Rishabh Instruments Ltd Management Discussions

Global Economy

The global economy has shown remarkable resilience in the face of multiple challenges, including the

COVID-19 pandemic, the Russia-Ukraine conflict, and ongoing cost-of-living crises. Despite initial concerns, inflation is declining faster than expected since its peak in 2022. This decline has had a less severe impact on employment and economic activity than initially expected. This positive trend can be attributed to several factors.

Global growth will remain at 3.1% in 2024 and 3.2% in 2025. Nevertheless, the projection for global growth in 2024 and 2025 is below the historical annual average of 3.8% (for 2000-2019), reflecting restrictive monetary policies, withdrawal of fiscal support, and low underlying productivity growth.

Mature economies are expected to stabilise with a slight improvement in growth to 1.5% in 2024 and 1.6% in 2025, despite being below the pre-pandemic average of 2.1%.

The US is anticipated to achieve a growth rate of 2.2% in 2024, although it may encounter economic challenges before stabilising in 2025. Europe is projected to experience a gradual recovery, with growth increasing from 0.7% in 2024 to 1.5% in 2025, supported by expected rate cuts. Emerging markets and developing economies are set for stable growth, with forecasts of 4.3% for both 2024 and 2025. China and India are expected to maintain robust growth, contributing to the Asian regions economic stability.

(Source: https://www.conference-board.org/topics/global-economic-outlook)

Indian Economy

Indias GDP growth for 2023-24 is provisionally estimated at 8.2%, surpassing the 7.8% projection by the National Statistical Office estimate by the RBI. This impressive growth, driven by a rise in investment spending, has also led to a t.6% for 2023-24. reductioninthefiscal deficit

Despite strong headline GDP numbers, there are signs of weakness in consumption spending, which accounts for two-thirds of growth. Private final consumption expenditure increased by only 3.1% in

2023-24. This sluggish consumption is attributed to reduced urban spending after the post-COVID sales bump and slow rural spending due to the uneven 2023 monsoon. However, with a favourable monsoon forecast for this year, rural spending is expected to resume.

The manufacturing sector witnessed a significant growth of 9.9% in 2023-24, highlighting the success of the Governments efforts for the sector. Growth in real Gross Value Added (GVA) accelerated to 7.2% in 2023-24 from 6.7% in 2022-23, mainly due to the manufacturing sectors performance. Overall, Indias economic outlook remains optimistic, buoyed by robust investment driving growth and the potential for enhanced consumption as conditions stabilise. The countrys robust estimated GDP growth rate of 8.2% in 2023-24 is the highest among major economies worldwide.

(Source: https://www.forbesindia.com/article/news/at-82-percent-indias-gdp-growth-continues-to-surprise/93275/1)

Electrical Automation Market

The electrical automation sector plays a crucial role in streamlining complex systems through signal integration. With the global adoption of digitisation and Industry 4.0 strategies, industries are increasingly focussing on enhancing operational efficiency and for electrical automation components. This trend has spurred consistent growth in the global electrical automation market.

In India, various industries including automotive, food and beverage, FMCG, and chemicals are witnessing a remarkable uptick in automation adoption. Manufacturers are prioritising automation to meet international quality standards and boost productivity. The Industrial Internet of Things (IIoT) concept is gaining traction, further propelling growth in Indias electrical automation sector.

(NSO) and the 7.6%

Indias proactive efforts to attract investments and fortify its global supply chain position amid evolving geopolitical dynamics add to the markets positive outlook. Collaborative endeavours between nations, such as India and the US, promise a bright future for semiconductors, defence, and emerging technologies. This bodes well for the overall advancement of the electrical automation industry, with emerging segments like building automation and data centres poised for substantial expansion.

Metering, Control, and Protection Devices Market

The metering, control, and protection devices market, both globally and in India, is poised for substantial growth in the coming years. Despite the setbacks caused by the COVID-19 pandemic, the demand for these devices remains robust, due to various factors. In the global landscape, the resurgence of infrastructure development and the gradual recovery of industries post-pandemic are expected to fuel the expansion of this market. As economic investments gain momentum, theres a renewed focus on upgrading and modernising electrical distribution networks, industrial panels, and process controls. Moreover, increasing awareness about energy efficiency and the need for reliable power distribution further augments the demand for these devices across various sectors.

In India, the growth trajectory is propelled by heightened demand from the utility sector, coupled with a favourable regulatory environment and Government initiatives aimed at infrastructure development. The market is characterised by a mix of multinational corporations with local manufacturing facilities and home-grown companies offering innovative solutions tailored to domestic market needs.

