costs or depressed revenue realisations OEL Mitigation - The Company undertakes prudent inventory planning and currency hedging strategies with limited exposure to minimise the risks of currency fluctuations.

Cautionary Statement

Certain information set forth in this report contains "forward-looking information", including "future-oriented financial information" and "financial outlook", under applicable securities laws (collectively referred to herein as forward-looking statements). Except for statements of historical fact, the information contained herein may constitute some forward-looking statements. Such forward-looking statements are provided to allow potential investors the opportunity to understand management?s beliefs and opinions in respect of the future so that they may use such beliefs and opinions as one factor in evaluating an investment.

These statements are not guarantees of future performance, and undue reliance should not be placed on them. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or result expressed or implied by such forward-looking statements.

Although forward-looking statements contained in this report are based upon what management of the Company believes are reasonable assumptions, there can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The Company undertakes no obligation to update forward-looking statements if circumstances or management?s estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking statements.