Servotech Power Systems Ltd Management Discussions

Pursuant to Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a Management Discussion and Analysis Report covering performance and outlook is given below:

1. OVERVIEW

MDAR (Market Demand and Risk Overview) provides a framework for assessing and managing market demand and risks. It involves analyzing current and future demand, identifying potential risks such as economic fluctuations and regulatory changes, and evaluating growth opportunities. Strategic planning and resource allocation are used to address these factors, while ongoing monitoring and stakeholder engagement ensure strategies remain effective and adaptable. This approach helps organizations align with market realities, optimize resources, and navigate both opportunities and threats effectively

2. ECONOMY OUTLOOK

The global economy is continuing growing at a modest pace. The Economic Outlook projects steady global GDP growth of 3.1% in 2024, the same as the 3.1% in 2023, followed by a slight pick-up to 3.2% in 2025. These include Real incomes are rising in many OECD countries as inflation moderates, and trade growth has turned positive. The outlook continues to differ across countries, with weaker outcomes in many advanced economies, especially in Europe, and strong growth in the United States and many emerging market economies.

• GLOBAL ECONOMY:

According to the IMFs World Economic Outlook, the baseline forecast is for the world economy to continue growing at 3.2 percent during 2024 and 2025, at the same pace as in 2023. A slight acceleration for advanced economies—where growth is expected to rise from 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8 percent in 2025—will be offset by a modest slowdown in emerging market and developing economies from 4.3 percent in 2023 to 4.2 percent in both 2024 and 2025. The forecast for global growth five years from now—at 3.1 percent—is at its lowest in decades. Global inflation is forecast to decline steadily, from 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025, with advanced economies returning to their inflation targets sooner than emerging market and developing economies. Core inflation is generally projected to decline more gradually. 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.

• INDIAN ECONOMY:

According to the IMF he forecast for growth in India has also been revised upward, to 7 per cent, this year, up from 6.8 per cent for 2024-25 with the change reflecting carryover from upward revisions to growth in 2023 and improved prospects for private consumption, particularly in rural areas. The countrys remarkable growth rate of 8.4% in the third quarter of the fiscal year 2024 surpassed all expectations, as market analysts had penciled in a slower growth this quarter, between 6.6% and 7.2%. With substantial revisions to the data from the past three quarters of the fiscal year, Indias GDP growth already touched 8.2% year over year (YoY) in these quarters. However, we expect growth in the fourth quarter to be modest because of uncertainties related to Indias 2024 general elections and modest consumption growth. Our expectations for the near-term future remain in line with previous forecasts with a slight change in the forecast range due to a higher base effect in fiscal 2024. We believe GDP growth to be around 6.6% in the next fiscal year (fiscal 2025) and 6.75% in the year after (fiscal 2026), as markets learn to factor in geopolitical uncertainties in their investment and consumption decisions.

3. INDUSTRY STRUCTURE AND DEVELOPMENTS

• INDIAN ELECTRIC VEHICLE MARKET

The global electric vehicle market size was valued at USD 437.62 Billion and in 2024, the revenue in the Electric Vehicles market is projected to reach a staggering US$623.3bn worldwide. Looking ahead, it is expected that the market will demonstrate a steady annual growth rate (CAGR 2024-2032) of 12.5%. This growth will ultimately lead to a projected market volume of US$906.7bn by 2028.

The India electric vehicle (EV) market size was valued at USD 8.03 billion in 2023. The market is projected to grow from USD 23.38 billion in 2024 to USD 117.78 billion by 2032, exhibiting a CAGR of 22.4% during the forecast period. The Indian automobile industry ranked fifth largest globally and is expected to become the third largest by 2030 as the demand for electric vehicles is growing tremendously due to population rise. So dependence on conventional energy resources is not suitable as India imports nearly 80% of its crude oil requirements

The electric commercial vehicle sector, though still in its early stages, is set to witness significant growth. This growth is being driven by a rising emphasis on sustainability and cost- effectiveness within the logistics and transportation sectors. Electric buses, trucks, and vans are gradually making their way into urban fleets, supported by government initiatives aimed at reducing pollution and promoting electric mobility in public transportation and goods delivery. The operational cost benefits of electric commercial vehicles, coupled with various state and central government incentives, are encouraging fleet operators and businesses to transition toward electric options. This segments growth is critical for achieving Indias ambitious environmental targets and improving urban air quality.

