s e power ltd Management discussions

The Management Discussion and Analysis Report has been prepared in accordance with the provisions of Regulation 34(2)(e) of Listing Regulations, read with Schedule V(B) thereto, with a view to provide an analysis of the business and Financial Statement of the Company for FY 2022-23 and should be read in conjunction with the respective Financial Statements and notes thereon.

COMPANY OVERVIEW

Our journey started with a vision to revolutionize the energy sector by employing cutting-edge technology and an out-of- the-box approach. We operate through the following segments: Non-Conventional Energy and Reclaimed Rubber. The Non-Conventional Energy segment generates electricity by wind energy and transfers the same to power grids. The Reclaimed Rubber segment has become a global supplier of crumb rubber, Whole tyre reclaim rubber and steel scrap obtained from tyres recycled.

Our focus is to engage in producing, manufacturing, supplying, distributing, transforming, converting, transmitting, processing, developing, storing, and procuring all forms of non-conventional and renewable power and energy and any such products and by-products derived from such business.

Through the years, our company has become one of the leading suppliers of reclaimed rubber in the country. Our ensemble of dedicated professionals has helped the company to grow exponentially, catering to a staunch set of domestic and international clientele. Our team is constantly cooperating with various rubber research experts, and has been working closely towards improving rubber processing methods with our experience and technology know-how of the modern reclaiming process and the end product application requirement, Companys Rubber recycling segment is producing consistent, excellent quality reclaimed rubber with our modern process and quality control systems.

We constantly feel that resources are limited and that protecting the natural environment is one of humanitys most pressing concerns. We are committed to reusing and recycling rubbish with the use of non-conventional energy in order to protect the environment. As community members, we are responsible for ensuring a healthy and pollution-free environment for future generations.

Last Few years were very challenging for the industries due to the COVID Impact but your company has reported improvement in key performance metrics.

Particulars	FY 2022-23	FY2021-22
Revenue from Operations	5,774.17	4,803.85
Other Income	50.94	64.03
Total Revenue	5825.11	4,867.88
Less: Expenditure except Financial Cost and Depreciation	5,468.62	4,497.93
Profit/Loss before Financial Cost, Depreciation and Tax	356.49	369.96
Less: Financial Cost	97.64	332.31
Less: Depreciation and amortization	481.57	445.00
Less: Exceptional Items	-	13.13
Profit/Loss before Tax (PBT)	222.73	394.23
Less: Tax Expenses	56.02	(99.22)
Profit/Loss after Tax (PAT)	(166.70)	(295.01)
Balance carried to Balance Sheet	(4,391.41)	(4,224.71)

A ECONOMIC OVERVIEW:

GLOBAL RECLAIMED MARKET INDUSTRY

According to the Market Statsville Group (MSG), the global reclaimed rubber market size is expected to grow from USD 1,231.5 million in 2021 to USD 3,049.5 million by 2030, at a CAGR of 10.6% from 2022 to 2030. Reclaimed rubber is used as a replacement for natural and synthetic rubber. Reclaim rubber from a scrap of a full tire; tread peelings, natural rubber tubes used for various tires and rubber goods applications. Reclaiming or recycling is the most often used method for fractional recycling and using scrap rubber. The most popular extant reclamation principle is the thermal-oxidative or turgid vulcanized rubber breakdown. Reclaimed rubber is used in various products, including automobile and aircraft tires, footwear, bicycle tires, molded rubber items, belts and hoses, and retreading.

Rubber recycling to increase sustainability considerations in the automobile tire business has greatly contributed to the sectors worldwide expansion. Because of its lower thermal plasticity and lower power consumption rate, manufacturers often select this less expensive raw material for tires. When opposed to its synthetic cousin, such qualities make it easier to break down throughout the processing step. Increased availability of discarded or waste tires and lower reclaim rubber costs have contributed to industry expansion in recent years.

The market has witnessed collaborations between end-users and chemical manufacturers to develop new products from used tires. For instance, as of December 2021, Ralf Bohle GmbH, a bicycle tire manufacturer, Pyrum Innovations AG, and TH Koln University entered into a collaborative partnership to develop new bicycle tires from old tires. Initiatives like these are expected to help companies source raw materials and manufacture reclaimed rubber at economical costs.

According to the International Organization of Motor Vehicle Manufacturers (OICA), the U.S. was the leading producer of commercial vehicles in the world in 2020. Despite the outbreak of the pandemic, the country witnessed a rise in demand for pickup trucks in 2020. Ford Motors F-Series truck retained its dominance followed by pickups from Fiat Chrysler and General Motors.