Moving forward, key differentiating factors such as product innovation, reliability, user safety, and ease of installation will continue to drive the competitiveness of market players.

Portable Test and Measurement Instruments Market

The global market for portable test and measurement instruments is experiencing steady growth, driven by the increasing demand for highly reliable electronic devices and the ongoing digital transformation across industries. This growth is particularly pronounced in regions like the Asia-Pacific, including

India, where rapid urbanisation, industrialisation, and favourable Government policies create a conducive environment for market expansion.

In India, the growth of the portable test and measurement instruments market is fuelled by several key factors, including the rise in electric vehicle (EV) manufacturing, heightened defence testing, and a growing emphasis on solar PV installations. Moreover, the growth of electronics manufacturing, especially in communications and consumer electronics, makes a substantial contribution. Government initiatives like Make in India drive investments in these sectors, providing financial incentives to OEMs for expanding their manufacturing capabilities, further propelling market growth.

Solar Inverters Market

The global solar PV market is experiencing a resurgence post-pandemic, fuelled by declining prices of modules and inverters, which are driving heightened installations worldwide. This growth is marked by an expanding geographical distribution of solar PV installations, with emerging markets like

India becoming the key drivers of this expansion.

The solar industrys positive trajectory is underpinned by a global shift towards renewable energy sources, particularly solar power. This is further supported by initiatives like the Paris Agreement and ambitious national targets such as Indias pledge to derive 40% of its energy from renewable sources by 2030.

In India, government initiatives like Make in India and attractive financial incentives such as tax holidays are stimulating investments in solar infrastructure.

Rooftop solar installations are gaining significant traction, buoyed by policies mandating a percentage of distributed power to originate from renewable sources. This presents a notable opportunity for the solar string inverter market, given that rooftop installations typically rely on string inverters.

Moreover, the growth of this market is propelled by increasing installations across diverse sectors including education, automotive, transportation, and power generation. As industries increasingly embrace solar power for their economic and environmental advantages, the demand for string inverters is anticipated to soar further, driving robust expansion in the coming years.

Aluminium High-Pressure Die Casting (HPDC) Market

Globally, the market for high-pressure aluminium die casting (HPDC) has experienced robust expansion, driven by the automotive industrys demand for lightweight and durable components. With a well-developed ecosystem supporting material suppliers, skilled labour, and equipment, Indias contribution to this market has been noteworthy. Companies in India manufacture critical components like engine blocks and bed plates, contributing significantly to the automotive industrys advancement.

Furthermore, the rise of EVs has opened up new opportunities for HPDC. Components such as EV motors and battery housings, vital for enhancing drive range and safety, are driving additional demand in the market.

Looking ahead, the outlook for the aluminium die-casting market remains promising, buoyed by factors like Government incentives for EV adoption, stringent emission standards, and the ongoing recovery of automotive sales. This positive momentum indicates sustained growth and high demand for aluminium cast parts, both in the automotive sector and other industrial applications, over the next decade.

Opportunities

Manufacturing Growth

The expansion of manufacturing activities, particularly in the automotive, food and beverage, FMCG, and chemicals sectors, drives the adoption of automation technologies to enhance productivity and meet international standards.

Rapid Urban Expansion

Urbanisation trends are driving the demand for infrastructure development, housing, and commercial spaces. This is boosting the demand for electrical automation, solar inverters, and aluminium die-casting components.

Industry 4.0 Adoption

The shift towards digitalisation and Industry 4.0 strategies is fuelling the demand for electrical automation components, facilitating efficient and flexible operations across industries.

Policy Support

Government initiatives like Make in India and financial incentives for EV adoption, infrastructure development, and renewable energy projects stimulate investments and drive market growth.

Infrastructure Development

The Governments focus on infrastructure development, including transportation, energy, and smart cities, translates to increased demand for electrical automation, solar inverters, and aluminium die-casting components to support these projects.

Threats

Competitive Threats

Indian players may lose out to global competitors if the manufacturing of electrical automation components is not strengthened in India. Additionally, the acquisition of Indian players by global competitors further threatens their market share and sustainability.

Market Entry and Sustenance Challenges

Global companies possess strong brand presence and equity, and extensive distribution networks, creating significant barriers for local players to enter and sustain themselves in the market.

Geopolitical Disruptions

Geopolitical instability can lead to significant chain and operational challenges, impacting the continuity and efficiency of business operations.

The Dominance of Chinese Players

The market is heavily dominated by Chinese companies. This poses substantial challenges for Indian players in terms of market entry and sustainability.