• SOLAR INDUSTRY

India is shifting toward greater renewable energy generation while striving to improve energy access, affordability, and security. Its also poised to be one of the fastest-growing in coming years, which will in turn sharply boost energy demand. Whether it meets those needs with fossil fuels or green alternatives has the potential to shift the trajectory of its greenhouse gas emissions for many more years to come. As a result, solar power is a fast- developing industry in India. The Indian solar energy market generated revenue of USD 10.4 billion in 2023, which is expected to witness a CAGR of 13.4% during 2024-2030, to reach USD 24.9 billion by 2030 and is projected to reach 195.11 GW in the next five years. Over the medium term, the Indian solar energy market is growing owing to the cost of solar power technology, solar systems are becoming more flexible, and solar power is a greener way to make electricity. The market is also propelled by supportive government policies, particularly the Ministry of New and Renewable Energy (MNRE) plans to encourage renewable- based power generation. On the other hand, the solar energy market is restrained by issues like transmission and distribution losses and unpredictability in the continuity of power supply. India attracts foreign investment in solar projects. Collaborations with international players drive research and development, leading to technological breakthroughs.

Nevertheless, India has a lot of solar irradiance and gets solar energy all year long. This means there are many places in the sunniest parts of the country, like Rajasthan, Gujarat, and Andhra Pradesh, where solar energy can be used. This, along with foreign investment and a lot of research and development projects to improve the technology, gives the Indian solar energy market a lot of chances to grow.

• LIGHTING INDUSTRY

The Global LED lighting market is projected to grow at a CAGR of 17.6 percent in value during 2023-2029. The global COVID-19 pandemic has been unprecedented and staggering, with light emitting diode lighting experiencing lower than-anticipated demand across all regions compared to pre-pandemic levels.

Consumers will realize the benefits of longer lights emitting diode life and increase in use of products like LED and recessed lights. Growth in display backlight applications, reduction in the cost of LED, longer lifespan, and high efficiency of these diodes are key factors that are expected to drive the LED lighting market growth.

• GLOBAL UV DISINFECTION EQUIPMENT MARKET

The Global UV Disinfection Equipment Market is anticipated to grow at a CAGR of 7.61% during the forecast period 20232030. The market was valued at $5775.04 million in 2022 and is expected to reach $10356.06 million by 2030. During the historical period, growth can be attributed to heightened awareness of infections, increased adoption within the healthcare sector, adherence to regulatory standards, requirements in water and wastewater treatment, and the needs specific to the food and beverage industry.

The global UV disinfection equipment market is expected to see rapid growth in the next few years. It will grow to $9.58 billion in 2028 at a compound annual growth rate (CAGR) of 16.0%. The anticipated growth in the upcoming forecast period is linked to factors such as a focus on food safety and advancements in agricultural practices, bolstering resilience against emerging pathogens, expanding applications of UV-C technology, government initiatives and regulatory actions, and the rising use of remote and off-grid applications. Major trends expected during this period involve the integration of UV disinfection with smart technologies, the development of portable and mobile UV solutions, advancements in UV-C LED technology, collaborations with robotics for enhanced efficiency, and the application of UV technology for air purification within HVAC systems.

• INDIAN HEALTHCARE INDUSTRY

Healthcare has become one of the largest sectors of the Indian economy, in terms of both revenue and employment. It is expected to grow at a CAGR of 11.07% during 2023-27. The healthcare sector was expected to add over 7.4 million direct jobs in India during 2022. Indias competitive advantage lies in its large pool of well-trained medical professionals. India is also cost- competitive compared to its peers in Asia and Western countries. The cost of surgery in India is about one-tenth of that in the US or Western Europe. The countrys status as a preferred destination for medical tourism continued to rise, drawing patients from around the world seeking cost-effective and quality healthcare services. This trend further bolstered Indias reputation as a global healthcare hub. Moreover, Indias healthcare industry continued to attract investment and attention in research and development (R&D) activities. Its relatively low cost of clinical research made it an attractive location for international players looking to conduct research and innovation initiatives.