Tire retreading is commonly observed in heavy-duty commercial vehicles since replacing tires is expensive and tire retreading provides a feasible and economical option for commercial vehicle owners. The growing automotive industry in the U.S. is expected to drive the demand for reclaimed rubber in the tire retreading industry.

The Environmental Protection Agency (EPA) along with the government of Mexico, implemented the U.S.-Mexico Border 2020 Program, incorporating goals to reduce and prevent land contamination via strengthening waste management. The project is aimed at reducing dumped waste, including tire scraps with other materials. Such initiatives are expected to promote tire recycling and positively affect the growth of the market.

INDIAN ECONOMY AND OUTLOOK

INDIAN TYRE INDUSTRY REVIEW

The Indian tyre industry is on course to more than double its revenue to USD 22 billion by fiscal 2032 from USD 9 billion in fiscal 2022, according to a report by the Automotive Tyre Manufacturers Association (ATMA) based on a comprehensive study by CRISIL Market Intelligence & Analytics (MI&A) Consulting.

India is among the leading tyre manufacturers globally. Apart from conventional radial and bias tyres, the industry offers advanced smart, noise-reduction, puncture-proof and electric vehicle versions. It is also expanding presence in the premium and luxury tyre segments, which are dominated by imports.

The report estimates the industrys turnover will increase 100 basis points to 3.4% of Indias manufacturing gross domestic product (GDP) by fiscal 2032 compared with 2.2% in fiscal 2022. Further, its contribution to Goods and Services

Tax (GST) will rise to USD 4.1 billion from USD2.0 billion, number of jobs supported to 3.7 million from 1.9 million and share in global trade to 4.5% from 3.1%. Research and development(R&D) expenditure of the industry is forecast to more than double to USD 151 million from USD 64 million, after growing threefold in the past five fiscals.

There is already considerable facilitation as well. Anti-dumping and countervailing duties, and Atmanirbhar Bharat have helped substantially reduce tyre imports from Southeast Asia and China. On the indigenisation front, the India Natural Rubber Operations for Assisted Development project — a public-private partnership between select tyre majors, the Rubber Board, and the government — is a landmark initiative where the consuming industry is directly helping develop 2lakh hectare of rubber plantation in northeast India.

On the flip side, increasing cost of raw materials is chewing away profit margins, while dependence on imports for certain raw materials continues. Infrastructure constraints, challenges in competing with Southeast Asian rivals, increased capital expenditure (capex) and R&D requirements, and cheap imports are the other roadblocks for an industry where competition is also high due to multiple domestic and international makers.

The Indian tyre industry has become one of the dominant players globally, with state-of-the-art manufacturing technology, scale and efficiency. This is reflected in the fact that exports contribute nearly one-third of the production in value terms. However, the governments focused approach can provide the required edge to further improve the industrys global competitiveness, in turn also sharply increasing the countrys foreign exchange earnings.

Source: Economic Times

OUTLOOK

The Indian economys domestic dynamics continue to be strong though negative cross-border spillovers and adverse global developments can act anytime as a deterrent to achieve the potential high growth path in the current financial year. The Indian economy is estimated to grow at the rate of 6.7 per cent per year from FY24 to FY31. Indias GDP will catapult to $6.7 trillion in FY31 from $3.4 trillion in FY23, stated a report by S&P Global. It added that per capita GDP will increase to about $4,500. India would overtake Japan and China to become the third largest economy in the world.

In manufacturing, new opportunities are expected to emerge from an accelerating global trend towards supply chain diversification, said the report, as the government offered incentives to manufacturers and improving infrastructure.

In the case of India as well, inflation has significantly declined in the June 2023 quarter compared to the corresponding quarter last year and has entered the tolerance band of the RBI. The core inflation has also been softening since the beginning of the June 2023 quarter, indicating a restoration of overall price stability in the economy. However, the recent spike in the prices of fruits, vegetables, and pulses and products owing to weather-related disruptions has led to a sequential increase in food inflation for the month of June 2023. As inflation has been reined in only recently while threats of supply-side shocks, including El Nino, persist, the RBI and the government continue to be guarded for appropriate and timely policy response.

The World Economic Outlook has revised Indias growth for 2023 (FY24) to 6.1 per cent, up from 5.9 per cent in the April report, while maintaining the growth projection for 2024 (FY25) at 6.3.

According to Reserve Bank of India, Inflation data released on July 12 had shown that headline retail inflation rate increased to 4.81 per cent in June from 4.31 per cent in May primarily due to a sharp increase in food inflation to 4.49 per cent from 2.96 per cent.