ImpactofGlobalSupplyChainandGeopolitical Issues

The increasing emphasis by governments worldwide on securing local supply chains may adversely affect the export market. Additionally, global geopolitical disruptions can impact the supply of semiconductors to the automotive industry, consequently reducing orders for aluminium die casting.

Company Overview

Established in 1982, Rishabh Instruments Limited (also referred to as ‘RIL or ‘The Company) is a global energy efficiency solutions provider, specialising in electrical automation, metering and measurement, and precision-engineered products. RIL caters to diverse industries including power, automotive, railway, and industrial sectors, offering a comprehensive range of electrical measurement and process optimisation equipment. The Companys portfolio focuses on designing, developing, manufacturing, and selling devices under its brand, providing cost-effective solutions to measure, control, record, analyse, and optimise energy and processes.

RIL is recognised as a global leader in the manufacturing and supply of analog panel meters and ranks among the top global companies in low-voltage current transformers. Additionally, RIL offers complete aluminium HPDC solutions for automotive compressor manufacturers and high-precision flow meter manufacturers, specialising in close tolerance fabrication, machining, and finishing of precision components.

As a vertically integrated player, RIL designs, develops, manufactures, and supplies electrical automation devices, metering, control and protection devices, portable test and measuring instruments, and solar string inverters. Through its subsidiary,

Lumel Alucast, RIL extends its expertise in aluminium

HPDC manufacturing and supply. The Company also provides various manufacturing services, including mould design and manufacturing, EMI/EMC testing services, electronic manufacturing services, Energy Management Services, and software solutions such as MARC.

With a strong global presence, RIL serves over 3,000 customers across 100+ countries, offering

145+ product lines. The Company operatesfive manufacturing facilities (two in Nashik, two in Poland, and one in China), supported by dedicated research and development units. RILs facilities are equipped with numerous approvals and certifications, ensuring high-quality and compliant production. Additionally,

RIL operates modification centres in the UK and the

US, enhancing its ability to serve global markets effectively.

The Companys Polish subsidiaries, Lumel SA and Lumel Alucast, contribute significantly to its manufacturing capabilities and global reach. With an impressive catalogue of 35.5 Million product SKUs,

RIL maintains a strong B2B focus, engaging in white labelling for industry giants.

Financial Highlights

For 2023-24, on a consolidated basis, RILs revenue stood at INR 6,897 Million, marking a substantial increase from INR 5,695 Million recorded in the previous year, reflectinga growth of 21%. The adjusted

EBITDA for 2023-24 stood at INR 955 Million, an increase from INR 841 Million in the previous year.

The Profit Before Tax (PBT) for 2023-24 stood at

INR 511 Million as compared to INR 607 Million in the previous year, witnessing a slight decrease of

(15.8)%. The Companys Profit After Tax (PAT) for

2023-24 stood at INR 399 Million as compared to INR 497 Million, registering a decrease of (19.6)%. The basic EPS is INR 10.71 and the diluted EPS is INR 10.61 for 2023-24.

Segment Performance

24

Segments	Revenue %
Electrical Automation	9.6
Metering, Control and	41.3
Protection Devices
Portable Test and	7.7
Manufacturing Instruments
Aluminium HPDCs	38.9
Others	2.5

Electrical automation witnessed a substantial growth of 17% in 2023-24, reaching INR 659 Million on a y-o-y basis

Metering and control devices also experienced a notable increase of 17% in 2023-24, reaching INR 2,849 Million compared to the previous year

The aluminium die-cast business demonstrated significant growth of 19% in 2023-24, reaching

INR 2,686 Million y-o-y

Portable testing and measurement instruments recorded healthy double-digit growth of 31% in 2023-24 compared to the previous year

Other products like solar string inverters exhibited remarkable growth potential, with a robust increase of 348%, reaching INR 170 Million in 2023-24

Risk Management

Risk	Description	Mitigation
Economic Risk	Economic risk refers to the potential for RILs financial performance and market position to be adversely affected by macroeconomic conditions and trends, such as economic recessions, inflation, changes in interest rates, and fluctuations in economic growth.	To mitigate economic risk, by employing strategies such as diversifying its product portfolio and geographic markets, focusing on cost management and efficiency improvements, and engaging in rigorous financial planning and stress testing To closely monitor macroeconomic indicators and market trends, invest in innovation and R&D to stay competitive, and maintain strong customer relationships To actively renegotiate long-term contracts with the Lumel Alucast automotive customers to address the significant cost increases driven by labour, inflation, and energy expenses
	Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, systems, or external events. This includes risks related to production delays, system failures, or breaches in cybersecurity.	To mitigate operational risks by implementing robust internal controls and process improvement initiatives To invest in advanced technology and regularly maintain its machinery and equipment to ensure smooth operations
Operational Risk
Regulatory and Compliance	Regulatory and compliance risk is the risk of loss resulting from non-compliance with laws, regulations, and industry standards. RIL operates in multiple jurisdictions and must comply with various local and international regulations.	To undertake comprehensive training programmes for employees To ensure strict adherence to safety and quality standards to avoid operational risks To have a dedicated compliance team that monitors regulatory changes and ensures that the Companys operations are in full compliance with applicable laws
Risk		To maintain high standards of regulatory adherence, the Company conducts regular audits and compliance training for employees