4. PRODUCT-WISE PERFORMANCE

Servotech emerged as a pioneer in providing solutions by integrating technology and innovation. It is engaged in the manufacturing, procurement and distribution of a range of high- end yet advanced solar products, EV chargers as well as energy- efficient lighting solutions. Company is doing exponential growth after entering into EV charging equipment and establishing EV charging tech infrastructure pan India expeditiously and bolster the nations progression towards the electric revolution. With a remarkable legacy of over two decades in establishing solar-powered infrastructure and commissioning projects on a massive scale pan India, Servotech is committed to not only setting the benchmarks but precedents one after the other in providing nothing but the best. With an aim to cater to our clients with utmost sincerity and devotion, the entity believes in not just serving but building forever-lasting relationships. Steering with expertise and driven by excellence, cutting-edge technological advancements coupled with game-changing innovations are central to Servotech, which has led to its astonishing success, overwhelmingly.

Brief glimpse of the some of the products of the Company are as mentioned below:

i. ELECTRIC VEHICLE CHARGER(EV CHARGER)

The demand for electric vehicles (EVs) has increased due to the rise of ecocentrism among people. These vehicles emit fewer greenhouse gases and air pollutants compared to petrol or diesel cars. This takes into consideration not only their production but also the generation of electricity needed to power them. As a result, EVs are being seen as potential replacements for current-generation automobiles in order to combat issues such as rising pollution, global warming, and the depletion of natural resources. Electric Vehicle Chargers come equipped with various communication protocols like GSM and Wi-Fi, and they comply with authentication protocols such as RFID. Servotech deals in the following categories of chargers:

a) AC Charger: The AC charger functions as a regulator and controller. It delivers the charge in AC mode to the on-board charger of the EV, which then converts the AC power into DC power to charge the battery. These chargers are more widely available due to their lower installation and operational costs. Additionally, they are smaller in size easier, and less expensive to install. AC chargers are suitable for parking spots where the vehicle will remain parked for longer periods of time. These chargers are easily available and charge at a continuous rate.

b) DC Charger: DC charger has the converter inside the charger itself. That means it can power directly to the cars battery and doesnt need the on-board charger to convert it. DC chargers are bigger, faster, and an exciting breakthrough when it comes to EVs. DC Fast Charging bypasses all of the limitations of the on-board charger and required conversion, instead providing DC power directly to the battery, charging speed has the potential to be greatly increased. These are often used at midways, conventional fuel pumps & other fast charging locations.

ii. SOLAR PRODUCTS

The company is actively involved in various solar projects, including the successful installation of solar systems. Additionally, it holds a leading position in the manufacturing of solar inverters.

a) SOLAR INVERTER: A Serving as a pivotal component of solar technology, a solar inverter plays a crucial role in converting the energy generated from solar panels into usable electricity for residential or commercial use. In hybrid solar power systems, storage batteries connected to the inverter ensure an uninterrupted power supply, functioning as both an inverter and backup during power outages. Presently, the company deals with the following types of solar inverters:

• Elegant Plus

• FLARE

• On-Grid

• Green Light

b) SOLAR MANAGEMENT UNIT: The Solar Management Unit (SMU) is a distinctive device exclusive to India, designed to transform conventional inverters into solar- powered ones. Its primary function is to prioritize the utilization of solar energy, thereby reducing dependence on the grid for electricity. Equipped with a high-speed microcontroller, the SMU enhances the performance of solar systems, ensuring greater reliability and efficiency in their operation.