OPPORTUNITIES AND THREATS

Reclaimed rubber is a recycled rubber obtained through various thermo-chemical processes. The process softens and swells the rubber by shortening the polymer chain. It is used in various applications such as aircraft, automobiles, footwear, belts and hoses, and retreading.

Increasing inclination of manufacturers towards rubber recycling owing to rising natural rubber prices is major factor expected to drive revenue growth of the reclaimed rubber market over the forecast period. Moreover, rising demand for rubber in automotive, footwear, and other molded goods is expected to support revenue growth of the target market.

Indian rubber industry has much positive strength. An extensive plantation sector with highest yield and indigenous availability of basic raw materials like natural rubber, synthetic rubber, reclaim rubber, carbon black, rubber chemicals, fatty acids, rayon, nylon yarn, steel cord, bead wire, rubber machinery and testing equipments are a boon to Indian rubber industry.

Amidst the gloomy landscape of high volatility in the international economic environment, Indian economy stands as a place of stability and opportunity. The countrys macro-economy is stable. Indias economic growth is amongst the highest in the world, helped by a reorientation of government spending much towards needed public infrastructure. The worldwide economic crisis is leading to surpluses, falling prices and import/export restrictions imposed by countries to protect their own industries. But with an optimistic view towards Indian economy, we can say that amidst the gloomy landscape of unusual volatility in the international economic environment, Indian economy stands as a place of stability and opportunity.

Various initiatives of government for economic reform of the country and growth of automobile industry in country provides opportunities to reclaimed rubber industry to grow. The development of reclaim rubber industry largely depends upon the export of reclaim produce therefore the economic conditions of importing country and currency movement plays a crucial role. Good growth of our Company largely depends on export of companys product and position of companys product in the domestic as well as international market among the products of other reclaim rubber manufacturer in the industry. However, the rubber price in the domestic and international market has been moving abruptly throughout the year.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

The Company is engaged in two segments viz. generation of energy through non-conventional sources and production of reclaimed rubber. Duriny FY 2022-23, Non -Conventional energy division has 7.00 % and reclaimed rubber division has 93.00 % share in total revenue of the Company as under

Amount in Lakh

Particulars	31- March-2023	31-March-2022
Non-Conventional Energy	407.29	179.35
Reclaimed Rubber Division	5,733.44	4,624.50
Total	5,774.17	4,803.85

OUTLOOK

Reclaimed rubber is a cured rubber produced after passing through various thermo-chemical processes. Reclaimed rubber is soften by shortening the polymer chain. It is used in various applications such as automobiles, aircraft, retreading, belts & hoses, footwear, and adhesives. Retreading has been the buzz of the town for its powerful proposition of minimizing the tyre Cost-per-Km (CPKM) by a large factor. CPKM, the embodiment of fuel efficiency, is an equally important parameter for tyres among the fleet owners. Tyres constitute the second largest cost component after fuel in operating a fleet.

Growing automotive industry is fuelling the reclaimed rubber demand owing to resistance to heat and ultraviolet light. The product use is increasing in manufacturing of wheels, tires, and belt & hoses with surging demand for automobiles globally. The global reclaimed rubber market size was valued at USD 1.04 billion in 2021 and is anticipated to grow at a compound annual growth rate (CAGR) of 10.9% from 2022 to 2030. In recent years, global demand for reclaimed rubber has been driven by favorable regulations implemented by governments across the globe to promote sustainable materials as a substitute for conventional virgin rubber and the rising demand for reclaimed rubber from end-use sectors like automotive & aircraft tires, footwear, belts & hoses, retreading, and molded rubber goods manufacturing.

The Asia Pacific region is dominant region for the said market with almost 35% of the global revenue share. Due to rising sales of personal vehicles and technology transfer into the industry, China and India have recently seen a rapid increase in automotive production. According to the reclaimed rubber market survey report released recently Europe region is turning out to rapidly growing in recent years.

Pursuant to companys philosophy, Company is focusing on consistent quality, physical properties of reclaim rubber to facilitate its higher loading in compound. The Company continues to supply REACH compliant products by way of revalidation of its certificate and Companys quality management system is in compliance with ISO 9000:2008 standards. Further, Company is continuously evaluating the available opportunities for its growth through continual market mapping initiatives. The opportunities in the industry would help the Company to amplify its business and revenue. The Company has gradually and steadily marched ahead to be an approved and preferred vendor for leading players in automotive tyres , conveyor belts and transmission belts industries and continues to associate itself with several manufactures in other segments. Discussions with dealers in high selling areas are underway and in advanced stages to cater to mid-size but quality driven customers.