 

Risk	Description	Mitigation
Commodity Price Risk	RIL is exposed to commodity price risk, primarily concerning the prices of raw materials such as metals and electronic components. These price fluctuations can impact the cost of production and ultimately the profit margins of the Company.	To enter long-term supply contracts with suppliers to lock in prices and reduce volatility To engage in strategic sourcing and bulk purchasing to benefit from economies of scale
		To closely monitor commodity markets and use financial derivatives to hedge against adverse price movements
Supply Chain Risk	Supply chain risk refers to the potential for disruptions in RILs supply chain, which can affect the timely and cost- effective procurement of raw materials, components, and finished goods.	To mitigate supply chain risk by diversifying its supplier base and establishing strategic partnerships with key suppliers to ensure reliability and stability
		To apply robust inventory management practices, including maintaining safety stock levels and just-in-time systems, and continuously monitor its supply chain using advanced analytics and real- time data
		To use technology and automation to enhance supply chain visibility and efficiency, ensuring seamless coordination and minimal operational impact

Human Resources

RILs workforce is a critical factor in maintaining the Companys competitive edge, supported by a comprehensive approach to employee training, retention, and development. The Company is dedicated to enhancing operational excellence, productivity, and adherence to quality and safety standards through regular employee training. To further motivate and reward contributions, RIL offers Performance Linked Incentives (PLIs).

RIL places strong emphasis on building robust bench strengths through diverse initiatives and strategic collaborations. These include management development programmes and partnerships with leading technical and management universities in

India, such as KK Wagh, SP Jain, Symbiosis, and IIT

Mumbai. In Europe, RIL has forged key alliances with institutions like Zielona Gora University and Poznan University in Poland and Chemnitz University of Technology in Germany.

Specifically, RILs collaboration with Zielona Gora

University has led to the creation of a specialised Masters program for Indian engineering students, sponsored by Lumel SA & Lumel Alucast. In addition, Lumel has initiated vocational training programmes for juvenile employees, offering them practical skills in electronics, CNC machine operation, and logistics. RIL also partners with Poznan and Chemnitz Universities to provide vocational training, joint research projects, and cross-border EU initiatives, thereby bridging the gap between academic knowledge and practical industry needs.

Moreover, Lumel is actively engaged in educational outreach, hosting numerous student internships, participating in job and education fairs, and organising study tours to introduce young talent to the working environment at Lumel facilities. These initiatives, along with the establishment of a Center of Excellence at MVP College of Engineering and AI

& Data Science internships, show RILs commitment to preparing a future-ready workforce.

As of March 31, 2024, the Company had 531 permanent employees in India and 159 labourers hired on a contract basis. The total global headcount stands at 1418.

Internal Control Systems

RILs internal control systems are meticulously designed to operate cohesively, incorporating thorough risk assessments, effective risk mitigation measures, and continuous monitoring. Initially, the Company identifies key business risks through extensive analysis and implements tailored mitigation strategies. Routine monitoring of business operations is conducted by both the internal team and an independent internal audit firm. Any deviations are swiftly reported to the Management and Audit Committee for prompt action and correction. Well-documented policies and procedures ensure strict adherence to all relevant regulations, laws, and statutes. Additionally, robust IT systems are deployed to safeguard sensitive data and streamline audit processes effectively. RIL maintains compliance with accounting standards when recording transactions. Several strategies, including robust Management Information Systems (MIS), are employed for real-time reporting and expense control. Furthermore, any deviations from budgetary allocations are promptly identified and rectified to ensure strict compliance.

Cautionary Statement

Statements in the Management Discussion and Analysis Report describing the Companys projections, estimates, and expectations may be interpreted as ‘forward-looking within the meaning of applicable laws and regulations. Actual results could differ from those expressed or implied.

Important factors that could make a difference to its operations include economic conditions affecting demand and supply, price conditions in the domestic and international markets in which it operates, and changes in Government regulations, tax laws, and other statutes. The Company assumes no responsibility to publicly amend, modify, or revise any ‘forward-looking statements based on any subsequent developments, information, or events.