c) SOLAR BATTERIES: Solar batteries are designed to efficiently store solar energy for optimal use in solar lighting systems. Used in off-grid and hybrid setups, they store electricity as DC power, which is later converted to AC power to supply home appliances during outages or when solar panels arent active

d) PV PORT: The PV port is a solar photovoltaic system designed to increase rooftop solar adoption among residential users. It features an intelligent controller, can be customized, and supports resale

e) POLY SOLAR PANEL: Polycrystalline solar panels are the predominant type used in India, prized for their affordability and decent efficiency. They find application in both small and large-scale installations due to their wide range of power wattages. Given their cost- effectiveness and environmentally friendly production process, they are employed in diverse settings such as large solar farms, rooftop arrays, traffic signals, and residential buildings.

iii. POWER & BACKUP

a) BATTERY: Tubular batteries, larger than fiat plate batteries, are a type of lead-acid battery commonly found in UPS and inverter systems. They feature a positive plate housed within a tubular structure wrapped in cloth, enhancing electrode power. With up to 30% longer service life compared to flat plate batteries, they include features like Low Resistance Fasteners and Heavy-duty terminals for improved performance.

b) SERVO STABILIZER: Servo stabilizer protects the costly equipment from high and low voltage problems

• Air cooled servo Stabilizer: This device regulates voltage in electrical systems and is suitable for indoor use due to its air cooling mechanism. Comprising a transformer, an air-cooled heat sink, and a control unit, it steps down voltage from the power source while dissipating heat generated by the transformer.

• Oil Cooled Servo Stabilizer: Deployed where voltage fluctuations are frequent, this stabilizer ensures stable power supply to electronic and electrical equipment by utilizing an oil cooling system, thereby safeguarding against the adverse effects of power surges

c) UPS:

• Domestic Inverter & UPS: Designed to minimize water loss and significantly extend battery life, this technology offers extended backup for computers while saving space, making it ideal for modern households.

• Commercial Inverter & UPS: Tailored for demanding telecom applications, these UPS units provide automatic protection against high and low voltage, enabling safe operation of various equipment, including lights, air conditioners, lifts, and welding machines, in a cost-effective manner.

iv. LED SEGMENT

SAARA LED lights are eco-friendly and deliver aesthetically pleasing illumination. They offer numerous benefits, including bright and uniform lighting for fuel stations and surroundings, enhancing safety for customers and employees. With greater energy efficiency and durability compared to traditional bulbs, SAARA LED lights require less maintenance and lower operating costs, while also beingfree from harmful elements like mercury or lead.

v. OXYGEN CONCENTRATOR & UV DISINFECTANT

An oxygen concentrator extracts and concentrates oxygen from ambient air, assisting in alleviating respiratory difficulties for patients. Portable and user-friendly, it serves both patients and caregivers alike.

UV-C Disinfectant technology deactivates microorganisms by damaging their genetic material, ensuring cleaner airflow and optimal ventilation. Equipped with intelligent sensors and controls, this purifier is suitable for maintaining sanitized environments in quarantine, containment, and infection control rooms.

5. STRENGTH

We are committed to advancing a sustainable, low-carbon economy by offering solutions in energy storage, grid optimization, and electric mobility, which contribute to a reduced environmental footprint. Our focus on innovation, strategic partnerships, and unwavering dedication to sustainability positions us to seize significant growth opportunities. As

we pursue accelerated expansion, we are experiencing a remarkable shift towards sustainable and eco-friendly energy. The data we collect across our value chain not only shapes our growth strategies but also creates mutually beneficial outcomes for our organization, partners, and employees.

i. Competitive Strength

• Skilled Management: Our senior management and execution team is highly skilled and efficient.

• Advanced Technology: We use the latest, cost-effective technology, emphasizing safety and quality assurance.

• Diverse Customer Base: We have a broad and varied customer base.

• Product Expansion: We are scaling our product offerings to meet rising demand.

ii. Business Strategy

• Supply Chain Excellence: Building a robust supply chain and logistics network for timely delivery and project execution.

• Industry Leadership: Striving to be the most respected and valuable company in the industry.

• Expansion and Diversification: Actively pursuing growth and diversification initiatives.

• Competitive Pricing: Offering attractive pricing to expand and retain our customer base.

• Technological Investment: Investing in advanced technologies to drive innovation.

iii. Overall Business Strategy shall be to

• Revenue Maximization: Enhancing revenue through capacity expansion, diversification, and improved efficiency.