ENVIRONMENT HEALTH NAD SAFETY

Consumer awareness of environmentally friendly materials with lower processing costs and improved qualities is at the forefront of driving demand in the global market for reclaimed rubber.

The increasing demand for whole tires reclaim (WTR) is a prominent trend in the global market for reclaimed rubber, and it is expected to contribute considerably to the industry in the years to come. Whole tires reclaim (WTR) is growing at a CAGR of 10.4% during the forecast period (2021-2026). The high demand arises from its high adaptability and durability, as well as its low processing costs and low environmental impact. Ethylene propylene diene monomer (EPDM), on the other hand, is expected to gain a significant share in the future, due to technological advancements that have resulted in improved product qualities and sustainability.

RISK DUE TO TECHNOLOGY UPGRADATION

Rapid upgrdation in technology is also a matter of concern. On one side, new technology would increase productivity and hence profitability, on the other side this change has obsolete the existing technology in which Company has made huge investments. However, to stay in market Company has to adopt new technologies. Sometime this process of migrating to the new technology is cumbersome and time consuming. This would also mean the business would loose on the critical time factor. To mitigate this risk factor, technology upgradation is the defined objective of companys risk management strategy.

RISKS FROM FRAUDS AND ERRORS

Risks related to frauds and errors are controlled and mitigated though internal audits and various checks on every level of transactions.

RISKS ASSOCIATED WITH POLICIES OF GOVERNMENT

Change in Government policies may affect the Companys various financial and other decisions.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has implemented a comprehensive system of internal controls which is commensurate to the size and nature of business and complexity of operations. Audits are led by professional internal auditors and supported by experienced personnel drawn from across the organization. They provide reports on various activities covering observations and pertinent comments on adequacy of internal controls and their recommendations. The management judiciously reviews and takes appropriate action on the recommendations made by the statutory auditors, internal auditors and the independent Audit Committee of the Board of Directors.

The Company has adequately designed communication network to support its business activities. Its manufacturing facilities endorse the highest health, safety, security and environmental standards and at the same time maintain operational efficiency.

FINANCIAL PERFORMANCE VIZ - A - VIZ OPERATIONAL PERFORMANCE

The details of the financial performance of the Company are appearing in the Balance Sheet, Profit & Loss Statements and other financial statements forming part of this Annual Report. For Financial highlights please refer heading FINANCIAL STATEMENTS of Boards Report.

HUMAN RESOURCE DEVELOPMENT AND INDUSTRIAL RELATIONS

At SAMPANN, people are our most important asset and a source of competitive advantage. SAMPANN is committed to creating an open and transparent organization that is focused on people and their capability and fostering an environment that enables them to deliver superior performance. The Human Resource strategy is aimed at talent acquisition, development, motivation and retention.

The Company has also been deliberately hiring employees from different cultural backgrounds, ideas, perspectives and business experiences. Though business of the Company does not call for large manpower but as a policy, the Company lays great emphasis on manpower rationalization and efficiency improvement.

Company has laid and evolved training calendar for all levels of employees including the gross root kind based on the assessment of their training needs by undertaking competence matrix and skill matrix analysis. There is very strong and regular performance review and feedback system for all levels of HR. The Company is also committed to create an open and transparent organization that is focused on fostering an environment that enables its human asset to deliver superior performance.

The HR policy acts as an effective lever for driving the Companys strategic initiatives and helps in integrating and aligning all people practices to Companys business priorities.

Addressing the aspirations of the Indian populace, our businesses are intrinsically linked to Indias growth Trajectory. Innovation and enterprise forms the essence of this surge of opportunities. This drives us towards continuous efforts in enterprise and innovation which act as catalysts in realising these aspirations.

CAUTIONARY STATEMENT

Statements in the management discussion and analysis describe the Companys objectives, projections, estimates, expectations which may be forward-looking statements within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Factors that could make a difference to the Companys operations, inter-alia, include the economic conditions, government policies and other related/incidental factors.

The Company assume no responsibility in respect of the forward-looking statements, which may undergo changes in future on the basis of subsequent developments, information or events.

Place: - New Delhi	For and on behalf of Board of
Date: -August 29,2023	Sampann Utpadan India Limited (Formerly Known as S. E. Power Limited)

 

Sd/-	Sd/-
(Sachin Agarwal)	(Sanjeetkumar Gourishankar Rath)
Managing Director	Executive Director
DIN:-00007047	DIN:- 08140999