• Cost Reduction: Lowering borrowing costs.

• Efficiency Improvement: Boosting production efficiency and reducing process losses.

• Operational Cost Management: Minimizing operational costs to stay competitive.

• Customer-Centric Approach: Focusing on customer satisfaction and value for money.

• Best Practices: Implementing best practices across all functions and processes.

6. OPPORTUNITIES AND THREATS

A. OPPORTUNITIES

1. Technological Advancements: Innovations can enhance efficiency and performance.

2. Growing Market Demand: Rising interest in EVs and solar energy boosts potential growth.

3. Government Incentives: Financial benefits from supportive policies.

4. Sustainability Trends: Aligning with eco-friendly values attracts customers.

5. Partnerships: Strategic alliances can expand market reach and resources.

B. Threats:

1. Regulatory Changes: New regulations can increase costs and complexity.

2. Market Volatility: Fluctuating demand and pricing affect profitability.

3. Supply Chain Disruptions: Material shortages or delays impact production.

4. Intense Competition: Increased competition can lead to price pressures.

5. Technological Risks: Rapid changes may require costly upgrades.

7. RISKS AND CHALLENGES

The Company uses a robust risk management process to promptly analyze and address threats, allowing us to adapt to industry changes and seize new opportunities. Regular risk assessment and adherence to regulatory frameworks help us mitigate risks and maintain our reputation. Despite a positive long-term outlook, the Company faces certain risks and uncertainties, as detailed below.

i. Technological Integration: Both sectors require continuous innovation and integration of new technologies. Staying current with advancements while managing integration complexities and costs is a significant challenge.

ii. Environmental and Social Impact: Managing the environmental footprint and ensuring ethical practices are crucial for both industries. Addressing these concerns while maintaining operational efficiency is a key challenge.

iii. Competition: Both EV chargers and solar products face intense competition. Companies must differentiate themselves and innovate to maintain market share and profitability.

iv. Supply Chain Disruptions: Both industries depend on a global supply chain for critical components and materials. Disruptions can impact manufacturing and project timelines

8. FINANCIAL ANALYSIS

The Financial performance with respect to Operational performance of the Company is discussed in the Directors Report which forms part of the Annual Report.

9. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES AND INDUSTRIAL RELATIONS

Servotech recognizes the pivotal role its employees play as the cornerstone of its success, serving as the bedrock of its competitive advantage. The company boasts a proficient cadre of trained professionals adept at steering its operations with efficiency and prudence. Prioritizing the cultivation, motivation, and retention of a diverse talent pool, Servotech endeavors to unleash the full potential of each employee within a purpose- driven, inclusive, and rewarding work environment.

Fostering a culture of continuous growth, Servotech actively seeks to expand and deepen employee relationships, constantly exploring new avenues and business domains to enhance value. Through proactive investments in developing new capabilities and reskilling the workforce, the company aims to equip its employees to tackle evolving challenges and seize emerging opportunities.

Servotech values employee participation, commitment, knowledge deployment, integrity, and confidentiality, anticipating their ongoing engagement in the companys journey ahead. With an unwavering focus on capability enhancement, the company endeavors to prepare its workforce for the future, ensuring they remain abreast of developments within their respective domains while offering ample opportunities for personal and professional growth.

10. EMPLOYEE HEALTH AND SAFETY

At Servotech, employee health and safety are top priorities, integral to maintaining a productive and secure work environment. The company is dedicated to implementing comprehensive measures to protect the well-being of its workforce and ensure a safe working environment. Servotech has established clear health and safety policies that comply with industry standards and legal requirements, providing a framework for a safe workplace. Regular risk assessments are conducted to identify and mitigate potential hazards. Employees receive ongoing training on health and safety practices, including emergency procedures, safe work practices, and the use of personal protective equipment (PPE). The company also emphasizes emergency preparedness with well-developed plans and regular drills for situations such as fires and chemical spills. Health and wellness programs support overall well-being, offering access to medical services and mental health support. Servotech encourages incident reporting and investigates all reported issues to implement corrective actions and prevent recurrence. Compliance is continually monitored through audits and reviews to maintain high safety standards. Through these measures, Servotech aims to create a safe, healthy, and supportive work environment that enhances both employee wellbeing and operational efficiency.

11. INTERNAL CONTROL SYSTEM

Servotech has established a robust internal control system designed to support its operations and ensure adherence to best practices. This system is underpinned by comprehensive, well-documented policies and procedures that cover all financial and operational aspects of the business.

Key components of Servotechs internal control system include:

1. Financial Reporting Reliability: Controls are meticulously crafted to ensure the accuracy and reliability of financial reporting, providing stakeholders with trustworthy information.

2. Operational Oversight: The system includes measures to oversee day-to-day operations, ensuring that they align with company goals and regulatory requirements.

3. Asset Protection: Safeguards are in place to protect assets from unauthorized use or potential losses, minimizing risks and securing company resources.

4. Regulatory Compliance: Servotechs controls are designed to ensure compliance with relevant regulations and standards, which are continually aligned with global best practices.

5. Policy and Procedure Framework: The Company has established comprehensive policies tailored to its size and growth trajectory. These guidelines are regularly reviewed to maintain relevance and effectiveness.

6. Employee Training: Servotech places a strong emphasis on employee involvement in regulatory compliance and ethical conduct. Periodic training sessions are conducted to reinforce the companys code of conduct and compliance standards.

Through these measures, Servotech maintains a strong internal control environment that supports its operational efficiency and regulatory adherence.

12. CAUTIONARY STATEMENT

The statements in the ‘Management Discussion and Analysis regarding the Companys objectives, projections, estimates, and expectations may constitute ‘forward-looking statements under relevant securities laws and regulations. Actual outcomes could vary significantly from those anticipated. Key factors that could influence the Companys performance include economic and political conditions, changes in government regulations, tax policies, economic developments, and various other internal and external factors. The Company does not commit to updating any forward-looking statements to reflect future events or circumstances. Investors are encouraged to exercise caution and due diligence when interpreting these statements.

13. KEY FINANCIAL RATIOS

The Company has identified following ratios as key financial ratios:

Sl. No. Particulars	As at 31st March, 2024	As at 31st March, 2023	Changes
1. Current Ratio(times) = Current Assets / Current liabilities	1.79	1.79	0
2. Debt-Equity Ratio (times) = Total Borrowings/Shareholders equity	0.63	0.52	21.15%
3. Debtor Turnover (Days)1	99.13	121.35	.18%
4. Return on Equity Ratio (%)2 = Net Profit after taxes/Average Shareholders equity	10.80%	13.0%	2.2%
5. Inventory Turnover ratio (times)3= Revenue from operations/Average inventory	10.43	18.62	43.98%
6. Net Profit ratio (%)4 = Net Profit/Revenue from operations	3.69%	4.25%	13.18%
7. Return on capital employed5 (% ) = EBIT/Capital employed (Average Total Equity + Debts)	8.96%	13.1%	31.60%
8. Return on Investment (%) = EBIT/Average Total Assets	9.11%	10.52%	13.36%
9. Operating Profit Ratio6=Operating Profit/Revenue from Operation)	6.61	10.89%	39.30%
10. Interest Coverage Ratio7 =EBIT/Finance Cost	5.82	6.78	14.16%

Note:1. Debtor Turnover Ratio decreased due to efficient credit policies and improved customer Relationship Management.

2. Return on Equity Ratio decreases due to increase in expenses and change in financial leverages.

3. Inventory Turnover ratio decreases in the previous year primarily due to higher inventories.

4. Net Profit Ratio decreases due to decrease in Profit after Tax in proportion of Total Revenue.

5. Operating Profit Ratio decreases due to decrease in increased operating expenses

6. Operating profit Ratio decreases due to increase in operating expenses.

7. Interest coverage ratio decreased due to expansion and change in capital structure.

14. DISCLOSURE OF ACCOUNTING TREATMENT

The Company has followed all the treatments in the Financial Statements as per the prescribed Accounting Standards.